10-Q
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 (Mark One)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2016
OR
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to         .
Commission File Number: 000-15637 
SVB FINANCIAL GROUP
(Exact name of registrant as specified in its charter)
  
Delaware
 
91-1962278
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
3003 Tasman Drive, Santa Clara, California
 
95054-1191
(Address of principal executive offices)
 
(Zip Code)
(408) 654-7400
(Registrant’s telephone number, including area code)
 
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  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨    Smaller reporting company  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
At April 30, 2016, 51,805,114 shares of the registrant’s common stock ($0.001 par value) were outstanding.


Table of Contents

TABLE OF CONTENTS
 
 
 
Page
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 

2

Table of Contents

Glossary of Acronyms that may be used in this Report

AFS — Available-for-Sale
APIC— Additional Paid-in Capital
ASC — Accounting Standards Codification
ASU – Accounting Standards Update
CET - Common Equity Tier
EHOP – Employee Home Ownership Program of the Company
EPS – Earnings Per Share
ESOP – Employee Stock Ownership Plan of the Company
ESPP – 1999 Employee Stock Purchase Plan of the Company
FASB – Financial Accounting Standards Board
FDIC – Federal Deposit Insurance Corporation
FHLB – Federal Home Loan Bank
FRB - Federal Reserve Bank
FTE - Full-Time Employee
FTP – Funds Transfer Pricing
GAAP - Accounting principles generally accepted in the United States of America
IASB – International Accounting Standards Board
IPO – Initial Public Offering
IRS – Internal Revenue Service
IT – Information Technology
LIBOR – London Interbank Offered Rate
NIB - Non-Interest Bearing
M&A – Merger and Acquisition
OTTI – Other Than Temporary Impairment
SEC – Securities and Exchange Commission
SPD-SVB - SPD Silicon Valley Bank
TDR – Troubled Debt Restructuring
UK – United Kingdom
VIE – Variable Interest Entity

3

Table of Contents

PART I - FINANCIAL INFORMATION
ITEM 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SVB FINANCIAL GROUP AND SUBSIDIARIES
INTERIM CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
(Dollars in thousands, except par value and share data)
 
March 31,
2016
 
December 31,
2015
Assets
 
 
 
 
Cash and cash equivalents
 
$
1,868,512

 
$
1,503,257

Available-for-sale securities, at fair value (cost of $14,150,695 and $16,375,941, respectively)
 
14,327,079

 
16,380,748

Held-to-maturity securities, at cost (fair value of $8,630,952 and $8,758,622, respectively)
 
8,548,238

 
8,790,963

Non-marketable and other securities
 
668,497

 
674,946

Total investment securities
 
23,543,814

 
25,846,657

Loans, net of unearned income
 
17,735,147

 
16,742,070

Allowance for loan losses
 
(230,249
)
 
(217,613
)
Net loans
 
17,504,898

 
16,524,457

Premises and equipment, net of accumulated depreciation and amortization
 
108,570

 
102,625

Accrued interest receivable and other assets
 
548,108

 
709,707

Total assets
 
$
43,573,902

 
$
44,686,703

Liabilities and total equity
 
 
 
 
Liabilities:
 
 
 
 
Noninterest-bearing demand deposits
 
$
30,933,256

 
$
30,867,497

Interest-bearing deposits
 
7,826,465

 
8,275,279

Total deposits
 
38,759,721

 
39,142,776

Short-term borrowings
 

 
774,900

Other liabilities
 
506,571

 
639,094

Long-term debt
 
796,570

 
796,702

Total liabilities
 
40,062,862

 
41,353,472

Commitments and contingencies (Note 12 and Note 15)
 

 


SVBFG stockholders’ equity:
 
 
 
 
Preferred stock, $0.001 par value, 20,000,000 shares authorized; no shares issued and outstanding
 

 

Common stock, $0.001 par value, 150,000,000 shares authorized; 51,701,312 shares and 51,610,226 shares outstanding, respectively
 
52

 
52

Additional paid-in capital
 
1,192,782

 
1,189,032

Retained earnings
 
2,072,820

 
1,993,646

Accumulated other comprehensive income
 
115,390

 
15,404

Total SVBFG stockholders’ equity
 
3,381,044

 
3,198,134

Noncontrolling interests
 
129,996

 
135,097

Total equity
 
3,511,040

 
3,333,231

Total liabilities and total equity
 
$
43,573,902

 
$
44,686,703


See accompanying notes to interim consolidated financial statements (unaudited).

4

Table of Contents

SVB FINANCIAL GROUP AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
 
 
Three months ended March 31,
(Dollars in thousands, except per share amounts)
 
2016
 
2015
Interest income:
 
 
 
 
Loans (1)
 
$
197,942

 
$
165,501

Investment securities:
 
 
 
 
Taxable
 
91,050

 
81,274

Non-taxable
 
596

 
772

Federal funds sold, securities purchased under agreements to resell and other short-term investment securities (1)
 
2,070

 
1,269

Total interest income
 
291,658

 
248,816

Interest expense:
 
 
 
 
Deposits
 
1,188

 
1,943

Borrowings (1)
 
9,049

 
7,948

Total interest expense
 
10,237

 
9,891

Net interest income
 
281,421

 
238,925

Provision for loan losses
 
33,341

 
6,452

Net interest income after provision for loan losses
 
248,080

 
232,473

Noninterest income:
 
 
 
 
(Losses) gains on investment securities, net (1)
 
(4,684
)
 
33,263

(Losses) gains on derivative instruments, net
 
(1,695
)
 
39,729

Foreign exchange fees
 
26,966

 
17,678

Credit card fees
 
15,507

 
12,090

Deposit service charges
 
12,672

 
10,736

Client investment fees
 
7,995

 
4,482

Lending related fees
 
7,813

 
8,022

Letters of credit and standby letters of credit fees
 
5,589

 
5,202

Other (1)
 
15,971

 
(7,678
)
Total noninterest income
 
86,134

 
123,524

Noninterest expense:
 
 
 
 
Compensation and benefits
 
122,262

 
115,770

Professional services (1)
 
19,000

 
18,747

Premises and equipment
 
14,984

 
12,657

Business development and travel
 
12,246

 
11,112

Net occupancy
 
10,035

 
7,313

FDIC and state assessments
 
6,927

 
5,789

Correspondent bank fees (1)
 
3,652

 
3,368

Provision for unfunded credit commitments
 
134

 
2,263

Other (1)
 
14,793

 
13,522

Total noninterest expense
 
204,033

 
190,541

Income before income tax expense
 
130,181

 
165,456

Income tax expense
 
53,584

 
63,066

Net income before noncontrolling interests
 
76,597

 
102,390

Net loss (income) attributable to noncontrolling interests (1)
 
2,577

 
(13,874
)
Net income available to common stockholders
 
$
79,174

 
$
88,516

Earnings per common share—basic
 
$
1.53

 
$
1.74

Earnings per common share—diluted
 
1.52

 
1.71

 
 
 
(1)
Amounts for the three months ended March 31, 2015, have been revised to reflect the retrospective application of new accounting guidance adopted in the second quarter of 2015 related to our consolidated variable interest entities (ASU 2015-02).

See accompanying notes to interim consolidated financial statements (unaudited).

5

Table of Contents

SVB FINANCIAL GROUP AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
 
 
Three months ended March 31,
(Dollars in thousands)
 
2016
 
2015
Net income before noncontrolling interests (1)
 
$
76,597

 
$
102,390

Other comprehensive income, net of tax:
 
 
 
 
Change in cumulative translation gains and (losses):
 
 
 
 
Foreign currency translation (losses) gains (1)
 
(254
)
 
2,161

Related tax benefit (expense)
 
104

 
(820
)
Change in unrealized gains on available-for-sale securities:
 
 
 
 
Unrealized holding gains
 
170,831

 
87,107

Related tax expense
 
(69,603
)
 
(35,215
)
Reclassification adjustment for losses (gains) included in net income
 
746

 
(2,596
)
Related tax (benefit) expense
 
(304
)
 
1,048

Amortization of unrealized gains on securities transferred from available-for-sale to held-to-maturity
 
(2,567
)
 
(2,828
)
Related tax benefit
 
1,033

 
1,139

Other comprehensive income, net of tax
 
99,986

 
49,996

Comprehensive income
 
176,583

 
152,386

Comprehensive loss (income) attributable to noncontrolling interests (1)
 
2,577

 
(13,874
)
Comprehensive income attributable to SVBFG
 
$
179,160

 
$
138,512

 
 
(1)
Amounts for the three months ended March 31, 2015, have been revised to reflect the retrospective application of new accounting guidance adopted in the second quarter of 2015 related to our consolidated variable interest entities (ASU 2015-02).

See accompanying notes to interim consolidated financial statements (unaudited).

6

Table of Contents

SVB FINANCIAL GROUP AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
 
 
 
Common Stock
 
Additional
Paid-in Capital
 
Retained Earnings
 
Accumulated
Other
Comprehensive Income
 
Total SVBFG
Stockholders’ Equity
 
Noncontrolling Interests
 
Total Equity
(Dollars in thousands)
 
Shares
 
Amount
 
 
 
 
 
 
Balance at December 31, 2014
 
50,924,925

 
$
51

 
$
1,120,350

 
$
1,649,967

 
$
42,704

 
$
2,813,072

 
$
1,238,662

 
$
4,051,734

Common stock issued under employee benefit plans, net of restricted stock cancellations
 
142,991

 

 
6,595

 

 

 
6,595

 

 
6,595

Common stock issued under ESOP
 
27,425

 

 
3,512

 

 

 
3,512

 

 
3,512

Income tax benefit from stock options exercised, vesting of restricted stock and other (1)
 

 

 
2,537

 

 

 
2,537

 

 
2,537

Deconsolidation of noncontrolling interest (1)
 

 

 

 

 

 

 
(1,069,437
)
 
(1,069,437
)
Net income (1)
 

 

 

 
88,516

 

 
88,516

 
13,874

 
102,390

Capital calls and distributions, net (1)
 

 

 

 

 

 

 
(40,823
)
 
(40,823
)
Net change in unrealized gains and losses on available-for-sale securities, net of tax
 

 

 

 

 
50,344

 
50,344

 

 
50,344

Amortization of unrealized gains on securities transferred from available-for-sale to held-to-maturity, net of tax
 

 

 

 

 
(1,689
)
 
(1,689
)
 

 
(1,689
)
Foreign currency translation adjustments, net of tax (1)
 

 

 

 

 
1,341

 
1,341

 

 
1,341

Share-based compensation expense
 

 

 
7,464

 

 

 
7,464

 

 
7,464

Balance at March 31, 2015
 
51,095,341

 
$
51

 
$
1,140,458

 
$
1,738,483

 
$
92,700

 
$
2,971,692

 
$
142,276

 
$
3,113,968

Balance at December 31, 2015
 
51,610,226

 
$
52

 
$
1,189,032

 
$
1,993,646

 
$
15,404

 
$
3,198,134

 
$
135,097

 
$
3,333,231

Common stock issued under employee benefit plans, net of restricted stock cancellations
 
47,921

 

 
(250
)
 

 

 
(250
)
 

 
(250
)
Common stock issued under ESOP
 
43,165

 

 
4,328

 

 

 
4,328

 

 
4,328

Income tax effect from stock options exercised, vesting of restricted stock and other
 

 

 
(8,483
)
 

 

 
(8,483
)
 

 
(8,483
)
Net income (loss)
 

 

 

 
79,174

 

 
79,174

 
(2,577
)
 
76,597

Capital calls and distributions, net
 

 

 

 

 

 

 
(2,524
)
 
(2,524
)
Net change in unrealized gains and losses on available-for-sale securities, net of tax
 

 

 

 

 
101,670

 
101,670

 

 
101,670

Amortization of unrealized gains on securities transferred from available-for-sale to held-to-maturity, net of tax
 

 

 

 

 
(1,534
)
 
(1,534
)
 

 
(1,534
)
Foreign currency translation adjustments, net of tax
 

 

 

 

 
(150
)
 
(150
)
 

 
(150
)
Share-based compensation expense
 

 

 
8,155

 

 

 
8,155

 

 
8,155

Balance at March 31, 2016
 
51,701,312

 
$
52

 
$
1,192,782

 
$
2,072,820

 
$
115,390

 
$
3,381,044

 
$
129,996

 
$
3,511,040

 
 
(1)
Amounts for the three months ended March 31, 2015, have been revised to reflect the retrospective application of new accounting guidance adopted in the second quarter of 2015 related to our consolidated variable interest entities (ASU 2015-02).

  See accompanying notes to interim consolidated financial statements (unaudited).

7

Table of Contents

SVB FINANCIAL GROUP AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
 March 31,
(Dollars in thousands)
 
2016
 
2015
Cash flows from operating activities:
 
 
 
 
Net income before noncontrolling interests (1)
 
$
76,597

 
$
102,390

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Provision for loan losses
 
33,341

 
6,452

Provision for unfunded credit commitments
 
134

 
2,263

Changes in fair values of derivatives, net
 
842

 
(20,404
)
Losses (gains) on investment securities, net
 
4,684

 
(33,263
)
Depreciation and amortization (1)
 
11,536

 
9,892

Amortization of premiums and discounts on investment securities, net
 
4,931

 
6,418

Amortization of share-based compensation
 
6,877

 
7,771

Amortization of deferred loan fees
 
(24,042
)
 
(21,169
)
Pre-tax net gain on SVBIF sale transaction
 

 
(887
)
Deferred income tax (benefit) expense
 
(5,982
)
 
1,311

Changes in other assets and liabilities:
 
 
 
 
Accrued interest receivable and payable, net
 
(4,628
)
 
772

Accounts payable and receivable, net
 
552

 
(9,141
)
Income tax payable and receivable, net (1)
 
28,711

 
9,283

Accrued compensation
 
(101,241
)
 
(74,614
)
Foreign exchange spot contracts, net
 
9,541

 
33,934

Other, net
 
14,208

 
32,198

Net cash provided by operating activities (1)
 
56,061

 
53,206

Cash flows from investing activities:
 
 
 
 
Purchases of available-for-sale securities
 

 
(552,573
)
Proceeds from sales of available-for-sale securities
 
1,864,396

 
5,612

Proceeds from maturities and pay downs of available-for-sale securities
 
364,101

 
424,713

Purchases of held-to-maturity securities
 
(98,199
)
 
(739,291
)
Proceeds from maturities and pay downs of held-to-maturity securities
 
351,834

 
336,511

Purchases of non-marketable and other securities
 
(12,412
)
 
(9,924
)
Proceeds from sales and distributions of non-marketable and other securities
 
9,977

 
45,120

Net increase in loans
 
(997,408
)
 
(53,886
)
Proceeds from recoveries of charged-off loans
 
5,469

 
1,551

Effect of deconsolidation of noncontrolling interest
 

 
15,995

Purchases of premises and equipment
 
(13,680
)
 
(12,038
)
Net cash provided by (used for) investing activities
 
1,474,078

 
(538,210
)
Cash flows from financing activities:
 
 
 
 
Net decrease in deposits
 
(383,055
)
 
(491,924
)
Net (decrease) increase in short-term borrowings
 
(774,900
)
 
69,985

(Distributions to noncontrolling interests), net of contributions from noncontrolling interests
 
(2,524
)
 
703

Tax benefit from stock exercises
 
(8,483
)
 
2,534

Proceeds from issuance of common stock, ESPP, and ESOP
 
4,078

 
10,107

Proceeds from issuance of 3.50% Senior Notes
 

 
346,431

Net cash used for financing activities
 
(1,164,884
)
 
(62,164
)
Net increase (decrease) in cash and cash equivalents
 
365,255

 
(547,168
)
Cash and cash equivalents at beginning of period (1) (2)
 
1,503,257

 
1,811,014

Cash and cash equivalents at end of period (1) (2)
 
$
1,868,512

 
$
1,263,846

Supplemental disclosures:
 
 
 
 
Cash paid during the period for:
 
 
 
 
Interest
 
$
17,407

 
$
11,859

Income taxes
 
35,778

 
46,599

Noncash items during the period:
 
 
 
 
Changes in unrealized gains and losses on available-for-sale securities, net of tax
 
$
101,670

 
$
50,344

Distributions of stock from investments (3)
 
34

 
61,649

 
 
(1)
Amounts for the three months ended March 31, 2015, have been revised to reflect the retrospective application of new accounting guidance adopted in the second quarter of 2015 related to our consolidated variable interest entities (ASU 2015-02).
(2)
Cash and cash equivalents at March 31, 2015 and December 31, 2014 included $9.3 million and $15.0 million, respectively, recognized in assets held-for-sale in conjunction with the SVBIF sale transaction.
(3)
For the quarter ended March 31, 2015, includes distributions to noncontrolling interests of $41.5 million.

See accompanying notes to interim consolidated financial statements (unaudited).

8

Table of Contents

SVB FINANCIAL GROUP AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1.
Basis of Presentation
SVB Financial Group is a diversified financial services company, as well as a bank holding company and financial holding company. SVB Financial was incorporated in the state of Delaware in March 1999. Through our various subsidiaries and divisions, we offer a variety of banking and financial products and services to support our clients of all sizes and stages throughout their life cycles. In these notes to our consolidated financial statements, when we refer to “SVB Financial Group,” “SVBFG”, the “Company,” “we,” “our,” “us” or use similar words, we mean SVB Financial Group and all of its subsidiaries collectively, including Silicon Valley Bank (the “Bank”), unless the context requires otherwise. When we refer to “SVB Financial” or the “Parent” we are referring only to the parent company, SVB Financial Group, unless the context requires otherwise.
The accompanying unaudited interim consolidated financial statements reflect all adjustments of a normal and recurring nature that are, in the opinion of management, necessary to fairly present our financial position, results of operations and cash flows in accordance with GAAP. Such unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The results of operations for the three months ended March 31, 2016 are not necessarily indicative of results to be expected for any future periods. These unaudited interim consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2015 (“2015 Form 10-K”).
The accompanying unaudited interim consolidated financial statements have been prepared on a consistent basis with the accounting policies described in Consolidated Financial Statements and Supplementary Data—Note 2—“Summary of Significant Accounting Policies” under Part II, Item 8 of our 2015 Form 10-K.
The preparation of unaudited interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates may change as new information is obtained. Significant items that are subject to such estimates include measurements of fair value, the valuation of non-marketable securities, the valuation of equity warrant assets, the adequacy of the allowance for loan losses and reserve for unfunded credit commitments, and the recognition and measurement of income tax assets and liabilities.
Principles of Consolidation and Presentation
Prior to April 1, 2015, the Company’s consolidated financial statements included the accounts of SVB Financial Group and entities in which we had a controlling interest.  The determination of whether we had controlling interest was based on consolidation principles prescribed by ASC Topic 810 and whether the controlling interest in an entity was a voting interest entity or a variable interest entity (“VIE”). However, during the three months ended June 30, 2015, we early adopted the provisions of ASU 2015-02, Amendments to the Consolidation Analysis (ASU 2015-02), which simplifies consolidation accounting by reducing the number of consolidation models and changing various aspects of current GAAP, including certain consolidation criteria for variable interest entities. The new guidance eliminates the presumption that a general partner of a limited partnership arrangement should consolidate a limited partnership. The amendments to ASC Topic 810 in ASU 2015-02 modify the evaluation of whether limited partnerships and similar entities are VIEs or voting entities. With these changes, we determined that the majority of our investments in limited partnership arrangements are VIEs under the new guidance while these entities were typically voting interest entities under the prior guidance.
ASU 2015-02 provided a single model for evaluating VIE entities for consolidation. VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or equity investors, as a group, lack one of the following characteristics: (a) the power to direct the activities that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of the entity, or (c) the right to receive the expected returns of the entity. We assess VIEs to determine if we are the primary beneficiary of a VIE.  A primary beneficiary is defined as a variable interest holder that has a controlling financial interest. A controlling financial interest requires both: (a) power to direct the activities that most significantly impact the VIE’s economic performance, and (b) obligation to absorb losses or receive benefits of a VIE that could potentially be significant to a VIE. Under this analysis, we evaluate kick-out rights and other participating rights which could provide us a controlling financial interest. The primary beneficiary of a VIE is required to consolidate the VIE.
ASU 2015-02 also changed how we evaluate fees paid to managers of our limited partnership investments. Under the new guidance, we exclude those fee arrangements that are not deemed to be variable interests from the analysis of our interests in our investments in VIEs and the determination of a primary beneficiary, if any.

9

Table of Contents

Our consolidated financial statements include the accounts of SVB Financial Group and consolidated entities. We consolidate voting entities in which we have control through voting interests. We determine whether we have a controlling financial interest in a VIE by determining if we have the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and whether we have significant variable interests. Generally, we have significant variable interests if our commitments to a limited partnership investment represent a significant amount of the total commitments to the entity. We also evaluate the impact of related parties on our determination of variable interests in our consolidation conclusions. We consolidate VIEs in which we are the primary beneficiary based on a controlling financial interest. If we are not the primary beneficiary of a VIE, we record our pro-rata interests or our cost basis in the VIE, as appropriate, based on other accounting guidance within GAAP.
All significant intercompany accounts and transactions with consolidated entities have been eliminated. We have not provided financial or other support during the periods presented to any VIE that we were not previously contractually required to provide.
Recent Accounting Pronouncements
In May 2014, the FASB issued a new accounting standard update (ASU 2014-09, Revenue from Contracts with Customers (Topic 606)), which provides revenue recognition guidance that is intended to create greater consistency with respect to how and when revenue from contracts with customers is shown in the income statement. This guidance will be effective January 1, 2018, either on a full retrospective approach or a modified retrospective approach, with early adoption permitted, but not before January 1, 2017. We are currently evaluating the impact this guidance will have on our financial position, results of operation and stockholders’ equity.
In January 2016, the FASB issued a new accounting standard update (ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Topic 825)), which will significantly change the income statement impact of equity investments, and the recognition of changes in fair value of financial liabilities. This guidance will be effective on January 1, 2018, on a prospective basis with a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. We are currently evaluating the impact this guidance will have on our financial position, results of operation and stockholders’ equity.
In February 2016, the FASB issued a new accounting standard update (ASU 2016-02, Leases (Topic 842)), which will require for all operating leases the recognition of a right-of-use asset and a lease liability, in the statement of financial position. The lease cost will be allocated over the lease term on a straight-line basis. This guidance will be effective on January 1, 2019, on a modified retrospective basis, with early adoption permitted. We are currently evaluating the impact this guidance will have on our financial position, results of operation and stockholders’ equity.
In March 2016, the FASB issued a new accounting standard update (ASU 2016-07, Investments—Equity Method and Joint Ventures (Topic 323)), which eliminates the requirement that when an investment qualifies for use of the equity method due to an increase in level of ownership or influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by step basis as if the equity method had been in effect during all previous periods that the investment had been held. This guidance will be effective January 1, 2017, on a prospective basis, with early adoption permitted. We are currently evaluating the impact this guidance will have on our financial position, results of operation and stockholders’ equity.
In March 2016, the FASB issued a new accounting standard update (ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)), which is intended to improve the operability and understandability of the implementation guidance by clarifying the following: how an entity should identify the unit of accounting for the principal versus agent evaluation; how the control principle applies to transactions, such as service arrangements; reframes the indicators to focus on a principal rather than an agent, removes the credit risk and commission indicators and clarifies the relationship between the control principle and the indicators; and revises the existing illustrative examples and adds new illustrative examples. This guidance will be effective January 1, 2018, either on a full retrospective approach or a modified retrospective approach, with early adoption permitted, but not before January 1, 2017. We are currently evaluating the impact this guidance will have on our financial position, results of operation and stockholders’ equity.
In March 2016, the FASB issued a new accounting standard update (ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718)), which includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows.  Under the ASU, an entity recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement.  This guidance eliminates the notion of the APIC pool and significantly reduces the complexity and cost of accounting for excess tax benefits and tax deficiencies.  Additionally, the ASU eliminates the requirement to defer recognition of an excess tax benefit until the benefit is realized through a reduction to taxes payable. This guidance will be effective January 1, 2017. Early adoption is

10

Table of Contents

permitted, but all of the guidance must be adopted in the same period. We are currently evaluating the impact this guidance will have on our financial position, results of operation and stockholders’ equity.
In April 2016, the FASB issued a new accounting standard update (ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing), which amends the new revenue recognition guidance on accounting for licenses of intellectual property and identifying performance obligations. The amendments clarify how an entity should evaluate the nature of its promise in granting a license of intellectual property, which will determine whether it recognizes revenue over time or a point in time. The amendments also clarify when a promised good or service is separately identifiable, that is distinct within the context of the contract, and allow entities to disregard items that are immaterial in the context of a contract. The effective date and transition requirements for this update are the same as those of the new standard. This guidance is effective January 1, 2018, on either a full retrospective approach or a modified retrospective approach, with early adoption permitted, but not before January 1, 2017. We are currently evaluating the impact this guidance will have on our financial position, results of operation and stockholders’ equity.
Reclassifications
Certain amounts for the three months ended March 31, 2015, have been revised to reflect the retrospective application of new accounting guidance adopted in the second quarter of 2015 related to our consolidated variable interest entities (ASU 2015-02).
2.
Stockholders’ Equity and EPS
Accumulated Other Comprehensive Income
The following table summarizes the items reclassified out of accumulated other comprehensive income into the Consolidated Statements of Income (unaudited) for the three months ended March 31, 2016 and 2015:
 
 
 
 
Three months ended March 31,
(Dollars in thousands)
 
Income Statement Location
 
2016
 
2015
Reclassification adjustment for losses (gains) included in net income
 
(Losses) gains on investment securities, net
 
$
746

 
$
(2,596
)
Related tax (benefit) expense
 
Income tax expense
 
(304
)
 
1,048

Total reclassification adjustment for losses (gains) included in net income, net of tax
 
 
 
$
442

 
$
(1,548
)
EPS
Basic EPS is the amount of earnings available to each share of common stock outstanding during the reporting period. Diluted EPS is the amount of earnings available to each share of common stock outstanding during the reporting period adjusted to include the effect of potentially dilutive common shares. Potentially dilutive common shares include incremental shares issued for stock options and restricted stock units outstanding under our equity incentive plans and our ESPP. Potentially dilutive common shares are excluded from the computation of dilutive EPS in periods in which the effect would be antidilutive. The following is a reconciliation of basic EPS to diluted EPS for the three months ended March 31, 2016 and 2015:
 
 
Three months ended March 31,
(Dollars and shares in thousands, except per share amounts)
 
2016
 
2015
Numerator:
 
 
 
 
Net income available to common stockholders
 
$
79,174

 
$
88,516

Denominator:
 
 
 
 
Weighted average common shares outstanding-basic
 
51,646

 
51,009

Weighted average effect of dilutive securities:
 
 
 
 
Stock options and ESPP
 
264

 
445

Restricted stock units
 
175

 
265

Denominator for diluted calculation
 
52,085

 
51,719

Earnings per common share:
 
 
 
 
Basic
 
$
1.53

 
$
1.74

Diluted
 
$
1.52

 
$
1.71


11

Table of Contents


The following table summarizes the weighted-average common shares excluded from the diluted EPS calculation due to the antidilutive effect for the three months ended March 31, 2016 and 2015:
 
 
Three months ended March 31,
(Shares in thousands)
 
2016
 
2015
Stock options
 
351

 
241

Restricted stock units
 
14

 
2

Total
 
365

 
243

3.
Share-Based Compensation
For the three months ended March 31, 2016 and 2015, we recorded share-based compensation and related tax benefits as follows: 
 
 
Three months ended March 31,
(Dollars in thousands)
 
2016
 
2015
Share-based compensation expense
 
$
6,877

 
$
7,771

Income tax benefit related to share-based compensation expense
 
(2,117
)
 
(2,638
)
Unrecognized Compensation Expense
As of March 31, 2016, unrecognized share-based compensation expense was as follows:
(Dollars in thousands)
 
  Unrecognized  
Expense
 
Average
Expected
Recognition
  Period - in Years  
Stock options
 
$
9,444

 
2.18
Restricted stock units
 
39,942

 
2.50
Total unrecognized share-based compensation expense
 
$
49,386

 
 
Share-Based Payment Award Activity
The table below provides stock option information related to the 2006 Equity Incentive Plan for the three months ended March 31, 2016:
 
 
Options
 
Weighted
Average
 Exercise Price 
 
Weighted Average Remaining Contractual Life - in Years  
 
Aggregate
  Intrinsic Value  
of In-The-
Money
Options
Outstanding at December 31, 2015
 
1,137,228

 
$
77.12

 
 
 
 
Exercised
 
(31,006
)
 
25.17

 
 
 
 
Forfeited
 
(4,154
)
 
87.99

 
 
 
 
Outstanding at March 31, 2016
 
1,102,068

 
78.54

 
3.65
 
$
30,595,989

Vested and expected to vest at March 31, 2016
 
1,078,583

 
77.88

 
3.61
 
30,455,095

Exercisable at March 31, 2016
 
589,043

 
63.10

 
2.68
 
23,310,253

The aggregate intrinsic value of outstanding options shown in the table above represents the pre-tax intrinsic value based on our closing stock price of $102.05 as of March 31, 2016. The total intrinsic value of options exercised during the three months ended March 31, 2016 was $2.0 million, compared to $10.2 million for the comparable 2015 period.

12

Table of Contents

The table below provides information for restricted stock units under the 2006 Equity Incentive Plan for the three months ended March 31, 2016:
 
 
Shares    
 
Weighted Average Grant Date Fair Value
Nonvested at December 31, 2015
 
572,038

 
$
103.50

Granted
 
95,464

 
87.22

Vested
 
(28,638
)
 
60.63

Forfeited
 
(4,113
)
 
101.31

Nonvested at March 31, 2016
 
634,751

 
103.00

4.
Variable Interest Entities
Our involvement with VIEs includes our investments in venture capital and private equity funds, debt funds, private and public portfolio companies and our investments in qualified affordable housing projects.
The following table presents the carrying amounts and classification of significant variable interests in consolidated and unconsolidated VIEs as of March 31, 2016 and December 31, 2015:
(Dollars in thousands)
 
Consolidated VIEs
 
Unconsolidated VIEs
 
Maximum Exposure to Loss in Unconsolidated VIEs
March 31, 2016:
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
10,855

 
$

 
$

Non-marketable and other securities (1)
 
196,789

 
362,470

 
362,470

Accrued interest receivable and other assets
 
614

 

 

Total assets
 
$
208,258

 
$
362,470

 
$
362,470

Liabilities:
 
 
 
 
 
 
Other liabilities
 
$
563

 
$

 
$

Accrued expenses and other liabilities (1)
 

 
87,754

 

Total liabilities
 
$
563

 
$
87,754

 
$

December 31, 2015:
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
11,811

 
$

 
$

Non-marketable and other securities (1)
 
203,714

 
364,450

 
364,450

Accrued interest receivable and other assets
 
494

 

 

Total assets
 
$
216,019

 
$
364,450

 
$
364,450

Liabilities:
 
 
 
 
 
 
Other liabilities
 
$
433

 
$

 
$

Accrued expenses and other liabilities (1)
 

 
90,978

 

Total liabilities
 
$
433

 
$
90,978

 
$

 
 
(1)
Included in our unconsolidated non-marketable and other securities portfolio at March 31, 2016 and December 31, 2015 are investments in qualified affordable housing projects of $157.7 million and $154.4 million, respectively and related unfunded commitments of $87.8 million and $91.0 million, respectively.

Non-marketable and other securities
Our non-marketable and other securities portfolio primarily represents investments in venture capital and private equity funds, debt funds, private and public portfolio companies and investments in qualified affordable housing projects. A majority of these investments are through third party funds held by SVB Financial in which we do not have controlling or significant variable interests. These investments represent our unconsolidated VIEs in the table above. Our non-marketable and other securities

13

Table of Contents

portfolio also includes investments from SVB Capital. SVB Capital is the venture capital investment arm of SVB Financial, which focuses primarily on funds management. The SVB Capital family of funds is comprised of direct venture funds that invest in companies and funds of funds that invest in other venture capital funds. We have a controlling and significant variable interest in five of these SVB Capital funds and consolidate these funds for financial reporting purposes.
All investments are generally nonredeemable and distributions are expected to be received through the liquidation of the underlying investments throughout the life of the investment fund. Investments may be sold or transferred subject to the notice and approval provisions of the underlying investment agreement. Subject to applicable regulatory requirements, including the Volcker Rule, we also make commitments to invest in venture capital and private equity funds, but are not obligated to fund commitments beyond our initial investment. For additional details, see Note 12—"Off-Balance Sheet Arrangements, Guarantees, and Other Commitments" of the "Notes to Interim Consolidated Financial Statements (unaudited)" under Part I, Item 1 of this report.
The Bank also has variable interests in low income housing tax credit funds, in connection with fulfilling its responsibilities under the Community Reinvestment Act ("CRA"), that are designed to generate a return primarily through the realization of federal tax credits. These investments are typically limited partnerships in which the general partner, other than the Bank, holds the power over significant activities of the VIE; therefore, these investments are not consolidated. For additional information on our investments in qualified affordable housing projects see Note 6—“Investment Securities" of the "Notes to Interim Consolidated Financial Statements (unaudited)" under Part I, Item 1 of this report.
As of March 31, 2016, our exposure to loss with respect to the consolidated VIEs is limited to our net assets of $207.7 million and our exposure to loss for our unconsolidated VIEs is equal to our investment in these assets of $362.5 million.
5.
Cash and Cash Equivalents
The following table details our cash and cash equivalents at March 31, 2016 and December 31, 2015:
(Dollars in thousands)
 
March 31, 2016

December 31, 2015
Cash and due from banks (1)
 
$
1,574,966

 
$
1,372,743

Securities purchased under agreements to resell (2)
 
288,421

 
125,391

Other short-term investment securities
 
5,125

 
5,123

Total cash and cash equivalents
 
$
1,868,512

 
$
1,503,257

 
 
(1)
At March 31, 2016 and December 31, 2015, $479 million and $405 million, respectively, of our cash and due from banks was deposited at the Federal Reserve Bank and was earning interest at the Federal Funds target rate, and interest-earning deposits in other financial institutions were $793 million and $500 million, respectively.
(2)
At March 31, 2016 and December 31, 2015, securities purchased under agreements to resell were collateralized by U.S. Treasury securities and U.S. agency securities with aggregate fair values of $295 million and $128 million, respectively. None of these securities received as collateral were sold or pledged as of March 31, 2016 or December 31, 2015.
6.
Investment Securities
Our investment securities portfolio consists of i) an available-for-sale securities portfolio and a held-to-maturity securities portfolio, both of which represent interest-earning investment securities, and ii) a non-marketable and other securities portfolio, which primarily represents investments managed as part of our funds management business.
Available-for-Sale Securities
The components of our available-for-sale investment securities portfolio at March 31, 2016 and December 31, 2015 are as follows:
 
 
March 31, 2016
(Dollars in thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Carrying
Value
Available-for-sale securities, at fair value:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
9,824,755

 
$
129,634

 
$
(35
)
 
$
9,954,354

U.S. agency debentures
 
2,444,137

 
41,294

 

 
2,485,431

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
Agency-issued collateralized mortgage obligations—fixed rate
 
1,308,859

 
7,414

 
(4,256
)
 
1,312,017

Agency-issued collateralized mortgage obligations—variable rate
 
570,740

 
2,421

 
(127
)
 
573,034

Equity securities
 
2,204

 
242

 
(203
)
 
2,243

Total available-for-sale securities
 
$
14,150,695

 
$
181,005

 
$
(4,621
)
 
$
14,327,079



14

Table of Contents

 
 
December 31, 2015
(Dollars in thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Carrying
Value
Available-for-sale securities, at fair value:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
11,679,450

 
$
19,134

 
$
(20,549
)
 
$
11,678,035

U.S. agency debentures
 
2,677,453

 
17,684

 
(5,108
)
 
2,690,029

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
Agency-issued collateralized mortgage obligations—fixed rate
 
1,408,206

 
6,591

 
(15,518
)
 
1,399,279

Agency-issued collateralized mortgage obligations—variable rate
 
604,236

 
3,709

 
(9
)
 
607,936

Equity securities
 
6,596

 
460

 
(1,587
)
 
5,469

Total available-for-sale securities
 
$
16,375,941

 
$
47,578

 
$
(42,771
)
 
$
16,380,748

The following table summarizes our unrealized losses on our available-for-sale securities portfolio into categories of less than 12 months and 12 months or longer as of March 31, 2016:
 
 
March 31, 2016
 
 
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
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
201,215

 
$
(35
)
 
$

 
$

 
$
201,215

 
$
(35
)
Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
 

 

Agency-issued collateralized mortgage obligations—fixed rate
 
176,469

 
(157
)
 
462,143

 
(4,099
)
 
638,612

 
(4,256
)
Agency-issued collateralized mortgage obligations—variable rate
 
103,900

 
(127
)
 

 

 
103,900

 
(127
)
Equity securities
 
1,561

 
(203
)
 

 

 
1,561

 
(203
)
Total temporarily impaired securities: (1)
 
$
483,145

 
$
(522
)
 
$
462,143

 
$
(4,099
)
 
$
945,288

 
$
(4,621
)
 
 
(1)
As of March 31, 2016, we identified a total of 70 investments that were in unrealized loss positions, of which 24 investments totaling $462.1 million with unrealized losses of $4.1 million have been in an impaired position for a period of time greater than 12 months. As of March 31, 2016, we do not intend to sell any impaired fixed income investment 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 March 31, 2016, 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 and 12 months or longer as of December 31, 2015:
 
 
December 31, 2015
 
 
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
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
7,467,519

 
$
(20,549
)
 
$

 
$

 
$
7,467,519

 
$
(20,549
)
U.S. agency debentures
 
760,071

 
(5,108
)
 

 

 
760,071

 
(5,108
)
Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
Agency-issued collateralized mortgage obligations—fixed rate
 
545,404

 
(4,681
)
 
373,284

 
(10,837
)
 
918,688

 
(15,518
)
Agency-issued collateralized mortgage obligations—variable rate
 
7,776

 
(9
)
 

 

 
7,776

 
(9
)
Equity securities
 
2,955

 
(1,587
)
 

 

 
2,955

 
(1,587
)
Total temporarily impaired securities (1):
 
$
8,783,725

 
$
(31,934
)
 
$
373,284

 
$
(10,837
)
 
$
9,157,009

 
$
(42,771
)
 
 

15

Table of Contents

(1)
As of December 31, 2015, we identified a total of 243 investments that were in unrealized loss positions, of which 18 investments totaling $373.3 million with unrealized losses of $10.8 million have been in an impaired position for a period of time greater than 12 months.



16

Table of Contents

The following table summarizes the remaining contractual principal maturities and fully taxable equivalent yields on fixed income investment securities classified as available-for-sale as of March 31, 2016. The weighted average yield is computed using the amortized cost of fixed income investment securities, which are reported at fair value. For U.S. Treasury securities and U.S. agency debentures, the expected maturity is the actual contractual maturity of the notes. 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 and prepayments in lower rate environments.
 
 
March 31, 2016
 
 
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
 
$
9,954,354

 
1.31
%
 
$
651,416

 
0.73
%
 
$
9,302,938

 
1.35
%
 
$

 
%
 
$

 
%
U.S. agency debentures
 
2,485,431

 
1.60

 
382,836

 
1.57

 
2,102,595

 
1.60

 

 

 

 

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency-issued collateralized mortgage obligations - fixed rate
 
1,312,017

 
1.95

 

 

 

 

 
884,785

 
2.15

 
427,232

 
1.53

Agency-issued collateralized mortgage obligations - variable rate
 
573,034

 
0.71

 

 

 

 

 

 

 
573,034

 
0.71

Total
 
$
14,324,836

 
1.39

 
$
1,034,252

 
1.04

 
$
11,405,533

 
1.40

 
$
884,785

 
2.15

 
$
1,000,266

 
1.06




17

Table of Contents

Held-to-Maturity Securities

The components of our held-to-maturity investment securities portfolio at March 31, 2016 and December 31, 2015 are as follows:
 
 
March 31, 2016
(Dollars in thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
Held-to-maturity securities, at cost:
 
 
 
 
 
 
 
 
U.S. agency debentures (1)
 
$
589,076

 
$
15,170

 
$

 
$
604,246

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
Agency-issued mortgage-backed securities
 
2,308,454

 
26,627

 
(622
)
 
2,334,459

Agency-issued collateralized mortgage obligations—fixed rate
 
4,047,342

 
32,071

 
(4,483
)
 
4,074,930

Agency-issued collateralized mortgage obligations—variable rate
 
359,244

 
387

 
(352
)
 
359,279

Agency-issued commercial mortgage-backed securities
 
1,181,904

 
14,773

 
(203
)
 
1,196,474

Municipal bonds and notes
 
62,218

 
113

 
(767
)
 
61,564

Total held-to-maturity securities
 
$
8,548,238

 
$
89,141

 
$
(6,427
)
 
$
8,630,952

 
 
(1)
Consists of pools of Small Business Investment Company debentures issued and guaranteed by the U.S. Small Business Administration, an independent agency of the United States.
 
 
December 31, 2015
(Dollars in thousands)
 
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Value
Held-to-maturity securities, at cost:
 
 
 
 
 
 
 
 
U.S. agency debentures (1)
 
$
545,473

 
$
8,876

 
$

 
$
554,349

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
Agency-issued mortgage-backed securities
 
2,366,627

 
546

 
(11,698
)
 
2,355,475

Agency-issued collateralized mortgage obligations—fixed rate
 
4,225,781

 
3,054

 
(32,999
)
 
4,195,836

Agency-issued collateralized mortgage obligations—variable rate
 
370,779

 
758

 
(33
)
 
371,504

Agency-issued commercial mortgage-backed securities
 
1,214,716

 
3,405

 
(3,475
)
 
1,214,646

Municipal bonds and notes
 
67,587

 
55

 
(830
)
 
66,812

Total held-to-maturity securities
 
$
8,790,963

 
$
16,694

 
$
(49,035
)
 
$
8,758,622

 
 
(1)
Consists of pools of Small Business Investment Company debentures issued and guaranteed by the U.S. Small Business Administration, an independent agency of the United States.


18

Table of Contents

The following table summarizes our unrealized losses on our held-to-maturity securities portfolio into categories of less than 12 months and 12 months or longer as of March 31, 2016:
 
 
March 31, 2016
 
 
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
Held-to-maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
Agency-issued mortgage-backed securities
 
$
31,969

 
$
(147
)
 
$
42,989

 
$
(475
)
 
$
74,958

 
$
(622
)
Agency-issued collateralized mortgage obligations—fixed rate
 
181,655

 
(1,466
)
 
358,847

 
(3,017
)
 
540,502

 
(4,483
)
Agency-issued collateralized mortgage obligations—variable rate
 
177,805

 
(352
)
 

 

 
177,805

 
(352
)
Agency-issued commercial mortgage-backed securities
 
31,913

 
(19
)
 
26,907

 
(184
)
 
58,820

 
(203
)
Municipal bonds and notes
 
25,875

 
(168
)
 
27,982

 
(599
)
 
53,857

 
(767
)
Total temporarily impaired securities (1):
 
$
449,217

 
$
(2,152
)
 
$
456,725

 
$
(4,275
)
 
$
905,942

 
$
(6,427
)
 
 
(1)
As of March 31, 2016, we identified a total of 161 investments that were in unrealized loss positions, of which 72 investments totaling $456.7 million with unrealized losses of $4.3 million have been in an impaired position for a period of time greater than 12 months. As of March 31, 2016, we do not intend to sell any impaired fixed income investment 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, which is consistent with our classification of these securities. Based on our analysis as of March 31, 2016, we deem all impairments to be temporary. Market valuations and impairment analyses on assets in the held-to-maturity securities portfolio are reviewed and monitored on a quarterly basis.
The following table summarizes our unrealized losses on our held-to-maturity securities portfolio into categories of less than 12 months and 12 months or longer as of December 31, 2015:
 
 
December 31, 2015
 
 
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
Held-to-maturity securities:
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
Agency-issued mortgage-backed securities
 
$
2,121,258

 
$
(10,860
)
 
$
22,507

 
$
(838
)
 
$
2,143,765

 
$
(11,698
)
Agency-issued collateralized mortgage obligations—fixed rate
 
3,153,483

 
(30,230
)
 
150,058

 
(2,769
)
 
3,303,541

 
(32,999
)
Agency-issued collateralized mortgage obligations—variable rate
 
170,350

 
(33
)
 

 

 
170,350

 
(33
)
Agency-issued commercial mortgage-backed securities
 
823,414

 
(2,994
)
 
40,276

 
(481
)
 
863,690

 
(3,475
)
Municipal bonds and notes
 
34,278

 
(274
)
 
25,509

 
(556
)
 
59,787

 
(830
)
Total temporarily impaired securities (1):
 
$
6,302,783

 
$
(44,391
)
 
$
238,350

 
$
(4,644
)
 
$
6,541,133

 
$
(49,035
)
 
 
(1)
As of December 31, 2015, we identified a total of 384 investments that were in unrealized loss positions, of which 58 investments totaling $238.4 million with unrealized losses of $4.6 million have been in an impaired position for a period of time greater than 12 months.

19

Table of Contents

The following table summarizes the remaining contractual principal maturities and fully taxable equivalent yields on fixed income investment securities classified as held-to-maturity as of March 31, 2016. 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 percent. The weighted average yield is computed using the amortized cost of fixed income investment securities. For U.S. agency debentures, the expected maturity is the actual contractual maturity of the notes. 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 held-to-maturity 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 and prepayments in lower rate environments.
 
 
March 31, 2016
 
 
Total
 
One Year
or Less
 
After One Year to
Five Years
 
After Five Years to
Ten Years
 
After
Ten Years
(Dollars in thousands)
 
Amortized Cost
 
Weighted-
Average
Yield
 
Amortized Cost
 
Weighted-
Average
Yield
 
Amortized Cost
 
Weighted-
Average
Yield
 
Amortized Cost
 
Weighted-
Average
Yield
 
Amortized Cost
 
Weighted-
Average
Yield
U.S. agency debentures
 
$
589,076

 
2.70
%
 
$

 
%
 
$
16,702

 
4.07
%
 
$
572,374

 
2.66
%
 
$

 
%
Residential mortgage-backed securities: