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. FTP is calculated at an instrument level based on account characteristics.

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. 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 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, global treasury management, foreign exchange, global trade finance, and other services. It broadly serves clients within the United States, 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. This practice is formerly known as SVB Specialty Lending and included our Community Development Finance practice which makes loans as part of our responsibilities under the Community Reinvestment Act. During the third quarter of 2014, management realigned the organizational structure of our Community Development Finance practice in order to improve its oversight and compliance for loans made as part of our responsibilities under the Community Reinvestment Act. This practice, formerly included in the GCB results, has been moved into "Other Items". Prior period results have been recast to conform to the new composition of these reportable segments and had no material effect on either the Global Commercial Bank or Other reporting segments.


◦	SVB Analytics provides equity valuation services to companies and private equity/venture capital firms.


◦	Debt Fund Investments is comprised of our investments in 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, as well as cash and wealth management services.

•

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, 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 through investment returns (including carried interest) 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 2014, 2013 and 2012 is as follows:



(Dollars in thousands)	Global Commercial Bank (1)			SVB Private Bank			SVB Capital (1)			Other Items (2)			Total
Year ended December 31, 2014
Net interest income	$	742,274		$	31,427		$	58		$	82,836		$	856,595
Provision for loan losses	(58,622		)	(864		)	—			—			(59,486		)
Noninterest income	213,084			1,494			58,058			299,603			572,239
Noninterest expense (3)	(510,165		)	(10,571		)	(12,668		)	(183,467		)	(716,871		)
Income before income tax expense (4)	$	386,571		$	21,486		$	45,448		$	198,972		$	652,477
Total average loans, net of unearned income	$	10,286,448		$	1,157,024		$	—		$	59,469		$	11,502,941
Total average assets (5)	30,286,374			1,150,835			320,129			1,206,857			32,964,195
Total average deposits	27,364,246			890,062			—			66,517			28,320,825
Year ended December 31, 2013
Net interest income	$	641,384		$	26,701		$	20		$	29,239		$	697,344
(Provision for) reduction of loan losses	(65,290		)	1,597			—			—			(63,693		)
Noninterest income	202,404			1,209			75,037			394,556			673,206
Noninterest expense (3)	(429,650		)	(9,195		)	(10,737		)	(172,098		)	(621,680		)
Income before income tax expense (4)	$	348,848		$	20,312		$	64,320		$	251,697		$	685,177
Total average loans, net of unearned income	$	8,401,943		$	919,831		$	—		$	29,604		$	9,351,378
Total average assets (5)	21,395,501			955,441			289,328			570,477			23,210,747
Total average deposits	19,072,608			524,398			—			22,188			19,619,194
Year ended December 31, 2012
Net interest income	$	593,770		$	21,807		$	15		$	2,272		$	617,864
(Provision for) reduction of loan losses	(45,417		)	1,087			—			—			(44,330		)
Noninterest income	188,821			681			27,435			118,609			335,546
Noninterest expense (3)	(393,151		)	(7,388		)	(11,263		)	(134,196		)	(545,998		)
Income (loss) before income tax expense (4)	$	344,023		$	16,187		$	16,187		$	(13,315	)	$	363,082
Total average loans, net of unearned income	$	6,750,951		$	758,471		$	—		$	49,506		$	7,558,928
Total average assets (5)	19,557,289			759,251			239,335			755,297			21,311,172
Total average deposits	17,574,001			313,836			—			22,251			17,910,088


(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. Noninterest income is primarily attributable to noncontrolling interests and gains on equity warrant assets. Noninterest expense primarily consists of expenses associated with corporate support functions such as finance, human resources, marketing, legal and other expenses. Additionally, average assets primarily consist of cash and cash equivalents and loans from our Community Development Finance practice as part of our responsibilities under the Community Reinvestment Act.


(3)	The Global Commercial Bank segment includes direct depreciation and amortization of $20.9 million, $18.7 million and $14.4 million for 2014, 2013 and 2012, 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 equals the greater of total average assets or the sum of total liabilities and total stockholders’ equity for each segment.