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Noninterest Income

6 Months Ended

Jun. 30, 2021

Other Income and Expenses [Abstract]

All of the Company's revenue from contracts with customers within the scope of ASC 606 is recognized within noninterest income. Included below is a summary of noninterest income for the three and six months ended June 30, 2021 and 2020:


	Three months ended June 30,				Six months ended June 30,
(Dollars in millions)	2021		2020		2021		2020
Noninterest income:
Gains on investment securities, net	$	305	$	35	$	472	$	81
Gains on equity warrant assets, net	122		27		344		40
Client investment fees	15		32		35		75
Foreign exchange fees	67		36		124		84
Credit card fees	31		21		59		50
Deposit service charges	28		21		53		45
Lending related fees	18		11		34		24
Letters of credit and standby letters of credit fees	13		11		26		23
Investment banking revenue	103		142		245		188
Commissions	17		17		41		33
Other	42		16		72		27
Total noninterest income	$	761	$	369	$	1,505	$	670

Gains on investment securities, net

Net gains on investment securities include both gains and losses from our non-marketable and other equity securities, which include public equity securities held as a result of exercised equity warrant assets, gains and losses from sales of our AFS debt securities portfolio, when applicable, and carried interest.

Our non-marketable and other equity securities portfolio primarily represents investments in venture capital and private equity funds, SPD-SVB, debt funds, private and public portfolio companies, which includes public equity securities held as a result of exercised equity warrant assets, and qualified affordable housing projects. We experience variability in the performance of our non-marketable and other equity securities from period to period, which results in net gains or losses on investment securities (both realized and unrealized). This variability is due to a number of factors, including unrealized changes in the values of our investments, changes in the amount of realized gains from distributions, changes in liquidity events and general economic and market conditions. Unrealized gains from non-marketable and other equity securities for any single period are typically driven by valuation changes.

The extent to which any unrealized gains or losses will become realized is subject to a variety of factors, including, among other things, the expiration of certain sales restrictions to which these equity securities may be subject to (e.g., lock-up agreements), changes in prevailing market prices, market conditions, the actual sales or distributions of securities, and the timing of such actual sales or distributions, which, to the extent such securities are managed by our managed funds, are subject to our funds' separate discretionary sales/distributions and governance processes.

Carried interest is comprised of preferential allocations of profits recognizable when the return on assets of our individual managed fund of funds and direct venture funds exceeds certain performance targets and is payable to us, as the general partners of the managed funds. The carried interest we earn is often shared with employees, who are also members of the general partner entities. We record carried interest on a quarterly basis by measuring fund performance to date versus the performance target. For our unconsolidated managed funds, carried interest is recorded as gains on investment securities, net. For our consolidated managed funds, it is recorded as a component of net income attributable to noncontrolling interests. Carried interest allocated to others is recorded as a component of net income attributable to noncontrolling interests. Any carried interest paid to us (or our employees) may be subject to reversal to the extent fund performance declines to a level where inception to date carried interest is lower than actual payments made by the funds. The limited partnership agreements for our funds provide that carried interest is generally not paid to the general partners until the funds have provided a full return of contributed capital to the limited partners. Accrued, but unpaid carried interest may be subject to reversal to the extent that the fund performance declines to a level where inception-to-date carried interest is less than prior amounts recognized. Carried interest income is accounted for under an ownership model based on ASC 323 — Equity Method of Accounting and ASC 810 — Consolidation.

Our AFS securities portfolio is a fixed income investment portfolio that is managed with the objective of earning an appropriate portfolio yield over the long-term while maintaining sufficient liquidity and credit diversification as well as addressing our asset/liability management objectives. Though infrequent, sales of debt securities in our AFS securities portfolio may result in net gains or losses and are conducted pursuant to the guidelines of our investment policy related to the management of our liquidity position and interest rate risk.

Gains on investment securities are recognized outside of the scope of ASC 606 as it explicitly excludes noninterest income earned from our investment-related activities. A summary of gains and losses on investment securities for the three and six months ended June 30, 2021 and 2020 is as follows:


	Three months ended June 30,				Six months ended June 30,
(Dollars in millions)	2021		2020		2021		2020
Gains on non-marketable and other equity securities, net	$	305	$	35	$	472	$	20
Gains on sales of AFS securities, net	—		—		—		61
Total gains on investment securities, net	$	305	$	35	$	472	$	81

Gains on equity warrant assets, net

In connection with negotiating credit facilities and certain other services, we often obtain rights to acquire stock in the form of equity warrant assets in primarily private, venture-backed companies in the technology and life science/healthcare industries. Any changes in fair value from the grant date fair value of equity warrant assets will be recognized as increases or decreases to other assets on our balance sheet and as net gains or losses on equity warrant assets, in noninterest income, a component of consolidated net income.

Gains on equity warrant assets are recognized outside of the scope of ASC 606 as it explicitly excludes noninterest income earned from our derivative-related activities. A summary of net gains on equity warrant assets for the three and six months ended June 30, 2021 and 2020 is as follows:


	Three months ended June 30,				Six months ended June 30,
(Dollars in millions)	2021		2020		2021		2020
Equity warrant assets:
Gains on exercises, net	$	78	$	9	$	251	$	33
Terminations	(1)		—		(1)		(1)
Changes in fair value, net	45		18		94		8
Total net gains on equity warrant assets	$	122	$	27	$	344	$	40

Client investment fees

Client investment fees include fees earned from discretionary investment management services for substantially all clients, managing clients’ portfolios based on their investment policies, strategies and objectives and investment advisory fees. Revenue is recognized on a monthly basis upon completion of our performance obligation and consideration is typically received in the subsequent month. Included in our sweep money market fees are Rule 12(b)-1 fees, revenue sharing and customer transactional-based fees. Rule 12(b)-1 fees and revenue sharing are recognized as earned based on client funds that are invested in the period, typically monthly. Transactional based fees are earned and recognized on fixed income securities when the transaction is executed on the clients' behalf. Amounts paid to third-party service providers are predominantly expensed, such that client investment fees are recorded gross of payments made to third parties. A summary of client investment fees by instrument type for the three and six months ended June 30, 2021 and 2020 is as follows:


	Three months ended June 30,				Six months ended June 30,
(Dollars in millions)	2021		2020		2021		2020
Client investment fees by type:
Sweep money market fees	$	7	$	19	$	18	$	42
Asset management fees (1)	8		12		16		21
Repurchase agreement fees	—		1		1		12
Total client investment fees (2)	$	15	$	32	$	35	$	75

(1)Represents fees earned from investments in third-party money market mutual funds and fixed-income securities managed by SVB Asset Management.

(2)Represents fees earned on client investment funds that are maintained at third-party financial institutions and are not recorded on our balance sheet.

Foreign exchange fees

Foreign exchange fees represent the income differential between purchases and sales of foreign currency on behalf of our clients, primarily from spot contracts. Foreign exchange spot contract fees are recognized upon the completion of the single performance obligation, the execution of a spot trade in exchange for a fee. In line with customary business practice, the legal right transfers to the client upon execution of a foreign exchange contract on the trade date, and as such, we currently recognize our fees based on the trade date and the transactions are typically settled within two business days.

Forward contract and option premium fees are recognized outside of the scope of ASC 606 as it explicitly excludes noninterest income earned from our derivative-related activities. A summary of foreign exchange fee income by instrument type for the three and six months ended June 30, 2021 and 2020 is as follows:


	Three months ended June 30,				Six months ended June 30,
(Dollars in millions)	2021		2020		2021		2020
Foreign exchange fees by instrument type:
Spot contract commissions	$	60	$	33	$	115	$	74
Forward contract commissions	6		3		8		10
Option premium fees	1		—		1		—
Total foreign exchange fees	$	67	$	36	$	124	$	84

Credit card fees

Credit card fees include interchange income from credit and debit cards and fees earned from processing transactions for merchants. Interchange income is earned after satisfying our performance obligation of providing nightly settlement services to a payment network. Costs related to rewards programs are recorded when the rewards are earned by the customer and presented as a reduction to interchange fee income. Rewards programs continue to be accounted for under ASC 310 - Receivables. Our performance obligations for merchant service fees are to transmit data and funds between the merchant and the payment network. Credit card interchange and merchant service fees are earned daily upon completion of transaction settlement services.

Annual card service fees are recognized on a straight-line basis over a 12-month period and continue to be accounted for under ASC 310 - Receivables.

A summary of credit card fees by instrument type for the three and six months ended June 30, 2021 and 2020 is as follows:


	Three months ended June 30,				Six months ended June 30,
(Dollars in millions)	2021		2020		2021		2020
Credit card fees by instrument type:
Card interchange fees, net	$	26	$	15	$	49	$	37
Merchant service fees	4		5		8		10
Card service fees	1		1		2		3
Total credit card fees	$	31	$	21	$	59	$	50

Deposit service charges

Deposit service charges include fees earned from performing cash management activities and other deposit account services. Deposit services include, but are not limited to, the following: receivables services, which include merchant services, remote capture, lockbox, electronic deposit capture, and fraud control services. Payment and cash management products and services include wire transfer and automated clearing house payment services to enable clients to transfer funds more quickly, as well as business bill pay, business credit and debit cards, account analysis, and disbursement services. Deposit service charges are recognized over the period in which the related performance obligation is provided, generally on a monthly basis, and are presented in the "Disaggregation of revenue from contracts with customers" table below.

Lending related fees

Unused commitment fees, minimum finance fees and unused line fees are recognized as earned on a monthly basis. Fees that qualify for syndication treatment are recognized at the completion of the syndicated loan deal for which the fees were received. Lending related fees are recognized outside of the scope of ASC 606 as it explicitly excludes noninterest income earned from our lending-related activities. A summary of lending related fees by instrument type for the three and six months ended June 30, 2021 and 2020 is as follows:


	Three months ended June 30,				Six months ended June 30,
(Dollars in millions)	2021		2020		2021		2020
Lending related fees by instrument type:
Unused commitment fees	$	15	$	8	$	28	$	17
Other	3		3		6		7
Total lending related fees	$	18	$	11	$	34	$	24

Letters of credit and standby letters of credit fees

Commercial and standby letters of credit represent conditional commitments issued by us on behalf of a client to guarantee the performance of the client to a third party when certain specified future events have occurred. Fees generated from letters of credit and standby letters of credit are deferred as a component of other liabilities and recognized in noninterest income over the commitment period using the straight-line method, based on the likelihood that the commitment being drawn down will be remote. Letters of credit and standby letters of credit fees are recognized outside of the scope of ASC 606 as it explicitly excludes noninterest income earned from our lending related activities.

Investment banking revenue

We earn investment banking revenue from clients for providing services related to securities underwriting, private placements and advisory services on strategic matters such as mergers and acquisitions. Underwriting fees are attributable to public and private offerings of equity and debt securities and are recognized at the point in time when the offering has been deemed to be completed by the lead manager of the underwriting group. Once the offering is completed, the performance obligation has been satisfied; we recognize the applicable management fee as well as the underwriting fee, net of consideration payable to customers. Private placement fees are recognized at the point in time when the private placement is completed, which is generally when the client accepts capital from the fund raise. Advisory fees from mergers and acquisitions engagements are generally recognized at the point in time when the related transaction is completed. Expenses are deferred only to the extent they are explicitly reimbursable by the client and the related revenue is recognized at a point in time. All other deal-related expenses are expensed as incurred. We have determined that we act as principal in the majority of these transactions and therefore present expenses gross within other operating expenses.

A summary of investment banking revenue by instrument type for the three and six months ended June 30, 2021 and 2020 is as follows:


	Three months ended June 30,				Six months ended June 30,
(Dollars in millions)	2021		2020		2021		2020
Investment banking revenue:
Underwriting fees	$	84	$	131	$	209	$	162
Advisory fees	9		9		13		24
Private placements and other	10		2		23		2
Total investment banking revenue	$	103	$	142	$	245	$	188

Commissions

Commissions include commissions received from customers for the execution of agency-based brokerage transactions in listed and over-the-counter equities. The execution of each trade order represents a distinct performance obligation and the transaction price is fixed at the point in time or trade order execution. Trade execution is satisfied at the point in time that the customer has control of the asset and as such, fees are recorded on a trade date basis. Commissions are presented in the "Disaggregation of revenue from contracts with customers" table below.

Other

Other noninterest income primarily includes income from fund management fees, gains from conversion of convertible debt options and service revenue. Fund management fees are comprised of fees charged directly to our managed funds of funds and direct venture funds. Fund management fees are based upon the contractual terms of the limited partnership agreements and are generally recognized as earned over the specified contract period, which is generally equal to the life of the individual fund. Fund management fees are calculated as a percentage of committed capital and collected in advance and are received quarterly. Fund management fees for certain of our limited partnership agreements are calculated as a percentage of distributions made by the funds and revenue is recorded only at the time of a distribution event. As distribution events are not predetermined for these certain funds, management fees are considered variable and constrained under ASC 606.

Gains from conversion of convertible debt options represent unrealized valuation gains on loan conversion derivative assets, and realized gains from the conversion of debt instruments, convertible into a third party’s common stock upon a triggering event such as an IPO. Gains from conversion of convertible debt options are recognized outside of the scope of ASC 606 as it explicitly excludes noninterest income earned from our derivative-related activities.

Other service revenue primarily consists of dividend income on FHLB/FRB stock, correspondent bank rebate income, incentive fees, or performance fees related to carried interest and other fee income. We recognize revenue when our performance obligations are met and record revenues on a daily/monthly, quarterly, semi-annual or annual basis. For event driven revenue sources, we recognize revenue when: (i) persuasive evidence of an arrangement exists, (ii) we have performed the service, provided we have no other remaining obligations to the customer, (iii) the fee is fixed or determinable and (iv) collectability is probable.

A summary of other noninterest income by instrument type for the three and six months ended June 30, 2021 and 2020 is as follows:


	Three months ended June 30,				Six months ended June 30,
(Dollars in millions)	2021		2020		2021		2020
Other noninterest income by instrument type:
Fund management fees	$	21	$	8	$	36	$	16
Net gains on revaluation of foreign currency instruments, net of foreign exchange forward contracts (1)	6		—		5		—
Other service revenue	15		8		31		11
Total other noninterest income	$	42	$	16	$	72	$	27

(1)Represents the net revaluation of client and internal foreign currency denominated financial instruments. We enter into foreign exchange forward contracts to economically reduce our foreign exchange exposure related to client and internal foreign currency denominated financial instruments.

Disaggregation of revenue from contracts with customers

The following tables present our revenues from contracts with customers disaggregated by revenue source and segment for the three and six months ended June 30, 2021 and 2020:


Three months ended June 30, 2021	Global Commercial Bank (2)		SVB Private Bank		SVB Capital (2)		SVB Leerink (2)		Other Items		Total
(Dollars in millions)
Revenue from contracts with customers:
Client investment fees	$	14	$	1	$	—	$	—	$	—	$	15
Spot contract commissions	60		—		—		—		—		60
Card interchange fees, gross	48		—		—		—		1		49
Merchant service fees	4		—		—		—		—		4
Deposit service charges	27		—		—		—		1		28
Investment banking revenue	—		—		—		103		—		103
Commissions	—		—		—		17		—		17
Fund management fees	—		—		20		1		—		21
Performance fees	—		—		8		—		—		8
Correspondent bank rebates	1		—		—		—		—		1
Total revenue from contracts with customers	$	154	$	1	$	28	$	121	$	2	$	306








Revenues outside the scope of ASC 606 (1)	20		—		147		28		260		455
Total noninterest income	$	174	$	1	$	175	$	149	$	262	$	761

(1)Amounts are accounted for under separate guidance than ASC 606.

(2)Global Commercial Bank’s, SVB Capital’s and SVB Leerink's components of noninterest income are shown net of noncontrolling interests. Noncontrolling interest is included within “Other Items."


Three months ended June 30, 2020	Global Commercial Bank (2)		SVB Private Bank		SVB Capital (2)		SVB Leerink (2)		Other Items		Total
(Dollars in millions)
Revenue from contracts with customers:
Client investment fees	$	31	$	1	$	—	$	—	$	—	$	32
Spot contract commissions	33		—		—		—		—		33
Card interchange fees, gross	26		—		—		—		—		26
Merchant service fees	5		—		—		—		—		5
Deposit service charges	21		—		—		—		—		21
Investment banking revenue	—		—		—		142		—		142
Commissions	—		—		—		17		—		17
Fund management fees	—		—		7		1		—		8
Correspondent bank rebates	1		—		—		—		—		1
Total revenue from contracts with customers	$	117	$	1	$	7	$	160	$	—	$	285








Revenues outside the scope of ASC 606 (1)	16		—		14		4		50		84
Total noninterest income	$	133	$	1	$	21	$	164	$	50	$	369

(1)Amounts are accounted for under separate guidance than ASC 606.


Six months ended June 30, 2021	Global Commercial Bank (2)		SVB Private Bank		SVB Capital (2)		SVB Leerink (2)		Other Items		Total
(Dollars in millions)
Revenue from contracts with customers:
Client investment fees	$	33	$	2	$	—	$	—	$	—	$	35
Spot contract commissions	115		—		—		—		—		115
Card interchange fees, gross	89		—		—		—		1		90
Merchant service fees	8		—		—		—		—		8
Deposit service charges	52		—		—		—		1		53
Investment banking revenue	—		—		—		245		—		245
Commissions	—		—		—		41		—		41
Fund management fees	—		—		33		3		—		36
Performance fees	—		—		8		—		—		8
Correspondent bank rebates	2		—		—		—		—		2
Total revenue from contracts with customers	$	299	$	2	$	41	$	289	$	2	$	633








Revenues outside the scope of ASC 606 (1)	34		—		203		30		605		872
Total noninterest income	$	333	$	2	$	244	$	319	$	607	$	1,505

(1)Amounts are accounted for under separate guidance than ASC 606.


Six months ended June 30, 2020	Global Commercial Bank (2)		SVB Private Bank		SVB Capital (2)		SVB Leerink (2)		Other Items		Total
(Dollars in millions)
Revenue from contracts with customers:
Client investment fees	$	74	$	1	$	—	$	—	$	—	$	75
Spot contract commissions	74		—		—		—		—		74
Card interchange fees, gross	62		—		—		—		1		63
Merchant service fees	10		—		—		—		—		10
Deposit service charges	45		—		—		—		—		45
Investment banking revenue	—		—		—		188		—		188
Commissions	—		—		—		33		—		33
Fund management fees	—		—		14		2		—		16
Correspondent bank rebates	2		—		—		—		—		2
Total revenue from contracts with customers	$	267	$	1	$	14	$	223	$	1	$	506








Revenues outside the scope of ASC 606 (1)	33		—		12		3		116		164
Total noninterest income	$	300	$	1	$	26	$	226	$	117	$	670

(1)Amounts are accounted for under separate guidance than ASC 606.

The timing of revenue recognition may differ from the timing of cash settlements or invoicing to customers. We record a receivable when revenue is recognized prior to invoicing, and unearned revenue when revenue is recognized subsequent to receipt of consideration. These assets and liabilities are reported on the consolidated balance sheets on a contract-by-contract basis at the end of each reporting period. During the three and six months ended June 30, 2021 and 2020, changes in our contract assets, contract liabilities and receivables were not material. Additionally, revenues recognized during the three and six months ended June 30, 2021 and 2020 that were included in the corresponding contract liability balance at the beginning of the periods were not material.