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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 September 30, 2018
 
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
At October 31, 2018, 53,250,854 shares of the registrant’s common stock ($0.001 par value) were outstanding.
Available on the web at www.svb.com



Table of Contents

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.
 
 

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Table of Contents

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

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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)

September 30,
2018

December 31,
2017
Assets




Cash and cash equivalents

$
3,819,141


$
2,923,075

Available-for-sale securities, at fair value (cost of $9,236,301 and $11,131,008, respectively)

9,087,609


11,120,664

Held-to-maturity securities, at cost (fair value of $15,372,238 and $12,548,280, respectively)

15,899,726


12,663,455

Non-marketable and other equity securities

896,249


651,053

Total investment securities

25,883,584


24,435,172

Loans, net of unearned income

27,494,915


23,106,316

Allowance for loan losses

(285,713
)

(255,024
)
Net loans

27,209,202


22,851,292

Premises and equipment, net of accumulated depreciation and amortization

121,890


128,682

Accrued interest receivable and other assets

1,105,917


876,246

Total assets

$
58,139,734


$
51,214,467

Liabilities and total equity




Liabilities:




Noninterest-bearing demand deposits

$
40,473,774


$
36,655,497

Interest-bearing deposits

8,122,337


7,598,578

Total deposits

48,596,111


44,254,075

Short-term borrowings

2,631,252


1,033,730

Other liabilities

1,146,109


911,755

Long-term debt

696,217


695,492

Total liabilities

53,069,689


46,895,052

Commitments and contingencies (Note 13 and Note 16)





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; 53,250,255 shares and 52,835,188 shares outstanding, respectively

53


53

Additional paid-in capital

1,360,030


1,314,377

Retained earnings

3,672,696


2,866,837

Accumulated other comprehensive loss

(108,410
)

(1,472
)
Total SVBFG stockholders’ equity

4,924,369


4,179,795

Noncontrolling interests

145,676


139,620

Total equity

5,070,045


4,319,415

Total liabilities and total equity

$
58,139,734


$
51,214,467


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

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

Three months ended September 30,

Nine months ended September 30,
(Dollars in thousands, except per share amounts)

2018

2017

2018

2017
Interest income:








Loans

$
352,353


$
268,445


$
979,724


$
745,983

Investment securities:








Taxable

142,075


109,443


403,702


294,768

Non-taxable

10,748


1,172


23,506


2,703

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

8,137


6,211


20,080


16,670

Total interest income

513,313


385,271


1,427,012


1,060,124

Interest expense:








Deposits

8,042


2,304


18,409


6,218

Borrowings

12,049


8,993


29,075


27,243

Total interest expense

20,091


11,297


47,484


33,461

Net interest income

493,222


373,974


1,379,528


1,026,663

Provision for credit losses

17,174


23,522


74,226


70,062

Net interest income after provision for credit losses

476,048


350,452


1,305,302


956,601

Noninterest income:








Gains on investment securities, net

32,193


15,238


77,365


48,838

Gains on equity warrant assets, net

34,141


24,922


72,393


42,432

Foreign exchange fees

32,656


29,671


100,560


82,026

Credit card fees

24,121


20,270


68,739


56,099

Deposit service charges

19,588


14,508


56,081


43,046

Client investment fees

36,265


15,563


88,592


37,571

Lending related fees

10,675


15,404


30,938


32,874

Letters of credit and standby letters of credit fees

8,409


7,306


24,938


20,951

Other

12,022


15,896


38,671


41,128

Total noninterest income

210,070


158,778


558,277


404,965

Noninterest expense:








Compensation and benefits

195,437


153,263


543,198


449,412

Professional services

36,542


32,987


112,080


86,331

Premises and equipment

19,858


18,937


57,576


53,753

Net occupancy

13,694


12,660


40,598


35,437

Business development and travel

12,712


10,329


35,998


30,913

FDIC and state assessments

9,550


8,359


29,306


26,354

Correspondent bank fees

3,513


3,162


10,200


9,770

Other

18,139


18,064


51,645


54,670

Total noninterest expense

309,445


257,761


880,601


746,640

Income before income tax expense

376,673


251,469


982,978


614,926

Income tax expense

95,308


97,351


246,561


220,412

Net income before noncontrolling interests

281,365


154,118


736,417


394,514

Net income attributable to noncontrolling interests

(6,548
)

(5,498
)

(28,841
)

(21,218
)
Net income available to common stockholders

$
274,817


$
148,620


$
707,576


$
373,296

Earnings per common share—basic

$
5.16


$
2.82


$
13.33


$
7.11

Earnings per common share—diluted

5.10


2.79


13.15


7.01

 


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

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Table of Contents

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

Three months ended September 30,

Nine months ended September 30,
(Dollars in thousands)

2018

2017

2018

2017
Net income before noncontrolling interests

$
281,365


$
154,118


$
736,417


$
394,514

Other comprehensive loss, net of tax:

 
 
 




Change in foreign currency cumulative translation gains and losses:

 
 
 




Foreign currency translation (losses) gains

(3,259
)

1,928


(5,337
)

4,463

Related tax benefit (expense)

905


(787
)

1,482


(1,821
)
Change in unrealized gains and losses on available-for-sale securities:

 
 
 




Unrealized holding (losses) gains

(24,902
)

925


(98,032
)

(12,471
)
Related tax benefit (expense)

6,994


(429
)

27,269


5,207

Reclassification adjustment for losses (gains) included in net income (1)



101




(384
)
Related tax (benefit) expense (1)



(41
)



157

Reclassification of unrealized gains on equity securities to retained earnings for ASU 2016-01 (1)
 

 

 
(40,316
)
 

Related tax expense (1)
 

 

 
11,145

 

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

(1,777
)

(1,594
)

(3,915
)

(4,931
)
Related tax benefit

494


641


1,085


1,984

Reclassification of stranded tax effect to retained earnings for ASU 2018-02 (1)
 

 

 
(319
)
 

Other comprehensive loss, net of tax

(21,545
)

744


(106,938
)

(7,796
)
Comprehensive income

259,820


154,862


629,479


386,718

Comprehensive income attributable to noncontrolling interests

(6,548
)

(5,498
)

(28,841
)

(21,218
)
Comprehensive income attributable to SVBFG

$
253,272


$
149,364


$
600,638


$
365,500

 
(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).

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Table of Contents

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

Common Stock

Additional
Paid-in Capital

Retained Earnings

Accumulated
Other
Comprehensive Income (Loss)

Total SVBFG
Stockholders’ Equity

Noncontrolling Interests

Total Equity
(Dollars in thousands)

Shares

Amount






Balance at December 31, 2016

52,254,074

 
$
52

 
$
1,242,741

 
$
2,376,331

 
$
23,430


$
3,642,554


$
134,483


$
3,777,037

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

458,742

 
1

 
14,191

 

 


14,192




14,192

Common stock issued under ESOP

10,838

 

 
2,094

 

 


2,094




2,094

Net income


 

 

 
373,296

 


373,296


21,218


394,514

Capital calls and distributions, net


 

 

 

 




(18,216
)

(18,216
)
Net change in unrealized gains and losses on AFS securities, net of tax


 

 

 

 
(7,491
)

(7,491
)



(7,491
)
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax


 

 

 

 
(2,947
)

(2,947
)



(2,947
)
Foreign currency translation adjustments, net of tax


 

 

 

 
2,642


2,642




2,642

Share-based compensation, net


 

 
35,473

 

 


35,473




35,473

Balance at September 30, 2017

52,723,654


$
53


$
1,294,499


$
2,749,627


$
15,634


$
4,059,813


$
137,485


$
4,197,298

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 ASU 2014-09, net of tax (1)
 

 

 

 
(5,802
)
 

 
(5,802
)
 

 
(5,802
)
Cumulative adjustment for ASU 2016-01, net of tax (1)
 

 

 

 
103,766

 
(29,171
)
 
74,595

 

 
74,595

Reclassification of stranded tax effect for ASU 2018-02 (1)
 

 

 

 
319

 
(319
)
 

 

 

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

405,395

 

 
9,108

 

 


9,108




9,108

Common stock issued under ESOP

9,672

 

 
2,577

 

 


2,577




2,577

Net income


 

 

 
707,576

 


707,576


28,841


736,417

Capital calls and distributions, net


 

 

 

 




(22,785
)

(22,785
)
Net change in unrealized gains and losses on AFS securities, net of tax


 

 

 

 
(70,763
)

(70,763
)



(70,763
)
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax


 

 

 

 
(2,830
)

(2,830
)



(2,830
)
Foreign currency translation adjustments, net of tax


 

 

 

 
(3,855
)

(3,855
)



(3,855
)
Share-based compensation, net


 

 
33,968

 

 


33,968




33,968

Balance at September 30, 2018

53,250,255


$
53


$
1,360,030


$
3,672,696


$
(108,410
)

$
4,924,369


$
145,676


$
5,070,045

 
(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).

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Table of Contents

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

Nine months ended September 30,
(Dollars in thousands)

2018

2017
Cash flows from operating activities:




Net income before noncontrolling interests

$
736,417


$
394,514

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




Provision for credit losses

74,226


70,062

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

(24,462
)
 
(29,666
)
Changes in fair values of derivatives, net

2,964


8,214

Gains on investment securities, net (1)

(77,365
)
 
(31,032
)
Distributions of earnings from non-marketable and other equity securities (1)
 
54,605

 
38,965

Depreciation and amortization

43,389


39,265

Amortization of premiums and discounts on investment securities, net

(252
)

2,609

Amortization of share-based compensation

33,968


27,739

Amortization of deferred loan fees

(94,771
)

(81,060
)
Deferred income tax (benefit) expense

(16,532
)

2,325

Excess tax benefit from exercise of stock options and vesting of restricted shares
 
(17,543
)
 
(14,399
)
Losses from the write-off of premises and equipment
 
7,117

 

Other gains
 

 
(6,150
)
Changes in other assets and liabilities:




Accrued interest receivable and payable, net

(51,521
)

(26,092
)
Accounts receivable and payable, net

1,697


4,120

Income tax receivable and payable, net

(12,962
)

30,069

Accrued compensation

5,505


(11,731
)
Foreign exchange spot contracts, net

86,298


86,911

Other, net

(46,874
)

16,410

Net cash provided by operating activities

703,904


521,073

Cash flows from investing activities:




Purchases of available-for-sale securities

(662,458
)

(2,420,741
)
Proceeds from sales of available-for-sale securities



7,311

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

2,529,666


2,434,039

Purchases of held-to-maturity securities

(4,726,595
)

(3,812,782
)
Proceeds from maturities and paydowns of held-to-maturity securities

1,482,204


1,283,764

Purchases of non-marketable and other securities

(56,435
)

(18,766
)
Proceeds from sales and distributions of capital of non-marketable and other securities (1)

83,020


35,821

Net increase in loans

(4,356,980
)

(2,263,600
)
Purchases of premises and equipment

(28,718
)

(35,470
)
Proceeds from sale of equity valuation services business
 

 
3,000

Net cash used for investing activities

(5,736,296
)

(4,787,424
)
Cash flows from financing activities:




Net increase in deposits

4,342,036


5,832,165

Net increase (decrease) in short-term borrowings

1,597,522


(507,828
)
Principal payments of long-term debt
 

 
(46,235
)
(Distributions to noncontrolling interests), net of contributions from noncontrolling interests

(22,785
)

(18,216
)
Proceeds from issuance of common stock, ESPP and ESOP

11,685


16,286

Net cash provided by financing activities

5,928,458


5,276,172

Net increase in cash and cash equivalents

896,066


1,009,821

Cash and cash equivalents at beginning of period

2,923,075


2,545,750

Cash and cash equivalents at end of period

$
3,819,141


$
3,555,571

Supplemental disclosures:




Cash paid during the period for:




Interest

$
54,681


$
41,324

Income taxes

277,388


190,706

Noncash items during the period:




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

$
(70,763
)

$
(7,491
)
Distributions of stock from investments

4,368


5,360

 
(1)
During the first quarter of 2018 we adopted ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This guidance was adopted on a retrospective basis and impacted the presentation between investing and operating activities related to distributions and net gains from our nonmarketable and other securities portfolio. See 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).

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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 variety 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 and nine months ended September 30, 2018 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, 2017 (“2017 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 2017 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) 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.

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Table of Contents

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 May 2014, the FASB issued a new accounting standard update (ASU 2014-09, Revenue from Contracts with Customers (Topic 606)), which provides revenue recognition guidance that is intended to create greater consistency with respect to how and when revenue from contracts with customers is shown in the income statement. The guidance requires that revenue from contracts with customers be recognized when transfer of control over goods or services is passed to customers in the amount of consideration expected to be received. Subsequent Accounting Standard Updates have been issued clarifying the original pronouncement (ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20).
On January 1, 2018, we adopted the new accounting standard ASU 2014-09, Revenue from Contracts with Customers and all the related amendments ("new revenue standard," "ASC 606" or "ASU 2014-09") using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. We elected to apply the practical expedient which allows us to expense costs related to obtaining contracts as incurred because the amortization period would have been one year or less. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.
We completed a comprehensive scoping exercise to determine the revenue streams that are within the scope of this guidance. The scope of this guidance explicitly excludes net interest income, including interest income earned from our loan and fixed income securities portfolios, as well as certain other noninterest income earned from our lending-, investment- and derivative-related activities. Based on our completed assessment, we did not identify any material changes to the timing or the amounts of our revenue recognition, however, we identified a change in the timing of recognizing fund management fees in other noninterest income for a portion of our SVB Capital funds. Fund management fees for these certain SVB Capital funds will now be recognized at the time of distribution which typically occurs later in the life of the fund than had been previously recognized. The cumulative adjustment to retained earnings associated with this change was $5.8 million, net of tax, with an immaterial impact to our net income on an ongoing basis. The impacts to net income as a result of applying the new revenue standard were decreases of $0.5 million and $1.4 million for the three and nine months ended September 30, 2018, respectively.
The timing of revenue recognition may differ from the timing of cash settlements or invoicing to customers. We record a receivable when revenue is recognized prior to invoicing, and unearned revenue when revenue is recognized subsequent to receipt of consideration. These assets and liabilities are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period. During the three and nine months ended September 30, 2018, changes in our contract assets, contract liabilities and receivables were not material. Additionally, revenues recognized during the three and nine months ended September 30, 2018 that were included in the corresponding contract liability balance at the beginning of the period were not material.
The cumulative effect of the changes to our consolidated balance sheets at January 1, 2018, for the adoption of the new revenue standard were as follows:

(Dollars in thousands)
 
Balance at December 31, 2017
 
Adjustments Due to Adoption of ASC 606
 
Balance at
January 1, 2018
Accrued interest receivable and other assets:
 
 
 
 
 
 
Accounts receivable
 
$
55,946

 
$
(34,340
)
 
$
21,606

Other liabilities:
 
 
 
 
 
 
Deferred revenue
 
27,057

 
(26,321
)
 
736

Current taxes payable
 
4,675

 
(2,217
)
 
2,458

Stockholders' Equity:
 
 
 
 
 
 
Retained earnings
 
2,866,837

 
(5,802
)
 
2,861,035


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In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated balance sheets at September 30, 2018 and our statements of income for the three and nine months ended September 30, 2018, were as follows:
 
 
September 30, 2018
(Dollars in thousands)
 
As Reported
 
Balances Without Adoption of ASC 606
 
Effect of Change
Higher/(Lower)
Accrued interest receivable and other assets:
 
 
 
 
 
 
Accounts receivable
 
$
61,090

 
$
100,470

 
$
(39,380
)
Other liabilities:
 
 
 
 
 
 
Deferred fees
 
556

 
28,379

 
(27,823
)
Current taxes payable (receivable)
 
2,002

 
(694
)
 
2,696

Stockholders' Equity:
 
 
 
 
 
 
Retained earnings
 
3,672,696

 
3,678,020

 
(5,324
)
 
 
Three months ended September 30, 2018
(Dollars in thousands)
 
As Reported
 
Balances Without Adoption of ASC 606
 
Effect of Change
Higher/(Lower)
Other noninterest income:
 
 
 
 
 
 
Fund management fees
 
$
5,479

 
$
6,087

 
$
(608
)
Income tax expense
 
95,308

 
95,463

 
(155
)
 
 
 
 
 
 
 
Net Income available to common stockholders
 
274,817

 
275,270

 
(453
)
Diluted earnings per share
 
5.10

 
5.11

 
(0.01
)
 
 
Nine months ended September 30, 2018
(Dollars in thousands)
 
As Reported
 
Balances Without Adoption of ASC 606
 
Effect of Change
Higher/(Lower)
Other noninterest income:
 
 
 
 
 
 
Fund management fees
 
$
17,144

 
$
19,001

 
$
(1,857
)
Income tax expense
 
246,561

 
247,040

 
(479
)
 
 
 
 
 
 
 
Net Income available to common stockholders
 
707,576

 
708,954

 
(1,378
)
Diluted earnings per share
 
13.15

 
13.18

 
(0.03
)
In February 2018, the FASB issued a new accounting standard update (ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU "2018-02")) to address certain stranded income tax effects in accumulated other comprehensive income ("AOCI") resulting from H.R.1, known as the Tax Cuts and Jobs Act (the "TCJ Act"). ASU 2018-02 changed current accounting whereby an entity may elect to reclassify the stranded tax effect from AOCI to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the TCJ Act (or portion thereof) is recorded. ASU 2018-02 is effective for periods beginning after December 15, 2018 and early adoption is permitted. We have elected to early adopt ASU 2018-02 and reclassified approximately $0.3 million from accumulated other comprehensive income to retained earnings within our consolidated statements of stockholders' equity in the first quarter of 2018.
On January 1, 2018, we adopted the new accounting standard update ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825), which addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This guidance requires equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income. We adopted this guidance using the modified retrospective method and our equity investments carried at cost with readily determinable fair values were re-measured at fair value and the difference between cost and fair value was recorded as a cumulative-effect adjustment to opening retained earnings as of January 1, 2018. The adjustment to opening retained earnings for these investments was $74.6 million, net of tax, with subsequent changes in the fair value of these equity securities recorded as unrealized gains or losses in

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our consolidated statements of income. Additionally, in accordance with this guidance, net unrealized gains of $29.2 million, net of tax, included in accumulated other comprehensive income on January 1, 2018, related to our previously reported available-for-sale equity securities, were reclassified as an adjustment to retained earnings. Subsequent changes in the fair value of these equity securities were recorded as unrealized gains or losses in our consolidated statements of income. Furthermore, for purposes of disclosing the fair value of loans carried at amortized cost, our valuation methodology was updated to conform to an “exit price” concept as required by the standard update, resulting in an immaterial change in the fair value.
In August 2016, the FASB issued a new accounting standard update (ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments), which clarifies the guidance on eight specific cash flow issues. We adopted the new accounting standard, specifically as it relates to distributions from our equity method investments, on January 1, 2018. We elected to adopt the nature of distribution approach and applied the guidance retrospectively. The new guidance had an immaterial impact on the presentation between investing and operating activities within our statements of cash flows related to distributions and net gains from our nonmarketable and other securities portfolio.
In November 2016, the FASB issued a new accounting standard update (ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash), which requires that a statement of cash flows explains the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.  Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows.  Previous to the update, there had been some diversity in practice.  Given that we had already classified restricted cash such as cash reserves at the Federal Reserve as part of cash and cash equivalents on the cash flow statement, the update had no impact on how we were already reporting and presenting our statement of cash flows.
Recent Accounting Pronouncements
In February 2016, the FASB issued a new accounting standard update (ASU 2016-02, Leases (Topic 842)), which will require for all operating leases the recognition of a right-of-use asset and a corresponding lease liability, in the statement of financial position. 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. This guidance will be effective on January 1, 2019, with early adoption permitted. We plan to adopt the lease accounting guidance on January 1, 2019, on a prospective basis. We intend to elect the transition "package of expedients" which will result in continuing to account for existing leases for which the commencement date is before January 1, 2019, in accordance with Leases (Topic 840) throughout the lease term, including periods after adoption of the new guidance. We expect the adoption of this standard to have an impact of less than one percent of total assets and liabilities on our consolidated balance sheets reflective of the recognition of right-of-use assets and related lease liabilities associated predominantly with noncancelable operating leases. In addition, we do not expect the adoption of this guidance to have a material impact on our consolidated statements of income.
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 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 2017, the FASB issued a new accounting standard update (ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities (Topic 815)), which better aligns an entity’s risk management activities and financial reporting for hedging relationships through changes to the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The targeted improvements in the ASU will allow increased flexibility to structure hedges of fixed rate instruments and floating rate instruments. Application of the ASU is expected to reduce the amount of ineffectiveness as the revised accounting guidance will better reflect the economics of risk management activities and will also reduce the volatility associated with foreign currency hedging. The ASU requires the hedging instrument to be presented in the same line item as the hedged item and requires expanded disclosures. There were further amendments, with the issuance of ASU 2018-16, “Derivatives and Hedging (Topic 815)," which provides us with the option to use the Overnight Index Swap ("OIS") rate based on the Secured Overnight Financing Rate ("SOFR") as a U.S. benchmark interest rate for purposes of applying hedge accounting under Topic 815. This guidance will be effective January 1, 2019, with early adoption permitted. We plan to early adopt this

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guidance in the fourth quarter of 2018, effective October 1, 2018. The accounting standard will not have a material impact on our consolidated financial position, results of operations or the disclosures in our Notes to the Consolidated Financial Statements.
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
Certain prior period amounts, primarily related to the adoption of new accounting guidance, have been reclassified to conform to current period presentations.

2.
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 and nine months ended September 30, 2018 and 2017:
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(Dollars in thousands)
 
Income Statement Location
 
2018

2017
 
2018
 
2017
Reclassification adjustment for losses (gains) included in net income (1)
 
Gains on investment securities, net
 
$

 
$
101

 
$

 
$
(384
)
Related tax (benefit) expense (1)
 
Income tax expense
 

 
(41
)
 

 
157

Total reclassification adjustment for losses (gains) included in net income, net of tax (1)
 
 
 
$

 
$
60

 
$

 
$
(227
)
 
(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.

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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 units 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 and nine months ended September 30, 2018 and 2017:
 
 
Three months ended September 30,
 
Nine months ended September 30,
(Dollars and shares in thousands, except per share amounts)
 
2018
 
2017
 
2018
 
2017
Numerator:
 
 
 
 
 
 
 
 
Net income available to common stockholders
 
$
274,817

 
$
148,620

 
$
707,576

 
$
373,296

Denominator:
 
 
 
 
 
 
 
 
Weighted average common shares outstanding—basic
 
53,235

 
52,705

 
53,062

 
52,530

Weighted average effect of dilutive securities:
 
 
 
 
 
 
 
 
Stock options and ESPP
 
383

 
343

 
404

 
381

Restricted stock units
 
301

 
257

 
334

 
319

Weighted average common shares outstanding—diluted
 
53,919

 
53,305

 
53,800

 
53,230

Earnings per common share:
 
 
 
 
 
 
 
 
Basic
 
$
5.16

 
$
2.82

 
$
13.33

 
$
7.11

Diluted
 
5.10

 
2.79

 
13.15

 
7.01


The following table summarizes the weighted-average common shares excluded from the diluted EPS calculation due to the antidilutive effect for the three and nine months ended September 30, 2018 and 2017:
 
 
Three months ended September 30,
 
Nine months ended September 30,
(Shares in thousands)
 
2018
 
2017
 
2018
 
2017
Stock options
 
86

 
112

 
49

 
61

Restricted stock units
 
5

 
5

 
71

 
2

Total
 
91

 
117

 
120

 
63


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Consolidated Statement of Changes in Equity
The following table summarizes the changes in our consolidated equity for the three months ended September 30, 2018 and 2017:
 
 
Common Stock
 
Additional
Paid-in Capital
 
Retained Earnings
 
Accumulated
Other
Comprehensive Income (Loss)
 
Total SVBFG
Stockholders’ Equity
 
Noncontrolling Interests
 
Total Equity
(Dollars in thousands)
 
Shares
 
Amount
 
 
 
 
 
 
Balance at June 30, 2017
 
52,684,159

 
$
53

 
$
1,283,485

 
$
2,601,007

 
$
14,890

 
$
3,899,435

 
$
140,600

 
$
4,040,035

Common stock issued under employee benefit plans, net of restricted stock cancellations
 
39,495

 

 
2,370

 

 

 
2,370

 

 
2,370

Net income
 

 

 

 
148,620

 

 
148,620

 
5,498

 
154,118

Capital calls and distributions, net
 

 

 

 

 

 

 
(8,613
)
 
(8,613
)
Net change in unrealized gains and losses on AFS securities, net of tax
 

 

 

 

 
556

 
556

 

 
556

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

 

 

 

 
(953
)
 
(953
)
 

 
(953
)
Foreign currency translation adjustments, net of tax
 

 

 

 

 
1,141

 
1,141

 

 
1,141

Share-based compensation, net
 

 

 
8,644

 

 

 
8,644

 

 
8,644

Balance at September 30, 2017
 
52,723,654

 
$
53

 
$
1,294,499

 
$
2,749,627

 
$
15,634

 
$
4,059,813

 
$
137,485

 
$
4,197,298

Balance at June 30, 2018
 
53,210,627

 
$
53

 
$
1,346,586

 
$
3,397,879

 
$
(86,865
)
 
$
4,657,653

 
$
147,188

 
$
4,804,841

Common stock issued under employee benefit plans, net of restricted stock cancellations
 
39,628

 

 
1,943

 

 

 
1,943

 

 
1,943

Net income
 

 

 

 
274,817

 

 
274,817

 
6,548

 
281,365

Capital calls and distributions, net
 

 

 

 

 

 

 
(8,060
)
 
(8,060
)
Net change in unrealized gains and losses on AFS securities, net of tax
 

 

 

 

 
(17,908
)
 
(17,908
)
 

 
(17,908
)
Amortization of unrealized holding gains on securities transferred from AFS to HTM, net of tax
 

 

 

 

 
(1,283
)
 
(1,283
)
 

 
(1,283
)
Foreign currency translation adjustments, net of tax
 

 

 

 

 
(2,354
)
 
(2,354
)
 

 
(2,354
)
Share-based compensation, net
 

 

 
11,501

 

 

 
11,501

 

 
11,501

Balance at September 30, 2018
 
53,250,255

 
$
53

 
$
1,360,030

 
$
3,672,696

 
$
(108,410
)
 
$
4,924,369

 
$
145,676

 
$
5,070,045



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3.
Share-Based Compensation
For the three and nine months ended September 30, 2018 and 2017, we recorded share-based compensation and related tax benefits as follows: 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(Dollars in thousands)
 
2018
 
2017
 
2018
 
2017
Share-based compensation expense
 
$
11,501

 
$
8,644

 
$
33,968

 
$
27,739

Income tax benefit related to share-based compensation expense
 
(2,895
)
 
(3,154
)
 
(7,955
)
 
(9,518
)
Unrecognized Compensation Expense
As of September 30, 2018, unrecognized share-based compensation expense was as follows:
(Dollars in thousands)
 
  Unrecognized  
Expense
 
Weighted Average Expected
Recognition Period 
- in Years  
Stock options
 
$
13,525

 
2.91
Restricted stock units
 
73,037

 
2.74
Total unrecognized share-based compensation expense
 
$
86,562

 
 
Share-Based Payment Award Activity
The table below provides stock option information related to the 2006 Equity Incentive Plan for the nine months ended September 30, 2018:
 
 
Options
 
Weighted
Average
 Exercise Price 
 
Weighted Average Remaining Contractual Life - in Years  
 
Aggregate
  Intrinsic Value  
of In-The-
Money
Options
Outstanding at December 31, 2017
 
808,049

 
$
105.68

 
 
 
 
Granted
 
89,616

 
305.71

 
 
 
 
Exercised
 
(191,585
)
 
83.37

 
 
 
 
Forfeited
 
(9,498
)
 
187.76

 
 
 
 
Expired
 
(2,337
)
 
60.37

 
 
 
 
Outstanding at September 30, 2018
 
694,245

 
136.68

 
3.76
 
$
120,932,288

Vested and expected to vest at September 30, 2018
 
673,674

 
134.25

 
3.70
 
118,982,041

Exercisable at September 30, 2018
 
415,993

 
99.63

 
2.66
 
87,856,349

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 $310.83 as of September 30, 2018. The total intrinsic value of options exercised during the three and nine months ended September 30, 2018 was $8.5 million and $39.5 million, respectively, compared to $3.8 million and $25.8 million for the comparable 2017 periods.

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The table below provides information for restricted stock units under the 2006 Equity Incentive Plan for the nine months ended September 30, 2018:
 
 
Shares    
 
Weighted Average Grant Date Fair Value
Nonvested at December 31, 2017
 
637,667

 
$
135.86

Granted
 
193,405

 
302.53

Vested
 
(213,944
)
 
130.20

Forfeited
 
(37,080
)
 
170.97

Nonvested at September 30, 2018
 
580,048

 
191.28

4.
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 our investments in qualified affordable housing projects.
The following table presents the carrying amounts and classification of significant variable interests in consolidated and unconsolidated VIEs as of September 30, 2018 and December 31, 2017:
(Dollars in thousands)
 
Consolidated VIEs
 
Unconsolidated VIEs
 
Maximum Exposure to Loss in Unconsolidated VIEs
September 30, 2018:
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
5,470

 
$

 
$

Non-marketable and other equity securities (1)
 
212,514

 
524,812

 
524,812

Accrued interest receivable and other assets
 
298

 

 

Total assets
 
$
218,282

 
$
524,812

 
$
524,812

Liabilities:
 
 
 
 
 
 
Other liabilities (1)
 
680

 
166,867

 

Total liabilities
 
$
680

 
$
166,867

 
$

December 31, 2017:
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
6,674

 
$

 
$

Non-marketable and other equity securities (1)
 
190,562

 
346,097

 
346,097

Accrued interest receivable and other assets
 
365

 

 

Total assets
 
$
197,601

 
$
346,097

 
$
346,097

Liabilities:
 
 
 
 
 
 
Other liabilities (1)
 
990

 
100,891

 

Total liabilities
 
$
990

 
$
100,891

 
$

 
 
(1)
Included in our unconsolidated non-marketable and other equity securities portfolio at September 30, 2018 and December 31, 2017 are investments in qualified affordable housing projects of $261.7 million and $174.2 million, respectively, and related other liabilities consisting of unfunded credit commitments of $166.9 million and $100.9 million, respectively.

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 investments in 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

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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 13—“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 6—“Investment Securities" of the “Notes to Interim Consolidated Financial Statements (unaudited)” under Part I, Item 1 of this report.
As of September 30, 2018, our exposure to loss with respect to the consolidated VIEs is limited to our net assets of $217.6 million and our exposure to loss for our unconsolidated VIEs is equal to our investment in these assets of $524.8 million.
5.
Cash and Cash Equivalents
The following table details our cash and cash equivalents at September 30, 2018 and December 31, 2017:
(Dollars in thousands)
 
September 30, 2018

December 31, 2017
Cash and due from banks (1)
 
$
3,697,018

 
$
2,672,290

Securities purchased under agreements to resell (2)
 
119,181

 
247,876

Other short-term investment securities
 
2,942

 
2,909

Total cash and cash equivalents
 
$
3,819,141

 
$
2,923,075

 
 
(1)
At September 30, 2018 and December 31, 2017, $2.1 billion and $0.6 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 $1.1 billion at both September 30, 2018 and December 31, 2017.
(2)
At September 30, 2018 and December 31, 2017, securities purchased under agreements to resell were collateralized by U.S. Treasury securities and U.S. agency securities with aggregate fair values of $124.5 million and $252.8 million, respectively. None of these securities were sold or repledged as of September 30, 2018 and December 31, 2017.
6.
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 components of our available-for-sale investment securities portfolio at September 30, 2018 and December 31, 2017 are as follows:
 
 
September 30, 2018
(Dollars in thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Carrying
Value
Available-for-sale securities, at fair value:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
5,560,828

 
$
117

 
$
(59,071
)
 
$
5,501,874

U.S. agency debentures
 
1,357,069

 

 
(10,397
)
 
1,346,672

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
Agency-issued collateralized mortgage obligations—fixed rate
 
2,001,048

 
3

 
(80,510
)
 
1,920,541

Agency-issued collateralized mortgage obligations—variable rate
 
317,356

 
1,297

 
(131
)
 
318,522

Total available-for-sale securities
 
$
9,236,301

 
$
1,417

 
$
(150,109
)
 
$
9,087,609


 
 
December 31, 2017
(Dollars in thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Carrying
Value
Available-for-sale securities, at fair value:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
6,865,068

 
$
1,113

 
$
(25,679
)
 
$
6,840,502

U.S. agency debentures
 
1,569,195

 
3,569

 
(5,636
)
 
1,567,128

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
Agency-issued collateralized mortgage obligations—fixed rate
 
2,292,311

 
258

 
(25,534
)
 
2,267,035

Agency-issued collateralized mortgage obligations—variable rate
 
372,481

 
1,375

 
(126
)
 
373,730

Equity securities
 
31,953

 
40,525

 
(209
)
 
72,269

Total available-for-sale securities
 
$
11,131,008

 
$
46,840