FARMERS NATIONAL BANC CORP /OH/ Revenue Disclosure

NOTE 5 – REVENUE FROM CONTRACTS WITH CUSTOMERS

 

All material revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest income. ASC 606 rules govern the disclosure of revenue tied to contracts. The following table presents the Company’s noninterest income by revenue stream and reportable segment, net of eliminations, for the years ended December 31, 2025, 2024 and 2023.

 

(In Thousands of Dollars)		Trust Segment				Bank Segment				Totals
December 31, 2025
Service charges on deposit accounts		$	0			$	7,212			$	7,212
Debit card and EFT fees			0				7,907				7,907
Trust fees			11,061				0				11,061
Insurance agency commissions			0				6,531				6,531
Retirement plan consulting fees			3,650				0				3,650
Investment commissions			0				2,614				2,614
Other (outside the scope of ASC 606)			0				7,155				7,155
Total noninterest income		$	14,711			$	31,419			$	46,130

 

(In Thousands of Dollars)		Trust Segment				Bank Segment				Totals
December 31, 2024
Service charges on deposit accounts		$	0			$	7,311			$	7,311
Debit card and EFT fees			0				7,484				7,484
Trust fees			10,099				0				10,099
Insurance agency commissions			0				5,472				5,472
Retirement plan consulting fees			2,637				0				2,637
Investment commissions			0				2,007				2,007
Other (outside the scope of ASC 606)			0				6,706				6,706
Total noninterest income		$	12,736			$	28,980			$	41,716

 

(In Thousands of Dollars)		Trust Segment				Bank Segment				Totals
December 31, 2023
Service charges on deposit accounts		$	0			$	6,322			$	6,322
Debit card and EFT fees			0				7,059				7,059
Trust fees			9,047				0				9,047
Insurance agency commissions			0				5,444				5,444
Retirement plan consulting fees			2,467				0				2,467
Investment commissions			0				1,978				1,978
Other (outside the scope of ASC 606)			0				9,544				9,544
Total noninterest income		$	11,514			$	30,347			$	41,861

 

A description of the Company’s revenue streams under ASC 606 follows:

 

Service Charges on Deposit Accounts – The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Management reviewed the deposit account agreements, and determined that the agreements can be terminated at any time by either the Bank or the account holder. Transaction fees, such as balance transfers, wires and overdraft charges are settled the day the performance obligation is satisfied. The Bank’s monthly service charges and maintenance fees are for services provided to the customer on a monthly basis and are considered a series of services that have the same pattern of transfer each month. The review of service charges assessed on deposit accounts, included the amount of variable consideration that is a part of the monthly charges. It was found that the waiver of service charges due to insufficient funds and dormant account fees is immaterial and would not require a change in the accounting treatment for these fees under the revenue standards.

 

Debit Card and EFT Fees – Customers and the Bank have an account agreement and maintain deposit balances with the Bank. Customers use a bank issued debit card to purchase goods and services, and the Bank earns interchange fees on those transactions, typically a percentage of the sale amount of the transaction. The Bank records the amount due when it receives the settlement from the payment network. Payments from the payment network are received and recorded into income on a daily basis. There are no contingent debit card or EFT fees recorded by the Company that could be subject to a clawback in future periods.

 

Trust Fees – Services provided to Farmers Trust customers are a series of distinct services that have the same pattern of transfer each month. Fees for trust accounts are billed and drafted from trust accounts monthly. The Company records these fees on the income statement on a monthly basis. Fees are assessed based on the total investable assets of the customer’s trust account. A signed contract between the Company and the customer is maintained for all customer trust accounts with payment terms identified. It is probable that the fees will be collectible as funds being managed are accessible by the asset manager. Past history of trust fee income recorded by the Company indicates that it is highly unlikely that a significant reversal could occur. There are no contingent incentive fees recorded by the Company that could be subject to a clawback in future periods.

 

Insurance Agency Commissions – Insurance agency commissions are received from insurance carriers for the agency’s share of commissions from customer premium payments. These commissions are recorded into income when checks are received from the insurance carriers, and there is no contingent portion associated with these commission checks. There may be a short time-lag in recording revenue when cash is received instead of recording the revenue when the policy is signed by the customer, but the time lag is insignificant and does not impact the revenue recognition process.

 

Insurance also receives incentive checks from the insurance carriers for achieving specified levels of production with particular carriers. These amounts are recorded into income when a check is received, and there are no contingent amounts associated with these payments that may be clawed back by the carrier in the future. Similar to the monthly commissions explained in the preceding paragraph, there may be a short time-lag in recording incentive revenue on a cash basis as opposed to estimating the amount of incentive revenue expected to be earned, this does not materially impact the recognition of Insurance revenue. If there were any amounts that would need to be refunded for one specific Insurance customer, management believes the reversal would not be significant.

 

Other potential situations surrounding the recognition of Farmers Insurance revenue include estimating potential refunds due to the likely cancellation of a percentage of customers canceling their policies and recording revenue at the time of policy renewals.

 

Retirement Plan Consulting Fees – Revenue is recognized based on the level of work performed for the client. Any payments that are received for work to be performed in the future are recorded on a deferred revenue account, and recorded into income when the fees are earned.

 

Investment Commissions – Investment commissions are earned through the sales of non-deposit investment products to customers of the Company. The sales are conducted through a third-party broker-dealer. When the commissions are received and recorded into income on the Bank’s income statement, there is no contingent portion that may need to be refunded back to the broker dealer.

 

Other – Income items included in “Other” are Bank owned life insurance income, security gains, net gains on the sale of loans and other operating income. Any amounts within the scope of ASC 606 are deemed immaterial.