SVB Financial Group Q3 2022 Earnings Call Transcript

Participants

Corporate Executives

• Meghan O'Leary, Head of Investor Relations
• Greg Becker, President & Chief Executive Officer
• Daniel Beck, Chief Financial Officer
• Marc Cadieux, Chief Credit Officer
• Michael Descheneaux, President, Silicon Valley Bank

Analysts

• Steven Alexopoulos, JPMorgan Chase & Co.
• Ebrahim Poonawala, Bank of America Co.
• John Pancari, Evercore ISI
• Casey Haire, Jefferies Financial Group Inc.
• Jared Shaw, Wells Fargo Securities
• Bill Carcache, Wolfe Research
• Andrew Liesch, Piper Sandler & Co
• Manan Gosalia, Morgan Stanley
• Gary Tenner, D.A. Davidson & Company
• Christopher McGratty, KBW
• David Smith, Autonomous Res
• Jon Arfstrom, RBC Capital Markets

Presentation

[Operator]

Please standby, we're about to begin. Good afternoon, ladies and gentlemen, welcome to SVB Financial Group's Q3 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode, and please be advised that this call is being recorded. After the speakers' prepared remarks, there will be a question-and-answer session. [Operator Instructions]

And at this time. I will turn things over to Ms. Meghan O'Leary, Head of Investor Relations. Please go ahead ma'am.

[Meghan O'Leary, Head of Investor Relations at SVB Financial Group]

Thank you, Bo, 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 third quarter 2022 financial results. And will be joined by other members of our management team for the Q&A.

Our current earnings release, slides, and CEO letter, have been filed with the SEC and are available on the Investor Relations section of our website.

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 this 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.

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

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Great. Thanks, Meghan. Before we go into questions, I just want to comment briefly on both our business and the market kind of the environment we're all - we're all dealing with just briefly. Let me start with the business. We continue to see strength and momentum in our underlying business, and it's really important to highlight, given all of the other factors that are going on. We got global fund banking term sheets near-record highs, new client acquisition at all-time highs, strong credit quality, record core fee income and investments in our four core businesses are driving better and deeper client relationships and really allowing us to give good advice to our clients as they weather this economic uncertainty. We've had great client feedback from the rollout of our digital banking platform SVB Go. And we hit some international milestones, the UK subsidiarization and opening up our Stockholm office, that's going to help fuel our long-term growth. These are just a few of the many good things happening at SVB.

And clearly at, the same time, the markets are undeniably challenging. Market volatility arising from a number of global issues has reduced private and public investment in the innovation economy. And this investment reduction combined with elevated cash burn is clearly pressuring deposit flow. This economic uncertainty is making it very difficult to predict when the balance of investment and lower cash burn will normalize. But we firmly believe the global innovation economy is the best market, it will get back on-track and our four business platform is well-positioned to capitalize on its return. In the meantime we're well-equipped to manage these conditions with a strong liquid balance sheet, with healthy levels of capital, recession tested management, a resilient client base, and, it's important to note that we remain steadfast in our focus on our strategy and laying the foundation for our long-term growth.

So, with that, I turn it over to the operator to open up the line for questions. Thanks.

Questions and Answers

[Operator]

Thank you, Mr. Becker. [Operator Instructions] We take our first question this afternoon from Steven Alexopoulos at JPMorgan.

[Steven Alexopoulos, Analyst at JPMorgan Chase & Co.]

Hey, good morning everyone or good afternoon, actually.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Hey, Steve.

[Steven Alexopoulos, Analyst at JPMorgan Chase & Co.]

Sorry. I wanted to start with a big-picture question. So asset sensitivity has declined but, you're still asset-sensitive and when your rates basically moving up across the entire curve, which would suggest you should see some benefit potentially to NIM but, definitely in the NII. But in the slides you're guiding to both NII and NIM have now peaked. Can you just explain for us what's happening in the real-world, that your asset sensitive model is not capturing, because the guidance almost looks like you are a liability sensitive bank here.

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

Yeah, Steve, it's Dan. So if, you think about what's happening we continue to have asset sensitivity on a static balance sheet, but we continue to with shift from noninterest bearing to interest bearing and the use of off-balance sheet client funds on the balance sheet, driving interest bearing to have higher levels of interest cost from an end-of-quarter perspective. So while we are still getting some benefit from a net interest income sensitivity perspective, that shift in mix to higher levels of interest bearing in this environment, while we're seeing higher cash burn and slower deployment in the venture space is driving weaker net interest income on a quarter-to-quarter basis.

[Steven Alexopoulos, Analyst at JPMorgan Chase & Co.]

Okay. Dan, if we stay with that line. The chart on Slide 9, shows inflows and outflows which was pretty helpful. Are the outflows now at 2 times historical rates, simply because more capital was raised during QE that's now getting spent or is something else going on there? And what level of VC spend do you need to see this stabilize?

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yes, Steve, it's Greg. I'll - let me take that. It clearly is a function in the first part of the money that was raised last year, right. And, when you think about it, the reason that you didn't see an immediate jump in all the way to max cash burn is it does take a while, once you've raised, all of the funds that raised last year to kind of hire the people to start spending the money and there'll be a - there'll be a lag the other way as well. And that's probably one of the things in the last quarter that we didn't - we didn't fully appreciate that there would be a lag there. And so it's hard to answer your question, because, you have to look at both of those variables, you have to look at the variable of dollars going in, inflow, but, it's both public and private, and then you have to look at the cash burn. So as we think about that, this quarter was basically going back to the early part of 2020 from a level perspective. And if you go back and look at that if we get back to, it will take a little while to get back to that same level of cash burn. We certainly think that cash burn will continue to drop, but it may take two, three, four quarters to kind of get back to a similar level to the way it was last year. I think it's important to note that roughly, we're capturing the, same amount of venture capital that we have in the past which is roughly 50%. You can go back and look at the analysis and say over the last several years, when on average when venture capital gets invested in a quarter, we capture roughly half of that and that was still true this quarter. And so, it's really almost more of a function of - of the cash burn that is the level. In my view, I think we're going to start to see kind of this bounce the ground at this level of venture capital, where it's at probably at this level for the next several quarters. So what we really need to see is an improvement in cash burn. We expect it, but to be honest that crystal ball is a little bit cloudy exactly when it will happen and what degree.

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

Yeah, the last thing to, say, Steve, is that the chart that you're looking at in the earnings deck is on total client funds. So, the other thing that we have an opportunity for is to continuing to direct both from off the balance sheet to on as well as for net new money that's being deployed, more towards the balance sheet to offset higher levels of cash burn. So just, something else to take into consideration, yes, that ends up costing a bit more from a liquidity perspective. But when you're growing, lending that's exiting the quarter close to 5% from an all-in yield perspective, that's still accretive.

[Steven Alexopoulos, Analyst at JPMorgan Chase & Co.]

Okay. Thanks, and just final question. So on the fourth quarter deposit guide, the $168 billion to $172 billion, what VC investment level are you assuming to get into that range? And what's the assumed mix of interest bearing and noninterest bearing? Thanks.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah, so Steve, again, what we think about for deposits is two things, macro venture deployment and client cash burn. In this quarter we saw total cash or client - venture deployment, 40% lower than Q2. If we're taking a look at our expectation to get to that higher-end of the range, we would assume that we have venture funding environment similar to Q3 with the continuation of higher levels of cash burn and continued success in bringing deposits from off our balance sheet on. The lower end of that range assumes a lower - even lower deployment environment, take another 20% down from there, continuation of higher levels of cash burn, and less success in bringing those off-balance sheet funds to on the balance sheet.

In terms of noninterest bearing to interest bearing, we're probably exiting the year in that 45% to 50% range.

[Steven Alexopoulos, Analyst at JPMorgan Chase & Co.]

Okay. Okay. Thanks for taking my questions.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yes, thanks, Steve.

[Operator]

Thank you. We go next now to Ebrahim Poonawala of Bank of America.

[Ebrahim Poonawala, Analyst at Bank of America]

Hey, good afternoon.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Hey, Ebrahim.

[Ebrahim Poonawala, Analyst at Bank of America]

I guess, just following-up on this cash burn dynamics, so, if we assume that VC investment pace doesn't change from here, I think as you pointed out, Greg, this is still the best year ex 2021, so let's say if this is the new normal for the next several quarters or years. Do you have any visibility when that cash burn actually meaningfully slows down, where you stop seeing outflows in deposits as a result? And secondly, is it fair for us to assume that unless we see a big shift in VC investments, the mix shift will worsen in terms NII and noninterest bearing total, and we could see NII decline sequentially for the next few quarters? Thank you.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah, Ebrahim, let me answer the first part of the question and then Dan can take the second one. The visibility into the cash burn is a function of kind of what we see on a day-to-day basis and then we extrapolate that out. What we saw is a slight decline in the third quarter roughly 7%, 8% and it's again it's not a precise math. And what I would expect to see, it would be logical to see, I should say, is a similar decline over the next few quarters on a quarterly basis. So your question is, if you keep it steady, keep it flat at the level of investment, when would we start to see, kind of I'll call flattening, you're probably looking at about three quarters out before you kind of get to that breakeven from a flow perspective. I haven't done the back-of-the-envelope math, but I would say it's quite generally in that - in that area. And so that's what we track. But what are the other kind of communications and engagement that we have with clients that Venture Capital is to kind of get a sense on that.

Here's what I would - here's how we would think about that. If you go back six months ago, the sentiment was definitely of concern. Three months ago it was of greater concern and now if you spend time and talk to a venture capitalist and we just had a a global CFO Summit for VC and PE, this sentiment has gotten - gotten worse. And so the message that they are communicating are cut your burn now it's serious, even if you've got a lot of cash, and we'll see how long this last and to be more defensive. That that dialog would imply that you should see cash burn continue to come down. I just would say we were a little bit surprised, or maybe I was that it didn't come down even more quickly last quarter which is why, again, it's just a little bit difficult to predict.

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

And then to follow-on to the question in terms of the NII and net interest margin dynamic, depending on how much of new money we can capture onto the balance sheet, which is generally cheaper, we may have to continue to replace dollars that are rolling-off in deposits with off-balance sheet solutions, which are higher cost for sure. If I think of the overall deposit beta associated with those accounts, those are in the much higher range than what's sitting on the balance sheet with the rest of - with the rest of the deposits. At the same time to the extent that we continue to see good strong lending, and we're picking-up close to 90% on commercial bank lending of the beta from higher rates. So that could be some offset, but generally speaking, I continue to see some pressure on net interest margin and net interest income as we head into 2023 in total cash burn, and overall deployment start to - start to rebound.

[Ebrahim Poonawala, Analyst at Bank of America]

Okay. And then just tied to the liquidity, so you have a ton of excess liquidity off-balance sheet and ability to borrow, is there any scenario where you see liquidating some part of the securities book to provide funding and just kind of restructuring the balance sheet to meet as opposed to bringing on higher cost deposit funding on?

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah, I mean I think the way to think about it as you mentioned the balance sheet is really flexible. We have been using and talked about earlier, off balance sheet deposits, and the wholesale funding effectively supported by the securities book to bridge and I think this is really important this period of time that we're out of balance between cash burn and the amount that's being deployed into the market. First and foremost the good news is that the securities portfolio is constantly paying down, so we're roughly seeing about $3 billion a quarter, even as interest rates increase to meet those funding needs. Additionally, as the burn in funding comes into balance, that's going to open up opportunities. We've talked about this before, where we're going to be able to drive more expensive funding off the balance sheet to reduce wholesale funding and that will provide opportunities to reduce the overall cost of funding. So with all that, we've got a lot of flexibility with the portfolio.

At the same time, we're always considering ways to optimize the balance sheet. We've got a considerable available-for-sale portfolio and we've demonstrated that we've been opportunistic with sales like that in the past.

[Ebrahim Poonawala, Analyst at Bank of America]

Got it. Thanks. I'll requeue.

[Operator]

Thank you. We go next now to John Pancari at Evercore.

[John Pancari, Analyst at Evercore ISI]

Good afternoon.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Hey, John.

[John Pancari, Analyst at Evercore ISI]

And just back to the cash flows coming off the bond book, Dan, I know you mentioned, you just said that $3 billion per quarter in pay-downs, is that the total cash flows coming off the bond book per quarter? Or is there maturities that add to that?

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

Yeah, that's the regular maturity. As we go on in time we'll start to see some of the bullet maturities come down from a treasury perspective. But the regular principal paydowns in the portfolio at least over the next four quarters or in that $3 billion, $3 billion range. And again as we get out into later duration with some of the treasury portfolios, you'll start to see some of those bullet maturities come through.

[John Pancari, Analyst at Evercore ISI]

Okay. And that $3 billion that is on a fully extended basis?

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

Yeah, that's, I mean, considering where rates are now and the mortgage portfolios, we think we have most, the vast majority of the extension in there.

[John Pancari, Analyst at Evercore ISI]

Okay. And if you could just remind us again in, you know, I know, [Indecipherable] if you give me more specific at what rates you're bringing on the off balance sheet deposits, like for example this quarter, what - at what rate where they brought on?

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

Yeah, so as a reminder those off balance sheet deposits that we're bringing on, they generally sit in money fund accounts that they're getting effectively money - money market rates. In order for us to effectively drive the product that allows for us to have those deposits both on or off the balance sheet we have to pay a bit of a spread to that. So we're paying in the, let's call it high-2s range associated with that, and they do have higher beta, obviously, than the rest of the organic deposits that are sitting naturally on the balance sheet.

[John Pancari, Analyst at Evercore ISI]

Okay, got it. And again of the $91 billion of the off balance sheet funds, again how much of that is eligible to be bought back on?

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

Yeah, we'd say it's roughly half, a lot of it is obviously client appetite and we always obviously do the right thing from a client perspective and how we're paying from a rate perspective. But, you know, we'd say it's roughly half from an availability perspective.

[John Pancari, Analyst at Evercore ISI]

Okay. And then last thing for me, just in terms of the, you mentioned the optionality in the available for sale portfolio to held to maturity portfolio just, there are you still have the of thinking that there is no intent to restructure that portfolio in any way?

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

There is no intent to restructure the held to maturity portfolio.

[John Pancari, Analyst at Evercore ISI]

Okay. Okay, all right. That's it for me. Thanks.

[Operator]

Thank you. We'll go next now to Casey Haire at Jefferies.

[Casey Haire, Analyst at Jefferies Financial Group]

Thanks. Good evening, guys. I wanted to touch on the borrowings, $10 billion last quarter, and another $10 million early in this quarter. Just what - what is the - what kind of term and what kind of rate are you guys paying on the borrowings side? Yeah.

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

Yeah, so, Casey, it's Dan. So, we've got a mix on right now of short-term borrowings in the 3% range. We've termed some of that out less than a year maturity some of that's in the high 3s, low 4% range.

[Casey Haire, Analyst at Jefferies Financial Group]

Okay, and that so that all - all of that $20 billion, the $10 billion in 3Q and $10 billion in October and the $10 billion in the second quarter?

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

So, in terms of balances at the end of the quarter, I believe we're sitting at $13 billion, something along those lines. So of that we're sitting with I'd say 60% less about close to a year than the rest of the short term.

[Casey Haire, Analyst at Jefferies Financial Group]

Okay, got you. All right. And then just on the - on the, so Slide 11, you the, the NIB, the deposit beta assumption and the DDA. It sounds like this - this VC, you know, the - the cash burn is going to take a couple of quarters to normalize. So, I mean what's this, I'm assuming that in 2023, the DDA mix is is moving consistently lower, and then the deposit beta is as obviously marching higher.

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

Yeah, you know, again as we were mentioning earlier, the visibility on exactly how that's going to play out is harder to come by right now. I think there will continue to be downward pressure on the noninterest bearing to interest bearing proportion, as we continue to see higher rates. That being said, at some point, I think you'll get to some stability add up those levels. So, you know, I think as we go further into 2023, it will be a little bit more clear where that reduction effectively slows down and I expect that we're going to really start to see a slow-down of that mix and shift from noninterest bearing to interest bearing in 2023, just how much and exactly where at bottoms out that - that's a question mark. But I think we're going to see that slow here at a fast pace in rates. I think for those that are activated that - that's already happening.

[Casey Haire, Analyst at Jefferies Financial Group]

Okay, understood. And just last one for me, the fee guide for fourth quarter ex SVB Securities, $345 million to $360 million, that's a pretty healthy step-up from the third quarter run-rate which I have at $316 million. What's driving that?

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

Yeah, we continue to see the benefits of higher interest rates come through on the spread on the off-balance sheet accounts. And we'll continue to see spreads improve - spreads improve there. So, that's - that's really the impact of the rate increase on client fund fee income coming through, as well as continuing to see good progress against our other payment categories, if you look at cards, if you look at FX, and the rest of our activities. So it was granted, Greg mentioned our clients are really active in the midst this slower deployment environment and we're seeing that come through in that business activity.

[Casey Haire, Analyst at Jefferies Financial Group]

Okay, thank you.

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

Thanks, Casey.

[Operator]

Thank you. We go next now to Jared Shaw at Wells Fargo.

[Jared Shaw, Analyst at Wells Fargo Securities]

Hey, good afternoon.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Hey, Jared.

[Jared Shaw, Analyst at Wells Fargo Securities]

I guess when you look at the companies that have taken that down around VC financing, are there any characteristics that stick out? And I guess for those that haven't, how long - how long they hold out before they certainly need to take, you know, take the lower lower pricing? Are we closer to a point of capitulation for that?

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah, Jared, the biggest challenge with, I guess, the private market repricing at a - at a fast pace is the fact that many of them raised so much money last year. So you don't, you know, if you've got three years' worth of cash, you're not running out to raise more money at a down round. And so it takes - it takes time for them to do that. Now there's some things that are going to be happening coming up, right, so at the end of the year you have to start looking at valuations, because how you do price stock options and things like that, so there we could see and probably will see more of a capitulation on valuations back to whatever the market is at the end of this year, which will filter through in kind of Q - Q1-ish into 2Q, because sometimes there's a little bit of a lag. So, right now, we're not seeing a lot of down rounds. We're seeing more structured rounds, which means you keep the same price, but maybe you do a 2x liquidation preference. From a return perspective, we're seeing more of that. But it's going to happen. We're going to see more of it and there is always a debate when you sit down with a group of venture capitalists, some would say never do a structured round, take your your medicine and lower the valuation to the market, raise money when you can, etc., and others would say protect valuation if you can keep it and do a structured round, it's not the end of the world. So we're just seeing that all play out. But that's - that's the main reason they end-up with a fair amount of cash right now, so they don't have to come to that conclusion yet. But more of it's coming.

[Jared Shaw, Analyst at Wells Fargo Securities]

Okay, okay. That's helpful. Thanks. And then, I guess, for the investments that you are all holding on and your own investments, how are you treating valuations, if there hasn't been recent rounds to give that market check? Or are you having to wait can take your lead from the company or are you proactively making any marks on your own?

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

Yeah, Jared, it's Dan. On the warrant positions, we get pretty regular updates and, you know, we're really current with those valuations, where we have at least, you know, some gap is in these - the liquid position. So we took a reserve last quarter associated with those and still had additional losses come through on some older funds, where we had the ownership position this - this quarter. So and as we, think about it on a go-forward basis, we would expect valuations on the illiquid positions, they're going to be updated as a part of fund of audits through Q4 and probably all the way through Q2 and that's where we may see additional losses. So think of that as a pool of about $600 million worth of the liquid positions. We could see kind of order of magnitude, anywhere between 5% and 10%, of that, you know, in the form of write-downs over the next the next couple of quarters. Now, those losses may be offset by the occasional warrant gain, which we continue to see, but that I think is going to be a more limited quantities at this point in the cycle.

[Jared Shaw, Analyst at Wells Fargo Securities]

Okay, thank you.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah.

[Operator]

Now, we'll go next now to Bill Carcache at Wolfe Research.

[Bill Carcache, Analyst at Wolfe Research]

Thank you. I had a question on credit. You maintain the ACL ratio at 77 basis points, it looks like but lowered the downside weighting from 55% from 40%, can you discuss what's behind the lower downside scenario weighting? Any color on that?

[Marc Cadieux, Chief Credit Officer at SVB Financial Group]

Yeah, this is Marc Cadieux. I'll start on that. And so in a nutshell, the most recent Moody's forecast was much more aligned with our view on the economic outlook and at the same time after the forecast, which included an assumption of 50 basis point Fed increase we saw 75 and - and so our conclusion in so many words was that closer, but not quite and so we took our weighting of the S3 scenario down, but not all the way back to standard weights. We kept it at 40% for this quarter.

[Bill Carcache, Analyst at Wolfe Research]

Understood. And separately, how would you characterize the demand that you're seeing from customers seeking funding from you relative to your capacity to provide funding? How are you determining customers that gets funding? Maybe discuss a little bit on how competitive that lending environment is?

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

This is, Greg, maybe I'll start and then Mike Descheneaux may want to - may want to add. So, there is no question we've seen an uptick in demand and that should be expected, right. So, last year we are definitely competing more with the healthy amount of venture capital that was coming in. Yes, well it was a competitive market, but definitely the major competition last year was equity. This year clearly it's harder to raise money and so or people want insurance policies, so debt is now back in vogue, so the level of activity, new clients coming on board and delivering term sheets, the pipeline, the backlog, and this is specifically in the technology and life science area, across all loan products, it's actually - has been very healthy.

Your question on, at least, I'll interpret it. Do you have the capacity to fill all the orders that you may want to? And the answer is, absolutely. As Dan said, we have the capacity in a lot of different ways to bring those of loans onto the balance sheet, assuming they are qualifying, of course, that's a given. And when they do, we're able to fill those orders. So we see no slowdown in that. And it's actually one of the many areas that excites us about what we're seeing, what we saw so far especially in the third-quarter, so take a look at the growth in the third quarter, and what we look at as we roll into - get ready to roll into 2023.

Mike, would you add anything to that?

[Michael Descheneaux, President, Silicon Valley Bank at SVB Financial Group]

I think, Greg, I would just go down the - the questions around, are we - I potentially interpreted, are we doing anything different or are being more cautious about who are we lending to and be a little bit more particular? And the answer is, of course, yes, right. I mean we've been through economic downturns. Our teams are very well versed and to kind of what to recognize them to pay attention to in terms of companies that might be more vulnerable to this during this economic cycle. So, for example, things such as the consumer area are definitely one area that we're going to keep an eye on, because given this macroeconomic backdrop and inflation, certainly that's an industry or sector that's going to take some sort of hit or impact. So those are, I mean, just one example kind of how we're thinking through and looking at the different sectors, where we need to be a little bit more thoughtful than had if the economic environment was stronger.

[Bill Carcache, Analyst at Wolfe Research]

All right, thanks. Maybe if I could follow up with one last one. Along those lines, to the extent that, you're putting up that growth, if you think about the yields that you're generating on those kinds of loans and if we think about the sort of funding environment persisting and perhaps the money market type rates that is sort of being your cost of funds, maybe is the spread and sort of the NII accretion, is it reasonable that you'd expect that essentially, that you would be asset sensitive? I think there's certainly a concern that some liability sensitivity could chime through give some of the dynamics that we're seeing. I know you're not giving guidance, but if you could just speak to that broader dynamic and any overall thoughts would be helpful?

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah. Bill, I'll start and Mike may want to add. if we just kind of look at the dynamics of the loan portfolio, again we've talked about it, over 90% of that is variable rate and we're seeing on the commercial lending side in particular, close to 90% beta coming through on that lending. So, I feel good as our entire funding base is certainly not going to reprice at those levels, but not just will we continue to maintain a strong spread there, but we'll actually be able to continue to grow it. So I feel - I feel good about that now on the lending side. Mike, anything to add?

[Michael Descheneaux, President, Silicon Valley Bank at SVB Financial Group]

Yeah, I think maybe we're getting to is the level of impact of competition on the spreads, you know, there is the pricings that we - the premium we can actually have. And so for a long time, as we all know it was competitive, by the way it's still very, very competitive. And so there was a drive or a trend downwards, spreads were getting tighter. I would say in this environment, particularly in, you know, certain segments of the loan portfolio, the downward pressure is not as significant as banks and other - other non-banks are being very conscientious of their cost of funds. And so I think that is, I wouldn't say it's abated, but nonetheless if there is a lot less downward pricing pressure on the spreads there, and a little bit more neutral at this time, may be neutral to some parcel bias to build spreads expanding a bit.

[Bill Carcache, Analyst at Wolfe Research]

That's very helpful. Thanks for taking my questions.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah.

[Operator]

Thank you. We go next now to Andrew Liesch at Piper Sandler.

[Andrew Liesch, Analyst at Piper Sandler & Co]

Hey, good afternoon, and thanks for taking the questions. Just on the increase in criticized loans here, and they are still relatively small as a percentage of the overall. But is that concerning to you? And I guess what - what drove that?

[Marc Cadieux, Chief Credit Officer at SVB Financial Group]

Hi, it's Marc. I'll start. Concerning in so-far as any increase in criticized loans would be concerning. And I think reflective of the environment and worsening projected economic conditions that we were talking about. At the same time as mentioned earlier in the call, our clients continue relative to past cycles, continue to have more robust liquidity. And so while we are seeing that uptick in criticized, as you could see in the third quarter, we did not see it translate to an increase in nonperforming loans or loan losses.

[Andrew Liesch, Analyst at Piper Sandler & Co]

Got it. Is it issues if of any individual credits or just a general just downgrade of, I guess, targets in the portfolio that drove this?

[Marc Cadieux, Chief Credit Officer at SVB Financial Group]

Yeah, I'd say it is concentrated in our tech and healthcare portfolio as you would imagine. And, generally speaking, there probably falls more heavily on our investor dependent segments.

[Andrew Liesch, Analyst at Piper Sandler & Co]

Got it, alright. And then just kind of a housekeeping item on the client investment fees. Are those capped at all? Or do you continue to benefit, no matter how fast or how high the Fed raises rates?

[Marc Cadieux, Chief Credit Officer at SVB Financial Group]

Yeah, based on some good work by Mike and the teams over the last couple of years they've renegotiated those agreements, so we don't, you know, see a cap on those client investment fees. Now, with where rates are, the expectation is that every 25 basis points is probably another basis point versus the like 1.5 to 2 that we got at the beginning of the rate cycle. But that it is not capped and expect about a basis point for every 25 basis-points.

[Andrew Liesch, Analyst at Piper Sandler & Co]

Got it. All right that covers my questions. Thanks so much.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah.

[Operator]

And next we'll go to Manan Gosalia at Morgan Stanley.

[Manan Gosalia, Analyst at Morgan Stanley]

Hi, good afternoon. Most have been answered at this stage, but, you know, just - I just sort of recognize there's no, not enough visibility for 2023. But I was wondering if you can just talk about the NII guide for next quarter as we've jumping off point for 2023? Maybe there will be some more weakness if funding levels remain weak, but I was wondering if you could help quantify that? And also on the flip side, if you see a rebound in the back-half of the year of, in terms of funding and cash bond, how quickly do you think the NIM and NII can pick-up in that environment?

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

Yeah, as we talked, it's Dan. As we talked about, it's really hard with looking at, you know, the past Q4, where cash burn rates are and the potential for venture deployment to fluctuate to have a really good sense of exactly, you know, where net interest income is going to at least start the year or, you know, jump off for 2023. I do think as long as we're in this environment, we're unbalanced between venture funding and we are - and the amount of cash burn, that we're going to continue to see some net interest margin compression. We're going to have offsets to that by the higher rates and the beta that we're seeing come through on the lending side of the bulk. But that remixing and the use of those off balance sheet funds again, where we've got flexibility to drive them off the balance sheet, now could continue to deteriorate margin and net interest income, just how much, I think that, you know, the degree of certainty, as we get into the first-quarter, I think it's going to obviously be a lot more clear.

Now, how quickly can it rebound? If we can - if we start to see cash burn slow appreciably and not just the stabilization of deployment, some effective increase, and at some public market activity has come in, you can start to see inflows on the deposit side pretty quickly and from there as we mentioned in the past, we have the ability to start to either pay down our borrowings very quickly or redeploy some of those funds off the balance sheet. So, exactly how and when that's going to play out is a question mark. But as soon as it does start to happen, we're going to be able to really start to move the balance sheet quickly. So, probably not a super satisfying answer, just because there's a little bit more uncertainty. But hopefully you'll understand all the pieces.

[Manan Gosalia, Analyst at Morgan Stanley]

Yeah, no, now that's helpful. And then typically cash burn gets worse before it gets better, because you have to spend on severance, renegotiating contracts, etc. Is that already part of the story on cash burn this quarter? I was curious what you're hearing from the private companies?

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah, this is Greg. It's all factored into that one chart that we show. So, it's a part of the - it's part of the equation that is built-in there.

[Manan Gosalia, Analyst at Morgan Stanley]

Okay, great. And then, apologies if I missed this. But how much of the sweep accounts were brought on in 3Q and what does the deposit guide for 4Q assume?

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

So, in total dollars, we brought in in the quarter roughly let's call it $5 billion, $6 billion, something along those lines. And then in terms of the fourth quarter guide, like I said to the higher side it assumes that we continue to be successful albeit to a smaller degree on those off balance sheet to on balance sheet, to the extent that the, you know, that's lower, and you see a slower deployment and faster cash burn that could get us to the lower end of that guidance range for the fourth quarter.

[Manan Gosalia, Analyst at Morgan Stanley]

All right, Greg. Thank you.

[Operator]

We'll go next now Gary Tenner at D.A. Davidson.

[Gary Tenner, Analyst at D.A. Davidson & Company]

Thanks, good afternoon. On Slide 24, the client investment or the client funds slide, you know, one of the considerations you pointed out was, China policy changes and the investment in Chinese companies, I just wonder if you could maybe talk to China policy changes and any considerations as it relates to your strategy over there?

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

So this is, Greg, I'll start and I know Mike will - Mike will add to it. From a policy perspective, you can look at, there's a whole variety of things, and that's problem, it changes kind of on a - on a monthly, weekly quarterly - quarterly basis. And so part of the policy is just the overall stance. At a very-high level, I think about the policy and positioning US versus China and the softening or the weakening of the relationship, so that's at a high policy level. Mike may be able to give you some color on any changes in the local market, local that is happening that would cause it on the ground. My view is just kind of at the macro level. So, Mike, what would you add to it?

Mike, I think you're still on mute.

[Michael Descheneaux, President, Silicon Valley Bank at SVB Financial Group]

Yeah, thank you, Greg. I think, you know, certainly the policy changes impact all of us, right. I think the key focus is kind of the US-China relationship there. And a good relationship will certainly help, overall, but again it's still too early to tell where that is actually trending. But setting policy aside, I think really the bigger picture the bigger question is just on the impact of COVID and in the supply-chain on how that's going to impact different business and level of activities that we actually have in terms of engaging with China, as we all know economically it had been extremely challenging that certainly affected our business levels and business activities in Asia overall. So this is something that to continue to watch, but no direct impact one way or the other, it's really just more about the macro picture here at this juncture.

[Gary Tenner, Analyst at D.A. Davidson & Company]

Okay, I appreciate that. I wasn't sure if that was referencing President Xi's more recent comments or not. And then just lastly from just there's been several questions about cash burn and obviously it's not slowed to the degree that, you know, it would benefit the balance sheet yet. Why is that? I mean, you know, I think we were at this point for several years it seems like we're kind of scale at any cost and money was free or close to it. How much has the, I guess, you know, the founders or the start-up, you know, CEOs of some of these companies, how has that population changed maybe over the last decade, potentially, slowing the ability or desire to kind of really focus on that? Has - have things not sunk it yet on that side?

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah, I mean there's - some of that does exist. So, I will acknowledge that. But I - how I think about it is, how I answered an earlier question about this, which is, if you raise a bunch of money, let's say, you've raised three years or four years worth of cash and your business is as you think about it, you're still, the business itself is fundamentally sound although it definitely is going to be harder for you to raise money in the future. Part of this is, the mentality is why would you cut back costs, you know, lay people off and make the hard policy, if you really believe that you're going to be need to add value, grow revenue, and maybe grow back into your valuation over time, right, it's the old saying, you can't cut your way to growth or you can't what cut your way to success. And so some of that exists. And it's a function of, again, a lot of is how much money has been raised. So, but if you fast forward, you know, six more months, or nine more months, these are for the companies that have raised, you know, a long runway, you know, they're going to have to look at either cutting - cutting burn or raising more money at that time, and there's a lot of companies out there that are still performing well, right. Sometimes it feels like, the, you know, that, you know, oh my gosh, all of these companies must be really having a hard time, but that's not the case. There's a lot of them that they're doing really well.

One last point, again, if you go back two years ago, and you read what happened in COVID, it was cut your cost, it's going to be a horrible situation, they did that. And then literally 90 days later, or 120 years later, people said, no, we were just kidding, let's go back and, you know, raise more money and increase your burn. So the COVID, call it fake out was definitely one that, I think is still in some of their - some of their heads. So, do I think it's fully set and across the board? The answer is, no. That's just a little bit of - it's a complex answer, because it's every company is slightly different, but those are just kind of the reasons that you wouldn't see or we haven't seen yet more of a dramatic reduction in burn.

[Gary Tenner, Analyst at D.A. Davidson & Company]

Thanks. I appreciate the answers.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah.

[Operator]

We'll go next now to Chris McGratty at KBW.

[Christopher McGratty, Analyst at KBW]

Great, thanks. Dan, just on the - on the average balance sheet, the bond yields, can you just speak to me a little bit about the yield at which stuff thrown off? I know you gave the dollars.

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

Yeah.

[Christopher McGratty, Analyst at KBW]

But the yield has kind of stuck around 2% on the [Indecipherable] around 170, and I was just wondering what the outlook is for those?

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

Yeah, all then yields, exiting the quarter roughly 2%. There were some pickup in yield from lower premium amortization in the quarter that just so everybody remembers is also part of the decline in our expectations from Q3 to Q4 net interest income. Net net at least as we look ahead we are going to see some lower yielding securities roll off, but I think we're going to - going to bump around, you know, this 2% range here, for - for at least the next couple of quarters.

[Christopher McGratty, Analyst at KBW]

Okay. And then just maybe Greg a question on charge-offs, if - as you see the world unfolding, if we are going to get losses like I'd love - I'd love a little bit of color on when you think the cadence would be? You built the reserve last quarter and a little bit less this quarter, but when do you - when do you think the losses will come?

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Hey, Chris, well, [Indecipherable] I could help answer that question, Marc is probably better.

[Marc Cadieux, Chief Credit Officer at SVB Financial Group]

Yeah, so I think consistent with all of the uncertainty that we've talked about and the challenges with guiding for 2023, I think that's a really very difficult question to answer. I think it really comes back to again that robust average client liquidity, the ability to last longer and wait for that reopening, so to speak for capital to start flowing again. And I think generally speaking, when I think about the portfolio and where borrowers are positioned going into whatever is next relative to past downturns, yes, more of these companies will probably out last, right, they'll live long enough to make it to that other side than it might otherwise have been the case. But exactly when the losses come, if they come, is just too difficult to predict at this point.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

And to add to what Marc is saying, Chris, if you take a look at the reserve, the area that we continue to expect if we were to see those types losses, to see at the moment to be in the investor dependent early stage, and if you think about the 2008 cycle and we're not saying that we would see something to that magnitude, that was about a 6% through the cycle loss. So, we're, you know, at a 4.3% range right now. So feeling pretty, pretty good relative to what that could look like in that type of environment from a reserve perspective. So even if those losses were to come, we've got sufficient reserves associated with it. And the last thing to say is, just again, remember the overall lending portfolio and the concentration of capital call it lending and our loss experience there, and when thinking about to the extent that we have a slower period what that might look like in terms of credit losses.

[Christopher McGratty, Analyst at KBW]

Great, thanks.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah.

[Operator]

And we'll go next now to Ebrahim Poonawala at Bank of America.

[Ebrahim Poonawala, Analyst at Bank of America]

Hey, thanks for taking my question again.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah.

[Ebrahim Poonawala, Analyst at Bank of America]

Just one question in terms of big-picture, Greg. So a lot of what's happened in terms of the earnings outlook for the company is marketing, and is there anything from a self-help perspective, and I don't mean to say you need to cut your way to prosperity, as you earlier mentioned. But is there anything either balance sheet wise expense-wise, capital-wise that you could do to alleviate some of this market-driven pressure on the earnings and ROE?

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah, let me - let me talk about it from an expense perspective, and then Dan or Mike may want to talk about it balance sheet, anything else, and Mike. But when I think about the expenses, Ebrahim, and as you know I've been here a long-time. And from that standpoint, the long-term belief in the potential of the opportunity we have in front of us hasn't changed. And in so doing anything that is going to truly diminish the growth potential of the outlook in, you know, a year or two years or three years, just doesn't - doesn't make sense. It may - it may feel - feel good or feel better in a short - in a short run, but it won't be helpful in the long run. And as you know we're playing the long game. But what are we doing. One area that we're taking a look at it over the last two years, we've had a lot of growth as we build out our LFI or risk-based function, large financial institution functions, and a lot of that actually came with the backs of professional services, because we need to build out the kind of core foundations. Now as we brought in the expertise in the form of FTEs, we expect and it's going to happen faster than - than even maybe was planned, and we're going be reducing professional services in a very aggressive way. We've got an incredibly talented team that we brought on-board to help us manage through this, I feel really good about it. And so what are you - what are we going to do, we're going to again, the biggest thing is reducing professional services as aggressively as possible. That's probably the biggest thing. The second part is, really taking a hard look at our overall the projects that we have and that project portfolio, and prioritizing. And so which ones are the more of a nice to have versus the must haves, and from that standpoint, we're looking at that and we'll make some changes there and - and not eliminate it, not - not - not say never, but it will definitely be put on the back burner as we concentrate our efforts and focus on the highest priority must do initiatives, which include things like the digitalization of the platform. So I mentioned in my opening comments, we've been rolling out our digital banking solution and have gotten some incredibly positive feedback, and we're going to continue to invest in that rollout more of that over the course of 2022 and 2023. So we have to continue to make those investments. So, while the expense growth will be lower than it would have been, it's still going to be healthy as we roll into 2023. I don't know Dan or - would add anything.

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

I'll start and Mike might have something to add. I think we just, you know, one I have to add-on expenses, continue to go back to 1,800 new clients added to the platform in the quarter, $0.5 trillion worth of dry powder raised from a venture capital perspective. Those are all opportunities for us in the medium and the long term. So for us to really material pull back on investment, you know, even cut investment levels, probably cuts into that opportunity here over the longer term. So we're still really bullish on that, you know at some - at some point we anticipate to play through the franchise. So that's number one.

Number two, Ebrahim, talk about capital in the balance sheet, yes, in this environment we clearly see some reduction in the overall size of the balance sheet. Growth in the Tier-1 leverage ratio is now close to 8% at the bank. As we, think about next year slowing cash burn potentially seeing venture investments start to pick-up, we could very quickly start to be in a spot, where you need that capital to be able to support growth on a go-forward basis so. I think that's the way we're thinking about it is that, you know, we've got that pent-up amount of venture flows waiting to be deployed and at some point it will be good to have the capital to be able to support that.

Last but not least, we talked about the investment securities portfolio, the available for sale investment securities portfolio, to be really clear, like we have no intent to restructure that portfolio at this - at this time. We're always evaluating options and that's the thing about this balance sheet is that it's highly flexible and we've got a lot of options associated with it.

[Christopher McGratty, Analyst at KBW]

That's helpful. Thank you.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah.

[Operator]

We'll go next now to David Smith at Autonomous.

[David Smith, Analyst at Autonomous Res]

Great. Thanks for taking my questions. With SVB Securities, does the current environment change how you're thinking about the build out there in terms of when they have to bring on new products or higher new teams?

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yes, this is, Greg. So the answer is, no. It's an interesting, I guess a couple points. So one, is when you look at the league tables, which is obviously one of the ways you kind of look at how you're - how you're investment bank is doing, the team is doing an exceptionally good job, right. So, put the market aside, and you just say, how are they competing in the market, but again everybody else. And they are moving up the league table - tables or they are definitely hanging in where they have been getting and getting their fair share, and in some cases more than their fair share. The team is truly exceptional and I see it when I go out in the market and spend time with them, meeting with clients, and that's number one. Number two what we had set out for the beginning of the year for our goal for the tech and life science team, that we - the team with all the people we brought onboard, we are going to exceed that, hit or exceed those numbers. And so that's pretty amazing given what's happened in the environment, so we feel really good about that.

The addition of MoffettNathanson, again, what an amazing group of people and research analysts and they have exceeded their expectations. The people we've added on the research side to that from a tax perspective were also leaders in the market. And the final piece is this, one of the benefits of a slow down in the ECM market is that it actually gives that team that really strong team time to spend time with the high-profile companies, who will be going public when the market opens back up. And those meetings are going really well. And so I believe that when that market does open up, and it will eventually, it always does, we're going to be really well-positioned, So, if anything, to be honest, I've gotten more - more bullish on not only the team of people, but the whole platform, but how well it's collaborating with our commercial bank, that collaboration is actually going exceptionally well. So, I feel - I feel good about it.

Would I like the market to be more cooperative? The answer is, of course. But while we're waiting for it to cooperate more, these those guys are also working awful hard to get it set up for our future success.

[David Smith, Analyst at Autonomous Res]

Great. And just to dig in on the securities yield a little bit more. I appreciate the guide for 1.70% to 1.75% in the fourth quarter. When we talk about bumping around the 2% range for the next couple of quarters, is there going to be like a - is it - are you seeing any kind of meaningful uptick going into 2023? Or is it kind of the lower side of the 2% more likely for the next couple of quarters given the fourth quarter starting point?

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah, I think where we're exiting 2023, absent additional hedging opportunities, as we think there's still room for us to effectively put on some received float swaps to open up additional asset sensitivity and the rate environment that we're in. That could provide some additional upside should rates be higher than what we're seeing from a forward curve perspective. So, I think there's some opportunity there. I think over the next couple of years you will see some roll-off of you even lower-yielding securities, but to see a material bump-up now off at those levels, you know, I don't see that in the actual cash flows coming off of the portfolio.

[David Smith, Analyst at Autonomous Res]

Thank you. And lastly as it looks like we're getting closer to peak Fed rates, is there a point where you start to work to reduce the variable component of the lending book or otherwise protect asset yields in some way?

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah, I think, well, first and foremost, I think the positioning right now for us is to continue to look to open up the position for asset sensitivity, at the same time, you know, we are contractually, you know, as we've done in the past, continuing to embed loan for - it's just as a matter of practice associated with that portfolio. That benefited us quite significantly. And one-way protection here during the 20 - post 2018 moved down, and I had expected to do the same thing. So that's the vast majority of the protection that we're putting on right now. If we see Fed funds in short-term rates move even further, you'll see us find ways to continue to manage, you know, down rate sensitivity. But as folks know, with the higher levels of interest bearing accounts, right now, with the off to on balance sheet moves, that's another great source of potential protection to downside rates for us.

[David Smith, Analyst at Autonomous Res]

Great, thank you.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Thank you.

[Operator]

And we'll take our last question from Jon Arfstrom at RBC Capital Markets.

[Jon Arfstrom, Analyst at RBC Capital Markets]

Hi. Thanks for hanging on till the end. Just a follow-up on that last question, would a Fed pause, help hurt or no difference, in terms of the outlook, how would you answer that?

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

Well, I'll start. Greg, might want to add. I think if you take a big step back and look at venture deployment there is like we talked about $0.5 trillion worth of funding that's been raised. What - what's really stopping that from being deployed is this disconnect in valuations between public equity markets that are bouncing around and the expectation, of these amazing founders that are, you know, and management teams that are working on these ideas. To the extent that we see Fed pause or a slowdown, I think that's going to start to bring some more certainty into public market valuations, reduce that uncertainty and really start the flow of funding across our markets. So, one just, I think from a broad deployment perspective that would be helpful. Second, rate - a pause or slowdown from a rate perspective, could be helpful just as we continue - we would see likely additional deposit flows that are coming in. But in terms of the asset sensitivity, a pause won't really help it at this point.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah, the only thing I would add is, is just and Dan said it, but it's just the market is looking for certainty, they're looking for clarity. And there isn't any right now. So a clear pause and the data that backs up a clear pause, I think could be well received by the - by the market. Right now, you know, if you talk to, you know, five different economists, what they would say what their crystal ball would be is, literally all over the map. And that clearly isn't helpful right now.

[Jon Arfstrom, Analyst at RBC Capital Markets]

Okay. I appreciate that. And then just speaking of uncertainty, but when I do the crude calculations on your fourth quarter guidance, I get, in the midpoint, excluding gains or losses, somewhere between $5.50 and $6.00 for EPS, and correct me if I'm wrong. But do you feel like that represents a trough for you for EPS or is that just too difficult to predict from here?

[Daniel Beck, Chief Financial Officer at SVB Financial Group]

As we mentioned earlier, there are so many variables that are going to drive what things look like heading into the first quarter, and the level of cash burn, what we're seeing in venture deployment, and ultimately, the interest bearing to noninterest bearing mix, those are going to be big drivers of what happens from here from a net interest income perspective. So, that could be pressured down and or we could see stability of cash burn, you know, materially reduce this from here. So, to go any further than that, I think would go against us not giving the guidance.

[Jon Arfstrom, Analyst at RBC Capital Markets]

Okay. All right. Thank you very much.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Yeah.

[Operator]

Thank you. Mr. Becker, I'll turn things back to you, sir, for any closing comments.

[Greg Becker, President & Chief Executive Officer at SVB Financial Group]

Great. Thank you. Thanks, again, everyone, for joining us. I know for people on the East Coast, it's so - you're in the - you're into the evening, so I appreciate it. I'm going to close where I started the conversation by really highlighting this. I know most of the discussion was about the balance sheet inflows, and clearly that's an very important part of the equation. I just want to make sure that it's not lost on everyone, and that's both investors, but also our employees, who are listening, all of the great things that are going on inside the platform. Again, I talked about it, you can look at record term sheets and all-time high and client funds and strong credit quality, and there's so many really positive things that are going on, we just can't lose sight of that. There's no question on the uncertainty that's out there, and as we've said, based on the fact that we're not going to give guidance into 2023, that uncertainty, clearly is difficult to predict exactly what will happen, although clearly we've given you some frameworks to think about for 2023 and what the - what the drivers will be, and how that could change.

First off, as always, I want to thank all our clients. I mean, it's - they're stressed right now, a lot of them are, and to be honest, that's where I think we end up shining, because we've been through a lot of cycles before and we know how to support them, and we know what the right questions to ask, and - and how to be there for them in difficult times. And so honestly, from my standpoint, it's challenging it is to be in an environment like this. It is actually enjoyable to sit down and really add value to clients. So, that's the first. Thanks.

The second one, the bigger one maybe even is, thanks to the employees. We've got a lot of people that have been here for a long period of time. We've added a lot of new people that haven't been through cycles. And people are working really hard. And sometimes you don't feel that you're getting all the - all the recognition and benefit from all the hard work. So, on behalf of the Executive Team, on behalf of the Board, I just want to say a huge thanks to the team for doing such a great job, supporting our clients, weathering this difficulty and uncertainty, and hanging with us as we navigate it.

So, with that, have a great rest of your day and thanks again for joining us.

[Operator]

[Operator Closing Remarks]