Disaggregation of Revenue:
Deposit fees and other service charges for the years ended December 31, 2025, 2024 and 2023, are summarized as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31 |
| 2025 | | 2024 | | 2023 |
| Deposit service charges | $ | 25,433 | | | $ | 24,708 | | | $ | 22,497 | |
| Debit and credit card interchange fees | 23,525 | | | 23,766 | | | 24,021 | |
| Debit and credit card expense | (13,099) | | | (12,632) | | | (12,386) | |
| Merchant services income | 13,506 | | | 13,431 | | | 14,466 | |
| Merchant services expense | (11,320) | | | (11,246) | | | (11,687) | |
| Other service charges | 5,195 | | | 5,344 | | | 4,727 | |
| Total deposit fees and other service charges | $ | 43,240 | | | $ | 43,371 | | | $ | 41,638 | |
Deposit fees and other service charges
Deposit fees and other service charges include both transaction-based and non-transaction-based deposit fees. Transaction based fees on deposit accounts are charged to deposit clients for specific services provided, such as wire transfers, official checks, and overdraft processing. These fees are contract-specific to each individual transaction, do not extend beyond the transaction, and are recognized when the specific service is performed. Non-transaction-based deposit fees primarily consist of monthly account maintenance fees. These fees are generally subject to day-to-day contracts that may be canceled by either party without notice. The performance obligation is satisfied, and the fees are recognized, on a monthly basis after the service period is completed.
Debit and credit card interchange income and expenses
Debit and credit card interchange income represent fees earned when a credit or debit card issued by the Bank is used to purchase goods or services at a merchant. The merchant’s bank pays the Bank a default interchange rate set by Mastercard on a transaction-by-transaction basis. The merchant acquiring bank can stop accepting the Bank’s cards at any time and the Bank can stop further use of cards issued by them at any time. The performance obligation is satisfied, and the fees are earned, when the cost of the transaction is charged to the Bank’s cardholders’ card. Direct expenses associated with the credit and debit card are recorded as a net reduction against the interchange income.
Merchant services income
Merchant services income represents fees earned by the Bank for card payment services provided to its merchant clients. The Bank has a contract with a third party to provide card payment services to the Bank’s merchants that contract for those services. The third party provider has contracts with the Bank’s merchants to provide the card payment services. The Bank does not have a direct contractual relationship with its merchants for these services. The Bank sets the rates for the services provided by the third party. The third party provider passes the payments made by the Bank’s merchants through to the Bank. The Bank, in turn, pays the third party provider for the services it provides to the Bank’s merchants. These payments to the third party provider are recorded as expenses as a net reduction against fee income. In addition, a portion of the payment received by the Bank represents interchange fees passed through to the card issuing bank. Income is primarily earned based on the dollar volume and number of transactions processed. The performance obligation is satisfied and the related fee is earned when each payment is accepted by the processing network.
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.