Short-Term Borrowings and Long-Term Debt

The following table represents outstanding short-term borrowings and long-term debt at December 31, 2012 and 2011:



				Carrying Value
(Dollars in thousands)	Maturity	Principal value at December 31, 2012		December 31, 2012		December 31, 2011
Short-term borrowings:
Federal funds purchased	January 1, 2013	160,000		160,000		—
Other short-term borrowings	(1)	6,110		6,110		—
Total short-term borrowings				$	166,110	$	—
Long-term debt:
5.375% Senior Notes	September 15, 2020	$	350,000	$	347,995	$	347,793
5.70% Senior Notes (2)	June 1, 2012	—		—		143,969
6.05% Subordinated Notes (3)	June 1, 2017	45,964		54,571		55,075
7.0% Junior Subordinated Debentures	October 15, 2033	50,000		55,196		55,372
Other long-term debt	(4)	—		—		1,439
Total long-term debt				$	457,762	$	603,648


(1)	Represents cash collateral received from our counterparty for our interest rate swap agreement related to our 6.05% Subordinated Notes.


(2)	At December 31, 2011, included in the carrying value of our 5.70% Senior Notes was $2.6 million related to hedge accounting associated with the notes.


(3)	At December 31, 2012 and 2011, included in the carrying value of our 6.05% Subordinated Notes were $9.0 million and $8.8 million, respectively, related to hedge accounting associated with the notes.


(4)	Represents long-term notes payable related to one of our debt fund investments. The last payment related to the notes was made in April 2012.

The aggregate annual maturities of long-term debt obligations as of December 31, 2012 are as follows:



Year ended December 31, (dollars in thousands):
2013	$	—
2014	—
2015	—
2016	—
2017	54,571
2018 and thereafter	403,191
Total	$	457,762

Interest expense related to short-term borrowings and long-term debt was $24.2 million, $30.2 million and $28.8 million in 2012, 2011 and 2010, respectively. Interest expense is net of the hedge accounting impact from our interest rate swap agreements related to our 5.70% Senior Notes and 6.05% Subordinated Notes. The weighted average interest rate associated with our short-term borrowings as of December 31, 2012 was 0.07 percent.

5.375% Senior Notes

In September 2010, we issued $350 million of 5.375% Senior Notes due in September 2020 (“5.375% Senior Notes”). We received net proceeds of $345 million after deducting underwriting discounts and commissions and other expenses. We used approximately $250 million of the net proceeds from the sale of the notes to meet obligations due on our 3.875% Convertible Notes, which matured in April 2011 (see “3.875% Convertible Notes” section below for further details). The remaining net proceeds were used for general corporate purposes, including working capital.

5.70% Senior Notes and 6.05% Subordinated Notes

On May 15, 2007, the Bank issued 5.70% Senior Notes, due in June 2012, in an aggregate principal amount of $250 million and 6.05% Subordinated Notes, due in June 2017, in an aggregate principal amount of $250 million (collectively, the “Notes”). Concurrent with the issuance of the Notes, we entered into fixed-to-variable interest rate swap agreements related to each of the notes (see Note 12-“Derivative Financial Instruments”).

We repurchased $109 million of our 5.70% Senior Notes and $204 million of our 6.05% Subordinated Notes through a tender offer transaction in May 2011. These repurchases resulted in a gross loss from extinguishment of debt of $33.9 million, which included the payment of the repurchase premiums, transaction fees, and discount and origination fee accretion related to the notes. In connection with these repurchases, we terminated corresponding amounts of the interest rate swaps associated with these notes (see Note 12-“Derivative Financial Instruments”), resulting in a gross gain on swap termination of $37.0 million. The net gain from the note repurchases and the termination of corresponding portions of the interest rate swaps was $3.1 million (on a pre-tax basis), and was recognized during the second quarter of 2011 as a reduction in noninterest expense, which is included in the line item “Other”.

Our remaining $141 million 5.70% Senior Notes matured in June 2012 and we repaid all outstanding principal, including unpaid and accrued interest, in cash upon maturity. In connection with the maturity, we also terminated the remaining portion of the interest rate swap associated with these notes.

3.875% Convertible Notes

Our $250 million 3.875% Convertible Notes matured in April 2011. All of the notes were converted prior to maturity and we made an aggregate $260 million conversion settlement payment. We paid $250 million in cash (representing total principal) and $10 million through the issuance of 187,760 shares of our common stock (representing total conversion premium value). In addition, in connection with the conversion settlement, we received 186,736 shares of our common stock, valued at $10 million, from the associated convertible note hedge. Accordingly, there was no significant net impact on our total stockholders' equity with respect to settling the conversion premium value.

Concurrent with the issuance of our 3.875% Convertible Notes, we entered into a convertible note hedge and warrant agreement (see Note 12–“Derivative Financial Instruments”), which effectively increased the economic conversion price of our 3.875% Convertible Notes to $64.43 per share of common stock. The terms of the hedge and warrant agreement were not part of the terms of the notes and did not affect the rights of the holders of the notes. The warrants expired ratably over 60 business days beginning in July 2011.

The effective interest rate for our 3.875% Convertible Notes in 2011 was 5.92 percent and interest expense was $4.2 million.

7.0% Junior Subordinated Debentures

In October 2003, we issued $52 million in 7.0% Junior Subordinated Debentures to a special-purpose trust, SVB Capital II. Distributions to SVB Capital II are cumulative and are payable quarterly at a fixed rate of 7.0 percent per annum of the face value of the junior subordinated debentures. Distributions for each of 2012, 2011 and 2010 were $3.5 million. The junior subordinated debentures are mandatorily redeemable upon maturity in October 2033, or may be redeemed prior to maturity in whole or in part, at our option, at any time on or after October 2008. Issuance costs of $2.2 million related to the junior subordinated debentures were deferred and are being amortized over the period until mandatory redemption of the debentures in October 2033. We entered into a fixed-to-variable interest rate swap agreement related to these junior subordinated debentures (see Note 12–“Derivative Financial Instruments”).

Available Lines of Credit

We have certain facilities in place to enable us to access short-term borrowings on a secured (using available-for-sale securities as collateral) and an unsecured basis. These include repurchase agreements and uncommitted federal funds lines with various financial institutions. As of December 31, 2012, we borrowed $160 million against our uncommitted federal funds lines. We also pledge securities to the FHLB of San Francisco and the discount window at the FRB. The market value of collateral pledged to the FHLB of San Francisco (comprised primarily of U.S. agency debentures) at December 31, 2012 totaled $1.5 billion, all of which was unused and available to support additional borrowings. The market value of collateral pledged at the discount window of the FRB at December 31, 2012 totaled $561 million, all of which was unused and available to support additional borrowings.