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TMCNet:  SVB FINANCIAL GROUP - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

[August 08, 2014]

SVB FINANCIAL GROUP - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Edgar Glimpses Via Acquire Media NewsEdge) Forward-Looking Statements This Quarterly Report on Form 10-Q, including in particular "Management's Discussion and Analysis of Financial Condition and Results of Operations" under Part I, Item 2 of this report, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Management has in the past and might in the future make forward-looking statements orally to analysts, investors, the media and others. Forward-looking statements are statements that are not historical facts. Broadly speaking, forward-looking statements include, but are not limited to, the following: ? Projections of our net interest income, noninterest income, earnings per share, noninterest expenses (including professional services, compliance, compensation and other costs), cash flows, balance sheet positions, capital expenditures, liquidity and capitalization or other financial items ? Descriptions of our strategic initiatives, plans or objectives for future operations, including pending sales or acquisitions ? Forecasts of venture capital/private equity funding and investment levels ? Forecasts of future interest rates, economic performance, and income from investments ? Forecasts of expected levels of provisions for loan losses, loan growth and client funds ? Descriptions of assumptions underlying or relating to any of the foregoing In this Quarterly Report on Form 10-Q, we make forward-looking statements, including, but not limited to, those discussing our management's expectations about: • Market and economic conditions (including interest rate environment, and levels of public offerings, mergers/acquisitions and venture capital financing activities) and the associated impact on us • The sufficiency of our capital, including sources of capital (such as funds generated through retained earnings), the extent to which capital may be used or required, and our capital category classification • The adequacy of our liquidity position, including sources of liquidity (such as funds generated through retained earnings) • Our overall investment plans, strategies and activities, including venture capital/private equity funding and investments, and our investment of excess cash/liquidity • The realization, timing, valuation and performance of equity or other investments, including the impact of changes in our valuation of our investments, such as FireEye.


• The likelihood that the market value of our temporarily impaired investments will recover • Our intent to sell our available-for-sale securities prior to recovery of our cost basis, or the likelihood of such • Our ability and intent to hold our held-to-maturity securities until maturity • The impact on our interest income from mortgage prepayment levels as it relates to our premium amortization expense, and from changes in loan yields due to shifts in loan mix • Expected cash requirements for unfunded commitments to certain investments, including capital calls • Our overall management of interest rate risk, including managing the sensitivity of our interest-earning assets and interest-bearing liabilities to interest rates, and the impact to earnings from a change in interest rates • The credit quality of our loan portfolio, including levels and trends of nonperforming loans, impaired loans, criticized loans and troubled debt restructurings • The adequacy of reserves (including allowance for loan and lease losses) and the appropriateness of our methodology for calculating such reserves • The level of loan and deposit and client investment fund balances • The level of client investment fees and associated margins • The profitability of our products and services, including loan yields, loan pricing, and interest margins • Our strategic initiatives, including the expansion of operations and business activities in China, Hong Kong, India, Israel, the UK and elsewhere domestically or internationally 53-------------------------------------------------------------------------------- Table of Contents • The expansion and growth of our noninterest income sources • Distributions of venture capital, private equity or debt fund investment proceeds; intentions to sell such fund investments • The changes in, or adequacy of, our unrecognized tax benefits and any associated impact • The realization of certain deferred tax assets, and of any benefit stemming from certain net operating loss carryforwards.

• The extent to which counterparties, including those to our forward and option contracts, will perform their contractual obligations • The condition and suitability of our properties • The manner in which we compete • The effect of application of accounting pronouncements and regulatory requirements • The effect of lawsuits and claims • Regulatory developments, including the nature and timing of the adoption and effectiveness of requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), new capital requirements and other applicable Federal, State and International laws and regulations, and any related impact on us • The expected impact of the "Volcker Rule" under the Dodd-Frank Act, including our intention to seek the maximum extensions to the conformance period applicable to us You can identify these and other forward-looking statements by the use of words such as "becoming," "may," "will," "should," "could," "would," "predicts," "potential," "continue," "anticipates," "believes," "estimates," "seeks," "expects," "plans," "intends," the negative of such words, or comparable terminology. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we have based these expectations on our beliefs as well as our assumptions, and such expectations may prove to be incorrect. Our actual results of operations and financial performance could differ significantly from those expressed in or implied by our management's forward-looking statements.

Factors that could cause actual results to differ from the expectations stated in the forward-looking statements include, but are not limited to, factors discussed elsewhere in this Quarterly Report on Form 10-Q, under "Risk Factors" set forth in our Annual Report on Form 10-K for the year ended December 31, 2013 ("2013 Form 10-K"), as filed with the SEC on February 27, 2014, and other documents we file with the SEC. We urge investors to consider all of these factors carefully in evaluating the forward-looking statements contained in this report. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements included in this filing are made only as of the date of this filing. We assume no obligation and do not intend to revise or update any forward-looking statements contained in this Quarterly Report on Form 10-Q, except as applicable by law.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our interim unaudited consolidated financial statements and accompanying notes as presented in Part I, Item 1 of this report and in conjunction with our 2013 Form 10-K.

Reclassifications Certain prior period amounts have been reclassified to conform to current period presentations.

Management's Overview of Second Quarter 2014 Performance Overall, we had a strong second quarter in 2014, which was reflective of the positive business environment for our clients and our unique business model and expertise in supporting innovation companies and their investors, which have enabled us to deliver solid organic growth. We had net income available to common stockholders of $50.8 million and diluted EPS was $1.04. This compares to net income of $48.6 million and diluted EPS of $1.06 in the second quarter of 2013. In the second quarter of 2014, compared to the second quarter of 2013, we experienced strong growth in net interest income as a result of the increase in average investments of $4.8 billion, and loan growth of $2.1 billion, driven by our outstanding deposit growth, with record high average deposits of $27.2 billion. In addition, overall credit quality improved resulting in lower loan reserves, we saw continued growth in income from core fees as well as gains on equity warrant assets, and our liquidity and capital ratios continued to remain strong overall. Net gains on investment securities of $41.6 million, excluding FireEye losses of $98.9, was also strong 54-------------------------------------------------------------------------------- Table of Contents in the second quarter 2014. Our total client funds, which consist of on-balance sheet deposits and off-balance sheet client investment funds, increased, reflecting growth from our existing and new clients. Our noninterest expense increased $30.2 million primarily from increases in compensation expense mainly driven by increased incentive compensation, due to our strong performance, as well as an increase in average FTEs.

Second quarter 2014 results (compared to the second quarter 2013, where applicable) included: ? Continued strong growth in our lending business with record high average loan balances of $11.1 billion, an increase of $2.1 billion, or 22.8 percent.

? Average investment securities, excluding non-marketable and other securities, of $15.2 billion, an increase of $4.8 billion, or 45.7 percent. Period-end investment securities, excluding non-marketable and other securities, of $17.1 billion, an increase of $7.1 billion, or 70.6 percent.

? Average deposit balances of $27.2 billion, an increase of $8.6 billion, or 46.0 percent. Period-end deposit balances were $28.4 billion, an increase of $9.7 billion, or 51.7 percent.

? Average total client funds (including on-balance sheet deposits and off-balance sheet client investment funds) were $57.3 billion, an increase of $15.5 billion, or 37.1 percent. Period-end total client funds were $58.7 billion, an increase of $16.0 billion, or 37.6 percent.

? Net interest income (fully taxable equivalent basis) of $205.4 million, an increase of $34.9 million, or 20.5 percent, primarily due to an increase in interest income from loans and fixed income investment securities, attributable to growth in average loan and investment balances of $2.1 billion and $4.8 billion, respectively, driven by the strong average deposit growth mentioned above. This increase was partially offset by a decrease in the overall yield of our loan portfolio primarily resulting from the growth in our venture capital and private equity loan portfolio which, on average, have lower yields. The overall low market rate environment and increased price competition also impacted interest income.

? Net interest margin of 2.79 percent, compared to 3.40 percent, primarily reflective of a 51 basis point decrease in the overall yield of our loan portfolio. This decrease was primarily attributable to the change in mix of our interest earning assets. Loans represented 38 percent of earning assets in the second quarter of 2014 compared to 45 percent in the second quarter of 2013.

? Provision for loan losses of $1.9 million, compared to $18.6 million. The provision of $1.9 million was primarily driven by $5.3 million from period-end loan growth and $4.8 million in net charge-offs, offset by a reserve release of $6.0 million due to the improvement of the credit quality of our overall loan portfolio and a $2.1 million decrease in the reserve for impaired loans resulting from a decrease in impaired loan balances from repayments and charge-offs.

? Foreign exchange, credit card and lending related fees of $34.1 million, an increase of $8.2 million, or 31.6 percent reflective of increased client activity and transaction volumes.

? Net losses on investment securities of $57.3 million, compared to net gains of $40.6 million. Non-GAAP net losses on investment securities, net of noncontrolling interests of $22.1 million, compared to net gains of $9.5 million (See non-GAAP reconciliation under the section "Results of Operations-Noninterest Income-Gains on Investment Securities, Net") , primarily resulting from our FireEye related investments.

Specifically, we had losses on investment securities related to FireEye of $98.9 million ($30.4 million net of noncontrolling interests). See "Results of Operations-Noninterest Income-Gains on Investment Securities, Net" for details about our FireEye related investments during the three and six months ended June 30, 2014.

? Net gains on equity warrant assets of $12.3 million, an increase of $5.1 million, or 71.5 percent, compared to $7.2 million. This increase was primarily driven by the increase in the number of equity warrant assets held as well as gains due to increases in valuations across the equity warrant asset portfolio.

? Noninterest expense of $173.4 million, an increase of $30.2 million, or 21.0 percent. The increase was primarily due to increases in incentive compensation and ESOP and other employee benefits as a result of our strong financial performance and an increase in average FTEs. Average FTEs increased by 6.7 percent to 1,768 for the three months ended June 30, 2014, compared to 1,657 FTEs for the comparable 2013 period.

? The issuance and sale through a registered public offering of 4,485,000 shares of common stock at an offering price of $101.00 per share, which resulted in net proceeds of $434.9 million to support the continued growth of our balance sheet.

55-------------------------------------------------------------------------------- Table of Contents A summary of our performance for the three and six months ended June 30, 2014 and 2013 is as follows: Three months ended June 30, Six months ended June 30, (Dollars in thousands, except per share data and ratios) 2014 2013 % Change 2014 2013 % Change Income Statement: Diluted earnings per share $ 1.04 $ 1.06 (1.9 ) % $ 2.96 $ 1.96 51.0 % Net income available to common stockholders 50,797 48,584 4.6 142,098 89,475 58.8 Net interest income 204,965 170,081 20.5 401,293 333,250 20.4 Net interest margin 2.79 % 3.40 % (61 ) bps 2.95 % 3.32 % (37 ) bpsProvision for loan losses $ 1,947 $ 18,572 (89.5 ) % $ 2,441 $ 24,385 (90.0 ) % Noninterest income 14,210 98,239 (85.5 ) 324,435 176,843 83.5 Noninterest expense 173,446 143,292 21.0 345,882 292,306 18.3 Non-GAAP core fee income (1) 49,993 41,957 19.2 100,939 83,278 21.2 Non-GAAP noninterest income, net of noncontrolling interests (1) 49,535 67,488 (26.6 ) 173,042 123,602 40.0 Non-GAAP noninterest expense, net of noncontrolling interests (2) 168,179 140,425 19.8 337,294 286,579 17.7 Balance Sheet: Average loans, net of unearned income $ 11,080,602 $ 9,022,173 22.8 % $ 10,925,007 $ 8,852,488 23.4 % Average noninterest-bearing demand deposits 19,472,542 13,257,481 46.9 18,183,692 13,321,635 36.5 Average interest-bearing deposits 7,704,583 5,356,689 43.8 7,252,765 5,377,733 34.9 Average total deposits 27,177,125 18,614,170 46.0 25,436,457 18,699,368 36.0 Earnings Ratios: Return on average assets (annualized) (3) 0.64 % 0.88 % (27.3 ) % 0.96 % 0.81 % 18.5 % Return on average SVBFG stockholders' equity (annualized) (4) 8.50 10.12 (16.0 ) 12.74 9.52 33.8 Asset Quality Ratios: Allowance for loan losses as a percentage of total period-end gross loans 1.06 % 1.23 % (17 ) bps 1.06 % 1.23 % (17 ) bps Allowance for loan losses for performing loans as a percentage of total gross performing loans 1.02 1.13 (11 ) 1.02 1.13 (11 ) Gross loan charge-offs as a percentage of average total gross loans (annualized) 0.23 0.68 (45 ) 0.50 0.47 3 Net loan charge-offs as a percentage of average total gross loans (annualized) 0.17 0.49 (32 ) 0.45 0.35 10 Capital Ratios: Total risk-based capital ratio 15.36 % 14.03 % 133 bps 15.36 % 14.03 % 133 bps Tier 1 risk-based capital ratio 14.42 12.84 158 14.42 12.84 158 Tier 1 leverage ratio 8.74 8.78 (4 ) 8.74 8.78 (4 ) Tangible common equity to tangible assets (5) 8.03 8.34 (31 ) 8.03 8.34 (31 ) Tangible common equity to risk-weighted assets (5) 14.52 12.73 179 14.52 12.73 179 Bank total risk-based capital ratio 13.41 12.42 99 13.41 12.42 99 Bank tier 1 risk-based capital ratio 12.45 11.20 125 12.45 11.20 125 Bank tier 1 leverage ratio 7.51 7.66 (15 ) 7.51 7.66 (15 ) Bank tangible common equity to tangible assets (5) 7.22 7.60 (38 ) 7.22 7.60 (38 ) Bank tangible common equity to risk-weighted assets (5) 12.65 11.18 147 12.65 11.18 147 Other Ratios: Operating efficiency ratio (6) 78.98 % 53.32 % 48.1 % 47.60 % 57.21 % (16.8 ) % Non-GAAP operating efficiency ratio (2) 65.97 59.01 11.8 58.64 62.62 (6.4 ) Book value per common share (7) $ 52.78 $ 40.65 29.8 $ 52.78 $ 40.65 29.8 Other Statistics: Average full-time equivalent employees 1,768 1,657 6.7 % 1,751 1,656 5.7 % Period-end full-time equivalent employees 1,786 1,657 7.8 1,786 1,657 7.8 (1) See "Results of Operations-Noninterest Income" for a description and reconciliation of non-GAAP core fee income and noninterest income.

56-------------------------------------------------------------------------------- Table of Contents (2) See "Results of Operations-Noninterest Expense" for a description and reconciliation of non-GAAP noninterest expense and non-GAAP operating efficiency ratio.

(3) Ratio represents annualized consolidated net income available to common stockholders divided by quarterly and year-to-date average assets.

(4) Ratio represents annualized consolidated net income available to common stockholders divided by quarterly and year-to-date average SVBFG stockholders' equity.

(5) See "Capital Resources-Capital Ratios" for a reconciliation of non-GAAP tangible common equity to tangible assets and tangible common equity to risk-weighted assets.

(6) The operating efficiency ratio is calculated by dividing total noninterest expense by total taxable-equivalent net interest income plus noninterest income.

(7) Book value per common share is calculated by dividing total SVBFG stockholders' equity by total outstanding common shares at period-end.

Critical Accounting Policies and Estimates The accompanying management's discussion and analysis of results of operations and financial condition is based upon our unaudited interim consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. Management evaluates estimates and assumptions on an ongoing basis. Management bases its estimates on historical experiences and various other factors and assumptions that are believed to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions.

There have been no significant changes during the six months ended June 30, 2014 to the items that we disclosed as our critical accounting policies and estimates in "Management's Discussion and Analysis of Financial Condition and Results of Operations" under Part II, Item 7 of our 2013 Form 10-K.

Results of Operations Net Interest Income and Margin (Fully Taxable Equivalent Basis) Net interest income is defined as the difference between interest earned on loans, fixed income investment portfolio (available-for-sale and held-to-maturity securities), short-term investment securities and interest paid on funding sources. Net interest income is our principal source of revenue. Net interest margin is defined as the amount of annualized net interest income, on a fully taxable equivalent basis, expressed as a percentage of average interest-earning assets. Net interest income and net interest margin are presented on a fully taxable equivalent basis to consistently reflect income from taxable loans and securities and tax-exempt securities based on the federal statutory tax rate of 35.0 percent.

Analysis of Net Interest Income Changes Due to Volume and Rate (Fully Taxable Equivalent Basis) Net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as "volume change." Net interest income is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing liabilities, referred to as "rate change." The following table sets forth changes in interest income for each major category of interest-earning assets and interest expense for each major category of interest-bearing liabilities. The table also reflects the amount of simultaneous changes attributable to both volume and rate changes for the periods indicated. For this table, changes that are not solely due to either volume or rate are allocated in proportion to the percentage changes in average volume and average rate.

57-------------------------------------------------------------------------------- Table of Contents 2014 Compared to 2013 2014 Compared to 2013 Three months ended June 30, increase (decrease) due Six months ended June 30, increase (decrease) due to change in to change in (Dollars in thousands) Volume Rate Total Volume Rate Total Interest income: Federal Reserve deposits, federal funds sold, securities purchased under agreements to resell and other short-term investment securities $ 1,644 $ (435 ) $ 1,209 $ 2,804 $ (678 ) $ 2,126 Fixed income investment portfolio (taxable) 21,781 (3,014 ) 18,767 28,076 (641 ) 27,435 Fixed income investment portfolio (non-taxable) (14 ) (7 ) (21 ) (48 ) 23 (25 ) Loans, net of unearned income 28,165 (12,270 ) 15,895 56,897 (16,574 ) 40,323 Increase (decrease) in interest income, net 51,576 (15,726 ) 35,850 87,729 (17,870 ) 69,859 Interest expense: NOW deposits 17 16 33 31 21 52 Money market deposits 1,229 (220 ) 1,009 2,204 (278 ) 1,926 Money market deposits in foreign offices 14 (8 ) 6 32 (8 ) 24 Time deposits (29 ) (48 ) (77 ) (30 ) (120 ) (150 ) Sweep deposits in foreign offices 21 (9 ) 12 (7 ) (9 ) (16 ) Total increase (decrease) in deposits expense 1,252 (269 ) 983 2,230 (394 ) 1,836 Short-term borrowings (43 ) - (43 ) (71 ) - (71 ) 5.375% Senior Notes - 7 7 6 8 14 Junior Subordinated Debentures - 16 16 (5 ) 28 23 6.05% Subordinated Notes (5 ) 16 11 (10 ) 33 23 Total (decrease) increase in borrowings expense (48 ) 39 (9 ) (80 ) 69 (11 ) Increase (decrease) in interest expense, net 1,204 (230 ) 974 2,150 (325 ) 1,825 Increase (decrease) in net interest income $ 50,372 $ (15,496 ) $ 34,876 $ 85,579 $ (17,545 ) $ 68,034 Net Interest Income (Fully Taxable Equivalent Basis) Three months ended June 30, 2014 and 2013 Net interest income increased by $34.9 million to $205.4 million for the three months ended June 30, 2014, compared to $170.5 million for the comparable 2013 period. Overall, we saw an increase in our net interest income primarily due to higher average loan and investment securities balances. These increases were partially offset by lower overall loan and investment yields.

The main factors affecting interest income and interest expense for the three months ended June 30, 2014, compared to the comparable 2013 period are discussed below: • Interest income for the three months ended June 30, 2014 increased by $35.9 million primarily due to: • An $18.7 million increase in interest income on investment securities to $64.6 million for the three months ended June 30, 2014, compared to $45.9 million for the comparable 2013period. The increase was reflective of an increase in average investment securities balances of $4.8 billion as a result of deposit growth, offset by a decrease in the overall yield on our investment securities portfolio, which decreased 6 basis points to 1.71 percent. Lower reinvestment yields, resulting from a lower overall market rate environment and an increase in purchases ofshorter term U.S. Treasury securities during the three months ended June 30, 2014, contributed to a decline of 13 basis points. The decline was partially offset by a 7 basis point benefit from lower premium amortization expense. As of June 30, 2014, the remainingunamortized premium balance, net of discounts, on our investment securities portfolio was $17.8 million (net of discounts of $85.3million), compared to $99.6 million (net of discounts of $16.3 million) for the comparable 2013 period.

• A $15.9 million increase in interest income on loans to $147.7 million for the three months ended June 30, 2014, compared to $131.8 million for the comparable 2013 period. This increase wasreflective of an increase in average loan balances of $2.1 billion, partially offset by a decrease from both gross loan and loan fee yields. Gross loan yields, excluding loan interest recoveries and loan fees, decreased to 4.49 percent from 4.90 percent, reflective of a continued change in the mix of our overall loan portfolio.Loan fee yields decreased to 77 basis 58-------------------------------------------------------------------------------- Table of Contents points, from 90 basis points, as a result of the decrease in regular amortizing fee income, fee income earned from early loan repayments and other nonrecurring loan fees. Loan growth through the second quarter of 2014 has primarily come from our venture capital/private equity loan portfolio which, on average, has lower yielding loans. Additionally, the overall low market rate environment and increased price competition have also impacted interest income.

• Interest expense for the three months ended June 30, 2014 increased to $8.9 million, compared to $7.9 million for the comparable 2013 period.

The increase in interest expense was primarily from interest-bearing money market deposits of $1.0 million, mainly attributable to growth of our average money market deposits of $2.1 billion.

Six months ended June 30, 2014 and 2013 Net interest income increased by $68.0 million to $402.1 million for the six months ended June 30, 2014, compared to $334.1 million for the comparable 2013 period. Overall, we saw an increase in our net interest income primarily due to higher average loan balances and growth in our investment securities portfolio, which has increased as a result of the continued growth in deposits. These increases were partially offset by lower yields earned on our loans.

The main factors affecting interest income for the six months ended June 30, 2014, compared to the comparable 2013 period are discussed below: • Interest income for the six months ended June 30, 2014 increased by $69.9 million primarily due to: • A $40.3 million increase in interest income on loans, primarily due to an increase in average loan balances of $2.1 billion. In addition, driven by early loan repayments, non-recurring loan fee income increased $6.1 million to $18.1 million for the six months ended June 30, 2014 compared to $12.0 million for the comparable 2013 period. Gross loan yields, excluding loan interest recoveries and loan fees, decreased to 4.53 percent from 4.92 percent, reflective of a continued change in the mix of our overall loan portfolio. As mentioned above, our loan growth through the second quarter of 2014 has primarily come from our venturecapital/private equity loan portfolio which, on average, has lower yielding loans.

Additionally, the overall low market rate environment and increased price competition have also impacted interest income. The decrease in gross loan yields was partially offset by loan interest recoveries of $3.3 million for the six months ended June 30, 2014, compared to $0.6 million for the comparable 2013 period.

• A $27.4 million increase in interest income on investment securities, with the majority of the increase due to a $3.1 billion increase in average balances due to strong deposit growth.

• Interest expense for the six months ended June 30, 2014 increased to $17.6 million, compared to $15.7 million for the comparable 2013 period.

The increase in interest expense was primarily from interest-bearing money market deposits of $1.9 million, mainly attributable to growth of our average money market deposits of $1.8 billion.

Net Interest Margin (Fully Taxable Equivalent Basis) Our net interest margin decreased by 61 basis points to 2.79 percent for the three months ended June 30, 2014, compared to 3.40 percent for the comparable 2013 period.

Our net interest margin decreased by 37 basis points to 2.95 percent for the six months ended June 30, 2014, compared to 3.32 percent for the comparable 2013 period.

The decrease in our net interest margin for both the three and six months ended June 30, 2014, was primarily reflective of the shift in the mix of our interest-earning assets as a result of the significant growth in deposits (higher average cash and investment securities balances to deposits and lower average loan balances to deposits) and lower overall loan yield, partially offset by lower premium amortization expense on investment securities. Our loan portfolio (higher-yielding assets) comprised 38 percent, and 40 percent, of our average interest-earning assets during the three and six months ended June 30, 2014, respectively, compared to 45 percent and 44 percent, respectively, for the comparable 2013 periods.

Average Balances, Yields and Rates Paid (Fully Taxable Equivalent Basis) The average yield earned on interest-earning assets is the amount of annualized fully taxable equivalent interest income expressed as a percentage of average interest-earning assets. The average rate paid on funding sources is the amount of annualized interest expense expressed as a percentage of average funding sources. The following tables set forth average assets, liabilities, noncontrolling interests and SVBFG stockholders' equity, interest income, interest expense, annualized yields and rates, and the composition of our annualized net interest margin for the three and six months ended June 30, 2014 and 2013: 59-------------------------------------------------------------------------------- Table of Contents Average Balances, Rates and Yields for the Three Months Ended June 30, 2014 and 2013 Three months ended June 30, 2014 2013 Interest Interest Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate Balance Expense Rate Interest-earning assets: Federal Reserve deposits, federal funds sold, securities purchased under agreements to resell and other short-term investment securities (1) $ 3,210,218 $ 1,943 0.24 % $ 693,297 $ 734 0.42 % Investment securities: Available-for-sale securities: (2) Taxable 13,342,544 53,915 1.62 10,342,873 44,657 1.73 Non-taxable (3) 54,721 815 5.97 82,943 1,242 6.01 Held-to-maturity securities: Taxable 1,765,204 9,509 2.16 - - - Non-taxable (3) 28,494 406 5.72 - - - Total loans, net of unearned income (4) (5) 11,080,602 147,680 5.35 9,022,173 131,785 5.86 Total interest-earning assets 29,481,783 214,268 2.91 20,141,286 178,418 3.55 Cash and due from banks 60,373 299,886 Allowance for loan losses (128,465 ) (118,635 ) Other assets (6) 2,331,939 1,770,761 Total assets $ 31,745,630 $ 22,093,298 Funding sources: Interest-bearing liabilities: NOW deposits $ 159,316 $ 155 0.39 % $ 140,725 $ 122 0.35 % Money market deposits 5,338,785 2,561 0.19 3,220,618 1,552 0.19 Money market deposits in foreign offices 201,821 38 0.08 133,084 32 0.10 Time deposits 150,731 92 0.24 179,361 169 0.38 Sweep deposits in foreign offices 1,853,930 222 0.05 1,682,901 210 0.05 Total interest-bearing deposits 7,704,583 3,068 0.16 5,356,689 2,085 0.16 Short-term borrowings 4,554 - - 24,019 43 0.72 5.375% Senior Notes 348,284 4,830 5.56 348,066 4,823 5.56 Junior Subordinated Debentures 54,962 848 6.19 55,138 832 6.05 6.05% Subordinated Notes 51,470 130 1.01 53,766 119 0.89 Total interest-bearing liabilities 8,163,853 8,876 0.44 5,837,678 7,902 0.54 Portion of noninterest-bearing funding sources 21,317,930 14,303,608 Total funding sources 29,481,783 8,876 0.12 20,141,286 7,902 0.15 Noninterest-bearing funding sources: Demand deposits 19,472,542 13,257,481 Other liabilities 398,492 290,381 SVBFG stockholders' equity 2,397,386 1,924,902 Noncontrolling interests 1,313,357 782,856 Portion used to fund interest-earning assets (21,317,930 ) (14,303,608 ) Total liabilities, noncontrolling interest, and SVBFG stockholders' equity $ 31,745,630 $ 22,093,298 Net interest income and margin $ 205,392 2.79 % $ 170,516 3.40 % Total deposits $ 27,177,125 $ 18,614,170 Reconciliation to reported net interest income: Adjustments for taxable equivalent basis (427 ) (435 ) Net interest income, as reported $ 204,965 $ 170,081 (1) Includes average interest-earning deposits in other financial institutions of $342 million and $157 million for the three months ended June 30, 2014 and 2013, respectively. For the three months ended June 30, 2014 and 2013, balances also include $2.5 billion and $404 million, respectively, deposited at the Federal Reserve Bank, earning interest at the Federal Funds target rate.

(2) Yields on available-for-sale securities are based on amortized cost, and therefore do not give effect to unrealized changes in fair value that are reflected in other comprehensive income.

(3) Interest income on non-taxable investment securities are presented on a fully taxable-equivalent basis using the federal statutory income tax rate of 35.0 percent for all periods presented.

(4) Nonaccrual loans are reflected in the average balances of loans.

(5) Interest income includes loan fees of $21.3 million and $20.3 million for the three months ended June 30, 2014 and 2013, respectively.

60-------------------------------------------------------------------------------- Table of Contents (6) Average investment securities of $1.8 billion and $1.4 billion for the three months ended June 30, 2014 and 2013, respectively, were classified as other assets as they were noninterest-earning assets. These investments primarily consisted of non-marketable and other securities.

Average Balances, Rates and Yields for the Six Months Ended June 30, 2014 and 2013 Six months ended June 30, 2014 2013 Interest Interest Average Income/ Yield/ Average Income/ Yield/ (Dollars in thousands) Balance Expense Rate Balance Expense Rate Interest-earning assets: Federal Reserve deposits, federal funds sold, securities purchased under agreements to resell and other short-term investment securities (1) $ 2,848,215 $ 3,579 0.25 % $ 757,501 $ 1,453 0.39 % Investment securities: Available-for-sale securities: (2) Taxable 12,758,090 108,335 1.71 10,572,031 90,409 1.72 Non-taxable (3) 68,177 2,040 6.03 83,374 2,471 5.98 Held-to-maturity securities: Taxable 887,478 9,509 2.16 - - - Non-taxable (3) 14,326 406 5.71 - - - Total loans, net of unearned income (4) (5) 10,925,007 295,852 5.46 8,852,488 255,529 5.82 Total interest-earning assets 27,501,293 419,721 3.08 20,265,394 349,862 3.48 Cash and due from banks 161,862 289,590 Allowance for loan losses (134,734 ) (117,069 ) Other assets (5) 2,239,200 1,765,402 Total assets $ 29,767,621 $ 22,203,317 Funding sources: Interest-bearing liabilities: NOW deposits $ 155,050 $ 291 0.38 % $ 138,095 $ 239 0.35 % Money market deposits 4,962,911 4,973 0.20 3,132,310 3,047 0.20 Money market deposits in foreign offices 196,796 84 0.09 124,420 60 0.10 Time deposits 159,343 192 0.24 175,900 342 0.39 Sweep deposits in foreign offices 1,778,665 432 0.05 1,807,008 448 0.05 Total interest-bearing deposits 7,252,765 5,972 0.17 5,377,733 4,136 0.16 Short-term borrowings 4,768 - - 49,339 71 0.29 5.375% Senior Notes 348,256 9,658 5.59 348,040 9,644 5.59 Junior Subordinated Debentures 54,984 1,687 6.19 55,159 1,664 6.08 6.05% Subordinated Notes 51,717 255 0.99 54,023 232 0.87 Total interest-bearing liabilities 7,712,490 17,572 0.46 5,884,294 15,747 0.54 Portion of noninterest-bearing funding sources 19,788,803 14,381,100 Total funding sources 27,501,293 17,572 0.13 20,265,394 15,747 0.16 Noninterest-bearing funding sources: Demand deposits 18,183,692 13,321,635 Other liabilities 397,354 324,954 SVBFG stockholders' equity 2,249,425 1,895,768 Noncontrolling interests 1,224,660 776,666 Portion used to fund interest-earning assets (19,788,803 ) (14,381,100 ) Total liabilities, noncontrolling interest, and SVBFG stockholders' equity $ 29,767,621 $ 22,203,317 Net interest income and margin $ 402,149 2.95 % $ 334,115 3.32 % Total deposits $ 25,436,457 $ 18,699,368 Reconciliation to reported net interest income: Adjustments for taxable equivalent basis (856 ) (865 ) Net interest income, as reported $ 401,293 $ 333,250 (1) Includes average interest-earning deposits in other financial institutions of $330 million and $167 million for the six months ended June 30, 2014 and 2013, respectively. For the six months ended June 30, 2014 and 2013, balances also include $2.3 billion and $0.4 billion, respectively, deposited at the FRB, earning interest at the Federal Funds target rate.

(2) Yields on available-for-sale securities are based on amortized cost, and therefore do not give effect to unrealized changes in fair value that are reflected in other comprehensive income.

(3) Interest income on non-taxable investment securities are presented on a fully taxable-equivalent basis using the federal statutory income tax rate of 35.0 percent for all periods presented.

61-------------------------------------------------------------------------------- Table of Contents (4) Nonaccrual loans are reflected in the average balances of loans.

(5) Interest income includes loan fees of $46 million and $37 million for the six months ended June 30, 2014 and 2013, respectively.

(6) Average investment securities of $1.7 billion and $1.4 billion for the six months ended June 30, 2014 and 2013, respectively, were classified as other assets as they were noninterest-earning assets. These investments primarily consisted of non-marketable and other securities.

Provision for Loan Losses Our provision for loan losses is based on our evaluation of the existing allowance for loan losses in relation to total gross loans using historical and other objective information, and on our qualitative assessment of the inherent and identified credit risks of the loan portfolio. The following table summarizes our allowance for loan losses for the three and six months ended June 30, 2014 and 2013: Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2014 2013 2014 2013 Allowance for loan losses, beginning balance $ 123,542 $ 112,205 $ 142,886 $ 110,651 Provision for loan losses 1,947 18,572 2,441 24,385 Gross loan charge-offs (6,382 ) (15,375 ) (27,532 ) (21,001 ) Loan recoveries 1,621 4,169 2,933 5,536 Allowance for loan losses, ending balance $ 120,728 $ 119,571 $ 120,728 $ 119,571 Provision for loan losses as a percentage of period-end total gross loans (annualized) 0.07 % 0.77 % 0.04 % 0.51 % Gross loan charge-offs as a percentage of average total gross loans (annualized) 0.23 0.68 0.50 0.47 Net loan charge-offs as a percentage of average total gross loans (annualized) 0.17 0.49 0.45 0.35 Allowance for loan losses as a percentage of period-end total gross loans 1.06 1.23 1.06 1.23 Period-end total gross loans $ 11,437,300 $ 9,705,464 $ 11,437,300 $ 9,705,464 Average total gross loans 11,166,021 9,100,420 11,010,328 8,929,012 Our provision for loan losses was $1.9 million for the three months ended June 30, 2014, compared to a provision of $18.6 million for the comparable 2013 period. The provision of $1.9 million for the second quarter of 2014 was primarily driven by $5.3 million from period-end loan growth and $4.8 million in net charge-offs, offset by a reserve release of $6.0 million due to the improvement of the credit quality of our overall loan portfolio and a $2.1 million decrease in the reserve for impaired loans resulting from a decrease in impaired loan balances from repayments and charge-offs. The provision of $18.6 million for the three months ended June 30, 2013 was primarily driven by $8.8 million from period-end loan growth, as well as to provide for net charge-offs and a modest increase in our reserve for impaired loans.

Gross loan charge-offs of $6.4 million for the second quarter of 2014 included $3.9 million of charge-offs from four software clients and $1.7 million from one client in our other commercial loans portfolio, of which a total of $1.4 million was previously reserved for in the first quarter of 2014. Net loan charge-offs of $4.8 million represented 0.17 percent of average total gross loans, compared to net charge offs of $11.2 million, or 0.49 percent of average total gross loans for the comparable 2013 period. The decrease in net charge offs, as a percentage of average total gross loans, of 32 basis points reflected the continued improvement in the credit quality of our loan portfolio.

We had a provision for loan losses of $2.4 million for the six months ended June 30, 2014, compared to a provision of $24.4 million for the comparable 2013 period. The provision of $2.4 million for the six months ended June 30, 2014 was primarily due to $24.6 million of net charge-offs and $5.2 million from period-end loan growth, offset by a $16.6 million decrease in the reserve for impaired loans resulting from a decrease in impaired loan balances from repayments and charge-offs and a reserve release of $10.8 million due to the improvement of the credit quality of our overall loan portfolio.

Gross loan charge-offs of $27.5 million for the six months ended June 30, 2014 were primarily from our hardware and software client portfolios. Loan recoveries of $2.9 million for the six months ended June 30, 2014 were primarily from our hardware client portfolio. The provision of $24.4 million for the six months ended June 30, 2013 was primarily driven by net charge-offs of $15.5 million and period-end loan growth.

See "Consolidated Financial Condition-Credit Quality and Allowance for Loan Losses" below and Note 6-"Loans and Allowance for Loan Losses" of the "Notes to Interim Consolidated Financial Statements (unaudited)" under Part I, Item 1 of this report for further details on our allowance for loan losses.

62-------------------------------------------------------------------------------- Table of Contents Noninterest Income A summary of noninterest income for the three and six months ended June 30, 2014 and 2013 is as follows: Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2014 2013 % Change 2014 2013 % Change Non-GAAP core fee income: Foreign exchange fees $ 17,928 $ 13,667 31.2 % $ 35,124 $ 27,863 26.1 % Credit card fees 10,249 7,609 34.7 20,531 15,057 36.4 Deposit service charges 9,611 8,907 7.9 19,218 17,700 8.6 Lending related fees (1) 5,876 4,596 27.9 12,179 8,570 42.1 Client investment fees 3,519 3,524 (0.1 ) 6,937 6,999 (0.9 ) Letters of credit and standby letters of credit fees 2,810 3,654 (23.1 ) 6,950 7,089 (2.0 ) Total non-GAAP core fee income (2) 49,993 41,957 19.2 100,939 83,278 21.2 (Losses) gains on investment securities, net (57,320 ) 40,561 NM 166,592 67,999 145.0 Gains on derivative instruments, net 12,775 8,087 58.0 36,942 18,379 101.0 Other 8,762 7,634 14.8 19,962 7,187 177.8 Total noninterest income $ 14,210 $ 98,239 (85.5 ) $ 324,435 $ 176,843 83.5 NM - Not meaningful (1) Lending related fees consists of fee income associated with credit commitments such as unused commitment fees, syndication fees and other loan processing fees and, historically, has been included in other noninterest income. Prior period amounts have been reclassified to conform to the current period presentation.

(2) The following table provides a reconciliation of GAAP noninterest income to non-GAAP core fee income: Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2014 2013 % Change 2014 2013 % Change GAAP noninterest income (as reported) $ 14,210 $ 98,239 (85.5 )% $ 324,435 $ 176,843 83.5 % Less: (losses) gains on investment securities, net (57,320 ) 40,561 NM 166,592 67,999 145.0 Less: gains on derivative instruments, net 12,775 8,087 58.0 36,942 18,379 101.0 Less: other noninterest income 8,762 7,634 14.8 19,962 7,187 177.8 Non-GAAP core fee income (1) $ 49,993 $ 41,957 19.2 $ 100,939 $ 83,278 21.2 NM - Not meaningful (1) This non-GAAP measure represents noninterest income, but excludes certain line items where performance is typically subject to market or other conditions beyond our control.

Included in net income is income and expense attributable to noncontrolling interests. We recognize, as part of our investment funds management business through SVB Capital and Debt Fund Investments, the entire income or loss from funds where we own significantly less than 100% of the investment. We are required under GAAP to consolidate 100% of the results of entities that we are deemed to control, even though we may own less than 100% of such entities. The relevant amounts attributable to investors other than us are reflected under "Net Income Attributable to Noncontrolling Interests" on our statements of income. Where applicable, the non-GAAP tables presented below for noninterest income and net gains on investment securities exclude noncontrolling interests.

We believe these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that represent income attributable to investors other than us and our subsidiaries. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results and when planning, forecasting and analyzing future periods. However, these non-GAAP financial measures should be considered in addition to, not as a substitute for or preferable to, financial measures prepared in accordance with GAAP.

63-------------------------------------------------------------------------------- Table of Contents The following table provides a summary of non-GAAP noninterest income, net of noncontrolling interests for the three and six months ended June 30, 2014 and 2013: Three months ended June 30, Six months ended June 30, Non-GAAP noninterest income, net of noncontrolling interests (Dollars in thousands) 2014 2013 % Change 2014 2013 % Change GAAP noninterest income (as reported) $ 14,210 $ 98,239 (85.5 )% $ 324,435 $ 176,843 83.5 % Less: (losses) income attributable to noncontrolling interests, including carried interest (35,325 ) 30,751 NM 151,393 53,241 184.4 Non-GAAP noninterest income, net of noncontrolling interests $ 49,535 $ 67,488 (26.6 ) $ 173,042 $ 123,602 40.0 NM - Not meaningful (Losses) gains on Investment Securities, Net Net (losses) gains on investment securities include both gains and losses from our non-marketable and other securities, as well as gains and losses from sales of our available-for-sale securities portfolio, when applicable.

Our available-for-sale, and held-to-maturity, securities portfolios are primarily fixed income investment portfolios that are managed to earn an appropriate portfolio yield over the long-term while maintaining sufficient liquidity and credit diversification as well as addressing our asset/liability management objectives. Sales of equity securities, held as a result of our exercised warrants, results in net gains or losses on investment securities and is within the guidelines of our investment policy of managing our liquidity position and interest rate risk. Though infrequent, the sale of investment securities in our fixed income portfolio may result in net gains or losses and is also within the guidelines of our investment policy.

Our non-marketable and other securities portfolio primarily represents investments in venture capital and private equity funds, venture debt funds and private and public portfolio companies. We experience variability in the performance of our non-marketable and other securities from quarter to quarter, which results in net gains or losses on investment securities (both realized and unrealized). This variability is due to a number of factors, including unrealized changes in the values of our investments, changes in the amount of realized gains from distributions, or changes in liquidity events and general economic and market conditions. Unrealized gains from non-marketable and other securities for any single period are typically driven by valuation changes, and are therefore subject to potential increases or decreases in future periods.

Such variability may lead to volatility in the gains from investment securities and as such our results for a particular period are not necessarily indicative of our expected performance in a future period.

The extent to which any unrealized gains will become realized is subject to a variety of factors, including, among other things, the expiration of certain sales restrictions to which these equity securities may be subject to, the actual sales of securities and the timing of such actual sales.

For the three months ended June 30, 2014, we had net losses on investment securities of $57.3 million, compared to $40.6 million in net gains for the comparable 2013 period. Net losses on investment securities, net of noncontrolling interests, were $22.1 million for the three months ended June 30, 2014, compared to net gains of $9.5 million for the comparable 2013 period.

Net losses, net of noncontrolling interests, of $22.1 million for the three months ended June 30, 2014 were primarily driven by the following: • Losses of $16.8 million from our managed direct venture funds, mainly due to the decrease in the public company stock price of FireEye.

• Losses of $16.5 million from our equity securities holdings, primarily attributable to the sale of shares of FireEye common stock (acquired through the exercise of certain warrants), the stock price of which decreased since March 31, 2014.

• Gains of $8.6 million from our strategic and other investments, primarily driven by distributions from strategic venture capital fund investments as well as the sale of one of our direct equity investments, for which we recorded a realized gain of $4.7 million.

• Gains of $3.0 million from our managed funds of funds, primarily related to unrealized valuation adjustments of two of our funds of funds.

64-------------------------------------------------------------------------------- Table of Contents For the six months ended June 30, 2014, we had net gains on investment securities of $166.6 million, compared to $68.0 million for the comparable 2013 period. Net gains on investment securities, net of noncontrolling interests, were $15.3 million for the six months ended June 30, 2014, compared to net gains of $14.6 million for the comparable 2013 period.

The losses, net of noncontrolling interests, of $15.3 million for the six months ended June 30, 2014 were primarily driven by the following: • Losses of $16.5 million from our equity securities holdings, primarily attributable to the sale of shares of FireEye common stock (acquired through the exercise of certain warrants), the stock price of which decreased since March 31, 2014.

• Gains of $13.0 million from our managed funds of funds, primarily related to unrealized valuation adjustments of three of our funds of funds and.

• Gains of $12.3 million from our strategic and other investments, primarily driven by distributions from strategic venture capital fund investments as well as the acquisition of one of our direct equity investments during the second quarter of 2014, for which we recorded a gain of $4.7 million.

• Gains of $3.8 million from our managed direct venture funds, driven by net valuation gains from stock performance of public companies.

• Gains of $3.0 million from our investments in debt funds, primarily from unrealized valuation increases from the investments within the funds.

The following tables provide a summary of non-GAAP net gains on investment securities, net of noncontrolling interests, for the three and six months ended June 30, 2014 and 2013: Managed Managed Direct Available- Strategic Funds of Venture Debt For-Sale and Other (Dollars in thousands) Funds Funds Funds Securities Investments Total Three months ended June 30, 2014 Total (losses) gains on investment securities, net $ 38,478 $ (87,548 ) $ (356 ) $ (16,480 ) $ 8,586 $ (57,320 ) Less: (losses) gains attributable to noncontrolling interests, including carried interest 35,507 (70,746 ) (1 ) - - (35,240 ) Non-GAAP net (losses) gains on investment securities, net of noncontrolling interests $ 2,971 $ (16,802 ) $ (355 ) $ (16,480 ) $ 8,586 $ (22,080 ) Three months ended June 30, 2013 Total gains on investment securities, net $ 33,626 $ 987 $ 1,799 $ 775 $ 3,374 $ 40,561 Less: gains (losses) attributable to noncontrolling interests, including carried interest 30,021 1,047 (1 ) - - 31,067 Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests $ 3,605 $ (60 ) $ 1,800 $ 775 $ 3,374 $ 9,494 Six months ended June 30, 2014 Total gains (losses) on investment securities, net $ 149,926 $ 18,154 $ 2,645 $ (16,420 ) $ 12,287 $ 166,592 Less: gains (losses) attributable to noncontrolling interests, including carried interest 136,958 14,368 (14 ) - - 151,312 Non-GAAP net gains (losses) on investment securities, net of noncontrolling interests $ 12,968 $ 3,786 $ 2,659 $ (16,420 ) $ 12,287 $ 15,280 Six months ended June 30, 2013 Total gains on investment securities, net $ 56,428 $ 2,843 $ 3,552 $ 730 $ 4,446 $ 67,999 Less: gains (losses) attributable to noncontrolling interests, including carried interest 50,823 2,543 (3 ) - - 53,363 Non-GAAP net gains on investment securities, net of noncontrolling interests $ 5,605 $ 300 $ 3,555 $ 730 $ 4,446 $ 14,636 65-------------------------------------------------------------------------------- Table of Contents Gains on Derivative Instruments, Net A summary of gains on derivative instruments, net, for the three and six months ended June 30, 2014 and 2013 is as follows: Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2014 2013 % Change 2014 2013 % Change Equity warrant assets (1) Gains on exercises, net $ 3,553 $ 1,611 120.5 % $ 21,955 $ 2,425 NM Cancellations and expirations (429 ) (118 ) NM (516 ) (222 ) 132.4 Changes in fair value 9,205 5,697 61.6 16,263 8,492 91.5 Net gains on equity warrant assets 12,329 7,190 71.5 37,702 10,695 NM Gains on foreign exchange forward contracts, net: Gains on client foreign exchange forward contracts, net (2) 170 124 37.1 472 173 172.8 Gains (losses) on internal foreign exchange forward contracts, net (3) 538 712 (24.4 ) (491 ) 6,912 (107.1 ) Total gains (losses) on foreign 708 836 (15.3 ) (19 ) 7,085 (100.3 ) exchange forward contracts, net Changes in fair value of interest rate swaps (13 ) (33 ) (60.6 ) (25 ) 27 (192.6 ) Net (losses) gains on other derivatives (4) (249 ) 94 NM (716 ) 572 NM Gains on derivative instruments, net $ 12,775 $ 8,087 58.0 $ 36,942 $ 18,379 101.0 NM-Not meaningful (1) At June 30, 2014, we held warrants in 1,383 companies, compared to 1,302 companies at June 30, 2013.

(2) Represents the net gains for foreign exchange forward contracts executed on behalf of clients, excluding any spread or fees earned in connection with these trades.

(3) Represents the change in the fair value of foreign exchange forward contracts used to economically reduce our foreign exchange exposure related to certain foreign currency denominated instruments. Refer to revaluation of foreign currency instruments included in the line item "other" within noninterest income for the amount we were able to partially offset.

(4) Primarily represents the change in fair value of loan conversion options held by SVB Financial.

Net gains on derivative instruments were $12.8 million for the three months ended June 30, 2014, compared to net gains of $8.1 million for the comparable 2013 period. The increase in net gains on derivative instruments was primarily attributable to the following: • Net gains on equity warrant assets of $12.3 million for the three months ended June 30, 2014, compared to $7.2 million for the comparable 2013 period. The $5.1 million increase was primarily due to net gains of $9.2 million from changes in warrant valuations, primarily attributable to our private company warrant portfolio, compared to net gains of $5.7 million for the comparable 2013 period.

• Net gains of $0.5 million on foreign exchange forward contracts hedging certain of our foreign currency denominated instruments for the three months ended June 30, 2014, compared to $0.7 million for the comparable 2013 period. The lower gains for the three months ended June 30, 2014 were primarily attributable to the weakening of the U.S. Dollar against the Euro and Pound Sterling, and were offset by losses of $0.7 million from the revaluation of foreign currency denominated instruments that are included in the line item "other" within noninterest income as noted below.

Net gains on derivative instruments were $36.9 million for the six months ended June 30, 2014, compared to net gains of $18.4 million for the comparable 2013 period. The increase in net gains on derivative instruments was primarily attributable to the following: • Net gains on equity warrant assets of $37.7 million for the six months ended June 30, 2014, compared to $10.7 million for the comparable 2013 period. The $27.0 million increase was primarily due to net gains of $22.0 million from the exercise of equity warrant assets, primarily reflective of the exercise and conversion of our FireEye equity warrants, compared to $2.4 million for the comparable 2013 period. Additionally, net gains of $16.3 million came from changes 66-------------------------------------------------------------------------------- Table of Contents in warrant valuations driven by valuation increases from IPO and M&A activity, primarily consisting of unrealized valuation gains from holdings in existing public companies in our equity warrant portfolio, compared to net gains of $8.5 million for the comparable 2013 period.

• Net losses of $0.5 million on foreign exchange forward contracts hedging certain of our foreign currency denominated instruments for the six months ended June 30, 2014, compared to net gains of $6.9 million for the comparable 2013 period. The losses recognized for the three months ended June 30, 2014 were primarily attributable to the strengthening of the U.S. Dollar against the Euro and Pound Sterling and were offset by gains of $0.3 million from the revaluation of foreign currency denominated instruments that are included in the line item "other" within noninterest income as noted below.

Foreign Exchange Fees Foreign exchange fees were $17.9 million and $35.1 million for the three and six months ended June 30, 2014, respectively, compared to $13.7 million and $27.9 million for the comparable 2013 periods. The increase was primarily due to improved business conditions for our clients, which has resulted in an increase in the number of trades and commissioned notional volumes.

Credit Card Fees Credit card fees were $10.2 million and $20.5 million for the three and six months ended June 30, 2014, respectively, compared to $7.6 million and $15.1 million for the comparable 2013 periods. The increase reflects increased client utilization of our credit card products and custom payment solutions from new and existing clients.

Lending Related Fees Lending related fees were $5.9 million and $12.2 million for the three and six months ended June 30, 2014, respectively, compared to $4.6 million and $8.6 million for the comparable 2013 periods. The increase was primarily due to an increase in unused commitment fees as our loan commitments available for funding balance increased from $9.8 billion to $13.6 billion.

Client Investment Fees Client investment fees were $3.5 million and $6.9 million for the three and six months ended June 30, 2014, respectively, compared to $3.5 million and $7.0 million for the comparable 2013 periods. The nominal change was reflective of lower margins earned on certain products due to the overall low rates in the short-term fixed income markets. There was an increase in average client investment funds driven by our clients' increased utilization of our off-balance sheet products managed by SVB Asset Management, as well as our sweep product.

The increases in average balances were partially offset by historically low yields on certain products. The following table summarizes average client investment funds for the three and six months ended June 30, 2014 and 2013: Three months ended June 30, Six months ended June 30, (Dollars in millions) 2014 2013 % Change 2014 2013 % Change Client directed investment assets (1) $ 7,513 $ 6,847 9.7 % $ 7,347 $ 6,872 6.9 % Client investment assets under management (2) 16,102 11,498 40.0 14,808 11,403 29.9 Sweep money market funds 6,537 4,856 34.6 6,489 4,570 42.0 Total average client investment funds (3) $ 30,152 $ 23,201 30.0 $ 28,644 $ 22,845 25.4 (1) Comprised of mutual funds and Repurchase Agreement Program assets.

(2) These funds represent investments in third party money market mutual funds and fixed-income securities managed by SVB Asset Management.

(3) Client investment funds are maintained at third party financial institutions and are not recorded on our balance sheet.

67-------------------------------------------------------------------------------- Table of Contents The following table summarizes period-end client investment funds at June 30, 2014 and December 31, 2013: December 31, (Dollars in millions) June 30, 2014 2013 % Change Client directed investment assets $ 6,979 $ 7,073 (1.3 )% Client investment assets under management 16,960 12,677 33.8 Sweep money market funds 6,437 6,613 (2.7 ) Total period-end client investment funds $ 30,376 $ 26,363 15.2 Other Noninterest Income A summary of other noninterest income for the three and six months ended June 30, 2014 and 2013 is as follows: Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2014 2013 % Change 2014 2013 % Change Fund management fees $ 3,559 $ 2,940 21.1 % $ 6,314 $ 5,709 10.6 % Service-based fee income 2,252 2,001 12.5 4,279 3,805 12.5 (Losses) gains on revaluation of foreign currency instruments (1) (685 ) (586 ) 16.9 293 (7,650 ) (103.8 ) Other (2) 3,636 3,279 10.9 9,076 5,323 70.5 Total other noninterest income $ 8,762 $ 7,634 14.8 $ 19,962 $ 7,187 177.8 (1) Represents the revaluation of foreign currency denominated financial instruments issued and held by us, primarily loans, deposits and cash. These instruments partially offset the impact of changes in internal foreign exchange forward contracts. Refer to internal foreign exchange forward contracts, net included within gains on derivative instruments as noted above.

(2) Includes dividends on FHLB/FRB stock, correspondent bank rebate income and other fee income.

Other noninterest income was $8.8 million for the three months ended June 30, 2014, compared to $7.6 million for the comparable 2013 period. The increase of $1.2 million for the three month period was primarily due to an increase in fund management fees and other noninterest income.

The increase of $12.8 million for the six months ended June 30, 2014 as compared to the six months ended June 30, 2013 was primarily due to the following: • Increase of $7.9 million from gains on the revaluation of foreign currency instruments of $0.3 million for the six months ended June 30, 2014, compared to losses of $7.7 million for the comparable 2013 period. The gain was offset by net losses of $0.5 million for the six months ended June 30, 2014, compared to net gains of $6.9 million for the comparable period of 2013, on internal foreign exchange forward contracts economically hedging certain of these instruments, which are included within noninterest income in the line item "gains on derivative instruments" as noted above. This resulted in net losses of $0.2 million and $0.8 million for the six months ended June 30, 2014 and 2013, respectively.

• Increase of $3.8 million in other income primarily related to a gain on one of our foreign investment holdings.

Overall Summary of Investments in FireEye During the six months ended June 30, 2014: (i) we sold all shares of FireEye common stock acquired through the exercise of certain warrants, and (ii) our managed direct venture funds distributed certain shares of FireEye common stock to the underlying limited partners of the funds. As of June 30, 2014, we still held through our managed funds approximately 4.9 million shares of FireEye common stock ("FireEye Shares").

During the six months ended June 30, 2014, net gains, related to FireEye, were $29.3 million ($6.6 million net of noncontrolling interests) and consisted of the following: • $15.2 million gain from the exercise and conversion of our warrants during the first quarter of 2014 as we exercised the warrants at a share price of $88.19 on March 4, 2014 compared to the December 31, 2013 price of $43.61, • $14.0 million of realized losses from the sales of all FireEye warrant shares, 68 -------------------------------------------------------------------------------- Table of Contents • $66.5 million ($12.8 million net of noncontrolling interests) of realized gains from the distribution of shares held by our managed direct venture funds, and • $38.4 million ($7.5 million net of noncontrolling interests) of unrealized losses primarily from the decreased valuation of the remaining FireEye Shares held through our managed funds.

From June 30, 2014 to August 6, 2014, the market price of FireEye's common stock decreased by 24% from $40.55 to $30.78. Based on this decrease, we would expect a total decrease in the pre-tax valuation of the FireEye Shares during this time period of approximately $48 million ($9 million, net of noncontrolling interests). (This is a non-GAAP financial measure. See reconciliation below.) Investment gains or losses relating to the FireEye Shares are subject to FireEye's stock price, which is subject to market conditions and various other factors. Additionally, the decrease in the pre-tax valuation of the FireEye Shares, specifically noted in the paragraph above, are currently unrealized losses. Any losses (or gains) relating to the FireEye Shares that will actually become realized is subject to a variety of factors, including among other things, changes in prevailing market prices and timing of any sales of securities, which are subject to our securities sales and governance processes.

None of the FireEye related investments currently are subject to a lock-up agreement.

The table below sets forth a reconciliation of the non-GAAP financial measure discussed above: Non-GAAP losses on investments securities, net of noncontrolling interests (Dollars in millions) Through August 6, 2014 GAAP losses on certain non-marketable and other securities $ 48 Less: losses attributable to noncontrolling interests, including carried interest 39 Non-GAAP losses on certain non-marketable and other securities, net of noncontrolling interests $ 9 Noninterest Expense A summary of noninterest expense for the three and six months ended June 30, 2014 and 2013 is as follows: Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2014 2013 % Change 2014 2013 % Change Compensation and benefits $ 99,820 $ 84,742 17.8 % $ 202,327 $ 173,446 16.7 % Professional services 21,113 16,633 26.9 42,302 33,793 25.2 Premises and equipment 12,053 11,402 5.7 23,635 22,127 6.8 Business development and travel 9,249 7,783 18.8 19,443 16,055 21.1 Net occupancy 7,680 5,795 32.5 15,000 11,562 29.7 FDIC assessments 4,945 2,853 73.3 9,073 6,235 45.5 Correspondent bank fees 3,274 3,049 7.4 6,477 6,104 6.1 Provision for unfunded credit commitments 2,185 1,347 62.2 3,308 3,361 (1.6 ) Other 13,127 9,688 35.5 24,317 19,623 23.9 Total noninterest expense $ 173,446 $ 143,292 21.0 $ 345,882 $ 292,306 18.3 Included in noninterest expense is expense attributable to noncontrolling interests. See below for a summary of non-GAAP noninterest expense and non-GAAP operating efficiency ratio, both of which exclude noncontrolling interests.

Non-GAAP Noninterest Expense We use and report non-GAAP noninterest expense, non-GAAP taxable equivalent revenue and non-GAAP operating efficiency ratio, which excludes noncontrolling interests. We believe these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by: 69-------------------------------------------------------------------------------- Table of Contents (i) excluding certain items that represent expenses attributable to investors other than us and our subsidiaries, or certain items that do not occur every reporting period; or (ii) providing additional information used by management that is not otherwise required by GAAP or other applicable requirements. Our management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing our operating results and when planning, forecasting and analyzing future periods. However, these non-GAAP financial measures should be considered in addition to, not as a substitute for or preferable to, financial measures prepared in accordance with GAAP. The table below provides a summary of non-GAAP noninterest expense and non-GAAP operating efficiency ratio, both net of noncontrolling interests for the three and six months ended June 30, 2014 and 2013: Three months ended June 30, Six months ended June 30, Non-GAAP operating efficiency ratio, net of noncontrolling interests (Dollars in thousands, except ratios) 2014 2013 % Change 2013 2013 % Change GAAP noninterest expense $ 173,446 $ 143,292 21.0 % $ 345,882 $ 292,306 18.3 % Less: amounts attributable to noncontrolling interests 5,267 2,867 83.7 8,588 5,727 50.0 Non-GAAP noninterest expense, net of noncontrolling interests $ 168,179 $ 140,425 19.8 $ 337,294 $ 286,579 17.7 GAAP taxable equivalent net interest income $ 205,392 $ 170,516 20.5 $ 402,149 $ 334,115 20.4 Less: (losses) income attributable to noncontrolling interests (5 ) 20 (125.0 ) 3 44 (93.2 ) Non-GAAP taxable equivalent net interest income, net of noncontrolling interests $ 205,397 $ 170,496 20.5 $ 402,146 $ 334,071 20.4 GAAP noninterest income $ 14,210 $ 98,239 (85.5 ) $ 324,435 $ 176,843 83.5 Non-GAAP noninterest income, net of noncontrolling interests 49,535 67,488 (26.6 ) 173,042 123,602 40.0 GAAP taxable equivalent revenue $ 219,602 $ 268,755 (18.3 ) $ 726,584 $ 510,958 42.2 Non-GAAP taxable equivalent revenue, net of noncontrolling interests $ 254,932 $ 237,984 7.1 $ 575,188 $ 457,673 25.7 GAAP operating efficiency ratio 78.98 % 53.32 % 48.1 47.60 % 57.21 % (16.8 ) Non-GAAP operating efficiency ratio (1) 65.97 % 59.01 % 11.8 58.64 % 62.62 % (6.4 ) (1) The non-GAAP operating efficiency ratio is calculated by dividing non-GAAP noninterest expense by non-GAAP total taxable-equivalent income.

Compensation and Benefits Expense The following table provides a summary of our compensation and benefits expense for the three and six months ended June 30, 2014 and 2013: Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2014 2013 % Change 2014 2013 % Change Compensation and benefits Salaries and wages $ 45,157 $ 39,209 15.2 % $ 89,510 $ 78,532 14.0 % Incentive compensation & ESOP 27,746 21,660 28.1 54,194 43,853 23.6 Other employee benefits (1) 26,917 23,873 12.8 58,623 51,061 14.8 Total compensation and benefits $ 99,820 $ 84,742 17.8 $ 202,327 $ 173,446 16.7 Period-end full-time equivalent employees 1,786 1,657 7.8 1,786 1,657 7.8 Average full-time equivalent employees 1,768 1,657 6.7 1,751 1,656 5.7 (1) Other employee benefits includes employer payroll taxes, group health and life insurance, share-based compensation, 401(k), warrant and retention program plans, agency fees and other employee related expenses.

70-------------------------------------------------------------------------------- Table of Contents Compensation and benefits expense was $99.8 million for the three months ended June 30, 2014, compared to $84.7 million for the comparable 2013 period. The key changes in factors affecting compensation and benefits expense were as follows: • An increase of $5.9 million in salaries and wages expense, primarily due to annual merit increases effective March 2014 and an increase in the number of average FTEs. Average FTEs increased by 111 to 1,768 FTEs for the three months ended June 30, 2014, compared to 1,657 FTEs for the comparable 2013 period, primarily to support our product development, operational and sales and advisory teams, as well as to support our commercial banking operations and initiatives.

• An increase of $6.1 million in incentive compensation and ESOP expense, primarily reflective of our strong performance in the first half of 2014 and an increase in the number of average FTEs compared to the second quarter of 2013.

• An increase of $3.0 million in other employee benefits, primarily due to an increase in share-based plan expense mainly as a result of the increase in the valuation of our common stock as well as an increase in contract agency fees to support our marketing and commercial banking operations teams.

Compensation and benefits expense was $202.3 million for the six months ended June 30, 2014, compared to $173.4 million for the comparable 2013 period. The key changes in factors affecting compensation and benefits expense were as follows: • An increase of $11.0 million in salaries and wages expense, primarily due to annual merit increases effective March 2014 and an increase in the number of average FTEs. Average FTEs increased by 95 to 1,751 FTEs for the six months ended June 30, 2014, compared to 1,656 FTEs for the comparable 2013 period.

• An increase of $10.3 million in incentive compensation and ESOP expense, primarily reflective of our strong performance in the first half of 2014 and an increase in the number of average FTEs compared to the first half of 2013.

• An increase of $7.6 million in other employee benefits, primarily due to an increase in share-based plan expense mainly as a result of the increase in the valuation of our common stock as well as an increase in contract agency fees to support our commercial banking operations and marketing teams. The remaining increases related to various other employee benefits.

Our variable compensation plans primarily consist of our Incentive Compensation Plan, Direct Drive Incentive Compensation Plan, 401(k) and ESOP Plan, Retention Program and Warrant Incentive Plan (See descriptions in our 2013 Form 10-K).

Total costs incurred under these plans were $30.2 million and $65.0 million for the three and six months ended June 30, 2014, respectively, compared to $25.2 million and $53.0 million for the comparable 2013 periods, respectively. These amounts are included in total compensation and benefits expense discussed above.

Professional Services Professional services expense was $21.1 million and $42.3 million for the three and six months ended June 30, 2014, respectively, compared to $16.6 million and $33.8 million for the comparable 2013 periods. The increase was primarily due to increased consulting fees related to our ongoing business and IT infrastructure initiatives.

Business Development and Travel Business development and travel was $9.2 million and $19.4 million for the three and six months ended June 30, 2014, respectively, compared to $7.8 million and $16.1 million for the comparable 2013 periods. The increase was primarily due to an increase in client related events supporting the growth of our business as well as employee related expenses due to the increase in average FTEs.

Net Occupancy Net occupancy expense was $7.7 million and $15.0 million for the three and six months ended June 30, 2014, respectively, compared to $5.8 million and $11.6 million for the comparable 2013 periods. The increases were reflective of lease renewals at higher rates, reflective of market conditions, and the expansion of certain existing offices.

FDIC Assessments FDIC assessments expense was $4.9 million and $9.1 million for the three and six months ended June 30, 2014, respectively, compared to $2.9 million and $6.2 million for the comparable 2013 periods, respectively. The increase was primarily due to the increase of $8.6 billion in average assets since the second quarter of 2013.

Provision for Unfunded Credit Commitments 71-------------------------------------------------------------------------------- Table of Contents We recorded a provision for unfunded credit commitments of $2.2 million and $3.3 million for the three and six months ended June 30, 2014, respectively, compared to a provision of $1.3 million and $3.4 million for the comparable 2013 periods, respectively. The provision of $2.2 million for the three months ended June 30, 2014 was primarily reflective of a $1.2 billion increase in total unfunded commitments during the second quarter of 2014. The provision of $3.3 million for the six months ended June 30, 2014 was primarily reflective of a $3.8 billion increase in total unfunded credit commitments during the six months ended June 30, 2014.

Other Noninterest Expense A summary of other noninterest expense for the three and six months ended June 30, 2014 and 2013 is as follows: Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2014 2013 % Change 2014 2013 % Change Client services $ 2,586 $ 1,856 39.3 % $ 4,945 $ 3,791 30.4 % Tax credit fund amortization 2,502 1,338 87.0 4,530 2,655 70.6 Data processing services 2,041 1,882 8.4 4,268 3,794 12.5 Telephone 1,538 1,512 1.7 3,286 3,069 7.1 Postage and supplies 716 680 5.3 1,485 1,218 21.9 Dues and publications 636 445 42.9 1,133 903 25.5 Other 3,108 1,975 57.4 4,670 4,193 11.4 Total other noninterest expense $ 13,127 $ 9,688 35.5 $ 24,317 $ 19,623 23.9 Other noninterest expense was $13.1 million for the three months ended June 30, 2014, compared to $9.7 million for the comparable 2013 period. The increase of $3.4 million for the three month period was primarily due to the increase in tax credit fund amortization expense of $1.2 million reflective of approximately $10.9 million in additional tax credit fund investment purchases and $1.1 million primarily due to certain non-recurring expenses and an increase in licensing and fees.

Other noninterest expense was $24.3 million for the six months ended June 30, 2014, compared to $19.6 million for the comparable 2013 period. The increase of $4.7 million for the six month period was primarily due to the increase in tax credit fund amortization expense of $1.9 million reflective of approximately $23.2 million in additional tax credit fund investment purchases and an increase of $1.2 million in client services expense as a result of increased cash management services for our clients.

72-------------------------------------------------------------------------------- Table of Contents Net Income Attributable to Noncontrolling Interests Included in net income is income and expense attributable to noncontrolling interests. The relevant amounts allocated to investors in our consolidated subsidiaries, other than us, are reflected under "Net Income Attributable to Noncontrolling Interests" on our statements of income.

In the table below, noninterest income consists primarily of investment gains and losses from our consolidated funds. Noninterest expense is primarily related to management fees paid by our managed funds to SVB Financial's subsidiaries as the funds' general partners. A summary of net income attributable to noncontrolling interests for the three and six months ended June 30, 2014 and 2013 is as follows: Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2014 2013 % Change 2014 2013 % Change Net interest loss (income) (1) $ 5 $ (20 ) (125.0 )% $ (3 ) $ (44 ) (93.2 )% Noninterest loss (income) (1) 43,961 (31,498 ) NM (158,177 ) (54,786 ) 188.7 Noninterest expense (1) 5,267 2,867 83.7 8,588 5,727 50.0 Carried interest (loss) income (2) (8,636 ) 747 NM 6,784 1,545 NM Net loss (income) attributable to noncontrolling interests $ 40,597 $ (27,904 ) NM $ (142,808 ) $ (47,558 ) NM NM-Not meaningful (1) Represents noncontrolling interests' share in net interest income, noninterest income and noninterest expense.

(2) Represents the preferred allocation of income (or change in income) earned by us as the general partner of certain consolidated funds.

Income Taxes Our effective income tax expense rate was 39.8 percent for the three months ended June 30, 2014, compared to 38.2 percent for the three months ended June 30, 2013. The components of our tax rate are consistent for the second quarter and first half of 2014 and 2013, respectively. Our effective income tax expense rate was 39.4 percent for the six months ended June 30, 2014, compared to 38.7 percent for the comparable 2013 period. The increases in the tax rates were primarily attributable to lower tax credits from our tax advantaged investments.

Our effective tax rate is calculated by dividing income tax expense by the sum of income before income tax expense and the net income attributable to noncontrolling interests.

Operating Segment Results We have three segments for which we report our financial information: Global Commercial Bank, SVB Private Bank and SVB Capital.

We report segment information based on the "management" approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of our reporting segments.

Please refer to Note 10-"Segment Reporting" of the "Notes to Interim Consolidated Financial Statements (unaudited)" under Part I, Item 1 of this report for additional details.

Our primary source of revenue is from net interest income, which is primarily the difference between interest earned on loans, net of 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.

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. The following is our reportable segment information for the three and six months ended June 30, 2014 and 2013: 73-------------------------------------------------------------------------------- Table of Contents Global Commercial Bank Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2014 2013 % Change 2014 2013 % Change Net interest income $ 178,488 $ 154,586 15.5 % $ 354,191 $ 303,522 16.7 % Provision for loan losses (1,841 ) (18,190 ) (89.9 ) (2,648 ) (24,397 ) (89.1 ) Noninterest income 53,021 48,361 9.6 111,658 94,902 17.7 Noninterest expense (123,679 ) (101,246 ) 22.2 (245,604 ) (205,585 ) 19.5 Income before income tax expense $ 105,989 $ 83,511 26.9 $ 217,597 $ 168,442 29.2 Total average loans, net of unearned income $ 9,971,725 $ 8,203,231 21.6 $ 9,867,841 $ 8,036,833 22.8 Total average assets 29,218,349 20,442,613 42.9 27,405,141 20,491,451 33.7 Total average deposits 26,324,070 18,137,218 45.1 24,610,629 18,219,590 35.1 Three months ended June 30, 2014 compared to the three months ended June 30, 2013 Income before income tax expense from our Global Commercial Bank ("GCB") increased to $106.0 million for the three months ended June 30, 2014, compared to $83.5 million for the comparable 2013 period. Income before income tax expense was primarily driven by higher interest income due to strong average loan growth, reflective of our outstanding deposit growth, and a lower provision for loan losses as the quality of the loan portfolio continued to improve. The key components of GCB's performance for the three months ended June 30, 2014 compared to the comparable 2013 period are discussed below.

Net interest income from our GCB increased by $23.9 million for the three months ended June 30, 2014, primarily due to a $13.0 million increase in loan interest income resulting mainly from an increase in average loan balances, partially offset by lower loan yields. Additionally, GCB had a $16.0 million increase in the FTP earned for deposits due to strong average deposit growth. These increases were partially offset by a $4.6 million decrease in the FTP earned for deposits from decreases in market interest rates.

GCB had a provision for loan losses of $1.8 million for the three months ended June 30, 2014, compared to $18.2 million for the comparable 2013 period. The provision of $1.8 million for the three months ended June 30, 2014 was primarily driven from period-end loan growth and net charge-offs, offset by a reserve release due to the improvement of the credit quality of our overall loan portfolio and a decrease in the reserve for impaired loans resulting from a decrease in impaired loan balances from repayments and charge-offs. The provision of $18.2 million for the three months ended June 30, 2013 was primarily attributable to period-end loan growth, as well as to provide for net charge-offs and a modest increase in our reserve for impaired loans.

Noninterest income increased by $4.7 million for the three months ended June 30, 2014, primarily related to higher foreign exchange fees, credit card fees and unused commitment fees. The increase in foreign exchange fees was primarily due to improved business conditions for our clients, which has resulted in an increase in the number of trades and commissioned notional volumes. The increase in credit card fees was primarily due to increases in client volumes and the addition of new credit card clients. The increase in unused commitment fees was primarily due to an increase in unfunded credit commitments.

Noninterest expense increased by $22.4 million for the three months ended June 30, 2014, primarily due to increases in compensation and benefits expenses related to our salaries and wages and incentive plan/ESOP expenses. The increase in our salaries and wages expenses was primarily due to an increase in the average number of FTEs at GCB, which increased by 95 to 1,440 FTEs for the three months ended June 30, 2014, compared to 1,345 FTEs for the comparable 2013 period. The increase in average FTEs was attributable to increases in positions for product development, operational and sales and advisory, as well as to support our commercial banking operations and initiatives. The increase in our incentive compensation plan/ESOP expenses were primarily related to our strong performance in the second quarter of 2014 and our current expectation that we will exceed our internal performance targets for 2014. Net occupancy costs for GCB also increased due to the impact of lease renewals at higher rates, reflective of market conditions, and the expansion of certain existing offices.

Six months ended June 30, 2014 compared to the six months ended June 30, 2013 Net interest income from our Global Commercial Bank ("GCB") increased by $50.7 million for the six months ended June 30, 2014, primarily due to an increase in loan interest income resulting mainly from an increase in average loan balances and an increase in the FTP earned for deposits due to deposit growth. These increases were partially offset by a decrease in the FTP earned for deposits from decreases in market interest rates.

We had a provision for loan losses for GCB of $2.6 million for the six months ended June 30, 2014, compared to a provision of $24.4 million for the comparable 2013 period. The provision of $2.6 million for the six months ended June 30, 2014 was 74-------------------------------------------------------------------------------- Table of Contents primarily due to net charge-offs and period-end loan growth and offset by a decrease in our reserve for impaired loans due to repayments on impaired loan balances and improvement in the overall credit quality of gross performing loans. The provision for the comparable 2013 period was primarily due to period-end loan growth, as well as to provide for net charge-offs and a modest increase in our reserve for impaired loans.

Noninterest income increased by $16.8 million for the six months ended June 30, 2014, primarily due to an increase in foreign exchange fees, credit card fees and unused commitment fees. The increase in foreign exchange fees was primarily due to improving business conditions for our clients and increased volatility in foreign markets, which has resulted in an improvement in our spread as well as a higher number of trades. The increase in credit card fees was primarily due to the addition of new credit card clients and an increase in client activity. The increase in unused commitment fees was primarily due to an increase in unfunded credit commitments.

Noninterest expense increased by $40.0 million for the six months ended June 30, 2014, primarily due to an increase in salaries and wages, net occupancy and professional services. The increase in salaries and wages was primarily due to an increase in the average number of FTEs at GCB, which increased by 84 to 1,428 for the six months ended June 30, 2014, compared to 1,344 for the comparable 2013 period. The increase in average FTEs was attributable to increases in positions for product development, operational and sales and advisory, as well as to support our commercial banking operations and initiatives. Net occupancy costs increased due to the impact of lease renewals at higher rates, reflective of market conditions, and the expansion of certain existing offices. The increase in professional services was to support our ongoing business and IT infrastructure initiatives.

SVB Private Bank Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2014 2013 % Change 2014 2013 % Change Net interest income $ 9,293 $ 5,927 56.8 % $ 16,185 $ 12,031 34.5 % (Provision for) reduction of loan losses (106 ) (382 ) (72.3 ) 207 12 NM Noninterest income 356 253 40.7 630 487 29.4 Noninterest expense (2,640 ) (1,848 ) 42.9 (5,135 ) (3,779 ) 35.9 Income before income tax expense $ 6,903 $ 3,950 74.8 $ 11,887 $ 8,751 35.8 Total average loans, net of unearned income $ 1,119,503 $ 871,746 28.4 $ 1,084,894 $ 858,351 26.4 Total average assets 985,225 881,298 11.8 974,853 865,777 12.6 Total average deposits 791,261 472,613 67.4 768,300 471,648 62.9 NM - Not meaningful Three months ended June 30, 2014 compared to the three months ended June 30, 2013 Net interest income from SVB Private Bank increased by $3.4 million for the three months ended June 30, 2014, primarily due to a $3.3 million increase in loan interest income resulting primarily from an increase in average loan balances and loan yields.

Noninterest expense increased by $0.8 million for the three months ended June 30, 2014, primarily driven by expenses related to our new Wealth Advisory practice.

Six months ended June 30, 2014 compared to the six months ended June 30, 2013 Net interest income from SVB Private Bank increased by $4.2 million for the six months ended June 30, 2014, primarily due to an increase in loan interest income resulting primarily from an increase in average loan balances.

Noninterest expense increased by $1.4 million for the six months ended June 30, 2014, primarily driven by expenses related to our new Wealth Advisory practice.

75-------------------------------------------------------------------------------- Table of Contents SVB Capital Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2014 2013 % Change 2014 2013 % Change Net interest income $ 29 $ 3 NM $ 43 $ 4 NM Noninterest (loss) income (3,119 ) 7,281 (142.8 ) 34,553 12,722 171.6 Noninterest expense (3,144 ) (2,757 ) 14.0 (5,779 ) (5,143 ) 12.4 (Loss) income before income tax expense $ (6,234 ) $ 4,527 NM $ 28,817 $ 7,583 NM Total average assets $ 342,924 $ 269,771 27.1 $ 342,451 $ 254,343 34.6 NM - Not meaningful SVB Capital's components of noninterest (loss) income primarily include net gains and losses on non-marketable and other securities, carried interest and fund management fees. All components of (loss) income before income tax expense discussed below are net of noncontrolling interests.

We experience variability in the performance of SVB Capital from quarter to quarter due to a number of factors, including changes in the values of our funds' underlying investments, changes in the amount of distributions and general economic and market conditions. Such variability may lead to volatility in the gains and losses from investment securities and cause our results to differ from period to period. Results for a particular period may not be indicative of future performance.

Three months ended June 30, 2014 compared to the three months ended June 30, 2013 SVB Capital had a noninterest loss of $3.1 million for the three months ended June 30, 2014, compared to noninterest income of $7.3 million for the comparable 2013 period. The loss was primarily due to net losses on investment securities and the related reduction of carried interest. SVB Capital's components of noninterest (loss) income primarily include the following: • Net losses on investment securities of $6.8 million for the three months ended June 30, 2014, compared to net gains of $4.2 million for the comparable 2013 period. The net losses on investment securities of $6.8 million for the three months ended June 30, 2014 were primarily driven by unrealized valuation losses and reductions in carried interest allocations in two of our managed direct venture funds, related to FireEye. These losses were partially offset by gains from our strategic and other investments, which were primarily driven by strong distributions from strategic venture capital fund investments as well as the sale of one of our direct equity investments, for which we recorded a realized gain of $4.7 million.

• Fund management fees of $3.6 million and $2.9 million for the three months ended June 30, 2014 and 2013, respectively. Fund management fees increased due to the addition of the Capital Partners III, LP fund in 2014.

Six months ended June 30, 2014 compared to the six months ended June 30, 2013 Noninterest (loss) income increased by $21.8 million to $34.6 million for the six months ended June 30, 2014, primarily due to net gains on investment securities. SVB Capital's components of noninterest (loss) income primarily include the following: • Net gains on investment securities of $27.5 million for the six months ended June 30, 2014, compared to net gains of $7.2 million for the comparable 2013 period. The net gains on investment securities of $27.5 million for the six months ended June 30, 2014 were primarily driven by unrealized valuation increases and carried interest allocations in two of our managed direct venture funds, related to FireEye, as well as unrealized valuation gains from our managed funds of funds and gains from our strategic and other investments, which were primarily driven by strong distributions from strategic venture capital fund investments as well as the sale of one of our direct equity investments, for which we recorded a realized gain of $4.7 million.

• Fund management fees of $6.3 million for the six months ended June 30, 2014, compared to $5.7 million for the comparable 2013 period. Fund management fees increased due to the addition of the Capital Partners III, LP fund in 2014.

Consolidated Financial Condition Our total assets, total liabilities and stockholders' equity were $33.3 billion at June 30, 2014, an increase of $6.9 billion, or 26.1 percent, compared to $26.4 billion at December 31, 2013. Below is a summary of the individual components driving the changes in total assets, total liabilities and stockholders' equity.

Cash and Cash Equivalents Cash and cash equivalents totaled $2.6 billion at June 30, 2014, an increase of $1.1 billion, or 72.2 percent, compared to $1.5 billion at December 31, 2013.

The increase was primarily reflective of a $5.7 billion increase in average deposits and $0.4 billion in net proceeds from our stock offering, offset by an increase of $4.2 billion in average investment securities and $0.9 billion in average loans.

As of June 30, 2014 and December 31, 2013, $1.7 billion and $715 million, respectively, of our cash and due from banks was deposited at the Federal Reserve Bank and was earning interest at the Federal Funds target rate, and interest-earning deposits in other financial institutions were $443 million and $300 million, respectively.

Investment Securities Investment securities totaled $18.9 billion at June 30, 2014, an increase of $5.3 billion, or 39.1 percent, compared to $13.6 billion at December 31, 2013.

Our investment securities portfolio consists of an available-for-sale securities portfolio and a held-to-maturity portfolio, both of which primarily represent interest-earning investment securities, and a non-marketable and other securities portfolio, which primarily represents investments managed as part of our funds management business. The increase of $5.3 billion included an increase of $5.1 billion in our fixed income securities portfolio as well as an increase of $0.2 billion in non-marketable and other securities. The major components of the change are explained below.

Available-for-Sale Securities Our available-for-sale securities portfolio is a fixed income investment portfolio that is managed to earn an appropriate portfolio yield over the long-term while maintaining sufficient liquidity and credit diversification as well as addressing our asset/liability management objectives. Available-for-sale securities were $11.7 billion at June 30, 2014, a decrease of $0.3 billion, or 2.6 percent, compared to $12.0 billion at December 31, 2013. The decrease was primarily due to a $5.4 billion transfer of securities out of our available-for-sale securities portfolio into a held-to-maturity securities portfolio as discussed below and paydowns, scheduled maturities and called maturities of $1.1 billion. These decreases were partially offset by the purchase of new available-for-sale securities of $6.0 billion. Purchases of new investments of $6.0 billion were primarily comprised of fixed-rate U.S. Treasury securities.

Securities classified as available-for-sale are carried at fair market value with changes in fair market value recorded as unrealized gains or losses in a separate component of shareholders equity. Securities classified as held-to-maturity are accounted for at cost with no adjustments for changes in fair value.

Held-to-Maturity Securities During the second quarter of 2014, we re-designated certain securities from the classification of "available-for-sale" to "held-to-maturity". The securities re-designated primarily consisted of agency-issued mortgage securities and CMOs with a total carrying value of $5.4 billion at June 1, 2014. At the time of re-designation the securities had unrealized gains totaling $22.5 million, net of tax, recorded in accumulated other comprehensive income and are being amortized over the life of the securities in a manner consistent with the amortization of a premium or discount. Our decision to re-designate the securities was based on our ability and intent to hold these securities to maturity. Factors used in assessing the ability to hold these securities to maturity were future liquidity needs and sources of funding.

76-------------------------------------------------------------------------------- Table of Contents During June 2014, new investments of $120 million increased the period-end held-to-maturity security balance to $5.5 billion at June 30, 2014. Average held-to-maturity securities were $1.8 billion for the second quarter of 2014.

The purchases of new investments of $120 million were primarily comprised of fixed-rate and agency-issued mortgage securities.

Securities classified as held-to-maturity are accounted for at cost with no adjustments for changes in fair value. For securities re-designated as held-to-maturity from available-for-sale, the unrealized gains at the date of transfer will continue to be reported as a separate component of shareholders' equity and amortized as mentioned above.

Portfolio duration is a standard measure used to approximate changes in the market value of fixed income instruments due to a change in market interest rates. The measure is an estimate based on the level of current market interest rates, expectations for changes in the path of forward rates and the effect of forward rates on mortgage prepayment speed assumptions. As such, portfolio duration will fluctuate with changes in market interest rates. Changes in portfolio duration are also impacted by changes in the mix of longer versus shorter term-to-maturity securities. At June 30, 2014 and December 31, 2013, our estimated fixed income securities portfolio duration was 3.1 years and 3.3 years, respectively.

Non-Marketable and Other Securities Our non-marketable and other securities portfolio primarily represents investments in venture capital and private equity funds, debt funds and private and public portfolio companies. A majority of these investments are managed through our SVB Capital funds business in funds of funds and direct venture and private equity funds. Included in our non-marketable and other securities carried under fair value accounting are amounts that are attributable to noncontrolling interests. We are required under GAAP to consolidate 100% of these investments that we are deemed to control, even though we may own less than 100% of such entities. See below for a summary of the carrying value (as reported) of non-marketable and other securities compared to the amounts attributable to SVBFG.

Non-marketable and other securities were $1.8 billion at June 30, 2014, an increase of $0.2 billion, or 10.1 percent, compared to $1.6 billion at December 31, 2013. The increase was primarily attributable to valuation gains in our managed funds of funds and managed direct venture funds, primarily driven by valuation gains in existing public portfolio holdings and fund investments. The following table summarizes the carrying value (as reported) of non-marketable and other securities compared to the amounts attributable to SVBFG (which generally represents the carrying value times our ownership percentage) at June 30, 2014 and December 31, 2013: June 30, 2014 December 31, 2013 Amount Amount Carrying value attributable Carrying value attributable (Dollars in thousands) (as reported) to SVBFG (as reported) to SVBFG Non-marketable securities (fair value accounting): Venture capital and private equity fund investments (1) $ 1,040,522 $ 78,122 $ 862,972 $ 76,505 Other venture capital investments (2) 43,747 1,941 32,839 2,097 Other securities (fair value accounting) (3) 281,639 20,193 321,374 23,058 Non-marketable securities (equity method accounting): Other investments 137,845 137,845 142,883 142,883 Low income housing tax credit funds 95,395 95,395 72,241 72,241 Non-marketable securities (cost method accounting): Venture capital and private equity fund investments 142,136 142,136 148,994 148,994 Other investments 15,951 15,951 14,191 14,191 Total non-marketable and other securities $ 1,757,235 $ 491,583 $ 1,595,494 $ 479,969 (1) The following table shows the amounts of venture capital and private equity fund investments held by the following consolidated funds and amounts attributable to SVBFG for each fund at June 30, 2014 and December 31, 2013: 77 -------------------------------------------------------------------------------- Table of Contents June 30, 2014 December 31, 2013 Amount Amount Carrying value attributable Carrying value attributable (Dollars in thousands) (as reported) to SVBFG (as reported) to SVBFG SVB Strategic Investors Fund, LP $ 27,075 $ 3,401 $ 29,104 $ 3,656 SVB Strategic Investors Fund II, LP 92,617 7,939 96,185 8,244 SVB Strategic Investors Fund III, LP 257,489 15,117 260,272 15,280 SVB Strategic Investors Fund IV, LP 307,600 15,380 226,729 11,337 Strategic Investors Fund V Funds 191,024 279 118,181 184 Strategic Investors Fund VI Funds 38,879 60 7,944 12 SVB Capital Preferred Return Fund, LP 61,573 13,270 59,028 12,722 SVB Capital-NT Growth Partners, LP 63,026 22,002 61,126 21,339 SVB Capital Partners II, LP 595 30 708 36 Other private equity fund 644 644 3,695 3,695 Total venture capital and private equity fund investments $ 1,040,522 $ 78,122 $ 862,972 $ 76,505 (2) The following table shows the amounts of other venture capital investments held by the following consolidated funds and amounts attributable to SVBFG for each fund at June 30, 2014 and December 31, 2013: June 30, 2014 December 31, 2013 Amount Amount Carrying value attributable Carrying value attributable (Dollars in thousands) (as reported) to SVBFG (as reported) to SVBFG Silicon Valley BancVentures, LP $ 6,177 $ 661 $ 6,564 $ 702 SVB Capital Partners II, LP 18,471 938 22,684 1,152 Capital Partners III, LP 15,000 65 - - SVB Capital Shanghai Yangpu Venture Capital Fund 4,099 277 3,591 243 Total other venture capital investments $ 43,747 $ 1,941 $ 32,839 $ 2,097 (3) Investments classified as other securities (fair value accounting) represent direct equity investments in public companies held by our consolidated funds.

At June 30, 2014, the amount primarily includes total unrealized gains of $193.9 million in one public company, FireEye. The extent to which any unrealized gains (or losses) will become realized is subject to a variety of factors, including among other things, changes in prevailing market prices and the timing of any sales or distribution of securities, which are subject to our securities sales and governance processes and may also be constrained by lock-up agreements. None of the FireEye related investments currently are subject to a lock-up agreement.

Volcker Rule The Volcker Rule is a part of the Dodd-Frank Act and prohibits certain investments, and relationships with, certain privately offered funds ("covered funds"). Under the final rules of the Dodd-Frank Act, the regulations implementing the Volcker Rule, these prohibitions and restrictions will apply to SVB Financial, the Bank and any affiliate of SVB Financial or the Bank (including the SVB Capital funds). SVB Financial maintains investments in certain venture capital and private equity funds, which are covered funds under the Volcker Rule, that it did not organize; maintains investments in covered funds that it organized, which investments exceed a three percent per fund limit that is generally imposed by the Volcker Rule; and it has aggregate investments in covered funds that may exceed three percent of its Tier 1 capital, which is another limit generally imposed by the Volcker Rule. SVB Financial (including its affiliates) expects, therefore, that it will be required to reduce the level of its investments in covered funds and to forego investment opportunities in certain funds in the future. SVB Financial is generally required by the final rules to come into conformance with all these requirements by July 2015. The time period to divest an investment that is not permitted by the final rule Volcker Rule may be extended by the Federal Reserve Board, on a case-by-case basis, for up to two one-year extensions (which may be granted on a case-by-case or industry-wide basis), and, on a case-by-case basis, up to one additional five-year extension for certain investments that are considered illiquid. We intend to seek the maximum extensions (up to July 2022) available to us.

However, there is no guarantee that the Federal Reserve Board will grant any of these extensions. If we are not successful in obtaining one or more of these extensions or if the Federal Reserve does not otherwise provide any relief of from the restrictions under the Volcker Rule on a broader basis, we may be forced to divest certain of our investments on terms that may not be favorable to us.

78-------------------------------------------------------------------------------- Table of Contents We currently estimate that our total venture capital and private equity fund investments deemed to be prohibited covered fund interests and therefore subject to the Volcker Rule restrictions, have, as of June 30, 2014, an aggregate carrying value of approximately $256.5 million (and an aggregate fair value of $343.6 million). These covered fund interests are comprised of interests attributable, solely, to the Company in our consolidated managed funds and certain of our non-marketable securities.

We continue to assess the financial impact of these rules on our fund investments, as well as the impact of other Volcker restrictions on other areas of our business. (See "Risk Factors" under Item 1A of Part I of our 2013 Form 10-K.) Loans Loans, net of unearned income were $11.3 billion at June 30, 2014, an increase of $0.4 billion, or 4.1 percent, compared to $10.9 billion at December 31, 2013.

Unearned income was $89 million at both June 30, 2014 and December 31, 2013.

Total gross loans were $11.4 billion at June 30, 2014, an increase of $0.4 billion, or 4.0 percent, compared to $11.0 billion at December 31, 2013. The increase came primarily from our venture capital/private equity portfolio for capital call lines of credit. The breakdown of total gross loans and total loans as a percentage of total gross loans by category is as follows: June 30, 2014 December 31, 2013 (Dollars in thousands) Amount Percentage Amount Percentage Commercial loans: Software $ 4,250,824 37.2 % $ 4,141,358 37.7 % Hardware 1,154,639 10.1 1,224,480 11.1 Venture capital/private equity 2,670,600 23.3 2,408,426 21.9 Life science 1,176,928 10.3 1,181,266 10.7 Premium wine 176,441 1.5 151,255 1.4 Other 247,159 2.1 291,630 2.7 Total commercial loans 9,676,591 84.5 9,398,415 85.5 Real estate secured loans: Premium wine 547,674 4.8 515,942 4.7 Consumer 984,197 8.6 873,070 7.9 Other 30,633 0.3 31,033 0.3 Total real estate secured loans 1,562,504 13.7 1,420,045 12.9 Construction loans 76,389 0.7 77,165 0.7 Consumer loans 121,816 1.1 99,643 0.9 Total gross loans $ 11,437,300 100.0 $ 10,995,268 100.0 79-------------------------------------------------------------------------------- Table of Contents Loan Concentration The following table provides a summary of loans by size and category. The breakout of the categories is based on total client balances (individually or in the aggregate) as of June 30, 2014: June 30, 2014 Less than Five to Ten Ten to Twenty Twenty to Thirty Million (Dollars in thousands) Five Million Million Million Thirty Million or More Total Commercial loans: Software $ 1,112,014 $ 674,464 $ 974,576 $ 964,586 $ 525,184 $ 4,250,824 Hardware 233,347 178,221 258,831 221,183 263,057 1,154,639 Venture capital/private equity 381,529 374,730 627,605 267,241 1,019,495 2,670,600 Life science 319,943 275,492 245,339 143,492 192,662 1,176,928 Premium wine (1) 77,825 42,887 16,576 39,153 - 176,441 Other 125,167 31,935 32,371 22,929 34,757 247,159 Commercial loans 2,249,825 1,577,729 2,155,298 1,658,584 2,035,155 9,676,591 Real estate secured loans: Premium wine (1) 144,994 155,791 157,752 58,897 30,240 547,674 Consumer (2) 850,195 104,220 9,782 20,000 - 984,197 Other 2,500 5,000 - 23,133 - 30,633 Real estate secured loans 997,689 265,011 167,534 102,030 30,240 1,562,504 Construction loans 11,285 41,646 23,458 - - 76,389 Consumer loans (2) 64,451 21,827 420 3,118 32,000 121,816 Total gross loans $ 3,323,250 $ 1,906,213 $ 2,346,710 $ 1,763,732 $ 2,097,395 $ 11,437,300 (1) Premium wine clients can have loan balances included in both commercial loans and real estate secured loans, the total of which are used for the breakout of the above categories.

(2) Consumer loan clients have loan balances included in both real estate secured loans and other consumer loans, the total of which are used for the breakout of the above categories.

At June 30, 2014, gross loans equal to or greater than $20 million to any single client (individually or in the aggregate) totaled $3.9 billion, or 33.8 percent of our portfolio. These loans represented 121 clients, and of these loans, none were on nonaccrual status as of June 30, 2014.

80-------------------------------------------------------------------------------- Table of Contents The following table provides a summary of loans by size and category. The breakout of the categories is based on total client balances (individually or in the aggregate) as of December 31, 2013: December 31, 2013 Less than Five to Ten Ten to Twenty Twenty to Thirty Million (Dollars in thousands) Five Million Million Million Thirty Million or More Total Commercial loans: Software $ 1,031,179 $ 647,060 $ 905,815 $ 832,375 $ 724,929 $ 4,141,358 Hardware 280,794 205,705 187,140 235,973 314,868 1,224,480 Venture capital/private equity 328,073 248,787 371,980 201,193 1,258,393 2,408,426 Life science 332,991 262,420 249,749 122,426 213,680 1,181,266 Premium wine (1) 77,431 24,667 24,810 24,347 - 151,255 Other 131,351 48,698 - 76,581 35,000 291,630 Commercial loans 2,181,819 1,437,337 1,739,494 1,492,895 2,546,870 9,398,415 Real estate secured loans: Premium wine (1) 136,748 128,291 146,439 73,594 30,870 515,942 Consumer loans (2) 760,693 82,545 9,832 20,000 - 873,070 Other 2,500 5,000 - 23,533 - 31,033 Real estate secured loans 899,941 215,836 156,271 117,127 30,870 1,420,045 Construction loans 16,432 48,359 12,374 - - 77,165 Consumer loans (2) 46,019 20,022 600 3,003 29,999 99,643 Total gross loans $ 3,144,211 $ 1,721,554 $ 1,908,739 $ 1,613,025 $ 2,607,739 $ 10,995,268 (1) Premium wine clients can have loan balances included in both commercial loans and real estate secured loans, the total of which are used for the breakout of the above categories.

(2) Consumer loan clients have loan balances included in both real estate secured loans and other consumer loans, the total of which are used for the breakout of the above categories.

At December 31, 2013, gross loans equal to or greater than $20 million to any single client (individually or in the aggregate) totaled $4.2 billion, or 38.4 percent of our portfolio. These loans represented 122 clients, and of these loans, none were on nonaccrual status as of December 31, 2013.

The credit profile of our clients varies across our loan portfolio, based on the nature of the lending we do for different market segments. Our technology and life sciences loan portfolio includes loans to clients at all stages of their life cycles, beginning with our SVB Accelerator practice, which serves our emerging or early-stage clients. Loans provided to early-stage clients represent a relatively small percentage of our overall portfolio at 10.3 percent of total gross loans at June 30, 2014, compared to 9.2 percent at December 31, 2013.

Typically these loans are made to companies with modest or negative cash flows and no established record of profitable operations. Repayment of these loans may be dependent upon receipt by borrowers of additional equity financing from venture capitalist firms or others, or in some cases, a successful sale to a third party or an IPO. Venture capital firms may provide financing at lower levels, more selectively or on less favorable terms, which may have an adverse effect on our borrowers that are otherwise dependent on such financing to repay their loans to us. When repayment is dependent upon the next round of venture investment and there is an indication that further investment is unlikely or will not occur, it is often likely the company would need to be sold to repay debt in full. If reasonable efforts have not yielded a likely buyer willing to repay all debt at the close of the sale or on commercially viable terms, the account will most likely be deemed to be impaired.

At June 30, 2014, our lending to venture capital/private equity firms represented 23.3 percent of total gross loans, compared to 21.9 percent of total gross loans at December 31, 2013. Many of these clients have capital call lines of credit, the repayment of which is dependent on the payment of capital calls by the underlying limited partner investors in the funds managed by these firms.

At June 30, 2014, sponsor-led buyout loans represented 15.9 percent of total gross loans, compared to 12.5 percent of total gross loans at December 31, 2013.

These loans are typically larger in nature and repayment is generally dependent upon the cash flows of the acquired company. However, these loans are typically highly-secured and therefore carry lower credit risk. The increase from December 31, 2013 to June 30, 2014 was primarily due to the use, by us, of an expanded definition for loans in the sponsor-led buyout loan portfolio.

At June 30, 2014, our asset-based lending, which consists primarily of working capital lines and accounts receivable factoring represented 7.4 percent and 3.5 percent, respectively, of total gross loans, compared to 7.3 percent and 4.2 percent, respectively 81-------------------------------------------------------------------------------- Table of Contents at December 31, 2013. The repayment of these arrangements is dependent on the financial condition, and payment ability, of third parties with whom our clients do business.

Approximately 39.3 percent of our outstanding total gross loan balances as of June 30, 2014 were to borrowers based in California compared to 39.7 percent as of December 31, 2013. Other than California, there are no states with gross loan balances greater than 10 percent.

See generally "Risk Factors-Credit Risks" set forth under Item 1A, Part I in our 2013 Form 10-K.

Credit Quality Indicators As of June 30, 2014, our criticized and impaired loans represented 5.5 percent of our total gross loans. This compares to 5.7 percent at December 31, 2013. The decrease in criticized loans was reflective of the overall improvement of the credit quality of our loan portfolio. A majority of our criticized loans are from our SVB Accelerator portfolio, serving our emerging or early stage clients.

Loans to early stage clients make up 10.3 percent of our loan portfolio. It is common for an emerging or early stage client's remaining liquidity to fall temporarily below the threshold for a pass-rated credit during its capital-raising period for a new round of funding. This situation typically lasts only a few weeks and, in our experience, generally resolves itself with a subsequent round of venture funding. As a result, we expect that each of our early-stage clients will be managed through our criticized portfolio during a portion of their life cycle. Criticized loan levels will continue to vary but are expected to remain within the current range.

Credit Quality and Allowance for Loan Losses Nonperforming assets consist of loans on nonaccrual status, loans past due 90 days or more still accruing interest, and Other Real Estate Owned ("OREO") and other foreclosed assets. We measure all loans placed on nonaccrual status for impairment based on the fair value of the underlying collateral or the net present value of the expected cash flows. The table below sets forth certain data and ratios between nonperforming loans, nonperforming assets and the allowance for loan losses: (Dollars in thousands) June 30, 2014 December 31, 2013 Gross nonperforming, past due, and restructured loans: Impaired loans $ 22,346 $ 51,649 Loans past due 90 days or more still accruing interest 93 99 Total nonperforming loans 22,439 51,748 OREO and other foreclosed assets 1,745 1,001 Total nonperforming assets $ 24,184 $ 52,749 Performing TDRs $ 1,132 $ 403 Nonperforming loans as a percentage of total gross loans 0.20 % 0.47 % Nonperforming assets as a percentage of total assets 0.07 0.20 Allowance for loan losses $ 120,728 $ 142,886 As a percentage of total gross loans 1.06 % 1.30 % As a percentage of total gross nonperforming loans 538.03 276.12 Allowance for loan losses for impaired loans $ 4,681 $ 21,277 As a percentage of total gross loans 0.04 % 0.19 % As a percentage of total gross nonperforming loans 20.86 41.12 Allowance for loan losses for total gross performing loans $ 116,047 $ 121,609 As a percentage of total gross loans 1.01 % 1.11 % As a percentage of total gross performing loans 1.02 1.11 Total gross loans $ 11,437,300 $ 10,995,268 Total gross performing loans 11,414,861 10,943,520 Reserve for unfunded credit commitments (1) 33,319 29,983 As a percentage of total unfunded credit commitments 0.25 % 0.26 % Total unfunded credit commitments (2) $ 13,569,982 $ 11,470,722 (1) The "Reserve for unfunded credit commitments" is included as a component of other liabilities. See "Provision for Unfunded Credit Commitments" above for a discussion of the changes to the reserve.

82-------------------------------------------------------------------------------- Table of Contents (2) Includes unfunded loan commitments and letters of credit.

Our allowance for loan losses as a percentage of total gross loans decreased to 1.06 percent at June 30, 2014, compared to 1.30 percent at December 31, 2013.

This decrease was driven by a decrease in reserves for impaired loans primarily due to repayments of impaired loans as well as the improvement in the credit quality of the gross performing loan portfolio. Our reserve percentage for performing loans decreased to 1.02 percent at June 30, 2014, compared to 1.11 percent at December 31, 2013, primarily due to the continued strong performance of our performing loan portfolio.

Our nonperforming loans were $22.4 million at June 30, 2014, compared to $51.7 million at December 31, 2013. Our impaired loan balance decreased $29.3 million as a result of $23.8 million in net repayments and $18.9 million in charge-offs, offset by $13.4 million in new impaired loans. The allowance for loan losses related to impaired loans was $4.7 million at June 30, 2014, compared to $21.3 million at December 31, 2013.

Average impaired loans for the three and six months ended June 30, 2014 were $26.8 million and $31.3 million, respectively, compared to $41.5 million and $41.4 million for the comparable 2013 periods. If the impaired loans had not been impaired, $0.4 million and $0.8 million in interest income would have been recorded for the three and six months ended June 30, 2014 compared to $0.6 million and $1.2 million for the comparable 2013 periods.

Accrued Interest Receivable and Other Assets A summary of accrued interest receivable and other assets at June 30, 2014 and December 31, 2013 is as follows: (Dollars in thousands) June 30, 2014 December 31, 2013 % Change Derivative assets, gross (1) $ 107,979 $ 127,114 (15.1 )% Foreign exchange spot contract assets, gross 136,823 73,423 86.3 Accrued interest receivable 79,135 67,772 16.8 FHLB and Federal Reserve Bank stock 41,026 40,632 1.0 Accounts receivable 18,447 15,773 17.0 Deferred tax assets - 68,237 (100.0 ) Other assets 82,382 72,159 14.2 Total accrued interest receivable and other assets $ 465,792 $ 465,110 0.1 (1) See "Derivatives" section below.

Foreign Exchange Spot Contract Assets Foreign exchange spot contract assets represent unsettled client trades at the end of the period. The increase of $63.4 million was primarily due to increased client trade activity at period-end, and is consistent with the increase in foreign exchange spot contract liabilities (see "Other Liabilities" section below).

Accrued Interest Receivable Accrued interest receivable consists of interest on our investment securities and loans. The increase of $11.4 million was primarily due to an increase in interest receivable on our loans due to an increase in our average loan portfolio as well as an increase in interest receivable on our investment securities from growth in our fixed income investment portfolio.

Deferred Tax Assets Our deferred taxes moved to a net liability position as of June 30, 2014. See "Other Liabilities - Net Deferred Tax Liabilities" below.

83-------------------------------------------------------------------------------- Table of Contents Derivatives Derivative instruments are recorded as a component of other assets and other liabilities on the balance sheet. The following table provides a summary of derivative assets and liabilities, net at June 30, 2014 and December 31, 2013: (Dollars in thousands) June 30, 2014 December 31, 2013 % Change Assets: Equity warrant assets $ 88,905 $ 103,513 (14.1 )% Foreign exchange forward and option contracts 11,090 15,530 (28.6 ) Interest rate swaps 5,692 6,492 (12.3 ) Loan conversion options 53 314 (83.1 ) Client interest rate derivatives 2,239 1,265 77.0 Total derivative assets $ 107,979 $ 127,114 (15.1 ) Liabilities: Foreign exchange forward and option contracts $ (10,744 ) $ (12,617 ) (14.8 ) Client interest rate derivatives (2,420 ) (1,396 ) 73.4 Total derivative liabilities $ (13,164 ) $ (14,013 ) (6.1 ) Equity Warrant Assets In connection with negotiating credit facilities and certain other services, we often obtain rights to acquire stock in the form of equity warrant assets in primarily private, venture-backed companies in the technology and life science industries. At June 30, 2014, we held warrants in 1,383 companies, compared to 1,320 companies at December 31, 2013. The change in fair value of equity warrant assets is recorded in gains on derivatives instruments, net, in noninterest income, a component of consolidated net income. The following table provides a summary of transactions and valuation changes for equity warrant assets for the three and six months ended June 30, 2014 and 2013: Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2014 2013 2014 2013 Balance, beginning of period $ 91,135 $ 72,333 $ 103,513 $ 74,272 New equity warrant assets 3,352 3,941 7,431 6,444 Non-cash increases in fair value 9,774 5,697 16,832 8,492 Exercised equity warrant assets (1) (14,927 ) (5,269 ) (38,355 ) (12,402 ) Terminated equity warrant assets (429 ) (118 ) (516 ) (222 ) Balance, end of period $ 88,905 $ 76,584 $ 88,905 $ 76,584 (1) Includes $12.1 million from the exercise of our FireEye warrants during the three months ended March 31, 2014.

Foreign Exchange Forward and Foreign Currency Option Contracts We enter into foreign exchange forward contracts and foreign currency option contracts with clients involved in foreign activities, either as the purchaser or seller, depending upon the clients' need. For each forward or option contract entered into with our clients, we enter into an opposite way forward or option contract with a correspondent bank, which mitigates the risk of fluctuations in currency rates. We also enter into forward contracts with correspondent banks to economically reduce our foreign exchange exposure related to certain foreign currency denominated instruments. Revaluations of foreign currency denominated instruments are recorded in the line item "Other" as part of noninterest income, a component of consolidated net income. We have not experienced nonperformance by any of our counterparties and therefore have not incurred related losses.

Further, we anticipate performance by all counterparties. Our net exposure for foreign exchange forward and foreign currency option contracts at June 30, 2014 and December 31, 2013 amounted to $0.3 million and $2.9 million, respectively.

For additional information on our foreign exchange forward contracts and foreign currency option contracts, see Note 8- "Derivative Financial Instruments" of the "Notes to the Consolidated Financial Statements" under Part I, Item I in this report.

84-------------------------------------------------------------------------------- Table of Contents Interest Rate Swaps For information on our interest rate swaps, see Note 8-"Derivative Financial Instruments" of the "Notes to Interim Consolidated Financial Statements (unaudited)" under Part I, Item 1 of this report.

Deposits Deposits were $28.4 billion at June 30, 2014, an increase of $5.9 billion, or 26.2 percent, compared to $22.5 billion at December 31, 2013. The increase was driven by increases in our noninterest-demand and money market deposits of $4.3 billion and $1.6 billion, respectively, primarily related to strong financing, IPO and M&A activity during the second quarter of 2014 resulting in increased balances from existing clients and also reflective of growth from new clients, including strong levels of early-stage and venture capital/private client additions. At June 30, 2014, 28.6 percent of our total deposits were interest-bearing deposits, compared to 29.3 percent at December 31, 2013.

At June 30, 2014, the aggregate balance of time deposit accounts individually equal to or greater than $100,000 totaled $142 million, compared to $197 million at December 31, 2013. At June 30, 2014, all time deposit accounts individually equal to or greater than $100,000 were scheduled to mature within one year. No material portion of our deposits has been obtained from a single depositor and the loss of any one depositor would not materially affect our business.

Short-Term Borrowings Short-term borrowings were $4.9 million at June 30, 2014, compared to $5.1 million at December 31, 2013. The decrease was due to a reduction in the amount of collateral held from our counterparties in relation to exposures in our favor on outstanding derivative contracts, primarily our interest rate swap agreement related to our 6.05% Subordinated Notes.

Long-Term Debt Our long-term debt was $454 million at June 30, 2014 and $455 million at December 31, 2013. As of both June 30, 2014 and December 31, 2013, long-term debt included our 5.375% Senior Notes, 6.05% Subordinated Notes and 7.0% Junior Subordinated Debentures. For more information on our long-term debt, see Note 7-"Short-term Borrowings and Long-Term Debt" of the "Notes to Interim Consolidated Financial Statements (unaudited)".

Other Liabilities A summary of other liabilities at June 30, 2014 and December 31, 2013 is as follows: (Dollars in thousands) June 30, 2014 December 31, 2013 % Change Foreign exchange spot contract liabilities, gross $ 273,702 $ 90,725 201.7 % Accrued compensation 68,286 117,134 (41.7 ) Reserve for unfunded credit commitments 33,319 29,983 11.1 Derivative liabilities, gross (1) 13,164 14,013 (6.1 ) Net deferred tax liabilities 3,891 - - Other 166,711 152,731 9.2 Total other liabilities $ 559,073 $ 404,586 38.2 (1) See "Derivatives" section above.

Foreign Exchange Spot Contract Liabilities Foreign exchange spot contract liabilities represent unsettled client trades at the end of the period. The increase of $183 million was primarily due to increased client trade activity at period-end, and is consistent with the increase in foreign exchange spot contract assets. (See "Accrued Interest Receivable and Other Assets" section above).

Accrued Compensation Accrued compensation includes amounts for our Incentive Compensation Plans, Direct Drive Incentive Compensation Plan, Retention Program, Warrant Incentive Plan, ESOP/profit sharing and other compensation arrangements. The decrease of $49 million was primarily the result of 2013 incentive compensation payouts during the first quarter of 2014, partially offset by additional accruals for the six months ended June 30, 2014.

85-------------------------------------------------------------------------------- Table of Contents Reserve for Unfunded Credit Commitments Our reserve for unfunded credit commitments increased to $33.3 million at June 30, 2014, compared to $30.0 million at December 31, 2013, due primarily to a $2.1 billion increase in unfunded credit commitments from $11.5 billion to $13.6 billion for the six months ended June 30, 2014.

Net Deferred Tax Liabilities As of June 30, 2014, we were in a net deferred tax liability position of $3.9 million, compared to a net deferred tax asset position of $68.2 million at December 31, 2013. The net deferred tax liability position is primarily reflective of a deferred tax liability resulting from the increase in the fair value of our investment securities portfolio of approximately $118.7 million due to the decrease in period-end market interest rates.

Noncontrolling Interests Noncontrolling interests totaled $1.3 billion and $1.1 billion at June 30, 2014 and December 31, 2013, respectively. The increase of $149.2 million was primarily due to net income attributable to noncontrolling interests of $142.8 million for the six months ended June 30, 2014, driven by gains on investment securities and carried interest of $137.0 million from our managed funds of funds and $14.4 million from our managed direct venture funds.

Fair Value Measurements The following table summarizes our financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2014 and December 31, 2013.

June 30, 2014 December 31, 2013 (Dollars in thousands) Total Balance Level 3 Total Balance Level 3 Assets carried at fair value $ 13,146,677 $ 1,177,228 $ 13,331,120 $ 1,314,951 As a percentage of total assets 39.5 % 3.5 % 50.5 % 5.0 % Liabilities carried at fair value $ 13,164 $ - $ 14,013 $ - As a percentage of total liabilities - % - % 0.1 % - % Level 1 and 2 Level 3 Level 1 and 2 Level 3 Percentage of assets measured at fair value 91.0 % 9.0 % 90.1 % 9.9 % As of June 30, 2014, our available-for-sale securities, consisting primarily of U.S. Treasuries, agency-issued mortgage-backed securities and debentures issued by the U.S. government and its agencies, totaled $11.7 billion, or 88.8 percent of our portfolio of assets measured at fair value on a recurring basis, compared to $12.0 billion, or 89.9 percent, as of December 31, 2013. With the exception of U.S. Treasuries, which are classified as Level 1, these instruments were classified as Level 2 because their valuations were based on indicative prices corroborated by observable market quotes or valuation techniques with all significant inputs derived from or corroborated by observable market data. The fair value of our available-for-sale securities portfolio is sensitive to changes in levels of market interest rates and market perceptions of credit quality of the underlying securities. Market valuations and impairment analyses on assets in the available-for-sale securities portfolio are reviewed and monitored on a quarterly basis. Assets valued using Level 2 measurements also include equity warrant assets in shares of public company capital stock, marketable securities, interest rate swaps, foreign exchange forward and option contracts, loan conversion options and client interest rate derivatives.

Financial assets valued using Level 3 measurements consist of our investments in venture capital and private equity funds and direct equity investments in privately and publicly held companies, as well as equity warrant assets in shares of private and public company capital stock.

During the three and six months ended June 30, 2014, the Level 3 assets that are measured at fair value on a recurring basis experienced net realized and unrealized gains of $52.9 million and $293.1 million (which is inclusive of noncontrolling interest), respectively, primarily due to valuation increases in underlying fund investments in our managed funds and from our equity warrant assets, as well as gains from liquidity events and distributions. During the three and six months ended June 30, 2013, the Level 3 assets that are measured at fair value on a recurring basis experienced net realized and unrealized gains of $39.3 million and $65.4 million (which is inclusive of noncontrolling interest), respectively.

The valuation of non-marketable securities and equity warrant assets in shares of private company capital stock is subject to significant judgment. The inherent uncertainty in the process of valuing securities for which a ready market does not exist may cause our estimated values of these securities to differ significantly from the values that would have been derived had a 86-------------------------------------------------------------------------------- Table of Contents ready market for the securities existed, and those differences could be material. The timing and amount of changes in fair value, if any, of these financial instruments depend upon factors beyond our control, including the performance of the underlying companies, fluctuations in the market prices of the preferred or common stock of the underlying companies, general volatility and interest rate market factors, and legal and contractual restrictions. The timing and amount of actual net proceeds, if any, from the disposition of these financial instruments depend upon factors beyond our control, including investor demand for IPOs, levels of M&A activity, legal and contractual restrictions on our ability to sell, and the perceived and actual performance of portfolio companies. All of these factors are difficult to predict and there can be no assurances that we will realize the full value of these securities, which could result in significant losses. (See "Risk Factors" set forth in our 2013 Form 10-K).

Capital Resources We maintain an adequate capital base to support anticipated asset growth, operating needs and unexpected credit risks, and to ensure that SVB Financial and the Bank are in compliance with all regulatory capital guidelines. Our primary sources of new capital include retained earnings and proceeds from the sale and issuance of our capital stock or other securities. In consultation with the Finance Committee of our Board of Directors, management engages in regular capital planning processes in an effort to optimize the use of the capital available to us and to appropriately plan for our future capital needs. The capital plan considers capital needs for the foreseeable future and allocates capital to both existing and future business activities. Expected future use or activities for which capital may be set aside include balance sheet growth and associated relative increases in market or credit exposure, investment activity, potential product and business expansions, acquisitions and strategic or infrastructure investments. In addition, we conduct capital stress tests as part of our annual capital planning process. The stress tests allow us to assess the impact of adverse changes in the economy and interest rates on our capital adequacy position.

Common Stock To support the continued growth of our balance sheet, during the second quarter of 2014, we issued and sold in a registered public offering 4,485,000 shares of common stock at a price of $101.00 per share. We received net proceeds of $434.9 million after deducting underwriting discounts and commissions, of which $400 million was contributed to the Bank for capital purposes.

SVBFG Stockholders' Equity SVBFG stockholders' equity totaled $2.7 billion at June 30, 2014, an increase of $0.7 billion, or 36.1 percent, compared to $2.0 billion at December 31, 2013.

This increase was primarily due to the $434.9 million in proceeds received in conjunction with the common stock equity offering as mentioned above and net income of $142.1 million for the six months ended June 30, 2014. Additionally, the increase in the net balance of our accumulated other comprehensive income to $50.3 million from a net loss of $48.8 million at December 31, 2013, was primarily driven by a $164.3 million increase in the fair value of our fixed income security portfolios ($98.1 million net of tax), which resulted from a decrease in period-end market interest rates compared to the prior year end.

Funds generated through retained earnings are a significant source of capital and liquidity and are expected to continue to be so in the future.

Capital Ratios Both SVB Financial and the Bank are subject to various capital adequacy guidelines issued by the Federal Reserve Board and the California Department of Financial Institutions. To be classified as "adequately capitalized" under these capital guidelines, minimum ratios for (i) total risk-based capital, (ii)Tier 1 risk-based capital and (iii) Tier 1 leverage ratio for bank holding companies and banks are 8.0%, 4.0% and 4.0%, respectively.

To be classified as "well capitalized" under these capital guidelines, minimum ratios for total risk-based capital and Tier 1 risk-based capital for bank holding companies and banks are 10.0% and 6.0%, respectively. Under the same capital adequacy guidelines, a well-capitalized state member bank must maintain a minimum Tier 1 leverage ratio of 5.0%. There is no Tier 1 leverage requirement for a holding company to be deemed well-capitalized.

Regulatory capital ratios for SVB Financial and the Bank exceeded minimum federal regulatory guidelines for a well-capitalized depository institution as of June 30, 2014 and December 31, 2013. Capital ratios for SVB Financial and the Bank, compared to the minimum regulatory ratios to be considered "well capitalized" and "adequately capitalized", are set forth below: December Minimum ratio to be Minimum ratio to be June 30, 2014 31, 2013 "Well Capitalized" "Adequately Capitalized" SVB Financial: Total risk-based capital ratio 15.36 % 13.13 % 10.0 % 8.0 % Tier 1 risk-based capital ratio 14.42 11.94 6.0 4.0 Tier 1 leverage ratio 8.74 8.31 N/A 4.0 Tangible common equity to tangible assets ratio (1)(2) 8.03 7.44 N/A N/A Tangible common equity to risk-weighted assets ratio (1)(2) 14.52 11.63 N/A N/A Bank: Total risk-based capital ratio 13.41 % 11.32 % 10.0 % 8.0 % Tier 1 risk-based capital ratio 12.45 10.11 6.0 4.0 Tier 1 leverage ratio 7.51 7.04 5.0 4.0 Tangible common equity to tangible assets ratio (1)(2) 7.22 6.59 N/A N/A Tangible common equity to risk-weighted assets ratio (1)(2) 12.65 9.87 N/A N/A (1) See below for a reconciliation of non-GAAP tangible common equity to tangible assets and tangible common equity to risk-weighted assets.

(2) The Federal Reserve Bank has not issued any minimum guidelines for the tangible common equity to tangible assets ratio or the tangible common equity to risk-weighted assets ratio. However, we believe these ratios provide meaningful supplemental information regarding our capital levels and are therefore provided above.

Our regulatory capital ratios (total risk-based capital, tier 1 risk-based capital and tier 1 leverage ratios) for both SVB Financial and the Bank increased compared to December 31, 2013, primarily reflective of growth in retained earnings and SVB Financial's common stock offering during May 2014, which resulted in the issuance of 4,485,000 shares and net proceeds of $434.9 million, of which $400 million was contributed to the Bank and had a positive impact on Bank level capital ratios. The increase in our total risk-based capital ratios and tier 1 risk-based capital ratios reflect the increase in regulatory capital partially offset by the increase in risk-weighted assets during the period, primarily due to loan growth. The increase in our tier 1 leverage ratios reflect the increase in regulatory capital partially offset by the increase in total average assets during the period, primarily due to the significant growth in client deposits which flowed into our investment securities portfolio, cash and loans. All of our capital ratios are above the levels to be considered "well capitalized" under banking regulations.

The tangible common equity to tangible assets ratio and the tangible common equity to risk-weighted assets ratios are not required by GAAP or applicable bank regulatory requirements. However, we believe these ratios provide meaningful supplemental information regarding our capital levels. Our management uses, and believes that investors benefit from referring to, these ratios in evaluating the adequacy of the Company's capital levels; however, this financial measure should be considered in addition to, not as a substitute for or preferable to, comparable financial measures prepared in accordance with GAAP.

These ratios are calculated by dividing total SVBFG stockholder's equity, by total period-end assets and risk-weighted assets, after reducing both amounts by acquired intangibles, if any. The manner in which this ratio is calculated varies among companies. Accordingly, our ratio is not necessarily comparable to similar measures of other companies. The following table provides a reconciliation of non-GAAP financial measures with financial measures defined by GAAP for SVB Financial and the Bank for the periods ending June 30, 2014 and December 31, 2013: 87-------------------------------------------------------------------------------- Table of Contents SVB Financial Bank Non-GAAP tangible common equity and tangible assets (dollars in June 30, December 31, June 30, December 31, thousands, except ratios) 2014 2013 2014 2013 GAAP SVBFG stockholders' equity $ 2,675,739 $ 1,966,270 $ 2,284,663 $ 1,639,024 Less: Intangible assets - - - - Tangible common equity $ 2,675,739 $ 1,966,270 $ 2,284,663 $ 1,639,024 GAAP Total assets $ 33,309,016 $ 26,417,189 $ 31,634,882 $ 24,854,119 Less: Intangible assets - - - - Tangible assets $ 33,309,016 $ 26,417,189 $ 31,634,882 $ 24,854,119 Risk-weighted assets $ 18,429,007 $ 16,901,501 $ 18,059,726 $ 16,612,870 Tangible common equity to tangible assets 8.03 % 7.44 % 7.22 % 6.59 % Tangible common equity to risk-weighted assets 14.52 11.63 12.65 9.87 The tangible common equity to tangible assets ratio increased for SVB Financial and the Bank due to increases in total equity. See "SVBFG Stockholders' Equity" above for further details on changes to the individual components of our equity balance.

For both SVB Financial and the Bank, the tangible common equity to risk-weighted assets ratios increased due to increases in total equity, partially offset by increases in risk-weighted assets, which primarily reflects our growth in our period-end unfunded loan commitments.

Off-Balance Sheet Arrangements In the normal course of business, we use financial instruments with off-balance sheet risk to meet the financing needs of our customers. These financial instruments include commitments to extend credit, commercial and standby letters of credit and commitments to invest in venture capital and private equity fund investments. These instruments involve, to varying degrees, elements of credit risk. Credit risk is defined as the possibility of sustaining a loss because other parties to the financial instrument fail to perform in accordance with the terms of the contract. For details of our commitments to extend credit, and commercial and standby letters of credit, please refer to Note 11-"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.

Commitments to Invest in Venture Capital/Private Equity Funds Subject to applicable regulatory requirements, including the Volcker Rule, we make investments. We make commitments to invest in venture capital and private equity funds, which in turn make investments generally in, or in some cases make loans to, privately-held companies. Commitments to invest in these funds are generally made for a 10-year period from the inception of the fund. Although the limited partnership agreements governing these investments typically do not restrict the general partners from calling 100% of committed capital in one year, it is customary for these funds to generally call most of the capital commitments over 5 to 7 years; however in certain cases, the funds may not call 100% of committed capital over the life of the fund. The actual timing of future cash requirements to fund these commitments is generally dependent upon the investment cycle, overall market conditions, and the nature and type of industry in which the privately held companies operate.

For further details on our commitments to invest in venture capital and private equity funds, refer to Note 11-"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.

Liquidity The objective of liquidity management is to ensure that funds are available in a timely manner to meet our financial obligations, including, as necessary, paying creditors, meeting depositors' needs, accommodating loan demand and growth, funding investments, repurchasing securities and other operating or capital needs, without incurring undue cost or risk, or causing a disruption to normal operating conditions.

We regularly assess the amount and likelihood of projected funding requirements through a review of factors such as historical deposit volatility and funding patterns, present and forecasted market and economic conditions, individual client funding needs, and existing and planned business activities. Our Asset/Liability Committee ("ALCO"), which is a management committee, provides oversight to the liquidity management process and recommends policy guidelines for the approval of the Finance Committee of our Board of Directors, and courses of action to address our actual and projected liquidity needs.

88-------------------------------------------------------------------------------- Table of Contents Our deposit base is, and historically has been, our primary source of liquidity.

Our deposit levels and cost of deposits may fluctuate from time to time due to a variety of factors, including market conditions, prevailing interest rates, changes in client deposit behaviors, availability of insurance protection, and our offering of deposit products. At June 30, 2014, our period-end total deposit balances increased by $5.9 billion to $28.4 billion, compared to $22.5 billion at December 31, 2013. The overall increase in deposit balances was due to the addition of new clients and increased fundraising activity by our venture capital/private equity clients.

Our liquidity requirements can also be met through the use of our portfolio of liquid assets. Our definition of liquid assets includes cash and cash equivalents in excess of the minimum levels necessary to carry out normal business operations, short-term investment securities maturing within one year, available-for-sale securities eligible and available for financing or pledging purposes with a maturity in excess of one year and anticipated near-term cash flows from investments.

On a stand-alone basis, SVB Financial's primary liquidity channels include dividends from the Bank, its portfolio of liquid assets, and its ability to raise debt and capital. The ability of the Bank to pay dividends is subject to certain regulations described in "Business-Supervision and Regulation-Restriction on Dividends" under Part I, Item 1 of our 2013 Form 10-K.

Consolidated Summary of Cash Flows Below is a summary of our average cash position and statement of cash flows for the six months ended June 30, 2014 and 2013. For further details, see our "Interim Consolidated Statements of Cash Flows" under Part I, Item 1 of this report.

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