What happened

Shares of SVB Financial Group (SIVB.Q -16.67%), the parent company of Silicon Valley Bank, were nearly 16% lower as of noon today after the bank reported disappointing earnings results for the second quarter of the year.

So what

SVB, which caters heavily to the start-up, tech, venture capital (VC), and private equity communities, reported diluted earnings per common share of $5.60 for the quarter on total revenue of $1.53 billion. Earnings fell woefully short of what analysts had been projecting for the quarter, missing estimates by $2.08.

The miss was driven by a rise in the provision for credit losses, which management attributed to deteriorating economic conditions. Furthermore, fee income of $362 million fell by about 30% from the first quarter.

In prepared remarks, CEO Greg Becker said, "The [initial public offering] window remained closed and, in contrast to the first quarter when public market declines mostly affected later-stage companies, companies across all investment stages experienced challenges to accessing liquidity, with total VC investment declining 24% quarter over quarter."

Becker added: "The reduction in client fundraising, coupled with increased burn rates – as companies with already accelerated burn rates took proactive actions to reduce future spending – pressured Q2 balance sheet growth."

As a result of second-quarter challenges, management lowered its full-year outlook for average loan growth, average deposit growth, and net interest income growth.

Now what

The lower guidance and big earnings miss explain the sell-off. Management probably should have been a bit more proactive or conservative about the macro environment in the first quarter of the year instead of continuing to raise guidance.

But this is an unprecedented time for the sectors that SVB caters to, so it was likely not easy to predict.

The bank still has a great business, has further developed its model, and has a history of strong credit performance. It has been through several crashes and recessions, and I still like the stock for the long haul.