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 Global Commercial Bank and SVB Private Bank 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, these 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. FTP is calculated at an instrument level based on account characteristics.

We also evaluate performance based on provision for credit 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 tax expense or the provision for unfunded credit commitments (included in provision for credit losses) 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. For reporting purposes, SVB Financial Group has three operating segments for which we report our financial information (for further description of these reportable segments, refer to "Business–Business Overview" under Part I, Item 1 of this report):


•	Global Commercial Bank is comprised of results from the following:

◦

Our Commercial Bank products and services are provided by the Bank and its subsidiaries to commercial clients primarily in the technology, life science/healthcare, and private equity/venture capital industries. The Bank provides solutions to the financial needs of commercial clients through credit, treasury management, foreign exchange, trade finance, and other services. We broadly serve clients within the U.S., as well as non-U.S. clients in key international innovation markets. In addition, the Bank and its subsidiaries offer a variety of investment services and solutions to its clients that enable them to effectively manage their assets.


◦	Our Private Equity Division provides banking products and services primarily to our private equity and venture capital clients.


◦	SVB Wine provides banking products and services to our premium wine industry clients, including vineyard development loans.


◦	SVB Analytics previously provided equity valuation services and currently provides research for investors and companies in the global innovation economy. In September 2017, SVB Analytics sold its equity valuation services business.


◦	Debt Fund Investments is comprised of our investments in certain debt funds in which we are a strategic investor.

•

SVB Private Bank is the private banking division of the Bank, which provides a range of personal financial solutions for consumers. Our clients are primarily private equity/venture capital professionals and executive leaders of the innovation companies they support. We offer a customized suite of private banking services, including mortgages, home equity lines of credit, restricted stock purchase loans, capital call lines of credit and other secured and unsecured lending products, as well as cash and wealth management services.

•

SVB Capital is the funds management business of SVBFG, which focuses primarily on venture capital investments. SVB Capital manages funds (primarily venture capital funds) on behalf of third-party limited partners and, on a more limited basis, SVB Financial Group. The SVB Capital family of funds is comprised of direct venture funds that invest in companies and funds of funds that invest in other venture capital funds. SVB Capital generates income for the Company primarily from investment returns (including carried interest allocations) and management fees.

The summary financial results of our operating segments are presented along with a reconciliation to our consolidated results.

Our segment information for 2018, 2017 and 2016 is as follows:



(Dollars in thousands)	Global Commercial Bank (1)			SVB Private Bank			SVB Capital (1)			Other Items (2)			Total
Year ended December 31, 2018
Net interest income	$	1,623,488		$	64,902		$	23		$	205,575		$	1,893,988
Provision for credit losses	(80,953		)	(3,339		)	—			(3,578		)	(87,870		)
Noninterest income	444,647			2,281			101,181			196,875			744,984
Noninterest expense (3)	(793,159		)	(25,064		)	(22,792		)	(347,178		)	(1,188,193		)
Income before income tax expense (4)	$	1,194,023		$	38,780		$	78,412		$	51,694		$	1,362,909
Total average loans, net of unearned income	$	22,354,305		$	2,850,271		$	—		$	425,944		$	25,630,520
Total average assets (5)	53,012,381			2,546,904			380,543			(710,768		)	55,229,060
Total average deposits	46,039,570			1,502,308			—			533,466			48,075,344
Year ended December 31, 2017
Net interest income	$	1,274,366		$	58,131		$	48		$	87,824		$	1,420,369
Provision for credit losses	(81,553		)	(4,386		)	—			(6,365		)	(92,304		)
Noninterest income	363,759			2,175			58,992			132,305			557,231
Noninterest expense (3)	(707,666		)	(17,693		)	(19,340		)	(265,956		)	(1,010,655		)
Income (loss) before income tax expense (4)	$	848,906		$	38,227		$	39,700		$	(52,192	)	$	874,641
Total average loans, net of unearned income	$	18,479,793		$	2,423,078		$	—		$	256,523		$	21,159,394
Total average assets (5)	46,302,350			2,449,763			325,939			(697,780		)	48,380,272
Total average deposits	41,043,731			1,303,542			—			397,875			42,745,148
Year ended December 31, 2016
Net interest income (expense)	$	1,040,712		$	53,582		$	(49	)	$	56,278		$	1,150,523
Provision for credit losses	(93,885		)	(1,812		)	—			(10,982		)	(106,679		)
Noninterest income	318,366			2,713			49,365			86,108			456,552
Noninterest expense (3)	(630,655		)	(12,379		)	(15,546		)	(201,217		)	(859,797		)
Income (loss) before income tax expense (4)	$	634,538		$	42,104		$	33,770		$	(69,813	)	$	640,599
Total average loans, net of unearned income	$	16,047,545		$	2,025,381		$	—		$	210,665		$	18,283,591
Total average assets (5)	41,495,332			2,047,513			338,848			105,758			43,987,451
Total average deposits	37,301,483			1,133,425			—			324,151			38,759,059


(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. Noncontrolling interest is included within "Other Items."

(2)

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. Net interest income consists primarily of interest earned from our fixed income investment portfolio, net of FTP. Noninterest income consists primarily of gains on equity warrant assets and gains or losses on the sale of fixed income investments and equity securities from exercised warrant assets. Noninterest expense consists primarily of expenses associated with corporate support functions such as finance, human resources, marketing, legal and other expenses.


(3)	The Global Commercial Bank segment includes direct depreciation and amortization of $21.8 million, $25.3 million and $24.9 million for 2018, 2017 and 2016, respectively.


(4)	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.


(5)	Total average assets equal the greater of total average assets or the sum of total average liabilities and total average stockholders’ equity for each segment to reconcile the results to the consolidated financial statements prepared in conformity with GAAP.