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 $158 million and $148 million at March 31, 2018 and December 31, 2017, respectively, is presented in the following table:



(Dollars in thousands)	March 31, 2018		December 31, 2017
Commercial loans:
Software/internet	$	6,209,084	$	6,172,531
Hardware	1,336,000		1,193,599
Private equity/venture capital	11,211,816		9,952,377
Life science/healthcare	1,932,608		1,808,827
Premium wine	188,943		204,105
Other	219,467		365,724
Total commercial loans	21,097,918		19,697,163
Real estate secured loans:
Premium wine (1)	676,081		669,053
Consumer loans (2)	2,362,340		2,300,506
Other	41,646		42,068
Total real estate secured loans	3,080,067		3,011,627
Construction loans	59,012		68,546
Consumer loans	350,947		328,980
Total loans, net of unearned income (3)	$	24,587,944	$	23,106,316


(1)	Included in our premium wine portfolio are gross construction loans of $101 million and $100 million at March 31, 2018 and December 31, 2017, respectively.


(2)	Consumer loans secured by real estate at March 31, 2018 and December 31, 2017 were comprised of the following:



(Dollars in thousands)	March 31, 2018		December 31, 2017
Loans for personal residence	$	2,048,676	$	1,995,840
Loans to eligible employees	249,050		243,118
Home equity lines of credit	64,614		61,548
Consumer loans secured by real estate	$	2,362,340	$	2,300,506


(3)	Included within our total loan portfolio are credit card loans of $307 million and $270 million at March 31, 2018 and December 31, 2017, respectively.

Credit Quality

The composition of loans, net of unearned income of $158 million and $148 million at March 31, 2018 and December 31, 2017, respectively, broken out by portfolio segment and class of financing receivable, is as follows:



(Dollars in thousands)	March 31, 2018		December 31, 2017
Commercial loans:
Software/internet	$	6,209,084	$	6,172,531
Hardware	1,336,000		1,193,599
Private equity/venture capital	11,211,816		9,952,377
Life science/healthcare	1,932,608		1,808,827
Premium wine	865,024		873,158
Other	320,125		476,338
Total commercial loans	21,874,657		20,476,830
Consumer loans:
Real estate secured loans	2,362,340		2,300,506
Other consumer loans	350,947		328,980
Total consumer loans	2,713,287		2,629,486
Total loans, net of unearned income	$	24,587,944	$	23,106,316

The following table summarizes the aging of our gross loans, broken out by portfolio segment and class of financing receivable as of March 31, 2018 and December 31, 2017:



(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
March 31, 2018:
Commercial loans:
Software/internet	$	30,557	$	10,670	$	3	$	41,230	$	6,113,585	$	3
Hardware	5,502		45		—		5,547		1,306,873		—
Private equity/venture capital	357,936		49,207		—		407,143		10,814,598		—
Life science/healthcare	4,193		49		4		4,246		1,972,241		4
Premium wine	708		—		—		708		862,530		—
Other	—		—		—		—		328,847		—
Total commercial loans	398,896		59,971		7		458,874		21,398,674		7
Consumer loans:
Real estate secured loans	599		—		—		599		2,354,108		—
Other consumer loans	557		—		—		557		349,301		—
Total consumer loans	1,156		—		—		1,156		2,703,409		—
Total gross loans excluding impaired loans	400,052		59,971		7		460,030		24,102,083		7
Impaired loans	8,113		1,246		33,209		42,568		141,071		—
Total gross loans	$	408,165	$	61,217	$	33,216	$	502,598	$	24,243,154	$	7
December 31, 2017:
Commercial loans:
Software/internet	$	14,257	$	6,526	$	141	$	20,924	$	6,101,147	$	141
Hardware	1,145		77		50		1,272		1,163,278		50
Private equity/venture capital	86,566		38,580		—		125,146		9,835,317		—
Life science/healthcare	4,390		191		—		4,581		1,841,692		—
Premium wine	418		—		—		418		871,074		—
Other	445		—		—		445		490,292		—
Total commercial loans	107,221		45,374		191		152,786		20,302,800		191
Consumer loans:
Real estate secured loans	2,164		532		—		2,696		2,292,980		—
Other consumer loans	796		—		—		796		327,234		—
Total consumer loans	2,960		532		—		3,492		2,620,214		—
Total gross loans excluding impaired loans	110,181		45,906		191		156,278		22,923,014		191
Impaired loans	1,344		11,902		30,403		43,649		131,212		—
Total gross loans	$	111,525	$	57,808	$	30,594	$	199,927	$	23,054,226	$	191

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 March 31, 2018 and December 31, 2017:



(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
March 31, 2018:
Commercial loans:
Software/internet	$	56,600	$	59,542	$	116,142	$	137,467
Hardware	14,833		21,988		36,821		37,450
Private equity/venture capital	108		—		108		108
Life science/healthcare	19,672		2,617		22,289		26,913
Premium wine	372		2,350		2,722		2,762
Other	14		—		14		94
Total commercial loans	91,599		86,497		178,096		204,794
Consumer loans:
Real estate secured loans	4,164		326		4,490		6,043
Other consumer loans	298		755		1,053		1,074
Total consumer loans	4,462		1,081		5,543		7,117
Total	$	96,061	$	87,578	$	183,639	$	211,911
December 31, 2017:
Commercial loans:
Software/internet	$	49,645	$	61,009	$	110,654	$	129,006
Hardware	15,637		20,713		36,350		41,721
Private equity/venture capital	658		—		658		984
Life science/healthcare	20,521		1,166		21,687		26,360
Premium wine	—		2,877		2,877		2,911
Other	32		—		32		165
Total commercial loans	86,493		85,765		172,258		201,147
Consumer loans:
Real estate secured loans	1,331		850		2,181		3,712
Other consumer loans	422		—		422		436
Total consumer loans	1,753		850		2,603		4,148
Total	$	88,246	$	86,615	$	174,861	$	205,295

The following tables summarize our average impaired loans and interest income on impaired loans, broken out by portfolio segment and class of financing receivable for the three months ended March 31, 2018 and 2017:



Three months ended March 31,	Average impaired loans				Interest income on impaired loans
(Dollars in thousands)	2018		2017		2018		2017
Commercial loans:
Software/internet	$	108,788	$	109,916	$	532	$	422
Hardware	38,426		34,110		363		572
Private equity/venture capital	302		358		—		2
Life science/healthcare	22,679		38,942		37		150
Premium wine	2,769		3,213		36		38
Other	11		1,061		—		4
Total commercial loans	172,975		187,600		968		1,188
Consumer loans:
Real estate secured loans	3,063		1,488		—		—
Other consumer loans	739		2,148		5		8
Total consumer loans	3,802		3,636		5		8
Total average impaired loans	$	176,777	$	191,236	$	973	$	1,196

The following tables summarize the activity relating to our allowance for loan losses for the three months ended March 31, 2018 and 2017, broken out by portfolio segment:



Three months ended March 31, 2018	Beginning Balance December 31, 2017		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Foreign Currency Translation Adjustments			Ending Balance March 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 March 31, 2018
Commercial loans:
Software/internet	$	96,104	$	(6,671	)	$	573	$	12,801		$	488		$	103,295
Hardware	27,614		(2,953		)	588		3,104			119			28,472
Private equity/venture capital	82,468		—			10		8,805			335			91,618
Life science/healthcare	24,924		(864		)	53		1,631			62			25,806
Premium wine	3,532		—			—		(161		)	(6		)	3,365
Other	3,941		(99		)	537		(906		)	9			3,482
Total commercial loans	238,583		(10,587		)	1,761		25,274			1,007			256,038
Total consumer loans	16,441		—			27		1,722			66			18,256
Total allowance for loan losses	$	255,024	$	(10,587	)	$	1,788	$	26,996		$	1,073		$	274,294



Three months ended March 31, 2017	Beginning Balance December 31, 2016		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Foreign Currency Translation Adjustments			Ending Balance March 31, 2017
(Dollars in thousands)	Beginning Balance December 31, 2016		Charge-offs			Recoveries		Provision for (Reduction of) Loan Losses			Foreign Currency Translation Adjustments			Ending Balance March 31, 2017
Commercial loans:
Software/internet	$	97,388	$	(7,980	)	$	1,171	$	18,719		$	204		$	109,502
Hardware	31,166		(4,024		)	267		(4,080		)	(45		)	23,284
Private equity/venture capital	50,299		—			—		6,706			73			57,078
Life science/healthcare	25,446		(1,732		)	36		7,708			84			31,542
Premium wine	4,115		—			—		226			2			4,343
Other	4,768		(294		)	297		(390		)	(4		)	4,377
Total commercial loans	213,182		(14,030		)	1,771		28,889			314			230,126
Total consumer loans	12,184		—			21		790			9			13,004
Total allowance for loan losses	$	225,366	$	(14,030	)	$	1,792	$	29,679		$	323		$	243,130

The following table summarizes the activity relating to our allowance for unfunded credit commitments for the three months ended March 31, 2018 and 2017:



	Three months ended March 31,
(Dollars in thousands)	2018		2017
Beginning balance	$	51,770	$	45,265
Provision for unfunded credit commitments	976		1,055
Foreign currency translation adjustments	77		15
Ending balance (1)	$	52,823	$	46,335


(1)	See Note 13—“Off-Balance Sheet Arrangements, Guarantees and Other Commitments” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report 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 March 31, 2018 and December 31, 2017, broken out by portfolio segment:



	March 31, 2018								December 31, 2017
	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	$	27,379	$	116,142	$	75,916	$	6,092,942	$	23,088	$	110,654	$	73,016	$	6,061,877
Hardware	7,087		36,821		21,385		1,299,179		8,450		36,350		19,164		1,157,249
Private equity/venture capital	108		108		91,510		11,211,708		330		658		82,138		9,951,719
Life science/healthcare	8,149		22,289		17,657		1,910,319		9,315		21,687		15,609		1,787,140
Premium wine	—		2,722		3,365		862,302		—		2,877		3,532		870,281
Other	14		14		3,468		320,111		32		32		3,909		476,306
Total commercial loans	42,737		178,096		213,301		21,696,561		41,215		172,258		197,368		20,304,572
Total consumer loans	1,524		5,543		16,732		2,707,744		578		2,603		15,863		2,626,883
Total	$	44,261	$	183,639	$	230,033	$	24,404,305	$	41,793	$	174,861	$	213,231	$	22,931,455

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 further description of nonaccrual loans, refer to Note 2—“Summary of Significant Accounting Policies” under Part II, Item 8 of our 2017 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 March 31, 2018 and December 31, 2017:



(Dollars in thousands)	Pass		Performing (Criticized)		Performing Impaired (Criticized)		Nonperforming Impaired (Nonaccrual)		Total
March 31, 2018:
Commercial loans:
Software/internet	$	5,622,167	$	532,648	$	39,691	$	76,451	$	6,270,957
Hardware	1,201,029		111,391		21,988		14,833		1,349,241
Private equity/venture capital	11,217,832		3,909		—		108		11,221,849
Life science/healthcare	1,787,185		189,302		2,617		19,672		1,998,776
Premium wine	825,892		37,346		2,350		372		865,960
Other	325,122		3,725		—		14		328,861
Total commercial loans	20,979,227		878,321		66,646		111,450		22,035,644
Consumer loans:
Real estate secured loans	2,346,069		8,638		326		4,164		2,359,197
Other consumer loans	349,459		399		—		1,053		350,911
Total consumer loans	2,695,528		9,037		326		5,217		2,710,108
Total gross loans	$	23,674,755	$	887,358	$	66,972	$	116,667	$	24,745,752
December 31, 2017:
Commercial loans:
Software/internet	$	5,655,739	$	466,332	$	31,794	$	78,860	$	6,232,725
Hardware	1,112,574		51,976		20,165		16,185		1,200,900
Private equity/venture capital	9,955,082		5,381		—		658		9,961,121
Life science/healthcare	1,720,613		125,660		1,167		20,520		1,867,960
Premium wine	834,537		36,955		2,476		401		874,369
Other	469,721		21,016		—		32		490,769
Total commercial loans	19,748,266		707,320		55,602		116,656		20,627,844
Consumer loans:
Real estate secured loans	2,282,375		13,301		—		2,181		2,297,857
Other consumer loans	326,851		1,179		—		422		328,452
Total consumer loans	2,609,226		14,480		—		2,603		2,626,309
Total gross loans	$	22,357,492	$	721,800	$	55,602	$	119,259	$	23,254,153

Troubled Debt Restructurings

As of March 31, 2018 we had 21 TDRs with a total carrying value of $141.0 million where concessions have been granted to borrowers experiencing financial difficulties, in an attempt to maximize collection. There were $0.4 million of unfunded commitments available for funding to the clients associated with these TDRs as of March 31, 2018.

The following table summarizes our loans modified in TDRs, broken out by portfolio segment and class of financing receivables at March 31, 2018 and December 31, 2017:



(Dollars in thousands)	March 31, 2018		December 31, 2017
Loans modified in TDRs:
Commercial loans:
Software/internet	$	67,205	$	73,455
Hardware	50,030		51,132
Private equity/venture capital	—		350
Life science/healthcare	20,037		19,235
Premium wine	3,137		3,198
Total commercial loans	140,409		147,370
Consumer loans:
Other consumer loans	577		423
Total	$	140,986	$	147,793

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 months ended March 31, 2018 and 2017:



	Three months ended March 31,
(Dollars in thousands)	2018		2017
Loans modified in TDRs during the period:
Commercial loans:
Software/internet	$	756	$	6,309
Hardware	1,559		—
Life science/healthcare	1,239		—
Total commercial loans	3,554		6,309
Consumer loans:
Other consumer loans	326		—
Total loans modified in TDRs during the period (1)	$	3,880	$	6,309


(1)	There were no partial charge-offs during the three months ended March 31, 2018 and $6.2 million of partial charge-offs during the three months ended March 31, 2017, respectively.

During the three months ended March 31, 2018 all new TDRs of $3.9 million were modified through payment deferrals granted to our clients. During the three months ended March 31, 2017, all new TDRs of $6.3 million were modified through payment deferrals granted to our clients.

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 months ended March 31, 2018 and 2017:



	Three months ended March 31,
(Dollars in thousands)	2018		2017
TDRs modified within the previous 12 months that defaulted during the period:
Commercial loans:
Software/internet	$	3,032	$	—
Hardware	—		3,105
Total commercial loans	3,032		3,105
Consumer loans:
Other consumer loans	—		536
Total TDRs modified within the previous 12 months that defaulted in the period	$	3,032	$	3,641

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 March 31, 2018.