Note 19 - Revenue From Contracts With Customers

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

(19) 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, 2020						Three months ended September 30, 2019
(dollars in thousands)	Commercial Banking		WM&T		Total		Commercial		WM&T		Total
Wealth management and trust services	$	—	$	5,657	$	5,657	$	—	$	5,738	$	5,738
Deposit service charges		998		—		998		1,356		—		1,356
Debit and credit card income		2,218		—		2,218		2,102		—		2,102
Treasury management fees		1,368		—		1,368		1,264		—		1,264
Mortgage banking income(1)		1,979		—		1,979		794		—		794
Net investment product sales commissions and fees		431		—		431		400		—		400
Bank owned life insurance(1)		172		—		172		487		—		487
Other(2)		220		—		220		1,068		—		1,068
Total non-interest income	$	7,386	$	5,657	$	13,043	$	7,471	$	5,738	$	13,209

	Nine months ended September 30, 2020						Nine months ended September 30, 2019
(Dollars in thousands)	Commercial Banking		WM&T		Total		Commercial		WM&T		Total
Wealth management and trust services	$	—	$	17,601	$	17,601	$	—	$	16,839	$	16,839
Deposit service charges		3,081		—		3,081		3,793		—		3,793
Debit and credit card income		6,261		—		6,261		6,014		—		6,014
Treasury management fees		3,901		—		3,901		3,623		—		3,623
Mortgage banking income(1)		4,447		—		4,447		2,004		—		2,004
Net investment product sales commissions and fees		1,288		—		1,288		1,120		—		1,120
Bank owned life insurance(1)		527		—		527		849		—		849
Other(2)		1,095		—		1,095		2,199		—		2,199
Total non-interest income	$	20,600	$	17,601	$	38,201	$	19,602	$	16,839	$	36,441

(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.

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

Bancorp earns fees from its deposit customers for transaction-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.

Treasury management transaction fees are recognized at the time the transaction is executed, as that is when the company fulfills the performance obligation. Account analysis 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 customers’ 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 fee income earned by WM&T is performance-based. Trust fees receivable were $2.1 million at both September 30, 2020 and December 31, 2019, respectively.

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 values 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 $417,000 and $391,000 for the nine month periods ended September 30, 2020 and 2019.

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 the six-month period ending September 30, 2020.