Loans, Allowance for Loan Losses and Allowance for Unfunded Credit Commitments | Loans, Allowance for Loan Losses and Allowance for Unfunded Credit Commitments We serve a variety of commercial clients in the technology, life science/healthcare, private equity/venture capital and premium wine industries. Our technology clients generally tend to be in the industries of hardware (semiconductors, communications, data, storage and electronics), software/internet (such as infrastructure software, applications, software services, digital content and advertising technology), and energy and resource innovation ("ERI"). Because of the diverse nature of ERI products and services, for our loan-related reporting purposes, ERI-related loans are reported under our hardware, software/internet, life science/healthcare and other commercial loan categories, as applicable. Our life science/healthcare clients primarily tend to be in the industries of biotechnology, medical devices, healthcare information technology and healthcare services. Loans made to private equity/venture capital 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 consumer loans through SVB Private Bank and provide real estate secured loans to eligible employees through our EHOP. Our private banking clients are primarily private equity/venture capital professionals and executive leaders in the innovation companies they support. 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 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 $163 million and $173 million at December 31, 2019 and 2018 , respectively, is presented in the following table: December 31, (Dollars in thousands) 2019 2018 Commercial loans: Software/internet $ 6,199,548 $ 6,154,755 Hardware 1,371,159 1,234,557 Private equity/venture capital 17,801,324 14,110,560 Life science/healthcare 2,368,048 2,385,612 Premium wine 267,487 249,266 Other 420,555 321,978 Total commercial loans 28,428,121 24,456,728 Real estate secured loans: Premium wine (1) 820,730 710,397 Consumer loans (2) 3,286,737 2,612,971 Other 38,880 40,435 Total real estate secured loans 4,146,347 3,363,803 Construction loans 100,219 97,077 Consumer loans 489,949 420,672 Total loans, net of unearned income (3) $ 33,164,636 $ 28,338,280 (1) Included in our premium wine portfolio are gross construction loans of $83 million and $99 million at December 31, 2019 and 2018 , respectively. (2) Consumer loans secured by real estate at December 31, 2019 and 2018 were comprised of the following: December 31, (Dollars in thousands) 2019 2018 Loans for personal residence $ 2,829,880 $ 2,251,292 Loans to eligible employees 401,396 290,194 Home equity lines of credit 55,461 71,485 Consumer loans secured by real estate $ 3,286,737 $ 2,612,971 (3) Included within our total loan portfolio are credit card loans of $395 million and $335 million at December 31, 2019 and 2018 , respectively. Credit Quality The composition of loans, net of unearned income of $163 million and $173 million at December 31, 2019 and 2018 , respectively, broken out by portfolio segment and class of financing receivable, is as follows: December 31, (Dollars in thousands) 2019 2018 Commercial loans: Software/internet $ 6,199,548 $ 6,154,755 Hardware 1,371,159 1,234,557 Private equity/venture capital 17,801,324 14,110,560 Life science/healthcare 2,368,048 2,385,612 Premium wine 1,088,217 959,663 Other 559,654 459,490 Total commercial loans 29,387,950 25,304,637 Consumer loans: Real estate secured loans 3,286,737 2,612,971 Other consumer loans 489,949 420,672 Total consumer loans 3,776,686 3,033,643 Total loans, net of unearned income $ 33,164,636 $ 28,338,280 The following table summarizes the aging of our gross loans, broken out by portfolio segment and class of financing receivable as of December 31, 2019 and 2018 : (Dollars in thousands) 30 - 59 Days Past Due 60 - 89 Days Past Due Equal to or Greater Than 90 Days Past Due Total Past Due Current Loans Past Due 90 Days or More Still Accruing Interest December 31, 2019: Commercial loans: Software/internet $ 19,839 $ 4,225 $ — $ 24,064 $ 6,136,230 $ — Hardware 104 18,084 — 18,188 1,357,379 — Private equity/venture capital 97,893 383 3,150 101,426 17,715,964 3,150 Life science/healthcare 445 8,420 — 8,865 2,387,203 — Premium wine 7,543 — — 7,543 1,070,111 — Other 9 24 — 33 579,446 — Total commercial loans 125,833 31,136 3,150 160,119 29,246,333 3,150 Consumer loans: Real estate secured loans 6,282 — 365 6,647 3,271,318 365 Other consumer loans 164 283 — 447 489,831 — Total consumer loans 6,446 283 365 7,094 3,761,149 365 Total gross loans excluding impaired loans 132,279 31,419 3,515 167,213 33,007,482 3,515 Impaired loans 5,096 6,805 12,473 24,374 128,635 — Total gross loans $ 137,375 $ 38,224 $ 15,988 $ 191,587 $ 33,136,117 $ 3,515 December 31, 2018: Commercial loans: Software/internet $ 28,134 $ 6,944 $ 378 $ 35,456 $ 6,059,672 $ 378 Hardware 300 34 4 338 1,233,956 4 Private equity/venture capital 59,481 11 — 59,492 14,054,940 — Life science/healthcare 16,082 817 19 16,918 2,410,091 19 Premium wine 2,953 14 — 2,967 956,285 — Other 7,391 163 1 7,555 477,442 1 Total commercial loans 114,341 7,983 402 122,726 25,192,386 402 Consumer loans: Real estate secured loans 3,598 1,750 1,562 6,910 2,598,496 1,562 Other consumer loans 361 — — 361 420,359 — Total consumer loans 3,959 1,750 1,562 7,271 3,018,855 1,562 Total gross loans excluding impaired loans 118,300 9,733 1,964 129,997 28,211,241 1,964 Impaired loans 2,843 1,181 25,092 29,116 140,958 — Total gross loans $ 121,143 $ 10,914 $ 27,056 $ 159,113 $ 28,352,199 $ 1,964 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 for the years ended December 31, 2019 and 2018 : (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 December 31, 2019: Commercial loans: Software/internet $ 64,100 $ 31,472 $ 95,572 $ 109,736 Hardware 2,143 3,315 5,458 10,049 Private equity/venture capital — — — — Life science/healthcare 25,941 5,671 31,612 70,600 Premium wine 204 11,718 11,922 12,010 Other 1,284 1,681 2,965 3,114 Total commercial loans 93,672 53,857 147,529 205,509 Consumer loans: Real estate secured loans 1,766 3,714 5,480 8,527 Total consumer loans 1,766 3,714 5,480 8,527 Total $ 95,438 $ 57,571 $ 153,009 $ 214,036 December 31, 2018: Commercial loans: Software/internet $ 49,625 $ 65,225 $ 114,850 $ 131,858 Hardware 1,256 10,250 11,506 12,159 Private equity/venture capital — 3,700 3,700 3,700 Life science/healthcare 17,791 16,276 34,067 44,446 Premium wine — 1,301 1,301 1,365 Other 411 — 411 411 Total commercial loans 69,083 96,752 165,835 193,939 Consumer loans: Real estate secured loans 3,919 320 4,239 5,969 Total consumer loans 3,919 320 4,239 5,969 Total $ 73,002 $ 97,072 $ 170,074 $ 199,908 The following table summarizes our average impaired loans and interest income recognized on impaired loans, broken out by portfolio segment and class of financing receivable during 2019 , 2018 and 2017 : Year ended December 31, (Dollars in thousands) Average impaired loans Interest income recognized on impaired loans 2019 2018 2017 2019 2018 2017 Commercial loans: Software/internet $ 88,628 $ 112,493 $ 119,557 $ 2,813 $ 1,513 $ 2,263 Hardware 12,500 28,540 35,022 464 312 1,061 Private equity/venture capital 2,264 1,327 556 — — — Life science/healthcare 44,827 30,144 30,842 919 756 90 Premium wine 2,912 2,605 3,249 311 68 152 Other 2,050 171 576 21 — — Total commercial loans 153,181 175,280 189,802 4,528 2,649 3,566 Consumer loans: Real estate secured loans 7,159 4,028 1,514 54 15 — Other consumer loans 7 358 1,804 — — — Total consumer loans 7,166 4,386 3,318 54 15 — Total average impaired loans $ 160,347 $ 179,666 $ 193,120 $ 4,582 $ 2,664 $ 3,566 The following tables summarize the activity relating to our allowance for loan losses for 2019 , 2018 and 2017 broken out by portfolio segment: Year ended December 31, 2019 (Dollars in thousands) Beginning Balance December 31, 2018 Charge-offs Recoveries Provision for Loan Losses Foreign Currency Translation Adjustments Ending Balance December 31, 2019 Commercial loans: Software/internet $ 103,567 $ (46,930 ) $ 11,363 $ 31,766 $ 457 $ 100,223 Hardware 19,725 (10,056 ) 7,069 2,740 166 19,644 Private equity/venture capital 98,581 (2,047 ) 2,047 16,989 235 115,805 Life science/healthcare 32,180 (31,950 ) 267 38,178 570 39,245 Premium wine 3,355 (174 ) — 1,813 154 5,148 Other 3,558 (415 ) 36 328 (154 ) 3,353 Total commercial loans 260,966 (91,572 ) 20,782 91,814 1,428 283,418 Consumer loans 19,937 (1,031 ) 256 2,369 (25 ) 21,506 Total allowance for loan losses $ 280,903 $ (92,603 ) $ 21,038 $ 94,183 $ 1,403 $ 304,924 Year ended December 31, 2018 (Dollars in thousands) Beginning Balance December 31, 2017 Charge-offs Recoveries Provision for (Reduction of) Loan Losses Foreign Currency Translation Adjustments Ending Balance December 31, 2018 Commercial loans: Software/internet $ 96,104 $ (42,315 ) $ 5,664 $ 45,068 $ (954 ) $ 103,567 Hardware 27,614 (16,148 ) 1,849 6,555 (145 ) 19,725 Private equity/venture capital 82,468 (112 ) 13 16,485 (273 ) 98,581 Life science/healthcare 24,924 (6,662 ) 348 14,347 (777 ) 32,180 Premium wine 3,532 — — (182 ) 5 3,355 Other 3,941 (2,391 ) 3,275 (1,320 ) 53 3,558 Total commercial loans 238,583 (67,628 ) 11,149 80,953 (2,091 ) 260,966 Consumer loans 16,441 (289 ) 487 3,339 (41 ) 19,937 Total allowance for loan losses $ 255,024 $ (67,917 ) $ 11,636 $ 84,292 $ (2,132 ) $ 280,903 Year ended December 31, 2017 Beginning Balance December 31, 2016 Charge-offs Recoveries Provision for (Reduction of) Loan Losses Foreign Currency Translation Adjustments Ending Balance December 31, 2017 Commercial loans: Software/internet $ 97,388 $ (45,012 ) $ 4,649 $ 38,462 $ 617 $ 96,104 Hardware 31,166 (10,414 ) 487 6,051 324 27,614 Private equity/venture capital 50,299 (323 ) — 31,625 867 82,468 Life science/healthcare 25,446 (8,210 ) 189 7,414 85 24,924 Premium wine 4,115 — — (540 ) (43 ) 3,532 Other 4,768 (1,156 ) 1,850 (1,459 ) (62 ) 3,941 Total commercial loans 213,182 (65,115 ) 7,175 81,553 1,788 238,583 Consumer loans 12,184 (1,567 ) 1,363 4,386 75 16,441 Total allowance for loan losses $ 225,366 $ (66,682 ) $ 8,538 $ 85,939 $ 1,863 $ 255,024 The following table summarizes the activity relating to our allowance for unfunded credit commitments for 2019 , 2018 and 2017 : Year ended December 31, (Dollars in thousands) 2019 2018 2017 Allowance for unfunded credit commitments, beginning balance $ 55,183 $ 51,770 $ 45,265 Provision for unfunded credit commitments 12,233 3,578 6,365 Foreign currency translation adjustments 240 (165 ) 140 Allowance for unfunded credit commitments, ending balance (1) $ 67,656 $ 55,183 $ 51,770 (1) The “allowance for unfunded credit commitments” is included as a component of “other liabilities” on our consolidated balance sheets. See Note 22—“Off-Balance Sheet Arrangements, Guarantees and Other Commitments” of the “Notes to the Consolidated Financial Statements” under Part II, Item 8 of this report for additional disclosures related to our commitments to extend credit. The following table summarizes the allowance for loan losses individually and collectively evaluated for impairment as of December 31, 2019 and 2018 , broken out by portfolio segment: December 31, 2019 December 31, 2018 Individually Evaluated for Impairment Collectively Evaluated for Impairment Individually Evaluated for Impairment Collectively Evaluated for Impairment (Dollars in thousands) Allowance for loan losses Recorded investment in loans Allowance for loan losses Recorded investment in loans Allowance for loan losses Recorded investment in loans Allowance for loan losses Recorded investment in loans Commercial loans: Software/internet $ 26,613 $ 95,572 $ 73,610 $ 6,103,976 $ 28,527 $ 114,850 $ 75,040 $ 6,039,905 Hardware 1,214 5,458 18,430 1,365,701 1,253 11,506 18,472 1,223,051 Private equity/venture capital — — 115,805 17,801,324 — 3,700 98,581 14,106,860 Life science/healthcare 16,414 31,612 22,831 2,336,436 7,484 34,067 24,696 2,351,545 Premium wine 204 11,922 4,944 1,076,295 — 1,301 3,355 958,362 Other 203 2,965 3,150 556,689 411 411 3,147 459,079 Total commercial loans 44,648 147,529 238,770 29,240,421 37,675 165,835 223,291 25,138,802 Total consumer loans 211 5,480 21,295 3,771,206 266 4,239 19,671 3,029,404 Total $ 44,859 $ 153,009 $ 260,065 $ 33,011,627 $ 37,941 $ 170,074 $ 242,962 $ 28,168,206 Credit Quality Indicators For each individual client, we establish an internal credit risk rating for that loan, which is used for assessing and monitoring credit risk as well as performance of the loan and the overall portfolio. Our internal credit risk ratings are also used to summarize the risk of loss due to failure by an individual borrower to repay the loan. For our internal credit risk ratings, each individual loan is given a risk rating of 1 through 10. Loans risk-rated 1 through 4 are performing loans and translate to an internal rating of “Pass,” with loans risk-rated 1 being cash secured. Loans risk-rated 5 through 7 are 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).” When full repayment of a criticized loan has been deemed improbable under the original contractual terms but full repayment remains probable overall, the loan is considered to be a “Performing Impaired (Criticized)” loan. All of our nonaccrual loans are risk-rated 8 or 9 and are classified under the nonperforming impaired category. (For a further description of nonaccrual loans, refer to Note 2—“Summary of Significant Accounting Policies” of the “Notes to the Consolidated Financial Statements” under Part II, Item 8 of this report ). 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 December 31, 2019 and 2018 : (Dollars in thousands) Pass Performing (Criticized) Performing Impaired (Criticized) Nonperforming Impaired (Nonaccrual) Total December 31, 2019: Commercial loans: Software/internet $ 5,704,283 $ 456,011 $ 28,417 $ 67,155 $ 6,255,866 Hardware 1,266,077 109,490 3,315 2,143 1,381,025 Private equity/venture capital 17,813,128 4,262 — — 17,817,390 Life science/healthcare 2,197,679 198,389 5,211 26,401 2,427,680 Premium wine 1,053,021 24,633 11,717 205 1,089,576 Other 571,040 8,439 1,680 1,285 582,444 Total commercial loans 28,605,228 801,224 50,340 97,189 29,553,981 Consumer loans: Real estate secured loans 3,266,748 11,217 — 5,480 3,283,445 Other consumer loans 489,903 375 — — 490,278 Total consumer loans 3,756,651 11,592 — 5,480 3,773,723 Total gross loans $ 32,361,879 $ 812,816 $ 50,340 $ 102,669 $ 33,327,704 December 31, 2018: Commercial loans: Software/internet $ 5,574,332 $ 520,796 $ 48,069 $ 66,781 $ 6,209,978 Hardware 1,146,985 87,309 10,250 1,256 1,245,800 Private equity/venture capital 14,098,281 16,151 — 3,700 14,118,132 Life science/healthcare 2,291,356 135,653 16,276 17,791 2,461,076 Premium wine 909,965 49,287 1,017 284 960,553 Other 467,653 17,344 — 411 485,408 Total commercial loans 24,488,572 826,540 75,612 90,223 25,480,947 Consumer loans: Real estate secured loans 2,584,261 21,145 320 3,919 2,609,645 Other consumer loans 419,771 949 — — 420,720 Total consumer loans 3,004,032 22,094 320 3,919 3,030,365 Total gross loans $ 27,492,604 $ 848,634 $ 75,932 $ 94,142 $ 28,511,312 Troubled Debt Restructurings As of December 31, 2019 we had 23 TDRs with a total carrying value of $109.0 million where concessions have been granted to borrowers experiencing financial difficulties, in an attempt to maximize collection. This compares to 17 TDRs with a total carrying value of $83.7 million as of December 31, 2018 . There were unfunded commitments available for funding of $0.8 million to the clients associated with these TDRs as of December 31, 2019 . The following table summarizes our loans modified in TDRs, broken out by portfolio segment and class of financing receivables at December 31, 2019 and 2018 : December 31, (Dollars in thousands) 2019 2018 Loans modified in TDRs: Commercial loans: Software/internet $ 71,136 $ 58,089 Hardware 1,685 9,665 Life science/healthcare 20,600 12,738 Premium wine 13,457 2,883 Total commercial loans 106,878 83,375 Consumer loans: Other consumer loans 2,104 320 Total loans modified in TDRs $ 108,982 $ 83,695 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 2019 , 2018 and 2017 : Year ended December 31, (Dollars in thousands) 2019 2018 2017 Loans modified in TDRs during the period: Commercial loans: Software/internet $ 62,367 $ 30,429 $ 42,184 Hardware 1,685 9,665 51,132 Private equity/venture capital — — 350 Life science/healthcare 13,309 660 — Premium wine 11,017 — 177 Total commercial loans 88,378 40,754 93,843 Consumer loans: Other consumer loans 1,793 320 — Total loans modified in TDRs during the period (1) $ 90,171 $ 41,074 $ 93,843 (1) There were $11.3 million , $4.6 million and $3.0 million of partial charge-offs during 2019 , 2018 and 2017 , respectively. During 2019 , $86.9 million of new TDRs were modified through payment deferrals granted to our clients and $3.3 million were modified through partial forgiveness of principal. During 2018 , all new TDRs of $41.1 million were modified through payment deferrals granted to our clients. During 2017 , $93.5 million of new TDRs were modified through payment deferrals granted to our clients and $0.3 million were modified through partial forgiveness of principal. 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 their respective periods, broken out by portfolio segment and class of financing receivable, during 2019 , 2018 and 2017 : December 31, (Dollars in thousands) 2019 2018 2017 TDRs modified within the previous 12 months that defaulted during the period: Commercial loans: Software/internet $ 37,294 $ — $ — Life science/healthcare 10,639 — — Total TDRs modified within the previous 12 months that defaulted in the period $ 47,933 $ — $ — 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 for TDRs was necessary to determine the allowance for loan losses as of December 31, 2019 . |