SVB FINANCIAL GROUP 3003 Tasman Drive, Santa Clara, CA 95054 Contact:
www.svb.com Meghan O'Leary
Investor Relations
For release at 1:00 P.M. (Pacific Time) (408) 654-6364
January 26, 2017 NASDAQ: SIVB
SVB FINANCIAL GROUP ANNOUNCES 2016 FOURTH QUARTER AND FULL-YEAR FINANCIAL RESULTS
SANTA CLARA, Calif. - January 26, 2017 - SVB Financial Group (NASDAQ: SIVB) today announced financial results for the fourth quarter and year ended December 31, 2016.
Consolidated net income available to common stockholders for the fourth quarter of 2016 was $99.5 million, or $1.89 per diluted common share, compared to $111.1 million, or $2.12 per diluted common share, for the third quarter of 2016 and $87.5 million, or $1.68 per diluted common share, for the fourth quarter of 2015. Consolidated net income available to common stockholders for the year ended December 31, 2016 was $382.7 million, or $7.31 per diluted common share, compared to $343.9 million, or $6.62 per diluted common share, for the comparable 2015 period.
"The fourth quarter capped a solid year marked by continued strong fundamentals. We saw healthy growth in loans, total client funds and core fee income; as well as sound credit quality, despite the VC market recalibration in the first half of 2016," said Greg Becker, President and CEO of SVB Financial Group. "Our positive expectations for 2017 have improved in light of recent short-term rate increases and we believe there could be potential upside if rates continue to rise. While there is still uncertainty in the global markets, and very early-stage companies are still feeling the effects of the recalibration, we believe SVB's position as the bank to the world's most dynamic companies, entrepreneurs and investors remains a distinct competitive advantage."
Highlights of our fourth quarter 2016 results (compared to third quarter 2016, unless otherwise noted) included:
Average loan balances of $19.3 billion, an increase of $0.6 billion (or 3.3 percent)
Period-end loan balances of $19.9 billion, an increase of $0.8 billion (or 4.1 percent).
Average total client funds (on-balance sheet deposits and off-balance sheet client investment funds) increased
$3.7 billion (or 4.5 percent) to $84.7 billion, with average off-balance sheet client investment funds increasing by
$1.9 billion (or 4.3 percent) and average on-balance sheet deposits increasing by $1.8 billion (or 4.7 percent).
Period-end total client funds increased $3.3 billion (or 4.0 percent) to $84.8 billion, with period-end off-balance sheet client investment funds increasing by $2.5 billion (or 5.7 percent) and period-end on-balance sheet deposits increasing by $0.8 billion (or 2.1 percent).
Net interest income (fully taxable equivalent basis) of $296.9 million, an increase of $7.5 million (or 2.6 percent).
Provision for loan losses of $7.1 million, compared to $19.0 million.
Gains on investment securities of $10.0 million, compared to $23.2 million. Non-GAAP gains on investment securities, net of noncontrolling interests, were $5.3 million, compared to $18.4 million. (See non-GAAP reconciliation under the section "Use of Non-GAAP Financial Measures".)
Gains on equity warrant assets of $4.6 million, compared to $21.6 million.
Noninterest income of $113.5 million, a decrease of $30.6 million (or 21.3 percent). Non-GAAP core fee income increased $4.1 million (or 5.1 percent) to $84.6 million. (See non-GAAP reconciliation under the section "Use of Non-GAAP Financial Measures".)
Noninterest expense of $244.6 million, an increase of $22.7 million (or 10.3 percent).
Three months ended Year ended
(Dollars in millions, except share data, employees and ratios) | December 31, 2016 | September 30, 2016 | June 30, 2016 | March 31, 2016 | December 31, 2015 | December 31, 2016 | December 31, 2015 | |
Income statement: | ||||||||
Diluted earnings per common share $ 1.89 | $ 2.12 | $ 1.78 | $ 1.52 | $ 1.68 | $ 7.31 | $ 6.62 | ||
Net income available to common stockholders 99.5 | 111.1 | 93.0 | 79.2 | 87.5 | 382.7 | 343.9 | ||
Net interest income 296.6 | 289.2 | 283.3 | 281.4 | 269.1 | 1,150.5 | 1,006.4 | ||
Provision for loan losses 7.1 | 19.0 | 36.3 | 33.3 | 31.3 | 95.7 | 97.6 | ||
Noninterest income 113.5 | 144.1 | 112.8 | 86.1 | 114.5 | 456.6 | 472.8 | ||
Noninterest expense 244.6 | 221.8 | 200.4 | 204.0 | 208.6 | 870.8 | 778.0 | ||
Non-GAAP core fee income (1) 84.6 | 80.5 | 74.5 | 76.5 | 72.7 | 316.2 | 265.4 | ||
Non-GAAP noninterest income, net of noncontrolling interests (1) 109.1 | 139.5 | 111.2 | 88.8 | 111.8 | 448.5 | 441.1 | ||
Non-GAAP noninterest expense, net of noncontrolling interests (1) 244.3 | 221.7 | 200.1 | 204.1 | 208.4 | 870.3 | 777.2 | ||
Fully taxable equivalent: | ||||||||
Net interest income (2) $ 296.9 | $ 289.4 | $ 283.6 | $ 281.7 | $ 269.4 | $ 1,151.7 | $ 1,008.0 | ||
Net interest margin | 2.73% | 2.75% | 2.73% | 2.67% | 2.54% | 2.72% | 2.57% | |
Balance sheet: | ||||||||
Average total assets | $ 44,933.7 | $ 43,451.3 | $ 43,370.0 | $ 44,190.2 | $ 43,634.8 | $ 43,987.5 | $ 40,846.4 | |
Average loans, net of unearned income | 19,260.7 | 18,647.2 | 18,199.3 | 17,012.4 | 15,745.6 | 18,283.6 | 14,762.9 | |
Average available-for-sale securities | 12,505.1 | 12,743.7 | 13,399.3 | 14,692.6 | 15,314.8 | 13,331.3 | 14,436.1 | |
Average held-to-maturity securities | 7,730.5 | 8,003.8 | 8,382.8 | 8,658.7 | 8,220.5 | 8,192.2 | 7,829.2 | |
Average noninterest-bearing demand deposits | 32,663.8 | 30,522.3 | 30,342.4 | 31,219.5 | 30,531.1 | 31,189.2 | 27,822.3 | |
Average interest-bearing deposits | 7,033.7 | 7,387.4 | 7,817.5 | 8,048.6 | 8,373.6 | 7,569.8 | 8,471.1 | |
Average total deposits | 39,697.4 | 37,909.8 | 38,160.0 | 39,268.1 | 38,904.7 | 38,759.1 | 36,293.4 | |
Average long-term debt | 795.9 | 796.2 | 796.5 | 796.7 | 797.1 | 796.3 | 770.8 | |
Period-end total assets | 44,683.7 | 43,274.0 | 43,132.7 | 43,573.9 | 44,686.7 | 44,683.7 | 44,686.7 | |
Period-end loans, net of unearned income | 19,899.9 | 19,112.3 | 18,833.8 | 17,735.1 | 16,742.1 | 19,899.9 | 16,742.1 | |
Period-end available-for-sale securities | 12,620.4 | 12,665.7 | 13,058.6 | 14,327.1 | 16,380.7 | 12,620.4 | 16,380.7 | |
Period-end held-to-maturity securities | 8,427.0 | 7,791.9 | 8,200.4 | 8,548.2 | 8,791.0 | 8,427.0 | 8,791.0 | |
Period-end non-marketable and other securities | 622.6 | 625.2 | 664.1 | 668.5 | 674.9 | 622.6 | 674.9 | |
Period-end noninterest-bearing demand deposits | 31,975.5 | 31,029.0 | 30,287.8 | 30,933.3 | 30,867.5 | 31,975.5 | 30,867.5 | |
Period-end interest-bearing deposits | 7,004.4 | 7,160.4 | 7,308.7 | 7,826.5 | 8,275.3 | 7,004.4 | 8,275.3 | |
Period-end total deposits | 38,979.9 | 38,189.4 | 37,596.6 | 38,759.7 | 39,142.8 | 38,979.9 | 39,142.8 | |
Off-balance sheet: | ||||||||
Average client investment funds | $ 44,966.8 | $ 43,105.5 | $ 42,883.3 | $ 42,471.6 | $ 43,435.2 | $ 43,356.8 | $ 39,225.9 | |
Period-end client investment funds | 45,797.8 | 43,343.7 | 43,072.4 | 42,273.5 | 43,991.7 | 45,797.8 | 43,991.7 | |
Total unfunded credit commitments | 16,743.2 | 16,297.1 | 15,502.5 | 15,880.2 | 15,614.4 | 16,743.2 | 15,614.4 | |
Earnings ratios: | ||||||||
Return on average assets (annualized) (3) | 0.88% | 1.02% | 0.86% | 0.72% | 0.80% | 0.87% | 0.84% | |
Return on average SVBFG stockholders' equity (annualized) (4) | 10.77 | 12.32 | 10.83 | 9.59 | 10.74 | 10.90 | 11.18 | |
Asset quality ratios:
Allowance for loan losses as a % of total gross loans
1.13%
1.25%
1.29%
1.29%
1.29%
1.13%
1.29%
Allowance for loan losses for performing loans as
Gross charge-offs as a % of average total gross loans (annualized)
a % of total gross performing loans 0.94 1.03 0.98 1.01 0.99 0.94 0.99
0.52
0.52
0.45
0.61
0.29
0.53
0.34
Net charge-offs as a % of average total gross
loans (annualized) | 0.44 | 0.48 | 0.43 | 0.49 | 0.28 | 0.46 | 0.31 |
Other ratios: | |||||||
GAAP operating efficiency ratio (5) | 59.63% | 51.19% | 50.58% | 55.51% | 54.39% | 54.18% | 52.60% |
Non-GAAP operating efficiency ratio (1) | 60.18 | 51.69 | 50.69 | 55.09 | 54.67 | 54.39 | 53.63 |
SVBFG CET 1 risk-based capital ratio | 12.80 | 12.75 | 12.43 | 12.38 | 12.28 | 12.80 | 12.28 |
Bank CET 1 risk-based capital ratio | 12.65 | 12.77 | 12.57 | 12.57 | 12.52 | 12.65 | 12.52 |
SVBFG total risk-based capital ratio | 14.21 | 14.22 | 13.92 | 13.90 | 13.84 | 14.21 | 13.84 |
Bank total risk-based capital ratio | 13.66 | 13.83 | 13.65 | 13.66 | 13.60 | 13.66 | 13.60 |
SVBFG tier 1 leverage ratio | 8.34 | 8.35 | 8.08 | 7.69 | 7.63 | 8.34 | 7.63 |
Bank tier 1 leverage ratio | 7.67 | 7.74 | 7.56 | 7.19 | 7.09 | 7.67 | 7.09 |
Period-end loans, net of unearned income, to deposits ratio | 51.05 | 50.05 | 50.09 | 45.76 | 42.77 | 51.05 | 42.77 |
Average loans, net of unearned income, to average deposits ratio
48.52
49.19
47.69
43.32
40.47
47.17
40.68
Book value per common share (6) $ 69.71 $ 69.02 $ 67.38 $ 65.40 $ 61.97 $ 69.71 $ 61.97
Other statistics:
Average full-time equivalent employees | 2,303 | 2,255 | 2,182 | 2,160 | 2,073 | 2,225 | 2,004 |
Period-end full-time equivalent employees | 2,311 | 2,280 | 2,188 | 2,170 | 2,089 | 2,311 | 2,089 |
To supplement our unaudited condensed consolidated financial statements presented in accordance with generally accepted accounting principles in the United States ("GAAP"), we use certain non-GAAP measures. A reconciliation of these non-GAAP measures to GAAP is provided at the end of this release under the section "Use of Non-GAAP Financial Measures."
Interest income on non-taxable investments is presented on a fully taxable equivalent basis using the federal statutory income tax rate of 35.0 percent. The taxable equivalent adjustments were $0.3 million for the quarters ended December 31, 2016, September 30, 2016, June 30, 2016, and March 31, 2016 and $0.4 million for the quarter ended December 31, 2015. The taxable equivalent adjustments were $1.2 million and $1.6 million for the years ended December 31, 2016 and 2015, respectively.
Ratio represents annualized consolidated net income available to common stockholders divided by quarterly and year-to-date average assets.
Ratio represents annualized consolidated net income available to common stockholders divided by quarterly and year-to-date average SVBFG stockholders' equity.
Ratio is calculated by dividing noninterest expense by total net interest income plus noninterest income.
Book value per common share is calculated by dividing total SVBFG stockholders' equity by total outstanding common shares.
Net Interest Income and MarginNet interest income, on a fully taxable equivalent basis, was $296.9 million for the fourth quarter of 2016, compared to $289.4 million for the third quarter of 2016. The following table provides a summary of changes in interest income and interest expense attributable to both volume and rate from the third quarter of 2016 to the fourth quarter of 2016. Changes that are not solely due to either volume or rate (principally changes in the number of days from quarter to quarter) are allocated in proportion to the percentage changes in average volume and average rate:
Q4'16 compared to Q3'16 Increase (decrease) due to change in(Dollars in thousands)
Volume
Rate
Total
Interest income:
Short-term investment securities
$ 1,578
$ 503
$ 2,081
AFS / HTM fixed income investment securities
(2,436)
4,813
2,377
Loans
6,904
(4,432)
2,472
Increase in interest income, net
6,046
884
6,930
Interest expense:
Deposits
(82)
174
92
Short-term borrowings
(550)
(91)
(641)
Long-term debt
(3)
28
25
(Decrease) increase in interest expense, net
(635)
111
(524)
Increase in net interest income
$ 6,681
$ 773
$ 7,454
The increase in net interest income, on a fully taxable equivalent basis, from the third quarter of 2016 to the fourth quarter of 2016, was attributable primarily to the following:
An increase in interest income from loans of $2.5 million to $216.7 million for the fourth quarter of 2016. The increase was primarily related to a $0.6 billion increase in average loan balances, partially offset by a decrease in fee income from loan prepayments. Overall loan yields decreased nine basis points reflective primarily of a six basis point decrease in loan fee yields. Loan fee yields decreased primarily as a result of lower income from loan prepayments. Gross loan yields remained unchanged at 3.93 percent.
An increase in interest income from our fixed income investment securities in our available-for-sale ("AFS") and held-to-maturity ("HTM") portfolios of $2.4 million to $86.6 million for the fourth quarter of 2016. The increase was due primarily to a $4.7 million change in premium amortization expense, net, from the third quarter to the fourth quarter of 2016 as a result of lower prepayment estimates following the increase in market interest rates during the fourth quarter of 2016. Our overall yields from investment securities increased eight basis points to 1.70 percent, all attributable to the change in premium amortization.
An increase in interest income from short-term investment securities of $2.1 million for the fourth quarter of 2016. The increase was primarily due to an increase in cash balances as a result of a $1.8 billion increase in average deposit balances during the fourth quarter of 2016.
Net interest income for the fourth quarter of 2016 includes $1.6 million attributable to the December 2016 federal funds rate increase.
Net interest margin, on a fully taxable equivalent basis, was 2.73 percent for the fourth quarter of 2016, compared to
2.75 percent for the third quarter of 2016. Our net interest margin decreased due to higher average balances of cash and short-term investment securities, our lowest yielding assets. Average short-term investments represented nine percent of interest earning assets for the fourth quarter of 2016 compared to six percent for the third quarter of 2016, reflective of higher average deposit balances during the fourth quarter.
For the fourth quarter of 2016, 88.2 percent, or $17.2 billion, of our average gross loans were variable-rate loans that adjust at prescribed measurement dates upon a change in prime-lending rates or other variable-rate indices. This compares to 87.8 percent, or $16.6 billion, for the third quarter of 2016.
Investment SecuritiesOur investment securities portfolio consists of: (i) an AFS portfolio and a HTM portfolio, both of which represent primarily interest-earning fixed income investment securities and 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; and (ii) a non-marketable and other securities portfolio, which primarily represents investments managed as part of our funds management business. Our total period-end fixed income investment securities portfolio increased $0.6 billion, or 2.9 percent, to $21.0 billion at December 31, 2016. The duration of our fixed income investment securities portfolio was 2.5 years and 2.3 years for December 31, 2016 and September 30, 2016, respectively. Non- marketable and other securities decreased $2.6 million to $622.6 million ($500.1 million net of noncontrolling interests) at December 31, 2016.
Available-for-Sale Securities
Average AFS securities were $12.5 billion for the fourth quarter of 2016, compared to $12.7 billion for the third quarter of 2016, a decrease of $0.2 billion. Period-end AFS securities were $12.6 billion at December 31, 2016 compared to
$12.7 billion at September 30, 2016. The decrease in average AFS securities balances was primarily reflective of the utilization of AFS portfolio cash flows to fund loan growth. The decrease in period-end AFS securities balances from the third quarter of 2016 to the fourth quarter of 2016 was due primarily to an increase in period-end market interest rates resulting in a decrease in the fair value of our period-end AFS securities portfolio by $118.5 million. The $118.5 million decrease in period-end fair value, was offset by net additions of $67.4 million, and is reflected as a $70.2 million (net of tax) decrease in accumulated other comprehensive income. The average duration of our AFS securities portfolio was 2.0 years and 2.1 years at December 31, 2016 and September 30, 2016, respectively.
Held-to-Maturity Securities
Average HTM securities were $7.7 billion for the fourth quarter of 2016, compared to $8.0 billion for the third quarter of 2016, reflecting a decrease of $0.3 billion. Period-end HTM securities were $8.4 billion at December 31, 2016, compared to $7.8 billion at September 30, 2016. The $0.6 billion increase for the three months ended December 31, 2016 was due to new purchases of $1.1 billion primarily in agency backed mortgage securities, partially offset by $0.5 billion in portfolio paydowns and maturities. The average duration of our HTM securities portfolio was 3.3 years and
2.7 years at December 31, 2016 and September 30, 2016, respectively.
Non-Marketable and Other Securities
Our non-marketable and other securities portfolio primarily represents investments in venture capital and private equity funds, our China joint venture bank, debt funds, private and public portfolio companies and investments in qualified affordable housing projects.
Non-marketable and other securities decreased $2.6 million to $622.6 million ($500.1 million net of noncontrolling interests) at December 31, 2016, compared to $625.2 million ($503.8 million net of noncontrolling interests) at
SVB Financial Group published this content on 26 January 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 26 January 2017 21:49:08 UTC.
Original documenthttp://ir.svb.com/common/download/download.cfm?companyid=SIVB&fileid=925459&filekey=6D2D4335-6967-4628-BD47-65B2B99A70AF&filename=Q416_Earnings_Release_Exhibit_99.1_r207.pdf
Public permalinkhttp://www.publicnow.com/view/5E0E9A6B899E41685C02BEB79439494C3464A327
