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As filed with the Securities and Exchange Commission on March 5, 2003

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2002
OR

For the transition period from                                      to                                     .

Commission File Number: 33-41102

SILICON VALLEY BANCSHARES
(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (408) 654-7400

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý No o

        The aggregate market value of the voting stock held by non-affiliates of the registrant, as of June 30, 2002, the last business day of the registrant's most recently completed second fiscal quarter, based upon the closing price of its common stock on such date, on the Nasdaq National Market was $1,203,441,259.

        At January 31, 2003, 38,912,748 shares of the registrant's common stock ($0.001 par value) were outstanding.

Documents Incorporated by Reference

TABLE OF CONTENTS

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PART I

ITEM 1. BUSINESS

General

        Silicon Valley Bancshares is a bank holding company and a financial holding company. Our principal subsidiary, Silicon Valley Bank, is a California state-chartered bank and a member of the Federal Reserve System. Silicon Valley Bank's deposits are insured by the Federal Deposit Insurance Corporation. Our corporate headquarters is located at 3003 Tasman Drive, Santa Clara, California 95054 and our telephone number is 408.654.7400. When we refer to "Silicon Valley Bancshares," or "we" or similar words, we intend to include Silicon Valley Bancshares and all of its subsidiaries collectively, including Silicon Valley Bank. When we refer to "Silicon," we are referring only to Silicon Valley Bancshares.

        Silicon Valley Bank's profitability, like most financial institutions, is primarily dependent on interest rate differentials. In general, the difference between the interest rates paid by Silicon Valley Bank on interest-bearing liabilities, such as deposits and other borrowings, and the interest rates received on its interest-earning assets, such as loans extended to its clients and securities held in its investment portfolio, comprise the major portion of its earnings. Silicon Valley Bank also provides a wide variety of fee-based financial services to its clients, including private label client investment and sweep products, foreign exchange products and deposit services. Over the long term, Silicon Valley Bank seeks to generate strong operating results by leveraging its lending practice to obtain warrant agreements to purchase equity in the technology and life sciences companies of the future.

        Our strategy is to increase our revenues by marketing our full range of financial products and services to clients and venture capital industry contacts we originally developed through our commercial banking business. In addition to our commercial banking services, we engage in venture capital fund and direct equity investment activities, fee-based merger and acquisition services and venture capital fund and fund of funds management. We believe that our ability to successfully cross-sell our five lines of banking and financial services to our clients is one of the strengths of our business model.

        We serve more than 9,500 clients across the country through 27 regional offices. We have 11 offices throughout California and operate regional offices across the country, including Arizona, Colorado, Florida, Georgia, Illinois, Massachusetts, Minnesota, New York, North Carolina, Oregon, Pennsylvania, Texas, Virginia, and Washington. We serve emerging-growth and mature companies in the technology and life sciences markets, as well as premium wineries. We believe our focus on specialized markets and extensive knowledge of the people and business issues driving them, that we provide a level of service and partnership that contributes to our clients' success.

Business Overview

        Silicon Valley Bancshares is organized along five lines of banking and financial services as follows:

Commercial Banking

        We provide cash management services including deposit services, collection services, disbursement services, electronic funds transfers, and online banking through SVBeConnect.

        International banking services include trade services, foreign exchange services, export trade finance, and international cash management.

        We also provide investment and advisory services through our broker-dealer, SVB Securities, which includes mutual funds, fixed income securities, and investment reporting and monitoring.

        Our lending services include traditional term loans, commercial finance lending, and structured finance lending.

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Investment Banking

        We provide merger and acquisition and corporate partnering services through our broker-dealer subsidiary, Alliant Partners.

Private Banking

        We provide a wide array of loan, personal asset management, mortgage services, trust and estate planning tailored for high-net-worth individuals. We also provide investment advisory services to these clients through our subsidiary, Woodside Asset Management, Inc.

Merchant Banking

        We make private equity and venture capital fund investments, international alliances and manage two limited partnerships: a venture capital fund and a fund of funds.

Other Business Services

        We provide Web-based business services, professional services, and executive placement services. Client Exchange™ is our online bulletin board, resume, and assets exchange service, and BenchmarkPro gives our clients the opportunity to see the financial performance of companies relative to their industry.

        In each of the industry sectors we serve, our products and services are tailored to the client's business life cycle, from early stage through maturity.

Industry Sectors

Technology and Life Sciences

        We serve a variety of clients in the technology and life sciences industries and markets. A key component of our technology and life sciences business strategy is to develop relationships with these clients at an early stage and offer them banking products and services throughout the business life cycle. We have cultivated strong relationships with venture capital firms, many of which are also clients, providing us access to many other potential clients.

        Our early-stage clients generally keep large cash balances in their deposit accounts and usually do not borrow large amounts under their credit facilities. The primary source of funding for most early-stage clients is equity from venture capitalists and public markets. Lending to this market typically involves working capital lines of credit, equipment financing, asset acquisition loans, and bridge financing.

        In the past few years, we expanded our target market within the technology and life sciences sector by adding an extended suite of financial products and services attractive to later-stage companies. From this initiative, we established our corporate technology practice, a network of senior lenders in every geographic region in which we operate, focused solely on the specific financial needs of our more mature clients. Today, we can comfortably address the financial needs of all companies in our target market, whether they are entrepreneurs with innovative ideas or multinational corporations with hundreds of millions of dollars in sales.

        Our technology and life sciences clients generally fall into the following industries:

Communications and Electronics

        The world's growing demand for faster, more convenient communication is driving entrepreneurs to create new telecommunications services, the infrastructure for delivering them and advanced electronics for accessing them. Companies in these fields face intense competitive pressures from established global corporations. Additionally, these companies are challenged with the complexity of mastering rapidly evolving optical and semiconductor technology. We help these companies gain access to the capital they need to bring their innovations to market and gain the critical mass required for long-term success.

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Software and Services

        Through our software and services practice, we are a full-service provider of banking solutions for companies in the Web-enabled applications, system integration and enterprise software industries. We help software companies capitalize on new opportunities with speed and financial flexibility by providing a wide range of credit facilities, international services and other support.

Life Sciences

        Our life sciences practice serves companies in the biotechnology, drug discovery, medical software, and medical devices industries. The biotechnology industry includes companies involved in research and development of therapeutics and diagnostics for the medical and pharmaceuticals industries. The medical devices industry encompasses companies involved in the design, manufacturing, and distribution of surgical instruments and medical equipment.

Premium Wineries

        Our premium wineries practice has become a leading provider of financial services to the rapidly expanding U.S. premium wine industry. We focus on vineyards and wineries that produce grapes and wines of the highest quality.

Industry Sectors Exited During 2002

        For many years, Silicon Valley Bancshares pursued a strategy of niche expansion that translated into reaching beyond the boundaries of technology and life sciences sectors, to penetrate what we thought to be under-served markets. In late 2002, we decided to focus our resources on the most profitable industry sectors served by us, which are technology, life sciences and premium wineries. As a result of narrowing our focus, we deliberately exited three niches: real estate, media, and religious lending. We will continue to service our existing real estate, media and religious niche loans until they are paid-off. However, we will not seek any new lending opportunities in these niches. We expect the termination of these niches to enable us to focus on more profitable aspects of our business and improve overall profitability.

Equity Securities

        We frequently obtain rights to acquire stock in the form of warrants in certain client companies as part of negotiated credit facilities. We also make investments in venture capital funds and direct equity investments in companies. As of December 31, 2002, we held 1,818 warrants in 1,355 companies, had investments in 244 venture capital funds, and had private equity investments in 25 companies. Additionally, we had private equity investments in 24 companies through our venture capital fund, Silicon Valley BancVentures, L.P. and made investments in 20 venture capital funds through our fund of funds, SVB Strategic Investors Fund, L.P.

Consolidated Managed Merchant Banking Activities

        In 2000, we formed SVB Strategic Investors, LLC, the general partner of SVB Strategic Investors Fund, L.P. SVB Strategic Investors Fund, L.P. raised approximately $135.3 million in committed capital to invest as a limited partner in top-tier venture funds, leading regional venture funds, and venture funds with a unique niche. We have committed capital of $15.0 million to SVB Strategic Investors Fund, L.P., representing an ownership interest of 11.1%, of which $3.9 million has been funded as of December 31, 2002. Effective January 1, 2003, the agreement of limited partnership of SVB Strategic Investors Fund, L.P. was amended to reduce the amount of capital that can be called by 10% to $121.8 million as a result of reductions in the size of the underlying venture capital funds. Thus, our committed capital that can be called was reduced to $13.5 million.

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        In 2000, we formed Silicon Valley BancVentures, Inc., the general partner of Silicon Valley BancVentures, L.P. Silicon Valley BancVentures, L.P. raised $56.1 million in committed capital to make private equity investments in emerging growth technology and life sciences companies throughout the United States. We have committed capital of $6.0 million to Silicon Valley BancVentures, L.P., representing an ownership interest of 10.7%, of which $2.0 million has been funded as of December 31, 2002.

Business Combinations

        On October 1, 2002, we acquired substantially all of the assets of Woodside Asset Management, Inc., an investment advisor firm, which has approximately $200 million under management for 70 clients. We are offering Woodside Asset Management's services as part of our private banking services. Additionally, as part of this acquisition, Silicon Valley Bancshares obtained the general partner interests in two limited partnerships, Taurus, L.P. and Libra, L.P., with total assets aggregating $12.4 million. We have less than a 1% ownership interest in each of these funds. The remaining ownership interest represents limited partners' funds invested on their behalf by the general partner in certain fixed income and marketable equity securities. However, due to our ability to control the investing activities of these limited partnerships, we have consolidated the related results of operations and financial condition into our consolidated financial statements as of and for the three-month period ended December 31, 2002. This acquisition did not have a material impact on goodwill and is not expected to materially impact our earnings in the short-term.

        On September 28, 2001, a subsidiary of Silicon Valley Bank, SVB Securities, Inc., completed the acquisition of Alliant Partners, an investment banking firm providing merger and acquisition and corporate partnering services. Our investment banking business continues to do business under the name "Alliant Partners." See "Item 8. Consolidated Financial Statements and Supplementary Data—Notes 2 to the Consolidated Financial Statements—Business Combinations." On October 1, 2002, Alliant Partners was sold from Silicon Valley Bank to Silicon. This transfer allows Alliant Partners to operate under less restrictive bank holding company regulations and increasing our capital ratios at Silicon Valley Bank.

Competition

        The banking and financial services industry is highly competitive. Our current competitors include other banks and specialty and diversified financial services companies that offer lending, leasing, and other financial products to our customer base. The principal competitive factors in our markets include product offerings, service and pricing. We believe we compete favorably in all our markets in all of these areas.

Employees

        As of December 31, 2002, we employed approximately 1,019 full-time equivalent employees. None of our employees are represented by a labor union, and our employee relations are considered good. Competition for qualified personnel in our industry is significant, particularly for client relationship manager positions and officers and employees with strong relationships with the venture capital community. Our future success will depend in part on our continued ability to attract, hire, and retain qualified personnel.

Supervision and Regulation

        Our operations are subject to extensive regulation by federal and state banking regulatory agencies. This regulatory framework is intended primarily to protect Silicon Valley Bank's depositors and the federal deposit insurance fund from losses and is not for the benefit of our stockholders. As a bank holding company and a financial holding company, Silicon is subject to the Federal Reserve Board's supervision and examination under the Bank Holding Company Act, or BHC Act, as revised by the Gramm-Leach-Bliley Act, discussed below. Silicon Valley Bank, as a California-chartered bank

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and a member of the Federal Reserve System, is subject to primary supervision and examination by the Federal Reserve Board through the Federal Reserve Bank of San Francisco and the Commissioner of the California Department of Financial Institutions. The following summary describes some of the more significant laws, regulations and policies that affect our operations. This summary is not intended to be a complete listing of all laws that apply to us. Any change in the statutes, regulations, or policies that apply to our operations may have a material effect on our business.

Gramm-Leach-Bliley Act

        On November 12, 1999, the Gramm-Leach-Bliley Act, or GLB Act, was signed into law, which significantly changed the regulatory structure and oversight of the financial services industry. The GLB Act repealed the provisions of the Glass-Steagall Act that restricted banks and securities firms from affiliating. It also revised the BHC Act to permit a qualifying bank holding company, called a financial holding company, to engage in a full range of financial activities, including banking, insurance, securities, and merchant banking activities. It permits financial holding companies to acquire many types of financial firms without the prior approval of the Federal Reserve Board. On November 14, 2000, Silicon became a financial holding company.

        The GLB Act provides expanded financial affiliation opportunities for existing bank holding companies and permits other financial services providers to acquire banks and become bank holding companies without ceasing any existing financial activities. Previously, a bank holding company could only engage in activities that were "closely related to banking." This limitation no longer applies to bank holding companies that qualify to be treated as financial holding companies. To qualify as a financial holding company, a holding company's subsidiary depository institutions must be well capitalized and have at least satisfactory general, managerial and Community Reinvestment Act examination ratings. A nonqualifying bank holding company is limited to activities that were permissible under the BHC Act as of November 11, 1999.

        The GLB Act changed the powers of national banks and their subsidiaries, and made similar changes in the powers of state bank subsidiaries. The GLB Act permits a national bank to underwrite, deal in and purchase state and local revenue bonds. It also allows a subsidiary of a national bank to engage in financial activities that the bank cannot, except for general insurance underwriting and real estate development and investment. In order for a subsidiary to engage in new financial activities, the national bank and its depository institution affiliates must be well capitalized; have at least satisfactory general, managerial, and Community Reinvestment Act examination ratings; and meet other qualification requirements relating to total assets, subordinated debt, capital, risk management, and affiliate transactions. Subsidiaries of state banks can exercise the same powers as national bank subsidiaries if they satisfy the same qualifying rules that apply to national banks. For state banks that are members of the Federal Reserve System like Silicon Valley Bank, prior approval of the Federal Reserve is required before a bank can create a subsidiary to capitalize on the additional financial activities empowered by the GLB Act.

        The GLB Act also reformed the overall regulatory framework of the financial services industry. In order to implement its underlying purposes, the GLB Act pre-empted state laws that would restrict the types of financial affiliations that are authorized or permitted under the GLB Act, subject to specified exceptions for state insurance laws and regulations.

        Separately, the GLB Act imposes customer privacy requirements on any company engaged in financial activities. Under these requirements, a financial company is required to protect the security and confidentiality of customer nonpublic personal information. Also, for customers who obtain a financial product such as a loan for personal, family, or household purposes, a financial company is required to disclose its privacy policy to the customer at the time the relationship is established and annually thereafter. The financial company must also disclose its policies concerning the sharing of the customer's nonpublic personal information with affiliates and third parties. If an exemption is not available, a financial company must provide consumers with a notice of its information-sharing practices that allows the consumer to reject the disclosure of its nonpublic personal information to

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third parties. Third parties that receive such information are subject to the same restrictions as the financial company on the reuse of the information. Finally, a financial company is prohibited from disclosing an account number or similar item to a third party for use in telemarketing, direct mail marketing, or other marketing through electronic mail. Financial companies were required to be in compliance with these consumer privacy requirements no later than July 1, 2001.

        As part of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the "USA Patriot Act"), Congress adopted the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 (IMLAFATA). IMLAFATA amended the Bank Secrecy Act and adopted certain additional measures that increase the obligation of financial institutions, including Silicon Valley Bank, to identify their customers, watch for and report upon suspicious transactions, respond to requests for information by federal banking regulatory authorities and law enforcement agencies, and share information with other financial institutions. The Secretary of the Treasury has adopted several regulations to implement these provisions. Silicon Valley Bank is also barred from dealing with foreign "shell" banks. In addition, IMLAFATA expands the circumstances under which funds in a bank account may be forfeited. IMLAFATA also amended the BHC Act and the Bank Merger Act to require the federal banking regulatory authorities to consider the effectiveness of a financial institution's anti-money laundering activities when reviewing an application to expand operations. Silicon Valley Bank has in place a Bank Secrecy Act compliance program.

Capital Standards Applicable to Silicon and Silicon Valley Bank

Silicon

        The Federal Reserve Board has adopted minimum risk-based capital guidelines intended to provide a measure of capital that reflects the degree of risk associated with a banking organization's operations for both transactions reported on the balance sheet as assets and those recorded as off-balance sheet items. These include transactions, such as commitments, letters of credit, and recourse arrangements. Under these guidelines, dollar amounts of assets and credit-equivalent amounts of off-balance sheet items are adjusted by one of several conversion factors and/or risk adjustment percentages. The Federal Reserve Board requires bank holding companies generally to maintain a minimum ratio of qualifying total capital to risk-adjusted assets of 8% (10% to be well capitalized) and a minimum ratio of Tier 1 capital to risk-adjusted assets of 4% (6% to be well capitalized). The Federal Reserve Board also requires Silicon Valley Bancshares to maintain a minimum amount of Tier 1 capital to total quarterly average assets, referred to as the Tier 1 leverage ratio. For a bank holding company in the highest of the five categories used by regulators to rate banking organizations, the minimum Tier 1 leverage ratio must be 3%. For all other institutions the ratio is 4% (5% to be well capitalized). In addition to these requirements, the Federal Reserve Board may set individual minimum capital requirements for specific institutions at rates substantially above the minimum guidelines and ratios. Under certain circumstances, Silicon must file written notice with, and obtain approval from, the Federal Reserve Board prior to purchasing or redeeming its equity securities. See "Item 1. Business—Supervision and Regulation—Prompt Corrective Action and Other Enforcement Mechanisms" for additional discussion of capital ratios.

        Silicon is subject to rules that govern the regulatory capital treatment of equity investments in nonfinancial companies made on or after March 13, 2000, and that are held under certain specified legal authorities by a bank holding company. Under the rules, these equity investments will be subject to a separate capital charge that will reduce a bank holding company's Tier 1 capital and, correspondingly, will remove these assets from being taken into consideration in establishing a bank holding company's required capital ratios discussed above. Silicon's capital ratios exceeded the well-capitalized requirements, as defined above, at December 31, 2002. See "Item 8. Consolidated Financial Statements and Supplementary Data—Note 22 to the Consolidated Financial Statements—Regulatory Matters" for Silicon's capital ratios as of December 31, 2002.

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        The rules provide for the following incremental Tier 1 capital charges: 8% of the adjusted carrying value of the portion of such aggregate investments that are up to 15% of Tier 1 capital; 12% of the adjusted carrying value of the portion of such aggregate investments that are between 15% and 25% of Tier 1 capital; and 25% of the adjusted carrying value of the portion of such aggregate investments that exceed 25% of Tier 1 capital. The rules normally do not apply to unexercised warrants acquired by a bank as additional consideration for making a loan or to equity securities that are acquired in satisfaction of a debt previously contracted and that are held and divested in accordance with applicable law.

Silicon Valley Bank

        The federal banking agencies require a minimum ratio of qualifying total capital to risk-adjusted assets of 8% (10% to be well capitalized) and a minimum ratio of Tier 1 capital to risk-adjusted assets of 4% (6% to be well capitalized). In addition to the risk-based guidelines, federal banking regulators also require banking organizations to maintain a minimum Tier 1 leverage ratio. For a banking organization rated in the highest of the five categories used by regulators to rate banking organizations, the minimum Tier 1 leverage ratio must be 3%. For all other institutions the ratio is 4% (5% to be well capitalized). In addition to these uniform risk-based capital guidelines and leverage-ratio requirements that apply across the industry, the regulators have the discretion to set individual minimum capital requirements for specific institutions at rates substantially above the minimum guidelines and ratios. Silicon Valley Bank's capital ratios exceeded the well-capitalized requirements, as defined above, at December 31, 2002. See "Item 8. Consolidated Financial Statements and Supplementary Data—Note 22 to the Consolidated Financial Statements—Regulatory Matters" for Silicon's and the Bank's capital ratios as of December 31, 2002.

        Like Silicon, Silicon Valley Bank is subject to rules that govern the regulatory capital treatment of equity investments in non-financial companies made on or after March 13, 2000, but Silicon Valley Bank does not currently hold any such equity investments. See "Item 8. Consolidated Financial Statements and Supplementary Data—Note 22 to the Consolidated Financial Statements—Regulatory Matters" for Silicon Valley Bank's capital ratios as of December 31, 2002.

        The federal banking agencies have also adopted a joint agency policy statement which provides that the adequacy and effectiveness of a bank's interest rate risk management process and the level of its interest rate exposures are critical factors in the evaluation of the bank's capital adequacy. A bank with material weaknesses in its interest rate risk management process or high levels of interest rate exposure relative to its capital will be directed by the federal banking agencies to take corrective actions. Financial institutions that have substantial amounts of their assets concentrated in high-risk loans or nontraditional banking activities and who fail to adequately manage these risks may be required to set aside capital in excess of the regulatory minimums.

Bank Holding Company Regulation of Silicon

        As a registered bank holding company and a financial holding company, Silicon and its subsidiaries are subject to the Federal Reserve Board's supervision, regulation, examination, and reporting requirements under the BHC Act, as revised by the GLB Act. Prior to becoming a financial holding company under the BHC Act, Silicon was required to seek the prior approval of the Federal Reserve Board before acquiring ownership or control of more than 5% of the outstanding shares of any class of voting securities, or substantially all of the assets, of any company, including a bank or bank holding company. As a financial holding company, the prior approval of the Federal Reserve Board is not required to acquire ownership or control of entities engaged in specified financial activities, although the existing restrictions on directly or indirectly acquiring shares of a bank or savings association are still applicable. In addition, prior to becoming a financial holding company, Silicon was generally allowed to engage, directly or indirectly, only in banking and other activities that

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were deemed by the Federal Reserve Board to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. As a financial holding company under the GLB Act, Silicon is permitted to engage in a full range of financial activities, including banking, insurance and securities activities, and additional activities that the Federal Reserve Board determines to be financial in nature, incidental to such financial activities, or complementary to a financial activity.

        The Federal Reserve Board requires Silicon to maintain minimum capital ratios discussed above. Under Federal Reserve Board regulations, a bank holding company is also required to serve as a source of financial and managerial strength to its subsidiary banks and may not conduct its operations in an unsafe or unsound manner. In addition, it is the Federal Reserve Board's policy that in serving as a source of strength to its subsidiary banks, a bank holding company should stand ready to use available resources to provide adequate capital funds to its subsidiary banks during periods of financial stress or adversity and should maintain the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks. A bank holding company's failure to meet its obligations to serve as a source of strength to its subsidiary banks or to observe established guidelines with respect to the payment of dividends by bank holding companies will generally be considered by the Federal Reserve Board to be an unsafe and unsound banking practice, or a violation of the Federal Reserve Board's regulations, or both.

        Silicon's ability to pay cash dividends is limited by generally applicable Delaware corporation law limits. In addition, there are statutory and regulatory limitations on the amount of dividends that may be paid to Silicon by Silicon Valley Bank. See "Item 1. Business—Supervision and Regulation—Restrictions on Dividends" for further discussion of current limitations on the ability of Silicon Valley Bank to pay dividends to Silicon.

        Silicon is also treated as a bank holding company under the California Financial Code. As such, Silicon and its subsidiaries are subject to periodic examination by, and may be required to file reports with, the California Department of Financial Institutions.

Sarbanes-Oxley Act of 2002

        On July 30, 2002, the President signed into law the Sarbanes-Oxley Act of 2002 (the S-O Act) implementing legislative reforms intended to address corporate and accounting fraud. In addition to the establishment of a new accounting oversight board which will enforce auditing, quality control and independence standards, and will be funded by fees from all publicly traded companies, the law restricts provision of both auditing and consulting services by accounting firms. To ensure auditor independence, any non-audit services being provided to an audit client will require preapproval by a company's audit committee members. In addition, the audit partners must be rotated. Chief executive officers and chief financial officers, or their equivalent, are required to certify to the accuracy of periodic reports filed with the SEC, subject to civil and criminal penalties if they knowingly or willfully violate this certification requirement. In addition, under the S-O Act, counsel will be required to report evidence of a material violation of the securities laws or a breach of fiduciary duty by a company to its chief executive officer or its chief legal officer, and, if such officer does not appropriately respond, to report such evidence to the audit committee or other similar committee of the board of directors or the board itself. Longer prison terms and increased penalties will be applied to corporate executives who violate federal securities laws, the period during which certain types of suits can be brought against a company or its officers has been extended, and bonuses issued to top executives prior to restatement of a company's financial statements are now subject to disgorgement if such restatement was due to corporate misconduct. Executives are also prohibited from insider trading during retirement plan "blackout" periods, and loans to company executives are restricted.

        The S-O Act also increases the oversight of, and codifies certain requirements relating to audit committees of public companies and how they interact with a company's "registered public accounting firm" (RPAF). Audit committee members must be independent and are barred from accepting consulting, advisory or other compensatory fees from the issuer. In addition, companies must disclose whether at least one member of the committee is a "financial expert" and if not, why

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not. Under the S-O Act, a RPAF is prohibited from performing statutorily mandated audit services for a company if such company's chief executive officer, chief financial officer, comptroller, chief accounting officer, or any person serving in equivalent positions has been employed by such firm and participated in the audit of such company during the one-year period preceding the audit initiation date. The S-O Act also prohibits any officer or director of a company or any other person acting under their direction from taking any action to fraudulently influence, coerce, manipulate, or mislead any independent public or certified accountant engaged in the audit of a company's financial statements for the purpose of rendering the financial statement's materially misleading.

        The board is determined to continue a corporate governance structure that meets or exceeds the requirements of the Sarbanes-Oxley Act.

Regulation of Silicon Valley Bank

        Silicon Valley Bank is a California-chartered bank and a member of the Federal Reserve System. It is subject to primary supervision, periodic examination, and regulation by the Commissioner of the California Department of Financial Institutions, or the Commissioner, the Federal Reserve Board, and the Federal Deposit Insurance Corporation. The Federal Reserve Board and the Commissioner require Silicon Valley Bank to maintain minimum capital levels discussed above. Both the Federal Reserve Board and the Commissioner also have broad powers and remedies available if they determine that the financial condition, capital resources, asset quality, management, earnings prospects, liquidity, sensitivity to market risk, or other aspects of Silicon Valley Bank's operations are unsatisfactory, or that Silicon Valley Bank is violating or has violated any law or regulation.

Restrictions on Dividends

        Silicon is a legal entity separate and distinct from Silicon Valley Bank. Silicon Valley Bank is subject to various statutory and regulatory restrictions on its ability to pay dividends to Silicon. During 2002, Silicon Valley Bank paid dividends of $80.0 million to Silicon. Consequently, under these regulatory restrictions, the remaining amount available for payment of dividends to Silicon by Silicon Valley Bank totaled $13.7 million at December 31, 2002. During 2001, Silicon Valley Bank paid dividends of $140.0 million to Silicon. The Federal Reserve Board and the Commissioner have the authority to prohibit Silicon Valley Bank from engaging in activities that, in their opinion, constitute unsafe or unsound practices in conducting its business. Depending upon the financial condition of Silicon Valley Bank and other factors, the regulators could assert that the payment of dividends or other payments might, under some circumstances, be an unsafe or unsound practice. If Silicon Valley Bank fails to comply with its minimum capital requirements, its regulators could restrict its ability to pay dividends using prompt corrective action or other enforcement powers. The Commissioner may impose similar limitations on the conduct of California-chartered banks. See "Item 8. Consolidated Financial Statements and Supplementary Data—Note 23 to the Consolidated Financial Statements—Regulatory Matters" for further discussion on dividend restrictions.

Transactions with Affiliates

        Silicon Valley Bank is subject to restrictions imposed by federal law on any extensions of credit to, or the issuance of a guarantee or letter of credit on behalf of, Silicon or other affiliates; the purchase of, or investments in, stock or other securities of Silicon or other affiliates; and the taking of such securities as collateral for loans, and the purchase of assets of Silicon or other affiliates. These restrictions prevent Silicon and such other affiliates from borrowing from Silicon Valley Bank unless the loans are secured by specified amounts of collateral. Any such secured loans and investments by Silicon Valley Bank to, or in, Silicon or to, or in, any other affiliate are limited individually to 10% of Silicon Valley Bank's capital and surplus (as defined by federal regulations); and such secured loans and investments are limited to, in the aggregate, 20% of Silicon Valley Bank's capital and surplus (as defined by federal regulations). California law also imposes restrictions on transactions involving Silicon and other controlling persons of Silicon Valley Bank. Additional restrictions on transactions with affiliates may be imposed on Silicon Valley Bank under the prompt corrective action provisions of

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federal law. See "Item 1. Business—Supervision and Regulation—Prompt Corrective Action and Other Enforcement Mechanisms" for related discussion regarding restrictions on transactions with affiliates.

Prompt Corrective Action and Other Enforcement Mechanisms

        Federal banking agencies possess broad powers to take corrective and other supervisory action on an insured bank and its holding company. Federal laws require each federal banking agency to take prompt corrective action to resolve the problems of insured banks. Each federal banking agency has issued regulations defining five categories in which an insured depository institution will be placed, based on the level of its capital ratios: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.

        Based upon its capital levels, a bank that is classified as well capitalized, adequately capitalized, or undercapitalized may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition, or an unsafe or unsound practice, warrants such treatment. At each successive lower-capital category, an insured bank is subject to more restrictions, including restrictions on the bank's activities, operational practices or the ability to pay dividends. However, the federal banking agencies may not treat an institution as critically undercapitalized unless its capital ratios actually warrant such treatment.

        In addition to measures taken under the prompt corrective action provisions, bank holding companies and insured banks may be subject to potential enforcement actions by the federal regulators for unsafe or unsound practices in conducting their businesses, or for violation of any law, rule, regulation, condition imposed in writing by the agency, or term of a written agreement with the agency. Enforcement actions may include the appointment of a conservator or receiver for the bank; the issuance of a cease and desist order that can be judicially enforced; the termination of the bank's deposit insurance; the imposition of civil monetary penalties; the issuance of directives to increase capital; the issuance of formal and informal agreements; the issuance of removal and prohibition orders against officers, directors, and other institution-affiliated parties; and the enforcement of such actions through injunctions or restraining orders based upon a judicial determination that the agency would be harmed if such equitable relief was not granted.

Safety and Soundness Guidelines

        The federal banking agencies have adopted guidelines to assist in identifying and addressing potential safety and soundness concerns before capital becomes impaired. The guidelines establish operational and managerial standards relating to: (1) internal controls, information systems, and internal audit systems; (2) loan documentation; (3) credit underwriting; (4) asset growth; and (5) compensation, fees, and benefits. In addition, the federal banking agencies have adopted safety and soundness guidelines for asset quality and for evaluating and monitoring earnings to ensure that earnings are sufficient for the maintenance of adequate capital and reserves.

Premiums for Deposit Insurance

        Silicon Valley Bank's deposit accounts are insured by the Bank Insurance Fund (BIF), as administered by the Federal Deposit Insurance Corporation, up to the maximum permitted by law. The Federal Deposit Insurance Corporation's annual assessment for the insurance of BIF deposits as of December 31, 2002, ranged from 0 to 27 basis points per $100 of insured deposits. The amount charged is based on the regulatory capital of an institution and on a supervisory assessment of its operational risk profile. At December 31, 2002, Silicon Valley Bank's assessment rate was the statutory minimum assessment.

        Silicon Valley Bank is also required to pay an annual assessment of approximately 1.7 basis points per $100 of insured deposits toward the retirement of U.S. government-issued financing orporation bonds.

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        The Federal Deposit Insurance Corporation may increase or decrease the assessment rate schedule on a semi-annual basis. Due to continued growth in deposits and some recent bank failures, the BIF is nearing its minimum ratio of 1.25% of insured deposits as mandated by law. If the ratio drops below 1.25%, it is likely the Federal Deposit Insurance Corporation will be required to assess premiums on all banks for the first time since 1996. Any increase in assessments or the assessment rate could have a material adverse effect on our earnings, depending on the amount of the increase.

Interstate Banking and Branching

        Bank holding companies from any state may generally acquire banks and bank holding companies located in any other state, subject to nationwide and state-imposed deposit concentration limits and limits on the acquisition of recently established banks. Banks also have the ability, subject to specific restrictions, to acquire by acquisition or merger branches located outside their home state. The establishment of new interstate branches is also possible in those states with laws that expressly permit it. Interstate branches are subject to many of the laws of the states in which they are located.

Community Reinvestment Act and Fair Lending

        Silicon Valley Bank is subject to a variety of fair lending laws and reporting obligations involving home mortgage lending operations and the Community Reinvestment Act, or CRA activities. The CRA generally requires the federal banking agencies to evaluate the record of a bank in meeting the credit needs of its local communities, including low- to moderate-income neighborhoods. In July 2002, the Federal Reserve Board approved Silicon Valley Bank's CRA Strategic Plan. This plan details our strategy in meeting our CRA obligations and is in effect from July 2002 through July 2005. The first CRA examination under this plan is scheduled for August 2003. In April 2001, the Federal Reserve Board rated Silicon Valley Bank "satisfactory" in complying with its CRA obligations. A bank can become subject to substantial penalties and corrective measures for a violation of certain fair lending laws. The federal banking agencies may take compliance with such laws and CRA obligations into account when regulating and supervising other activities or assessing whether to approve certain applications.

Regulation of Certain Subsidiaries

        Two of our subsidiaries, Alliant Partners and SVB Securities, are registered as broker-dealers with the Securities and Exchange Commission ("SEC") and as such are subject to regulation by the SEC and by self-regulatory organizations, such as the National Association of Securities Dealers, Inc. (NASD).

        Our broker-dealer subsidiaries are subject to Rule 15c3-1 under the Securities Exchange Act of 1934 (the "Exchange Act"), which is designed to measure the general financial condition and liquidity of a broker-dealer. Under this rule, our broker-dealer subsidiaries are required to maintain the minimum net capital deemed necessary to meet broker-dealers' continuing commitments to customers and others. Under certain circumstances, this rule could limit the ability of Silicon Valley Bancshares to withdraw capital from Alliant Partners and limit the ability of Silicon Valley Bank to withdraw capital from SVB Securities.

        As broker-dealers, Alliant Partners and SVB Securities are also subject to other regulations covering the operations of their respective businesses, including sales and trading practices; use of client funds and securities; and conduct of directors, officers, and employees. Broker-dealers are also subject to regulation by state securities administrators in the states where they do business. Violations of the stringent regulations governing the actions of a broker-dealer can result in the revocation of broker-dealer licenses; the imposition of censures or fines; the issuance of cease and desist orders; and the suspension or expulsion from the securities business of a firm, its officers, or its employees. The SEC and the national securities exchange emphasize in particular the need for supervision and control by broker-dealers of their employees.

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        Our investment advisory subsidiary, Woodside Asset Management, Inc., is registered with the SEC under the Investment Advisers Act of 1940, as amended, and is subject to that act and the rules and regulations promulgated there under.

Available Information

        Our Internet address is http://www.svb.com. We make available free of charge through our Internet website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Silicon Valley Bancshares was incorporated in Delaware in 1999.

ITEM 2. PROPERTIES

        In 1995, we relocated our corporate headquarters and main branch and entered into a 10-year lease on a two-story office building located at 3003 Tasman Drive, Santa Clara, California. In July 1997 and June 2000, we finalized amendments to the original lease associated with our corporate headquarters. The amendments provide for the lease of two additional premises, approximating 56,000 square feet each, adjacent to the existing headquarters facility. We began occupying the first of these additional premises in August 1998 and the second in December 2000.

        In 2002, we exited leased premises, located in Santa Clara, California, approximating 18,000 square feet. The lease on the building will expire in August 2005. Our management determined that the premises would have no future economic value to our operations, except for any potential future sub-lease arrangement. Therefore, during 2002, we incurred charge-offs of approximately $2.5 million related to the exit of these premises.

        We currently operate 27 regional offices. We operate throughout the Silicon Valley in Fremont, Santa Clara, Palo Alto, and on Sand Hill Road, which is the center of the venture capital community in California. Other regional offices in California include: Irvine, Los Angeles, Napa Valley, San Diego, San Francisco, Santa Barbara, and Sonoma. Office locations outside of California include: Phoenix, Arizona; Boulder, Colorado; West Palm Beach, Florida; Atlanta, Georgia; Chicago, Illinois; Boston, Massachusetts; Minneapolis, Minnesota; New York, New York; Durham, North Carolina; Portland, Oregon; Philadelphia, Pennsylvania; Austin, Texas; Dallas, Texas; Northern Virginia; and Seattle, Washington. All of our properties are occupied under leases, which expire at various dates through October 2008, and in most instances include options to renew or extend at market rates and terms. We also own leasehold improvements, equipment, furniture, and fixtures at our offices, all of which are used in our business activities.

ITEM 3. LEGAL PROCEEDINGS

        There were no legal proceedings requiring disclosure pursuant to this item pending at December 31, 2002, or at the date of this report.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matters were submitted to a vote by the stockholders of Silicon Valley Bancshares' common stock during the fourth quarter of 2002.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

        Our common stock is traded over the counter on the National Association of Securities Dealers Automated Quotation (Nasdaq) national market under the symbol "SIVB."

        The following table shows the high and low sales prices for our common stock for each quarterly period during the last two years, based on the daily closing price as reported by the Nasdaq national market.

Stockholders

        There were 775 registered holders of stock as of December 31, 2002. Additionally, we believe there were approximately 8,573 beneficial holders of common stock whose shares are held in the name of brokerage firms or other financial institutions. We are not provided with the number or identities of all of these stockholders, but we have estimated the number of such stockholders from the number of stockholder documents requested by these brokerage firms for distribution to their customers.

Dividends

        We have not paid cash dividends on our common stock since 1992. Currently, we have no plan to pay cash dividends on our common stock. Periodically, we evaluate the decision of paying cash dividend in the context of our performance, general economic performance, and relevant tax and financial parameters. Our ability to pay cash dividends is limited by generally applicable corporate and banking laws and regulations. See "Item 1. Business—Supervision and Regulation—Restrictions on Dividends," and "Item 8. Consolidated Financial Statements and Supplementary Data—Note 23 to the Consolidated Financial Statements—Regulatory Matters" for additional discussion on restrictions and limitations on the payment of dividends imposed on us by government regulations.

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

        The following selected consolidated financial data should be read in conjunction with our consolidated financial statements and supplementary data as presented in Item 8 of this report. Certain reclassifications have been made to our prior years results to conform to 2002 presentations. Such reclassifications had no effect on the results of operations or stockholders' equity. In addition, the common stock summary information has been restated to reflect two-for-one stock splits affected on May 1, 1998 and May 15, 2000.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Please read the following discussion and analysis of financial condition and results of operations in conjunction with our consolidated financial statements and supplementary data as presented in Item 8 of this report.

        This discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our senior management has in the past and might in the future make forward-looking statements orally to analysts, investors, the media, and others. Forward-looking statements are statements that are not historical facts. Broadly speaking, forward-looking statements include:

(1)

Projections of our revenues, income, earnings per share, capital expenditures, capital structure or other financial items



(2)

Descriptions of strategic initiatives, plans or objectives of our management for future operations, including pending acquisitions



(3)

Descriptions of products, services, and industry sectors



(4)

Forecasts of future economic performance



(5)

Descriptions of assumptions underlying or relating to any of the foregoing

        In this report, we make forward-looking statements discussing our management's expectations about:

(1)

Future changes in our average loan balances and their impact on our net interest margin



(2)

Future changes in short-term interest rates and their impact on our earnings



(3)

Future changes in private label investment product balances due to transferring of private label investment operations from Silicon Valley Bank to its wholly owned broker-dealer subsidiary



(4)

Future revenue of Alliant Partners



(5)

Future investment gains or losses from private equity and venture capital fund investments



(6)

Future changes in trust preferred securities distributions expense due to changes in hedging interest rates



(7)

Future changes in market prices of the underlying common stock and its impact on future warrant income of those companies



(8)

Future changes in allowance for loan losses balance



(9)

Future cost of funds savings from raising capital through real estate investment trust



(10)

Future tax benefits from real estate investment trust



(11)

Future common stock repurchases

        You can identify these and other forward-looking statements by using such words as: "becoming," "may," "will," "should," "predicts," "potential," "continue," "anticipates," "believes," "estimates," "seeks," "expects," "plans," "intends," or using the negative of such words, or comparable terminology. Although we believe that the expectations reflected in these forward-looking statements are reasonable, and we have based these expectations on our beliefs, as well as our assumptions, such expectations may prove to be incorrect. Our actual results of operations and financial performance could differ significantly from those expressed in or implied by our management's forward-looking statements.

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        For information about factors that could cause actual results to differ from the expectations stated in the forward-looking statements, see the subsection titled "Risk Factors" at the end of this section. We urge investors to consider these factors carefully in evaluating the forward-looking statements contained in this discussion and analysis. All subsequent written or oral forward-looking statements attributable to our company or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements included in this filing are made only as of the date of this filing. We do not intend, and undertake no obligation, to update these forward-looking statements.

        Certain reclassifications have been made to our prior years' results to conform to 2002 presentations. Such reclassifications had no effect on our results of operations or stockholders' equity.

Critical Accounting Policies

Marketable Equity Securities

        Investments in marketable equity securities include warrants for shares of publicly-traded companies and investments in shares of publicly-traded companies. Equity securities in our warrant, direct equity, and venture capital fund portfolios generally become marketable when a portfolio company completes an initial public offering on a publicly-reported market, or is acquired by a publicly-traded company. Our merchant banking marketable warrant and equity securities totaled $0.8 million at December 31, 2002 and $2.5 million at December 31, 2001. Marketable equity securities related to Taurus, L.P. and Libra, L.P. totaled approximately $7.1 million, see "Item 1. Business—Acquisitions." These instruments are classified as available-for-sale and are accounted for at fair value. We recognized gains from the disposition of client warrants in our consolidated statements of income of $1.7 million in 2002, $8.5 million in 2001, and $86.3 million in 2000.

        Unrealized gains or losses on warrant and equity investment securities are recorded upon the establishment of a readily determinable fair value of the underlying security, as defined by Statement of Financial Accounting Standard ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Instruments."

        1.    Unrealized gains or losses after applicable taxes, on available-for-sale marketable equity securities that result from initial public offerings are excluded from earnings and are reported in accumulated other comprehensive income, which is a separate component of stockholders' equity. Unrealized losses on available-for-sale securities become realized and are charged against earnings when it is determined that an other than temporary decline in value has occurred. Further, the cost basis of the individual security is written down to fair value as a new cost basis. We are often contractually restricted from selling equity securities subsequent to the portfolio company's initial public offering. Gains or losses on these marketable equity instruments are recorded in our consolidated statements of income in the period the underlying securities are sold to a third party.

        2.    Gains or losses on marketable warrant and equity investment securities that result from a portfolio company being acquired by a publicly-traded company are marked to market when the acquisition occurs. The resulting gains or losses are recognized into income on that date, in accordance with Emerging Issues Task Force, Issue No. 91-5, "Nonmonetary Exchange of Cost-Method Investments." Further fluctuations in the market value of these marketable equity instruments, prior to eventual sale, are excluded from earnings and are reported in accumulated other comprehensive income, which is a separate component of stockholders' equity. Upon the sale of these equity securities to a third party, gains and losses, which are measured from the acquisition price, are recognized in our consolidated statements of income.

        Notwithstanding the foregoing, a decline in the fair value of any of these securities that is considered other than temporary, is recorded in our consolidated statements of income in the period the impairment occurs.

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        We consider our marketable equity securities accounting policies to be critical, as the timing and amount of income, if any, from these instruments typically depend upon factors beyond our control. These factors include the general condition of the public equity markets, levels of mergers and acquisitions activity, fluctuations in the market prices of the underlying common stock of these companies, and legal and contractual restrictions on our ability to sell the underlying securities. Hence, the amount of income we realize from these equity instruments in future periods may vary materially from the current unrealized amount of $0.7 million and are likely to vary materially from period to period.

Non-Marketable Equity Securities

        We invest in non-marketable equity securities in several ways:

•

Through the exercise of warrants obtained in the normal course of lending



•

By direct purchases of preferred or common stock in privately-held companies



•

By capital contributions to venture capital funds, which in turn, make investments in preferred or common stock of privately held companies



•

Through our venture capital fund, Silicon Valley BancVentures, L.P., which makes investments in preferred or common stock of privately held companies



•

Through our fund of funds, SVB Strategic Investors Fund, L.P., which makes investments in venture capital funds, which in turn invest in privately held companies

        Unexercised warrant securities are recorded at a nominal value on our consolidated balance sheets. They are carried at this value until they become marketable or expire.

        A summary of our accounting policies for other non-marketable equity securities is presented in the following table. A complete description of the accounting policies follows the table.

        Non-marketable venture capital fund investments and other direct private equity investments wholly-owned by Silicon totaled $31.6 million at December 31, 2002 and $30.7 million at December 31, 2001 (excluding our ownership interest in our managed funds, SVB Strategic Investors Fund, L.P. and Silicon Valley BancVentures, L.P., which are described below.) We record these investments on a cost basis as our interests are considered minor because we own less than 5% of the company and have no influence over the company's operating and financial policies. Our cost basis in each investment is reduced by returns until the cost basis of the individual investment is fully recovered. Returns in excess of the cost basis are recorded as investment gains in noninterest income.

        The values of the investments are reviewed at least quarterly, giving consideration to the facts and circumstances of each individual investment. Management's review of private equity investments typically includes the relevant market conditions, offering prices, operating results, financial conditions, and exit strategies. A decline in the fair value that is considered other than temporary is recorded in our consolidated statements of income in the period the impairment occurs. Any estimated loss is recorded in noninterest income as investment losses.

        Investments held by Silicon Valley BancVentures, L.P. totaled $10.0 million at December 31, 2002 and $5.1 million at December 31, 2001 and are recorded at fair value using investment accounting rules. The investments consist of stock in private companies that are not traded on a public market

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and are subject to restrictions on resale. These investments are carried at estimated fair value as determined by the general partner. The valuation generally remains at cost until such time that there is significant evidence of a change in values based upon consideration of the relevant market conditions, offering prices, operating results, financial conditions, exit strategies, and other pertinent information. The general partner, Silicon Valley BancVentures, Inc. is owned and controlled by Silicon and has an ownership interest of 10.7% in Silicon Valley BancVentures, L.P. Therefore, Silicon Valley BancVentures, L.P. is fully consolidated and any gains or losses resulting from changes in the estimated fair value of the investments are recorded as investment gains or losses in our consolidated statements of income. The portion of any gains or losses belonging to the limited partners is reflected in minority interest and adjusts Silicon's income to its percentage ownership.

        The SVB Strategic Investors Fund, L.P. portfolio consists primarily of investments in venture capital funds. These funds totaled $22.1 million at December 31, 2002 and $16.5 million at December 31, 2001, which are recorded at fair value using investment accounting rules. The carrying value of the investments is determined by the general partner based on the percentage of SVB Strategic Investors Fund, L.P.'s interest in the total fair market value as provided by each venture capital fund investment. SVB Strategic Investors, LLC generally utilizes the fair values assigned to the underlying portfolio investments by the management of the venture capital funds. The estimated fair value of the investments is determined after giving consideration to the relevant market conditions, offering prices, operating results, financial conditions, exit strategy, and other pertinent information. The general partner, SVB Strategic Investors, LLC, is owned and controlled by Silicon and has an ownership interest of 11.1% in SVB Strategic Investors Fund, L.P. Therefore, SVB Strategic Investors Fund, L.P. is fully consolidated and any gains or losses resulting from changes in the estimated fair value of the venture capital fund investments are recorded as investment gains or losses in our consolidated statements of income. The limited partner's share of any gains or losses is reflected in minority interest and adjusts Silicon's income to its percentage ownership.

        The following tables present the carrying value of our non-marketable venture capital and other private equity investments at and for the year ended December 31, 2002.

*

Effective January 1, 2003, SVB Strategic Investors Fund, L.P. reduced the total capital that can be called to $121.8 million as a result of the reductions in the size of the underlying venture capital fund investments. Our committed capital that can be called was reduced to $13.5 million.

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        The following tables present the carrying value of our non-marketable venture capital and other private equity investments at and for the year ended December 31, 2001.

        We consider our non-marketable equity securities accounting policies to be critical, as the timing and amount of gain or losses, if any, from these instruments depend upon factors beyond our control. These factors include the general condition of the public equity markets, levels of mergers and acquisitions activity, and legal and contractual restrictions on our ability to sell the underlying securities. Therefore, we cannot predict future gains or losses with any degree of accuracy and any gains or losses are likely to vary materially from period to period. In addition, the valuation of non-marketable equity securities included in our financial statements at December 31, 2002 represents our best interpretation of the underlying equity securities performance at this time. Because of the inherent uncertainty of valuations, the estimated values of these securities may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material. Future adverse changes in market conditions or poor operating results of underlying investments could result in losses or an inability to recover the carrying value of the investments that may not be reflected in an investment's carrying value, thereby possibly requiring an impairment charge in the future.

Allowance for Loan Losses

        We consider our accounting policy relating to the estimation of the allowance for loan losses to be critical as it involves material estimates by our management and is particularly susceptible to significant changes in the near term.

        We define credit risk as the probability of sustaining a loss because other parties to the financial instrument fail to perform in accordance with the terms of the contract. Through the administration of loan policies and monitoring of the loan portfolio, our management seeks to reduce such credit risks. While we follow underwriting and credit monitoring procedures, which we believe are appropriate in growing and managing the loan portfolio, in the event of nonperformance by these other parties, our potential exposure to credit losses could significantly affect our consolidated financial position and earnings.

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        The allowance for loan losses is established through a provision for loan losses charged to expense to provide for credit risk. Our allowance for loan losses is established for loan losses not yet realized. The process of anticipating loan losses is imprecise. Our management applies the following evaluation process to our loan portfolio to estimate the required allowance for loan losses.

        We maintain a systematic process for the evaluation of individual loans and pools of loans for inherent risk of loan losses. On a quarterly basis, each loan in our portfolio is assigned a credit risk-rating. Credit risk-ratings are assigned on a scale of 1 to 10, with 1 representing loans with a low risk of nonpayment, 9 representing loans with the highest risk of nonpayment, and 10 representing loans, which have been charged-off. This credit risk-rating evaluation process includes, but is not limited to, consideration of such factors as payment status, the financial condition of the borrower, borrower compliance with loan covenants, underlying collateral values, potential loan concentrations, and general economic conditions. Our policies require a committee of senior management to review credit relationships that exceed specific dollar values, at least quarterly. Our review process evaluates the appropriateness of the credit risk rating and allocation of allowance for loan losses, as well as other account management functions. In addition, our management receives and approves an analysis for all impaired loans, as defined by the Statement of Financial Accounting Standards ("SFAS") No. 114 "Accounting by Creditors for Impairment of a Loan." The allowance for loan losses is allocated based on a formula allocation for similarly risk-rated loans, or for specific risk issues, which suggest a probable loss factor exceeding the formula allocation for a specific loan, or for individual impaired loans as determined by SFAS No. 114.

        Our evaluation process was designed to determine the adequacy of the allowance for loan losses. We assess the risk of losses inherent in the loan portfolio by utilizing modeling techniques. For this purpose, we have developed a statistical model based on historical loan loss migration to estimate an appropriate allowance for outstanding loan balances. In addition, we apply macro and contingent allocations to the results of the aforementioned model to ascertain the total allowance for loan losses. While this evaluation process uses historical and other objective information, the classification of loans and the establishment of the allowance for loan losses, relies, to a great extent, on the judgment and experience of our management.

Historical Loan Loss Migration Model

        We use the historical loan loss migration model as a basis for determining expected loan loss factors by credit risk-rating category. The effectiveness of the historical loan loss migration model is predicated on the theory that historical trends are predictive of future experience. Specifically, the model calculates the likelihood and rate of a loan in one risk-rating category moving one category lower using loan data from our portfolio.

        We analyze the historical loan loss migration trend by compiling gross loan loss data and by credit risk rating for the four-quarter period preceding the current period end. Each of the loans charged-off over the four-quarter period is assigned a credit risk rating at the period end of each of the preceding quarters. On a quarter-by-quarter basis, the model calculates charged-off loans as a percentage of current period end loans by credit risk-rating category. These percentages are weighted, based on the age of the data, and are aggregated to estimate our loan loss factors. These expected loan loss factors are ultimately applied to the current period end aggregate outstanding loan balances to provide an estimation of the allowance for loan losses.

Macro and Contingent Allocations

        Additionally, we apply a contingent allocation to the results of this model. Our contingent allocation acknowledges that unfunded credit obligations can result in future losses. Unfunded credit obligations at each quarter end are allocated to credit risk-rating categories in accordance with the client's credit risk-rating. We provide for the risk of loss on unfunded credit obligations by allocating fixed credit risk-rating factors to our unfunded credit obligations.

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        A macro allocation is calculated each quarter based upon an assessment of the risks that may lead to a loan loss experience different from our historical results. These risks are aggregated to become our macro allocation. Based on management's prediction or estimates of changing risks in the lending environment, the macro allocation may vary significantly from period to period and includes but is not limited to consideration of the following factors:

(1)

Changes in lending policies and procedures, including underwriting standards and collections, charge-off and recovery practices



(2)

Changes and development in national and local economic business conditions, including the market and economic condition of our clients' industry sectors



(3)

Changes in the nature of our loan portfolio



(4)

Changes in experience, ability and depth of lending management and staff



(5)

Changes in the trend of the volume and severity of past due and classified loans



(6)

Changes in the trend of the volume of nonaccrual loans, troubled debt restructurings and other loan modifications

        Finally, we compute several modified versions of the model, which provide additional assurance that the statistical results of the historical loan loss migration model are reasonable. Our Chief Credit Officer and Chief Financial Officer evaluate the adequacy of the allowance for loan losses based on the results of the historical loan loss migration model.

        In addition to risk-rating every loan in our portfolio, our management concluded that our allowance for loan and lease losses at December 31, 2002 was appropriate in consideration of the following factors:

(7)

A decreased risk of severe future losses from the early-stage product loan portfolio



(8)

A decreased risk of loan losses resulting from client instigated corporate fraud, due to the enforcement of recent government corporate governance regulations



(9)

An increase of $31.0 million in our average loan balance between September 30, 2002 and December 31, 2002



(10)

A continued weakness in the U.S. economy



(11)

A declining venture capital fund investment into our clients in our core industry sectors



(12)

A continued volatility in global stock markets indices

        We consider our allowance for loan losses at December 31, 2002 to be adequate but not excessive and to be our best estimate using the historical loan loss experience and our perception of variables potentially leading to deviation from the historical loss experience.

Goodwill

        As discussed in "Item 8. Consolidated Financial Statements and Supplementary Data—Note 1 to the Consolidated Financial Statements—Significant Accounting Policies", we adopted the provisions of Statement of Financial Accounting Standard No. 142 ("SFAS No.142"), "Goodwill and Other Intangible Assets" on January 1, 2002. Under this standard, we are required to test intangible assets identified as having an indefinite useful life for impairment in accordance with the provisions of SFAS No. 142 in 2002.

        Substantially all of our goodwill pertains to the acquisition of Alliant Partners, discussed in "Item 8. Consolidated Financial Statements and Supplementary Data—Note 2 to the Consolidated Financial Statements—Business Combinations." In accordance with the provision of SFAS No. 142, the goodwill balance was determined to be unamortizable. We completed our initial test for goodwill

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impairment in July 2002, the result of which concluded that the goodwill balance was not impaired. At December 31, 2002, our goodwill totaled $100.5 million.

        In testing for a potential impairment of goodwill, SFAS 142 requires us to: 1. allocate goodwill to the reporting units to which the acquired goodwill relates, 2. estimate the fair value of those reporting units to which goodwill relates, and 3. determine the carrying value (book value) of those reporting units. Furthermore, if the estimated fair value is less than the carrying value for a particular reporting unit, then we are required to estimate the fair value of all identifiable assets and liabilities of the reporting unit in a manner similar to a purchase price allocation for an acquired business. Only after this process is completed is the amount of goodwill impairment determined.

        Accordingly, the process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment at many points during the analysis. In estimating the fair value of the businesses with recognized goodwill for the purposes of our financial statements at December 31, 2002, we applied the fair value test using discounted estimated net cash flows. Our cash flow forecasts were based on assumptions that are consistent with the plans and estimates we are using to manage the underlying business.

        Based on our best estimates, we have concluded that there is no impairment of our goodwill. However, changes in these estimates could cause the businesses to be valued differently. If Alliant does not meet projected operating results, then this analysis could potentially result in a non-cash goodwill impairment charge, depending on the estimated value of the Alliant business unit and the value of the other assets and liabilities attributed to the business.

        Senior management discussed the development, selection, and disclosure of the aforementioned critical accounting policies with our audit committee on January 15, 2003.

Results of Operations

Earnings Summary

        We reported net income in 2002 of $53.4 million, as compared to the net income of $88.2 million in 2001 and $159.1 million in 2000. Diluted earnings per common share totaled $1.18 in 2002, as compared to $1.79 in 2001, and $3.23 in 2000. Return on average equity in 2002 was 8.5%, as compared to 13.5% in 2001, and 33.3% in 2000. Return on average assets was 1.4% in 2002, as to 2.0% in 2001, and 3.1% in 2000.

        The decrease in net income for 2002, as compared to 2001, resulted primarily from a decline in net interest income, partially offset by decreases in both provision for loan losses and income tax expense. The decrease in net interest income was caused by a 224 basis points decline in the average prime rate from 6.9% in 2001 to 4.7% in 2002. The decrease in net income for 2001 as compared to 2000, was primarily attributable to decline in both net interest income and noninterest income, partially offset by decreases in both provision for loan losses and income tax expense. The major components of net income and changes in these components are summarized in the following

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table for the years ended December 31, 2002, 2001, and 2000, and are discussed in more detail on the following pages.

Net Interest Income and Margin

        Net interest income is defined as the difference between interest earned, primarily on loans, investment securities, federal funds sold, securities purchased under agreement to resell, and interest paid on funding sources, primarily deposits. Net interest income is our principal source of revenue. Net interest margin is defined as the amount of net interest income, on a fully taxable-equivalent basis, expressed as a percentage of average interest-earning assets. The average yield earned on interest-earning assets is the amount of taxable-equivalent interest income expressed as a percentage of average interest-earning assets. The average rate paid on funding sources is defined as interest expense as a percentage of average interest-earning assets.

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        The following table sets forth average assets, liabilities, minority interest and stockholders' equity, interest income and interest expense, average yields and rates, and the composition of our net interest margin for the years ended December 31, 2002, 2001, and 2000.

(1)

Includes average interest-bearing deposits in other financial institutions of $609, $568, and $501 in 2002, 2001, and 2000, respectively.

(2)

Interest income on nontaxable investments is presented on a fully taxable-equivalent basis using the federal statutory tax rate of 35% for all years presented. These adjustments were $3,712, $5,815, and $3,746 for the years ended December 31, 2002, 2001, and 2000, respectively.

(3)

Average loans include average nonaccrual loans of $19,602, $21,565, and $24,337 in 2002, 2001, and 2000, respectively.

(4)

Average loans are net of average unearned income of $11,651, $7,669, and $9,929 in 2002, 2001, and 2000, respectively.

(5)

Loan interest income includes loan fees of $36,701, $37,407, and $26,183 in 2002, 2001 and 2000, respectively.

(6)

The 8.25% annual distribution to SVB Capital I, which is the special-purpose trust formed for the purpose of issuing the trust-preferred securities, is recorded as a component of noninterest expense.

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        Net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as "volume change." Net interest income is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing liabilities, referred to as "rate change." The following table sets forth changes in interest income and interest expense for each major category of interest-earning assets and interest-bearing liabilities. The table also reflects the amount of simultaneous changes attributable to both volume and rate for the years indicated. For this table, changes that are not solely due to either volume or rate are allocated in proportion to the percentage changes in average volume and average rate. Changes relating to investments in non-taxable municipal securities are presented on a fully taxable-equivalent basis using the federal statutory tax rate of 35% for all years presented.