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

12 Months Ended

Dec. 31, 2020

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 and are reported under the Global Fund Banking (previously Private Equity/Venture Capital) portfolio segment below. 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 CRA. These loans are included within “construction loans” below and are primarily secured by real estate. Additionally, beginning in April 2020, we accepted applications under the PPP administered by the SBA under the CARES Act and originated loans to qualified small businesses. Disbursement of PPP funds under the CARES Act expired on August 8, 2020, however, on December 27, 2020, the Economic Aid Act was enacted, and allows borrowers to apply for PPP loans up to March 31, 2021, as well as allowing for certain PPP borrowers to apply for second draw loans.

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 primarily presented at the risk-based segment level of disaggregation. As of December 31, 2020, we have six portfolio segments and eleven risk-based segments 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 new CECL guidance but are included below for reference purposes. The superseded tables provided below are not comparative to our credit quality disclosures under the new credit loss guidance for 2020.

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


	December 31,
(Dollars in thousands)	2020		2019
Global fund banking	$	25,543,198	$	17,696,794
Investor dependent:
Early stage	1,485,866		1,624,221
Mid stage	1,564,870		1,047,398
Later stage	1,921,082		1,663,576
Total investor dependent	4,971,818		4,335,195
Cash flow dependent:
Sponsor led buyout	1,989,173		2,185,497
Other	2,945,360		2,238,741
Total cash flow dependent	4,934,533		4,424,238
Private bank (1) (5)	4,901,056		3,492,269
Balance sheet dependent	2,191,023		1,286,153
Premium wine (1) (5)	1,052,643		1,062,264
Other (1) (5)	27,687		867,723
SBA loans	1,559,530		—
Total loans (2) (3) (4)	$	45,181,488	$	33,164,636
Allowance for credit losses	(447,765)		(304,924)
Net loans	$	44,733,723	$	32,859,712

(1)As of December 31, 2020, as a result of enhanced portfolio characteristic definitions for our risk-based segments, loans in the amount of $427 million and $53 million that would have been reported in Other under historical definitions, are now being reported in our Private Bank and Premium Wine risk-based segments, respectively.

(2)Total loans at amortized cost is net of unearned income of $226 million and $163 million at December 31, 2020 and 2019, respectively.

(3)Included within our total loan portfolio are credit card loans of $400 million and $395 million at December 31, 2020 and 2019, respectively.

(4)Included within our total loan portfolio are construction loans of $118 million and $183 million at December 31, 2020 and 2019, respectively.

(5)Of our total loans, the table below includes those secured by real estate at amortized cost at December 31, 2020 and 2019 and were comprised of the following:


	December 31,
(Dollars in thousands)	2020		2019
Real estate secured loans:
Private bank:
Loans for personal residence	$	3,392,237	$	2,829,880
Loans to eligible employees	481,098		401,396
Home equity lines of credit	42,449		55,461
Other	142,895		38,880
Total private bank loans secured by real estate	$	4,058,679	$	3,325,617
Premium wine	824,008		820,730
Other	56,882		—
Total real estate secured loans	$	4,939,569	$	4,146,347