Revenue from Contracts with Customers

The Company adopted ASU 2014-09, "Revenue from Contracts with Customers," and its related amendments on January 1, 2018. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For the year ended December 31, 2018, approximately 62% of the Company’s total revenue was comprised of net interest income, which is not within the scope of this guidance. Of the remaining revenue, those items that were subject to this guidance mainly included fees for bank card, trust, deposit account services and consumer brokerage services.

The Company has concluded that the new guidance did not require any significant change to its revenue recognition processes. However, application of the new guidance resulted in a reclassification of certain bank card related network and rewards costs, previously classified as non-interest expense, to a reduction to non-interest income in the Company’s consolidated statements of income. The reclassification had no effect on prior period net income or net income per share. The Company adopted ASU 2014-09 on a full retrospective basis, in which each prior reporting period has been presented in accordance with the new guidance.

The table below shows the effect of this reclassification on bank card fee income and non-interest expense for the years ended December 31, 2017 and 2016.



	For the year ended December 31, 2017							For the Year Ended December 31, 2016
(In thousands)	As Previously Reported		Adoption of ASU 2014-09			As Adjusted		As Previously Reported		Adoption of ASU 2014-09			As Adjusted
Non-interest income:
Bank card transaction fees	$	180,441	$	(25,341	)	$	155,100	$	181,879	$	(27,836	)	$	154,043
Total non-interest income	486,604		(25,341		)	461,263		474,392		(27,836		)	446,556
Non-interest expense:
Data processing and software	$	92,246	$	(11,248	)	$	80,998	$	92,722	$	(13,133	)	$	79,589
Other	77,459		(14,093		)	63,366		74,202		(14,703		)	59,499
Total non-interest expense	769,684		(25,341		)	744,343		717,065		(27,836		)	689,229

The following table disaggregates non-interest income subject to ASU 2014-09 by major product line.



	For the Year Ended December 31
(In thousands)	2018		2017		2016
Bank card transaction fees	$	171,576	$	155,100	$	154,043
Trust fees	147,964		135,159		121,795
Deposit account charges and other fees	94,517		90,060		86,394
Consumer brokerage services	15,807		14,630		13,784
Other non-interest income	37,440		30,128		31,326
Total non-interest income from contracts with customers	467,304		425,077		407,342
Other non-interest income ^(a)	34,037		36,186		39,214
Total non-interest income	$	501,341	$	461,263	$	446,556

(a) This revenue is not within the scope of ASU 2014-09, and includes fees relating to capital market activities, loan fees and sales, derivative instruments, standby letters of credit and various other transactions.

The following table presents the opening and closing receivable balances for the years ended December 31, 2018 and 2017 for the Company’s significant revenue categories subject to ASU 2014-09.



(In thousands)	December 31, 2018		December 31, 2017		December 31, 2016
Bank card transaction fees	$	13,035	$	13,315	$	14,686
Trust fees	2,721		2,802		2,681
Deposit account charges and other fees	6,107		5,597		5,735
Consumer brokerage services	559		380		309

For these revenue categories, none of the transaction price has been allocated to performance obligations that are unsatisfied as of the end of a reporting period. A description of these revenue categories follows.

Bank Card Transaction Fees

The following table presents the components of bank card fee income.



	For the Years Ended December 31
(In thousands)	2018			2017			2016
Debit card:
Fee income	$	41,522		$	40,134		$	39,430
Expense for network charges	(1,784		)	(4,498		)	(5,989		)
Net debit card fees	39,738			35,636			33,441

Credit card:
Fee income	26,799			25,275			24,650
Expense for network charges and rewards	(13,834		)	(10,699		)	(9,816		)
Net credit card fees	12,965			14,576			14,834

Corporate card:
Fee income	199,651			179,642			166,576
Expense for network charges and rewards	(100,011		)	(94,823		)	(83,851		)
Net corporate card fees	99,640			84,819			82,725

Merchant:
Fee income	30,241			31,863			37,407
Fees to cardholder banks	(7,831		)	(8,228		)	(9,585		)
Expense for network charges	(3,177		)	(3,566		)	(4,779		)
Net merchant fees	19,233			20,069			23,043
Total bank card transaction fees	$	171,576		$	155,100		$	154,043

The majority of debit and credit card fees are reported in the Consumer segment, while corporate card and merchant fees are reported in the Commercial segment.

Debit and Credit Card Fees

The Company issues debit and credit cards to its retail and commercial banking customers who use the cards to purchase goods and services from merchants through an electronic payment system. As a card issuer, the Company earns fees, including interchange income, for processing the cardholder’s purchase transaction with a merchant through a settlement network. Purchases are charged directly to a customer’s checking account (in the case of a debit card), or are posted to a customer’s credit card account. The fees earned are established by the settlement network and are dependent on the type of transaction processed but are typically based on a per unit charge. Interchange income, the largest component of debit and credit card fees, is settled daily through the networks. The services provided to the cardholders include issuing and maintaining cards, settling purchases with merchants, and maintaining memberships in various card networks to facilitate processing. These services are considered one performance obligation, as one of the services would not be performed without the others. The performance obligation is satisfied as services are rendered for each purchase transaction, and income is immediately recognized.

In order to participate in the settlement network process, the Company must pay various transaction-related costs, established by the networks, including membership fees and a per unit charge for each transaction. These expenses are recorded net of the card fees earned.

Consumer credit card products offer cardholders rewards that can be later redeemed for cash or goods or services to encourage card usage. Reward programs must meet network requirements based on the type of card issued. The expense associated with the rewards granted are recorded net of the credit card fees earned.

Commercial card products offer cash rewards to corporate cardholders to encourage card usage in facilitating corporate payments. The Company pays cash rewards based on contractually agreed upon amounts, normally as a percent of each sales transaction. The expense associated with the cash rewards program is recorded net of the corporate card fees earned.

Merchant Fees

The Company offers merchant processing services to its business customers to enable them to accept credit and debit card payments. Merchant processing activities include gathering merchant sales information, authorizing sales transactions and collecting the funds from card issuers using the networks. The merchant is charged a merchant discount fee for the services based on agreed upon pricing between the merchant and the Company. Merchant fees are recorded net of outgoing interchange costs paid to the card issuing banks and net of other network costs as show in the table above.

Merchant services provided are considered one performance obligation, as one of the services would not be performed without the others. The performance obligation is satisfied as services are rendered for each settlement transaction and income is immediately recognized. Income earned from merchant fees settles with the customer according to terms negotiated in individual customer contracts. The majority of customers settle with the Company at least monthly.

Trust Fees

The following table shows the components of revenue within trust fees.



	For the Years Ended December 31
(In thousands)	2018		2017		2016
Private client	$	111,533	$	100,358	$	90,992
Institutional	29,241		27,477		24,565
Other	7,190		7,324		6,238
Total trust fees	$	147,964	$	135,159	$	121,795

This revenue is reported in the Wealth segment.

The Company provides trust and asset management services to both private client and institutional trust customers including asset custody, investment advice, and reporting and administrative services. Other specialized services such as tax preparation, financial planning, representation and other related services are provided as needed. Trust fees are generally earned monthly and billed based on a rate multiplied by the fair value of the customer trust assets. The majority of customer trust accounts are billed monthly. However, some accounts are billed quarterly, and a small number of accounts are billed semi-annually or annually, in accordance with agreements in place with the customer. The Company accrues trust fees monthly based on an estimate of fees due and either directly charges the customer’s account the following month or invoices the customer for fees due according to the billing schedule.

The Company maintains written product pricing information which is used to bill each trust customer based on the services provided. Providing trust services is considered to be a single performance obligation that is satisfied on a monthly basis, involving the monthly custody of customer assets, statement rendering, periodic investment advice where applicable, and other specialized services as needed. As such, performance obligations are considered to be satisfied at the conclusion of each month while trust fee income is also recorded monthly.

Deposit Account Charges and Other Fees

The following table shows the components of revenue within deposit account charges and other fees.



	For the Years Ended December 31
(In thousands)	2018		2017		2016
Corporate cash management fees	$	38,468	$	36,044	$	36,131
Overdraft and return item fees	31,468		30,576		29,350
Other service charges on deposit accounts	24,581		23,440		20,913
Total deposit account charges and other fees	$	94,517	$	90,060	$	86,394

Approximately half of this revenue is reported in the Consumer segment, while the remainder is reported in the Commercial segment.

The Company provides corporate cash management services to its business and non-profit customers to meet their various transaction processing needs. Such services include deposit and check processing, lockbox, remote deposit, reconciliation, on-line banking and other similar transaction processing services. The Company maintains unit prices for each type of service, and the customer is billed based on transaction volumes processed monthly. The customer is usually billed either monthly or quarterly, however, some customers may be billed semi-annually or annually. The customer may pay for the cash management services provided either by paying in cash or using the value of deposit balances (formula provided to the customer) held at the Company. The Company’s performance obligation for corporate cash management services is the processing of items over a monthly term, and the obligations are satisfied at the conclusion of each month.

Overdraft fees are charged to customers when daily checks and other withdrawals to customers’ accounts exceed balances on hand. Fees are based on a unit price multiplied by the number of items processed whose total amounts exceed the available account balance. The daily overdraft charge is calculated and the fee is posted to the customer’s account each day. The Company’s performance obligations for overdraft transactions is based on the daily transaction processed and the obligation is satisfied as each day’s transaction processing is concluded.

Other deposit fees include numerous smaller fees such as monthly statement fees, foreign ATM processing fees, identification restoration fees, and stop payment fees. Such fees are mostly billed to customers directly on their monthly deposit account statements, or in the case of foreign ATM processing fees, the fee is charged to the customer on the day that transactions are processed. Performance obligations for all of these various services are satisfied at the time that the service is rendered.

Consumer Brokerage Services

The following shows the components of revenue within consumer brokerage services.



	For the Years Ended December 31
(In thousands)	2018		2017		2016
Commission income	$	8,956	$	8,400	$	8,170
Managed account services	6,851		6,230		5,614
Total consumer brokerage services	$	15,807	$	14,630	$	13,784

Nearly all of this revenue is reported in the Company's Wealth segment.

Consumer brokerage services revenue is comprised of commissions received upon the execution of purchases and sales of mutual fund shares and equity securities, in addition to sales of annuities and certain limited insurance products in an agency capacity. Also, fees are earned on professionally managed advisory programs through arrangements with sub-advisors. Payment from the customer is due upon settlement date for purchases and sales of securities, at the purchase date for annuities and insurance products, and upon inception of the service period for advisory programs.

Most of the contracts (except advisory contracts) encompass two types of performance obligations. The first is an obligation to provide account maintenance, record keeping and custodial services throughout the contract term. The second is the obligation to provide trade execution services for the customers' purchases and sales of products mentioned above. The first obligation is satisfied over time as the service period elapses, while the second type of obligation is satisfied upon the execution of each purchase/sale transaction. Contracts for advisory services contain a single performance obligation comprised of providing the management services and related reporting/administrative services over the contract term.

The transaction price of the contracts (except advisory contracts) is a commission charged at the time of trade execution. The commission varies across different security types, insurance products and mutual funds. It is generally determined by standardized price lists published by the Company and its mutual fund and insurance vendors. Because the transaction price relates specifically to the trade execution, it has been allocated to that performance obligation and is recorded at the time of execution. The fee for advisory services is charged to the customer in advance of the quarterly service period, based on the account balance at the beginning of the period. Revenue is recognized ratably over the service period.

Other Non-Interest Income from Contracts with Customers

Other non-interest income consists mainly of various customer deposit related fees such as ATM fees and gains on sales of tax credits, foreclosed assets, and bank premises and equipment. Performance obligations for these services consist mainly of the execution of transactions for sales of various properties or providing specific deposit related transactions. Fees from these revenue sources are recognized when the performance obligation is completed, at which time cash is received by the Company.