SVB Financial Group
SILICON VALLEY BANCSHARES (Form: 10-Q, Received: 11/13/1998 16:26:12)

As filed with the Securities and Exchange Commission on November 13, 1998

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-Q

(MARK ONE)

/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________ to ________.

Commission File Number: 33-41102

SILICON VALLEY BANCSHARES
(Exact name of registrant as specified in its charter)

             California                                    94-2856336
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
    incorporation or organization)


          3003 Tasman Drive
        Santa Clara, California                            95054-1191
(Address of principal executive offices)                   (Zip Code)


       Registrant's telephone number, including area code: (408) 654-7282

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

At October 31, 1998, 20,641,341 shares of the registrant's common stock (no par value) were outstanding.

This report contains a total of 31 pages.


TABLE OF CONTENTS

                                                                            Page
                                                                            ----
                         PART I - FINANCIAL INFORMATION

ITEM 1.    INTERIM CONSOLIDATED FINANCIAL STATEMENTS

           CONSOLIDATED BALANCE SHEETS                                        3

           CONSOLIDATED INCOME STATEMENTS                                     4

           CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME                    5

           CONSOLIDATED STATEMENTS OF CASH FLOWS                              6

           NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS                 7

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS                               12

                           PART II - OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS                                                 30

ITEM 2.    CHANGES IN SECURITIES                                             30

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES                                   30

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               30

ITEM 5.    OTHER INFORMATION                                                 30

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K                                  30

SIGNATURES                                                                   31


PART I - FINANCIAL INFORMATION

ITEM 1 - INTERIM CONSOLIDATED FINANCIAL STATEMENTS

SILICON VALLEY BANCSHARES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

                                                                                   September 30,       December 31,
                                                                                        1998               1997
(Dollars in thousands)                                                              (Unaudited)
-------------------------------------------------------------------------------------------------------------------
Assets:
Cash and due from banks                                                              $  107,953          $  105,059
Federal funds sold and securities purchased under
  agreement to resell                                                                   711,220             321,773
Investment securities, at fair value                                                    940,893           1,013,904
Loans, net of unearned income                                                         1,438,231           1,174,645
Allowance for loan losses                                                               (35,900)            (37,700)
-------------------------------------------------------------------------------------------------------------------
  Net loans                                                                           1,402,331           1,136,945
Premises and equipment                                                                    9,348               4,460
Other real estate owned                                                                     664                 689
Accrued interest receivable and other assets                                             43,773              42,293
-------------------------------------------------------------------------------------------------------------------
Total assets                                                                         $3,216,182          $2,625,123
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

Liabilities and Shareholders' Equity:
Liabilities:
Noninterest-bearing demand deposits                                                  $  839,713          $  788,442
NOW deposits                                                                             15,561              21,348
Money market deposits                                                                 1,958,341           1,497,996
Time deposits                                                                           130,255             124,621
-------------------------------------------------------------------------------------------------------------------
  Total deposits                                                                      2,943,870           2,432,407
Other liabilities                                                                        23,602              18,235
-------------------------------------------------------------------------------------------------------------------
Total liabilities                                                                     2,967,472           2,450,642
-------------------------------------------------------------------------------------------------------------------

Company obligated mandatorily redeemable trust preferred securities of
  subsidiary trust holding solely junior subordinated debentures
 (trust preferred securities)                                                            38,472                   -

Shareholders' Equity:
Preferred stock, no par value:
  20,000,000 shares authorized; none outstanding
Common stock, no par value:
  60,000,000 shares authorized; 20,635,643 and
  19,940,474 shares outstanding at September 30, 1998
  and December 31, 1997, respectively                                                    91,728              83,009
Retained earnings                                                                       119,331              94,999
Unearned compensation                                                                    (4,792)             (5,946)
Accumulated other comprehensive income:
   Net unrealized gain on available-for-sale investments                                  3,971               2,419
-------------------------------------------------------------------------------------------------------------------
Total shareholders' equity                                                              210,238             174,481
-------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                                           $3,216,182          $2,625,123
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

See notes to interim consolidated financial statements.


SILICON VALLEY BANCSHARES AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS

                                                  For the three months ended           For the nine months ended
                                                  --------------------------           -------------------------
                                                 September 30,   September 30,      September 30,       September 30,
                                                     1998            1997               1998                1997
(Dollars in thousands, except per share amounts)  (Unaudited)    (Unaudited)         (Unaudited)         (Unaudited)
-------------------------------------------------------------------------------------------------------------------
Interest income:
   Loans, including fees                            $36,494         $28,349            $101,356            $ 77,874
   Investment securities                             17,757          10,897              47,959              29,020
   Federal funds sold and securities
     purchased under agreement to resell              5,941           4,925              15,149              11,891
-------------------------------------------------------------------------------------------------------------------
Total interest income                                60,192          44,171             164,464             118,785
-------------------------------------------------------------------------------------------------------------------
Interest expense:
   Deposits                                          21,736          15,117              58,669              38,791
   Other borrowings                                       -               -                   3                   -
-------------------------------------------------------------------------------------------------------------------
Total interest expense                               21,736          15,117              58,672              38,791
-------------------------------------------------------------------------------------------------------------------
Net interest income                                  38,456          29,054             105,792              79,994
Provision for loan losses                            10,557           1,716              20,061               7,682
-------------------------------------------------------------------------------------------------------------------
Net interest income after provision
   for loan losses                                   27,899          27,338              85,731              72,312
-------------------------------------------------------------------------------------------------------------------
Noninterest income:
   Letter of credit and foreign
     exchange income                                  1,795           1,159               5,137               3,249
   Disposition of client warrants                       705             708               4,979               4,953
   Investment gains                                   4,149              33               4,626                  78
   Deposit service charges                              432             588               1,277               1,360
   Other                                                635             318               1,523                 973
-------------------------------------------------------------------------------------------------------------------
Total noninterest income                              7,716           2,806              17,542              10,613
-------------------------------------------------------------------------------------------------------------------
Noninterest expense:
   Compensation and benefits                         10,773          10,625              34,877              29,100
   Professional services                              2,361           1,958               6,390               5,088
   Furniture and equipment                            1,320           1,178               5,051               2,602
   Business development and travel                    1,460           1,077               4,422               3,063
   Net occupancy expense                              1,394             840               3,451               2,493
   Telephone                                            481             370               1,600               1,004
   Advertising and promotion                            643             354               1,553               1,082
   Postage and supplies                                 635             420               1,545               1,122
   Trust preferred securities distributions             825               -               1,187                   -
   Cost of other real estate owned                       19              30              (1,229)                 56
   Other                                              1,152             766               2,893               2,429
-------------------------------------------------------------------------------------------------------------------
Total noninterest expense                            21,063          17,618              61,740              48,039
-------------------------------------------------------------------------------------------------------------------
Income before income tax expense                     14,552          12,526              41,533              34,886
Income tax expense                                    6,002           5,261              17,202              14,652
-------------------------------------------------------------------------------------------------------------------
Net income                                          $ 8,550         $ 7,265            $ 24,331            $ 20,234
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Basic earnings per share                            $  0.42         $  0.37            $   1.20            $   1.05
Diluted earnings per share                          $  0.41         $  0.35            $   1.16            $   1.00
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

See notes to interim consolidated financial statements.


SILICON VALLEY BANCSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                                For the three months ended             For the nine months ended
                                                --------------------------             -------------------------

                                              September 30,     September 30,       September 30,      September 30,
                                                  1998              1997                1998                1997
(Dollars in thousands)                         (Unaudited)      (Unaudited)          (Unaudited)        (Unaudited)
--------------------------------------------------------------------------------------------------------------------
Net income                                      $  8,550           $7,265              $24,331             $20,234

Other comprehensive income, net of tax:
   Unrealized gain/(loss) on available-for-
     sale investments:
     Unrealized holding gain arising
       during period                               4,873            2,172                7,123               2,431
     Less: Reclassification adjustment for
       gain included in net income                (2,815)            (430)              (5,571)             (2,918)
------------------------------------------------------------------------------------------------------------------
Other comprehensive income                         2,058            1,742                1,552                (487)
------------------------------------------------------------------------------------------------------------------
Comprehensive income                             $10,608           $9,007              $25,883             $19,747
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------

See notes to interim consolidated financial statements.


SILICON VALLEY BANCSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                    For the nine months ended
                                                                            ---------------------------------------

                                                                               September 30,            September 30,
                                                                                   1998                     1997
(Dollars in thousands)                                                         (Unaudited)               (Unaudited)
---------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
     Net income                                                               $   24,331               $    20,234
     Adjustments to reconcile net income to net cash
      provided by operating activities:
       Provision for loan losses                                                  20,061                     7,682
       Depreciation and amortization                                               1,187                       974
       Net gain on sales of investment securities                                 (4,626)                      (78)
       Net gain on sales of other real estate owned                               (1,298)                      (45)
       (Increase) decrease in accrued interest receivable                          1,108                    (5,260)
       Increase in prepaid expenses                                                 (924)                     (180)
       Increase in unearned income                                                   662                     1,757
       Increase (decrease) in accrued liabilities                                   (489)                      896
       Increase (decrease) in taxes payable                                        3,926                      (327)
       Other, net                                                                 (1,539)                   (2,316)
------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                         42,399                    23,337
------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
     Proceeds from maturities and paydowns of
        investment securities                                                  1,122,228                   923,336
     Proceeds from sales of investment securities                                453,821                   105,476
     Purchases of investment securities                                       (1,489,814)               (1,236,675)
     Net increase in loans                                                      (288,165)                 (181,605)
     Proceeds from recoveries of charged off loans                                 2,055                     3,121
     Net proceeds from sales of other real estate owned                            1,323                     1,193
     Purchases of premises and equipment                                          (6,251)                     (426)
------------------------------------------------------------------------------------------------------------------
Net cash applied to investing activities                                        (204,803)                 (385,580)
------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
     Net increase in deposits                                                    511,463                   453,906
       Proceeds from issuance of trust preferred securities,
       net of issuance costs                                                      38,472                         -
     Proceeds from issuance of common stock,
       net of issuance costs                                                       4,810                     3,481
------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                        554,745                   457,387
------------------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents                                        392,341                    95,144
Cash and cash equivalents at January 1,                                          426,832                   433,177
------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at September 30,                                    $  819,173               $   528,321
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
Supplemental disclosures:
     Interest paid                                                            $   58,528               $    38,514
     Income taxes paid                                                        $   16,306               $    14,585
Non-cash investing activities:
     Transfer of loans to other foreclosed assets                             $        -               $     1,169
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------

See notes to interim consolidated financial statements.


SILICON VALLEY BANCSHARES AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of Silicon Valley Bancshares (the "Company") and its subsidiaries conform with generally accepted accounting principles and prevailing practices within the banking industry. Certain reclassifications have been made to the Company's 1997 consolidated financial statements to conform to the 1998 presentations. Such reclassifications had no effect on the results of operations or shareholders' equity. The following is a summary of the significant accounting and reporting policies used in preparing the interim consolidated financial statements.

NATURE OF OPERATIONS

The Company is a bank holding company whose principal subsidiary is Silicon Valley Bank (the "Bank"), a California-chartered bank with headquarters in Santa Clara, California. The Bank maintains regional banking offices in Northern and Southern California, and additionally has loan offices in Arizona, Colorado, Georgia, Illinois, Maryland, Massachusetts, Oregon, Texas, and Washington. The Bank serves emerging growth and middle-market companies in targeted niches, focusing on the technology and life sciences industries, while also identifying and capitalizing on opportunities to serve companies in other industries whose financial services needs are underserved. Substantially all of the assets, liabilities and earnings of the Company relate to its investment in the Bank.

CONSOLIDATION

The interim consolidated financial statements include the accounts of the Company and those of its wholly owned subsidiaries, the Bank, SVB Capital I and SVB Leasing Company (inactive). The revenues, expenses, assets, and liabilities of the subsidiaries are included in the respective line items in the interim consolidated financial statements after elimination of intercompany accounts and transactions.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

In the opinion of Management, the interim consolidated financial statements contain all adjustments (consisting of only normal, recurring adjustments) necessary to present fairly the Company's consolidated financial position at September 30, 1998, the results of its operations for the three and nine month periods ended September 30, 1998, and September 30, 1997, and the results of its cash flows for the nine month periods ended September 30, 1998, and September 30, 1997. The December 31, 1997, consolidated financial statements were derived from audited financial statements, and certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted.

The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1997 Annual Report on Form 10-K. The results of operations for the three and nine month periods ended September 30, 1998, may not necessarily be indicative of the Company's operating results for the


full year.

BASIS OF FINANCIAL STATEMENT PRESENTATION

The preparation of financial statements in conformity with generally accepted accounting principles requires Management to make estimates and judgments that affect the reported amounts of assets and liabilities as of the balance sheet date and the results of operations for the period. Actual results could differ from those estimates. A material estimate that is particularly susceptible to possible change in the near term relates to the determination of the allowance for loan losses. An estimate of possible changes or range of possible changes cannot be made.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents as reported in the consolidated statements of cash flows includes cash on hand, cash balances due from banks, federal funds sold, and securities purchased under agreement to resell. The cash equivalents are readily convertible to known amounts of cash and are so near their maturity that they present insignificant risk of changes in value.

FEDERAL FUNDS SOLD AND SECURITIES PURCHASED UNDER AGREEMENT TO RESELL

Federal funds sold and securities purchased under agreement to resell as reported in the consolidated balance sheets includes interest-bearing deposits in other financial institutions of $220,000 and $273,000 at September 30, 1998, and December 31, 1997, respectively.

NONACCRUAL LOANS

Loans are placed on nonaccrual status when they become 90 days past due as to principal or interest payments (unless the principal and interest are well secured and in the process of collection), when the Company has determined, based upon currently known information, that the timely collection of principal or interest is doubtful, or when the loans otherwise become impaired under the provisions of Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment of a Loan."

When a loan is placed on nonaccrual status, the accrued interest is reversed against interest income and the loan is accounted for on the cash or cost recovery method thereafter until qualifying for return to accrual status. Generally, a loan will be returned to accrual status when all delinquent principal and interest become current in accordance with the terms of the loan agreement and full collection of the principal appears probable.

RECENT ACCOUNTING PRONOUNCEMENTS

The Company has adopted SFAS No. 130, "Reporting Comprehensive Income." This statement establishes standards for all entities for reporting comprehensive income and its components in financial statements. This statement requires that all items which are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Comprehensive income is equal to net income plus the change in "other comprehensive income," as defined by SFAS No. 130. The only component of other comprehensive income currently applicable to the Company is the net unrealized gain or loss on available-for-sale investments.


SFAS No. 130 requires that an entity: (a) classify items of other comprehensive income by their nature in a financial statement, and (b) report the accumulated balance of other comprehensive income separately from common stock and retained earnings in the equity section of the balance sheet. This statement is effective for financial statements issued for fiscal years beginning after December 15, 1997.

In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement establishes standards for publicly held entities to follow in reporting information about operating segments in annual financial statements and requires that those entities also report selected information about operating segments in interim financial statements. This statement also establishes standards for related disclosures about products and services, geographic areas and major customers. This statement is effective for annual financial statements issued for periods beginning after December 15, 1997.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The statement is effective for fiscal quarters of fiscal years beginning after June 15, 1999. The Company expects to adopt this statement on January 1, 2000. The Company will begin evaluating the impact of its adoption on the Company's consolidated financial statements.

In July 1998, the Securities and Exchange Commission (SEC) issued an interpretive release (Release No. 33-7558) that provides specific guidance regarding Year 2000 disclosure requirements in a public company's Form 10-K and 10-Qs. Emphasis of the Release is on expanded disclosure under Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A). The Release supersedes the revised Staff Legal Bulletin No. 5 and is effective for quarters ending after August 4, 1998. See the Item 2 section entitled "Year 2000 Compliance" for the Company's expanded disclosure.

2. EARNINGS PER SHARE

The following is a reconciliation of basic earnings per share (EPS) to diluted EPS for the three and nine month periods ended September 30, 1998 and 1997. The number of shares and earnings per share have been restated to reflect a two-for-one stock split for common shares of record as of April 17, 1998.


                                           Three Months Ended September 30,        Nine Months Ended September 30,
                                                     (Unaudited)                            (Unaudited)
                                                     -----------                            -----------
(Dollars and shares in thousands,            Net                Per Share           Net                   Per Share
except per share amounts)                   Income     Shares     Amount           Income       Shares      Amount
-------------------------------------------------------------------------------------------------------------------
1998:
Basic EPS:
Income available to common
    shareholders                            $8,550      20,350     $0.42           $24,331       20,227      $1.20

Effect of Dilutive Securities:
Stock options and restricted stock               -         630         -                 -          721          -
-------------------------------------------------------------------------------------------------------------------

Diluted EPS:
Income available to common
     shareholders plus assumed
     conversions                            $8,550      20,980     $0.41           $24,331       20,948      $1.16
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

1997:
Basic EPS:
Income available to common
     shareholders                           $7,265      19,480     $0.37           $20,234       19,212      $1.05

Effect of Dilutive Securities:
Stock options and restricted stock               -       1,097         -                 -        1,076          -
-------------------------------------------------------------------------------------------------------------------

Diluted EPS:
Income available to common
     shareholders plus assumed
     conversions                            $7,265      20,577     $0.35           $20,234       20,288      $1.00
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

3. LOANS

The detailed composition of loans, net of unearned income of $8.7 million and $8.0 million at September 30, 1998, and December 31, 1997, respectively, is presented in the following table:

                                                                              September 30,           December 31,
                                                                                  1998                    1997
(Dollars in thousands)                                                         (Unaudited)
------------------------------------------------------------------------------------------------------------------
Commercial                                                                      $1,266,547              $1,051,218
Real estate term                                                                    59,485                  33,395
Real estate construction                                                            58,819                  53,583
Consumer and other                                                                  53,380                  36,449
------------------------------------------------------------------------------------------------------------------
Total loans                                                                     $1,438,231              $1,174,645
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------


4. ALLOWANCE FOR LOAN LOSSES

The activity in the allowance for loan losses for the three and nine month periods ended September 30, 1998 and 1997 was as follows:

                                       Three Months Ended September 30,          Nine Months Ended September 30,
                                                  (Unaudited)                               (Unaudited)
                                                  -----------                               -----------
(Dollars in thousands)                    1998                   1997                1998                 1997
---------------------------------------------------------------------------------------------------------------
Beginning balance                       $42,300                $37,300             $37,700              $32,700
Provision for loan losses                10,557                  1,716              20,061                7,682
Loans charged off                       (17,406)                (1,700)            (23,916)              (4,903)
Recoveries                                  449                  1,284               2,055                3,121
---------------------------------------------------------------------------------------------------------------
Balance at September 30,                $35,900                $38,600             $35,900              $38,600
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------

The aggregate recorded investment in loans for which impairment has been determined in accordance with SFAS No. 114 totaled $23.2 million and $23.3 million at September 30, 1998, and September 30, 1997, respectively. Allocations of the allowance for loan losses related to impaired loans totaled $5.9 million at September 30, 1998, and $11.5 million at September 30, 1997. Average impaired loans for the third quarter of 1998 and 1997 totaled $30.2 million and $19.5 million, respectively. See "Financial Condition - Credit Quality and the Allowance for Loan Losses" for additional related discussion.


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the Company's interim consolidated financial statements as presented in Item 1 of this report. In addition to historical information, this discussion and analysis includes certain forward-looking statements regarding events and circumstances that may affect the Company's future results. Such forward-looking statements are subject to risks and uncertainties that could cause the Company's actual results to differ materially. These risks and uncertainties include, but are not limited to, those described in this discussion and analysis, as well as those described in the Company's 1997 Annual Report on Form 10-K.

The Company wishes to caution readers not to place undue reliance on any forward-looking statements included herein, which speak only as of the date made. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect unanticipated events and circumstances occurring after the date of such statements.

Certain reclassifications have been made to the Company's 1997 consolidated financial statements to conform to the 1998 presentations. Such reclassifications had no effect on the results of operations or shareholders' equity.

EARNINGS SUMMARY

The Company reported net income of $8.6 million, or $0.41 per diluted share, for the third quarter of 1998, compared with net income of $7.3 million, or $0.35 per diluted share, for the third quarter of 1997. Net income totaled $24.3 million, or $1.16 per diluted share, for the nine months ended September 30, 1998, versus $20.2 million, or $1.00 per diluted share, for the respective 1997 period. The annualized return on average assets (ROA) was 1.1% in the third quarter of 1998 versus 1.3% in the third quarter of 1997. The annualized return on average equity (ROE) for the third quarter of 1998 was 16.6%, compared to 18.4% in the 1997 third quarter. For the first nine months of 1998, ROA was 1.1% and ROE was 16.9% versus 1.3% and 18.4%, respectively, for the comparable prior year period.

The increase in net income during the three and nine month periods ended September 30, 1998, as compared with the prior year respective periods, was attributable to increases in net interest income and noninterest income, partially offset by an increase in both the provision for loan losses and noninterest expense. The major components of net income and changes in these components are summarized in the following table for the three and nine month periods ended September 30, 1998 and 1997, and are discussed in more detail below.


                                          Three Months Ended September 30,         Nine Months Ended September 30,
                                                      (Unaudited)                           (Unaudited)
                                                      -----------                           -----------
(Dollars in thousands)                          1998               1997                  1998             1997
-------------------------------------------------------------------------------------------------------------------
Net interest income                           $38,456            $29,054              $105,792          $79,994
Provision for loan losses                      10,557              1,716                20,061            7,682
Noninterest income                              7,716              2,806                17,542           10,613
Noninterest expense                            21,063             17,618                61,740           48,039
-------------------------------------------------------------------------------------------------------------------
Income before income taxes                     14,552             12,526                41,533           34,886
Income tax expense                              6,002              5,261                17,202           14,652
-------------------------------------------------------------------------------------------------------------------
Net income                                    $ 8,550            $ 7,265              $ 24,331          $20,234
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

NET INTEREST INCOME AND MARGIN

Net interest income represents the difference between interest earned, primarily on loans and investments, and interest paid on funding sources, primarily deposits, and is the principal source of revenue for the Company. Net interest margin is the amount of net interest income, on a fully taxable-equivalent basis, expressed as a percentage of average interest-earning assets. The average yield earned on interest-earning assets is the amount of taxable-equivalent interest income expressed as a percentage of average interest-earning assets. The average rate paid on funding sources expresses interest expense as a percentage of average interest-earning assets.

The following tables set forth average assets, liabilities and shareholders' equity, interest income and interest expense, average yields and rates, and the composition of the Company's net interest margin for the three and nine months ended September 30, 1998 and 1997, respectively.



AVERAGE BALANCES, RATES AND YIELDS

                                                            For the three months ended September 30,
                                                            ----------------------------------------
                                                         1998                                   1997
                                                      (Unaudited)                           (Unaudited)
                                                      -----------                           -----------
                                                                  Average                                  Average
                                             Average               Yield            Average                 Yield
(Dollars in thousands)                       Balance    Interest    Rate            Balance    Interest      Rate
-------------------------------------------------------------------------------------------------------------------
Interest-earning assets:
   Federal funds sold and
     securities purchased under
     agreement to resell (1)               $  423,316    $ 5,941     5.6%         $  350,786    $ 4,925      5.6%
   Investment securities:
     Taxable                                1,135,695     16,835     5.9             680,886     10,399      6.1
     Non-taxable (2)                           79,872      1,418     7.0              45,767        766      6.6
   Loans:
     Commercial                             1,194,522     31,992    10.6             885,577     25,265     11.3
     Real estate construction and term        124,789      3,394    10.8              80,269      2,169     10.7
     Consumer and other                        48,380      1,108     9.1              35,905        915     10.1
-------------------------------------------------------------------------------------------------------------------
   Total loans                              1,367,691     36,494    10.6           1,001,751     28,349     11.2
-------------------------------------------------------------------------------------------------------------------
Total interest-earning assets               3,006,574     60,688     8.0           2,079,190     44,439      8.5
-------------------------------------------------------------------------------------------------------------------

Cash and due from banks                       143,921                                147,834
Allowance for loan losses                     (43,295)                               (38,455)
Other real estate owned                           681                                    921
Other assets                                   57,447                                 37,507
-------------------------------------------------------------------------------------------------------------------
Total assets                               $3,165,328                             $2,226,997
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

Funding sources:
Interest-bearing liabilities:
   NOW deposits                           $    21,742        101     1.8        $     17,900         94      2.1
   Regular money market deposits              353,241      2,434     2.7             356,449      2,441      2.7
   Bonus money market deposits              1,622,710     17,763     4.3             967,974     11,338      4.6
   Time deposits                              126,075      1,438     4.5             113,082      1,244      4.4
-------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities          2,123,768     21,736     4.1           1,455,405     15,117      4.1
Portion of noninterest-bearing
   funding sources                            882,806                                623,785
-------------------------------------------------------------------------------------------------------------------
Total funding sources                       3,006,574     21,736     2.9           2,079,190     15,117      2.9
-------------------------------------------------------------------------------------------------------------------

Noninterest-bearing funding sources:
   Demand deposits                            773,506                                602,078
   Other liabilities                           25,644                                 13,033
   Trust preferred securities                  38,460                                      -
   Shareholders' equity                       203,950                                156,481
   Portion used to fund
       interest-earning assets               (882,806)                              (623,785)
-------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders'
   equity                                  $3,165,328                             $2,226,997
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

Net interest income and margin                           $38,952    5.1%                        $29,322     5.6%
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

Memorandum:  Total deposits                $2,897,274                             $2,057,483
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

(1) Includes average interest-bearing deposits in other financial institutions of $232 and $298 for the three months ended September 30, 1998 and 1997, respectively.
(2) Interest income on non-taxable investments is presented on a fully taxable-equivalent basis using the federal statutory rate of 35% in 1998 and 1997. The tax equivalent adjustments were $496 and $268 for the three months ended September 30, 1998 and 1997, respectively.



AVERAGE BALANCES, RATES AND YIELDS

                                                            For the nine months ended September 30,
                                                            ----------------------------------------
                                                         1998                                   1997
                                                      (Unaudited)                           (Unaudited)
                                                      -----------                           -----------
                                                                  Average                                  Average
                                             Average               Yield            Average                 Yield
(Dollars in thousands)                       Balance    Interest    Rate            Balance    Interest      Rate
-------------------------------------------------------------------------------------------------------------------
Interest-earning assets:
   Federal funds sold and
     securities purchased under
     agreement to resell (1)               $  364,544    $ 15,149   5.6%           $  288,685   $ 11,891   5.5%
   Investment securities:
     Taxable                                1,027,295      45,699    5.9              625,800     28,146   6.0
     Non-taxable (2)                           68,419       3,477    6.8               25,049      1,344   7.2
   Loans:
     Commercial                             1,113,177      89,257   10.7              833,120     69,475  11.1
     Real estate construction and term        112,299       9,097   10.8               75,319      5,775  10.3
     Consumer and other                        43,943       3,002    9.1               37,556      2,624   9.3
-----------------------------------------------------------------------------------------------------------------
   Total loans                              1,269,419     101,356   10.7              945,995     77,874  11.0
-----------------------------------------------------------------------------------------------------------------
Total interest-earning assets               2,729,677     165,681    8.1            1,885,529    119,255   8.5
-----------------------------------------------------------------------------------------------------------------

Cash and due from banks                       134,861                                 155,725
Allowance for loan losses                     (41,364)                                (36,901)
Other real estate owned                           686                                   1,334
Other assets                                   52,901                                  35,642
-----------------------------------------------------------------------------------------------------------------
Total assets                               $2,876,761                              $2,041,329
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

Funding sources:
Interest-bearing liabilities:
   NOW deposits                            $   19,463          283     1.9         $   15,175        222   2.0
   Regular money market deposits              339,056        6,900     2.7            344,075      6,960   2.7
   Bonus money market deposits              1,416,124       47,171     4.5            834,645     28,381   4.5
   Time deposits                              127,913        4,315     4.5            103,132      3,228   4.2
   Other borrowings                                73            3     5.5                  -          -     -
-----------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities          1,902,629       58,672     4.1          1,297,027     38,791   4.0
Portion of noninterest-bearing
   funding sources                            827,048                                 588,502
-----------------------------------------------------------------------------------------------------------------
Total funding sources                       2,729,677       58,672     2.9          1,885,529     38,791   2.8
-----------------------------------------------------------------------------------------------------------------

Noninterest-bearing funding sources:
Demand deposits                               741,798                                 583,732
Other liabilities                              20,666                                  13,448
Trust preferred securities                     18,615                                       -
Shareholders' equity                          193,051                                 147,122
Portion used to fund
   interest-earning assets                   (827,048)                               (588,502)
-----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders'
   equity                                  $2,876,761                              $2,041,329
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

Net interest income and margin                            $107,009    5.2%                      $ 80,464   5.7%
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

Memorandum:  Total deposits                $2,644,355                             $1,880,759
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

(1) Includes average interest-bearing deposits in other financial institutions of $248 and $315 for the nine months ended September 30, 1998 and 1997, respectively.
(2) Interest income on non-taxable investments is presented on a fully taxable-equivalent basis using the federal statutory rate of 35% in 1998 and 1997. The tax equivalent adjustments were $1,217 and $470 for the nine months ended September 30, 1998 and 1997, respectively.


Net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as "volume change." Net interest income is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing liabilities, referred to as "rate change." The following table sets forth changes in interest income and interest expense for each major category of interest-earning assets and interest-bearing liabilities. The table also reflects the amount of change attributable to both volume and rate changes for the periods indicated. Changes relating to investments in non-taxable municipal securities are presented on a fully taxable-equivalent basis using the federal statutory rate of 35% in 1998 and 1997.

                                                                     1998 Compared to 1997
                                                                     ---------------------
                                             Three Months Ended September 30,      Nine Months Ended September 30,
                                                       (Unaudited)                          (Unaudited)
                                                       -----------                          -----------
                                                    Increase (Decrease)                 Increase (Decrease)
                                                     Due to Change in                    Due to Change in
                                                    -------------------                 -------------------
(Dollars in thousands)                         Volume       Rate      Total        Volume        Rate      Total
------------------------------------------------------------------------------------------------------------------
Interest income:
   Federal funds sold and securities
     purchased under agreement to resell      $ 1,018  $      (2)   $ 1,016        $ 3,152   $    106    $ 3,258
   Investment securities                        7,342       (254)     7,088         19,967       (281)    19,686
   Loans                                        9,764     (1,619)     8,145         25,823     (2,341)    23,482
------------------------------------------------------------------------------------------------------------------
Increase (decrease) in interest income         18,124     (1,875)    16,249         48,942     (2,516)    46,426
------------------------------------------------------------------------------------------------------------------

Interest expense:
   NOW deposits                                    17        (10)         7             63         (2)        61
   Regular money market deposits                  (22)        15         (7)          (102)        42        (60)
   Bonus money market deposits                  7,168       (743)     6,425         19,369       (579)    18,790
   Time deposits                                  148         46        194            836        251      1,087
   Other borrowings                                 -          -          -              3          -          3
------------------------------------------------------------------------------------------------------------------
Increase (decrease) in interest expense         7,311       (692)     6,619         20,169       (288)    19,881
------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net interest income    $10,813    $(1,183)   $ 9,630        $28,773    $(2,228)   $26,545
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------

Net interest income, on a fully taxable-equivalent basis, totaled $39.0 million for the third quarter of 1998, an increase of $9.6 million, or 32.8%, from the $29.3 million total for the third quarter of 1997. The increase in net interest income was the result of a $16.2 million, or 36.6%, increase in interest income, offset by a $6.6 million, or 43.8%, increase in interest expense over the comparable prior year period.

The $16.2 million increase in interest income for the third quarter of 1998, as compared to the third quarter of 1997, was the result of an $18.1 million favorable volume variance partially offset by a $1.9 million unfavorable rate variance. The favorable volume variance resulted from a $927.4 million, or 44.6%, increase in average interest-earning assets over the comparable prior year period. The increase in average interest-earning assets resulted from strong growth in the Company's deposits, which increased $839.8 million, or 40.8%, compared to the third quarter of 1997. The increase in average interest-earning assets consisted of loans, which were up $365.9 million, plus a combination of highly liquid, lower-yielding federal funds sold, securities purchased under agreement to resell and investment securities, which collectively increased $561.4 million, accounting for 60.6% of the total increase in average interest-earning assets.

Average loans increased $365.9 million, or 36.5%, in the third quarter of 1998 as compared to the 1997 third quarter, resulting in a $9.8 million favorable volume variance. This growth was widely distributed throughout the loan portfolio, as reflected by increased loan balances in most of the Company's technology, life sciences and special industry niche practices, in specialized


lending products, and throughout the Company's loan offices located across the nation.

Average investment securities for the third quarter of 1998 increased $488.9 million, or 67.3%, as compared to the 1997 third quarter, resulting in a $7.3 million favorable volume variance. The aforementioned strong growth in average deposits exceeded the growth in average loans over the past year, and generated excess funds that were largely invested in U.S. agency securities, U.S. Treasury securities, mortgage-backed securities, and municipal securities.

Average federal funds sold and securities purchased under agreement to resell in the third quarter of 1998 increased a combined $72.5 million, or 20.7%, over the prior year third quarter, resulting in a $1.0 million favorable volume variance. This increase was also a result of the aforementioned strong growth in average deposits during the past year.

The $18.1 million favorable volume variance associated with interest-earning assets was partially offset by a $1.9 million unfavorable rate variance in the third quarter of 1998 as compared to the respective prior year period. This unfavorable rate variance was largely attributable to a $1.6 million decrease in loan interest income that resulted from a 60 basis points decline in the average yield on loans primarily due to increased competition.

The yield on average interest-earning assets decreased 50 basis points in the third quarter of 1998 from the comparable prior year period. This decrease resulted from a decline in the average yield on loans, largely due to increased competition, and a shift in the composition of average interest-earning assets towards a higher percentage of highly liquid, lower-yielding federal funds sold, securities purchased under agreement to resell and investment securities. This shift in the composition of average interest-earning assets resulted from the aforementioned deposit growth having exceeded the growth in loans.

Total interest expense in the 1998 third quarter increased $6.6 million from the third quarter of 1997 due to an unfavorable volume variance of $7.3 million partially offset by a $0.7 million favorable rate variance. The unfavorable volume variance resulted from a $668.4 million, or 45.9%, increase in average interest-bearing liabilities in the third quarter of 1998 as compared with the third quarter of 1997. This increase was largely concentrated in the Company's bonus money market deposit product, which increased $654.7 million, or 67.6%, and was explained by high levels of client liquidity attributable to a strong inflow of investment capital into the venture capital community during the past year, and by growth in the number of clients served by the Company. The $0.7 million favorable rate variance was primarily attributable to a decrease in the average rate paid on the Company's bonus money market deposit product during the past year in response to changes in short-term market interest rates.

The average cost of funds paid on interest-bearing liabilities during the third quarter of 1998 was comparable to the third quarter of 1997. Although there was a shift in the composition of average interest-bearing liabilities towards a higher percentage of the Company's bonus money market deposit product, this resulting increase was offset by decreases in the average rate paid on that product during the past year.

Net interest income, on a fully taxable-equivalent basis, totaled $107.0 million for the first nine months of 1998, an increase of $26.5 million, or 33.0%, from the $80.5 million total for the first nine months of 1997. This increase in net interest income was the result of a $46.4 million, or 38.9%, increase in interest income, offset by a $19.9 million, or 51.3%, increase in interest


expense over the comparable prior year period.

The $46.4 million increase in interest income for the first nine months of 1998, as compared to the first nine months of 1997, was the result of a $48.9 million favorable volume variance partially offset by a $2.5 million unfavorable rate variance. The favorable volume variance was attributable to growth in average interest-earning assets, which increased $844.1 million, or 44.8%, from the prior year comparable period. The increase in average interest-earning assets resulted from strong growth in the Company's deposits, which increased $763.6 million, or 40.6%, compared to the first nine months of 1997, and primarily consisted of an increase in both average loans and investment securities. The growth in average loans was widely distributed throughout the loan portfolio, as reflected by increased loan balances in most of the Company's technology, life sciences and special industry niche practices, in specialized lending products, and throughout the Company's loan offices located across the nation. The growth in average investment securities resulted from the aforementioned strong growth in average deposits, which exceeded the growth in average loans over the past year, and generated excess funds that were largely invested in U.S. agency securities, U.S. Treasury securities, mortgage-backed securities, and municipal securities.

The $48.9 million favorable volume variance associated with interest-earning assets was partially offset by a $2.5 million unfavorable rate variance in the first nine months of 1998 as compared to the respective prior year period. This unfavorable rate variance was largely attributable to a $2.3 million decrease in loan interest income that resulted from a 30 basis points decline in the average yield on loans primarily due to increased competition.

Total interest expense in the first nine months of 1998 increased $19.9 million from the first nine months of 1997 due to a $20.2 million unfavorable volume variance partially offset by a $0.3 million favorable rate variance. The unfavorable volume variance resulted from a $605.6 million, or 46.7%, increase in average interest-bearing liabilities in the first nine months of 1998 as compared with the first nine months of 1997. This increase was largely concentrated in the Company's bonus money market deposit product, which increased $581.5 million, or 69.7%, and was explained by high levels of client liquidity attributable to a strong inflow of investment capital into the venture capital community during the past year, and by growth in the number of clients served by the Company. The $0.3 million favorable rate variance was largely attributable to a slight decrease in the average rate paid on the Company's bonus money market deposit product during the past year in response to changes in short-term market interest rates.

PROVISION FOR LOAN LOSSES

The provision for loan losses is based on Management's evaluation of the adequacy of the existing allowance for loan losses in relation to total loans, and on Management's periodic assessment of the inherent and identified risk dynamics of the loan portfolio resulting from reviews of selected individual loans and loan commitments.

The Company's provision for loan losses totaled $10.6 million for the third quarter of 1998, an $8.8 million, or 515.2%, increase compared to the $1.7 million provision for the third quarter of 1997. The provision for loan losses increased $12.4 million, or 161.1%, to a total of $20.1 million for the first nine months of 1998, versus $7.7 million for the comparable 1997 period. See "Financial Condition - Credit Quality and the Allowance for Loan Losses" for additional related discussion.


NONINTEREST INCOME

The following table summarizes the components of noninterest income for the three and nine month periods ended September 30, 1998 and 1997:

                                                              Three Months Ended             Nine Months Ended
                                                                 September 30,                 September 30,
                                                                  (Unaudited)                   (Unaudited)
                                                                 -------------                 -------------
(Dollars in thousands)                                     1998             1997             1998          1997
----------------------------------------------------------------------------------------------------------------
Letter of credit and foreign exchange income              $1,795            $1,159         $ 5,137       $ 3,249
Disposition of client warrants                               705               708           4,979         4,953
Investment gains                                           4,149                33           4,626            78
Deposit service charges                                      432               588           1,277         1,360
Other                                                        635               318           1,523           973
----------------------------------------------------------------------------------------------------------------
Total noninterest income                                  $7,716            $2,806         $17,542       $10,613
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------

Noninterest income increased $4.9 million, or 175.0%, to a total of $7.7 million in the third quarter of 1998 versus $2.8 million in the prior year third quarter. During the first nine months of 1998, noninterest income totaled $17.5 million, an increase of $6.9 million, or 65.3%, from the $10.6 million in the comparable 1997 period. The increase in noninterest income for the three and nine month periods ended September 30, 1998, versus the comparable prior year periods, was primarily due to both an increase in gains on sales of investment securities and an increase in letter of credit fees, foreign exchange fees and other trade finance income.

Letter of credit fees, foreign exchange fees and other trade finance income totaled $1.8 million in the third quarter of 1998, an increase of $0.6 million, or 54.9%, from the $1.2 million reported in the third quarter of 1997. For the first nine months of 1998, letter of credit fees, foreign exchange fees and other trade finance income totaled $5.1 million, an increase of $1.9 million, or 58.1%, compared to the $3.2 million in the first nine months of 1997. The growth in this category of noninterest income reflects a concerted effort by Management to expand the penetration of trade finance products and services among the Company's growing client base, a large percentage of which provide products and services in international markets.

The Company has historically obtained rights to acquire stock (in the form of warrants) in certain clients as part of negotiated credit facilities. The receipt of warrants does not change the loan covenants or other collateral control techniques employed by the Company to mitigate the risk of a loan becoming nonperforming, and collateral requirements on loans with warrants are similar to lending arrangements where warrants are not obtained. The timing and amount of income from the disposition of client warrants typically depend upon factors beyond the control of the Company, including the general condition of the public equity markets as well as the merger and acquisition environment, and therefore cannot be predicted with any degree of accuracy and are likely to vary materially from period to period. During the first nine months of 1998, as well as throughout 1997, a significant portion of the income realized by the Company from the disposition of client warrants was offset by expenses related to the Company's efforts to build an infrastructure sufficient to support present and prospective business activities, and was also offset by increases to the provision for loan losses during those periods. As opportunities present themselves in future periods, the Company may continue to reinvest some or all of the income realized from the disposition of client warrants in furthering its business strategies.


During the third quarter of 1998, the Company realized investment gains of $4.1 million related to sales of approximately $280.9 million in U.S. Treasury and agency securities, as well as mortgage-backed securities. Investment gains for the first nine months of 1998 totaled $4.6 million. The Company realized nominal gains on investment securities during the three and nine month periods ended September 30, 1997. All investment securities sold were classified as available-for-sale, and all sales were conducted as a component of the Company's asset/liability management activities.

Deposit service charges totaled $0.4 million for the three month period ended September 30, 1998, a decrease of $0.2 million, or 26.5%, from the $0.6 million reported in the third quarter of 1997. For the first nine months of 1998, deposit service charges totaled $1.3 million, a nominal decrease from the $1.4 million total for the first nine months of the prior year. Clients compensate the Company for depository services either through earnings credits computed on their demand deposit balances, or via explicit payments recognized by the Company as deposit service charges income.

Other noninterest income largely consists of service-based fee income, and increased $0.3 million, or 100.0%, to $0.6 million in the third quarter of 1998 from $0.3 million in the third quarter of 1997. For the nine month period ended September 30, 1998, other noninterest income increased $0.5 million, or 56.5%, to $1.5 million from $1.0 million in the comparable 1997 period. The increase during 1998 was primarily due to a higher volume of cash management and loan documentation services related to the Company's growing client base.

NONINTEREST EXPENSE

Noninterest expense in the third quarter of 1998 totaled $21.1 million, a $3.4 million, or 19.6%, increase from the $17.6 million incurred in the comparable 1997 period. Noninterest expense totaled $61.7 million for the first nine months of 1998, an increase of $13.7 million, or 28.5%, over the $48.0 million total for the comparable 1997 period. Management closely monitors the level of noninterest expense using a variety of financial ratios, including the efficiency ratio. The efficiency ratio is calculated by dividing the amount of noninterest expense, excluding costs associated with other real estate owned, by adjusted revenues, defined as the total of net interest income and noninterest income, excluding income from the disposition of client warrants and gains or losses related to sales of investment securities. This ratio reflects the level of operating expense required to generate $1 of operating revenue. The Company's efficiency ratio for the 1998 third quarter was 50.9% versus 56.5% for the third quarter of 1997. The Company's efficiency ratio for the first nine months of 1998 was 55.4% versus 56.1% for the comparable 1997 period. The following tables present the detail of noninterest expense and the incremental contribution of each line item to the Company's efficiency ratio:


                                                                       Three Months Ended September 30,
                                                                       --------------------------------
                                                             1998                               1997
                                                             ----                               ----
                                                                  Percent of                         Percent of
                                                                   Adjusted                           Adjusted
(Dollars in thousands)                              Amount         Revenues            Amount         Revenues
---------------------------------------------------------------------------------------------------------------
Compensation and benefits                            $10,773       26.1%                $10,625         34.1%
Professional services                                  2,361        5.7                   1,958          6.3
Furniture and equipment                                1,320        3.2                   1,178          3.8
Business development and travel                        1,460        3.5                   1,077          3.5
Net occupancy expense                                  1,394        3.4                     840          2.7
Telephone                                                481        1.2                     370          1.2
Advertising and promotion                                643        1.6                     354          1.1
Postage and supplies                                     635        1.5                     420          1.3
Trust preferred securities distributions                 825        2.0                       -            -
Other                                                  1,152        2.8                     766          2.5
-----------------------------------------------------------------------------------------------------------------
Total excluding cost of other
  real estate owned                                   21,044       50.9%                 17,588         56.5%
Cost of other real estate owned                           19                                 30
-----------------------------------------------------------------------------------------------------------------
Total noninterest expense                            $21,063                            $17,618
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

                                                                        Nine Months Ended September 30,
                                                                        -------------------------------
                                                             1998                              1997
                                                             ----                              ----
                                                                  Percent of                         Percent of
                                                                   Adjusted                           Adjusted
(Dollars in thousands)                              Amount         Revenues            Amount         Revenues
---------------------------------------------------------------------------------------------------------------
Compensation and benefits                            $34,877       30.7%                $29,100         34.0%
Professional services                                  6,390        5.6                   5,088          5.9
Furniture and equipment                                5,051        4.4                   2,602          3.0
Business development and travel                        4,422        3.9                   3,063          3.6
Net occupancy expense                                  3,451        3.0                   2,493          2.9
Telephone                                              1,600        1.4                   1,004          1.2
Advertising and promotion                              1,553        1.4                   1,082          1.2
Postage and supplies                                   1,545        1.4                   1,122          1.3
Trust preferred securities distributions               1,187        1.0                       -            -
Other                                                  2,893        2.5                   2,429          2.8
-----------------------------------------------------------------------------------------------------------------
Total excluding cost of other
  real estate owned                                   62,969       55.4%                 47,983         56.1%
Cost of other real estate owned                       (1,229)                                56
-----------------------------------------------------------------------------------------------------------------
Total noninterest expense                            $61,740                            $48,039
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------


Compensation and benefits expenses totaled $10.8 million in the third quarter of 1998, a slight increase over the $10.6 million incurred in the third quarter of 1997. For the first nine months of 1998, compensation and benefits expenses totaled $34.9 million, an increase of $5.8 million, or 19.9%, compared to $29.1 million for the comparable 1997 period. The increase in compensation and benefits expenses was largely the result of an increase in the number of average full-time equivalent (FTE) personnel employed by the Company, partially offset by decreased expenses associated with certain variable-based compensation programs. Average FTE were 537 and 504 for the three and nine month periods ended September 30, 1998, versus 428 and 407 for the respective prior year periods. The increase in FTE was primarily due to a combination of the Company's efforts to develop and support new markets through geographic expansion, to develop and expand products, services and niches, and to build an infrastructure sufficient to support present and prospective business activities. Further growth in the Company's FTE is likely to occur during future years as a result of the continued expansion of the Company's business activities.

Professional services expenses, which consist of costs associated with corporate legal services, litigation settlements, accounting and auditing services, consulting, and the Company's Board of Directors, totaled $2.4 million and $6.4 million for the three and nine month periods ended September 30, 1998, an increase of $0.4 million, or 20.6%, and $1.3 million, or 25.6%, compared to $2.0 million and $5.1 million in the comparable 1997 periods. The level of professional services expenses during 1998 and 1997 reflects the extensive efforts undertaken by the Company to continue to build and support its infrastructure, as well as evaluate and pursue new business opportunities. It also reflects the Company's efforts in outsourcing several corporate functions, such as internal audit, facilities management and credit review, where the Company believes it can achieve a combination of cost savings and increased quality of service.

Occupancy, furniture and equipment expenses totaled $2.7 million and $8.5 million for the three and nine month periods ended September 30, 1998, an increase of $0.7 million, or 34.5%, and $3.4 million, or 66.9%, from the $2.0 million and $5.1 million for the three and nine month periods ended September 30, 1997, respectively. The increase in occupancy, furniture and equipment expenses is largely attributable to the Company incurring certain non-recurring costs in connection with the expansion of its existing headquarters facility during the second quarter of 1998 and an increase in recurring expenses associated with that additional office space. Occupancy, furniture and equipment expenses were also impacted by costs related to furniture, computer equipment and other related costs associated with the Company opening new loan offices in West Los Angeles, California, and Rosemont, Illinois, in early 1998. The Company intends to continue its geographic expansion into other emerging technology market places across the U.S. during future periods.

Business development and travel expenses totaled $1.5 million and $4.4 million for the three and nine month periods ended September 30, 1998, an increase of $0.4 million, or 35.6%, and $1.4 million, or 44.4%, compared to the $1.1 million and $3.1 million totals for the comparable 1997 periods. The increase in business development and travel expenses was largely attributable to overall growth in the Company's business, including both an increase in the number of FTE and expansion into new geographic markets.

Total telephone expenses were $0.5 million and $1.6 million for the three and nine month periods ended September 30, 1998, and increase of $0.1 million, or 30.0%, and $0.6 million, or 59.4%, compared to the $0.4 million and $1.0 million totals for the comparable 1997 periods.


The increase in telephone expenses in 1998, as compared to the prior year respective periods, was largely the result of the aforementioned overall growth in the Company's business, including both an increase in the number of FTE and expansion into new geographic markets.

The Company incurred $0.8 million and $1.2 million for the three and nine month periods ended September 30, 1998, in trust preferred securities distributions in connection with the sale of $40.0 million in cumulative trust preferred securities during the second quarter of 1998. The trust preferred securities pay a fixed rate quarterly distribution of 8.25% and have a maximum maturity of 30 years. For further discussion related to the trust preferred securities, see the Item 2 section entitled "Liquidity."

Other noninterest expenses totaled $1.2 million in the third quarter of 1998, a $0.4 million, or 50.4%, increase over the $0.8 million incurred in the third quarter of 1997. For the first nine months of 1998, other noninterest expenses increased $0.5 million, or 19.1%, to a total of $2.9 million compared to $2.4 million for the first nine months of 1997. These increases were primarily due to an increase in data processing services related to the continued expansion of the Company's business activities.

During the second quarter of 1998, the Company realized a net gain of $1.3 million in connection with a sale of an OREO property that consisted of multiple undeveloped lots.

Certain lawsuits and claims arising in the ordinary course of business have been filed or are pending against the Company and/or the Bank. Based upon information available to the Company, its review of such claims to date and consultation with its legal counsel, Management believes the liability relating to these actions, if any, will not have a material adverse effect on the Company's liquidity, consolidated financial position or results of operations.

INCOME TAXES

The Company's effective tax rate was 41.3% and 41.4% for the third quarter and first nine months of 1998, respectively, compared to 42.0% in both the three and nine month prior year periods. The slight decrease in the Company's effective income tax rate was attributable to adjustments in the Company's estimate of its tax liabilities.

FINANCIAL CONDITION

The Company's total assets were $3.2 billion at September 30, 1998, an increase of $591.1 million, or 22.5%, compared to $2.6 billion at December 31, 1997.

FEDERAL FUNDS SOLD AND SECURITIES PURCHASED UNDER AGREEMENT TO RESELL

Federal funds sold and securities purchased under agreement to resell totaled a combined $711.2 million at September 30, 1998, an increase of $389.4 million, or 121.0%, compared to the $321.8 million outstanding at the prior year end. This increase was attributable to the Company investing funds, resulting from both the strong growth in deposits during the first nine months of 1998 and from sales of investment securities during the third quarter of 1998, into these types of short-term, liquid investments.


INVESTMENT SECURITIES

Investment securities totaled $940.9 million at September 30, 1998, a decrease of $73.0 million, or 7.2%, from the December 31, 1997, balance of $1.0 billion. This decrease primarily resulted from the sales of approximately $280.9 million in U.S. Treasury and agency securities, as well as mortgage-backed securities, during the third quarter of 1998. The Company realized investment gains of $4.1 million related to those sales. All investment securities sold were classified as available-for-sale, and all sales were conducted as a component of the Company's asset/liability management activities.

LOANS

Total loans, net of unearned income, at September 30, 1998, were $1.4 billion, a $263.6 million, or 22.4%, increase compared to the $1.2 billion total at December 31, 1997. The increase in loans from the 1997 year-end total was widely distributed throughout the loan portfolio. This diversified growth was evidenced by increased quarter-end loan balances in many of the Company's market niches, specialized lending products and loan offices.

CREDIT QUALITY AND THE ALLOWANCE FOR LOAN LOSSES

Credit risk is defined as the possibility of sustaining a loss because other parties to the financial instrument fail to perform in accordance with the terms of the contract. While the Bank follows underwriting and credit monitoring procedures which it believes are appropriate in growing and managing the loan portfolio, in the event of nonperformance by these other parties, the Bank's potential exposure to credit losses could significantly affect the Company's consolidated financial position and earnings.

Lending money involves an inherent risk of nonpayment. Through the administration of loan policies and monitoring of the portfolio, Management seeks to reduce such risks. The allowance for loan losses is an estimate to provide a financial buffer for losses, both identified and unidentified, in the loan portfolio.

Management regularly reviews and monitors the loan portfolio to determine the risk profile of each credit and to identify credits whose risk profiles have changed. This review includes, but is not limited to, such factors as payment status, the financial condition of the borrower, borrower compliance with loan covenants, underlying collateral values, potential loan concentrations, and general economic conditions. Potential problem credits are identified and, based upon known information, action plans are developed.

The allowance for loan losses totaled $35.9 million at September 30, 1998, a decrease of $1.8 million, or 4.8%, compared to the $37.7 million balance at December 31, 1997. This slight decrease was due to net charge-offs of $21.9 million, largely offset by $20.1 million in additional provisions to the allowance for loan losses for the nine months ended September 30, 1998. Gross charge-offs for the first nine months of 1998 totaled $23.9 million, of which $17.4 million were incurred in the third quarter of 1998.

Gross charge-offs for the third quarter of 1998, the largest of which was $7.0 million, were primarily related to five commercial credits and were not concentrated in any particular niche or industry. Of the total 1998 third quarter gross charge-offs, $8.1 million were classified as


nonperforming loans at the end of 1997, while $8.7 million were disclosed in the Company's second quarter 10-Q as having a higher than normal risk of becoming nonperforming loans during the third quarter of 1998.

In general, Management believes the allowance for loan losses is adequate as of September 30, 1998. However, future changes in circumstances, economic conditions or other factors could cause Management to increase or decrease the allowance for loan losses as deemed necessary.

Nonperforming assets consist of loans that are past due 90 days or more but still accruing interest, loans on nonaccrual status and OREO and other foreclosed assets. The table below sets forth certain relationships between nonperforming loans, nonperforming assets and the allowance for loan losses:

                                                                               September 30,         December 31,
                                                                                   1998                  1997
(Dollars in thousands)                                                          (Unaudited)           (Unaudited)
------------------------------------------------------------------------------------------------------------------
Nonperforming assets:
Loans past due 90 days or more                                                     $   244               $ 1,016
Nonaccrual loans                                                                    23,229                24,476
------------------------------------------------------------------------------------------------------------------
Total nonperforming loans                                                           23,473                25,492
OREO and other foreclosed assets                                                     1,832                 1,858
------------------------------------------------------------------------------------------------------------------
Total nonperforming assets                                                         $25,305               $27,350
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------

Nonperforming loans as a percentage of total loans                                     1.6%                  2.2%
OREO and other foreclosed assets as a percentage of total assets                       0.1%                  0.1%
Nonperforming assets as a percentage of total assets                                   0.8%                  1.0%

Allowance for loan losses:                                                         $35,900               $37,700
     As a percentage of total loans                                                    2.5%                  3.2%
     As a percentage of nonaccrual loans                                             154.6%                154.0%
     As a percentage of nonperforming loans                                          152.9%                147.9%

Nonperforming loans totaled $23.5 million, or 1.6% of total loans, at September 30, 1998, compared to $25.5 million, or 2.2% of total loans, at December 31, 1997. The slight decrease in nonperforming loans from the prior year end was primarily due to gross charge-offs of $8.6 million incurred on loans that were nonperforming at the prior year end, partially offset by new loans placed on nonperforming status during the first nine months of 1998.

In addition to the loans disclosed in the foregoing analysis, Management has identified three loans with principal amounts aggregating approximately $6.6 million, that, on the basis of information known by Management, were judged to have a higher than normal risk of becoming nonperforming. The Company is not aware of any other loans where known information about possible problems of the borrower casts serious doubts about the ability of the borrower to comply with the loan repayment terms.

OREO and other foreclosed assets totaled a combined $1.8 million at September 30, 1998, a slight decrease from the $1.9 million balance at December 31, 1997. The OREO and other foreclosed assets balance at September 30, 1998, consisted of one OREO property and one other


asset that was acquired through foreclosure. The OREO property consists of multiple undeveloped lots and was acquired by the Company prior to June 1993. The one other asset acquired through foreclosure, which totaled $1.2 million at September 30, 1998, consists of a favorable leasehold right under a master lease which the Company acquired upon foreclosure of a loan during the third quarter of 1997.

DEPOSITS

Total deposits were $2.9 billion at September 30, 1998, an increase of $511.5 million, or 21.0%, from the prior year-end total of $2.4 billion. A significant portion of the increase in deposits during the first nine months of 1998 was concentrated in the Company's highest-rate paying deposit product, the bonus money market deposit product, which increased $492.0 million, or 42.9%, to a total of $1.6 billion at the end of the September 30, 1998. This increase was explained by high levels of client liquidity attributable to a strong inflow of investment capital into the venture capital community, and by growth during the first nine months of 1998 in the number of clients served by the Company.

YEAR 2000 COMPLIANCE

In May 1997, the Federal Financial Institutions Examination Council (FFIEC) issued an interagency statement to the chief executive officers of all federally supervised financial institutions regarding Year 2000 project awareness. The statement provides guidance to financial institutions, providers of data services and all examining personnel of the federal banking agencies regarding the Year 2000 issue. The federal banking agencies intend to conduct Year 2000 compliance examinations, and the failure to implement a Year 2000 compliance program by December 31, 1998, may be viewed by the federal banking agencies as an unsafe and unsound banking practice. In addition, the federal banking agencies will be taking into account Year 2000 compliance programs when analyzing applications to acquire a bank or other bank holding company and may deny an application based on Year 2000 related issues.

In July 1998, the SEC issued an interpretive release No. 33-7558, that provides specific guidance regarding Year 2000 expanded disclosure requirements under MD&A in a public company's Form 10-K and 10-Qs. The Release supersedes the revised Staff Legal Bulletin No. 5 and is effective for quarters ending after August 4, 1998.

The Company and the Bank are currently in the process of addressing the Year 2000 issue. The Bank has engaged a third party vendor, a recognized expert, to assist in the Year 2000 remediation effort for information technology systems. The FFIEC has defined Supervisory Milestones that cover each of the phases of a Year 2000 remediation program. As of September 30, 1998, the Bank has met all of the Supervisory Milestones required as of that date. The remaining milestones, as defined by the FFIEC, are:

December 31, 1998: Substantially complete testing of internal
                   systems which are critical to the Bank's operations.
March 31, 1999:    Testing with business partners should be substantially
                   complete for critical systems.
June 30, 1999:     Testing and implementation of critical systems should
                   be complete.


Currently, the Bank expects to meet each of these deadlines.

Most of the Bank's information technology systems are off-the-shelf software, as a result, remediation efforts have focused on obtaining Year 2000 compliant application upgrades. The Bank's core banking system, which runs loans, deposits and the general ledger has been upgraded to the Year 2000 compliant version and is currently being tested. Year 2000 releases have been completed and received for all of the Bank's other critical systems. Testing and implementation of these releases is expected to be completed by June 30, 1999. The Bank has inventoried its non-information technology systems and is working with the vendors to determine Year 2000 compliance and to define procedures to be used to complete a compliance test in those applications where a calendar function is found. The Bank has obtained verification from third party business partners and suppliers regarding their Year 2000 compliance status. Business partners and suppliers who are critical to the Bank's operations have reported being on schedule with FFIEC guidelines. The Bank has plans to conduct testing of critical applications with these third party vendors during the first quarter of 1999.

The Company is currently analyzing its most reasonably likely worst case Year 2000 scenario and is developing a contingency plan to handle that scenario. This analysis and contingency plan is expected to be completed during the fourth quarter of 1998. The Bank is also in the process of assessing loan portfolio credit risk relating to its customers' understanding and preparedness to address Year 2000 issues. An initial assessment was completed during the third quarter of 1998 and an update of the initial survey will be done in the fourth quarter of 1998. The Bank will continue to use customer surveys to monitor this risk through January 2000.

The Company has incurred $1.0 million in costs during the first nine months of 1998 for remediation of the Year 2000 issue and expects to incur an additional $0.5 million in the fourth quarter of 1998 and $0.6 million in 1999. The remediation costs for the Year 2000 issue are included in noninterest expense as incurred.

MARKET RISK MANAGEMENT

Interest rate risk is the most significant market risk impacting the Company. The Company's monitoring activities related to managing interest rate risk include both interest rate sensitivity "gap" analysis and the use of a simulation model to measure the impact of market interest rate changes on the net present value of estimated cash flows from the Company's assets, liabilities and off-balance sheet items, defined as the Company's market value of portfolio equity (MVPE). See the Company's 1997 Annual Report on Form 10-K for disclosure of the quantitative and qualitative information regarding the interest rate risk inherent in interest rate risk sensitive instruments as of December 31, 1997. There have been no changes in the assumptions used by the Company in monitoring interest rate risk, and the Company is in compliance with all interest rate risk policy guidelines as of September 30, 1998. Other types of market risk affecting the Company in the normal course of its business activities include foreign currency exchange risk and equity price risk. The impact on the Company, resulting from these other two types of market risks, is deemed immaterial. The Company does not maintain a portfolio of trading securities and does not intend to engage in such activities in the immediate future.


LIQUIDITY

The objective of liquidity management is to ensure that funds are available in a timely manner to meet loan demand and depositors' needs, and to service other liabilities as they come due, without causing an undue amount of cost or risk, and without causing a disruption to normal operating conditions.

The Company regularly assesses the amount and likelihood of projected funding requirements through a review of factors such as historical deposit volatility and funding patterns, present and forecasted market and economic conditions, individual client funding needs, and existing and planned Company business activities. The asset/liability committee of the Bank provides oversight to the liquidity management process and recommends policy guidelines, subject to Board of Directors approval, and courses of action to address the Company's actual and projected liquidity needs.

The ability to attract a stable, low-cost base of deposits is the Company's primary source of liquidity. Other sources of liquidity available to the Company include short-term borrowings, which consist of federal funds purchased, security repurchase agreements and other short-term borrowing arrangements. The Company's liquidity requirements can also be met through the use of its portfolio of liquid assets. Liquid assets, as defined, include cash and cash equivalents in excess of the minimum levels necessary to carry out normal business operations, federal funds sold, securities purchased under resale agreements, investment securities maturing within six months, investment securities eligible and available for pledging purposes with a maturity in excess of six months, and anticipated near term cash flows from investments.

Additionally, during the second quarter of 1998 the Company issued $40.0 million in cumulative trust preferred securities through a newly formed special-purpose trust (SVB Capital I). The securities had an offering price (liquidation amount) of $25 per security and distributions at a fixed rate of 8.25% will be paid by the Company quarterly. The securities have a maximum maturity of 30 years. The Company received proceeds of $38.5 million related to the sale of these securities, net of underwriting commissions and other offering expenses. The proceeds will be used by the Company for general corporate purposes, which may include, without limitation, investments in liquid government and corporate debt securities, and investments in venture capital funds.

Bank policy guidelines provide that liquid assets as a percentage of total deposits should not fall below 20.0%. At September 30, 1998, the Bank's ratio of liquid assets to total deposits was 53.2%. This ratio is well in excess of the Bank's minimum policy guidelines and is slightly higher than the comparable ratio of 52.1% as of December 31, 1997. In addition to monitoring the level of liquid assets relative to total deposits, the Bank also utilizes other policy measures in its liquidity management activities. As of September 30, 1998, the Bank was in compliance with all of these policy measures.

CAPITAL RESOURCES

Management seeks to maintain adequate capital to support anticipated asset growth and credit risks, and to ensure that the Company and the Bank are in compliance with all regulatory capital


guidelines. The primary source of new capital for the Company has been the retention of earnings. Aside from current earnings, other sources of new capital for the Company have been the issuance of common stock under the Company's employee benefit plans, including the Company's stock option plans, defined contribution plans and employee stock purchase plan.

Additionally, during the second quarter of 1998 the Company issued $40.0 million in cumulative trust preferred securities through SVB Capital I. The trust preferred securities are presented as a separate line item in the consolidated balance sheet of the Company under the caption "Company obligated mandatorily redeemable trust preferred securities of subsidiary trust holding solely junior subordinated debentures." The securities have a maximum maturity of 30 years and qualify as Tier 1 capital under the capital guidelines of the Federal Reserve Board.

Shareholders' equity totaled $210.2 million at September 30, 1998, an increase of $35.8 million, or 20.5%, from the $174.5 million balance at December 31, 1997. This increase resulted from net income of $24.3 million combined with capital generated primarily through the Company's employee benefit plans of $9.9 million and an increase in the after-tax net unrealized gain on available-for-sale investments of $1.6 million from the prior year end.

The Company and the Bank are subject to capital adequacy guidelines issued by the Federal Reserve Board. Under these capital guidelines, the minimum total risk-based capital and Tier 1 risk-based capital ratio requirements are 10.0% and 6.0%, respectively, of risk-weighted assets and certain off-balance sheet items for a "well capitalized" depository institution.

The Federal Reserve Board has also established minimum capital leverage ratio guidelines for state member banks. The ratio is determined using Tier 1 capital divided by quarterly average total assets. The guidelines require a minimum of 5.0% for a well capitalized depository institution.

The Company's and the Bank's risk-based capital ratios were in excess of regulatory guidelines for a well capitalized depository institution as of September 30, 1998, and December 31, 1997. Capital ratios for the Company are set forth below:

                                            September 30,        December 31,
                                                1998                1997
                                            (Unaudited)
-----------------------------------------------------------------------------
Total risk-based capital ratio                 12.5%                11.5%
Tier 1 risk-based capital ratio                11.2%                10.2%
Tier 1 leverage ratio                           7.7%                 7.1%
-----------------------------------------------------------------------------

The improvement in the Company's total risk-based capital ratio and Tier 1 risk-based capital ratio from December 31, 1997, to September 30, 1998, was attributable to an increase in Tier 1 capital, partially offset by an increase in total assets. The increase in Tier 1 capital primarily resulted from the aforementioned net income and the issuance of $40.0 million in trust preferred securities during the first nine months of 1998.


PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

There were no legal proceedings requiring disclosure pursuant to this item pending at September 30, 1998, or at the date of this report.

ITEM 2 - CHANGES IN SECURITIES

None.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5 - OTHER INFORMATION

None.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS:

10.40   Severance Agreement between Silicon Valley Bancshares and John C. Dean
        related to garage.com-TM-, as of August 12, 1998

10.41   Severance Agreement between Silicon Valley Bancshares and Harry W.
        Kellogg related to garage.com-TM-, as of August 12, 1998

10.42   Form of Executive Change In Control Severance Benefits, as of
        August 12, 1998


(b)  REPORTS ON FORM 8-K:

     No reports on Form 8-K were filed by the Company during the quarter ended
     September 30, 1998.


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SILICON VALLEY BANCSHARES

Date:  November 13, 1998               /s/ Lydia A. Burke
                                       ------------------
                                       Lydia A. Burke
                                       Senior Vice President and Controller


                                       (Principal Accounting Officer)


Severance Agreement
Page
EXHIBIT 10.40

SEVERANCE AGREEMENT

THIS AGREEMENT (the "Agreement") is made and entered into as of the 12th day of August, 1998, by and between Silicon Valley Bancshares ("Bancshares") and John C. Dean ("Mr. Dean").

RECITALS

WHEREAS, Mr. Dean is the President and Chief Executive Officer of Bancshares and Silicon Valley Bank (the "Bank");

WHEREAS, Bancshares has made an equity investment in non-voting preferred stock (the "Preferred Stock") of garage.com-TM- (the "Company") and, in that regard, has been offered membership on the Company's board of directors;

WHEREAS, Bancshares has asked, and Mr. Dean has agreed, to serve as a director of the Company;

WHEREAS, the Company offered to Bancshares the opportunity to purchase 75,000 shares of the Company's common stock (the "Common Stock"), in regard to services provided by Mr. Dean on the Company's board of directors;

WHEREAS, Mr. Dean's service on the board of directors of the Company will provide value to Bancshares;

WHEREAS, Bancshares purchased the Common Stock for a total purchase price of $750;

WHEREAS, the Company intends to form a California limited liability company each year during its existence (the "LLCs") to hold and distribute securities, or the proceeds from the sale or disposition of such securities, that the Company receives in each particular year from entities that seek to raise capital using the Company's Internet matchmaking service; and

WHEREAS, the Company intends to allocate an interest in each of the annual LLCs to its holders of common and preferred stock, including Bancshares. For purposes of this Agreement, "Interests" means the interests allocated by the Company in each of the annual LLCs to Bancshares related solely to Bancshares' ownership of the Common Stock granted in regard to Mr. Dean's services on the Company's board of directors.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants set forth below, the parties agree as follows:


Severance Agreement
Page

AGREEMENT

1. RIGHTS IN THE STOCK AND THE INTERESTS. Except as otherwise provided in this Agreement, Bancshares shall have all right, title and interest in the Common Stock and the Interests.

2. MR. DEAN'S SEPARATION. Upon the earlier of (i) a Covered Termination; or (ii) a Qualified Separation of Mr. Dean from Bancshares and the Bank (collectively, "Mr. Dean's Separation"), the determination of the value of the Common Stock and the Interests will be made in accordance with Section 3 of this Agreement. For purposes of this Agreement, a "Covered Termination" shall have the meaning as defined in the then existing Change in Control Agreement among Mr. Dean, Bancshares and the Bank; and a "Qualified Separation" shall mean where Mr. Dean voluntarily resigns as an officer of Bancshares and the Bank and, in the sole discretion of Bancshares, determines that Mr. Dean continues to add value to Bancshares and the Bank. Factors to be considered in this determination include, but are not limited to: (1) Mr. Dean's promotion and support of the interests of the Bank in the marketplace and community; (2) Mr. Dean's promotion and support of the interests of the Bank with clients, venture capitalists and prospective Bank clients; (3) Mr. Dean's promotion and support of the interests of the Bank through civic activities; (4) Mr. Dean's continued service to the Bank (i.e., as a consultant); (5) Mr. Dean's continued addition of value to a Bank-related project; or (6) Mr. Dean providing referrals to the Bank. Bancshares' shall make this determination one time only, within three (3) months following Mr. Dean's separation.

3. DETERMINED VALUE. The term "Determined Value" shall mean fifty percent (50%) of the present value of the fair market value of the then-vested Common Stock and the Interests, valued as of the date of Mr. Dean's Separation, and determined as follows: (i) within twenty (20) days of Mr. Dean's Separation, Bancshares and Mr. Dean shall each select a business valuation appraiser, each of whom is an accredited senior appraiser by the American Society of Appraisers;
(ii) within twenty (20) days of their selection, the appraisers selected by Bancshares and Mr. Dean shall promptly meet and confer and select an independent business valuation appraiser who is an accredited senior appraiser by the American Society of Appraisers (the "Independent Appraiser"); (iii) the Independent Appraiser shall promptly conduct an appraisal of the Common Stock and the Interests and determine the fair market value of the Common Stock and the Interests discounted to present value; and (iv) the Independent Appraiser shall then promptly prepare and deliver to Bancshares and Mr. Dean a written report reflecting the fair market value of the Common Stock and the Interests discounted to present value (the "Appraisal Report"). The fair market value determined under this Section 3 will include an amount representing the value of the goodwill of the Company. The Determined Value established by the Independent Appraiser is conclusive and binding upon the parties. Bancshares will pay the fees and expenses charged by the Independent Appraiser.

4. CLOSING. Within twenty (20) days of the delivery of the Appraisal Report, but no earlier than ninety-five (95) days from the date of Mr. Dean's Separation, Bancshares will pay to


Severance Agreement
Page

Mr. Dean the amount of the Determined Value. Notwithstanding the foregoing, if Harry W. Kellogg, Jr. ("Mr. Kellogg") is then participating in the payment from Bancshares to Mr. Dean pursuant to the Severance Agreement between Bancshares and Mr. Kellogg dated August 12, 1998, Bancshares will pay to Mr. Dean only one-half of the amount of the Determined Value (with the other half then being paid to Mr. Kellogg).

5. ATTORNEYS' FEES. In any action at law or in equity, including any arbitration proceeding, to enforce any of the provisions or rights under this Agreement, the unsuccessful party to the action, as determined by the court or the arbitrator in its final judgment or decree, shall pay the successful party all costs, expenses and reasonable attorneys' fees incurred by the successful party (including, without limitation, costs, expenses and fees on any appeal), and, if the successful party shall recover judgment in any such action or proceeding, such costs, expenses and attorneys' fees shall be included as part of the judgment.

6. AMENDMENTS. No change in, modification of or addition to the terms of this Agreement shall be valid unless set forth in a writing signed by Bancshares and Mr. Dean and specifically stating that it constitutes an amendment to this Agreement.

7. CHOICE OF LAW. It is the intention of the parties that the laws of the State of California shall govern the validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties.

8. BINDING ON HEIRS, SUCCESSORS AND ASSIGNS. This Agreement and all of its terms, conditions and covenants are intended to be fully effective and binding, to the extent permitted by law, on the heirs, executors, administrators, successors and assigns of the parties to this Agreement.

9. ASSIGNMENT. Except as otherwise provided in this Agreement, neither this Agreement nor any right or interest is assignable by any of the parties without the prior written consent of all of the parties.

10. ARBITRATION. Any dispute between the parties arising out of or in connection with this Agreement shall be referred to arbitration in Santa Clara County, California in accordance with the Commercial Rules of the American Arbitration Association. The award shall be final and binding upon the parties and judgment of such award may be entered in any court having jurisdiction.

IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date and year first above written.

SILICON VALLEY BANCSHARES JOHN C. DEAN

By:



EXHIBIT 10.41

SEVERANCE AGREEMENT

THIS AGREEMENT (the "Agreement") is made and entered into as of the 12th day of August, 1998, by and between Silicon Valley Bancshares ("Bancshares") and Harry W. Kellogg, Jr. ("Mr. Kellogg").

RECITALS

WHEREAS, Mr. Kellogg is Executive Vice President of Bancshares and Executive Vice President, Strategic Products and Services Group, of Silicon Valley Bank (the "Bank");

WHEREAS, John C. Dean ("Mr. Dean") is the President and Chief Executive Officer of Bancshares and the Bank;

WHEREAS, Bancshares has made an equity investment in non-voting preferred stock (the "Preferred Stock") of garage.com-TM- (the "Company") and, in that regard, has been offered membership on the Company's board of directors;

WHEREAS, Bancshares has asked, and Mr. Dean has agreed, to serve as a director of the Company;

WHEREAS, Mr. Kellogg has provided, and will from time to time in the future provide, support to Mr. Dean in connection with Mr. Dean's activities concerning the Company;

WHEREAS, the Company offered to Bancshares the opportunity to purchase 75,000 shares of the Company's common stock (the "Common Stock"), in regard to services provided by Mr. Dean on the Company's board of directors;

WHEREAS, Mr. Kellogg's support of Mr. Dean in connection with Mr. Dean's service on the board of directors of the Company will provide value to Bancshares;

WHEREAS, Bancshares purchased the Common Stock for a total purchase price of $750;

WHEREAS, the Company intends to form a California limited liability company each year during its existence (the "LLCs") to hold and distribute securities, or the proceeds from the sale or disposition of such securities, that the Company receives in each particular year from entities that seek to raise capital using the Company's Internet matchmaking service;

WHEREAS, the Company intends to allocate an interest in each of the annual LLCs to its holders of common and preferred stock, including Bancshares. For purposes of this Agreement, "Interests" means the interests allocated by the Company in each of the annual LLCs to Bancshares related solely to Bancshares' ownership of the Common Stock granted in regards to Mr. Dean's services on the Company's board of directors; and


Severance Agreement

Page 2

WHEREAS, Bancshares and Mr. Dean entered into that certain Severance Agreement dated August 12, 1998 (the "Bancshares/Dean Agreement"). A copy of the Bancshares/Dean Agreement is attached as Exhibit A and incorporated by reference.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants set forth below, the parties agree as follows:

AGREEMENT

1. RIGHTS IN THE STOCK AND THE INTERESTS. Except as otherwise provided in this Agreement and in the Bancshares/Dean Agreement, Bancshares has all right, title and interest in the Common Stock and the Interests.

2. MR. KELLOGG'S PARTICIPATION IN THE BANCSHARES/DEAN AGREEMENT. If Bancshares is obligated to pay Mr. Dean the Determined Value (as defined in
Section 3 of the Bancshares/Dean Agreement) pursuant to Section 4 of the Bancshares/Dean Agreement, Bancshares shall pay one-half of the amount of the Determined Value to Mr. Kellogg and one-half of the Determined Value to Mr. Dean; provided however, that the conditions set forth in Section 3, below, are satisfied.

3. CONDITIONS TO MR. KELLOGG'S PARTICIPATION IN THE DETERMINED VALUE. Mr. Kellogg may participate in the Determined Value only if: (i) this Agreement has not earlier been terminated by Bancshares in accordance with Section 4 below; and (ii) Mr. Kellogg is employed by Bancshares and the Bank on the date of Mr. Dean's Separation (as defined in Section 2 of the Bancshares/Dean Agreement.)

4. TERMINATION OF THIS AGREEMENT. Bancshares may terminate this Agreement effective on an annual anniversary of the date of this Agreement by providing Mr. Kellogg with written notice of Bancshares' decision to terminate this Agreement provided such notice of termination is made at least sixty (60) days before an annual anniversary date of this Agreement.

5. ATTORNEYS' FEES. In any action at law or in equity, including any arbitration proceeding, to enforce any of the provisions or rights under this Agreement, the unsuccessful party to the action, as determined by the court or the arbitrator in its final judgment or decree, shall pay the successful party all costs, expenses and reasonable attorneys' fees incurred by the successful party (including, without limitation, costs, expenses and fees on any appeal), and, if the successful party shall recover judgment in any such action or proceeding, such costs, expenses and attorneys' fees shall be included as part of the judgment.

6. AMENDMENTS. No change in, modification of or addition to the terms of this Agreement shall be valid unless set forth in a writing signed by Bancshares and Mr. Kellogg and specifically stating that it constitutes an amendment to this Agreement.

7. CHOICE OF LAW. It is the intention of the parties that the laws of the State of California shall govern the validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties.


Severance Agreement

Page 3

8. BINDING ON HEIRS, SUCCESSORS AND ASSIGNS. This Agreement and all of its terms, conditions and covenants are intended to be fully effective and binding, to the extent permitted by law, on the heirs, executors, administrators, successors and assigns of the parties to this Agreement.

9. ASSIGNMENT. Except as otherwise provided in this Agreement, neither this Agreement nor any right or interest is assignable by any of the parties without the prior written consent of all of the parties.

10. ARBITRATION. Any dispute between the parties arising out of or in connection with this Agreement shall be referred to arbitration in Santa Clara County, California in accordance with the Commercial Rules of the American Arbitration Association. The award shall be final and binding upon the parties and judgment of such award may be entered in any court having jurisdiction.

IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date and year first above written.

SILICON VALLEY BANCSHARES           HARRY W. KELLOGG, JR.

By:


   ----------------------           --------------------------------


EXHIBIT 10.42

EXECUTIVE
CHANGE IN CONTROL
SEVERANCE BENEFITS AGREEMENT

THIS EXECUTIVE CHANGE IN CONTROL SEVERANCE BENEFITS AGREEMENT (the "AGREEMENT") is entered into this 12th day of August, 1998 between _________ ("EXECUTIVE") and SILICON VALLEY BANK, a California corporation (the "COMPANY"), a wholly owned subsidiary of Silicon Valley Bancshares, a California corporation ("BANCSHARES"). This Agreement is intended to provide Executive with the compensation and benefits described herein upon the occurrence of specific events.

Certain capitalized terms used in this Agreement are defined in Article VI.

The Company and Executive hereby agree as follows:

ARTICLE 1

EMPLOYMENT BY THE COMPANY

1.1 Executive is currently employed as a(n) ___[TITLE]___ of the Company.

1.2 This Agreement shall remain in full force and effect for the two (2) year period specified in Article VII; provided, however, that the rights and obligations of the parties hereto contained in Articles II through VII shall survive any termination for the longer of (i) until August 11, 2000 or (ii) twenty-four (24) months following a Change in Control (as hereinafter defined) or such later period as may be required so that all benefits to which Executive is entitled under this Agreement are paid or otherwise provided to Executive.

1.3 The Company and Executive wish to set forth the compensation and benefits which Executive shall be entitled to receive in the event that there is a Change in Control or Executive's employment with the Company terminates following a Change in Control under the circumstances described in Article II of this Agreement.

1.4 The duties and obligations of the Company to Executive under this Agreement shall be in consideration for Executive's past services to the Company, Executive's continued employment with the Company, and Executive's execution of the general waiver and release described in Section 3.2.

1.5 This Agreement shall supersede any other agreements relating to any compensation, benefits, severance or other amounts to be paid to Executive in the event of Executive's termination of employment following the occurrence of a Change in Control, including but not limited to any Termination Agreement entered into between Executive and the Company, but shall NOT supersede: (i) any agreement between Executive and the Company or any personnel policies of the Company relating to other aspects of Executive's employment relationship with the Company, including but not limited to the Company's personnel policies addressing severance payments to Executive in the event of a

1

termination of Executive's employment which is not proximately related to the occurrence of a Change in Control; and (ii) the Company's 1998 Venture Capital Retention Program (and any subsequent Venture Capital Retention programs) and any severance amounts payable to Executive under such program(s).

By executing this Agreement, both Executive and the Company agree that any Termination Agreement previously entered into between the parties which addressed as part of its provisions compensation to be paid to the Executive upon the termination of Executive's employment with the Company (following a Change in Control), shall terminate immediately and shall be of no further force and effect.

ARTICLE 2

SEVERANCE BENEFITS

2.1 ENTITLEMENT TO SEVERANCE BENEFITS. If Executive's employment terminates due to an Involuntary Termination or a Constructive Termination within twenty-four (24) months following a Change in Control, the termination of employment will be a Covered Termination and the Company shall pay Executive the compensation and benefits described in this Article II. If Executive's employment terminates (i) but not due to an Involuntary Termination or a Constructive Termination within twenty-four (24) months following a Change in Control, (ii) for any reason prior to a Change in Control or (iii) after twenty-four (24) months or more following a Change in Control, then the termination of employment will NOT be a Covered Termination and Executive will NOT be entitled to receive any payments or benefits under this Article II.

Payment of any benefits described in this Article II shall be subject to the restrictions and limitations set forth in Article III.

2.2 LUMP SUM SEVERANCE PAYMENT. Within thirty (30) days following a Covered Termination, or such longer period as is administratively reasonable following the close of the maximum period provided by law for consideration and revocation of the employee agreement and release described in Section 3.2, Executive shall receive a lump sum payment determined by the Executive's Base Salary multiplied by the appropriate factor applied from the table attached as Exhibit A (which factor shall be based upon (1) the Executive's title or grade within the Company and (2) the relationship between the Selling Price of the Company or Bancshares (as the case may be) at the time of the transaction (or series of related transactions) causing the occurrence of a Change in Control and the Book Value of the Company or Bancshares (as the case may be) at that time). This lump sum payment shall be called the Executive's "CIC Benefit."

If the Executive's Covered Termination occurs on or before the expiration of twelve (12) months from the occurrence of a Change in Control, the Executive shall be entitled to receive 100% of his or her CIC Benefit. If the Executive's Covered Termination occurs after the expiration of twelve (12) months from the occurrence of a Change in Control, the Executive shall be entitled to receive a CIC Benefit based upon the following table:

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NUMBER OF MONTHS
FOLLOWING CHANGE IN CONTROL              PERCENTAGE OF CIC BENEFIT
        15                                         75%
        18                                         50%
        21                                         25%
        24                                          0%

In the event that an Executive's Covered Termination occurs on a date between two of these quarterly benchmarks, then the percentage of the CIC Benefit to which Executive shall be entitled shall be equal to the sum of two percentages (rounded to the nearest whole percentage): (1) the Percentage of CIC Benefit for the quarterly benchmark next following the occurrence of the Covered Termination, and (2) twenty five percent (25%) multiplied by a fraction, the numerator of which is the number of days after the date of Covered Termination and on or before the date on which the subsequent quarterly benchmark falls, and the denominator of which is ninety one (91). For example, if the date on which a Change of Control occurs is September 1, 1998 and the Executive incurs a Covered Termination on November 15, 1999, then the Percentage of CIC Benefit to which Executive is entitled shall be 79% (75% + (16/91 x 25%)) or (75% + 4.4%) or 79.4%, as rounded to the nearest whole percentage. Executive's CIC Benefit may be further reduced as a result of the limits on payment of aggregate CIC Benefits described in Exhibit A to this Agreement.

2.3 STOCK OPTIONS AND STOCK. All stock options held by the Executive with respect to Bancshares stock that are unvested at the time of a Change in Control shall become fully vested and exercisable upon a Change in Control (regardless of whether a Covered Termination occurs). All Bancshares stock held by the Executive that is unvested at the time of a Change in Control may become fully vested upon a Change in Control, subject to the terms of the agreements providing for the grant of such Bancshares stock.

2.4 TAX-QUALIFIED RETIREMENT PLANS. Upon the occurrence of a Covered Termination, the Executive's benefits under any pension, profit sharing, or stock bonus plan intended to satisfy the requirements of Section 401(a) of the Internal Revenue Code, specifically including, but not limited to, the Silicon Valley Bank 401(k) and Employee Stock Ownership Plan and the Silicon Valley Bank Money Purchase Pension Plan, shall become fully vested.

2.5 WELFARE BENEFITS. Following a Covered Termination, Executive and his or her covered dependents will be eligible to continue their Welfare Benefit coverage under any Welfare Benefit plan or program maintained by the Company only to the extent provided under the terms and conditions of such Welfare Benefit plan or program. Except for the foregoing, no continuation of Welfare Benefits shall be provided under this Agreement, except to the extent continuation of health insurance coverage is required under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA").

This Section 2.5 is not intended to affect, nor does it affect, the rights of Executive, or Executive's covered dependents, under any applicable law with respect to health insurance continuation coverage.

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2.6 OUTPLACEMENT SERVICES. The Company shall provide Executive with outplacement services under the terms and conditions of the Company's personnel policies in effect immediately prior to the occurrence of a Change in Control.

2.7 MITIGATION. Except as otherwise specifically provided herein, Executive shall not be required to mitigate damages or the amount of any payment provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by Executive as a result of employment by another employer or by retirement benefits received after the date of the Covered Termination, or otherwise.

2.8 BASIS OF PAYMENTS. All benefits under this Agreement shall be paid by the Company. This Agreement shall be unfunded, and benefits hereunder shall be paid only from the general assets of the Company.

ARTICLE 3

LIMITATIONS AND CONDITIONS ON BENEFITS

3.1 WITHHOLDING OF TAXES. The Company shall withhold appropriate federal, state or local income and employment taxes from any payments hereunder.

3.2 EMPLOYEE AGREEMENT AND RELEASE PRIOR TO RECEIPT OF BENEFITS. Upon the occurrence of a Covered Termination, and prior to the receipt of any benefits under this Agreement on account of the occurrence of a Covered Termination, Executive shall, as of the date of a Covered Termination, execute an employee agreement and release substantially in the form attached hereto as Exhibit B. Such employee agreement and release shall specifically relate to all of Executive's rights and claims in existence at the time of such execution. In the event Executive does not execute such employee agreement and release within the time period specified in such employee agreement and release or if Executive revokes such employee agreement and release within the revocation period provided in such employee agreement and release no benefits shall be payable under this Agreement to Executive.

3.3 LIMITS IMPOSED BY APPLICABLE BANKING LAW. Notwithstanding any other provision to the contrary, the Company shall not be obligated under this Agreement to pay any CIC Benefit to the extent that such payment would violate any prohibition or limitation on termination payments under any applicable federal or state statute, rule or regulation promulgated, or effective order issued, by any federal or state regulatory agency having jurisdiction over the Company or Bancshares. Without limiting the foregoing, the Company and Executive acknowledge and agree that the Federal Deposit Insurance Corporation (the "FDIC") has issued a regulation that prohibits payment of the CIC Benefit under certain circumstances, unless such payments were approved by the FDIC, the Federal Reserve Bank of San Francisco (the "FRB") and the California State Banking Department (the "SBD").

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ARTICLE 4

OTHER RIGHTS AND BENEFITS

4.1 NONEXCLUSIVITY. Nothing in the Agreement shall prevent or limit Executive's continuing or future participation in any benefit, bonus, incentive or other plans, programs, policies or practices provided by the Company and for which Executive may otherwise qualify, nor, except as specifically provided herein, shall anything herein limit or otherwise affect such rights as Executive may have under any stock option or other agreements with the Company. Except as otherwise expressly provided herein, amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of the Company at or subsequent to the date of a Covered Termination shall be payable in accordance with such plan, policy, practice or program.

4.2 PARACHUTE PAYMENTS.

(a) In the event that any payment received or to be received by Executive pursuant to this Agreement ("Payment") would (i) constitute a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code (the "Code") and (ii) but for this subsection (a), be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then, subject to the provisions of subsection (c) hereof, such Payment shall be reduced, if at all, to the largest amount which Executive, in his or her discretion, determines would result in maximizing Executive's net proceeds with respect to such Payments (after taking into account the payment of any appropriate federal, state or local income and employment taxes and the payment of any Excise Tax imposed on such Payment). The determination by Executive of any required reduction pursuant to this subsection (a) shall be conclusive and binding upon the Company. The Company shall reduce a Payment in accordance with this subsection (a) (the "Reduction Amount") only upon written notice by Executive indicating the Reduction Amount, if any. If the Internal Revenue Service (the "IRS") determines that a Payment is subject to the Excise Tax, then subsection
(c) hereof shall apply, and the enforcement of subsection (c) shall be the exclusive remedy to the Company for a failure by Executive to reduce the Payment so that no portion thereof is subject to the Excise Tax.

(b) Intentionally omitted.

< TO BE INSERTED IN THOSE AGREEMENTS WHICH INCLUDE A CHARITABLE RECIPIENT DESIGNATION:
" (b) IN THE EVENT A PAYMENT IS REDUCED IN ACCORDANCE WITH SUBSECTION (a) HEREOF, THE COMPANY SHALL REMIT TO [________________] (THE "CHARITABLE RECIPIENT"), WITHIN [TEN (10)] DAYS AFTER A PAYMENT IS MADE TO EXECUTIVE, AN AMOUNT EQUAL TO THE REDUCTION AMOUNT. THE COMPANY AND THE EXECUTIVE AGREE THAT THE EXECUTIVE MAY AMEND, AT ANY TIME BY WRITTEN SUBMISSION TO THE COMPANY, THIS SUBSECTION (b) FOR THE SOLE PURPOSE OF DESIGNATING A DIFFERENT ENTITY AS THE CHARITABLE RECIPIENT; PROVIDED, HOWEVER, THAT ANY SUCH AMENDMENT RECEIVED BY THE COMPANY WITHIN SIX (6) MONTHS PRIOR TO THE DATE IN WHICH EXECUTIVE FIRST BECOMES ENTITLED TO A PAYMENT PURSUANT TO THIS AGREEMENT MAY BE DISREGARDED BY THE COMPANY IN ITS SOLE DISCRETION. NOTWITHSTANDING ANYTHING TO THE FOREGOING, IN NO EVENT MAY EXECUTIVE DESIGNATE A CHARITABLE RECIPIENT IN WHICH EXECUTIVE HAS A DIRECT OR INDIRECT BENEFICIAL OWNERSHIP INTEREST." >

(c) If, notwithstanding any reduction described in subsection (a) hereof (or in the absence of any such reduction), the IRS determines that Executive is liable for the Excise Tax as a result of the

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receipt of one or more Payments, then Executive shall be obligated to pay back to the Company, within 30 days after final IRS determination, an amount of such Payments equal to the "Repayment Amount." The Repayment Amount with respect to such Payments shall be the smallest such amount, if any, as shall be required to be paid to the Company so that Executive's net proceeds with respect to such Payments (after taking into account the payment of the Excise Tax imposed on such Payments) shall be maximized. Notwithstanding the foregoing, the Repayment Amount with respect to such Payments shall be zero if a Repayment Amount of more than zero would not eliminate the Excise Tax imposed on such Payments. If the Excise Tax is not eliminated pursuant to this subsection (c), Executive shall pay the Excise Tax.

4.3 STOCK OPTIONS. The Company shall take all actions necessary to amend all stock agreements evidencing outstanding stock options granted to Executive to provide for full vesting of stock options upon a Change in Control or to otherwise conform such stock agreements, as required, to the terms of this Agreements.

ARTICLE 5

NON-ALIENATION OF BENEFITS

No benefit hereunder shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to so subject a benefit hereunder shall be void.

ARTICLE 6

DEFINITIONS

For purposes of the Agreement, the following terms shall have the meanings set forth below:

6.1 "AGREEMENT" means this Executive Change in Control Severance Benefits Agreement.

6.2 "BASE SALARY" means the base salary rate in effect for the subject Executive at the time of a Covered Termination, exclusive of any bonus or other incentive cash compensation, income from any stock options or other stock awards, supplemental deferred compensation contributions made by the Company, pension or profit sharing contributions or distributions (except as provided below), insurance payments or proceeds, fringe benefits, or other form of additional compensation, but specifically including any amounts withheld from base salary to provide benefits pursuant to section 125, 401(k), or 402(g) of the Internal Revenue Code or pursuant to any other plan or program of deferred compensation.

6.3 "CHANGE IN CONTROL" means the consummation of any of the following transactions during the term of this Agreement:

(a) the shareholders of the Company or Bancshares approve a merger or consolidation of the Company or Bancshares with any other corporation, other than a merger or consolidation which would result in beneficial owners of the total voting power in the election of directors represented by the voting securities ("Voting Securities") of the Company or Bancshares (as the case may be)

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outstanding immediately prior thereto continuing to beneficially own securities representing (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total Voting Securities of the Company or Bancshares, or of such surviving entity, outstanding immediately after such merger or consolidation;

(b) the shareholders of the Company or Bancshares approve a plan of liquidation or dissolution of the Company or approve an agreement for the sale, lease, exchange or other transfer or disposition by the Company or Bancshares of all or substantially all of the Company's assets;

(c) any person (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), other than (A) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or Bancshares, (B) a corporation owned directly or indirectly by the shareholders of Bancshares in substantially the same proportions as their beneficial ownership of stock in Bancshares, or (C) Bancshares (with respect to Bancshares' ownership of the stock of the Company), is or becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of the securities of the Company or Bancshares representing 50% or more of the Voting Securities; or

(d) (A) (1) the shareholders of the Company or Bancshares approve a merger or consolidation of the Company or Bancshares with any other corporation, other than a merger or consolidation which would result in beneficial owners of Voting Securities of the Company or Bancshares (as the case may be) outstanding immediately prior thereto continuing to beneficially own securities representing (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than twenty-five percent (25%) of the total Voting Securities of the Company or Bancshares, or of such surviving entity, outstanding immediately after such merger or consolidation, or (2) any person (as such term is used in Sections 13(d) or 14(d) of the Exchange Act), other than (a) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or Bancshares, (b) a corporation owned directly or indirectly by the shareholders of Bancshares in substantially the same proportions as their ownership of stock in Bancshares, or (c) Bancshares (with respect to Bancshares' ownership of the stock of the Company) is or becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of the securities of the Company or Bancshares representing 25% or more of the Voting Securities of such corporation, and

(B) within twelve (12) months of the occurrence of such event, a change in the composition of the Board of Directors of Bancshares occurs as a result of which sixty percent (60%) or fewer of the directors are Incumbent Directors.

"Incumbent Directors" shall mean directors who either

(A) are directors of Bancshares as of the date hereof;

(B) are elected, or nominated for election, to the Board of Directors of Bancshares with the affirmative votes of at least a majority of the directors of Bancshares who are Incumbent Directors described in (A) above at the time of such election or nomination; or

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(C) are elected, or nominated for election, to the Board of Directors of Bancshares with the affirmative votes of at least a majority of the directors of Bancshares who are Incumbent Directors described in (A) or (B) above at the time of such election or nomination.

Notwithstanding the foregoing, "Incumbent Directors" shall not include an individual whose election or nomination to the Board of Directors of Bancshares occurs in order to provide representation for a person or group of related persons who have initiated or encouraged an actual or threatened proxy contest relating to the election of directors of Bancshares.

6.4 "COMPANY" means Silicon Valley Bank, a California corporation, and any successor thereto.

6.5 "CONSTRUCTIVE TERMINATION" means that the Executive voluntarily terminates his or her employment after any of the following are undertaken without Executive's express written consent:

(a) the material, involuntary reduction in Executive's responsibilities, authorities or functions as an employee of the Company as in effect immediately prior to a Change in Control, except in connection with the termination of Executive's employment for death, disability, retirement, fraud, misappropriation, embezzlement or any listed exclusion from the definition of Involuntary Termination;

(b) a reduction in Executive's Base Salary;

(c) reduction in Executive's Total Compensation to less than 85% of the amount provided to Executive for the last full calendar year immediately preceding the occurrence of a Change in Control; or

(d) a relocation of Executive to a location more than fifty (50) miles from the location at which Executive performed Executive's duties prior to a Change in Control, except for required travel by Executive on the Company's business to an extent substantially consistent with Executive's business travel obligations at the time of a Change in Control.

6.6 "COVERED TERMINATION" means an Involuntary Termination or a Constructive Termination within twenty-four (24) months following a Change in Control. No other event shall be a Covered Termination for purposes of this Agreement.

6.7 "INVOLUNTARY TERMINATION" means Executive's dismissal or discharge by the Company (or, if applicable, by the successor entity) for reasons other than for one of the following reasons:

(a) the commission by Executive of an act of deliberately criminal or fraudulent misconduct in the line of duty to the Company or Bancshares (including, but not limited to, the willful violation of any material law, rule, regulation, or cease and desist order applicable to Executive, the Company or Bancshares), a deliberate act that constitutes a conflict of interest with the Company, Bancshares, or Bancshares' shareholders, or a deliberate breach of a fiduciary duty owed by Executive to the Company, Bancshares, or Bancshares' shareholders;

8

(b) Executive's habitual absence from work, intentional failure to perform stated duties, gross negligence, or gross incompetence in the performance of stated duties;

(c) Executive's chronic alcohol or drug abuse that results in a material impairment of Executive's ability to perform his or her duties as an employee of the Company after reasonable accommodation;

(d) the rendering of a verdict of guilty against Executive for any criminal offense (other than a law relating to a traffic violation or similar offense), whether or not in the line of duty; or

(e) Executive's removal from his or her office with the Company or Bancshares pursuant to an effective order under Section 8(e) of the Federal Deposit Insurance Act 12 U.S.C. Section 1818(e).

The termination of an Executive's employment will not be deemed to be an "Involuntary Termination" if such termination occurs as a result of the death or disability of Executive.

6.8 "TOTAL COMPENSATION" means the amount of compensation paid by the Company to Executive with respect to the calendar year immediately preceding the occurrence of a Change in Control. Such amount shall include the following amounts paid with respect to such calendar year: Executive's Base Salary, any annual incentive compensation (including any "VC Participant Amount" under, and as defined in, the Company's Venture Capital Retention Program), and any amounts withheld from Executive's base salary or bonus to provide benefits pursuant to section 125, 401(k), or 402(g) of the Internal Revenue Code or pursuant to any other plan or program of deferred compensation. Such amount shall exclude any bonus declared or paid from the warrant incentive plan of the Company, any income from any stock options or other stock awards, supplemental deferred compensation contributions made by the Company, pension or profit sharing contributions or distributions (except included above), insurance payments or proceeds, fringe benefits, and other forms of additional compensation. Notwithstanding the foregoing, any annual incentive compensation declared for the calendar year immediately preceding the occurrence of a Change in Control shall relate to the Executive's performance in the preceding calendar year.

6.9 "WELFARE BENEFITS" means benefits providing for coverage or payment in the event of Executive's death, disability, illness or injury that were provided to Executive immediately before a Change in Control, whether taxable or non-taxable and whether funded through insurance or otherwise.

ARTICLE 7

TERM OF AGREEMENT

This Agreement shall commence as of the date of execution of this Agreement set forth on page 1 of this Agreement, and shall terminate on August 11, 2000.

ARTICLE 8

GENERAL PROVISIONS

9

8.1 EMPLOYMENT STATUS. This Agreement does not constitute a contract of employment or impose on Executive any obligation to remain as an employee, or impose on the Company any obligation (i) to retain Executive as an employee,
(ii) to change the status of Executive as an at-will employee, or (iii) to change the Company's policies regarding termination of employment.

8.2 NOTICES. Any notices provided hereunder must be in writing and such notices or any other written communication shall be deemed effective upon the earlier of personal delivery (including personal delivery by telex or facsimile) or the third day after mailing by first class mail, to the Company at its primary office location and to Executive at his or her address as listed in the Company's payroll records. Any payments made by the Company to Executive under the terms of this Agreement shall be delivered to Executive either in person or at his or her address as listed in the Company's payroll records.

8.3 SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.

8.4 WAIVER. If either party should waive any breach of any provisions of this Agreement, such party shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.

8.5 COMPLETE AGREEMENT. This Agreement, including Exhibits A, B and C and any other written agreements expressly referred to in this Agreement, constitutes the entire agreement between Executive and the Company and it is the complete, final, and exclusive embodiment of their agreement with regard to this subject matter. It is entered into without reliance on any promise or representation other than those expressly contained herein.

8.6 AMENDMENT OR TERMINATION OF AGREEMENT. This Agreement may be changed or terminated only upon the mutual written consent of the Company and Executive. The written consent of the Company to a change or termination of this Agreement must be signed by an executive officer of the Company after such change or termination has been approved by an authorized committee of the Company's Board of Directors.

8.7 COUNTERPARTS. This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.

8.8 HEADINGS. The headings of the Articles and Sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.

8.9 SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Executive may not assign any of his duties hereunder and he

10

may not assign any of his rights hereunder without the written consent of the Company, which consent shall not be withheld unreasonably.

8.10 ARBITRATION. Any and all disputes or controversies, arising from or regarding the interpretation, performance, enforcement or termination of this Agreement shall be resolved by final and binding arbitration under the procedures set forth in the Arbitration Procedure attached hereto as Exhibit C and the then existing Judicial Arbitration and Mediation Services, Inc. ("JAMS") Rules of Practice and Procedure or the rules of practice and procedure of any successor entity to JAMS (except insofar as they are inconsistent with the procedures set forth in the enclosed Arbitration Procedure). Nothing in this section is intended to prevent either party from obtaining either injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration or in lieu of arbitration or from utilizing any judicial court system to seek enforcement of an arbitration award.

8.11 ATTORNEY FEES. In the event of any arbitration or litigation or any other action or proceeding relating to the interpretation, performance, enforcement or termination of this Agreement, the prevailing party shall be entitled to an award requiring payment by the other party of such prevailing party's reasonable fees and costs, including reasonable attorneys' fees, incurred as a result of such action or proceeding.

8.12 CHOICE OF LAW. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the State of California applicable to contracts executed and to be performed solely in the State of California.

8.13 NON-PUBLICATION. The parties mutually agree not to disclose publicly the terms of this Agreement except to the extent that disclosure is mandated by applicable law.

8.14 TRANSFER OF SERVICES TO AFFILIATE. This Agreement shall not prohibit the Company from transferring Executive's services to an affiliate of the Company, provided that the rights and obligations of the parties hereto shall not terminate in the event of such transfer, and provided further that the new entity for which Executive is performing services also shall be bound hereby without the need for further written agreement and without release of the Company.

8.15 NO VIOLATION OF GOVERNING BANKING LAW. Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law, rule, regulation or order. The Company's inability, pursuant to court or regulatory order, to perform its obligations under this Agreement or the modification of this Agreement by the FRB, the SBD or other bank regulatory agency through administrative action shall not constitute a breach of this Agreement. Except to the extent provided in
Section 3.3, the provisions of this Agreement shall be severable. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless perform its obligations hereunder to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms.

8.16 OPPORTUNITY FOR INDEPENDENT COUNSEL AND ADVISORS. Executive acknowledges that he or she has had an opportunity to retain independent counsel and tax advisors to review this Agreement.

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8.17 CONSTRUCTION OF AGREEMENT. In the event of a conflict between the text of the Agreement and any summary, description or other information regarding the Agreement, the text of the Agreement shall control.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year written above.

SILICON VALLEY BANK,

a California corporation                             Executive



By:
    -------------------------------------    ------------------------------
    John C. Dean                                         [Name]
    President and Chief Executive Officer


Exhibit A:  CIC Benefit Table
Exhibit B:  Employee Agreement and Release
Exhibit C:  Arbitration Procedure

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EXHIBIT A

For purposes of this table, the following definitions shall apply:

1. "BOOK VALUE" shall mean the amount of stockholders' equity, as determined in accordance with generally accepted accounting principles, as of the date immediately preceding a Change in Control, excluding the Company's allowance for loan losses.

2. "SELLING PRICE" shall mean the valuation of the Company or Bancshares (as the case may be) as determined by the Company or Bancshares, respectively, in good faith at the time of the occurrence of the transaction (or series of related transactions) as a result of which a Change in Control occurs.

Furthermore, notwithstanding any provision in this table, the Executive's Agreement, and any personnel policy of the Company to the contrary, the cumulative CIC Benefit paid to all employees of the Company shall not exceed 5.8% of the difference between the Selling Price and the Book Value assuming one-third (1/3rd) of the Company's employees at the time of a Change in Control incur a Covered Termination, shall not exceed 11.7% of the difference between the Selling Price and the Book Value assuming two-thirds (2/3rds) of the Company's employees at the time of a Change in Control incur a Covered Termination, and in no event shall exceed 17.5% of the difference between the Selling Price and the Book Value. For purposes of the potential reduction in CIC Benefits provided for in this paragraph, the determination shall be made at the time of the Change in Control and the determination of whether the cumulative CIC Benefit to be paid exceeds the relevant limits specified herein also shall be determined at the time of the Change in Control. If, at the time of the Change in Control, it is determined that the limits specified in this paragraph are exceeded, then the potential CIC Benefits of all employees of the Company incurring a Covered Termination shall be proportionately decreased such that the resulting potential aggregate payouts will not exceed the relevant limit.

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EXHIBIT A

CIC BENEFIT(1)

                                                          Multiple of Base Salary
    Selling Price                ---------------------------------------------------------------------
     Multiple of             Executive **          MC Members &           Grades 11-12          Grades 8-10
      Book Value              Committee            Grades 13-14
------------------------------------------------------------------------------------------------------------------
         1.00                  0.0000                 0.0000                 0.5000                0.2500
------------------------------------------------------------------------------------------------------------------
         1.10                  0.0000                 0.0000                 0.5000                0.2500
------------------------------------------------------------------------------------------------------------------
         1.20                  0.0000                 0.0000                 0.5000                0.2500
------------------------------------------------------------------------------------------------------------------
         1.30                  0.0000                 0.0000                 0.5000                0.2500
------------------------------------------------------------------------------------------------------------------
         1.40                  0.0000                 0.0000                 0.5000                0.2500
------------------------------------------------------------------------------------------------------------------
         1.50                  0.0000                 0.0000                 0.5000                0.2500
------------------------------------------------------------------------------------------------------------------
         1.60                  0.0000                 0.0000                 0.5000                0.2500
------------------------------------------------------------------------------------------------------------------
         1.70                  0.0000                 0.0000                 0.5000                0.2500
------------------------------------------------------------------------------------------------------------------
         1.80                  0.0000                 0.0000                 0.5000                0.2500
------------------------------------------------------------------------------------------------------------------
         1.90                  0.0000                 0.0000                 0.5000                0.2500
------------------------------------------------------------------------------------------------------------------
         2.00                  0.0000                 0.0000                 0.5000                0.2500
------------------------------------------------------------------------------------------------------------------
         2.10                  1.6500                 1.2375                 0.5500                0.2750
------------------------------------------------------------------------------------------------------------------
         2.20                  1.8000                 1.3500                 0.6000                0.3000
------------------------------------------------------------------------------------------------------------------
         2.30                  1.9500                 1.4625                 0.6500                0.3250
------------------------------------------------------------------------------------------------------------------
         2.40                  2.1000                 1.5750                 0.7000                0.3500
------------------------------------------------------------------------------------------------------------------
         2.50                  2.2500                 1.6875                 0.7500                0.3750
------------------------------------------------------------------------------------------------------------------
         2.60                  2.4000                 1.8000                 0.8000                0.4000
------------------------------------------------------------------------------------------------------------------
         2.70                  2.5500                 1.9125                 0.8500                0.4250
------------------------------------------------------------------------------------------------------------------
         2.80                  2.7000                 2.0250                 0.9000                0.4500
------------------------------------------------------------------------------------------------------------------
         2.90                  2.8500                 2.1375                 0.9500                0.4750
------------------------------------------------------------------------------------------------------------------
         3.00                  3.0000                 2.2500                 1.0000                0.5000
------------------------------------------------------------------------------------------------------------------
         3.10                  3.1500                 2.3625                 1.0500                0.5250
------------------------------------------------------------------------------------------------------------------
         3.20                  3.3000                 2.4750                 1.1000                0.5500
------------------------------------------------------------------------------------------------------------------
         3.30                  3.4500                 2.5875                 1.1500                0.5750
------------------------------------------------------------------------------------------------------------------
         3.40                  3.6000                 2.7000                 1.2000                0.6000
------------------------------------------------------------------------------------------------------------------
         3.50                  3.7500                 2.8125                 1.2500                0.6250
------------------------------------------------------------------------------------------------------------------
         3.60                  3.9000                 2.9250                 1.3000                0.6500
------------------------------------------------------------------------------------------------------------------
         3.70                  4.0500                 3.0375                 1.3500                0.6750
------------------------------------------------------------------------------------------------------------------
         3.80                  4.2000                 3.1500                 1.4000                0.7000
------------------------------------------------------------------------------------------------------------------
         3.90                  4.3500                 3.2625                 1.4500                0.7250
------------------------------------------------------------------------------------------------------------------
         4.00                  4.5000                 3.3750                 1.5000                0.7500
------------------------------------------------------------------------------------------------------------------


(1) This table reflects CIC benefits for sales up to 4.00 times SVB's then book value (the "4.0x Sales"). For sales above this, the multiples (of total cash compensation) will be fixed at the multiples for 4.0x Sales. ** Executive Committee members are the CEO and such other persons determined by the CEO and Board. For purposes of this grid, "Executive Committee" members are not necessarily SVB's Reg O Officers.

14

EXHIBIT B.1

EMPLOYEE AGREEMENT AND RELEASE

I UNDERSTAND AND AGREE COMPLETELY TO THE TERMS SET FORTH IN THE FOREGOING.

Except as otherwise set forth in this Agreement, I hereby release, acquit and forever discharge the Company, its parents and subsidiaries, and their officers, directors, agents, servants, employees, shareholders, attorneys, successors, assigns and affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys fees, damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed (other than any claim for indemnification which I may have as a result of any third party action against me based on my employment with the Company), arising out of or in any way related to agreements, events, acts or conduct at any time prior to and including the effective date of this Agreement, including but not limited to:
all such claims and demands directly or indirectly arising out of or in any way connected with my employment with the Company or the termination of that employment, including but not limited to, claims of intentional and negligent infliction of emotional distress, any and all tort claims for personal injury, claims or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership interests in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of compensation; claims pursuant to any federal, state or local law, statute or cause of action including, but not limited to, the federal Civil Rights Act of 1964, as amended; the federal Americans with Disabilities Act of 1990; the California Fair Employment and Housing Act, as amended; tort law; contract law; wrongful discharge; discrimination; harassment; fraud; defamation; emotional distress; and breach of the implied covenant of good faith and fair dealing; provided, however, that nothing in this paragraph shall be construed in any way to release the Company from its obligation to indemnify me pursuant to any Indemnification Agreement between me and the Company which is currently in effect.

In giving this release, which includes claims which may be unknown to me at present, I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims I may have against the Company.

By:
[Employee Name]

Date: _________________________, 199__
[FOR PARTICIPANTS UNDER AGE 40]

15

EXHIBIT B.2

EMPLOYEE AGREEMENT AND RELEASE

I UNDERSTAND AND AGREE COMPLETELY TO THE TERMS SET FORTH IN THE FOREGOING

AGREEMENT.

I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims I may have against the Company.

Except as otherwise set forth in this Agreement, I hereby release, acquit and forever discharge the Company, its parents and subsidiaries, and their officers, directors, agents, servants, employees, shareholders, attorneys, successors, assigns and affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys fees, damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed (other than any claim for indemnification I may have as a result of any third party action against me based on my employment with the Company), arising out of or in any way related to agreements, events, acts or conduct at any time prior to and including the Effective Date of this Agreement, including but not limited to:
all such claims and demands directly or indirectly arising out of or in any way connected with my employment with the Company or the termination of that employment, including but not limited to, claims of intentional and negligent infliction of emotional distress, any and all tort claims for personal injury, claims or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership interests in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of compensation; claims pursuant to any federal, state or local law or cause of action including, but not limited to, the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination in Employment Act of 1967, as amended ("ADEA"); the federal Americans with Disabilities Act of 1990; the California Fair Employment and Housing Act, as amended; tort law; contract law; wrongful discharge; discrimination; fraud; defamation; emotional distress; and breach of the implied covenant of good faith and fair dealing; provided, however, that nothing in this paragraph shall be construed in any way to release the Company from its obligation to indemnify me pursuant to any Indemnification Agreement between me and the Company which is currently in effect.

I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under ADEA. I also acknowledge that the consideration given for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rights or claims that may arise after the Effective Date of this Agreement; (B) I have the right to consult with an attorney prior to executing this Agreement; (C) I have twenty-one (21) days to consider this Agreement (although I may choose to voluntarily execute this Agreement earlier); (D) I have seven (7) days following the execution of this Agreement by the parties to revoke the Agreement; and (E) this Agreement shall not be effective until the date upon which the revocation period has expired, which shall be the eighth day after this Agreement is executed by me, provided that the Company has also executed this Agreement by that date ("Effective Date").

By:
[Employee Name]

Date:

[FOR PARTICIPANTS WHO ARE AGE 40 AND OVER]

16

EXHIBIT C

ARBITRATION PROCEDURE

1. The parties agree that any dispute that arises in connection with the payment of benefits under this Agreement or the termination of this Agreement shall be resolved by binding arbitration in the manner described below.

2. A party intending to seek resolution of any dispute under the Agreement by arbitration shall provide a written demand for arbitration to the other party, which demand shall contain a brief statement of the issues to be resolved.

3. The arbitration shall be conducted in Santa Clara County, California, by a mutually acceptable retired judge from the panel of Judicial Arbitration and Mediation Services, Inc. or any entity performing the same type of services that succeeds to its business ("JAMS"). At the request of either party, arbitration proceedings will be conducted in the utmost secrecy and, in such case, all documents, testimony and records shall be received, heard and maintained by the arbitrator in secrecy under seal, available for inspection only by the parties to the arbitration, their respective attorneys, and their respective expert consultants or witnesses who shall agree, in advance and in writing, to receive all such information confidentially and to maintain such information in secrecy, and make no use of such information except for the purposes of the arbitration, unless compelled by legal process.

4. The arbitrator is required to disclose any circumstances that might preclude the arbitrator from rendering an objective and impartial determination. In the event the parties cannot mutually agree upon the selection of a JAMS arbitrator, the President of JAMS shall designate the arbitrator.

5. The party demanding arbitration shall promptly request that JAMS conduct a scheduling conference within fifteen (15) days of the date of that party's written demand for arbitration or on the first available date thereafter on the arbitrator's calendar. The arbitration hearing shall be held within thirty (30) days after the scheduling conference or on the first available date thereafter on the arbitrator's calendar. Nothing in this paragraph shall prevent a party from at any time seeking temporary equitable relief, from JAMS or any court of competent jurisdiction, to prevent irreparable harm pending the resolution of the arbitration.

6. Discovery shall be conducted as follows: (a) prior to the arbitration any party may make a written demand for lists of the witnesses to be called and the documents to be introduced at the hearing; (b) the lists must be served within fifteen days of the date of receipt of the demand, or one day prior to the arbitration, whichever is earlier; and (c) each party may take no more than two depositions (pursuant to the procedures set forth in the California Code of Civil Procedure) with a maximum of five hours of examination time per deposition, and no other form of pre-arbitration discovery shall be permitted.

7. It is the intent of the parties that the Federal Arbitration Act ("FAA") shall apply to the enforcement of this provision unless it is held inapplicable by a court with jurisdiction over the dispute, in which event the California Arbitration Act ("CAA") shall apply.

17

8. The arbitrator shall apply California law, including the California Evidence Code, and shall be able to decree any and all relief of an equitable nature, including but not limited to such relief as a temporary restraining order, a preliminary injunction, a permanent injunction, or replevin of Company property. The arbitrator shall also be able to award actual, general or consequential damages, but shall not award any other form of damage (e.g., punitive damages).

18

ARTICLE 9
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS RELATED NOTES AND MANAGEMENT'S DISCUSSION AND ANALYSIS CONTAINED IN THE REPORT ON FORM 10-Q FILED BY SILICON VALLEY BANCSHARES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998.
MULTIPLIER: 1,000


PERIOD TYPE 9 MOS
FISCAL YEAR END DEC 31 1998
PERIOD START JAN 01 1998
PERIOD END SEP 30 1998
CASH 107,953
INT BEARING DEPOSITS 220
FED FUNDS SOLD 711,000
TRADING ASSETS 0
INVESTMENTS HELD FOR SALE 940,893
INVESTMENTS CARRYING 0
INVESTMENTS MARKET 0
LOANS 1,438,231
ALLOWANCE 35,900
TOTAL ASSETS 3,216,182
DEPOSITS 2,943,870
SHORT TERM 0
LIABILITIES OTHER 23,602
LONG TERM 0
PREFERRED MANDATORY 0
PREFERRED 0
COMMON 86,936
OTHER SE 123,302
TOTAL LIABILITIES AND EQUITY 3,216,182
INTEREST LOAN 101,356
INTEREST INVEST 47,959
INTEREST OTHER 15,149
INTEREST TOTAL 164,464
INTEREST DEPOSIT 58,669
INTEREST EXPENSE 58,672
INTEREST INCOME NET 105,792
LOAN LOSSES 20,061
SECURITIES GAINS 4,626
EXPENSE OTHER 61,740
INCOME PRETAX 41,533
INCOME PRE EXTRAORDINARY 24,331
EXTRAORDINARY 0
CHANGES 0
NET INCOME 24,331
EPS PRIMARY 1.20
EPS DILUTED 1.16
YIELD ACTUAL 5.2
LOANS NON 23,229
LOANS PAST 244
LOANS TROUBLED 0
LOANS PROBLEM 6,575
ALLOWANCE OPEN 37,700
CHARGE OFFS 23,916
RECOVERIES 2,055
ALLOWANCE CLOSE 35,900
ALLOWANCE DOMESTIC 26,610
ALLOWANCE FOREIGN 0
ALLOWANCE UNALLOCATED 9,290