Note 21. Quarterly Results of Operations (unaudited)

The following is a condensed summary of the quarterly results of consolidated operations of the Corporation for the years ended December 31, 2018 and 2017:


(Dollars in thousands, except per share)	Three months ended
	March 31, 2018		June 30, 2018			September 30, 2018		December 31, 2018

Interest income	$	10,488	$	11,053		$	11,477	$	11,849
Interest expense		795		954			1,122		1,343
Net interest income		9,693		10,099			10,355		10,506
Provision for loan losses		200		9,129	*		250		375
Other noninterest income		3,148		3,221			3,120		3,140
Noninterest expense		8,648		11,188	*		8,571		8,961
Income (loss) before income taxes		3,993		(6,997)			4,654		4,310
Federal income tax expense		491		(1,816)			654		506
Net Income (loss)	$	3,502		(5,181)			4,000		3,804
Basic earnings per share	$	0.80	$	(1.18)		$	0.91	$	0.86
Diluted earnings per share	$	0.80	$	(1.18)		$	0.91	$	0.86
Dividends declared per share	$	0.24	$	0.27		$	0.27	$	0.27

* Includes impairment charges on a loan participation


(Dollars in thousands, except per share)	Three months ended
	March 31, 2017		June 30, 2017		September 30, 2017		December 31, 2017

Interest income	$	9,546	$	9,938	$	10,063	$	10,339
Interest expense		581		590		629		691
Net interest income		8,965		9,348		9,434		9,648
Provision for loan losses		120		50		250		250
Other noninterest income		2,925		3,155		2,971		3,137
Noninterest expense		7,957		8,161		8,305		18,750	**
Income (loss) before income taxes		3,813		4,292		3,850		(6,215)
Federal income tax expense		793		950		774		1,048	***
Net Income (loss)	$	3,020		3,342		3,076		(7,263)
Basic earnings per share	$	0.70	$	0.77	$	0.71	$	(1.67)
Diluted earnings per share	$	0.70	$	0.77	$	0.70	$	(1.67)
Dividends declared per share	$	0.21	$	0.24	$	0.24	$	0.24

**Includes $10 million for the accrual of a legal settlement

*** Includes $2.3 million for revaluation of the net deferred tax assets

Due to rounding, the sum of the quarters may not equal the amount reported for the year.

Note 22. Revenue Recognition

The Corporation adopted ASC 606 on January 1, 2018 using the modified retrospective approach applied to all contracts initiated on or after the effective date, and for contracts which have remaining obligations as of the effective date. Results for the reporting period beginning January 1, 2018 are presented under ASC 606 while the prior period results continue to be reported under legacy GAAP. Adoption of the standard did not have a material effect on any of the reported periods. The Corporation did not record a cumulative effect adjustment to the beginning retained earnings balance as of January 1, 2018 from the adoption of ASC 606 as it was determined the transition adjustment was immaterial to Corporation’s consolidated financial statements.

All of the Corporation’s revenue from contracts with customers within the scope of ASC 606 is recognized in non-interest income as presented in our consolidated statements of income. Revenue generating activities that fall within the scope of ASC 606 are described as follows:

Investment and Trust Service Fees - these represent fees from wealth management (assets under management), fees from the management and settlement of estates and commissions from the sale of investment and insurance products.

Asset management fees are generally assessed based on a tiered fee schedule, based on the value of assets under management, and are recognized monthly when the service obligation is completed. Fees recognized were $5.1 million for 2018 and $4.8 million for 2017.

Fees for estate management services are based on the estimated fair value of the estate. These fees are generally recognized monthly over an 18 month period that Management has determined to represent the average time to fulfill the performance obligations of the contract. Management has the discretion to adjust this time period as needed based upon the nature and complexity of an individual estate. Fees recognized were $314 thousand for 2018 and $243 thousand for the 2017.

Commissions from the sale of investment and insurance products are recognized upon the completion of the transaction. Fees recognized were $282 thousand for 2018 and $315 thousand for 2017.

Loan Service Charges – these represent fees on loans for services or charges that occur after the loan has been booked, for example, late payment fees. These also include fees for mortgages settled for a third party mortgage company. All of these fees are transactional in nature and are recognized upon completion of the transaction which represents the performance obligation.

Deposit Service Charges and Fees – these represent fees from deposit customers for transaction based, account maintenance, and overdraft services. Transaction based fees include, but are not limited to stop payment fees and overdraft fees. These fees are recognized at the time of the transaction when the performance obligation has been fulfilled. Account maintenance fees and account analysis fee are earned over the course of a month, representing the period of the performance obligation, and are recognized monthly.

Debit Card Income – this represents interchange fees from cardholder transactions conducted through the card payment network. Cardholders use the debit card to conduct point-of-sale transactions that produce interchange fees. The fees are transaction based and the fee is recognized with the processing of the transaction. These fees are reported net of cardholder rewards.

Other Service Charges and Fees – these are comprised primarily of merchant card fees, credit card fees, ATM surcharges and interchange fees and wire transfer fees. Merchant card fees represent fees the Bank earns from a third party for enrolling a customer in the processor’s program. Credit card fees represent a fee earned by the Bank for a successful referral to a card-issuing company. ATM surcharges and interchange fees are the result of Bank customers conducting ATM transactions that generate fee income and are processed through multiple card networks. All of these fees are transaction based and are recognized at the time of the transaction.

Gains/Losses on the Sale of Other Real Estate – these are recognized when control of the property transfers to the buyer.

Increases in the cash surrender value of life insurance and security transactions are not within the scope of ASC 606.

Contract Balances

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into longer-term revenue contracts with customers, and therefore, does not experience significant contract balances.

Contract Acquisition Costs

The Corporation expenses all contract acquisition costs as costs are incurred.