Edgar Filing: SVB FINANCIAL GROUP

SIVB-09.30.2012-10Q

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, 2012



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

For the transition period from to .

Commission File Number: 000-15637

SVB FINANCIAL GROUP

(Exact name of registrant as specified in its charter)



Delaware		91-1962278
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



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

(408) 654-7400

(Registrant’s telephone number, including area code)

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

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

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

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

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

At October 31, 2012, 44,517,133 shares of the registrant’s common stock ($0.001 par value) were outstanding.

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TABLE OF CONTENTS



		Page
PART I - FINANCIAL INFORMATION		4

Item 1.	Interim Consolidated Financial Statements (unaudited)	4

	Interim Consolidated Balance Sheets (unaudited) as of September 30, 2012 and December 31, 2011	4

	Interim Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2012 and 2011	5

	Interim Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended September 30, 2012 and 2011	6

	Interim Consolidated Statements of Stockholders’ Equity (unaudited) for the nine months ended September 30, 2012 and 2011	7

	Interim Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2012 and 2011	8

	Notes to Interim Consolidated Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	47

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	84

Item 4.	Controls and Procedures	86

PART II - OTHER INFORMATION		86

Item 1.	Legal Proceedings	86

Item 1A.	Risk Factors	86

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	86

Item 3.	Defaults Upon Senior Securities	86

Item 4.	Mine Safety Disclosures	86

Item 5.	Other Information	86

Item 6.	Exhibits	86

SIGNATURES		87

INDEX TO EXHIBITS		88

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Glossary of Acronyms used in this Report

AICPA – American Institute of Certified Public Accountants

ASC — Accounting Standards Codification

ASU – Accounting Standards Update

EHOP – Employee Home Ownership Program of the Company

EPS – Earnings Per Share

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

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

IASB – International Accounting Standards Board

IFRS – International Financial Reporting Standards

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

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 (UNAUDITED)

SVB FINANCIAL GROUP AND SUBSIDIARIES

INTERIM CONSOLIDATED BALANCE SHEETS (UNAUDITED)



(Dollars in thousands, except par value and share data)	September 30, 2012			December 31, 2011
Assets
Cash and cash equivalents	$	906,680		$	1,114,948
Available-for-sale securities	11,047,730			10,536,046
Non-marketable securities	1,163,815			1,004,440
Investment securities	12,211,545			11,540,486
Loans, net of unearned income	8,192,369			6,970,082
Allowance for loan losses	(101,524		)	(89,947		)
Net loans	8,090,845			6,880,135
Premises and equipment, net of accumulated depreciation and amortization	68,270			56,471
Accrued interest receivable and other assets	299,594			376,854
Total assets	$	21,576,934		$	19,968,894
Liabilities and total equity
Liabilities:
Noninterest-bearing demand deposits	$	12,598,639		$	11,861,888
Interest-bearing deposits	5,126,427			4,847,648
Total deposits	17,725,066			16,709,536
Short-term borrowings	508,170			—
Other liabilities	330,038			405,321
Long-term debt	458,314			603,648
Total liabilities	19,021,588			17,718,505
Commitments and contingencies (Note 11 and Note 14)
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; 44,510,524 shares and 43,507,932 shares outstanding, respectively	45			44
Additional paid-in capital	538,454			484,216
Retained earnings	1,124,415			999,733
Accumulated other comprehensive income	122,010			85,399
Total SVBFG stockholders’ equity	1,784,924			1,569,392
Noncontrolling interests	770,422			680,997
Total equity	2,555,346			2,250,389
Total liabilities and total equity	$	21,576,934		$	19,968,894

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)	2012			2011			2012			2011
Interest income:
Loans	$	121,446		$	101,693		$	344,842		$	284,935
Available-for-sale securities:
Taxable	38,493			39,357			129,940			124,956
Non-taxable	894			899			2,693			2,723
Federal funds sold, securities purchased under agreements to resell and other short-term investment securities	1,125			1,375			3,075			4,972
Total interest income	161,958			143,324			480,550			417,586
Interest expense:
Deposits	1,740			1,715			4,835			7,379
Borrowings	5,788			6,154			18,414			24,000
Total interest expense	7,528			7,869			23,249			31,379
Net interest income	154,430			135,455			457,301			386,207
Provision for (reduction of) loan losses	6,788			769			29,316			(2,144		)
Net interest income after provision for loan losses	147,642			134,686			427,985			388,351
Noninterest income:
Gains on investment securities, net	20,228			52,262			53,876			175,279
Foreign exchange fees	12,211			11,546			36,345			32,397
Deposit service charges	8,369			8,259			24,834			23,214
Credit card fees	6,348			4,506			18,185			12,687
Gains on derivative instruments, net	1,111			9,951			15,800			24,153
Letters of credit and standby letters of credit income	3,495			3,040			10,427			8,452
Client investment fees	3,954			2,939			10,226			9,707
Other	13,423			3,108			39,165			23,384
Total noninterest income	69,139			95,611			208,858			309,273
Noninterest expense:
Compensation and benefits	79,262			77,009			243,384			232,529
Professional services	17,759			16,122			48,880			43,000
Premises and equipment	11,247			7,220			28,230			19,572
Business development and travel	6,838			5,886			21,743			17,429
Net occupancy	5,666			4,967			16,667			14,163
Correspondent bank fees	3,000			2,336			8,528			6,701
FDIC assessments	2,836			2,302			8,065			7,940
(Reduction of) provision for unfunded credit commitments	(400		)	2,055			1,264			2,131
Other	8,963			9,554			26,188			22,453
Total noninterest expense	135,171			127,451			402,949			365,918
Income before income tax expense	81,610			102,846			233,894			331,706
Income tax expense	28,470			26,770			83,743			92,803
Net income before noncontrolling interests	53,140			76,076			150,151			238,903
Net income attributable to noncontrolling interests	(10,851		)	(38,505		)	(25,469		)	(102,575		)
Net income available to common stockholders	$	42,289		$	37,571		$	124,682		$	136,328
Earnings per common share—basic	$	0.95		$	0.87		$	2.82		$	3.18
Earnings per common share—diluted	0.94			0.86			2.79			3.12

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)	2012			2011			2012			2011
Net income before noncontrolling interests	$	53,140		$	76,076		$	150,151		$	238,903
Other comprehensive income, net of tax:
Change in cumulative translation gains:
Foreign currency translation gains (losses)	2,940			(5,573		)	755			(3,682		)
Related tax (expense) benefit	(1,190		)	2,280			(314		)	1,506
Change in unrealized gains on available-for-sale securities:
Unrealized holding gains	27,596			93,701			64,631			168,378
Related tax expense	(11,473		)	(38,329		)	(26,290		)	(68,858		)
Reclassification adjustment for losses (gains) included in net income	101			(5		)	(3,592		)	(37,288		)
Related tax (benefit) expense	(41		)	2			1,421			15,254
Other comprehensive income, net of tax	17,933			52,076			36,611			75,310
Comprehensive income	71,073			128,152			186,762			314,213
Comprehensive income attributable to noncontrolling interests	(10,851		)	(38,505		)	(25,469		)	(102,575		)
Comprehensive income attributable to SVBFG	$	60,222		$	89,647		$	161,293		$	211,638

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			Total SVBFG Stockholders’ Equity			Noncontrolling Interests		Total Equity
(Dollars in thousands)	Shares	Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income			Total SVBFG Stockholders’ Equity			Noncontrolling Interests		Total Equity
Balance at December 31, 2010	42,268,201	$	42	$	422,334	$	827,831	$	24,143		$	1,274,350		$	473,928	$	1,748,278
Common stock issued under employee benefit plans, net of restricted stock cancellations	999,655	1		30,271		—		—			30,272			—		30,272
Common stock issued upon settlement of 3.875% Convertible Notes, net of shares received from associated convertible note hedge	1,024	—		—		—		—			—			—		—
Income tax benefit from stock options exercised, vesting of restricted stock and other	—	—		6,548		—		—			6,548			—		6,548
Net income	—	—		—		136,328		—			136,328			102,575		238,903
Capital calls and distributions, net	—	—		—		—		—			—			79,727		79,727
Net change in unrealized gains on available-for-sale securities, net of tax	—	—		—		—		77,486			77,486			—		77,486
Foreign currency translation adjustments, net of tax	—	—		—		—		(2,176		)	(2,176		)	—		(2,176		)
Share-based compensation expense	—	—		13,290		—		—			13,290			—		13,290
Balance at September 30, 2011	43,268,880	$	43	$	472,443	$	964,159	$	99,453		$	1,536,098		$	656,230	$	2,192,328
Balance at December 31, 2011	43,507,932	$	44	$	484,216	$	999,733	$	85,399		$	1,569,392		$	680,997	$	2,250,389
Common stock issued under employee benefit plans, net of restricted stock cancellations	929,032	1		27,350		—		—			27,351			—		27,351
Common stock issued under ESOP	73,560	—		4,345		—		—			4,345			—		4,345
Income tax benefit from stock options exercised, vesting of restricted stock and other	—	—		6,312		—		—			6,312			—		6,312
Net income	—	—		—		124,682		—			124,682			25,469		150,151
Capital calls and distributions, net	—	—		—		—		—			—			63,956		63,956
Net change in unrealized gains on available-for-sale securities, net of tax	—	—		—		—		36,170			36,170			—		36,170
Foreign currency translation adjustments, net of tax	—	—		—		—		441			441			—		441
Share-based compensation expense	—	—		16,231		—		—			16,231			—		16,231
Balance at September 30, 2012	44,510,524	$	45	$	538,454	$	1,124,415	$	122,010		$	1,784,924		$	770,422	$	2,555,346

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)	2012			2011
Cash flows from operating activities:
Net income before noncontrolling interests	$	150,151		$	238,903
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for (reduction of) loan losses	29,316			(2,144		)
Provision for unfunded credit commitments	1,264			2,131
Changes in fair values of derivatives, net	(4,411		)	(20,334		)
Gains on investment securities, net	(53,876		)	(175,279		)
Depreciation and amortization	22,651			19,999
Amortization of premiums and discounts on available-for-sale securities, net	42,511			18,170
Tax benefit from stock exercises	1,245			854
Amortization of share-based compensation	16,594			13,501
Amortization of deferred loan fees	(42,308		)	(43,806		)
Deferred income tax expense	(997		)	3,135
Gain on the sale of certain assets related to our equity services management business	(4,243		)	—
Net gain from note repurchases and termination of corresponding interest rate swaps	—			(3,123		)
Changes in other assets and liabilities:
Accrued interest receivable and payable, net	(9,084		)	(13,919		)
Accounts receivable and payable, net	33,277			(3,441		)
Income tax payable and receivable, net	6,223			8,174
Prepaid FDIC assessments and amortization	6,896			6,468
Accrued compensation	(40,600		)	9,968
Foreign exchange spot contracts, net	(41,188		)	10,587
Other, net	12,244			20,344
Net cash provided by operating activities	125,665			90,188
Cash flows from investing activities:
Purchases of available-for-sale securities	(2,859,155		)	(5,034,425		)
Proceeds from sales of available-for-sale securities	326,178			1,414,794
Proceeds from maturities and pay downs of available-for-sale securities	2,047,753			2,048,439
Purchases of nonmarketable securities (cost and equity method accounting)	(114,134		)	(43,260		)
Proceeds from sales of nonmarketable securities (cost and equity method accounting)	31,903			21,524
Purchases of nonmarketable securities (fair value accounting)	(99,062		)	(127,362		)
Proceeds from sales and distributions of nonmarketable securities (fair value accounting)	94,188			66,541
Net increase in loans	(1,218,366		)	(792,169		)
Proceeds from recoveries of charged-off loans	8,018			21,626
Purchases of premises and equipment	(31,548		)	(21,600		)
Proceeds from the sale of certain assets related to our equity services management business	2,870			—
Net cash used for investing activities	(1,811,355		)	(2,445,892		)
Cash flows from financing activities:
Net increase in deposits	1,015,530			1,802,281
Increase (decrease) in short-term borrowings	508,170			(37,245		)
Principal payments of other long term debt	(1,222		)	—
Capital contributions from noncontrolling interests, net of distributions	63,956			79,727
Tax benefit from stock exercises	5,067			5,694
Proceeds from issuance of common stock and ESPP	27,350			30,271
Principal payments of 5.70% Senior Notes	(141,429		)	—
Payments for repurchases of portions of 5.70% Senior Notes and 6.05% Subordinated Notes, including repurchase premiums and associated fees	—			(346,443		)
Proceeds from termination of portions of interest rate swaps associated with 5.70% Senior Notes and 6.05% Subordinated Notes	—			36,959
Payments for settlement of 3.875% Convertible Notes	—			(250,000		)
Net cash provided by financing activities	1,477,422			1,321,244
Net decrease in cash and cash equivalents	(208,268		)	(1,034,460		)
Cash and cash equivalents at beginning of period	1,114,948			3,076,432
Cash and cash equivalents at end of period	$	906,680		$	2,041,972
Supplemental disclosures:
Cash paid during the period for:
Interest	$	28,000		$	37,776
Income taxes	69,094			74,313
Noncash items during the period:
Unrealized gains on available-for-sale securities, net of tax	$	36,170		$	77,486

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 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, unless the context requires otherwise.

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, 2012 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, 2011 (“2011 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 2011 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 securities, the valuation of equity warrant assets, the adequacy of the allowance for loan losses and reserve 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 entities in which we have a controlling financial interest. We determine whether we have a controlling financial interest in an entity by evaluating whether the entity is a voting interest entity or a variable interest entity and whether the accounting guidance requires consolidation. All significant intercompany accounts and transactions have been eliminated.

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

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


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


2.	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; and,


3.	Qualitative and quantitative factors regarding the nature, size, and form of our involvement with the VIE.

Voting interest entities in which we have a controlling financial interest or VIEs in which we are the primary beneficiary are consolidated into our financial statements.

We have not provided financial or other support during the periods presented to any VIE that we were not previously contractually required to provide. We are variable interest holders in certain partnerships for which we are the primary beneficiary.

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We perform on-going reassessments on the status of the entities and whether facts or circumstances have changed in relation to previously evaluated voting interest entities and our involvement in VIEs which could cause our consolidation conclusion to change.

Impact of Adopting ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS

In May 2011, the FASB issued a new accounting standard which requires new disclosures and clarifies existing guidance surrounding fair value measurement. This standard was issued concurrently with the IASB’s issuance of a fair value measurement standard with the objective of a converged definition of fair value measurement and disclosure guidance. The new guidance clarified that the principal market for a financial instrument should be determined based on the market with the greatest volume and level of activity. This new guidance was effective on a prospective basis for interim and annual reporting periods beginning after December 15, 2011, and was therefore adopted effective January 1, 2012. This standard clarified how fair value is measured and increased the disclosure requirements for fair value measurements, and did not have a material impact on our financial position, results of operations or stockholders’ equity. See Note 13 – “Fair Value of Financial Instruments” for further details.

Impact of Adopting ASU No. 2011-05, Presentation of Comprehensive Income

In June 2011, the FASB issued a new accounting standard, which requires presentation of the components of total comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. Regardless of which option is chosen, reclassification adjustments for items that are reclassified from other comprehensive income to net income are required to be shown on the face of the financial statements. In December 2011, the FASB approved a proposed update, which indefinitely defers the requirements of ASU No. 2011-05 to present components of reclassifications of other comprehensive income on the face of the income statement. This new guidance did not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The guidance was effective on a retrospective basis for the interim and annual reporting periods beginning after December 15, 2011, and was therefore adopted effective January 1, 2012. This standard only clarified the presentation of comprehensive income and did not affect our financial position, results of operations or stockholders’ equity.

Recent Accounting Pronouncements

In December 2011, the FASB issued a new accounting standard (ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities), which requires new disclosures surrounding financial instruments and derivative instruments that are offset on the statement of financial position, or are eligible for offset subject to a master netting arrangement. This standard was issued concurrent with the IASB’s issuance of a similar standard with the objective of converged disclosure guidance. The guidance is effective on a retrospective basis for the interim and annual reporting periods beginning after January 1, 2013. We are currently assessing the impact of this guidance, however we do not expect it to have a material impact on our financial position, results of operations or stockholders’ equity.

Reclassifications

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


2.	Stockholders’ Equity and EPS

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 issued for stock options and restricted stock units outstanding under our equity incentive plans, our ESPP, and for certain prior periods, our 3.875% convertible senior notes (“3.875% Convertible Notes”). 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, 2012 and 2011:

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	Three months ended September 30,				Nine months ended September 30,
(Dollars and shares in thousands, except per share amounts)	2012		2011		2012		2011
Numerator:
Net income available to common stockholders	$	42,289	$	37,571	$	124,682	$	136,328
Denominator:
Weighted average common shares outstanding-basic	44,449		43,233		44,147		42,882
Weighted average effect of dilutive securities:
Stock options and ESPP	346		452		402		610
Restricted stock units	120		106		143		122
3.875% Convertible Notes (1)	—		—		—		27
Denominator for diluted calculation	44,915		43,791		44,692		43,641
Earnings per common share:
Basic	$	0.95	$	0.87	$	2.82	$	3.18
Diluted	$	0.94	$	0.86	$	2.79	$	3.12


(1)	Our $250 million 3.875% Convertible Notes matured on April 15, 2011.

The following table summarizes the weighted-average common shares excluded from the diluted EPS calculation as they were deemed to be antidilutive for the three and nine months ended September 30, 2012 and 2011:



	Three months ended September 30,		Nine months ended September 30,
(Shares in thousands)	2012	2011	2012	2011
Stock options	795	1,264	658	663
Restricted stock units	220	279	—	128
Total	1,015	1,543	658	791


3.	Share-Based Compensation

For the three and nine months ended September 30, 2012 and 2011, we recorded share-based compensation and related tax benefits as follows:



	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2012			2011			2012			2011
Share-based compensation expense	$	5,617		$	4,552		$	16,594		$	13,501
Income tax benefit related to share-based compensation expense	(1,720		)	(1,256		)	(4,408		)	(3,532		)

Unrecognized Compensation Expense

As of September 30, 2012, unrecognized share-based compensation expense was as follows:



(Dollars in thousands)	Unrecognized Expense		Average Expected Recognition Period - in Years
Stock options	$	17,308	2.80
Restricted stock units	26,662		2.81
Total unrecognized share-based compensation expense	$	43,970

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, 2012:

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	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years	Aggregate Intrinsic Value of In-The- Money Options
Outstanding at December 31, 2011	2,439,360		$	42.64
Granted	395,563		63.90
Exercised	(680,929	)	35.28
Forfeited	(56,996	)	47.90
Expired	(4,568	)	42.50
Outstanding at September 30, 2012	2,092,430		48.91		4.14	$	25,582,079
Vested and expected to vest at September 30, 2012	2,003,907		48.50		4.07	25,221,007
Exercisable at September 30, 2012	1,088,716		44.35		2.88	17,542,729

The aggregate intrinsic value of outstanding options shown in the table above represents the pretax intrinsic value based on our closing stock price of $60.46 as of September 30, 2012. The total intrinsic value of options exercised during the three and nine months ended September 30, 2012 was $3.0 million and $16.7 million, respectively, compared to $3.2 million and $19.0 million for the comparable 2011 periods.

The table below provides information for restricted stock units under the 2006 Equity Incentive Plan for the nine months ended September 30, 2012:



	Shares		Weighted Average Grant Date Fair Value
Nonvested at December 31, 2011	499,119		$	52.72
Granted	313,040		63.83
Vested	(144,953	)	51.25
Forfeited	(26,700	)	54.89
Nonvested at September 30, 2012	640,506		58.39


4.	Cash and Cash Equivalents

The following table details our cash and cash equivalents at September 30, 2012 and December 31, 2011:



(Dollars in thousands)	September 30, 2012		December 31, 2011
Cash and due from banks (1)	$	678,239	$	852,010
Securities purchased under agreements to resell (2)	116,276		175,553
Other short-term investment securities	112,165		87,385
Total cash and cash equivalents	$	906,680	$	1,114,948


(1)	At September 30, 2012 and December 31, 2011, $139.1 million and $100.1 million, respectively, of our cash and due from banks was deposited at the FRB and was earning interest at the Federal Funds target rate, and interest-earning deposits in other financial institutions were $187.6 million and $371.5 million, respectively.


(2)	At September 30, 2012 and December 31, 2011, securities purchased under agreements to resell were collateralized by U.S. treasury securities and U.S. agency securities with aggregate fair values of $118.6 million and $179.1 million, respectively. None of these securities received as collateral were sold or repledged as of September 30, 2012 and December 31, 2011.


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.

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The major components of our investment securities portfolio at September 30, 2012 and December 31, 2011 are as follows:



	September 30, 2012									December 31, 2011
(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	$	25,101	$	328	$	—		$	25,429	$	25,233	$	731	$	—		$	25,964
U.S. agency debentures	2,857,336		78,814		—			2,936,150		2,822,158		52,864		(90		)	2,874,932
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	1,535,934		54,648		—			1,590,582		1,529,466		34,926		(106		)	1,564,286
Agency-issued collateralized mortgage obligations—fixed rate	4,119,707		49,160		(742		)	4,168,125		3,317,285		56,546		(71		)	3,373,760
Agency-issued collateralized mortgage obligations—variable rate	1,928,853		10,951		(5		)	1,939,799		2,416,158		1,554		(4,334		)	2,413,378
Agency-issued commercial mortgage-backed securities	273,021		6,486		—			279,507		176,646		2,047		—			178,693
Municipal bonds and notes	91,643		8,578		—			100,221		92,241		8,257		—			100,498
Equity securities	3,941		4,265		(289		)	7,917		5,554		180		(1,199		)	4,535
Total available-for-sale securities	$	10,835,536	$	213,230	$	(1,036	)	$	11,047,730	$	10,384,741	$	157,105	$	(5,800	)	$	10,536,046
Non-marketable securities:
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments (1)								658,409									611,824
Other venture capital investments (2)								118,622									124,121
Other investments								—									987
Non-marketable securities (equity method accounting):
Other investments (3)								141,761									68,252
Low income housing tax credit funds								66,806									34,894
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments (4)								158,275									145,007
Other investments								19,942									19,355
Total non-marketable securities								1,163,815									1,004,440
Total investment securities								$	12,211,545								$	11,540,486


(1)	The following table shows the amounts of venture capital and private equity fund investments held by the following consolidated funds and our ownership percentage of each fund at September 30, 2012 and December 31, 2011 (fair value accounting):

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	September 30, 2012				December 31, 2011
(Dollars in thousands)	Amount		Ownership %		Amount		Ownership %
SVB Strategic Investors Fund, LP	$	35,963	12.6	%	$	39,567	12.6	%
SVB Strategic Investors Fund II, LP	103,302		8.6		122,619		8.6
SVB Strategic Investors Fund III, LP	208,809		5.9		218,429		5.9
SVB Strategic Investors Fund IV, LP	161,082		5.0		122,076		5.0
Strategic Investors Fund V Funds	28,908		Various		8,838		0.3
SVB Capital Preferred Return Fund, LP	51,460		20.0		42,580		20.0
SVB Capital—NT Growth Partners, LP	61,253		33.0		43,958		33.0
SVB Capital Partners II, LP (i)	1,341		5.1		2,390		5.1
Other private equity fund (ii)	6,291		58.2		11,367		58.2
Total venture capital and private equity fund investments	$	658,409			$	611,824


(i)	At September 30, 2012, we had a direct ownership interest of 1.3 percent and an indirect ownership interest of 3.8 percent in the fund through our ownership interest of SVB Strategic Investors Fund II, LP.


(ii)	At September 30, 2012, we had a direct ownership interest of 41.5 percent and indirect ownership interests of 12.6 percent and 4.1 percent in the fund through our ownership interest of SVB Capital—NT Growth Partners, LP and SVB Capital Preferred Return Fund, LP, respectively.


(2)	The following table shows the amounts of other venture capital investments held by the following consolidated funds and our ownership percentage of each fund at September 30, 2012 and December 31, 2011 (fair value accounting):



	September 30, 2012				December 31, 2011
(Dollars in thousands)	Amount		Ownership %		Amount		Ownership %
Silicon Valley BancVentures, LP	$	16,737	10.7	%	$	17,878	10.7	%
SVB Capital Partners II, LP (i)	55,686		5.1		61,099		5.1
SVB India Capital Partners I, LP	42,713		14.4		42,832		14.4
SVB Capital Shanghai Yangpu Venture Capital Fund	3,486		6.8		2,312		6.8
Total other venture capital investments	$	118,622			$	124,121


(i)	At September 30, 2012, we had a direct ownership interest of 1.3 percent and an indirect ownership interest of 3.8 percent in the fund through our ownership of SVB Strategic Investors Fund II, LP.


(3)	The following table shows the carrying value and our ownership percentage of each investment at September 30, 2012 and December 31, 2011 (equity method accounting):



	September 30, 2012				December 31, 2011
(Dollars in thousands)	Amount		Ownership %		Amount		Ownership %
Gold Hill Venture Lending 03, LP (i)	$	9,187	9.3	%	$	16,072	9.3	%
Gold Hill Capital 2008, LP (ii)	20,491		15.5		19,328		15.5
Partners for Growth II, LP	3,199		24.2		3,785		24.2
China Joint Venture investment (iii)	78,484		50.0		—		—
Other investments	30,400		N/A		29,067		N/A
Total other investments (equity method accounting)	$	141,761			$	68,252


(i)	At September 30, 2012, we had a direct ownership interest of 4.8 percent in the fund and an indirect interest in the fund through our investment in Gold Hill Venture Lending Partners 3, LLC (“GHLLC”) of 4.5 percent.


(ii)	At September 30, 2012, we had a direct ownership interest of 11.5 percent in the fund and an indirect interest in the fund through our investment in Gold Hill Capital 2008, LLC of 4.0 percent.


(iii)	On May 3, 2012, we contributed $79.7 million to SPD Silicon Valley Bank Co., Ltd. ("SPD-SVB"), our joint venture bank in China.

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(4)

Represents investments in 325 and 329 funds (primarily venture capital funds) at September 30, 2012 and December 31, 2011, respectively, where our ownership interest is less than 5% of the voting interests of each such fund and in which we do not have the ability to exercise significant influence over the partnerships operating activities and financial policies. For the three months ended September 30, 2012, we recognized OTTI losses of $0.4 million resulting from other-than-temporary declines in value for 17 of the 325 investments. For the nine months ended September 30, 2012, we recognized OTTI losses of $0.9 million resulting from other-than-temporary declines in value for 43 of the 325 investments. The OTTI losses are included in net gains on investment securities, a component of noninterest income. We concluded that any declines in value for the remaining investments were temporary and as such, no OTTI was required to be recognized. At September 30, 2012, the carrying value of these venture capital and private equity fund investments (cost method accounting) was $158.3 million, and the estimated fair value was $190.0 million.

The following table summarizes our unrealized losses on our available-for-sale securities portfolio into categories of less than 12 months, or 12 months or longer as of September 30, 2012:



	September 30, 2012
	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
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate	$	205,942	$	(742	)	$	—	$	—		$	205,942	$	(742	)
Agency-issued collateralized mortgage obligations—variable rate	10,611		(5		)	—		—			10,611		(5		)
Equity securities	1,551		(95		)	250		(194		)	1,801		(289		)
Total temporarily impaired securities (1)	$	218,104	$	(842	)	$	250	$	(194	)	$	218,354	$	(1,036	)

(1)

As of September 30, 2012, we identified a total of 10 investments that were in unrealized loss positions, of which three investments totaling $0.3 million with unrealized losses of $0.2 million have been in an impaired position for a period of time greater than 12 months. As of September 30, 2012, we do not intend to sell any impaired debt or equity securities prior to recovery of our adjusted cost basis, and it is more likely than not that we will not be required to sell any of our securities prior to recovery of our adjusted cost basis. Based on our analysis as of September 30, 2012, we deem all impairments to be temporary, and therefore changes in value for our temporarily impaired securities as of the same date are included in other comprehensive income. Market valuations and impairment analyses on assets in the available-for-sale securities portfolio are reviewed and monitored on a quarterly basis.

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, 2011:



	December 31, 2011
	Less than 12 months					12 months or longer				Total
(Dollars in thousands)	Fair Value of Investments		Unrealized Losses			Fair Value of Investments		Unrealized Losses		Fair Value of Investments		Unrealized Losses
U.S. agency debentures	$	50,994	$	(90	)	$	—	$	—	$	50,994	$	(90	)
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	54,588		(106		)	—		—		54,588		(106		)
Agency-issued collateralized mortgage obligations—fixed rate	50,125		(71		)	—		—		50,125		(71		)
Agency-issued collateralized mortgage obligations—variable rate	1,521,589		(4,334		)	—		—		1,521,589		(4,334		)
Equity securities	3,831		(1,199		)	—		—		3,831		(1,199		)
Total temporarily impaired securities	$	1,681,127	$	(5,800	)	$	—	$	—	$	1,681,127	$	(5,800	)

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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, 2012. 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 certain U.S. agency debentures may occur earlier than their contractual maturities because the note issuers have the right to call outstanding amounts ahead of their contractual maturity. Expected maturities for mortgage-backed securities may differ significantly from their contractual maturities because mortgage borrowers have the right to prepay outstanding loan obligations with or without penalties. Mortgage-backed securities classified as available-for-sale typically have original contractual maturities from 10 to 30 years whereas expected average lives of these securities tend to be significantly shorter and vary based upon structure.



	September 30, 2012
	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	$	25,429	2.39	%	$	25,429	2.39	%	$	—	—	%	$	—	—	%	$	—	—	%
U.S. agency debentures	2,936,150		1.56		51,027		1.05		2,653,180		1.49		231,943		2.43		—		—
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	1,590,582		2.34		—		—		—		—		1,470,437		2.27		120,145		3.29
Agency-issued collateralized mortgage obligations - fixed rate	4,168,125		2.06		—		—		—		—		—		—		4,168,125		2.06
Agency-issued collateralized mortgage obligations - variable rate	1,939,799		0.70		—		—		—		—		—		—		1,939,799		0.70
Agency-issued commercial mortgage-backed securities	279,507		2.01		—		—		—		—		—		—		279,507		2.01
Municipal bonds and notes	100,221		4.99		933		5.20		17,333		5.60		49,532		6.02		32,423		6.24
Total	$	11,039,813	1.75		$	77,389	1.54		$	2,670,513	1.52		$	1,751,912	2.39		$	6,539,999	1.70

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The following table presents the components of gains and losses (realized and unrealized) on investment securities for the three and nine months ended September 30, 2012 and 2011:



	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2012			2011			2012			2011
Gross gains on investment securities:
Available-for-sale securities, at fair value (1)	$	20		$	5		$	5,363		$	37,382
Marketable securities (fair value accounting)	255			470			3,874			912
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	28,639			34,640			88,037			117,344
Other venture capital investments	2,515			22,058			5,848			29,077
Other investments	—			—			21			20
Non-marketable securities (equity method accounting):
Other investments	5,571			2,192			12,382			8,708
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments	694			735			1,639			1,791
Other investments	1,406			8			1,712			2,437
Total gross gains on investment securities	39,100			60,108			118,876			197,671
Gross losses on investment securities:
Available-for-sale securities, at fair value (1)	(121		)	—			(1,771		)	(94		)
Marketable securities (fair value accounting)	(553		)	(1,691		)	(1,307		)	(5,806		)
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	(16,557		)	(2,373		)	(49,090		)	(9,274		)
Other venture capital investments	(125		)	(3,351		)	(10,007		)	(5,015		)
Other investments	—			(16		)	—			(16		)
Non-marketable securities (equity method accounting):
Other investments	(1,091		)	(50		)	(1,794		)	(1,359		)
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments	(423		)	(365		)	(963		)	(797		)
Other investments	(2		)	—			(68		)	(31		)
Total gross losses on investment securities	(18,872		)	(7,846		)	(65,000		)	(22,392		)
Gains on investment securities, net	$	20,228		$	52,262		$	53,876		$	175,279
Gains attributable to noncontrolling interests, including carried interest	$	12,776		$	42,961		$	34,616		$	112,783


(1)	Includes realized gains on sales of available-for-sale securities that are recognized in the income statement. Unrealized gains on available-for-sale securities are recognized in other comprehensive income. The cost basis of available-for-sale securities sold is determined on a specific identification basis.


6.	Loans and Allowance for Loan Losses

We serve a variety of commercial clients in the technology, life science, venture capital/private equity and premium wine industries. Our technology clients generally tend to be in the industries of hardware (semiconductors, communications and electronics), software and related services, and clean technology. Because of the diverse nature of clean technology products and services, for our loan-related reporting purposes, cleantech-related loans are reported under our hardware, software, life science and other commercial loan categories, as applicable. 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 through SVB Private Bank primarily to venture capital/private equity

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professionals. These products and services include real estate secured home equity lines of credit, which may be used to finance real estate investments and loans used to purchase, renovate or refinance personal residences. These products and services also include restricted stock purchase loans and capital call lines of credit. We also provide real estate secured loans to eligible employees through our EHOP.

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

The composition of loans, net of unearned income of $73.8 million and $60.2 million at September 30, 2012 and December 31, 2011, respectively, is presented in the following table:



(Dollars in thousands)	September 30, 2012		December 31, 2011
Commercial loans:
Software	$	2,952,866	$	2,492,849
Hardware	1,192,716		952,303
Venture capital/private equity	1,393,943		1,117,419
Life science	1,027,693		863,737
Premium wine	133,810		130,245
Other	309,970		342,147
Total commercial loans	7,010,998		5,898,700
Real estate secured loans:
Premium wine (1)	379,837		345,988
Consumer loans (2)	609,370		534,001
Total real estate secured loans	989,207		879,989
Construction loans	48,558		30,256
Consumer loans	143,606		161,137
Total loans, net of unearned income (3)	$	8,192,369	$	6,970,082


(1)	Included in our premium wine portfolio are gross construction loans of $148.4 million and $110.8 million at September 30, 2012 and December 31, 2011, respectively.


(2)	Consumer loans secured by real estate at September 30, 2012 and December 31, 2011 were comprised of the following:



(Dollars in thousands)	September 30, 2012		December 31, 2011
Loans for personal residence	$	432,004	$	350,359
Loans to eligible employees	107,969		99,704
Home equity lines of credit	69,397		83,938
Consumer loans secured by real estate	$	609,370	$	534,001


(3)	Included within our total loan portfolio are credit card loans of $66.2 million and $49.7 million at September 30, 2012 and December 31, 2011, respectively.

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Credit Quality

The composition of loans, net of unearned income of $73.8 million and $60.2 million at September 30, 2012 and December 31, 2011, respectively, broken out by portfolio segment and class of financing receivable is as follows:



(Dollars in thousands)	September 30, 2012		December 31, 2011
Commercial loans:
Software	$	2,952,866	$	2,492,849
Hardware	1,192,716		952,303
Venture capital/private equity	1,393,943		1,117,419
Life science	1,027,693		863,737
Premium wine	513,647		476,233
Other	358,528		372,403
Total commercial loans	7,439,393		6,274,944
Consumer loans:
Real estate secured loans	609,370		534,001
Other consumer loans	143,606		161,137
Total consumer loans	752,976		695,138
Total loans, net of unearned income	$	8,192,369	$	6,970,082

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The following table summarizes the aging of our gross loans, broken out by portfolio segment and class of financing receivable as of September 30, 2012 and December 31, 2011:



(Dollars in thousands)	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater Than 90 Days Past Due		Total Past Due		Current		Loans Past Due 90 Days or More Still Accruing Interest
September 30, 2012:
Commercial loans:
Software	$	5,323	$	273	$	—	$	5,596	$	2,975,008	$	—
Hardware	8,901		181		5,000		14,082		1,163,848		5,000
Venture capital/private equity	1,651		—		—		1,651		1,406,695		—
Life science	8,646		1,875		—		10,521		1,027,806		—
Premium wine	49		—		—		49		512,621		—
Other	74		—		—		74		358,862		—
Total commercial loans	24,644		2,329		5,000		31,973		7,444,840		5,000
Consumer loans:
Real estate secured loans	—		—		—		—		607,117		—
Other consumer loans	—		—		—		—		142,841		—
Total consumer loans	—		—		—		—		749,958		—
Total gross loans excluding impaired loans	24,644		2,329		5,000		31,973		8,194,798		5,000
Impaired loans	331		501		2,953		3,785		35,612		—
Total gross loans	$	24,975	$	2,830	$	7,953	$	35,758	$	8,230,410	$	5,000
December 31, 2011:
Commercial loans:
Software	$	415	$	1,006	$	—	$	1,421	$	2,515,327	$	—
Hardware	1,951		45		—		1,996		954,690		—
Venture capital/private equity	45		—		—		45		1,128,475		—
Life science	398		78		—		476		871,626		—
Premium wine	1		174		—		175		475,406		—
Other	15		—		—		15		370,539		—
Total commercial loans	2,825		1,303		—		4,128		6,316,063		—
Consumer loans:
Real estate secured loans	—		—		—		—		515,534		—
Other consumer loans	590		—		—		590		157,389		—
Total consumer loans	590		—		—		590		672,923		—
Total gross loans excluding impaired loans	3,415		1,303		—		4,718		6,988,986		—
Impaired loans	1,350		1,794		6,613		9,757		26,860		—
Total gross loans	$	4,765	$	3,097	$	6,613	$	14,475	$	7,015,846	$	—

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The following table summarizes our impaired loans as they relate to our allowance for loan losses, broken out by portfolio segment and class of financing receivable as of September 30, 2012 and December 31, 2011:



(Dollars in thousands)	Impaired loans for which there is a related allowance for loan losses		Impaired loans for which there is no related allowance for loan losses		Total carrying value of impaired loans		Total unpaid principal of impaired loans
September 30, 2012:
Commercial loans:
Software	$	2,634	$	182	$	2,816	$	3,324
Hardware	27,129		—		27,129		42,415
Life Science	—		—		—		—
Premium wine	—		3,079		3,079		3,317
Other	—		2,745		2,745		6,894
Total commercial loans	29,763		6,006		35,769		55,950
Consumer loans:
Real estate secured loans	120		2,288		2,408		7,407
Other consumer loans	1,220		—		1,220		1,371
Total consumer loans	1,340		2,288		3,628		8,778
Total	$	31,103	$	8,294	$	39,397	$	64,728
December 31, 2011:
Commercial loans:
Software	$	1,142	$	—	$	1,142	$	1,540
Hardware	4,754		429		5,183		8,843
Life science	—		311		311		523
Premium wine	—		3,212		3,212		3,341
Other	4,303		1,050		5,353		9,104
Total commercial loans	10,199		5,002		15,201		23,351
Consumer loans:
Real estate secured loans	—		18,283		18,283		22,410
Other consumer loans	3,133		—		3,133		3,197
Total consumer loans	3,133		18,283		21,416		25,607
Total	$	13,332	$	23,285	$	36,617	$	48,958

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The following table summarizes our average impaired loans, broken out by portfolio segment and class of financing receivable during the three and nine months ended September 30, 2012 and 2011:



	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2012		2011		2012		2011
Average impaired loans:
Commercial loans:
Software	$	2,689	$	2,562	$	2,040	$	2,652
Hardware	18,490		7,071		17,407		6,086
Life science	—		827		78		1,498
Premium wine	3,093		1,954		3,334		2,345
Other	2,619		7,604		3,590		4,453
Total commercial loans	26,891		20,018		26,449		17,034
Consumer loans:
Real estate secured loans	2,411		18,746		5,967		19,476
Other consumer loans	1,266		1,107		2,152		369
Total consumer loans	3,677		19,853		8,119		19,845
Total average impaired loans	$	30,568	$	39,871	$	34,568	$	36,879

The following tables summarize the activity relating to our allowance for loan losses for the three and nine months ended September 30, 2012 and 2011, broken out by portfolio segment:



Three months ended September 30, 2012 (dollars in thousands)	Beginning Balance June 30, 2012		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Ending Balance September 30, 2012
Commercial loans:
Software	$	37,981	$	—		$	374	$	(1,110	)	$	37,245
Hardware	22,632		(1,849		)	106		6,796			27,685
Venture capital/private equity	9,652		—			—		991			10,643
Life science	11,660		(2,781		)	3		3,281			12,163
Premium wine	3,396		—			228		(463		)	3,161
Other	4,942		(7		)	30		(1,708		)	3,257
Total commercial loans	90,263		(4,637		)	741		7,787			94,154
Consumer loans	7,903		—			466		(999		)	7,370
Total allowance for loan losses	$	98,166	$	(4,637	)	$	1,207	$	6,788		$	101,524



Nine months ended September 30, 2012 (dollars in thousands)	Beginning Balance December 31, 2011		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Ending Balance September 30, 2012
Commercial loans:
Software	$	38,263	$	(2,977	)	$	4,462	$	(2,503	)	$	37,245
Hardware	16,810		(16,110		)	540		26,445			27,685
Venture capital/private equity	7,319		—			—		3,324			10,643
Life science	10,243		(3,016		)	316		4,620			12,163
Premium wine	3,914		(584		)	493		(662		)	3,161
Other	5,817		(2,463		)	1,181		(1,278		)	3,257
Total commercial loans	82,366		(25,150		)	6,992		29,946			94,154
Consumer loans	7,581		(607		)	1,026		(630		)	7,370
Total allowance for loan losses	$	89,947	$	(25,757	)	$	8,018	$	29,316		$	101,524

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Three months ended September 30, 2011 (dollars in thousands)	Beginning Balance June 30, 2011		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Ending Balance September 30, 2011
Commercial loans:
Software	$	31,873	$	(3,125	)	$	2,718	$	4,899		$	36,365
Hardware	16,042		(4,813		)	44		2,304			13,577
Venture capital/private equity	8,307		—			—		(497		)	7,810
Life science	7,225		(310		)	3,359		(2,110		)	8,164
Premium wine	4,009		—			360		(354		)	4,015
Other	5,869		—			64		(359		)	5,574
Total commercial loans	73,325		(8,248		)	6,545		3,883			75,505
Consumer loans	8,830		—			4,025		(3,114		)	9,741
Total allowance for loan losses	$	82,155	$	(8,248	)	$	10,570	$	769		$	85,246



Nine months ended September 30, 2011 (dollars in thousands)	Beginning Balance December 31, 2010		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Ending Balance September 30, 2011
Commercial loans:
Software	$	29,288	$	(4,747	)	$	10,638	$	1,186		$	36,365
Hardware	14,688		(4,828		)	356		3,361			13,577
Venture capital/private equity	8,241		—			—		(431		)	7,810
Life science	9,077		(3,972		)	4,487		(1,428		)	8,164
Premium wine	5,492		(449		)	1,090		(2,118		)	4,015
Other	5,318		(2,867		)	471		2,652			5,574
Total commercial loans	72,104		(16,863		)	17,042		3,222			75,505
Consumer loans	10,523		—			4,584		(5,366		)	9,741
Total allowance for loan losses	$	82,627	$	(16,863	)	$	21,626	$	(2,144	)	$	85,246

The following table summarizes the allowance for loan losses individually and collectively evaluated for impairment as of September 30, 2012 and December 31, 2011, broken out by portfolio segment:



	September 30, 2012				December 31, 2011
(Dollars in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
Commercial loans:
Software	$	653	$	36,592	$	526	$	37,737
Hardware	5,061		22,624		1,261		15,549
Venture capital/private equity	—		10,643		—		7,319
Life science	—		12,163		—		10,243
Premium wine	—		3,161		—		3,914
Other	—		3,257		1,180		4,637
Total commercial loans	5,714		88,440		2,967		79,399
Consumer loans	289		7,081		740		6,841
Total allowance for loan losses	$	6,003	$	95,521	$	3,707	$	86,240

Credit Quality Indicators

For each individual client, we establish an internal credit risk rating for that loan, which is used for assessing and monitoring credit risk as well as performance of the loan and the overall portfolio. Our internal credit risk ratings are also used to summarize the risk of loss due to failure by an individual borrower to repay the loan. For our internal credit risk ratings, each individual loan

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is given a risk rating of 1 through 10. Loans risk-rated 1 through 4 are performing loans and translate to an internal rating of “Pass”, with loans risk-rated 1 being cash secured. Loans risk-rated 5 through 7 are performing loans, however, we consider them as demonstrating higher risk which requires more frequent review of the individual exposures; these translate to an internal rating of “Performing (Criticized)”. A majority of our Performing (Criticized) loans are from our SVB Accelerator practice, serving our emerging or early stage clients. Loans risk-rated 8 and 9 are loans that are considered to be impaired and are on nonaccrual status. Loans are placed on nonaccrual status when they become 90 days past due as to principal or interest payments (unless the principal and interest are well secured and in the process of collection), or when we have determined, based upon most recent available information, that the timely collection of principal or interest is not probable; these loans are deemed “impaired” (For further description of nonaccrual loans, refer to Note 2—“Summary of Significant Accounting Policies” under Part II, Item 8 of our 2011 Form 10-K). Loans rated 10 are charged-off and are not included as part of our loan portfolio balance. We review our credit quality indicators for performance and appropriateness of risk ratings as part of our evaluation process for our allowance for loan losses. The following table summarizes the credit quality indicators, broken out by portfolio segment and class of financing receivables as of September 30, 2012 and December 31, 2011:



(Dollars in thousands)	Pass		Performing (Criticized)		Impaired		Total
September 30, 2012:
Commercial loans:
Software	$	2,751,238	$	229,366	$	2,816	$	2,983,420
Hardware	1,069,973		107,957		27,129		1,205,059
Venture capital/private equity	1,406,746		1,600		—		1,408,346
Life science	939,092		99,235		—		1,038,327
Premium wine	501,507		11,163		3,079		515,749
Other	335,201		23,735		2,745		361,681
Total commercial loans	7,003,757		473,056		35,769		7,512,582
Consumer loans:
Real estate secured loans	588,678		18,439		2,408		609,525
Other consumer loans	131,548		11,293		1,220		144,061
Total consumer loans	720,226		29,732		3,628		753,586
Total gross loans	$	7,723,983	$	502,788	$	39,397	$	8,266,168
December 31, 2011:
Commercial loans:
Software	$	2,290,497	$	226,251	$	1,142	$	2,517,890
Hardware	839,230		117,456		5,183		961,869
Venture capital/private equity	1,120,373		8,147		—		1,128,520
Life science	748,129		123,973		311		872,413
Premium wine	434,309		41,272		3,212		478,793
Other	353,434		17,120		5,353		375,907
Total commercial loans	5,785,972		534,219		15,201		6,335,392
Consumer loans:
Real estate secured loans	497,060		18,474		18,283		533,817
Other consumer loans	151,101		6,878		3,133		161,112
Total consumer loans	648,161		25,352		21,416		694,929
Total gross loans	$	6,434,133	$	559,571	$	36,617	$	7,030,321

TDRs

As of September 30, 2012 we had TDRs of $23.5 million where concessions have been granted to borrowers experiencing financial difficulties, in an attempt to maximize collection. There were unfunded commitments available for funding of $0.1 million to the clients associated with these TDRs as of September 30, 2012. The following table summarizes our loans modified in TDRs, broken out by portfolio segment and class of financing receivables at September 30, 2012 and December 31, 2011:

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(Dollars in thousands)	September 30, 2012		December 31, 2011
Loans modified in TDRs:
Commercial loans:
Software	$	2,459	$	1,142
Hardware	12,193		5,183
Premium wine	1,971		1,949
Other	3,281		4,934
Total commercial loans	19,904		13,208
Consumer loans:
Real estate secured loans	2,363		17,934
Other consumer loans	1,220		3,133
Total consumer loans	3,583		21,067
Total	$	23,487	$	34,275

The following table summarizes the recorded investment in loans modified in TDRs, broken out by portfolio segment and class of financing receivable, for modifications made during the three and nine months ended September 30, 2012 and 2011:



	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2012		2011		2012		2011
Loans modified in TDRs during the period:
Commercial loans:
Software	$	1,969	$	381	$	1,969	$	941
Hardware	—		801		11,677		2,674
Premium wine	—		—		156		1,993
Other	—		2,247		2,237		2,247
Total commercial loans	1,969		3,429		16,039		7,855
Consumer loans:
Real estate secured loans	—		—		392		—
Other consumer loans	—		—		—		3,322
Total consumer loans	—		—		392		3,322
Total loans modified in TDR’s during the period (1)	$	1,969	$	3,429	$	16,431	$	11,177


(1)	During the three and nine months ended September 30, 2012, we had partial charge-offs of $1.1 million and $11.0 million, respectively, on loans classified as TDRs. There were $0.6 million partial charge-offs on loans classified as TDRs during the three and nine months ended September 30, 2011.

During the three months ended September 30, 2012 all new TDRs were modified through payment deferrals granted to our clients and no principal or interest was forgiven. During the nine months ended September 30, 2012 new TDRs totaling $9.6 million and $6.8 million were modified through forgiveness of principal and payment deferrals granted to our clients, respectively. During the three and nine months ended September 30, 2011 all new TDRs were modified through payment deferrals granted to our clients and no principal or interest was forgiven.

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

The following table summarizes the recorded investment in loans modified in TDRs within the previous 12 months that subsequently defaulted during the three and nine months ended September 30, 2012 and 2011, broken out by portfolio segment and class of financing receivable:

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	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2012		2011		2012		2011
TDRs modified within the previous 12 months that defaulted during the period:
Commercial loans:
Software	$	—	$	64	$	—	$	64
Hardware	515		1,206		515		3,079
Premium wine	—		1,993		—		1,993
Total commercial loans	515		3,263		515		5,136
Consumer loans:
Real estate secured loans	120		—		120		—
Other consumer loans	—		3,322		—		3,322
Total consumer loans	120		3,322		120		3,322
Total TDRs modified within the previous 12 months that defaulted in the period	$	635	$	6,585	$	635	$	8,458

Charge-offs and defaults on previously restructured loans are evaluated to determine the impact to the allowance for loan losses, if any. The evaluation of these defaults may impact the assumptions used in calculating the reserve on other TDRs and impaired loans as well as management’s overall outlook of macroeconomic factors that affect the reserve on the loan portfolio as a whole. After evaluating the charge-offs and defaults experienced on our TDRs we determined that no change to our reserving methodology was necessary to determine the allowance for loan losses as of September 30, 2012.


7.	Short-Term Borrowings and Long-Term Debt

The following table represents outstanding short-term borrowings and long-term debt at September 30, 2012 and December 31, 2011:



				Carrying Value
(Dollars in thousands)	Maturity	Principal value at September 30, 2012		September 30, 2012		December 31, 2011
Short-term borrowings:
Short-term FHLB advances	October 1, 2012	$	215,000	$	215,000	$	—
Federal funds purchased	October 1, 2012	287,000		287,000		—
Other short-term borrowings	(1)	6,170		6,170		—
Total short-term borrowings				$	508,170	$	—
Long-term debt:
5.375% Senior Notes	September 15, 2020	$	350,000	$	347,944	$	347,793
5.70% Senior Notes (2)	June 1, 2012	—		—		143,969
6.05% Subordinated Notes (3)	June 1, 2017	45,964		55,130		55,075
7.0% Junior Subordinated Debentures	October 15, 2033	50,000		55,240		55,372
Other long-term debt	(4)	—		—		1,439
Total long-term debt				$	458,314	$	603,648


(1)	Represents cash collateral received from our counterparty for our interest rate swap agreement related to our 6.05% Subordinated Notes.


(2)	At December 31, 2011, included in the carrying value of our 5.70% Senior Notes was $2.6 million related to the fair value of the interest rate swap associated with the notes.


(3)	At September 30, 2012 and December 31, 2011, included in the carrying value of our 6.05% Subordinated Notes were $9.5 million and $8.8 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. The last payment related to the notes was made in April 2012.

Interest expense related to short-term borrowings and long-term debt was $5.8 million and $18.4 million for the three and nine months ended September 30, 2012, respectively, and $6.2 million and $24.0 million for the three and nine months ended

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September 30, 2011, respectively. Interest expense is net of the cash flow impact from our interest rate swap agreements related to our 5.70% Senior Notes and 6.05% Subordinated Notes. The weighted average interest rate associated with our short-term borrowings as of September 30, 2012 was 0.17 percent.

5.70% Senior Notes

Our remaining $141.4 million 5.70% Senior Notes matured on June 1, 2012 and we repaid all outstanding principal, including unpaid and accrued interest, in cash upon maturity. In connection with the maturity, we also terminated the interest rate swap associated with these notes (see Note 8—“Derivative Financial Instruments”).

3.875% Convertible Notes

Our $250 million 3.875% Convertible Notes matured on April 15, 2011. The effective interest rate for our 3.875% Convertible Notes for the nine months ended September 30, 2011 was 5.92 percent and interest expense was $4.2 million.

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, 2012, we borrowed $287.0 million against our uncommitted federal funds lines. We also pledge securities to the FHLB of San Francisco and the discount window at the FRB. The market value of collateral pledged to the FHLB of San Francisco (comprised primarily of U.S. agency debentures) at September 30, 2012 totaled $1.5 billion, of which $1.3 billion was unused and available to support additional borrowings. The market value of collateral pledged at the discount window of the FRB at September 30, 2012 totaled $604.5 million, all of which was unused and available to support additional borrowings.


8.	Derivative Financial Instruments

We primarily use derivative financial instruments to manage interest rate risk, currency exchange rate risk, and to assist customers with their risk management objectives. Also, in connection with negotiating credit facilities and certain other services, we often obtain equity warrant assets giving us the right to acquire stock in private, venture-backed companies in the technology and life science industries.

Interest Rate Risk

Interest rate risk is our primary market risk and can result from timing and volume differences in the repricing of our interest rate-sensitive assets and liabilities and changes in market interest rates. To manage interest rate risk for our 5.70% Senior Notes and 6.05% Subordinated Notes, we entered into fixed-for-floating interest rate swap agreements at the time of debt issuance based upon LIBOR with matched-terms. Prior to our termination of portions of our interest rate swap agreements (discussed below), we used the shortcut method to assess hedge effectiveness and evaluate the hedging relationships for qualification under the shortcut method requirements for each reporting period. Net cash benefits associated with our interest rate swaps were recorded as a reduction in “Interest expense—Borrowings,” a component of net interest income. The fair value of our interest rate swaps was calculated using a discounted cash flow method and adjusted for credit valuation associated with counterparty risk. Increases from changes in fair value were included in other assets and decreases from changes in fair value were included in other liabilities.

In connection with the repurchase of portions of our 5.70% Senior Notes and 6.05% Subordinated Notes in May 2011, we terminated corresponding amounts of the associated interest rate swaps. As a result of these terminations, the remaining portions of the interest rate swaps no longer qualify for the shortcut method to assess hedge effectiveness under ASC 815, Derivatives and Hedging, and are accounted for under the long-haul method. Any differences associated with our interest rate swaps that arise as a result of hedge ineffectiveness are recorded through net gains on derivative instruments, in noninterest income, a component of consolidated net income. Our 5.70% Senior Notes matured and were repaid on June 1, 2012, at which time the remaining portion of the associated interest rate swap expired.

Currency Exchange Risk

We enter into foreign exchange forward contracts to economically reduce our foreign exchange exposure risk related to certain of our client loans that are denominated in foreign currencies, primarily in Pound Sterling and Euro. 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

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in other assets and loss positions in other liabilities, while net changes in fair value are recorded through net gains on derivative instruments, in noninterest income, a component of consolidated net income. Additionally, through our global banking operations we maintain customer deposits denominated in the Euro and Pound Sterling which are used to fund certain loans in these currencies to limit our exposure to currency fluctuations.

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”). 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 on derivative instruments, in noninterest income, a component of consolidated net income.

Loan Conversion Options

In connection with negotiating certain credit facilities, we occasionally extend loan facilities which have convertible option features. The convertible loans may be converted into a certain number of shares determined by dividing the principal amount of the loan by the applicable conversion price. Because our loan conversion options have underlying and notional values and had no initial net investment, these assets qualify as derivative instruments. We value our loan conversion options using a modified Black-Scholes option pricing model, which incorporates assumptions about the underlying asset value, volatility, and the risk-free rate. Loan conversion options are recorded at fair value in other assets, while changes in their fair value are recorded through net gains on derivative instruments, in noninterest income, a component of consolidated net income.

Other Derivatives

We sell forward and option contracts to clients who wish to mitigate their foreign currency exposure. We economically reduce the currency risk from this business by entering into opposite way contracts with correspondent banks. This 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. Generally, we 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 on derivative instruments, in noninterest income, a component of consolidated net income.

We sell interest rate contracts to clients who wish to mitigate their interest rate exposure. We economically reduce the interest rate risk from this business by entering into opposite way contracts with correspondent banks. We do not designate any of these contracts (which are derivative instruments) as qualifying for hedge accounting. 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 derivatives is recorded through net gains 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 mitigate counterparty credit risk through credit approvals, limits, monitoring procedures and obtaining collateral, as appropriate. Consistent with the clarification guidance included in ASU 2011-4, we made an accounting policy decision effective January 1, 2012 to use the exception in the guidance with respect to measuring counterparty credit risk for derivative instruments, which allows us to continue to measure the fair value of a group of financial assets and financial liabilities on a net risk basis by counterparty portfolio.

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The total notional or contractual amounts, fair value, collateral and net exposure of our derivative financial instruments at September 30, 2012 and December 31, 2011 were as follows:



		September 30, 2012										December 31, 2011
(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	$	45,964	$	9,508		$	6,170	$	3,338		$	187,393	$	11,441		$	—	$	11,441
Derivatives not designated as hedging instruments:
Currency exchange risks:
Foreign exchange forwards	Other assets	23,441		548			—		548			68,518		514			—		514
Foreign exchange forwards	Other liabilities	38,593		(1,373		)	—		(1,373		)	6,822		(199		)	—		(199		)
Net exposure				(825		)	—		(825		)			315			—		315
Other derivative instruments:
Equity warrant assets	Other assets	162,471		70,478			—		70,478			144,586		66,953			—		66,953
Other derivatives:
Foreign exchange forwards	Other assets	419,005		11,581			—		11,581			387,714		17,541			—		17,541
Foreign exchange forwards	Other liabilities	393,426		(10,116		)	—		(10,116		)	366,835		(16,346		)	—		(16,346		)
Foreign currency options	Other assets	127,379		987			—		987			75,600		271			—		271
Foreign currency options	Other liabilities	127,379		(987		)	—		(987		)	75,600		(271		)	—		(271		)
Loan conversion options	Other assets	9,778		1,240			—		1,240			14,063		923			—		923
Client interest rate derivatives	Other assets	62,120		236			—		236			39,713		50			—		50
Client interest rate derivatives	Other liabilities	62,120		(247		)	—		(247		)	39,713		(52		)	—		(52		)
Net exposure				2,694			—		2,694					2,116			—		2,116
Net				$	81,855		$	6,170	$	75,685				$	80,825		$	—	$	80,825


(1)	Cash collateral received from our counterparty for our interest rate swap agreement 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, 2012 remain at investment grade or higher and there were no material changes in their credit ratings for the three and nine months ended September 30, 2012.

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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, 2012 and 2011 is as follows:



		Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	Statement of income location	2012			2011			2012			2011
Derivatives designated as hedging instruments:
Interest rate risks:
Net cash benefit associated with interest rate swaps	Interest expense—borrowings	$	612		$	2,337		$	4,537		$	12,205
Changes in fair value of interest rate swaps	Net gains on derivative instruments	74			(400		)	571			(467		)
Net gains associated with interest rate risk derivatives		$	686		$	1,937		$	5,108		$	11,738
Derivatives not designated as hedging instruments:
Currency exchange risks:
Gains (losses) on revaluations of foreign currency instruments	Other noninterest income	$	1,578		$	(3,931	)	$	96		$	(733	)
Gains on internal foreign exchange forward contracts, net	Net gains on derivative instruments	220			3,591			1,162			540
Net gains (losses) associated with currency risk		$	1,798		$	(340	)	$	1,258		$	(193	)
Other derivative instruments:
Gains on equity warrant assets	Net gains on derivative instruments	$	547		$	5,518		$	12,358		$	23,375
Gains on client foreign exchange forward contracts, net	Net gains on derivative instruments	$	607		$	658		$	3,002		$	1,448
Net (losses) gains on other derivatives (1)	Net gains on derivative instruments	$	(337	)	$	584		$	(1,293	)	$	(743	)


(1)	Primarily represents the change in fair value of loan conversion options.

9. Other Noninterest Income and Other Noninterest Expense

A summary of other noninterest income for the three and nine months ended September 30, 2012 and 2011 is as follows:



	Three months ended September 30,					Nine months ended September 30,
(Dollars in thousands)	2012		2011			2012			2011
Unused commitment fees	$	2,579	$	1,900		$	9,312		$	5,194
Fund management fees	2,496		2,671			8,448			8,022
Service-based fee income	1,651		2,339			6,197			7,151
Net gains on the sale of certain assets related to our equity management services business	—		—			4,243			—
Loan syndication fees	1,353		50			2,853			920
Gains (losses) on revaluation of foreign currency instruments (1)	1,578		(3,931		)	96			(733		)
Currency revaluation gains (losses) (2)	845		(1,551		)	(88		)	(2,672		)
Other	2,921		1,630			8,104			5,502
Total other noninterest income	$	13,423	$	3,108		$	39,165		$	23,384


(1)	Represents the revaluation of foreign currency denominated financial instruments issued and held by us, primarily loans, deposits and cash.

(2)

Represents the revaluation of foreign currency denominated financial statements of certain funds. Included in these amounts are gains of $0.8 million and losses of $3 thousand for the three and nine months ended September 30, 2012, respectively, attributable to noncontrolling interests calculated based on the ownership percentages of the noncontrolling interests. This compares to losses of $1.7 million and $1.6 million for the comparable 2011 periods.

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A summary of other noninterest expense for the three and nine months ended September 30, 2012: and 2011 is as follows:



	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands)	2012		2011		2012		2011
Telephone	$	1,619	$	1,610	$	4,950	$	4,376
Client services	1,804		1,289		4,796		3,128
Data processing services	1,575		1,097		4,290		3,589
Tax credit fund amortization	941		1,212		2,961		3,366
Postage and supplies	591		641		1,844		1,725
Dues and publications	472		465		1,503		1,166
Net gain from note repurchases and termination of corresponding interest rate swaps	—		—		—		(3,123		)
Other	1,961		3,240		5,844		8,226
Total other noninterest expense	$	8,963	$	9,554	$	26,188	$	22,453


10.	Segment Reporting

We have three reportable segments for management reporting purposes: Global Commercial Bank, SVB Private Bank and SVB Capital. The results of our operating segments are based on our internal management reporting process.

Our operating segments’ primary source of revenue is from net interest income, which is primarily the difference between interest earned on loans, net of funds transfer pricing (“FTP”), and interest paid on deposits, net of FTP. Accordingly, 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. Effective January 1, 2012, FTP is calculated at an instrument level based on account characteristics. Prior to January 1, 2012, FTP was calculated by applying a transfer rate to pooled, or aggregated, loan and deposit volumes. We have reclassified all prior period amounts to conform to the current period’s methodology and presentation.

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.

The following is a description of the services that our three reportable 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. Our Global Commercial Bank segment is comprised of results from our Commercial Bank, and also includes SVB Specialty Lending, SVB Analytics and our Debt Fund Investments. (For further description of these operating segments, refer to Note 20—“Segment Reporting” under Part II, Item 8 of our 2011 Form 10-K.) As a result of the change in FTP methodology discussed above, our Global Commercial Bank segment’s total net interest income for the three and nine months ended September 30, 2011 was increased by $18.6 million and $52.9 million, respectively (offset is included within “Other Items”), due to the reclassification of all prior periods to reflect the current period’s methodology and presentation.


•	SVB Private Bank provides banking products and a range of credit services primarily to venture capital/private equity professionals using both long-term secured and short-term unsecured lines of credit.

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•

SVB Capital is the venture capital investment arm of SVBFG, which focuses primarily on funds management. SVB Capital manages funds (primarily venture capital funds) on behalf of third party limited partners and SVB Financial Group. The SVB Capital family of funds is comprised of funds of funds and direct venture funds. SVB Capital generates income for the Company primarily through management fees, carried interest arrangements and returns through the Company’s investments in the funds.

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. Noninterest income in the Other Items column is primarily attributable to noncontrolling interests and gains on equity warrant assets. Noninterest expense in the Other Items column primarily consists of expenses associated with corporate support functions such as finance, human resources, marketing, legal and other expenses. Additionally, average assets in the Other Items column primarily consists of cash and cash equivalents.

Our segment information for the three and nine months ended September 30, 2012 and 2011 is as follows:



(Dollars in thousands)	Global Commercial Bank (1)			SVB Private Bank			SVB Capital (1)			Other Items			Total
Three months ended September 30, 2012
Net interest income (loss)	$	151,858		$	5,666		$	6		$	(3,100	)	$	154,430
(Provision for) reduction of loan losses	(7,787		)	999			—			—			(6,788		)
Noninterest income	46,965			149			4,330			17,695			69,139
Noninterest expense (2)	(97,846		)	(3,749		)	(3,562		)	(30,014		)	(135,171		)
Income (loss) before income tax expense (3)	$	93,190		$	3,065		$	774		$	(15,419	)	$	81,610
Total average loans, net of unearned income	$	7,159,609		$	755,001		$	—		$	(7,004	)	$	7,907,606
Total average assets (4)	19,861,275			758,988			238,595			868,339			21,727,197
Total average deposits	17,881,175			341,537			—			37,632			18,260,344
Three months ended September 30, 2011
Net interest income (loss)	$	133,946		$	5,513		$	2		$	(4,006	)	$	135,455
(Provision for) reduction of loan losses	(3,883		)	3,114			—			—			(769		)
Noninterest income	39,189			128			9,873			46,421			95,611
Noninterest expense (2)	(92,350		)	(2,846		)	(3,860		)	(28,395		)	(127,451		)
Income before income tax expense (3)	$	76,902		$	5,909		$	6,015		$	14,020		$	102,846
Total average loans, net of unearned income	$	5,263,448		$	684,613		$	—		$	58,553		$	6,006,614
Total average assets (4)	17,347,197			685,308			238,949			525,056			18,796,510
Total average deposits	15,573,886			200,547			—			29,603			15,804,036
Nine months ended September 30, 2012
Net interest income (loss)	$	441,542		$	16,147		$	22		$	(410	)	$	457,301
(Provision for) reduction of loan losses	(29,946		)	630			—			—			(29,316		)
Noninterest income	139,387			457			12,474			56,540			208,858
Noninterest expense (2)	(292,580		)	(10,338		)	(8,970		)	(91,061		)	(402,949		)
Income (loss) before income tax expense (3)	$	258,403		$	6,896		$	3,526		$	(34,931	)	$	233,894
Total average loans, net of unearned income	$	6,559,036		$	745,069		$	—		$	14,432		$	7,318,537
Total average assets (4)	19,149,952			749,500			243,124			810,465			20,953,041
Total average deposits	17,240,715			278,736			—			27,743			17,547,194
Nine months ended September 30, 2011
Net interest income (loss)	$	380,461		$	14,567		$	6		$	(8,827	)	$	386,207
(Provision for) reduction of loan losses	(3,222		)	5,366			—			—			2,144
Noninterest income	110,604			351			23,879			174,439			309,273
Noninterest expense (2)	(262,932		)	(7,326		)	(10,113		)	(85,547		)	(365,918		)
Income before income tax expense (3)	$	224,911		$	12,958		$	13,772		$	80,065		$	331,706
Total average loans, net of unearned income	$	4,933,707		$	637,443		$	—		$	48,559		$	5,619,709
Total average assets (4)	16,788,462			637,854			225,041			685,491			18,336,848
Total average deposits	15,063,215			169,368			—			18,355			15,250,938

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(1)	Global Commercial Bank’s and SVB Capital’s components of net interest income, noninterest income, 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 $4.5 million and $3.1 million for the three months ended September 30, 2012 and 2011, respectively, and $11.6 million and $8.7 million for the nine months ended September 30, 2012 and 2011, 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.


(4)	Total average assets equals the greater of total average assets or the sum of total liabilities and total stockholders’ equity for each segment.


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

Commitments to Extend Credit

The following table summarizes information related to our commitments to extend credit at September 30, 2012 and December 31, 2011:



(Dollars in thousands)	September 30, 2012		December 31, 2011
Loan commitments available for funding: (1)
Fixed interest rate commitments	$	855,885	$	658,377
Variable interest rate commitments	6,965,078		6,548,002
Total loan commitments available for funding	7,820,963		7,206,379
Commercial and standby letters of credit (2)	889,265		861,191
Total unfunded credit commitments	$	8,710,228	$	8,067,570
Commitments unavailable for funding (3)	$	994,888	$	841,439
Maximum lending limits for accounts receivable factoring arrangements (4)	888,463		747,392
Reserve for unfunded credit commitments (5)	23,075		21,811


(1)	Represents commitments which are available for funding, due to clients meeting all collateral, compliance and financial covenants required under loan commitment agreements.


(2)	See below for additional information on our commercial and standby letters of credit.


(3)	Represents commitments which are currently unavailable for funding, due to clients failing to meet all collateral, compliance and financial covenants under loan commitment agreements.


(4)	We extend credit under accounts receivable factoring arrangements when our clients’ sales invoices are deemed creditworthy under existing underwriting practices.


(5)	Our reserve for unfunded credit commitments includes an allowance for both our unfunded loan commitments and our letters of credit.

Commercial and Standby Letters of Credit

The table below summarizes our commercial and standby letters of credit at September 30, 2012. The maximum potential amount of future payments represents the amount that could be remitted under letters of credit if there were a total default by the guaranteed parties, without consideration of possible recoveries under recourse provisions or from the collateral held or pledged.

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(Dollars in thousands)	Expires In One Year or Less		Expires After One Year		Total Amount Outstanding		Maximum Amount of Future Payments
Financial standby letters of credit	$	696,922	$	60,234	$	757,156	$	757,156
Performance standby letters of credit	63,336		11,677		75,013		75,013
Commercial letters of credit	57,096		—		57,096		57,096
Total	$	817,354	$	71,911	$	889,265	$	889,265

At September 30, 2012 and December 31, 2011, deferred fees related to financial and performance standby letters of credit were $5.0 million and $6.1 million, respectively. At September 30, 2012, collateral in the form of cash of $347.7 million and available-for-sale securities of $13.2 million were available to us to reimburse losses, if any, under financial and performance standby letters of credit.

Commitments to Invest in Venture Capital and Private Equity Funds

We make commitments to invest in venture capital and private equity funds, which in turn make investments generally in, or in some cases make loans to, privately-held companies. Commitments to invest in these funds are generally made for a 10-year period from the inception of the fund. Although the limited partnership agreements governing these investments typically do not restrict the general partners from calling 100% of committed capital in one year, it is customary for these funds to generally call most of the capital commitments over 5 to 7 years; however in certain cases, the funds may not call 100% of committed capital over the life of the fund. The actual timing of future cash requirements to fund these commitments is generally dependent upon the investment cycle, overall market conditions, and the nature and type of industry in which the privately held companies operate. The following table details our total capital commitments, unfunded capital commitments, and our ownership percentage in each fund at September 30, 2012:



Our Ownership in Limited Partnership (Dollars in thousands)	SVBFG Capital Commitments		SVBFG Unfunded Commitments		SVBFG Ownership of each Fund
Silicon Valley BancVentures, LP	$	6,000	$	270	10.7	%
SVB Capital Partners II, LP (1)	1,200		162		5.1
SVB India Capital Partners I, LP	7,750		1,015		14.4
SVB Capital Shanghai Yangpu Venture Capital Fund	923		159		6.8
SVB Strategic Investors Fund, LP	15,300		688		12.6
SVB Strategic Investors Fund II, LP	15,000		1,200		8.6
SVB Strategic Investors Fund III, LP	15,000		2,700		5.9
SVB Strategic Investors Fund IV, LP	12,239		4,284		5.0
Strategic Investors Fund V Funds	1,000		833		Various
SVB Capital Preferred Return Fund, LP	12,687		—		20.0
SVB Capital—NT Growth Partners, LP	24,670		1,340		33.0
Other private equity fund (2)	9,338		—		58.2
Partners for Growth, LP	25,000		9,750		50.0
Partners for Growth II, LP	15,000		4,950		24.2
Gold Hill Venture Lending 03, LP (3)	20,000		—		9.3
Other fund investments (4)	331,902		64,435		Various
Total	$	513,009	$	91,786


(1)	Our ownership includes 1.3 percent direct ownership through SVB Capital Partners II, LLC and SVB Financial, and 3.8 percent indirect ownership through our investment in SVB Strategic Investors Fund II, LP.


(2)	Our ownership includes 41.5 percent direct ownership and indirect ownership interest of 12.6 percent and 4.1 percent in the fund through our ownership interest of SVB Capital - NT Growth Partners, LP and SVB Capital Preferred Return Fund, LP, respectively.


(3)	Our ownership includes 4.8 percent direct ownership and 4.5 percent indirect ownership interest through GHLLC.


(4)	Represents commitments to 331 funds (primarily venture capital funds) where our ownership interest is generally less than 5 percent of the voting interests of each such fund.

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The following table details the amounts of remaining unfunded commitments to venture capital and private equity funds by our consolidated managed funds of funds (including our interest and the noncontrolling interests) at September 30, 2012:



Limited Partnership (Dollars in thousands)	Unfunded Commitments
SVB Strategic Investors Fund, LP	$	2,307
SVB Strategic Investors Fund II, LP	10,345
SVB Strategic Investors Fund III, LP	43,865
SVB Strategic Investors Fund IV, LP	102,650
Strategic Investors Fund V Funds	230,629
SVB Capital Preferred Return Fund, LP	17,688
SVB Capital—NT Growth Partners, LP	18,867
Other private equity fund	4,447
Total	$	430,798


12.	Income Taxes

We are subject to income tax in the U.S. federal jurisdiction and various state and foreign jurisdictions and have identified our federal tax return and tax returns in California and Massachusetts as “major” tax filings. U.S. federal tax examinations through 1998 have been concluded. Our U.S. federal tax returns for the years 1999 through 2006 were not reviewed and are no longer open to examination by the IRS. Our U.S. federal tax returns for 2007 and subsequent years remain open to examination. Our California tax returns for 2006 and subsequent years remain open to examination. Our Massachusetts tax returns for 2008 and subsequent years remain open to examination.

We are currently under audit examination by the IRS for the 2008 and 2009 tax years, which began in July 2011. To the extent the final tax liabilities are different from the amounts originally accrued, the increases or decreases will be recorded as income tax expense or benefit in the consolidated statements of operations. While the actual outcome is subject to the completion of these audits, we do not believe there will be a material adverse impact on our results of operations.

At September 30, 2012, our unrecognized tax benefit was $0.7 million, the recognition of which would reduce our income tax expense by $0.6 million. We expect that our unrecognized tax benefit will change in the next 12 months; however we do not expect the change to have a significant impact on our financial position or our results of operations.


13.	Fair Value of Financial Instruments

Fair Value Measurements

Our available-for-sale securities, derivative instruments and certain non-marketable and marketable securities are financial instruments recorded at fair value on a recurring basis. We make estimates regarding valuation of assets and liabilities measured at fair value in preparing our interim consolidated financial statements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (the “exit price”) in an orderly transaction between market participants at the measurement date. There is a three-level hierarchy for disclosure of assets and liabilities recorded at fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for measurement are observable or unobservable and the significance of those inputs in the fair value measurement. Observable inputs reflect market-derived or market-based information obtained from independent sources, while unobservable inputs reflect our estimates about market data and views of market participants. The three levels for measuring fair value are based on the reliability of inputs and are as follows:

Level 1

Fair value measurements based on quoted prices in active markets for identical assets or liabilities that we have the ability to access. Valuation adjustments and block discounts are not applied to instruments utilizing Level 1 inputs. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these instruments does not entail a significant degree of judgment. Assets utilizing Level 1 inputs include exchange-traded equity securities and certain marketable securities accounted for under fair value accounting.

Level 2

Fair value measurements based on quoted prices in markets that are not active or for which all significant inputs are observable, directly or indirectly. Valuations for the available-for-sale securities are provided by independent external pricing

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service providers. We review the methodologies used to determine the fair value, including understanding the nature and observability of the inputs used to determine the price. Additional corroboration, such as obtaining a non-binding price from a broker, may be required depending on the frequency of trades of the security and the level of liquidity or depth of the market. The valuation methodology that is generally used for the Level 2 assets is the income approach. Below is a summary of the significant inputs used for each class of Level 2 assets and liabilities:

U.S. treasury securities: U.S. treasury securities are considered by most investors to be the most liquid fixed income investments available. These securities are priced relative to market prices on similar U.S. treasury securities.

U.S. agency debentures: Fair value measurements of U.S. agency debentures are based on the characteristics specific to bonds held, such as issuer name, coupon rate, maturity date and any applicable issuer call option features. Valuations are based on market spreads relative to similar term benchmark market interest rates, generally U.S. treasury securities.

Agency-issued mortgage-backed securities: Agency-issued mortgage-backed securities are pools of individual conventional mortgage loans underwritten to U.S. agency standards with similar coupon rates, tenor, and other attributes such as geographic location, loan size and origination vintage. Fair value measurements of these securities are based on observable price adjustments relative to benchmark market interest rates taking into consideration estimated loan prepayment speeds.

Agency-issued collateralized mortgage obligations: Agency-issued collateralized mortgage obligations are structured into classes or tranches with defined cash flow characteristics and are collateralized by U.S. agency-issued mortgage pass-through securities. Fair value measurements of these securities incorporate similar characteristics of mortgage pass-through securities such as coupon rate, tenor, geographic location, loan size and origination vintage, in addition to incorporating the effect of estimated prepayment speeds on the cash flow structure of the class or tranche. These measurements incorporate observable market spreads over an estimated average life after considering the inputs listed above.

Agency-issued commercial mortgage-backed securities: Fair value measurements of these securities are based on spreads to benchmark market interest rates (usually U.S. treasury rates or rates observable in the swaps market), prepayment speeds, loan default rate assumptions and loan loss severity assumptions on underlying loans.

Municipal bonds and notes: Bonds issued by municipal governments generally have stated coupon rates, final maturity dates and are subject to being called ahead of the final maturity date at the option of the issuer. Fair value measurements of these securities are priced based on spreads to other municipal benchmark bonds with similar characteristics; or, relative to market rates on U.S. treasury bonds of similar maturity.

Interest rate swap assets: Fair value measurements of interest rate swaps are priced considering the coupon rate of the fixed leg of the contract and the variable coupon on the floating leg of the contract. Valuation is based on both spot and forward rates on the swap yield curve and the credit worthiness of the contract counterparty.

Foreign exchange forward and option contract assets and liabilities: Fair value measurements of these assets and liabilities are priced based on spot and forward foreign currency rates and option volatility assumptions and the credit worthiness of the contract counterparty.

Equity warrant assets (public portfolio): Fair value measurements of equity warrant assets of public portfolio companies are priced based on the Black-Scholes option pricing model that use the publicly-traded equity prices (underlying stock value), stated strike prices, option expiration dates, the risk-free interest rate and market-observable option volatility assumptions.

Level 3

The fair value measurement is derived from valuation techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect our own estimates of assumptions we believe market participants would use in pricing the asset. Below is a summary of the valuation techniques used for each class of Level 3 assets:

Venture capital and private equity fund investments: Fair value measurements are based on the information provided by the investee funds’ management, which reflects our share of the fair value of the net assets of the investment fund on the valuation date. We account for differences between our measurement date and the date of the fund investment’s net asset value by using the most recent available financial information from the investee general partner, adjusted for any contributions paid, distributions received from the investment, and significant fund transactions or market events during the reporting period.

Other venture capital investments: Fair value measurements are based on consideration of a range of factors including, but not limited to, the price at which the investment was acquired, the term and nature of the investment, local market conditions, values for comparable securities, and as it relates to the private company, the current and projected operating performance, exit strategies and financing transactions subsequent to the acquisition of the investment. The significant unobservable inputs used in the fair value measurement include the information about each portfolio company, including

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actual and forecasted results, cash position, recent or planned transactions and market comparable companies. Significant changes to any one of these inputs in isolation could result in a significant change in the fair value measurement, however, we generally consider all factors available through ongoing communication with the portfolio companies and venture capital fund managers to determine whether there are changes to the portfolio company or the environment that indicate a change in the fair value measurement.

Equity warrant assets (private portfolio): Fair value measurements of equity warrant assets of private portfolio companies are priced based on a modified Black-Scholes option pricing model to estimate the underlying asset value by using stated strike prices, option expiration dates, risk-free interest rates and option volatility assumptions. Option volatility assumptions used in the modified Black-Scholes model are based on public market indices whose members operate in similar industries as companies in our private company portfolio. Option expiration dates are modified to account for estimates to actual life relative to stated expiration. Overall model asset values are further adjusted for a general lack of liquidity due to the private nature of the associated underlying company. There is a direct correlation between changes in the volatility and remaining life assumptions in isolation and the fair value measurement while there is an inverse correlation between changes in the liquidity discount assumption and the fair value measurement.

It is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements. When available, we use quoted market prices to measure fair value. If market prices are not available, fair value measurement is based upon valuation techniques that use primarily market-based or independently-sourced market parameters, including interest rate yield curves, prepayment speeds, option volatilities and currency rates. Substantially all of our financial instruments use either of the foregoing methodologies, and are categorized as a Level 1 or Level 2 measurement in the fair value hierarchy. However, in certain cases, when market observable inputs for our valuation techniques may not be readily available, we are required to make judgments about assumptions we believe market participants would use in estimating the fair value of the financial instrument, and based on the significance of those judgments, the measurement may be determined to be a Level 3 fair value measurement.

The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices or observable market parameters. For financial instruments that trade actively and have quoted market prices or observable market parameters, there is minimal subjectivity involved in measuring fair value. When observable market prices and parameters are not fully available, management judgment is necessary to estimate fair value. For inactive markets, there is little information, if any, to evaluate if individual transactions are orderly. Accordingly, we are required to estimate, based upon all available facts and circumstances, the degree to which orderly transactions are occurring and provide more weighting to price quotes that are based upon orderly transactions. In addition, changes in the market conditions may reduce the availability of quoted prices or observable data. For example, reduced liquidity in the capital markets or changes in secondary market activities could result in observable market inputs becoming unavailable. Therefore, when market data is not available, we use valuation techniques requiring more management judgment to estimate the appropriate fair value measurement. Accordingly, the degree of judgment exercised by management in determining fair value is greater for financial assets and liabilities categorized as Level 3.

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The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2012:



(Dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of September 30, 2012
Assets
Available-for-sale securities:
U.S. treasury securities	$	—	$	25,429	$	—	$	25,429
U.S. agency debentures	—		2,936,150		—		2,936,150
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	—		1,590,582		—		1,590,582
Agency-issued collateralized mortgage obligations - fixed rate	—		4,168,125		—		4,168,125
Agency-issued collateralized mortgage obligations - variable rate	—		1,939,799		—		1,939,799
Agency-issued commercial mortgage-backed securities	—		279,507		—		279,507
Municipal bonds and notes	—		100,221		—		100,221
Equity securities	7,917		—		—		7,917
Total available-for-sale securities	7,917		11,039,813		—		11,047,730
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	—		—		658,409		658,409
Other venture capital investments	—		—		118,622		118,622
Total non-marketable securities (fair value accounting)	—		—		777,031		777,031
Other assets:
Marketable securities	3,807		1,609		—		5,416
Interest rate swaps	—		9,508		—		9,508
Foreign exchange forward and option contracts	—		13,116		—		13,116
Equity warrant assets	—		5,787		64,691		70,478
Loan conversion options	—		1,240		—		1,240
Client interest rate derivatives	—		236		—		236
Total assets (1)	$	11,724	$	11,071,309	$	841,722	$	11,924,755
Liabilities
Foreign exchange forward and option contracts	$	—	$	12,476	$	—	$	12,476
Client interest rate derivatives	—		247		—		247
Total liabilities	$	—	$	12,723	$	—	$	12,723


(1)	Included in Level 1, Level 2, and Level 3 assets are $3.4 million, $1.5 million, and $689.6 million, respectively, attributable to noncontrolling interests calculated based on the ownership percentages of the noncontrolling interests.

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The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2011:



(Dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2011
Assets
Available-for-sale securities:
U.S. treasury securities	$	—	$	25,964	$	—	$	25,964
U.S. agency debentures	—		2,874,932		—		2,874,932
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities	—		1,564,286		—		1,564,286
Agency-issued collateralized mortgage obligations - fixed rate	—		3,373,760		—		3,373,760
Agency-issued collateralized mortgage obligations - variable rate	—		2,413,378		—		2,413,378
Agency-issued commercial mortgage-backed securities	—		178,693		—		178,693
Municipal bonds and notes	—		100,498		—		100,498
Equity securities	4,535		—		—		4,535
Total available-for-sale securities	4,535		10,531,511		—		10,536,046
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	—		—		611,824		611,824
Other venture capital investments	—		—		124,121		124,121
Other investments	—		—		987		987
Total non-marketable securities (fair value accounting)	—		—		736,932		736,932
Other assets:
Marketable securities	1,410		—		—		1,410
Interest rate swaps	—		11,441		—		11,441
Foreign exchange forward and option contracts	—		18,326		—		18,326
Equity warrant assets	—		3,923		63,030		66,953
Loan conversion options	—		923		—		923
Client interest rate derivatives	—		50		—		50
Total assets (1)	$	5,945	$	10,566,174	$	799,962	$	11,372,081
Liabilities
Foreign exchange forward and option contracts	$	—	$	16,816	$	—	$	16,816
Client interest rate derivatives	—		52		—		52
Total liabilities	$	—	$	16,868	$	—	$	16,868


(1)	Included in Level 1 and Level 3 assets are $1.2 million and $647.5 million, respectively, attributable to noncontrolling interests calculated based on the ownership percentages of the noncontrolling interests.

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The following table presents additional information about Level 3 assets measured at fair value on a recurring basis for the three and nine months ended September 30, 2012 and 2011, respectively:



(Dollars in thousands)	Beginning Balance		Total Realized and Unrealized Gains (Losses) Included in Income			Purchases		Sales			Issuances		Distributions and Other Settlements			Transfers Into Level 3		Transfers Out of Level 3			Ending Balance
Three months ended September 30, 2012
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	$	639,596	$	12,104		$	35,092	$	—		$	—	$	(28,383	)	$	—	$	—		$	658,409
Other venture capital investments	120,111		3,259			953		(5,202		)	—		479			—		(978		)	118,622
Total non-marketable securities (fair value accounting) (1)	759,707		15,363			36,045		(5,202		)	—		(27,904		)	—		(978		)	777,031
Other assets:
Equity warrant assets (2)	68,619		(800		)	—		(5,954		)	2,994		—			—		(168		)	64,691
Total assets	$	828,326	$	14,563		$	36,045	$	(11,156	)	$	2,994	$	(27,904	)	$	—	$	(1,146	)	$	841,722
Three months ended September 30, 2011
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	$	515,118	$	32,041		$	42,590	$	—		$	—	$	(11,623	)	$	—	$	—		$	578,126
Other venture capital investments	114,070		17,237			2,193		(9,335		)	—		(4,005		)	—		—			120,160
Other investments	995		(16		)	—		—			—		(6		)	—		—			973
Total non-marketable securities (fair value accounting) (1)	630,183		49,262			44,783		(9,335		)	—		(15,634		)	—		—			699,259
Other assets:
Equity warrant assets (2)	49,777		8,192			—		(6,427		)	2,876		—			—		—			54,418
Total assets	$	679,960	$	57,454		$	44,783	$	(15,762	)	$	2,876	$	(15,634	)	$	—	$	—		$	753,677
Nine months ended September 30, 2012
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	$	611,824	$	38,765		$	90,173	$	—		$	—	$	(82,353	)	$	—	$	—		$	658,409
Other venture capital investments	124,121		(3,868		)	8,888		(9,441		)	—		495			—		(1,573		)	118,622
Other investments	987		21			—		—			—		(1,008		)	—		—			—
Total non-marketable securities (fair value accounting) (1)	736,932		34,918			99,061		(9,441		)	—		(82,866		)	—		(1,573		)	777,031
Other assets:
Equity warrant assets (2)	63,030		8,848			—		(15,672		)	9,167		1			—		(683		)	64,691
Total assets	$	799,962	$	43,766		$	99,061	$	(25,113	)	$	9,167	$	(82,865	)	$	—	$	(2,256	)	$	841,722
Nine months ended September 30, 2011
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments	$	391,247	$	108,032		$	119,990	$	—		$	—	$	(41,143	)	$	—	$	—		$	578,126
Other venture capital investments	111,843		22,608			12,939		(27,513		)	—		283			—		—			120,160
Other investments	981		4			—		—			—		(12		)	—		—			973
Total non-marketable securities (fair value accounting) (1)	504,071		130,644			132,929		(27,513		)	—		(40,872		)	—		—			699,259
Other assets:
Equity warrant assets (2)	43,537		21,403			—		(19,889		)	10,058		(63		)	—		(628		)	54,418
Total assets	$	547,608	$	152,047		$	132,929	$	(47,402	)	$	10,058	$	(40,935	)	$	—	$	(628	)	$	753,677


(1)	Realized and unrealized gains (losses) are recorded on the line items “gains on investment securities, net”, and “other noninterest income”, components of noninterest income.


(2)	Realized and unrealized gains (losses) are recorded on the line item “gains on derivative instruments, net”, a component of noninterest income.

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The following table presents the amount of unrealized gains (losses) included in earnings (which is inclusive of noncontrolling interest) attributable to Level 3 assets still held at September 30, 2012:



	Three months ended September 30, 2012			Nine months ended September 30, 2012
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments (1)	$	12,724		$	38,916
Other venture capital investments	(963		)	4,177
Total non-marketable securities (fair value accounting) (2)	11,761			43,093
Other assets:
Equity warrant assets (3)	(2,480		)	(2,505		)
Total unrealized gains	$	9,281		$	40,588
Unrealized gains attributable to noncontrolling interests (1)	$	9,543		$	37,445


(1)	In the third quarter of 2012, for purposes of this disclosure we have revised our methodology to exclude reclassifications of previously recorded unrealized gains (losses) as a result of distributions.


(2)	Unrealized gains (losses) are recorded on the line items “gains on investment securities, net”, and “other noninterest income”, components of noninterest income.


(3)	Unrealized (losses) gains are recorded on the line item “gains on derivative instruments, net”, a component of noninterest income.

The following table presents quantitative information about the significant unobservable inputs used for certain of our Level 3 fair value measurements at September 30, 2012. We have not included in this table our venture capital and private equity fund investments (fair value accounting) as we use net asset value per share (as obtained from the general partners of the investments) as a practical expedient to determine fair value.



(Dollars in thousands)	Fair value at September 30, 2012		Valuation Technique	Significant Unobservable Inputs	Weighted Average
Other venture capital investments (fair value accounting)	$	118,622	Private company equity pricing	(1)	(1)
Equity warrant assets (private portfolio)	64,691		Modifed Black-Scholes option pricing model	Volatility	49.8	%
				Risk-Free interest rate	0.3	%
				Marketability discount (2)	22.5	%
				Remaining life assumption (3)	45.0	%

(1)

In determining the fair value of our other venture capital investment portfolio, we evaluate a variety of factors related to each underlying private portfolio company including, but not limited to, actual and forecasted results, cash position, recent or planned transactions and market comparable companies. Additionally, we have ongoing communication with the portfolio companies and venture capital fund managers, to determine whether there is a material change in fair value. These factors are specific to each portfolio company and a weighted average or range of values of the unobservable inputs is not meaningful.

(2)

Our marketability discount is applied to all private company warrants to account for a general lack of liquidity due to the private nature of the associated underlying company. The quantitative measure used is based on long-run averages and is influenced over time by various factors, including market conditions. On a quarterly basis, a sensitivity analysis is performed on our marketability discount. In the third quarter of 2012, we increased the marketability discount from 15.0 percent to 22.5 percent to reflect market conditions and trends.

(3)

We adjust the contractual remaining term of private company warrants based on our best estimate of the actual remaining life, which we determine by utilizing historical data on cancellations and exercises. At September 30, 2012, the weighted average contractual remaining term was 6.6 years, compared to our estimated remaining life of 3.0 years. On a quarterly basis, a sensitivity analysis is performed on our remaining life assumption. In the third quarter of 2012, we increased the remaining life assumption from 40.0 percent to 45.0 percent of the contractual term to reflect market conditions and trends.

As a result of the changes made to our marketability discount and remaining life assumption in the third quarter of 2012 (discussed above), our private warrant portfolio valuation decreased by $3.4 million.

For the three and nine months ended September 30, 2012, we had transfers of $2.1 million from Level 2 to Level 1. For

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the three and nine months ended September 30, 2011 we had no transfers between Level 1 and Level 2. Transfers from Level 3 to Level 2 for the three and nine months ended September 30, 2012 included $1.0 million and $1.6 million, respectively, due to IPOs of certain of our portfolio companies, which were included in our non-marketable securities portfolio. All other transfers from Level 3 to Level 2 for the three and nine months ended September 30, 2012 and all transfers for the three and nine months ended September 30, 2011 were due to the transfer of equity warrant assets from our private portfolio to our public portfolio (See our Level 3 reconciliation above). All amounts reported as transfers represent the fair value as of the date of the change in circumstances that caused the transfer.

Financial Instruments not Carried at Fair Value

FASB guidance over financial instruments requires that we disclose estimated fair values for our financial instruments not carried at fair value. Fair value estimates, methods and assumptions, set forth below for our financial instruments, are made solely to comply with these requirements.

Fair values are based on estimates or calculations at the transaction level using present value techniques in instances where quoted market prices are not available. Because broadly traded markets do not exist for many of our financial instruments, the fair value calculations attempt to incorporate the effect of current market conditions at a specific time. The aggregation of the fair value calculations presented herein does not represent, and should not be construed to represent, the underlying value of the Company.

The following describes the methods and assumptions used in estimating the fair values of financial instruments, excluding financial instruments already recorded at fair value as described above.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash balances due from banks, interest-earning deposits, securities purchased under agreement to resell and other short-term investment securities. The carrying amount is a reasonable estimate of fair value because of the insignificant risk of changes in fair value due to changes in market interest rates, and the instruments are purchased in conjunction with our cash management activities.

Non-Marketable Securities (Cost and Equity Method Accounting)

Non-marketable securities (cost and equity method accounting) includes other investments (equity method accounting), low income housing tax credit funds (equity method accounting), venture capital and private equity fund investments (cost method accounting), and other venture capital investments (cost method accounting). Other investments (equity method accounting) includes our investment in SPD-SVB, our joint venture bank in China. At this time, the carrying value of our investment in SPD-SVB is a reasonable estimate of fair value. The fair value of the remaining other investments (equity method accounting) and the fair value of venture capital and private equity fund investments (cost method accounting) and other venture capital investments (cost method accounting) is based on financial information obtained from the investee or obtained from the fund investments’ or debt fund investments’ respective general partners. For private company investments, fair value is based on consideration of a range of factors including, but not limited to, the price at which the investment was acquired, the term and nature of the investment, local market conditions, values for comparable securities, current and projected operating performance, exit strategies and financing transactions subsequent to the acquisition of the investment. For our fund investments, we utilize the net asset value per share as obtained from the general partners of the investments. We adjust the net asset value per share for differences between our measurement date and the date of the fund investment’s net asset value by using the most recently available financial information from the investee general partner, for example June 30^th, for our September 30^th consolidated financial statements, adjusted for any contributions paid, distributions received from the investment, and significant fund transactions or market events during the reporting period. The carrying value of our low income housing tax credit funds (equity method accounting) is a reasonable estimate of fair value.

Loans

The fair value of fixed and variable rate loans is estimated by discounting contractual cash flows using rates that reflect current pricing for similar loans and the projected forward yield curve. This method is not based on the exit price concept of fair value required under ASC 820, Fair Value Measurements and Disclosures.

FHLB and FRB stock

Investments in FHLB and FRB stock are recorded at cost. The carrying amounts of these investments are reasonable estimates of fair value because the securities are restricted to member banks and they do not have a readily determinable market value.

Accrued Interest Receivable and Payable

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The carrying amounts of accrued interest receivable and payable are reasonable estimates of fair value due to the short-term nature of these instruments.

Deposits

The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, interest-bearing checking accounts, money market accounts and interest-bearing sweep deposits is equal to the amount payable on demand at the measurement date. The fair value of time deposits is estimated by discounting the cash flows using our cost of borrowings and the projected forward yield curve over their remaining contractual term.

Short-Term Borrowings

Short-term borrowings at September 30, 2012 included FHLB advances, federal funds purchased and cash collateral received from our counterparty for our interest rate swap agreement related to our 6.05% Subordinated Notes. The carrying amounts of our FHLB advances and federal funds purchased are reasonable estimates of fair value because of the relatively short time between the origination of the instrument and its contractual maturity. The carrying amount of the cash collateral is a reasonable estimate of fair value.

Long-Term Debt

Long-term debt at September 30, 2012 included our 5.375% Senior Notes, 7.0% Junior Subordinated Debentures and 6.05% Subordinated Notes. The fair value of long-term debt is generally based on quoted market prices, when available, or is estimated based on calculations utilizing third-party pricing services and current market spread, price indications from reputable dealers or observable market prices of the underlying instrument(s), whichever is deemed more reliable. Also included in the estimated fair value of our 6.05% Subordinated Notes are amounts related to the fair value of the interest rate swap associated with the note.

Off-Balance Sheet Financial Instruments

The fair value of net available commitments to extend credit is estimated based on the average amount we would receive or pay to execute a new agreement with identical terms and pricing, while taking into account the counterparties’ credit standing.

Letters of credit are carried at their fair value, which is equivalent to the residual premium or fee at September 30, 2012 or December 31, 2011. Commitments to extend credit and letters of credit typically result in loans with a market interest rate if funded.

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The following fair value hierarchy table presents the estimated fair values of our financial instruments that are not carried at fair value at September 30, 2012 and December 31, 2011:



			Estimated Fair Value
(Dollars in thousands)	Carrying Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2012:
Financial assets:
Cash and cash equivalents	$	906,680	$	906,680	$	—	$	—
Non-marketable securities (cost and equity method accounting)	386,784		—		—		421,123
Net commercial loans	7,345,239		—		—		7,542,349
Net consumer loans	745,606		—		—		766,903
FHLB and FRB stock	39,301		—		—		39,301
Accrued interest receivable	62,441		—		62,441		—
Financial liabilities:
Short-term FHLB advances	215,000		215,000		—		—
Federal funds purchased	287,000		287,000		—		—
Other short-term borrowings	6,170		6,170		—		—
Non-maturity deposits (1)	17,575,816		17,575,816		—		—
Time deposits	149,250		—		149,031		—
5.375% Senior Notes	347,944		—		398,220		—
6.05% Subordinated Notes (2)	55,130		—		62,486		—
7.0% Junior Subordinated Debentures	55,240		—		52,268		—
Accrued interest payable	1,938		—		1,938		—
Off-balance sheet financial assets:
Commitments to extend credit	—		—		—		21,467
December 31, 2011:
Financial assets:
Cash and cash equivalents	$	1,114,948	$	1,114,948	$	—	$	—
Non-marketable securities (cost and equity method accounting)	267,508		—		—		290,393
Net commercial loans	6,192,578		—		—		6,336,705
Net consumer loans	687,557		—		—		627,733
FHLB and FRB stock	39,189		—		—		39,189
Accrued interest receivable	58,108		—		58,108		—
Financial liabilities:
Non-maturity deposits (1)	16,553,787		16,553,787		—		—
Time deposits	155,749		—		155,346		—
5.375% Senior Notes	347,793		—		362,786		—
6.05% Subordinated Notes (2)	55,075		—		57,746		—
5.70% Senior Notes (3)	143,969		—		145,184		—
7.0% Junior Subordinated Debentures	55,372		—		51,526		—
Other long-term debt	1,439		—		—		1,439
Accrued interest payable	6,689		—		6,689		—
Off-balance sheet financial assets:
Commitments to extend credit	—		—		—		21,232


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


(2)	At September 30, 2012 and December 31, 2011, included in the carrying value and estimated fair value of our 6.05% Subordinated Notes was $9.5 million and $8.8 million, respectively, related to the fair value of the interest rate swap associated with the notes.


(3)	At December 31, 2011, included in the carrying value and estimated fair value of our 5.70% Senior Notes was $2.6 million related to the fair value of the interest rate swap associated with the notes.

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Investments in Entities that Calculate Net Asset Value Per Share

FASB guidance over certain fund investments requires that we disclose the fair value of funds, significant investment strategies of the investees, redemption features of the investees, restrictions on the ability to sell investments, estimate of the period of time over which the underlying assets are expected to be liquidated by the investee, and unfunded commitments related to the investments.

Our investments in debt funds and venture capital and private equity fund investments generally cannot be redeemed. Alternatively, we expect distributions, if any, to be received primarily through IPOs and M&A activity of the underlying assets of the fund. We currently do not have any plans to sell any of these fund investments. If we decide to sell these investments in the future, the investee fund’s management must approve of the buyer before the sale of the investments can be completed. The fair values of the fund investments have been estimated using the net asset value per share of the investments, adjusted for any differences between our measurement date and the date of the fund investment’s net asset value by using the most recently available financial information from the investee general partner, for example June 30^st, for our September 30^th consolidated financial statements, adjusted for any contributions paid, distributions received from the investment, and significant fund transactions or market events during the reporting period.

The following table is a summary of the estimated fair values of these investments and remaining unfunded commitments for each major category of these investments as of September 30, 2012:



(Dollars in thousands)	Carrying Amount		Fair Value		Unfunded Commitments
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments (1)	$	658,409	$	658,409	$	430,798
Non-marketable securities (equity method accounting):
Other investments (2)	54,288		55,715		6,750
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments (3)	158,275		190,033		60,809
Total	$	870,972	$	904,157	$	498,357

(1)

Venture capital and private equity fund investments within non-marketable securities (fair value accounting) include investments made by our managed funds of funds, one of our direct venture funds and one other private equity fund. These investments represent investments in venture capital and private equity funds that invest primarily in U.S. and global technology and life sciences companies. Included in the fair value and unfunded commitments of fund investments under fair value accounting are $581.9 million and $420.0 million, respectively, attributable to noncontrolling interests. It is estimated that we will receive distributions from the fund investments over the next 10 to 13 years, depending on the age of the funds and any potential extensions of terms of the funds.

(2)

Other investments within non-marketable securities (equity method accounting) include investments in debt funds and venture capital and private equity fund investments that invest in or lend money to primarily U.S. and global technology and life sciences companies. It is estimated that we will receive distributions from the fund investments over the next 10 to 13 years, depending on the age of the funds.

(3)

Venture capital and private equity fund investments within non-marketable securities (cost method accounting) include investments in venture capital and private equity fund investments that invest primarily in U.S. and global technology and life sciences companies. It is estimated that we will receive distributions from the fund investments over the next 10 to 13 years, depending on the age of the funds and any potential extensions of the terms of the funds.


14.	Legal Matters

Certain lawsuits and claims arising in the ordinary course of business have been filed or are pending against us or our affiliates. In accordance with applicable accounting guidance, we establish accruals for all lawsuits, claims and expected settlements when we believe it is probable that a loss has been incurred and the amount of the loss is reasonably estimable. When a loss contingency is not both probable and estimable, we do not establish an accrual. Any such loss estimates are inherently uncertain, based on currently available information and are subject to management’s judgment and various assumptions. Due to the inherent subjectivity of these estimates and unpredictability of outcomes of legal proceedings, any amounts accrued may not represent the ultimate resolution of such matters.

To the extent we believe any potential loss relating to such lawsuits and claims may have a material impact on our liquidity, consolidated financial position, results of operations, and/or our business as a whole and is reasonably possible but not probable,

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we disclose information relating to any such potential loss, whether in excess of any established accruals or where there is no established accrual. We also disclose information relating to any material potential loss that is probable but not reasonably estimable. Where reasonably practicable, we will provide an estimate of loss or range of potential loss. No disclosures are generally made for any loss contingencies that are deemed to be remote.

Based upon information available to us, our review of lawsuits and claims filed or pending against us to date and consultation with our outside legal counsel, we have not recognized a material accrual liability for these matters, nor do we currently expect it is reasonably possible that these matters will result in a material liability to the Company. However, the outcome of litigation and other legal and regulatory matters is inherently uncertain, and it is possible that one or more of such matters currently pending or threatened could have an unanticipated material adverse effect on our liquidity, consolidated financial position, results of operations, and/or our business as a whole, in the future.


15.	Related Parties

During the nine months ended September 30, 2012, the Bank made loans to related parties, including certain companies in which certain of our directors or their affiliated venture funds are beneficial owners of ten percent or more of the equity securities of such companies. Such loans: (a) were made in the ordinary course of business; (b) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons; and (c) did not involve more than the normal risk of collectability or present other unfavorable features. Additionally, we also provide real estate secured loans to eligible employees through our EHOP.


16.	Subsequent Events

We have evaluated all material subsequent events and determined there are no events that require disclosure.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including in particular “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part I, Item 2 of this report, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Management has in the past and might in the future make forward-looking statements orally to analysts, investors, the media and others. Forward-looking statements are statements that are not historical facts. Broadly speaking, forward-looking statements include, but are not limited to, the following:


•	Projections of our net interest income, noninterest income, earnings per share, noninterest expenses (including professional services, compliance, compensation and other costs), cash flows, balance sheet positions, capital expenditures, liquidity and capitalization or other financial items


•	Descriptions of our strategic initiatives, plans or objectives for future operations, including pending sales or acquisitions


•	Forecasts of venture capital/private equity funding and investment levels


•	Forecasts of future interest rates, economic performance, and income from investments


•	Forecasts of expected levels of provisions for loan losses, loan growth and client funds


•	Descriptions of assumptions underlying or relating to any of the foregoing

In this Quarterly Report on Form 10-Q, we make forward-looking statements, including, but not limited to, those discussing our management’s expectations about:


▪	Market and economic conditions (including interest rate environment, and levels of public offerings, mergers/acquisitions and venture capital financing activities) and the associated impact on us


▪	The sufficiency of our capital, including sources of capital (such as funds generated through retained earnings) and the extent to which capital may be used or required


▪	The adequacy of our liquidity position, including sources of liquidity (such as funds generated through retained earnings)


▪	The adequacy of our liquidity position, including sources of liquidity (such as funds generated through retained earnings)


▪	The realization, timing, valuation and performance of equity or other investments


▪	The likelihood that the market value of our impaired investments will recover


▪	Our intent to sell our investment securities prior to recovery of our cost basis, or the likelihood of such


▪	Expected cash requirements for unfunded commitments to certain investments, including capital calls


▪	Our overall management of interest rate risk, including managing the sensitivity of our interest-earning assets and interest-bearing liabilities to interest rates, and the impact to earnings from a change in interest rates


▪	The credit quality of our loan portfolio, including levels and trends of nonperforming loans, impaired loans, criticized loans and troubled debt restructurings


▪	The adequacy of reserves (including allowance for loan and lease losses) and the appropriateness of our methodology for calculating such reserves


▪	The level of loan and deposit balances


▪	The level of client investment fees and associated margins


▪	The profitability of our products and services


▪	Our strategic initiatives, including the expansion of operations in China, India, Israel, the UK and elsewhere (such as establishing our joint venture bank in China and a branch in the UK)

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▪	The expansion and growth of our noninterest income sources


▪	Distributions of venture capital, private equity or debt fund investment proceeds; intentions to sell such fund investments


▪	The changes in, or adequacy of, our unrecognized tax benefits and any associated impact


▪	The impact from the IRS audit examination results


▪	The extent to which counterparties, including those to our forward and option contracts, will perform their contractual obligations


▪	The effect of application of certain accounting pronouncements


▪	The effect of lawsuits and claims


▪	Regulatory developments, including the nature and timing of the adoption and effectiveness of new requirements under the Dodd-Frank Act (as defined below), Basel guidelines, and other applicable laws and regulations

You can identify these and other forward-looking statements by the use of words such as “becoming,” “may,” “will,” “should,” “predicts,” “potential,” “continue,” “anticipates,” “believes,” “estimates,” “seeks,” “expects,” “plans,” “intends,” the negative of such words, or comparable terminology. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we have based these expectations on our beliefs as well as our assumptions, and such expectations may prove to be incorrect. Our actual results of operations and financial performance could differ significantly from those expressed in or implied by our management’s forward-looking statements.

For information with respect to factors that could cause actual results to differ from the expectations stated in the forward-looking statements, see “Risk Factors” set forth in our Annual Report on Form 10-K for the year ended December 31, 2011 (“2011 Form 10-K”), as filed with the SEC. We urge investors to consider all of these factors carefully in evaluating the forward-looking statements contained in this report. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements included in this filing are made only as of the date of this filing. We assume no obligation and do not intend to revise or update any forward-looking statements contained in this Quarterly Report on Form 10-Q.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our interim unaudited consolidated financial statements and accompanying notes as presented in Part I, Item 1 of this report and in conjunction with our 2011 Form 10-K.

Reclassifications

Certain reclassifications have been made to prior period results to conform to the current period’s presentations. Such reclassifications had no effect on our results of operations or stockholders’ equity.

Management’s Overview of Third Quarter 2012 Performance

Overall, we had a strong third quarter of 2012, which reflected the strength of our clients and our business. We had net income available to common stockholders of $42.3 million and diluted earnings per common share of $0.94. In the third quarter of 2012, compared to the third quarter of 2011, we experienced strong growth in net interest income as a result of exceptional loan growth during the quarter with record high average balances of $7.9 billion. Our total client funds, which consists of on-balance sheet deposits and off-balance sheet client investment funds, also increased reflecting growth from our existing clients and the addition of new clients. In addition, overall credit quality remains strong, and we saw continued growth in fee income and solid gains from our investment securities portfolio. Additionally, our liquidity and capital ratios continued to remain strong.

Third quarter 2012 results (compared to the third quarter 2011, where applicable) included:


▪	Continued strong growth in our lending business with record high average loan balances of $7.9 billion, an increase of $1.9 billion, or 31.6 percent.


▪	A provision for loan losses of $6.8 million, primarily attributable to loan growth. Net charge-offs of $3.4 million (or 0.17 percent of average total gross loans-annualized) for the third quarter of 2012 reflects the strong overall credit quality of our portfolio.


▪	Average deposit balances of $18.3 billion, an increase of $2.5 billion, or 15.5 percent. Average total client funds

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(including both average on-balance sheet deposits and off-balance sheet client investment funds) were $39.2 billion, an increase of $5.5 billion, or 16.2 percent.


▪	Net interest income (fully taxable equivalent basis) of $154.9 million, an increase of $19.0 million, primarily due to an increase in interest income from loans mainly attributable to growth in average balances of $1.9 billion. These increases were partially offset by lower yields earned on our overall loan portfolio.

▪

Our net interest margin remained relatively flat at 3.12 percent, compared to 3.13 percent. Our net interest margin was impacted by decrease in the overall yield of our available-for-sale securities due to increased premium amortization expense from increasing prepayment rates on our mortgage-backed securities and a decrease in the yield of our loan portfolio. The decrease in yields was largely offset by strong growth in average loan balances, which has resulted in a favorable change in our mix of interest-earning assets.

▪

Core fee income (deposit service charges, letters of credit fees, credit card fees, client investment fees, and foreign exchange fees) of $34.4 million, an increase of $4.1 million, or 13.5 percent. This increase reflects increased client activity and continued growth in our business, primarily from credit card fees, client investments fees and foreign exchange fees. See “Results of Operations—Noninterest Income” for a description and reconciliation of core fee income.


▪	Gains on investment securities, net of noncontrolling interests, of $7.5 million, compared to $9.3 million. See “Results of Operations—Noninterest Income—Gains on Investment Securities, Net” for further details and a reconciliation of gains on investment securities, net of noncontrolling interests.

▪

Noninterest expense of $135.2 million, an increase of $7.7 million, or 6.1 percent. The increase was primarily due to increased premises and equipment and professional services expenses to support continued growth in our business and IT infrastructure initiatives. In addition, average full-time equivalent employees (“FTEs”) increased by 7.8 percent to 1,594 average FTEs, compared to 1,478 average FTEs, which contributed to an increase in salaries and wages expense.

▪

Overall, our liquidity remained strong based on our period end available-for-sale securities portfolio of $11.0 billion at September 30, 2012. Our available-for-sale securities portfolio continues to be a good source of liquidity as it is invested in high quality investments and generates substantial monthly cash flows. Additionally, our available-for-sale securities portfolio provides us the ability to secure wholesale borrowings, if needed.

A summary of our performance for the three and nine months ended September 30, 2012 and 2011 is as follows:



	Three months ended September 30,									Nine months ended September 30,
(Dollars in thousands, except per share data and ratios)	2012			2011			% Change			2012			2011			% Change
Income Statement:
Diluted earnings per share	$	0.94		$	0.86		9.3		%	$	2.79		$	3.12		(10.6	)	%
Net income available to common stockholders	42,289			37,571			12.6			124,682			136,328			(8.5	)
Net interest income	154,430			135,455			14.0			457,301			386,207			18.4
Net interest margin	3.12		%	3.13		%	(1	)	bps	3.21		%	3.07		%	14		bps
Provision for (reduction of) loan losses	$	6,788		$	769		NM		%	$	29,316		$	(2,144	)	NM		%
Noninterest income	69,139			95,611			(27.7	)		208,858			309,273			(32.5	)
Noninterest expense	135,171			127,451			6.1			402,949			365,918			10.1
Non-GAAP net income available to common stockholders (1)	42,289			37,571			12.6			119,148			111,941			6.4
Non-GAAP diluted earnings per share (1)	0.94			0.86			9.3			2.67			2.57			3.9
Non-GAAP noninterest income, net of noncontrolling interest and excluding gains on sales of available-for-sale-securities (2)	55,615			54,372			2.3			164,834			160,600			2.6
Non-GAAP noninterest expense, net of noncontrolling interest and excluding net gains from debt repurchases (3)	132,448			124,685			6.2			393,461			360,173			9.2
Balance Sheet:
Average loans, net of unearned income	$	7,907,606		$	6,006,614		31.6		%	$	7,318,537		$	5,619,709		30.2		%
Average noninterest-bearing demand deposits	12,914,697			10,634,757			21.4			12,403,438			9,783,426			26.8
Average interest-bearing deposits	5,345,647			5,169,279			3.4			5,143,756			5,467,512			(5.9	)
Average total deposits	18,260,344			15,804,036			15.5			17,547,194			15,250,938			15.1

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Earnings Ratios:
Return on average assets (annualized) (4)	0.77		%	0.79		%	(2.5	)	%	0.79		%	0.99		%	(20.2	)	%
Return on average common SVBFG stockholders’ equity (annualized) (5)	9.44			9.93			(4.9	)		9.77			12.95			(24.6	)
Asset Quality Ratios:
Allowance for loan losses as a percentage of total period-end gross loans	1.23		%	1.34		%	(11	)	bps	1.23		%	1.34		%	(11	)	bps
Allowance for loan losses for performing loans as a percentage of total gross performing loans	1.16			1.25			(9	)		1.16			1.25			(9	)
Gross loan charge-offs as a percentage of average total gross loans (annualized)	0.23			0.54			(31	)		0.47			0.40			7
Net loan charge-offs (recoveries) as a percentage of average total gross loans (annualized)	0.17			(0.15		)	32			0.32			(0.11		)	43
Capital Ratios:
Total risk-based capital ratio (6)	14.34		%	14.81		%	(47	)	bps	14.34		%	14.81		%	(47	)	bps
Tier 1 risk-based capital ratio (6)	13.07			13.42			(35	)		13.07			13.42			(35	)
Tier 1 leverage ratio	8.02			8.01			1			8.02			8.01			1
Tangible common equity to tangible assets (7)	8.27			8.00			27			8.27			8.00			27
Tangible common equity to risk-weighted assets (6) (7)	13.93			14.21			(28	)		13.93			14.21			(28	)
Bank total risk-based capital ratio (6)	12.70			13.07			(37	)		12.70			13.07			(37	)
Bank tier 1 risk-based capital ratio (6)	11.41			11.63			(22	)		11.41			11.63			(22	)
Bank tier 1 leverage ratio	7.00			6.93			7			7.00			6.93			7
Bank tangible common equity to tangible assets (7)	7.61			7.31			30			7.61			7.31			30
Bank tangible common equity to risk-weighted assets (6) (7)	12.40			12.60			(20	)		12.40			12.60			(20	)
Other Ratios:
Operating efficiency ratio (8)	60.33		%	55.04		%	9.6		%	60.36		%	52.50		%	15.0		%
Non-GAAP operating efficiency ratio (3)	62.93		%	65.53		%	(4.0	)		63.11		%	65.70		%	(3.9	)
Book value per common share (9)	$	40.10		$	35.50		13.0			$	40.10		$	35.50		13.0
Other Statistics:
Average full-time equivalent employees	1,594			1,478			7.8		%	1,572			1,428			10.1		%
Period-end full-time equivalent employees	1,602			1,504			6.5			1,602			1,504			6.5

NM–Not meaningful


(1)	See "Non-GAAP Net Income and Non-GAAP Diluted Earnings Per Common Share” for a description and reconciliation of non-GAAP net income available to common stockholders and non-GAAP diluted earnings per share.


(2)	See “Results of Operations–Noninterest Income” for a description and reconciliation of non-GAAP noninterest income.


(3)	See “Results of Operations–Noninterest Expense” for a description and reconciliation of non-GAAP noninterest expense and non-GAAP operating efficiency ratio.


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


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


(6)	Our risk-weighted assets at September 30, 2012 reflect a refinement in our determination of certain unfunded credit commitments related to the contractual borrowing base.


(7)	See “Capital Resources–Capital Ratios” for a reconciliation of non-GAAP tangible common equity to tangible assets and tangible common equity to risk-weighted assets.


(8)	The operating efficiency ratio is calculated by dividing total noninterest expense by total taxable-equivalent net interest income plus noninterest income.


(9)	Book value per common share is calculated by dividing total SVBFG stockholders’ equity by total outstanding common shares at period-end.

Non-GAAP Net Income and Non-GAAP Diluted Earnings Per Common Share

We use and report non-GAAP net income and non-GAAP diluted earnings per common share, which excludes gains from sales of certain available-for-sale securities and net gains from debt repurchases and termination of corresponding interest rate swaps, as well as gains from the sale of certain assets related to our equity management services business. We believe these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that do not occur every reporting period. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results and related trends, and when planning, forecasting and analyzing future periods. However, these non-GAAP financial measures should be considered in addition to, not as a substitute for or preferable to, financial measures prepared in

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accordance with GAAP.

A reconciliation of GAAP to non-GAAP net income available to common stockholders and non-GAAP diluted earnings per common share for the three and nine months ended September 30, 2012 and 2011 is as follows:



	Three months ended September 30,				Nine months ended September 30,
(Dollars in thousands, except per share data and ratios)	2012		2011		2012			2011
Net income available to common stockholders	$	42,289	$	37,571	$	124,682		$	136,328
Less: gains on sales of available-for-sale securities (1)	—		—		(4,955		)	(37,314		)
Tax impact of gains on sales of available-for-sale securities	—		—		1,974			14,810
Less: gains on the sale of certain assets related to our equity management services business (2)	—		—		(4,243		)	—
Tax impact of gains on the sale of certain assets related to our equity management services business	—		—		1,690			—
Less: net gain from note repurchases and termination of corresponding interest rate swaps (3)	—		—		—			(3,123		)
Tax impact of net gain from note repurchases and termination of corresponding interest rate swaps	—		—		—			1,240
Non-GAAP net income available to common stockholders	$	42,289	$	37,571	$	119,148		$	111,941
GAAP earnings per common share—diluted	0.94		0.86		2.79			3.12
Less: gains on sales of available-for-sale securities (1)	—		—		(0.11		)	(0.85		)
Tax impact of gains on sales of available-for-sale securities	—		—		0.05			0.34
Less: gains on the sale of certain assets related to our equity management services business (2)	—		—		(0.10		)	—
Tax impact of gains on the sale of certain assets related to our equity management services business	—		—		0.04			—
Less: net gain from note repurchases and termination of corresponding interest rate swaps (3)	—		—		—			(0.07		)
Tax impact of net gain from note repurchases and termination of corresponding interest rate swaps	—		—		—			0.03
Non-GAAP earnings per common share—diluted	0.94		0.86		2.67			2.57
Weighted average diluted common shares outstanding	44,914,564		43,791,238		44,692,224			43,641,185


(1)	Gains on the sales of $315.7 million and $1.4 billion in certain available-for-sale securities in the second quarters of 2012 and 2011, respectively.


(2)	Net gains of $4.2 million from the sale of certain assets related to our equity management services business in the second quarter of 2012.


(3)	Net gains of $3.1 million from the repurchase of $108.6 million of our 5.70% Senior Notes and $204.0 million of our 6.05% Subordinated Notes and the termination of the corresponding portions of interest rate swaps in the second quarter of 2011.

Critical Accounting Policies and Estimates

The accompanying management’s discussion and analysis of results of operations and financial condition is based upon our unaudited interim consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. Management evaluates estimates and assumptions on an ongoing basis. Management bases its estimates on historical experiences and various other factors and assumptions that are believed to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions.

There have been no significant changes during the nine months ended September 30, 2012 to the items that we disclosed as our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II, Item 7 of our 2011 Form 10-K.

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Results of Operations

Net Interest Income and Margin (Fully Taxable Equivalent Basis)

Net interest income is defined as the difference between interest earned on loans, available-for-sale securities and short-term investment securities, and interest paid on funding sources. Net interest income is our principal source of revenue. Net interest margin is defined as the amount of annualized net interest income, on a fully taxable equivalent basis, expressed as a percentage of average interest-earning assets. Net interest income and net interest margin are presented on a fully taxable equivalent basis to consistently reflect income from taxable loans and securities and tax-exempt securities based on the federal statutory tax rate of 35.0 percent.

Analysis of Net Interest Income Changes Due to Volume and Rate (Fully Taxable Equivalent Basis)

Net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as “volume change.” Net interest income is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing liabilities, referred to as “rate change.” The following table sets forth changes in interest income for each major category of interest-earning assets and interest expense for each major category of interest-bearing liabilities. The table also reflects the amount of simultaneous changes attributable to both volume and rate changes for the years indicated. For this table, changes that are not solely due to either volume or rate are allocated in proportion to the percentage changes in average volume and average rate.



	2012 Compared to 2011									2012 Compared to 2011
	Three months ended September 30, increase (decrease) due to change in									Nine months ended September 30, increase (decrease) due to change in
(Dollars in thousands)	Volume			Rate			Total			Volume			Rate			Total
Interest income:
Federal Reserve deposits, federal funds sold, securities purchased under agreements to resell and other short-term investment securities	$	(273	)	$	23		$	(250	)	$	(2,279	)	$	382		$	(1,897	)
Available-for-sale securities (taxable)	3,656			(4,520		)	(864		)	17,718			(12,734		)	4,984
Available-for-sale securities (non-taxable)	(13		)	6			(7		)	(95		)	49			(46		)
Loans, net of unearned income	29,624			(9,871		)	19,753			81,439			(21,532		)	59,907
Increase (decrease) in interest income, net	32,994			(14,362		)	18,632			96,783			(33,835		)	62,948
Interest expense:
NOW deposits	10			25			35			57			(9		)	48
Money market deposits	98			(4		)	94			254			(1,228		)	(974		)
Money market deposits in foreign offices	3			—			3			(8		)	(160		)	(168		)
Time deposits	(66		)	(40		)	(106		)	(428		)	6			(422		)
Sweep deposits in foreign offices	1			(2		)	(1		)	(239		)	(789		)	(1,028		)
Total increase (decrease) in deposits expense	46			(21		)	25			(364		)	(2,180		)	(2,544		)
Short-term borrowings	1			11			12			100			10			110
5.375% Senior Notes	1			5			6			17			1			18
3.875% Convertible Notes	—			—			—			(4,210		)	—			(4,210		)
Junior Subordinated Debentures	(3		)	4			1			(7		)	6			(1		)
5.70% Senior Notes	(342		)	—			(342		)	(1,115		)	524			(591		)
6.05% Subordinated Notes	2			32			34			(715		)	(66		)	(781		)
Other long-term debt	(77		)	—			(77		)	(327		)	196			(131		)
Total (decrease) increase in borrowings expense	(418		)	52			(366		)	(6,257		)	671			(5,586		)
(Decrease) increase in interest expense, net	(372		)	31			(341		)	(6,621		)	(1,509		)	(8,130		)
Increase (decrease) in net interest income	$	33,366		$	(14,393	)	$	18,973		$	103,404		$	(32,326	)	$	71,078

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Net Interest Income (Fully Taxable Equivalent Basis)

Three months ended September 30, 2012 and 2011

Net interest income increased by $19.0 million to $154.9 million for the three months ended September 30, 2012, compared to $135.9 million for the comparable 2011 period. Overall, we saw an increase in our net interest income primarily due to higher average loan balances and growth in our available-for-sale securities portfolio, which has increased as a result of our continued growth in deposits. These increases were partially offset by lower yields earned on our loans and available-for-sale securities.

The main factors affecting interest income and interest expense for the three months ended September 30, 2012, compared to the comparable 2011 period are discussed below:


•	Interest income for the three months ended September 30, 2012 increased by $18.6 million primarily due to:

◦

A $19.8 million increase in interest income on loans, primarily due to an increase in average loan balances of $1.9 billion. This increase was partially offset by a decrease in the overall yield on our loan portfolio reflective of our success in growing our later stage client portfolio, which typically is benchmarked to three-month LIBOR and bears lower credit risk. Additionally, the trend in yields is being influenced by changes in the composition of our loan portfolio to a higher proportion of variable-rate loans benchmarked to the national Prime rate.

◦

A $0.9 million decrease in interest income on available-for-sale securities, reflecting a $4.5 million decrease related to lower overall yields, partially offset by $3.6 million increase related to higher average balances. The decrease in yields came primarily from an increase of $7.9 million in premium amortization expense from $9.3 million to $17.2 million, reflective of an increase in actual and estimated mortgage prepayment levels due to a decrease in long-term market rates and growth in our mortgage securities balances. As of September 30, 2012, the remaining unamortized premium balance on our available-for-sale securities portfolio was $123.8 million. The decrease in yield from an increase in premium amortization expense was partially offset by higher coupon yields resulting from a shift in our portfolio to a smaller proportion of lower-yielding variable-rate securities. For the three months ended September 30, 2012, average variable-rate securities were $2.0 billion, or 19.2 percent of our available-for-sale securities portfolio, compared to $2.6 billion, or 27.4 percent for the comparable 2011 period. These securities have variable-rate coupons that are indexed to and change with movements in the one-month LIBOR rate.


•	Interest expense for the three months ended September 30, 2012 decreased by $0.3 million primarily due to:


◦	A decrease in interest expense of $0.4 million related to our long-term debt, mainly attributable to a decrease of $0.3 million related to our 5.70% Senior Notes, which matured on June 1, 2012.

Nine months ended September 30, 2012 and 2011

Net interest income increased by $71.1 million to $458.8 million for the nine months ended September 30, 2012, compared to $387.7 million for the comparable 2011 period. Overall, we saw an increase in our net interest income primarily due to higher average loan balances and growth in our available-for-sale securities portfolio, which has increased as a result of our continued growth in deposits. These increases were partially offset by lower yields earned on our loans and available-for-sale securities.

The main factors affecting interest income and interest expense for the nine months ended September 30, 2012, compared to the comparable 2011 period are discussed below:


•	Interest income for the nine months ended September 30, 2012 increased by $62.9 million primarily due to:

◦

A $59.9 million increase in interest income on loans, primarily due to an increase in average loan balances of $1.7 billion, as well as an increase of $7.5 million in loan prepayment fees. These increases were partially offset by a decrease in the overall yield on our loan portfolio reflective of our success in growing our later stage client portfolio, which typically is benchmarked to three-month LIBOR and bears lower credit risk. Additionally, the trend in yields is being influenced by changes in the composition of our loan portfolio to a higher proportion of variable-rate loans benchmarked to the national Prime rate.

◦

A $4.9 million increase in interest income on available-for-sale securities, reflecting a $17.6 million increase related to higher average balances, offset by a $12.7 million decrease related to lower yields. The increase in average balances came primarily from new investments in fixed-rate mortgage securities in the latter part of 2011 and first and third quarters of 2012, which were purchased with excess cash as a result of our continued deposit growth. The decrease in yields came primarily from an increase of $24.3 million in premium amortization expense from $18.2 million to $42.5 million, reflective of an increase in actual and estimated mortgage prepayment levels due to a decrease in long-term market rates and growth in our

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mortgage securities balances. The decrease in yield from an increase in premium amortization expense was partially offset by higher coupon yields resulting from a shift in our portfolio to a smaller proportion of lower-yielding variable-rate securities. For the nine months ended September 30, 2012, average variable-rate securities were $2.2 billion, or 20.6 percent of our available-for-sale securities portfolio, compared to $2.8 billion, or 29.9 percent for the comparable 2011 period. These securities have variable-rate coupons that are indexed to and change with movements in the one-month LIBOR rate.


•	Interest expense for the nine months ended September 30, 2012 decreased by $8.1 million primarily due to:


◦	A decrease in interest expense of $5.7 million related to our long-term debt, primarily due to the maturity of $250.0 million of our 3.875% Convertible Notes in April 2011.


◦	A decrease in interest expense from interest-bearing deposits of $2.5 million, primarily due to decreases in rates paid on deposits throughout 2011, which is reflective of market rates.

Net Interest Margin (Fully Taxable Equivalent Basis)

Our net interest margin remained stable at 3.12 percent for the three months ended September 30, 2012, compared to 3.13 percent for the comparable 2011 period. The main factors affecting our net interest margin for the three months ended September 30, 2012 were as follows:


•	A decrease in net interest margin from a decrease in the overall yield on our loan portfolio resulting from changes in loan composition, which is reflective of our ongoing strategy of growing our larger, later stage client portfolio that typically has lower credit risk and therefore lower relative yield.


•	A decrease in net interest margin from a decrease in overall yields on our available-for-sale securities portfolio, due to an increase in premium amortization expense.


•	An increase in net interest margin from an increase of $1.9 billion in average loan balances (higher-yielding assets).

Our net interest margin increased to 3.21 percent for the nine months ended September 30, 2012, compared to 3.07 percent for the comparable 2011 period. The increase in our net interest margin for the nine months ended September 30, 2012 was primarily due to growth in average loan balances and lower cash balances from deployment into available-for-sale securities, which has resulted in a favorable change in our mix of interest-earning assets. The increase was partially offset by a decrease in the overall yield of our loan portfolio and available-for-sale securities.

Average Balances, Yields and Rates Paid (Fully Taxable Equivalent Basis)

The average yield earned on interest-earning assets is the amount of annualized fully taxable equivalent interest income expressed as a percentage of average interest-earning assets. The average rate paid on funding sources is the amount of annualized interest expense expressed as a percentage of average funding sources. The following tables set forth average assets, liabilities, noncontrolling interests and SVBFG stockholders’ equity, interest income, interest expense, annualized yields and rates, and the composition of our annualized net interest margin for the three and nine months ended September 30, 2012 and 2011:

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Average Balances, Rates and Yields for the Three Months Ended September 30, 2012 and 2011



	Three months ended September 30,
	2012								2011
(Dollars in thousands)	Average Balance			Interest Income/ Expense			Yield/ Rate		Average Balance			Interest Income/ Expense			Yield/ Rate
Interest-earning assets:
Federal Reserve deposits, federal funds sold, securities purchased under agreements to resell and other short-term investment securities (1)	$	1,287,103		$	1,125		0.35	%	$	1,595,176		$	1,375		0.34	%
Available-for-sale securities: (2)
Taxable	10,478,071			38,493			1.46		9,528,645			39,357			1.64
Non-taxable (3)	91,654			1,375			5.97		92,268			1,382			5.94
Total loans, net of unearned income (4) (5)	7,907,606			121,446			6.11		6,006,614			101,693			6.72
Total interest-earning assets	19,764,434			162,439			3.27		17,222,703			143,807			3.31
Cash and due from banks	309,934								286,485
Allowance for loan losses	(102,506		)						(88,315		)
Other assets (6)	1,755,335								1,375,637
Total assets	$	21,727,197							$	18,796,510
Funding sources:
Interest-bearing liabilities:
NOW deposits	$	105,302		$	88		0.33	%	$	89,549		$	53		0.23	%
Money market deposits	2,790,021			1,219			0.17		2,577,617			1,125			0.17
Money market deposits in foreign offices	118,002			29			0.10		104,605			26			0.10
Time deposits	157,585			130			0.33		229,430			236			0.41
Sweep deposits in foreign offices	2,174,737			274			0.05		2,168,078			275			0.05
Total interest-bearing deposits	5,345,647			1,740			0.13		5,169,279			1,715			0.13
Short-term borrowings	26,751			12			0.18		1,250			—			—
5.375% Senior Notes	347,910			4,818			5.51		347,712			4,812			5.49
Junior Subordinated Debentures	55,269			830			5.97		55,445			829			5.93
5.70% Senior Notes	—			—			—		146,816			342			0.92
6.05% Subordinated Notes	55,214			128			0.92		54,208			94			0.69
Other long-term debt	—			—			—		5,840			77			5.23
Total interest-bearing liabilities	5,830,791			7,528			0.51		5,780,550			7,869			0.54
Portion of noninterest-bearing funding sources	13,933,643								11,442,153
Total funding sources	19,764,434			7,528			0.15		17,222,703			7,869			0.18
Noninterest-bearing funding sources:
Demand deposits	12,914,697								10,634,757
Other liabilities	452,160								287,030
SVBFG stockholders’ equity	1,782,443								1,500,452
Noncontrolling interests	747,106								593,721
Portion used to fund interest-earning assets	(13,933,643		)						(11,442,153		)
Total liabilities, noncontrolling interest, and SVBFG stockholders’ equity	$	21,727,197							$	18,796,510
Net interest income and margin				$	154,911		3.12	%				$	135,938		3.13	%
Total deposits	$	18,260,344							$	15,804,036
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis				(481		)						(483		)
Net interest income, as reported				$	154,430							$	135,455


(1)	Includes average interest-earning deposits in other financial institutions of $211.0 million and $338.4 million for the three months ended September 30, 2012 and 2011, respectively. For the three months ended September 30, 2012 and 2011, balances also include $887.0 million and $975.1 million, respectively, deposited at the FRB, earning interest at the Federal Funds target rate.


(2)	Yields on available-for-sale securities are based on amortized cost, and therefore do not give effect to unrealized changes in fair value that are reflected in other comprehensive income.


(3)	Interest income on non-taxable available-for-sale securities is presented on a fully taxable-equivalent basis using the federal statutory income tax rate of 35.0 percent for all periods presented.


(4)	Nonaccrual loans are reflected in the average balances of loans.


(5)	Interest income includes loan fees of $19.0 million and $17.8 million for the three months ended September 30, 2012 and 2011, respectively.


(6)	Average investment securities of $1.4 billion and $1.0 billion for the three months ended September 30, 2012 and 2011, respectively, were classified as other assets as they were noninterest-earning assets. These investments primarily consisted of non-marketable securities.

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Average Balances, Rates and Yields for the Nine Months Ended September 30, 2012 and 2011



	Nine months ended September 30,
	2012								2011
(Dollars in thousands)	Average Balance			Interest Income/ Expense			Yield/ Rate		Average Balance			Interest Income/ Expense			Yield/ Rate
Interest-earning assets:
Federal Reserve deposits, federal funds sold, securities purchased under agreements to resell and other short-term investment securities (1)	$	1,115,192		$	3,075		0.37	%	$	1,951,625		$	4,972		0.34	%
Available-for-sale securities: (2)
Taxable	10,574,021			129,940			1.64		9,195,583			124,956			1.82
Non-taxable (3)	92,002			4,143			6.02		94,179			4,189			5.95
Total loans, net of unearned income (4) (5)	7,318,537			344,842			6.29		5,619,709			284,935			6.78
Total interest-earning assets	19,099,752			482,000			3.37		16,861,096			419,052			3.32
Cash and due from banks	301,507								275,617
Allowance for loan losses	(100,795		)						(87,616		)
Other assets (5)	1,652,577								1,287,751
Total assets	$	20,953,041							$	18,336,848
Funding sources:
Interest-bearing liabilities:
NOW deposits	$	102,502		$	246		0.32	%	$	79,112		$	198		0.33	%
Money market deposits	2,646,272			3,212			0.16		2,486,211			4,186			0.23
Money market deposits in foreign offices	130,257			96			0.10		134,216			264			0.26
Time deposits	156,321			491			0.42		292,710			913			0.42
Sweep deposits in foreign offices	2,108,404			790			0.05		2,475,263			1,818			0.10
Total interest-bearing deposits	5,143,756			4,835			0.13		5,467,512			7,379			0.18
Short-term borrowings	91,772			135			0.20		22,287			25			0.15
5.375% Senior Notes	347,860			14,449			5.55		347,665			14,431			5.55
3.875% Convertible Notes	—			—			—		95,071			4,210			5.92
Junior Subordinated Debentures	55,313			2,493			6.02		55,489			2,494			6.01
5.70% Senior Notes	79,312			863			1.45		199,734			1,454			0.97
6.05% Subordinated Notes	55,122			382			0.93		157,789			1,163			0.99
Other long-term debt	642			92			19.14		5,580			223			5.34
Total interest-bearing liabilities	5,773,777			23,249			0.54		6,351,127			31,379			0.66
Portion of noninterest-bearing funding sources	13,325,975								10,509,969
Total funding sources	19,099,752			23,249			0.16		16,861,096			31,379			0.25
Noninterest-bearing funding sources:
Demand deposits	12,403,438								9,783,426
Other liabilities	355,571								254,033
SVBFG stockholders’ equity	1,704,957								1,407,231
Noncontrolling interests	715,298								541,031
Portion used to fund interest-earning assets	(13,325,975		)						(10,509,969		)
Total liabilities, noncontrolling interest, and SVBFG stockholders’ equity	$	20,953,041							$	18,336,848
Net interest income and margin				$	458,751		3.21	%				$	387,673		3.07	%
Total deposits	$	17,547,194							$	15,250,938
Reconciliation to reported net interest income:
Adjustments for taxable equivalent basis				(1,450		)						(1,466		)
Net interest income, as reported				$	457,301							$	386,207


(1)	Includes average interest-earning deposits in other financial institutions of $277.1 million and $293.0 million for the nine months ended September 30, 2012 and 2011, respectively. For the nine months ended September 30, 2012 and 2011, balances also include $626.3 million and $1.4 billion, respectively, deposited at the FRB, earning interest at the Federal Funds target rate.


(2)	Yields on available-for-sale securities are based on amortized cost, and therefore do not give effect to unrealized changes in fair value that are reflected in other comprehensive income.


(3)	Interest income on non-taxable available-for-sale securities is presented on a fully taxable-equivalent basis using the federal statutory income tax rate of 35.0 percent for all periods presented.


(4)	Nonaccrual loans are reflected in the average balances of loans.


(5)	Interest income includes loan fees of $56.6 million and $48.3 million for the nine months ended September 30, 2012 and 2011, respectively.


(6)	Average investment securities of$1.3 billion and $899.6 million for the nine months ended September 30, 2012 and 2011, respectively, were classified as other assets as they were noninterest-earning assets. These investments primarily consisted of non-marketable securities.

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Provision for (Reduction of) Loan Losses

Our provision for (reduction of) loan losses is based on our evaluation of the existing allowance for loan losses in relation to total gross loans using historical and other objective information, and on our qualitative assessment of the inherent and identified credit risks of the loan portfolio. The following table summarizes our allowance for loan losses for the three and nine months ended September 30, 2012 and 2011:



	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2012			2011			2012			2011
Allowance for loan losses, beginning balance	$	98,166		$	82,155		$	89,947		$	82,627
Provision for (reduction of) loan losses	6,788			769			29,316			(2,144		)
Gross loan charge-offs	(4,637		)	(8,248		)	(25,757		)	(16,863		)
Loan recoveries	1,207			10,570			8,018			21,626
Allowance for loan losses, ending balance	$	101,524		$	85,246		$	101,524		$	85,246
Provision for (reduction of) loan losses as a percentage of total gross loans (annualized)	0.33		%	0.05		%	0.47		%	(0.04		)%
Gross loan charge-offs as a percentage of average total gross loans (annualized)	0.23			0.54			0.47			0.40
Net loan charge-offs (recoveries) as a percentage of average total gross loans (annualized)	0.17			(0.15		)	0.32			(0.11		)
Allowance for loan losses as a percentage of period-end total gross loans	1.23			1.34			1.23			1.34
Period-end total gross loans	$	8,266,168		$	6,382,235		$	8,266,168		$	6,382,235
Average total gross loans	7,976,257			6,057,937			7,380,458			5,666,939

We had a provision for loan losses of $6.8 million for the three months ended September 30, 2012, compared to a provision of $0.8 million for the comparable 2011 period. The provision of $6.8 million in the third quarter of 2012 was primarily attributable to loan growth and net charge-offs of $3.4 million. Gross loan charge-offs of $4.6 million for the three months ended September 30, 2012 were primarily from our life science and hardware client portfolios.

We had a provision for loan losses of $29.3 million for the nine months ended September 30, 2012, compared to a reduction of provision of $2.1 million for the comparable 2011 period. The provision of $29.3 million for the nine months ended September 30, 2012 was primarily due to net charge-offs of $17.7 million and loan growth. Gross loan charge-offs of $25.8 million for the nine months ended September 30, 2012 were primarily from our hardware client portfolio. Loan recoveries of $8.0 million for the nine months ended September 30, 2012 were primarily from our software client portfolio.

See “Consolidated Financial Condition—Credit Quality and Allowance for Loan Losses” below and Note 6—“Loans and Allowance for Loan Losses” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for further details on our allowance for loan losses.

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Noninterest Income

A summary of noninterest income for the three and nine months ended September 30, 2012 and 2011 is as follows:



	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2012		2011		% Change		2012		2011		% Change
Core fee income:
Foreign exchange fees	$	12,211	$	11,546	5.8	%	$	36,345	$	32,397	12.2	%
Deposit service charges	8,369		8,259		1.3		24,834		23,214		7.0
Credit card fees	6,348		4,506		40.9		18,185		12,687		43.3
Letters of credit and standby letters of credit income	3,495		3,040		15.0		10,427		8,452		23.4
Client investment fees	3,954		2,939		34.5		10,226		9,707		5.3
Total core fee income (1)	34,377		30,290		13.5		100,017		86,457		15.7
Gains on investment securities, net	20,228		52,262		(61.3	)	53,876		175,279		(69.3	)
Gains on derivative instruments, net	1,111		9,951		(88.8	)	15,800		24,153		(34.6	)
Other	13,423		3,108		NM		39,165		23,384		67.5
Total noninterest income	$	69,139	$	95,611	(27.7	)	$	208,858	$	309,273	(32.5	)

NM—Not meaningful


(1)	The following table provides a reconciliation GAAP noninterest income to non-GAAP core fee income:



	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2012		2011		% Change		2012		2011		% Change
GAAP noninterest income (as reported)	$	69,139	$	95,611	(27.7	)%	$	208,858	$	309,273	(32.5	)%
Less: gains on investment securities, net	20,228		52,262		(61.3	)	53,876		175,279		(69.3	)
Less: gains on derivative instruments, net	1,111		9,951		(88.8	)	15,800		24,153		(34.6	)
Less: other noninterest income	13,423		3,108		NM		39,165		23,384		67.5
Non-GAAP core fee income	$	34,377	$	30,290	13.5		$	100,017	$	86,457	15.7

NM—Not meaningful

Included in net income is income and expense attributable to noncontrolling interests. We recognize, as part of our investment funds management business through SVB Capital and Debt Fund Investments, the entire income or loss from funds where we own significantly less than 100% of the investment. We are required under GAAP to consolidate 100% of the results of entities that we are deemed to control, even though we may own less than 100% of such entities. The relevant amounts attributable to investors other than us are reflected under “Net Income Attributable to Noncontrolling Interests” on our statements of income. The non-GAAP tables presented below, for noninterest income and net gains on investment securities, all exclude noncontrolling interests. We believe these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that represent income attributable to investors other than us and our subsidiaries. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results and when planning, forecasting and analyzing future periods. However, these non-GAAP financial measures should be considered in addition to, not as a substitute for or preferable to, financial measures prepared in accordance with GAAP.

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The following table provides a summary of non-GAAP noninterest income, net of noncontrolling interests:



	Three months ended September 30,						Nine months ended September 30,
Non-GAAP noninterest income, net of noncontrolling interests (Dollars in thousands)	2012		2011		% Change		2012		2011		% Change
GAAP noninterest income (as reported)	$	69,139	$	95,611	(27.7	)%	$	208,858	$	309,273	(32.5	)%
Less: income attributable to noncontrolling interests, including carried interest	13,524		41,239		(67.2	)	34,826		111,359		(68.7	)
Non-GAAP noninterest income, net of noncontrolling interests	55,615		54,372		2.3		174,032		197,914		(12.1	)
Less: gains on sales of certain available-for-sale securities	—		—		—		4,955		37,314		(86.7	)
Less: net gains on the sale of certain assets related to our equity management services business	—		—		—		4,243		—		—
Non-GAAP noninterest income, net of noncontrolling interests and excluding gains on sales of certain assets	$	55,615	$	54,372	2.3		$	164,834	$	160,600	2.6

Foreign Exchange Fees

Foreign exchange fees were $12.2 million and $36.3 million for the three and nine months ended September 30, 2012, respectively, compared to $11.5 million and $32.4 million for the comparable 2011 periods. The increases were primarily due to improved business conditions for our clients and increased volatility in foreign markets, which has resulted in an improvement in our spread as well as a higher number of trades.

Credit Card Fees

Credit card fees were $6.3 million and $18.2 million for the three and nine months ended September 30, 2012, compared to $4.5 million and $12.7 million for the comparable 2011 periods. The increases were primarily due to new credit card clients and an increase in client activity.

Client Investment Fees

Client investment fees were $4.0 million and $10.2 million for the three and nine months ended September 30, 2012, compared to $2.9 million and $9.7 million for the comparable 2011 periods. The increases were primarily due to an increase in average client investment funds due to our clients’ increased utilization of our off-balance sheet sweep money market funds. The following table summarizes average client investment funds for the three and nine months ended September 30, 2012 and 2011:



	Three months ended September 30,						Nine months ended September 30,
(Dollars in millions)	2012		2011		% Change		2012	2011	% Change
Client directed investment assets (1)	$	7,528	$	8,063	(6.6	)%	7,406	8,845	(16.3	)%
Client investment assets under management	10,283		9,541		7.8		10,247	8,519	20.3
Sweep money market funds	3,118		312		NM		2,239	132	NM
Total average client investment funds (2)	$	20,929	$	17,916	16.8		19,892	17,496	13.7

NM—Not meaningful


(1)	Comprised of mutual funds and Repurchase Agreement Program assets.


(2)	Client investment funds are maintained at third party financial institutions and are not recorded on our balance sheet.

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The following table summarizes period-end client investment funds at September 30, 2012 and December 31, 2011:



(Dollars in millions)	September 30, 2012	December 31, 2011	% Change
Client directed investment assets	7,363	7,709	(4.5	)%
Client investment assets under management	10,291	9,919	3.8
Sweep money market funds	3,404	1,116	NM
Total period-end client investment funds	21,058	18,744	12.3

NM—Not meaningful

Gains on Investment Securities, Net

Net gains on investment securities include both gains from our non-marketable and marketable securities, as well as gains from sales of our available-for-sale securities portfolio, when applicable.

Our available-for-sale securities portfolio is managed to optimize portfolio yield over the long-term in a manner consistent with our liquidity, credit diversification, and asset/liability strategies. Though infrequent, the sale of investments from our available-for-sale portfolio results in net gains or losses on investment securities.

We experience variability in the performance of our non-marketable and marketable investments from quarter to quarter, which results in net gains or losses on investment securities. This variability is due to a number of factors, including changes in the values of our investments, changes in the amount of distributions or liquidity events and general economic and market conditions. Such variability may lead to volatility in the gains from investment securities and as such our results for a particular period are not necessarily indicative of our expected performance in a future period.

For the three months ended September 30, 2012, we had net gains on investment securities of $20.2 million, compared to net gains of $52.3 million for the comparable 2011 period. Gains on investment securities, net of noncontrolling interests, were $7.5 million for the three months ended September 30, 2012, compared to $9.3 million for the comparable 2011 period. The gains, net of noncontrolling interests, of $7.5 million for the three months ended September 30, 2012 were primarily driven by the following:


•	Gains of $5.4 million from our investments in debt funds, driven primarily by IPO and M&A activity and other valuation adjustments on investments within the funds.


•	Gains of $1.4 million from the sale of certain private company shares, which were included as part of "Strategic and Other Investments".

For the nine months ended September 30, 2012, we had net gains on investment securities of $53.9 million, compared to net gains of $175.3 million for the comparable 2011 period. Gains on investment securities, net of noncontrolling interests, were $19.3 million for the nine months ended September 30, 2012, compared to $62.5 million for the comparable 2011 period. The gains, net of noncontrolling interests, of $19.3 million for the nine months ended September 30, 2012 were primarily driven by the following:


•	Gains of $8.8 million from our investments in debt funds, driven primarily by IPO and M&A activity and other valuation adjustments on investments within the funds.


•	Gains of $5.0 million from the sale of $315.7 million U.S. agency securities in the second quarter of 2012 that were held in our available-for-sale securities portfolio.


•	Gains of $4.1 million from our strategic and other investments, primarily from gains on the sales of certain private company shares and unrealized gains from certain fund investments.

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The following tables provide a summary of non-GAAP net gains on investment securities, net of noncontrolling interests, for the three and nine months ended September 30, 2012 and 2011:



(Dollars in thousands)	Managed Funds of Funds		Managed Direct Venture Funds			Debt Funds			Available- For-Sale Securities			Strategic and Other Investments		Total
Three months ended September 30, 2012
Total gains (losses) on investment securities, net	$	12,139	$	2,034		$	5,439		$	(101	)	$	717	$	20,228
Less: income (losses) attributable to noncontrolling interests, including carried interest	11,351		1,427			(2		)	—			—		12,776
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests	$	788	$	607		$	5,441		$	(101	)	$	717	$	7,452
Three months ended September 30, 2011
Total gains on investment securities, net	$	32,264	$	17,517		$	1,422		$	5		$	1,054	$	52,262
Less: income (losses) attributable to noncontrolling interests, including carried interest	28,765		14,222			(26		)	—			—		42,961
Non-GAAP net gains on investment securities, net of noncontrolling interests	$	3,499	$	3,295		$	1,448		$	5		$	1,054	$	9,301
Nine months ended September 30, 2012
Total gains (losses) on investment securities, net	$	38,908	$	(1,589	)	$	8,823		$	3,592		$	4,142	$	53,876
Less: income (losses) attributable to noncontrolling interests, including carried interest	35,919		(1,331		)	28			—			—		34,616
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests	2,989		(258		)	8,795			3,592			4,142		19,260
Less: gain on sales of available-for-sale securities	—		—			—			4,955			—		4,955
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests and excluding gains on sales of certain available-for-sale securities	$	2,989	$	(258	)	$	8,795		$	(1,363	)	$	4,142	$	14,305
Nine months ended September 30, 2011
Total gains on investment securities, net	$	107,640	$	19,623		$	4,524		$	37,288		$	6,204	$	175,279
Less: income attributable to noncontrolling interests, including carried interest	95,727		17,042			14			—			—		112,783
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests	11,913		2,581			4,510			37,288			6,204		62,496
Less: gain on sales of available-for-sale securities	—		—			—			37,314			—		37,314
Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests and excluding gains on sales of certain available-for-sale securities	$	11,913	$	2,581		$	4,510		$	(26	)	$	6,204	$	25,182

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Gains on Derivative Instruments, Net

A summary of gains on derivative instruments, net, for the three and nine months ended September 30, 2012 and 2011 is as follows:



	Three months ended September 30,								Nine months ended September 30,
(Dollars in thousands)	2012			2011			% Change		2012			2011			% Change
Equity warrant assets (1)
Gains on exercises, net	$	2,417		$	2,372		1.9	%	$	7,577		$	11,977		(36.7	)%
Cancellations and expirations	(252		)	(386		)	(34.7	)	(1,424		)	(1,690		)	(15.7	)
Changes in fair value	(1,618		)	3,532			(145.8	)	6,205			13,088			(52.6	)
Net gains on equity warrant assets (2)	547			5,518			(90.1	)	12,358			23,375			(47.1	)
Gains on foreign exchange forward contracts, net:
Gains on client foreign exchange forward contracts, net	607			658			(7.8	)	3,002			1,448			107.3
Gains on internal foreign exchange forward contracts, net (3)	220			3,591			(93.9	)	1,162			540			115.2
Total gains on foreign exchange forward contracts, net	827			4,249			(80.5	)	4,164			1,988			109.5
Change in fair value of interest rate swaps	74			(400		)	(118.5	)	571			(467		)	NM
Net (losses) gains on other derivatives (4)	(337		)	584			(157.7	)	(1,293		)	(743		)	74.0
Gains on derivative instruments, net	$	1,111		$	9,951		(88.8	)	$	15,800		$	24,153		(34.6	)

NM—Not meaningful


(1)	At September 30, 2012, we held warrants in 1,248 companies, compared to 1,151 companies at September 30, 2011.


(2)	Net gains on equity warrant assets are included in the line item “Gains on derivative instruments, net” as part of noninterest income.


(3)	Represents the change in the fair value of foreign exchange forward contracts used to economically reduce our foreign exchange exposure related to certain foreign currency denominated loans.


(4)	Primarily represents the change in fair value of loan conversion options held by SVB Financial. As of September 30, 2012, the loan conversion options related to five clients.

Net gains on derivative instruments were $1.1 million for the three months ended September 30, 2012, compared to net gains of $10.0 million for the comparable 2011 period. The key changes in factors affecting net gains on derivative instruments were as follows:


•	Net gains on equity warrant assets of $0.5 million for the three months ended September 30, 2012, compared to net gains of $5.5 million for the comparable 2011 period. The net gains of $0.5 million for the three months ended September 30, 2012 included the following:


◦	Gains of $2.4 million from the exercise of equity warrant assets.


◦	Losses of $1.6 million from changes in fair value, which were the net result of valuation decreases of $3.4 million driven by increases in the marketability discount and remaining life assumptions to reflect market conditions, offset by net gains of $1.8 million from increases in individual warrant valuations.

•

Net gains of $0.2 million on foreign exchange forward contracts hedging certain of our foreign currency denominated loans for the three months ended September 30, 2012, compared to net gains of $3.6 million for the comparable 2011 period. The net gains of $3.6 million for the three months ended September 30, 2011 were primarily due to the strengthening of the U.S. Dollar against the Euro and Pound Sterling, and were partially offset by net losses of $3.8 million from the revaluation of foreign currency denominated loans that are included in the line item "Other" as part of noninterest income.

Net gains on derivative instruments were $15.8 million for the nine months ended September 30, 2012, compared to net gains of $24.2 million for the comparable 2011 period. The key changes in factors affecting net gains on derivative were as follows:


•	Net gains on equity warrant assets of $12.4 million for the nine months ended September 30, 2012, compared to net gains of $23.4 million for the comparable 2011 period. The net gains of $12.4 million for the nine months ended

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September 30, 2012 were driven by gains of $17.2 million from the exercise of equity warrant assets and valuation increases driven by IPO and M&A activity, partially offset by valuation decreases of $3.4 million in the third quarter of 2012 which were driven by changes in the marketability discount and remaining life assumptions to reflect market conditions.

Other Noninterest Income

A summary of other noninterest income for the three and nine months ended September 30, 2012 and 2011, respectively, is as follows:



	Three months ended September 30,							Nine months ended September 30,
(Dollars in thousands)	2012		2011			% Change		2012			2011			% Change
Unused commitment fees	$	2,579	$	1,900		35.7	%	$	9,312		$	5,194		79.3	%
Fund management fees	2,496		2,671			(6.6	)	8,448			8,022			5.3
Service-based fee income (1)	1,651		2,339			(29.4	)	6,197			7,151			(13.3	)
Net gains on the sale of certain assets related to our equity management services business	—		—			—		4,243			—			—
Loan syndication fees	1,353		50			NM		2,853			920			NM
Gains (losses) on revaluation of foreign currency instruments (2)	1,578		(3,931		)	(140.1	)	96			(733		)	(113.1	)
Currency revaluation gains (losses) (3)	845		(1,551		)	(154.5	)	(88		)	(2,672		)	(96.7	)
Other	2,921		1,630			79.2		8,104			5,502			47.3
Total other noninterest income	$	13,423	$	3,108		NM		$	39,165		$	23,384		67.5

NM—Not meaningful


(1)	Includes income from SVB Analytics.


(2)	Represents the revaluation of foreign currency denominated financial instruments issued and held by us, primarily loans, deposits and cash

(3)

Other noninterest income was $13.4 million and $39.2 million for the three and nine months ended September 30, 2012, compared to $3.1 million and $23.4 million for the comparable 2011 periods. The increase of $10.3 million for the three month period was due to the following:


•	Gains on the revaluation of foreign currency instruments of $1.6 million for the three months ended September 30, 2012, compared to net losses of $3.9 million for the comparable 2011 period. The revaluation gains were primarily due to the weakening of the U.S. Dollar against the Euro and Pound Sterling.


•	Currency revaluation gains of $0.8 million for the three months ended September 30, 2012, compared to net losses $1.6 million for the comparable 2011 period. The revaluation gains primarily due to the weakening of the U.S. Dollar against the Rupee.


•	A $1.3 million increase in loan syndication fee income due to an increase in the volume of loan syndication deals

The increase in other noninterest income of $15.8 million for the nine months ended September 30, 2012 was due to the following:


•	Gains of $4.2 million on the sale of certain assets related to our equity management services business in the second quarter of 2012.


•	A $4.1 million increase in unused commitment fees, primarily resulting from the prospective reclassification of certain fees from interest income to noninterest income. The comparable amount of these fees included in interest income for the nine months ended September 30, 2011 was $3.0 million.


•	Currency revaluation losses of $0.1 million for the nine months ended September 30, 2012, compared to net losses of $2.7 million for the comparable 2011 period. The net losses of $0.1 million for the nine months ended September 30,

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2012 were primarily due to the strengthening of the U.S. Dollar against the Rupee.

Noninterest Expense

A summary of noninterest expense for the three and nine months ended September 30, 2012 and 2011 is as follows:



	Three months ended September 30,							Nine months ended September 30,
(Dollars in thousands)	2012			2011		% Change		2012		2011		% Change
Compensation and benefits	$	79,262		$	77,009	2.9	%	$	243,384	$	232,529	4.7	%
Professional services	17,759			16,122		10.2		48,880		43,000		13.7
Premises and equipment	11,247			7,220		55.8		28,230		19,572		44.2
Business development and travel	6,838			5,886		16.2		21,743		17,429		24.8
Net occupancy	5,666			4,967		14.1		16,667		14,163		17.7
Correspondent bank fees	3,000			2,336		28.4		8,528		6,701		27.3
FDIC assessments	2,836			2,302		23.2		8,065		7,940		1.6
Provision for unfunded credit commitments	(400		)	2,055		(119.5	)	1,264		2,131		(40.7	)
Other	8,963			9,554		(6.2	)	26,188		22,453		16.6
Total noninterest expense	$	135,171		$	127,451	6.1		$	402,949	$	365,918	10.1

Included in noninterest expense is expense attributable to noncontrolling interests. See below for a summary of non-GAAP noninterest expense and non-GAAP operating efficiency ratio, both of which exclude noncontrolling interests.

Non-GAAP Noninterest Expense

We use and report non-GAAP noninterest expense, non-GAAP taxable equivalent revenue and non-GAAP operating efficiency ratio, which excludes noncontrolling interests. We believe these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by: (i) excluding certain items that represent expenses attributable to investors other than us and our subsidiaries, or certain items that do not occur every reporting period; or (ii) providing additional information used by management that is not otherwise required by GAAP or other applicable requirements. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results and when planning, forecasting and analyzing future periods. However, these non-GAAP financial measures should be considered in addition to, not as a substitute for or preferable to, financial measures prepared in accordance with GAAP. The table below provides a summary of non-GAAP noninterest expense and non-GAAP operating efficiency ratio, both net of noncontrolling interests:



	Three months ended September 30,								Nine months ended September 30,
Non-GAAP operating efficiency ratio, net of noncontrolling interests (Dollars in thousands, except ratios)	2012			2011			% Change		2012			2011			% Change
GAAP noninterest expense	$	135,171		$	127,451		6.1	%	$	402,949		$	365,918		10.1	%
Less: amounts attributable to noncontrolling interests	2,723			2,766			(1.6	)	9,488			8,868			7.0
Less: net gain from note repurchases and termination of corresponding interest rate swaps	—			—			—		—			(3,123		)	(100.0	)
Non-GAAP noninterest expense, net of noncontrolling interests	$	132,448		$	124,685		6.2		$	393,461		$	360,173		9.2
GAAP taxable equivalent net interest income	$	154,911		$	135,938		14.0		$	458,751		$	387,673		18.3
Less: income attributable to noncontrolling interests	50			32			56.3		131			84			56.0
Non-GAAP taxable equivalent net interest income, net of noncontrolling interests	154,861			135,906			13.9		458,620			387,589			18.3
Non-GAAP noninterest income, net of noncontrolling interests	55,615			54,372			2.3		164,834			160,600			2.6
Non-GAAP taxable equivalent revenue, net of noncontrolling interests	$	210,476		$	190,278		10.6		$	623,454		$	548,189		13.7
Non-GAAP operating efficiency ratio (1)	62.93		%	65.53		%	(4.0	)	63.11		%	65.70		%	(3.9	)

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(1)	The non-GAAP operating efficiency ratio is calculated by dividing non-GAAP noninterest expense by non-GAAP total taxable-equivalent income.

Compensation and Benefits Expense

The following table provides a summary of our compensation and benefits expense:



	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2012		2011		% Change		2012		2011		% Change
Compensation and benefits
Salaries and wages	$	37,769	$	33,342	13.3	%	$	113,391	$	99,783	13.6	%
Incentive compensation & ESOP	20,185		23,907		(15.6	)	62,170		71,894		(13.5	)
Other employee benefits (1)	21,308		19,760		7.8		67,823		60,852		11.5
Total compensation and benefits	$	79,262	$	77,009	2.9		$	243,384	$	232,529	4.7
Period-end full-time equivalent employees	1,602		1,504		6.5		1,602		1,504		6.5
Average full-time equivalent employees	1,594		1,478		7.8		1,572		1,428		10.1


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

Compensation and benefits expense was $79.3 million for the three months ended September 30, 2012, compared to $77.0 million for the comparable 2011 period. The key changes in factors affecting compensation and benefits expense were as follows:

•

An increase of $4.4 million in salaries and wages expense, primarily due to an increase in the number of average FTEs, which increased by 116 to 1,594 average FTEs in the third quarter of 2012, compared to 1,478 average FTE for the comparable 2011 period. The increase in headcount was primarily to support our product development, operational and sales and advisory, as well as to support our commercial banking operations and initiatives.


•	A decrease of $3.7 million in incentive compensation and ESOP expense primarily reflective of higher expenses in the third quarter of 2011 as a result of better than expected results for that period.

Compensation and benefits expense was $243.4 million for the nine months ended September 30, 2012, compared to $232.5 million for the comparable 2011 period. The key changes in factors affecting compensation and benefits expense were as follows:

•

An increase of $13.6 million in salaries and wages expense, primarily due to an increase in the number of average FTEs, which increased by 144 to 1,572 average FTEs in the nine months ended September 30, 2012, compared to 1,428 average FTEs for the comparable 2011 period. The increase in headcount was primarily to support our product development, operational and sales and advisory, as well as to support our commercial banking operations and initiatives.


•	An increase of $7.0 million in other employee benefits, primarily due to an increase in average FTEs, as well as an increase in 401(k) expenses driven by 2011 incentive compensation payouts during the first quarter of 2012, which were at higher levels than 2010 incentive compensation payouts in the first quarter of 2011.


•	A decrease of $9.7 million in incentive compensation and ESOP expense primarily reflective of higher expenses in the first nine months of 2011 as a result of better than expected results for that period.

Our variable compensation plans primarily consist of our Incentive Compensation Plan, Direct Drive Incentive Compensation Plan, Long-Term Cash Incentive Plan, 401(k) and ESOP Plan, Retention Program and Warrant Incentive Plan. Total costs incurred under these plans were $22.3 million and $73.9 million for the three and nine months ended September 30, 2012, respectively, compared to $26.5 million and $82.4 million for the comparable 2011 periods. These amounts are included in total compensation and benefits expense discussed above.

Professional Services

Professional services expense was $17.8 million and $48.9 million for the three and nine months ended September 30, 2012, respectively, compared to $16.1 million and $43.0 million for the comparable 2011 periods. The increases were to support our ongoing business and infrastructure initiatives.

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Premises and Equipment

Premises and equipment expense was $11.2 million and $28.2 million for the three and nine months ended September 30, 2012, respectively, compared to $7.2 million and $19.6 million for the comparable 2011 periods. The increases were primarily due to increased spending to enhance and maintain our IT infrastructure.

Business Development and Travel

Business development and travel expense was $6.8 million and $21.7 million for the three and nine months ended September 30, 2012, respectively, compared to $5.9 million and $17.4 million for the comparable 2011 periods. The increases were primarily reflective of our increased focus on global initiatives and increased business development activity due to improving economic and business conditions.

(Reduction of ) Provision for Unfunded Credit Commitments

We recorded a reduction of provision for unfunded credit commitments of $0.4 million for the three months ended September 30, 2012, compared to $2.1 million for the comparable 2011 period. The reduction of provision for the three months ended September 30, 2012 was primarily due to improved credit performance across our client portfolio and a decrease in unfunded credit commitment balances of $42.5 million. We recorded a a provision of $1.3 million for the nine months ended September 30, 2012, respectively, compared to $2.1 million for the comparable 2011 period. The provision for the nine months ended September 30, 2012 was reflective of the increase in total unfunded credit commitments during the period.

Other Noninterest Expense

A summary of other noninterest expense for the three and six months ended September 30, 2012 and 2011 is as follows:



	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2012		2011		% Change		2012		2011			% Change
Telephone	$	1,619	$	1,610	0.6	%	$	4,950	$	4,376		13.1	%
Client services	1,804		1,289		40.0		4,796		3,128			53.3
Data processing services	1,575		1,097		43.6		4,290		3,589			19.5
Tax credit fund amortization	941		1,212		(22.4	)	2,961		3,366			(12.0	)
Postage and supplies	591		641		(7.8	)	1,844		1,725			6.9
Dues and publications	472		465		1.5		1,503		1,166			28.9
Net gain from note repurchases and termination of corresponding interest rate swaps (1)	—		—		—		—		(3,123		)	(100.0	)
Other	1,961		3,240		(39.5	)	5,844		8,226			(29.0	)
Total other noninterest expense	$	8,963	$	9,554	(6.2	)	$	26,188	$	22,453		16.6


(1)	Represents net gains from the repurchase of $108.6 million of our 5.70% Senior Notes and $204.0 million of our 6.05% Subordinated Notes and the termination of the corresponding portions of interest rate swaps in 2011.

Net Income Attributable to Noncontrolling Interests

Included in net income is income and expense attributable to noncontrolling interests. The relevant amounts attributable to investors other than us are reflected under “Net Income Attributable to Noncontrolling Interests” on our statements of income.

In the table below, noninterest income consists primarily of investment gains and losses from our consolidated funds. Noninterest expense is primarily related to management fees paid by our managed funds to SVB Financial’s subsidiaries as the funds’ general partners. A summary of net income attributable to noncontrolling interests for the three and nine months ended September 30, 2012 and 2011, respectively, is as follows:

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	Three months ended September 30,								Nine months ended September 30,
(Dollars in thousands)	2012			2011			% Change		2012			2011			% Change
Net interest income (1)	$	(50	)	$	(32	)	56.3	%	$	(131	)	$	(84	)	56.0	%
Noninterest income (1)	(14,416		)	(43,487		)	(66.8	)	(32,258		)	(114,276		)	(71.8	)
Noninterest expense (1)	2,723			2,766			(1.6	)	9,488			8,868			7.0
Carried interest (2)	892			2,248			(60.3	)	(2,568		)	2,917			(188.0	)
Net income attributable to noncontrolling interests	$	(10,851	)	$	(38,505	)	(71.8	)	$	(25,469	)	$	(102,575	)	(75.2	)


(1)	Represents noncontrolling interests’ share in net interest income, noninterest income and noninterest expense.


(2)	Represents the preferred allocation of income earned by the general partners or limited partners of certain consolidated funds.

Income Taxes

Our effective income tax expense rate was 40.2 percent for the three months ended September 30, 2012, compared to 41.6 percent for the comparable 2011 period. Our effective income tax expense rate was 40.2 percent for the nine months ended September 30, 2012, compared to 40.5 percent for the comparable 2011 period. The decreases in the tax rates were primarily attributable to lower taxes on foreign operations.

Our effective tax rate is calculated by dividing income tax expense by the sum of income before income tax expense and the net income attributable to noncontrolling interests.

Operating Segment Results

We have three segments for which we report our financial information: Global Commercial Bank, SVB Private Bank and SVB Capital.

We report segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of our reporting segments. Please refer to Note 10—”Segment Reporting” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional details.

Our primary source of revenue is from net interest income, which is primarily the difference between interest earned on loans, net of 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. Effective January 1, 2012, FTP is calculated at an instrument level based on account characteristics. Prior to January 1, 2012, FTP was calculated by applying a transfer rate to pooled, or aggregated, loan and deposit volumes. We have reclassified all prior period amounts to conform to the current period’s methodology and presentation.

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. The following is our reportable segment information for the three and nine months ended September 30, 2012 and 2011:

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Global Commercial Bank



	Three months ended September 30,								Nine months ended September 30,
(Dollars in thousands)	2012			2011			% Change		2012			2011			% Change
Net interest income	$	151,858		$	133,946		13.4	%	$	441,542		$	380,461		16.1	%
Provision for loan losses	(7,787		)	(3,883		)	100.5		(29,946		)	(3,222		)	NM
Noninterest income	46,965			39,189			19.8		139,387			110,604			26.0
Noninterest expense	(97,846		)	(92,350		)	6.0		(292,580		)	(262,932		)	11.3
Income before income tax expense	$	93,190		$	76,902		21.2		$	258,403		$	224,911		14.9
Total average loans, net of unearned income	$	7,159,609		$	5,263,448		36.0		$	6,559,036		$	4,933,707		32.9
Total average assets	19,861,275			17,347,197			14.5		19,149,952			16,788,462			14.1
Total average deposits	17,881,175			15,573,886			14.8		17,240,715			15,063,215			14.5

NM—Not meaningful

Three months ended September 30, 2012 compared to the three months ended September 30, 2011

Net interest income from our Global Commercial Bank (“GCB”) increased by $17.9 million for the three months ended September 30, 2012, primarily due to a $20.1 million increase in loan interest income resulting mainly from an increase in average loan balances and a $6.2 million increase in the FTP earned for deposits due to deposit growth. These increases were partially offset by a $6.4 million decrease in the FTP earned for deposits from decreases in market interest rates.

We had a provision for loan losses for GCB of $7.8 million for the three months ended September 30, 2012, compared to a provision of $3.9 million for the comparable 2011 period. The provision of $7.8 million in the third quarter of 2012 was primarily attributable to loan growth.

Noninterest income increased by $7.8 million for the three months ended September 30, 2012, primarily due to an increase in gains from debt fund investments, credit card fees and client investment fees. The increase in gains from debt fund investments was driven primarily by IPO and M&A activity and other valuation adjustments on investments within the funds. The increase in credit card fees was primarily due to the addition of new credit card clients and an increase in client activity. The increase in client investment fees was primarily due to an increase in average client investment funds due to our clients’ increased utilization of our off-balance sheet sweep money market funds.

Noninterest expense increased by $5.5 million for the three months ended September 30, 2012, primarily due to an increase in salaries and wages and premises and equipment expense. The increase in salaries and wages was primarily due to an increase in the average number of FTEs at GCB, which increased by 109 to 1,259 for the three months ended September 30, 2012, compared to 1,150 for the comparable 2011 period. The increase in average FTEs was attributable to increases in positions for product development, operational and sales and advisory, as well as to support our commercial banking operations and initiatives. The increase in premises and equipment was primarily due to increased spending to enhance and maintain our IT infrastructure.

Nine months ended September 30, 2012 compared to the nine months ended September 30, 2011

Net interest income from our Global Commercial Bank (“GCB”) increased by $61.1 million for the nine months ended September 30, 2012, primarily due to a $60.6 million increase in loan interest income resulting mainly from an increase in average loan balances and a $18.4 million increase in the FTP earned for deposits due to deposit growth. These increases were partially offset by a $15.5 million decrease in the FTP earned for deposits from decreases in market interest rates.

We had a provision for loan losses for GCB of $29.9 million for the nine months ended September 30, 2012, compared to a provision of $3.2 million for the comparable 2011 period. The provision of $29.9 million for the nine months ended September 30, 2012 was primarily due to net charge-offs and loan growth. The provision for the comparable 2011 period was primarily due to loan growth, partially offset by a decrease in the allowance for our performing loans due to the strong overall credit quality of our clients.

Noninterest income increased by $28.8 million for the nine months ended September 30, 2012, primarily due to an increase in gains from debt fund investments, credit card fees and foreign exchange fees, as well as gains of $4.2 million on the sale of certain assets related to our equity management services business in the second quarter of 2012. The increase in gains from debt fund investments was driven primarily by IPO and M&A activity and other valuation adjustments on investments within the funds. The increase in credit card fees was primarily due to the addition of new credit card clients and an increase in client activity. The increase in foreign exchange fees was primarily due to improving business conditions for our clients and increased volatility

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in foreign markets, which has resulted in an improvement in our spread as well as higher number of trades.

Noninterest expense increased by $29.6 million for the nine months ended September 30, 2012, primarily due to an increase in salaries and wages, premises and equipment and professional services. The increase in salaries and wages was primarily due to an increase in the average number of FTEs at GCB, which increased by 116 to 1,234 for the nine months ended September 30, 2012, compared to 1,118 for the comparable 2011 period. The increase in average FTEs was attributable to increases in positions for product development, operational and sales and advisory, as well as to support our commercial banking operations and initiatives. The increase in premises and equipment was primarily due to increased spending to enhance and maintain our IT infrastructure. The increase in professional services was to support our ongoing business and infrastructure initiatives.

SVB Private Bank



	Three months ended September 30,								Nine months ended September 30,
(Dollars in thousands)	2012			2011			% Change		2012			2011			% Change
Net interest income	$	5,666		$	5,513		2.8	%	$	16,147		$	14,567		10.8	%
Reduction of provision for loan losses	999			3,114			(67.9	)	630			5,366			(88.3	)
Noninterest income	149			128			16.4		457			351			30.2
Noninterest expense	(3,749		)	(2,846		)	31.7		(10,338		)	(7,326		)	41.1
Income before income tax expense	$	3,065		$	5,909		(48.1	)	$	6,896		$	12,958		(46.8	)
Total average loans, net of unearned income	$	755,001		$	684,613		10.3		$	745,069		$	637,443		16.9
Total average assets	758,988			685,308			10.8		749,500			637,854			17.5
Total average deposits	341,537			200,547			70.3		278,736			169,368			64.6

Three months ended September 30, 2012 compared to the three months ended September 30, 2011

Net interest income from SVB Private Bank remained relatively flat at $5.7 million for the three months ended September 30, 2012, resulting from an increase in loan interest income from an increase in average loan balances, partially offset by a decrease in the overall yield on our loan portfolio.

SVB Private Bank had a reduction of provision for loan losses of $1.0 million for the three months ended September 30, 2012, compared to a reduction of provision of $3.1 million for the comparable 2011 period. The reduction of provision for both periods was primarily due to net loan recoveries.

Noninterest expense increased by $0.9 million for the three months ended September 30, 2012, primarily due to an increase in professional services, net occupancy and compensation and benefits expense to support the growth of SVB Private Bank. The average number of FTEs at SVB Private Bank increased by 7 to 47 FTEs for the three months ended September 30, 2012, compared to 40 FTEs for the comparable 2011 period.

Nine months ended September 30, 2012 compared to the nine months ended September 30, 2011

Net interest income from SVB Private Bank increased by $1.6 million for the nine months ended September 30, 2012, primarily due to an increase in loan interest income resulting primarily from an increase in average loan balances.

SVB Private Bank had a reduction of provision for loan losses of $0.6 million for the nine months ended September 30, 2012, compared to a reduction of provision of $5.4 million for the comparable 2011 period. The reduction of provision for both periods was primarily due to net loan recoveries.

Noninterest expense increased by $3.0 million for the nine months ended September 30, 2012, primarily due to an increase in compensation and benefits expense resulting from an increase in the average number of FTEs at SVB Private Bank, which increased by 15 to 46 FTEs for the nine months ended September 30, 2012, compared to 31 FTEs for the comparable 2011 period. The increase in average FTEs was to support the growth of SVB Private Bank.

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SVB Capital



	Three months ended September 30,								Nine months ended September 30,
(Dollars in thousands)	2012			2011			% Change		2012			2011			% Change
Net interest income	$	6		$	2		200.0	%	$	22		$	6		NM%
Noninterest income	4,330			9,873			(56.1	)	12,474			23,879			(47.8	)
Noninterest expense	(3,562		)	(3,860		)	(7.7	)	(8,970		)	(10,113		)	(11.3	)
Income before income tax expense	$	774		$	6,015		(87.1	)	$	3,526		$	13,772		(74.4	)
Total average assets	$	238,595		$	238,949		(0.1	)	$	243,124		$	225,041		8.0

NM—Not meaningful

SVB Capital’s components of noninterest income primarily include net gains and losses on marketable and non-marketable securities, carried interest and fund management fees. All components of income before income tax expense discussed below are net of noncontrolling interests.

We experience variability in the performance of SVB Capital from quarter to quarter due to a number of factors, including changes in the values of our funds’ underlying investments, changes in the amount of distributions and general economic and market conditions. Such variability may lead to volatility in the gains and losses from investment securities and cause our results to differ from period to period. Results for a particular period may not be indicative of future performance.

Three months ended September 30, 2012 compared to the three months ended September 30, 2011

Noninterest income decreased by $5.5 million to $4.3 million for the three months ended September 30, 2012, primarily due to lower net gains on investment securities. SVB Capital’s components of noninterest income primarily include the following:


•	Net gains on investment securities of $1.7 million for the three months ended September 30, 2012, compared to net gains of $7.5 million for the comparable 2011 period. The net gains on investment securities of $1.7 million for the three months ended September 30, 2012 were primarily driven by valuation adjustments within our managed funds of funds and direct venture funds.


•	Fund management fees of $2.5 million for the three months ended September 30, 2012, compared to $2.7 million for the comparable 2011 period.

Nine months ended September 30, 2012 compared to the nine months ended September 30, 2011

Noninterest income decreased by $11.4 million to $12.5 million for the nine months ended September 30, 2012, primarily due to lower net gains on investment securities. SVB Capital’s components of noninterest income primarily include the following:


•	Net gains on investment securities of $4.0 million for the nine months ended September 30, 2012, compared to net gains of $16.1 million for the comparable 2011 period. The net gains on investment securities of $4.0 million for the nine months ended September 30, 2012 were primarily driven by valuation adjustments and IPO and M&A activity within our managed funds of funds.


•	Fund management fees of $8.4 million for the nine months ended September 30, 2012, compared to $8.0 million for the comparable 2011 period.

Consolidated Financial Condition

Our total assets were $21.6 billion at September 30, 2012, an increase of $1.6 billion, or 8.1 percent, compared to $20.0 billion at December 31, 2011. Below is a summary of the individual components driving the increase.

Cash and Cash Equivalents

Cash and cash equivalents totaled $906.7 million at September 30, 2012, a decrease of $208.3 million, or 18.7 percent, compared to $1.1 billion at December 31, 2011. The decrease was primarily due to the investment of cash previously held at the FRB into available-for-sale securities as well as to fund loan growth, partially offset by deposit growth from both new and existing clients.

As of September 30, 2012 and December 31, 2011, $139.1 million and $100.1 million, respectively, of our cash and due from banks was deposited at the FRB and was earning interest at the Federal Funds target rate, and interest-earning deposits in other financial institutions were $187.6 million and $371.5 million, respectively.

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Investment Securities

Investment securities totaled $12.2 billion at September 30, 2012, an increase of $671.1 million, or 5.8 percent, compared to $11.5 billion at December 31, 2011. 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 increase of $671.1 million million included an increase of $511.7 million in available-for-sale securities and an increase of $159.4 million in non-marketable securities. The major components of the change are explained below.

Available-for-Sale Securities

Our available-for-sale securities portfolio is a fixed income investment portfolio that is managed to optimize portfolio yield over the long-term consistent with our liquidity, credit diversification and asset/liability strategies. Available-for-sale securities were $11.0 billion at September 30, 2012, an increase of $511.7 million, or 4.9 percent, compared to $10.5 billion at December 31, 2011. The increase was primarily due to purchases of new investments of $2.9 billion, partially offset by paydowns of $2.0 billion and sales of $315.7 million. The purchases of new investments of $2.9 billion were primarily comprised of fixed-rate agency-issued mortgage securities and fixed-rate agency debentures. The paydowns of securities of $2.0 billion were comprised of $1.5 billion in fixed-rate securities and $488.4 million in variable-rate securities. The sales of $315.7 million were comprised entirely of U.S. agency securities. The proceeds from the sales and paydowns were used primarily to fund loan growth and reduce overnight borrowings.

Portfolio duration is a standard measure used to approximate changes in the market value of fixed income instruments due to a change in market interest rates. The measure is an estimate based on the level of current market interest rates, expectations for changes in the path of forward rates and the effect of forward rates on mortgage prepayment speed assumptions. As such, portfolio duration will fluctuate with changes in market interest rates. Changes in portfolio duration are also impacted by changes in the mix of longer versus shorter term-to-maturity securities. At September 30, 2012, our estimated portfolio duration was 1.6 years, compared to 1.8 years at December 31, 2011.

Non-Marketable Securities

Our non-marketable securities portfolio primarily represents investments in venture capital funds, debt funds and private portfolio companies. A majority of these investments are managed through our SVB Capital funds business in funds of funds and direct venture funds. Included in our non-marketable securities carried under fair value accounting are amounts that are attributable to noncontrolling interests. We are required under GAAP to consolidate 100% of these investments that we are deemed to control, even though we may own less than 100% of such entities. See below for a summary of the carrying value (as reported) of non-marketable securities compared to the amounts attributable to SVBFG.

Non-marketable securities were $1.2 billion at September 30, 2012, an increase of $159.4 million, or 15.9 percent, compared to $1.0 billion at December 31, 2011. The increase was primarily attributable to the funding of our capital contribution of $79.7 million to our joint venture bank in China in the second quarter of 2012, as well as to capital calls (net of distributions) from noncontrolling interests of $64.0 million. The following table summarizes the carrying value (as reported) of nonmarketable securities compared to the amounts attributable to SVBFG (which generally represents the carrying value times our ownership percentage) at September 30, 2012 and December 31, 2011:



	September 30, 2012				December 31, 2011
(Dollars in thousands)	Carrying value (as reported)		Amount attributable to SVBFG		Carrying value (as reported)		Amount attributable to SVBFG
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments (1)	$	658,409	$	76,541	$	611,824	$	77,674
Other venture capital investments (2)	118,622		10,998		124,121		11,333
Other investments	—		—		987		493
Non-marketable securities (equity method accounting):
Other investments	141,761		141,761		68,252		68,252
Low income housing tax credit funds	66,806		66,806		34,894		34,894
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments	158,275		158,275		145,007		145,007
Other investments	19,942		19,942		19,355		19,355
Total non-marketable securities	$	1,163,815	$	474,323	$	1,004,440	$	357,008

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(1)	The following table shows the amounts of venture capital and private equity fund investments held by the following consolidated funds and amounts attributable to SVBFG for each fund at September 30, 2012 and December 31, 2011:



	September 30, 2012				December 31, 2011
(Dollars in thousands)	Carrying value (as reported)		Amount attributable to SVBFG		Carrying value (as reported)		Amount attributable to SVBFG
SVB Strategic Investors Fund, LP	$	35,963	$	4,518	$	39,567	$	4,970
SVB Strategic Investors Fund II, LP	103,302		8,854		122,619		10,510
SVB Strategic Investors Fund III, LP	208,809		12,259		218,429		12,824
SVB Strategic Investors Fund IV, LP	161,082		8,054		122,076		6,104
Strategic Investors Fund V Funds	28,908		69		8,838		31
SVB Capital Preferred Return Fund, LP	51,460		12,137		42,580		11,571
SVB Capital—NT Growth Partners, LP	61,253		24,291		43,958		20,176
SVB Capital Partners II, LP	1,341		68		2,390		121
Other private equity fund	6,291		6,291		11,367		11,367
Total venture capital and private equity fund investments	$	658,409	$	76,541	$	611,824	$	77,674


(2)	The following table shows the amounts of other venture capital investments held by the following consolidated funds and amounts attributable to SVBFG for each fund at September 30, 2012 and December 31, 2011:



	September 30, 2012				December 31, 2011
(Dollars in thousands)	Carrying value (as reported)		Amount attributable to SVBFG		Carrying value (as reported)		Amount attributable to SVBFG
Silicon Valley BancVentures, LP	$	16,737	$	1,790	$	17,878	$	1,912
SVB Capital Partners II, LP	55,686		2,828		61,099		3,103
SVB India Capital Partners I, LP	42,713		6,144		42,832		6,162
SVB Capital Shanghai Yangpu Venture Capital Fund	3,486		236		2,312		156
Total other venture capital investments	$	118,622	$	10,998	$	124,121	$	11,333

Loans

Loans, net of unearned income were $8.2 billion at September 30, 2012, an increase of $1.2 billion, or 17.5 percent, compared to $7.0 billion at December 31, 2011. Unearned income was $73.8 million at September 30, 2012, compared to $60.2 million at December 31, 2011. Total gross loans were $8.3 billion at September 30, 2012, an increase of $1.2 billion, or 17.6 percent, compared to $7.0 billion at December 31, 2011. The increase came primarily from sponsor-led buyouts in the software niche and from our venture capital/private equity clients for capital calls. The breakdown of total gross loans and total loans as a percentage of total gross loans by category is as follows:

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	September 30, 2012				December 31, 2011
(Dollars in thousands)	Amount		Percentage		Amount		Percentage
Commercial loans:
Software	$	2,983,420	36.1	%	$	2,517,890	35.8	%
Hardware	1,205,059		14.6		961,869		13.7
Venture capital/private equity	1,408,346		17.0		1,128,520		16.1
Life science	1,038,327		12.6		872,413		12.4
Premium wine	135,194		1.6		131,552		1.9
Other	313,177		3.8		345,588		4.9
Total commercial loans	7,083,523		85.7		5,957,832		84.8
Real estate secured loans:
Premium wine	380,555		4.6		347,241		4.9
Consumer loans	609,525		7.4		533,817		7.6
Total real estate secured loans	990,080		12.0		881,058		12.5
Construction loans	48,505		0.6		30,319		0.4
Consumer loans	144,060		1.7		161,112		2.3
Total gross loans	$	8,266,168	100.0	%	$	7,030,321	100.0	%

Loan Concentration

The following table provides a summary of loans by size and category. The breakout of the categories is based on total client balances (individually or in the aggregate) as of September 30, 2012:



	September 30, 2012
(Dollars in thousands)	Less than Five Million		Five to Ten Million		Ten to Twenty Million		Twenty to Thirty Million		Thirty Million or More		Total
Commercial loans:
Software	$	962,244	$	494,159	$	597,429	$	649,737	$	279,851	$	2,983,420
Hardware	309,492		226,336		215,746		189,473		264,012		1,205,059
Venture capital/private equity	272,026		195,009		256,842		213,924		470,545		1,408,346
Life science	261,927		230,260		193,432		198,668		154,040		1,038,327
Premium wine (1)	67,835		37,129		24,230		6,000		—		135,194
Other	116,116		53,993		86,049		25,440		31,579		313,177
Commercial loans	1,989,640		1,236,886		1,373,728		1,283,242		1,200,027		7,083,523
Real estate secured loans:
Premium wine (1)	109,090		94,323		102,799		42,843		31,500		380,555
Consumer loans (2)	512,339		53,513		43,673		—		—		609,525
Real estate secured loans	621,429		147,836		146,472		42,843		31,500		990,080
Construction loans	17,516		30,989		—		—		—		48,505
Consumer loans (2)	48,698		50,362		—		—		45,000		144,060
Total gross loans	$	2,677,283	$	1,466,073	$	1,520,200	$	1,326,085	$	1,276,527	$	8,266,168


(1)	Premium wine clients can have loan balances included in both commercial loans and real estate secured loans, the total of which are used for the breakout of the above categories.


(2)	Consumer loan clients have loan balances included in both real estate secured loans and other consumer loans, the total of which are used for the breakout of the above categories.

At September 30, 2012, gross loans (individually or in the aggregate) totaling $2.6 billion, or 31.5 percent of our portfolio, were equal to or greater than $20 million to any single client. These loans represented 85 clients, and of these loans, none were on nonaccrual status as of September 30, 2012.

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The following table provides a summary of loans by size and category. The breakout of the categories is based on total client balances (individually or in the aggregate) as of December 31, 2011:



	December 31, 2011
(Dollars in thousands)	Less than Five Million		Five to Ten Million		Ten to Twenty Million		Twenty to Thirty Million		Thirty Million or More		Total
Commercial loans:
Software	$	764,200	$	429,670	$	578,248	$	715,772	$	30,000	$	2,517,890
Hardware	306,557		166,619		133,505		116,305		238,883		961,869
Venture capital/private equity	277,087		232,775		127,848		53,000		437,810		1,128,520
Life science	251,921		140,786		187,874		171,702		120,130		872,413
Premium wine (1)	69,418		13,971		42,763		5,400		—		131,552
Other	90,110		14,915		82,849		45,435		112,279		345,588
Commercial loans	1,759,293		998,736		1,153,087		1,107,614		939,102		5,957,832
Real estate secured loans:
Premium wine (1)	119,708		75,161		75,247		45,625		31,500		347,241
Consumer loans (2)	434,406		41,177		39,302		18,932		—		533,817
Real estate secured loans	554,114		116,338		114,549		64,557		31,500		881,058
Construction loans	7,581		22,738		—		—		—		30,319
Consumer loans (2)	59,713		32,105		21,294		3,000		45,000		161,112
Total gross loans	$	2,380,701	$	1,169,917	$	1,288,930	$	1,175,171	$	1,015,602	$	7,030,321


(1)	Premium wine clients can have loan balances included in both commercial loans and real estate secured loans, the total of which are used for the breakout of the above categories.


(2)	Consumer loan clients have loan balances included in both real estate secured loans and other consumer loans, the total of which are used for the breakout of the above categories.

At December 31, 2011, gross loans (individually or in the aggregate) totaling $2.2 billion, or 31.2 percent of our portfolio, were equal to or greater than $20 million to any single client. These loans represented 71 clients, and of these loans, none were on nonaccrual status as of December 31, 2011.

The credit profile of our clients varies across our loan portfolio, based on the nature of the lending we do for different market segments. Our technology and life sciences loan portfolio includes loans to clients at all stages of their life cycles, beginning with our SVB Accelerator practice, which serves our emerging or early-stage clients. Loans provided to early-stage clients represent a relatively small percentage of our overall portfolio at approximately 9 percent of total gross loans at September 30, 2012, compared to approximately 8 percent at December 31, 2011. Typically these loans are made to companies with modest or negative cash flows and no established record of profitable operations. Repayment of these loans may be dependent upon receipt by borrowers of additional equity financing from venture capitalists or others, or in some cases, a successful sale to a third party or a public offering. Venture capital firms may provide financing at lower levels, more selectively or on less favorable terms, which may have an adverse effect on our borrowers that are otherwise dependent on such financing to repay their loans to us. When repayment is dependent upon the next round of venture investment and there is an indication that further investment is unlikely or will not occur, it is often likely the company would need to be sold to repay debt in full. If reasonable efforts have not yielded a likely buyer willing to repay all debt at the close of the sale or on commercially viable terms, the account will most likely be deemed to be impaired.

At September 30, 2012, our lending to venture capital/private equity firms represented 17.0 percent of total gross loans, compared to 16.1 percent of total gross loans at December 31, 2011. Many of these clients have capital call lines of credit, the repayment of which is dependent on the payment of capital calls by the underlying limited partner investors in the funds managed by these firms.

At September 30, 2012, our asset-based lending, which consists primarily of working capital lines and accounts receivable factoring represented 7.5 percent and 5.0 percent, respectively, of total gross loans, compared to 8.8 percent and 5.4 percent, respectively at December 31, 2011. The repayment of these arrangements is dependent on the financial condition, and payment ability, of third parties with whom our clients do business.

Approximately 44.4 percent of our outstanding total gross loan balances as of September 30, 2012 were to borrowers based in California compared to 43.7 percent as of December 31, 2011. Other than California, there are no states with balances greater than 10 percent.

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See generally “Risk Factors–Credit Risks” set forth under Item 1A, Part I in our 2011 Form 10-K.

Credit Quality Indicators

As of September 30, 2012, our criticized and impaired loans represented 6.6 percent of our total gross loans. This compares to 8.5 percent at December 31, 2011. A majority of our criticized loans are from our SVB Accelerator portfolio, serving our emerging or early stage clients. Loans to early stage clients make up approximately 9 percent of our loan portfolio. It is common for an early stage client’s remaining liquidity to fall temporarily below the threshold for a pass-rated credit during its capital-raising period for a new round of funding. This situation typically lasts only a few weeks and, in our experience, generally resolves itself with a subsequent round of venture funding. As a result, we expect that each of our early-stage clients will be managed through our criticized portfolio during a portion of their life cycle. Criticized loan levels will continue to vary but are expected to remain within the current range.

Credit Quality and Allowance for Loan Losses

Nonperforming assets consist of loans past due 90 days or more that are still accruing interest and loans on nonaccrual status. We measure all loans placed on nonaccrual status for impairment based on the fair value of the underlying collateral or the net present value of the expected cash flows. The table below sets forth certain data and ratios between nonperforming loans, nonperforming assets and the allowance for loan losses:



(Dollars in thousands)	September 30, 2012			December 31, 2011
Gross nonperforming, past due, and restructured loans:
Loans past due 90 days or more still accruing interest	$	5,000		$	—
Impaired loans	39,397			36,617
Performing TDRs	963			2,100
Nonperforming loans as a percentage of total gross loans	0.48		%	0.52		%
Nonperforming assets as a percentage of total assets	0.18			0.18		%
Allowance for loan losses	$	101,524		$	89,947
As a percentage of total gross loans	1.23		%	1.28		%
As a percentage of total gross nonperforming loans	257.69			245.64
Allowance for loan losses for impaired loans	$	6,003		$	3,707
As a percentage of total gross loans	0.07		%	0.05		%
As a percentage of total gross nonperforming loans	15.24			10.12
Allowance for loan losses for total gross performing loans	$	95,521		$	86,240
As a percentage of total gross loans	1.16		%	1.23		%
As a percentage of total gross performing loans	1.16			1.23
Total gross loans	$	8,266,168		$	7,030,321
Total gross performing loans	8,226,771			6,993,704
Reserve for unfunded credit commitments (1)	23,075			21,811
As a percentage of total unfunded credit commitments	0.26		%	0.27		%
Total unfunded credit commitments (2)	$	8,710,228		$	8,067,570


(1)	The “Reserve for unfunded credit commitments” is included as a component of other liabilities. See “Provision for Unfunded Credit Commitments” above for a discussion of the changes to the reserve.


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

Our allowance for loan losses as a percentage of total gross loans decreased to 1.23 percent at September 30, 2012 from 1.28 percent at December 31, 2011. The decrease is primarily reflective of the strong performance of our performing loan portfolio as our allowance for loan losses for total gross performing loans as a percentage of total gross performing loans decreased from 1.23 percent at December 31, 2011 to 1.16 percent at September 30, 2012.

Our nonperforming loans were $39.4 million at September 30, 2012, compared to $36.6 million at December 31, 2011. The increase of $2.8 million was primarily due to the addition of two nonperforming hardware loans that had a combined impaired balance of $24.5 million at September 30, 2012, partially offset by paydowns of $22.3 million on impaired loans. The allowance

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for loan losses related to impaired loans was $6.0 million at September 30, 2012 compared to $3.7 million at December 31, 2011.

Average impaired loans for the three and nine months ended September 30, 2012 were $30.6 million and $34.6 million, respectively, compared to $39.9 million and $36.9 million for the comparable 2011 periods. If the impaired loans had not been impaired, $0.7 million and $1.8 million in interest income would have been recorded for the three and nine months ended September 30, 2012, respectively, compared to $0.9 million and $2.5 million for the comparable 2011 periods.

Accrued Interest Receivable and Other Assets

A summary of accrued interest receivable and other assets at September 30, 2012 and December 31, 2011 is as follows:



(Dollars in thousands)	September 30, 2012		December 31, 2011		% Change
Derivative assets, gross (1)	$	94,578	$	97,693	(3.2	)%
Accrued interest receivable	62,441		58,108		7.5
FHLB and FRB stock	39,301		39,189		0.3
Foreign exchange spot contract assets, gross	37,769		86,610		(56.4	)
Accounts receivable	15,470		49,076		(68.5	)
Prepaid FDIC assessments	1,880		8,776		(78.6	)
Other assets	48,155		37,402		28.7
Total accrued interest receivable and other assets	$	299,594	$	376,854	(20.5	)


(1)	See “Derivatives” section below.

Foreign Exchange Spot Contract Assets

Foreign exchange spot contract assets represent unsettled client trades at the end of the period. The decrease of $48.8 million was primarily due to decreased client trade activity at period-end, and is consistent with the decrease in foreign exchange spot contract liabilities (see “Other Liabilities” section below).

Accounts Receivable

The decrease in accounts receivable of $33.6 million from December 31, 2011 was primarily due to a decrease in unsettled client trades related to our off-balance sheet sweep money market funds.

Prepaid FDIC Assessments

In 2009 the FDIC required insured financial institutions to prepay their estimated quarterly risk-based assessments for 2010 through 2012. The decrease of $6.9 million from December 31, 2011 was due to the amortization of this prepayment during the nine months ended September 30, 2012.

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Derivatives

Derivative instruments are recorded as a component of other assets and other liabilities on the balance sheet. The following table provides a summary of derivative assets and liabilities, net at September 30, 2012 and December 31, 2011:



(Dollars in thousands)	September 30, 2012			December 31, 2011			% Change
Assets:
Equity warrant assets	$	70,478		$	66,953		5.3	%
Foreign exchange forward and option contracts	13,116			18,326			(28.4	)
Interest rate swaps	9,508			11,441			(16.9	)
Loan conversion options	1,240			923			34.3
Client interest rate derivatives	236			50			NM
Total derivatives assets	$	94,578		$	97,693		(3.2	)
Liabilities:
Foreign exchange forward and option contracts	$	(12,476	)	$	(16,816	)	(25.8	)
Client interest rate derivatives	(247		)	(52		)	NM
Total derivatives liabilities	$	(12,723	)	$	(16,868	)	(24.6	)

NM—Not meaningful

Equity Warrant Assets

In connection with negotiating credit facilities and certain other services, we often obtain rights to acquire stock in the form of equity warrant assets in primarily private, venture-backed companies in the technology and life science industries. At September 30, 2012, we held warrants in 1,248 companies, compared to 1,174 companies at December 31, 2011. The change in fair value of equity warrant assets is recorded in gains on derivatives instruments, net, in noninterest income, a component of consolidated net income. The following table provides a summary of transactions and valuation changes for equity warrant assets for the three and nine months ended September 30, 2012 and 2011:



	Three months ended September 30,						Nine months ended September 30,
(Dollars in thousands)	2012			2011			2012			2011
Balance, beginning of period	$	74,405		$	56,941		$	66,953		$	47,565
New equity warrant assets	3,649			3,090			10,803			10,386
Non-cash (decreases) increases in fair value	(1,618		)	3,532			6,205			13,088
Exercised equity warrant assets	(5,706		)	(4,654		)	(12,059		)	(10,826		)
Terminated equity warrant assets	(252		)	(386		)	(1,424		)	(1,690		)
Balance, end of period	$	70,478		$	58,523		$	70,478		$	58,523

Interest Rate Swaps

For information on our interest rate swaps, see Note 8–“Derivative Financial Instruments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

Foreign Exchange Forward and Foreign Currency Option Contracts

We enter into foreign exchange forward contracts and foreign currency option contracts with clients involved in foreign activities, either as the purchaser or seller, depending upon the clients’ need. For each forward or option contract entered into with our clients, we enter into an opposite way forward or option contract with a correspondent bank, which mitigates the risk of fluctuations in currency rates. We enter into forward contracts with correspondent banks to economically reduce our foreign exchange exposure related to certain foreign currency denominated loans. Revaluations of foreign currency denominated loans are recorded on the line item “Other” as part of noninterest income, a component of consolidated net income. We have not experienced nonperformance by a counterparty and therefore have not incurred related losses. Further, we anticipate performance by all counterparties. Our net exposure for foreign exchange forward and foreign currency option contracts at September 30, 2012 and December 31, 2011 amounted to $0.6 million and $1.5 million, respectively. For additional information on our foreign exchange forward contracts and foreign currency option contracts, see Note 8- “Derivative Financial Instruments”

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of the “Notes to the Consolidated Financial Statements” under Part I, Item I in this report.

Deposits

Deposits were $17.7 billion at September 30, 2012, an increase of $1.0 billion, or 6.1 percent, compared to $16.7 billion at December 31, 2011. The increase is primarily due to the addition of new clients. At September 30, 2012, 28.9 percent of our total deposits were interest-bearing deposits, compared to 29.0 percent at December 31, 2011.

At September 30, 2012, the aggregate balance of time deposit accounts individually equal to or greater than $100,000 totaled $124.9 million, compared to $126.0 million at December 31, 2011. At September 30, 2012, substantially all time deposit accounts individually equal to or greater than $100,000 were scheduled to mature within one year. No material portion of our deposits has been obtained from a single depositor and the loss of any one depositor would not materially affect our business.

Long-Term Debt

At September 30, 2012, we had long-term debt of $458.3 million, compared to $603.6 million at December 31, 2011. At September 30, 2012, long-term debt included our 5.375% Senior Notes, 6.05% Subordinated Notes and 7.0% Junior Subordinated Debentures. Our 5.70% Senior Notes matured on June 1, 2012 and we repaid all outstanding principal, including unpaid and accrued interest, in cash upon maturity. For more information on our long-term debt, see Note 7–“Short-term Borrowings and Long-Term Debt” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

Other Liabilities

A summary of other liabilities at September 30, 2012 and December 31, 2011 is as follows:



(Dollars in thousands)	September 30, 2012		December 31, 2011		% Change
Foreign exchange spot contract liabilities, gross	$	62,698	$	152,727	(58.9	)%
Accrued compensation	68,326		114,472		(40.3	)
Deferred tax liabilities	45,179		7,975		NA
Reserve for unfunded credit commitments	23,075		21,811		5.8
Derivative liabilities, gross (1)	12,723		16,868		(24.6	)
Other	118,037		91,468		29.0
Total other liabilities	$	330,038	$	405,321	(18.6	)

NM—Not meaningful


(1)	See “Derivatives” section above.

Foreign Exchange Spot Contract Liabilities

Foreign exchange spot contract liabilities represent unsettled client trades at the end of the period. The decrease of $90.0 million was primarily due to decreased client trade activity at period-end, and is consistent with the decrease in foreign exchange spot contract assets. (See “Accrued Interest Receivable and Other Assets” section above).

Accrued Compensation

Accrued compensation includes amounts for our Incentive Compensation Plans, Direct Drive Incentive Compensation Plan, Long-Term Cash Incentive Plan, Retention Program, Warrant Incentive Plan, ESOP and other compensation arrangements. The decrease of $46.1 million was primarily the result of 2011 incentive compensation payouts during the first quarter of 2012, partially offset by additional accruals for the nine months ended September 30, 2012.

Deferred Tax Liabilities

The increase in deferred tax liabilities of $37.2 million was primarily due to an increase in unrealized gains on available-for-sale securities resulting from a general decline in market interest rates.

Other Liabilities

The increase in other liabilities of $26.6 million was primarily due to a $27.7 million increase in tax credit fund investments payable which is a result of additional commitments to invest in certain tax credit funds which we have not yet funded.

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Noncontrolling Interests

Noncontrolling interests totaled $770.4 million and $681.0 million at September 30, 2012 and December 31, 2011, respectively. The increase of $89.4 million was primarily due to $64.0 million of contributed capital (net of distributions) from investors in our managed funds and net income attributable to noncontrolling interests of $25.5 million for the nine months ended September 30, 2012, primarily from our managed funds of funds.

Fair Value Measurements

The following table summarizes our financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011.



	September 30, 2012						December 31, 2011
(Dollars in thousands)	Total Balance			Level 3			Total Balance			Level 3
Assets carried at fair value	$	11,924,755		$	841,722		$	11,372,081		$	799,962
As a percentage of total assets	55.3		%	3.9		%	56.9		%	4.0		%
Liabilities carried at fair value	$	12,723		$	—		$	16,868		$	—
As a percentage of total liabilities	0.1		%	—		%	0.1		%	—		%
	Level 1 and 2			Level 3			Level 1 and 2			Level 3
Percentage of assets measured at fair value	92.9		%	7.1		%	93.0		%	7.0		%

As of September 30, 2012, our available-for-sale securities, consisting of agency-issued mortgage-backed securities, agency-issued collateralized mortgage obligations, U.S. agency debentures, U.S. treasury securities and municipal bonds and notes, totaled $11.0 billion, or 92.6 percent of our portfolio of assets measured at fair value on a recurring basis, compared to $10.5 billion, or 92.6 percent, as of December 31, 2011. These instruments were classified as Level 2 because their valuations were based on indicative prices corroborated by observable market quotes or valuation techniques with all significant inputs derived from or corroborated by observable market data. The fair value of our available-for-sale securities portfolio is sensitive to changes in levels of market interest rates and market perceptions of credit quality of the underlying securities. Market valuations and impairment analyses on assets in the available-for-sale securities portfolio are reviewed and monitored on a quarterly basis. Assets valued using Level 2 measurements also include equity warrant assets in shares of public company capital stock, marketable securities, interest rate swaps, foreign exchange forward and option contracts, loan conversion options and client interest rate derivatives.

Financial assets valued using Level 3 measurements consist primarily of our investments in venture capital and private equity funds and direct equity investments in privately held companies. Our managed funds that hold these investments qualify as investment companies under AICPA Audit and Accounting Guide for Investment Companies and accordingly, these funds report their investments at estimated fair value, with unrealized gains and losses resulting from changes in fair value reflected as investment gains or losses in our consolidated statements of income. Assets valued using Level 3 measurements also include equity warrant assets in shares of private company capital stock.

During the three and nine months ended September 30, 2012, the Level 3 assets that are measured at fair value on a recurring basis experienced net realized and unrealized gains of $14.6 million and $43.8 million (which is inclusive of noncontrolling interest), respectively, primarily due to valuation increases in underlying fund investments in our managed funds, as well as gains from liquidity events and distributions and gains from our equity warrant assets. During the three and nine months ended September 30, 2011, the Level 3 assets that are measured at fair value on a recurring basis experienced net realized and unrealized gains of $57.5 million and $152.0 million, respectively, (which is inclusive of noncontrolling interest).

The valuation of non-marketable securities and equity warrant assets in shares of private company capital stock is subject to significant judgment. The inherent uncertainty in the process of valuing securities for which a ready market does not exist may cause our estimated values of these securities to differ significantly from the values that would have been derived had a ready market for the securities existed, and those differences could be material. The timing and amount of changes in fair value, if any, of these financial instruments depend upon factors beyond our control, including the performance of the underlying companies, fluctuations in the market prices of the preferred or common stock of the underlying companies, general volatility and interest rate market factors, and legal and contractual restrictions. The timing and amount of actual net proceeds, if any, from the disposition of these financial instruments depend upon factors beyond our control, including investor demand for IPOs, levels of M&A activity, legal and contractual restrictions on our ability to sell, and the perceived and actual performance of portfolio companies. All of these factors are difficult to predict (see “Risk Factors” set forth in our 2011 Form 10-K).

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Capital Resources

Our management seeks to maintain adequate capital to support anticipated asset growth, operating needs and unexpected credit risks, and to ensure that SVB Financial and the Bank are in compliance with all regulatory capital guidelines. Our primary sources of new capital include retained earnings and proceeds from the sale and issuance of capital stock or other securities. Our management engages, in consultation with our Finance Committee of the Board of Directors, in a regular capital planning process in an effort to make effective use of the capital available to us and to appropriately plan for our future capital needs. The capital plan considers capital needs for the foreseeable future and allocates capital to both existing and future business activities. Expected future use or activities for which capital may be set aside include balance sheet growth and associated relative increases in market or credit exposure, investment activity, potential product and business expansions, acquisitions and strategic or infrastructure investments.

SVBFG Stockholders’ Equity

SVBFG stockholders’ equity totaled $1.8 billion at September 30, 2012, an increase of $215.5 million, or 13.7 percent compared to $1.6 billion at December 31, 2011. This increase was primarily the result of net income of $124.7 million for the nine months ended September 30, 2012 and an increase in additional-paid-in-capital of $54.2 million primarily from stock option exercises and amortization of share based compensation expense during the nine months ended September 30, 2012.

Funds generated through retained earnings are a significant source of capital and liquidity and are expected to continue to be so in the future.

Capital Ratios

Both SVB Financial and the Bank are subject to various capital adequacy guidelines issued by the Federal Reserve Board and the California Department of Financial Institutions. To be classified as “adequately capitalized” under these capital guidelines, minimum ratios for total risk-based capital, Tier 1 risk-based capital and Tier 1 leverage ratio for bank holding companies and banks are 8.0%, 4.0% and 4.0%, respectively.

To be classified as “well capitalized” under these capital guidelines, minimum ratios for total risk-based capital and Tier 1 risk-based capital for bank holding companies and banks are 10.0% and 6.0%, respectively. Under the same capital adequacy guidelines, a well-capitalized state member bank must maintain a minimum Tier 1 leverage ratio of 5.0%. There is no Tier 1 leverage requirement for a holding company to be deemed well-capitalized.

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

Regulatory capital ratios for SVB Financial and the Bank exceeded minimum federal regulatory guidelines for a well-capitalized depository institution as of September 30, 2012 and December 31, 2011. Capital ratios for SVB Financial and the Bank, compared to the minimum regulatory ratios to be considered “well capitalized” and “adequately capitalized”, are set forth below:



	September 30, 2012		December 31, 2011		Minimum ratio to be “Well Capitalized”		Minimum ratio to be “Adequately Capitalized”
SVB Financial:
Total risk-based capital ratio (1)	14.34	%	13.95	%	10.0	%	8.0	%
Tier 1 risk-based capital ratio (1)	13.07		12.62		6.0		4.0
Tier 1 leverage ratio	8.02		7.92		N/A		4.0
Tangible common equity to tangible assets ratio (2)(3)	8.27		7.86		N/A		N/A
Tangible common equity to risk-weighted assets ratio (1)(2)(3)	13.93		13.25		N/A		N/A
Bank:
Total risk-based capital ratio (1)	12.70	%	12.33	%	10.0	%	8.0	%
Tier 1 risk-based capital ratio (1)	11.41		10.96		6.0		4.0
Tier 1 leverage ratio	7.00		6.87		5.0		4.0
Tangible common equity to tangible assets ratio (2)(3)	7.61		7.18		N/A		N/A
Tangible common equity to risk-weighted assets ratio (1)(2)(3)	12.40		11.75		N/A		N/A


(1)	Our risk-weighted assets at September 30, 2012 reflect a refinement in our determination of certain unfunded credit commitments related to the contractual borrowing base.


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

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

Our total risk based capital (includes tier 1 and tier 2 capital components) ratios for both SVB Financial and the Bank increased compared to December 31, 2011 reflective of growth in retained earnings, largely offset by continued growth in assets. Additionally, during the third quarter of 2012, we refined our determination of certain unfunded credit commitments related to the contractual borrowing base, which increased these ratios by approximately 40 basis points. Our tier 1 leverage ratios for both SVB Financial and the Bank increased compared to December 31, 2011 due to growth in retained earnings and additional-paid-in-capital, the impact of which was partially offset by continued growth in assets. All of our capital ratios are above the levels to be considered “well capitalized”.

The tangible common equity to tangible assets ratio and the tangible common equity to risk-weighted assets ratios are not required by GAAP or applicable bank regulatory requirements. However, we believe these ratios provide meaningful supplemental information regarding our capital levels. Our management uses, and believes that investors benefit from referring to, these ratios in evaluating the adequacy of the Company’s capital levels; however, this financial measure should be considered in addition to, not as a substitute for or preferable to, comparable financial measures prepared in accordance with GAAP. These ratios are calculated by dividing total SVBFG stockholder’s equity, by total period-end assets and risk-weighted assets, after reducing both amounts by acquired intangibles, if any. The manner in which this ratio is calculated varies among companies. Accordingly, our ratio is not necessarily comparable to similar measures of other companies. The following table provides a reconciliation of non-GAAP financial measures with financial measures defined by GAAP:



	SVB Financial						Bank
Non-GAAP tangible common equity and tangible assets (dollars in thousands, except ratios)	September 30, 2012			December 31, 2011			September 30, 2012			December 31, 2011
GAAP SVBFG stockholders’ equity	$	1,784,924		$	1,569,392		$	1,547,061		$	1,346,854
Less:
Intangible assets	—			601			—			—
Tangible common equity	$	1,784,924		$	1,568,791		$	1,547,061		$	1,346,854
GAAP Total assets	$	21,576,934		$	19,968,894		$	20,325,446		$	18,758,813
Less:
Intangible assets	—			601			—			—
Tangible assets	$	21,576,934		$	19,968,293		$	20,325,446		$	18,758,813
Risk-weighted assets (1)	$	12,812,798		$	11,837,902		$	12,478,371		$	11,467,401
Tangible common equity to tangible assets	8.27		%	7.86		%	7.61		%	7.18		%
Tangible common equity to risk-weighted assets	13.93			13.25			12.40			11.75


(1)	Our risk-weighted assets at September 30, 2012 reflect a refinement in our determination of risk rating for certain unfunded credit commitments related to the contractual borrowing base.

For both SVB Financial and the Bank, the tangible common equity to risk-weighted assets ratios increased due to an increase in retained earnings, an increase in accumulated other comprehensive income from increases in the fair value of our available-for-sale securities portfolio, and an increase in additional-paid-in-capital from stock option exercises, stock purchases under our ESPP plan, and ESOP contributions during the nine months ended September 30, 2012. This growth was partially offset by increases in both tangible and risk-weighted assets, which reflects our growth in period-end loan balances.

Off-Balance Sheet Arrangements

In the normal course of business, we use financial instruments with off-balance sheet risk to meet the financing needs of our customers. These financial instruments include commitments to extend credit, commercial and standby letters of credit and commitments to invest in venture capital and private equity fund investments. These instruments involve, to varying degrees, elements of credit risk. Credit risk is defined as the possibility of sustaining a loss because other parties to the financial instrument fail to perform in accordance with the terms of the contract. For details of our commitments to extend credit, and commercial and standby letters of credit, please refer to Note 11—“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.

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Commitments to Invest in Venture Capital/Private Equity Funds

We make commitments to invest in venture capital and private equity funds, which in turn make investments generally in, or in some cases make loans to, privately-held companies. Commitments to invest in these funds are generally made for a ten-year period from the inception of the fund. Although the limited partnership agreements governing these investments typically do not restrict the general partners from calling 100% of committed capital in one year, it is customary for these funds to generally call most of the capital commitments over five to seven years. The actual timing of future cash requirements to fund these commitments is generally dependent upon the investment cycle, overall market conditions, and the nature and type of industry in which the privately held companies operate.

For further details on our commitments to invest in private equity funds, refer to Note 11—“Off-Balance Sheet Arrangements, Guarantees, and Other Commitments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

Liquidity

The objective of liquidity management is to ensure that funds are available in a timely manner to meet our financial obligations, including, as necessary, paying creditors, meeting depositors’ needs, accommodating loan demand and growth, funding investments, repurchasing securities and other operating or capital needs, without incurring undue cost or risk, or causing a disruption to normal operating conditions.

We regularly assess the amount and likelihood of projected funding requirements through a review of factors such as historical deposit volatility and funding patterns, present and forecasted market and economic conditions, individual client funding needs, and existing and planned business activities. Our Asset/Liability Committee (“ALCO”), which is a management committee, provides oversight to the liquidity management process and recommends policy guidelines for the approval of the Finance Committee of our Board of Directors, and courses of action to address our actual and projected liquidity needs.

Our deposit base is, and historically has been, our primary source of liquidity. Our deposit levels and cost of deposits may fluctuate from time to time due to a variety of factors, including market conditions, prevailing interest rates, changes in client deposit behaviors, availability of insurance protection, and our offering of deposit products. At September 30, 2012, our period-end total deposit balances increased by $1.0 billion to $17.7 billion, compared to $16.7 billion at December 31, 2011. The overall increase in deposit balances was primarily due to the addition of new clients and increased fundraising activity by our venture capital/private equity clients.

Our liquidity requirements can also be met through the use of our portfolio of liquid assets. Our definition of liquid assets includes cash and cash equivalents in excess of the minimum levels necessary to carry out normal business operations, short-term investment securities maturing within one year, available-for-sale securities eligible and available for financing or pledging purposes with a maturity in excess of one year and anticipated near-term cash flows from investments.

On a stand-alone basis, SVB Financial’s primary liquidity channels include dividends from the Bank, its portfolio of liquid assets, and its ability to raise debt and capital. The ability of the Bank to pay dividends is subject to certain regulations described in “Business—Supervision and Regulation—Restriction on Dividends” under Part I, Item 1 of our 2011 Form 10-K.

Consolidated Summary of Cash Flows

Below is a summary of our average cash position and statement of cash flows for the nine months ended September 30, 2012 and 2011, respectively. Please refer to our Interim Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 under Part I, Item 1 of this report for more details.



	Nine months ended September 30,
(Dollars in thousands)	2012			2011
Average cash and cash equivalents	$	1,416,699		$	2,227,242
Percentage of total average assets	6.8		%	12.1		%
Net cash provided by operating activities	$	125,665		$	90,188
Net cash used for investing activities	(1,811,355		)	(2,445,892		)
Net cash provided by financing activities	1,477,422			1,321,244
Net decrease in cash and cash equivalents	$	(208,268	)	$	(1,034,460	)

Average cash and cash equivalents decreased by $0.8 billion to $1.4 billion for the nine months ended September 30, 2012, compared to $2.2 billion for the comparable 2011 period. The decrease was primarily due to the investment of cash and cash equivalents into available-for-sale securities and to fund loan growth.

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Cash provided by operating activities of $125.7 million for the nine months ended September 30, 2012 included strong operating income from the business and $33.3 million in net cash received from accounts receivable, partially offset by $40.6 million in net payouts of accrued compensation and $41.2 million to reduce our net foreign exchange spot contract position.

Cash used for investing activities of $1.8 billion for the nine months ended September 30, 2012 included $2.9 billion for purchases of available-for-sale securities, a $1.2 billion net increase in loans, $213.2 million for purchases of non-marketable securities and $31.5 million for purchases of premises and equipment. These cash outflows were partially offset by $2.4 billion from sales, maturities and paydowns of available-for-sale securities, $126.1 million from sales or distributions of non-marketable securities of and $8.0 million in recoveries from loans previously charged-off.

Cash provided by financing activities of $1.5 billion for the nine months ended September 30, 2012 included a $1.0 billion increase in deposits, $508.2 million from short-term borrowings, $64.0 million from capital contributions (net of distributions) from noncontrolling interests and $27.4 million from the issuance of common stock and ESPP. These cash inflows were offset by principal payments of $141.4 million upon maturity of our 5.70% Senior Notes.

Cash and cash equivalents at September 30, 2012 were $906.7 million, compared to $2.0 billion at September 30, 2011.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk Management

Market risk is defined as the risk of adverse fluctuations in the market value of financial instruments due to changes in market interest rates. Interest rate risk is our primary market risk and can result from timing and volume differences in the repricing of our rate-sensitive assets and liabilities, widening or tightening of credit spreads, changes in the general level of market interest rates and changes in the shape and level of the benchmark LIBOR/SWAP yield curve. Additionally, changes in interest rates can influence the rate of principal prepayments on mortgage securities which affects the rate of amortization of purchase premiums and discounts. Other market risks include foreign currency exchange risk and equity price risk. These risks are not considered significant and no separate quantitative information concerning them is presented herein.

Interest rate risk is managed by our ALCO. ALCO reviews the market valuation and 12-month forward looking earnings sensitivity of assets and liabilities to changes in interest rates, structural changes in investment and funding portfolios, loan and deposit activity and current market conditions. Adherence to relevant policies, which are approved by the Finance Committee of our Board of Directors, is monitored on an ongoing basis.

Management of interest rate risk is carried out primarily through strategies involving our available-for-sale securities, available funding channels and capital market activities. In addition, our policies permit the use of off-balance sheet derivative instruments to assist in managing interest rate risk.

We utilize a simulation model to perform sensitivity analysis on the economic value of equity and net interest income under a variety of interest rate scenarios, balance sheet forecasts and proposed strategies. The simulation model provides a dynamic assessment of interest rate sensitivity embedded in our balance sheet which measures the potential variability in forecasted results relating to changes in market interest rates over time. We review our interest rate risk position on a quarterly basis at a minimum.

Model Simulation and Sensitivity Analysis

One application of the aforementioned simulation model involves measurement of the impact of market interest rate changes on our economic value of equity (“EVE”). EVE is defined as the market value of assets, less the market value of liabilities, adjusted for any off-balance sheet items. A second application of the simulation model measures the impact of market interest rate changes on our net interest income (“NII”) assuming a static balance sheet as of the period-end reporting date. The market interest rate changes that affect us are principally short-term interest rates and include the following: (1) National Prime and SVB Prime rates (impacts the majority of our variable rate loans); (2) 1-month and 3-month LIBOR (impacts our variable rate available-for-sale securities, our 6.05% Subordinated Notes, and a portion of our variable rate loans); and (3) Fed Funds target rate (impacts cash and cash equivalents). Additionally, deposit pricing generally follows overall changes in short-term interest rates.

Effective January 1, 2012, we enhanced certain model assumptions related to the decay rates on our deposits with no stated maturity, such as noninterest-bearing demand deposits, interest-bearing checking accounts, money market accounts and interest-bearing sweep deposits. As a result we have recast prior period EVE and NII sensitivities to provide a more comparable basis for the current quarter’s analysis. The following table presents our EVE and NII sensitivity exposure at September 30, 2012 and December 31, 2011, related to an instantaneous and sustained parallel shift in market interest rates of 100 and 200 basis points.

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	Estimated		Estimated Increase/ (Decrease) In EVE				Estimated		Estimated Increase/ (Decrease) In NII
Change in interest rates (basis points)	EVE		Amount		Percent		NII		Amount			Percent
	(Dollars in thousands)
September 30, 2012:
+200	$	3,085,140	$	376,854	13.9		$	776,270	$	110,903		16.7	%
+100	2,799,547		91,261		3.4		713,433		48,066			7.2
—	2,708,286		—		—		665,367		—			—
-100	2,888,214		179,928		6.6		636,084		(29,283		)	(4.4	)
-200	2,910,414		202,128		7.5		632,976		(32,391		)	(4.9	)
December 31, 2011:
+200	$	3,003,465	$	508,947	20.4	%	$	735,740	$	106,717		17.0	%
+100	2,729,000		234,482		9.4		671,880		42,857			6.8
—	2,494,518		—		—		629,023		—			—
-100	2,619,182		124,664		5.0		592,325		(36,698		)	(5.8	)
-200	2,626,452		131,934		5.3		583,214		(45,809		)	(7.3	)

Economic Value of Equity

The estimated EVE in the preceding table is based on a combination of valuation methodologies including a discounted cash flow analysis and a multi-path lattice based valuation. Both methodologies use publicly available market interest rates. The model simulations and calculations are highly assumption-dependent and will change regularly as our asset/liability structure changes, as interest rate environments evolve, and as we change our assumptions in response to relevant market or business circumstances. These calculations do not reflect the changes that we anticipate or may make to reduce our EVE exposure in response to a change in market interest rates as a part of our overall interest rate risk management strategy.

As with any method of measuring interest rate risk, certain limitations are inherent in the method of analysis presented in the preceding table. We are exposed to yield curve risk, prepayment risk and basis risk, which cannot be fully modeled and expressed using the above methodology. Accordingly, the results in the preceding table should not be relied upon as a precise indicator of actual results in the event of changing market interest rates. Additionally, the resulting EVE and NII estimates are not intended to represent, and should not be construed to represent the underlying value.

Our base case EVE at September 30, 2012 increased from December 31, 2011 by $213.8 million primarily due to the change in balance sheet mix, the growth in interest-earning assets and lower market yield curves. The asset growth was primarily due to an increase in loans and available-for-sale securities, which grew by $1.2 billion and $511.7 million, respectively. EVE sensitivity decreased in the simulated upward interest rate movement due to the addition of fixed rate available-for-sale securities and fixed rate loans, which partially offset the increase in deposits and variable rate loans. In the simulated downward interest rate movements, EVE sensitivity increased slightly due to the combined effects of lower yield curve and deposit rates being at or near their absolute floors thus muting the negative effects of the downward interest rate shocks.

12-Month Net Interest Income Simulation

Our expected 12-month NII at September 30, 2012 increased from December 31, 2011 by $36.3 million primarily due to growth of $1.2 billion in our loan portfolio. This growth was funded primarily by increases in deposit balances. NII sensitivity remained relatively unchanged in the simulated upward interest rate movements as the mix between our fixed and variable rate earning assets remained stable compared to December 31, 2011. In the simulated downward interest rate movements, the NII sensitivity decreased due to the current low rate environment as certain of our deposit and loan rates are at or near their floors and a decrease in variable-rate available-for-sale securities.

The simulation model used for above analysis embeds floors in our interest rate scenarios, which prevent model benchmark rates from moving below 0.0%. Current modeling assumptions maintain the SVB prime lending rate at its existing level (currently at 4.0%) until the National Prime Index has been adjusted upward by a minimum of 75 basis points (to 4.0%), as we did not lower the Bank’s prime lending rate despite the 75 basis points decrease in the target Federal Funds rates in December 2008. These assumptions may change in future periods based on management discretion. Actual changes in our deposit pricing strategies may differ from our current model assumptions and may have an impact on our overall sensitivity.

Table of Contents

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are the controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. Disclosure controls and procedures include, among other things, processes, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of our most recently completed fiscal quarter, pursuant to Exchange Act Rule 13a-15(b). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

Changes in Internal Control

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II–OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Please refer to Note 14–“Legal Matters” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.

ITEM 1A. RISK FACTORS

There are no material changes from the risk factors set forth in our 2011 Form 10-K.

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

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

See Index to Exhibits at end of report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		SVB Financial Group

Date: November 9, 2012		/s/ MICHAEL DESCHENEAUX
		Michael Descheneaux
		Chief Financial Officer
		(Principal Financial Officer)

		SVB Financial Group

Date: November 9, 2012		/s/ KAMRAN HUSAIN
		Kamran Husain
		Chief Accounting Officer
		(Principal Accounting Officer)

Table of Contents

INDEX TO EXHIBITS



Exhibit Number	Exhibit Description	Incorporated by Reference				Filed Herewith
Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith
3.1	Restated Certificate of Incorporation	8-K	000-15637	3.1	May 31, 2005
3.2	Amended and Restated Bylaws	8-K	000-15637	3.2	July 27, 2010
3.3	Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock	8-K	000-15637	3.3	December 8, 2008
3.4	Certificate of Designations of Fixed Rate Cumulative Perpetual Preferred Stock, Series B	8-K	000-15637	3.4	December 15, 2008
4.1	Junior Subordinated Indenture, dated as of October 30, 2003 between SVB Financial and Wilmington Trust Company, as trustee	8-K	000-15637	4.12	November 19, 2003
4.2	7.0% Junior Subordinated Deferrable Interest Debenture due October 15, 2033 of SVB Financial	8-K	000-15637	4.13	November 19, 2003
4.3	Amended and Restated Trust Agreement, dated as of October 30, 2003, by and among SVB Financial as depositor, Wilmington Trust Company as property trustee, Wilmington Trust Company as Delaware trustee, and the Administrative Trustees named therein	8-K	000-15637	4.14	November 19, 2003
4.4	Certificate Evidencing 7% Cumulative Trust Preferred Securities of SVB Capital II, dated October 30, 2003	8-K	000-15637	4.15	November 19, 2003
4.5	Guarantee Agreement, dated October 30, 2003, between SVB Financial and Wilmington Trust Company, as trustee	8-K	000-15637	4.16	November 19, 2003
4.6	Agreement as to Expenses and Liabilities, dated as of October 30, 2003, between SVB Financial and SVB Capital II	8-K	000-15637	4.17	November 19, 2003
4.7	Certificate Evidencing 7% Common Securities of SVB Capital II, dated October 30, 2003	8-K	000-15637	4.18	November 19, 2003
4.8	Officers’ Certificate and Company Order, dated October 30, 2003, relating to the 7.0% Junior Subordinated Deferrable Interest Debentures due October 15, 2033	8-K	000-15637	4.19	November 19, 2003
4.9	Amended and Restated Preferred Stock Rights Agreement, dated as of January 29, 2004, between SVB Financial and Wells Fargo Bank Minnesota, N.A.	8-A12G/A	000-15637	4.20	February 27, 2004
4.10	Amendment No. 1 to Amended & Restated Preferred Stock Rights Agreement, dated as of August 2, 2004, by and between SVB Financial and Wells Fargo Bank, N.A.	8-A12G/A	000-15637	4.13	August 3, 2004
4.11	Amendment No. 2 to Amended & Restated Preferred Stock Rights Agreement, dated as of January 29, 2008, by and between SVB Financial and Wells Fargo Bank, N.A.	8-A/A	000-15637	4.14	January 29, 2008
4.12	Amendment No. 3 to Amended and Restated Preferred Stock Rights Agreement, dated as of April 30, 2008, by and between SVB Financial and Wells Fargo Bank, N.A	8-A/A	000-15637	4.20	April 30, 2008

Table of Contents

Exhibit

Number

Exhibit Description

Incorporated by Reference

Filed

Herewith

Form

File No.

Exhibit

Filing Date

4.13

Amendment No. 4 to Amended and Restated Preferred Stock Rights Agreement, dated as of January 15, 2010, by and between SVB Financial, Wells Fargo Bank, N.A. and American Stock Transfer & Trust Company, LLC

8-A/A

000-15637

4.22

January 19, 2010

4.14

Indenture, dated September 20, 2010, by and between SVB Financial Group and U.S. Bank National Association, as trustee

8-K

000-15637

4.1

September 20, 2010

4.15

Form of 5.375% Senior Note due 2020

8-K

000-15637

4.2

September 20, 2010

31.1

Rule 13a-14(a) / 15(d)-14(a) Certification of Principal Executive Officer

31.2

Rule 13a-14(a) / 15(d)-14(a) Certification of Principal Financial Officer

32.1

Section 1350 Certifications

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document



*	Denotes management contract or any compensatory plan, contract or arrangement.



**	Furnished herewith