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 a funding credit is given for deposits raised, and a funding charge is made for loans funded. 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:


•	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 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.


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


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


◦	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, 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 from 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 interim results.

Our segment information for the three and nine months ended September 30, 2016 and 2015 is as follows:



(Dollars in thousands)	Global Commercial Bank (1)			SVB Private Bank			SVB Capital (1)			Other Items (2)			Total
Three months ended September 30, 2016
Net interest income	$	262,484		$	13,298		$	1		$	13,378		$	289,161
Provision for loan losses	(16,974		)	(1,976		)	—			—			(18,950		)
Noninterest income	79,226			664			30,619			33,631			144,140
Noninterest expense (3)	(159,429		)	(3,122		)	(3,924		)	(55,352		)	(221,827		)
Income (loss) before income tax expense (4)	$	165,307		$	8,864		$	26,696		$	(8,343	)	$	192,524
Total average loans, net of unearned income	$	16,357,099		$	2,074,982		$	—		$	215,113		$	18,647,194
Total average assets (5)	40,829,515			2,091,244			325,321			205,249			43,451,329
Total average deposits	36,484,125			1,115,446			—			310,183			37,909,754
Three months ended September 30, 2015
Net interest income	$	217,932		$	11,667		$	1		$	25,060		$	254,660
Provision for loan losses	(32,074		)	(1,329		)	—			—			(33,403		)
Noninterest income	68,517			506			17,332			22,122			108,477
Noninterest expense (3)	(137,637		)	(2,761		)	(3,745		)	(40,612		)	(184,755		)
Income before income tax expense (4)	$	116,738		$	8,083		$	13,588		$	6,570		$	144,979
Total average loans, net of unearned income	$	13,047,507		$	1,669,858		$	—		$	199,287		$	14,916,652
Total average assets (5)	39,688,677			1,664,602			334,045			326,896			42,014,220
Total average deposits	36,151,235			1,041,773			—			190,059			37,383,067
Nine months ended September 30, 2016
Net interest income (expense)	$	773,342		$	40,508		$	(51	)	$	40,119		$	853,918
Provision for loan losses	(86,143		)	(2,481		)	—			—			(88,624		)
Noninterest income	231,295			2,053			44,492			65,210			343,050
Noninterest expense (3)	(461,058		)	(9,481		)	(11,521		)	(144,152		)	(626,212		)
Income (loss) before income tax expense (4)	$	457,436		$	30,599		$	32,920		$	(38,823	)	$	482,132
Total average loans, net of unearned income	$	15,769,964		$	1,978,175		$	—		$	207,358		$	17,955,497
Total average assets (5)	41,021,311			1,986,215			334,328			327,862			43,669,716
Total average deposits	37,002,027			1,120,575			—			321,388			38,443,990
Nine months ended September 30, 2015
Net interest income	$	625,611		$	32,499		$	3		$	79,243		$	737,356
Provision for loan losses	(64,126		)	(2,242		)	—			—			(66,368		)
Noninterest income	197,740			1,498			57,919			101,131			358,288
Noninterest expense (3)	(421,425		)	(8,869		)	(10,935		)	(128,179		)	(569,408		)
Income before income tax expense (4)	$	337,800		$	22,886		$	46,987		$	52,195		$	459,868
Total average loans, net of unearned income	$	12,721,972		$	1,529,095		$	—		$	180,718		$	14,431,785
Total average assets (5)	37,449,533			1,527,339			335,136			594,681			39,906,689
Total average deposits	34,124,748			1,125,345			—			163,260			35,413,353


(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 on the sale of fixed income securities. 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 $6.4 million and $4.9 million for the three months ended September 30, 2016 and 2015, respectively, and $18.3 million and $14.9 million for the nine months ended September 30, 2016 and 2015, 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.