15. Revenue Recognition
CTBI’s primary source of revenue is interest income generated from loans and investment securities. Interest income is recognized according to the
terms of the financial instrument agreement over the life of the loan or investment security unless it is determined that the counterparty is unable to continue making interest payments. Interest income also includes prepaid interest fees from
commercial customers, which approximates the interest foregone on the balance of the loan prepaid.
CTBI’s additional source of income, also referred to as noninterest income, includes service charges on deposit accounts, gains on sales of loans,
trust and wealth management income, loan related fees, brokerage revenue, and other miscellaneous income and is largely based on contracts with customers. In these cases, CTBI recognizes revenue when it satisfies a performance obligation by
transferring control over a product or service to a customer. CTBI considers a customer to be any party to which we will provide goods or services that are an output of CTBI’s ordinary activities in exchange for consideration. There is little
seasonality with regards to revenue from contracts with customers and all inter-company revenue is eliminated when CTBI’s financial statements are consolidated.
Generally, CTBI enters into contracts with customers that are short-term in nature where the performance obligations are fulfilled and payment is
processed at the same time. Such examples include revenue related to merchant fees, interchange fees, and investment services income. In addition, revenue generated from existing customer relationships such as deposit accounts are also considered
short-term in nature, because the relationship may be terminated at any time and payment is processed at the time performance obligations are fulfilled. As a result, CTBI does not have contract assets, contract liabilities, or related receivable accounts for contracts with customers. In cases where collectability is a concern, CTBI does not
record revenue.
Generally, the pricing of transactions between CTBI and each customer is either (i) established within a legally enforceable contract between the two
parties, as is the case with loan sales, or (ii) disclosed to the customer at a specific point in time, as is the case when a deposit account is opened or before a new loan is underwritten. Fees are usually fixed at a specific amount or as a
percentage of a transaction amount. No judgment or estimates by management are required to record revenue related to these transactions and pricing is clearly identified within these contracts.
CTBI primarily operates in Kentucky and contiguous areas. Therefore, all significant operating decisions are based upon analysis of CTBI as one operating segment.
We disaggregate our revenue from contracts with customers by contract-type and timing of revenue recognition, as we believe it best depicts how the
nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors. Noninterest income not generated from customers during CTBI’s ordinary activities primarily relates to MSRs, gains/losses on the sale of
investment securities, gains/losses on the sale of OREO, gains/losses on the sale of property, plant and equipment, and income from bank owned life insurance.
All revenue streams in the scope of the revenue recognition accounting standard are recognized at a point in
time. For more information related to our components of noninterest income, see the consolidated statements of income and comprehensive income.