Business Combinations and Asset Acquisitions

9 Months Ended

Sep. 30, 2021

Business Combination and Asset Acquisition [Abstract]

On July 1, 2021, we acquired 100 percent of the voting equity interests of Boston Private Financial Holdings, Inc., the parent company of Boston Private Bank & Trust Company. The acquisition of Boston Private accelerates SVB’s private bank and wealth management offering, strengthening SVB’s overall platform and ability to fully meet the financial needs of its clients. The acquisition was accounted for as a business combination and accordingly, the results of Boston Private's operations have been included in the Company's consolidated financial statements for the three and nine months ended September 30, 2021 from the date of acquisition.

We acquired Boston Private for $1.2 billion comprised of $2.10 in cash and 0.0228 shares of SVB common stock for each Boston Private share. For the transaction, we issued approximately 1.9 million shares of SVB common stock and registered an additional 99,000 shares of SVB common stock issuable upon the exercise, vesting or settlement of converted legacy Boston Private equity awards.

The following table summarizes the allocation of the purchase price to the net assets of Boston Private as of July 1, 2021:


(Dollars in millions)	July 1, 2021
Cash paid	$	174
Share-based consideration	1,050
Replacement equity awards	10
Total purchase consideration	$	1,234
Fair value of net assets acquired	1,033

Goodwill	$	201

The following table summarizes the estimated fair value of assets acquired and liabilities assumed upon the finalization of the purchase:


(Dollars in millions)	July 1, 2021
Assets acquired:
Cash and cash equivalents	$	1,290
Investment securities	1,429
Net loans	7,217
Premises and equipment	39
Intangible assets	104
Right-of-use assets	107
Other assets	284
Total assets acquired	$	10,470
Liabilities assumed:
Deposits	$	8,983
Borrowings	132
Lease liabilities	103
Other liabilities	219
Total liabilities assumed	$	9,437
Fair value of net assets acquired	$	1,033

The Company recognized identifiable intangible assets of $104 million and goodwill of $201 million as a result of the acquisition. Intangible assets of $104 million are subject to amortization over their estimated useful lives. The goodwill recorded includes expected revenue-generating synergies driven by the broadening of our product suite and strength of the combined platform, providing our teams with expanded capabilities, technology and scalability to meet the increasing needs of our Private Bank clients. Goodwill amounts have been allocated to the SVB Private Bank reporting segment and will not be deductible for tax purposes.

The following table summarizes the fair value and estimated useful lives of the other intangible assets at the date of acquisition:


(Dollars in millions)	Estimated Fair Value		Weighted Average Estimated Useful Life - in Years
Other intangible assets:
Customer relationships	$	85	20
Other	19		6
Total other intangible assets	$	104

Of the $7.2 billion net loans acquired, $1.4 billion exhibited credit deterioration on the date of purchase. The following table provides a summary of these PCD loans at acquisition:


(Dollars in millions)	July 1, 2021
Par value of PCD loans	$	1,368
PCD ACL at acquisition	(22)
Non-credit premium on PCD loans	43
Purchase price of PCD loans	$	1,389

Due to the various conversions of Boston Private systems during the third quarter of 2021, as well as other streamlining and continuing integration of Boston Private's operating activities into those of the Company, reporting for revenue and net income of the former Boston Private operations for the period subsequent to the acquisition is impracticable.

Supplementary pro forma financial information related to the acquisition is not included because the impact to the Company's consolidated statements of income is not material.

Acquisition-related expenses

Direct expenses related to the acquisition of Boston Private were expensed as incurred and were $9 million and $22 million for three and nine months ended September 30, 2021. All expenses were included in merger-related charges, a component of noninterest expense, with the exception of $6 million attributable to the three months ended March 31, 2021, which were recorded in professional services.