5. Investment Securities

Our investment securities portfolio consists of both an available-for-sale securities portfolio, which represents interest-earning investment securities, and a non-marketable securities portfolio, which primarily represents investments managed as part of our funds management business.

The major components of our investment securities portfolio at June 30, 2012 and December 31, 2011 are as follows:


	June 30, 2012								December 31, 2011
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Carrying Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Carrying Value
Available-for-sale securities, at fair value:
U.S. treasury securities	$	25,146	$	453	$	-	$	25,599	$	25,233	$	731	$	-	$	25,964
U.S. agency debentures		2,571,796		68,328		-		2,640,124		2,822,158		52,864		(90)		2,874,932
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities		1,668,523		45,276		-		1,713,799		1,529,466		34,926		(106)		1,564,286
Agency-issued collateralized mortgage obligations—fixed rate		3,751,327		54,283		(1,399)		3,804,211		3,317,285		56,546		(71)		3,373,760
Agency-issued collateralized mortgage obligations—variable rate		2,103,451		5,081		(83)		2,108,449		2,416,158		1,554		(4,334)		2,413,378
Agency-issued commercial mortgage-backed securities		223,200		4,880		-		228,080		176,646		2,047		-		178,693
Municipal bonds and notes		91,659		8,035		-		99,694		92,241		8,257		-		100,498
Equity securities		1,352		26		(383)		995		5,554		180		(1,199)		4,535

Total available-for-sale securities	$	10,436,454	$	186,362	$	(1,865)	$	10,620,951	$	10,384,741	$	157,105	$	(5,800)	$	10,536,046

Non-marketable securities:
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments (1)								639,596								611,824
Other venture capital investments (2)								120,111								124,121
Other investments (3)								-								987
Non-marketable securities (equity method accounting):
Other investments (4)								138,993								68,252
Low income housing tax credit funds								58,698								34,894
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments (5)								153,618								145,007
Other investments								21,296								19,355

Total non-marketable securities								1,132,312								1,004,440

Total investment securities							$	11,753,263							$	11,540,486

(1)	The following table shows the amount of venture capital and private equity fund investments by the following consolidated funds and our ownership of each fund at June 30, 2012 and December 31, 2011:


	June 30, 2012					December 31, 2011
(Dollars in thousands)	Amount		Ownership %			Amount		Ownership %
SVB Strategic Investors Fund, LP	$	36,694		12.6	%	$	39,567		12.6	%
SVB Strategic Investors Fund II, LP		109,343		8.6			122,619		8.6
SVB Strategic Investors Fund III, LP		213,405		5.9			218,429		5.9
SVB Strategic Investors Fund IV, LP		146,477		5.0			122,076		5.0
Strategic Investors Fund V, LP		18,134		0.2			8,838		0.3
SVB Capital Preferred Return Fund, LP		50,573		20.0			42,580		20.0
SVB Capital—NT Growth Partners, LP		57,588		33.0			43,958		33.0
SVB Capital Partners II, LP (i)		863		5.1			2,390		5.1
Other private equity fund (ii)		6,519		58.2			11,367		58.2

Total venture capital and private equity fund investments	$	639,596				$	611,824

(i)

At June 30, 2012, we had a direct ownership interest of 1.3 percent and an indirect ownership interest of 3.8 percent in the fund through our ownership interest of SVB Strategic Investors Fund II, LP.

(ii)

At June 30, 2012, we had a direct ownership interest of 41.5 percent and indirect ownership interests of 12.6 percent and 4.1 percent in the fund through our ownership interest of SVB Capital—NT Growth Partners, LP and SVB Capital Preferred Return Fund, LP, respectively.

(2)	The following table shows the amount of other venture capital investments by the following consolidated funds and our ownership of each fund at June 30, 2012 and December 31, 2011:


	June 30, 2012					December 31, 2011
(Dollars in thousands)	Amount		Ownership %			Amount		Ownership %
Silicon Valley BancVentures, LP	$	16,739		10.7	%	$	17,878		10.7	%
SVB Capital Partners II, LP (i)		59,256		5.1			61,099		5.1
SVB India Capital Partners I, LP		40,668		14.4			42,832		14.4
SVB Capital Shanghai Yangpu Venture Capital Fund		3,448		6.8			2,312		6.8

Total other venture capital investments	$	120,111				$	124,121

(i)

At June 30, 2012, we had a direct ownership interest of 1.3 percent and an indirect ownership interest of 3.8 percent in the fund through our ownership of SVB Strategic Investors Fund II, LP.

(3)

Other investments within non-marketable securities (fair value accounting) include our ownership in Partners for Growth, LP, a consolidated debt fund. At June 30, 2012, we had a majority ownership interest of slightly more than 50.0 percent in the fund. Partners for Growth, LP is managed by a third party and we do not have an ownership interest in the general partner of this fund.

(4)	The following table shows the carrying value and our ownership percentage of each investment at June 30, 2012 and December 31, 2011:


	June 30, 2012					December 31, 2011
(Dollars in thousands)	Amount		Ownership %			Amount		Ownership %
Gold Hill Venture Lending 03, LP (i)	$	6,238		9.3	%	$	16,072		9.3	%
Gold Hill Capital 2008, LP (ii)		19,553		15.5			19,328		15.5
Partners for Growth II, LP		3,551		24.2			3,785		24.2
China Joint Venture investment (iii)		79,524		50.0			-		-
Other investments		30,127		N/A			29,067		N/A

Total other investments	$	138,993				$	68,252

(i)

At June 30, 2012, we had a direct ownership interest of 4.8 percent in the fund and an indirect interest in the fund through our investment in Gold Hill Venture Lending Partners 03, LLC (“GHLLC”) of 4.5 percent. Our aggregate direct and indirect ownership in the fund is 9.3 percent.

(ii)

At June 30, 2012, we had a direct ownership interest of 11.5 percent in the fund and an indirect interest in the fund through our investment in Gold Hill Capital 2008, LLC of 4.0 percent. Our aggregate direct and indirect ownership in the fund is 15.5 percent.

(iii)

On May 3, 2012, we contributed $79.7 million to SPD Silicon Valley Bank Co., Ltd., our joint venture bank in China.

(5)

Represents investments in 326 and 329 funds (primarily venture capital funds) at June 30, 2012 and December 31, 2011, respectively, where our ownership interest is less than 5% of the voting interests of each such fund and in which we do not have the ability to exercise significant influence over the partnerships operating and financial policies. For the three months ended June 30, 2012, we recognized OTTI losses of $0.2 million resulting from other-than-temporary declines in value for 12 of the 326 investments. For the six months ended June 30, 2012, we recognized OTTI losses of $0.5 million resulting from other-than-temporary declines in value for 30 of the 326 investments. The OTTI losses are included in net gains on investment securities, a component of noninterest income. We concluded that any declines in value for the remaining 296 investments were temporary and as such, no OTTI was required to be recognized. At June 30, 2012, the carrying value of these venture capital and private equity fund investments (cost method accounting) was $153.6 million, and the estimated fair value was $185.3 million.

The following table summarizes our unrealized losses on our available-for-sale securities portfolio into categories of less than 12 months, or 12 months or longer as of June 30, 2012:


	June 30, 2012
	Less than 12 months				12 months or longer				Total
(Dollars in thousands)	Fair Value of Investments		Unrealized Losses		Fair Value of Investments		Unrealized Losses		Fair Value of Investments		Unrealized Losses
Residential mortgage-backed securities:
Agency-issued collateralized mortgage obligations—fixed rate	$	425,171	$	(1,399)	$	-	$	-	$	425,171	$	(1,399)
Agency-issued collateralized mortgage obligations—variable rate		182,847		(74)		43,153		(9)		226,000		(83)
Equity securities		162		(178)		243		(205)		405		(383)

Total temporarily impaired securities (1)	$	608,180	$	(1,651)	$	43,396	$	(214)	$	651,576	$	(1,865)

(1)

As of June 30, 2012, we identified a total of 33 investments that were in unrealized loss positions, of which five investments totaling $43.4 million with unrealized losses of $0.2 million has been in an impaired position for a period of time greater than 12 months. As of June 30, 2012, we do not intend to sell any impaired debt securities prior to recovery of our adjusted cost basis, and it is more likely than not that we will not be required to sell any of our securities prior to recovery of our adjusted cost basis. Based on our analysis as of June 30, 2012, we deem all impairments to be temporary, and therefore changes in value for our temporarily impaired securities as of the same date are included in other comprehensive income. Market valuations and impairment analyses on assets in the available-for-sale securities portfolio are reviewed and monitored on a quarterly basis.

The following table summarizes our unrealized losses on our available-for-sale securities portfolio into categories of less than 12 months, or 12 months or longer as of December 31, 2011:


	December 31, 2011
	Less than 12 months				12 months or longer				Total
(Dollars in thousands)	Fair Value of Investments		Unrealized Losses		Fair Value of Investments		Unrealized Losses		Fair Value of Investments		Unrealized Losses
U.S. agency debentures	$	50,994	$	(90)	$	-	$	-	$	50,994	$	(90)
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities		54,588		(106)		-		-		54,588		(106)
Agency-issued collateralized mortgage obligations—fixed rate		50,125		(71)		-		-		50,125		(71)
Agency-issued collateralized mortgage obligations—variable rate		1,521,589		(4,334)		-		-		1,521,589		(4,334)
Equity securities		3,831		(1,199)		-		-		3,831		(1,199)

Total temporarily impaired securities	$	1,681,127	$	(5,800)	$	-	$	-	$	1,681,127	$	(5,800)

The following table summarizes the remaining contractual principal maturities and fully taxable equivalent yields on debt securities classified as available-for-sale as of June 30, 2012. Interest income on certain municipal bonds and notes (non-taxable investments) are presented on a fully taxable equivalent basis using the federal statutory tax rate of 35.0 percent. The weighted average yield is computed using the amortized cost of debt securities, which are reported at fair value. For U.S. treasury securities, the expected maturity is the actual contractual maturity of the notes. Expected remaining maturities for certain U.S. agency debentures may occur earlier than their contractual maturities because the note issuers have the right to call outstanding amounts ahead of their contractual maturity. Expected maturities for mortgage-backed securities may differ significantly from their contractual maturities because mortgage borrowers have the right to prepay outstanding loan obligations with or without penalties. Mortgage-backed securities classified as available-for-sale typically have original contractual maturities from 10 to 30 years whereas expected average lives of these securities tend to be significantly shorter and vary based upon structure.


	June 30, 2012
	Total					One Year or Less					After One Year to Five Years					After Five Years to Ten Years					After Ten Years
(Dollars in thousands)	Carrying Value		Weighted- Average Yield			Carrying Value		Weighted- Average Yield			Carrying Value		Weighted- Average Yield			Carrying Value		Weighted- Average Yield			Carrying Value		Weighted- Average Yield
U.S. treasury securities	$	25,599		2.39	%	$	25,599		2.39	%	$	-		-	%	$	-		-	%	$	-		-	%
U.S. agency debentures		2,640,124		1.61			35,097		2.13			2,474,409		1.53			130,618		3.07			-		-
Residential mortgage-backed securities:
Agency-issued mortgage-backed securities		1,713,799		2.35			-		-			-		-			1,583,036		2.27			130,763		3.28
Agency-issued collateralized mortgage obligations - fixed rate		3,804,211		2.21			-		-			-		-			-		-			3,804,211		2.21
Agency-issued collateralized mortgage obligations - variable rate		2,108,449		0.70			-		-			-		-			-		-			2,108,449		0.70
Agency-issued commercial mortgage-backed securities		228,080		2.09			-		-			-		-			-		-			228,080		2.09
Municipal bonds and notes		99,694		6.00			941		5.20			15,195		5.55			50,166		6.00			33,392		6.24

Total	$	10,619,956		1.82		$	61,637		2.28		$	2,489,604		1.55		$	1,763,820		2.44		$	6,304,895		1.74

The following table presents the components of gains and losses (realized and unrealized) on investment securities for the three and six months ended June 30, 2012 and 2011:


	Three months ended June 30,				Six months ended June 30,
(Dollars in thousands)	2012		2011		2012		2011
Gross gains on investment securities:
Available-for-sale securities, at fair value (1)	$	5,322	$	37,314	$	5,343	$	37,377
Marketable securities (fair value accounting)		3,303		-		3,619		442
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments		33,288		37,205		59,398		82,704
Other venture capital investments		1,556		2,071		3,333		7,019
Other investments		-		-		21		20
Non-marketable securities (equity method accounting):
Other investments		5,389		3,132		6,811		6,516
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments		538		801		945		1,056
Other investments		264		2,256		306		2,429

Total gross gains on investment securities		49,660		82,779		79,776		137,563


Gross losses on investment securities:
Available-for-sale securities, at fair value (1)		(755)		(93)		(1,650)		(94)
Marketable securities (fair value accounting)		(754)		(3,307)		(754)		(4,115)
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments		(18,618)		(4,845)		(32,533)		(6,901)
Other venture capital investments		(3,219)		(1,420)		(9,882)		(1,664)
Non-marketable securities (equity method accounting):
Other investments		(327)		(1,110)		(703)		(1,309)
Non-marketable securities (cost method accounting):
Venture capital and private equity fund investments		(177)		(293)		(540)		(432)
Other investments		(1)		(31)		(66)		(31)

Total gross losses on investment securities		(23,851)		(11,099)		(46,128)		(14,546)

Gains on investment securities, net	$	25,809	$	71,680	$	33,648	$	123,017

Gains attributable to noncontrolling interests, including carried interest	$	14,502	$	26,437	$	21,840	$	69,822

(1)	The cost basis of available-for-sale securities sold is determined on a specific identification basis.