Silicon Valley Bank (SVB Financial Group) focuses on commercial lending to companies predominantly in the technology, life science, wine and private equity sectors. Jaded and weary from the seemingly endless loss of banks involved in originating and securitizing mortgage loans, might this offer some comfort to stockholders? Unfortunately, the focus on business loans and services does not mean SVB Financial has no exposure to mortgages. A close read of the footnotes in the bank’s September-quarter regulatory filing reveals the cracks in this piggy bank.
At the end of September 2008, the 10-Q filing showed $1.8 billion in investment securities, or 22 percent of total assets. Of this, $1.3 billion is characterized as “available-for-sale securities.” Just over half of this little nest egg is composed of “temporarily impaired” securities, including collateralized mortgage obligations (CMOs) and mortgage-backed securities. Not surprisingly these securities are sporting unrealized losses near $36.0 million — more than double the unrealized loss at the end of 2007. SVB Financial has written off more $4.9 million in loss on investment securities since the beginning of the year, which trimmed approximately eight cents off its share-net.
As a commercial lender SVB Financial Group appears to be among the most resilient of regional and boutique banks. Albeit that apparent strength should make it a good candidate for “the last bank standing” garland, one needs to read all the fine print before crowning SVB king of the prom.
Reporting by contributor Debra Fiakas, who does not hold a financial interest in any stocks mentioned in this article. The 10-Q Detective has a Full Disclosure Policy.
