Revenue Recognition

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

The Company earns revenue from a variety of sources. The Company’s principal source of revenue is interest income on loans, investment securities and other interest earning assets, while the remainder of the Company’s revenue is earned from a variety of fees, service charges, gains and losses, and other income, all of which are classified as noninterest income. Revenue from interest on loans and investment securities is accounted for on an accrual basis using the interest method, while revenue from other sources is accounted for under other applicable U.S. GAAP as well as ASC 606 - Revenue from Contracts with Customers. Revenue streams within the scope of and accounted for under ASC 606 include: service charges and fees on deposit accounts, debit card interchange fees, fees from other services the Company provides its customers and gains and losses from the sale of other real estate owned and property, premises and equipment. ASC 606 requires revenue to be recognized when the Company satisfies the related performance obligations by transferring to the customer a good or service. The recognition of revenue under ASC 606 requires the Company to first identify the contract with the customer, identify the associated performance obligations, determine the transaction price, allocate the transaction price to the performance obligations and finally recognize revenue when the performance obligations have been satisfied and the good or service has been transferred. The majority of the Company’s contracts with customers associated with revenue streams that are within the scope of ASC 606 are considered short-term in nature, can be canceled at any time by the customer or the Company without penalty, such as a deposit account agreement, and are satisfied at a point in time. These revenue streams are included in noninterest income.

The following tables provide a summary of the Company’s revenue streams, including those that are within the scope of ASC 606 and those that are accounted for under other applicable U.S. GAAP:



	Three Months Ended
	September 30, 2019				June 30, 2019				September 30, 2018
	Within Scope⁽¹⁾		Out of Scope⁽²⁾		Within Scope⁽¹⁾		Out of Scope⁽²⁾		Within Scope⁽¹⁾			Out of Scope⁽²⁾
	(dollars in thousands)
Interest income:
Loans	$	—	$	122,974	$	—	$	121,860	$	—		$	119,271
Investment securities and other interest-earning assets	—		9,630		—		10,554		—			9,605
Total interest income	—		132,604		—		132,414		—			128,876
Noninterest income:
Loan servicing fees	—		546		—		409		—			400
Service charges on deposit accounts	1,440		—		1,441		—		1,570			—
Other service fee income	360		—		363		—		317			—
Debit card interchange income	421		—		1,145		—		1,061			—
Earnings on bank-owned life insurance	—		861		—		851		—			1,270
Net gain from sales of loans	—		2,313		—		902		—			2,029
Net gain from sales of investment securities	—		4,261		—		212		—			1,063
Other income	592		636		544		457		(446		)	976
Total noninterest income	2,813		8,617		3,493		2,831		2,502			5,738
Total revenues	$	2,813	$	141,221	$	3,493	$	135,245	$	2,502		$	134,614
⁽¹⁾ Revenues from contracts with customers accounted for under ASC 606.
⁽²⁾ Revenues not within the scope of ASC 606 and accounted for under other applicable U.S. GAAP requirements.



	Nine Months Ended
	September 30, 2019				September 30, 2018
	Within Scope⁽¹⁾		Out of Scope⁽²⁾		Within Scope⁽¹⁾		Out of Scope⁽²⁾
	(dollars in thousands)
Interest income:
Loans	$	—	$	366,310	$	—	$	289,069
Investment securities and other interest-earning assets	—		29,951		—		23,333
Total interest income	—		396,261		—		312,402
Noninterest income:
Loan servicing fees	—		1,353		—		1,037
Service charges on deposit accounts	4,211		—		3,777		—
Other service fee income	1,079		—		632		—
Debit card interchange income	2,637		—		3,187		—
Earnings on bank-owned life insurance	—		2,622		—		2,498
Net gain from sales of loans	—		4,944		—		8,830
Net gain from sales of investment securities	—		4,900		—		1,399
Other income	1,328		2,361		84		2,613
Total noninterest income	9,255		16,180		7,680		16,377
Total revenues	$	9,255	$	412,441	$	7,680	$	328,779
⁽¹⁾ Revenues from contracts with customers accounted for under ASC 606.
⁽²⁾ Revenues not within the scope of ASC 606 and accounted for under other applicable U.S. GAAP requirements.

The following provides information concerning the major components of the Company’s revenue:

Interest Income

Interest income is comprised of interest on loans, investment securities and other interest-earning assets. Interest is recognized using the interest method, which reflects the contractual yield on loans and coupon yield for investment securities. These yields are adjusted for purchase discounts, premiums and net deferred loan origination fees/costs for newly originated loans.

Loan Servicing Fees

Loan servicing fees generally consist of fees related to servicing of loans for others, as well as the net impact of related serving asset amortization. ASC 606 stipulates that income streams generated through the transfer and servicing of financial instruments shall be accounted for under ASC 860 - Transfers and Servicing and is therefore excluded from the scope of ASC 606.

Service Charges on Deposit Accounts and Other Service Fee Income

Service charges on deposit accounts and other service fee income consists of periodic service charges on deposit accounts and transaction based fees such as those related to overdrafts, ATM charges and wire transfer fees. The majority of these revenues are accounted for under ASC 606. Performance obligations for periodic service charges on deposit accounts are typically short-term in nature and are generally satisfied on a monthly basis, while performance obligations for other transaction based fees are typically satisfied at a point in time (which may consist of only a few moments to perform the service or transaction) with no further obligations on behalf of the Company to the customer. Periodic service charges are generally collected monthly directly from the customer's deposit account, and at the end of a statement cycle, while transaction based service charges are typically collected at the time of or soon after the service is performed.

Debit Card Interchange Income

Debit card interchange fee income consists of transaction processing fees associated with customer debit card transactions processed through a payment network and are accounted for under ASC 606. These fees are earned each time a request for payment is originated by a customer debit cardholder at a merchant. In these transactions, the Company transfers funds from the debit cardholder’s account to a merchant through a payment network at the request of the debit cardholder by way of the debit card transaction. The related performance obligations are generally satisfied when the transfer of funds is complete, which is generally a point in time when the debit card transaction is processed. Debit card interchange fees are typically received and recorded as revenue on a daily basis.

Earnings on Bank-Owned Life Insurance

Earnings on bank-owned life insurance relates to the periodic increase in the cash surrender value of bank-owned life insurance policies on certain key employees of the Company for which the Company is the owner and beneficiary of the related policies. This revenue stream is excluded from the scope of ASC 606, and is accounted for under other applicable U.S. GAAP provisions (ASC 325-30).

Gains and (Losses) from Sales of Loans and Investment Securities

ASC 606 stipulates that gains and (losses) from the periodic sale of loans and investment securities are excluded from ASC 606 and are accounted for under other applicable U.S. GAAP provisions.

Other Income

Other income generally consists of recoveries on acquired loans, which were fully charged off and had no book value prior to their acquisition, and gains and (losses) on debt extinguishment. These revenue streams are excluded from the scope of ASC 606 and is accounted for under other applicable U.S. GAAP provisions. Other income also consists of other miscellaneous fees, which are accounted for under ASC 606; however, much like service charges on deposit accounts, these fees have performance obligations that are very short-term in nature and are typically satisfied at a point in time. Revenue is typically recorded at the time these fees are collected, which is generally upon the completion the related transaction or service provided.

Other revenue streams that may be applicable to the Company include gains and losses from the sale of non-financial assets such as other real estate owned and property premises and equipment. The Company accounts for these revenue streams in accordance with ASC 610-20, which requires the Company to look to guidance in ASC 606 in the application of certain measurement and recognition concepts. The Company records gains and losses on the sale of non-financial assets when control of the asset has been surrendered to the buyer, which generally occurs at a specific point in time.

Practical Expedient

The Company also employs a practical expedient with respect to contract acquisition costs, which are generally capitalized and amortized into expense. These costs relate to expenses incurred directly attributable to the efforts to obtain a contract. The practical expedient allows the Company to immediately recognize contract acquisition costs in current period earnings when these costs would have been amortized over a period of one year or less.

At September 30, 2019, the Company did not have any material contract assets or liabilities in its consolidated financial statements related to revenue streams within the scope of ASC 606, and there were no material changes in those balances during the reporting period.