NOTE 11 – REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company adopted ASU 2014-09, Revenue from Contracts with Customers, as of January 1, 2019. All of the Company’s revenue from contracts with customers that are in the scope of the accounting guidance are recognized in non-interest income. The following table presents the Company’s sources of non-interest income, within the scope of the ASU, for the three months ended March 31 2019 and 2018 (dollars in thousands):


	Quarter Ended March 31,
	2019		2018 (1)
Service charges on deposit accounts	$	819	$	1,910
Prepaid third-party debit card income		1,257		908
Other service charges and fees		278		2,494
Total	$	2,354	$	5,312

(1)

The Company elected the modified retrospective approach of adoption; therefore, prior period balances are presented under legacy GAAP and may not be comparable to current year presentation.

A description of the Company’s revenue streams accounted for under the accounting guidance follows:

Debit card income: The Bank serves as a debit card issuer to and contracts with various program managers to issue debit cards to support various products including, but not limited to, healthcare marketing, general purpose reloadable cards, payroll cards, disbursement of government payments, payment of federal benefits and E-Wallet and push payments for sellers in online marketplaces. The Bank earns initial set-up fees for these programs as well as fees for transactions processed. The Bank receives transaction data at the end of each month for debit card services rendered, at which time revenue is recognized.

Prior to the adoption of the ASU, at December 31, 2018, upfront fees were recognized under the percentage of completion method. Since the performance obligation of setting up the program to go live is satisfied at a point in time, the revenue is deemed to be recognized once the performance obligation has been completed and the program is live, thereby creating an asset available for the customer to use.

The ASU provides the option to elect the modified retrospective method as a transition approach and the Bank has elected to use this method to comply with the new guidance under the ASU. Accordingly, the Company recorded an adjustment to opening retained earnings of $117,000 to reflect the change in accounting under the ASU. Beginning January 1, 2019 initial set-up fees will be deferred until the program goes live.

Service charges on deposit accounts: The Bank offers business and personal retail products and services, which include, but are not limited to: online banking, mobile banking, ACH, and remote deposit capture. A standard deposit contract exists between the Bank and all deposit customers. The Bank earns fees from its deposit customers for transaction-based (such as ATM use fees, stop payment charges, statement rendering, and ACH fees), account maintenance, and overdraft services. Transaction-based fees are recognized at the time the transaction is executed as that is the point in time the Bank fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.

Other service charges: The primary component of other service charges relates to foreign exchange (“FX”) conversion fees. The Bank ‘outsources’ FX conversion for foreign currency transactions to 3 different banks, namely, PNC, BVBA and PCBB. The Bank earns a portion of FX conversion fee that the customer charges to process an FX transaction. Revenue is recognized at the end of the month, once the customer has remitted the transaction information to the Bank.