Revenue Recognition

12 Months Ended

Dec. 31, 2020

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

On January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” and all subsequent amendments that modified ASC 606. ASC 606 requires revenue that is derived from a contract with a customer to be recognized when the Company satisfies the related performance obligations by transferring to the customer a good or service. 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 and can be canceled at any time by the customer or the Company without penalty, such as a deposit account agreement. These revenue streams are included in noninterest income.

The Company’s principal source of revenue is interest income on loans, investment securities and other interest earning assets, all of which are not within the scope of ASC 606. The remainder of the Company’s revenue is classified as noninterest income and is earned from a variety of sources, such as custodial and other fees, service charges, gains and losses, interchange income, and other income.

The following table provides a summary of the Company’s noninterest income, segregated by revenue streams within and outside the scope of ASC 606 for the periods indicated:

	For the Year Ended December 31,
	2020				2019				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)
Noninterest income:
Loan servicing income	$	—	$	2,028	$	—	$	1,840	$	—	$	1,445
Service charges on deposit accounts	6,712		—		5,769		—		5,128		—
Other service fee income	1,554		—		1,438		—		902		—
Debit card interchange income	2,526		—		3,004		—		4,326		—
Earnings on bank-owned life insurance	—		7,160		—		3,486		—		3,427
Net gain from sales of loans	—		8,609		—		6,642		—		10,759
Net gain from sales of investment securities	—		13,882		—		8,571		—		1,399
Trust custodial account fees	16,653		—		—		—		—		—
Other income	3,090		9,111		1,015		3,471		1,242		2,399
Total noninterest income	$	30,535	$	40,790	$	11,226	$	24,010	$	11,598	$	19,429

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(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 GAAP requirements.

The major revenue streams by fee type that are within the scope of ASC 606 presented in the above tables are described in additional detail below:

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.

Trust Custodial Account Fees. Trust custodial account fees is a revenue stream acquired in the Opus acquisition and is governed by contracts executed with Pacific Premier Trust clients to perform maintenance and custodial services for their alternative IRA investments. Fees are billed and collected on a quarterly basis and recognized commensurate with completion of the performance obligations required under the contracts. At December 31, 2020, the Company had accrued fees receivable of approximately $5.8 million, which are included in other assets in the consolidated statements of financial position.

Other Income. Other noninterest income includes 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.

Also included in other income are escrow and exchange fees from the Commerce Escrow division acquired in the Opus acquisition, which are related to agreements with customers participating in escrow transactions. Transactions under Section 1031 of the Internal Revenue Code generate exchange fees as well as escrow fees. These fees relate to services that include preparation of closing statements and custody of escrow funds. The fees are received from the sale proceeds of a relinquished property and are recognized as revenue upon closing of the escrow transaction, which is the final performance obligation. These fees totaled approximately $2.7 million for the year ended 2020.

Other revenue streams that may be applicable to the Company include gains and losses from the sale of nonfinancial 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 nonfinancial 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 December 31, 2020 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.