Note 13: Noninterest Income

The Company adopted the revenue recognition guidance effective January 1, 2018, and applied the new accounting guidance using a modified retrospective approach for reporting purposes. A significant amount of the Company’s revenues are derived from net interest income on financial assets and liabilities, which are excluded from the scope of the amended guidance.

The Company recognizes revenue as it is earned. The adoption of ASU 2014-09 required that credit card interchange revenue be presented net of rewards expense in noninterest income. For the three months ended September 30, 2018 and 2017, the Company recognized credit cards reward program expense as a reduction of noninterest income in the amounts of $28,000 and $29,000, respectively. For the nine months ended September 30, 2018 and 2017, the Company recognized credit cards reward program expense as a reduction of noninterest income in the amounts of $66,000 and $68,000, respectively.

The Company has included the following table regarding the Company’s noninterest income for the periods presented.

	For the three months					For the nine months
	ended September 30,					ended September 30,
(In thousands)	2018			2017		2018			2017
Service fees
Insufficient funds fees	$	218		$	224	$	618		$	617
Deposit related fees		49			46		148			141
ATM fees		24			25		72			74
Total service fees		291			295		838			832
Fee Income
Insurance commissions		172			175		632			627
Investment services revenue		70			40		218			186
ATM fees surcharge		71			65		178			170
Banking house rents collected		34			26		100			81
Total fee income		347			306		1,128			1,064
Card income
Debit card interchange fees		141			105		432			373
Merchant card fees		21			15		54			40
Total card income		162			120		486			413
Mortgage fee income and realized gain on sale of loans and foreclosed real estate
Loan servicing fees		25			44		108			112
Net gains (losses) on sales of loans and foreclosed real estate		8			2		24			(43	)
Total mortgage fee income and realized gain on sale of loans and foreclosed real estate		33			46		132			69
Total		833			767		2,584			2,378
Earnings and gain on bank owned life insurance		138			92		319			225
Net (losses) gains on sales and redemptions of investment securities		(60	)		108		(189	)		314
Gains on equity securities		-			-		26			-
Other miscellaneous income		29			14		119			51
Total noninterest income	$	940		$	981	$	2,859		$	2,968

The following is a discussion of key revenues within the scope of the new revenue guidance:

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Service fees – Revenue is earned through insufficient funds fees, customer initiated activities or passage of time for deposit related fees, and ATM service fees. Transaction-based fees are recognized as the time the transaction is executed, which is the same time the Company’s performance obligation is satisfied. Account maintenance fees are earned over the course of the month as the monthly maintenance performance obligation to the customer is satisfied.

•

Fee income – Revenue is earned through commissions on insurance, investment products and investment advisory services, ATM surcharge fees, and banking house rents collected. The Company earns investment advisory services fee income by providing investment management services to customers under investment management contracts. As investment management services are provided over time, the performance obligation to customers is satisfied over time, and therefore, revenue is recognized over time.

•

Card income – Card income consists of interchange fees from consumer debit card networks and other related services. Interchange rates are set by the card networks. Interchange fees are based on purchase volumes and other factors and are recognized as transactions occur.

•

Mortgage fee income and realized gain on sale of loans and foreclosed real estate – Revenue from mortgage fee income and realized gain on sale of loans and foreclosed real estate is earned through the origination of residential and commercial mortgage loans, sales of one-to-four family residential mortgage loans and sales of foreclosed real estate, and is earned as the individual transactions occur.