SVB Financial Group (SIVB) Q2 2018 Earnings Conference Call Transcript

SVB Financial Group (SIVB.Q 20.00%)
Q2 2018 Earnings Conference Call
Jul. 26, 2018 6:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to the SVB Financial Group Q2 2018 earnings call. My name is Darryl, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.

[Operator instructions]. Please note that this conference is being recorded.

I will now turn the call over to Meghan O'Leary. Meghan, you may begin.

Meghan O'Leary -- Head of Investor Relations

Thank you, Darryl, and thank you, everyone, for joining us today. Our president and CEO, Greg Becker, and our CFO, Dan Beck, are here to talk about our second-quarter 2018 financial results and will be joined by other members of management for the Q&A.

Our current earnings release is available on the Investor Relations section of our website at svb.com. We'll be making forward-looking statements during this call, and actual results may differ materially. We encourage you to review the disclaimer in our earnings release dealing with forward-looking information, which applies equally to statements made in this call.

In addition, some of our discussion may include references to non-GAAP financial measures. Information about those measures, including reconciliation to GAAP measures, may be found in our SEC filings and in our earnings release. We expect the call, including Q&A, to last approximately an hour.

And with that, I will turn the call over to Greg Becker.

Greg Becker -- President and Chief Executive Officer

Thank you, Meghan, and thanks, everyone, for joining us today. We had an excellent second quarter with continued strong performance across the business. We delivered earnings per share of $4.42 and net income of $238 million. These results were driven by sustained positive trends in our core business, including exceptional client liquidity, healthy balance sheet growth, higher interest rates, strong core fee income, and stable credit quality.

A few highlights from the second quarter compared to the first quarter: net interest income increased by 11% to $469 million, average loans grew by 4% to $24.9 billion, average total client funds grew by 8% to $119.3 billion, core fee income increased by 7% to $123 million, and we delivered a return equity of 20.8% along with an efficiency ratio of 46.4%.

Included in our results, a tax benefit tied to share-based compensation and a decrease in reserve related to the high quality of our capital call lines of credit and a write-off of previously capitalized assets related to CCAR reporting which were no longer needed. Together, these three items equated to approximately $0.30 of EPS on a net basis. Based on our quarterly performance and the current positive market environment, we are raising our full-year 2018 outlook for revenues and balance sheet growth.

I'd like to start with some comments on our markets, milestones, and investments we're making, and Dan will get into details of our financial performance and our improved outlook. Starting with the markets, record levels of liquidity continues to be a significant positive driver of our performance in almost every aspect with the exception of loan growth. Venture capital funds invested $57.5 billion in the first half of 2018, which puts investing on pace to potentially exceed $100 billion for the first time since 2000. These investment levels reflect a continued trend of mega rounds for large, later-stage companies, although medium deal sizes for companies at all funding stages have been rising.

While high company valuations are an area that many people, including SVB, are watching closely, in general, the companies that are able to secure large funding loans today have demonstrated significant revenue traction and the ability to scale rapidly. The strong pace of VC investment continued to fuel new company formation which contributed to our continued robust client acquisition with 1,200 new core commercial clients added in the second quarter.

On the exit front, we saw a relatively healthy 28 VC-backed technology, science IPOs in the second quarter. That brings the total to 43 for the first half of the year, 67% of which were SVB clients. All of this has been good for our business and those effects have been amplified by the prevailing market tailwinds of regulatory relief, lower taxes, and rising interest rates. We're taking advantage of these positive market conditions to invest in our growth.

On the people front, we continue to build out our management team, most notably by hiring Yvette Butler, who has deep expertise in private banking and wealth management and will lead our growth strategy on that front. We saw continued momentum across nearly all markets and segments of our business. Our initiative to drive on-balance-sheet deposit growth has gained traction, and since we launched in March the number of related new deposit account openings has more than doubled while balances have grown to more than $1 billion.

Our overall client funds growth is not just a reflection of liquidity environment but also of our deep client engagement and product capabilities. Year to date more than 65% of our clients that have executed IPOs or follow-on transactions have chosen SVB as their asset manager.

On the loan side, we continue to see outsized growth in private equity, but that growth masks healthy activity in other segments. For instance, we logged a record quarter in life sciences loan growth, with annualized growth in that segment up 32%. And the pace of new underlying tech loan originations has been very strong, with 19% annualized growth in net new tech borrowers in the first half of 2018, even as immense liquidity in the market has suppressed actual loan outstandings.

In fee income, although client investment fee growth was a headline for the quarter, our foreign exchange income is up 31% year over year, which in and of itself is something to be proud of and reflects the success of our approach to client engagement. In addition, our FX team was ranked the No. 2 currency forecaster in the world by Bloomberg in the second quarter, the only U.S. bank in the rankings.

Finally, our continued investment in people and expansion of our national FinTech practice has contributed to 80% growth in the number of FinTech clients and more than 100% growth in FinTech client funds year over year. In addition, it has opened up tangible opportunities to us in payments and new loan products while giving us a unique strategic view on where disruption is occurring and how to leverage and embrace it.

In our international business, we achieved a major milestone, opening our German branch in June. There is a lot of opportunity there and we hit the ground running, recently booking our first $20 million term loan. Overall our international expansion continues to accelerate our already strong growth. International loan and deposit balances today are 10% and 23% respectively of total balances and our international business continues to grow at a faster pace than the overall business.

These are just a few of the things that are driving our business forward, deepening our client engagement, and amplifying the value we bring to them. As positive as the current environment is, we continue to focus on some very real challenges. First, the pressure of competition for loans from banks, non-banks, and ample liquidity continues to pressure the pace of loan growth and utilization.

Second, we continue to pay attention to valuations, in particular, the potential for a future market pullback that could trigger higher credit costs and possible warrant an investment securities losses. And finally, the escalating trade and tariff war between the U.S. and its biggest trading partners can potentially derail much of the positive market momentum we've all been enjoying.

For now, we remain focused on leveraging our current positive environment and market tailwinds to lay the groundwork for our future growth through three primary strategic objectives. First is employee enablement, making it easier for our employees to do their jobs. As part of this we're rolling out new collaboration and mobility tools to help them work more efficiently and effectively and we're also upgrading our CRM platform to one that is more integrated, scalable, mobile, and secure.

Second is improving the client experience. The major focus here is improving our client-facing digital infrastructure and optimizing product and service delivery from our teams. These efforts will be supported by a central group responsible for orchestrating all client experience enhancements.

And the third is an end-to-end process improvement which will benefit both employee enablement and the client experience while improving overall operating leverage in our core business. This effort is currently focused on end-to-end transformations of both the client and loan on-boarding processes and quick-win program to address long-standing employee pain points that have led to manual workarounds in the past.

We are really pleased that our solid execution and strong performance enable us to make these investments. Although the current market environment is ideal, we believe that our efforts now will also enable us to sustain this growth momentum in the future and maintain our unique role as the bank of the global innovation economy.

Thank you and now I'll turn the call over to our CFO, Dan Beck.

Daniel Beck -- Chief Financial Officer

Thank you, Greg, and good afternoon, everyone. Our excellent quarterly performance was the result of continued strength in our core business and included the following highlights. First, strong growth in net interest income due to healthy loan growth and higher yields from loans in fixed income investment securities; second, outstanding client funds balance growth both on- and off-balance sheet; third, higher core fee income, primarily due to higher client investment fees; fourth, continued stable credit quality with solid underlying trends; fifth, strong gains on warrants and equity investment securities; and sixth, higher expenses related to higher incentive compensations from our strong performance, client investment, and a write-off of capitalized CCAR costs.

In view of our continued robust client liquidity and balance sheet growth as well as the June Fed funds increase, we're again raising our full-year outlook for balance sheet and revenue business drivers, and due to higher incentive compensation related to our outperformance and the CCAR write-off, we are raising our expense outlook. I'll get into those details as I discuss our operating results.

Starting with the balance sheet, average loans increased by $1.1 billion, or 4.4%, to $24.9 billion, driven primarily by new private equity capital call lines as well as growth in life sciences and our private bank. In our technology lending segment we saw healthy commitment origination but that strength was offset by lower utilization of liquidity from the strong equity funding environment acted as a headwind to funded loan growth and by an increase in M&A in our corporate finance portfolio.

We are holding our loan growth outlook steady but expect average loan growth of the full year to be at the high end of our current high-teens outlook range. Average total client funds grew by $8.8 billion, or 8%, to $119.3 billion. This reflected average off-balance-sheet client investment funds growth of 10.8%, particularly from healthy IPO and secondary offering activity among our clients. It also reflected average deposit growth of $1.9 billion, or 4%, driven primarily by new client acquisition and a healthy funding environment, as well as the impact of our deposit initiative, which has generated more than $1 billion of new deposits year to date.

As a result of the strong funding environment and expectations of better growth from our deposit initiatives, we are raising our full-year outlook for average deposit growth from the low double-digits to the low teens. Average assets grew by 3.9% to $54.4 billion and period-end assets were $55.9 billion. In addition, with the implementation of the regulatory relief bill, the threshold for compliance with certain enhanced financial standards for banks has been raised from $50 billion to $100 billion and will eventually be raised to $250 billion and as a result we will not be required to file a public CCAR report in the foreseeable future.

Now I'd like to turn to the income statement. Net interest income increased by 11.2% to $468.5 million due to loan growth, higher investment balances from deposit growth, and the impact of higher rates on loan and investment yields. Higher loan and investment balances and higher interest rates drove an increase in interest income from loans of $33.2 million to $330.3 million in the second quarter. As a result of these rate increases, overall loan yield increased by 27 basis points to 5.33%.

This includes an increase of 10 basis points, or $7.9 million in low fee yields related to prepayments. In our fixed-income investment portfolio, higher yields, mainly from reinvestment at higher market rates, drove an increase in interest income of $16 million to $146.9 million.

We purchased approximately $2.2 billion in new investments in the second quarter, primarily mortgage-backed securities and municipal bonds, at an approximate tax-effective yield of 3.62%. At the same time, interest-bearing deposit costs increased by only 11 basis points, or $2.1 million. Total funding costs increased by only 1 basis point, as a proportion of demand deposit accounts represented 83% of our total deposit balances at period-end. Our net interest margin increased by 21 basis points to 3.59%.

As a result of the effects of higher rates on loan investment yields, as well as our improved balance sheet outlook we are increasing our full-year 2018 outlook for net interest income from the low 30s to the mid-30s. We are also raising our full-year outlook for net interest margin by 5 basis points to a range of 3.55% to 3.65%.

Now I'll move to credit quality, which remained stable with solid underlying trends. Our provision for credit losses was $29.1 million, compared to $28 million in the second quarter. This was fairly evenly split between loan growth, net new specific reserves were nonaccrual loan and charge-offs. It was partially offset by a $16 million decrease in reserves related to methodology enhancement for large loans, which are primarily composed of private equity, capital call lines of credit.

Net charge-offs were $13.5 million, or 22 basis points of total average loans, compared to $8.8 million, or 15 basis points, in the first quarter. This reflected $8.7 million of charge-offs from one sponsored-buy loan not specifically reserved for with remaining charge-offs coming primarily from early stage loans. Credit quality remains solid. We continue to monitor our client base in the markets for things we could believe affect future repayment activity.

The trends in our portfolio, including the sponsored buyout portfolio, indicate continued stability.

With this in mind, we're improving our overall credit outlook for the year. We are reducing our full-year outlook for net charge-offs to total gross loans by 10 basis points to between 20 and 40 basis points. We are likewise reducing our full-year outlook for nonperforming loans as a percentage of total gross loans to between 40 and 60 basis points.

Now I'll turn to noninterest income, which is composed of core fee income, gains from private equity and venture capital investments and gains from warrants. GAAP noninterest income was $192.7 million, compared to $155.5 million in the prior quarter. Non-GAAP noninterest income net of non-controlling interests was $183.2 million, an increase of $40.8 million from the prior quarter, which, as you will recall, included a $22.2 million of pre-tax losses on the sale of more related Roku shares following the expiration of the lockup period.

Net gains on investment securities net of non-controlling interests were $26.4 million, compared to losses of $3.8 million in the prior quarter. Second-quarter gains were driven primarily by valuation increases from our VC-related investments. Equity warrant gains were strong at $19.1 million, driven by healthy IPO and M&A activity for our clients during the quarter. I want to underscore that a significant amount of gains from the investment securities and warrants is unrealized and are subject to future market volatility.

With regard to our VC fund investments, many of these funds own positions in private and public companies and SVB does not control the timing of the sale of those positions. Core fee income increased by 7.1% $123.1 million. This growth was driven primarily by an increase in client investment fees of $6.6 million related to higher rates and higher client fund balances. As a result of this increase and our expectations improved spread on our client investment funds, we are raising our full-year outlook for core fee income growth from the high 20s to the low 30s, and we are tracking toward the higher end of this range.

Now turning to expenses. Noninterest interest expense was $305.7 million, compared to $265.4 million in the first quarter. The quarter-over-quarter increase mainly reflects the following components: first, $16.2 million of higher compensation and benefits expense, mostly related to incentive compensation from our outperformance in investments and people; second, $12 million from planned investments in projects and growth initiatives, along with accelerated investments mentioned last quarter as an outcome of the tax reform benefits. These are largely investments in client experience, employee enablement, and end-to-end process improvement efforts.

And third, a $7 million write-off of previously capitalized costs related to CCAR preparation. These were investments in reporting systems we expected to use for regulatory compliance that will no longer be needed due to the implementation of the regulatory relief bill.

We are raising our full-year 2018 expense growth outlook from the low double-digits to the low teens. This increase relative to our forecast was driven by higher incentive compensation of our strong performance and improved outlook and by the write-off of capital costs related to CCAR. We believe we are likely to come out at the high end of this revised outlook.

As we've said in prior quarters, if we continue to outperform and raise our growth outlook further in the second half of the year, we will see additional incentive compensation costs. And by the same token, we could decide to accelerate other investments in the second half of the year in light of our strong performance, which would result in higher project-related costs.

Turning to taxes, we saw a $9.4 million increase in tax benefit from share-based compensation related to our exceptional stock price performance and seasonally high activity surrounding the annual vesting of restricted stock units. This impact resulted in a lower effective tax rate of 24.5%, compared to 27.5% in the first quarter. With additional excess tax benefit from share-based compensation expected for the remainder of 2018, along with the continued investments in tax advantage municipal bonds, we expect our full-year effective tax rate will be lower than originally forecast and are lowering our outlook range to between 26% and 28%.

Moving to capital, capital and liquidity remained healthy, with strong growth in regulatory capital during the quarter. Growth in risk-weighted assets from higher loan investment balances reduced the bank's risk-based capital ratio somewhat and our bank Tier 1 leverage ratio increased by 3 bases to 7.72%. We expect that the majority of these earnings and capital generation we see from strong loan and deposit growth will be used to fund balance sheet growth for the remainder of 2018.

In closing, we delivered another outstanding quarter and raised our full-year growth outlook for the second time this year. Our business continues to benefit from the tremendous liquidity available to the market and to our clients and the generally high quality of businesses that are able to get funding and make a successful exit in these markets.

As always, we remain focused on implementing our growth and operational initiatives, delivering high-quality growth with stable credit quality and maintaining optimal capital and liquidity to position ourselves for success in the long-term. We believe we remain well-positioned for future growth assuming no change in the macro environment and regardless of the environment, we continue to prioritize strong executions, long-term planning, and adding value to our clients.

Thank you and I'll now ask the operator to open the Q&A.

Questions and Answers:

Operator

[Operator Instructions]. And we do have a question from Ken Zerbe from Morgan Stanley. Ken, you can go ahead with your question.

Ken Zerbe -- Morgan Stanley -- Analyst

Great, thanks. Good evening.

I guess maybe starting off with expenses, just and actually a little bit higher than probably where we were thinking about this quarter, is there a rule of thumb or maybe you could just help us understand like how much of the higher incentive-based comp is actually tied to non-core fee items like the warrants or the investment securities gains if at all? I'm just trying to understand that relationship, thanks.

Greg Becker -- President and Chief Executive Officer

So there is incentive comp that is tied to those non-core items but that's at a lesser percentage than what we get from our core revenue drivers. So that's going to drive less of the increase in incentive compensation than what happens from the base net interest income and other core fee income drivers.

Ken Zerbe -- Morgan Stanley -- Analyst

Got it, OK. So it sounds like a fairly small percentage. I guess I'm just, all right now that's fine, we can also talk about it offline.

Greg Becker -- President and Chief Executive Officer

Ken, just to put in context the question on expenses for the quarter, if we take a look at this year we have increased the overall revenue outlook just by 13% to 15% just roughly and expenses another 3 to 4 percentage point basis. So we're driving strong operating leverage.

Ken Zerbe -- Morgan Stanley -- Analyst

No, I guess, I was going to say obviously, I did see the stronger revenue growth which I think is great but the guidance for expenses almost implies that this is a one-quarter boost in expenses and then it kind of reversed to something much lower even though revenues stayed higher. And that's what I am trying to figure out, like which this quarter was presumably higher expenses than it would seem like you would have on a go-forward basis from here.

Daniel Beck -- Chief Financial Officer

Yes, so I'll take that. So if we'd look at the Q2 spend there are three notable items to take into consideration. One was that CCAR impairment that we talked about for $7 million; two was $5 million roughly of incentive compensation was just really a catch-up from the first part of the year based on our strong performance; and third is about $5 million worth of professional services that are really driving these scalability and client-experience initiatives that Greg referred to earlier. So when we look at that, those notable items and we take that off of the base, that gives you a better picture of at least what the base case expense rate looks like.

Ken Zerbe -- Morgan Stanley -- Analyst

Got it. OK, that helps and then maybe just a slightly different question on expenses, regarding the strategic initiatives that you guys are doing, the way I understood your comments about the guidance for expenses that you may accelerate some of those investments, I guess what is stopping you from just building that into your normal expense growth outlook?

Daniel Beck -- Chief Financial Officer

So, as we look at where we are from an internal-capacity perspective, we have a substantial number of projects already to support our strategic growth initiatives, to support these scalability initiatives as well. So that's really a limiter for just you know how much we can get accomplished within a given year. So that I think is probably the biggest one there for us on what would stop us from going further at this point.

Greg Becker -- President and Chief Executive Officer

Yes, and Ken this is Greg, just to add on to it. So as we look at that and Dan is right, you look at what your capacity is for change, capacity for projects and all those things and we're upped that capacity but if we sit back and say during the course of the year that we believe we can actually keep doing them the right way and have more, that's what we may say, we may just continue to accelerate. Now again, our guidance doesn't have that expectation there.

We think we're on the right track and we have the right capacity for the balance of the year but we just wanted to make sure we would have that kind of caveat in there. So we can look at what could cause it to go higher, it's really those two things. If we decided we had the capacity and the willingness to do it, No. 1, and No.

2, if we actually continue to outperform our forecast, and so those are kind of the two things.

Ken Zerbe -- Morgan Stanley -- Analyst

All right, great. Thank you very much.

Operator

And our next question comes from Steven Alexopoulos from JPMorgan. Steven, you can go ahead with your question.

Steven Alexopoulos -- J.P.Morgan -- Analyst

Hi, everybody. I thought Greg's remarks indicated that the newer interest-bearing deposit is done, the interest-bearing account added a $1 billion but when we look at interest-bearing deposits actually declined about $100 million quarter over quarter, was that in the third quarter that you added that billion?

Greg Becker -- President and Chief Executive Officer

No, so let me, so a great clarification Steve. So I was specifically talking about the new product we introduced which is and I'll make it really simple, so there are early stage clients historically we would have said open up your checking account. If the balance was high enough we basically say then take the excess balance and move it off balance sheet. Now it was kind of the standard.

The change was, the same client comes in, we say open up your checking account, you have a lot of excess cash.

We will then open up an on-balance sheet money market account. Right? So the point was specifically to this product change going from the opening of an off-balance sheet to opening up an interest-bearing on-balance sheet that's where we doubled the run rate and we effectively have since we introduced this a $1 billion of deposits.

Now obviously what that means is, there are other clients and other products that raised more money that moved then more off balance sheet. So they had an interest-bearing account and then moved it off to higher levels of balances off balance sheet. So it's very specific to the new product introduction.

Steven Alexopoulos -- J.P.Morgan -- Analyst

OK. And, Greg, now that the safety threshold is lifted does that change your appetite in terms of how much of that you'd like to bring on the balance sheet?

Greg Becker -- President and Chief Executive Officer

So that's quite a question before we hit $50 billion, Steve. So I kind of look at it and say, "You know we have good amounts of capital and so obviously we're going to try to do what we can to appropriately balance the interest of our clients with the right product set," and so clearly we would like to move more of that money onto the balance sheet, which is why we're paying attention to this new product introduction, and hopefully it will accelerate and we'll see even more balances being driven by that. But I think we've got the right initiatives in place to see the deposit growth that we have in our outlook.

Steven Alexopoulos -- J.P.Morgan -- Analyst

OK and then just one separate question on the capital calls, if we look at the capital call loan is below $20 million, they declined modestly quarter over quarter. I assume most of those are VC, give some color on that are volumes of VC peaking or competition is getting tougher for that type of lending? Thanks.

Greg Becker -- President and Chief Executive Officer

This is Greg, I'll start and then Marc may want to add. It is my view. It doesn't have anything to do with any change in behavior that we're seeing but it's just I would say coincidentally that it happened as opposed to any trend that we're seeing. So we still see robust activity in our venture capital funds flow as well as private equities.

So I don't see any change in that.

Marc Cadieux -- Chief Credit Officer

Yes, nothing to add.

Daniel Beck -- Chief Financial Officer

I think the one thing to look at Steve is to look at the year-over-year growth. It was something around $700 million of growth in that area. So, yes, there is no real pervasive or systemic trends that we've noted at this point.

Steven Alexopoulos -- J.P.Morgan -- Analyst

OK, great. Thanks for taking my questions.

Operator

And our next question comes from John Pancari from Evercore. John, you can go ahead with your question.

John Pancari -- Evercore ISI -- Analyst

Hi, so yes, on the deposit balances, could you just tell us, what are you paying on the new deposits that are redirected to -- or that are being directed into the money markets? What's that yielding now? And I know you had previously indicated, I think, the ballpark 90 to 100 basis points on new money that you're putting onto the balance sheet, where is that now?

Daniel Beck -- Chief Financial Officer

Yes. So the range there is anywhere, call it 50 to 90 basis points just based on the overall size of the deposit account, the deposit relationship.

John Pancari -- Evercore ISI -- Analyst

OK, all right. And then in terms of the off-balance sheet funds obviously up more than expected as well, very solid growth there, I guess what would be your outlook to that, so those flows clearly they seem to be coming in better and tied to the activity in this space, I mean can you just give us a little bit of thought process on how we should think about that?

Greg Becker -- President and Chief Executive Officer

Yes, this is Greg. John, I'll start. So obviously as we talked about where we are from the overall fund flow venture capital financing is potentially trending toward an all-time high in volumes, right. So that's kind of one tailwind that we have but there are other parts.

As I mentioned, we have a very strong market share of companies that are going public and we're winning the majority of those funds in our off-balance sheet vehicles right.

And then there's just money flowing in from other sources not just venture capital and so our ability to have a product set that we're winning really well in the market, our team is exceptionally strong and our off-balance sheet solutions. So it's the market, it's the team and it's the share of the top companies that we have in our portfolio and the combination of those three is really allowing us to really grow again another quarter of incredibly strong growth in total client funds but especially off-balance-sheet.

And if that continues, we expect a continuation of the trend based on our quality of companies and our execution, obviously, the market will dictate how much money overall is flowing into the industry.

Michael Descheneaux -- President, Silicon Valley Bank

John, this is Mike Descheneaux. One thing you may want to think about is Greg was saying we brought in about what 20% on-balance sheet deposits this quarter in terms of total client funds but you have to remember in Q2 there's quite a strong IPO and FPO pipeline particularly from some of the life sciences, so that's why a lot of those bulk of those dollars are going to go off the balance sheet as well. So it's just a really interesting quarter from that perspective.

John Pancari -- Evercore ISI -- Analyst

OK, got it, got it. All right, that's helpful. And then lastly, just back on the loan side of the PE and VC capital call lines, where are you bringing them on to the balance sheet in terms of pricing right now? I think the last time we talked about it was prime minus 50 maybe prime minus 75 basis points?

Marc Cadieux -- Chief Credit Officer

Yes, it's Marc Cadieux, and that's still a pretty good range. Private equity tends to be in for interest only yield in the low four's and venture tends to be about 40 to 50 basis points better than that, so around the mid-fours.

John Pancari -- Evercore ISI -- Analyst

Got it. Thanks, Marc.

Operator

And our next question comes from Aaron Deer from Sandler O'Neill. Aaron, you can go ahead with your question.

Aaron Deer -- Sandler O'Neill and Partners -- Analyst

Hi. Good afternoon, everyone.

Greg, obviously, if you guys have a lot of tailwinds working for you and the outlook seems to be improving but you've expressed concern over the potential for a market pullback and maybe some of the trade and tariff issues. Is there anything specific that you see currently that gives you pause or is there anything that you're watching for that would cause you to become more cautious I guess especially on the lending side?

Greg Becker -- President and Chief Executive Officer

This is Greg. I will start and then Marc may want to add. My view is right now we don't see anything on the horizon but kind of given where we are both in the length of the cycle, given where we are on the funds flow of capital into the industry and just what's happening around, I think anyone that doesn't have a little bit of a caution to say that things are moving really well, I would say probably not being that thoughtful about the real risk in their business. And so there is nothing that we see in our crystal ball that would point to that happening in the near term, other than just again the market is doing really well and the fund flows are strong.

And you do have the issues out in the market, the geopolitical issues, and trade is one of them, and none of us know how that is going to shake out at the end of the day, and implications there are I would say a little bit less for the technology and innovation space but it's more for the broad economy and if that all of a sudden takes a, there's an economic shock there that's obviously what could kind of cause the whole market to settle down.

Aaron Deer -- Sandler O'Neill and Partners -- Analyst

OK. And then maybe as a follow-up related to credit, any details you can provide on the $9 million sponsor-led buyout loan and in terms of an industry that that was in or circumstances that might have led to that default?

Marc Cadieux -- Chief Credit Officer

Sure. It's Marc Cadieux. So the company, broadly speaking, is in the software space. It had been, candidly, a company that had struggled for the last couple of years and while this doesn't happen with any frequency in this segment of the portfolio, it can happen where things can deteriorate very quickly, as was the case with this particular credit.

It got worse in a hurry in the space of the second quarter.

And so, while, again, a rare event, it can happen. It did happen in this instance. I think the key things to take away from this is first it's not indicative, we think, of any broader systemic issue, deteriorating trend, etc., in this segment of the portfolio. And then I would also point out that we've been in this business, the sponsor finance business, for almost 12 years now.

This is only our second loan loss in that entire 12-year period, which we think is reflective of the thoughtful and prudent approach we've taken to lending in that segment, particularly following on Greg's comments, given where we are in a long period of economic expansion, we think we continue to manage the portfolio in a way that should keep that, hopefully keep that loss record clean.

Aaron Deer -- Sandler O'Neill and Partners -- Analyst

OK, that's great. Thanks for taking my questions.

Operator

OK, and our next question comes from Ebrahim Poonawala from BOA Merrill Lynch.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Good afternoon, guys. Just one question, like if you take a step back given your balance sheet size today, the global expansion that we're doing, just wondering if you can touch upon, has it improved your ability in terms of the clients you're acquiring in terms of when you look at the software or tech clients in the mid to higher end of the spectrum which usually may not have banked with you. I'm just wondering just given your sort of evolution of your franchise, has that improved and does that lead to, as we look forward in terms of the kind of deposit growth and loan growth that we may get not next quarter but over the next few years?

Greg Becker -- President and Chief Executive Officer

Yes, this is Greg. I'll start and Mike may want to add to it. Clearly, the balance sheet helps, right? So when you're working with larger companies, their ideal situation would be is they would love to work with fewer institutions then more, and so if you can step up with either a larger loan commitment or a larger syndication capability which we can do both off, that's really effective right?

So those two things are drivers but I would say on top of that there are other things. One is we've talked about the product and services and the core fee income growth that we've had and I just would say whether it's FX, whether it's COGS, our off-balance-sheet cash management, each one of those areas both in capability from a technology perspective as well as the people that we have we're doing incredibly well and we get really positive feedback. Again, just one example, I mentioned in my prepared comments about our FX team being rated by Bloomberg the second-best forecaster, not just in the U.S but actually around the world.

We do believe we have incredibly strong teams and so it's not just one thing, it's really a combination of both, our balance sheet capability syndications, deal sizes as well as our product capabilities that really allows us to compete. Now your question was what will that do then in the future to drive loan growth or to drive deposits.

I would say client acquisition, clearly, it helps with that or as important or maybe even in some cases more important keeping our clients with us longer. We're certainly optimistic about that how that translates into outstanding the challenge still is there as I said in technology especially there's so much liquidity out there that it's still a challenge to find I know it's standing to the way we would see in a maybe you know more normal environment but for new client acquisition and retention it's clearly a positive thing.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

That's helpful. And just switching gears to the off-balance-sheet funds and the investment fees, so we were about at 16.5 basis points in the second quarter. I know you want to be conservative there, but outlook on that means, I know pre-crisis this used to be in the 20-, 25-basis-points range, so how much more room is there for the investment fees you charge on those funds to go higher with future Fed rate hikes and just over the next year?

Greg Becker -- President and Chief Executive Officer

Yes, this is Greg. And yes, if you go back a few quarters ago maybe in several quarters, we said we thought we'd tap out kind of at that 15 basis points and by virtue of the size of the assets that we have right now, it actually allows us to negotiate better deals with our partners, so that's helped with a few basis points. And then on top of that, just the rate pickup and how fast it's been that actually allows us to help us too. So that's how we gotten to 17 basis points.

As we look at our crystal ball you know we could see with kind of each additional rate increase that we see a basis point per increase and maybe capping at around 20 basis points, so clearly, 3 basis points doesn't seem like a whole lot, though when you multiply that across you know $70 plus billion it ends up being real money, and so that's kind of how we look at the future.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Understood. Thanks for taking my questions.

Greg Becker -- President and Chief Executive Officer

Yes.

Operator

And our next question comes from Brett Rabatin from Piper Jaffray.

Brett Rabatin -- Piper Jaffray -- Analyst

Hi. Good afternoon, everyone. I wanted to, I guess, first ask about the guidance around loan growth and if we just think about this quarter and the guidance, I realize you indicated to the upper end of that range but it would it would seem like you might have a little bit more upside than that. And there were things in the back half of the year either comparatively or that you see in the market that is indicating some slower growth or what additional color can you give us on the back half guide being a little slower?

Daniel Beck -- Chief Financial Officer

Yes, this is Dan. And when we looked at what happened in 2017 we certainly started to see higher levels of M&A than what we've seen is a headwind to loan growth. And we haven't seen as much of that in the early stages of 2018 but just to be prudent, the expectation is that we get to a much more normal level of M&A as we got through the second half of the year. So that's why you're seeing us be a little bit more conservative in the forecast in the second part of the year.

Brett Rabatin -- Piper Jaffray -- Analyst

OK and then wanted to ask just thinking about the whole on-balance sheet, off-balance-sheet topic and your capital levels and your high level of profitability now can you just give us maybe some thought process and thoughts on just will you move some more of the off-balance-sheet on-balance-sheet to kind of keep the capital levels fairly consistent, and I know you bought some municipal securities this quarter, are those things that you're going to do to kind of manage capital from growing given your new higher level of profitability?

Daniel Beck -- Chief Financial Officer

Yes, so as we look at where we are from capital-accretion perspective, it certainly does provide us an opportunity with deposits, and as Greg was mentioning, the deposit strategy that we've put in place starts with the new clients to drive for the right break for the client those balances on-balance sheet. So we think that the program has continued room to grow and that will consume some of the additional capital that we have. So between that and the loan growth opportunities, we have we think we can use that capital organically and we'll see based on where things are at the end of the year where we stand from a capital perspective.

Brett Rabatin -- Piper Jaffray -- Analyst

OK, is there any targeted capital ratio that you might be thinking about?

Daniel Beck -- Chief Financial Officer

We manage our constraining ratios historically been the Tier I leverage ratio with the bank and the expectations we've managed between 7% and 8%, so we're still at the 7.7-ish range at this point, so we still are in between that range at this point, so we're managing between it.

Brett Rabatin -- Piper Jaffray -- Analyst

OK, great. I appreciate the color.

Operator

And our next question comes from Jared Shaw from Wells Fargo. Go ahead, Jared.

Jared Shaw -- Wells Fargo Securities -- Analyst

Great, thank you. On your comments on the tariffs and as a potential headwind do you see that potentially driving more business to the international branches and if so I guess where do you see the international loans as a percentage of the book going as you look out over the next year or so?

Greg Becker -- President and Chief Executive Officer

Yes, Jared so it's Greg I'll start. Right now we're not seeing I would say any change in behavior or things that are causing loans to be directed a different way or demand in a certain jurisdiction domestically or international markets. So I think it's too early to tell what will happen with that. The good news to your point is, you know our strategy of actually having international offices could be beneficial because if that does happen, we have offices in these international jurisdictions that could benefit from it but we're not, again we're not seeing it yet.

What I said in my prepared comments holds true though that the domestic business is growing really well but our international business loans and deposit is actually growing at a faster pace. Right? So 10% of the loan portfolio, 23% of our deposits are international in nature and they're growing at a faster pace. So not dramatically so, do you see that going 11%, 12%, 15% and a little bit higher in deposits, yes you could see that but as far as your specific question really not seeing any behavior changes.

Jared Shaw -- Wells Fargo Securities -- Analyst

And in the past, you'd mentioned that when the International loans it was either a percentage or a dollar a price. You sort of lost some of the benefits from Crapo where are we in terms of progress there and do you think that there could be an additional regulatory reform that would give you some relief on those additional burdens?

Greg Becker -- President and Chief Executive Officer

Oh, is that question specifically about the foreign exposure?

Jared Shaw -- Wells Fargo Securities -- Analyst

Yes.

Greg Becker -- President and Chief Executive Officer

Yes. So, that foreign exposure limit was not cleared up with the Crapo Bill but I guess it is important to note that as we said we were going to do just look at what we could do to move things around and I guess optimize the number, and so really it hasn't changed a whole lot, it's still around $6 billion, $6.5 billion. Our view is that it really doesn't become an issue until late 2019 and 2020 maybe even late 2020. And so from that standpoint what we certainly believe is that there is the potential probability that the regulators are going to continue to look at all facets of the laws and regulations to say, how do we make sure we're tailoring it the right way.

And we certainly hope that the $10 billion will be part of that of that tailoring, which is why we continue to spend time in Washington, D.C. to make sure that our voice is known.

Jared Shaw -- Wells Fargo Securities -- Analyst

OK, thank you.

Operator

And our next question comes from Tyler Stafford from Stephens Inc.

Tyler Stafford -- Stephens -- Analyst

Hi, guys. Good afternoon. Dan, just to start with you, do you still think the impact to NOI from each rate hike is going to be roughly around $50 million?

Daniel Beck -- Chief Financial Officer

Yes, on an annualized basis $50 million worth of pre-tax net interest income, yes.

Tyler Stafford -- Stephens -- Analyst

OK, so when you weigh the strong long growth you had in the second quarter and the June rate hike, how much did the deposit strategy success you've had so far contribute to that NOI guidance to the low 30s, or excuse me, to the mid-30s? Is there a way to think about the magnitude of each of those -- the growth, the loan growth, the hike, and the deposit strategy?

Daniel Beck -- Chief Financial Officer

Yes, my opinion, and I think it's too complicated to look at it like that. I think if we take a look at the overall growth in deposits the fact that we added a $1 billion year to date through that strategy just helps us continue us to reinforce the deposit guide that we put out there which is obviously a generator to the uplift in net interest income. So I'd just think about it that way versus trying to parse the two out.

Tyler Stafford -- Stephens -- Analyst

OK, and then just lastly from me, do you have what the reinvestment rate on the new securities that you're purchasing right now is?

Daniel Beck -- Chief Financial Officer

It's right around 350 right now.

Tyler Stafford -- Stephens -- Analyst

OK, thanks. That's it from me.

Operator

And our next question comes from Christopher York from JMP Securities. Christopher, you can go ahead.

Christopher York -- JMP Securities -- Analyst

Good afternoon. Thanks for taking my questions. I guess forgive me if I missed this but what was the period end balance in PE/VC loans and then maybe the utilization on the lines there?

Greg Becker -- President and Chief Executive Officer

So the period-end was about $12.2 billion. Utilization, I believe was somewhere in the mid-50s, I think I don't actually have that stat handy around there.

Christopher York -- JMP Securities -- Analyst

OK, helpful. And then maybe a follow-up, Greg or Marc. Is the growth in that loans some type maybe today driven more by increasing utilization or maybe clients raising new funds or new clients recognizing the value proposition to GPs themselves and then LPs by the liquidity in the facility?

Greg Becker -- President and Chief Executive Officer

Yes, this is Greg. I think it's really, there is new clients, clearly, but it's also existing clients raising new funds and those are the two main drivers of utilization. It changes a little bit on a quarter-to-quarter basis but it's not changing materially in a trend-line basis, it really is those first two.

Christopher York -- JMP Securities -- Analyst

Great. And then any changes in the competitive environment in that product?

Greg Becker -- President and Chief Executive Officer

I guess I would just say it's one of the most competitive of all and for the reasons that we know right, it's a big space. It's a place to get outstanding and the credit quality is very sound. So as we think about it, it's like we have to continue to differentiate based on client service, expertise, based on speed, based on our ability to add value, meaning the fact that we in our private equity, we have offices in Hong Kong and in New York and in the U.K., London and those are the kind of the big centers. And we can bring people together to talk about what's happening in the industry, what are the best practices and things like things like that, we really have to focus on how to add value because it is a competitive space and obviously you can tell based on the growth that we've done an effective job of competing there.

Christopher York -- JMP Securities -- Analyst

Yes, I was going to say the same thing there. Switching gears just two housekeeping items, so I wrote down two different numbers for investment spend within non-interest expenses in the core so could you clarify again how much was allocated to investment?

Daniel Beck -- Chief Financial Officer

So not sure what you mean by investments, are you talking about investment on some of the key initiatives that we were mentioning that were in the Q2 expense space?

Christopher York -- JMP Securities -- Analyst

Yes, I think that was maybe a $12 million, is that right?

Daniel Beck -- Chief Financial Officer

Yes, so we said, yes, $12 million for planned investments in the second quarter -- and that's an increase over the expenses from the first quarter.

Christopher York -- JMP Securities -- Analyst

Got it. OK, that's very helpful. And then the last one, what would your NIM outlook in 2018 include, subject to the forward curve[ [ph]?

Daniel Beck -- Chief Financial Officer

So as we look at the NIM outlook, we'd probably be toward the higher end of the range that we put out there considering how late in the year we'd be with rate increases.

Christopher York -- JMP Securities -- Analyst

OK, that's it from me. Thanks, guys.

Operator

And our next question comes from Chris McGratty from KBW. Chris, you can go ahead.

Chris McGratty -- Keefe, Bruyette & Woods -- Analyst

Yes, good afternoon. Thanks for the question. Dan, the durations moved up a bit. Just interested in kind of target duration and then the timing?

Daniel Beck -- Chief Financial Officer

Yes. So we continue to extend duration with the purchases in the investment securities portfolio, so you'd seen us continue to extend out. In terms of the target we haven't set that at least at this point but just considering how late we are with the overall economic expansion it makes sense for us to continue to extend out. So you'll see us progressively continue to extend out on the investment securities portfolio at about the same pace that we've been doing over the last year or so.

Chris McGratty -- Keefe, Bruyette & Woods -- Analyst

OK, thanks a lot for that. And Greg on capital return, I think you addressed the balance sheet strategy, I'm not sure if you touched on a dividend that you talked about perhaps an update on the dividend prospects? Thanks.

Greg Becker -- President and Chief Executive Officer

Chris, we've talked about this in the past, we said it is like, it's something we will consider when we hit or exceed the threshold targets that we talked about. And what we've looked at and that's part of the reason we focused on the deposit question last quarter is, given where rates are, we do believe there is ability for us to attract more deposits on balance sheet with the type of product that we just mentioned earlier and that that is the best place to use capital to get a better really strong return.

And so right now as Dan talked about, we're in that range in the Tier 1 leverage ratio and it's 7% to 8% and feels good about that. So if deposit strategy changes, if something doesn't work, or if capital again continues to be brought on board at the rate it is with earnings, at some point we may have to make a decision about it but I guess in some ways we're just not in a rush to think about the dividend strategy, it's best to invest it in the core business.

Chris McGratty -- Keefe, Bruyette & Woods -- Analyst

That's helpful. Thanks a lot.

Operator

And our next question comes from Gary Tenner from D.A. Davidson. You can go ahead.

Gary Tenner -- D.A. Davidson -- Analyst

Thanks. Good afternoon. I just wanted to ask a follow-up question in terms of the PE and venture capital lending business. You know it is about 80% of your sequential-quarter growth this quarter, it's starting to get pretty close to 50% of total loans outstanding.

I know the experience has been great historically, and, of course, the momentum is very strong right now, but how do you think about it from a risk perspective? Maybe not as much credit, although I'd love to hear your thoughts there, but earnings-risk perspective, if there were to be a slowdown or any sort of disruption in the fundraising market?

Greg Becker -- President and Chief Executive Officer

Yes, this is Greg, I'll start at a high level and you're right, it's roughly 47% right now and as we've said we're comfortable going up to a higher number and I think last quarter I talked about maybe in the mid-50s. And so you're right, we feel very good about the credit quality. We've done a lot of sensitivity around, or call it stress testing of the portfolio what could happen with private equity and venture capital.

Of the two buckets though, I think it's really important to look at venture capital versus private equity, venture capital tends to be more volatile and more tied to the economy, so if the economy started to slow, if there's an issue on the funding side, we've seen that historically where it actually slows down more quickly but the private equity portfolio, the private equity, not venture capital, is incredibly diversified. And so you can look at it both domestically and globally.

And so from a sensitivity perspective, based on industry and based on geography, it's very broad-based, and so we don't believe that it actually has the level of sensitivity that people may think. It doesn't certainly act, or we don't believe it will act, like venture capital as we look at it. So that's how we think about it from a volatility perspective. I don't know, Marc or Dan, if you guys have anything else to add.

Daniel Beck -- Chief Financial Officer

So I'd think just to echo something Greg said, first we think the credit quality in that says the portfolio has been excellent historically, we think it will remain so and so that wouldn't be a concern for us as it approaches that 50% of loan balances.

I think the other thing to note and Greg touched on this a little bit in his comments is that we continue to see good borrower count growth in other segments of our portfolio and then growth in other segments like a private bank and in life sciences for example. It certainly is the hope that at some point the liquidity, the massive liquidity out there notwithstanding, that we'll see those new borrowers we are adding start to borrow more and take some pressure off of that growing concentration of private equity and venture capital.

Greg Becker -- President and Chief Executive Officer

And maybe I would add one more thing which is as a percentage of the loan portfolio, we're spending a lot of time on that but I think it's really the percentage of the overall what I'll call earnings of the company, you have to look at that. And what I mean by that is tech banking is an example of the headwinds of deposits and liquidity but if you look at the amount of both core fee income that's being driven by that team as well as the deposit and total client funds it has been incredible growth.

And so we have to look at it holistically and look at the drivers of the business and remember even on the loan side with private equity, it's been the key part of our loan growth but it's also one of the lowest margins as well. And so we look at it holistically and the revenue part is the best way that we look at it. And so it's much more broad-based revenue growth than you would look by just focusing on the lending.

Gary Tenner -- D.A. Davidson -- Analyst

OK, that's a great color. I appreciate it. And just one other question related to that topic, mechanically are the lines with the private equity funds or venture capital funds, do most of them have multiple lines where they have a primary line and secondary line, and if that's the case, how would you kind of view yourselves as positioned there?

Greg Becker -- President and Chief Executive Officer

This is Greg. Almost all our capital are call lines. In fact, Marc may say none. Excluding this, there is one credit facility.

So you don't have in these capital call loans, a senior and a junior strip. They typically only have one, one, one lender and if it's multiple lenders, it's under one agreement and so you're kind of very impressive passive. I think that's right and I am hard pressed to think of any instances where there's more than one loan to a fund borrower. The only thing I would add is that there are firms and funds and so it's very typical to have a given firm have multiple funds under management and then, of course, multiple credit lines or a credit line for each of those funds if that helps.

Gary Tenner -- D.A. Davidson -- Analyst

That's great. Thanks for taking my questions.

Operator

And our next question comes from Matthew Keating from Barclays. Matthew, you can go ahead with your question.

Matthew Keating -- Barclays -- Analyst

Great, thank you. I have a follow-up question on the international business, if we think back several years ago SVB invested a lot of time, effort and energy in Asia, more and in particular in China and more recently we hear a lot more about the U.K., Germany, and Canada. And so maybe if you could just provide an update on obviously with the banks already going out of India but what's going on in China at this point and what is the recent trade issues had on your level of investment there? Thanks.

Greg Becker -- President and Chief Executive Officer

Yes. So a couple of things. One is there are two parts to our business in Asia. There's the SVB Asia which is taking deposits and having clients from offshore Chinese firms usually funded by the U.S.

venture capitalists. So they have a parent company deposits put into a Cayman account and then it get downstreamed in the country to a local account in mostly China. That business is doing really well. We also have capital call lending to Asian venture capital and private equity firms that we do out of Hong Kong that is also doing exceptionally well.

So the deposits and loans from that business mostly deposit heavy, so those deposits are very strong when it's a $6 billion to $7 billion.

And then on the lending side, you're at anywhere it varies but you're kind of at that $500 million to $650 million, in that range. Now that's that business so that's doing really well. The joint venture, I'll start with the comment that when we highlighted this at the beginning we said we're going to be in that in that business, we said we're taking a very long-term approach long-term view about and we think that the only way to do it.

That being said, the joint venture is doing really, really well. We have roughly $1 billion of assets in that joint venture. For the last couple years it's grown 75% to 100% per year from a growth perspective in loans and deposits, right? The reason we're not spending much time talking about it is because, again, we're a 50-50 joint venture No. 1; No.

2, on a bottom-line basis, it's kind of at that kind of breakeven or modest loss perspective, so the contribution to our numbers isn't that great.

And said do we believe we're adding value there, do we believe we're on the right track or the right plan that we put in place several years back and the answer is yes. We're actually ahead of that plan that we put in place and we believe we're headed to what we want to get to which is to build out a bank like Silicon Valley Bank in China.

Your last question was, do we see the impact of what's going on and the answer is from a trade perspective the answer is no, not at this point.

Matthew Keating -- Barclays -- Analyst

Great, thank you for that color and then just following up Greg on your comments about trying to keep your clients longer. I'm just more curious if you have any milestones around those initiatives in terms of progress, whether it's the number of corporate finance type clients or the number of clients that were growth clients and now are transitioning to that next bucket, how can we kind of monitor assess the banks progress on that front? Thanks.

Michael Descheneaux -- President, Silicon Valley Bank

I think maybe something you might want to look at Matt is on the loan concentrations for example maybe one data point you can point to, so loans greater than $20 million is typically indicative of say a larger client that we may have you'll hold on to and so you can kind of see their growth year over year where we've gone from about $9 billion or so to $12 billion of the loan. So you might want to focus more on the software and hardware clients. So you'll definitely see some growth, use that as a data point to kind of show that we have been making progress on holding on to our clients longer and then also attracting some larger clients.

Matthew Keating -- Barclays -- Analyst

Great. Thanks very much, Mike.

Operator

And our next question comes from David Chiaverini from Wedbush. You can go ahead with your question David.

David Chiaverini -- Wedbush Securities -- Analyst

Hi, thanks. You mentioned that you're building out the private banking capability with a key strategic hire and leadership hire, is the team fully in place or is some additional spending in hiring required in that segment?

Greg Becker -- President and Chief Executive Officer

Yes, this is Greg. I'll start. So as you know, we've talked about for a few years that we believe we have such a great opportunity in the private bank and in emerging I would say in the wealth management space as well. We have I would say do a really good job of executing on the strategy that we had in place which is you look at the loan growth we have in a private bank, we can look at the deposits in the private bank and new client acquisition the private banks it actually has been very, very good but I would also say that we look at and say we're still only scratching the surface on the potential.

And so we said let's take a look as good as our team is let's go out in the market and try to find somebody that has just a lot of different experiences. And so what Yvette has is she has worked at many different firms to include the last one being Capital One, and so she's got a broad background. She also is rooted in technology, so if you look at her background she actually came from a development background and then has spent the last kind of 15, 20 years more in running these type of businesses.

We believe that combination along with the team we have in place is going to allow us to grow that business. Now the question specifically do we believe we're going to be making investments in that space and the answer is yes is it going to be noticeable that we would have to come out and say look there's something specific in this quarter or the next few quarters. I don't believe so.

I think it will be in the in the run rates that we're going to be able to provide you over the coming years but it's not something that is going to happen tomorrow. So the answer is yes to investment. It will be our view is enough to make sure we capitalize an opportunity but it won't be so significant that I would say that investors or analysts are going to be paying a lot of attention to it.

David Chiaverini -- Wedbush Securities -- Analyst

Great. That's all I had. Thanks very much.

Operator

And that concludes our question and answer session. I would like to turn the call back to CEO Greg Becker for closing comments.

Greg Becker -- President and Chief Executive Officer

Great, thanks, Darryl. Just to wrap up, obviously, we had another great quarter really across the board, raised our outlook for the second time this year. We're really pleased with the results and obviously, our clients are doing well, the markets are doing well, and I think the team is executing really effectively on our strategy.

As always, the success that we're having is really a function of two things; one is our clients and I get the opportunity to spend an incredible amount of time with our clients, meeting with them face to face and hearing what they're doing and I have absolutely no doubt in my mind that our clients are doing things that are just no other bank gets the exposure and gets to work with clients the way we do. And that that is truly inspiring, it inspires me and it inspires our employees, and so clients are No. 1.

No. 2 was our employees because whether it's the feedback I get directly about our employees and how they engage with our clients, so their commitment to our clients, and what I see first-hand, I think we have the best employees, and they are incredibly dedicated to the clients and dedicated to SVB. So the combination of two things allows us to be as successful as we are and we certainly feel good about the outlook. So with that, I just want to thank everyone for joining us and just wish everyone a great day.

Thanks.

Operator

And thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

Duration: 69 minutes

Call Participants:

Meghan O'Leary -- Head of Investor Relations

Greg Becker -- President and Chief Executive Officer

Daniel Beck -- Chief Financial Officer

Ken Zerbe -- Morgan Stanley -- Analyst

Steven Alexopoulos -- J.P.Morgan -- Analyst

Marc Cadieux -- Chief Credit Officer

John Pancari -- Evercore ISI -- Analyst

Michael Descheneaux -- President, Silicon Valley Bank

Aaron Deer -- Sandler O'Neill and Partners -- Analyst

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Brett Rabatin -- Piper Jaffray -- Analyst

Jared Shaw -- Wells Fargo Securities -- Analyst

Tyler Stafford -- Stephens -- Analyst

Christopher York -- JMP Securities -- Analyst

Chris McGratty -- Keefe, Bruyette & Woods -- Analyst

Gary Tenner -- D.A. Davidson -- Analyst

Matthew Keating -- Barclays -- Analyst

David Chiaverini -- Wedbush Securities -- Analyst

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