SIVB
#Hi Aaron.
Aaron, this is <UNK>.
I'll start.
So we don't give guidance on it, but let me give you a couple ---+ few pieces of color.
One is you said that we have a good visibility to up rounds and down rounds.
Again, what we saw through the fourth quarter was no, I'll call meaningful, and I honestly can't think of any or many down rounds that we saw.
Do we think that is going to change.
Sure, that's going to change.
But, when you look at it, the market, these companies continue to still perform, this is a broad statement, perform at a very high level, number one.
And number two, going back to what <UNK> said, they are refocusing their efforts on going and becoming cash flow positive.
We think those are good signs.
And there is the availability of capital.
So we don't believe it's going to be a complete shrinking of capital in 2016 so that down rounds are going to be the norm.
But of course, it will happen.
So do we expect it to be lower than last year.
Absolutely.
But, we're still feeling okay about the outlook.
And the last point I would make is, one thing I'd pay attention to is when you look at our filings and look at the number of warrants that we actually have, we continue to take warrants actually at a faster pace, and it has been that way the last few years.
That gives you a sign, and it may not be for this year, because that is what is difficult to predict.
But the trend is that we continue to take warrants and if there are down rounds, that's going to be a good opportunity for us to price rounds at warrants at a lower level.
Maybe perhaps if I may, the one thing ---+ or a couple things I would add, Aaron, as you know, probably, is generally you have to monitor and follow what is the state of the IPO activity or M&A activity.
If those two things are ---+ continue to be strong going into 2017, particularly M&A, then you could likely see some nice gains there.
Obviously, continue to watch the stock markets and evaluations thereof as well too.
Look for tech spending as well too.
But sometimes, unfortunately, we get some bad press or headlines, well IPO activity slow down or ended.
But the reality is a lot of the exits from, whether it's warrants or the investment gains, really comes from M&A.
And again, that has demonstrated over the past year that it's pretty healthy, and it is likely probably to continue at least a healthy clip.
And maybe just to add on to that.
The last part is on M&A.
Is it goes back to one of my comments that thinking about the activity levels of these technology companies that are the larger, more mature companies, I believe you're going to see a greater activity level of acquisitions in M&A then we even saw in the last few years because of their focus on having to fill their R&D pipelines.
They have to figure out how to grow and differentiate themselves.
That's happening with technology companies, innovation companies in that early and mid-stage level.
So you may see a little bit of change here and there, and you may see a slowdown, but I think it will pick back up, if it does, very quickly.
Yes, I'll just give you some general color, and I think you might be able to discern it from some of our comments.
We did talk about that we had a strong run-up in capital call lines in the private equity.
And we mentioned in the notes and the comments that look, you could see something similar to what happened last year, which is we may hold through the first and maybe go into the second quarter and then you may see some pay downs.
But going into 2016, as we said, the balances look strong and at this point in time and seem ---+ are holding.
And we'd probably be expected to hold fairly well, but again, there is always the risk of the pullback, as you're alluding to.
Thank you.
Yes, I don't know if I'd describe it as cushion, per se.
But as you know, we carried at a fair value and the way we value the warrants is using a Black-Scholes model, which has a few inputs certainly, which you can certainly look up to.
But it's certainly at fair value.
One of the larger drivers is whether there is an up or down round, aka, the stock price component of a Black-Scholes model.
There's certainly the risk-free rate.
There's the time value of money.
There's a volatility factor as well too, and then obviously the fifth factor in the Black-Scholes model is dividends, which obviously none of these pay.
So really it's just a fair value we market each quarter.
Hey <UNK>, this is <UNK>.
One of the things you may be thinking about is in the investment securities portfolio.
So we do have, there two different parts.
One is held at fair market value and then there is others that are held at cost, and it's basically the structure of the investment.
If you look back over the last quarter, there was roughly between $80 million and $100 million of value difference between the cost, which is what we are carrying it at, and the fair market value.
And it's in the financial statement, so if you are talking about some cushion, that's one place where you may see it.
So this is <UNK>, <UNK>, I'll start.
I just think when you look at new client additions, the last couple of years have been very strong, and so they have obviously contributed to it.
So I don't think there has really been a change materially from new client contributions versus existing client contributions.
This is Mike.
I will actually be brief.
We don't really see, I would say, a characterization of seasonal flow of deposits for us.
As you have seen, it has pretty much been consistent growth for the last several years in deposits.
So at this juncture, at this point, we really don't anticipate any major change in that.
Now again, as we alluded to, we talked about how maybe perhaps the higher interest rates might be able to help us move some clients' deposits products or off-balance sheet.
But in general, as <UNK> was also talking about, the Company formations continue to be healthy and some of the funding rounds were healthy, even getting towards the end of December as well too.
So we don't really see any pattern at the moment in terms of deposit outflows related to any seasonal items.
No, as we commented about that as well.
We actually think, it may happen similar to what happened last year where the loans actually held fairly well going into Q2 last year.
So we possibly could see a similar experience.
The categoric answer is we really have not seen any major runoff so far this quarter.
As you may have guessed, we really don't break it down between PE and VC, but I will just say generally, a lot of the strength and the growth over the last couple quarters has been driven primarily by some of the PE.
There's just much more larger dollars and more funds and firms there in order to grow.
So that's where we've seen the predominant amount of the growth.
There's certainly still some growth in the VC area, but it's largely driven by the PE area.
Hi, <UNK>.
Let's just wait till we come out with the 10-K to show you the general.
But you can refer in our past in the 10-Q about the impact of the rate increases.
They will be directly consistent, yes.
Sure, this is <UNK>.
So you are going to see greater numbers, bigger numbers from private equity.
Secondarily, you will see it in the private bank.
You'll see it in global.
And those are the sequencing and a prioritization of where the growth is coming from.
And below that you are going to see growth consistent across the other industries, niches, so life sciences, technology, later stage, early stage.
That's a good breakdown of what we see happening from a growth perspective.
Geoff, this is <UNK>.
So when we look at ---+ so we've done stress testing for a while, and although we are not required to do stress testing and what I'll call idiosyncratic.
So this isn't one of the guidances that the Fed gives you; they don't talk about a tech impact.
We obviously do that.
And from the standpoint of how we're looking at it, we feel good about it.
And here's an important point: when we see the stress in the portfolio, we keep referencing back, and I will reiterate that 8% of the portfolio is the early stage.
That is where you see the stress.
That's when you would see a big impact.
But if you look at that and even if you had a 10% loss in that, you are looking at 80 basis points across the overall portfolio.
Now you'd see it in other parts of the portfolio as well, but it mainly early stage.
That's one way to think about stress overall, but we obviously don't publish the details of that.
They are just part of our risk management.
We haven't come out and commented exactly how much we're spending.
Part of the challenge is we obviously have been growing extremely fast and our expense growth rate have obviously been growing as well, as we invest in our business.
So we have not broken that out to give you any indication of that.
But having said that, we are continuing to invest and spend money, but it's not as if something you're going to really notice any pick up in our expense run rates at the current rate.
We have been investing for a number of years, so it's in our run rate, and we will incrementally continue to add.
But again, once again, it's just not going to raise it's head for you to see necessarily any major changes in our expense growth rates.
Average across the portfolio.
Yes, I'm not sure we have it for the fourth quarter in isolation, but it's in the plus or minus 4% across the portfolio.
This is <UNK>.
There's two aspects of it.
One is that the last two years in venture capital activity, although we've had a robust growth in venture capital activity in the US, the growth in venture capital numbers actually was even stronger on a percentage growth in 2014 and 2015.
As we look at that market, we do expect a pullback there, potentially even greater than what we see in the US.
That being said, in the innovation economy in China continues to be on an uptick.
And you think about it, what's happening in China actually ends up not being a negative for the innovation economy.
Right.
So China has got two different markets, right, they have the innovation economy and the old economy.
Old economy is the one that is struggling.
And they have got to figure out how to balance that, which means that more than likely, they are going to reemphasize or increase their emphasis on the innovation economy, which from our standpoint, bodes well.
And actually, we may overtime accelerate that.
So we feel good about what we're looking at in China, about the outlook.
But remember, as we said on the last call, this is a long-term strategy.
So you're not going to see very much change in the next 12 months, 18 months with our financials from any real impact on China.
Great.
I want to just thank everyone for joining us today.
We had a record year in 2015, which I'm extremely proud of.
But what I am even more proud of is how our team, and that means all 2,000-plus SVBers, executed on our strategy and took great care of our clients.
Our outlook for 2016 is strong, despite this early volatility that we've seen.
We tried to give you as much color as we could and have seen on that, and we remain committed to long-term smart growth.
So I want to thank all our employees for doing such a great job in 2015 and getting excited about 2016, and to our clients for putting their trust in us and hopefully trust for many years to come.
With that, have a great 2016.
Thanks, everyone.
