One of the bigger victims of the tech-stock correction isn’t even a tech company. It’s Silicon Valley Bancshares.

The parent of Silicon Valley Bank has always had an identity crisis. Because its gets an equity stake in many client companies — mostly tech and life sciences startups — it’s part bank, part venture capitalist, part mutual fund.

Investors, however, valued it pretty much like a bank until the company issued its third-quarter report in October. At that time, it became clear the bank had overcome some gnarly bad-loan problems and was going to start raking in some big gains on its tech investments.

Suddenly, the Santa Clara bank became the new best friend of momentum investors who were snapping up anything that smelled like tech.

The stock (SIVB) soared from $25 per share in mid-October to $90 on March 3.

But like most fickle friends, the momentum crowd dropped it as soon as the tech market started crumbling.

It closed yesterday at $40.94, up $6.94 for the day but still more than 50 percent below its peak.

I think the stock is cheap, says Preston Athey. manager of the T. Rowe Price Small Cap Value Fund. Fair value is something like $60. Although he sold some shares last year, the bank is still one of his five largest holdings.

Other analysts also consider it undervalued but are waiting to change their opinions until the company reports earnings tomorrow and holds a conference call (open to the public) on Monday.

Silicon Valley Bank really consists of two pieces — a bank and an investment portfolio.

The bank lends money to companies that have already received one or two rounds of venture capital. The companies may not be profitable, but they’ve usually started shipping products and have accounts receivable or inventories they can use as collateral to borrow money for working capital.

The bank asks for — and often gets — warrants from its clients. Similar to stock options, the warrants let the bank buy shares in companies at a price similar to what venture capitalists get, which is almost always below the IPO price.

The bank has warrants in more than 900 client companies. It gets to exercise the warrants — or turn them into stock — when the company goes public or gets acquired. In the case of an IPO, the bank sells the stock as soon as it can after the lockup period has ended, and realizes the gain.

As the Nasdaq soared and the IPO market boomed, so did the value of the warrants.

In the first three quarters of last year, the bank’s income from cashing in warrants was $8.7 million. In the fourth quarter, it was $24.3 million. In the first two months of this year, it was $35 million.

On March 20, the company was sitting on an additional $60.7 million worth of unrealized gains in stock it had not yet sold.

The bank won’t disclose which companies are still in its warrant portfolio, or what they’re worth, since there’s no way of knowing.

Only 15 to 20 percent of the warrants we take end up having some value. Of that, maybe 1 or 2 percent are the large home runs, says Chris Lutes. the bank’s CFO.

The bank values the warrants at cost — just $1 per company, no matter how many warrants.

In addition to its warrant portfolio, the bank also invests in outside venture capital funds. In February, the bank had $30 million in gains from its VC investments.

Because warrant and venture capital income is so unpredictable, most analysts don’t include it in their earnings estimates. And until recently, most investors didn’t pay it much heed.

But a growing number of shareholders have been placing some value on these unrealized gains, says analyst David Winton of Keefe, Bruyette & Woods. That’s part of the reason (the stock) sold off in sympathy with the Nasdaq.

Shareholders are especially worried about the bank’s exposure to the troubled dot-com sector. Lutes says the bank’s investment in business-to-consumer and business-to- business Internet companies is minimal. Most of our Internet lending is in the backbone/infrastructure area. To ease concerns, the bank will disclose its exposure to Internet companies for the first time during Monday’s conference call.

Although the Nasdaq is on the mend, a relapse would hurt the bank’s warrant income because fewer companies would be able to go public. On the upside, companies that couldn’t sell stock would probably borrow more money, and that would help the bank’s core business.

But a prolonged slowdown in the tech sector could threaten its loan portfolio. Startups have four ways to repay their loans: through operations, going public, getting more venture capital or selling out.

If VCs became more picky and less apt to fund second, third and fourth rounds, (the bank) could have some companies going out of business, says Steve Didion. an analyst with Hoefer & Arnett.

He doesn’t expect that to happen. And even if it did, Lutes points out that the bank still has borrowers’ collateral to fall back on.

Analysts expect that the bank’s operating earnings — excluding warrant income — will be 80 cents for the first quarter and $3.30 for the full year. At $41 per share, the stock is trading at 12.4 times expected earnings.

That’s a bit high for a bank stock, but analysts point out that Silicon Valley is growing much faster than the typical bank.

T. Rowe Price’s Athey calls it a pretty conservative way to play the long term growth of technology with a really well-managed company.

(Full disclosure: I own shares in Athey’s fund in a 401(k) plan.)