Note 27 - Revenue From Contracts With Customers

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

(27) Revenue from contracts with customers

Bancorp adopted ASU 2014-09, Revenue from Contracts with Customers and all related amendments (ASC 606), which created a single framework for recognizing revenue from contracts with customers that fall within its scope and revised 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 Bancorp’s sources of non-interest income. Items outside the scope of ASC 606 are noted as such.

	Year Ended December 31, 2019
(in thousands)	Commercial		WM&T		Total
Wealth management and trust services	$	—	$	22,643	$	22,643
Deposit service charges		5,513		—		5,513
Debit and credit card income		8,123		—		8,123
Treasury management fees		4,992		—		4,992
Mortgage banking income(1)		3,090		—		3,090
Net investment product sales commissions and fees		1,498		—		1,498
Bank owned life insurance(1)		1,031		—		1,031
Other(2)		2,900		—		2,900
Total non-interest income	$	27,147	$	22,643	$	49,790

	Year Ended December 31, 2018
(in thousands)	Commercial		WM&T		Total
Wealth management and trust services	$	—	$	21,536	$	21,536
Deposit service charges		5,759		—		5,759
Debit and credit card income		6,769		—		6,769
Treasury management fees		4,571		—		4,571
Mortgage banking income(1)		2,568		—		2,568
Net investment product sales commissions and fees		1,677		—		1,677
Bank owned life insurance(1)		1,129		—		1,129
Other(2)		1,337		—		1,337
Total non-interest income	$	23,810	$	21,536	$	45,346

	Year Ended December 31, 2017
(in thousands)	Commercial			WM&T		Total
Wealth management and trust services	$	—		$	20,505	$	20,505
Deposit service charges		6,172			—		6,172
Debit and credit card income		5,979			—		5,979
Treasury management fees		4,297			—		4,297
Mortgage banking income(1)		3,221			—		3,221
Loss on sale of securities		(232	)		—		(232	)
Net investment product sales commissions and fees		1,629			—		1,629
Bank owned life insurance(1)		1,159			—		1,159
Other(2)		1,769			—		1,769
Total non-interest income	$	23,994		$	20,505	$	44,499

(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 December 31, 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 $516,000 and $544,000 for the years ended December 31, 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.