Revenue from Contracts with Customers

12 Months Ended

Dec. 31, 2022

Revenue from Contracts with Customers

Revenue from Contracts with Customers

18. Revenue from Contracts with Customers

In accordance with Topic 606, Revenue from Contracts with Customers, revenues are recognized when control of promised goods or services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services that are promised within each contract and identifies those that contain performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Disaggregation of Revenue

The following table summarizes the Company’s revenues, which includes net interest income on financial instruments and noninterest income, disaggregated by type of service and business segments for the years ended December 31, 2022, 2021 and 2020:

		Year Ended December 31, 2022
					Treasury
	Retail		Commercial		and
(dollars in thousands)	Banking		Banking		Other		Total
Net interest income(1)	$	436,228	$	157,128	$	20,193	$	613,549
Service charges on deposit accounts		25,871		1,972		966		28,809
Credit and debit card fees		—		58,659		4,974		63,633
Other service charges and fees		25,062		2,243		1,888		29,193
Trust and investment services income		36,465		—		—		36,465
Other		488		7,956		1,288		9,732
Not in scope of Topic 606(1)		6,199		6,709		(1,215)		11,693
Total noninterest income		94,085		77,539		7,901		179,525
Total revenue	$	530,313	$	234,667	$	28,094	$	793,074

		Year Ended December 31, 2021
					Treasury
	Retail		Commercial		and
(dollars in thousands)	Banking		Banking		Other		Total
Net interest income(1)	$	385,656	$	162,997	$	(18,094)	$	530,559
Service charges on deposit accounts		24,413		1,225		1,872		27,510
Credit and debit card fees		—		55,728		5,415		61,143
Other service charges and fees		23,917		3,547		1,594		29,058
Trust and investment services income		34,719		—		—		34,719
Other		353		5,790		1,194		7,337
Not in scope of Topic 606(1)		8,270		6,491		10,388		25,149
Total noninterest income		91,672		72,781		20,463		184,916
Total revenue	$	477,328	$	235,778	$	2,369	$	715,475

		Year Ended December 31, 2020
					Treasury
	Retail		Commercial		and
(dollars in thousands)	Banking		Banking		Other		Total
Net interest income(1)	$	375,145	$	151,622	$	8,967	$	535,734
Service charges on deposit accounts		25,326		1,305		1,538		28,169
Credit and debit card fees		—		48,999		4,373		53,372
Other service charges and fees		20,084		1,550		1,533		23,167
Trust and investment services income		35,652		—		—		35,652
Other		700		6,403		1,811		8,914
Not in scope of Topic 606(1)		16,264		19,945		11,897		48,106
Total noninterest income		98,026		78,202		21,152		197,380
Total revenue	$	473,171	$	229,824	$	30,119	$	733,114

(1) Most of the Company’s revenue is not within the scope of Topic 606. The guidance explicitly excludes net interest income from financial assets and liabilities as well as other noninterest income from loans, leases, investment securities and derivative financial instruments.

For the years ended December 31, 2022, 2021 and 2020, substantially all of the Company’s revenues under the scope of Topic 606 were related to performance obligations satisfied at a point in time.

The following is a discussion of revenues within the scope of Topic 606.

Service Charges on Deposit Accounts

Service charges on deposit accounts relate to fees generated from a variety of deposit products and services rendered to customers. Charges include, but are not limited to, overdraft fees, non-sufficient fund fees, dormant fees and monthly service charges. Such fees are recognized concurrent with the event on a daily basis or on a monthly basis depending upon the customer’s cycle date.

Credit and Debit Card Fees

Credit and debit card fees primarily represent revenues earned from interchange fees, ATM fees and merchant processing fees. Interchange and network revenues are earned on credit and debit card transactions conducted with payment networks. ATM fees are primarily earned as a result of surcharges assessed to non-FHB customers who use an FHB ATM. Merchant processing fees are primarily earned on transactions in which FHB is the acquiring bank. Such fees are generally recognized concurrently with the delivery of services on a daily basis.

Trust and Investment Services Fees

Trust and investment services fees represent revenue earned by directing, holding and managing customers’ assets. Fees are generally computed based on a percentage of the previous period’s value of assets under management. The transaction price (i.e., percentage of assets under management) is established at the inception of each contract. Trust and investment services fees also include broker dealer fees which represent revenue earned from buying and selling securities on behalf of customers. Such fees are recognized at the end of a valuation period or concurrently with the execution of a buy or sell transaction.

Other Fees

Other fees primarily include revenues generated from wire transfers, lockboxes, bank issuance of checks and insurance commissions. Such fees are recognized concurrent with the event or on a monthly basis.

Contract Balances

A contract liability is an entity’s obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer. The Company received signing bonuses from three vendors in prior years and two vendors in the current year, which are being amortized over the term of the respective contracts. As of December 31, 2022 and 2021, the Company had contract liabilities of $2.7 million and $3.0 million, respectively, which will be recognized over the remaining term of the respective contracts with the vendors. For the years ended December 31, 2022, 2021 and 2020, the Company recognized revenues, thereby decreasing contract liabilities by approximately $0.9 million, $0.9 million and $0.8 million, respectively, due to the passage of time. There were no changes in contract liabilities due to changes in transaction price estimates.

A contract asset is the right to consideration for transferred goods or services when the amount is conditioned on something other than the passage of time. As of December 31, 2022 and 2021, there were no material receivables from contracts with customers or contract assets recorded on the Company’s consolidated balance sheets.

Other

Except for the contract liabilities noted above, the Company did not have any significant performance obligations as of December 31, 2022 and 2021. The Company also did not have any material contract acquisition costs or use any significant judgments or estimates in recognizing revenue for financial reporting purposes.