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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended 
 
March 31, 2020
 
OR
 
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number
000-17820
 
LAKELAND BANCORP, INC.
(Exact name of registrant as specified in its charter)
New Jersey
22-2953275
(State or other jurisdiction of
 incorporation  or organization) 
 (I.R.S. Employer
Identification No.)
250 Oak Ridge RoadOak RidgeNew Jersey 07438
 (Address of principal executive offices and zip code)
(973) 697-2000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of exchange on which registered
Common Stock, no par value
LBAI
The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files).  Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer     Accelerated filer     Non-accelerated filer   Smaller reporting company   Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes      No  

APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of May 1, 2020, there were 50,462,552 outstanding shares of Common Stock, no par value.

1

Table of Contents


LAKELAND BANCORP, INC.
Form 10-Q Index
 
 
 
PAGE
 
 
 
 
 
 
 
 
 
 
Consolidated Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019
 
Consolidated Statements of Income for the Three Months Ended March 31, 2020 and 2019 (unaudited)
 
Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2020 and 2019 (unaudited)
 
Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019 (unaudited)
 
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2

Table of Contents


PART I. FINANCIAL INFORMATION
Item 1.        Financial Statements
Lakeland Bancorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
 
March 31, 2020
 
December 31, 2019
(dollars in thousands)
(unaudited)
 
ASSETS
 
 
 
Cash
$
272,560

 
$
275,794

Interest-bearing deposits due from banks
13,076

 
6,577

Total cash and cash equivalents
285,636

 
282,371

Investment securities available for sale, at fair value
813,090

 
755,900

Equity securities, at fair value
16,902

 
16,473

Investment securities held to maturity; fair value of $119,023 at March 31, 2020 and $124,904 at December 31, 2019
115,752

 
123,975

Federal Home Loan Bank and other membership bank stock, at cost
28,575

 
22,505

Loans held for sale
3,098

 
1,743

Loans, net of deferred fees
5,328,623

 
5,137,823

Less: Allowance for loan losses
48,884

 
40,003

Net loans
5,279,739

 
5,097,820

Premises and equipment, net
47,618

 
47,608

Operating lease right-of-use assets
17,621

 
18,282

Accrued interest receivable
16,775

 
16,832

Goodwill
156,277

 
156,277

Other identifiable intangible assets
4,049

 
4,314

Bank owned life insurance
113,082

 
112,392

Other assets
115,694

 
54,744

TOTAL ASSETS
$
7,013,908

 
$
6,711,236

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
LIABILITIES
 
 
 
Deposits:
 
 
 
Noninterest-bearing
$
1,129,695

 
$
1,124,121

Savings and interest-bearing transaction accounts
3,241,397

 
3,298,854

Time deposits $250 thousand and under
845,554

 
652,144

Time deposits over $250 thousand
238,492

 
218,660

Total deposits
5,455,138

 
5,293,779

Federal funds purchased and securities sold under agreements to repurchase
419,085

 
328,658

Other borrowings
140,715

 
165,816

Subordinated debentures
118,229

 
118,220

Operating lease liabilities
19,126

 
19,814

Other liabilities
124,693

 
59,686

TOTAL LIABILITIES
6,276,986

 
5,985,973

STOCKHOLDERS’ EQUITY
 
 
 
Common stock, no par value; authorized shares, 100,000,000; issued shares 50,592,673 and outstanding shares 50,461,638 at March 31, 2020 and issued and outstanding shares 50,498,410 at December 31, 2019
560,653

 
560,263

Retained earnings
168,780

 
162,752

Treasury shares, at cost, 131,035 shares at March 31, 2020 and no shares at December 31, 2019
(1,452
)
 

Accumulated other comprehensive income
8,941

 
2,248

TOTAL STOCKHOLDERS’ EQUITY
736,922

 
725,263

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
7,013,908

 
$
6,711,236

The accompanying notes are an integral part of these consolidated financial statements.

3

Table of Contents


Lakeland Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
For the Three Months Ended March 31,
(in thousands, except per share data)
2020
 
2019
INTEREST INCOME
 
 
 
Loans and fees
$
57,857

 
$
57,642

Federal funds sold and interest-bearing deposits with banks
159

 
254

Taxable investment securities and other
5,229

 
4,873

        Tax-exempt investment securities
332

 
408

TOTAL INTEREST INCOME
63,577

 
63,177

INTEREST EXPENSE
 
 
 
Deposits
10,863

 
11,497

Federal funds purchased and securities sold under agreements to repurchase
429

 
608

Other borrowings
2,386

 
2,466

TOTAL INTEREST EXPENSE
13,678

 
14,571

NET INTEREST INCOME
49,899

 
48,606

Provision for loan losses
9,223

 
508

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
40,676

 
48,098

NONINTEREST INCOME
 
 
 
Service charges on deposit accounts
2,500

 
2,573

Commissions and fees
1,640

 
1,412

Income on bank owned life insurance
665

 
683

(Loss) gain on equity securities
(653
)
 
353

Gains on sales of loans
415

 
371

Gains on sales of investment securities, net
342

 

Swap income
2,843

 
199

Other income
259

 
132

TOTAL NONINTEREST INCOME
8,011

 
5,723

NONINTEREST EXPENSE
 
 
 
Salaries and employee benefits
20,235

 
19,231

Net occupancy expense
2,836

 
2,954

Furniture and equipment
2,560

 
2,116

FDIC insurance expense
298

 
450

Stationery, supplies and postage
399

 
447

Marketing expense
227

 
469

Data processing expense
1,253

 
1,327

Telecommunications expense
444

 
493

ATM and debit card expense
587

 
602

Core deposit intangible amortization
265

 
304

Other real estate and repossessed asset expense
12

 
86

Long-term debt prepayment fee
356

 

Merger related expenses

 
2,860

Other expenses
3,032

 
2,645

TOTAL NONINTEREST EXPENSE
32,504

 
33,984

Income before provision for income taxes
16,183

 
19,837

Provision for income taxes
3,791

 
4,211

NET INCOME
$
12,392

 
$
15,626

PER SHARE OF COMMON STOCK
 
 
 
Basic earnings
$
0.24

 
$
0.31

Diluted earnings
$
0.24

 
$
0.31

Dividends
$
0.125

 
$
0.115

The accompanying notes are an integral part of these consolidated financial statements.

4

Table of Contents


Lakeland Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
For the Three Months Ended March 31,
(in thousands)
2020
 
2019
 
 
 
 
NET INCOME
$
12,392

 
$
15,626

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
 
 
 
Unrealized gains on securities available for sale
7,284

 
4,363

Reclassification for securities gains included in net income
(254
)
 

Unrealized losses on derivatives
(337
)
 
(214
)
Other comprehensive income
6,693

 
4,149

TOTAL COMPREHENSIVE INCOME
$
19,085

 
$
19,775

The accompanying notes are an integral part of these consolidated financial statements.

5

Table of Contents



Lakeland Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
For the Three Months Ended March 31, 2020 and 2019
(in thousands, except per share data)
Common
Stock
 
Retained
Earnings
 
Treasury Stock
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
 
 
January 1, 2019
$
514,703

 
$
116,874

 
$

 
$
(7,838
)
 
$
623,739

Cumulative adjustment for adoption of ASU 842

 
125

 

 

 
125

January 1, 2019, as adjusted
514,703

 
116,999

 

 
(7,838
)
 
623,864

Net income

 
15,626

 

 

 
15,626

Other comprehensive income, net of tax

 

 

 
4,149

 
4,149

Stock based compensation
696

 

 

 

 
696

Issuance of stock for Highlands acquisition
43,417

 

 

 

 
43,417

Retirement of restricted stock
(571
)
 

 

 

 
(571
)
Cash dividends on common stock of $0.115 per share

 
(5,838
)
 

 

 
(5,838
)
At March 31, 2019
$
558,245


$
126,787


$

 
$
(3,689
)

$
681,343

 
 
 
 
 
 
 
 
 
 
January 1, 2020
$
560,263

 
$
162,752

 
$

 
$
2,248

 
$
725,263

Net income

 
12,392

 

 

 
12,392

Other comprehensive income, net of tax

 

 

 
6,693

 
6,693

Purchase of treasury stock, 131,035 shares

 

 
(1,452
)
 

 
(1,452
)
Stock based compensation
847

 

 

 

 
847

Retirement of restricted stock
(457
)
 

 

 

 
(457
)
Cash dividends on common stock of $0.125 per share

 
(6,364
)
 

 

 
(6,364
)
At March 31, 2020
$
560,653


$
168,780


$
(1,452
)
 
$
8,941


$
736,922

The accompanying notes are an integral part of these consolidated financial statements.


6

Table of Contents


Lakeland Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
For the Three Months Ended March 31,
(in thousands)
2020
 
2019
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
12,392

 
$
15,626

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Net amortization of premiums, discounts and deferred loan fees and costs
1,109

 
497

Depreciation and amortization
855

 
2,138

Amortization of intangible assets
265

 
304

Amortization of operating lease right-of-use assets
661

 
652

Provision for loan losses
9,223

 
508

Loans originated for sale
(14,634
)
 
(8,931
)
Proceeds from sales of loans held for sale
13,694

 
10,928

Gains on sales of securities
(342
)
 

Change in market value of equity securities
653

 
(353
)
Gains on sales of loans held for sale
(415
)
 
(371
)
Gains on other real estate and other repossessed assets
(86
)
 
(36
)
Losses on sales of premises and equipment
14

 
85

Long-term debt prepayment penalty
356

 

Stock-based compensation
847

 
696

Excess tax (deficiencies) benefits
(113
)
 
131

Increase in other assets
(64,307
)
 
(2,590
)
Increase in other liabilities
64,225

 
959

NET CASH PROVIDED BY OPERATING ACTIVITIES
24,397

 
20,243

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Net cash acquired in acquisitions

 
13,454

Proceeds from repayments and maturities of available for sale securities
70,134

 
42,074

Proceeds from repayments and maturities of held to maturity securities
8,076

 
4,153

Proceeds from sales of equity securities

 
1,138

Proceeds from sales of available for sale securities
94,696

 

Purchase of available for sale securities
(213,062
)
 
(36,085
)
Purchase of held to maturity securities

 
(8,510
)
Purchase of equity securities
(1,082
)
 
(95
)
Proceeds from redemptions of Federal Home Loan Bank stock
41,450

 
25,792

Purchases of Federal Home Loan Bank stock
(47,520
)
 
(27,675
)
Net increase in loans
(191,014
)
 
(38,506
)
Proceeds from sales of other real estate and repossessed assets
649

 
253

Proceeds from dispositions and sales of premises and equipment

 
953

Purchases of premises and equipment
(1,605
)
 
(1,793
)
NET CASH USED IN INVESTING ACTIVITIES
(239,278
)
 
(24,847
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Net increase in deposits
161,448

 
34,545

Increase in federal funds purchased and securities sold under agreements to repurchase
90,427

 
27,361

Repayments of other borrowings
(25,456
)
 
(33,133
)
Purchase of treasury stock
(1,452
)
 

Retirement of restricted stock
(457
)
 
(571
)
Dividends paid
(6,364
)
 
(5,838
)
NET CASH PROVIDED BY FINANCING ACTIVITIES
218,146

 
22,364

Net increase in cash and cash equivalents
3,265

 
17,760

Cash and cash equivalents, beginning of period
282,371

 
208,599

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
285,636

 
$
226,359


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For the Three Months Ended March 31,
(in thousands)
2020
 
2019
 
 
 
 
Supplemental schedule of non-cash investing and financing activities:
 
 
 
Cash paid during the period for income taxes
$
368

 
$
230

Cash paid during the period for interest
12,973

 
13,001

Transfer of loans into other repossessed assets and other real estate owned
(393
)
 
102

Initial recognition of operating lease right-of-use assets

 
18,651

Initial recognition of operating lease liabilities

 
20,203

Acquisitions:
 
 
 
Non-cash assets acquired:
 
 
 
Federal Home Loan Bank stock

 
1,767

Investment securities

 
22,734

Loans, including loans held for sale

 
426,118

Goodwill and other intangible assets, net

 
23,125

Other assets

 
9,304

Total non-cash assets acquired

 
483,048

Liabilities assumed:
 
 
 
Deposits

 
409,638

Other borrowings

 
40,957

Other liabilities

 
2,490

Total liabilities assumed

 
453,085

Common stock issued
$

 
$
43,417

The accompanying notes are an integral part of these consolidated financial statements.

8

Table of Contents


Lakeland Bancorp, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
This quarterly report presents the consolidated financial statements of Lakeland Bancorp, Inc. and its subsidiaries, including Lakeland Bank (“Lakeland”) and Lakeland’s wholly owned subsidiaries (collectively, the “Company”). The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and predominant practices within the banking industry. The Company’s unaudited interim financial statements reflect all adjustments, such as normal recurring accruals that are in the opinion of management, necessary for the fair presentation of the results of the interim periods. The results of operations for the three months ended March 31, 2020 do not necessarily indicate the results that the Company will achieve for all of 2020.
Certain information and footnote disclosures required under U.S. GAAP have been condensed or omitted, as permitted by rules and regulations of the Securities and Exchange Commission. These unaudited interim financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes that are presented in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2019. Certain reclassifications have been made in the consolidated financial statements to conform with current year classifications.
NOTE 2 – ACQUISITIONS
On January 4, 2019, the Company completed its acquisition of Highlands Bancorp, Inc. ("Highlands"), a bank holding company headquartered in Vernon, New Jersey. Highlands was the parent of Highlands State Bank, which operated four branches in Sussex, Passaic and Morris Counties in New Jersey. This acquisition enabled the Company to broaden its presence in those counties. Effective as of the close of business on January 4, 2019, Highlands merged into the Company and Highlands State Bank merged into Lakeland. Pursuant to the merger agreement, the shareholders of Highlands received for each outstanding share of Highlands common stock that they owned at the effective time of the merger, 1.015 shares of Lakeland Bancorp, Inc. common stock. The Company issued 2,837,524 shares of its common stock in the merger. Outstanding Highlands stock options were paid out in cash at the difference between $14.71 and an average strike price of $8.09 for a total cash payment of $797,000.
The acquisition was accounted for under the acquisition method of accounting and accordingly, the assets acquired and liabilities assumed in the acquisition were recorded at their estimated fair values as of the acquisition date. Highlands' assets were recorded at their preliminary estimated fair values as of January 4, 2019 and Highlands' results of operations have been included in the Company's Consolidated Statements of Income from that date forward.
The assets acquired and liabilities assumed in the acquisition were recorded at their estimated fair values based on management's best estimates using information available at the date of the acquisition, including the use of a third-party valuation specialist.
During the second quarter of 2019, the Company revised the estimated fair value of the acquired assets as of the acquisition date as the result of additional information obtained. The adjustment related to credit-impaired loans acquired in the acquisition that were recorded at fair value and subsequently accounted for in accordance with Accounting Standards Codification ("ASC") Subtopic 310-30 and resulted in a $1.7 million increase in goodwill.
As a result of new information obtained during the third quarter of 2019, about facts and circumstances that existed as of the acquisition date, the Company revised the estimated fair value on two Highlands branches acquired. The adjustment resulted in an increase in goodwill of $447,000.


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The following table summarizes the estimated fair value of the acquired assets and liabilities assumed at the date of acquisition for Highlands.
(in thousands)
 
Assets acquired:
 
Cash and cash equivalents
$
13,454

Securities, available for sale
21,234

Securities, held to maturity
1,500

Federal Home Loan Bank stock
1,767

Loans held for sale
1,113

Loans
425,005

Premises and equipment
2,613

Goodwill
19,844

Identifiable intangible assets
3,728

Accrued interest receivable and other assets
6,244

Total assets acquired
496,502

Liabilities assumed:
 
Deposits
(409,638
)
Other borrowings
(27,800
)
Subordinated debt
(13,157
)
Other liabilities
(2,490
)
Total liabilities assumed
(453,085
)
Net assets acquired
$
43,417



Loans acquired in the Highlands acquisition were recorded at fair value and subsequently accounted for in accordance with ASC Topic 310. There was no carryover related allowance for loan losses. The fair values of loans acquired from Highlands were estimated using cash flow projections based on the remaining maturity and repricing terms. Cash flows were adjusted for estimated future credit losses and the rate of prepayments. Projected cash flows were then discounted to present value using a risk-adjusted market rate for similar loans.
The following is a summary of the credit impaired loans acquired in the Highlands acquisition as of the closing date.
(in thousands)
 
Contractually required principal and interest at acquisition
$
22,363

Contractual cash flows not expected to be collected (non-accretable difference)
7,129

Expected cash flows at acquisition
$
15,234

Interest component of expected cash flows (accretable difference)
1,431

Fair value of acquired loans
$
13,803


The core deposit intangible totaled $3.7 million and is being amortized over its estimated useful life of approximately ten years using an accelerated method. The goodwill will be evaluated annually for impairment. The goodwill is not deductible for tax purposes.
The fair values of deposit liabilities with no stated maturities such as checking, money market and savings accounts, were assumed to equal the carrying amounts since these deposits are payable on demand. The fair values of certificates of deposits and IRAs represent the present value of contractual cash flows discounted at market rates for similar certificates of deposit.
Direct costs related to the acquisition were expensed as incurred. During the three months ended March 31, 2019, the Company incurred $2.9 million of merger and acquisition integration-related expenses, which have been separately stated in the Company's Consolidated Statements of Income. There were no merger or acquisition integration-related expenses in 2020.

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Table of Contents


NOTE 3 – REVENUE RECOGNITION
The Company’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.
The Company’s additional source of income, also referred to as noninterest income, is generated from deposit related fees, interchange fees, loan fees, merchant fees, loan sales, investment services and other miscellaneous income and is largely based on contracts with customers. In these cases, the Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. The Company considers a customer to be any party to which the Company will provide goods or services that are an output of the Company’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 the Company’s financial statements are consolidated.
Generally, the Company 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, the Company does not have contract assets, contract liabilities or related receivable accounts for contracts with customers. In cases where collectability is a concern, the Company does not record revenue.
Generally, the pricing of transactions between the Company 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.
The Company primarily operates in one geographic region, Northern and Central New Jersey and contiguous areas. Therefore, all significant operating decisions are based upon analysis of the Company as one operating segment or unit.
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 the Company’s ordinary activities primarily relates to mortgage servicing rights, gains/losses on the sale of investment securities, gains/losses on the sale of other real estate owned, gains/losses on the sale of property, plant and equipment, and income from bank owned life insurance.

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Table of Contents


The following table sets forth the components of noninterest income for the three months ended March 31, 2020 and 2019:
 
For the Three Months Ended March 31,
(in thousands)
2020
 
2019
Deposit Related Fees and Charges:
 
 
 
  Debit card interchange income
$
1,223

 
$
1,218

  Overdraft charges
953

 
996

  ATM service charges
167

 
184

  Demand deposit fees and charges
134

 
143

  Savings service charges
23

 
32

Total
2,500

 
2,573

Commissions and Fees:

 

  Loan fees
340

 
348

  Wire transfer charges
308

 
267

  Investment services income
523

 
352

  Merchant fees
248

 
184

  Commissions from sales of checks
83

 
103

  Safe deposit income
86

 
91

  Other income
51

 
61

Total
1,639

 
1,406

Gains on Sales of Loans
415

 
371

Other Income:

 

  Gains on customer swap transactions
2,843

 
199

  Title insurance (loss) income
(4
)
 
90

  Other income
97

 
61

Total
2,936

 
350

Revenue not from contracts with customers
521

 
1,023

Total Noninterest Income
$
8,011

 
$
5,723

Timing of Revenue Recognition:

 

  Products and services transferred at a point in time
7,471

 
4,681

  Products and services transferred over time
19

 
19

  Revenue not from contracts with customers
521

 
1,023

Total Noninterest Income
$
8,011

 
$
5,723



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Table of Contents


NOTE 4 – EARNINGS PER SHARE
The following schedule shows the Company’s earnings per share calculations for the periods presented:
 
For the Three Months Ended March 31,
(in thousands, except per share data)
2020
 
2019
Net income available to common shareholders
$
12,392

 
$
15,626

Less: earnings allocated to participating securities
102

 
141

Net income allocated to common shareholders
$
12,290

 
$
15,485

 
 
 
 
Weighted average number of common shares outstanding - basic
50,586

 
50,275

Share-based plans
142

 
167

Weighted average number of common shares outstanding - diluted
50,728

 
50,442

 
 
 
 
Basic earnings per share
$
0.24

 
$
0.31

Diluted earnings per share
$
0.24

 
$
0.31


There were no antidilutive options to purchase common stock excluded from the computation for the three months ended March 31, 2020 and 2019.
NOTE 5 – INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses and the fair value of the Company's available for sale and held to maturity investment securities are as follows:
 
March 31, 2020
 
December 31, 2019
(in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
AVAILABLE FOR SALE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and U.S. government agencies
$
155,853

 
$
1,807

 
$
(319
)
 
$
157,341

 
$
135,361

 
$
722

 
$
(436
)
 
$
135,647

Mortgage-backed securities, residential
461,700

 
13,156

 
(1,305
)
 
473,551

 
500,245

 
3,185

 
(1,551
)
 
501,879

Mortgage-backed securities, multifamily
53,026

 
1,500

 
(18
)
 
54,508

 
48,675

 
633

 
(123
)
 
49,185

Asset-backed securities
43,064

 

 
(1,951
)
 
41,113

 

 

 

 

Obligations of states and political subdivisions
77,353

 
1,023

 
(913
)
 
77,463

 
58,979

 
1,077

 
(35
)
 
60,021

Debt securities
9,000

 
114

 

 
9,114

 
9,000

 
168

 

 
9,168

 
$
799,996

 
$
17,600

 
$
(4,506
)
 
$
813,090

 
$
752,260

 
$
5,785

 
$
(2,145
)
 
$
755,900


 
March 31, 2020
 
December 31, 2019
(in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
HELD TO MATURITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agencies
$
31,207

 
$
901

 
$

 
$
32,108

 
$
31,335

 
$
182

 
$
(8
)
 
$
31,509

Mortgage-backed securities, residential
70,999

 
2,162

 

 
73,161

 
76,229

 
734

 
(176
)
 
76,787

Mortgage-backed securities, multifamily
740

 
44

 

 
784

 
1,750

 
4

 
(2
)
 
1,752

Obligations of states and political subdivisions
10,306

 
164

 

 
10,470

 
12,161

 
195

 

 
12,356

Debt securities
2,500

 

 

 
2,500

 
2,500

 

 

 
2,500

 
$
115,752

 
$
3,271

 
$

 
$
119,023

 
$
123,975

 
$
1,115

 
$
(186
)
 
$
124,904



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Table of Contents


The following table lists contractual maturities of investment securities classified as available for sale and held to maturity as of March 31, 2020. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
Available for Sale
 
Held to Maturity
(in thousands)
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Due in one year or less
$
90,556

 
$
90,722

 
$
6,796

 
$
6,831

Due after one year through five years
68,557

 
70,198

 
30,495

 
31,482

Due after five years through ten years
38,008

 
38,964

 
6,722

 
6,765

Due after ten years
45,085

 
44,034

 

 

 
242,206

 
243,918

 
44,013

 
45,078

Mortgage-backed and asset-backed securities
557,790

 
569,172

 
71,739

 
73,945

Total securities
$
799,996

 
$
813,090

 
$
115,752

 
$
119,023


The following table shows proceeds from sales of available-for-sale securities, gross gains and gross losses on sales and calls of securities for the periods indicated:
 
 
For the Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Sales proceeds
 
$
94,696

 
$

Gross gains
 
569

 

Gross losses
 
(227
)
 


Gains or losses on sales of securities are based on the net proceeds and the adjusted carrying amount of the securities sold using the specific identification method.
Securities with a carrying value of approximately $640.3 million and $581.1 million at March 31, 2020 and December 31, 2019, respectively, were pledged to secure public deposits and for other purposes required by applicable laws and regulations.
The following tables indicate the length of time individual securities have been in a continuous unrealized loss position for the periods presented:
March 31, 2020
Less Than 12 Months
 
12 Months or Longer
 
Total
(dollars in thousands)
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Number of
Securities
 
Fair Value
 
Unrealized
Losses
AVAILABLE FOR SALE
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and U.S. government agencies
$
74,745

 
$
28

 
$
19,355

 
$
291

 
11

 
$
94,100

 
$
319

Mortgage-backed securities, residential
51,693

 
919

 
8,180

 
386

 
24

 
59,873

 
1,305

Mortgage-backed securities, multifamily
2,801

 
16

 
4,257

 
2

 
2

 
7,058

 
18

Asset-backed securities
41,112

 
1,951

 

 

 
6

 
41,112

 
1,951

Obligations of states and political subdivisions
24,318

 
913

 

 

 
11

 
24,318

 
913

 
$
194,669

 
$
3,827

 
$
31,792

 
$
679

 
54

 
$
226,461

 
$
4,506

There are no unrealized losses for held-to-maturity securities at March 31, 2020.

14

Table of Contents


December 31, 2019
Less Than 12 Months
 
12 Months or Longer
 
Total
(dollars in thousands)
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Number of
Securities
 
Fair Value
 
Unrealized
Losses
AVAILABLE FOR SALE
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and U.S. government agencies
$
11,625

 
$
39

 
$
41,617

 
$
397

 
11

 
$
53,242

 
$
436

Mortgage-backed securities, residential
125,782

 
561

 
99,489

 
990

 
86

 
225,271

 
1,551

Mortgage-backed securities, multifamily
7,651

 
118

 
4,878

 
5

 
3

 
12,529

 
123

Obligations of states and political subdivisions
373

 
2

 
6,559

 
33

 
5

 
6,932

 
35

 
$
145,431

 
$
720

 
$
152,543

 
$
1,425

 
105

 
$
297,974

 
$
2,145

HELD TO MATURITY
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agencies
$
3,195

 
$
6

 
$
5,102

 
$
2

 
2

 
$
8,297

 
$
8

Mortgage-backed securities, residential
12,462

 
46

 
10,592

 
130

 
16

 
23,054

 
176

Mortgage-backed securities, multifamily

 

 
998

 
2

 
1

 
998

 
2

 
$
15,657

 
$
52

 
$
16,692

 
$
134

 
19

 
$
32,349

 
$
186


Management has evaluated the securities in the above table and has concluded that none of the securities with unrealized losses has impairments that are other-than-temporary. Fair value below cost is solely due to interest rate movements and is deemed temporary.
Investment securities, including the mortgage-backed securities and corporate securities, are evaluated on a periodic basis to determine if factors are identified that would require further analysis. In evaluating the Company’s securities, management considers the following items:
The Company’s ability and intent to hold the securities, including an evaluation of the need to sell the security to meet certain liquidity measures, or whether the Company has sufficient levels of cash to hold the identified security in order to recover the entire amortized cost of the security;
The financial condition of the underlying issuer;
The credit ratings of the underlying issuer and if any changes in the credit rating have occurred;
The length of time the security’s fair value has been less than amortized cost; and
Adverse conditions related to the security or its issuer if the issuer has failed to make scheduled payments or other factors.
If the above factors indicate that an additional analysis is required, management will perform a discounted cash flow analysis evaluating the security.
Equity securities at fair value
The Company has an equity securities portfolio which consists of investments in other financial institutions for market appreciation purposes and investments in Community Reinvestment funds. The market value of these investments was $16.9 million and $16.5 million at March 31, 2020 and December 31, 2019, respectively. The Company recorded purchases of $1.1 million and $95,000 for the three months ended March 31, 2020 and 2019, respectively. For the three months ended March 31, 2020, the Company recorded no sales of equity securities and recorded proceeds from sales of equity securities of $1.1 million for the three months ended March 31, 2019. The Company recorded $653,000 in market value losses on equity securities in noninterest income for the three months ended March 31, 2020, and $353,000 in market value gains on equity securities for the three months ended March 31, 2019.
As of March 31, 2020, the equity investments in other financial institutions and Community Reinvestment funds had a market value of $915,000 and $16.0 million, respectively. The Community Reinvestment funds include $3.5 million that are primarily invested in community development loans that are guaranteed by the Small Business Administration (“SBA”). Because the funds are primarily guaranteed by the federal government, there are minimal changes in market value between accounting periods. These funds can be redeemed with 60 days' notice at the net asset value less unpaid management fees with the approval of the fund manager. As of March 31, 2020, the net amortized cost equaled the market value of the investment. There are no unfunded commitments related to these investments.
The Community Reinvestment funds also include $12.5 million of investment in government guaranteed loans, mortgage-backed securities, small business loans and other instruments supporting affordable housing and economic development as of March 31, 2020. The Company may redeem these funds at the net asset value calculated at the end of the current business day less any unpaid management fees. There are no restrictions on redemptions for the holdings in these investments other than the notice required by the fund manager. There are no unfunded commitments related to these investments.

15

Table of Contents


NOTE 6 – LOANS AND OTHER REAL ESTATE
The following sets forth the composition of the Company’s loan portfolio:
(in thousands)
March 31, 2020
 
December 31, 2019
Commercial, secured by real estate
$
3,740,319

 
$
3,589,593

Commercial, industrial and other
467,346

 
431,934

Equipment finance
116,421

 
111,076

Real estate - residential mortgage
334,114

 
335,191

Real estate - construction
333,592

 
335,169

Home equity and consumer
340,071

 
337,977

Total loans
5,331,863

 
5,140,940

Less: deferred fees
(3,240
)
 
(3,117
)
Loans, net of deferred fees
$
5,328,623

 
$
5,137,823


At March 31, 2020 and December 31, 2019, home equity and consumer loans included overdraft deposit balances of $281,000 and $789,000, respectively. At March 31, 2020 and December 31, 2019, the Company had $1.5 billion and $1.3 billion, respectively, in loans pledged for actual and potential borrowings at the Federal Home Loan Bank of New York (“FHLB”).
Purchased Credit Impaired Loans
The following sets forth the carrying value of the purchased credit impaired ("PCI") loans acquired in mergers:
(in thousands)
March 31, 2020
 
December 31, 2019
Acquisition
 
 
 
  Highlands
$
7,494

 
$
8,194

  Pascack Community Bank ("Pascack")
106

 
113

  Harmony Bank ("Harmony")
434

 
441

Total
$
8,034

 
$
8,748


The following table presents changes in the accretable yield for PCI loans:
 
For the Three Months Ended
(in thousands)
March 31, 2020
 
March 31, 2019
 
 
 
 
Balance, beginning of period
$
363

 
$
81

Acquisitions

 
1,420

Accretion
(144
)
 
(193
)
Net reclassification non-accretable difference
72

 
30

Balance, end of period
$
291

 
$
1,338



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Non-Performing Assets and Past Due Loans
The following schedule sets forth certain information regarding the Company’s non-performing assets and its accruing troubled debt restructurings, excluding PCI loans:
(in thousands)
March 31, 2020
 
December 31, 2019
Commercial, secured by real estate
$
23,851

 
$
12,314

Commercial, industrial and other
1,909

 
1,539

Equipment finance
199

 
284

Real estate - residential mortgage
2,837

 
3,428

Real estate - construction
919

 
967

Home equity and consumer
2,689

 
2,606

Total non-accrual loans
$
32,404

 
$
21,138

Other real estate and other repossessed assets
393

 
563

TOTAL NON-PERFORMING ASSETS
$
32,797

 
$
21,701

Troubled debt restructurings, still accruing
$
4,719

 
$
5,650


Non-accrual loans included $2.2 million and $1.6 million of troubled debt restructurings at March 31, 2020 and December 31, 2019, respectively. At March 31, 2020 and December 31, 2019, the Company had $1.5 million and $2.0 million, respectively, in residential mortgages and consumer home equity loans that were in the process of foreclosure which are included in non-accrual loans in the above table.
An age analysis of past due loans, excluding PCI loans which are accounted for on a pool basis, segregated by class of loans as of March 31, 2020 and December 31, 2019, is as follows:
(in thousands)
30-59 Days Past Due
 
60-89 Days Past Due
 
Greater Than 89 Days Past Due
 
Total Past Due
 
Current
 
Total Loans
 
Recorded Investment  Greater than 89 Days and Still Accruing
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
12,162

 
$
8,032

 
$
13,190

 
$
33,384

 
$
3,701,509

 
$
3,734,893

 
$

Commercial, industrial and other
2,101

 
1,010

 
1,057

 
4,168

 
462,284

 
466,452

 

Equipment finance
264

 
30

 
200

 
494

 
115,927

 
116,421

 

Real estate - residential mortgage
1,988

 
125

 
1,630

 
3,743

 
329,970

 
333,713

 

Real estate - construction

 

 
225

 
225

 
332,570

 
332,795

 

Home equity and consumer
1,645

 
299

 
1,243

 
3,187

 
336,368

 
339,555

 
99

 
$
18,160

 
$
9,496

 
$
17,545

 
$
45,201

 
$
5,278,628

 
$
5,323,829

 
$
99

December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
3,578

 
$
1,200

 
$
9,702

 
$
14,480

 
$
3,569,008

 
$
3,583,488

 
$

Commercial, industrial and other
353

 
71

 
1,064

 
1,488

 
429,502

 
430,990

 

Equipment finance
166

 
80

 
284

 
530

 
110,546

 
111,076

 

Real estate - residential mortgage
1,138

 
251

 
2,075

 
3,464

 
331,337

 
334,801

 

Real estate - construction

 

 
967

 
967

 
333,418

 
334,385

 

Home equity and consumer
1,573

 
287

 
1,533

 
3,393

 
334,059

 
337,452

 

 
$
6,808

 
$
1,889

 
$
15,625

 
$
24,322

 
$
5,107,870

 
$
5,132,192

 
$



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Table of Contents


Impaired Loans
The Company defines impaired loans as all non-accrual loans with recorded investments of $500,000 or greater. Impaired loans also include all loans that have been modified in troubled debt restructurings, but excludes PCI loans. Impaired loans as of March 31, 2020 and December 31, 2019 are as follows:
(in thousands)
Recorded
Investment in
Impaired  Loans
 
Contractual
Unpaid
Principal
Balance
 
Specific
Allowance
 
Average
Investment in
Impaired  Loans
 
Interest
Income
Recognized
March 31, 2020
 
 
 
 
 
 
 
 
 
Loans without specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
23,705

 
$
23,965

 
$

 
$
13,594

 
$
30

Commercial, industrial and other
1,330

 
1,333

 

 
1,347

 
4

Equipment finance

 

 

 

 

Real estate - residential mortgage
1,525

 
1,651

 

 
1,581

 

Real estate - construction
694

 
694

 

 
702

 
10

Home equity and consumer

 

 

 

 

Loans with specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
3,263

 
3,505

 
202

 
3,406

 
38

Commercial, industrial and other
106

 
105

 
5

 
105

 
2

Equipment finance
19

 
19

 
8

 
21

 

Real estate - residential mortgage
654

 
835

 
2

 
659

 
5

Real estate - construction

 

 

 

 

Home equity and consumer
638

 
739

 
5

 
640

 
8

Total:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
26,968

 
$
27,470

 
$
202

 
$
17,000

 
$
68

Commercial, industrial and other
1,436

 
1,438

 
5

 
1,452

 
6

Equipment finance
19

 
19

 
8

 
21

 

Real estate - residential mortgage
2,179

 
2,486

 
2

 
2,240

 
5

Real estate - construction
694

 
694

 

 
702

 
10

Home equity and consumer
638

 
739

 
5

 
640

 
8

 
$
31,934

 
$
32,846

 
$
222

 
$
22,055

 
$
97


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Table of Contents


(in thousands)
Recorded
Investment in
Impaired  Loans
 
Contractual
Unpaid
Principal
Balance
 
Specific
Allowance
 
Average
Investment in
Impaired  Loans
 
Interest
Income
Recognized
December 31, 2019
 
 
 
 
 
 
 
 
 
Loans without specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
12,478

 
$
12,630

 
$

 
$
10,386

 
$
164

Commercial, industrial and other
1,391

 
1,381

 

 
1,334

 
16

Equipment finance

 

 

 

 

Real estate - residential mortgage
803

 
815

 

 
233

 

Real estate - construction
1,663

 
1,661

 

 
82

 
2

Home equity and consumer

 

 

 

 

Loans with specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
3,470

 
3,706

 
228

 
4,554

 
190

Commercial, industrial and other
113

 
113

 
5

 
113

 
6

Equipment finance
23

 
23

 
10

 
21

 

Real estate - residential mortgage
1,512

 
1,682

 
104

 
926

 
19

Real estate - construction

 

 

 

 

Home equity and consumer
671

 
765

 
5

 
693

 
29

Total:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
15,948

 
$
16,336

 
$
228

 
$
14,940

 
$
354

Commercial, industrial and other
1,504

 
1,494

 
5

 
1,447

 
22

Equipment finance
23

 
23

 
10

 
21

 

Real estate - residential mortgage
2,315

 
2,497

 
104

 
1,159

 
19

Real estate - construction
1,663

 
1,661

 

 
82

 
2

Home equity and consumer
671

 
765

 
5

 
693

 
29

 
$
22,124

 
$
22,776

 
$
352

 
$
18,342

 
$
426


Interest income recognized on impaired loans was $97,000 and $144,000 for the three months ended March 31, 2020 and 2019, respectively. Interest that would have been accrued on impaired loans during the first three months of 2020 and 2019 had the loans been performing under original terms would have been $297,000 and $268,000, respectively.
Credit Quality Indicators
The class of loans is determined by internal risk rating. Management closely and continually monitors the quality of its loans and assesses the quantitative and qualitative risks arising from the credit quality of its loans. Lakeland assigns a credit risk rating to all commercial loans and loan commitments. The credit risk rating system has been developed by management to provide a methodology to be used by loan officers, department heads and senior management in identifying various levels of credit risk that exist within Lakeland’s commercial loan portfolios. The risk rating system assists senior management in evaluating Lakeland’s commercial loan portfolio, analyzing trends, and determining the proper level of required reserves to be recommended to the Board. In assigning risk ratings, management considers, among other things, a borrower’s debt service coverage, earnings strength, loan to value ratios, guarantor support, industry conditions and economic conditions. Management categorizes commercial loans and commitments into a one (1) to nine (9) numerical structure with rating 1 being the strongest rating and rating 9 being the weakest. Ratings 1 through 5W are considered ‘Pass’ ratings.

19

Table of Contents


The following table shows the Company’s commercial loan portfolio as of March 31, 2020 and December 31, 2019, by the risk ratings discussed above (in thousands):
March 31, 2020
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Real Estate -
Construction
 
Total Commercial Loans
RISK RATING
 
 
 
 
 
 
 
1
$

 
$
554

 
$

 
$
554

2

 
18,099

 

 
18,099

3
73,368

 
35,528

 

 
108,896

4
986,743

 
117,485

 
17,899

 
1,122,127

5
2,329,762

 
203,708

 
301,455

 
2,834,925

5W - Watch
227,836

 
68,160

 
1,050

 
297,046

6 - Other assets especially mentioned
59,250

 
9,338

 
11,472

 
80,060

7 - Substandard
63,360

 
14,474

 
1,716

 
79,550

8 - Doubtful

 

 

 

9 - Loss

 

 

 

Total
$
3,740,319

 
$
467,346

 
$
333,592

 
$
4,541,257

December 31, 2019
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Real Estate -
Construction
 
Total Commercial Loans
RISK RATING
 
 
 
 
 
 
 
1
$

 
$
898

 
$

 
$
898

2

 
17,988

 

 
17,988

3
74,072

 
39,112

 

 
113,184

4
965,825

 
107,376

 
17,941

 
1,091,142

5
2,332,863

 
215,975

 
307,824

 
2,856,662

5W - Watch
100,347

 
30,192

 
6,959

 
137,498

6 - Other assets especially mentioned
55,438

 
11,328

 

 
66,766

7 - Substandard
61,048

 
9,065

 
2,445

 
72,558

8 - Doubtful

 

 

 

9 - Loss

 

 

 

Total
$
3,589,593

 
$
431,934

 
$
335,169

 
$
4,356,696


The risk rating tables above do not include residential mortgage loans, consumer loans, or equipment finance loans because they are evaluated on their payment status.
Allowance for Loan Losses
The Coronavirus Aid, Relief and Economic Security ("CARES") Act, a stimulus package signed into law on March 27, 2020 to address economic disruption caused by the COVID-19 pandemic, provides financial institutions with the option to defer adoption of the Financial Accounting Standards Board's Accounting Standard Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326) until the earlier of the end of the pandemic or December 31, 2020. The Company has elected to defer adoption of ASU 2016-13 and its Current Expected Credit Loss methodology ("CECL").

20

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The following table details activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2020 and 2019:
(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
Three Months Ended March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance
$
28,950

 
$
3,289

 
$
957

 
$
1,725

 
$
2,672

 
$
2,410

 
$
40,003

Charge-offs
(169
)
 

 
(84
)
 
(116
)
 

 
(114
)
 
(483
)
Recoveries
26

 
30

 
14

 
20

 
32

 
19

 
141

Provision
5,986

 
2,170

 
370

 
(29
)
 
640

 
86

 
9,223

Ending Balance
$
34,793

 
$
5,489

 
$
1,257

 
$
1,600

 
$
3,344

 
$
2,401

 
$
48,884

(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
Three Months Ended March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance
$
27,881

 
$
1,742

 
$
987

 
$
1,566

 
$
3,015

 
$
2,497

 
$
37,688

Charge-offs
(187
)
 
(147
)
 
(87
)
 
(50
)
 

 
(45
)
 
(516
)
Recoveries
115

 
97

 
2

 
9

 
5

 
71

 
299

Provision
(294
)
 
900

 
45

 
39

 
(133
)
 
(49
)
 
508

Ending Balance
$
27,515

 
$
2,592

 
$
947

 
$
1,564

 
$
2,887

 
$
2,474

 
$
37,979


Loans receivable summarized by portfolio segment and impairment method are as follows:
(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance: Individually evaluated for impairment
$
26,968

 
$
1,436

 
$
19

 
$
2,179

 
$
694

 
$
638

 
$
31,934

Ending Balance: Collectively evaluated for impairment
3,707,925

 
465,016

 
116,402

 
331,534

 
332,101

 
338,917

 
5,291,895

Ending Balance: Loans acquired with deteriorated credit quality
5,426

 
894

 

 
401

 
797

 
516

 
8,034

Ending Balance (1)
$
3,740,319

 
$
467,346

 
$
116,421

 
$
334,114

 
$
333,592

 
$
340,071

 
$
5,331,863

(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance: Individually evaluated for impairment
$
15,948

 
$
1,504

 
$
23

 
$
2,315

 
$
1,663

 
$
671

 
$
22,124

Ending Balance: Collectively evaluated for impairment
3,567,540

 
429,486

 
111,053

 
332,486

 
332,722

 
336,781

 
5,110,068

Ending balance: Loans acquired with deteriorated credit quality
6,105

 
944

 

 
390

 
784

 
525

 
8,748

Ending Balance (1)
$
3,589,593

 
$
431,934

 
$
111,076

 
$
335,191

 
$
335,169

 
$
337,977

 
$
5,140,940

(1)
Excludes deferred fees

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Table of Contents


The allowance for loan losses is summarized by portfolio segment and impairment classification as follows:
(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance: Individually evaluated for impairment
$
202

 
$
5

 
$
8

 
$
2

 
$

 
$
5

 
$
222

Ending Balance: Collectively evaluated for impairment
34,591

 
5,484

 
1,249

 
1,598

 
3,344

 
2,396

 
48,662

Ending Balance
$
34,793

 
$
5,489

 
$
1,257

 
$
1,600

 
$
3,344

 
$
2,401

 
$
48,884

(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance: Individually evaluated for impairment
$
228

 
$
5

 
$
10

 
$
104

 
$

 
$
5

 
$
352

Ending Balance: Collectively evaluated for impairment
28,722

 
3,284

 
947

 
1,621

 
2,672

 
2,405

 
39,651

Ending Balance
$
28,950

 
$
3,289

 
$
957

 
$
1,725

 
$
2,672

 
$
2,410

 
$
40,003


Lakeland also maintains a reserve for unfunded lending commitments which is included in other liabilities. This reserve was $2.0 million and $1.8 million as of March 31, 2020 and December 31, 2019, respectively. The Company analyzes the adequacy of the reserve for unfunded lending commitments quarterly.
Troubled Debt Restructurings
Loans are classified as troubled debt restructured loans ("TDR") in cases where borrowers experience financial difficulties and Lakeland makes certain concessionary modifications to contractual terms. Restructured loans typically involve a modification of terms such as a reduction of the stated interest rate, a moratorium of principal payments and/or an extension of the maturity date at a stated interest rate lower than the current market rate of a new loan with similar risk. The Company considers the potential losses on these loans as well as the remainder of its impaired loans while considering the adequacy of the allowance for loan losses.
Section 4013 of the CARES Act, as interpreted by the "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers Affected by the Coronavirus (Revised)" (“Revised Statement”), dated April 17, 2020, includes criteria that enable financial institutions to exclude from TDR status loans that are modified in connection with COVID-19. Under these provisions, TDR status is not required for the term of a loan modification if (i) the loan modification is made in connection with COVID-19, (ii) the loan was not past due more than 30 days as of December 31, 2019 and (iii) the loan modification is entered into during the period between March 1, 2020, and the earlier of (a) 60 days after COVID-19 is no longer characterized as a National Emergency or (b) December 31, 2020. Furthermore, pursuant to the Revised Statement, for loan modifications that do not meet these criteria but are made in connection with COVID-19, such loans may be presumed not to be TDR if they are modified at a time when the borrower is current and the modifications are short-term (e.g., six months). If the criteria are not met under either Section 4013 or the Revised Statement, banks are required to follow their existing accounting policies to determine whether COVID-related modifications should be accounted for as a TDR. The Company has elected to suspend the classification of loan modifications as TDR if they qualify under Section 4013 or the Revised Statement.
There are no loans that were restructured during the three months ended March 31, 2020 and 2019.
The following table summarizes as of March 31, 2020 and 2019, loans that were restructured within the previous twelve months that have subsequently defaulted:
 
March 31, 2020
 
March 31, 2019
(dollars in thousands)
Number of
Contracts
 
Recorded
Investment
 
Number of
Contracts
 
Recorded
Investment
 
 
Home equity and consumer
2

 
$
83

 

 
$

 
2

 
$
83

 

 
$


Other Real Estate and Other Repossessed Assets
At March 31, 2020 and December 31, 2019, the Company had other real estate owned of $393,000 and $563,000, respectively, consisting of residential property acquired as a result of foreclosure proceedings. There were no balances of other repossessed assets at both March 31, 2020 and December 31, 2019.

22

Table of Contents


NOTE 7 – LEASES
The Company leases certain premises and equipment under operating leases. Portions of certain properties are subleased for terms extending through 2024. At March 31, 2020, the Company had lease liabilities totaling $19.1 million and right-of-use assets totaling $17.6 million related to these leases. At December 31, 2019, the Company had lease liabilities totaling $19.8 million and right-of-use assets totaling $18.3 million. The calculated amount of the right-of-use asset and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of the minimum lease payments. The Company's lease agreements often include one or more options to renew at the Company's discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the right-of-use asset and lease liability. The Company uses its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. For leases existing prior to January 1, 2019, the rate for the remaining lease term as of January 1, 2019 was used.
For the three months ended March 31, 2020, the weighted average remaining lease term for operating leases was 10.25 years and the weighted average discount rate used in the measurement of operating lease liabilities was 3.52%.
As the Company elected not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities. Lease costs were as follows:
 
 
For the Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Operating lease cost
 
$
828

 
$
820

Short-term lease cost
 

 

Variable lease cost
 
32

 
35

Sublease income
 
(31
)
 
(31
)
Net lease cost
 
$
829

 
$
824


The table below presents other information on the Company's operating leases for the three months ended March 31, 2020:
(in thousands)
 
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
689

Right-of-use asset obtained in exchange for new operating lease liabilities
$


There were no sale and leaseback transactions, leveraged leases or lease transactions with related parties during the three months ended March 31, 2020. At March 31, 2020, the Company had no leases that had not yet commenced.
A maturity analysis of operating lease liabilities and a reconciliation of the undiscounted cash flows to the total operating lease liability at March 31, 2020 are as follows:
(in thousands)
 
 
Within one year
 
$
3,238

After one year but within three years
 
5,482

After three years but within five years
 
4,339

After 5 years
 
10,096

Total undiscounted cash flows
 
23,155

Discount on cash flows
 
(4,029
)
Total lease liability
 
$
19,126



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Table of Contents


NOTE 8 – DERIVATIVES
Lakeland is a party to interest rate derivatives that are not designated as hedging instruments. Under a program, Lakeland executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that Lakeland executes with a third-party financial institution, such that Lakeland minimizes its net risk exposure resulting from such transactions. Because the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. The changes in the fair value of the swaps offset each other, except for the credit risk of the counterparties, which is determined by taking into consideration the risk rating, probability of default and loss given default for all counterparties. Lakeland had $98.4 million and $30.0 million, respectively, in available for sale securities pledged for collateral on its interest rate swaps with financial institutions at March 31, 2020 and December 31, 2019.
In June 2016, the Company entered into two cash flow hedges in order to hedge the variable cash outflows associated with its subordinated debentures. The notional value of these hedges was $30.0 million. The Company’s objectives in using cash flow hedges are to add stability to interest expense and to manage its exposure to interest rate movements. The Company used interest rate swaps designated as cash flow hedges which involved the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. In these particular hedges the Company is paying a third party an average of 1.10% in exchange for a payment at 3 month LIBOR . The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three months ended March 31, 2020, the Company did not record any hedge ineffectiveness. The Company recognized $62,000 and $124,000 of accumulated other comprehensive income that was reclassified into interest expense for the first three months of 2020 and 2019, respectively.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s debt. During the next twelve months, the Company estimates that $105,000 will be reclassified as a decrease to interest expense should the rate environment remain the same.
The following table presents summary information regarding these derivatives for the periods presented (dollars in thousands):
March 31, 2020
Notional Amount
 
Average
Maturity (Years)
 
Weighted Average
Fixed Rate
 
Weighted Average
Variable Rate
 
Fair
 Value
Classified in Other Assets:
 
 
 
 
 
 
 
 
 
Customer interest rate swaps
780,599

 
9.7
 
3.89
%
 
1 Mo. LIBOR + 1.89%
 
91,277

Classified in Other Liabilities:
 
 
 
 
 
 
 
 
 
3rd Party interest rate swaps
780,599

 
9.7
 
3.89
%
 
1 Mo. LIBOR + 1.89%
 
(91,277
)
Interest rate swap (cash flow hedge)
30,000

 
1.3
 
1.10
%
 
3 Mo. LIBOR
 
(207
)
December 31, 2019
Notional
 Amount
 
Average
Maturity (Years)
 
Weighted 
Average
Fixed Rate
 
Weighted Average
Variable Rate
 
Fair
 Value
Classified in Other Assets:
 
 
 
 
 
 
 
 
 
      3rd Party interest rate swaps
$
85,796

 
9.0
 
3.51
%
 
1 Mo. LIBOR + 1.95
 
$
947

      Customer interest rate swaps
473,273

 
9.9
 
4.32
%
 
1 Mo. LIBOR + 1.93
 
25,905

      Interest rate swap (cash flow hedge)
30,000

 
1.5
 
1.10
%
 
3 Mo. LIBOR
 
271

Classified in Other Liabilities:
 
 
 
 
 
 
 
 
 
      Customer interest rate swaps
$
85,796

 
9.0
 
3.51
%
 
1 Mo. LIBOR + 1.95
 
$
(947
)
      3rd party interest rate swaps
473,273

 
9.9
 
4.32
%
 
1 Mo. LIBOR + 1.93
 
(25,905
)


24

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NOTE 9 – GOODWILL AND INTANGIBLE ASSETS
The Company had goodwill of $156.3 million at both March 31, 2020 and December 31, 2019. The Company recorded $19.8 million in goodwill from the Highlands merger in January 2019. The Company reviews its goodwill and intangible assets annually, on November 30, or more frequently if conditions warrant, for impairment. In testing goodwill for impairment, the Company compares the estimated fair value of its reporting unit to its carrying amount, including goodwill. The Company has determined that it has one reporting unit, Community Banking. At March 31, 2020, the Company evaluated whether it is more likely than not that the fair value of our one reporting unit is less than its carrying amount, by assessing relevant events and circumstances as a result of the impact of COVID-19 and concluded that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount.
The Company had core deposit intangibles of $4.0 million and $4.3 million at March 31, 2020 and December 31, 2019, respectively. The Company recorded core deposit intangibles of $3.7 million for the Highlands acquisition in January 2019. The estimated future amortization expense for the remainder of 2020 and for each of the succeeding five years ended December 31 is as follows (in thousands):
For the Year Ended
 
2020
$
760

2021
868

2022
711

2023
554

2024
425

2025
317


NOTE 10 – BORROWINGS
At March 31, 2020 and December 31, 2019, the Company had overnight and short-term borrowings from the Federal Home Loan Bank ("FHLB") totaling $360.0 million and $200.0 million, respectively. In addition, overnight and short-term borrowings from correspondent banks totaled $20.0 million and $85.0 million at March 31, 2020 and December 31, 2019, respectively.
Other short-term borrowings at March 31, 2020 and December 31, 2019 consisted of short-term securities sold under agreements to repurchase of $39.1 million and $43.7 million, respectively. The securities sold under agreements to repurchase are overnight sweep arrangement accounts with our customers. As of March 31, 2020, the Company had $39.8 million in mortgage backed securities pledged for its securities sold under agreements to repurchase.
At times the market values of securities collateralizing our securities sold under agreements to repurchase may decline due to changes in interest rates and may necessitate our lenders to issue a “margin call” which requires Lakeland to pledge additional collateral to meet that margin call.
Advances from the FHLB totaled $140.7 million at March 31, 2020 compared to $165.8 million at December 31, 2019 and were collateralized by first mortgage loans. The advances have prepayment penalties. In the first quarter of 2020, the Company repaid two advances totaling $10.0 million and recorded $356,000 in long-term debt prepayment fees.
NOTE 11 – SHARE-BASED COMPENSATION
The Company's shareholders approved the 2018 Omnibus Equity Incentive Plan (the "Plan"), which authorizes the granting of incentive stock options, supplemental stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), other stock-based awards and cash-based awards to officers, employees and non-employee directors of, and consultants and advisors to, the Company and its subsidiaries. The Company previously granted such awards under the 2009 Equity Compensation Program; however, no further awards may be granted from the 2009 program.

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Restricted Stock
The following is a summary of the Company’s restricted stock activity during the three months ended March 31, 2020:
 
Number of
Shares
 
Weighted
Average
Price
Outstanding, January 1, 2020
13,110

 
$
15.93

Granted
13,041

 
16.87

Vested
(13,052
)
 
15.96

Outstanding, March 31, 2020
13,099

 
$
16.83


In the first three months of 2020, the Company granted 13,041 shares of restricted stock to non-employee directors at a grant date fair value of $16.87 per share under the 2018 Omnibus Equity Incentive Program. The restricted stock vests one year from the date it was granted. Compensation expense on this restricted stock is expected to be $220,000 over a one year period. In the first three months of 2019, the Company granted 13,052 shares of restricted stock to non-employee directors at a grant date fair value of $15.96 per share. The restricted stock vested one year from the date it was granted with a compensation expense of $208,000 over such period.
The Company recognized share-based compensation expense on its restricted stock of $54,000 and $55,000 for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, there was unrecognized compensation cost of $166,000 related to unvested restricted stock that is expected to be recognized over a weighted average period of approximately 0.79 years.
Restricted Stock Units
The following is a summary of the Company’s RSU activity during the three months ended March 31, 2020:
 
Number of
Shares
 
Weighted
Average
Price
Outstanding, January 1, 2020
300,629

 
$
18.13

Granted
169,169

 
15.56

Vested
(84,082
)
 
18.74

Forfeited
(5,416
)
 
18.45

Outstanding, March 31, 2020
380,300

 
$
16.85


In the first three months of 2020, the Company granted 169,169 RSUs under the 2018 Omnibus Equity Incentive Plan at a weighted average grant date fair value of $15.56 per share. These units vest within a range of two years to three years. A portion of these RSUs will vest subject to certain performance conditions in the restricted stock unit agreement. There are also certain provisions in the compensation program which state that if a recipient of the RSUs reaches a certain age and years of service, the person has effectively earned a portion of the RSUs at that time. Compensation expense on the restricted stock units issued in the first three months of 2020 is expected to average approximately $877,000 per year over a three year period. In the first three months of 2019, the Company granted 127,559 RSUs under the Company’s 2018 Omnibus Equity Incentive Plan at a weighted average grant date fair value of $16.66 per share. Compensation expense on these RSUs is expected to average approximately $708,000 per year over a three year period.
The Company recognized share based compensation expense of $794,000 and $640,000 on RSUs for the three months ended March 31, 2020 and 2019, respectively. Unrecognized compensation expense related to RSUs was approximately $4.1 million as of March 31, 2020, and that cost is expected to be recognized over a period of 1.88 years.

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Table of Contents


Stock Options
A summary of the activity under the Company’s stock option plans as of March 31, 2020 is as follows:
 
Number of
Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic
Value
Outstanding, January 1, 2019
31,706

 
$
7.76

 
0.58
 
$
305,120

Granted

 

 
 
 
 
Exercised

 

 
 
 
 
Outstanding, March 31, 2020
31,706

 
$
7.76

 
0.33
 
$
96,811

Options exercisable at March 31, 2020
31,706

 
$
7.76

 
0.33
 
$
96,811


The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options).
There were no grants of stock options in the first three months of 2020 or 2019. There were no stock options exercised during the first three months of 2020 or 2019. There was no unrecognized compensation expense related to unvested stock options as of March 31, 2020.
NOTE 12 – COMPREHENSIVE INCOME
The components of other comprehensive income (loss) are as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
March 31, 2020
 
March 31, 2019
(in thousands)
Before Tax Amount
 
Tax Benefit (Expense)
 
Net of Tax Amount
 
Before Tax Amount
 
Tax Benefit
(Expense)
 
Net of Tax Amount
Net unrealized gains (losses) on available for sale securities:
 
 
 
 
 
 
 
 
 
 
 
Net unrealized holding gains arising during period
$
9,796

 
$
(2,512
)
 
$
7,284

 
$
6,109

 
$
(1,746
)
 
$
4,363

Reclassification adjustment for net gains arising during the period
(342
)
 
88

 
(254
)
 

 

 

Net unrealized gains
9,454

 
(2,424
)
 
7,030

 
6,109

 
(1,746
)
 
4,363

Unrealized losses on derivatives
(478
)
 
141

 
(337
)
 
(271
)
 
57

 
(214
)
Other comprehensive income, net
$
8,976

 
$
(2,283
)
 
$
6,693

 
$
5,838

 
$
(1,689
)
 
$
4,149


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The following tables show the changes in the balances of each of the components of other comprehensive income for the periods presented, net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended March 31, 2020
 
For the Three Months Ended March 31, 2019
(in thousands)
Unrealized Gains
(Losses) on
Available for  Sale
Securities
 
Unrealized
Gains (Losses)
on Derivatives
 
Pension Items
 
Total
 
Unrealized Losses on
Available for  Sale
Securities
 
Unrealized
Gains 
on Derivatives
 
Pension Items
 
Total
Beginning balance
$
1,936

 
$
317

 
$
(5
)
 
$
2,248

 
$
(8,782
)
 
$
903

 
$
41

 
$
(7,838
)
Other comprehensive income (loss) before classifications
7,284

 
(337
)
 

 
6,947

 
4,363

 
(214
)
 

 
4,149

Amounts reclassified from accumulated other comprehensive income
(254
)
 

 

 
(254
)
 

 

 

 

Net current period other comprehensive income (loss)
7,030

 
(337
)
 

 
6,693

 
4,363

 
(214
)
 

 
4,149

Ending balance
$
8,966

 
$
(20
)
 
$
(5
)
 
$
8,941

 
$
(4,419
)
 
$
689

 
$
41

 
$
(3,689
)

NOTE 13 – FAIR VALUE MEASUREMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair Value Measurement
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for an asset or liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest level priority to unobservable inputs (level 3 measurements). The following describes the three levels of fair value hierarchy:
Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities; includes U.S. Treasury Notes, and other U.S. Government Agency securities that actively trade in over-the-counter markets; equity securities and mutual funds that actively trade in over-the-counter markets.
Level 2 – quoted prices for similar assets or liabilities in active markets; or quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable for the asset or liability including yield curves, volatilities, and prepayment speeds.
Level 3 – unobservable inputs for the asset or liability that reflect the Company’s own assumptions about assumptions that market participants would use in the pricing of the asset or liability and that are consequently not based on market activity but upon particular valuation techniques.
The Company’s assets that are measured at fair value on a recurring basis are its available for sale investment securities and its interest rate swaps. The Company obtains fair values on its securities using information from a third-party servicer. If quoted prices for securities are available in an active market, those securities are classified as Level 1 securities. The Company has U.S. Treasury Notes and certain equity securities that are classified as Level 1 securities. Level 2 securities were primarily comprised of U.S. Agency bonds, residential mortgage-backed securities, obligations of state and political subdivisions and corporate securities. Fair values were estimated primarily by obtaining quoted prices for similar assets in active markets or through the use of pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker-dealer quotes, issuer spreads, bids and offers. On a quarterly basis, the Company reviews the pricing information received from the Company’s third-party pricing service. This review includes a comparison to non-binding third-party quotes.
The fair values of derivatives are based on valuation models from a third party using current market terms (including interest rates and fees), the remaining terms of the agreements and the credit worthiness of the counter party as of the measurement date (Level 2).

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Table of Contents


The following table sets forth the Company’s financial assets that were accounted for at fair value on a recurring basis as of the periods presented by level within the fair value hierarchy. During the three months ended March 31, 2020, the Company did not make any transfers between any levels within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
(in thousands)
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Fair Value
March 31, 2020
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Investment securities, available for sale
 
 
 
 
 
 
 
U.S. Treasury and government agencies
$
76,986

 
$
80,355

 
$

 
$
157,341

Mortgage-backed securities

 
528,059

 

 
528,059

Asset-backed securities

 
41,113

 

 
41,113

Obligations of states and political subdivisions

 
77,463

 

 
77,463

Debt securities

 
9,114

 

 
9,114

Total securities available for sale
76,986

 
736,104

 

 
813,090

Equity securities, at fair value
915

 
15,987

 

 
16,902

Derivative assets

 
91,277

 

 
91,277

Total Assets
$
77,901

 
$
843,368

 
$

 
$
921,269

Liabilities:
 
 
 
 
 
 
 
Derivative liabilities
$

 
$
91,484

 
$

 
$
91,484

Total Liabilities
$

 
$
91,484

 
$

 
$
91,484

December 31, 2019
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Investment securities, available for sale
 
 
 
 
 
 
 
U.S. Treasury and government agencies
$
12,580

 
$
123,067

 
$

 
$
135,647

Mortgage-backed securities

 
551,064

 

 
551,064

Obligations of states and political subdivisions

 
60,021

 

 
60,021

Debt securities

 
9,168

 

 
9,168

Total securities available for sale
12,580

 
743,320

 

 
755,900

Equity securities, at fair value
1,735

 
14,738

 

 
16,473

Derivative assets

 
27,123

 

 
27,123

Total Assets
$
14,315

 
$
785,181

 
$

 
$
799,496

Liabilities:
 
 
 
 
 
 
 
Derivative liabilities
$

 
$
26,852

 
$

 
$
26,852

Total Liabilities
$

 
$
26,852

 
$

 
$
26,852


29

Table of Contents


The following table sets forth the Company’s assets subject to fair value adjustments (impairment) on a non-recurring basis. Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
(in thousands)
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
Fair Value
March 31, 2020
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Impaired loans
$

 
$

 
$
4,680

 
$
4,680

Loans held for sale

 
3,098

 

 
3,098

Other real estate owned and other repossessed assets

 

 
393

 
393

 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Impaired loans
$

 
$

 
$
5,789

 
$
5,789

Loans held for sale

 
1,743

 

 
1,743

Other real estate owned and other repossessed assets

 

 
563

 
563


Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or market value. Because most of Lakeland’s impaired loans are collateral dependent, fair value is generally measured based on the value of the collateral, less estimated costs to sell, securing these loans and is classified at a level 3 in the fair value hierarchy. Collateral may be real estate, accounts receivable, inventory, equipment and/or other business assets. The value of real estate is assessed based on appraisals by qualified third-party licensed appraisers. The appraisers may use the income approach to value the collateral using discount rates (with ranges of 5-11%) or capitalization rates (with ranges of 4-9%) to evaluate the property. The value of the equipment may be determined by an appraiser, if significant, inquiry through a recognized valuation resource, or by the value on the borrower’s financial statements. Field examiner reviews on business assets may be conducted based on the loan exposure and reliance on this type of collateral. Appraised and reported values may be adjusted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and client’s business. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors identified above.
The Company has a held for sale loan portfolio that consists of residential mortgages that are being sold in the secondary market. The Company records these mortgages at the lower of cost or market value. Fair value is generally determined by the value of purchase commitments.
Other real estate owned (“OREO”) and other repossessed assets, representing property acquired through foreclosure or deed in lieu of foreclosure, are carried at fair value less estimated disposal costs of the acquired property. Fair value on other real estate owned is based on the appraised value of the collateral using discount rates or capitalization rates similar to those used in impaired loan valuation. The fair value of other repossessed assets is estimated by inquiry through recognized valuation resources.
Changes in the assumptions or methodologies used to estimate fair values may materially affect the estimated amounts. Changes in economic conditions, locally or nationally, could impact the value of the estimated amounts of impaired loans, OREO and other repossessed assets.
Fair Value of Certain Financial Instruments
Estimated fair values have been determined by the Company using the best available data and an estimation methodology suitable for each category of financial instruments. Management is concerned that there may not be reasonable comparability between institutions due to the wide range of permitted assumptions and methodologies in the absence of active markets. This lack of uniformity gives rise to a high degree of subjectivity in estimating financial instrument fair values.
The estimation methodologies used, the estimated fair values and recorded book balances at March 31, 2020, and December 31, 2019, are outlined below.
This summary, as well as the table below, excludes financial assets and liabilities for which carrying value approximates fair value. For financial assets, these include cash and cash equivalents. For financial liabilities, these include noninterest-bearing demand deposits, savings and interest-bearing transaction accounts and federal funds purchased and securities sold under agreements to repurchase. The estimated fair value of demand, savings and interest-bearing transaction accounts is the amount payable on demand at the reporting date. Carrying value is used because there is no stated maturity on these accounts, and the customer has the ability to withdraw the funds immediately. Also excluded from this summary and the following table are those financial instruments recorded at fair value on a recurring basis, as previously described.

30

Table of Contents


The fair value of investment securities held to maturity is measured using information from the same third-party servicer used for investment securities available for sale using the same methodologies discussed above. Investment securities held to maturity includes $75,000 in short-term municipal bond anticipation notes and $2.5 million in subordinated debt that are non-rated and do not have an active secondary market or information readily available on standard financial systems. As a result, the securities are classified as Level 3 securities. Management performs a credit analysis before investing in these securities.
FHLB stock is an equity interest that can be sold to the issuing FHLB, to other FHLBs, or to other member banks at its par value. Because ownership of these securities is restricted, they do not have a readily determinable fair value. As such, the Company’s FHLB stock is recorded at cost or par value and is evaluated for impairment each reporting period by considering the ultimate recoverability of the investment rather than temporary declines in value. The Company’s evaluation primarily includes an evaluation of liquidity, capitalization, operating performance, commitments, and regulatory or legislative events.
The net loan portfolio has been valued using an exit price approach, which incorporates a buildup discount rate calculation that uses a swap rate adjusted for credit risk, servicing costs, a liquidity premium and a prepayment premium.
For fixed maturity certificates of deposit, fair value is estimated based on the present value of discounted cash flows using the rates currently offered for deposits of similar remaining maturities. The carrying amount of accrued interest payable approximates its fair value.
The fair value of long-term debt is based upon the discounted value of contractual cash flows. The Company estimates the discount rate using the rates currently offered for similar borrowing arrangements. The fair value of subordinated debentures is based on bid/ask prices from brokers for similar types of instruments.
The fair values of commitments to extend credit and standby letters of credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date. The fair value of commitments to extend credit and standby letters of credit are deemed immaterial.
The following table presents the carrying values, fair values and placement in the fair value hierarchy of the Company’s financial instruments as of March 31, 2020 and December 31, 2019:
(in thousands)
Carrying
Value
 
Fair
Value
 
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
 
 
 
 
 
 
 
 
 
March 31, 2020
 
 
 
 
 
 
 
 
 
Financial Assets:
 
 
 
 
 
 
 
 
 
Investment securities held to maturity
$
115,752

 
$
119,023

 
$

 
$
116,448

 
$
2,575

Federal Home Loan Bank and other membership bank stocks
28,575

 
28,575

 

 
28,575

 

Loans, net
5,279,739

 
5,229,776

 

 

 
5,229,776

Financial Liabilities:
 
 
 
 
 
 
 
 
 
Certificates of deposit
1,084,046

 
1,084,580

 

 
1,084,580

 

Other borrowings
140,715

 
144,658

 

 
144,658

 

Subordinated debentures
118,229

 
112,272

 

 

 
112,272

December 31, 2019
 
 
 
 
 
 
 
 
 
Financial Assets:
 
 
 
 
 
 
 
 
 
Investment securities held to maturity
$
123,975

 
$
124,904

 
$

 
$
121,503

 
$
3,401

Federal Home Loan Bank and other membership bank stocks
22,505

 
22,505

 

 
22,505

 

Loans, net
5,097,820

 
5,194,065

 

 

 
5,194,065

Financial Liabilities:
 
 
 
 
 
 
 
 
 
Certificates of deposit
870,804

 
871,418

 

 
871,418

 

Other borrowings
165,816

 
166,505

 

 
166,505

 

Subordinated debentures
118,220

 
117,992

 

 

 
117,992



31

Table of Contents


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
This section should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2019.
Statements Regarding Forward Looking Information
The information disclosed in this document includes various forward-looking statements that are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to credit quality (including delinquency trends and the allowance for loan losses), the Company's future tax expense, corporate objectives, the anticipated impact of COVID-19 and other financial and business matters. The words “anticipates,” “projects,” “intends,” “estimates,” “expects,” “believes,” “plans,” “may,” “will,” “should,” “could,” and other similar expressions are intended to identify such forward-looking statements. The Company cautions that these forward-looking statements are necessarily speculative and speak only as of the date made, and are subject to numerous assumptions, risks and uncertainties, all of which may change over time. Actual results could differ materially from such forward-looking statements.
In addition to the risk factors disclosed elsewhere in this document and in the Company's most recently filed Annual Report on Form 10-K/A, the following factors, among others, could cause the Company’s actual results to differ materially and adversely from such forward-looking statements: changes in the financial services industry and the U.S. and global capital markets; changes in economic conditions nationally, regionally and in the Company’s markets; public health crises (such as the governmental, social and economic effects of the novel coronavirus); the nature and timing of actions of the Federal Reserve Board and other regulators; the nature and timing of legislation and regulation affecting the financial services industry; government intervention in the U.S. financial system; changes in federal and state tax laws; changes in levels of market interest rates; pricing pressures on loan and deposit products; credit risks of Lakeland’s lending and equipment financing activities; successful implementation, deployment and upgrades of new and existing technology, systems, services and products; and customers’ acceptance of Lakeland’s products and services.
The above-listed risk factors are not necessarily exhaustive, particularly as to possible future events, and new risk factors may emerge from time to time. Certain events may occur that could cause the Company’s actual results to be materially different than those described in the Company’s periodic filings with the Securities and Exchange Commission. Any statements made by the Company that are not historical facts should be considered to be forward-looking statements. The Company is not obligated to update and does not undertake to update any of its forward-looking statements made herein.
Critical Accounting Policies, Judgments and Estimates
The accounting and reporting policies of the Company and its subsidiaries conform to accounting principles generally accepted in the United States of America and predominant practices within the banking industry. The consolidated financial statements include the accounts of the Company, Lakeland and their subsidiaries, including Lakeland NJ Investment Corp., Lakeland Investment Corp., Lakeland Equity, Inc. and Lakeland Preferred Equity, Inc. All intercompany balances and transactions have been eliminated.
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. These estimates and assumptions also affect reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. There have been no material changes in the Company’s critical accounting policies, judgments and estimates, including assumptions or estimation techniques utilized, as compared to those disclosed in the Company’s most recent Annual Report on Form 10-K/A.
Executive Summary
In December 2019, a novel strain of coronavirus, ("COVID-19"), was reported in Wuhan, China. The COVID-19 virus continues to aggressively spread globally and has spread to over 185 countries, including all 50 states in the United States. A prolonged COVID-19 outbreak, or any other epidemic that harms the global economy, the U.S. economy or the markets in which we operate could adversely affect our operations. While the spread of the COVID-19 virus has minimally impacted our operations as of March 31, 2020, we may experience temporary closures of our offices and/or suspension of certain services until it is safe to open and return to work. The ultimate effect of COVID-19 on the Company's business will depend on numerous factors and future developments that are highly uncertain and cannot be predicted with confidence. At this time, it is unknown how long the COVID-19 pandemic will last or when restrictions on individuals and businesses will be lifted and businesses and their employees will be able to resume normal activities. Further, additional information may emerge regarding the severity of COVID-19 and additional actions may be taken by federal, state and local governments to contain COVID-19 or treat its impact. Changes in the behavior of customers, businesses and their employees as a result of the COVID-19 pandemic, including social distancing practices, even after formal restrictions have been lifted, are also unknown. As a result of the COVID-19 pandemic and the actions taken to contain it or reduce its impact, the Company may experience changes in the value of collateral securing outstanding loans, reductions in the credit quality of borrowers and the inability of borrowers to repay loans in accordance with their terms. Management is

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actively managing credit risk in the Company's commercial loan portfolio, including reviewing the industries that the Company believes are most likely to be impacted by emerging COVID-19 events. These and similar factors and events may have substantial negative effects on the business, financial condition, and results of operations of the Company and its customers.
The Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was signed into law on March 27, 2020 and provides over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. The CARES Act authorized the Small Business Administration ("SBA") to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program ("PPP"). As a qualified SBA lender, we were automatically authorized to originate PPP loans. An eligible business can apply for a PPP loan up to the lesser of (1) 2.5 times its average monthly payroll costs or (2) $10.0 million. PPP loans will have (a) an interest rate of 1.00%, (b) a two-year loan term to maturity; and (c) principal and interest payments deferred for six months from the date of the disbursement. The SBA guarantees 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower's PPP loan is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and 75% of the loan proceeds are used for payroll expenses, with the remaining 25% of the loan proceeds used for other qualifying expenses.
Section 4013 of the CARES Act, as interpreted by the "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers Affected by the Coronavirus (Revised)" (“Revised Statement”), dated April 17, 2020, includes criteria that enable financial institutions to exclude from TDR status loans that are modified in connection with COVID-19. Under these provisions, TDR status is not required for the term of a loan modification if (i) the loan modification is made in connection with COVID-19, (ii) the loan was not past due more than 30 days as of December 31, 2019 and (iii) the loan modification is entered into during the period between March 1, 2020, and the earlier of (a) 60 days after COVID-19 is no longer characterized as a National Emergency or (b) December 31, 2020. Furthermore, pursuant to the Revised Statement, for loan modifications that do not meet these criteria but are made in connection with COVID-19, such loans may be presumed not to be TDR if they are modified at a time when the borrower is current and the modifications are short-term (e.g., six months). If the criteria are not met under either Section 4013 or the Revised Statement, banks are required to follow their existing accounting policies to determine whether COVID-related modifications should be accounted for as a TDR. The Company has elected to suspend the classification of loan modifications as TDR if they qualify under Section 4013 or the Revised Statement.
The CARES Act also provides financial institutions with the option to defer adoption of the Financial Accounting Standards Board's Accounting Standard Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326) until the earlier of the end of the pandemic or December 31, 2020. The Company has elected to defer adoption of ASU 2016-13 and its Current Expected Credit Loss methodology ("CECL").
Management has identified that the COVID-19 pandemic could adversely affect the liquidity of the Company. As such, management has taken specific steps to raise awareness of the risk and taken action to minimize the risk. In addition to processes already in place to closely monitor changes in liquidity needs, including those that may result from the COVID-19 pandemic, the Company has increased collateral and expanded access to additional borrowings should it be necessary in order to meet liquidity needs. While we are unable to predict actual fluctuations in deposit or cash balances, management continues to monitor liquidity and believes that its current level of liquidity is sufficient to meet its current and future operational needs.
In addition, the carrying value of investment securities, right-of-use assets, goodwill and other intangibles could decrease resulting in future impairment losses. Management will continue to evaluate current economic conditions to determine if a triggering event would impact the current valuations for these assets. As a result, it is not currently possible to ascertain the overall impact of COVID-19 on the Company's business.
As the COVID-19 pandemic has advanced, Lakeland has made it a priority to safeguard the health of our associates and customers, while assisting customers impacted by the economic burdens of COVID-19 and providing support to our communities. Lakeland initiated remote working plans and encouraged the use of our mobile and online banking alternatives as we adjusted our branch hours, decreased lobby usage and temporarily closed branches. To assist COVID-19 impacted borrowers, we are offering temporary payment deferrals on commercial, mortgage and consumer loans and we are assisting customers with the origination of PPP loans to help strengthen local businesses and preserve jobs in our communities. Despite this challenging environment, our associates show tireless professionalism, compassion and dedication to serving our customers under these unprecedented conditions. We remain open for business, continuing to lend to qualified businesses for working capital and general business purposes. This constitutes a forward-looking statement under the Private Securities Litigation Reform Act of 1995.
Financial Overview
For the first quarter of 2020, the Company reported net income of $12.4 million and earnings per diluted share of $0.24 compared to net income of $15.6 million and earnings per diluted share of $0.31 for the first quarter of 2019. For the first quarter of 2020, annualized return on average assets was 0.76%, annualized return on average common equity was 6.77% and annualized return on average tangible common equity was 8.65% compared to 1.02%, 9.41%, and 12.32%, respectively, for the first quarter of 2019.

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The first quarter of 2020 results were adversely impacted by a $9.2 million provision for loan losses compared to a $508,000 provision for the same period last year. The increased provision was primarily due to an increase in certain qualitative factors to account for the impact of COVID-19 and COVID-related loan downgrades, resulting in approximately $8.0 of the provision. The remaining $1.2 million of the provision is attributable to loan growth, a change in the loan portfolio composition and a change in loss rates.
Net interest margin was 3.28% in the first quarter of 2020 compared to 3.42% in the first quarter of 2019, while total loans, net of deferred fees, grew $190.8 million, or 4%, to $5.33 billion during the first three months of 2020. Total deposits increased $161.4 million, or 3%, from December 31, 2019 to March 31, 2020, to $5.46 billion.
Comparison of Operating Results for the Three Months Ended March 31, 2020 and 2019
Net Income
Net income was $12.4 million, or $0.24 per diluted share, for the first quarter of 2020 compared to net income of $15.6 million, or $0.31 per diluted share, for the first quarter of 2019. The reduction in net income compared to the first quarter of 2019 was due primarily to the increased provision for loan losses mentioned above. Net interest income of $49.9 million for the first quarter of 2020 increased $1.3 million from the first quarter of 2019 due to the growth of interest-earning assets and a decrease in interest rates on interest-bearing liabilities partially offset by a decrease in the yield on interest earning assets.
Net Interest Income
Net interest income is the difference between interest income on earning assets and the cost of funds supporting those assets. The Company’s net interest income is determined by: (i) the volume of interest-earning assets that it holds and the yields that it earns on those assets, and (ii) the volume of interest-bearing liabilities that it has assumed and the rates that it pays on those liabilities.
Net interest income on a tax equivalent basis for the first quarter of 2020 was $50.0 million, compared to $48.7 million for the first quarter of 2019. The net interest margin decreased to 3.28% in the first quarter of 2020 from 3.42% in the first quarter of 2019 primarily as a result of a decrease in the yield on interest-earning assets partially offset by a decrease in the cost of interest-bearing liabilities. The components of net interest income will be discussed in greater detail below.
The following table reflects the components of the Company’s net interest income, setting forth for the periods presented, (1) average assets, liabilities and stockholders’ equity, (2) interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities, (3) average yields earned on interest-earning assets and average rates paid on interest-bearing liabilities, (4) the Company’s net interest spread (i.e., the average yield on interest-earning assets less the average cost of interest-bearing liabilities) and (5) the Company’s net interest margin. Rates for the three months ended March 31, 2020 and March 31, 2019 are computed on a tax equivalent basis using a tax rate of 21%.

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For the Three Months Ended March 31, 2020
 
For the Three Months Ended March 31, 2019
(dollars in thousands)
Average
Balance
 
Interest
Income/
Expense
 
Average
Rates
Earned/
Paid
 
Average
Balance
 
Interest
Income/
Expense
 
Average
Rates
Earned/
Paid
 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Loans (1)
$
5,208,097

 
$
57,857

 
4.47
%
 
$
4,871,534

 
$
57,642

 
4.80
%
Taxable investment securities and other
817,143

 
5,229

 
2.56
%
 
782,699

 
4,873

 
2.49
%
Tax-exempt securities
62,844

 
420

 
2.67
%
 
75,347

 
516

 
2.74
%
Federal funds sold (2)
44,919

 
159

 
1.42
%
 
43,273

 
254

 
2.35
%
Total interest-earning assets
6,133,003

 
63,665

 
4.17
%
 
5,772,853

 
63,285

 
4.44
%
Noninterest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses
(40,621
)
 
 
 
 
 
(41,829
)
 
 
 
 
Other assets
472,920

 
 
 
 
 
452,200

 
 
 
 
TOTAL ASSETS
$
6,565,302

 
 
 
 
 
$
6,183,224

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Savings accounts
$
496,798

 
$
85

 
0.07
%
 
$
513,270

 
$
94

 
0.07
%
Interest-bearing transaction accounts
2,830,778

 
6,826

 
0.97
%
 
2,554,865

 
7,417

 
1.18
%
Time deposits
872,998

 
3,952

 
1.81
%
 
890,070

 
3,986

 
1.79
%
Borrowings
437,578

 
2,815

 
2.54
%
 
435,501

 
3,074

 
2.82
%
Total interest-bearing liabilities
4,638,152

 
13,678

 
1.18
%
 
4,393,706

 
14,571

 
1.34
%
Noninterest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
Demand deposits
1,109,638

 
 
 
 
 
1,056,060

 
 
 
 
Other liabilities
80,793

 
 
 
 
 
60,253

 
 
 
 
Stockholders' equity
736,719

 
 
 
 
 
673,205

 
 
 
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
6,565,302

 
 
 
 
 
$
6,183,224

 
 
 
 
Net interest income/spread
 
 
49,987

 
2.99
%
 
 
 
48,714

 
3.10
%
Tax equivalent basis adjustment
 
 
88

 
 
 
 
 
108

 
 
NET INTEREST INCOME
 
 
$
49,899

 
 
 
 
 
$
48,606

 
 
Net interest margin (3)
 
 
 
 
3.28
%
 
 
 
 
 
3.42
%
(1)    Includes non-accrual loans, the effect of which is to reduce the yield earned on loans, and deferred loan fees.
(2)    Includes interest-bearing cash accounts.
(3)    Net interest income divided by interest-earning assets.
Interest income on a tax equivalent basis increased $380,000, or 1% from $63.3 million in the first quarter of 2019 to $63.7 million in the first quarter of 2020, as a result of higher volumes of interest-earning assets partially offset by a reduction in the yield on interest-earning assets. Average loans increased $336.6 million compared to the first quarter of 2019 while the yield on average loans decreased 33 basis points to 4.47% in the first quarter of 2020 from the first quarter of 2019. Total average taxable investment securities increased $34.4 million to $817.1 million for the first quarter of 2020 from the first quarter of 2019, while average tax-exempt securities decreased $12.5 million to $62.8 million for the same periods. The yield on average taxable investment securities increased seven basis points from the first quarter of 2019 to 2.56% for the first quarter of 2020, while the yield on average tax-exempt investment securities decreased seven basis points to 2.67%.
Total interest expense of $13.7 million in the first quarter of 2020 was $893,000 less than the $14.6 million reported for the same period in 2019. Total average interest-bearing liabilities increased $244.4 million primarily as a result of organic growth in money market accounts due to increased marketing efforts. The cost of average interest-bearing liabilities decreased from 1.34% in the first quarter of 2019 to 1.18% in the first quarter of 2020. For the first quarter of 2020, the cost of interest-bearing transaction accounts and borrowings decreased by 21 basis points and 28 basis points, respectively, when compared to the same period in 2019, largely driven by reductions in the federal funds rate.

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Provision for Loan Losses
In determining the provision for loan losses, management considers national and local economic conditions; trends in the portfolio including orientation to specific loan types or industries; experience, ability and depth of lending management in relation to the complexity of the portfolio; adequacy and adherence to policies, procedures and practices; levels and trends in delinquencies, impaired loans and charge-offs and the results of independent third-party loan reviews.
In the first quarter of 2020, a $9.2 million provision for loan loss was recorded, compared to $508,000 for the same period last year. As previously noted, approximately $8.0 million of the increase in provision was due to an increase in certain qualitative factors to account for the impact of COVID-19 and COVID-related loan downgrades, while the remaining $1.2 million of the provision is attributable to loan growth, a change in the loan portfolio composition and a change in loss rates. The Company recorded charge offs of $483,000 and recoveries of $141,000 in the first quarter of 2020 compared to charge offs of $516,000 and recoveries of $299,000 in the first quarter of 2019. For more information regarding the determination of the provision, see “Risk Elements” below.
Noninterest Income
Noninterest income increased $2.3 million to $8.0 million for the first quarter of 2020 compared to $5.7 million during the same period in 2019 due primarily to an increase in swap income of $2.6 million. The first quarter of 2020 included $342,000 in gains on sales of investment securities compared to none in the first quarter of 2019. Commissions and fees increased $228,000 compared to the first quarter of 2019 due primarily to increased investment services income. The first quarter of 2020 also included losses on equity securities of $653,000 compared to gains of $353,000 during the same period in 2019.
Noninterest Expense
Noninterest expense in the first quarter of 2020 totaled $32.5 million compared to $34.0 million reported for the same quarter of 2019, a decrease of $1.5 million. Excluding merger-related expenses recorded in the first quarter of 2019, noninterest expense increased $1.4 million, or 4%, in the first quarter of 2020 compared to the first quarter of 2019. Salaries and employee benefits expense was $20.2 million for the first quarter of 2020, increasing $1.0 million, or 5%, from the same period last year, as a result of additions to staff to support continued growth, normal merit increases and increases in benefits costs. Furniture and equipment increased $444,000 compared to the first quarter of 2019 due primarily to an increase in costs associated with the Company's digital strategy initiative. Marketing expense decreased $242,000 due to the timing of marketing campaigns. First quarter 2020 results also included a long-term debt prepayment fee of $356,000 resulting from the payoff of $10.0 million in FHLB debt yielding 2.89%.
The Company’s efficiency ratio, a non-GAAP financial measure, was 55.3% in the first quarter of 2020, compared to 56.6% for the same period last year. The Company uses this ratio because it believes that the ratio provides a good comparison of period-to-period performance and because the ratio is widely accepted in the banking industry. The following table shows the calculation of the efficiency ratio for the periods presented:
 
For the Three Months Ended March 31,
(dollars in thousands)
2020
 
2019
 
 
 
 
Total noninterest expense
$
32,504

 
$
33,984

Amortization of core deposit intangibles
(265
)
 
(304
)
Merger-related expenses

 
(2,860
)
Long term debt prepayment fee
(356
)
 

Noninterest expense, as adjusted
$
31,883

 
$
30,820

 
 
 
 
Net interest income
$
49,899

 
$
48,606

Noninterest income
8,011

 
5,723

Total revenue
57,910

 
54,329

Tax-equivalent adjustment on municipal securities
88

 
108

(Gains) losses on sales of investment securities
(342
)
 

Total revenue, as adjusted
$
57,656

 
$
54,437

Efficiency ratio
55.3
%
 
56.6
%

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Income Tax Expense
The effective tax rate in the first quarter of 2020 was 23.4% compared to 21.2% during the same period in 2019 as a result of a technical bulletin issued by the New Jersey Division of Taxation during the second quarter of 2019, which resulted in increasing our annualized effective tax rate to 23.4%.
Financial Condition
The Company’s total assets increased $302.7 million from December 31, 2019, to $7.01 billion at March 31, 2020. Total loans, net of deferred fees, were $5.33 billion, an increase of $190.8 million, or 4%, from $5.14 billion at December 31, 2019. Total deposits were $5.46 billion, an increase of $161.4 million, or 3%, from December 31, 2019, while total borrowings increased $65.3 million to $678.0 million at March 31, 2020.
Loans
Gross loans of $5.33 billion at March 31, 2020 increased $190.9 million from December 31, 2019, primarily in the commercial loans secured by real estate category which increased $150.7 million, or 4%. Commercial, industrial and other loans increased $35.4 million, or 8%. For more information on the loan portfolio, see Note 6 in Notes to the Consolidated Financial Statements in this Quarterly Report on Form 10-Q. As of April 30, 2020, we had approved 1,866 applications for approximately $321.7 million of loans under the PPP.
Risk Elements
Non-performing assets, excluding PCI loans, increased from $21.7 million at December 31, 2019 to $32.8 million at March 31, 2020. The increase in non-performing assets primarily resulted from loans to one borrower totaling $9.5 million moving into non-accrual status for reasons unrelated to COVID-19. Non-accrual loans in the commercial loans secured by real estate and commercial, industrial and other categories increased $11.5 million and $370,000, respectively, while the residential mortgage category decreased $591,000. The percentage of non-performing assets to total assets was 0.47% at March 31, 2020 compared to 0.32% at December 31, 2019. Non-accrual loans at March 31, 2020 included four loan relationships with a balance of $1 million or greater, totaling $18.7 million, and six loan relationships between $500,000 and $1.0 million, totaling $4.1 million. Loans past due ninety days or more and still accruing totaled $99,000 at March 31, 2020 compared to none at December 31, 2019.
Troubled debt restructurings are those loans where the Company has granted concessions to the borrower in payment terms, either in rate or in term, as a result of the financial condition of the borrower. On March 31, 2020, the Company had $4.7 million in loans that were troubled debt restructurings and accruing interest income compared to $5.7 million at December 31, 2019. These loans are expected to be able to perform under the modified terms of the loan. On March 31, 2020, the Company had $2.2 million in troubled debt restructurings that were included in non-accrual loans compared to $1.6 million at December 31, 2019.
As of April 30, 2020, we have applications for payment deferrals on approximately $909.4 million of commercial loans and $60.7 million of mortgage and consumer loans. As of March 31, 2020, to the extent that we received deferral requests on Pass loans in the commercial loan portfolio, the Company downgraded the risk ratings of these loans to 5W or "Watch" totaling $178.5 million. In addition, commercial loans with payment deferral requests received after March 31, 2020, were downgraded to 5W in the second quarter of 2020.
On March 31, 2020, the Company had $31.9 million in impaired loans (consisting primarily of non-accrual and restructured loans) compared to $22.1 million at year-end 2019. The Company also had purchased credit impaired loans from prior acquisitions with carrying values of $8.0 million at March 31, 2020. For more information on impaired loans see Note 6 in Notes to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q. The allowance for impaired loans is based primarily on the fair value of the underlying collateral. Based on such evaluation, $222,000 of the allowance for loan losses has been allocated for impairment at March 31, 2020 compared to $352,000 at December 31, 2019. At March 31, 2020 and December 31, 2019, the Company had $44.5 million and $47.7 million, respectively, in loans that were rated substandard that were not classified as non-performing or impaired.
There were no loans at March 31, 2020, other than those designated non-performing, impaired or substandard, where the Company was aware of any credit conditions of any borrowers or obligors that would indicate a strong possibility of the borrowers not complying with present terms and conditions of repayment and which may result in such loans being included as non-accrual, past due or renegotiated at a future date.
Allowance for loan losses
As noted earlier in this discussion, pursuant to the CARES Act, the Company has delayed implementation of ASU 2016-13, CECL accounting standard. Upon the Company's future adoption of CECL, the change from the incurred loss methodology to the CECL methodology will be recognized through an adjustment to retained earnings, with an effective retrospective implementation date of January 1, 2020.

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The overall balance of the allowance for loan losses of $48.9 million at March 31, 2020 increased $8.9 million from December 31, 2019, an increase of 22%. The change in the allowance within loan segments during the two comparable periods is principally due to factors relating to COVID-19 to the extent identified by the Company and gives effect to changes in the Company's level of loan growth and related credit downgrades.
The following table sets forth for the periods presented, the historical relationships among the allowance for loan losses, the provision for loan losses, the amount of loans charged-off and the amount of loan recoveries:
(dollars in thousands)
For the Three Months Ended March 31, 2020
 
For the Three Months Ended March 31, 2019
 
For the Year Ended December 31, 2019
Balance at the beginning of the year
$
40,003

 
$
37,688

 
$
37,688

Loans charged off:
 
 
 
 
 
Commercial, secured by real estate
(169
)
 
(187
)
 
(544
)
Commercial, industrial and other

 
(147
)
 
(645
)
Equipment finance
(84
)
 
(87
)
 
(414
)
Real estate - mortgage
(116
)
 
(50
)
 
(50
)
Home equity and consumer
(114
)
 
(45
)
 
(283
)
Total loans charged off
(483
)
 
(516
)
 
(1,936
)
Recoveries:
 
 
 
 
 
Commercial, secured by real estate
26

 
115

 
251

Commercial, industrial and other
30

 
97

 
1,100

Equipment finance
14

 
2

 
332

Real estate - mortgage
20

 
9

 
66

Real estate - construction
32

 
5

 
126

Home equity and consumer
19

 
71

 
246

Total recoveries
141

 
299

 
2,121

Net recoveries (charge-offs)
(342
)
 
(217
)
 
185

Provision for loan losses
9,223

 
508

 
2,130

Ending balance
$
48,884

 
$
37,979

 
$
40,003

 
 
 
 
 
 
Net charge-offs as a percentage of average loans outstanding
0.03
%
 
0.02
%
 
%
Allowance as a percentage of total loans outstanding
0.92
%
 
0.77
%
 
0.78
%
Allowance as a percentage of non-accrual loans
150.86
%
 
241.55
%
 
189.25
%
The determination of the adequacy of the allowance for loan losses and the periodic provisioning for estimated losses included in the consolidated financial statements is the responsibility of management and the Board of Directors. Management performs a formal quarterly evaluation of the allowance for loan losses. This quarterly process is performed by the credit administration department and approved by the Chief Credit Officer. All supporting documentation with regard to the evaluation process is maintained by the credit administration department. Each quarter, the evaluation along with the supporting documentation is reviewed by the finance department before approval by the Chief Credit Officer. The allowance evaluation is then presented to an Allowance for Loan Losses Committee, which gives final approval to the allowance evaluation before being presented to the Board of Directors for its approval.
The methodology employed for assessing the adequacy of the allowance consists of the following criteria:
The establishment of specific reserve amounts for impaired loans, including PCI loans.
The establishment of reserves for pools of homogeneous loans not subject to specific review, including impaired loans under $500,000, equipment finance, 1 - 4 family residential mortgages, and consumer loans.
The establishment of reserve amounts for pools of homogeneous loans are based upon the determination of historical loss rates, which are adjusted to reflect current conditions through the use of qualitative factors. The qualitative factors considered by the Company include an evaluation of the results of the Company’s independent loan review function, the Company's reporting capabilities, the adequacy and expertise of Lakeland’s lending staff, underwriting policies, loss histories, trends in the portfolio, delinquency trends, economic and business conditions and capitalization rates. Since many of Lakeland’s loans depend on the sufficiency of collateral as a secondary source of repayment, any adverse trends in the real estate market could affect the underlying values available to protect Lakeland from losses.

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Additionally, management determines the loss emergence periods for each loan segment, which are used to define loss migration periods and establish appropriate ranges for qualitative adjustments for each loan segment. The loss emergence period is the estimated time from the date of a loss event (such as a personal bankruptcy) to the actual recognition of the loss (typically via the first partial or full loan charge-off), and is determined based upon a study of our past loss experience by loan segment. All of the factors considered in the analysis of the adequacy of the allowance for loan losses may be subject to change. To the extent actual outcomes differ from management estimates, additional provisions for loan losses may be required that would adversely impact earnings in future periods.
Non-performing loans of $32.4 million at March 31, 2020 increased $11.3 million from December 31, 2019. The allowance for loan losses as a percent of total loans was 0.92% at March 31, 2020 compared to 0.78% at December 31, 2019. Excluding the loans from prior acquisitions, the allowance as a percent of total loans would be 1.03% as of March 31, 2020 compared to 0.88% at December 31, 2019. The increase in the percentage of the allowance for loan losses as a percent of total loans was primarily due to the $9.2 million provision recorded in the first quarter of 2020 primarily resulting from the impact of COVID-19. Management believes, based on appraisals and estimated selling costs, that the majority of the Company's non-performing loans are adequately secured and that reserves on its non-performing loans are adequate. Based upon the process employed and giving recognition to all accompanying factors related to the loan portfolio, management considers the allowance for loan losses to be adequate at March 31, 2020.
Investment Securities
Investment securities totaled $928.8 million at March 31, 2020 and $879.9 million at December 31, 2019, increasing $49.0 million from year-end. For detailed information on the composition and maturity distribution of the Company’s investment securities portfolio, see Note 5 in Notes to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.
Deposits
Total deposits increased from $5.29 billion at December 31, 2019 to $5.46 billion at March 31, 2020, an increase of $161.4 million, or 3%. Time deposits increased $213.2 million, due primarily to an increase in brokered deposits of $201.0 million, while savings and interest-bearing transaction accounts decreased $57.5 million due primarily to a reduction in public deposits. Noninterest-bearing deposits increased $5.6 million during the first quarter of 2020.
Liquidity
“Liquidity” measures whether an entity has sufficient cash flow to meet its financial obligations and commitments on a timely basis. The Company is liquid when its subsidiary bank has the cash available to meet the borrowing and cash withdrawal requirements of customers and the Company can pay for current and planned expenditures and satisfy its debt obligations.
Lakeland funds loan demand and operation expenses from several sources:
Net income. Cash provided by operating activities was $24.4 million for the first three months of 2020 compared to $20.2 million for the same period in 2019.
Deposits. Lakeland can offer new products or change its rate structure in order to increase deposits. In the first three months of 2020, Lakeland’s deposits increased $161.4 million compared to an increase of $34.5 million during the first three months of 2019.
Sales of securities. At March 31, 2020 the Company had $813.1 million in securities designated “available for sale.” Of these securities, $550.2 million were pledged to secure public deposits and for other purposes required by applicable laws and regulations.
Repayments on loans can also be a source of liquidity.
Credit lines. As a member of the FHLB, Lakeland has the ability to borrow overnight based on the market value of collateral pledged. Lakeland had $360.0 million in overnight borrowings from the FHLB on March 31, 2020. Lakeland also has overnight federal funds lines available for it to borrow up to $215.0 million, of which $20.0 million was outstanding at March 31, 2020. Lakeland may also borrow from the discount window of the Federal Reserve Bank of New York based on the market value of collateral pledged. Lakeland had no borrowings with the Federal Reserve Bank of New York as of March 31, 2020.
Other borrowings. Lakeland can also generate funds by utilizing long-term debt or securities sold under agreements to repurchase that would be collateralized by security or mortgage collateral. At times the market values of securities collateralizing our securities sold under agreements to repurchase may decline due to changes in interest rates and may necessitate our lenders to issue a “margin call” which requires Lakeland to pledge additional collateral to meet that margin call.

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Management and the Board monitor the Company’s liquidity through the Asset/Liability Committee, which monitors the Company’s compliance with certain regulatory ratios and other various liquidity guidelines. As noted in the Executive Summary, management is closely monitoring changes in liquidity needs, including those that may result from the COVID-19 pandemic. The Company has increased collateral and expanded access to additional borrowings should it be necessary in order to meet liquidity needs. While we are unable to predict actual fluctuations in deposit or cash balances, management continues to monitor liquidity and believes that its current level of liquidity is sufficient to meet its current and future operational needs.
The cash flow statements for the periods presented provide an indication of the Company’s sources and uses of cash, as well as an indication of the ability of the Company to maintain an adequate level of liquidity. A discussion of the cash flow statement for the three months ended March 31, 2020 follows.
Cash and cash equivalents totaling $285.6 million on March 31, 2020 increased $3.3 million from December 31, 2019. Operating activities provided $24.4 million in net cash. Investing activities used $239.3 million in net cash, primarily reflecting an increase in loans and the purchase of securities. Financing activities provided $218.1 million in net cash primarily reflecting the net increase in deposits of $161.4 million and an increase in federal funds purchased and securities sold under agreements to repurchase of $90.4 million, partially offset by repayments of other borrowing. The Company anticipates that it will have sufficient funds available to meet its current loan commitments and deposit maturities. This constitutes a forward-looking statement under the Private Securities Litigation Reform Act of 1995.
The following table sets forth contractual obligations and other commitments representing required and potential cash outflows as of March 31, 2020. Interest on subordinated debentures and long-term borrowed funds is calculated based on current contractual interest rates.
(in thousands)
Total
 
Within
One Year
 
After One
But Within
Three Years
 
After Three
But Within
Five Years
 
After
Five Years
 
 
 
 
 
 
 
 
 
 
Minimum annual rentals on noncancellable operating leases
$
23,155

 
$
3,238

 
$
5,482

 
$
4,339

 
$
10,096

Benefit plan commitments
5,215

 
397

 
818

 
792

 
3,208

Remaining contractual maturities of time deposits
1,084,046

 
884,677

 
191,993

 
7,376

 

Subordinated debentures
118,229

 

 

 
5,318

 
112,911

Loan commitments
1,009,163

 
680,181

 
184,557

 
38,184

 
106,241

Other borrowings
140,715

 
46,135

 
75,143

 
19,437

 

Interest on other borrowings*
53,528

 
8,773

 
14,885

 
11,914

 
17,956

Standby letters of credit
17,226

 
15,512

 
1,634

 
80

 

Total
$
2,451,277

 
$
1,638,913

 
$
474,512

 
$
87,440

 
$
250,412

*Includes interest on other borrowings and subordinated debentures at a weighted rate of 3.54%.    
Capital Resources
Total stockholders’ equity increased to $736.9 million on March 31, 2020 from $725.3 million on December 31, 2019, an increase of $11.7 million. Book value per common share increased to $14.60 on March 31, 2020 from $14.36 on December 31, 2019. Tangible book value per share increased from $11.18 per share on December 31, 2019 to $11.43 per share on March 31, 2020, an increase of 2%. Please see “Non-GAAP Financial Measures” below. The increase in stockholders’ equity from December 31, 2019 to March 31, 2020 was primarily due to $12.4 million of net income and other comprehensive income of $6.7 million, which was partially offset by the payment of cash dividends on common stock of $6.4 million and purchase of treasury stock under the Company's stock buyback program of $1.5 million.
The Company and Lakeland are subject to various regulatory capital requirements that are monitored by federal banking agencies. Failure to meet minimum capital requirements can lead to certain supervisory actions by regulators; any supervisory action could have a direct material adverse effect on the Company or Lakeland or their financial statements. As of March 31, 2020, the Company and Lakeland met all capital adequacy requirements to which they are subject.     
As of March 31, 2020, the Company’s capital levels remained characterized as “well-capitalized.”

40

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The capital ratios for the Company and Lakeland for the periods presented are as follows: 
 
Tier 1 Capital to Total
Average Assets Ratio
 
Common Equity Tier 1 to
Risk-Weighted Assets
Ratio
 
Tier 1 Capital to Risk-
Weighted Assets Ratio
 
Total Capital to Risk-
Weighted Assets Ratio
 
March 31, 2020
 
December 31, 2019
 
March 31, 2020
 
December 31, 2019
 
March 31, 2020
 
December 31, 2019
 
March 31, 2020
 
December 31, 2019
The Company
9.38
%
 
9.41
%
 
10.08
%
 
10.46
%
 
10.61
%
 
11.02
%
 
13.04
%
 
13.40
%
Lakeland Bank
10.10
%
 
10.16
%
 
11.41
%
 
11.89
%
 
11.41
%
 
11.89
%
 
12.31
%
 
12.67
%
Required capital ratios including conservation buffer
4.00
%
 
4.00
%
 
7.00
%
 
7.00
%
 
8.50
%
 
8.50
%
 
10.50
%
 
10.50
%
“Well capitalized” institution under FDIC Regulations
5.00
%
 
5.00
%
 
6.50
%
 
6.50
%
 
8.00
%
 
8.00
%
 
10.00
%
 
10.00
%
The Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Act”) was signed into law during the second quarter of 2018. The Act, among other matters, amends the Federal Deposit Insurance Act to require federal banking agencies to develop a specified Community Bank Leverage Ratio (the ratio of a bank's equity capital to its average total consolidated assets) for banks with assets of less than $10 billion. Qualifying participating banks that exceed this ratio shall be deemed to comply with all other capital and leverage requirements. In September 2019, the FDIC approved a final rule allowing community banks with a leverage capital ratio of at least 9% to be considered in compliance with Basel III capital requirements and exempt from the Basel Calculation. Under the final rule, banks with less than $10 billion in assets may elect the community bank leverage ratio framework if they meet the 9% ratio and if they hold 25% or less of assets in off-balance sheet exposures, and 5% or less of assets in trading assets and liabilities. For institutions that fall below the 9% capital requirement but remain above 8%, the final rule establishes a two-quarter grace period to either meet the qualifying criteria again or comply with the generally applicable capital rule. Lakeland Bancorp and Lakeland Bank elected not to use the Community Bank Leverage Ratio framework.
Non-GAAP Financial Measures
Reported amounts are presented in accordance with U.S. GAAP. The Company’s management uses certain supplemental non-GAAP information in its analysis of the Company’s financial results. Specifically, the Company provides measurements and ratios based on tangible equity and tangible assets. These measures are utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors.
The Company also provides measures based on what it believes are its operating earnings on a consistent basis, and excludes material non-routine operating items which affect the GAAP reporting of results of operations. The Company’s management believes that providing this information to analysts and investors allows them to better understand and evaluate the Company’s core financial results for the periods in question.

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These disclosures should not be viewed as a substitute for financial results determined in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies.
(dollars in thousands, except per share amounts)
March 31, 2020
 
December 31, 2019
Calculation of Tangible Book Value per Common Share
 
 
 
Total common stockholders’ equity at end of period - GAAP
$
736,922

 
$
725,263

Less:
 
 
 
Goodwill
156,277

 
156,277

Other identifiable intangible assets, net
4,049

 
4,314

Total tangible common stockholders’ equity at end of period - Non-GAAP
$
576,596

 
$
564,672

Shares outstanding at end of period
50,462

 
50,498

Book value per share - GAAP
$
14.60

 
$
14.36

Tangible book value per share - Non-GAAP
$
11.43

 
$
11.18

 
 
 
 
Calculation of Tangible Common Equity to Tangible Assets
 
 
 
Total tangible common stockholders’ equity at end of period - Non-GAAP
$
576,596

 
$
564,672

 
 
 
 
Total assets at end of period
$
7,013,908

 
$
6,711,236

Less:
 
 
 
Goodwill
156,277

 
156,277

Other identifiable intangible assets, net
4,049

 
4,314

Total tangible assets at end of period - Non-GAAP
$
6,853,582

 
$
6,550,645

Common equity to assets - GAAP
10.51
%
 
10.81
%
Tangible common equity to tangible assets - Non-GAAP
8.41
%
 
8.62
%
 
For the Three Months Ended March 31,
(dollars in thousands)
2020
 
2019
Calculation of Return on Average Tangible Common Equity
 
 
 
Net income - GAAP
$
12,392

 
$
15,626

Total average common stockholders’ equity
$
736,719

 
$
673,205

Less:
 
 
 
Average goodwill
156,277

 
153,562

Average other identifiable intangible assets, net
4,205

 
5,254

Total average tangible common stockholders’ equity - Non-GAAP
$
576,237

 
$
514,389

Return on average common stockholders’ equity - GAAP
6.77
%
 
9.41
%
Return on average tangible common stockholders’ equity - Non-GAAP
8.65
%
 
12.32
%
Recent Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board ("FASB") issued Update 2020-04, an update to Topic 848, Reference Rate Reform. The update provides guidance to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. The update provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met and only applies to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In addition, the update provides optional expedients for applying the requirements of certain Topics or Industry Subtopics in the Codification for contracts that are modified because of reference rate reform and contemporaneous modifications of other contract terms related to the replacement of the reference rate. The ASU allows companies to apply the standard as of the beginning of the interim period that includes March 12, 2020 or any date thereafter. The Company is currently assessing the impact to its financial statements; however, the impact is not expected to be material.

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In January 2020, FASB issued Update 2020-01, an update to Topic 321, Investments, Topic 323, Joint Ventures and Topic 815, Derivatives and Hedging. The update clarifies the accounting for certain equity securities upon the application or discontinuation of the equity method of accounting in accordance with Topic 321. In addition, the update clarifies scope considerations for forward contracts and purchased options on certain securities. This update will be effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2020. The Company does not expect the update to have a material impact on the Company's financial statements.
In December 2019, FASB issued Update 2019-12, an update to Topic 740, Income Taxes, as part of an initiative to reduce complexity in accounting standards for income taxes. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This update will be effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2021 with early adoption permitted. The Company does not expect the update to have a material impact on the Company's financial statements.
In August 2018, the FASB issued Update 2018-13, an update to Topic 820, Fair Value Measurement, to improve the effectiveness of fair value measurement disclosures. Among other provisions, the update removes requirements to disclose amounts of and reasons for transfers between Level 1 and Level 2 in the fair value hierarchy, and it modifies the disclosures regarding transfers in and out of Level 3 of the fair value hierarchy. The update requires a discussion regarding the change in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This update will be effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2019. Because the Company does not typically have Level 3 fair value measurements, the update did not have a material impact on the Company's financial statements.
In August 2018, the FASB issued Update 2018-15, an update to Subtopic 350-40, Intangibles - Goodwill and Other - Internal-Use Software, which aligns the requirements for capitalizing implementation costs in a cloud-computing arrangement service contract with the requirements for capitalizing implementation costs incurred for an internal-use software license. Implementation costs incurred by customers in a cloud computing arrangement are to be deferred and recognized over the term of the arrangement, if those costs would be capitalized by the customer in a software licensing arrangement under the internal-use software guidance. This update will be effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2019. The adoption of this update did not have a material impact on the Company’s financial statements.
In August 2018, the FASB issued Update 2018-14, an update to Subtopic 715-20, Compensation - Retirement Benefits - Defined Benefit Plans - General, which changes the disclosure of accounting and reporting requirements related to single-employer defined benefit pension or other postretirement benefit plans. The amendments in the update remove disclosures that are no longer considered cost-beneficial, clarify the specific requirements of disclosures and add disclosure requirements identified as relevant. For calendar-year public companies, the changes will be effective for annual periods, including interim periods within those annual periods, in 2020. Because the Company has minimal pension plans that require calculation of projected benefit obligations or accumulated benefit obligations, the update did not have a material impact on the Company's financial statements.
In August 2017, the FASB issued Update 2017-05, an update to Subtopic 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets, intended to improve and simplify accounting rules around hedge accounting. Amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. The amendments in this update also make certain targeted improvements to simplify the application of hedge accounting guidance and ease the administrative burden of hedge documentation requirements and assessing hedge effectiveness. This update will be effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2019. The adoption of this update did not have a material impact on the Company’s financial statements.
In January 2017, the FASB issued Update 2017-04, an update to Topic 350, Intangibles - Goodwill and Other, to simplify the test for goodwill impairment. This amendment eliminates Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. This update will be effective for the Company’s financial statements for annual years beginning after December 15, 2019. The update was adopted by the Company as of January 1, 2020 with prospective application and did not impact the first quarter of 2020 results. The future impact of the update will depend upon the performance of the Company and the market conditions impacting the fair value of the Company going forward.

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In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("CECL"), further amended by ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. Topic 326 pertains to the measurement of credit losses on financial instruments. This update requires the measurement of all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. This update is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. This update was effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2019; however, the Company has elected to defer implementation of the update as allowed as part of the CARES Act, which allows for an optional delay in implementation until President Trump declares the COVID-19 national emergency to be over or the end of 2020, whichever comes first. The Company elected to delay CECL because of the rapidly changing economic forecast and uncertainty surrounding the economic impact of COVID-19. The additional time will allow the Company to better understand the impact of the pandemic and various U.S. government stimulus programs. Upon the Company's future adoption of CECL, the change from the incurred loss methodology to the CECL methodology will be recognized through an adjustment to retained earnings, with an effective retrospective implementation date of January 1, 2020. Once final, the calculation will require approval by the Company's Allowance for Credit Losses Committee and governance in accordance with the Company’s internal controls over financial reporting.
When we adopt Topic 326, we anticipate using a modified retrospective approach. Our CECL methodology includes the following key factors and assumptions for all loan portfolio segments: a) the calculation of a baseline lifetime loss by applying a segment-specific historical average annual loss rate, calculated using an open pool method, applied over the remaining life of each instrument; b) a single set of economic forecast inputs for the reasonable and supportable period; c) an initial reasonable and supportable forecast period, which reflects management's expectations of losses based on forward-looking economic scenarios over that time; d) baseline lifetime loss rates adjusted for changes in macroeconomic conditions over the reasonable and supportable forecast period via a series of adjustment factors developed using a third-party developed and supported top-down statistical model suite that uses a set of relevant economic forecast inputs sourced from a leading global forecasting firm; e) a reversion period (after the reasonable and supportable forecast period) using a straight-line approach; f) a historical loss period which represents a full economic credit cycle (with the exception of equipment finance loans which will use a shorter time period due to circumstances unique to that segment); and g) expected prepayment rates estimated on more recent historical experience adjusted for refinance incentive, seasoning and burnout, as applicable. The Company expects that upon adoption of CECL, the allowance for loan losses and the reserve for unfunded commitments will increase, as a result of changing from an incurred loss model, which encompasses allowances for current known and inherent losses within the portfolio, to an expected loss model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. The future impact of CECL on the Company’s allowance for credit losses and provision expense subsequent to the initial adoption will depend on changes in the loan portfolio, economic conditions and refinements to key assumptions including forecasting and qualitative factors. Furthermore, ASU 2016-13 will necessitate that we establish an allowance for expected credit losses for certain debt securities and other financial assets; however, we do not expect these allowances to be significant.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company manages interest rate risk and market risk by identifying and quantifying interest rate risk exposures using simulation analysis and economic value at risk models. Net interest income simulation considers the relative sensitivities of the balance sheet including the effects of interest rate caps on adjustable rate mortgages and the relatively stable aspects of core deposits. As such, net interest income simulation is designed to address the probability of interest rate changes and the behavioral response of the balance sheet to those changes. Market Value of Portfolio Equity represents the fair value of the net present value of assets, liabilities and off-balance-sheet items. Changes in estimates and assumptions made for interest rate sensitivity modeling could have a significant impact on projected results and conclusions. These assumptions could include prepayment rates, sensitivity of non-maturity deposits and other similar assumptions. Therefore, if our assumptions should change, this technique may not accurately reflect the impact of general interest rate movements on the Company’s net interest income or net portfolio value.

44

Table of Contents


The starting point (or “base case”) for the following table is an estimate of the following year’s net interest income assuming that both interest rates and the Company’s interest-sensitive assets and liabilities remain at period-end levels. The net interest income estimated for this purpose for the next twelve months (the base case) is $195.0 million. The Company’s review of interest rate risk includes policy limits for net interest income changes in various “rate shock” scenarios. Rate shocks assume that current interest rates change immediately. The information provided for net interest income assumes fluctuations or “rate shocks” for changes in interest rates as shown in the table below.
 
Changes in Interest Rates
Rate Shock
+300 bp
 
+200 bp
 
+100 bp
 
-100 bp
Asset/Liability policy limit
(15.0
)%
 
(10.0
)%
 
(5.0
)%
 
(5.0
)%
March 31, 2020
0.7
 %
 
0.9
 %
 
1.3
 %
 
1.4
 %
December 31, 2019
2.4
 %
 
1.7
 %
 
1.1
 %
 
(3.3
)%
The base case for the following table is an estimate of the Company’s net portfolio value for the periods presented using current discount rates, and assuming the Company’s interest-sensitive assets and liabilities remain at period-end levels. The net portfolio value at March 31, 2020 (the base case) was $876.3 million. The information provided for the net portfolio value assumes fluctuations or “rate shocks” for changes in interest rates as shown in the table below. Rate shocks assume that current interest rates change immediately.
 
Changes in Interest Rates
Rate Shock
+300 bp
 
+200 bp
 
+100 bp
 
-100 bp
Asset/Liability policy limit
(25.0
)%
 
(20.0
)%
 
(10.0
)%
 
(10.0
)%
March 31, 2020
3.3
 %
 
4.0
 %
 
5.2
 %
 
(14.4
)%
December 31, 2019
(4.8
)%
 
(2.8
)%
 
(0.9
)%
 
(1.2
)%
The Company's net portfolio value in the -100 basis point scenario was -14.4% for the first quarter of 2020 compared to its policy limit of -10% resulting from the effects of the extremely low interest rate environment. Management has determined that no corrective action is necessary at this time and will continue to monitor this rate shock scenario. The information set forth in the above tables and the net interest income estimate set forth above are based on significant estimates and assumptions, and constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. For more information regarding the Company’s market risk and assumptions used in the Company’s simulation models, please refer to the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2019.
Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes in net interest income requires the making of certain assumptions regarding prepayment and deposit decay rates, which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. While management believes such assumptions are reasonable, there can be no assurance that assumed prepayment rates and decay rates will approximate actual future loan prepayment and deposit withdrawal activity. Moreover, the net interest income table presented assumes that the composition of interest sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the net interest income table provides an indication of the Company’s interest rate risk exposure at a particular point in time, such measurement is not intended to and does not provide a precise forecast of the effect of changes in market interest rates on net interest income and will differ from actual results.
Item 4.  Controls and Procedures
(a)Disclosure controls and procedures. As of the end of the Company’s most recently completed fiscal quarter covered by this report, the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and are operating in an effective manner and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
(b)Changes in internal controls over financial reporting. There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

45

Table of Contents


PART II. OTHER INFORMATION
Item 1.   Legal Proceedings
There are no pending legal proceedings involving the Company or Lakeland other than those arising in the normal course of business. Management does not anticipate that the potential liability, if any, arising out of such legal proceedings will have a material effect on the financial condition or results of operations of the Company and Lakeland on a consolidated basis.
Item 1A.   Risk Factors
There have been no material changes from the risk factors previously disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2019, except as described below.
The recent outbreak of the novel coronavirus ("COVID-19"), or other such epidemic, pandemic, or outbreak of a highly contagious disease, occurring in the United States or in the geographies in which we conduct operations could materially adversely affect our business operations, financial condition, results of operations and cash flows.
The recent outbreak of COVID-19 or an outbreak of other highly infectious or contagious diseases, could materially adversely impact certain industries in which our customers operate and could materially impair their ability to fulfill their obligations to us. Further, the spread of the outbreak could lead to an economic recession or other severe disruptions in the U.S. economy and may disrupt banking and other financial activity in the areas in which we operate and could potentially create widespread business continuity issues for us.
Our business is dependent upon the willingness and ability of our employees and customers to conduct banking and other financial transactions. The spread of highly infectious or contagious diseases could cause severe disruptions in the U.S. economy at large, and for small businesses in particular, which could disrupt our operations and if the global response to contain COVID-19 is unsuccessful, we could experience a material adverse effect on our business, financial condition, results of operations and cash flows. COVID-19 or an outbreak of other highly infectious or contagious diseases may result in a decrease in our customers’ businesses, a decrease in consumer confidence and business generally or a disruption in the services provided by our vendors. Disruptions to our customers could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans, declines in wealth management revenues, negatively impact regional economic conditions, result in declines in local loan demand, liquidity of loan guarantors, loan collateral (particularly in real estate), loan originations and deposit availability and negatively impact the implementation of our growth strategy. We rely upon our third-party vendors to conduct business and to process, record and monitor transactions. If any of these vendors are unable to continue to provide us with these services, it could negatively impact our ability to serve our customers. Furthermore, COVID-19 could negatively impact the ability of our employees and customers to engage in banking and other financial transactions in the geographic areas in which we operate and could create widespread business continuity issues for us. We also could be adversely affected if key personnel or a significant number of employees were to become unavailable due to the effects of COVID-19 and the restrictions imposed to contain COVID-19 in our market areas. Although we have business continuity plans and other safeguards in place, there is no assurance that such plans and safeguards will be effective.
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds
 
The following table presents information regarding shares of our common stock repurchased during the first quarter of 2020.
Period
 
Total Number of Shares (or Units) Purchased (1)
 
Weighted Average Price Paid per Share (or Unit)
 
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
 
Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
January 1 to January 31, 2020
 

 
$

 

 
2,524,458
February 1 to February 29, 2020
 

 

 

 
2,524,458
March 1 to March 31, 2020
 
131,035

 
11.08

 
131,035

 
2,393,423


46



(1)On October 24, 2019, the Company announced that its Board of Directors authorized a new share repurchase program. Under the repurchase program, the Company may repurchase up to 2,524,458 shares of its common stock, or approximately 5% of its outstanding shares of common stock at September 30, 2019. Repurchases may be made from time to time through a combination of open market and privately negotiated repurchases. The specific timing, price and quantity of repurchases will be at the discretion of the Company and will depend on a variety of factors, including general market conditions, the trading price of the common stock, legal and contractual requirements and the Company's financial performance.

Item 3.   Defaults Upon Senior Securities
Not Applicable
Item 4.   Mine Safety Disclosures
Not Applicable
Item 5.   Other Information
Not applicable
Item 6.   Exhibits
31.1
31.2
32.1
101.INS
Inline XBRL Instance Document (The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document)
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101)

47



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Lakeland Bancorp, Inc.
(Registrant)
 
/s/ Thomas J. Shara
Thomas J. Shara
President and Chief Executive Officer
(Principal Executive Officer)
 
/s/ Thomas F. Splaine
Thomas F. Splaine
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: May 11, 2020


48
Exhibit


EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Thomas J. Shara, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Lakeland Bancorp, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
(d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 11, 2020
 
 
 
 
/s/ Thomas J. Shara
 
Thomas J. Shara
 
President and Chief Executive Officer
 
(Principal Executive Officer)


Exhibit


EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Thomas F. Splaine, Jr., certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Lakeland Bancorp, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
(d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: May 11, 2020
 
 
 
 
/s/ Thomas F. Splaine, Jr.
 
Thomas F. Splaine, Jr.
 
Executive Vice President and Chief Financial Officer
 
(Principal Financial Officer)


Exhibit


EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
AND OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Lakeland Bancorp, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2020 filed with the Securities and Exchange Commission (the “Report”), Thomas J. Shara, President and Chief Executive Officer of the Company, and Thomas F. Splaine, Jr., Executive Vice President and Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and consolidated results of operations of the Company for the periods presented.
Dated: May 11, 2020
 
 
 
 
/s/ Thomas J. Shara
 
Thomas J. Shara
 
President and Chief Executive Officer
 
(Principal Executive Officer)
 
 
 
/s/ Thomas F. Splaine, Jr.
 
Thomas F. Splaine, Jr.
 
Executive Vice President and Chief Financial Officer
 
(Principal Financial Officer)
This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


v3.20.1
Revenue Recognition - Disaggregation of Revenues (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Disaggregation of Revenue [Line Items]    
Gains on Sales of Loans $ 415 $ 371
Other Income:    
Gains on customer swap transactions 2,843 199
Title insurance (loss) income (4) 90
Other income 97 61
Total 2,936 350
Revenue not from contracts with customers 521 1,023
Total Noninterest Income 8,011 5,723
Products and services transferred at a point in time    
Disaggregation of Revenue [Line Items]    
Revenue from contract with customer, excluding assessed tax 7,471 4,681
Products and services transferred over time    
Disaggregation of Revenue [Line Items]    
Revenue from contract with customer, excluding assessed tax 19 19
Deposit Related Fees and Charges    
Disaggregation of Revenue [Line Items]    
Revenue from contract with customer, excluding assessed tax 2,500 2,573
Debit card interchange income    
Disaggregation of Revenue [Line Items]    
Revenue from contract with customer, excluding assessed tax 1,223 1,218
Overdraft charges    
Disaggregation of Revenue [Line Items]    
Revenue from contract with customer, excluding assessed tax 953 996
ATM service charges    
Disaggregation of Revenue [Line Items]    
Revenue from contract with customer, excluding assessed tax 167 184
Demand deposit fees and charges    
Disaggregation of Revenue [Line Items]    
Revenue from contract with customer, excluding assessed tax 134 143
Savings service charges    
Disaggregation of Revenue [Line Items]    
Revenue from contract with customer, excluding assessed tax 23 32
Commissions and Fees:    
Disaggregation of Revenue [Line Items]    
Revenue from contract with customer, excluding assessed tax 1,639 1,406
Loan fees    
Disaggregation of Revenue [Line Items]    
Revenue from contract with customer, excluding assessed tax 340 348
Wire transfer charges    
Disaggregation of Revenue [Line Items]    
Revenue from contract with customer, excluding assessed tax 308 267
Investment services income    
Disaggregation of Revenue [Line Items]    
Revenue from contract with customer, excluding assessed tax 523 352
Merchant fees    
Disaggregation of Revenue [Line Items]    
Revenue from contract with customer, excluding assessed tax 248 184
Commissions from sales of checks    
Disaggregation of Revenue [Line Items]    
Revenue from contract with customer, excluding assessed tax 83 103
Safe deposit income    
Disaggregation of Revenue [Line Items]    
Revenue from contract with customer, excluding assessed tax 86 91
Other income    
Disaggregation of Revenue [Line Items]    
Revenue from contract with customer, excluding assessed tax $ 51 $ 61
v3.20.1
Goodwill and Intangible Assets (Tables)
3 Months Ended
Mar. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Estimated Future Amortization Expense The estimated future amortization expense for the remainder of 2020 and for each of the succeeding five years ended December 31 is as follows (in thousands):
For the Year Ended
 
2020
$
760

2021
868

2022
711

2023
554

2024
425

2025
317


v3.20.1
Acquisitions - Additional Information (Details)
3 Months Ended
Jan. 04, 2019
USD ($)
Branch
$ / shares
shares
Mar. 31, 2020
USD ($)
Sep. 30, 2019
USD ($)
Jun. 30, 2019
USD ($)
Mar. 31, 2019
USD ($)
Business Acquisition [Line Items]          
Merger related expenses   $ 0     $ 2,860,000
Highlands Bancorp, Inc.          
Business Acquisition [Line Items]          
Number of bank branches operated | Branch 4        
Business acquisition, conversion, shares issued (in shares) | shares 1.015        
Consideration paid through common stock (in shares) | shares 2,837,524        
Stock option payout price per share (in dollars per share) | $ / shares $ 14.71        
Average strike price (in dollars per share) | $ / shares $ 8.09        
Cash paid for redemption of stock options $ 797,000        
Goodwill adjustments     $ 447,000,000 $ 1,700,000  
Identifiable intangible assets $ 3,728,000        
Useful life 10 years        
Merger related expenses   $ 0     $ 2,900,000
v3.20.1
Goodwill and Intangible Assets
3 Months Ended
Mar. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets GOODWILL AND INTANGIBLE ASSETS
The Company had goodwill of $156.3 million at both March 31, 2020 and December 31, 2019. The Company recorded $19.8 million in goodwill from the Highlands merger in January 2019. The Company reviews its goodwill and intangible assets annually, on November 30, or more frequently if conditions warrant, for impairment. In testing goodwill for impairment, the Company compares the estimated fair value of its reporting unit to its carrying amount, including goodwill. The Company has determined that it has one reporting unit, Community Banking. At March 31, 2020, the Company evaluated whether it is more likely than not that the fair value of our one reporting unit is less than its carrying amount, by assessing relevant events and circumstances as a result of the impact of COVID-19 and concluded that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount.
The Company had core deposit intangibles of $4.0 million and $4.3 million at March 31, 2020 and December 31, 2019, respectively. The Company recorded core deposit intangibles of $3.7 million for the Highlands acquisition in January 2019. The estimated future amortization expense for the remainder of 2020 and for each of the succeeding five years ended December 31 is as follows (in thousands):
For the Year Ended
 
2020
$
760

2021
868

2022
711

2023
554

2024
425

2025
317


v3.20.1
Investment Securities
3 Months Ended
Mar. 31, 2020
Investments, Debt and Equity Securities [Abstract]  
Investment Securities INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses and the fair value of the Company's available for sale and held to maturity investment securities are as follows:
 
March 31, 2020
 
December 31, 2019
(in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
AVAILABLE FOR SALE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and U.S. government agencies
$
155,853

 
$
1,807

 
$
(319
)
 
$
157,341

 
$
135,361

 
$
722

 
$
(436
)
 
$
135,647

Mortgage-backed securities, residential
461,700

 
13,156

 
(1,305
)
 
473,551

 
500,245

 
3,185

 
(1,551
)
 
501,879

Mortgage-backed securities, multifamily
53,026

 
1,500

 
(18
)
 
54,508

 
48,675

 
633

 
(123
)
 
49,185

Asset-backed securities
43,064

 

 
(1,951
)
 
41,113

 

 

 

 

Obligations of states and political subdivisions
77,353

 
1,023

 
(913
)
 
77,463

 
58,979

 
1,077

 
(35
)
 
60,021

Debt securities
9,000

 
114

 

 
9,114

 
9,000

 
168

 

 
9,168

 
$
799,996

 
$
17,600

 
$
(4,506
)
 
$
813,090

 
$
752,260

 
$
5,785

 
$
(2,145
)
 
$
755,900


 
March 31, 2020
 
December 31, 2019
(in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
HELD TO MATURITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agencies
$
31,207

 
$
901

 
$

 
$
32,108

 
$
31,335

 
$
182

 
$
(8
)
 
$
31,509

Mortgage-backed securities, residential
70,999

 
2,162

 

 
73,161

 
76,229

 
734

 
(176
)
 
76,787

Mortgage-backed securities, multifamily
740

 
44

 

 
784

 
1,750

 
4

 
(2
)
 
1,752

Obligations of states and political subdivisions
10,306

 
164

 

 
10,470

 
12,161

 
195

 

 
12,356

Debt securities
2,500

 

 

 
2,500

 
2,500

 

 

 
2,500

 
$
115,752

 
$
3,271

 
$

 
$
119,023

 
$
123,975

 
$
1,115

 
$
(186
)
 
$
124,904


The following table lists contractual maturities of investment securities classified as available for sale and held to maturity as of March 31, 2020. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
Available for Sale
 
Held to Maturity
(in thousands)
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Due in one year or less
$
90,556

 
$
90,722

 
$
6,796

 
$
6,831

Due after one year through five years
68,557

 
70,198

 
30,495

 
31,482

Due after five years through ten years
38,008

 
38,964

 
6,722

 
6,765

Due after ten years
45,085

 
44,034

 

 

 
242,206

 
243,918

 
44,013

 
45,078

Mortgage-backed and asset-backed securities
557,790

 
569,172

 
71,739

 
73,945

Total securities
$
799,996

 
$
813,090

 
$
115,752

 
$
119,023


The following table shows proceeds from sales of available-for-sale securities, gross gains and gross losses on sales and calls of securities for the periods indicated:
 
 
For the Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Sales proceeds
 
$
94,696

 
$

Gross gains
 
569

 

Gross losses
 
(227
)
 


Gains or losses on sales of securities are based on the net proceeds and the adjusted carrying amount of the securities sold using the specific identification method.
Securities with a carrying value of approximately $640.3 million and $581.1 million at March 31, 2020 and December 31, 2019, respectively, were pledged to secure public deposits and for other purposes required by applicable laws and regulations.
The following tables indicate the length of time individual securities have been in a continuous unrealized loss position for the periods presented:
March 31, 2020
Less Than 12 Months
 
12 Months or Longer
 
Total
(dollars in thousands)
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Number of
Securities
 
Fair Value
 
Unrealized
Losses
AVAILABLE FOR SALE
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and U.S. government agencies
$
74,745

 
$
28

 
$
19,355

 
$
291

 
11

 
$
94,100

 
$
319

Mortgage-backed securities, residential
51,693

 
919

 
8,180

 
386

 
24

 
59,873

 
1,305

Mortgage-backed securities, multifamily
2,801

 
16

 
4,257

 
2

 
2

 
7,058

 
18

Asset-backed securities
41,112

 
1,951

 

 

 
6

 
41,112

 
1,951

Obligations of states and political subdivisions
24,318

 
913

 

 

 
11

 
24,318

 
913

 
$
194,669

 
$
3,827

 
$
31,792

 
$
679

 
54

 
$
226,461

 
$
4,506

There are no unrealized losses for held-to-maturity securities at March 31, 2020.
December 31, 2019
Less Than 12 Months
 
12 Months or Longer
 
Total
(dollars in thousands)
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Number of
Securities
 
Fair Value
 
Unrealized
Losses
AVAILABLE FOR SALE
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and U.S. government agencies
$
11,625

 
$
39

 
$
41,617

 
$
397

 
11

 
$
53,242

 
$
436

Mortgage-backed securities, residential
125,782

 
561

 
99,489

 
990

 
86

 
225,271

 
1,551

Mortgage-backed securities, multifamily
7,651

 
118

 
4,878

 
5

 
3

 
12,529

 
123

Obligations of states and political subdivisions
373

 
2

 
6,559

 
33

 
5

 
6,932

 
35

 
$
145,431

 
$
720

 
$
152,543

 
$
1,425

 
105

 
$
297,974

 
$
2,145

HELD TO MATURITY
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agencies
$
3,195

 
$
6

 
$
5,102

 
$
2

 
2

 
$
8,297

 
$
8

Mortgage-backed securities, residential
12,462

 
46

 
10,592

 
130

 
16

 
23,054

 
176

Mortgage-backed securities, multifamily

 

 
998

 
2

 
1

 
998

 
2

 
$
15,657

 
$
52

 
$
16,692

 
$
134

 
19

 
$
32,349

 
$
186


Management has evaluated the securities in the above table and has concluded that none of the securities with unrealized losses has impairments that are other-than-temporary. Fair value below cost is solely due to interest rate movements and is deemed temporary.
Investment securities, including the mortgage-backed securities and corporate securities, are evaluated on a periodic basis to determine if factors are identified that would require further analysis. In evaluating the Company’s securities, management considers the following items:
The Company’s ability and intent to hold the securities, including an evaluation of the need to sell the security to meet certain liquidity measures, or whether the Company has sufficient levels of cash to hold the identified security in order to recover the entire amortized cost of the security;
The financial condition of the underlying issuer;
The credit ratings of the underlying issuer and if any changes in the credit rating have occurred;
The length of time the security’s fair value has been less than amortized cost; and
Adverse conditions related to the security or its issuer if the issuer has failed to make scheduled payments or other factors.
If the above factors indicate that an additional analysis is required, management will perform a discounted cash flow analysis evaluating the security.
Equity securities at fair value
The Company has an equity securities portfolio which consists of investments in other financial institutions for market appreciation purposes and investments in Community Reinvestment funds. The market value of these investments was $16.9 million and $16.5 million at March 31, 2020 and December 31, 2019, respectively. The Company recorded purchases of $1.1 million and $95,000 for the three months ended March 31, 2020 and 2019, respectively. For the three months ended March 31, 2020, the Company recorded no sales of equity securities and recorded proceeds from sales of equity securities of $1.1 million for the three months ended March 31, 2019. The Company recorded $653,000 in market value losses on equity securities in noninterest income for the three months ended March 31, 2020, and $353,000 in market value gains on equity securities for the three months ended March 31, 2019.
As of March 31, 2020, the equity investments in other financial institutions and Community Reinvestment funds had a market value of $915,000 and $16.0 million, respectively. The Community Reinvestment funds include $3.5 million that are primarily invested in community development loans that are guaranteed by the Small Business Administration (“SBA”). Because the funds are primarily guaranteed by the federal government, there are minimal changes in market value between accounting periods. These funds can be redeemed with 60 days' notice at the net asset value less unpaid management fees with the approval of the fund manager. As of March 31, 2020, the net amortized cost equaled the market value of the investment. There are no unfunded commitments related to these investments.
The Community Reinvestment funds also include $12.5 million of investment in government guaranteed loans, mortgage-backed securities, small business loans and other instruments supporting affordable housing and economic development as of March 31, 2020. The Company may redeem these funds at the net asset value calculated at the end of the current business day less any unpaid management fees. There are no restrictions on redemptions for the holdings in these investments other than the notice required by the fund manager. There are no unfunded commitments related to these investments.
v3.20.1
Fair Value Measurement and fair Value of Financial Instruments - Financial Assets and Liabilities Measured on Recurring Basis (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Assets:    
Investment securities available for sale, at fair value $ 813,090 $ 755,900
Equity securities, at fair value 16,902 16,473
U.S. Treasury and U.S. government agencies    
Assets:    
Investment securities available for sale, at fair value 157,341 135,647
Asset-backed securities    
Assets:    
Investment securities available for sale, at fair value 41,113 0
Obligations of states and political subdivisions    
Assets:    
Investment securities available for sale, at fair value 77,463 60,021
Fair Value, Measurements, Recurring    
Assets:    
Investment securities available for sale, at fair value 813,090 755,900
Equity securities, at fair value 16,902 16,473
Derivative assets 91,277 27,123
Total Assets 921,269 799,496
Liabilities:    
Derivative liabilities 91,484 26,852
Total Liabilities 91,484 26,852
Fair Value, Measurements, Recurring | U.S. Treasury and U.S. government agencies    
Assets:    
Investment securities available for sale, at fair value 157,341 135,647
Fair Value, Measurements, Recurring | Mortgage-backed and asset-backed securities    
Assets:    
Investment securities available for sale, at fair value 528,059 551,064
Fair Value, Measurements, Recurring | Asset-backed securities    
Assets:    
Investment securities available for sale, at fair value 41,113  
Fair Value, Measurements, Recurring | Obligations of states and political subdivisions    
Assets:    
Investment securities available for sale, at fair value 77,463 60,021
Fair Value, Measurements, Recurring | Debt securities    
Assets:    
Investment securities available for sale, at fair value 9,114 9,168
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring    
Assets:    
Investment securities available for sale, at fair value 76,986 12,580
Equity securities, at fair value 915 1,735
Derivative assets 0 0
Total Assets 77,901 14,315
Liabilities:    
Derivative liabilities 0 0
Total Liabilities 0 0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring | U.S. Treasury and U.S. government agencies    
Assets:    
Investment securities available for sale, at fair value 76,986 12,580
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring | Mortgage-backed and asset-backed securities    
Assets:    
Investment securities available for sale, at fair value 0 0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring | Asset-backed securities    
Assets:    
Investment securities available for sale, at fair value 0  
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring | Obligations of states and political subdivisions    
Assets:    
Investment securities available for sale, at fair value 0 0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Fair Value, Measurements, Recurring | Debt securities    
Assets:    
Investment securities available for sale, at fair value 0 0
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring    
Assets:    
Investment securities available for sale, at fair value 736,104 743,320
Equity securities, at fair value 15,987 14,738
Derivative assets 91,277 27,123
Total Assets 843,368 785,181
Liabilities:    
Derivative liabilities 91,484 26,852
Total Liabilities 91,484 26,852
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | U.S. Treasury and U.S. government agencies    
Assets:    
Investment securities available for sale, at fair value 80,355 123,067
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Mortgage-backed and asset-backed securities    
Assets:    
Investment securities available for sale, at fair value 528,059 551,064
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Asset-backed securities    
Assets:    
Investment securities available for sale, at fair value 41,113  
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Obligations of states and political subdivisions    
Assets:    
Investment securities available for sale, at fair value 77,463 60,021
Significant Other Observable Inputs (Level 2) | Fair Value, Measurements, Recurring | Debt securities    
Assets:    
Investment securities available for sale, at fair value 9,114 9,168
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring    
Assets:    
Investment securities available for sale, at fair value 0 0
Equity securities, at fair value 0 0
Derivative assets 0 0
Total Assets 0 0
Liabilities:    
Derivative liabilities 0 0
Total Liabilities 0 0
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring | U.S. Treasury and U.S. government agencies    
Assets:    
Investment securities available for sale, at fair value 0 0
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring | Mortgage-backed and asset-backed securities    
Assets:    
Investment securities available for sale, at fair value 0 0
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring | Asset-backed securities    
Assets:    
Investment securities available for sale, at fair value 0  
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring | Obligations of states and political subdivisions    
Assets:    
Investment securities available for sale, at fair value 0 0
Significant Unobservable Inputs (Level 3) | Fair Value, Measurements, Recurring | Debt securities    
Assets:    
Investment securities available for sale, at fair value $ 0 $ 0
v3.20.1
Loans and Other Real Estate - Activity in the Allowance for Loan and Lease Losses by Portfolio Segment (Detail) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Allowance for Loan and Lease Losses [Roll Forward]    
Beginning Balance $ 40,003 $ 37,688
Charge-offs (483) (516)
Recoveries 141 299
Provision 9,223 508
Ending Balance 48,884 37,979
Commercial, secured by real estate    
Allowance for Loan and Lease Losses [Roll Forward]    
Beginning Balance 28,950 27,881
Charge-offs (169) (187)
Recoveries 26 115
Provision 5,986 (294)
Ending Balance 34,793 27,515
Commercial, industrial and other    
Allowance for Loan and Lease Losses [Roll Forward]    
Beginning Balance 3,289 1,742
Charge-offs 0 (147)
Recoveries 30 97
Provision 2,170 900
Ending Balance 5,489 2,592
Equipment finance    
Allowance for Loan and Lease Losses [Roll Forward]    
Beginning Balance 957 987
Charge-offs (84) (87)
Recoveries 14 2
Provision 370 45
Ending Balance 1,257 947
Real estate - residential mortgage    
Allowance for Loan and Lease Losses [Roll Forward]    
Beginning Balance 1,725 1,566
Charge-offs (116) (50)
Recoveries 20 9
Provision (29) 39
Ending Balance 1,600 1,564
Real estate - construction    
Allowance for Loan and Lease Losses [Roll Forward]    
Beginning Balance 2,672 3,015
Charge-offs 0 0
Recoveries 32 5
Provision 640 (133)
Ending Balance 3,344 2,887
Home equity and consumer    
Allowance for Loan and Lease Losses [Roll Forward]    
Beginning Balance 2,410 2,497
Charge-offs (114) (45)
Recoveries 19 71
Provision 86 (49)
Ending Balance $ 2,401 $ 2,474
v3.20.1
Loans and Other Real Estate - Non-Performing Assets and Its Accruing Troubled Debt Restructurings (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Total non-accrual loans $ 32,404 $ 21,138
Other real estate and other repossessed assets 393 563
TOTAL NON-PERFORMING ASSETS 32,797 21,701
Troubled debt restructurings, still accruing 4,719 5,650
Commercial, secured by real estate    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Total non-accrual loans 23,851 12,314
Commercial, industrial and other    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Total non-accrual loans 1,909 1,539
Equipment finance    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Total non-accrual loans 199 284
Real estate - residential mortgage    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Total non-accrual loans 2,837 3,428
Real estate - construction    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Total non-accrual loans 919 967
Home equity and consumer    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Total non-accrual loans $ 2,689 $ 2,606
v3.20.1
Leases - Schedule of Lease, Cost (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Leases [Abstract]    
Operating lease cost $ 828 $ 820
Short-term lease cost 0 0
Variable lease cost 32 35
Sublease income (31) (31)
Net lease cost $ 829 $ 824
v3.20.1
Comprehensive Income - Components of Other Comprehensive Income (Loss) (Detail) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Before Tax Amount    
Other comprehensive income, net $ 8,976 $ 5,838
Tax Benefit (Expense)    
Other comprehensive income, net (2,283) (1,689)
Net of Tax Amount    
Other comprehensive income, net 6,693 4,149
Unrealized Gains (Losses) on Available for Sale Securities    
Before Tax Amount    
Net unrealized holding gains arising during period 9,796 6,109
Reclassification adjustment for net gains arising during the period (342) 0
Other comprehensive income, net 9,454 6,109
Tax Benefit (Expense)    
Net unrealized holding gains arising during period (2,512) (1,746)
Reclassification adjustment for net gains arising during the period 88 0
Other comprehensive income, net (2,424) (1,746)
Net of Tax Amount    
Net unrealized holding gains arising during period 7,284 4,363
Reclassification adjustment for net gains arising during the period (254) 0
Other comprehensive income, net 7,030 4,363
Unrealized Gains (Losses) on Derivatives    
Before Tax Amount    
Other comprehensive income, net (478) (271)
Tax Benefit (Expense)    
Other comprehensive income, net 141 57
Net of Tax Amount    
Other comprehensive income, net $ (337) $ (214)
v3.20.1
Derivatives - Summary Information Regarding Derivatives (Detail) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
3rd Party interest rate swaps    
Classified in Other Assets:    
Notional Amount   $ 85,796
Average Maturity (Years)   9 years
Weighted Average Fixed Rate   3.51%
Fair Value   $ 947
Interest rate   1.95%
Classified in Other Liabilities:    
Notional Amount $ 780,599 $ 473,273
Average Maturity (Years) 9 years 8 months 12 days 9 years 10 months 24 days
Weighted Average Fixed Rate 3.89% 4.32%
Other Liabilities, Fair Value $ (91,277) $ (25,905)
Interest rate 1.89% 1.93%
Customer interest rate swaps    
Classified in Other Assets:    
Notional Amount $ 780,599 $ 473,273
Average Maturity (Years) 9 years 8 months 12 days 9 years 10 months 24 days
Weighted Average Fixed Rate 3.89% 4.32%
Fair Value $ 91,277 $ 25,905
Interest rate 1.89% 1.93%
Classified in Other Liabilities:    
Notional Amount   $ 85,796
Average Maturity (Years)   9 years
Weighted Average Fixed Rate   3.51%
Other Liabilities, Fair Value   $ (947)
Interest rate   1.95%
Interest Rate Swaps    
Classified in Other Assets:    
Notional Amount   $ 30,000
Average Maturity (Years)   1 year 6 months
Weighted Average Fixed Rate   1.10%
Fair Value   $ 271
Classified in Other Liabilities:    
Notional Amount $ 30,000  
Average Maturity (Years) 1 year 3 months 18 days  
Weighted Average Fixed Rate 1.10%  
Other Liabilities, Fair Value $ (207)  
v3.20.1
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)
$ in Thousands
Total
Common Stock
Retained Earnings
Treasury Stock
Accumulated Other Comprehensive Income (Loss)
Balance at beginning of period at Dec. 31, 2018 $ 623,739 $ 514,703 $ 116,874 $ 0 $ (7,838)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income 15,626   15,626    
Other comprehensive income, net of tax 4,149       4,149
Stock based compensation 696 696      
Issuance of stock for Highlands acquisition 43,417 43,417      
Retirement of restricted stock (571) (571)      
Cash dividends on common stock of $0.115 per share (5,838)   (5,838)    
Balance at end of period at Mar. 31, 2019 681,343 558,245 126,787 0 (3,689)
Balance at beginning of period at Dec. 31, 2019 725,263 560,263 162,752 0 2,248
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net income 12,392   12,392    
Other comprehensive income, net of tax 6,693       6,693
Purchase of treasury stock, 131,035 shares (1,452)     (1,452)  
Stock based compensation 847 847      
Retirement of restricted stock (457) (457)      
Cash dividends on common stock of $0.115 per share (6,364)   (6,364)    
Balance at end of period at Mar. 31, 2020 $ 736,922 $ 560,653 $ 168,780 $ (1,452) $ 8,941
v3.20.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
ASSETS    
Cash $ 272,560 $ 275,794
Interest-bearing deposits due from banks 13,076 6,577
Total cash and cash equivalents 285,636 282,371
Investment securities available for sale, at fair value 813,090 755,900
Equity securities, at fair value 16,902 16,473
Investment securities held to maturity; fair value of $119,023 at March 31, 2020 and $124,904 at December 31, 2019 115,752 123,975
Federal Home Loan Bank and other membership bank stock, at cost 28,575 22,505
Loans held for sale 3,098 1,743
Loans, net of deferred fees 5,328,623 5,137,823
Less: Allowance for loan losses 48,884 40,003
Net loans 5,279,739 5,097,820
Premises and equipment, net 47,618 47,608
Operating lease right-of-use assets 17,621 18,282
Accrued interest receivable 16,775 16,832
Goodwill 156,277 156,277
Other identifiable intangible assets 4,049 4,314
Bank owned life insurance 113,082 112,392
Other assets 115,694 54,744
TOTAL ASSETS 7,013,908 6,711,236
Deposits:    
Noninterest-bearing 1,129,695 1,124,121
Savings and interest-bearing transaction accounts 3,241,397 3,298,854
Time deposits $250 thousand and under 845,554 652,144
Time deposits over $250 thousand 238,492 218,660
Total deposits 5,455,138 5,293,779
Federal funds purchased and securities sold under agreements to repurchase 419,085 328,658
Other borrowings 140,715 165,816
Subordinated debentures 118,229 118,220
Operating lease liabilities 19,126 19,814
Other liabilities 124,693 59,686
TOTAL LIABILITIES 6,276,986 5,985,973
STOCKHOLDERS’ EQUITY    
Common stock, no par value; authorized shares, 100,000,000; issued shares 50,592,673 and outstanding shares 50,461,638 at March 31, 2020 and issued and outstanding shares 50,498,410 at December 31, 2019 560,653 560,263
Retained earnings 168,780 162,752
Treasury shares, at cost, 131,035 shares at March 31, 2020 and no shares at December 31, 2019 (1,452) 0
Accumulated other comprehensive income 8,941 2,248
TOTAL STOCKHOLDERS’ EQUITY 736,922 725,263
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 7,013,908 $ 6,711,236
v3.20.1
Loans and Other Real Estate - Narrative (Detail) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Accounts, Notes, Loans and Financing Receivable [Line Items]      
Troubled debt restructurings included in non accrual loans $ 2,200,000   $ 1,600,000
Unfunded lending reserve 2,000,000.0   1,800,000
Other real estate owned 393,000   563,000
Other repossessed assets owned 0   0
Impaired Loans      
Accounts, Notes, Loans and Financing Receivable [Line Items]      
Interest income on credit impaired loans 97,000 $ 144,000  
Interest accrued on impaired loans 297,000 $ 268,000  
Minimum      
Accounts, Notes, Loans and Financing Receivable [Line Items]      
Group of impaired loans with recorded investment 500,000    
Federal Home Loan Bank of New York      
Accounts, Notes, Loans and Financing Receivable [Line Items]      
Residential loans pledged for potential borrowings at the Federal Home Loan Bank of New York 1,500,000,000   1,300,000,000
Home equity and consumer      
Accounts, Notes, Loans and Financing Receivable [Line Items]      
Overdraft balances included in home equity and consumer loans 281,000   789,000
Residential Mortgages and Consumer Home Equity Loans      
Accounts, Notes, Loans and Financing Receivable [Line Items]      
Mortgage loans that were in process of foreclosure $ 1,500,000   $ 2,000,000.0
v3.20.1
Earnings Per Share - Additional Information (Detail) - shares
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Common Stock    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Options to purchase (in shares) 0 0
v3.20.1
Investment Securities - Gross Gains and Gross Losses on Sales of Securities (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Investments, Debt and Equity Securities [Abstract]    
Sales proceeds $ 94,696 $ 0
Gross gains 569 0
Gross losses $ (227) $ 0
v3.20.1
Earnings Per Share (Tables)
3 Months Ended
Mar. 31, 2020
Earnings Per Share [Abstract]  
Computation of Earnings Per Share
The following schedule shows the Company’s earnings per share calculations for the periods presented:
 
For the Three Months Ended March 31,
(in thousands, except per share data)
2020
 
2019
Net income available to common shareholders
$
12,392

 
$
15,626

Less: earnings allocated to participating securities
102

 
141

Net income allocated to common shareholders
$
12,290

 
$
15,485

 
 
 
 
Weighted average number of common shares outstanding - basic
50,586

 
50,275

Share-based plans
142

 
167

Weighted average number of common shares outstanding - diluted
50,728

 
50,442

 
 
 
 
Basic earnings per share
$
0.24

 
$
0.31

Diluted earnings per share
$
0.24

 
$
0.31


v3.20.1
Fair Value Measurement and fair Value of Financial Instruments
3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurement and Fair Value of Financial Instruments FAIR VALUE MEASUREMENT AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair Value Measurement
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for an asset or liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest level priority to unobservable inputs (level 3 measurements). The following describes the three levels of fair value hierarchy:
Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities; includes U.S. Treasury Notes, and other U.S. Government Agency securities that actively trade in over-the-counter markets; equity securities and mutual funds that actively trade in over-the-counter markets.
Level 2 – quoted prices for similar assets or liabilities in active markets; or quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable for the asset or liability including yield curves, volatilities, and prepayment speeds.
Level 3 – unobservable inputs for the asset or liability that reflect the Company’s own assumptions about assumptions that market participants would use in the pricing of the asset or liability and that are consequently not based on market activity but upon particular valuation techniques.
The Company’s assets that are measured at fair value on a recurring basis are its available for sale investment securities and its interest rate swaps. The Company obtains fair values on its securities using information from a third-party servicer. If quoted prices for securities are available in an active market, those securities are classified as Level 1 securities. The Company has U.S. Treasury Notes and certain equity securities that are classified as Level 1 securities. Level 2 securities were primarily comprised of U.S. Agency bonds, residential mortgage-backed securities, obligations of state and political subdivisions and corporate securities. Fair values were estimated primarily by obtaining quoted prices for similar assets in active markets or through the use of pricing models supported with market data information. Standard inputs include benchmark yields, reported trades, broker-dealer quotes, issuer spreads, bids and offers. On a quarterly basis, the Company reviews the pricing information received from the Company’s third-party pricing service. This review includes a comparison to non-binding third-party quotes.
The fair values of derivatives are based on valuation models from a third party using current market terms (including interest rates and fees), the remaining terms of the agreements and the credit worthiness of the counter party as of the measurement date (Level 2).
The following table sets forth the Company’s financial assets that were accounted for at fair value on a recurring basis as of the periods presented by level within the fair value hierarchy. During the three months ended March 31, 2020, the Company did not make any transfers between any levels within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
(in thousands)
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Fair Value
March 31, 2020
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Investment securities, available for sale
 
 
 
 
 
 
 
U.S. Treasury and government agencies
$
76,986

 
$
80,355

 
$

 
$
157,341

Mortgage-backed securities

 
528,059

 

 
528,059

Asset-backed securities

 
41,113

 

 
41,113

Obligations of states and political subdivisions

 
77,463

 

 
77,463

Debt securities

 
9,114

 

 
9,114

Total securities available for sale
76,986

 
736,104

 

 
813,090

Equity securities, at fair value
915

 
15,987

 

 
16,902

Derivative assets

 
91,277

 

 
91,277

Total Assets
$
77,901

 
$
843,368

 
$

 
$
921,269

Liabilities:
 
 
 
 
 
 
 
Derivative liabilities
$

 
$
91,484

 
$

 
$
91,484

Total Liabilities
$

 
$
91,484

 
$

 
$
91,484

December 31, 2019
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Investment securities, available for sale
 
 
 
 
 
 
 
U.S. Treasury and government agencies
$
12,580

 
$
123,067

 
$

 
$
135,647

Mortgage-backed securities

 
551,064

 

 
551,064

Obligations of states and political subdivisions

 
60,021

 

 
60,021

Debt securities

 
9,168

 

 
9,168

Total securities available for sale
12,580

 
743,320

 

 
755,900

Equity securities, at fair value
1,735

 
14,738

 

 
16,473

Derivative assets

 
27,123

 

 
27,123

Total Assets
$
14,315

 
$
785,181

 
$

 
$
799,496

Liabilities:
 
 
 
 
 
 
 
Derivative liabilities
$

 
$
26,852

 
$

 
$
26,852

Total Liabilities
$

 
$
26,852

 
$

 
$
26,852

The following table sets forth the Company’s assets subject to fair value adjustments (impairment) on a non-recurring basis. Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
(in thousands)
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
Fair Value
March 31, 2020
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Impaired loans
$

 
$

 
$
4,680

 
$
4,680

Loans held for sale

 
3,098

 

 
3,098

Other real estate owned and other repossessed assets

 

 
393

 
393

 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Impaired loans
$

 
$

 
$
5,789

 
$
5,789

Loans held for sale

 
1,743

 

 
1,743

Other real estate owned and other repossessed assets

 

 
563

 
563


Impaired loans are evaluated and valued at the time the loan is identified as impaired at the lower of cost or market value. Because most of Lakeland’s impaired loans are collateral dependent, fair value is generally measured based on the value of the collateral, less estimated costs to sell, securing these loans and is classified at a level 3 in the fair value hierarchy. Collateral may be real estate, accounts receivable, inventory, equipment and/or other business assets. The value of real estate is assessed based on appraisals by qualified third-party licensed appraisers. The appraisers may use the income approach to value the collateral using discount rates (with ranges of 5-11%) or capitalization rates (with ranges of 4-9%) to evaluate the property. The value of the equipment may be determined by an appraiser, if significant, inquiry through a recognized valuation resource, or by the value on the borrower’s financial statements. Field examiner reviews on business assets may be conducted based on the loan exposure and reliance on this type of collateral. Appraised and reported values may be adjusted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and client’s business. Impaired loans are reviewed and evaluated on at least a quarterly basis for additional impairment and adjusted accordingly, based on the same factors identified above.
The Company has a held for sale loan portfolio that consists of residential mortgages that are being sold in the secondary market. The Company records these mortgages at the lower of cost or market value. Fair value is generally determined by the value of purchase commitments.
Other real estate owned (“OREO”) and other repossessed assets, representing property acquired through foreclosure or deed in lieu of foreclosure, are carried at fair value less estimated disposal costs of the acquired property. Fair value on other real estate owned is based on the appraised value of the collateral using discount rates or capitalization rates similar to those used in impaired loan valuation. The fair value of other repossessed assets is estimated by inquiry through recognized valuation resources.
Changes in the assumptions or methodologies used to estimate fair values may materially affect the estimated amounts. Changes in economic conditions, locally or nationally, could impact the value of the estimated amounts of impaired loans, OREO and other repossessed assets.
Fair Value of Certain Financial Instruments
Estimated fair values have been determined by the Company using the best available data and an estimation methodology suitable for each category of financial instruments. Management is concerned that there may not be reasonable comparability between institutions due to the wide range of permitted assumptions and methodologies in the absence of active markets. This lack of uniformity gives rise to a high degree of subjectivity in estimating financial instrument fair values.
The estimation methodologies used, the estimated fair values and recorded book balances at March 31, 2020, and December 31, 2019, are outlined below.
This summary, as well as the table below, excludes financial assets and liabilities for which carrying value approximates fair value. For financial assets, these include cash and cash equivalents. For financial liabilities, these include noninterest-bearing demand deposits, savings and interest-bearing transaction accounts and federal funds purchased and securities sold under agreements to repurchase. The estimated fair value of demand, savings and interest-bearing transaction accounts is the amount payable on demand at the reporting date. Carrying value is used because there is no stated maturity on these accounts, and the customer has the ability to withdraw the funds immediately. Also excluded from this summary and the following table are those financial instruments recorded at fair value on a recurring basis, as previously described.
The fair value of investment securities held to maturity is measured using information from the same third-party servicer used for investment securities available for sale using the same methodologies discussed above. Investment securities held to maturity includes $75,000 in short-term municipal bond anticipation notes and $2.5 million in subordinated debt that are non-rated and do not have an active secondary market or information readily available on standard financial systems. As a result, the securities are classified as Level 3 securities. Management performs a credit analysis before investing in these securities.
FHLB stock is an equity interest that can be sold to the issuing FHLB, to other FHLBs, or to other member banks at its par value. Because ownership of these securities is restricted, they do not have a readily determinable fair value. As such, the Company’s FHLB stock is recorded at cost or par value and is evaluated for impairment each reporting period by considering the ultimate recoverability of the investment rather than temporary declines in value. The Company’s evaluation primarily includes an evaluation of liquidity, capitalization, operating performance, commitments, and regulatory or legislative events.
The net loan portfolio has been valued using an exit price approach, which incorporates a buildup discount rate calculation that uses a swap rate adjusted for credit risk, servicing costs, a liquidity premium and a prepayment premium.
For fixed maturity certificates of deposit, fair value is estimated based on the present value of discounted cash flows using the rates currently offered for deposits of similar remaining maturities. The carrying amount of accrued interest payable approximates its fair value.
The fair value of long-term debt is based upon the discounted value of contractual cash flows. The Company estimates the discount rate using the rates currently offered for similar borrowing arrangements. The fair value of subordinated debentures is based on bid/ask prices from brokers for similar types of instruments.
The fair values of commitments to extend credit and standby letters of credit are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparties at the reporting date. The fair value of commitments to extend credit and standby letters of credit are deemed immaterial.
The following table presents the carrying values, fair values and placement in the fair value hierarchy of the Company’s financial instruments as of March 31, 2020 and December 31, 2019:
(in thousands)
Carrying
Value
 
Fair
Value
 
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
 
 
 
 
 
 
 
 
 
March 31, 2020
 
 
 
 
 
 
 
 
 
Financial Assets:
 
 
 
 
 
 
 
 
 
Investment securities held to maturity
$
115,752

 
$
119,023

 
$

 
$
116,448

 
$
2,575

Federal Home Loan Bank and other membership bank stocks
28,575

 
28,575

 

 
28,575

 

Loans, net
5,279,739

 
5,229,776

 

 

 
5,229,776

Financial Liabilities:
 
 
 
 
 
 
 
 
 
Certificates of deposit
1,084,046

 
1,084,580

 

 
1,084,580

 

Other borrowings
140,715

 
144,658

 

 
144,658

 

Subordinated debentures
118,229

 
112,272

 

 

 
112,272

December 31, 2019
 
 
 
 
 
 
 
 
 
Financial Assets:
 
 
 
 
 
 
 
 
 
Investment securities held to maturity
$
123,975

 
$
124,904

 
$

 
$
121,503

 
$
3,401

Federal Home Loan Bank and other membership bank stocks
22,505

 
22,505

 

 
22,505

 

Loans, net
5,097,820

 
5,194,065

 

 

 
5,194,065

Financial Liabilities:
 
 
 
 
 
 
 
 
 
Certificates of deposit
870,804

 
871,418

 

 
871,418

 

Other borrowings
165,816

 
166,505

 

 
166,505

 

Subordinated debentures
118,220

 
117,992

 

 

 
117,992


v3.20.1
Derivatives (Tables)
3 Months Ended
Mar. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Summary Information Regarding Derivatives
The following table presents summary information regarding these derivatives for the periods presented (dollars in thousands):
March 31, 2020
Notional Amount
 
Average
Maturity (Years)
 
Weighted Average
Fixed Rate
 
Weighted Average
Variable Rate
 
Fair
 Value
Classified in Other Assets:
 
 
 
 
 
 
 
 
 
Customer interest rate swaps
780,599

 
9.7
 
3.89
%
 
1 Mo. LIBOR + 1.89%
 
91,277

Classified in Other Liabilities:
 
 
 
 
 
 
 
 
 
3rd Party interest rate swaps
780,599

 
9.7
 
3.89
%
 
1 Mo. LIBOR + 1.89%
 
(91,277
)
Interest rate swap (cash flow hedge)
30,000

 
1.3
 
1.10
%
 
3 Mo. LIBOR
 
(207
)
December 31, 2019
Notional
 Amount
 
Average
Maturity (Years)
 
Weighted 
Average
Fixed Rate
 
Weighted Average
Variable Rate
 
Fair
 Value
Classified in Other Assets:
 
 
 
 
 
 
 
 
 
      3rd Party interest rate swaps
$
85,796

 
9.0
 
3.51
%
 
1 Mo. LIBOR + 1.95
 
$
947

      Customer interest rate swaps
473,273

 
9.9
 
4.32
%
 
1 Mo. LIBOR + 1.93
 
25,905

      Interest rate swap (cash flow hedge)
30,000

 
1.5
 
1.10
%
 
3 Mo. LIBOR
 
271

Classified in Other Liabilities:
 
 
 
 
 
 
 
 
 
      Customer interest rate swaps
$
85,796

 
9.0
 
3.51
%
 
1 Mo. LIBOR + 1.95
 
$
(947
)
      3rd party interest rate swaps
473,273

 
9.9
 
4.32
%
 
1 Mo. LIBOR + 1.93
 
(25,905
)

v3.20.1
Label Element Value
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1 $ 623,864,000
Cumulative Effect of New Accounting Principle in Period of Adoption us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption 125,000
Treasury Stock [Member]  
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1 0
AOCI Attributable to Parent [Member]  
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1 (7,838,000)
Common Stock [Member]  
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1 514,703,000
Retained Earnings [Member]  
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, Adjusted Balance us-gaap_StockholdersEquityIncludingPortionAttributableToNoncontrollingInterestAdjustedBalance1 116,999,000
Cumulative Effect of New Accounting Principle in Period of Adoption us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption $ 125,000
v3.20.1
Borrowings - Additional Information (Detail) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Debt Instrument [Line Items]    
Securities sold under agreements to repurchase $ 39,100 $ 43,700
Advances from the FHLB 140,700 165,800
Repayments of debt 10,000  
Securities Sold under Agreements to Repurchase    
Debt Instrument [Line Items]    
Pledged securities 39,800  
Line of Credit    
Debt Instrument [Line Items]    
Overnight federal funds borrowed 20,000 85,000
Federal Home Loan Bank of New York | Line of Credit    
Debt Instrument [Line Items]    
Overnight borrowings 360,000 $ 200,000
Collateralized FHLB Advances    
Debt Instrument [Line Items]    
Long term debt prepayment fee $ 356  
v3.20.1
Derivatives - Additional Information (Detail)
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
Mar. 31, 2019
USD ($)
Dec. 31, 2019
USD ($)
Jun. 30, 2016
USD ($)
Derivative
Derivative [Line Items]        
Interest Expense $ 13,678 $ 14,571    
Estimated decrease in interest expense 105      
Interest Rate Swaps        
Derivative [Line Items]        
Available for sale securities pledged for collateral 98,400   $ 30,000  
Interest Rate Swaps | Cash Flow Hedging        
Derivative [Line Items]        
Number of derivatives | Derivative       2
Notional amount       $ 30,000
Average interest rate       1.10%
Interest Expense $ 62 $ 124    
v3.20.1
Investment Securities - Reconciliation of Available-for-Sale Securities (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost $ 799,996 $ 752,260
Gross Unrealized Gains 17,600 5,785
Gross Unrealized Losses (4,506) (2,145)
Investment securities available for sale, at fair value 813,090 755,900
U.S. Treasury and U.S. government agencies    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost 155,853 135,361
Gross Unrealized Gains 1,807 722
Gross Unrealized Losses (319) (436)
Investment securities available for sale, at fair value 157,341 135,647
Mortgage-backed securities, residential    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost 461,700 500,245
Gross Unrealized Gains 13,156 3,185
Gross Unrealized Losses (1,305) (1,551)
Investment securities available for sale, at fair value 473,551 501,879
Mortgage-backed securities, multifamily    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost 53,026 48,675
Gross Unrealized Gains 1,500 633
Gross Unrealized Losses (18) (123)
Investment securities available for sale, at fair value 54,508 49,185
Asset-backed securities    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost 43,064 0
Gross Unrealized Gains 0 0
Gross Unrealized Losses (1,951) 0
Investment securities available for sale, at fair value 41,113 0
Obligations of states and political subdivisions    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost 77,353 58,979
Gross Unrealized Gains 1,023 1,077
Gross Unrealized Losses (913) (35)
Investment securities available for sale, at fair value 77,463 60,021
Debt securities    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost 9,000 9,000
Gross Unrealized Gains 114 168
Gross Unrealized Losses 0 0
Investment securities available for sale, at fair value $ 9,114 $ 9,168
v3.20.1
Investment Securities - Additional Information (Detail) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Investment Holdings [Line Items]      
Securities, carrying value $ 640,300,000   $ 581,100,000
Equity securities, at fair value 16,902,000   $ 16,473,000
Purchase of equity securities 1,082,000 $ 95,000  
Proceeds from sales of equity securities 0 1,138,000  
Loss on equity securities 653,000 $ (353,000)  
Investment in community development loans $ 3,500,000    
Redemption of funds 60 days    
Unfunded commitments $ 0    
Investment in government guaranteed loans, mortgage-backed securities, small business loans 12,500,000    
Other financial institutions      
Investment Holdings [Line Items]      
Equity securities, at fair value 915,000    
Unfunded commitments 0    
Community reinvestment funds      
Investment Holdings [Line Items]      
Equity securities, at fair value $ 16,000,000.0    
v3.20.1
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parenthetical)
3 Months Ended
Mar. 31, 2020
$ / shares
shares
Common stock, dividends price per share (in usd per share) | $ / shares $ 0.125
Treasury Stock  
Treasury shares (in shares) | shares 131,035
v3.20.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Statement of Financial Position [Abstract]    
Investment securities held to maturity, fair value $ 119,023 $ 124,904
Common stock, par value (in usd per share) $ 0 $ 0
Common stock, shares authorized (in shares) 100,000,000 100,000,000
Common stock, shares issued (in shares) 50,592,673 50,498,410
Common stock, shares outstanding (in shares) 50,461,638 50,498,410
Treasury shares (in shares) 131,035 0
v3.20.1
Loans and Other Real Estate - Carrying Value of Purchased Credit Impaired Loans Acquired (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Loans and debt securities acquired with deteriorated credit quality $ 8,034 $ 8,748
Highlands Bancorp, Inc.    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Loans and debt securities acquired with deteriorated credit quality 7,494 8,194
Pascack Bancorp, Inc.    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Loans and debt securities acquired with deteriorated credit quality 106 113
Harmony Bank    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Loans and debt securities acquired with deteriorated credit quality $ 434 $ 441
v3.20.1
Leases (Tables)
3 Months Ended
Mar. 31, 2020
Leases [Abstract]  
Lease, Cost Lease costs were as follows:
 
 
For the Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Operating lease cost
 
$
828

 
$
820

Short-term lease cost
 

 

Variable lease cost
 
32

 
35

Sublease income
 
(31
)
 
(31
)
Net lease cost
 
$
829

 
$
824


The table below presents other information on the Company's operating leases for the three months ended March 31, 2020:
(in thousands)
 
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
689

Right-of-use asset obtained in exchange for new operating lease liabilities
$


Maturity analysis of operating lease liabilities
A maturity analysis of operating lease liabilities and a reconciliation of the undiscounted cash flows to the total operating lease liability at March 31, 2020 are as follows:
(in thousands)
 
 
Within one year
 
$
3,238

After one year but within three years
 
5,482

After three years but within five years
 
4,339

After 5 years
 
10,096

Total undiscounted cash flows
 
23,155

Discount on cash flows
 
(4,029
)
Total lease liability
 
$
19,126


v3.20.1
Revenue Recognition (Tables)
3 Months Ended
Mar. 31, 2020
Revenue from Contract with Customer [Abstract]  
Disaggregation of Revenue
The following table sets forth the components of noninterest income for the three months ended March 31, 2020 and 2019:
 
For the Three Months Ended March 31,
(in thousands)
2020
 
2019
Deposit Related Fees and Charges:
 
 
 
  Debit card interchange income
$
1,223

 
$
1,218

  Overdraft charges
953

 
996

  ATM service charges
167

 
184

  Demand deposit fees and charges
134

 
143

  Savings service charges
23

 
32

Total
2,500

 
2,573

Commissions and Fees:

 

  Loan fees
340

 
348

  Wire transfer charges
308

 
267

  Investment services income
523

 
352

  Merchant fees
248

 
184

  Commissions from sales of checks
83

 
103

  Safe deposit income
86

 
91

  Other income
51

 
61

Total
1,639

 
1,406

Gains on Sales of Loans
415

 
371

Other Income:

 

  Gains on customer swap transactions
2,843

 
199

  Title insurance (loss) income
(4
)
 
90

  Other income
97

 
61

Total
2,936

 
350

Revenue not from contracts with customers
521

 
1,023

Total Noninterest Income
$
8,011

 
$
5,723

Timing of Revenue Recognition:

 

  Products and services transferred at a point in time
7,471

 
4,681

  Products and services transferred over time
19

 
19

  Revenue not from contracts with customers
521

 
1,023

Total Noninterest Income
$
8,011

 
$
5,723


v3.20.1
Share-Based Compensation
3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Share-Based Compensation SHARE-BASED COMPENSATION
The Company's shareholders approved the 2018 Omnibus Equity Incentive Plan (the "Plan"), which authorizes the granting of incentive stock options, supplemental stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), other stock-based awards and cash-based awards to officers, employees and non-employee directors of, and consultants and advisors to, the Company and its subsidiaries. The Company previously granted such awards under the 2009 Equity Compensation Program; however, no further awards may be granted from the 2009 program.
Restricted Stock
The following is a summary of the Company’s restricted stock activity during the three months ended March 31, 2020:
 
Number of
Shares
 
Weighted
Average
Price
Outstanding, January 1, 2020
13,110

 
$
15.93

Granted
13,041

 
16.87

Vested
(13,052
)
 
15.96

Outstanding, March 31, 2020
13,099

 
$
16.83


In the first three months of 2020, the Company granted 13,041 shares of restricted stock to non-employee directors at a grant date fair value of $16.87 per share under the 2018 Omnibus Equity Incentive Program. The restricted stock vests one year from the date it was granted. Compensation expense on this restricted stock is expected to be $220,000 over a one year period. In the first three months of 2019, the Company granted 13,052 shares of restricted stock to non-employee directors at a grant date fair value of $15.96 per share. The restricted stock vested one year from the date it was granted with a compensation expense of $208,000 over such period.
The Company recognized share-based compensation expense on its restricted stock of $54,000 and $55,000 for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, there was unrecognized compensation cost of $166,000 related to unvested restricted stock that is expected to be recognized over a weighted average period of approximately 0.79 years.
Restricted Stock Units
The following is a summary of the Company’s RSU activity during the three months ended March 31, 2020:
 
Number of
Shares
 
Weighted
Average
Price
Outstanding, January 1, 2020
300,629

 
$
18.13

Granted
169,169

 
15.56

Vested
(84,082
)
 
18.74

Forfeited
(5,416
)
 
18.45

Outstanding, March 31, 2020
380,300

 
$
16.85


In the first three months of 2020, the Company granted 169,169 RSUs under the 2018 Omnibus Equity Incentive Plan at a weighted average grant date fair value of $15.56 per share. These units vest within a range of two years to three years. A portion of these RSUs will vest subject to certain performance conditions in the restricted stock unit agreement. There are also certain provisions in the compensation program which state that if a recipient of the RSUs reaches a certain age and years of service, the person has effectively earned a portion of the RSUs at that time. Compensation expense on the restricted stock units issued in the first three months of 2020 is expected to average approximately $877,000 per year over a three year period. In the first three months of 2019, the Company granted 127,559 RSUs under the Company’s 2018 Omnibus Equity Incentive Plan at a weighted average grant date fair value of $16.66 per share. Compensation expense on these RSUs is expected to average approximately $708,000 per year over a three year period.
The Company recognized share based compensation expense of $794,000 and $640,000 on RSUs for the three months ended March 31, 2020 and 2019, respectively. Unrecognized compensation expense related to RSUs was approximately $4.1 million as of March 31, 2020, and that cost is expected to be recognized over a period of 1.88 years.
Stock Options
A summary of the activity under the Company’s stock option plans as of March 31, 2020 is as follows:
 
Number of
Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic
Value
Outstanding, January 1, 2019
31,706

 
$
7.76

 
0.58
 
$
305,120

Granted

 

 
 
 
 
Exercised

 

 
 
 
 
Outstanding, March 31, 2020
31,706

 
$
7.76

 
0.33
 
$
96,811

Options exercisable at March 31, 2020
31,706

 
$
7.76

 
0.33
 
$
96,811


The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options).
There were no grants of stock options in the first three months of 2020 or 2019. There were no stock options exercised during the first three months of 2020 or 2019. There was no unrecognized compensation expense related to unvested stock options as of March 31, 2020.
v3.20.1
Comprehensive Income (Tables)
3 Months Ended
Mar. 31, 2020
Equity [Abstract]  
Summary of Changes in Components of Other Comprehensive Income, Net of Tax
The components of other comprehensive income (loss) are as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
March 31, 2020
 
March 31, 2019
(in thousands)
Before Tax Amount
 
Tax Benefit (Expense)
 
Net of Tax Amount
 
Before Tax Amount
 
Tax Benefit
(Expense)
 
Net of Tax Amount
Net unrealized gains (losses) on available for sale securities:
 
 
 
 
 
 
 
 
 
 
 
Net unrealized holding gains arising during period
$
9,796

 
$
(2,512
)
 
$
7,284

 
$
6,109

 
$
(1,746
)
 
$
4,363

Reclassification adjustment for net gains arising during the period
(342
)
 
88

 
(254
)
 

 

 

Net unrealized gains
9,454

 
(2,424
)
 
7,030

 
6,109

 
(1,746
)
 
4,363

Unrealized losses on derivatives
(478
)
 
141

 
(337
)
 
(271
)
 
57

 
(214
)
Other comprehensive income, net
$
8,976

 
$
(2,283
)
 
$
6,693

 
$
5,838

 
$
(1,689
)
 
$
4,149

The following tables show the changes in the balances of each of the components of other comprehensive income for the periods presented, net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended March 31, 2020
 
For the Three Months Ended March 31, 2019
(in thousands)
Unrealized Gains
(Losses) on
Available for  Sale
Securities
 
Unrealized
Gains (Losses)
on Derivatives
 
Pension Items
 
Total
 
Unrealized Losses on
Available for  Sale
Securities
 
Unrealized
Gains 
on Derivatives
 
Pension Items
 
Total
Beginning balance
$
1,936

 
$
317

 
$
(5
)
 
$
2,248

 
$
(8,782
)
 
$
903

 
$
41

 
$
(7,838
)
Other comprehensive income (loss) before classifications
7,284

 
(337
)
 

 
6,947

 
4,363

 
(214
)
 

 
4,149

Amounts reclassified from accumulated other comprehensive income
(254
)
 

 

 
(254
)
 

 

 

 

Net current period other comprehensive income (loss)
7,030

 
(337
)
 

 
6,693

 
4,363

 
(214
)
 

 
4,149

Ending balance
$
8,966

 
$
(20
)
 
$
(5
)
 
$
8,941

 
$
(4,419
)
 
$
689

 
$
41

 
$
(3,689
)

v3.20.1
Acquisitions - Estimated Fair Value of the Acquired Assets and Liabilities (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Jan. 04, 2019
Business Acquisition [Line Items]      
Goodwill $ 156,277 $ 156,277 $ 19,800
Highlands Bancorp, Inc.      
Business Acquisition [Line Items]      
Cash and cash equivalents     13,454
Securities, available for sale     21,234
Securities, held to maturity     1,500
Federal Home Loan Bank stock     1,767
Loans held for sale     1,113
Loans     425,005
Premises and equipment     2,613
Goodwill     19,844
Identifiable intangible assets     3,728
Accrued interest receivable and other assets     6,244
Total assets acquired     496,502
Deposits     (409,638)
Other borrowings     (27,800)
Subordinated debt     (13,157)
Other liabilities     (2,490)
Total liabilities assumed     (453,085)
Net assets acquired     $ 43,417
v3.20.1
Earnings Per Share - Computation of Basic and Diluted Earnings Per Share (Detail) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Earnings Per Share [Abstract]    
Net income available to common shareholders $ 12,392 $ 15,626
Less: earnings allocated to participating securities 102 141
Net income allocated to common shareholders $ 12,290 $ 15,485
Weighted average number of common shares outstanding - basic (in shares) 50,586 50,275
Share-based plans (in shares) 142 167
Weighted average number of common shares outstanding - diluted (in shares) 50,728 50,442
Basic earnings per share (in usd per share) $ 0.24 $ 0.31
Diluted earnings per share (in usd per share) $ 0.24 $ 0.31
v3.20.1
Derivatives
3 Months Ended
Mar. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives DERIVATIVES
Lakeland is a party to interest rate derivatives that are not designated as hedging instruments. Under a program, Lakeland executes interest rate swaps with commercial lending customers to facilitate their respective risk management strategies. These interest rate swaps with customers are simultaneously offset by interest rate swaps that Lakeland executes with a third-party financial institution, such that Lakeland minimizes its net risk exposure resulting from such transactions. Because the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. The changes in the fair value of the swaps offset each other, except for the credit risk of the counterparties, which is determined by taking into consideration the risk rating, probability of default and loss given default for all counterparties. Lakeland had $98.4 million and $30.0 million, respectively, in available for sale securities pledged for collateral on its interest rate swaps with financial institutions at March 31, 2020 and December 31, 2019.
In June 2016, the Company entered into two cash flow hedges in order to hedge the variable cash outflows associated with its subordinated debentures. The notional value of these hedges was $30.0 million. The Company’s objectives in using cash flow hedges are to add stability to interest expense and to manage its exposure to interest rate movements. The Company used interest rate swaps designated as cash flow hedges which involved the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. In these particular hedges the Company is paying a third party an average of 1.10% in exchange for a payment at 3 month LIBOR . The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three months ended March 31, 2020, the Company did not record any hedge ineffectiveness. The Company recognized $62,000 and $124,000 of accumulated other comprehensive income that was reclassified into interest expense for the first three months of 2020 and 2019, respectively.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s debt. During the next twelve months, the Company estimates that $105,000 will be reclassified as a decrease to interest expense should the rate environment remain the same.
The following table presents summary information regarding these derivatives for the periods presented (dollars in thousands):
March 31, 2020
Notional Amount
 
Average
Maturity (Years)
 
Weighted Average
Fixed Rate
 
Weighted Average
Variable Rate
 
Fair
 Value
Classified in Other Assets:
 
 
 
 
 
 
 
 
 
Customer interest rate swaps
780,599

 
9.7
 
3.89
%
 
1 Mo. LIBOR + 1.89%
 
91,277

Classified in Other Liabilities:
 
 
 
 
 
 
 
 
 
3rd Party interest rate swaps
780,599

 
9.7
 
3.89
%
 
1 Mo. LIBOR + 1.89%
 
(91,277
)
Interest rate swap (cash flow hedge)
30,000

 
1.3
 
1.10
%
 
3 Mo. LIBOR
 
(207
)
December 31, 2019
Notional
 Amount
 
Average
Maturity (Years)
 
Weighted 
Average
Fixed Rate
 
Weighted Average
Variable Rate
 
Fair
 Value
Classified in Other Assets:
 
 
 
 
 
 
 
 
 
      3rd Party interest rate swaps
$
85,796

 
9.0
 
3.51
%
 
1 Mo. LIBOR + 1.95
 
$
947

      Customer interest rate swaps
473,273

 
9.9
 
4.32
%
 
1 Mo. LIBOR + 1.93
 
25,905

      Interest rate swap (cash flow hedge)
30,000

 
1.5
 
1.10
%
 
3 Mo. LIBOR
 
271

Classified in Other Liabilities:
 
 
 
 
 
 
 
 
 
      Customer interest rate swaps
$
85,796

 
9.0
 
3.51
%
 
1 Mo. LIBOR + 1.95
 
$
(947
)
      3rd party interest rate swaps
473,273

 
9.9
 
4.32
%
 
1 Mo. LIBOR + 1.93
 
(25,905
)

v3.20.1
Earnings Per Share
3 Months Ended
Mar. 31, 2020
Earnings Per Share [Abstract]  
Earnings Per Share EARNINGS PER SHARE
The following schedule shows the Company’s earnings per share calculations for the periods presented:
 
For the Three Months Ended March 31,
(in thousands, except per share data)
2020
 
2019
Net income available to common shareholders
$
12,392

 
$
15,626

Less: earnings allocated to participating securities
102

 
141

Net income allocated to common shareholders
$
12,290

 
$
15,485

 
 
 
 
Weighted average number of common shares outstanding - basic
50,586

 
50,275

Share-based plans
142

 
167

Weighted average number of common shares outstanding - diluted
50,728

 
50,442

 
 
 
 
Basic earnings per share
$
0.24

 
$
0.31

Diluted earnings per share
$
0.24

 
$
0.31


There were no antidilutive options to purchase common stock excluded from the computation for the three months ended March 31, 2020 and 2019.
v3.20.1
Fair Value Measurement and fair Value of Financial Instruments - Assets Measured on Non-recurring Basis (Detail) - Fair Value, Measurements, Non-recurring - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Assets:    
Impaired loans $ 4,680 $ 5,789
Loans held for sale 3,098 1,743
Other real estate owned and other repossessed assets 393 563
(Level 1)    
Assets:    
Impaired loans 0 0
Loans held for sale 0 0
Other real estate owned and other repossessed assets 0 0
(Level 2)    
Assets:    
Impaired loans 0 0
Loans held for sale 3,098 1,743
Other real estate owned and other repossessed assets 0 0
(Level 3)    
Assets:    
Impaired loans 4,680 5,789
Loans held for sale 0 0
Other real estate owned and other repossessed assets $ 393 $ 563
v3.20.1
Leases - Additional Information (Details) - USD ($)
Mar. 31, 2020
Dec. 31, 2019
Leases [Abstract]    
Operating lease liabilities $ 19,126,000 $ 19,814,000
Operating lease right-of-use assets $ 17,621,000 $ 18,282,000
Operating lease, weighted average remaining lease term 10 years 3 months  
Lessee, operating lease, discount rate 3.52%  
Operating lease, lease not yet commenced $ 0  
v3.20.1
Loans and Other Real Estate - Commercial Loan Portfolio (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans $ 5,279,739 $ 5,097,820
Commercial, secured by real estate    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 3,740,319 3,589,593
Commercial, secured by real estate | 1    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 0 0
Commercial, secured by real estate | 2    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 0 0
Commercial, secured by real estate | 3    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 73,368 74,072
Commercial, secured by real estate | 4    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 986,743 965,825
Commercial, secured by real estate | 5    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 2,329,762 2,332,863
Commercial, secured by real estate | 5W - Watch    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 227,836 100,347
Commercial, secured by real estate | 6 - Other assets especially mentioned    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 59,250 55,438
Commercial, secured by real estate | 7 - Substandard    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 63,360 61,048
Commercial, secured by real estate | 8 - Doubtful    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 0 0
Commercial, secured by real estate | 9 - Loss    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 0 0
Commercial, industrial and other    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 467,346 431,934
Commercial, industrial and other | 1    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 554 898
Commercial, industrial and other | 2    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 18,099 17,988
Commercial, industrial and other | 3    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 35,528 39,112
Commercial, industrial and other | 4    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 117,485 107,376
Commercial, industrial and other | 5    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 203,708 215,975
Commercial, industrial and other | 5W - Watch    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 68,160 30,192
Commercial, industrial and other | 6 - Other assets especially mentioned    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 9,338 11,328
Commercial, industrial and other | 7 - Substandard    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 14,474 9,065
Commercial, industrial and other | 8 - Doubtful    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 0 0
Commercial, industrial and other | 9 - Loss    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 0 0
Real estate - construction    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 333,592 335,169
Real estate - construction | 1    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 0 0
Real estate - construction | 2    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 0 0
Real estate - construction | 3    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 0 0
Real estate - construction | 4    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 17,899 17,941
Real estate - construction | 5    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 301,455 307,824
Real estate - construction | 5W - Watch    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 1,050 6,959
Real estate - construction | 6 - Other assets especially mentioned    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 11,472 0
Real estate - construction | 7 - Substandard    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 1,716 2,445
Real estate - construction | 8 - Doubtful    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 0 0
Real estate - construction | 9 - Loss    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 0 0
Total Commercial Loans    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 4,541,257 4,356,696
Total Commercial Loans | 1    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 554 898
Total Commercial Loans | 2    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 18,099 17,988
Total Commercial Loans | 3    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 108,896 113,184
Total Commercial Loans | 4    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 1,122,127 1,091,142
Total Commercial Loans | 5    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 2,834,925 2,856,662
Total Commercial Loans | 5W - Watch    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 297,046 137,498
Total Commercial Loans | 6 - Other assets especially mentioned    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 80,060 66,766
Total Commercial Loans | 7 - Substandard    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 79,550 72,558
Total Commercial Loans | 8 - Doubtful    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans 0 0
Total Commercial Loans | 9 - Loss    
Financing Receivable, Credit Quality Indicator [Line Items]    
Total loans $ 0 $ 0
v3.20.1
Loans and Other Real Estate - Schedule of Changes in Accretable Yield (Detail) - Loans Acquired with Deteriorated Credit Quality - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]    
Balance, beginning of period $ 363 $ 81
Acquisitions 0 1,420
Accretion (144) (193)
Net reclassification non-accretable difference 72 30
Balance, end of period $ 291 $ 1,338
v3.20.1
Significant Accounting Policies
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Significant Accounting Policies SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
This quarterly report presents the consolidated financial statements of Lakeland Bancorp, Inc. and its subsidiaries, including Lakeland Bank (“Lakeland”) and Lakeland’s wholly owned subsidiaries (collectively, the “Company”). The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and predominant practices within the banking industry. The Company’s unaudited interim financial statements reflect all adjustments, such as normal recurring accruals that are in the opinion of management, necessary for the fair presentation of the results of the interim periods. The results of operations for the three months ended March 31, 2020 do not necessarily indicate the results that the Company will achieve for all of 2020.
Certain information and footnote disclosures required under U.S. GAAP have been condensed or omitted, as permitted by rules and regulations of the Securities and Exchange Commission. These unaudited interim financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes that are presented in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2019. Certain reclassifications have been made in the consolidated financial statements to conform with current year classifications.
v3.20.1
Investment Securities - Summary of Contractual Maturities of Investment Securities Classified as Available for Sale and Held to Maturity (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Available for Sale, Amortized Cost    
Due in one year or less $ 90,556  
Due after one year through five years 68,557  
Due after five years through ten years 38,008  
Due after ten years 45,085  
Total 242,206  
Total securities 799,996 $ 752,260
Available for Sale, Fair Value    
Due in one year or less 90,722  
Due after one year through five years 70,198  
Due after five years through ten years 38,964  
Due after ten years 44,034  
Total 243,918  
Total securities 813,090 755,900
Held to Maturity, Amortized Cost    
Due in one year or less 6,796  
Due after one year through five years 30,495  
Due after five years through ten years 6,722  
Due after ten years 0  
Total 44,013  
Total securities 115,752 123,975
Held to Maturity, Fair Value    
Due in one year or less 6,831  
Due after one year through five years 31,482  
Due after five years through ten years 6,765  
Due after ten years 0  
Total 45,078  
Total securities 119,023 $ 124,904
Mortgage-backed and asset-backed securities    
Available for Sale, Amortized Cost    
Mortgage-backed and asset-backed securities 557,790  
Available for Sale, Fair Value    
Mortgage-backed and asset-backed securities 569,172  
Held to Maturity, Amortized Cost    
Mortgage-backed and asset-backed securities 71,739  
Held to Maturity, Fair Value    
Mortgage-backed and asset-backed securities $ 73,945  
v3.20.1
Loans and Other Real Estate - Composition of Loan and Lease Portfolio (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Total loans $ 5,331,863 $ 5,140,940
Less: deferred fees (3,240) (3,117)
Loans, net of deferred fees 5,328,623 5,137,823
Commercial, secured by real estate    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Total loans 3,740,319 3,589,593
Commercial, industrial and other    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Total loans 467,346 431,934
Equipment finance    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Total loans 116,421 111,076
Real estate - residential mortgage    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Total loans 334,114 335,191
Real estate - construction    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Total loans 333,592 335,169
Home equity and consumer    
Accounts, Notes, Loans and Financing Receivable [Line Items]    
Total loans $ 340,071 $ 337,977
v3.20.1
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Statement of Comprehensive Income [Abstract]    
NET INCOME $ 12,392 $ 15,626
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:    
Unrealized gains on securities available for sale 7,284 4,363
Reclassification for securities gains included in net income (254) 0
Unrealized losses on derivatives (337) (214)
Other comprehensive income 6,693 4,149
TOTAL COMPREHENSIVE INCOME $ 19,085 $ 19,775
v3.20.1
Cover page - shares
3 Months Ended
Mar. 31, 2020
May 01, 2020
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Mar. 31, 2020  
Document Transition Report false  
Entity File Number 000-17820  
Entity Registrant Name LAKELAND BANCORP, INC  
Entity Incorporation, State or Country Code NJ  
Entity Tax Identification Number 22-2953275  
Entity Address, Address Line One 250 Oak Ridge Road  
Entity Address, City or Town Oak Ridge  
Entity Address, State or Province NJ  
Entity Address, Postal Zip Code 07438  
City Area Code 973  
Local Phone Number 697-2000  
Title of 12(b) Security Common Stock, no par value  
Trading Symbol LBAI  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   50,462,552
Amendment Flag false  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q1  
Entity Central Index Key 0000846901  
Current Fiscal Year End Date --12-31  
v3.20.1
Goodwill and Intangible Assets - Additional Information (Detail)
$ in Thousands
1 Months Ended 3 Months Ended
Jan. 31, 2019
USD ($)
Mar. 31, 2020
USD ($)
reporting_unit
Dec. 31, 2019
USD ($)
Jan. 04, 2019
USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]        
Goodwill   $ 156,277 $ 156,277 $ 19,800
Number of reporting units | reporting_unit   1    
Core Deposits        
Acquired Finite-Lived Intangible Assets [Line Items]        
Intangible assets   $ 4,000 $ 4,300  
Finite-lived intangible assets acquired $ 3,700      
v3.20.1
Leases - Other Information (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
Leases [Abstract]  
Operating cash flows from operating leases $ 689
Right-of-use asset obtained in exchange for new operating lease liabilities $ 0
v3.20.1
Comprehensive Income - Summary of Changes in Components of Other Comprehensive Income, Net of Tax (Detail) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]    
Balance at beginning of period $ 725,263 $ 623,739
Other comprehensive income (loss) before classifications 6,947 4,149
Amounts reclassified from accumulated other comprehensive income (254) 0
Other comprehensive income 6,693 4,149
Balance at end of period 736,922 681,343
Unrealized Gains (Losses) on Available for Sale Securities    
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]    
Balance at beginning of period 1,936 (8,782)
Other comprehensive income (loss) before classifications 7,284 4,363
Amounts reclassified from accumulated other comprehensive income (254) 0
Other comprehensive income 7,030 4,363
Balance at end of period 8,966 (4,419)
Unrealized Gains (Losses) on Derivatives    
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]    
Balance at beginning of period 317 903
Other comprehensive income (loss) before classifications (337) (214)
Amounts reclassified from accumulated other comprehensive income 0 0
Other comprehensive income (337) (214)
Balance at end of period (20) 689
Pension Items    
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]    
Balance at beginning of period (5) 41
Other comprehensive income (loss) before classifications 0 0
Amounts reclassified from accumulated other comprehensive income 0 0
Other comprehensive income 0 0
Balance at end of period (5) 41
Accumulated Other Comprehensive Income (Loss)    
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward]    
Balance at beginning of period 2,248 (7,838)
Other comprehensive income 6,693 4,149
Balance at end of period $ 8,941 $ (3,689)
v3.20.1
Investment Securities (Tables)
3 Months Ended
Mar. 31, 2020
Investments, Debt and Equity Securities [Abstract]  
Reconciliation of Available-for-Sale Securities
The amortized cost, gross unrealized gains and losses and the fair value of the Company's available for sale and held to maturity investment securities are as follows:
 
March 31, 2020
 
December 31, 2019
(in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
AVAILABLE FOR SALE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and U.S. government agencies
$
155,853

 
$
1,807

 
$
(319
)
 
$
157,341

 
$
135,361

 
$
722

 
$
(436
)
 
$
135,647

Mortgage-backed securities, residential
461,700

 
13,156

 
(1,305
)
 
473,551

 
500,245

 
3,185

 
(1,551
)
 
501,879

Mortgage-backed securities, multifamily
53,026

 
1,500

 
(18
)
 
54,508

 
48,675

 
633

 
(123
)
 
49,185

Asset-backed securities
43,064

 

 
(1,951
)
 
41,113

 

 

 

 

Obligations of states and political subdivisions
77,353

 
1,023

 
(913
)
 
77,463

 
58,979

 
1,077

 
(35
)
 
60,021

Debt securities
9,000

 
114

 

 
9,114

 
9,000

 
168

 

 
9,168

 
$
799,996

 
$
17,600

 
$
(4,506
)
 
$
813,090

 
$
752,260

 
$
5,785

 
$
(2,145
)
 
$
755,900


Reconciliation of Held-to-Maturity Securities
 
March 31, 2020
 
December 31, 2019
(in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
HELD TO MATURITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agencies
$
31,207

 
$
901

 
$

 
$
32,108

 
$
31,335

 
$
182

 
$
(8
)
 
$
31,509

Mortgage-backed securities, residential
70,999

 
2,162

 

 
73,161

 
76,229

 
734

 
(176
)
 
76,787

Mortgage-backed securities, multifamily
740

 
44

 

 
784

 
1,750

 
4

 
(2
)
 
1,752

Obligations of states and political subdivisions
10,306

 
164

 

 
10,470

 
12,161

 
195

 

 
12,356

Debt securities
2,500

 

 

 
2,500

 
2,500

 

 

 
2,500

 
$
115,752

 
$
3,271

 
$

 
$
119,023

 
$
123,975

 
$
1,115

 
$
(186
)
 
$
124,904


Summary of Investment Securities by Stated Maturity
The following table lists contractual maturities of investment securities classified as available for sale and held to maturity as of March 31, 2020. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
Available for Sale
 
Held to Maturity
(in thousands)
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Due in one year or less
$
90,556

 
$
90,722

 
$
6,796

 
$
6,831

Due after one year through five years
68,557

 
70,198

 
30,495

 
31,482

Due after five years through ten years
38,008

 
38,964

 
6,722

 
6,765

Due after ten years
45,085

 
44,034

 

 

 
242,206

 
243,918

 
44,013

 
45,078

Mortgage-backed and asset-backed securities
557,790

 
569,172

 
71,739

 
73,945

Total securities
$
799,996

 
$
813,090

 
$
115,752

 
$
119,023


Sales of Securities, Gross Gains and Gross Losses on Sales of Securities
The following table shows proceeds from sales of available-for-sale securities, gross gains and gross losses on sales and calls of securities for the periods indicated:
 
 
For the Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Sales proceeds
 
$
94,696

 
$

Gross gains
 
569

 

Gross losses
 
(227
)
 


Reconciliation of Available-for-Sale and Held-to-Maturity Securities in Continuous Unrealized Loss Position
The following tables indicate the length of time individual securities have been in a continuous unrealized loss position for the periods presented:
March 31, 2020
Less Than 12 Months
 
12 Months or Longer
 
Total
(dollars in thousands)
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Number of
Securities
 
Fair Value
 
Unrealized
Losses
AVAILABLE FOR SALE
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and U.S. government agencies
$
74,745

 
$
28

 
$
19,355

 
$
291

 
11

 
$
94,100

 
$
319

Mortgage-backed securities, residential
51,693

 
919

 
8,180

 
386

 
24

 
59,873

 
1,305

Mortgage-backed securities, multifamily
2,801

 
16

 
4,257

 
2

 
2

 
7,058

 
18

Asset-backed securities
41,112

 
1,951

 

 

 
6

 
41,112

 
1,951

Obligations of states and political subdivisions
24,318

 
913

 

 

 
11

 
24,318

 
913

 
$
194,669

 
$
3,827

 
$
31,792

 
$
679

 
54

 
$
226,461

 
$
4,506

There are no unrealized losses for held-to-maturity securities at March 31, 2020.
December 31, 2019
Less Than 12 Months
 
12 Months or Longer
 
Total
(dollars in thousands)
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Number of
Securities
 
Fair Value
 
Unrealized
Losses
AVAILABLE FOR SALE
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and U.S. government agencies
$
11,625

 
$
39

 
$
41,617

 
$
397

 
11

 
$
53,242

 
$
436

Mortgage-backed securities, residential
125,782

 
561

 
99,489

 
990

 
86

 
225,271

 
1,551

Mortgage-backed securities, multifamily
7,651

 
118

 
4,878

 
5

 
3

 
12,529

 
123

Obligations of states and political subdivisions
373

 
2

 
6,559

 
33

 
5

 
6,932

 
35

 
$
145,431

 
$
720

 
$
152,543

 
$
1,425

 
105

 
$
297,974

 
$
2,145

HELD TO MATURITY
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agencies
$
3,195

 
$
6

 
$
5,102

 
$
2

 
2

 
$
8,297

 
$
8

Mortgage-backed securities, residential
12,462

 
46

 
10,592

 
130

 
16

 
23,054

 
176

Mortgage-backed securities, multifamily

 

 
998

 
2

 
1

 
998

 
2

 
$
15,657

 
$
52

 
$
16,692

 
$
134

 
19

 
$
32,349

 
$
186


v3.20.1
Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Basis of Presentation
Basis of Presentation
This quarterly report presents the consolidated financial statements of Lakeland Bancorp, Inc. and its subsidiaries, including Lakeland Bank (“Lakeland”) and Lakeland’s wholly owned subsidiaries (collectively, the “Company”). The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and predominant practices within the banking industry. The Company’s unaudited interim financial statements reflect all adjustments, such as normal recurring accruals that are in the opinion of management, necessary for the fair presentation of the results of the interim periods. The results of operations for the three months ended March 31, 2020 do not necessarily indicate the results that the Company will achieve for all of 2020.
Certain information and footnote disclosures required under U.S. GAAP have been condensed or omitted, as permitted by rules and regulations of the Securities and Exchange Commission. These unaudited interim financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes that are presented in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2019. Certain reclassifications have been made in the consolidated financial statements to conform with current year classifications.
v3.20.1
Loans and Other Real Estate
3 Months Ended
Mar. 31, 2020
Receivables [Abstract]  
Loans and Other Real Estate LOANS AND OTHER REAL ESTATE
The following sets forth the composition of the Company’s loan portfolio:
(in thousands)
March 31, 2020
 
December 31, 2019
Commercial, secured by real estate
$
3,740,319

 
$
3,589,593

Commercial, industrial and other
467,346

 
431,934

Equipment finance
116,421

 
111,076

Real estate - residential mortgage
334,114

 
335,191

Real estate - construction
333,592

 
335,169

Home equity and consumer
340,071

 
337,977

Total loans
5,331,863

 
5,140,940

Less: deferred fees
(3,240
)
 
(3,117
)
Loans, net of deferred fees
$
5,328,623

 
$
5,137,823


At March 31, 2020 and December 31, 2019, home equity and consumer loans included overdraft deposit balances of $281,000 and $789,000, respectively. At March 31, 2020 and December 31, 2019, the Company had $1.5 billion and $1.3 billion, respectively, in loans pledged for actual and potential borrowings at the Federal Home Loan Bank of New York (“FHLB”).
Purchased Credit Impaired Loans
The following sets forth the carrying value of the purchased credit impaired ("PCI") loans acquired in mergers:
(in thousands)
March 31, 2020
 
December 31, 2019
Acquisition
 
 
 
  Highlands
$
7,494

 
$
8,194

  Pascack Community Bank ("Pascack")
106

 
113

  Harmony Bank ("Harmony")
434

 
441

Total
$
8,034

 
$
8,748


The following table presents changes in the accretable yield for PCI loans:
 
For the Three Months Ended
(in thousands)
March 31, 2020
 
March 31, 2019
 
 
 
 
Balance, beginning of period
$
363

 
$
81

Acquisitions

 
1,420

Accretion
(144
)
 
(193
)
Net reclassification non-accretable difference
72

 
30

Balance, end of period
$
291

 
$
1,338


Non-Performing Assets and Past Due Loans
The following schedule sets forth certain information regarding the Company’s non-performing assets and its accruing troubled debt restructurings, excluding PCI loans:
(in thousands)
March 31, 2020
 
December 31, 2019
Commercial, secured by real estate
$
23,851

 
$
12,314

Commercial, industrial and other
1,909

 
1,539

Equipment finance
199

 
284

Real estate - residential mortgage
2,837

 
3,428

Real estate - construction
919

 
967

Home equity and consumer
2,689

 
2,606

Total non-accrual loans
$
32,404

 
$
21,138

Other real estate and other repossessed assets
393

 
563

TOTAL NON-PERFORMING ASSETS
$
32,797

 
$
21,701

Troubled debt restructurings, still accruing
$
4,719

 
$
5,650


Non-accrual loans included $2.2 million and $1.6 million of troubled debt restructurings at March 31, 2020 and December 31, 2019, respectively. At March 31, 2020 and December 31, 2019, the Company had $1.5 million and $2.0 million, respectively, in residential mortgages and consumer home equity loans that were in the process of foreclosure which are included in non-accrual loans in the above table.
An age analysis of past due loans, excluding PCI loans which are accounted for on a pool basis, segregated by class of loans as of March 31, 2020 and December 31, 2019, is as follows:
(in thousands)
30-59 Days Past Due
 
60-89 Days Past Due
 
Greater Than 89 Days Past Due
 
Total Past Due
 
Current
 
Total Loans
 
Recorded Investment  Greater than 89 Days and Still Accruing
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
12,162

 
$
8,032

 
$
13,190

 
$
33,384

 
$
3,701,509

 
$
3,734,893

 
$

Commercial, industrial and other
2,101

 
1,010

 
1,057

 
4,168

 
462,284

 
466,452

 

Equipment finance
264

 
30

 
200

 
494

 
115,927

 
116,421

 

Real estate - residential mortgage
1,988

 
125

 
1,630

 
3,743

 
329,970

 
333,713

 

Real estate - construction

 

 
225

 
225

 
332,570

 
332,795

 

Home equity and consumer
1,645

 
299

 
1,243

 
3,187

 
336,368

 
339,555

 
99

 
$
18,160

 
$
9,496

 
$
17,545

 
$
45,201

 
$
5,278,628

 
$
5,323,829

 
$
99

December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
3,578

 
$
1,200

 
$
9,702

 
$
14,480

 
$
3,569,008

 
$
3,583,488

 
$

Commercial, industrial and other
353

 
71

 
1,064

 
1,488

 
429,502

 
430,990

 

Equipment finance
166

 
80

 
284

 
530

 
110,546

 
111,076

 

Real estate - residential mortgage
1,138

 
251

 
2,075

 
3,464

 
331,337

 
334,801

 

Real estate - construction

 

 
967

 
967

 
333,418

 
334,385

 

Home equity and consumer
1,573

 
287

 
1,533

 
3,393

 
334,059

 
337,452

 

 
$
6,808

 
$
1,889

 
$
15,625

 
$
24,322

 
$
5,107,870

 
$
5,132,192

 
$


Impaired Loans
The Company defines impaired loans as all non-accrual loans with recorded investments of $500,000 or greater. Impaired loans also include all loans that have been modified in troubled debt restructurings, but excludes PCI loans. Impaired loans as of March 31, 2020 and December 31, 2019 are as follows:
(in thousands)
Recorded
Investment in
Impaired  Loans
 
Contractual
Unpaid
Principal
Balance
 
Specific
Allowance
 
Average
Investment in
Impaired  Loans
 
Interest
Income
Recognized
March 31, 2020
 
 
 
 
 
 
 
 
 
Loans without specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
23,705

 
$
23,965

 
$

 
$
13,594

 
$
30

Commercial, industrial and other
1,330

 
1,333

 

 
1,347

 
4

Equipment finance

 

 

 

 

Real estate - residential mortgage
1,525

 
1,651

 

 
1,581

 

Real estate - construction
694

 
694

 

 
702

 
10

Home equity and consumer

 

 

 

 

Loans with specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
3,263

 
3,505

 
202

 
3,406

 
38

Commercial, industrial and other
106

 
105

 
5

 
105

 
2

Equipment finance
19

 
19

 
8

 
21

 

Real estate - residential mortgage
654

 
835

 
2

 
659

 
5

Real estate - construction

 

 

 

 

Home equity and consumer
638

 
739

 
5

 
640

 
8

Total:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
26,968

 
$
27,470

 
$
202

 
$
17,000

 
$
68

Commercial, industrial and other
1,436

 
1,438

 
5

 
1,452

 
6

Equipment finance
19

 
19

 
8

 
21

 

Real estate - residential mortgage
2,179

 
2,486

 
2

 
2,240

 
5

Real estate - construction
694

 
694

 

 
702

 
10

Home equity and consumer
638

 
739

 
5

 
640

 
8

 
$
31,934

 
$
32,846

 
$
222

 
$
22,055

 
$
97

(in thousands)
Recorded
Investment in
Impaired  Loans
 
Contractual
Unpaid
Principal
Balance
 
Specific
Allowance
 
Average
Investment in
Impaired  Loans
 
Interest
Income
Recognized
December 31, 2019
 
 
 
 
 
 
 
 
 
Loans without specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
12,478

 
$
12,630

 
$

 
$
10,386

 
$
164

Commercial, industrial and other
1,391

 
1,381

 

 
1,334

 
16

Equipment finance

 

 

 

 

Real estate - residential mortgage
803

 
815

 

 
233

 

Real estate - construction
1,663

 
1,661

 

 
82

 
2

Home equity and consumer

 

 

 

 

Loans with specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
3,470

 
3,706

 
228

 
4,554

 
190

Commercial, industrial and other
113

 
113

 
5

 
113

 
6

Equipment finance
23

 
23

 
10

 
21

 

Real estate - residential mortgage
1,512

 
1,682

 
104

 
926

 
19

Real estate - construction

 

 

 

 

Home equity and consumer
671

 
765

 
5

 
693

 
29

Total:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
15,948

 
$
16,336

 
$
228

 
$
14,940

 
$
354

Commercial, industrial and other
1,504

 
1,494

 
5

 
1,447

 
22

Equipment finance
23

 
23

 
10

 
21

 

Real estate - residential mortgage
2,315

 
2,497

 
104

 
1,159

 
19

Real estate - construction
1,663

 
1,661

 

 
82

 
2

Home equity and consumer
671

 
765

 
5

 
693

 
29

 
$
22,124

 
$
22,776

 
$
352

 
$
18,342

 
$
426


Interest income recognized on impaired loans was $97,000 and $144,000 for the three months ended March 31, 2020 and 2019, respectively. Interest that would have been accrued on impaired loans during the first three months of 2020 and 2019 had the loans been performing under original terms would have been $297,000 and $268,000, respectively.
Credit Quality Indicators
The class of loans is determined by internal risk rating. Management closely and continually monitors the quality of its loans and assesses the quantitative and qualitative risks arising from the credit quality of its loans. Lakeland assigns a credit risk rating to all commercial loans and loan commitments. The credit risk rating system has been developed by management to provide a methodology to be used by loan officers, department heads and senior management in identifying various levels of credit risk that exist within Lakeland’s commercial loan portfolios. The risk rating system assists senior management in evaluating Lakeland’s commercial loan portfolio, analyzing trends, and determining the proper level of required reserves to be recommended to the Board. In assigning risk ratings, management considers, among other things, a borrower’s debt service coverage, earnings strength, loan to value ratios, guarantor support, industry conditions and economic conditions. Management categorizes commercial loans and commitments into a one (1) to nine (9) numerical structure with rating 1 being the strongest rating and rating 9 being the weakest. Ratings 1 through 5W are considered ‘Pass’ ratings.
The following table shows the Company’s commercial loan portfolio as of March 31, 2020 and December 31, 2019, by the risk ratings discussed above (in thousands):
March 31, 2020
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Real Estate -
Construction
 
Total Commercial Loans
RISK RATING
 
 
 
 
 
 
 
1
$

 
$
554

 
$

 
$
554

2

 
18,099

 

 
18,099

3
73,368

 
35,528

 

 
108,896

4
986,743

 
117,485

 
17,899

 
1,122,127

5
2,329,762

 
203,708

 
301,455

 
2,834,925

5W - Watch
227,836

 
68,160

 
1,050

 
297,046

6 - Other assets especially mentioned
59,250

 
9,338

 
11,472

 
80,060

7 - Substandard
63,360

 
14,474

 
1,716

 
79,550

8 - Doubtful

 

 

 

9 - Loss

 

 

 

Total
$
3,740,319

 
$
467,346

 
$
333,592

 
$
4,541,257

December 31, 2019
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Real Estate -
Construction
 
Total Commercial Loans
RISK RATING
 
 
 
 
 
 
 
1
$

 
$
898

 
$

 
$
898

2

 
17,988

 

 
17,988

3
74,072

 
39,112

 

 
113,184

4
965,825

 
107,376

 
17,941

 
1,091,142

5
2,332,863

 
215,975

 
307,824

 
2,856,662

5W - Watch
100,347

 
30,192

 
6,959

 
137,498

6 - Other assets especially mentioned
55,438

 
11,328

 

 
66,766

7 - Substandard
61,048

 
9,065

 
2,445

 
72,558

8 - Doubtful

 

 

 

9 - Loss

 

 

 

Total
$
3,589,593

 
$
431,934

 
$
335,169

 
$
4,356,696


The risk rating tables above do not include residential mortgage loans, consumer loans, or equipment finance loans because they are evaluated on their payment status.
Allowance for Loan Losses
The Coronavirus Aid, Relief and Economic Security ("CARES") Act, a stimulus package signed into law on March 27, 2020 to address economic disruption caused by the COVID-19 pandemic, provides financial institutions with the option to defer adoption of the Financial Accounting Standards Board's Accounting Standard Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326) until the earlier of the end of the pandemic or December 31, 2020. The Company has elected to defer adoption of ASU 2016-13 and its Current Expected Credit Loss methodology ("CECL").

The following table details activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2020 and 2019:
(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
Three Months Ended March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance
$
28,950

 
$
3,289

 
$
957

 
$
1,725

 
$
2,672

 
$
2,410

 
$
40,003

Charge-offs
(169
)
 

 
(84
)
 
(116
)
 

 
(114
)
 
(483
)
Recoveries
26

 
30

 
14

 
20

 
32

 
19

 
141

Provision
5,986

 
2,170

 
370

 
(29
)
 
640

 
86

 
9,223

Ending Balance
$
34,793

 
$
5,489

 
$
1,257

 
$
1,600

 
$
3,344

 
$
2,401

 
$
48,884

(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
Three Months Ended March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance
$
27,881

 
$
1,742

 
$
987

 
$
1,566

 
$
3,015

 
$
2,497

 
$
37,688

Charge-offs
(187
)
 
(147
)
 
(87
)
 
(50
)
 

 
(45
)
 
(516
)
Recoveries
115

 
97

 
2

 
9

 
5

 
71

 
299

Provision
(294
)
 
900

 
45

 
39

 
(133
)
 
(49
)
 
508

Ending Balance
$
27,515

 
$
2,592

 
$
947

 
$
1,564

 
$
2,887

 
$
2,474

 
$
37,979


Loans receivable summarized by portfolio segment and impairment method are as follows:
(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance: Individually evaluated for impairment
$
26,968

 
$
1,436

 
$
19

 
$
2,179

 
$
694

 
$
638

 
$
31,934

Ending Balance: Collectively evaluated for impairment
3,707,925

 
465,016

 
116,402

 
331,534

 
332,101

 
338,917

 
5,291,895

Ending Balance: Loans acquired with deteriorated credit quality
5,426

 
894

 

 
401

 
797

 
516

 
8,034

Ending Balance (1)
$
3,740,319

 
$
467,346

 
$
116,421

 
$
334,114

 
$
333,592

 
$
340,071

 
$
5,331,863

(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance: Individually evaluated for impairment
$
15,948

 
$
1,504

 
$
23

 
$
2,315

 
$
1,663

 
$
671

 
$
22,124

Ending Balance: Collectively evaluated for impairment
3,567,540

 
429,486

 
111,053

 
332,486

 
332,722

 
336,781

 
5,110,068

Ending balance: Loans acquired with deteriorated credit quality
6,105

 
944

 

 
390

 
784

 
525

 
8,748

Ending Balance (1)
$
3,589,593

 
$
431,934

 
$
111,076

 
$
335,191

 
$
335,169

 
$
337,977

 
$
5,140,940

(1)
Excludes deferred fees
The allowance for loan losses is summarized by portfolio segment and impairment classification as follows:
(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance: Individually evaluated for impairment
$
202

 
$
5

 
$
8

 
$
2

 
$

 
$
5

 
$
222

Ending Balance: Collectively evaluated for impairment
34,591

 
5,484

 
1,249

 
1,598

 
3,344

 
2,396

 
48,662

Ending Balance
$
34,793

 
$
5,489

 
$
1,257

 
$
1,600

 
$
3,344

 
$
2,401

 
$
48,884

(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance: Individually evaluated for impairment
$
228

 
$
5

 
$
10

 
$
104

 
$

 
$
5

 
$
352

Ending Balance: Collectively evaluated for impairment
28,722

 
3,284

 
947

 
1,621

 
2,672

 
2,405

 
39,651

Ending Balance
$
28,950

 
$
3,289

 
$
957

 
$
1,725

 
$
2,672

 
$
2,410

 
$
40,003


Lakeland also maintains a reserve for unfunded lending commitments which is included in other liabilities. This reserve was $2.0 million and $1.8 million as of March 31, 2020 and December 31, 2019, respectively. The Company analyzes the adequacy of the reserve for unfunded lending commitments quarterly.
Troubled Debt Restructurings
Loans are classified as troubled debt restructured loans ("TDR") in cases where borrowers experience financial difficulties and Lakeland makes certain concessionary modifications to contractual terms. Restructured loans typically involve a modification of terms such as a reduction of the stated interest rate, a moratorium of principal payments and/or an extension of the maturity date at a stated interest rate lower than the current market rate of a new loan with similar risk. The Company considers the potential losses on these loans as well as the remainder of its impaired loans while considering the adequacy of the allowance for loan losses.
Section 4013 of the CARES Act, as interpreted by the "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers Affected by the Coronavirus (Revised)" (“Revised Statement”), dated April 17, 2020, includes criteria that enable financial institutions to exclude from TDR status loans that are modified in connection with COVID-19. Under these provisions, TDR status is not required for the term of a loan modification if (i) the loan modification is made in connection with COVID-19, (ii) the loan was not past due more than 30 days as of December 31, 2019 and (iii) the loan modification is entered into during the period between March 1, 2020, and the earlier of (a) 60 days after COVID-19 is no longer characterized as a National Emergency or (b) December 31, 2020. Furthermore, pursuant to the Revised Statement, for loan modifications that do not meet these criteria but are made in connection with COVID-19, such loans may be presumed not to be TDR if they are modified at a time when the borrower is current and the modifications are short-term (e.g., six months). If the criteria are not met under either Section 4013 or the Revised Statement, banks are required to follow their existing accounting policies to determine whether COVID-related modifications should be accounted for as a TDR. The Company has elected to suspend the classification of loan modifications as TDR if they qualify under Section 4013 or the Revised Statement.
There are no loans that were restructured during the three months ended March 31, 2020 and 2019.
The following table summarizes as of March 31, 2020 and 2019, loans that were restructured within the previous twelve months that have subsequently defaulted:
 
March 31, 2020
 
March 31, 2019
(dollars in thousands)
Number of
Contracts
 
Recorded
Investment
 
Number of
Contracts
 
Recorded
Investment
 
 
Home equity and consumer
2

 
$
83

 

 
$

 
2

 
$
83

 

 
$


Other Real Estate and Other Repossessed Assets
At March 31, 2020 and December 31, 2019, the Company had other real estate owned of $393,000 and $563,000, respectively, consisting of residential property acquired as a result of foreclosure proceedings. There were no balances of other repossessed assets at both March 31, 2020 and December 31, 2019.
v3.20.1
Acquisitions
3 Months Ended
Mar. 31, 2020
Business Combinations [Abstract]  
Acquisitions ACQUISITIONS
On January 4, 2019, the Company completed its acquisition of Highlands Bancorp, Inc. ("Highlands"), a bank holding company headquartered in Vernon, New Jersey. Highlands was the parent of Highlands State Bank, which operated four branches in Sussex, Passaic and Morris Counties in New Jersey. This acquisition enabled the Company to broaden its presence in those counties. Effective as of the close of business on January 4, 2019, Highlands merged into the Company and Highlands State Bank merged into Lakeland. Pursuant to the merger agreement, the shareholders of Highlands received for each outstanding share of Highlands common stock that they owned at the effective time of the merger, 1.015 shares of Lakeland Bancorp, Inc. common stock. The Company issued 2,837,524 shares of its common stock in the merger. Outstanding Highlands stock options were paid out in cash at the difference between $14.71 and an average strike price of $8.09 for a total cash payment of $797,000.
The acquisition was accounted for under the acquisition method of accounting and accordingly, the assets acquired and liabilities assumed in the acquisition were recorded at their estimated fair values as of the acquisition date. Highlands' assets were recorded at their preliminary estimated fair values as of January 4, 2019 and Highlands' results of operations have been included in the Company's Consolidated Statements of Income from that date forward.
The assets acquired and liabilities assumed in the acquisition were recorded at their estimated fair values based on management's best estimates using information available at the date of the acquisition, including the use of a third-party valuation specialist.
During the second quarter of 2019, the Company revised the estimated fair value of the acquired assets as of the acquisition date as the result of additional information obtained. The adjustment related to credit-impaired loans acquired in the acquisition that were recorded at fair value and subsequently accounted for in accordance with Accounting Standards Codification ("ASC") Subtopic 310-30 and resulted in a $1.7 million increase in goodwill.
As a result of new information obtained during the third quarter of 2019, about facts and circumstances that existed as of the acquisition date, the Company revised the estimated fair value on two Highlands branches acquired. The adjustment resulted in an increase in goodwill of $447,000.

The following table summarizes the estimated fair value of the acquired assets and liabilities assumed at the date of acquisition for Highlands.
(in thousands)
 
Assets acquired:
 
Cash and cash equivalents
$
13,454

Securities, available for sale
21,234

Securities, held to maturity
1,500

Federal Home Loan Bank stock
1,767

Loans held for sale
1,113

Loans
425,005

Premises and equipment
2,613

Goodwill
19,844

Identifiable intangible assets
3,728

Accrued interest receivable and other assets
6,244

Total assets acquired
496,502

Liabilities assumed:
 
Deposits
(409,638
)
Other borrowings
(27,800
)
Subordinated debt
(13,157
)
Other liabilities
(2,490
)
Total liabilities assumed
(453,085
)
Net assets acquired
$
43,417



Loans acquired in the Highlands acquisition were recorded at fair value and subsequently accounted for in accordance with ASC Topic 310. There was no carryover related allowance for loan losses. The fair values of loans acquired from Highlands were estimated using cash flow projections based on the remaining maturity and repricing terms. Cash flows were adjusted for estimated future credit losses and the rate of prepayments. Projected cash flows were then discounted to present value using a risk-adjusted market rate for similar loans.
The following is a summary of the credit impaired loans acquired in the Highlands acquisition as of the closing date.
(in thousands)
 
Contractually required principal and interest at acquisition
$
22,363

Contractual cash flows not expected to be collected (non-accretable difference)
7,129

Expected cash flows at acquisition
$
15,234

Interest component of expected cash flows (accretable difference)
1,431

Fair value of acquired loans
$
13,803


The core deposit intangible totaled $3.7 million and is being amortized over its estimated useful life of approximately ten years using an accelerated method. The goodwill will be evaluated annually for impairment. The goodwill is not deductible for tax purposes.
The fair values of deposit liabilities with no stated maturities such as checking, money market and savings accounts, were assumed to equal the carrying amounts since these deposits are payable on demand. The fair values of certificates of deposits and IRAs represent the present value of contractual cash flows discounted at market rates for similar certificates of deposit.
Direct costs related to the acquisition were expensed as incurred. During the three months ended March 31, 2019, the Company incurred $2.9 million of merger and acquisition integration-related expenses, which have been separately stated in the Company's Consolidated Statements of Income. There were no merger or acquisition integration-related expenses in 2020.
v3.20.1
Borrowings
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Borrowings BORROWINGS
At March 31, 2020 and December 31, 2019, the Company had overnight and short-term borrowings from the Federal Home Loan Bank ("FHLB") totaling $360.0 million and $200.0 million, respectively. In addition, overnight and short-term borrowings from correspondent banks totaled $20.0 million and $85.0 million at March 31, 2020 and December 31, 2019, respectively.
Other short-term borrowings at March 31, 2020 and December 31, 2019 consisted of short-term securities sold under agreements to repurchase of $39.1 million and $43.7 million, respectively. The securities sold under agreements to repurchase are overnight sweep arrangement accounts with our customers. As of March 31, 2020, the Company had $39.8 million in mortgage backed securities pledged for its securities sold under agreements to repurchase.
At times the market values of securities collateralizing our securities sold under agreements to repurchase may decline due to changes in interest rates and may necessitate our lenders to issue a “margin call” which requires Lakeland to pledge additional collateral to meet that margin call.
Advances from the FHLB totaled $140.7 million at March 31, 2020 compared to $165.8 million at December 31, 2019 and were collateralized by first mortgage loans. The advances have prepayment penalties. In the first quarter of 2020, the Company repaid two advances totaling $10.0 million and recorded $356,000 in long-term debt prepayment fees.
v3.20.1
Fair Value Measurement and fair Value of Financial Instruments (Tables)
3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value of Financial Assets and Liabilities Measured on Recurring Basis
The fair values of derivatives are based on valuation models from a third party using current market terms (including interest rates and fees), the remaining terms of the agreements and the credit worthiness of the counter party as of the measurement date (Level 2).
The following table sets forth the Company’s financial assets that were accounted for at fair value on a recurring basis as of the periods presented by level within the fair value hierarchy. During
Fair Value of Assets Measured on Non-recurring Basis
The following table sets forth the Company’s assets subject to fair value adjustments (impairment) on a non-recurring basis. Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
(in thousands)
(Level 1)
 
(Level 2)
 
(Level 3)
 
Total
Fair Value
March 31, 2020
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Impaired loans
$

 
$

 
$
4,680

 
$
4,680

Loans held for sale

 
3,098

 

 
3,098

Other real estate owned and other repossessed assets

 

 
393

 
393

 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Impaired loans
$

 
$

 
$
5,789

 
$
5,789

Loans held for sale

 
1,743

 

 
1,743

Other real estate owned and other repossessed assets

 

 
563

 
563


Carrying Values and Fair Values of Company's Financial Instruments
The following table presents the carrying values, fair values and placement in the fair value hierarchy of the Company’s financial instruments as of March 31, 2020 and December 31, 2019:
(in thousands)
Carrying
Value
 
Fair
Value
 
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
 
 
 
 
 
 
 
 
 
March 31, 2020
 
 
 
 
 
 
 
 
 
Financial Assets:
 
 
 
 
 
 
 
 
 
Investment securities held to maturity
$
115,752

 
$
119,023

 
$

 
$
116,448

 
$
2,575

Federal Home Loan Bank and other membership bank stocks
28,575

 
28,575

 

 
28,575

 

Loans, net
5,279,739

 
5,229,776

 

 

 
5,229,776

Financial Liabilities:
 
 
 
 
 
 
 
 
 
Certificates of deposit
1,084,046

 
1,084,580

 

 
1,084,580

 

Other borrowings
140,715

 
144,658

 

 
144,658

 

Subordinated debentures
118,229

 
112,272

 

 

 
112,272

December 31, 2019
 
 
 
 
 
 
 
 
 
Financial Assets:
 
 
 
 
 
 
 
 
 
Investment securities held to maturity
$
123,975

 
$
124,904

 
$

 
$
121,503

 
$
3,401

Federal Home Loan Bank and other membership bank stocks
22,505

 
22,505

 

 
22,505

 

Loans, net
5,097,820

 
5,194,065

 

 

 
5,194,065

Financial Liabilities:
 
 
 
 
 
 
 
 
 
Certificates of deposit
870,804

 
871,418

 

 
871,418

 

Other borrowings
165,816

 
166,505

 

 
166,505

 

Subordinated debentures
118,220

 
117,992

 

 

 
117,992


v3.20.1
Revenue Recognition - Additional Information (Details)
3 Months Ended
Mar. 31, 2020
Region
Segment
Revenue from Contract with Customer [Abstract]  
Number of geographic regions | Region 1
Number of operating segments | Segment 1
v3.20.1
Loans and Other Real Estate - Allowance for Loan and Lease Losses by Portfolio Segment (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Mar. 31, 2019
Dec. 31, 2018
Financing Receivable, Past Due [Line Items]        
Total Loans $ 5,331,863 $ 5,140,940    
Ending Balance: Individually evaluated for impairment, related allowance 222 352    
Ending Balance 48,884 40,003 $ 37,979 $ 37,688
Loans and Leases        
Financing Receivable, Past Due [Line Items]        
Ending Balance: Individually evaluated for impairment 31,934 22,124    
Ending Balance: Collectively evaluated for impairment 5,291,895 5,110,068    
Ending Balance: Loans acquired with deteriorated credit quality 8,034 8,748    
Total Loans 5,331,863 5,140,940    
Ending Balance: Individually evaluated for impairment, related allowance 222 352    
Ending Balance: Collectively evaluated for impairment, related allowance 48,662 39,651    
Ending Balance 48,884 40,003    
Commercial, secured by real estate        
Financing Receivable, Past Due [Line Items]        
Total Loans 3,740,319 3,589,593    
Ending Balance: Individually evaluated for impairment, related allowance 202 228    
Ending Balance 34,793 28,950 27,515 27,881
Commercial, secured by real estate | Loans and Leases        
Financing Receivable, Past Due [Line Items]        
Ending Balance: Individually evaluated for impairment 26,968 15,948    
Ending Balance: Collectively evaluated for impairment 3,707,925 3,567,540    
Ending Balance: Loans acquired with deteriorated credit quality 5,426 6,105    
Total Loans 3,740,319 3,589,593    
Ending Balance: Individually evaluated for impairment, related allowance 202 228    
Ending Balance: Collectively evaluated for impairment, related allowance 34,591 28,722    
Ending Balance 34,793 28,950    
Commercial, industrial and other        
Financing Receivable, Past Due [Line Items]        
Total Loans 467,346 431,934    
Ending Balance: Individually evaluated for impairment, related allowance 5 5    
Ending Balance 5,489 3,289 2,592 1,742
Commercial, industrial and other | Loans and Leases        
Financing Receivable, Past Due [Line Items]        
Ending Balance: Individually evaluated for impairment 1,436 1,504    
Ending Balance: Collectively evaluated for impairment 465,016 429,486    
Ending Balance: Loans acquired with deteriorated credit quality 894 944    
Total Loans 467,346 431,934    
Ending Balance: Individually evaluated for impairment, related allowance 5 5    
Ending Balance: Collectively evaluated for impairment, related allowance 5,484 3,284    
Ending Balance 5,489 3,289    
Equipment finance        
Financing Receivable, Past Due [Line Items]        
Total Loans 116,421 111,076    
Ending Balance: Individually evaluated for impairment, related allowance 8 10    
Ending Balance 1,257 957 947 987
Equipment finance | Loans and Leases        
Financing Receivable, Past Due [Line Items]        
Ending Balance: Individually evaluated for impairment 19 23    
Ending Balance: Collectively evaluated for impairment 116,402 111,053    
Ending Balance: Loans acquired with deteriorated credit quality 0 0    
Total Loans 116,421 111,076    
Ending Balance: Individually evaluated for impairment, related allowance 8 10    
Ending Balance: Collectively evaluated for impairment, related allowance 1,249 947    
Ending Balance 1,257 957    
Real estate - residential mortgage        
Financing Receivable, Past Due [Line Items]        
Total Loans 334,114 335,191    
Ending Balance: Individually evaluated for impairment, related allowance 2 104    
Ending Balance 1,600 1,725 1,564 1,566
Real estate - residential mortgage | Loans and Leases        
Financing Receivable, Past Due [Line Items]        
Ending Balance: Individually evaluated for impairment 2,179 2,315    
Ending Balance: Collectively evaluated for impairment 331,534 332,486    
Ending Balance: Loans acquired with deteriorated credit quality 401 390    
Total Loans 334,114 335,191    
Ending Balance: Individually evaluated for impairment, related allowance 2 104    
Ending Balance: Collectively evaluated for impairment, related allowance 1,598 1,621    
Ending Balance 1,600 1,725    
Real estate - construction        
Financing Receivable, Past Due [Line Items]        
Total Loans 333,592 335,169    
Ending Balance: Individually evaluated for impairment, related allowance 0 0    
Ending Balance 3,344 2,672 2,887 3,015
Real estate - construction | Loans and Leases        
Financing Receivable, Past Due [Line Items]        
Ending Balance: Individually evaluated for impairment 694 1,663    
Ending Balance: Collectively evaluated for impairment 332,101 332,722    
Ending Balance: Loans acquired with deteriorated credit quality 797 784    
Total Loans 333,592 335,169    
Ending Balance: Individually evaluated for impairment, related allowance 0 0    
Ending Balance: Collectively evaluated for impairment, related allowance 3,344 2,672    
Ending Balance 3,344 2,672    
Home equity and consumer        
Financing Receivable, Past Due [Line Items]        
Total Loans 340,071 337,977    
Ending Balance: Individually evaluated for impairment, related allowance 5 5    
Ending Balance 2,401 2,410 $ 2,474 $ 2,497
Home equity and consumer | Loans and Leases        
Financing Receivable, Past Due [Line Items]        
Ending Balance: Individually evaluated for impairment 638 671    
Ending Balance: Collectively evaluated for impairment 338,917 336,781    
Ending Balance: Loans acquired with deteriorated credit quality 516 525    
Total Loans 340,071 337,977    
Ending Balance: Individually evaluated for impairment, related allowance 5 5    
Ending Balance: Collectively evaluated for impairment, related allowance 2,396 2,405    
Ending Balance $ 2,401 $ 2,410    
v3.20.1
Loans and Other Real Estate - Age Analysis of Past Due Loans, Segregated by Class of Loans (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Financing Receivable, Past Due [Line Items]    
Total Past Due $ 45,201 $ 24,322
Current 5,278,628 5,107,870
Total Loans 5,323,829 5,132,192
Recorded Investment Greater than 89 Days and Still Accruing 99 0
Commercial, secured by real estate    
Financing Receivable, Past Due [Line Items]    
Total Past Due 33,384 14,480
Current 3,701,509 3,569,008
Total Loans 3,734,893 3,583,488
Recorded Investment Greater than 89 Days and Still Accruing 0 0
Commercial, industrial and other    
Financing Receivable, Past Due [Line Items]    
Total Past Due 4,168 1,488
Current 462,284 429,502
Total Loans 466,452 430,990
Recorded Investment Greater than 89 Days and Still Accruing 0 0
Equipment finance    
Financing Receivable, Past Due [Line Items]    
Total Past Due 494 530
Current 115,927 110,546
Total Loans 116,421 111,076
Recorded Investment Greater than 89 Days and Still Accruing 0 0
Real estate - residential mortgage    
Financing Receivable, Past Due [Line Items]    
Total Past Due 3,743 3,464
Current 329,970 331,337
Total Loans 333,713 334,801
Recorded Investment Greater than 89 Days and Still Accruing 0 0
Real estate - construction    
Financing Receivable, Past Due [Line Items]    
Total Past Due 225 967
Current 332,570 333,418
Total Loans 332,795 334,385
Recorded Investment Greater than 89 Days and Still Accruing 0 0
Home equity and consumer    
Financing Receivable, Past Due [Line Items]    
Total Past Due 3,187 3,393
Current 336,368 334,059
Total Loans 339,555 337,452
Recorded Investment Greater than 89 Days and Still Accruing 99 0
30-59 Days Past Due    
Financing Receivable, Past Due [Line Items]    
Total Past Due 18,160 6,808
30-59 Days Past Due | Commercial, secured by real estate    
Financing Receivable, Past Due [Line Items]    
Total Past Due 12,162 3,578
30-59 Days Past Due | Commercial, industrial and other    
Financing Receivable, Past Due [Line Items]    
Total Past Due 2,101 353
30-59 Days Past Due | Equipment finance    
Financing Receivable, Past Due [Line Items]    
Total Past Due 264 166
30-59 Days Past Due | Real estate - residential mortgage    
Financing Receivable, Past Due [Line Items]    
Total Past Due 1,988 1,138
30-59 Days Past Due | Real estate - construction    
Financing Receivable, Past Due [Line Items]    
Total Past Due 0 0
30-59 Days Past Due | Home equity and consumer    
Financing Receivable, Past Due [Line Items]    
Total Past Due 1,645 1,573
60-89 Days Past Due    
Financing Receivable, Past Due [Line Items]    
Total Past Due 9,496 1,889
60-89 Days Past Due | Commercial, secured by real estate    
Financing Receivable, Past Due [Line Items]    
Total Past Due 8,032 1,200
60-89 Days Past Due | Commercial, industrial and other    
Financing Receivable, Past Due [Line Items]    
Total Past Due 1,010 71
60-89 Days Past Due | Equipment finance    
Financing Receivable, Past Due [Line Items]    
Total Past Due 30 80
60-89 Days Past Due | Real estate - residential mortgage    
Financing Receivable, Past Due [Line Items]    
Total Past Due 125 251
60-89 Days Past Due | Real estate - construction    
Financing Receivable, Past Due [Line Items]    
Total Past Due 0 0
60-89 Days Past Due | Home equity and consumer    
Financing Receivable, Past Due [Line Items]    
Total Past Due 299 287
Greater Than 89 Days Past Due    
Financing Receivable, Past Due [Line Items]    
Total Past Due 17,545 15,625
Greater Than 89 Days Past Due | Commercial, secured by real estate    
Financing Receivable, Past Due [Line Items]    
Total Past Due 13,190 9,702
Greater Than 89 Days Past Due | Commercial, industrial and other    
Financing Receivable, Past Due [Line Items]    
Total Past Due 1,057 1,064
Greater Than 89 Days Past Due | Equipment finance    
Financing Receivable, Past Due [Line Items]    
Total Past Due 200 284
Greater Than 89 Days Past Due | Real estate - residential mortgage    
Financing Receivable, Past Due [Line Items]    
Total Past Due 1,630 2,075
Greater Than 89 Days Past Due | Real estate - construction    
Financing Receivable, Past Due [Line Items]    
Total Past Due 225 967
Greater Than 89 Days Past Due | Home equity and consumer    
Financing Receivable, Past Due [Line Items]    
Total Past Due $ 1,243 $ 1,533
v3.20.1
Share-Based Compensation - Option Activity under Stock Option Plans (Detail) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Number of Shares      
Outstanding, beginning of period (in shares) 31,706    
Granted (in shares) 0 0  
Exercised (in shares) 0 0  
Outstanding, end of period (in shares) 31,706    
Options exercisable end of period (in shares) 31,706    
Weighted Average Exercise Price      
Outstanding, beginning of period (in usd per share) $ 7.76    
Granted (in usd per share) 0    
Exercised (in usd per share) 0    
Outstanding, end of period (in usd per share) 7.76    
Options exercisable at end of period (in usd per share) $ 7.76    
Weighted Average Remaining Contractual Term (in years)      
Outstanding 10 days 17 days  
Options exercisable 10 days    
Aggregate Intrinsic Value      
Outstanding $ 96,811   $ 305,120
Options exercisable, end of period $ 96,811    
v3.20.1
Fair Value Measurement and fair Value of Financial Instruments - Carrying Values and Fair Values of Financial Instruments (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Financial Assets:    
Investment securities held to maturity, Carrying Value $ 115,752 $ 123,975
Investment securities held to maturity, fair value 119,023 124,904
Federal Home Loan Bank and other membership bank stocks, Carrying Value 28,575 22,505
Federal Home Loan Bank and other membership bank stocks, Fair Value 28,575 22,505
Loans, net Carrying Value 5,279,739 5,097,820
Loans, net Fair Value 5,229,776 5,194,065
Financial Liabilities:    
Certificates of deposit, Carrying value 1,084,046 870,804
Certificates of deposit, Fair Value 1,084,580 871,418
Other borrowings, Carrying value 140,715 165,816
Other borrowings, Fair Value 144,658 166,505
Subordinated debentures, Carrying Value 118,229 118,220
Subordinated debentures, Fair Value 112,272 117,992
Quoted Prices in Active Markets for Identical Assets (Level 1)    
Financial Assets:    
Investment securities held to maturity, fair value 0 0
Federal Home Loan Bank and other membership bank stocks, Fair Value 0 0
Loans, net Fair Value 0 0
Financial Liabilities:    
Certificates of deposit, Fair Value 0 0
Other borrowings, Fair Value 0 0
Subordinated debentures, Fair Value 0 0
Significant Other Observable Inputs (Level 2)    
Financial Assets:    
Investment securities held to maturity, fair value 116,448 121,503
Federal Home Loan Bank and other membership bank stocks, Fair Value 28,575 22,505
Loans, net Fair Value 0 0
Financial Liabilities:    
Certificates of deposit, Fair Value 1,084,580 871,418
Other borrowings, Fair Value 144,658 166,505
Subordinated debentures, Fair Value 0 0
Significant Unobservable Inputs (Level 3)    
Financial Assets:    
Investment securities held to maturity, fair value 2,575 3,401
Federal Home Loan Bank and other membership bank stocks, Fair Value 0 0
Loans, net Fair Value 5,229,776 5,194,065
Financial Liabilities:    
Certificates of deposit, Fair Value 0 0
Other borrowings, Fair Value 0 0
Subordinated debentures, Fair Value $ 112,272 $ 117,992
v3.20.1
Comprehensive Income
3 Months Ended
Mar. 31, 2020
Equity [Abstract]  
Comprehensive Income COMPREHENSIVE INCOME
The components of other comprehensive income (loss) are as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
March 31, 2020
 
March 31, 2019
(in thousands)
Before Tax Amount
 
Tax Benefit (Expense)
 
Net of Tax Amount
 
Before Tax Amount
 
Tax Benefit
(Expense)
 
Net of Tax Amount
Net unrealized gains (losses) on available for sale securities:
 
 
 
 
 
 
 
 
 
 
 
Net unrealized holding gains arising during period
$
9,796

 
$
(2,512
)
 
$
7,284

 
$
6,109

 
$
(1,746
)
 
$
4,363

Reclassification adjustment for net gains arising during the period
(342
)
 
88

 
(254
)
 

 

 

Net unrealized gains
9,454

 
(2,424
)
 
7,030

 
6,109

 
(1,746
)
 
4,363

Unrealized losses on derivatives
(478
)
 
141

 
(337
)
 
(271
)
 
57

 
(214
)
Other comprehensive income, net
$
8,976

 
$
(2,283
)
 
$
6,693

 
$
5,838

 
$
(1,689
)
 
$
4,149

The following tables show the changes in the balances of each of the components of other comprehensive income for the periods presented, net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended March 31, 2020
 
For the Three Months Ended March 31, 2019
(in thousands)
Unrealized Gains
(Losses) on
Available for  Sale
Securities
 
Unrealized
Gains (Losses)
on Derivatives
 
Pension Items
 
Total
 
Unrealized Losses on
Available for  Sale
Securities
 
Unrealized
Gains 
on Derivatives
 
Pension Items
 
Total
Beginning balance
$
1,936

 
$
317

 
$
(5
)
 
$
2,248

 
$
(8,782
)
 
$
903

 
$
41

 
$
(7,838
)
Other comprehensive income (loss) before classifications
7,284

 
(337
)
 

 
6,947

 
4,363

 
(214
)
 

 
4,149

Amounts reclassified from accumulated other comprehensive income
(254
)
 

 

 
(254
)
 

 

 

 

Net current period other comprehensive income (loss)
7,030

 
(337
)
 

 
6,693

 
4,363

 
(214
)
 

 
4,149

Ending balance
$
8,966

 
$
(20
)
 
$
(5
)
 
$
8,941

 
$
(4,419
)
 
$
689

 
$
41

 
$
(3,689
)

v3.20.1
Leases
3 Months Ended
Mar. 31, 2020
Leases [Abstract]  
Leases LEASES
The Company leases certain premises and equipment under operating leases. Portions of certain properties are subleased for terms extending through 2024. At March 31, 2020, the Company had lease liabilities totaling $19.1 million and right-of-use assets totaling $17.6 million related to these leases. At December 31, 2019, the Company had lease liabilities totaling $19.8 million and right-of-use assets totaling $18.3 million. The calculated amount of the right-of-use asset and lease liabilities are impacted by the length of the lease term and the discount rate used to calculate the present value of the minimum lease payments. The Company's lease agreements often include one or more options to renew at the Company's discretion. If at lease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the right-of-use asset and lease liability. The Company uses its incremental borrowing rate at lease inception, on a collateralized basis, over a similar term. For leases existing prior to January 1, 2019, the rate for the remaining lease term as of January 1, 2019 was used.
For the three months ended March 31, 2020, the weighted average remaining lease term for operating leases was 10.25 years and the weighted average discount rate used in the measurement of operating lease liabilities was 3.52%.
As the Company elected not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease cost primarily represents variable payments such as common area maintenance and utilities. Lease costs were as follows:
 
 
For the Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Operating lease cost
 
$
828

 
$
820

Short-term lease cost
 

 

Variable lease cost
 
32

 
35

Sublease income
 
(31
)
 
(31
)
Net lease cost
 
$
829

 
$
824


The table below presents other information on the Company's operating leases for the three months ended March 31, 2020:
(in thousands)
 
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
689

Right-of-use asset obtained in exchange for new operating lease liabilities
$


There were no sale and leaseback transactions, leveraged leases or lease transactions with related parties during the three months ended March 31, 2020. At March 31, 2020, the Company had no leases that had not yet commenced.
A maturity analysis of operating lease liabilities and a reconciliation of the undiscounted cash flows to the total operating lease liability at March 31, 2020 are as follows:
(in thousands)
 
 
Within one year
 
$
3,238

After one year but within three years
 
5,482

After three years but within five years
 
4,339

After 5 years
 
10,096

Total undiscounted cash flows
 
23,155

Discount on cash flows
 
(4,029
)
Total lease liability
 
$
19,126


v3.20.1
Revenue Recognition
3 Months Ended
Mar. 31, 2020
Revenue from Contract with Customer [Abstract]  
Revenue Recognition REVENUE RECOGNITION
The Company’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.
The Company’s additional source of income, also referred to as noninterest income, is generated from deposit related fees, interchange fees, loan fees, merchant fees, loan sales, investment services and other miscellaneous income and is largely based on contracts with customers. In these cases, the Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. The Company considers a customer to be any party to which the Company will provide goods or services that are an output of the Company’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 the Company’s financial statements are consolidated.
Generally, the Company 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, the Company does not have contract assets, contract liabilities or related receivable accounts for contracts with customers. In cases where collectability is a concern, the Company does not record revenue.
Generally, the pricing of transactions between the Company 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.
The Company primarily operates in one geographic region, Northern and Central New Jersey and contiguous areas. Therefore, all significant operating decisions are based upon analysis of the Company as one operating segment or unit.
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 the Company’s ordinary activities primarily relates to mortgage servicing rights, gains/losses on the sale of investment securities, gains/losses on the sale of other real estate owned, gains/losses on the sale of property, plant and equipment, and income from bank owned life insurance.
The following table sets forth the components of noninterest income for the three months ended March 31, 2020 and 2019:
 
For the Three Months Ended March 31,
(in thousands)
2020
 
2019
Deposit Related Fees and Charges:
 
 
 
  Debit card interchange income
$
1,223

 
$
1,218

  Overdraft charges
953

 
996

  ATM service charges
167

 
184

  Demand deposit fees and charges
134

 
143

  Savings service charges
23

 
32

Total
2,500

 
2,573

Commissions and Fees:

 

  Loan fees
340

 
348

  Wire transfer charges
308

 
267

  Investment services income
523

 
352

  Merchant fees
248

 
184

  Commissions from sales of checks
83

 
103

  Safe deposit income
86

 
91

  Other income
51

 
61

Total
1,639

 
1,406

Gains on Sales of Loans
415

 
371

Other Income:

 

  Gains on customer swap transactions
2,843

 
199

  Title insurance (loss) income
(4
)
 
90

  Other income
97

 
61

Total
2,936

 
350

Revenue not from contracts with customers
521

 
1,023

Total Noninterest Income
$
8,011

 
$
5,723

Timing of Revenue Recognition:

 

  Products and services transferred at a point in time
7,471

 
4,681

  Products and services transferred over time
19

 
19

  Revenue not from contracts with customers
521

 
1,023

Total Noninterest Income
$
8,011

 
$
5,723


v3.20.1
Share-Based Compensation (Tables)
3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Summary of Company's Restricted Stock Activity
The following is a summary of the Company’s RSU activity during the three months ended March 31, 2020:
 
Number of
Shares
 
Weighted
Average
Price
Outstanding, January 1, 2020
300,629

 
$
18.13

Granted
169,169

 
15.56

Vested
(84,082
)
 
18.74

Forfeited
(5,416
)
 
18.45

Outstanding, March 31, 2020
380,300

 
$
16.85


The following is a summary of the Company’s restricted stock activity during the three months ended March 31, 2020:
 
Number of
Shares
 
Weighted
Average
Price
Outstanding, January 1, 2020
13,110

 
$
15.93

Granted
13,041

 
16.87

Vested
(13,052
)
 
15.96

Outstanding, March 31, 2020
13,099

 
$
16.83


Option Activity under the Company's Stock Option Plans
A summary of the activity under the Company’s stock option plans as of March 31, 2020 is as follows:
 
Number of
Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic
Value
Outstanding, January 1, 2019
31,706

 
$
7.76

 
0.58
 
$
305,120

Granted

 

 
 
 
 
Exercised

 

 
 
 
 
Outstanding, March 31, 2020
31,706

 
$
7.76

 
0.33
 
$
96,811

Options exercisable at March 31, 2020
31,706

 
$
7.76

 
0.33
 
$
96,811


v3.20.1
Acquisitions - Summary of Loans Acquired (Details) - Financial Asset Acquired with Credit Deterioration - Highlands Bancorp, Inc.
$ in Thousands
Jan. 04, 2019
USD ($)
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period [Line Items]  
Contractually required principal and interest at acquisition $ 22,363
Contractual cash flows not expected to be collected (non-accretable difference) 7,129
Expected cash flows at acquisition 15,234
Interest component of expected cash flows (accretable difference) 1,431
Fair value of acquired loans $ 13,803
v3.20.1
Loans and Other Real Estate - Summary of Restructured Loans within Previous 12 Months that have Subsequently Defaulted (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
Contract
Mar. 31, 2019
USD ($)
Contract
Financing Receivable, Troubled Debt Restructuring [Line Items]    
Number of Contracts | Contract 2 0
Financing receivable, modifications, subsequent default, recorded investment | $ $ 83 $ 0
Home equity and consumer    
Financing Receivable, Troubled Debt Restructuring [Line Items]    
Number of Contracts | Contract 2 0
Financing receivable, modifications, subsequent default, recorded investment | $ $ 83 $ 0
v3.20.1
Loans and Other Real Estate - Impaired Loans with and without Specific Allowances (Detail) - USD ($)
$ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Financing Receivable, Impaired [Line Items]    
Recorded Investment in Impaired Loans $ 31,934 $ 22,124
Contractual Unpaid Principal Balance 32,846 22,776
Specific Allowance 222 352
Average Investment in Impaired Loans 22,055 18,342
Interest Income Recognized 97 426
Commercial, secured by real estate    
Financing Receivable, Impaired [Line Items]    
Loans without related allowance, Recorded Investment in Impaired Loans 23,705 12,478
Loans with related allowance, Recorded Investment in Impaired Loans 3,263 3,470
Recorded Investment in Impaired Loans 26,968 15,948
Loans without related allowance, Contractual Unpaid Principal Balance 23,965 12,630
Loans with related allowance, Contractual Unpaid Principal Balance 3,505 3,706
Contractual Unpaid Principal Balance 27,470 16,336
Specific Allowance 202 228
Loans without related allowance, Average Investment in Impaired Loans 13,594 10,386
Loans with related allowance, Average Investment in Impaired Loans 3,406 4,554
Average Investment in Impaired Loans 17,000 14,940
Loans without related allowance, Interest Income Recognized 30 164
Loans with related allowance, Interest Income Recognized 38 190
Interest Income Recognized 68 354
Commercial, industrial and other    
Financing Receivable, Impaired [Line Items]    
Loans without related allowance, Recorded Investment in Impaired Loans 1,330 1,391
Loans with related allowance, Recorded Investment in Impaired Loans 106 113
Recorded Investment in Impaired Loans 1,436 1,504
Loans without related allowance, Contractual Unpaid Principal Balance 1,333 1,381
Loans with related allowance, Contractual Unpaid Principal Balance 105 113
Contractual Unpaid Principal Balance 1,438 1,494
Specific Allowance 5 5
Loans without related allowance, Average Investment in Impaired Loans 1,347 1,334
Loans with related allowance, Average Investment in Impaired Loans 105 113
Average Investment in Impaired Loans 1,452 1,447
Loans without related allowance, Interest Income Recognized 4 16
Loans with related allowance, Interest Income Recognized 2 6
Interest Income Recognized 6 22
Equipment finance    
Financing Receivable, Impaired [Line Items]    
Loans without related allowance, Recorded Investment in Impaired Loans 0 0
Loans with related allowance, Recorded Investment in Impaired Loans 19 23
Recorded Investment in Impaired Loans 19 23
Loans without related allowance, Contractual Unpaid Principal Balance 0 0
Loans with related allowance, Contractual Unpaid Principal Balance 19 23
Contractual Unpaid Principal Balance 19 23
Specific Allowance 8 10
Loans without related allowance, Average Investment in Impaired Loans 0 0
Loans with related allowance, Average Investment in Impaired Loans 21 21
Average Investment in Impaired Loans 21 21
Loans without related allowance, Interest Income Recognized 0 0
Loans with related allowance, Interest Income Recognized 0 0
Interest Income Recognized 0 0
Real estate - residential mortgage    
Financing Receivable, Impaired [Line Items]    
Loans without related allowance, Recorded Investment in Impaired Loans 1,525 803
Loans with related allowance, Recorded Investment in Impaired Loans 654 1,512
Recorded Investment in Impaired Loans 2,179 2,315
Loans without related allowance, Contractual Unpaid Principal Balance 1,651 815
Loans with related allowance, Contractual Unpaid Principal Balance 835 1,682
Contractual Unpaid Principal Balance 2,486 2,497
Specific Allowance 2 104
Loans without related allowance, Average Investment in Impaired Loans 1,581 233
Loans with related allowance, Average Investment in Impaired Loans 659 926
Average Investment in Impaired Loans 2,240 1,159
Loans without related allowance, Interest Income Recognized 0 0
Loans with related allowance, Interest Income Recognized 5 19
Interest Income Recognized 5 19
Real estate - construction    
Financing Receivable, Impaired [Line Items]    
Loans without related allowance, Recorded Investment in Impaired Loans 694 1,663
Loans with related allowance, Recorded Investment in Impaired Loans 0 0
Recorded Investment in Impaired Loans 694 1,663
Loans without related allowance, Contractual Unpaid Principal Balance 694 1,661
Loans with related allowance, Contractual Unpaid Principal Balance 0 0
Contractual Unpaid Principal Balance 694 1,661
Specific Allowance 0 0
Loans without related allowance, Average Investment in Impaired Loans 702 82
Loans with related allowance, Average Investment in Impaired Loans 0 0
Average Investment in Impaired Loans 702 82
Loans without related allowance, Interest Income Recognized 10 2
Loans with related allowance, Interest Income Recognized 0 0
Interest Income Recognized 10 2
Home equity and consumer    
Financing Receivable, Impaired [Line Items]    
Loans without related allowance, Recorded Investment in Impaired Loans 0 0
Loans with related allowance, Recorded Investment in Impaired Loans 638 671
Recorded Investment in Impaired Loans 638 671
Loans without related allowance, Contractual Unpaid Principal Balance 0 0
Loans with related allowance, Contractual Unpaid Principal Balance 739 765
Contractual Unpaid Principal Balance 739 765
Specific Allowance 5 5
Loans without related allowance, Average Investment in Impaired Loans 0 0
Loans with related allowance, Average Investment in Impaired Loans 640 693
Average Investment in Impaired Loans 640 693
Loans without related allowance, Interest Income Recognized 0 0
Loans with related allowance, Interest Income Recognized 8 29
Interest Income Recognized $ 8 $ 29
v3.20.1
Share-Based Compensation - Summary of Restricted Stock Activity (Detail)
3 Months Ended
Mar. 31, 2020
$ / shares
shares
Restricted Stock  
Number of Shares  
Balance at beginning of period (in shares) | shares 13,110
Granted (in shares) | shares 13,041
Vested (in shares) | shares (13,052)
Balance at end of period (in shares) | shares 13,099
Weighted Average Price  
Balance at beginning of period (in usd per share) | $ / shares $ 15.93
Granted (in usd per share) | $ / shares 16.87
Vested (in usd per share) | $ / shares 15.96
Balance of end of period (in usd per share) | $ / shares $ 16.83
RSUs  
Number of Shares  
Balance at beginning of period (in shares) | shares 300,629
Granted (in shares) | shares 169,169
Vested (in shares) | shares (84,082)
Forfeited (in shares) | shares (5,416)
Balance at end of period (in shares) | shares 380,300
Weighted Average Price  
Balance at beginning of period (in usd per share) | $ / shares $ 18.13
Granted (in usd per share) | $ / shares 15.56
Vested (in usd per share) | $ / shares 18.74
Forfeited (in usd per share) | $ / shares 18.45
Balance of end of period (in usd per share) | $ / shares $ 16.85
v3.20.1
Fair Value Measurement and fair Value of Financial Instruments - Additional Information (Detail) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Subordinate debt $ 118,229 $ 118,220
Non-rated    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Short-term municipal bond 75  
Subordinate debt $ 2,500  
Minimum    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Discount rates 5.00%  
Capitalization rates 4.00%  
Maximum    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Discount rates 11.00%  
Capitalization rates 9.00%  
v3.20.1
Consolidated Statements of Income (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
INTEREST INCOME    
Loans and fees $ 57,857 $ 57,642
Federal funds sold and interest-bearing deposits with banks 159 254
Taxable investment securities and other 5,229 4,873
Tax-exempt investment securities 332 408
TOTAL INTEREST INCOME 63,577 63,177
INTEREST EXPENSE    
Deposits 10,863 11,497
Federal funds purchased and securities sold under agreements to repurchase 429 608
Other borrowings 2,386 2,466
TOTAL INTEREST EXPENSE 13,678 14,571
NET INTEREST INCOME 49,899 48,606
Provision for loan losses 9,223 508
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 40,676 48,098
NONINTEREST INCOME    
Service charges on deposit accounts 2,500 2,573
Commissions and fees 1,640 1,412
Income on bank owned life insurance 665 683
(Loss) gain on equity securities (653) 353
Gains on sales of loans 415 371
Gains on sales of investment securities, net 342 0
Gain (Loss) on Sales of Investment Securities, Net 342 0
Swap income 2,843 199
Other income 259 132
Total Noninterest Income 8,011 5,723
NONINTEREST EXPENSE    
Salaries and employee benefits 20,235 19,231
Net occupancy expense 2,836 2,954
Furniture and equipment 2,560 2,116
FDIC insurance expense 298 450
Stationery, supplies and postage 399 447
Marketing expense 227 469
Data processing expense 1,253 1,327
Telecommunications expense 444 493
ATM and debit card expense 587 602
Core deposit intangible amortization 265 304
Other real estate and repossessed asset expense 12 86
Long-term debt prepayment fee 356 0
Merger related expenses 0 2,860
Other expenses 3,032 2,645
TOTAL NONINTEREST EXPENSE 32,504 33,984
Income before provision for income taxes 16,183 19,837
Provision for income taxes 3,791 4,211
NET INCOME $ 12,392 $ 15,626
PER SHARE OF COMMON STOCK    
Basic earnings (in usd per share) $ 0.24 $ 0.31
Diluted earnings (in usd per share) 0.24 0.31
Common stock, dividends price per share (in usd per share) $ 0.125 $ 0.115
v3.20.1
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:    
NET INCOME $ 12,392,000 $ 15,626,000
Adjustments to reconcile net income to net cash provided by operating activities:    
Net amortization of premiums, discounts and deferred loan fees and costs 1,109,000 497,000
Depreciation and amortization 855,000 2,138,000
Amortization of intangible assets 265,000 304,000
Amortization of operating lease right-of-use assets 661,000 652,000
Provision for loan losses 9,223,000 508,000
Loans originated for sale (14,634,000) (8,931,000)
Proceeds from sales of loans held for sale 13,694,000 10,928,000
Gains on sales of investment securities, net (342,000) 0
Change in market value of equity securities 653,000 (353,000)
Gains on sales of loans held for sale (415,000) (371,000)
Gains on other real estate and other repossessed assets (86,000) (36,000)
Losses on sales of premises and equipment 14,000 85,000
Long-term debt prepayment penalty 356,000 0
Stock-based compensation 847,000 696,000
Excess tax (deficiencies) benefits (113,000) 131,000
Increase in other assets (64,307,000) (2,590,000)
Increase in other liabilities 64,225,000 959,000
NET CASH PROVIDED BY OPERATING ACTIVITIES 24,397,000 20,243,000
CASH FLOWS FROM INVESTING ACTIVITIES:    
Net cash acquired in acquisitions 0 13,454,000
Proceeds from repayments and maturities of available for sale securities 70,134,000 42,074,000
Proceeds from repayments and maturities of held to maturity securities 8,076,000 4,153,000
Proceeds from sales of equity securities 0 1,138,000
Sales proceeds 94,696,000 0
Purchase of available for sale securities (213,062,000) (36,085,000)
Purchase of held to maturity securities 0 (8,510,000)
Purchase of equity securities (1,082,000) (95,000)
Proceeds from redemptions of Federal Home Loan Bank stock 41,450,000 25,792,000
Purchases of Federal Home Loan Bank stock (47,520,000) (27,675,000)
Net increase in loans (191,014,000) (38,506,000)
Proceeds from sales of other real estate and repossessed assets 649,000 253,000
Proceeds from dispositions and sales of premises and equipment 0 953,000
Purchases of premises and equipment (1,605,000) (1,793,000)
NET CASH USED IN INVESTING ACTIVITIES (239,278,000) (24,847,000)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Net increase in deposits 161,448,000 34,545,000
Increase in federal funds purchased and securities sold under agreements to repurchase 90,427,000 27,361,000
Repayments of other borrowings (25,456,000) (33,133,000)
Purchase of treasury stock (1,452,000) 0
Retirement of restricted stock (457,000) (571,000)
Dividends paid (6,364,000) (5,838,000)
NET CASH PROVIDED BY FINANCING ACTIVITIES 218,146,000 22,364,000
Net increase in cash and cash equivalents 3,265,000 17,760,000
Cash and cash equivalents, beginning of period 282,371,000 208,599,000
CASH AND CASH EQUIVALENTS, END OF PERIOD 285,636,000 226,359,000
Supplemental schedule of non-cash investing and financing activities:    
Cash paid during the period for income taxes 368,000 230,000
Cash paid during the period for interest 12,973,000 13,001,000
Transfer of loans into other repossessed assets and other real estate owned (393,000) 102,000
Initial recognition of operating lease right-of-use assets 0 18,651,000
Initial recognition of operating lease liabilities 0 20,203,000
Non-cash assets acquired:    
Federal Home Loan Bank stock 0 1,767,000
Investment securities 0 22,734,000
Loans, including loans held for sale 0 426,118,000
Goodwill and other intangible assets, net 0 23,125,000
Other assets 0 9,304,000
Total non-cash assets acquired 0 483,048,000
Deposits 0 409,638,000
Other borrowings 0 40,957,000
Other liabilities 0 2,490,000
Total liabilities assumed 0 453,085,000
Common stock issued $ 0 $ 43,417,000
v3.20.1
Investment Securities - Reconciliation of Held-to-Maturity Securities (Detail) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Schedule of Held-to-maturity Securities [Line Items]    
Amortized Cost $ 115,752 $ 123,975
Gross Unrealized Gains 3,271 1,115
Gross Unrealized Losses 0 (186)
Fair Value 119,023 124,904
U.S. government agencies    
Schedule of Held-to-maturity Securities [Line Items]    
Amortized Cost 31,207 31,335
Gross Unrealized Gains 901 182
Gross Unrealized Losses 0 (8)
Fair Value 32,108 31,509
Mortgage-backed securities, residential    
Schedule of Held-to-maturity Securities [Line Items]    
Amortized Cost 70,999 76,229
Gross Unrealized Gains 2,162 734
Gross Unrealized Losses 0 (176)
Fair Value 73,161 76,787
Mortgage-backed securities, multifamily    
Schedule of Held-to-maturity Securities [Line Items]    
Amortized Cost 740 1,750
Gross Unrealized Gains 44 4
Gross Unrealized Losses 0 (2)
Fair Value 784 1,752
Obligations of states and political subdivisions    
Schedule of Held-to-maturity Securities [Line Items]    
Amortized Cost 10,306 12,161
Gross Unrealized Gains 164 195
Gross Unrealized Losses 0 0
Fair Value 10,470 12,356
Debt securities    
Schedule of Held-to-maturity Securities [Line Items]    
Amortized Cost 2,500 2,500
Gross Unrealized Gains 0 0
Gross Unrealized Losses 0 0
Fair Value $ 2,500 $ 2,500
v3.20.1
Investment Securities - Reconciliation of Available-for-Sale and Held-to-Maturity Securities in Continuous Unrealized Loss Position (Detail)
$ in Thousands
Mar. 31, 2020
USD ($)
Security
Dec. 31, 2019
USD ($)
Security
Investment Holdings [Line Items]    
Available for Sale, Less Than 12 Months, Fair Value $ 194,669 $ 145,431
Available for Sale, Less Than 12 Months, Unrealized Losses 3,827 720
Available for Sale, 12 Months or Longer, Fair Value 31,792 152,543
Available for Sale, 12 Months or Longer, Unrealized Losses $ 679 $ 1,425
Available for Sale, Number of Securities (in shares) | Security 54 105
Available for Sale, Total, Fair Value $ 226,461 $ 297,974
Available for Sale, Total, Unrealized Losses 4,506 2,145
Held to Maturity, Less Than 12 Months, Fair Value   15,657
Held to Maturity, Less Than 12 Months, Unrealized Losses   52
Held to Maturity, 12 Months or Longer, Fair Value   16,692
Held to Maturity, 12 Months or Longer, Unrealized Losses   $ 134
Held to Maturity, Number of Securities (in shares) | Security   19
Held to Maturity, Total, Fair Value   $ 32,349
Held to Maturity, Total, Unrealized Losses   186
U.S. Treasury and U.S. government agencies    
Investment Holdings [Line Items]    
Available for Sale, Less Than 12 Months, Fair Value 74,745 11,625
Available for Sale, Less Than 12 Months, Unrealized Losses 28 39
Available for Sale, 12 Months or Longer, Fair Value 19,355 41,617
Available for Sale, 12 Months or Longer, Unrealized Losses $ 291 $ 397
Available for Sale, Number of Securities (in shares) | Security 11 11
Available for Sale, Total, Fair Value $ 94,100 $ 53,242
Available for Sale, Total, Unrealized Losses 319 436
Held to Maturity, Less Than 12 Months, Fair Value   3,195
Held to Maturity, Less Than 12 Months, Unrealized Losses   6
Held to Maturity, 12 Months or Longer, Fair Value   5,102
Held to Maturity, 12 Months or Longer, Unrealized Losses   $ 2
Held to Maturity, Number of Securities (in shares) | Security   2
Held to Maturity, Total, Fair Value   $ 8,297
Held to Maturity, Total, Unrealized Losses   8
Mortgage-backed securities, residential    
Investment Holdings [Line Items]    
Available for Sale, Less Than 12 Months, Fair Value 51,693 125,782
Available for Sale, Less Than 12 Months, Unrealized Losses 919 561
Available for Sale, 12 Months or Longer, Fair Value 8,180 99,489
Available for Sale, 12 Months or Longer, Unrealized Losses $ 386 $ 990
Available for Sale, Number of Securities (in shares) | Security 24 86
Available for Sale, Total, Fair Value $ 59,873 $ 225,271
Available for Sale, Total, Unrealized Losses 1,305 1,551
Held to Maturity, Less Than 12 Months, Fair Value   12,462
Held to Maturity, Less Than 12 Months, Unrealized Losses   46
Held to Maturity, 12 Months or Longer, Fair Value   10,592
Held to Maturity, 12 Months or Longer, Unrealized Losses   $ 130
Held to Maturity, Number of Securities (in shares) | Security   16
Held to Maturity, Total, Fair Value   $ 23,054
Held to Maturity, Total, Unrealized Losses   176
Mortgage-backed securities, multifamily    
Investment Holdings [Line Items]    
Available for Sale, Less Than 12 Months, Fair Value 2,801 7,651
Available for Sale, Less Than 12 Months, Unrealized Losses 16 118
Available for Sale, 12 Months or Longer, Fair Value 4,257 4,878
Available for Sale, 12 Months or Longer, Unrealized Losses $ 2 $ 5
Available for Sale, Number of Securities (in shares) | Security 2 3
Available for Sale, Total, Fair Value $ 7,058 $ 12,529
Available for Sale, Total, Unrealized Losses 18 123
Held to Maturity, Less Than 12 Months, Fair Value   0
Held to Maturity, Less Than 12 Months, Unrealized Losses   0
Held to Maturity, 12 Months or Longer, Fair Value   998
Held to Maturity, 12 Months or Longer, Unrealized Losses   $ 2
Held to Maturity, Number of Securities (in shares) | Security   1
Held to Maturity, Total, Fair Value   $ 998
Held to Maturity, Total, Unrealized Losses   2
Asset-backed securities    
Investment Holdings [Line Items]    
Available for Sale, Less Than 12 Months, Fair Value 41,112  
Available for Sale, Less Than 12 Months, Unrealized Losses 1,951  
Available for Sale, 12 Months or Longer, Fair Value 0  
Available for Sale, 12 Months or Longer, Unrealized Losses $ 0  
Available for Sale, Number of Securities (in shares) | Security 6  
Available for Sale, Total, Fair Value $ 41,112  
Available for Sale, Total, Unrealized Losses 1,951  
Obligations of states and political subdivisions    
Investment Holdings [Line Items]    
Available for Sale, Less Than 12 Months, Fair Value 24,318 373
Available for Sale, Less Than 12 Months, Unrealized Losses 913 2
Available for Sale, 12 Months or Longer, Fair Value 0 6,559
Available for Sale, 12 Months or Longer, Unrealized Losses $ 0 $ 33
Available for Sale, Number of Securities (in shares) | Security 11 5
Available for Sale, Total, Fair Value $ 24,318 $ 6,932
Available for Sale, Total, Unrealized Losses $ 913 $ 35
v3.20.1
Share-Based Compensation - Additional Information (Detail) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense $ 847,000 $ 696,000
Options granted (in shares) 0 0
Options exercised (in shares) 0 0
Restricted Stock    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Granted (in usd per share) $ 16.87  
Granted (in shares) 13,041  
Restricted Stock | 2018 Omnibus Equity Incentive Plan    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Share-based compensation expense $ 54,000 $ 55,000
Unrecognized compensation cost $ 166,000  
Unrecognized compensation expense, period of recognition 9 months 14 days  
Restricted Stock | 2018 Omnibus Equity Incentive Plan | Non-Employee Directors    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Shares granted (in shares) 13,041 13,052
Granted (in usd per share) $ 16.87 $ 15.96
Vesting period 1 year 1 year
Share-based compensation expense $ 220,000 $ 208,000
RSUs    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Granted (in usd per share) $ 15.56  
Unrecognized compensation cost $ 4,100,000  
Unrecognized compensation expense, period of recognition 1 year 10 months 17 days  
Granted (in shares) 169,169  
RSUs | 2018 Omnibus Equity Incentive Plan    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Granted (in usd per share) $ 15.56 $ 16.66
Vesting period 3 years 3 years
Share-based compensation expense $ 877,000 $ 708,000
Share-based compensation expense $ 794,000 $ 640,000
Granted (in shares) 169,169 127,559
RSUs | 2018 Omnibus Equity Incentive Plan | Minimum    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Vesting period 2 years  
RSUs | 2018 Omnibus Equity Incentive Plan | Maximum    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Vesting period 3 years  
Stock Options    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Unrecognized compensation cost $ 0  
v3.20.1
Goodwill and Intangible Assets - Schedule of Estimated Future Amortization Expense (Detail)
$ in Thousands
Mar. 31, 2020
USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]  
2020 $ 760
2021 868
2022 711
2023 554
2024 425
2025 $ 317
v3.20.1
Leases - Maturity analysis of operating lease liabilities (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Leases [Abstract]    
Within one year $ 3,238  
After one year but within three years 5,482  
After three years but within five years 4,339  
After 5 years 10,096  
Total undiscounted cash flows 23,155  
Discount on cash flows (4,029)  
Operating lease liabilities $ 19,126 $ 19,814
v3.20.1
Loans and Other Real Estate (Tables)
3 Months Ended
Mar. 31, 2020
Receivables [Abstract]  
Schedule of Loans Receivable
The following sets forth the composition of the Company’s loan portfolio:
(in thousands)
March 31, 2020
 
December 31, 2019
Commercial, secured by real estate
$
3,740,319

 
$
3,589,593

Commercial, industrial and other
467,346

 
431,934

Equipment finance
116,421

 
111,076

Real estate - residential mortgage
334,114

 
335,191

Real estate - construction
333,592

 
335,169

Home equity and consumer
340,071

 
337,977

Total loans
5,331,863

 
5,140,940

Less: deferred fees
(3,240
)
 
(3,117
)
Loans, net of deferred fees
$
5,328,623

 
$
5,137,823


The following table presents changes in the accretable yield for PCI loans:
 
For the Three Months Ended
(in thousands)
March 31, 2020
 
March 31, 2019
 
 
 
 
Balance, beginning of period
$
363

 
$
81

Acquisitions

 
1,420

Accretion
(144
)
 
(193
)
Net reclassification non-accretable difference
72

 
30

Balance, end of period
$
291

 
$
1,338


Schedule of Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period
The following is a summary of the credit impaired loans acquired in the Highlands acquisition as of the closing date.
(in thousands)
 
Contractually required principal and interest at acquisition
$
22,363

Contractual cash flows not expected to be collected (non-accretable difference)
7,129

Expected cash flows at acquisition
$
15,234

Interest component of expected cash flows (accretable difference)
1,431

Fair value of acquired loans
$
13,803


The following sets forth the carrying value of the purchased credit impaired ("PCI") loans acquired in mergers:
(in thousands)
March 31, 2020
 
December 31, 2019
Acquisition
 
 
 
  Highlands
$
7,494

 
$
8,194

  Pascack Community Bank ("Pascack")
106

 
113

  Harmony Bank ("Harmony")
434

 
441

Total
$
8,034

 
$
8,748


Company's Non-Performing Assets and its Accruing Troubled Debt Restructurings, Excluding PCI Loans
The following schedule sets forth certain information regarding the Company’s non-performing assets and its accruing troubled debt restructurings, excluding PCI loans:
(in thousands)
March 31, 2020
 
December 31, 2019
Commercial, secured by real estate
$
23,851

 
$
12,314

Commercial, industrial and other
1,909

 
1,539

Equipment finance
199

 
284

Real estate - residential mortgage
2,837

 
3,428

Real estate - construction
919

 
967

Home equity and consumer
2,689

 
2,606

Total non-accrual loans
$
32,404

 
$
21,138

Other real estate and other repossessed assets
393

 
563

TOTAL NON-PERFORMING ASSETS
$
32,797

 
$
21,701

Troubled debt restructurings, still accruing
$
4,719

 
$
5,650


Age Analysis of Past Due Loans, Segregated by Class of Loans
An age analysis of past due loans, excluding PCI loans which are accounted for on a pool basis, segregated by class of loans as of March 31, 2020 and December 31, 2019, is as follows:
(in thousands)
30-59 Days Past Due
 
60-89 Days Past Due
 
Greater Than 89 Days Past Due
 
Total Past Due
 
Current
 
Total Loans
 
Recorded Investment  Greater than 89 Days and Still Accruing
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
12,162

 
$
8,032

 
$
13,190

 
$
33,384

 
$
3,701,509

 
$
3,734,893

 
$

Commercial, industrial and other
2,101

 
1,010

 
1,057

 
4,168

 
462,284

 
466,452

 

Equipment finance
264

 
30

 
200

 
494

 
115,927

 
116,421

 

Real estate - residential mortgage
1,988

 
125

 
1,630

 
3,743

 
329,970

 
333,713

 

Real estate - construction

 

 
225

 
225

 
332,570

 
332,795

 

Home equity and consumer
1,645

 
299

 
1,243

 
3,187

 
336,368

 
339,555

 
99

 
$
18,160

 
$
9,496

 
$
17,545

 
$
45,201

 
$
5,278,628

 
$
5,323,829

 
$
99

December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
3,578

 
$
1,200

 
$
9,702

 
$
14,480

 
$
3,569,008

 
$
3,583,488

 
$

Commercial, industrial and other
353

 
71

 
1,064

 
1,488

 
429,502

 
430,990

 

Equipment finance
166

 
80

 
284

 
530

 
110,546

 
111,076

 

Real estate - residential mortgage
1,138

 
251

 
2,075

 
3,464

 
331,337

 
334,801

 

Real estate - construction

 

 
967

 
967

 
333,418

 
334,385

 

Home equity and consumer
1,573

 
287

 
1,533

 
3,393

 
334,059

 
337,452

 

 
$
6,808

 
$
1,889

 
$
15,625

 
$
24,322

 
$
5,107,870

 
$
5,132,192

 
$


Credit Quality Indicators
The following table shows the Company’s commercial loan portfolio as of March 31, 2020 and December 31, 2019, by the risk ratings discussed above (in thousands):
March 31, 2020
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Real Estate -
Construction
 
Total Commercial Loans
RISK RATING
 
 
 
 
 
 
 
1
$

 
$
554

 
$

 
$
554

2

 
18,099

 

 
18,099

3
73,368

 
35,528

 

 
108,896

4
986,743

 
117,485

 
17,899

 
1,122,127

5
2,329,762

 
203,708

 
301,455

 
2,834,925

5W - Watch
227,836

 
68,160

 
1,050

 
297,046

6 - Other assets especially mentioned
59,250

 
9,338

 
11,472

 
80,060

7 - Substandard
63,360

 
14,474

 
1,716

 
79,550

8 - Doubtful

 

 

 

9 - Loss

 

 

 

Total
$
3,740,319

 
$
467,346

 
$
333,592

 
$
4,541,257

December 31, 2019
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Real Estate -
Construction
 
Total Commercial Loans
RISK RATING
 
 
 
 
 
 
 
1
$

 
$
898

 
$

 
$
898

2

 
17,988

 

 
17,988

3
74,072

 
39,112

 

 
113,184

4
965,825

 
107,376

 
17,941

 
1,091,142

5
2,332,863

 
215,975

 
307,824

 
2,856,662

5W - Watch
100,347

 
30,192

 
6,959

 
137,498

6 - Other assets especially mentioned
55,438

 
11,328

 

 
66,766

7 - Substandard
61,048

 
9,065

 
2,445

 
72,558

8 - Doubtful

 

 

 

9 - Loss

 

 

 

Total
$
3,589,593

 
$
431,934

 
$
335,169

 
$
4,356,696


Impaired Loans Impaired loans as of March 31, 2020 and December 31, 2019 are as follows:
(in thousands)
Recorded
Investment in
Impaired  Loans
 
Contractual
Unpaid
Principal
Balance
 
Specific
Allowance
 
Average
Investment in
Impaired  Loans
 
Interest
Income
Recognized
March 31, 2020
 
 
 
 
 
 
 
 
 
Loans without specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
23,705

 
$
23,965

 
$

 
$
13,594

 
$
30

Commercial, industrial and other
1,330

 
1,333

 

 
1,347

 
4

Equipment finance

 

 

 

 

Real estate - residential mortgage
1,525

 
1,651

 

 
1,581

 

Real estate - construction
694

 
694

 

 
702

 
10

Home equity and consumer

 

 

 

 

Loans with specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
3,263

 
3,505

 
202

 
3,406

 
38

Commercial, industrial and other
106

 
105

 
5

 
105

 
2

Equipment finance
19

 
19

 
8

 
21

 

Real estate - residential mortgage
654

 
835

 
2

 
659

 
5

Real estate - construction

 

 

 

 

Home equity and consumer
638

 
739

 
5

 
640

 
8

Total:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
26,968

 
$
27,470

 
$
202

 
$
17,000

 
$
68

Commercial, industrial and other
1,436

 
1,438

 
5

 
1,452

 
6

Equipment finance
19

 
19

 
8

 
21

 

Real estate - residential mortgage
2,179

 
2,486

 
2

 
2,240

 
5

Real estate - construction
694

 
694

 

 
702

 
10

Home equity and consumer
638

 
739

 
5

 
640

 
8

 
$
31,934

 
$
32,846

 
$
222

 
$
22,055

 
$
97

(in thousands)
Recorded
Investment in
Impaired  Loans
 
Contractual
Unpaid
Principal
Balance
 
Specific
Allowance
 
Average
Investment in
Impaired  Loans
 
Interest
Income
Recognized
December 31, 2019
 
 
 
 
 
 
 
 
 
Loans without specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
12,478

 
$
12,630

 
$

 
$
10,386

 
$
164

Commercial, industrial and other
1,391

 
1,381

 

 
1,334

 
16

Equipment finance

 

 

 

 

Real estate - residential mortgage
803

 
815

 

 
233

 

Real estate - construction
1,663

 
1,661

 

 
82

 
2

Home equity and consumer

 

 

 

 

Loans with specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
3,470

 
3,706

 
228

 
4,554

 
190

Commercial, industrial and other
113

 
113

 
5

 
113

 
6

Equipment finance
23

 
23

 
10

 
21

 

Real estate - residential mortgage
1,512

 
1,682

 
104

 
926

 
19

Real estate - construction

 

 

 

 

Home equity and consumer
671

 
765

 
5

 
693

 
29

Total:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
15,948

 
$
16,336

 
$
228

 
$
14,940

 
$
354

Commercial, industrial and other
1,504

 
1,494

 
5

 
1,447

 
22

Equipment finance
23

 
23

 
10

 
21

 

Real estate - residential mortgage
2,315

 
2,497

 
104

 
1,159

 
19

Real estate - construction
1,663

 
1,661

 

 
82

 
2

Home equity and consumer
671

 
765

 
5

 
693

 
29

 
$
22,124

 
$
22,776

 
$
352

 
$
18,342

 
$
426


Loans receivable summarized by portfolio segment and impairment method are as follows:
(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance: Individually evaluated for impairment
$
26,968

 
$
1,436

 
$
19

 
$
2,179

 
$
694

 
$
638

 
$
31,934

Ending Balance: Collectively evaluated for impairment
3,707,925

 
465,016

 
116,402

 
331,534

 
332,101

 
338,917

 
5,291,895

Ending Balance: Loans acquired with deteriorated credit quality
5,426

 
894

 

 
401

 
797

 
516

 
8,034

Ending Balance (1)
$
3,740,319

 
$
467,346

 
$
116,421

 
$
334,114

 
$
333,592

 
$
340,071

 
$
5,331,863

(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance: Individually evaluated for impairment
$
15,948

 
$
1,504

 
$
23

 
$
2,315

 
$
1,663

 
$
671

 
$
22,124

Ending Balance: Collectively evaluated for impairment
3,567,540

 
429,486

 
111,053

 
332,486

 
332,722

 
336,781

 
5,110,068

Ending balance: Loans acquired with deteriorated credit quality
6,105

 
944

 

 
390

 
784

 
525

 
8,748

Ending Balance (1)
$
3,589,593

 
$
431,934

 
$
111,076

 
$
335,191

 
$
335,169

 
$
337,977

 
$
5,140,940

(1)
Excludes deferred fees
Allowance for Loan and Lease Losses by Portfolio Segment
The allowance for loan losses is summarized by portfolio segment and impairment classification as follows:
(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance: Individually evaluated for impairment
$
202

 
$
5

 
$
8

 
$
2

 
$

 
$
5

 
$
222

Ending Balance: Collectively evaluated for impairment
34,591

 
5,484

 
1,249

 
1,598

 
3,344

 
2,396

 
48,662

Ending Balance
$
34,793

 
$
5,489

 
$
1,257

 
$
1,600

 
$
3,344

 
$
2,401

 
$
48,884

(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance: Individually evaluated for impairment
$
228

 
$
5

 
$
10

 
$
104

 
$

 
$
5

 
$
352

Ending Balance: Collectively evaluated for impairment
28,722

 
3,284

 
947

 
1,621

 
2,672

 
2,405

 
39,651

Ending Balance
$
28,950

 
$
3,289

 
$
957

 
$
1,725

 
$
2,672

 
$
2,410

 
$
40,003



The following table details activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2020 and 2019:
(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
Three Months Ended March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance
$
28,950

 
$
3,289

 
$
957

 
$
1,725

 
$
2,672

 
$
2,410

 
$
40,003

Charge-offs
(169
)
 

 
(84
)
 
(116
)
 

 
(114
)
 
(483
)
Recoveries
26

 
30

 
14

 
20

 
32

 
19

 
141

Provision
5,986

 
2,170

 
370

 
(29
)
 
640

 
86

 
9,223

Ending Balance
$
34,793

 
$
5,489

 
$
1,257

 
$
1,600

 
$
3,344

 
$
2,401

 
$
48,884

(in thousands)
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Equipment Finance
 
Real Estate-
Residential
Mortgage
 
Real Estate-
Construction
 
Home
Equity and
Consumer
 
Total
Three Months Ended March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance
$
27,881

 
$
1,742

 
$
987

 
$
1,566

 
$
3,015

 
$
2,497

 
$
37,688

Charge-offs
(187
)
 
(147
)
 
(87
)
 
(50
)
 

 
(45
)
 
(516
)
Recoveries
115

 
97

 
2

 
9

 
5

 
71

 
299

Provision
(294
)
 
900

 
45

 
39

 
(133
)
 
(49
)
 
508

Ending Balance
$
27,515

 
$
2,592

 
$
947

 
$
1,564

 
$
2,887

 
$
2,474

 
$
37,979


Summary of Troubled Debt Restructurings
The following table summarizes as of March 31, 2020 and 2019, loans that were restructured within the previous twelve months that have subsequently defaulted:
 
March 31, 2020
 
March 31, 2019
(dollars in thousands)
Number of
Contracts
 
Recorded
Investment
 
Number of
Contracts
 
Recorded
Investment
 
 
Home equity and consumer
2

 
$
83

 

 
$

 
2

 
$
83

 

 
$


v3.20.1
Acquisitions - (Tables)
3 Months Ended
Mar. 31, 2020
Business Combinations [Abstract]  
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed
The following table summarizes the estimated fair value of the acquired assets and liabilities assumed at the date of acquisition for Highlands.
(in thousands)
 
Assets acquired:
 
Cash and cash equivalents
$
13,454

Securities, available for sale
21,234

Securities, held to maturity
1,500

Federal Home Loan Bank stock
1,767

Loans held for sale
1,113

Loans
425,005

Premises and equipment
2,613

Goodwill
19,844

Identifiable intangible assets
3,728

Accrued interest receivable and other assets
6,244

Total assets acquired
496,502

Liabilities assumed:
 
Deposits
(409,638
)
Other borrowings
(27,800
)
Subordinated debt
(13,157
)
Other liabilities
(2,490
)
Total liabilities assumed
(453,085
)
Net assets acquired
$
43,417


Schedule of Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period
The following is a summary of the credit impaired loans acquired in the Highlands acquisition as of the closing date.
(in thousands)
 
Contractually required principal and interest at acquisition
$
22,363

Contractual cash flows not expected to be collected (non-accretable difference)
7,129

Expected cash flows at acquisition
$
15,234

Interest component of expected cash flows (accretable difference)
1,431

Fair value of acquired loans
$
13,803


The following sets forth the carrying value of the purchased credit impaired ("PCI") loans acquired in mergers:
(in thousands)
March 31, 2020
 
December 31, 2019
Acquisition
 
 
 
  Highlands
$
7,494

 
$
8,194

  Pascack Community Bank ("Pascack")
106

 
113

  Harmony Bank ("Harmony")
434

 
441

Total
$
8,034

 
$
8,748