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
October 26, 2017 NASDAQ: SIVB
SVB FINANCIAL GROUP ANNOUNCES 2017 THIRD QUARTER FINANCIAL RESULTS
SANTA CLARA, Calif. - October 26, 2017 - SVB Financial Group (NASDAQ: SIVB) today announced financial results for the third quarter ended September 30, 2017.
Consolidated net income available to common stockholders for the third quarter of 2017 was $148.6 million, or $2.79 per diluted common share, compared to $123.2 million, or $2.32 per diluted common share, for the second quarter of 2017 and $111.1 million, or $2.12 per diluted common share, for the third quarter of 2016. Consolidated net income available to common stockholders for the nine months ended September 30, 2017 was $373.3 million, or $7.01 per diluted common share, compared to $283.2 million, or $5.42 per diluted common share, for the comparable 2016 period.
"We had an outstanding quarter marked by record earnings, robust loan and deposit growth, healthy increases in both net interest income and fee income, and continued stable credit quality," said Greg Becker, President and CEO of SVB Financial Group. "Our dynamic client base, the overall health of the innovation economy and our consistent execution drove our strong performance this quarter. Looking ahead, we believe our commitment to the success of innovative companies and the people behind them, and our discipline in making decisions consistent with that focus will enable us to continue growing and maintain our unique position as the bank for the global innovation economy."
Highlights of our third quarter 2017 results (compared to second quarter 2017, unless otherwise noted) included:
Average loan balances of $21.6 billion, an increase of $1.1 billion (or 5.2 percent).
Period-end loan balances of $22.2 billion, an increase of $1.2 billion (or 5.8 percent).
Average fixed income investment securities of $23.1 billion, an increase of $1.6 billion (or 7.5 percent).
Period-end fixed income investment securities of $23.7 billion, an increase of $1.6 billion (or 7.5 percent).
Average total client funds (on-balance sheet deposits and off-balance sheet client investment funds) increased
$6.1 billion (or 6.7 percent) to $97.3 billion, with average off-balance sheet client investment funds increasing by
$4.2 billion (or 8.5 percent) and average on-balance sheet deposits increasing by $1.9 billion (or 4.5 percent).
Period-end total client funds increased $4.7 billion (or 5.0 percent) to $99.1 billion, with period-end off-balance sheet client investment funds increasing by $2.3 billion (or 4.5 percent) and period-end on-balance sheet deposits increasing by $2.3 billion (or 5.5 percent).
Net interest income (fully taxable equivalent basis) of $374.6 million, an increase of $31.4 million (or 9.2 percent).
Provision for credit losses1 of $23.5 million, compared to $15.8 million.
Net loan charge-offs of $10.5 million, or 19 basis points of average total gross loans (annualized), compared to
$22.5 million, or 44 basis points
Gains on investment securities of $15.2 million, compared to $17.6 million. Non-GAAP gains on investment securities, net of noncontrolling interests, were $9.7 million, compared to $8.2 million. (See non-GAAP reconciliation under the section "Use of Non-GAAP Financial Measures.")
Gains on equity warrant assets of $24.9 million, compared to $10.8 million.
Noninterest income of $158.8 million, an increase of $30.3 million (or 23.5 percent). Non-GAAP core fee income increased $15.5 million (or 17.7 percent) to $102.7 million. (See non-GAAP reconciliation under the section "Use of Non-GAAP Financial Measures.")
Noninterest expense of $257.8 million, an increase of $6.6 million (or 2.6 percent).
Income tax expense included a $1.3 million, and a $7.0 million, benefit for the third and second quarters of 2017, respectively, related to new accounting guidance, adopted in the first quarter of 2017, for the tax impact associated
with excess tax benefits related to employee share-based compensation. (See "Income Tax Expense" for further details.)
(1) As of the first quarter of 2017, our consolidated statements of income have been modified from prior periods' presentation to conform to the current period presentation to reflect our provision for loan losses and provision for unfunded credit commitments together as our "provision for credit losses". In prior periods, our provision for unfunded credit commitments was reported separately as a component of noninterest expense.
Third Quarter 2017 SummaryThree months ended Nine months ended
(Dollars in millions, except share data, employees and ratios) | September 30, 2017 | June 30, 2017 | March 31, 2017 | December 31, 2016 | September 30, 2016 | September 30, 2017 | September 30, 2016 |
Income statement: | |||||||
Diluted earnings per common share (1) $ 2.79 | $ 2.32 | $ 1.91 | $ 1.89 | $ 2.12 | $ 7.01 | $ 5.42 | |
Net income available to common stockholders (1) 148.6 | 123.2 | 101.5 | 99.5 | 111.1 | 373.3 | 283.2 | |
Net interest income 374.0 | 342.7 | 310.0 | 296.6 | 289.2 | 1,026.7 | 853.9 | |
Provision for credit losses (2) 23.5 | 15.8 | 30.7 | 16.5 | 20.0 | 70.1 | 90.2 | |
Noninterest income 158.8 | 128.5 | 117.7 | 113.5 | 144.1 | 405.0 | 343.1 | |
Noninterest expense 257.8 | 251.2 | 237.6 | 235.2 | 220.8 | 746.6 | 624.6 | |
Non-GAAP core fee income (3) 102.7 | 87.3 | 82.6 | 84.6 | 80.5 | 272.6 | 231.5 | |
Non-GAAP noninterest income, net of noncontrolling interests (3) 153.2 | 119.0 | 111.1 | 109.1 | 139.5 | 383.3 | 339.4 | |
Non-GAAP noninterest expense, net of noncontrolling interests (3) 257.6 | 251.0 | 237.5 | 234.9 | 220.7 | 746.1 | 624.3 | |
Fully taxable equivalent: | |||||||
Net interest income (4) | $ 374.6 | $ 343.2 | $ 310.3 | $ 296.9 | $ 289.4 | $ 1,028.1 | $ 854.8 |
Net interest margin | 3.10% | 3.00% | 2.88% | 2.73% | 2.75% | 2.99% | 2.72% |
Balance sheet: | |||||||
Average total assets | $ 49,795.4 | $ 47,549.4 | $ 45,301.0 | $ 44,933.7 | $ 43,451.3 | $ 47,565.1 | $ 43,669.7 |
Average loans, net of unearned income | 21,584.9 | 20,508.5 | 20,069.3 | 19,260.7 | 18,647.2 | 20,726.5 | 17,955.5 |
Average available-for-sale securities | 12,674.6 | 12,393.1 | 12,550.3 | 12,505.1 | 12,743.7 | 12,539.8 | 13,608.7 |
Average held-to-maturity securities | 10,467.5 | 9,128.4 | 8,600.2 | 7,730.5 | 8,003.8 | 9,405.5 | 8,347.2 |
Average noninterest-bearing demand deposits | 36,578.8 | 34,629.1 | 32,709.4 | 32,663.8 | 30,522.3 | 34,653.3 | 30,694.1 |
Average interest-bearing deposits | 7,464.1 | 7,509.6 | 7,249.1 | 7,033.7 | 7,387.4 | 7,408.4 | 7,749.9 |
Average total deposits | 44,042.8 | 42,138.6 | 39,958.5 | 39,697.4 | 37,909.8 | 42,061.6 | 38,444.0 |
Average long-term debt | 749.5 | 780.2 | 795.6 | 795.9 | 796.2 | 774.9 | 796.4 |
Period-end total assets | 50,754.3 | 48,400.4 | 46,413.3 | 44,683.7 | 43,274.0 | 50,754.3 | 43,274.0 |
Period-end loans, net of unearned income | 22,189.3 | 20,976.5 | 20,427.5 | 19,899.9 | 19,112.3 | 22,189.3 | 19,112.3 |
Period-end available-for-sale securities | 12,603.3 | 12,071.1 | 12,384.0 | 12,620.4 | 12,665.7 | 12,603.3 | 12,665.7 |
Period-end held-to-maturity securities | 11,055.0 | 9,938.4 | 8,615.7 | 8,427.0 | 7,791.9 | 11,055.0 | 7,791.9 |
Period-end non-marketable and other securities | 627.5 | 630.7 | 635.6 | 622.6 | 625.2 | 627.5 | 625.2 |
Period-end noninterest-bearing demand | |||||||
deposits | 36,862.0 | 35,046.4 | 33,587.9 | 31,975.5 | 31,029.0 | 36,862.0 | 31,029.0 |
Period-end interest-bearing deposits | 7,950.0 | 7,418.9 | 7,491.8 | 7,004.4 | 7,160.4 | 7,950.0 | 7,160.4 |
Period-end total deposits | 44,812.0 | 42,465.3 | 41,079.7 | 38,979.9 | 38,189.4 | 44,812.0 | 38,189.4 |
Off-balance sheet: | |||||||
Average client investment funds | $ 53,273.3 | $ 49,109.4 | $ 46,130.2 | $ 44,966.8 | $ 43,105.5 | $ 49,504.3 | $ 42,820.1 |
Period-end client investment funds | 54,241.5 | 51,897.5 | 46,434.8 | 45,797.8 | 43,343.7 | 54,241.5 | 43,343.7 |
Total unfunded credit commitments | 16,341.9 | 16,786.8 | 16,082.3 | 16,743.2 | 16,297.1 | 16,341.9 | 16,297.1 |
Earnings ratios:
Return on average assets (annualized)
(5) 1.18% 1.04% 0.91% 0.88% 1.02% 1.05% 0.87%
Return on average SVBFG stockholders'
equity (annualized) (6) 14.59 12.75 11.03 10.77 12.32 12.85 10.95
Asset quality ratios:
Allowance for loan losses as a % of total
gross loans 1.12% 1.12% 1.18% 1.13% 1.25% 1.12% 1.25%
loans | 0.92 | 0.93 | 0.94 | 0.94 | 1.03 | 0.92 | 1.03 |
Gross charge-offs as a % of average total gross loans (annualized) | 0.23 | 0.49 | 0.28 | 0.52 | 0.52 | 0.33 | 0.53 |
Net charge-offs as a % of average total | |||||||
gross loans (annualized) | 0.19 | 0.44 | 0.25 | 0.44 | 0.48 | 0.29 | 0.47 |
Other ratios: | |||||||
GAAP operating efficiency ratio (7) | 48.38% | 53.32% | 55.57% | 57.35% | 50.95% | 52.15% | 52.18% |
Non-GAAP operating efficiency ratio (3) | 48.82 | 54.32 | 56.35 | 57.87 | 51.45 | 52.87 | 52.28 |
SVBFG CET 1 risk-based capital ratio | 12.96 | 13.05 | 13.05 | 12.80 | 12.75 | 12.96 | 12.75 |
Allowance for loan losses for performing loans as a % of total gross performing
Bank CET 1 risk-based capital ratio | 12.41 | 12.59 | 12.75 | 12.65 | 12.77 | 12.41 | 12.77 |
SVBFG total risk-based capital ratio | 14.29 | 14.39 | 14.45 | 14.21 | 14.22 | 14.29 | 14.22 |
Bank total risk-based capital ratio | 13.40 | 13.59 | 13.80 | 13.66 | 13.83 | 13.40 | 13.83 |
SVBFG tier 1 leverage ratio | 8.34 | 8.40 | 8.51 | 8.34 | 8.35 | 8.34 | 8.35 |
Bank tier 1 leverage ratio | 7.59 | 7.66 | 7.81 | 7.67 | 7.74 | 7.59 | 7.74 |
Period-end loans, net of unearned income, to deposits ratio | 49.52 | 49.40 | 49.73 | 51.05 | 50.05 | 49.52 | 50.05 |
Average loans, net of unearned income, to average deposits ratio | 49.01 | 48.67 | 50.23 | 48.52 | 49.19 | 49.28 | 46.71 |
Book value per common share (8) | $ 77.00 | $ 74.02 | $ 71.80 | $ 69.71 | $ 69.02 | $ 77.00 | $ 69.02 |
Other statistics: | |||||||
Average full-time equivalent employees | 2,434 | 2,372 | 2,345 | 2,303 | 2,255 | 2,384 | 2,199 |
Period-end full-time equivalent employees | 2,433 | 2,380 | 2,347 | 2,311 | 2,280 | 2,433 | 2,280 |
Included in diluted earnings per common share and net income available to common stockholders for the three months ended March 31, 2017, June 30, 2017 and September 30, 2017 and nine months ended September 30, 2017 are tax benefits recognized associated with the adoption of Accounting Standards Update ("ASU") 2016-09, Improvements to Employee Share-Based Payment Accounting in the first quarter of 2017. This guidance was adopted on a prospective basis with no changes to prior period amounts. (See "Income Tax Expense" for further details).
As of the first quarter of 2017, our consolidated statements of income have been modified from prior periods' presentation to conform to the current period presentation to reflect our provision for loan losses and provision for unfunded credit commitments together as our "provision for credit losses". In prior periods, our provision for unfunded credit commitments was reported separately as a component of noninterest expense.
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 $0.6 million for the quarter ended September 30, 2017, $0.5 million for the quarter ended June 30, 2017, and $0.3 million for each of the quarters ended March 31, 2017, December 31, 2016 and September 30, 2016. The taxable equivalent adjustments were $1.5 million and $0.9 million for the nine months ended September 30, 2017 and September 30, 2016, 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 basis, was $374.6 million for the third quarter of 2017, compared to $343.2 million for the second quarter of 2017. The $31.4 million increase from the second quarter of 2017 to the third quarter of 2017, was attributable primarily to the following:
An increase in interest income from loans of $18.2 million to $268.4 million for the third quarter of 2017. The increase was reflective primarily of the impact of $1.1 billion in average loan growth, higher interest rates and one additional day in the third quarter of 2017 compared to the second quarter of 2017. Gross loan yields, excluding loan interest recoveries and loan fees, increased 10 basis points to 4.30 percent, as compared to
4.20 percent for the second quarter of 2017, reflective primarily of the recent rate increases. The increase in gross loan yields for the third quarter of 2017 was offset by lower loan fees in the third quarter of 2017 and, as a result of, the impact of higher interest recoveries on non-performing loans in the second quarter of 2017 resulting in the 4 basis point increase in overall loan yields to 4.93 percent, compared to 4.89 percent in the second quarter of 2017.
An increase in interest income from our fixed income investment securities in our available-for-sale ("AFS") and held-to-maturity ("HTM") portfolios of $14.4 million to $111.2 million for the third quarter of 2017. The increase in net interest income was primarily reflective of an increase in average fixed income investments of
$1.6 billion and continued reinvestment of maturing fixed income investment securities at higher-yielding rates. Our overall yield from our fixed income investment securities portfolio increased ten basis points to 1.91 percent, primarily attributable to the higher reinvestment rates compared to rates on paydowns and maturities.
A decrease in interest income from short-term investment securities of $1.1 million reflective of a $0.9 billion decrease in average interest-earning Federal Reserve cash balances to fund loan growth and investment purchases.
SVB Financial Group published this content on 26 October 2017 and is solely responsible for the information contained herein.
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