<PAGE>
As filed with the Securities and Exchange Commission on November 14, 2000
================================================================================
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, 2000
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)
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
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 654-7400
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, 2000, 48,883,701 shares of the registrant's common stock
($0.001 par value) were outstanding.
================================================================================
This report contains a total of 30 pages.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PART I - FINANCIAL INFORMATION
<S> <C>
ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 3
CONSOLIDATED STATEMENTS OF INCOME 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 29
ITEM 2. CHANGES IN SECURITIES 29
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 29
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 29
ITEM 5. OTHER INFORMATION 29
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 29
SIGNATURES 30
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
(Dollars in thousands, except par value) 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets:
Cash and due from banks $ 364,670 $ 278,061
Federal funds sold and securities purchased under
agreement to resell 1,440,567 898,041
Investment securities, at fair value 2,020,914 1,747,408
Loans, net of unearned income 1,596,855 1,623,005
Allowance for loan losses (73,800) (71,800)
-------------------------------------------------------------------------------------------------------------------
Net loans 1,523,055 1,551,205
Premises and equipment 11,745 10,742
Accrued interest receivable and other assets 143,180 110,941
-------------------------------------------------------------------------------------------------------------------
Total assets $5,504,131 $4,596,398
===================================================================================================================
Liabilities, Minority Interest and Stockholders' Equity:
Liabilities:
Deposits:
Noninterest-bearing demand $2,390,865 $1,928,100
NOW 25,896 43,643
Money market 1,686,348 1,845,377
Time 696,785 292,285
-------------------------------------------------------------------------------------------------------------------
Total deposits 4,799,894 4,109,405
Other liabilities 76,696 79,606
-------------------------------------------------------------------------------------------------------------------
Total liabilities 4,876,590 4,189,011
-------------------------------------------------------------------------------------------------------------------
Company obligated mandatorily redeemable trust preferred securities of
subsidiary trust holding solely junior subordinated debentures
(trust preferred securities) 38,576 38,537
Minority interest 17,355 -
Stockholders' Equity:
Preferred stock, $0.001 par value, 20,000,000 shares authorized;
none outstanding
Common stock, $0.001 par value, 60,000,000 shares authorized; 48,862,381 and
44,800,736 shares outstanding at September 30, 2000
and December 31, 1999, respectively 49 45
Additional paid-in capital 273,944 153,440
Retained earnings 299,359 176,030
Unearned compensation (3,068) (2,327)
Accumulated other comprehensive income:
Net unrealized gains on available-for-sale investments 1,326 41,662
-------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 571,610 368,850
-------------------------------------------------------------------------------------------------------------------
Total liabilities, minority interest and stockholders' equity $5,504,131 $4,596,398
===================================================================================================================
</TABLE>
See notes to interim consolidated financial statements.
3
<PAGE>
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
-------------------------- -------------------------
September 30, September 30, September 30, September 30,
(Dollars in thousands, except per share amounts) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income:
Loans $ 47,743 $41,813 $139,125 $118,872
Investment securities 30,035 24,158 83,695 65,252
Federal funds sold and securities
purchased under agreement to resell 24,930 9,415 59,830 22,340
------------------------------------------------------------------------------------------------------------------
Total interest income 102,708 75,386 282,650 206,464
Interest expense 14,942 20,997 41,486 63,900
------------------------------------------------------------------------------------------------------------------
Net interest income 87,766 54,389 241,164 142,564
Provision for loan losses 22,679 21,563 46,309 40,334
-------------------------------------------------------------------------------------------------------------------
Net interest income after provision
for loan losses 65,087 32,826 194,855 102,230
-------------------------------------------------------------------------------------------------------------------
Noninterest income:
Disposition of client warrants 21,189 6,177 77,299 8,687
Investment gains (losses) 3,817 - 35,950 (243)
Client investment fees 9,324 1,241 23,180 1,719
Letter of credit and foreign
exchange income 5,239 4,304 13,565 10,448
Deposit service charges 900 729 2,482 2,073
Other 2,589 963 6,311 2,441
-------------------------------------------------------------------------------------------------------------------
Total noninterest income 43,058 13,414 158,787 25,125
-------------------------------------------------------------------------------------------------------------------
Noninterest expense:
Compensation and benefits 28,359 17,591 80,102 47,857
Retention and warrant incentive plans 2,855 559 15,640 1,214
Professional services 5,166 2,531 13,889 8,426
Business development and travel 2,954 1,500 7,689 4,356
Furniture and equipment 2,798 1,368 7,689 4,159
Net occupancy 2,305 1,713 6,351 4,750
Postage and supplies 874 618 2,563 1,850
Trust preferred securities distributions 825 825 2,475 2,475
Advertising and promotion 1,152 474 2,455 1,808
Telephone 849 522 2,056 1,361
Cost of other real estate owned - - - 268
Other 1,887 2,015 5,635 4,526
-------------------------------------------------------------------------------------------------------------------
Total noninterest expense 50,024 29,716 146,544 83,050
Minority interest 209 - 209 -
-------------------------------------------------------------------------------------------------------------------
Income before income tax expense 58,330 16,524 207,307 44,305
Income tax expense 23,391 6,015 83,978 17,006
-------------------------------------------------------------------------------------------------------------------
Net income $ 34,939 $10,509 $123,329 $ 27,299
===================================================================================================================
Basic earnings per share $ 0.74 $ 0.26 $ 2.68 $ 0.66
Diluted earnings per share $ 0.69 $ 0.25 $ 2.54 $ 0.65
===================================================================================================================
</TABLE>
See notes to interim consolidated financial statements.
4
<PAGE>
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
-------------------------- -------------------------
September 30, September 30, September 30, September 30,
(Dollars in thousands) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 34,939 $10,509 $123,329 $27,299
Other comprehensive income (loss), net of tax:
Changes in unrealized gains (losses) on
available-for-sale investments:
Unrealized holding gains 19,346 9,140 27,036 2,279
Less: Reclassification adjustment for
gains included in net income (14,979) (3,892) (67,372) (5,320)
-------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) 4,367 5,248 (40,336) (3,041)
-------------------------------------------------------------------------------------------------------------------
Comprehensive income $ 39,306 $15,757 $ 82,993 $24,258
===================================================================================================================
</TABLE>
See notes to interim consolidated financial statements.
5
<PAGE>
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the nine months ended
-------------------------
September 30, September 30,
(Dollars in thousands) 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 123,329 $ 27,299
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 46,309 40,334
Minority interest (209) -
Depreciation and amortization 2,797 2,402
Net (gain) loss on sales of investment securities (35,950) 243
Net gains on disposition of client warrants (77,299) (8,687)
Decrease (increase) in accrued interest receivable 1,908 (8,286)
Increase in inventory (12,267) (8,918)
Increase in prepaid expenses (1,179) (456)
Increase (decrease) in unearned income 844 (1,246)
Decrease in taxes payable (1,253) (3,938)
Increase in retention, warrant and other
incentive plan payable 14,835 4,050
Other, net (8,113) 5,655
-------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 53,752 48,452
-------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from maturities and paydowns of
investment securities 742,335 819,707
Proceeds from sales of investment securities 212,499 540,725
Purchases of investment securities (1,178,200) (1,713,900)
Net increase in loans (26,522) (70,340)
Proceeds from recoveries of charged off loans 7,519 6,958
Net proceeds from sales of other real estate owned - 400
Purchases of premises and equipment (3,800) (2,107)
-------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (246,169) (418,557)
-------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net increase in deposits 690,489 135,047
Proceeds from issuance of common stock,
net of issuance costs 113,499 1,873
Capital contributions from minority interest participants 17,564 -
-------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 821,552 136,920
-------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 629,135 (233,185)
Cash and cash equivalents at January 1, 1,176,102 522,203
-------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at September 30, $ 1,805,237 $ 289,018
===================================================================================================================
Supplemental disclosures:
Interest paid $ 40,630 $ 63,956
Income taxes paid $ 98,392 $ 29,310
===================================================================================================================
</TABLE>
See notes to interim consolidated financial statements.
6
<PAGE>
SILICON VALLEY BANCSHARES AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Silicon Valley Bancshares and its
subsidiaries (the "Company") conform with generally accepted accounting
principles and prevailing practices within the banking industry. Certain
reclassifications have been made to the Company's 1999 consolidated financial
statements to conform to the 2000 presentations. Such reclassifications had no
effect on the results of operations or stockholders' equity. The following is a
summary of the significant accounting and reporting policies used in preparing
the interim consolidated financial statements.
NATURE OF OPERATIONS
Silicon Valley Bancshares 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 California, and additionally has loan offices in Arizona, Colorado,
Florida, Georgia, Illinois, Massachusetts, Minnesota, North Carolina, Oregon,
Pennsylvania, Texas, Virginia, and Washington. The Bank serves emerging growth
and middle-market companies in targeted niches, focusing on the technology and
life sciences industries, while also addressing other specific industries in
which it can provide a higher level of service and better manage credit through
specialization and focus. 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 Silicon
Valley Bancshares and those of its wholly owned subsidiaries, the Bank, SVB
Strategic Investors, LLC, SVB Capital I and SVB Leasing Company (inactive).
Intercompany accounts and transactions have been eliminated. Minority interest
represents the minority participants' share of the equity of SVB Strategic
Investors Fund, LP, a subsidiary of SVB Strategic Investors, LLC and Silicon
Valley BancVentures, LP, a subsidiary of Silicon Valley Bank.
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, 2000, the results of its operations and cash flows for the three
and nine months ended September 30, 2000, and September 30, 1999. The December
31, 1999 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 1999 Annual Report on Form 10-K. The results of operations for the
three and nine months ended September 30, 2000 may not necessarily be indicative
of the Company's operating results for the full year.
7
<PAGE>
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 interim 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 present an insignificant
risk of changes in value due to maturity dates of 90 days or less.
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 $548,000 and $291,000 at September 30, 2000,
and December 31, 1999, 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.
STOCK-BASED COMPENSATION
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees," and complies with the disclosure
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Under APB
Opinion No. 25, compensation expense is based on the difference, if any, on the
date of the grant, between the fair value of the Company's stock and the
exercise price. The Company accounts for stock issued to non-employees in
accordance with the provisions of SFAS No. 123 and Financial Accounting
Standards Board Interpretation No. 44, "Accounting for Certain Transactions
Involving Stock Compensation."
8
<PAGE>
SEGMENT REPORTING
Management views the Company as one operating segment, therefore, separate
reporting of financial segment information under SFAS No. 131 is not considered
necessary. Management approaches the Company's principal subsidiary, the Bank,
as one business enterprise which operates in a single economic environment,
since the products and services, types of customers and regulatory environment
all have similar economic characteristics.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued and was effective for all fiscal years beginning after
June 15, 1999. SFAS No. 133 was subsequently amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of FASB Statement No. 133" and will now be effective for fiscal
years beginning after June 15, 2000, with early adoption permitted. SFAS No.
133, as amended, requires the Company to recognize all derivatives as either
assets or liabilities and measure those instruments at fair value. It further
provides criteria for derivative instruments to be designated as fair value,
cash flow and foreign currency hedges and establishes respective accounting
standards for reporting changes in the fair value of the derivative instruments.
Upon adoption, the Company will be required to adjust hedging instruments to
fair value in the balance sheet and recognize the offsetting gains or losses as
adjustments to be reported in net income or other comprehensive income, as
appropriate. SFAS No. 133, was further amended by SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities", which primarily
relates to certain foreign-exchange, consolidation, normal purchases and normal
sales derivative issues. The Company does not expect adoption of SFAS No. 133,
as amended, to have a material impact on its consolidated financial position or
results of operations. The Company will adopt these statements on January 1,
2001.
2. EARNINGS PER SHARE
The Company computes net income per share in accordance with SFAS No. 128,
"Earnings per Share." Under the provisions of SFAS No. 128, basic earnings per
share (EPS) excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
financial instruments or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity.
9
<PAGE>
The following is a reconciliation of basic EPS to diluted EPS for the three and
nine months ended September 30, 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------------------------------------------------------------------------------------------
(Dollars and shares in thousands, Net Per Share Net Per Share
except per share amounts) Income Shares Amount Income Shares Amount
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2000:
Basic EPS:
Income available to common
Stockholders $34,939 47,334 $0.74 $123,329 46,061 $2.68
Effect of Dilutive Securities:
Stock options and restricted stock - 2,952 - - 2,563 -
-------------------------------------------------------------------------------------------------------------------
Diluted EPS:
Income available to common
stockholders plus assumed
conversions $34,939 50,286 $0.69 $123,329 48,624 $2.54
================================================================================================================
1999:
Basic EPS:
Income available to common
stockholders $10,509 41,203 $0.26 $ 27,299 41,069 $0.66
Effect of Dilutive Securities:
Stock options and restricted stock - 1,251 - - 914 -
-------------------------------------------------------------------------------------------------------------------
Diluted EPS:
Income available to common
stockholders plus assumed
conversions $10,509 42,454 $0.25 $ 27,299 41,983 $0.65
===================================================================================================================
</TABLE>
3. LOANS
The detailed composition of loans, net of unearned income of $9.4 million and
$8.6 million at September 30, 2000, and December 31, 1999, respectively, is
presented in the following table:
<TABLE>
<CAPTION>
September 30, December 31,
(Dollars in thousands) 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial $1,402,634 $1,414,728
Real estate construction 61,275 76,209
Real estate term 53,441 67,738
Consumer and other 79,505 64,330
-------------------------------------------------------------------------------------------------------------------
Total loans $1,596,855 $1,623,005
===================================================================================================================
</TABLE>
10
<PAGE>
4. ALLOWANCE FOR LOAN LOSSES
The activity in the allowance for loan losses for the three and nine months
ended September 30, 2000 and 1999 was as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
(Dollars in thousands) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning balance $ 73,800 $ 56,300 $ 71,800 $ 46,000
Provision for loan losses 22,679 21,563 46,309 40,334
Loans charged off (24,316) (10,253) (51,828) (22,491)
Recoveries 1,637 3,190 7,519 6,957
-------------------------------------------------------------------------------------------------------------------
Balance at September 30, $ 73,800 $ 70,800 $ 73,800 $ 70,800
===================================================================================================================
</TABLE>
The aggregate recorded investment in loans for which impairment has been
determined in accordance with SFAS No. 114 totaled $18.5 million and $34.0
million at September 30, 2000, and September 30, 1999, respectively. Allocations
of the allowance for loan losses related to impaired loans totaled $8.3 million
at September 30, 2000, and $13.3 million at September 30, 1999. Average impaired
loans for the third quarters of 2000 and 1999 totaled $29.1 million and $40.9
million, respectively.
5. STOCK SPLIT
In March 2000, the Board of Directors approved a two-for-one stock split, in the
form of a stock dividend of the Company's common stock. Holders of the Company's
$0.001 par value common stock as of the record date, April 21, 2000 received one
additional share of $0.001 par value for every one share of common stock they
owned as of the record date. Shares and per share amounts for all periods
presented in the accompanying financial statements have been adjusted to give
retroactive recognition to a two-for-one stock split distributed on May 15,
2000.
6. COMMON STOCK OFFERING
In August, 2000, the Company issued 2.3 million shares of common stock at $42.19
per share. The Company received proceeds of $91.0 million related to the sale of
these securities, net of underwriting commission and other offering expenses.
11
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Throughout the following management discussion and analysis when we refer to
"Silicon Valley Bancshares," or "we" or similar words, we intend to include
Silicon Valley Bancshares and its subsidiaries collectively, including Silicon
Valley Bank. When we refer to "Silicon," we are referring only to Silicon Valley
Bancshares.
You should read the following discussion and analysis of financial condition and
results of operations in conjunction with our consolidated financial statements
and supplementary data as presented in Item 1 of this report. This discussion
and analysis includes "forward-looking statements" as that term is used in the
securities laws. All statements regarding our expected financial position,
business and strategies are forward-looking statements. In addition, in this
discussion and analysis the words "anticipates," "believes," "estimates,"
"seeks," "expects," "plans," "intends" and similar expressions, as they relate
to Silicon Valley Bancshares or our management, are intended to identify
forward-looking statements. Although we believe that the expectations reflected
in these forward-looking statements are reasonable, and have based these
expectations on our beliefs as well as our assumptions, such expectations may
prove to be incorrect.
For information with respect to factors that could cause actual results to
differ from the expectations stated in the forward-looking statements, see the
text under the caption "Risk Factors" included in our Report on Form S-3 filed
with the Securities and Exchange Commission on August 1, 2000. We urge investors
to consider these factors carefully in evaluating the forward-looking statements
contained in this discussion and analysis. All subsequent written or oral
forward-looking statements attributable to our company or persons acting on our
behalf months are expressly qualified in their entirety by these cautionary
statements. The forward-looking statements included in this filing are made only
as of the date of this filing. We do not intend, and undertake no obligation, to
update these forward-looking statements.
Certain reclassifications have been made to our prior years results to conform
with 2000 presentations. Such reclassifications had no effect on our results of
operations or stockholders' equity.
EARNINGS SUMMARY
We reported net income of $34.9 million, or $0.69 per diluted share, for the
third quarter of 2000, compared with net income of $10.5 million, or $0.25 per
diluted share, for the third quarter of 1999. Net income totaled $123.3 million,
or $2.54 per diluted share, for the nine months ended September 30, 2000, versus
$27.3 million, or $0.65 per diluted share, for the comparable 1999 period. The
annualized return on average assets (ROA) was 2.6% in the third quarter of 2000
versus 1.0% in the third quarter of 1999. The annualized return on average
equity (ROE) for the third quarter of 2000 was 27.0%, compared to 18.0% in the
1999 third quarter. For the first nine months of 2000, ROA was 3.2% and ROE was
37.4% versus 0.9% and 16.2%, respectively, for the comparable 1999 period.
The increase in net income during the three and nine month periods ended
September 30, 2000, as compared with the prior year respective periods, was
attributable to increases in net interest
12
<PAGE>
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 months periods ended September 30, 2000 and 1999, and are
discussed in more detail below.
<TABLE>
<CAPTION>
Three months ended september 30, Nine months ended september 30,
-------------------------------- -------------------------------
(Dollars in thousands) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income $87,766 $54,389 $241,164 $142,564
Provision for loan losses 22,679 21,563 46,309 40,334
Noninterest income 43,058 13,414 158,787 25,125
Noninterest expense 50,024 29,716 146,544 83,050
Minority interest 209 - 209 -
-------------------------------------------------------------------------------------------------------------------
Income before income taxes 58,330 16,524 207,307 44,305
Income tax expense 23,391 6,015 83,978 17,006
-------------------------------------------------------------------------------------------------------------------
Net income $34,939 $10,509 $123,329 $ 27,299
===================================================================================================================
</TABLE>
NET INTEREST INCOME AND MARGIN
Net interest income is defined as the difference between interest earned,
primarily on loans, federal funds sold, securities purchased under agreement to
resell and investments, 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 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 is defined as
interest expense as a percentage of average interest-earning assets.
The following tables set forth average assets, liabilities, minority interest
and stockholders' equity, interest income and interest expense, average yields
and rates, and the composition of our net interest margin for the three and nine
months ended September 30, 2000 and 1999, respectively.
13
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES, RATES AND YIELDS
-------------------------------------------------------------------------------------------------------------------
For the three months ended september 30,
--------------------------------------------------------------------------
2000 1999
---------------------------------- -------------------------------------
Average Average
Average Yield/ Average Yield/
(Dollars in thousands) Balance Interest Rate Balance Interest Rate
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Federal funds sold and
securities purchased under
agreement to resell (1) $ 1,500,532 $ 24,930 6.6% $ 730,271 $ 9,415 5.1%
Investment securities:
Taxable 1,830,899 28,204 6.1 1,589,229 22,798 5.7
Non-taxable (2) 169,207 2,817 6.6 136,994 2,092 6.1
Loans:
Commercial 1,379,895 42,912 12.4 1,373,122 37,193 10.7
Real estate construction and term 116,694 3,025 10.3 132,975 3,310 9.9
Consumer and other 72,509 1,806 9.9 59,531 1,310 8.7
-------------------------------------- ----------------------------------- -------------------------------------
Total loans 1,569,098 47,743 12.1 1,565,628 41,813 10.6
-------------------------------------- ----------------------------------- -------------------------------------
Total interest-earning assets 5,069,736 103,694 8.1 4,022,122 76,118 7.5
-------------------------------------- ----------------------------------- -------------------------------------
Cash and due from banks 258,205 211,045
Allowance for loan losses (75,887) (63,725)
Other assets 155,065 71,735
-------------------------------------- ------------ ------------
Total assets $ 5,407,119 $ 4,241,177
====================================== ============ ============
Funding Sources:
Interest-Bearing Liabilities:
NOW deposits $ 62,223 185 1.2 $ 37,776 193 2.0
Regular money market deposits 359,571 1,657 1.8 386,360 2,546 2.6
Bonus money market deposits 1,275,729 6,222 1.9 2,095,554 15,900 3.0
Time deposits 664,168 6,878 4.1 229,823 2,358 4.1
-------------------------------------- ----------------------------------- -------------------------------------
Total interest-bearing liabilities 2,361,691 14,942 2.5 2,749,513 20,997 3.0
Portion of noninterest-bearing
funding sources 2,708,045 1,272,609
-------------------------------------- ----------------------------------- ----------------------------------
Total funding sources 5,069,736 14,942 1.2 4,022,122 20,997 2.1
-------------------------------------- ----------------------------------- ------------------------------------
Noninterest-Bearing Funding Sources:
Demand deposits 2,399,315 1,188,773
Other liabilities 87,762 32,694
Trust preferred securities (3) 38,565 38,513
Minority interest 5,218 -
Stockholders' equity 514,568 231,684
Portion used to fund
interest-earning assets (2,708,045) (1,272,609)
-------------------------------------- ------------- -------------
Total liabilities, minority interest
and stockholders' equity $ 5,407,119 $ 4,241,177
====================================== ============ ============
Net interest income and margin $ 88,752 7.0% $55,121 5.4%
====================================== ======== ==== ======= ====
Memorandum: Total deposits $ 4,761,006 $ 3,938,286
====================================== ============ ============
</TABLE>
(1) Includes average interest-bearing deposits in other financial
institutions of $547 thousand and $227 thousand for the three months
ended September 30, 2000 and 1999, respectively.
(2) Interest income on non-taxable investments is presented on a fully
taxable-equivalent basis using the federal statutory rate of 35% in
2000 and 1999. The tax equivalent adjustments were $986 thousand and
$732 thousand for the three months ended September 30, 2000 and 1999,
respectively.
(3) The 8.25% annual distributions are recorded as a component of
noninterest expense.
14
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES, RATES AND YIELDS
-------------------------------------------------------------------------------------------------------------------
For the nine months ended september 30,
---------------------------------------------------------------------------
2000 1999
----------------------------------- -------------------------------------
Average Average
Average Yield/ Average Yield/
(Dollars in Thousands) Balance Interest Rate Balance Interest Rate
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Federal funds sold and
securities purchased under
agreement to resell (1) $ 1,272,057 $ 59,830 6.3% $ 607,892 $ 22,340 4.9%
Investment securities:
Taxable 1,739,759 78,607 6.0 1,426,444 61,158 5.7
Non-taxable (2) 160,193 7,828 6.5 134,827 6,298 6.2
Loans:
Commercial 1,385,003 124,075 12.0 1,382,358 104,738 10.1
Real estate construction and term 125,781 9,877 10.5 136,276 10,351 10.2
consumer and other 71,458 5,173 9.7 58,004 3,783 8.7
-------------------------------------- ---------------------------------- -------------------------------------
Total loans 1,582,242 139,125 11.7 1,576,638 118,872 10.1
-------------------------------------- ---------------------------------- -------------------------------------
Total interest-earning assets 4,754,251 285,390 8.0 3,745,801 208,668 7.4
-------------------------------------- ---------------------------------- -------------------------------------
Cash and due from banks 265,673 182,238
Allowance for loan losses (73,771) (54,982)
Other real estate owned - 242
Other assets 156,144 66,837
-------------------------------------- ------------ ------------
Total assets $ 5,102,297 $ 3,940,136
====================================== ============ ============
Funding Sources:
Interest-Bearing Liabilities:
NOW deposits $ 57,710 629 1.5 $ 27,396 353 1.7
Regular money market deposits 389,971 5,349 1.8 357,115 7,124 2.7
Bonus money market deposits 1,318,685 19,529 2.0 2,041,519 50,564 3.3
Time deposits 520,720 15,979 4.1 188,618 5,859 4.2
-------------------------------------- ---------------------------------- -------------------------------------
Total interest-bearing liabilities 2,287,086 41,486 2.4 2,614,648 63,900 3.3
Portion of noninterest-bearing
funding sources 2,467,165 1,131,153
-------------------------------------- ---------------------------------- -------------------------------------
Total funding sources 4,754,251 41,486 1.2 3,745,801 63,900 2.3
-------------------------------------- ---------------------------------- -------------------------------------
Noninterest-Bearing Funding Sources:
Demand deposits 2,247,421 1,034,637
Other liabilities 87,490 27,410
Trust preferred securities (3) 38,552 38,501
Minority interest 1,752 -
Stockholders' equity 439,996 224,940
Portion used to fund
interest-earning assets (2,467,165) (1,131,153)
-------------------------------------- ------------ ------------
Total liabilities, minority interest
and stockholders' equity $ 5,102,297 $ 3,940,136
====================================== ============ ============
Net interest income and margin $243,904 6.9% $144,768 5.2%
====================================== ======== ==== ======== ====
Memorandum: Total deposits $ 4,534,507 $ 3,649,285
====================================== ============ ============
</TABLE>
(1) Includes average interest-bearing deposits in other financial
institutions of $485 thousand and $199 thousand for the nine months
ended September 30, 2000 and 1999, respectively.
(2) Interest income on non-taxable investments is presented on a fully
taxable-equivalent basis using the federal statutory rate of 35% in
2000 and 1999. The tax equivalent adjustments were $2,740 thousand and
$2,204 thousand for the nine months ended September 30, 2000 and 1999,
respectively.
(3) The 8.25% annual distributions are recorded as a component of
noninterest expense.
15
<PAGE>
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. Because
of the numerous simultaneous volume and rate changes during any period, it is
not possible to allocate such changes between volume and rate. For this table,
changes that are not solely due to either volume or rate are allocated in
proportion to the percentage changes in average volume and average rate. 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 2000
and 1999.
<TABLE>
<CAPTION>
2000 Compared to 1999
----------------------------------------------------------------------
Three Months Ended September 30, Nine Months Ended September 30,
Increase (Decrease) Increase (Decrease)
Due to Change in Due to Change in
-------------------------------- ----------------------------------
(Dollars in thousands) Volume Rate Total Volume Rate Total
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Federal funds sold and securities
purchased under agreement to resell $12,149 $ 3,366 $15,515 $ 29,871 $ 7,619 $ 37,490
Investment securities 4,112 2,019 6,131 15,298 3,681 18,979
Loans 91 5,839 5,930 427 19,826 20,253
-------------------------------------------------------------------------------------------------------------------
Increase in interest income 16,352 11,224 27,576 45,596 31,126 76,722
-------------------------------------------------------------------------------------------------------------------
Interest Expense:
NOW deposits 92 (100) (8) 306 (30) 276
Regular money market deposits (167) (722) (889) 270 (2,045) (1,775)
Bonus money market deposits (5,071) (4,607) (9,678) (14,522) (16,513) (31,035)
Time deposits 4,491 29 4,520 10,146 (26) 10,120
-------------------------------------------------------------------------------------------------------------------
Decrease in interest expense (655) (5,400) (6,055) (3,800) (18,614) (22,414)
-------------------------------------------------------------------------------------------------------------------
Increase in net interest income $17,007 $16,624 $33,631 $ 49,396 $ 49,740 $ 99,136
===================================================================================================================
</TABLE>
Net interest income, on a fully taxable-equivalent basis, totaled $88.8 million
for the third quarter of 2000, an increase of $33.6 million, or 61.0%, from the
$55.1 million total for the third quarter of 1999. The increase in net interest
income was the result of a $27.6 million, or 36.2%, increase in interest income,
combined with a $6.1 million, or 28.8%, decrease in interest expense over the
comparable prior year period.
The $27.6 million increase in interest income for the third quarter of 2000, as
compared to the third quarter of 1999, was the result of a $16.4 million
favorable volume variance and a $11.2 million favorable rate variance. The
favorable volume variance resulted from a $1.0 billion, or 26.0%, increase in
average interest-earning assets over the comparable prior year period. The
increase in average interest-earning assets resulted primarily from strong
growth in our deposits, which increased $822.7 million, or 20.9%, compared to
the third quarter of 1999. The increase in average interest-earning assets was
primarily centered in highly liquid federal funds sold, securities purchased
under agreement to resell and investment securities, which collectively
increased $1.0 billion.
Average investment securities for the third quarter of 2000 increased $273.9
million, or 15.9%, as compared to the 1999 third quarter, resulting in a $4.1
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 partially invested in U.S. agency securities,
16
<PAGE>
municipal securities and commercial paper. The growth in the investment
portfolio reflected our actions to continue to increase as well as further
diversify our portfolio of short-term investments.
Average federal funds sold and securities purchased under agreement to resell
increased a combined $770.3 million, or 105.5%, in the third quarter of 2000
over the prior year third quarter, resulting in a $12.1 million favorable volume
variance. This increase was also a result of the aforementioned strong growth in
average deposits during the past year and reflected our actions to continue to
further diversify our portfolio of short-term investments.
Favorable rate variances associated with each component of interest-earning
assets combined to increase interest income by $11.2 million in the third
quarter of 2000, as compared to the respective prior year period. Short-term
market interest rates have increased on an overall basis during the first nine
months of 2000. As a result, we earned higher yields during the third quarter of
2000 on federal funds sold, securities purchased under agreements to resell and
our investment securities, a significant portion of which were short-term in
nature, resulting in a $5.4 million favorable rate variance as compared to the
prior year. The average yield on loans in third quarter 2000 also increased 150
basis points from the respective prior year third quarter, accounting for the
remaining $5.8 million of the total favorable rate variance. This increase was
primarily attributable to a 140 basis points increase in our weighted average
prime rate in the third quarter of 2000 as compared to the similar prior year
period. A significant portion of our loans continues to be prime rate-based as
of September 30, 2000.
The yield on average interest-earning assets increased 60 basis points in the
third quarter of 2000 from the comparable prior year period. This increase
primarily resulted from a rise in the average yield on loans, largely due to an
increase in our prime rate, as well as an increase in short-term market rates,
which resulted in increased yields on federal funds sold and securities
purchased under agreement to resell.
Total interest expense in the 2000 third quarter decreased $6.1 million from the
third quarter of 1999. This decrease was due to a favorable volume variance of
$0.7 million, combined with favorable rate variance of $5.4 million. The
favorable volume variance resulted from a $387.8 million, or 14.1%, decrease in
average interest-bearing liabilities in the third quarter of 2000 as compared to
the third quarter of 1999. This decrease was largely concentrated in our bonus
money market deposit product, which decreased $819.8 million, or 39.1%,
partially offset by an increase in our time deposit product, which increased
$434.3 million, or 189.0%. The favorable rate variance largely resulted from a
reduction in the average rate paid on our bonus money market deposit product,
from 3.0% in third quarter 1999 to 1.9% in third quarter 2000. The reduction in
average rates paid on interest-bearing liabilities during the third quarter of
2000 as compared to the similar prior year period was primarily attributable to
our lowering the average rate paid on our bonus money market deposit product by
110 basis points. We took this action in order to lower total assets and thereby
increase our Tier 1 leverage capital ratio. See " Item 2. Capital Resources."
The average cost of funds paid in the third quarter of 2000 was 1.2%, down from
the 2.1% paid in the third quarter of 1999. The decrease in the average cost of
funds was largely due to a decrease of 110 basis points in the average rate paid
on our bonus money market deposit product.
Net interest income, on a fully taxable-equivalent basis, totaled $243.9 million
for the first nine months of 2000, an increase of $99.1 million, or 68.5%, from
the $144.8 million total for the first nine months of 1999. The increase in net
interest income was the result of a $76.7 million, or
17
<PAGE>
36.8%, increase in interest income, combined with a $22.4 million, or 35.1%,
decrease in interest expense over the comparable prior year period.
The $76.7 million increase in interest income for the first nine months of 2000,
as compared to the first nine months of 1999, was the result of a $45.6 million
favorable volume variance and a $31.1 million favorable rate variance. The
favorable volume variance resulted from a $1.0 billion, or 26.9%, increase in
average interest-earning assets over the comparable prior year period. The
increase in average interest-earning assets was primarily centered in highly
liquid federal funds sold, securities purchased under agreement to resell and
investment securities, which collectively increased $1.0 billion.
The yield on average interest-earning assets increased 60 basis points in the
first nine months of 2000 from the comparable prior year period. This increase
primarily resulted from a rise in the average yield on loans, largely due to an
increase in our prime rate, as well as an increase in short-term market rates,
which resulted in increased yields on federal funds sold and securities
purchased under agreement to resell.
Total interest expense in the 2000 first nine months decreased $22.4 million
from the first nine months of 1999. This decrease was due to a favorable volume
variance of $3.8 million, combined with a favorable rate variance of $18.6
million. The favorable volume variance resulted from a $327.6 million, or 12.5%,
decrease in average interest-bearing liabilities in the first nine months of
2000 as compared to the first nine months of 1999. This decrease was largely
concentrated in our bonus money market deposit product, which decreased $722.8
million, or 35.4%, partially offset by an increase in our time deposit product,
which increased $332.1 million, or 176.1%. The favorable rate variance largely
resulted from a reduction in the average rate paid on our bonus money market
deposit product, from 3.3% in the first nine months 1999 to 2.0% in the first
nine months 2000. The reduction in average rates paid on interest-bearing
liabilities during the first nine months of 2000 as compared to the similar
prior year period was primarily attributable to our lowering the average rate
paid on our bonus money market deposit product by 130 basis points. We took this
action in order to lower total assets and thereby increase our Tier 1 leverage
capital ratio. See "Item 2. Capital Resources."
The average cost of funds paid in the first nine months of 2000 was 1.2%, down
from the 2.3% paid in the first nine months of 1999. The decrease in the average
cost of funds was largely due to a decrease of 130 basis points in the average
rate paid on our bonus money market deposit product.
PROVISION FOR LOAN LOSSES
The provision for loan losses is based on our evaluation of the adequacy of the
existing allowance for loan losses in relation to total loans, and on our
periodic assessment of the inherent and identified risk dynamics of the loan
portfolio resulting from reviews of selected individual loans and loan
commitments.
Our provision for loan losses totaled $22.7 million for the third quarter of
2000, a $1.1 million, or 5.2%, increase compared to the $21.6 million provision
for the third quarter of 1999. The provision for loan losses increased $6.0
million, or 14.8%, to a total of $46.3 million for the first nine months of 2000
versus $40.3 million for the comparable 1999 period. See "Financial Condition -
Credit Quality and the Allowance for Loan Losses" for additional related
discussion.
18
<PAGE>
NONINTEREST INCOME
The following table summarizes the components of noninterest income for the
three and nine months ended September 30, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ------------------
(Dollars in thousands) 2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Disposition of client warrants $21,189 $ 6,177 $ 77,299 $ 8,687
Investment gains (losses) 3,817 - 35,950 (243)
Client investment fees 9,324 1,241 23,180 1,719
Letter of credit and foreign exchange income 5,239 4,304 13,565 10,448
Deposit service charges 900 729 2,482 2,073
Other 2,589 963 6,311 2,441
-------------------------------------------------------------------------------------------------------------------
Total noninterest income $43,058 $13,414 $158,787 $25,125
===================================================================================================================
</TABLE>
Noninterest income increased $29.6 million, or 221.0%, to a total of $43.1
million in the third quarter of 2000 versus $13.4 million in the prior year
third quarter. This increase was largely due to a $15.0 million increase in
income from the disposition of client warrants, combined with a $8.1 million
increase in client investment fees and a $3.8 million increase in investment
gains from venture capital funds. Noninterest income totaled $158.8 million for
the first nine months of 2000, an increase of $133.7 million, or 532.0%, from
the $25.1 million in the comparable 1999 period. This increase was largely due
to a $68.6 million increase in income from the disposition of client warrants,
combined with a $36.2 million increase in investment gains and a $21.5 million
increase in client investment fees.
Income from the disposition of client warrants totaled $21.2 million and $77.3
million for the three and nine months ended September 30, 2000, compared to $6.2
million and $8.7 million for the respective 1999 periods. We have historically
obtained rights to acquire stock, in the form of warrants, in certain clients,
primarily, as part of negotiated credit facilities. The receipt of warrants does
not change the loan covenants or other collateral control techniques we employ
to mitigate the risk of a loan becoming nonperforming. The 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 depends upon factors beyond our control, including
the general condition of the public equity markets as well as the merger and
acquisition environment. We therefore cannot predict the timing and amount of
income with any degree of accuracy and it is likely to vary materially from
period to period. During the first nine months of 2000 and throughout 1999, a
portion of the income from the disposition of client warrants was offset by
expenses related to our 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 in those periods.
We realized $3.8 million and $36.0 million in gains on sale of investment
securities during the three and nine months ended September 30, 2000, related to
venture capital fund and direct equity investments.
Client investment fees totaled $9.3 million and $23.2 million in the three and
nine months ended September 30, 2000, compared to $1.2 million and $1.7 million
in the similar prior year periods. Prior to June 1999, we only earned client
investment fees on off-balance sheet funds that were invested by clients in
investment securities such as U.S. Treasuries, U.S. agencies and commercial
paper. Beginning in June 1999, we began offering off-balance sheet private label
mutual fund
19
<PAGE>
products to clients. We earn fees ranging from 35 to 50 basis points on the
average balance in these products. At September 30, 2000, $11.4 billion in
client funds were invested by clients off-balance sheet, including $8.0 billion
in the mutual fund products. The significant growth in the amount of off-balance
sheet client funds 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. Additionally, growth in off-balance sheet client funds was
also attributable to the expansion of our client base and increased marketing of
off-balance sheet private label mutual fund products.
Letter of credit fees, foreign exchange fees and other trade finance income
totaled $5.2 million in the third quarter of 2000, an increase of $0.9 million,
or 21.7%, from the $4.3 million earned in the third quarter of 1999. For the
first nine months of 2000, letter of credit fees, foreign exchange fees and
other trade finance income totaled $13.6 million, an increase of $3.1 million,
or 29.8%, compared to the $10.4 million in the first nine months of 1999. The
growth reflects a concerted effort by our management to expand the penetration
of trade finance-related products and services among our growing client base, a
large percentage of which provide products and services in international
markets.
Deposit service charges totaled $0.9 million for the three months ended
September 30, 2000, an increase of $0.2 million, or 23.5%, from the $0.7 million
reported in the third quarter of 1999. For the first nine months of 2000 and
1999 deposit service charges totaled $2.5 million and $2.1 million,
respectively. Clients compensate us for depository services either through
earnings credits computed on their demand deposit balances, or via explicit
payments recognized by us as deposit service charges income.
Other noninterest income largely consists of service-based fee income, and
increased $1.6 million, or 168.8%, to $2.6 million in the third quarter of 2000
from $1.0 million in the third quarter of 1999. For the nine months ended
September 30, 2000, other noninterest income increased $3.9 million, or 158.5%,
to $6.3 million from $2.4 million in the comparable 1999 period. The increase in
other noninterest income was primarily due to corporate finance fees of $0.6
million and $1.8 million for the three and nine months ended September 30, 2000
and a higher volume of cash management and loan documentation services related
to our growing client base.
NONINTEREST EXPENSE
Noninterest expense in the third quarter of 2000 totaled $50.0 million, a $20.3
million, or 68.3%, increase from the $29.7 million incurred in the comparable
1999 period. Noninterest expense totaled $146.5 million for the first nine
months of 2000, an increase of $63.5 million, or 76.5%, over the $83.1 million
total for the comparable 1999 period. We closely monitor our 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 retention and warrant
incentive plans and 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. Our efficiency ratio for the 2000 third quarter was 44.6%
versus 47.3% for the third quarter of 1999. Our efficiency ratio for the first
nine months of 2000 was 45.7%, versus 51.2% for the comparable 1999 period. The
following table presents the detail of noninterest expense and the incremental
contribution of each line item to our efficiency ratio:
20
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended September 30,
----------------------------------------------------------------
2000 1999
---------------------------- ------------------------------
Percent of Percent of
Adjusted Adjusted
(Dollars in thousands) Amount Revenues Amount Revenues
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Compensation and benefits $28,359 26.8% $17,591 28.5%
Professional services 5,166 4.9 2,531 4.1
Business development and travel 2,954 2.8 1,500 2.4
Furniture and equipment 2,798 2.6 1,368 2.2
Net occupancy 2,305 2.2 1,713 2.8
Advertising and promotion 1,152 1.1 474 0.8
Postage and supplies 874 0.8 618 1.0
Telephone 849 0.8 522 0.9
Trust preferred securities distributions 825 0.8 825 1.3
Other 1,887 1.8 2,015 3.3
-------------------------------------------------------------------------------------------------------------------
Total, excluding retention and
warrant incentive plans 47,169 44.6% 29,157 47.3%
Retention and warrant incentive plans 2,855 559
-------------------------------------------------------------------------------------------------------------------
Total noninterest expense $50,024 $29,716
===================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
----------------------------------------------------------------
2000 1999
---------------------------- ------------------------------
Percent of Percent of
Adjusted Adjusted
(Dollars in thousands) Amount Revenues Amount Revenues
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Compensation and benefits $ 80,102 27.9% $47,857 30.0%
Professional services 13,889 4.8 8,426 5.3
Business development and travel 7,689 2.7 4,356 2.7
Furniture and equipment 7,689 2.7 4,159 2.6
Net occupancy 6,351 2.2 4,750 3.0
Postage and supplies 2,563 0.9 1,850 1.2
Trust preferred securities distributions 2,475 0.9 2,475 1.6
Advertising and promotion 2,455 0.9 1,808 1.1
Telephone 2,056 0.7 1,361 0.9
Other 5,635 2.0 4,526 2.8
-------------------------------------------------------------------------------------------------------------------
Total, excluding retention and
warrant incentive plans 130,904 45.7% 81,568 51.2%
Retention and warrant incentive plans 15,640 1,214
Cost of other real estate owned - 268
-------------------------------------------------------------------------------------------------------------------
Total noninterest expense $146,544 $83,050
===================================================================================================================
</TABLE>
Compensation and benefits expenses totaled $28.4 million in the third quarter of
2000, a $10.8 million, or 61.2%, increase over the $17.6 million incurred in the
third quarter of 1999. For the first nine months of 2000, compensation and
benefits expenses totaled $80.1 million, an increase of $32.2 million, or 67.4%,
compared to $47.9 million for the comparable 1999 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 we employ, combined with
an increase in performance-based compensation associated with our incentive
bonuses and employee stock ownership plan. Average FTE were 860 and 790 for the
three and nine months ended September
21
<PAGE>
30, 2000 versus 641 and 623 for the respective prior year periods. The increase
in FTE personnel was primarily due to a combination of our 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 our FTE
personnel is likely to occur during future years as a result of the continued
expansion of our business activities.
Retention and warrant incentive plans expense totaled $2.9 million in the third
quarter of 2000, a $2.3 million increase over the $0.6 million incurred in the
third quarter of 1999. Retention and warrant incentive plans expense totaled
$15.6 million for the first nine months of 2000, a $14.4 million increase over
the $1.2 million incurred in the first nine months of 1999. Under the provisions
of the retention and warrant incentive plans, employees are compensated with a
fixed percentage of gains realized on warrant and certain venture capital fund
and direct equity investments. The increase in retention and warrant plans
expense was directly related to the increase in warrant, venture capital fund
and direct equity investment gains over the comparable 1999 period.
Professional services expenses, which consist of costs associated with corporate
legal services, litigation settlements, accounting and auditing services,
consulting, and our Board of Directors, totaled $5.2 million and $13.9 million
for the three and nine months ended September 30, 2000, an increase of $2.6
million, or 104.1%, and $5.5 million, or 64.8%, compared to $2.5 million and
$8.4 million in the comparable 1999 periods. The increase in professional
services expenses reflects the extensive efforts undertaken by us to continue to
build and support our infrastructure, as well as evaluate and pursue new
business opportunities. It also reflects our efforts in outsourcing several
corporate functions, such as internal audit, facilities management and credit
review, where we believe we can achieve a combination of cost savings and
increased quality of service.
Business development and travel expenses totaled $3.0 million and $7.7 million
for the three and nine months ended September 30, 2000, an increase of $1.5
million, or 96.9%, and $3.3 million, or 76.5%, compared to $1.5 million and $4.4
million in the comparable 1999 periods. The increase in business development and
travel expenses was largely attributable to overall growth in our business,
including both an increase in the number of FTE personnel and expansion into new
geographic markets.
Occupancy, furniture and equipment expenses totaled $5.1 million for the three
months ended September 30, 2000, an increase of $2.0 million, or 65.6%, from the
$3.1 million for the three months ended September 30, 1999. Occupancy, furniture
and equipment expenses totaled $14.0 million and $8.9 million for the nine
months ended September 30, 2000 and 1999. The increase in occupancy, furniture
and equipment expenses in 2000, as compared to 1999, was primarily the result of
an increase in personnel as well as continued geographic expansion to develop
and support new markets.
Trust preferred securities distributions totaled $0.8 million and $2.5 million
for the three and nine months ended September 30, 2000 and 1999. These amounts
resulted from the issuance 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.
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<PAGE>
Other noninterest expense totaled $1.9 million and $5.6 million for the three
and nine months ended September 30, 2000, compared to $2.0 million and $4.5
million for the respective 1999 periods. The increase in other noninterest
expense for the first nine months ended September 30, 2000, was primarily
attributable to an increase in data processing costs related to both the overall
growth in the our business and several new business initiatives.
INCOME TAXES
The Company's effective tax rate was 40.1% and 40.5% for the third quarter and
first nine months of 2000, compared to 36.4% and 38.4% in the three and nine
month comparative prior year periods, respectively. The increase in our
effective income tax rate was primarily attributable to the increase in pre-tax
income as compared to the relatively constant level of non-taxable income from
certain security investments.
FINANCIAL CONDITION
The Company's total assets were $5.5 billion at September 30, 2000, an increase
of $907.7 million, or 19.7%, compared to $4.6 billion at December 31, 1999.
FEDERAL FUNDS SOLD AND SECURITIES PURCHASED UNDER AGREEMENT TO RESELL
Federal funds sold and securities purchased under agreement to resell totaled a
combined $1.4 billion at September 30, 2000, an increase of $542.5 million, or
60.4%, compared to the $898.0 million outstanding at December 31, 1999. This
increase was attributable to our investing excess funds, resulting from
continued deposit growth during the first nine months of 2000, in these types of
short-term liquid investments.
INVESTMENT SECURITIES
Investment securities totaled $2.0 billion at September 30, 2000, an increase of
$273.5 million, or 15.7%, from the December 31, 1999 balance of $1.7 billion.
This increase resulted from excess funds that were generated by growth in our
deposits outpacing the growth in loans during the first nine months of 2000, and
primarily consisted of U.S. agency securities, commercial paper, money market
mutual funds, and municipal securities. The overall growth in the investment
portfolio reflected our actions to increase, as well as to further diversify our
portfolio.
The increase in market interest rates during the first nine months of 2000
resulted in a pre-tax unrealized loss on our available-for-sale fixed income
securities investment portfolio of $26.0 million as of September 30, 2000, which
was offset by a pre-tax unrealized gain of $28.2 million associated with our
warrant securities. Because of the level of liquidity we maintain, we do not
anticipate having to sell fixed income investment securities and incurring
material losses on sales in future periods for liquidity purposes.
Based on October 31, 2000 market valuations, we had potential pre-tax warrant
gains totaling $20.2 million related to 48 companies. We are restricted from
exercising many of these warrants until the fourth quarter of 2000 and 2001. As
of October 31, 2000, we held 1,251 warrants in 980 companies, and had made
investments in 188 venture capital funds and direct equity investments in 53
companies. Many of these companies are non-public. Thus, for those companies for
which a readily determinable market value cannot be obtained, we value those
equity instruments at cost less any identified impairment. Additionally, we are
typically precluded
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<PAGE>
from using any type of derivative instrument to secure the current unrealized
gains associated with many of these equity instruments. Hence, the amount of
income we realize from these equity instruments in future periods may vary
materially from the current unrealized amount due to fluctuations in the market
prices of the underlying common stock of these companies. Furthermore, we may
reinvest some or all of the income realized from the disposition of these equity
instruments in pursuing our business strategies.
LOANS
Total loans, net of unearned income, at September 30, 2000, were $1.6 billion, a
slight decrease compared to the balance at December 31, 1999. While we continue
to generate new loans in most of our technology and life sciences and special
industry niche practices, as well as in specialized lending products, many of
our clients, primarily in the technology and life sciences niche, have received
significant cash inflows from the capital markets and venture capital community.
Consequently, we have experienced higher than normal paydowns and loan payoffs,
which has caused total loans to remain relatively unchanged from December 31,
1999 to September 30, 2000.
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 we follow underwriting and credit monitoring procedures
which we believe are appropriate in growing and managing the loan portfolio, in
the event of nonperformance by these other parties, our potential exposure to
credit losses could significantly affect our consolidated financial position and
earnings.
Lending money involves an inherent risk of nonpayment. Through the
administration of loan policies and monitoring of the loan portfolio, our
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.
We regularly review and monitor 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. We identify potential problem credits and, based upon known
information, we develop action plans.
We have established an evaluation process designed to determine the adequacy of
the allowance for loan losses. This process attempts to assess the risk of
losses inherent in the loan portfolio by segregating the allowance for loan
losses into three components: "specific," "loss migration," and "general." The
specific component is established by allocating a portion of the allowance for
loan losses to individual classified credits on the basis of specific
circumstances and assessments. The loss migration component is calculated as a
function of the historical loss migration experience of the internal loan credit
risk rating categories. The general component, composed of allocated and
unallocated portions that supplements the first two components, includes: our
management's judgment of the effect of current and forecasted economic
conditions on the borrowers' abilities to repay, an evaluation of the allowance
for loan losses in relation to the size of the overall loan portfolio, an
evaluation of the composition of, and growth trends within, the loan portfolio,
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<PAGE>
consideration of the relationship of the allowance for loan losses to
nonperforming loans, net charge-off trends, and other factors. While this
evaluation process uses historical and other objective information, the
classification of loans and the establishment of the allowance for loan losses,
relies, to a great extent, on the judgment and experience of our management.
The allowance for loan losses totaled $73.8 million at September 30, 2000, an
increase of $2.0 million, or 2.8%, compared to the $71.8 million balance at
December 31, 1999. This increase was due to $46.3 million in additional
provisions to the allowance for loan losses, offset by net charge-offs of $44.3
million for the first nine months of 2000.
We incurred $24.3 million and $51.8 million in gross charge-offs during the
three and nine months ended September 30, 2000. The gross charge-offs in the
first nine months of 2000 included six commercial credits totaling $32.7
million, of which $12.0 million was centered in our healthcare services niche
and $20.7 million was related to three entertainment credits that are
currently in litigation with credit insurers. Though we charged off these
three entertainment credits, we anticipate full recoveries but the timing of
the recoveries is currently unknown. Of the total gross charge-offs incurred
during the first nine months of 2000, $13.0 million were classified as
nonperforming loans at the end of 1999.
We believe our allowance for loan losses is adequate as of September 30, 2000.
However, future changes in circumstances, economic conditions or other factors
could cause us to increase or decrease the allowance for loan losses as deemed
necessary. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review our allowance for loan losses.
Such agencies may require us to make adjustments to the allowance for loan
losses based on their judgment of information available to them at the time of
their examination.
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:
<TABLE>
<CAPTION>
September 30, December 31,
(Dollars in thousands) 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nonperforming assets:
Loans past due 90 days or more $ - $ 911
Nonaccrual loans 18,495 27,552
-------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $18,495 $28,463
===================================================================================================================
Nonperforming loans as a percentage of total loans 1.2% 1.7%
Nonperforming assets as a percentage of total assets 0.3% 0.6%
Allowance for loan losses: $73,800 $71,800
As a percentage of total loans 4.6% 4.4%
As a percentage of nonaccrual loans 399.0% 260.6%
As a percentage of nonperforming loans 399.0% 252.3%
</TABLE>
25
<PAGE>
Nonperforming loans totaled $18.5 million, or 1.2% of total loans, at September
30, 2000, a decrease of $10.0 million or 35.0%, from the prior year-end total of
$28.5 million, or 1.7% of total loans. Nonperforming loans at September 30, 2000
include one commercial credit totaling $6.9 million. This credit is in our
healthcare services niche and has been nonperforming since the 2000 first
quarter. Our management believes this credit is adequately secured with
collateral and reserves, and that any future charge-offs associated with this
loan will not have a material impact on our future net income.
In addition to the loans disclosed in the foregoing analysis, we have identified
six loans totaling $14.0 million, that, on the basis of information known to us,
were judged to have a higher than normal risk of becoming nonperforming. We are
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.
DEPOSITS
Total deposits were $4.8 billion at September 30, 2000, an increase of $690.5
million, or 16.8%, from the prior year-end total of $4.1 billion. A significant
portion of the increase in deposits during the first nine months of 2000 was due
to increases in both the noninterest-bearing demand and time deposit products,
which increased $462.8 million, or 24.0%, and $404.5 million, or 138.4%,
respectively. The growth in noninterest-bearing demand deposits was explained by
growth in the number of clients served by us during the first nine months of
2000. The increase in time deposits was due to an increase in cash secured
letters of credit issued by Silicon Valley Bank on behalf of our clients.
MARKET RISK MANAGEMENT
Interest rate risk is the most significant market risk impacting us. Our
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 our assets, liabilities and off-balance sheet items,
defined as our market value of portfolio equity (MVPE). See our 1999 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, 1999. There have been no significant
changes in the assumptions or results of the MVPE calculation used by us in
monitoring interest rate risk as of September 30, 2000. Other types of market
risk affecting us in the normal course of our business activities include
foreign currency exchange risk and equity price risk. The impact on us,
resulting from these other two types of market risks, is deemed immaterial. We
do not maintain a portfolio of trading securities and do not intend to engage in
such activities in the immediate future.
LIQUIDITY
Another important objective of asset/liability management is to manage
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.
We regularly assess the amount and likelihood of projected funding requirements
through a review of factors such as historical deposit volatility and funding
patterns, present and forecasted
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<PAGE>
market and economic conditions, individual client funding needs, and existing
and planned business activities. Our asset/liability committee (ALCO) provides
oversight to the liquidity management process and recommends policy guidelines,
subject to board of directors approval, and courses of action to address our
actual and projected liquidity needs.
The ability to attract a stable, low-cost base of deposits is our primary source
of liquidity. Other sources of liquidity available to us include short-term
borrowings, which consist of federal funds purchased, security repurchase
agreements and other short-term borrowing arrangements. Our liquidity
requirements can also be met through the use of our portfolio of liquid assets.
Our definition of liquid assets includes 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.
Our policy guidelines provide that liquid assets as a percentage of total
deposits should not fall below 20.0%. At September 30, 2000, the Bank's ratio of
liquid assets to total deposits was 66.6%. This ratio is well in excess of our
minimum policy guidelines and is higher than the comparable ratio of 55.7% as of
December 31, 1999. In addition to monitoring the level of liquid assets relative
to total deposits, we also utilize other policy measures in liquidity management
activities. As of September 30, 2000, we were in compliance with all of these
policy measures.
CAPITAL RESOURCES
Our management seeks to maintain adequate capital to support anticipated asset
growth and credit risks, and to ensure that Silicon and Silicon Valley Bank are
in compliance with all regulatory capital guidelines. Our primary sources of new
capital include the issuance of trust preferred securities and common stock, as
well as retained earnings.
In August, 2000, we issued 2.3 million shares of common stock at $42.19 per
share. We received proceeds of $91.0 million related to the sale of these
securities, net of underwriting commission and other offering expenses.
In December 1999 we issued 2.8 million shares of common stock at $21.00 per
share. In January 2000, we issued an additional 0.4 million shares at $21.00 per
share in relation to the exercise of an over-allotment option by the
underwriters for that offering. Proceeds from the sale of these securities
totaled $63.3 million, net of underwriting commissions and other offering
expenses. In addition, in 1998 we issued $40.0 million face amount in cumulative
trust preferred securities through a newly formed special-purpose trust, SVB
Capital I. These securities had an offering price (liquidation amount) of $25
per security and distributions at a fixed rate of 8.25% are paid quarterly. The
securities have a maximum maturity of 30 years and qualify as Tier 1 capital
under the capital guidelines of the Federal Reserve Board. We received proceeds
of $38.5 million related to the sale of these securities, net of underwriting
commissions and other offering expenses. The trust preferred securities are
presented as a separate line item in the consolidated balance sheets under the
caption "Company obligated mandatorily redeemable trust preferred securities of
subsidiary trust holding solely junior subordinated debentures."
Stockholders' equity totaled $571.6 million at September 30, 2000, an increase
of $202.8 million, or 55.0%, from the $368.9 million balance at December 31,
1999. This increase was primarily due to net income of $123.3 million for the
nine months ended September 30, 2000 and net
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<PAGE>
proceeds from the issuance of common stock of $113.5 million, partially offset
by a decrease in the after-tax net unrealized gains on available-for-sale
securities of $40.3 million. We have not paid a cash dividend on our common
stock since 1992, and we do not have any material commitments for capital
expenditures as of September 30, 2000.
Both Silicon and Silicon Valley Bank are subject to capital adequacy guidelines
issued by the Federal Reserve Board. Under these capital guidelines, the minimum
total risk-based capital ratio 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.
Both Silicon's and Silicon Valley Bank's capital ratios were in excess of
regulatory guidelines for a well capitalized depository institution as of
September 30, 2000, and December 31, 1999. Capital ratios for Silicon and
Silicon Valley Bank are set forth below:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Silicon Valley Bancshares:
Total risk-based capital ratio.................................................. 20.4% 15.5%
Tier 1 risk-based capital ratio................................................. 19.1% 14.3%
Tier 1 leverage ratio........................................................... 11.6% 8.8%
Silicon Valley Bank:
Total risk-based capital ratio.................................................. 15.2% 14.0%
Tier 1 risk-based capital ratio................................................. 14.0% 12.7%
Tier 1 leverage ratio........................................................... 8.4% 7.9%
</TABLE>
The increase in the total risk-based capital ratio, the Tier 1 risk-based
capital ratio and the Tier 1 leverage ratio from December 31, 1999 to September
30, 2000 was primarily attributable to an increase in Tier 1 capital. This
increase was due to both the issuance of common stock, which generated net
proceeds of $113.5 million, and internally generated capital, primarily net
income of $123.3 million.
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PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
There were no legal proceedings requiring disclosure pursuant to this item
pending at September 30, 2000, 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:
10.45 Silicon Valley Bancshares 1997 Equity Incentive Plan, amended
as of July 20, 2000.
10.46 Change in Control Severance Benefits Policy, effective
August 18, 2000.
27.1 Financial Data Schedule
(b) The Company filed the following reports on Form 8-K during the third
quarter of 2000:
1. A report on Form 8-K was filed on July 24, 2000, whereby the
Company announced financial results for the three and six
months ended June 30, 2000.
2. On July 25, 2000, the Company filed a report on Form 8-K to
announce its investment in the Nippon Credit Bank and
partnering of the Company with the Softbank in connection with
the investment in the Nippon Credit Bank. Also, the Company
announced that SVB Strategic Investors Fund, L.P., completed
its first close of $64.5 million on June 21, 2000.
29
<PAGE>
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 14, 2000 /s/ Donal D. Delaney
-----------------------------------
Donal D. Delaney
Controller
(Principal Accounting Officer)
30
