Segment Reporting

9 Months Ended

Sep. 30, 2012

Text Block [Abstract]

Segment Reporting

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.

• 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

(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.