Company Quick10K Filing
Quick10K
Silicon Valley Bank
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$250.15 52 $13,090
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-04-29 Regulation FD, Exhibits
8-K 2019-04-25 Shareholder Vote
8-K 2019-04-25 Earnings, Exhibits
8-K 2019-02-19 Amend Bylaw, Exhibits
8-K 2019-02-01 Regulation FD, Exhibits
8-K 2019-01-24 Earnings, Exhibits
8-K 2019-01-24 Earnings, Exhibits
8-K 2019-01-10 Officers, Exhibits
8-K 2019-01-04 Other Events, Exhibits
8-K 2018-12-04 Regulation FD, Exhibits
8-K 2018-11-13 Other Events, Exhibits
8-K 2018-11-02 Regulation FD, Exhibits
8-K 2018-10-25 Earnings, Exhibits
8-K 2018-07-27 Regulation FD, Exhibits
8-K 2018-07-26 Earnings, Exhibits
8-K 2018-05-04 Regulation FD, Exhibits
8-K 2018-04-26 Shareholder Vote
8-K 2018-01-31 Regulation FD, Exhibits
8-K 2018-01-25 Earnings, Exhibits
SBCF Seacoast Banking of Florida 1,400
ODP Office Depot 1,140
AMNB American National Bankshares 415
RRBI Red River Bancshares 390
PRCP Perceptron 68
SKIS Peak Resorts 67
FORK Fuling Global 32
NSEC National Security Group 29
SVTE Service Team 0
FNGR Fingermotion 0
SIVB 2019-03-31
Part I - Financial Information
Item 1. Interim Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part Ii-Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-3.1 exhibit31amendedandrestate.htm
EX-31.1 sivb-3312019x10q_ex311.htm
EX-31.2 sivb-3312019x10q_ex312.htm
EX-32.1 sivb-3312019x10q_ex321.htm

Silicon Valley Bank Earnings 2019-03-31

SIVB 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 sivb-3312019x10q.htm FORM 10-Q Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2019
 
Commission File Number: 000-15637 
SVB FINANCIAL GROUP
(Exact name of registrant as specified in its charter)
  
Delaware
 
91-1962278
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
3003 Tasman Drive, Santa Clara, California
 
95054-1191
(Address of principal executive offices)
 
(Zip Code)
(408) 654-7400
(Registrant’s telephone number, including area code) 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company,” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer        x             Accelerated filer        ¨    
Non-accelerated filer        ¨                 Smaller reporting company     ¨        
Emerging growth company        ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
Securities registered pursuant to Section 12(b) of the Act
Title of Each Class
 
Trading Symbol
 
Name of Exchange on Which Registered
Common Stock, par value $0.001 per share
 
SIVB
 
NASDAQ Global Select Market
At April 30, 2019, 52,027,190 shares of the registrant’s common stock ($0.001 par value) were outstanding.




TABLE OF CONTENTS
 
 
 
Page
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 

2


Glossary of Acronyms that may be used in this Report

AFS— Available-for-Sale
APIC— Additional Paid-in Capital
ASC— Accounting Standards Codification
ASU— Accounting Standards Update
CET— Common Equity Tier
EHOP— Employee Home Ownership Program of the Company
EPS— Earnings Per Share
ERI— Energy and Resource Innovation
ESOP— Employee Stock Ownership Plan of the Company
ESPP— 1999 Employee Stock Purchase Plan of the Company
FASB— Financial Accounting Standards Board
FDIC— Federal Deposit Insurance Corporation
FHLB— Federal Home Loan Bank
FRB— Federal Reserve Bank
FTE— Full-Time Employee
FTP— Funds Transfer Pricing
GAAP— Accounting principles generally accepted in the United States of America
HTM— Held-to-Maturity
IASB— International Accounting Standards Board
IPO— Initial Public Offering
IRS— Internal Revenue Service
IT— Information Technology
LIBOR— London Interbank Offered Rate
M&A— Merger and Acquisition
OTTI— Other Than Temporary Impairment
SEC— Securities and Exchange Commission
SPD-SVB— SPD Silicon Valley Bank Co., Ltd. (the Bank's joint venture bank in China)
TDR— Troubled Debt Restructuring
UK— United Kingdom
VIE— Variable Interest Entity

3


PART I - FINANCIAL INFORMATION
ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SVB FINANCIAL GROUP AND SUBSIDIARIES
INTERIM CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
(Dollars in thousands, except par value and share data)

March 31,
2019

December 31,
2018
Assets




Cash and cash equivalents

$
7,066,883


$
3,571,539

Available-for-sale securities, at fair value (cost of $6,776,896 and $7,862,311, respectively)

6,755,094


7,790,043

Held-to-maturity securities, at cost (fair value of $14,996,508 and $15,188,236, respectively)

15,055,255


15,487,442

Non-marketable and other equity securities

974,979


941,104

Total investment securities

22,785,328


24,218,589

Loans, net of unearned income

28,850,445


28,338,280

Allowance for loan losses

(300,151
)

(280,903
)
Net loans

28,550,294


28,057,377

Premises and equipment, net of accumulated depreciation and amortization

139,003


129,213

Goodwill
 
135,190

 

Other intangible assets, net
 
58,029

 

Lease right-of-use assets
 
164,659

 

Accrued interest receivable and other assets

1,260,899


951,261

Total assets

$
60,160,285


$
56,927,979

Liabilities and total equity




Liabilities:




Noninterest-bearing demand deposits

$
39,278,712


$
39,103,422

Interest-bearing deposits

13,048,485


10,225,478

Total deposits

52,327,197


49,328,900

Short-term borrowings

14,455


631,412

Lease liabilities
 
205,167

 

Other liabilities

1,432,928


1,006,359

Long-term debt

696,715


696,465

Total liabilities

54,676,462


51,663,136

Commitments and contingencies (Note 16 and Note 19)





SVBFG stockholders’ equity:




Preferred stock, $0.001 par value, 20,000,000 shares authorized; no shares issued and outstanding




Common stock, $0.001 par value, 150,000,000 shares authorized; 52,322,105 shares and 52,586,498 shares issued and outstanding, respectively

52


53

Additional paid-in capital

1,394,130


1,378,438

Retained earnings

3,963,965


3,791,838

Accumulated other comprehensive loss

(15,374
)

(54,120
)
Total SVBFG stockholders’ equity

5,342,773


5,116,209

Noncontrolling interests

141,050


148,634

Total equity

5,483,823


5,264,843

Total liabilities and total equity

$
60,160,285


$
56,927,979

See accompanying notes to interim consolidated financial statements (unaudited).

4


SVB FINANCIAL GROUP AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
 

Three months ended March 31,
(Dollars in thousands, except per share amounts)

2019

2018
Interest income:




Loans

$
394,144


$
297,073

Investment securities:




Taxable

126,717


124,477

Non-taxable

10,937


5,092

Federal funds sold, securities purchased under agreements to resell and other short-term investment securities

19,216


5,756

Total interest income

551,014


432,398

Interest expense:




Deposits

27,907


4,097

Borrowings

10,221


8,438

Total interest expense

38,128


12,535

Net interest income

512,886


419,863

Provision for credit losses

28,551


27,972

Net interest income after provision for credit losses

484,335


391,891

Noninterest income:




Gains on investment securities, net

29,028


9,058

Gains on equity warrant assets, net

21,305


19,191

Foreign exchange fees

38,048


33,827

Credit card fees

27,483


21,692

Deposit service charges

20,939


17,699

Client investment fees

44,482


22,875

Lending related fees

13,937


10,735

Letters of credit and standby letters of credit fees

9,354


8,182

Investment banking revenue
 
49,795

 

Commissions
 
14,108

 

Other

11,897


12,259

Total noninterest income

280,376


155,518

Noninterest expense:




Compensation and benefits

238,061


165,806

Professional services

36,986


28,725

Premises and equipment

21,700


18,545

Net occupancy

16,048


13,616

Business development and travel

15,354


11,191

FDIC and state assessments

3,979


9,430

Other

33,536


18,104

Total noninterest expense

365,664


265,417

Income before income tax expense

399,047


281,992

Income tax expense

107,435


73,966

Net income before noncontrolling interests

291,612


208,026

Net income attributable to noncontrolling interests

(2,880
)

(13,065
)
Net income available to common stockholders

$
288,732


$
194,961

Earnings per common share—basic

$
5.49


$
3.69

Earnings per common share—diluted

5.44


3.63

 
See accompanying notes to interim consolidated financial statements (unaudited).

5


SVB FINANCIAL GROUP AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
 

Three months ended March 31,
(Dollars in thousands)

2019

2018
Net income before noncontrolling interests

$
291,612


$
208,026

Other comprehensive income (loss), net of tax:

 
 
 
Change in foreign currency cumulative translation gains and losses:

 
 
 
Foreign currency translation gains

2,806


3,106

Related tax expense

(782
)

(856
)
Change in unrealized gains and losses on available-for-sale securities:

 
 
 
Unrealized holding gains (losses)

46,836


(58,027
)
Related tax (expense) benefit

(13,045
)

15,926

Reclassification adjustment for losses included in net income

3,630



Related tax benefit

(1,010
)


Reclassification of unrealized gains on equity securities to retained earnings for ASU 2016-01
 

 
(40,316
)
Related tax expense
 

 
11,145

Amortization of unrealized holding gains on securities transferred from available-for-sale to held-to-maturity

(674
)

(1,206
)
Related tax benefit

188


333

Reclassification of stranded tax effect to retained earnings for ASU 2018-02
 

 
(319
)
Change in unrealized gains and losses on cash flow hedges:
 
 
 
 
Unrealized gains
 
1,102

 

Related tax expense
 
(307
)
 

Reclassification adjustment for losses included in net income
 
3

 

Related tax benefit
 
(1
)
 

Other comprehensive income (loss), net of tax

38,746


(70,214
)
Comprehensive income

330,358


137,812

Comprehensive income attributable to noncontrolling interests

(2,880
)

(13,065
)
Comprehensive income attributable to SVBFG

$
327,478


$
124,747

See accompanying notes to interim consolidated financial statements (unaudited).

6


SVB FINANCIAL GROUP AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
 
 

Common Stock

Additional
Paid-in Capital

Retained Earnings

Accumulated
Other
Comprehensive Loss

Total SVBFG
Stockholders’ Equity

Noncontrolling Interests

Total Equity
(Dollars in thousands)

Shares

Amount






Balance at December 31, 2017

52,835,188

 
$
53

 
$
1,314,377

 
$
2,866,837

 
$
(1,472
)

$
4,179,795


$
139,620


$
4,319,415

Cumulative adjustment for adoption of the revenue standard (ASU 2014-09), net of tax


 

 

 
(5,802
)
 


(5,802
)



(5,802
)
Cumulative adjustment for adoption of financial instruments (ASU 2016-01), net of tax


 

 

 
103,766

 
(29,171
)

74,595




74,595

Reclassification of stranded tax effect for ASU 2018-02


 

 

 
319

 
(319
)






Common stock issued under employee benefit plans, net of restricted stock cancellations

77,359

 

 
(479
)
 

 


(479
)



(479
)
Common stock issued under ESOP

9,672

 

 
2,577

 

 


2,577




2,577

Net income


 

 

 
194,961

 


194,961


13,065


208,026

Capital calls and distributions, net


 

 

 

 




(8,407
)

(8,407
)
Net change in unrealized gains and losses on AFS securities, net of tax


 

 

 

 
(42,101
)

(42,101
)



(42,101
)
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax
 

 

 

 

 
(873
)
 
(873
)
 

 
(873
)
Foreign currency translation adjustments, net of tax
 

 

 

 

 
2,250

 
2,250

 

 
2,250

Share-based compensation, net
 

 

 
10,523

 

 

 
10,523

 

 
10,523

Balance at March 31, 2018

52,922,219


$
53


$
1,326,998


$
3,160,081


$
(71,686
)

$
4,415,446


$
144,278


$
4,559,724

Balance at December 31, 2018

52,586,498

 
$
53

 
$
1,378,438

 
$
3,791,838

 
$
(54,120
)
 
$
5,116,209

 
$
148,634

 
$
5,264,843

Cumulative adjustment for the adoption of premium amortization on purchased callable debt securities (ASU 2017-08) (1)
 

 

 

 
(583
)
 

 
(583
)
 

 
(583
)
Acquisition of SVB Leerink
 

 

 

 

 

 

 
5,256

 
5,256

Common stock issued under employee benefit plans, net of restricted stock cancellations

209,743

 

 
(2,936
)
 

 


(2,936
)



(2,936
)
Common stock issued under ESOP

14,442

 

 
3,506

 

 


3,506




3,506

Net income


 

 

 
288,732

 


288,732


2,880


291,612

Capital calls and distributions, net


 

 

 

 




(15,720
)

(15,720
)
Net change in unrealized gains and losses on AFS securities, net of tax


 

 

 

 
36,411


36,411




36,411

Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax


 

 

 

 
(486
)

(486
)



(486
)
Foreign currency translation adjustments, net of tax


 

 

 

 
2,024


2,024




2,024

Net change in unrealized gains and losses on cash flow hedges, net of tax
 

 

 

 

 
797

 
797

 

 
797

Share-based compensation, net


 

 
15,122

 

 


15,122




15,122

Common stock repurchases
 
(488,578
)
 
(1
)
 

 
(116,022
)
 

 
(116,023
)
 

 
(116,023
)
Balance at March 31, 2019

52,322,105


$
52


$
1,394,130


$
3,963,965


$
(15,374
)

$
5,342,773


$
141,050


$
5,483,823

 
(1)
See "Adoption of New Accounting Standards" in Note 1—“Basis of Presentation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional details.
  See accompanying notes to interim consolidated financial statements (unaudited).

7


SVB FINANCIAL GROUP AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 

Three months ended March 31,
(Dollars in thousands)

2019

2018
Cash flows from operating activities:




Net income before noncontrolling interests

$
291,612


$
208,026

Adjustments to reconcile net income to net cash provided by operating activities:




Provision for credit losses

28,551


27,972

Changes in fair values of equity warrant assets, net of proceeds from exercises

(10,248
)
 
(17,508
)
Changes in fair values of derivatives, net

(3,068
)

3,928

Gains on investment securities, net

(29,028
)
 
(9,058
)
Distributions of earnings from non-marketable and other equity securities
 
15,619

 
11,385

Depreciation and amortization

20,830


14,377

Amortization of premiums and discounts on investment securities, net

1,606


(1,125
)
Amortization of share-based compensation

15,122


10,523

Amortization of deferred loan fees

(35,276
)

(29,133
)
Deferred income tax benefit

(8,834
)

(8,834
)
Excess tax benefit from exercise of stock options and vesting of restricted shares
 
(2,804
)
 
(2,543
)
Losses from the write-off of premises and equipment
 
52

 

Changes in other assets and liabilities:




Accrued interest receivable and payable, net

(3,361
)

(18,365
)
Accounts receivable and payable, net

30,447


(7,277
)
Income tax receivable and payable, net

94,552


69,869

Accrued compensation

(253,769
)

(106,356
)
Foreign exchange spot contracts, net

169,079


134,638

Other, net

19,668


67,885

Net cash provided by operating activities

340,750


348,404

Cash flows from investing activities:




Purchases of available-for-sale securities

(204,328
)


Proceeds from sales of available-for-sale securities

1,171,564



Proceeds from maturities and paydowns of available-for-sale securities

116,001


911,839

Purchases of held-to-maturity securities



(2,295,985
)
Proceeds from maturities and paydowns of held-to-maturity securities

428,433


470,232

Purchases of non-marketable and other equity securities

(16,165
)

(20,401
)
Proceeds from sales and distributions of capital of non-marketable and other equity securities

19,979


9,377

Net increase in loans

(505,516
)

(1,463,998
)
Purchases of premises and equipment

(5,504
)

(7,717
)
Acquisition of SVB Leerink, net of cash acquired
 
(100,037
)
 

Net cash provided by (used for) investing activities

904,427


(2,396,653
)
Cash flows from financing activities:




Net increase in deposits

2,998,297


1,682,457

Net (decrease) increase in short-term borrowings

(616,957
)

68,410

(Distributions to noncontrolling interests), net of contributions from noncontrolling interests

(15,720
)

(8,407
)
Common stock repurchases
 
(116,023
)
 

Proceeds from issuance of common stock, ESPP and ESOP

570


2,098

Net cash provided by financing activities

2,250,167


1,744,558

Net increase (decrease) in cash and cash equivalents

3,495,344


(303,691
)
Cash and cash equivalents at beginning of period

3,571,539


2,923,075

Cash and cash equivalents at end of period

$
7,066,883


$
2,619,384

Supplemental disclosures:




Cash paid during the period for:




Interest

$
46,548


$
20,411

Income taxes

17,570


9,385

Noncash items during the period:




Changes in unrealized gains and losses on available-for-sale securities, net of tax

$
36,411


$
(42,101
)
Distributions of stock from investments

1,276


2,282

See accompanying notes to interim consolidated financial statements (unaudited).

8


SVB FINANCIAL GROUP AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1.
Basis of Presentation
SVB Financial Group is a diversified financial services company, as well as a bank holding company and a financial holding company. SVB Financial was incorporated in the state of Delaware in March 1999. Through our various subsidiaries and divisions, we offer a diverse set of banking and financial products and services to support our clients of all sizes and stages throughout their life cycles. In these notes to our consolidated financial statements, when we refer to “SVB Financial Group,” “SVBFG," the “Company,” “we,” “our,” “us” or use similar words, we mean SVB Financial Group and all of its subsidiaries collectively, including Silicon Valley Bank (the “Bank”), unless the context requires otherwise. When we refer to “SVB Financial” or the “Parent” we are referring only to the parent company, SVB Financial Group (not including subsidiaries).
The accompanying unaudited interim consolidated financial statements reflect all adjustments of a normal and recurring nature that are, in the opinion of management, necessary to fairly present our financial position, results of operations and cash flows in accordance with GAAP. Such unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three months ended March 31, 2019 are not necessarily indicative of results to be expected for any future periods. These unaudited interim consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K”).
The accompanying unaudited interim consolidated financial statements have been prepared on a consistent basis with the accounting policies described in Consolidated Financial Statements and Supplementary Data—Note 2—“Summary of Significant Accounting Policies” under Part II, Item 8 of our 2018 Form 10-K.
The preparation of unaudited interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates may change as new information is obtained. Significant items that are subject to such estimates include measurements of fair value, the valuation of non-marketable and other equity securities, the valuation of equity warrant assets, the adequacy of the allowance for loan losses and allowance for unfunded credit commitments, and the recognition and measurement of income tax assets and liabilities.
Principles of Consolidation and Presentation
Our consolidated financial statements include the accounts of SVB Financial Group and consolidated entities. We consolidate voting entities in which we have control through voting interests or entities through which we have a controlling financial interest in a variable interest entity (“VIE”). We determine whether we have a controlling financial interest in a VIE by determining if we have: (a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses, or (c) the right to receive the expected returns of the entity. Generally, we have significant variable interests if our commitments to a limited partnership investment represent a significant amount of the total commitments to the entity. We also evaluate the impact of related parties on our determination of variable interests in our consolidation conclusions. We consolidate VIEs in which we are the primary beneficiary based on a controlling financial interest. If we are not the primary beneficiary of a VIE, we record our pro-rata interests based on our ownership percentage.
VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or equity investors, as a group, lack one of the following characteristics: (a) the power to direct the activities that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of the entity, or (c) the right to receive the expected returns of the entity. We assess VIEs to determine if we are the primary beneficiary of a VIE. A primary beneficiary is defined as a variable interest holder that has a controlling financial interest. A controlling financial interest requires both: (a) the power to direct the activities that most significantly impact the VIE’s economic performance, and (b) obligation to absorb losses or receive benefits of a VIE that could potentially be significant to a VIE. Under this analysis, we also evaluate kick-out rights and other participating rights, which could provide us a controlling financial interest. The primary beneficiary of a VIE is required to consolidate the VIE.
We also evaluate fees paid to managers of our limited partnership investments. We exclude those fee arrangements that are not deemed to be variable interests from the analysis of our interests in our investments in VIEs and the determination of a primary beneficiary, if any. Fee arrangements based on terms that are customary and commensurate with the services provided are deemed not to be variable interests and are, therefore, excluded.

9


All significant intercompany accounts and transactions with consolidated entities have been eliminated. We have not provided financial or other support during the periods presented to any VIE that we were not previously contractually required to provide.
Adoption of New Accounting Standards
In February 2016, the FASB issued a new accounting standard update (ASU 2016-02, Leases (Topic 842)), which requires for all operating leases the recognition of a right-of-use ("ROU") asset and a corresponding lease liability, in the statement of financial position. For short term leases (term of 12 months or less), a lessee is permitted to make an accounting election not to recognize lease assets and lease liabilities. The lease cost will be allocated over the lease term on a straight-line basis. There were further amendments, including practical expedients, with the issuance of ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842” in January 2018. In July 2018 the FASB issued ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements", which provides us with the option to apply the new leasing standard to all open leases as of the adoption date, on a prospective basis.
On January 1, 2019, we adopted the new accounting standard ASU 2016-02, Leases (Topic 842) and all the related amendments ("new lease standard", "ASC 842" or "ASU 2016-02") utilizing the practical expedient to apply the new lease standard as of the January 1, 2019 on a prospective basis. We also elected the "package of expedients" and elected as an accounting policy to exclude recording ROU assets and lease liabilities for leases that meet the definition of short-term leases. In addition to excluding short-term leases, we have implemented an accounting policy in which non-lease components are not separated from lease components in the measurement of ROU assets and lease liabilities for all lease contracts. The "package of expedients" allowed us to continue to account for existing leases for which the commencement date is before January 1, 2019, in accordance with the previous guidance, Leases (Topic 840), throughout the lease term, including periods after adoption of the new guidance. We recognized $146 million in ROU assets and $178 million in lease liabilities as a result of applying the new lease standard as an adjustment to our opening consolidated balance sheet on January 1, 2019. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. See Note 9—"Leases" of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for additional disclosures related to our leases.
In March 2017, the FASB issued ASU No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, which amends the amortization period for certain purchased callable debt securities held at a premium. The ASU requires entities to amortize premiums on debt securities by the first call date when the securities have fixed and determinable call dates and prices. The scope of the ASU includes all accounting premiums, such as purchase premiums and cumulative fair value hedge adjustments. The ASU does not change the accounting for discounts, which continue to be recognized over the contractual life of a security. Adoption of the ASU is on a modified retrospective basis through a cumulative effect adjustment to retained earnings as of the beginning of the year of adoption. Adoption of the ASU primarily affected our HTM portfolio of callable state and municipal debt securities. On January 1, 2019, we adopted the ASU and recognized a net reduction to retained earnings of $583 thousand.
Recent Accounting Pronouncements
In June 2016, the FASB issued a new accounting standard update (ASU 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments), which amends the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This guidance will be effective January 1, 2020, on a modified retrospective approach, with early adoption permitted, but not before January 1, 2019. We currently have a project team in place and subject matter experts to assist with our review of key interpretive issues and assist in the assessment of our existing credit loss forecasting models and processes against the new guidance to determine what modifications may be required. We are currently evaluating the impact this guidance will have on our financial position, results of operation and stockholders’ equity.
In August 2018, the FASB issued a new accounting standard update (ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement). The ASU primarily modifies certain disclosures with respect to Level 3 fair value measurements. This guidance will be effective January 1, 2020, with early adoption permitted. This guidance will not have an impact on our consolidated financial position or results of operations, and we do not expect the adoption of this standard to have a material impact on the disclosures in our Notes to the Consolidated Financial Statements.
Reclassifications

10


Certain prior period amounts, primarily related to presentation changes to our financial statement line items and immaterial changes to our reportable segments, have been reclassified to conform to current period presentations.
2.
Business Combination
On January 4, 2019, we completed the acquisition of Leerink Holdings LLC, the Boston-based parent company of healthcare and life science investment bank Leerink Partners LLC, now SVB Leerink Holdings LLC ("SVB Leerink"). The acquisition was previously announced on November 13, 2018. SVB Leerink is an investment bank specializing in Equity & Convertible Capital Markets, Mergers & Acquisitions, Equity Research and Sales & Trading for growth and innovation-minded healthcare and life science companies and operates as a wholly-owned subsidiary of SVB Financial.

The acquisition was accounted for as a business combination and accordingly, the results of SVB Leerink's operations have been included in the Company's consolidated statement of income for the three months ended March 31, 2019 from the date of acquisition. We acquired SVB Leerink for approximately $270.9 million comprised of cash and share-based replacement award liabilities. The previously announced agreed upon purchase price of $280.0 million included $9.1 million of post-combination expenses related to share-based replacement awards. In addition, we provided a retention pool for employees of $60.0 million to be paid over five years comprised of a mix of cash and equity issued under the Company's current Equity Incentive Plan. Refer to Note 4—“Share-Based Compensation” of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report for more information. The following table summarizes the allocation of the purchase price to the net assets of SVB Leerink as of January 4, 2019:
(Dollars in thousands)
 
January 4, 2019
Cash paid
 
$
263,310

Replacement award liabilities (1)
 
7,629

Total purchase consideration
 
$
270,939

Fair value of net assets acquired
 
135,749

Goodwill
 
$
135,190

 
 
(1)
The replacement award liabilities recognized as part of the total purchase consideration and the post-combination expenses of $9.1 million related to share-based replacement awards will be paid out in cash in accordance with SVB Leerink's original grant date vesting schedules.
The following table summarizes the estimated fair value of assets acquired and liabilities assumed at the date of acquisition:
(Dollars in thousands)
 
January 4, 2019
Assets acquired:
 
 
Cash and cash equivalents
 
$
163,273

Investment securities
 
32,986

Accounts receivable
 
37,538

Intangible assets
 
60,900

Other assets
 
35,128

Total assets acquired
 
329,825

Liabilities assumed:
 
 
Accrued compensation
 
137,206

Due to broker-dealers
 
18,483

Other liabilities
 
33,131

Noncontrolling interests
 
5,256

Total liabilities assumed
 
194,076

Fair value of net assets acquired
 
$
135,749


The Company recognized provisional identifiable intangible assets of $60.9 million and goodwill of $135.2 million as a result of the acquisition. The goodwill recorded includes revenue generating synergies expected from collaboration between SVB Leerink and the Company. All reported goodwill amounts have been allocated to the SVB Leerink reporting segment and are expected to be deductible for tax purposes. The Company recorded intangible assets of $60.9 million, which are subject to amortization

11


over their estimated useful lives. These fair value estimates represent our best estimate of fair value at March 31, 2019. The final amounts are subject to the completion of the fiscal 2018 financial statement audit of Leerink Holdings LLC, which is expected to be completed during the second quarter of 2019. The fair value of the noncontrolling interests in Leerink Holdings LLC represents the noncontrolling ownership percentage for SVB Leerink's consolidated VIE investment securities which are measured at net asset value.
The following table summarizes the fair value and estimated useful lives of the other intangible assets at the date of acquisition:
(Dollars in thousands)
 
Estimated Fair Value
 
Weighted Average Estimated Useful Life - in Years
Other intangible assets:
 
 
 
 
Customer relationships
 
$
42,000

 
11.0
Other
 
18,900

 
9.9
Total other intangible assets
 
$
60,900

 


SVB Leerink's net income from January 4, 2019 through March 31, 2019 was approximately $5.8 million. Supplementary pro forma financial information related to the acquisition is not included because the impact to the Company's consolidated statements of income is not material. The following table represents the amount of revenue and earnings attributable to SVB Leerink that is included in our financial results from January 4, 2019 through March 31, 2019:
(Dollars in thousands)
 
Three months ended March 31, 2019
Net interest income
 
$
442

Noninterest income
 
68,117

Noninterest expense
 
60,540

Income before income tax expense
 
8,019

Income tax expense
 
2,174

Net income attributable to noncontrolling interests
 

Net income available to common stockholders
 
$
5,845

The following table shows the components of acquisition-related activities expense:
(Dollars in thousands)
 
Three months ended March 31, 2019
Professional fees
 
$
368

Other
 
204

Total acquisition-related expenses
 
$
572


12


3.
Stockholders' Equity and EPS
Accumulated Other Comprehensive Income
The following table summarizes the items reclassified out of accumulated other comprehensive income into the Consolidated Statements of Income (unaudited) for the three months ended March 31, 2019 and 2018:
 
 
 
 
Three months ended March 31,
(Dollars in thousands)
 
Income Statement Location
 
2019
 
2018
Reclassification adjustment for losses on available-for-sale securities included in net income
 
Gains on investment securities, net
 
$
3,630

 
$

Related tax benefit
 
Income tax expense
 
(1,010
)
 

Reclassification adjustment for losses on cash flow hedges included in net income
 
Net interest income
 
3

 

Related tax benefit
 
Income tax expense
 
(1
)
 

Total reclassification adjustment for losses included in net income, net of tax
 
 
 
$
2,622

 
$

The table below summarizes the activity relating to net gains on our cash flow hedges included in accumulated other comprehensive income for the three months ended March 31, 2019 and 2018. Over the next 12 months, we expect that approximately $0.7 million in accumulated other comprehensive income ("AOCI") at March 31, 2019, related to our cash flow hedges will be reclassified out of AOCI and recognized in net income.
 
 
Three months ended March 31,
(Dollars in thousands)
 
2019
 
2018
Beginning balance
 
$

 
$

Net increase in fair value, net of tax
 
795

 

Net realized loss reclassified to net income, net of tax
 
2

 

Ending balance
 
$
797

 
$

EPS

Basic EPS is the amount of earnings available to each share of common stock outstanding during the reporting period. Diluted EPS is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of potentially dilutive common shares. Potentially dilutive common shares include incremental shares issuable for stock options and restricted stock unit awards outstanding under our 2006 Equity Incentive Plan and our ESPP. Potentially dilutive common shares are excluded from the computation of dilutive EPS in periods in which the effect would be antidilutive. The following is a reconciliation of basic EPS to diluted EPS for the three months ended March 31, 2019 and 2018:
 
 
Three months ended March 31,
(Dollars and shares in thousands, except per share amounts)
 
2019
 
2018
Numerator:
 
 
 
 
Net income available to common stockholders
 
$
288,732

 
$
194,961

Denominator:
 
 
 
 
Weighted average common shares outstanding—basic
 
52,587

 
52,883

Weighted average effect of dilutive securities:
 
 
 
 
Stock options and ESPP
 
297

 
420

Restricted stock units and awards
 
225

 
382

Weighted average common shares outstanding—diluted
 
53,109

 
53,685

Earnings per common share:
 
 
 
 
Basic
 
$
5.49

 
$
3.69

Diluted
 
5.44

 
3.63



13


The following table summarizes the weighted-average common shares excluded from the diluted EPS calculation due to the antidilutive effect for the three months ended March 31, 2019 and 2018:
 
 
Three months ended March 31,
(Shares in thousands)
 
2019
 
2018
Stock options
 
91

 
4

Restricted stock units
 
134

 

Total
 
225

 
4

Stock Repurchase Program
On November 13, 2018, the Company announced a new program to repurchase up to $500 million of our outstanding common stock (the "Stock Repurchase Program"). For the three months ended March 31, 2019, we repurchased 0.5 million shares of our outstanding common stock for $116.0 million under the Stock Repurchase Program. As of March 31, 2019, we have repurchased 1.2 million shares of our outstanding common stock for $263.1 million under the Stock Repurchase Program.
4.
Share-Based Compensation
For the three months ended March 31, 2019 and 2018, we recorded share-based compensation and related tax benefits as follows: 
 
 
Three months ended March 31,
(Dollars in thousands)
 
2019
 
2018
Share-based compensation expense
 
$
15,122

 
$
10,523

Income tax benefit related to share-based compensation expense
 
(3,327
)
 
(2,317
)
Unrecognized Compensation Expense
As of March 31, 2019, unrecognized share-based compensation expense was as follows:
(Dollars in thousands)
 
  Unrecognized  
Expense
 
Weighted Average Expected
Recognition Period 
- in Years  
Stock options
 
$
10,714

 
2.58
Restricted stock units and awards
 
74,885

 
2.71
Total unrecognized share-based compensation expense
 
$
85,599

 
 
Share-Based Payment Award Activity
The table below provides stock option information related to the 2006 Equity Incentive Plan for the three months ended March 31, 2019:
 
 
Options
 
Weighted
Average
 Exercise Price 
 
Weighted Average Remaining Contractual Life - in Years  
 
Aggregate
  Intrinsic Value  
of In-The-
Money
Options
Outstanding at December 31, 2018
 
679,659

 
$
137.19

 
 
 
 
Granted
 
1,328

 
239.56

 
 
 
 
Exercised
 
(44,973
)
 
73.17

 
 
 
 
Forfeited
 
(1,897
)
 
168.90

 
 
 
 
Outstanding at March 31, 2019
 
634,117

 
141.85

 
3.45
 
$
58,330,402

Vested and expected to vest at March 31, 2019
 
620,349

 
139.89

 
3.41
 
57,863,381

Exercisable at March 31, 2019
 
366,474

 
103.35

 
2.36
 
43,630,770


14


The aggregate intrinsic value of outstanding options shown in the table above represents the pre-tax intrinsic value based on our closing stock price of $222.36 as of March 31, 2019. The total intrinsic value of options exercised during the three months ended March 31, 2019 was $7.5 million, compared to $9.4 million for the comparable 2018 period.
The table below provides information for restricted stock units and awards under the 2006 Equity Incentive Plan for the three months ended March 31, 2019:
 
 
Shares    
 
Weighted Average Grant Date Fair Value
Nonvested at December 31, 2018
 
597,296

 
$
194.48

Granted (1)
 
176,076

 
233.03

Vested
 
(65,748
)
 
97.06

Forfeited
 
(16,780
)
 
125.52

Nonvested at March 31, 2019
 
690,844

 
215.25

 
 
(1)
On February 1, 2019, we granted 125,160 restricted stock awards to SVB Leerink employees at a market price of $238.28 under the retention plan previously announced on November 13, 2018. The restricted stock awards will vest over a five-year period.
5.
Variable Interest Entities
Our involvement with VIEs includes our investments in venture capital and private equity funds, debt funds, private and public portfolio companies and qualified affordable housing projects.
The following table presents the carrying amounts and classification of significant variable interests in consolidated and unconsolidated VIEs as of March 31, 2019 and December 31, 2018:
(Dollars in thousands)
 
Consolidated VIEs
 
Unconsolidated VIEs
 
Maximum Exposure to Loss in Unconsolidated VIEs
March 31, 2019:
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
4,660

 
$

 
$

Non-marketable and other equity securities (1)
 
224,136

 
591,260

 
591,260

Accrued interest receivable and other assets
 
764

 

 

Total assets
 
$
229,560

 
$
591,260

 
$
591,260

Liabilities:
 
 
 
 
 
 
Other liabilities (1)
 
1,975

 
223,206

 

Total liabilities
 
$
1,975

 
$
223,206

 
$

December 31, 2018:
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
9,058

 
$

 
$

Non-marketable and other equity securities (1)
 
221,646

 
568,272

 
568,272

Accrued interest receivable and other assets
 
228

 

 

Total assets
 
$
230,932

 
$
568,272

 
$
568,272

Liabilities:
 
 
 
 
 
 
Other liabilities (1)
 
919

 
205,685

 

Total liabilities
 
$
919

 
$
205,685

 
$

 
 
(1)
Included in our unconsolidated non-marketable and other equity securities portfolio at March 31, 2019 and December 31, 2018 are investments in qualified affordable housing projects of $339.9 million and $318.6 million, respectively, and related other liabilities consisting of unfunded credit commitments of $223.2 million and $205.7 million, respectively.


15


Non-marketable and other equity securities
Our non-marketable and other equity securities portfolio primarily represents investments in venture capital and private equity funds, SPD Silicon Valley Bank Co., Ltd. (the Bank's joint venture bank in China (“SPD-SVB”)), debt funds, private and public portfolio companies and qualified affordable housing projects. A majority of these investments are through third- party funds held by SVB Financial in which we do not have controlling or significant variable interests. These investments represent our unconsolidated VIEs in the table above. Our non-marketable and other equity securities portfolio also includes investments from SVB Capital. SVB Capital is the funds management business of SVB Financial Group, which focuses primarily on venture capital investments. The SVB Capital family of funds is comprised of direct venture funds that invest in companies and funds of funds that invest in other venture capital funds. We have a controlling and significant variable interest in four of these SVB Capital funds and consolidate these funds for financial reporting purposes.
All investments are generally nonredeemable and distributions are expected to be received through the liquidation of the underlying investments throughout the life of the investment fund. Investments may only be sold or transferred subject to the notice and approval provisions of the underlying investment agreement. Subject to applicable regulatory requirements, including the Volcker Rule, we also make commitments to invest in venture capital and private equity funds. For additional details, see Note 16—“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.
The Bank also has variable interests in low income housing tax credit funds, in connection with fulfilling its responsibilities under the Community Reinvestment Act (“CRA”), that are designed to generate a return primarily through the realization of federal tax credits. These investments are typically limited partnerships in which the general partner, other than the Bank, holds the power over significant activities of the VIE; therefore, these investments are not consolidated. For additional information on our investments in qualified affordable housing projects, see Note 7—“Investment Securities" of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.
As of March 31, 2019, our exposure to loss with respect to the consolidated VIEs is limited to our net assets of $227.6 million and our exposure to loss for our unconsolidated VIEs is equal to our investment in these assets of $591.3 million.
6.
Cash and Cash Equivalents
The following table details our cash and cash equivalents at March 31, 2019 and December 31, 2018:
(Dollars in thousands)
 
March 31, 2019

December 31, 2018
Cash and due from banks (1)
 
$
6,766,158

 
$
3,444,971

Securities purchased under agreements to resell (2)
 
298,755

 
123,611

Other short-term investment securities
 
1,970

 
2,957

Total cash and cash equivalents
 
$
7,066,883

 
$
3,571,539

 
 
(1)
At March 31, 2019 and December 31, 2018, $4.7 billion and $1.7 billion, 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 $1.4 billion and $1.2 billion, respectively.
(2)
At March 31, 2019 and December 31, 2018, securities purchased under agreements to resell were collateralized by U.S. Treasury securities and U.S. agency securities with aggregate fair values of $304.7 million and $126.2 million, respectively. None of these securities were sold or repledged as of March 31, 2019 and December 31, 2018.

16


7.
Investment Securities
Our investment securities portfolio consists of: (i) an available-for-sale securities portfolio and a held-to-maturity securities portfolio, both of which represent interest-earning investment securities, and (ii) a non-marketable and other equity securities portfolio, which primarily represents investments managed as part of our funds management business as well as public equity securities held as a result of equity warrant assets exercised.
Available-for-Sale Securities
The major components of our available-for-sale investment securities portfolio at March 31, 2019 and December 31, 2018 are as follows:
 
 
March 31, 2019
(Dollars in thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Carrying
Value
Available-for-sale securities, at fair value:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
3,767,777

 
$
19,425

 
$
(19,792
)
 
$
3,767,410

U.S. agency debentures
 
1,066,279

 
394

 
(2,960
)
 
1,063,713

Foreign government debt securities
 
5,689

 

 
(4
)
 
5,685

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
Agency-issued collateralized mortgage obligations—fixed rate
 
1,858,979

 

 
(19,096
)
 
1,839,883

Agency-issued collateralized mortgage obligations—variable rate
 
78,172

 
243

 
(12
)
 
78,403

Total available-for-sale securities
 
$
6,776,896

 
$
20,062

 
$
(41,864
)
 
$
6,755,094


 
 
December 31, 2018
(Dollars in thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Carrying
Value
Available-for-sale securities, at fair value:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
4,762,182

 
$
11,638

 
$
(35,562
)
 
$
4,738,258

U.S. agency debentures
 
1,090,426

 
61

 
(6,370
)
 
1,084,117

Foreign government debt securities
 
5,815

 

 
(3
)
 
5,812

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
Agency-issued collateralized mortgage obligations—fixed rate
 
1,922,618

 

 
(42,400
)
 
1,880,218

Agency-issued collateralized mortgage obligations—variable rate
 
81,270

 
383

 
(15
)
 
81,638

Total available-for-sale securities
 
$
7,862,311

 
$
12,082

 
$
(84,350
)
 
$
7,790,043


17


The following table summarizes sale activity of available-for-sale securities during the three months ended March 31, 2019 and 2018 as recorded in the line item “Gains on investment securities, net," a component of noninterest income:
 
 
Three months ended March 31,
(Dollars in thousands)
 
2019

2018
Sales proceeds
 
$
1,171,564

 
$

Net realized gains and losses:
 
 
 
 
Gross realized gains
 

 

Gross realized losses
 
(3,630
)
 

Net realized losses
 
$
(3,630
)
 
$

The following tables summarize our unrealized losses on our available-for-sale securities portfolio into categories of less than 12 months, or 12 months or longer as of March 31, 2019 and December 31, 2018:
 
 
March 31, 2019
 
 
Less than 12 months
 
12 months or longer (1)
 
Total
(Dollars in thousands)
 
Fair Value of
Investments
 
Unrealized
Losses
 
Fair Value of
Investments
 
Unrealized
Losses
 
Fair Value of
Investments
 
Unrealized
Losses
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
101,342

 
$
(28
)
 
$
2,878,665

 
$
(19,764
)
 
$
2,980,007

 
$
(19,792
)
U.S. agency debentures
 

 

 
865,746

 
(2,960
)
 
865,746

 
(2,960
)
Foreign government debt securities
 
5,685

 
(4
)
 

 

 
5,685

 
(4
)
Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
Agency-issued collateralized mortgage obligations—fixed rate
 
5,085

 

 
1,834,798

 
(19,096
)
 
1,839,883

 
(19,096
)
Agency-issued collateralized mortgage obligations—variable rate
 
2,630

 
(7
)
 
6,960

 
(5
)
 
9,590

 
(12
)
Total temporarily impaired securities (1)
 
$
114,742

 
$
(39
)
 
$
5,586,169

 
$
(41,825
)
 
$
5,700,911

 
$
(41,864
)
 
 
(1)
As of March 31, 2019, we identified a total of 159 investments that were in unrealized loss positions, of which 151 investments totaling $5.6 billion with unrealized losses of $41.8 million have been in an impaired position for a period of time greater than 12 months. As of March 31, 2019, we do not intend to sell any of our impaired securities prior to recovery of our adjusted cost basis, and it is more likely than not that we will not be required to sell any of our securities prior to recovery of our adjusted cost basis. Based on our analysis as of March 31, 2019, we deem all impairments to be temporary, and therefore changes in value for our temporarily impaired securities as of the same date are included in other comprehensive income. Market valuations and impairment analyses on assets in the available-for-sale securities portfolio are reviewed and monitored on a quarterly basis.
 
 
December 31, 2018
 
 
Less than 12 months
 
12 months or longer (1)
 
Total
(Dollars in thousands)
 
Fair Value of
Investments
 
Unrealized
Losses
 
Fair Value of
Investments
 
Unrealized
Losses
 
Fair Value of
Investments
 
Unrealized
Losses
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
494,287

 
$
(3,785
)
 
$
3,568,119

 
$
(31,777
)
 
$
4,062,406

 
$
(35,562
)
U.S. agency debentures
 
443,790

 
(1,602
)
 
591,216

 
(4,768
)
 
1,035,006

 
(6,370
)
Foreign government debt securities
 
5,812

 
(3
)
 

 

 
5,812

 
(3
)
Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
Agency-issued collateralized mortgage obligations—fixed rate
 
13,430

 
(22
)
 
1,866,788

 
(42,378
)
 
1,880,218

 
(42,400
)
Agency-issued collateralized mortgage obligations—variable rate
 

 

 
13,516

 
(15
)
 
13,516

 
(15
)
Total temporarily impaired securities (1)
 
$
957,319

 
$
(5,412
)
 
$
6,039,639

 
$
(78,938
)
 
$
6,996,958

 
$
(84,350
)
 
 

18


(1)
As of December 31, 2018, we identified a total of 200 investments that were in unrealized loss positions, of which 162 investments totaling $6.0 billion with unrealized losses of $78.9 million have been in an impaired position for a period of time greater than 12 months.
The following table summarizes the fixed income securities, carried at fair value, classified as available-for-sale as of March 31, 2019 by the remaining contractual principal maturities. For U.S. Treasury securities and U.S. agency debentures, the expected maturity is the actual contractual maturity of the notes. Expected maturities for mortgage-backed securities may differ significantly from their contractual maturities because mortgage borrowers have the right to prepay outstanding loan obligations with or without penalties. Mortgage-backed securities classified as available-for-sale typically have original contractual maturities from 10 to 30 years whereas expected average lives of these securities tend to be significantly shorter and vary based upon structure and prepayments in lower interest rate environments.
 
 
March 31, 2019
(Dollars in thousands)
 
Total
 
One Year
or Less
 
After One
Year to
Five Years
 
After Five
Years to
Ten Years
 
After
Ten Years
U.S. Treasury securities
 
$
3,767,410

 
$
1,165,910

 
$
2,194,840

 
$
406,660

 
$

U.S. agency debentures
 
1,063,713

 
643,279

 
420,434

 

 

Foreign government debt securities
 
5,685

 

 
5,685

 

 

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
Agency-issued collateralized mortgage obligations—fixed rate
 
1,839,883

 

 

 
8,654

 
1,831,229

Agency-issued collateralized mortgage obligationsvariable rate
 
78,403

 

 

 

 
78,403

Total
 
$
6,755,094

 
$
1,809,189

 
$
2,620,959

 
$
415,314

 
$
1,909,632

Held-to-Maturity Securities

The components of our held-to-maturity investment securities portfolio at March 31, 2019 and December 31, 2018 are as follows:
 
 
March 31, 2019
(Dollars in thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
Held-to-maturity securities, at cost:
 
 
 
 
 
 
 
 
U.S. agency debentures (1)
 
$
585,892

 
$
2,858

 
$
(2,950
)
 
$
585,800

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
Agency-issued mortgage-backed securities
 
7,887,579

 
41,279

 
(50,917
)
 
7,877,941

Agency-issued collateralized mortgage obligations—fixed rate
 
2,058,789

 
66

 
(40,414
)
 
2,018,441

Agency-issued collateralized mortgage obligations—variable rate
 
206,421

 
114

 
(727
)
 
205,808

Agency-issued commercial mortgage-backed securities
 
2,745,662

 
16,866

 
(53,676
)
 
2,708,852

Municipal bonds and notes
 
1,570,912

 
30,028

 
(1,274
)
 
1,599,666

Total held-to-maturity securities
 
$
15,055,255

 
$
91,211

 
$
(149,958
)
 
$
14,996,508

 
 
(1)
Consists of pools of Small Business Investment Company debentures issued and guaranteed by the U.S. Small Business Administration, an independent agency of the United States.

19


 
 
December 31, 2018
(Dollars in thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
Held-to-maturity securities, at cost:
 
 
 
 
 
 
 
 
U.S. agency debentures (1)
 
$
640,990

 
$
2,148

 
$
(4,850
)
 
$
638,288

Residential mortgage-backed securities: