(

)

Revenue from Contracts with Customers

Bancorp adopted Accounting Standards Update (ASU)

2014

09,

Revenue from Contracts with Customers and all related amendments (ASC

606

), which creates a single framework for recognizing revenue from contracts with customers that fall within its scope and revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets, effective

January 1, 2018

using the full retrospective method. Bancorp recognizes revenue upon satisfying a performance obligation as services are rendered to a customer. All of Bancorp’s revenue from contracts with customers in the scope of ASC

606

is recognized within non-interest income. The only impact to financial statement presentation was reclassification from expense to contra income costs incurred to obtain and fulfill contracts associated with investment product sales. All periods presented in these financial statements have been adjusted to reflect the reclassification. The table below presents the Company’s sources of non-interest income for the

three

and

nine

months ended

September 30, 2018

and

2017.

Items outside the scope of ASC

606

are noted as such.

	Three months ended						Nine months ended
Revenue by operating segment	September 30, 2018						September 30, 2018
(In thousands)	Commercial		WM&T		Consolidated		Commercial		WM&T		Consolidated
Wealth management and trust services	$	-	$	5,380	$	5,380	$	-	$	16,224	$	16,224
Deposit service charges		1,482				1,482		4,340				4,340
Debit and credit card revenue		1,759				1,759		4,956				4,956
Treasury management fees		1,151				1,151		3,311				3,311
Mortgage banking revenue (1)		712				712		2,034				2,034
Investment product sales commissions and fees		444				444		1,245				1,245
Bank owned life insurance income (1)		186				186		564				564
Other income (2)		312				312		1,096				1,096
Total non-interest income	$	6,046	$	5,380	$	11,426	$	17,546	$	16,224	$	33,770

(

)

Not

within the scope of ASC

606

(

) Includes safe box deposit fees of

$46,000

quarterly and

$137,000

year-to-date included within the scope of ASC

606

	Three months ended						Nine months ended
Revenue by operating segment	September 30, 2017						September 30, 2017
(In thousands)	Commercial		WM&T		Consolidated		Commercial		WM&T		Consolidated
Wealth management and trust services	$	-	$	5,025	$	5,025	$	-	$	15,272	$	15,272
Deposit service charges		1,568				1,568		4,583				4,583
Debit and credit card revenue		1,492				1,492		4,412				4,412
Treasury management fees		1,083				1,083		3,187				3,187
Mortgage banking revenue (1)		781				781		2,380				2,380
Gain on callsale of securities available for sale (1)		31				31		31				31
Investment product sales commissions and fees		404				404		1,147				1,147
Bank owned life insurance income (1)		204				204		964				964
Other income (2)		357				357		1,116				1,116
Total non-interest income	$	5,920	$	5,025	$	10,945	$	17,820	$	15,272	$	33,092

(

)

Not

within the scope of ASC

606

(

) Includes safe box deposit fees of

$43,000

quarterly and

$128,000

year-to-date included within the scope of ASC

606

Revenue sources within the scope of ASC

606

are discussed below.

The Company 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.

The Wealth Management and Trust Group 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. 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.

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. Variable costs considered costs of obtaining the contracts related to investment product sales activities include incentive compensation expense and trading activity charges. The incentive compensation has been reclassified from compensation expense and the trading activity fees from technology and communication in prior years’ presentation to a reduction of income.

Debit and credit card interchange revenue 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 the

nine

month period ending

September 30, 2018.

Trust fees receivable as of

September 30, 2018

were

$2.1

million compared with

$2.2

million as of

December 31, 2017.

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.