CB Financial Services, Inc.CBFV
CB Financial Services, Inc. Revenue Disclosure
NOTE
4—REVENUE
RECOGNITION FROM CONTRACTS WITH CUSTOMERSThe Company adopted ASC
606
using the modified retrospective method applied to all contracts not
completed as of January 1, 2018.
Results for reporting periods beginning after January 1, 2018
are presented under ASC 606
while prior periods’ amounts continue to be reported in accordance with legacy U.S. GAAP. The adoption of ASC 606
resulted in a change in recognition of revenue for insurance commissions. There were no
changes in the accounting for all other in-scope revenue streams.The Company generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic
606
that significantly affects the determination of the amount and timing of revenue from contracts with customers.The following table below presents ASC
606
in-scope revenue streams and the impact of the accounting standard at the date indicted:| (Dollars in thousands) | ||||||||||||
| Year Ended December 31, 2018 | ||||||||||||
| As reported | Under Legacy GAAP | Impact of ASC 606 | ||||||||||
| NONINTEREST INCOME | ||||||||||||
| Service Fees on Deposit Accounts | $ | 2,970 | $ | 2,970 | $ | - | ||||||
| Insurance Commissions | 3,763 | 3,754 | 9 | |||||||||
| Other Commissions | 947 | 947 | - | |||||||||
| Other | 135 | 135 | - | |||||||||
| Total | 7,815 | 7,806 | 9 | |||||||||
| NONINTEREST EXPENSE | ||||||||||||
| Other Real Estate Owned Expense | 48 | 48 | - | |||||||||
| Total | 48 | 48 | - | |||||||||
| Net Impact | 7,767 | 7,758 | 9 | |||||||||
| Income Tax Expense | $ | 1,631 | $ | 1,629 | $ | 2 | ||||||
| Net Income | $ | 7,052 | $ | 7,045 | $ | 7 | ||||||
| Basic earnings per share | $ | 1.42 | $ | 1.41 | $ | - | ||||||
| Diluted earnings per share | $ | 1.40 | $ | 1.40 | $ | - | ||||||
All of the Company’s revenue from contracts with customers in the scope of ASC
606
is recognized within Non-Interest Income with the exception of Other Real Estate Owned Expense (Income), which is accounted for in Non-Interest Expense. The following table presents the Company’s sources of Non-Interest Income and Expense as of the date indicated:| (Dollars in thousands) | ||||
| Year Ended December 31, 2018 | ||||
| NONINTEREST INCOME | ||||
| Service Fees on Deposit Accounts (a) | $ | 2,970 | ||
| Insurance Commissions | 3,763 | |||
| Other Commissions (c) | 947 | |||
| Net Gains on Sales of Loans (b) | 171 | |||
| Net Gains on Sales of Investments (b) | - | |||
| Fair Value of Equity Securities (b) | (63 | ) | ||
| Net Gains on Purchased Tax Credits (b) | 44 | |||
| Net Loss on Disposal of Fixed Assets (b) | (137 | ) | ||
| Income from Bank-Owned Life Insurance (b) | 509 | |||
| Other (b) | 135 | |||
| Total non-interest income | 8,339 | |||
| NONINTEREST EXPENSE | ||||
| Other Real Estate Owned Expense | 48 | |||
| Total non-interest expense | 48 | |||
| Net non-interest income | $ | 8,291 | ||
(a) | Interchange fees and ATM fees are included within this line item. |
(b) | Not within the scope of ASC 606. |
(c) | The Other Commissions category includes wealth management referral fees, merchant services fees, check sales and safety deposit box rentals totaling $460,000 for the year ended December 31, 2018, which is in the scope of ASC 606; the remaining balance of $487,000 for the year ended December 31, 2018, mainly represents income derived from an assumable rate conversion (“ARC”) loan referral fee and a bank-owned life insurance policy claim for the year ended December 31, 2018, which are outside the scope of ASC 606. The following narrative describes the Company’s revenue streams accounted for under the guidance of ASC 606 as follows: |
Service Fees on Deposit Accounts
: The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees include services fees for ATM usage, stop payment charges, statement production, ACH and wire fees, which are recognized into income at the occurrence of an executed transaction and the point in time the Company fulfills the customer’s request. Account maintenance fees, which are primarily based on monthly maintenance activities, are earned over the course of the month, and satisfy the Company’s performance obligation. Overdraft fees are recognized as the overdrafts on customer’s accounts are incurred. The services fees on deposit accounts are automatically withdrawn from the customer’s accounts balance per their account agreement with the Company.Interchange Fees
: The Company earns interchange fees from debit/credit cardholder transactions conducted through the MasterCard network for our debit cards and through the Visa network for our credit cards. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. The Company currently does not
offer a cardholder rewards program.Insurance Commissions
: The Company’s insurance subsidiary, Exchange Underwriters, derives commission and fee income from direct and agency bill insurance policies. Direct bill policies are invoiced directly from the insurance company provider to the customer, once the customer remits payment for the policy, the insurance company provider then remits the commission or fee income to EU on a monthly basis. Agency bill policies are invoiced from EU, the insurance underwriting agency, to the customer. EU records the insurance company policy payable and the commission or fee income earned on the policy. As all insurance policies are contracts with customers, each policy has different terms and conditions.EU utilizes a report from their core insurance data processing program, The Agency Manager, otherwise known as “TAM”. The report from TAM captures all in force policies that are active in the system and annualizes the commission over the life of each individual contract. The report then provides an overall commission and fee income total for the monthly reporting financial statement period. This income is then compared to the amount of direct and agency bill income recorded in TAM for the reporting month and an adjustment to income is made according to the report and this is the income recognized for the portion of the insurance contract that has been earned by EU and subsequently the Company.
Other Commissions
: The Company earns other commissions, such as, wealth management referral fees, check sales and safety deposit box rentals to customers. The wealth management referral fees are earned as a referral of a bank customer initiates a customer relationship with an associated wealth management firm. These fees fulfill the contract/agreement between the Company and the wealth management firm. Check sales are recognized as customers contact the Company for check supplies or the customer initiates the check order through the Company website to our third
party check company. These commissions are recognized as the third
party check company satisfies the contract of providing check stock to our customers. Safety deposit box rental income is recognized on a monthly basis, per each contract agreement with our customers. The safety deposit box income is automatically withdrawn from the customer’s deposit account on a monthly basis as this revenue is earned by the contract.Gains/Losses on Sales of OREO
: The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. It is not
common policy that the Company will finance an OREO property with the buyer. It is the Company’s belief that once loan collateral has been recognized as an OREO property, it needs to be sold to free the Company of any additional possible loss exposure.Free Sentinel
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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.