Note 21 - Revenue From Contracts With Customers

9 Months Ended

Sep. 30, 2019

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

(21) Revenue from Contracts with Customers

All of Bancorp’s revenue from contracts with customers in the scope of ASC 606 is recognized within non-interest income. The table below presents Bancorp’s sources of non-interest income with items outside the scope of ASC 606 noted as such:

	Three months ended September 30, 2019						Three months ended September 30, 2018
(Dollars in thousands)	Commercial		WM&T		Total		Commercial		WM&T		Total
Wealth management and trust services	$	—	$	5,738	$	5,738	$	—	$	5,380	$	5,380
Deposit service charges		1,444		—		1,444		1,482		—		1,482
Debit and credit card income		2,102		—		2,102		1,759		—		1,759
Treasury management fees		1,264		—		1,264		1,151		—		1,151
Mortgage banking income(1)		834		—		834		712		—		712
Net investment product sales commissions and fees		400		—		400		444		—		444
Bank owned life insurance(1)		487		—		487		186		—		186
Other(2)		1,035		—		1,035		312		—		312
Total non-interest income	$	7,566	$	5,738	$	13,304	$	6,046	$	5,380	$	11,426

	Nine months ended September 30, 2019						Nine months ended September 30, 2018
(Dollars in thousands)	Commercial		WM&T		Total		Commercial		WM&T		Total
Wealth management and trust services	$	—	$	16,839	$	16,839	$	—	$	16,224	$	16,224
Deposit service charges		4,027		—		4,027		4,340		—		4,340
Debit and credit card income		6,014		—		6,014		4,956		—		4,956
Treasury management fees		3,623		—		3,623		3,311		—		3,311
Mortgage banking income(1)		2,112		—		2,112		2,034		—		2,034
Gain on sale of securities		—		—		—		—		—		—
Net investment product sales commissions and fees		1,120		—		1,120		1,245		—		1,245
Bank owned life insurance(1)		849		—		849		564		—		564
Other(2)		2,045		—		2,045		1,096		—		1,096
Total non-interest income	$	19,790	$	16,839	$	36,629	$	17,546	$	16,224	$	33,770

(1) Outside of the scope of ASC 606.

(2) Outside of the scope of ASC 606, with the exception of safe deposit fees which were nominal for all periods.

Revenue sources within the scope of ASC 606 are discussed below:

Bancorp earns fees from its deposit customers for transactions-based, account management, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payments fees, and ACH fees, are recognized at the time the transaction is executed as that is when the company fulfills the performance obligation. Account management fees are earned over the course of a month and charged in the month in which the services are provided. Overdraft fees are recognized at the point in time that the overdraft occurs. Deposit service charges are withdrawn from customer’s account balances.

Treasury management transaction fees are recognized at the time the transaction is executed as that is when the company fulfills the performance obligation. Account management fees are earned over the course of a month and charged in the month in which the services are provided. Treasury management fees are withdrawn from customer’s account balances.

WM&T provides customers fiduciary and investment management services as agreed upon in asset management contracts. The contracts require WM&T to provide a series of distinct services for which fees are earned over time. The contracts are cancellable upon demand with fees typically based upon the asset value of investments. Revenue is accrued and recognized monthly based upon month-end asset values and collected from the customer predominately in the following month except for a small percentage of fees collected quarterly. Incentive compensation related to WM&T activities is considered a cost of obtaining the contract. Contracts between WM&T and clients do not permit performance based fees and accordingly, none of the fees earned by WM&T are performance based. Trust fees receivable as of September 30, 2019 were $2.1 million compared with $1.9 million as of December 31, 2018.

Investment products sales commissions and fees represent the Bank’s share of transaction fees and wrap fees resulting from investment services and programs provided through an agent relationship with a third party broker-dealer. Transaction fees are assessed at the time of the transaction. Those fees are collected and recognized on a monthly basis. Trailing fees are based upon market value and are assessed, collected, and recognized on a quarterly basis. Because the Bank acts as an agent in arranging the relationship between the customer and third party provider, and does not control the services rendered, investment product sales commissions and fees are reported net of related costs, including nominal incentive compensation, and trading activity charges of $391,000 and $403,000 for the nine month periods ended September 30, 2019 and 2018.

Debit and credit card revenue primarily consists of debit and credit card interchange income. Interchange income represents fees assessed within the payment card system for acceptance of card based transactions. Interchange fees are assessed as the performance obligation is satisfied, which is at the point in time the card transaction is authorized. Revenue is collected and recognized daily through the payment network settlement process.

Bancorp did not establish any contract assets or liabilities as a result of adopting ASC 606, nor were any recognized during 2019.

Bancorp’s revenue on the consolidated statement of income is categorized by product type, which effectively depicts how the nature, timing, and extent of cash flows are affected by economic factors.