Loans, Allowance for Loan Losses and Allowance for Unfunded Credit Commitments

6 Months Ended

Jun. 30, 2020

Receivables [Abstract]

Loans and Allowance for Credit Losses: Loans and Unfunded Credit Commitments

Loans and Allowance for Credit Losses: Loans and Unfunded Credit Commitments

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 (such as 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”). Our life science/healthcare clients primarily tend to be in the industries of biotechnology, medical devices, healthcare information technology and healthcare services. Loans to our technology, life science/healthcare and ERI clients are reported under the Investor Dependent, Cash Flow Dependent and Balance Sheet Dependent risk-based segments below. 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.

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.

CECL Adoption

On January 1, 2020, we adopted the new credit loss guidance, CECL, and all related amendments. Our loan portfolio was pooled into six portfolio segments that share similar risk characteristics and represent the level at which we developed our systematic methodology to determine our allowance for credit losses. Further, our portfolio segments were disaggregated and grouped into ten classes of financing receivable that represent the level at which we monitor and assess credit risk, which we refer to as "risk-based segments". As such, our funded loans and credit quality disclosures below are presented at the risk-based segment level of disaggregation. As of June 30, 2020, we have seven portfolio segments and eleven classes of financing receivable reflective of the funding of SBA loans under the PPP. The comparative information below has been reclassified to conform to current period presentations. However, the financial results continue to be reported under the accounting standards in effect for those periods. Certain prior period credit quality disclosures related to impaired loans and our individually and collectively evaluated loan portfolio have been superseded with the current guidance and have not been included below, please refer to Note 10 - “Loans, Allowance for Loan Losses and Allowance for Unfunded Credit Commitments" under Part II, Item 8 of our 2019 Form 10-K for additional prior period information.

Refer to Note 1 — “Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional information regarding the adoption of CECL.

The composition of loans at amortized cost basis broken out by risk-based segment at June 30, 2020 and December 31, 2019 is presented in the following table:

(Dollars in thousands)	June 30, 2020			December 31, 2019
Private equity/venture capital	$	17,901,117		$	17,696,794
Investor dependent:
Early stage	1,797,576			1,624,221
Mid stage	1,435,772			1,047,398
Later stage	1,905,528			1,663,576
Total investor dependent	5,138,876			4,335,195
Cash flow dependent:
Sponsor led buyout	2,057,439			2,185,497
Other	2,787,807			2,238,741
Total cash flow dependent	4,845,246			4,424,238
Private bank (4)	3,816,277			3,492,269
Balance sheet dependent	1,693,071			1,286,153
Premium wine (4)	1,039,456			1,062,264
Other (4)	457,234			867,723
SBA loans	1,835,945			—
Total loans (1) (2) (3)	$	36,727,222		$	33,164,636
Allowance for credit losses	(589,828		)	(304,924		)
Net loans	$	36,137,394		$	32,859,712

(1) Total loans at amortized cost is net of unearned income of $220 million and $163 million at June 30, 2020 and December 31, 2019, respectively.

(2) Included within our total loan portfolio are credit card loans of $280 million and $395 million at June 30, 2020 and December 31, 2019, respectively.

(3) Included within our total loan portfolio are construction loans of $147 million and $183 million at June 30, 2020 and December 31, 2019, respectively.

(4)     Our total loans secured by real estate at amortized cost at June 30, 2020 and December 31, 2019 were comprised of the following:

(Dollars in thousands)	June 30, 2020		December 31, 2019
Real estate secured loans:
Private bank:
Loans for personal residence	$	2,714,069	$	2,829,880
Loans to eligible employees	439,006		401,396
Home equity lines of credit	58,284		55,461
Other	42,464		38,880
Total private bank loans secured by real estate	$	3,253,823	$	3,325,617
Premium wine	777,560		820,730
Other	470,567		—
Total real estate secured loans	$	4,501,950	$	4,146,347

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 “Criticized.” All of our nonaccrual loans are risk-rated 8 or 9 and are classified under the nonperforming category. Loans rated 10 are charged-off and are not included as part of our loan portfolio balance. We review our credit quality indicators on a quarterly basis for performance and appropriateness of risk ratings as part of our evaluation process for our allowance for credit losses for loans.

The following table summarizes the credit quality indicators, broken out by risk-based segment, as of June 30, 2020 and December 31, 2019:

(Dollars in thousands)	Pass		Criticized		Nonperforming (Nonaccrual)		Total
June 30, 2020:
Private equity/venture capital	$	17,892,840	$	8,268	$	9	$	17,901,117
Investor dependent:
Early stage	1,549,222		223,932		24,422		1,797,576
Mid stage	1,259,442		168,211		8,119		1,435,772
Later stage	1,719,152		175,878		10,498		1,905,528
Total investor dependent	4,527,816		568,021		43,039		5,138,876
Cash flow dependent:
Sponsor led buyout	1,819,253		216,528		21,658		2,057,439
Other	2,441,376		341,114		5,317		2,787,807
Total cash flow dependent	4,260,629		557,642		26,975		4,845,246
Private bank	3,787,830		21,930		6,517		3,816,277
Balance sheet dependent	1,588,207		93,022		11,842		1,693,071
Premium wine	926,549		111,226		1,681		1,039,456
Other	456,947		226		61		457,234
SBA loans	1,688,030		143,713		4,202		1,835,945
Total loans (1)	$	35,128,848	$	1,504,048	$	94,326	$	36,727,222
December 31, 2019:
Private equity/venture capital	$	17,708,550	$	4,247	$	—	$	17,712,797
Investor dependent
Early stage	1,436,022		206,310		11,093		1,653,425
Mid stage	924,002		125,451		17,330		1,066,783
Later stage	1,490,561		201,819		6,296		1,698,676
Total investor dependent	3,850,585		533,580		34,719		4,418,884
Cash flow dependent
Sponsor led buyout	2,039,847		118,588		44,585		2,203,020
Other	2,141,766		93,400		17,681		2,252,847
Total cash flow dependent	4,181,613		211,988		62,266		4,455,867
Private bank	3,472,138		11,601		5,480		3,489,219
Balance sheet dependent	1,231,961		65,343		—		1,297,304
Premium wine	1,026,973		36,335		204		1,063,512
Other	890,059		62		—		890,121
Total loans (1)	$	32,361,879	$	863,156	$	102,669	$	33,327,704

(1) For the quarter ended June 30, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

The following table summarizes the credit quality indicators, broken out by risk-based segments and vintage year, as of June 30, 2020:

	Term Loans by Origination Year
(Dollars in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
Private equity/venture capital:
Risk rating:
Pass	$	339,398	$	188,421	$	71,803	$	39,857	$	3,577	$	16,055	$	17,228,948	$	4,781	$	17,892,840
Criticized	54		—		—		—		—		—		8,214		—		8,268
Nonperforming	—		9		—		—		—		—		—		—		9
Total private equity/venture capital	$	339,452	$	188,430	$	71,803	$	39,857	$	3,577	$	16,055	$	17,237,162	$	4,781	$	17,901,117
Investor dependent:
Early stage:
Risk rating:
Pass	$	576,597	$	614,464	$	216,902	$	53,103	$	4,304	$	355	$	83,497	$	—	$	1,549,222
Criticized	38,123		93,416		53,065		12,949		6,555		5,702		14,122		—		223,932
Nonperforming	2,085		8,670		7,542		2,771		2,197		—		1,157		—		24,422
Total early stage	$	616,805	$	716,550	$	277,509	$	68,823	$	13,056	$	6,057	$	98,776	$	—	$	1,797,576
Mid stage:
Risk rating:
Pass	$	527,905	$	342,149	$	194,287	$	59,075	$	1,502	$	4,448	$	130,076	$	—	$	1,259,442
Criticized	32,514		53,500		48,379		13,833		3,345		2,907		13,733		—		168,211
Nonperforming	—		210		5,646		2,041		—		—		222		—		8,119
Total mid stage	$	560,419	$	395,859	$	248,312	$	74,949	$	4,847	$	7,355	$	144,031	$	—	$	1,435,772
Later stage:
Risk rating:
Pass	$	495,546	$	564,400	$	188,404	$	73,703	$	6,539	$	7,860	$	382,700	$	—	$	1,719,152
Criticized	32,347		25,890		53,707		7,074		—		6,506		50,354		—		175,878
Nonperforming	—		1,435		2,374		3,885		—		—		2,804		—		10,498
Total later stage	$	527,893	$	591,725	$	244,485	$	84,662	$	6,539	$	14,366	$	435,858	$	—	$	1,905,528
Total investor dependent	$	1,705,117	$	1,704,134	$	770,306	$	228,434	$	24,442	$	27,778	$	678,665	$	—	$	5,138,876
Cash flow dependent:
Sponsor led buyout:
Risk rating:
Pass	$	374,547	$	637,287	$	357,322	$	262,844	$	58,014	$	—	$	129,239	$	—	$	1,819,253
Criticized	33,714		69,764		51,479		31,801		11,958		—		17,812		—		216,528
Nonperforming	19		11,937		—		7,218		—		—		2,484		—		21,658
Total sponsor led buyout	$	408,280	$	718,988	$	408,801	$	301,863	$	69,972	$	—	$	149,535	$	—	$	2,057,439
Other
Risk rating:
Pass	$	339,862	$	639,167	$	193,797	$	114,650	$	41,605	$	347	$	1,111,948	$	—	$	2,441,376
Criticized	14,326		71,911		88,065		2,807		581		—		163,424		—		341,114
Nonperforming	—		—		1,140		—		—		—		4,177		—		5,317
Total other	$	354,188	$	711,078	$	283,002	$	117,457	$	42,186	$	347	$	1,279,549	$	—	$	2,787,807
Total cash flow dependent	$	762,468	$	1,430,066	$	691,803	$	419,320	$	112,158	$	347	$	1,429,084	$	—	$	4,845,246
Private bank:
Risk rating:
Pass	$	596,908	$	1,062,779	$	443,164	$	440,490	$	363,380	$	531,090	$	277,942	$	72,077	$	3,787,830
Criticized	—		5,859		2,926		1,805		2,500		8,238		602		—		21,930
Nonperforming	—		—		—		1,570		—		2,901		2,046		—		6,517
Total private bank	$	596,908	$	1,068,638	$	446,090	$	443,865	$	365,880	$	542,229	$	280,590	$	72,077	$	3,816,277

Balance sheet dependent:
Risk rating:
Pass	$	216,879	$	221,481	$	247,818	$	33,048	$	4,545	$	—	$	864,436	$	—	$	1,588,207
Criticized	—		8,627		2,494		1,464		—		—		80,437		—		93,022
Nonperforming	14		—		—		—		—		—		11,828		—		11,842
Total balance sheet dependent	$	216,893	$	230,108	$	250,312	$	34,512	$	4,545	$	—	$	956,701	$	—	$	1,693,071
Premium wine:
Risk rating:
Pass	$	85,177	$	237,520	$	73,632	$	92,594	$	93,214	$	177,246	$	167,166	$	—	$	926,549
Criticized	2,042		12,674		35,964		353		3,980		13,327		42,886		—		111,226
Nonperforming	—		—		—		—		1,668		—		13		—		1,681
Total Premium wine	$	87,219	$	250,194	$	109,596	$	92,947	$	98,862	$	190,573	$	210,065	$	—	$	1,039,456
Other:
Risk rating:
Pass	$	21,785	$	240,902	$	40,279	$	38,752	$	58,554	$	33,212	$	23,256	$	207	$	456,947
Criticized	100		—		—		—		—		—		126		—		226
Nonperforming	—		61		—		—		—		—		—		—		61
Total other	$	21,885	$	240,963	$	40,279	$	38,752	$	58,554	$	33,212	$	23,382	$	207	$	457,234
SBA loans:
Risk rating:
Pass	$	1,688,030	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	1,688,030
Criticized	143,713		—		—		—		—		—		—		—		143,713
Nonperforming	4,202		—		—		—		—		—		—		—		4,202
Total SBA loans	$	1,835,945	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	1,835,945
Total loans	$	5,565,887	$	5,112,533	$	2,380,189	$	1,297,687	$	668,018	$	810,194	$	20,815,649	$	77,065	$	36,727,222

The following tables summarize the activity relating to our allowance for credit losses for loans for the three and six months ended June 30, 2020 and 2019, broken out by risk-based segment:

Three months ended June 30, 2020	Beginning Balance March 31, 2020		Charge-offs			Recoveries		Provision for (Reduction of) Credit Losses			Foreign Currency Translation Adjustments			Ending Balance June 30, 2020
(Dollars in thousands)
Private equity/venture capital	$	56,774	$	—		$	—	$	(3,051	)	$	—		$	53,723
Investor dependent:
Early stage	127,189		(1,764		)	2,390		20,451			4			148,270
Mid stage	51,962		(3,653		)	1,269		6,861			(46		)	56,393
Later stage	96,550		—			—		(8,950		)	4			87,604
Total investor dependent	275,701		(5,417		)	3,659		18,362			(38		)	292,267
Cash flow dependent:
Sponsor led buyout	42,091		—			—		12,763			(1		)	54,853
Other	39,416		(3,385		)	1		7,068			—			43,100
Total cash flow dependent	81,507		(3,385		)	1		19,831			(1		)	97,953
Private bank	87,795		(1,035		)	—		4,585			—			91,345
Balance sheet dependent	23,235		(4,900		)	—		6,393			—			24,728
Premium wine	12,377		—			—		(58		)	—			12,319
Other	11,574		(318		)	413		1,979			(13		)	13,635
SBA loans	—		—			—		3,858			—			3,858
Total allowance for credit losses	$	548,963	$	(15,055	)	$	4,073	$	51,899		$	(52	)	$	589,828

Three months ended June 30, 2019	Beginning Balance March 31, 2019		Charge-offs			Recoveries		Provision for (Reduction of) Credit Losses			Foreign Currency Translation Adjustments			Ending Balance June 30, 2019
(Dollars in thousands)
Private equity/venture capital	$	95,311	$	(2,047	)	$	—	$	8,336		$	(347	)	$	101,253
Investor dependent:
Early stage	26,730		(7,627		)	3,357		8,878			(369		)	30,969
Mid stage	38,163		(13,395		)	900		2,708			(112		)	28,264
Later stage	30,163		—			1,133		6,932			(288		)	37,940
Total investor dependent	95,056		(21,022		)	5,390		18,518			(769		)	97,173
Cash flow dependent:
Sponsor led buyout	40,933		(2,402		)	—		(6,677		)	277			32,131
Other	20,514		—			4,397		(376		)	16			24,551
Total cash flow dependent	61,447		(2,402		)	4,397		(7,053		)	293			56,682
Private Bank	19,964		(960		)	15		1,438			(60		)	20,397
Balance sheet dependent	21,632		—			—		(4,566		)	190			17,256
Premium wine	3,949		—			—		290			(12		)	4,227
Other	2,792		(4		)	18		2,185			(91		)	4,900
Total allowance for credit losses	$	300,151	$	(26,435	)	$	9,820	$	19,148		$	(796	)	$	301,888

Six months ended June 30, 2020	Beginning Balance December 31, 2019		Impact of adopting ASC 326			Charge-offs			Recoveries		Provision for (Reduction of) Credit Losses			Foreign Currency Translation Adjustments			Ending Balance June 30, 2020
(Dollars in thousands)
Private equity/venture capital	$	107,285	$	(69,888	)	$	—		$	—	$	16,506		$	(180	)	$	53,723
Investor dependent:
Early stage	26,245		39,911			(11,947		)	3,963		90,665			(567		)	148,270
Mid stage	15,936		6,963			(12,985		)	4,606		42,006			(133		)	56,393
Later stage	40,189		24,750			(13,984		)	—		37,088			(439		)	87,604
Total investor dependent	82,370		71,624			(38,916		)	8,569		169,759			(1,139		)	292,267
Cash flow dependent:
Sponsor led buyout	42,939		3,151			(2,624		)	2,845		8,675			(133		)	54,853
Other	25,159		(3,056		)	(3,385		)	1		24,506			(125		)	43,100
Total cash flow dependent	68,098		95			(6,009		)	2,846		33,181			(258		)	97,953
Private bank	21,551		12,615			(1,616		)	—		59,075			(280		)	91,345
Balance sheet dependent	12,722		(1,364		)	(4,900		)	—		18,344			(74		)	24,728
Premium wine	5,296		3,650			(192		)	—		3,605			(40		)	12,319
Other	7,602		8,732			(318		)	413		(3,528		)	734			13,635
SBA loans	—		—			—			—		3,858			—			3,858
Total allowance for credit losses	$	304,924	$	25,464		$	(51,951	)	$	11,828	$	300,800		$	(1,237	)	$	589,828

Six months ended June 30, 2019	Beginning Balance December 31, 2018		Charge-offs			Recoveries		Provision for (Reduction of) Credit Losses			Foreign Currency Translation Adjustments			Ending Balance June 30, 2019
(Dollars in thousands)
Private equity/venture capital	$	93,781	$	(2,047	)	$	—	$	9,819		$	(300	)	$	101,253
Investor dependent:
Early stage	25,885		(9,295		)	3,925		10,764			(310		)	30,969
Mid stage	20,999		(19,911		)	903		25,665			608			28,264
Later stage	25,217		—			1,777		11,103			(157		)	37,940
Total investor dependent	72,101		(29,206		)	6,605		47,532			141			97,173
Cash flow dependent:
Sponsor led buyout	44,274		(2,402		)	—		(9,916		)	175			32,131
Other	21,754		(716		)	4,397		(884		)	—			24,551
Total cash flow dependent	66,028		(3,118		)	4,397		(10,800		)	175			56,682
Private Bank	20,583		(1,019		)	225		692			(84		)	20,397
Balance sheet dependent	21,707		—			—		(4,639		)	188			17,256
Premium wine	3,646		—			—		584			(3		)	4,227
Other	3,057		(45		)	18		1,781			89			4,900
Total allowance for credit losses	$	280,903	$	(35,435	)	$	11,245	$	44,969		$	206		$	301,888

The following table summarizes the aging of our loans broken out by risk-based segments as of June 30, 2020 and December 31, 2019:

(Dollars in thousands)	30 - 59   Days Past   Due		60 - 89   Days Past   Due		Equal to or Greater Than 90   Days Past   Due		Total Past   Due		Current		Total		Loans Past Due   90 Days or More Still Accruing Interest
June 30, 2020:
Private equity/venture capital	$	54	$	10	$	9	$	73	$	17,901,044	$	17,901,117	$	—
Investor dependent:
Early stage	742		316		2,809		3,867		1,793,709		1,797,576		73
Mid stage	4,190		3,157		5,493		12,840		1,422,932		1,435,772		—
Later stage	2,502		3,900		—		6,402		1,899,126		1,905,528		—
Total investor dependent	7,434		7,373		8,302		23,109		5,115,767		5,138,876		73
Cash flow dependent:
Sponsor led buyout	46		14		—		60		2,057,379		2,057,439		—
Other	2,316		183		3,988		6,487		2,781,320		2,787,807		—
Total cash flow dependent	2,362		197		3,988		6,547		4,838,699		4,845,246		—
Private bank	601		—		2,749		3,350		3,812,927		3,816,277		—
Balance sheet dependent	4,777		255		—		5,032		1,688,039		1,693,071		—
Premium wine	1		—		—		1		1,039,455		1,039,456		—
Other	1		39		82		122		457,112		457,234		3
SBA loans	—		—		—		—		1,835,945		1,835,945		—
Total loans (1)	$	15,230	$	7,874	$	15,130	$	38,234	$	36,688,988	$	36,727,222	$	76
December 31, 2019:
Private equity/venture capital	$	97,739	$	383	$	3,150	$	101,272	$	17,611,525	17,712,797		$	3,150
Investor dependent:
Early stage	1,307		22,062		723		24,092		1,629,333		1,653,425		—
Mid stage	10,025		6,999		—		17,024		1,049,759		1,066,783		—
Later stage	8,113		500		10,569		19,182		1,679,494		1,698,676		—
Total investor dependent	19,445		29,561		11,292		60,298		4,358,586		4,418,884		—
Cash flow dependent
Sponsor led buyout	—		—		—		—		2,203,020		2,203,020		—
Other	2,426		3,061		2		5,489		2,247,358		2,252,847		—
Total cash flow dependent	2,426		3,061		2		5,489		4,450,378		4,455,867		—
Private bank	6,582		2,049		1,544		10,175		3,479,044		3,489,219		365
Balance sheet dependent	2,731		—		—		2,731		1,294,573		1,297,304		—
Premium wine	8,435		3,170		—		11,605		1,051,907		1,063,512		—
Other	17		—		—		17		890,104		890,121		—
Total loans (1)	$	137,375	$	38,224	$	15,988	$	191,587	$	33,136,117	$	33,327,704	$	3,515

(1) For the quarter ended June 30, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

Nonaccrual Loans

The following tables summarize our nonaccrual loan activity by risk-based segment for the three and six months ended June 30, 2020 and 2019:

Three months ended June 30, 2020	Beginning Balance March 31, 2020		Additions		Paydowns and Other Reductions			Charge-offs			Ending Balance June 30, 2020
(Dollars in thousands)
Private equity/venture capital	$	—	$	9	$	—		$	—		$	9
Investor dependent:
Early stage	18,414		9,606		(3,141		)	(457		)	24,422
Mid stage	12,180		494		(399		)	(4,156		)	8,119
Later stage	14,443		959		(4,904		)	—			10,498
Total investor dependent	45,037		11,059		(8,444		)	(4,613		)	43,039
Cash flow dependent:
Sponsor led buyout	—		21,658		—			—			21,658
Other	13		8,580		(3,276		)	—			5,317
Total cash flow dependent	13		30,238		(3,276		)	—			26,975
Private bank	4,857		2,634		(974		)	—			6,517
Balance sheet dependent	—		16,742		(4,900		)	—			11,842
Premium wine	700		998		(17		)	—			1,681
Other	—		234		(173		)	—			61
SBA loans	—		4,202		—			—			4,202
Total nonaccrual loans	$	50,607	$	66,116	$	(17,784	)	$	(4,613	)	$	94,326

Three months ended June 30, 2019	Beginning Balance March 31, 2019		Additions		Paydowns and Other Reductions			Charge-offs			Ending Balance June 30, 2019
(Dollars in thousands)
Private equity/venture capital	$	5,947	$	—	$	(3,900	)	$	(2,047	)	$	—
Investor dependent:
Early stage	8,697		8,379		(5,231		)	(1,555		)	10,290
Mid stage	32,099		10,392		(869		)	(12,923		)	28,699
Later stage	23,140		18,507		(3,301		)	—			38,346
Total investor dependent	63,936		37,278		(9,401		)	(14,478		)	77,335
Cash flow dependent:
Sponsor led buyout	38,237		—		(27,470		)	(2,402		)	8,365
Other	16,690		79		(16,690		)	—			79
Total cash flow dependent	54,927		79		(44,160		)	(2,402		)	8,444
Private bank	3,809		1,865		(22		)	(8		)	5,644
Balance sheet dependent	4,736		238		—			—			4,974
Premium wine	268		—		(24		)	—			244
Other	—		—		—			—			—
Total nonaccrual loans (1)	$	133,623	$	39,460	$	(57,507	)	$	(18,935	)	$	96,641

(1) For the quarter ended June 30, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

Six months ended June 30, 2020	Beginning Balance December 31, 2019		Additions		Paydowns and Other Reductions			Charge-offs			Ending Balance June 30, 2020
(Dollars in thousands)
Private equity/venture capital	$	—	$	9	$	—		$	—		$	9
Investor dependent:
Early stage	11,093		21,949		(5,905		)	(2,715		)	24,422
Mid stage	17,330		12,585		(787		)	(21,009		)	8,119
Later stage	6,296		12,183		(4,776		)	(3,205		)	10,498
Total investor dependent	34,719		46,717		(11,468		)	(26,929		)	43,039
Cash flow dependent:
Sponsor led buyout	44,585		21,658		(41,961		)	(2,624		)	21,658
Other	17,681		8,580		(20,926		)	(18		)	5,317
Total cash flow dependent	62,266		30,238		(62,887		)	(2,642		)	26,975
Private bank	5,480		2,634		(1,016		)	(581		)	6,517
Balance sheet dependent	—		16,742		(4,900		)	—			11,842
Premium wine	204		1,686		(17		)	(192		)	1,681
Other	—		234		(173		)	—			61
SBA loans	—		4,202		—			—			4,202
Total nonaccrual loans (1)	$	102,669	$	102,462	$	(80,461	)	$	(30,344	)	$	94,326

(1) For the quarter ended June 30, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

Six months ended June 30, 2019	Beginning Balance December 31, 2018		Additions		Paydowns and Other Reductions			Charge-offs			Ending Balance June 30, 2019
(Dollars in thousands)
Private equity/venture capital	$	3,700	$	2,247	$	(3,900	)	$	(2,047	)	$	—
Investor dependent:
Early stage	7,616		12,812		(8,443		)	(1,695		)	10,290
Mid stage	4,751		42,491		(1,390		)	(17,153		)	28,699
Later stage	11,385		30,570		(3,609		)	—			38,346
Total investor dependent	23,752		85,873		(13,442		)	(18,848		)	77,335
Cash flow dependent:
Sponsor led buyout	39,534		—		(28,767		)	(2,402		)	8,365
Other	17,156		79		(16,690		)	(466		)	79
Total cash flow dependent	56,690		79		(45,457		)	(2,868		)	8,444
Private bank	3,919		1,880		(88		)	(67		)	5,644
Balance sheet dependent	5,004		238		(268		)	—			4,974
Premium wine	285		—		(41		)	—			244
Other	792		—		(792		)	—			—
Total nonaccrual loans (1)	$	94,142	$	90,317	$	(63,988	)	$	(23,830	)	$	96,641

(1) For the quarter ended June 30, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

The following table summarizes our nonaccrual loans with no allowance for credit loss at June 30, 2020 and December 31, 2019:

	June 30, 2020				December 31, 2019
(Dollars in thousands)	Nonaccrual Loans		Nonaccrual Loans with no Allowance for Credit Loss		Nonaccrual Loans		Nonaccrual Loans with no Allowance for Credit Loss
Private equity/venture capital	$	9	$	9	$	—	$	—
Investor dependent:
Early stage	24,422		—		11,093		460
Mid stage	8,119		368		17,330		274
Later stage	10,498		4		6,296		—
Total investor dependent	43,039		372		34,719		734
Cash flow dependent:
Sponsor led buyout	21,658		—		44,585		—
Other	5,317		—		17,681		2,782
Total cash flow dependent	26,975		—		62,266		2,782
Private bank	6,517		6,517		5,480		3,714
Balance sheet dependent	11,842		—		—		—
Premium wine	1,681		997		204		—
Other	61		61		—		—
SBA loans	4,202		—		—		—
Total nonaccrual loans (1)	$	94,326	$	7,956	$	102,669	$	7,230

 

(1) For the quarter ended June 30, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

Troubled Debt Restructurings

As of June 30, 2020, we had 18 TDRs with a total carrying value of $56.3 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 June 30, 2020.

The following table summarizes our loans modified in TDRs, broken out by risk-based segment, at June 30, 2020 and December 31, 2019:

(Dollars in thousands)	June 30, 2020		December 31, 2019
Loans modified in TDRs:
Private equity/venture capital	$	—	$	—
Investor dependent
Early stage	5,354		9,471
Mid stage	11,130		5,189
Later stage	10,595		23,318
Total investor dependent	27,079		37,978
Cash flow dependent
Sponsor led buyout	10,350		55,443
Other	5,326		—
Total cash flow dependent	15,676		55,443
Private bank	1,318		2,104
Balance sheet dependent	—		—
Premium wine	12,208		13,457
Other	—		—
SBA loans	—		—
Total loans modified in TDRs (1)	$	56,281	$	108,982

 

(1) For the quarter ended June 30, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

The following table summarizes the recorded investment in loans modified in TDRs, broken out by risk-based segment, for modifications made during the three and six months ended June 30, 2020 and 2019:

	Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2020		2019		2020		2019
Loans modified in TDRs during the period:
Private equity/venture capital	$	—	$	—	$	—	$	—
Investor dependent
Early stage	93		—		93		616
Mid stage	5,281		3,521		11,130		3,521
Later stage	3,966		14,214		6,710		14,214
Total investor dependent	9,340		17,735		17,933		18,351
Cash flow dependent
Sponsor led buyout	—		48,557		—		48,557
Other	3,986		—		3,986		—
Total cash flow dependent	3,986		48,557		3,986		48,557
Private bank	—		1,865		—		1,865
Balance sheet dependent	—		—		—		—
Premium wine	997		—		998		—
Other	—		—		—		—
SBA loans	—		—		—		—
Total loans modified in TDRs during the period (1) (2)	$	14,323	$	68,157	$	22,917	$	68,773

(1) For the quarter ended June 30, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

(2) There were $5.0 million and $17.5 million of partial charge-offs for the three and six months ended June 30, 2020, respectively and $3.4 million and $5.6 million of partial charge-offs for the three and six months ended June 30, 2019.

During the three months ended June 30, 2020, all new TDRs of $14.3 million were modified through payment deferrals granted to our clients. During the six months ended June 30, 2020, new TDRs of $22.5 million were modified through payment deferrals granted to our clients and $0.4 million were modified through forgiveness of principal. During the three and six months ended June 30, 2019, $66.3 million and $66.9 million, respectively, were modified through payment deferrals granted to our clients. During the three and six months ended June 30, 2019, $1.9 million were modified through partial forgiveness of principal for both periods presented.

The following table summarizes the recorded investment in loans modified in TDRs within the previous 12 months that subsequently defaulted during the three and six months ended June 30, 2020 and 2019:

	Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2020		2019		2020		2019
TDRs modified within the previous 12 months that defaulted during the period:
Private equity/venture capital	$	—	$	—	$	—	$	—
Investor dependent
Early stage	—		—		—		—
Mid stage	—		—		—		—
Later stage	—		—		—		—
Total investor dependent	—		—		—		—
Cash flow dependent
Sponsor led buyout	10,350		—		10,350		—
Other	—		—		—		—
Total cash flow dependent	10,350		—		10,350		—
Private bank	—		—		—		—
Balance sheet dependent	—		—		—		—
Premium wine	—		—		—		—
Other	—		—		—		—
SBA loans	—		—		—		—
Total TDRs modified within the previous 12 months that defaulted in the period (1)	$	10,350	$	—	$	10,350	$	—

 

(1) For the quarter ended June 30, 2020, loan amounts are disclosed using the amortized cost basis as a result of the adoption of CECL. Prior period loan amounts are disclosed using the gross basis.

Charge-offs and defaults on previously restructured loans are evaluated to determine the impact to the allowance for credit losses for loans, if any. The evaluation of these defaults may impact the assumptions used in calculating the reserve on other TDRs and nonaccrual 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 for TDRs was necessary to determine the allowance for credit losses for loans as of June 30, 2020.

Allowance for Credit Losses: Unfunded Credit Commitments

We maintain a separate allowance for credit losses for unfunded credit commitments that is determined using a methodology that is inherently similar to the methodology used for calculating the allowance for credit losses for loans.

The following table summarizes the activity relating to our allowance for credit losses for unfunded credit commitments for the three and six months ended June 30, 2020 and 2019:

	Three months ended June 30,					Six months ended June 30,
(Dollars in thousands)	2020		2019			2020			2019
Allowance for credit losses: unfunded credit commitments, beginning balance	$	84,690	$	57,970		$	67,656		$	55,183
Impact of adopting ASC 326	—		—			22,826			—
Provision for credit losses	14,590		4,798			9,113			7,528
Foreign currency translation adjustments	14		(104		)	(301		)	(47		)
Allowance for credit losses: unfunded credit commitments, ending balance (1)	$	99,294	$	62,664		$	99,294		$	62,664

(1)

The “allowance for credit losses: unfunded credit commitments” is included as a component of “other liabilities” on our unaudited interim consolidated balance sheets. See Note 15 — “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.