SVB Financial Group
SILICON VALLEY BANCSHARES (Form: 10-Q, Received: 05/10/2005 14:35:40)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

(Mark One)

 

ý         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2005

 

OR

 

o         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: 000-15637

 

SILICON VALLEY BANCSHARES

(Exact name of registrant as specified in its charter)

 

Delaware

 

91-1962278

(State or other jurisdiction of

 

(I.R.S. Employer Identification No.)

incorporation or organization)

 

 

 

 

 

3003 Tasman Drive, Santa Clara, California 95054 – 1191

 

http://www.svb.com/company/investor_fs.asp

(Address of principal executive offices including zip code)

 

(Registrant’s URL)

 

 

 

(408) 654-7400

Registrant’s telephone number, including area code:

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes  ý   No  o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)

 

Yes  ý   No  o

 

At April 30, 2005, 35,486,738 shares of the registrant’s common stock ($0.001 par value) were outstanding.

 

 



 

TABLE OF CONTENTS

 

PART I - FINANCIAL INFORMATION

 

 

 

 

ITEM 1.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3

 

 

 

 

INTERIM CONSOLIDATED BALANCE SHEETS

3

 

 

 

 

INTERIM CONSOLIDATED STATEMENTS OF INCOME

4

 

 

 

 

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

5

 

 

 

 

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

6

 

 

 

 

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

7

 

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

19

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

36

 

 

 

ITEM 4.

CONTROLS AND PROCEDURES

43

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

44

 

 

 

ITEM 2.

UNREGISTED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

44

 

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

45

 

 

 

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

45

 

 

 

ITEM 5.

OTHER INFORMATION

45

 

 

 

ITEM 6.

EXHIBITS

45

 

 

 

SIGNATURES

46

 

 

 

INDEX TO EXHIBITS

47

 

2



 

PART I - FINANCIAL INFORMATION

 

ITEM 1 - INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

SILICON VALLEY BANCSHARES AND SUBSIDIARIES

INTERIM CONSOLIDATED BALANCE SHEETS

 

 

 

March 31,

 

December 31,

 

(Dollars in thousands, except par value)

 

2005
(Unaudited)

 

2004

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Cash and due from banks

 

$

252,659

 

$

279,653

 

Federal funds sold and securities purchased under agreement to resell

 

144,048

 

166,295

 

Investment securities

 

2,188,182

 

2,258,207

 

Loans, net of unearned income

 

2,344,022

 

2,312,143

 

Allowance for loan and lease losses

 

(35,698

)

(37,613

)

Net loans

 

2,308,324

 

2,274,530

 

Premises and equipment, net of accumulated depreciation and amortization

 

16,476

 

14,951

 

Goodwill

 

35,639

 

35,639

 

Accrued interest receivable and other assets

 

102,308

 

124,325

 

Total assets

 

$

5,047,636

 

$

5,153,600

 

 

 

 

 

 

 

Liabilities, Minority Interest, and Stockholders’ Equity

 

 

 

 

 

Liabilities:

 

 

 

 

 

Deposits:

 

 

 

 

 

Noninterest-bearing demand

 

$

2,642,591

 

$

2,649,853

 

Negotiable order of withdrawal (NOW)

 

29,320

 

32,009

 

Money market

 

1,191,474

 

1,206,078

 

Time

 

292,890

 

331,574

 

Total deposits

 

4,156,275

 

4,219,514

 

Contingently convertible debt

 

146,975

 

146,740

 

Junior subordinated debentures

 

50,272

 

49,421

 

Other borrowings

 

11,915

 

9,820

 

Other liabilities

 

80,409

 

125,163

 

Total liabilities

 

4,445,846

 

4,550,658

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Minority interest in capital of consolidated affiliates

 

84,924

 

70,674

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

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

 

 

 

Common stock, $0.001 par value, 150,000,000 shares authorized; 35,406,732 and 35,970,095 shares outstanding at March 31, 2005 and December 31, 2004, respectively

 

35

 

36

 

Additional paid-in capital

 

20,079

 

44,886

 

Retained earnings

 

511,659

 

487,509

 

Unearned compensation

 

(3,995

)

(4,512

)

Accumulated other comprehensive income

 

(10,912

)

4,349

 

Total stockholders’ equity

 

516,866

 

532,268

 

Total liabilities, minority interest, and stockholders’ equity

 

$

5,047,636

 

$

5,153,600

 

 

See accompanying notes to interim unaudited consolidated financial statements.

 

3



 

SILICON VALLEY BANCSHARES AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

For the three months ended

 

(Dollars in thousands, except per share amounts)

 

March 31, 2005

 

March 31, 2004

 

 

 

 

 

 

 

Interest income:

 

 

 

 

 

Loans

 

$

48,029

 

$

36,632

 

Investment securities:

 

 

 

 

 

Taxable

 

21,736

 

14,023

 

Non-taxable

 

1,023

 

1,461

 

Federal funds sold and securities purchased under agreement to resell

 

2,197

 

1,444

 

Total interest income

 

72,985

 

53,560

 

Interest expense:

 

 

 

 

 

Deposits

 

2,262

 

2,014

 

Other borrowings

 

795

 

726

 

Total interest expense

 

3,057

 

2,740

 

Net interest income

 

69,928

 

50,820

 

(Recovery of)/provision for loan and lease losses

 

(3,843

)

736

 

Net interest income after (recovery of)/provision for loan and lease losses

 

73,771

 

50,084

 

 

 

 

 

 

 

Noninterest income:

 

 

 

 

 

Client investment fees

 

7,396

 

6,268

 

Corporate finance fees

 

4,748

 

4,087

 

Letter of credit and foreign exchange income

 

4,693

 

3,729

 

Deposit service charges

 

2,504

 

3,713

 

Income from client warrants

 

1,723

 

2,908

 

Investment gains

 

1,599

 

1,322

 

Other

 

3,512

 

2,859

 

Total noninterest income

 

26,175

 

24,886

 

 

 

 

 

 

 

Noninterest expense:

 

 

 

 

 

Compensation and benefits

 

40,154

 

34,103

 

Professional services

 

5,070

 

3,339

 

Net occupancy

 

4,580

 

4,523

 

Furniture and equipment

 

2,719

 

2,909

 

Business development and travel

 

2,090

 

1,991

 

Correspondent bank fees

 

1,221

 

1,281

 

Data processing services

 

1,013

 

1,085

 

Telephone

 

889

 

782

 

(Recovery of) provision for loan and loss contingency

 

(185

)

(719

)

Other

 

3,072

 

3,156

 

Total noninterest expense

 

60,623

 

52,450

 

 

 

 

 

 

 

Income before minority interest in net loss (income) of consolidated affiliates and income tax expense

 

39,323

 

22,520

 

Minority interest in net loss (income) of consolidated affiliates

 

616

 

(481

)

Income before income taxes expense

 

39,939

 

22,039

 

Income tax expense

 

15,789

 

8,029

 

Net income

 

$

24,150

 

$

14,010

 

 

 

 

 

 

 

Earnings per common share — basic

 

$

0.68

 

$

0.40

 

Earnings per common share — diluted

 

$

0.62

 

$

0.38

 

 

See accompanying notes to interim unaudited consolidated financial statements.

 

4



 

SILICON VALLEY BANCSHARES AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

For the three months ended

 

(Dollars in thousands)

 

March 31,
2005

 

March 31,
2004

 

 

 

 

 

 

 

Net income

 

$

24,150

 

$

14,010

 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

Cumulative translation gain:

 

 

 

 

 

Translation gain

 

422

 

 

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

 

 

 

 

 

Unrealized holding (losses) gains

 

(13,738

)

8,246

 

Reclassification adjustment for gains included in net income

 

(1,945

)

(2,484

)

Other comprehensive (loss) income, net of tax

 

(15,261

)

5,762

 

Comprehensive income

 

$

8,889

 

$

19,772

 

 

See accompanying notes to interim unaudited consolidated financial statements.

 

5



 

SILICON VALLEY BANCSHARES AND SUBSIDIARIES

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

For the three months ended

 

(Dollars in thousands)

 

March 31,
2005

 

March 31,
2004

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

24,150

 

$

14,010

 

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

 

 

 

 

 

(Recoveries of)/provision for loan and lease losses

 

(3,843

)

736

 

Income from client warrants

 

(1,723

)

(2,908

)

Net (gain) on sale of investment securities

 

(1,599

)

(1,322

)

Depreciation and amortization

 

2,047

 

1,959

 

Minority interest

 

(616

)

481

 

Amortization of deferred stock-based compensation

 

776

 

307

 

Changes in other assets and liabilities:

 

 

 

 

 

(Increase) in accrued interest receivable

 

(1,095

)

(949

)

Decrease (increase) in income tax receivable

 

5,568

 

(5,003

)

Decrease in deferred income tax

 

3,715

 

2,201

 

Increase (decrease) in other liabilities

 

5,820

 

(520

)

(Decrease) in accrued retention, warrant, incentive plans, and other compensation benefits payable

 

(29,771

)

(13,494

)

Other, net

 

7,353

 

7,414

 

Net cash provided by operating activities

 

10,782

 

2,912

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of investment securities

 

(2,136,179

)

(2,811,393

)

Proceeds from sales of investment securities

 

848,977

 

2,090,295

 

Proceeds from maturities and pay-downs of investment securities

 

1,334,085

 

600,446

 

Net (increase) in loans

 

(35,213

)

(7,900

)

Proceeds from recoveries of charged-off loans

 

5,959

 

2,838

 

Purchases of premises and equipment

 

(3,572

)

(1,276

)

Net cash provided by (used for) investing activities

 

14,057

 

(126,990

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Net (decrease) increase in deposits

 

(63,239

)

9,417

 

Increase in other borrowings, net

 

2,095

 

567

 

Capital contributions from minority interest participants

 

14,866

 

4,710

 

Proceeds from net issuance costs, from issuance of common stock including tax benefits of certain stock option exercises

 

4,832

 

4,807

 

Repurchase of common stock

 

(33,056

)

 

Net cash (used for) provided by financing activities

 

(74,502

)

19,501

 

Foreign exchange effect on cash and cash equivalents

 

422

 

 

Net (decrease) in cash and cash equivalents

 

(49,241

)

(104,577

)

Cash and cash equivalents at beginning of year

 

445,948

 

794,996

 

Cash and cash equivalents at end of period

 

$

396,707

 

$

690,419

 

Supplemental disclosures:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest paid

 

$

3,035

 

$

2,599

 

Income taxes paid

 

$

3,673

 

$

7,548

 

Noncash items during the period:

 

 

 

 

 

Decrease in deferred rent liability related to landlord non-cash incentives

 

$

174

 

$

 

 

See accompanying notes to interim unaudited consolidated financial statements.

 

6



 

SILICON VALLEY BANCSHARES AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

1.  Nature of Business

 

Silicon Valley Bancshares and its subsidiaries (collectively referred to as the Company) offer clients financial products and services through five lines of banking and financial services (see Note 9. Segment Reporting.) Silicon Valley Bancshares (Bancshares) is a bank holding company and a financial holding company whose principal subsidiary is Silicon Valley Bank (the Bank), a California-chartered bank, founded in 1983, and headquartered in Santa Clara, California. The Bank serves more than 10,000 clients across the country, through its 26 regional offices in the United States, and through two foreign subsidiaries located in London, England and Bangalore, India. The Bank has 12 offices throughout California and operates regional offices across the country, in Arizona, Colorado, Georgia, Illinois, Massachusetts, Minnesota, New York, North Carolina, Oregon, Pennsylvania, Texas, Virginia, and Washington. The Bank serves clients in all stages of maturity ranging from emerging-growth companies to established corporate companies in the technology and life science markets and the premium wine industry. The Company defines “emerging-growth” clients as companies in the start-up or early stages of their lifecycle; these companies tend to be privately held and backed by venture capital; they generally have few employees, are primarily engaged in research and development, have brought relatively few products or services to market, and have no or little revenue. By contrast, the Company defines “middle market” clients as companies that tend to be more mature; these companies may be publicly traded, and more established in the markets in which they participate. Additionally, merger, acquisition, private placement, and corporate partnering services are provided through the Company’s wholly-owned investment banking subsidiary, SVB Alliant, whose offices are in California and Massachusetts.

 

2.  Basis of Presentation

 

The accompanying unaudited interim consolidated financial statements contain all adjustments (of a normal and recurring nature) that are, in the opinion of management, necessary to fairly present the financial position, results of operations and cash flows of the Company in accordance with accounting principles generally accepted in the United States of America (GAAP). Such interim financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three months ended March 31, 2005, are not necessarily indicative of the results for any future periods. These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

 

The consolidated balance sheet at December 31, 2004 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying consolidated financial statements have been prepared on a consistent basis with the accounting policies described in Note 2 to the Consolidated Financial Statements that are presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

 

The preparation of consolidated financial statements in conformity with GAAP in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Prior to fourth quarter of 2004, the Company aggregated its allowance for loan and lease losses and its allowance for loan loss contingency and reflected the aggregate allowance in its allowance for loan and lease losses (ALLL) balance. Commencing in the fourth quarter of 2004, the Company reflected its allowance for loan and lease losses in its ALLL balance and its allowance for loan loss contingency in other liabilities. These reclassifications were also made to prior periods’ balance sheets to conform to current period’s presentations. Additionally, the Company reclassified expense related to the ALLL to provision for loan losses and expense related to changes in the allowance for loan loss contingency into noninterest expense for all periods presented. Such reclassifications had no effect on our results of operations or stockholders’ equity.

 

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 sheet include interest-bearing deposits in other financial institutions of $28.6 million and $15.9 million at March 31, 2005 and December 31, 2004, respectively.

 

Stock-Based Compensation

 

The Company has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB No. 25), and related interpretations, to account for its employee stock options rather than the alternative fair value accounting allowed by SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure.” APB No. 25 provides that the compensation expense relative to the Company’s employee stock options be measured based on the intrinsic value of the stock option. SFAS No. 123 as amended by SFAS No. 148 requires those companies that continue to follow APB No. 25 to provide pro forma disclosure of the impact of applying the fair value method of SFAS No. 123.

 

The Company accounts for stock issued to non-employees in accordance with the provisions of SFAS No. 123 and Financial Accounting Standards Board (FASB) Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation.”

 

7



 

The Company accounts for the cost of restricted stock and restricted stock units by amortizing the grant date fair value of such grants over their vesting period.

 

If compensation cost related to both the Company’s stock option awards to employees and directors and to the Employee Stock Purchase Plan had been determined under the fair value method prescribed under SFAS No. 123, the Company’s net income, basic earnings per share, and diluted earnings per share would have been the pro forma amounts shown below for the three months ended March 31, 2005 and 2004:

 

 

 

For the three months ended

 

 

 

March 31,

 

(Dollars in thousands, except per share amounts)

 

2005

 

2004

 

Net income, as reported

 

$

24,150

 

$

14,010

 

 

 

 

 

 

 

Less:  Total stock-based employee compensation expense determined under fair value based method, net of tax

 

(3,110

)

(4,148

)

Net income, pro forma

 

$

21,040

 

$

9,862

 

 

 

 

 

 

 

Earnings per common share – basic:

 

 

 

 

 

As reported

 

$

0.68

 

$

0.40

 

Pro forma

 

0.59

 

0.28

 

Earnings per diluted share – diluted:

 

 

 

 

 

As reported

 

$

0.62

 

$

0.38

 

Pro forma

 

0.55

 

0.28

 

 

Refer to the Company’s 2004 Annual Report on Form 10-K under “Part II. Item 8. Consolidated Financial Statements and Supplementary Data — Note 18 to the Consolidated Financial Statements — Employee Benefit Plans” for assumptions used in calculating the pro forma amounts above.

 

Recent Accounting Pronouncements

 

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” which is a revision of SFAS No. 123 and supersedes APB No. 25.  SFAS No. 123(R) requires the Company to measure the cost of employee services received in exchange for an award of equity instruments using a fair value method, and record such expense in the Company’s consolidated financial statements for interim or annual reporting periods beginning after June 15, 2005. On April 14, 2005 the U.S. Securities and Exchange Commission (the SEC) changed the effective date of SFAS No. 123(R) from the first interim or annual reporting period beginning after June 15, 2005 to the first annual reporting period beginning after June 15, 2005. The effect of this change was to defer the effective date of FAS 123(R) for the Company and all calendar year companies until fiscal 2006.

 

The adoption of SFAS No. 123(R) will require additional accounting related to the income tax effects and additional disclosure regarding the cash flow effects resulting from share-based payment arrangements. The adoption of SFAS No. 123(R) will have a material impact on the Company’s consolidated results of operations, financial position, and statement of cash flows as such expense will now be reported in its consolidated financial statements rather than on a pro forma basis in the notes to the consolidated financial statements. However, the Company expects that the pro forma expense calculated under SFAS No. 123 (above) does approximate the expense that will be recognized under SFAS No. 123(R).

 

8



 

3.  Earnings Per Share (EPS)

 

The following is a reconciliation of basic EPS to diluted EPS for the three months ended March 31, 2005 and 2004.

 

 

 

For the three months ended
March 31,

 

(Dollars and shares in thousands,

 

Net

 

Weighted Average

 

Per Share

 

except per share amounts)

 

Income

 

Shares

 

Amount

 

 

 

 

 

 

 

 

 

2005:

 

 

 

 

 

 

 

Basic EPS:

 

 

 

 

 

 

 

Income available to common stockholders

 

$

24,150

 

35,385

 

$

0.68

 

Effect of dilutive securities:

 

 

 

 

 

 

 

Stock options and restricted stock

 

 

3,405

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS:

 

 

 

 

 

 

 

Income available to common stockholders plus common stock equivalents

 

$

24,150

 

38,790

 

$

0.62

 

 

 

 

 

 

 

 

 

2004:

 

 

 

 

 

 

 

Basic EPS:

 

 

 

 

 

 

 

Income available to common stockholders

 

$

14,010

 

34,881

 

$

0.40

 

Effect of dilutive securities:

 

 

 

 

 

 

 

Stock options and restricted stock

 

 

1,841

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS:

 

 

 

 

 

 

 

Income available to common stockholders plus common stock equivalents

 

$

14,010

 

36,722

 

$

0.38

 

 

9



 

4.  Investment Securities

 

The detailed composition of the Company’s investment securities is presented as follows:

 

 

 

March 31,

 

December 31,

 

(Dollars in thousands)

 

2005

 

2004

 

 

 

 

 

 

 

Available-for-sale securities, at fair value

 

$

2,030,238

 

$

2,112,284

 

Marketable securities (investment company accounting)(1)

 

473

 

480

 

Non-marketable securities (investment company accounting):

 

 

 

 

 

Venture capital fund investments(2)

 

59,606

 

52,547

 

Other private equity investments(3)

 

18,743

 

15,720

 

Other investments(4)

 

15,418

 

13,635

 

Non-marketable securities (cost basis accounting):

 

 

 

 

 

Venture capital fund investments

 

26,093

 

25,400

 

Tax credit funds

 

13,473

 

14,070

 

Federal Home Loan Bank stock (5)

 

12,798

 

12,798

 

Federal Reserve Bank stock (5)

 

7,954

 

7,967

 

Other private equity investments

 

3,386

 

3,306

 

Total investment securities

 

$

2,188,182

 

$

2,258,207

 

 


(1)   Marketable equity securities (investment company accounting) included $0.5 million related to Silicon Valley BancVentures, LP, at March 31, 2005 and December 31, 2004, respectively. The Company has a controlling ownership interest of 10.7% in the fund.  Excluding the minority interest-owned portion of Silicon Valley BancVentures, LP, the Company has marketable equity securities (investment company accounting) of $0.1 million as of March 31, 2005 and December 31, 2004, respectively.

(2)   Non-marketable venture capital fund investments included $48.4 million and $45.3 million related to SVB Strategic Investors Fund, LP, at March 31, 2005, and December 31, 2004, respectively. The Company has a controlling ownership interest of 12.56% in the fund. It also included $11.2 million and $7.3 million related to SVB Strategic Investors Fund II, LP, at March 31, 2005 and December 31, 2004, respectively. The Company has a controlling interest of 9.47% in the fund.

(3)   Non-marketable other private equity investments included $18.7 million and $15.7 million related to Silicon Valley BancVentures, LP, at March 31, 2005, and December 31, 2004, respectively. The Company has a controlling ownership interest of 10.7% in the fund. Excluding the minority interest-owned portion of Silicon Valley BancVentures, LP, the Company has non-marketable other private equity investments of $2.0 million and $1.7 million as of March 31, 2005, and December 31, 2004, respectively.

(4)   Non-marketable other investments included $9.3 million and $9.0 million related to Partners For Growth, LP, at March 31, 2005 and December 31, 2004, respectively. The Company has a majority ownership interest of 53.2% in the fund. It also included $2.9 million and $3.0 million related to Gold Hill Venture Lending Partners 03, LLC and Gold Hill Venture Lending 03, LP, respectively, as of March 31, 2005. It also included $2.4 million and $2.3 million related to Gold Hill Venture Lending Partners 03, LLC and Gold Hill Venture Lending 03, LP, respectively, as of December 31, 2004. The Company has a majority interest of 90.65% in Gold Hill Venture Lending Partners 03, LLC.

(5)   Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) stock are restricted, as the Company is required to hold shares of FHLB and FRB stock under the Bank’s borrowing agreement.

 

10



 

The following tables present the total commitments, funded commitments, and carrying value of the Company’s venture capital and other private equity investments at March 31, 2005. The tables also present net investment gains (losses) for the three months ended March 31, 2005.

 

 

 

Consolidated as of March 31, 2005

 

 

 

Venture Capital Funds

 

Other Private Equity

 

 

 

(Dollars in thousands)

 

Wholly owned
Fund
Investments

 

Funds of Funds

 

Wholly owned
Equity
Investments

 

Co-Investment
Fund

 

Venture Debt
Funds

 

Total

 

Commitments by investors to consolidated funds

 

$

 

$

280,250

 

$

 

$

56,100

 

$

47,000

 

$

383,350

 

Commitments to investments

 

61,373

 

186,425

 

16,054

 

27,773

 

39,434

 

331,059

 

Commitments funded

 

46,884

 

78,994

 

16,054

 

27,773

 

19,705

 

189,410

 

Inception to date distributions

 

53,022

 

6,910

 

9,213

 

5,019

 

 

74,164

 

Current cost of investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable

 

 

 

 

514

 

7

 

521

 

Non-marketable

 

26,092

 

74,826

 

1,665

 

20,519

 

15,614

 

138,716

 

Total current cost of investments

 

26,092

 

74,826

 

1,665

 

21,033

 

15,621

 

139,237

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying value:

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable

 

1

 

 

 

473

 

7

 

481

 

Non-marketable

 

26,092

 

59,606

 

1,665

 

18,743

 

15,379

 

121,485

 

Total carrying value of investments

 

26,093

 

59,606

 

1,665

 

19,216

 

15,386

 

121,966

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-to-date net investment (losses) gains

 

1,205

 

387

 

(215

)

220

 

(51

)

1,546

 

 

 

 

The Company’s ownership interest as of March 31, 2005

 

 

 

Venture Capital Funds

 

Other Private Equity

 

 

 

(Dollars in thousands)

 

Wholly owned
Fund
Investments

 

Managed Funds
of Funds

 

Wholly owned
Equity
Investments

 

Managed Venture
Capital Fund

 

Venture Debt
Funds

 

Total

 

Commitments to investments

 

$

61,373

 

$

30,300

 

$

16,054

 

$

6,000

 

$

45,000

 

$

158,727

 

Current cost of investments

 

26,092

 

9,039

 

1,665

 

2,250

 

10,958

 

50,005

 

Carrying value

 

26,093

 

7,141

 

1,665

 

2,055

 

10,734

 

47,688

 

Year-to-date net investment (losses) gains

 

1,205

 

274

 

(215

)

24

 

(49

)

1,239

 

 

11



 

The following tables present the carrying value of the Company’s non-marketable venture capital and other private equity investments at December 31, 2004:

 

 

 

Consolidated as of December 31, 2004

 

 

 

Venture Capital Funds

 

Other Private Equity

 

 

 

(Dollars in thousands)

 

Wholly owned
Fund
Investments

 

Funds of Funds

 

Wholly owned
Equity
Investments

 

Co-Investment
Fund

 

Venture Debt
Funds

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments by investors to consolidated funds

 

$

 

$

225,800

 

$

 

$

56,100

 

$

47,000

 

$

328,900

 

Commitments to investments

 

61,003

 

165,925

 

16,008

 

24,945

 

37,431

 

305,312

 

Commitments funded

 

45,109

 

71,170

 

16,008

 

24,945

 

15,830

 

173,062

 

Inception to date distributions

 

50,733

 

6,007

 

9,212

 

5,009

 

 

70,961

 

Current cost of investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable

 

 

 

 

514

 

7

 

521

 

Non-marketable

 

25,400

 

67,455

 

1,834

 

19,164

 

15,854

 

129,707

 

Total current cost of investments

 

25,400

 

67,455

 

1,834

 

19,678

 

15,861

 

130,228

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying value:

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable

 

 

 

 

473

 

7

 

480

 

Non-marketable

 

25,400

 

52,547

 

1,834

 

15,720

 

13,635

 

109,136

 

Total carrying value of investments

 

25,400

 

52,547

 

1,834

 

16,193

 

13,642

 

109,616

 

 

 

 

The Company’s ownership interest as of December 31, 2004

 

 

 

Venture Capital Funds

 

Other Private Equity

 

 

 

(Dollars in thousands)

 

Wholly owned
Fund
Investments

 

Managed Fund
of Funds

 

Wholly owned
Equity
Investments

 

Managed Venture
Capital Fund

 

Venture Debt

Funds

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments to investments

 

$

61,003

 

$

28,500

 

$

16,008

 

$

6,000

 

$

45,000

 

$

156,511

 

Current cost of investments

 

25,400

 

7,728

 

1,834

 

2,105

 

10,468

 

47,535

 

Carrying value

 

25,400

 

6,067

 

1,834

 

1,732

 

9,220

 

44,254

 

 

                The following table presents the components of gains and losses on investment securities, excluding warrant gains, for the three months ended March 31, 2005 and 2004.

 

 

 

 

March 31,

 

March 31,

 

(Dollars in thousands)

 

2005

 

2004

 

 

 

 

 

 

 

Gross gains on investment securities:

 

 

 

 

 

Available-for-sale securities, at fair value

 

$

50

 

$

1,233

 

Non-marketable securities:

 

 

 

 

 

Venture capital fund investments

 

405

 

237

 

Other private equity investments

 

3,646

 

1,293

 

Total gross gains on investment securities

 

4,101

 

2,763

 

 

 

 

 

 

 

Gross losses on investment securities:

 

 

 

 

 

Non-marketable securities:

 

 

 

 

 

Venture capital fund investments

 

(2,102

)

(1,341

)

Other private equity investments

 

(400

)

(100

)

Total gross losses on investment securities

 

(2,502

)

(1,441

)

Net gains/(losses) on investment securities

 

$

1,599

 

$

1,322

 

 

Warrant gains totaled $1.7 million and $2.9 million for the three months ended March 31, 2005 and 2004, respectively.

 

5.  Loans and Allowance for Loan and Lease Losses

 

The detailed composition of loans, net of unearned income of $13.7 million and $14.4 million, for the periods ended March 31 2005, and December 31, 2004, respectively, is presented in the following table:

 

 

 

March 31,

 

December 31,

 

(Dollars in thousands)

 

2005

 

2004

 

 

 

 

 

 

 

Core commercial

 

$

1,415,483

 

$

1,378,133

 

Asset-based lending

 

330,799

 

327,796

 

Accounts receivable factoring

 

202,282

 

224,897

 

Total commercial loans

 

1,948,564

 

1,930,826

 

 

 

 

 

 

 

Vineyard development

 

89,887

 

80,960

 

Commercial real estate

 

22,152

 

18,562

 

Total real estate construction

 

112,039

 

99,522

 

 

 

 

 

 

 

Real estate term — consumer

 

27,671

 

27,124

 

Real estate term — commercial

 

19,604

 

16,720

 

Total real estate term

 

47,275

 

43,844

 

 

 

 

 

 

 

Consumer and other

 

236,144

 

237,951

 

Total loans, net of unearned income

 

$

2,344,022

 

$

2,312,143

 

 

12



 

                                                The activity in the allowance for loan and lease losses for the three months ended March 31, 2005 and 2004 was as follows:

 

 

 

Three months ended March 31,

 

(Dollars in thousands)

 

2005

 

2004

 

 

 

 

 

 

 

Beginning balance

 

$

37,613

 

$

49,862

 

(Recovery of)/provision for loan and lease losses

 

(3,843

)

736

 

Loans charged off

 

(4,031

)

(4,055

)

Recoveries

 

5,959

 

2,838

 

Ending balance

 

$

35,698

 

$

49,381

 

 

The aggregate recorded investment in loans for which impairment has been determined in accordance with SFAS No. 114 totaled $13.4 million and $14.0 million at March 31, 2005, and March 31, 2004, respectively. Allocations of the allowance for loan and lease losses specific to impaired loans totaled $3.8 million at March 31, 2005, and $4.7 million at March 31, 2004. Average impaired loans for the three months ended 2005 and 2004 totaled $13.8 million and $14.4 million, respectively.

 

6.  Borrowings

 

The following table represents the outstanding borrowings at March 31, 2005 and December 31, 2004:

 

 

 

 

 

March 31

 

December 31,

 

 

 

Maturity

 

2005

 

2004

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

0% Short-term borrowings(1)

 

September 28, 2005

 

$

9,192

 

$

9,120

 

Other borrowings

 

Overdraft

 

1,523

 

 

Revolving line of credit — venture debt fund

 

Due on Demand

 

1,200

 

700

 

Total other borrowings

 

 

 

$

11,915

 

$

9,820

 

 

 

 

 

 

 

 

 

Contingently convertible debt

 

June 15, 2008

 

$

146,975

 

$

146,740

 

Junior subordinated debentures

 

October 30, 2033

 

50,272

 

49,421

 

 


(1)                         Relates to the acquisition of SVB Alliant (Alliant Partners) in 2001 and were payable to the former owners, who have been employed by the Company.  These notes were discounted over their respective terms, based on market interest rates as of September 28, 2001.

 

Contingently Convertible Debt

 

On May 20, 2003, the Company issued $150.0 million of zero-coupon, convertible subordinated notes at face value, due June 15, 2008, to qualified institutional buyers pursuant to Rule 144A under the Securities Act and outside the United States to non-US persons pursuant to Regulation S under the Securities Act. The notes are convertible into the Company’s common stock at a conversion price of $33.6277 per share and are subordinated to all present and future senior debt of the Company. Holders of the notes may convert their notes only if: (i) the price of the Company’s common stock issuable upon conversion of a note reaches a specified threshold, (ii) specified corporate transactions occur, or (iii) the trading price for the notes falls below certain thresholds. At the initial conversion price, each $1,000 principal amount of notes will be convertible into approximately 29.7374 shares of the Company’s common stock. This represents 4,460,410 shares of the Company’s common stock. On August 14, 2003, the Company filed a shelf registration statement with the Securities and Exchange Commission, with respect to the resale of the notes and the common stock issuable upon the conversion of the notes. The fair value of the convertible subordinated notes at March 31, 2005, was $196.5 million, based on quoted market prices. The Company intends to settle the principal amount of $150.0 million (accreted value) in cash. Please refer to the 2004 Annual Report on Form 10-K, under “Part II. Item 8. Consolidated Financial Statements and Supplementary Data — Note 12 to the Consolidated Financial Statements — Borrowings.” The notes were convertible during the three months ended March 31, 2005, due to the share price of $44.82 on December 31, 2004, exceeding their conversion price. The Company is unaware of any note holders exercising their conversion option. The potential dilutive effect of this contingently convertible debt using the treasury stock method was 1,113,888 shares as of March 31, 2005, and was included in the calculation of earnings per share for the three months ended March 31, 2005. The Company included the dilutive effect in its EPS calculation using the treasury stock method, in accordance with the provisions of Emerging Issue Task Force (EITF) issue No. 90-19, “Convertible Bonds With Issuer Option to Settle in Cash Upon Conversion” and Statement of Financial Accounting Standard (SFAS) No. 128, “Earnings Per Share”. The exposure draft of SFAS No. 128R, if adopted in its proposed form, will require the Company to change its accounting for the calculation of EPS for its contingently convertible debt to the “if converted” method. If converted treatment of the contingently convertible debt would have decreased EPS by $0.05 per diluted common share, or 7.9% for the first quarter of 2005.

 

13



 

Concurrent with the issuance of the convertible notes, the Company entered into a convertible note hedge at a cost of $39.3 million and a warrant transaction providing proceeds of $17.4 million with respect to its common stock, with the objective of decreasing its exposure to potential economic dilution from conversion of the notes. The terms and conditions of the convertible note hedge are disclosed in the 2004 Annual Report on Form 10-K, under “Part II. Item 8. Consolidated Financial Statements and Supplementary Data — Note 15. Derivative Financial Instruments.” The cost of the convertible note hedge and the proceeds of the warrant transaction were included in stockholders’ equity in accordance with the guidance in EITF No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under the warrant agreement, the Counterparty may purchase up to approximately 4,460,410 shares of the Company’s common stock at $51.34 per share, upon the occurrence of conversion events defined above. The warrant transaction will expire on June 15, 2008.

 

7.0% Junior Subordinated Debentures

 

On October 30, 2003, the Company issued $51.5 million in 7.0% junior subordinated debentures to a special-purpose trust, SVB Capital II. Distributions to SVB Capital II are cumulative and are payable quarterly at a fixed rate of 7.0% per annum of the face value of the junior subordinated debentures. The junior subordinated debentures are mandatorily redeemable upon the maturity of the debentures on October 15, 2033, or to the extent that there are any earlier redemptions of any debentures by the Company. The Company may redeem the debentures prior to maturity in whole or in part, at its option, at any time on or after October 30, 2008. In addition, the Company may redeem the debentures, in whole but not in part, prior to October 30, 2008 upon the occurrence of certain events. Issuance costs of $2.2 million related to the junior subordinated debentures were deferred and are being amortized over the period until mandatory redemption of the debentures in October 2033. Also see Note 7. Derivative Financial Instruments below. The fair value of the 7.0% junior subordinated debentures was estimated to be $49.9 million as of March 31, 2005.

 

Available Lines of Credit

 

The Company currently has available $306.0 million in federal funds and lines of credit, which were unused at March 31, 2005. In addition to the available federal funds lines the Company has reverse repurchase agreement lines available with multiple securities dealers. Reverse repurchase lines allow the Company to finance short term borrowings using various fixed income securities as collateral. At March 31, 2005, the Company had not borrowed against any of its reverse repurchase lines.

 

7.  Derivative Financial Instruments

 

Derivative instruments that the Company uses as a part of its interest rate risk management may include interest rate swaps, caps and floors, and forward contracts. On October 30, 2003, the Company entered into an interest rate swap agreement with a notional amount of $50.0 million. This agreement hedges against the risk of changes in fair values associated with the majority of the Company’s 7.0% fixed rate, junior subordinated debentures. For information on the Company’s junior subordinated debentures, see Note 6. Borrowings.

 

The terms of this fair value hedge agreement provide for a swap of the Company’s 7.0% fixed rate payment for a variable rate based on London Inter-Bank Offer Rate (LIBOR) plus a spread. Because the swap meets the criteria for the short-cut treatment, the benefit or expense is recorded in the period incurred. This derivative agreement provided income of $0.4 million in the three months ended March 31, 2005. The swap agreement mirrors the terms of the junior subordinated debentures and therefore is callable by the counterparty anytime after October 30, 2008. The Company assumes no ineffectiveness as the swap agreement meets the short-cut method requirements under SFAS No. 133 for fair value hedges of debt instruments. As a result, changes in the fair value of the swap are offset by changes in the fair value of the junior subordinated debentures, and no net gain or loss is recognized in earnings. Changes in the fair value of the derivative agreement and the junior subordinated debentures are primarily dependent on changes in market interest rates. The derivative instrument had a fair value of $0.8 million, which was recorded in other assets at March 31, 2005.

 

On May 15, 2003, the Company entered into a convertible note hedge agreement (purchased call option) with a Counterparty with respect to its common stock, to limit its exposure to potential economic dilution from conversion of the Company’s $150.0 million principal amount of zero coupon convertible notes. For information on the Company’s $150.0 million principal amount of zero coupon convertible notes, see Note 6. Borrowings. Upon the occurrence of conversion events, the Company has the right to purchase up to approximately 4,460,410 of its common stock from the Counterparty at a price of $33.6277 per common share. The convertible note hedge agreement will expire on June 15, 2008. The Company has the option to settle any amounts due under the convertible hedge either in cash or net shares of its common stock. The cost of the convertible note hedge is included in stockholders’ equity in accordance with the guidance in EITF No. 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”.

 

For the Company’s foreign exchange contracts and foreign currency option contracts, see “Part II. Item 8. Consolidated Financial Statements and Supplementary Data — Note 2. to the Consolidated Financial Statements — Summary of Significant Accounting Policies and Note 20. Off-Balance Sheet Arrangements, Guarantees, and Other Commitments” in the Company’s 2004 Annual Report on Form 10-K.

 

14



 

8.  Common Stock Repurchase

 

$75.0 million share repurchase program authorized by the Company’s board of directors, effective January 27, 2005

 

On January 27, 2005, the Company announced that its board of directors authorized the repurchase of up to an additional $75.0 million of common stock under the Company’s stock repurchase program, in conjunction with the $160.0 million originally approved in May 2003. The additional $75.0 million of shares may be repurchased at any time, at the Company’s discretion, before June 30, 2006, in the open market, through block trades or otherwise, pursuant to applicable securities laws. Depending on market conditions, availability of funds, and other relevant factors, the repurchase of the additional shares may be commenced or suspended at any time prior to June 30, 2006, without any prior notice.

 

The Company repurchased 767,500 shares of its common stock for $33.9 million in the first quarter of 2005 under the May 2003 stock repurchase program. During the first quarter, the Company put into effect a 10b5-1 plan which allows the Company to automatically repurchase a predetermined number of shares per day at the market price. Since May 2003 when the program was approved by the board of directors, the Company has repurchased 5.6 million shares totaling $159.8 million as of March 31, 2005. The approximate dollar value of shares that may still be repurchased under this program is $75.2 million.

 

Included in the common stock repurchase activity in the first quarter was a block transaction of 400,000 shares of the Company’s common stock which was repurchased on March 2, 2005 from one of its principal stockholders, H.A. Schupf & Co., LLC. The shares were repurchased at a price of $44.20 per share for an aggregate price of $17.7 million, which reflected a discount from the current asking price, as quoted on the Nasdaq National Market, at the time the transaction was entered into.

 

9.  Segment Reporting

 

In accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” the Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing financial performance as the source of the Company’s reportable segments.

 

The Company is organized into five lines of banking and financial services for management reporting:  Commercial Banking, SVB Capital, SVB Alliant, Global Financial Services, and Private Client Services and Other. These operating segments are strategic units that offer different services to different clients. The segments are managed separately because they appeal to different markets and, accordingly, require different strategies. The results of operating segments are based on the Company’s internal profitability reporting process. This process assigns each client relationship in its entirety, to a primary operating segment. The process assigns income and expenses to the operating segments according to the customer’s primary relationship designation. Additionally, working capital and its associated costs are allocated to the operating segments on an economic basis, treating each operating segment as if it were an independent entity. Unlike financial reporting, which benefits from the comprehensive structure provided by GAAP, the internal profitability reporting process is highly subjective, as there is no comprehensive, authoritative guidance for management reporting. The management reporting process measures the performance of operating segments based on the Company’s internal operating structure and is not necessarily comparable with similar information for other financial services companies. Changes in the management structure and/or the allocation process have resulted, and may in the future result in, changes in the Company’s allocation methodology as this process is under constant refinement. In the event of such changes, results for prior periods have been, and may be, restated for comparability. Changes in an individual client’s primary relationship designation have resulted, and may in the future result, in certain client’s inclusion in different segments in different periods.

 

As of March 31, 2005, based on the quantitative threshold for determining reportable segments as required by SFAS No. 131, the Company’s reportable segments are: Commercial Banking and SVB Capital.  SVB Alliant, Private Client Services and Global Financial Services do not meet the separate reporting thresholds as defined by SFAS No. 131 and as such, have been aggregated in a column labeled Other Business Services for segment reporting purposes.  For further information, please see our 2004 Annual Report on Form 10-K under “Part II. Item 8. Consolidated Financial Statements and Supplementary Data - Note 24. Segment Reporting.”

 

Commercial Banking provides solutions to the needs of the Company’s commercial clients in the technology, life science, and premium wine industry niches, through the Company’s lending, cash and deposit management, and global banking and trade products and services.

 

SVB Capital focuses on the business needs of the Company’s venture capital and private equity clients while establishing and maintaining relationships with those firms domestically and internationally. Through this segment, Silicon Valley Bank provides banking services and financial solutions, including traditional deposit and checking accounts, loans, letters of credit, and cash management services.

 

The Other Business Services segment is principally comprised of Private Client Services, SVB Alliant, and Global Financial Services and other business service units that are not part of the Commercial Bank or SVB Capital segments. The Private Client Services group provides a wide range of credit services to high-net-worth individuals using both long-term secured and short-term unsecured lines of credit. Those products and services include home equity lines of credit, secured lines of credit, restricted stock

 

15



 

purchase loans, airplane loans, and capital call lines of credit. SVB Alliant provides investment banking products and services including, merger and acquisition services, strategic alliances services, and specialized financial studies such as valuations and fairness opinions. Global Financial Services serves the needs of the Company’s domestic clients with global banking products, including foreign exchange and global finance and access to SVB’s international banking network for in-country services abroad. Global Financial Services also supports venture capital and commercial banking clients with business services through subsidiaries in India and the United Kingdom.

 

The other business services units provide various products and services. The Other Business Services segment also reflects those adjustments necessary to reconcile the results of operating segments based on the Company’s internal profitability reporting process to the Consolidated Financial Statements prepared in conformity with GAAP.

 

The Company’s primary source of revenue is from net interest income. Accordingly, the Company’s segments are reported using net interest income. The Company also evaluates performance based on noninterest income and noninterest expense, which are presented as components of segment operating profit or loss. The Company does not allocate income taxes to its segments. Additionally, the Company’s management reporting model is predicated on average asset balances; therefore it is not possible to provide period-end asset balances for segment reporting purposes.

 

16



 

The Company’s segment information at and for the three months ended March 31, 2005 and 2004 are as follows:

 

 

 

Commercial
Banking

 

SVB
Capital

 

Other Business
Services

 

Total

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

First quarter of 2005

 

 

 

 

 

 

 

 

 

Net interest income

 

$

50,955

 

$

4,096

 

$

14,877

 

$

69,928

 

(Recovery of)/provision for loan and lease losses(1)

 

(3,413

)

 

(430

)

(3,843

)

Noninterest income (2)

 

18,646

 

3,118

 

4,411

 

26,175

 

Noninterest expense (3)

 

42,587

 

4,556

 

13,480

 

60,623

 

Minority interest in net (income) loss of consolidated affiliates

 

 

 

616

 

616

 

Income (loss) before income taxes

 

$

30,427

 

$

2,658

 

$

6,854

 

$

39,939

 

 

 

 

 

 

 

 

 

 

 

Total average loans

 

$

1,852,900

 

$

82,245

 

$

241,785

 

$

2,176,930

 

Total average assets

 

1,875,453

 

207,115

 

3,042,079

 

5,124,647

 

Total average deposits

 

3,443,374

 

601,928

 

152,062

 

4,197,364

 

Goodwill at March 31, 2005

 

 

 

35,639

 

35,639

 

 

 

 

 

 

 

 

 

 

 

First quarter of 2004

 

 

 

 

 

 

 

 

 

Net interest income

 

$

38,046

 

$

2,434

 

$

10,340

 

$

50,820

 

(Recovery of)/provision for loan and lease losses(1)

 

1,218

 

4

 

(486

)

736

 

Noninterest income (2)

 

18,574

 

847

 

5,465

 

24,886

 

Noninterest expense(3)

 

36,627

 

3,720

 

12,103

 

52,450

 

Minority interest in net (income) losses of consolidated affiliates

 

 

 

(481

)

(481

)

Income (loss) before income taxes

 

$

18,775

 

$

(443

)

$

3,707

 

$

22,039

 

 

 

 

 

 

 

 

 

 

 

Total average loans

 

$

1,519,373

 

$

63,725

 

$

223,994

 

$

1,807,092

 

Total average assets

 

1,514,187

 

144,167

 

2,777,570

 

4,435,924

 

Total average deposits

 

3,003,583

 

478,904

 

137,702

 

3,620,189

 

Goodwill at March 31, 2004

 

 

 

37,549

 

37,549

 

 


(1) For segment reporting purposes, the Company reports net charge-offs as provision for loan and lease losses. Thus, the Other Business Services segment includes $(2.1) million and $(0.5) million for the three months ended March 31, 2005 and 2004, respectively, which represent the difference between net charge-offs and the provision for loan and lease losses.

(2) Noninterest income presented in the SVB Capital segment included warrant income of $1.7 million and $2.9 million, for the three months ended March 31, 2005 and 2004, respectively.

(3) Commercial Banking segment included direct depreciation and amortization of $0.4 million and $0.3 million for the three months ended March 31, 2005 and 2004, respectively. Due to the complexity of the Company’s cost allocation model, it is not feasible to determine the exact amount of the remaining depreciation and amortization expense allocated to the various business segments totaling approximately $1.7 million for both three months ended March 31, 2005 and 2004.

 

10.   Obligations Under Guarantees

 

The Company provides guarantees related to financial and performance standby letters of credit issued to its clients to enhance their credit standings and enable them to complete a wide variety of business transactions.  Financial standby letters of credit are conditional commitments issued by the Company to guarantee the payment by a client to a third party (beneficiary). Financial standby letters of credit are primarily used to support many types of domestic and international payments. Performance standby letters of credit are issued to guarantee the performance of a client to a third party when certain specified future events have occurred. Performance standby letters of credit are primarily used to support performance instruments such as bid bonds, performance bonds, lease obligations, repayment of loans, and past due notices. These standby letters of credit have fixed expiration dates and generally require a fee paid by a client at the time the Company issues the commitment. Fees generated from these standby letters of credit are recognized in noninterest income over the commitment period.

 

The credit risk involved in issuing letters of credit is essentially the same as that involved with extending loan commitments to clients, and accordingly, the Company uses a credit evaluation process and collateral requirements similar to those for loan commitments. The Company’s standby letters of credit are often cash-secured by its clients. The actual liquidity needs or the credit risk that the Company has experienced historically have been lower than the contractual amount of letters of credit issued because a significant portion of these conditional commitments expire without being drawn upon.

 

17



 

The table below summarizes the Company’s standby letter of credits at March 31, 2005. The maximum potential amount of future payments represents the amount that could be lost under the standby letters of credit if there were a total default by the guaranteed parties, without consideration of possible recoveries under recourse provisions or from the collateral held or pledged.

 

(Dollars in thousands as of

 

Expires within one

 

Expires after

 

Total amount

 

Maximum amount

 

March 31, 2005)

 

year or less

 

one year

 

outstanding

 

of future payments

 

Financial standby

 

$

531,846

 

$

49,783

 

$

581,629

 

$

581,629

 

Performance standby

 

8,476

 

5,311

 

13,787

 

13,787

 

Total

 

$

540,322

 

$

55,094

 

$

595,416

 

$

595,416

 

 

At March 31, 2005, the carrying amount of the liabilities related to financial and performance standby letters of credit was approximately $3.5 million. At March 31, 2005, cash and investment securities collateral available to us to reimburse losses under financial and performance standby letters of credits was $245.2 million.

 

In addition to standby letter of credit guarantees, the Company has issued additional guarantees as off-balance sheet arrangement. As of March 31, 2005, those guarantees include the following:

 

*    

The Bank has guaranteed credit cards issued to the Company’s clients by an unaffiliated financial institution. As of March 31, 2005, the combined credit limits on those accounts are $46.8 million.

 

 

*    

The Company may be required to make contingent payments to the former owners of Woodside Asset Management based on their future revenue growth. During 2004, the Company paid one earn-out payment of $338,000 to the former owners of Woodside Asset Management. As of March 31, 2005, under the acquisition agreement, the maximum future gross earn-out payments to Woodside Asset Management’s former owners are $1.6 million.

 

11.   Legal Matters

 

On May 24, 2001, Gateway Communications, Inc. (Gateway) filed a lawsuit in the United States Bankruptcy Court for the Southern District of Ohio (Western Division) naming the Bank as a defendant.  Gateway (the debtor in the bankruptcy case) alleges that the Bank’s actions in connection with a loan resulted in Gateway’s bankruptcy, and seeks $20,000,000 in compensatory damages, punitive damages, interest and attorneys’ fees. On June 24, 2003, the Court dismissed four of the five counts in the complaint, including the claim for punitive damages, leaving one breach of contract claim. The Company believes that the sole remaining claim has no merit and intends to defend the lawsuit vigorously.  The action is scheduled for trial in December 2005.

 

The Company is unable to predict at this time the final outcome of the above matter and the ultimate effect, if any, on the Company’s liquidity, consolidated financial position or results of operations.

 

Additionally, from time to time, the Company is subject to other legal claims and proceedings that are in the normal course of the Company’s business. While the outcome of these matters is currently not determinable, based on information available to the Company, its review of such claims to date and consultation with outside counsel, the Company does not currently expect that the ultimate costs to resolve these matters, if any, will have a material adverse effect on the Company’s liquidity, consolidated financial position or results of operations.

 

12.   Subsequent Event

 

Repurchases under the Company’s stock repurchase program

 

From April 1, 2005 through April 30, 2005, the Company repurchased 0.2 million shares of its common stock totaling $7.4 million under the stock repurchase program. Since May 2003 when the program was approved by the board of directors, the Company has repurchased 5.8 million shares totaling $167.1 million as of April 30, 2005. The approximate dollar value of shares that may still be repurchased under this program is $67.9 million.

 

18



 

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

 

Management’s discussion and analysis contains forward-looking statements. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors discussed in “Item 3. Quantitative and Qualitative Disclosures about Market Risk—Factors That May Affect Future Results.”

 

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our interim unaudited consolidated financial statements and notes as presented in Part I - Item 1 of this report and in conjunction with our 2004 Annual Report on Form 10-K as filed with the Securities and Exchange Commission (SEC). Certain reclassifications have been made to prior years’ results to conform to the current period’s presentations. Such reclassifications had no effect on our results of operations or stockholders’ equity.

 

Overview of Company Operations

 

Silicon Valley Bancshares is a bank holding company and a financial holding company that was incorporated in the state of Delaware in March 1999. Our principal subsidiary, Silicon Valley Bank, is a California state-chartered bank and a member of the Federal Reserve System. Silicon Valley Bank’s deposits are insured by the Federal Deposit Insurance Corporation. Our corporate headquarters is located at 3003 Tasman Drive, Santa Clara, California 95054, and our telephone number is 408.654.7400. When we refer to “Silicon Valley Bancshares,” or “we” or use similar words, we intend to include Silicon Valley Bancshares and all of its subsidiaries collectively, including Silicon Valley Bank. When we refer to “Bancshares,” we are referring only to the parent company, Silicon Valley Bancshares.

 

For over 20 years, we have been dedicated to helping entrepreneurs succeed, specifically focusing on industries where we have deep knowledge and relationships. Our focus is on the technology, life science, private equity, and premium wine industries. We continue to diversify our products and services to support our clients throughout their life cycles, regardless of their age or size. We offer a range of financial services that generate three distinct sources of income.

 

In part, our income is generated from interest rate differentials. The difference between the interest rates received on interest-earning assets, such as loans extended to clients and securities held in our investment portfolio, and the interest rates paid by us on interest-bearing liabilities, such as deposits and other borrowings, accounts for the major portion of our earnings. Our deposits are largely obtained from commercial clients within our technology, life science, private equity, and premium wine industry sectors, and, to a lesser extent, from individuals served by our Private Client Services group. We do not obtain deposits from conventional retail sources and have no brokered deposits. As part of negotiated credit facilities and certain other services, we frequently obtain rights to acquire stock in the form of warrants in certain client companies.

 

Fee-based services also generate income for our business. We market our full range of financial services to all of our commercial and private equity firm clients. In addition to commercial banking and private client services, we offer fee-based merger and acquisition services, private placements, and investment and advisory services. Our ability to integrate and cross-sell our diverse financial services to our clients is a strength of our business model.

 

In addition, we seek to obtain returns through investments in private equity and venture capital fund investments. We manage three limited partnerships: a venture capital fund that invests directly in privately held companies and two funds that invest in other venture capital funds.

 

Business Overview

 

Silicon Valley Bancshares is organized into groups, which manage the diverse financial services we offer:

 

Commercial Banking

 

We provide solutions to the needs of our commercial clients in the technology, life science, private equity and premium wine industries through our lending, deposit account and cash management, and global banking and trade products and services.

 

Through our lending products and services, we extend loans and other credit facilities to our commercial clients, most often secured by the assets of our clients. Lending products and services include traditional term loans, equipment loans, revolving lines of credit, accounts-receivable based lines of credit, asset-based loans, real estate loans, vineyard development loans, and financing of affordable housing projects. We often obtain warrants to purchase an equity position in a client company’s stock in consideration for making loans, or for providing other services.

 

19



 

Our deposit account and cash management products and services provide commercial clients with short and long-term cash management solutions. Deposit account products and services include traditional deposit and checking accounts, certificates of deposit, and money market accounts. In connection with deposit accounts, we also provide lockbox and merchant services that facilitate quicker depositing of checks and other payments to clients’ accounts. Cash management products and services include wire transfer and Automated Clearing House (ACH) payment services to enable clients to transfer funds quickly from their deposit accounts. Additionally, the cash management services unit provides collection services, disbursement services, electronic funds transfers, and online banking through SVBeConnect.

 

Our global banking and trade products and services facilitate our clients’ global finance and business needs. These products and services include foreign exchange services that allow commercial clients to manage their foreign currency risks through the purchase and sale of currencies on the global inter-bank market. To facilitate our clients’ international trade, we offer a variety of loans and credit facilities guaranteed by the Export-Import Bank of the United States. We also offer letters of credit, including export, import, and standby letters of credit, to enable clients to ship and receive goods globally.

 

The Commercial Banking group also provides investment services to our clients through our broker-dealer subsidiary, SVB Securities.  SVB Securities is registered with the National Association of Securities Dealers, Inc. (NASD). These services, which include money market mutual funds, fixed income securities and repurchase agreements enable our clients to better manage their assets.  We also offer investment advisory services through SVB Asset Management, one of our registered investment advisor subsidiaries. SVB Asset Management specializes in outsourced treasury management, customized cash portfolio management and reporting and monitoring for corporations.

 

SVB Capital

 

SVB Capital focuses on the business needs of our venture capital and private equity clients, establishing and maintaining relationships with those firms domestically and internationally. Through this segment, we provide banking services and financial solutions, including traditional deposit and checking accounts, loans, letters of credit, and cash management services.

 

SVB Capital also makes investments in venture capital and other private equity firms and in companies in the niches we serve. The segment also manages three venture funds that are consolidated into our financial statements: SVB Strategic Investors Fund, LP and SVB Strategic Investors Fund II, LP, which are funds of funds that invest in other venture funds, and Silicon Valley BancVentures, LP, a direct equity venture fund that invests in privately held technology and life-science companies. This segment also includes 2004 investments in Gold Hill Venture Lending Partners 03, LP and its parallel funds (collectively known as Gold Hill Venture Lending Partners 03, LP), which provide secured debt to emerging growth clients in their earliest stages, and Partners for Growth, LP, a fund that provides secured debt to higher risk, emerging growth clients in their later stages. We define “emerging-growth” clients as companies in the start-up or early stages of their lifecycle. These companies tend to be privately held and backed by venture capital; they generally have few employees, have brought relatively few products or services to market, and have no or little revenue. By contrast, “middle market companies” tend to be more mature; they may be publicly traded and more established in the markets in which they participate, although not necessarily the leading players in the largest industries.

 

SVB Capital also offers services, through the Special Equities Group, to assist private equity firms, and the partners of such firms, with liquidating securities following initial public offerings and mergers and acquisitions, including in-kind stock transactions, restricted stock sales, block trading, and special situations trading such as liquidation of foreign securities and Private Investment in Public Equity (PIPE) positions.  The Special Equities Group is a division of SVB Securities, a broker-dealer registered with the NASD.

 

Other Business Services

 

The Other Business Services segment is principally comprised of SVB Alliant, Global Financial Services and Private Client Services, and other business service units that are not part of the Commercial Bank or SVB Capital segments. SVB Alliant, Global Financial Services and Private Client Services do not meet the separate reporting thresholds as defined by SFAS No. 131 and as such, have been aggregated as Other Business Services for segment reporting purposes.

 

SVB Alliant

 

Through SVB Alliant, our investment banking subsidiary, we provide merger and acquisition advisory services (M&A), strategic alliance services, and specialized financial studies such as valuations and fairness opinions. In October 2003, we enhanced our investment banking product set by launching a Private Capital Group that provides advisory services for the private placement of securities. SVB Alliant is a broker-dealer registered with the NASD.

 

Global Financial Services

 

Global Financial Services serves the needs of the Company’s domestic clients with global banking products, including foreign exchange and global finance and access to SVB’s international banking network for in-country services abroad. Global Financial Services also supports venture capital and commercial banking clients with business services through subsidiaries in India and the United Kingdom.

 

20



 

Private Client Services and Other

 

Our Private Client Services and Other group is principally comprised of our Private Client Services group and other business services units. Private Client Services provides a wide range of credit services to high-net-worth individuals using both long-term secured and short-term unsecured lines of credit. Those products and services include home equity lines of credit, secured lines of credit, restricted stock purchase loans, airplane loans, and capital call lines of credit. We also help our clients meet their cash management needs by providing deposit account products and services, including checking accounts, deposit accounts, money market accounts, and certificates of deposit. Through our subsidiary, Woodside Asset Management, Inc., we provide individual clients with personal investment advisory services, assisting clients in establishing and implementing investment strategies to meet their individual needs and goals. As a result of the Private Client Services group’s recent decision to focus on its core banking and credit products, we are exploring strategic alternatives in relation to Woodside Asset Management, including a possible sale to a third party.

 

Critical Accounting Policies and Estimates

 

The accompanying management’s discussion and analysis of results of operations and financial condition are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. Management evaluates estimates on an ongoing basis. Management bases its estimates on historical experiences and various other factors and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

 

A summary of significant accounting policies and a description of accounting policies that are considered critical are described in Note 2 to the Consolidated Financial Statements and in the Critical Accounting Policies section in our Annual Report on Form 10-K for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on March 16, 2005.

 

Recent Accounting Pronouncements

 

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” which is a revision of SFAS No. 123 and supersedes APB No. 25.  SFAS No. 123(R) requires us to measure the cost of employee services received in exchange for an award of equity instruments using a fair value method, and record such expense in our consolidated financial statements for interim or annual reporting periods beginning after June 15, 2005. On April 14, 2005 the SEC changed the effective date of SFAS No. 123(R) from the first interim or annual reporting period beginning after June 15, 2005 to the first annual reporting period beginning after June 15, 2005. The effect of this change was to defer the effective date of FAS 123(R) for us and all calendar year companies until fiscal 2006.

 

The adoption of SFAS No. 123(R) will require additional accounting related to the income tax effects and additional disclosure regarding the cash flow effects resulting from share-based payment arrangements. The adoption of SFAS No. 123(R) will have a material impact on our consolidated results of operations, financial position, and statement of cash flows as such expense will now be reported in our consolidated financial statements rather than on a pro forma basis in the notes to the consolidated financial statements. However, we expect that the pro forma expense calculated under SFAS No. 123 does approximate the expense that will be recognized under SFAS No. 123(R).

 

21



 

Results of Operations

 

Earnings Summary

 

We reported net income of $24.2 million, or $0.62 per diluted common share, for the three months ended March 31, 2005. This was $10.2 million, or 63.2%, higher than net income of $14.0 million, or $0.38 per diluted common share, for the three months ended March 31, 2004.

 

Dilutive Effect of Contingently Convertible Debt on our Diluted Earnings per Share Calculation

 

We included the dilutive effect of the $150.0 million zero-coupon, convertible subordinated notes due June 15, 2008 in our fully diluted earnings per share (EPS) calculation using the treasury stock method, in accordance with the provisions of Emerging Issue Task Force (EITF) issue No. 90-19, “Convertible Bonds With Issuer Option to Settle in Cash Upon Conversion” and Statement of Financial Accounting Standard (SFAS) No. 128, “Earnings Per Share”. The exposure draft of SFAS No. 128R, if adopted in its proposed form, will require us to change our accounting for the calculation of EPS on our contingently convertible debt to the if converted method. If converted treatment of the contingently convertible debt would have decreased EPS by $0.05 per diluted common share, or 7.9% for the three months ended March 31, 2005, respectively.

 

Quarter ended March 31, 2005 Compared to Quarter ended March 31, 2004

 

Consolidated net income increased by $10.2 million between quarter ended March 31, 2005 and quarter ended March 31, 2004.

 

                  Net interest income increased by $19.1 million due to an increase in interest-earning assets, particularly commercial loans and fixed income securities, and due to an improvement in yields generated from these assets.

 

                  An increase in noninterest expense of $8.2 million was largely attributable to higher compensation expense of $6.1 million. Additionally, higher professional services expense of $1.7 million was primarily due to costs associated with commitment of resources to document, enhance and audit internal controls to accomplish compliance with the Sarbanes-Oxley Act of 2002.

 

The major components and changes of net income are summarized in the following table:

 

 

 

For the three months

 

 

 

 

 

ended March 31,

 

%

 

(Dollars in thousands)

 

2005

 

2004

 

Change

 

 

 

 

 

 

 

 

 

Net interest income

 

$

69,928

 

$

50,820

 

37.6

%

(Recovery of)/provision for loan and lease losses

 

(3,843

)

736

 

622.1

 

Noninterest income

 

26,175

 

24,886

 

5.2

 

Noninterest expense

 

60,623

 

52,450

 

15.6

 

Minority interest in net losses (income) of consolidated affiliates

 

616

 

(481

)

228.1

 

Income before income taxes

 

39,939

 

22,039

 

81.2

 

Income tax expense

 

15,789

 

8,029

 

96.6

 

Net income

 

$

24,150

 

$

14,010

 

72.4

 

Return on average assets(1)

 

1.91

%

1.27

%

 

 

Return on average stockholders’ equity(1)

 

18.42

 

12.15

 

 

 

Average stockholders’ equity to average assets

 

10.38

 

10.46

 

 

 

 


(1)           Quarterly ratios represent annualized net income divided by quarterly average assets/equity.

 

Net Interest Income and Margin

 

Net interest income is defined as the difference between interest earned primarily on loans, investment securities, federal funds sold and securities purchased under agreement to resell, and interest paid on funding sources, primarily deposits. Net interest income is our principal source of revenue. Net interest margin is defined as the amount of annualized 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 annualized taxable-equivalent interest income expressed as a percentage of average interest-earning assets. The average rate paid on funding sources is defined as annualized interest expense as a percentage of average interest-earning assets.

 

The following tables set forth average assets, liabilities, minority interest, stockholders’ equity, interest income, interest expense, annualized yields and rates, and the composition of our annualized net interest margin for the three months ended March 31, 2005 and 2004, respectively.

 

22



 

AVERAGE BALANCES, RATES AND YIELDS

 

 

 

For the three months ended March 31,

 

 

 

2005

 

2004

 

 

 

 

 

Interest

 

 

 

 

 

Interest

 

 

 

 

 

Average

 

Income/

 

Yield/

 

Average

 

Income/

 

Yield/

 

(Dollars in thousands)

 

Balance

 

Expense

 

Rate

 

Balance

 

Expense

 

Rate

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal funds sold and securities purchased under agreement to resell(1)

 

$

359,312

 

$

2,197

 

2.48

%

$

541,819

 

$

1,444

 

1.07

%

Investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxable

 

2,020,406

 

21,736

 

4.36

 

1,515,957

 

14,023

 

3.72

 

Non-taxable(2)

 

92,079

 

1,574

 

6.93

 

144,413

 

2,247

 

6.26

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

1,789,100

 

42,628

 

9.66

 

1,514,123

 

33,303

 

8.85

 

Real estate construction and term

 

150,532

 

2,201

 

5.93

 

96,310

 

1,236

 

5.16

 

Consumer and other

 

237,298

 

3,200

 

5.47

 

196,659

 

2,093

 

4.28

 

Total loans, net of unearned income

 

2,176,930

 

48,029

 

8.95

 

1,807,092

 

36,632

 

8.15

 

Total interest-earning assets

 

4,648,727

 

73,536

 

6.42

 

4,009,281

 

54,346

 

5.45

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

228,782

 

 

 

 

 

212,335

 

 

 

 

 

Allowance for loan and lease losses

 

(39,242

)

 

 

 

 

(51,824

)

 

 

 

 

Goodwill

 

35,639

 

 

 

 

 

37,551

 

 

 

 

 

Other assets (3)

 

250,741

 

 

 

 

 

228,581

 

 

 

 

 

Total assets

 

$

5,124,647

 

 

 

 

 

$

4,435,924

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funding sources:

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

NOW deposits

 

$

30,594

 

30

 

0.40

 

$

23,475

 

25

 

0.43

 

Regular money market deposits

 

498,379

 

692

 

0.56

 

427,993

 

537

 

0.50

 

Bonus money market deposits

 

740,967

 

1,048

 

0.57

 

704,511

 

891

 

0.51

 

Time deposits

 

313,870

 

492

 

0.64

 

370,177

 

560

 

0.61

 

Contingently convertible debt

 

146,844

 

236

 

0.65

 

145,892

 

236

 

0.65

 

Junior subordinated debentures

 

49,491

 

484

 

3.97

 

49,311

 

350

 

2.85

 

Other borrowings

 

9,743

 

75

 

3.12

 

18,239

 

141

 

3.11

 

Total interest-bearing liabilities

 

1,789,888

 

3,057

 

0.69

 

1,739,598

 

2,740

 

0.63

 

Portion of noninterest-bearing funding sources

 

2,858,839

 

 

 

 

 

2,269,683

 

 

 

 

 

Total funding sources

 

4,648,727

 

3,057

 

0.27

 

4,009,281

 

2,740

 

0.27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing funding sources:

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

2,613,554

 

 

 

 

 

2,094,033

 

 

 

 

 

Other liabilities

 

117,072

 

 

 

 

 

91,518

 

 

 

 

 

Minority interest in capital of consolidated affiliates

 

72,438

 

 

 

 

 

46,968

 

 

 

 

 

Stockholders’ equity

 

531,695