Loans | = 90 days Past due but still accruing Amortized Cost Basis of Non-accrual Loans without Related Allowance Non-owner occupied commercial $ 11,427 $ — $ — $ 6,403 Owner occupied commercial 7,152 — — 5,811 Multifamily 195 — — — Non-owner occupied residential 1,305 — — 853 Commercial, industrial and other 1,449 — — 723 Construction 515 — — 515 Equipment finance 264 — — — Consumer 308 — — — Total $ 22,615 $ — $ — $ 14,305 December 31, 2020 (in thousands) Non-accrual Interest Income Recognized on Non-accrual Loans Amortized Cost Basis of Loans >= 90 days Past due but still accruing Amortized Cost Basis of Non-accrual Loans without Related Allowance Non-owner occupied commercial $ 16,537 $ — $ — $ 14,719 Owner occupied commercial 14,271 — — 12,371 Multifamily 626 — — — Non-owner occupied residential 2,217 — — 1,580 Commercial, industrial and other 2,633 — — 1,418 Construction 1,440 — — 1,234 Equipment finance 327 — — — Residential mortgage 2,469 — — 1,015 Consumer 2,243 — 1 — Total $ 42,763 $ — $ 1 $ 32,337 At June 30, 2021, there were no loans that were past due more than 89 days and still accruing and at December 31, 2020, one loan with a recorded investment of $1,000 was past due more than 89 days and still accruing. The Company had $797,000 and $1.7 million in residential mortgages and consumer home equity loans included in total non-accrual loans that were in the process of foreclosure at June 30, 2021 and December 31, 2020, respectively. 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 CARES Act provided relief from TDR classification for certain loan modifications related to the COVID-19 pandemic beginning March 1, 2020 through the earlier of 60 days after the end of the pandemic or December 31, 2020. Additionally, banking regulatory agencies issued interagency guidance that COVID-19 related short-term modifications (i.e., six months or less) granted to borrowers that were current as of the loan modification program implementation date do not need to be considered TDRs. The Consolidated Appropriations Act, 2021 (the "CAA"), which was signed into law on December 27, 2020, extended this guidance to modifications made until the earlier of January 1, 2022 or 60 days after the end of the COVID-19 national emergency. The Company elected this provision of the CARES Act and excluded modified loans that met the required guidelines for relief from its TDR classification. At June 30, 2021, no loans were on COVID-related deferrals as the remaining 90-day loan deferments expired and borrowers began paying their pre-deferral loan payments in the first quarter of 2021. For most commercial loans, borrowers are paying their pre-deferral loan payments plus an additional monthly amount to catch up on the payments that were deferred. None of these modifications were considered TDRs." id="sjs-B4">Loans When the Company adopted Financial Accounting Standards Board's Accounting Standard Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326) ("ASU 2016-13") for measuring credit losses, the loan portfolio segmentation was expanded to nine portfolio segments, taking into consideration common loan attributes and risk characteristics, as well as historical reporting metrics and data availability. All disclosures as of and for the three and six months ended June 30, 2021, and as of December 31, 2020, are presented in accordance with ASU 2016-13. The Company did not reclassify prior comparative financial periods and has presented those disclosures under previously applicable U.S. GAAP. The following sets forth the composition of the Company’s loan portfolio: (in thousands) June 30, 2021 December 31, 2020 Non owner occupied commercial $ 2,330,376 $ 2,398,946 Owner occupied commercial 870,535 827,092 Multifamily 902,394 813,225 Non owner occupied residential 189,765 200,229 Commercial, industrial and other 565,704 718,189 Construction 335,167 266,883 Equipment finance 121,096 116,690 Residential mortgage 391,589 377,380 Home equity and consumer 282,206 302,598 Total $ 5,988,832 $ 6,021,232 Loans are recognized at amortized cost, which includes principal balance and net deferred loan fees and costs. The Company elected to exclude accrued interest receivable from amortized cost. Accrued interest receivable is reported separately in the Consolidated Balance Sheets and totaled $14.3 million at June 30, 2021 and $16.1 million at December 31, 2020. Loan origination fees and certain direct loan origination costs are deferred and the net fee or cost is recognized in interest income as an adjustment of yield. Net deferred loan fees are included in loans by respective segment and total $11.0 million at June 30, 2021 and $10.0 million at December 31, 2020. At June 30, 2021 and December 31, 2020, Small Business Association ("SBA") Paycheck Protection Program ("PPP") loans totaled $207.0 million and $284.6 million, respectively and are included in the balance of commercial, industrial and other loans. Consumer loans included overdraft deposit balances of $272,000 and $650,000, at June 30, 2021 and December 31, 2020, respectively. At June 30, 2021 and December 31, 2020, the Company had $2.26 billion and $2.28 billion of loans pledged for potential borrowings at the Federal Home Loan Bank of New York ("FHLB"). The Company transferred approximately $15.1 million of commercial and residential mortgage loans from the loan portfolio to loans held for sale during the six months ended June 30, 2021 and subsequently sold these loans. Excluding the loan transfers, there were no other sales to loans from the held for investment portfolio during the six months ended June 30, 2021. Credit Quality Indicators 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 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 the loan portfolios. The risk rating system assists senior management in evaluating the loan portfolio and analyzing trends. In assigning risk ratings, management considers, among other things, the borrower’s ability to service the debt based on relevant information such as current financial information, historical payment experience, credit documentation, public information and current economic conditions. Management categorizes loans and commitments into the following risk ratings: Pass: "Pass" assets are well protected by the current net worth and paying capacity of the obligor or guarantors, if any, or by the fair value of any underlying collateral. Watch: "Watch" assets require more than the usual amount of monitoring due to declining earnings, strained cash flow, increasing leverage and/or weakening market. These borrowers generally have limited additional debt capacity and modest coverage and average or below average asset quality, margins and market share. Any residential or consumer loan currently on deferment in accordance with the Coronavirus Aid, Relief and Economic Security ("CARES") Act or the interagency statement issued by bank regulatory agencies has been classified by management as watch or worse. Special Mention: "Special mention" assets exhibit identifiable credit weakness, which if not checked or corrected could weaken the loan quality or inadequately protect the bank’s credit position at some future date. Substandard: "Substandard" assets are inadequately protected by the current sound worth and paying capacity of the obligors or of the collateral pledged, if any. A substandard loan has a well-defined weakness or weaknesses that may jeopardize the liquidation of the debt. Doubtful: "Doubtful" assets that exhibit all of the weaknesses inherent in substandard loans, but have the added characteristics that the weaknesses make collection or liquidation in full improbable on the basis of existing facts. Loss: “Loss” is a rating for loans or portions of loans that are considered uncollectible and of such little value that their continuance as bankable loans is not warranted. The following table presents the risk category of loans by class of loan and vintage as of June 30, 2021: Term Loans by Origination Year (in thousands) 2021 2020 2019 2018 2017 Pre-2017 Revolving Loans Revolving to Term Total Non owner occupied commercial Pass $ 145,375 $ 552,563 $ 304,739 $ 198,074 $ 239,433 $ 652,362 $ 17,694 — $ 2,110,240 Watch — — 25,822 11,898 4,746 49,686 820 — 92,972 Special mention — 3,368 3,090 8,310 12,318 30,293 60 — 57,439 Substandard — 899 — 2,657 10,668 55,501 — — 69,725 Total 145,375 556,830 333,651 220,939 267,165 787,842 18,574 — 2,330,376 Owner occupied commercial Pass 106,751 115,766 103,388 64,984 74,217 297,020 7,100 336 769,562 Watch — 1,561 2,887 892 283 17,496 20 — 23,139 Special mention — — 2,166 13,706 105 28,296 — — 44,273 Substandard — — 18 2,968 1,814 28,717 44 — 33,561 Total 106,751 117,327 108,459 82,550 76,419 371,529 7,164 336 870,535 Multifamily Pass 109,244 252,490 78,034 89,956 81,657 240,963 10,261 — 862,605 Watch — — — — 4,571 5,701 — — 10,272 Special mention — 12,176 — — 2,400 1,099 — — 15,675 Substandard — — 5,484 1,325 — 6,833 200 — 13,842 Total 109,244 264,666 83,518 91,281 88,628 254,596 10,461 — 902,394 Non owner occupied residential Pass 18,362 21,396 18,334 18,497 19,397 62,191 7,863 430 166,470 Watch — — — — 1,045 5,245 — — 6,290 Special mention — — 1,025 845 486 930 515 — 3,801 Substandard — 3,315 512 5,031 1,861 2,485 — — 13,204 Total 18,362 24,711 19,871 24,373 22,789 70,851 8,378 430 189,765 Term Loans by Origination Year (in thousands) 2021 2020 2019 2018 2017 Pre-2017 Revolving Loans Revolving to Term Total Commercial, industrial and other Pass 157,098 89,379 73,878 13,950 5,116 40,518 155,183 330 535,452 Watch 395 283 544 107 1,515 223 3,229 80 6,376 Special mention — — 1 306 2,004 809 4,057 — 7,177 Substandard — 7,300 48 2,206 645 1,565 4,935 — 16,699 Total 157,493 96,962 74,471 16,569 9,280 43,115 167,404 410 565,704 Construction Pass 43,967 101,838 88,989 33,067 26,442 3,694 329 — 298,326 Watch — — — 13,707 12,867 — — — 26,574 Special mention — — — — 9,752 — — — 9,752 Substandard — — — — — 515 — — 515 Total 43,967 101,838 88,989 46,774 49,061 4,209 329 — 335,167 Equipment finance Pass 27,986 35,644 34,792 15,132 5,554 1,724 — — 120,832 Substandard — — 98 90 76 — — — 264 Total 27,986 35,644 34,890 15,222 5,630 1,724 — — 121,096 Residential mortgage Pass 75,321 120,307 32,126 29,708 13,105 120,884 — — 391,451 Substandard — — — — — 138 — — 138 Total 75,321 120,307 32,126 29,708 13,105 121,022 — — 391,589 Consumer Pass 11,986 12,951 7,512 5,763 3,921 30,293 209,027 — 281,453 Substandard 33 — — — 1 566 153 — 753 Total 12,019 12,951 7,512 5,763 3,922 30,859 209,180 — 282,206 Total loans $ 696,518 $ 1,331,236 $ 783,487 $ 533,179 $ 535,999 $ 1,685,747 $ 421,490 $ 1,176 $ 5,988,832 The following table presents the risk category of loans by class of loan and vintage as of December 31, 2020: Term Loans by Origination Year (in thousands) 2020 2019 2018 2017 2016 Pre-2016 Revolving Loans Revolving to Term Total Non owner occupied commercial Pass $ 570,665 $ 376,681 $ 217,931 $ 251,751 $ 187,605 $ 509,573 $ 50,071 2,246 $ 2,166,523 Watch 770 638 8,498 5,936 19,579 47,680 315 — 83,416 Special mention 3,400 3,131 8,377 9,115 19,936 7,894 2,895 — 54,748 Substandard — — 2,809 15,903 14,844 60,703 — — 94,259 Total 574,835 380,450 237,615 282,705 241,964 625,850 53,281 2,246 2,398,946 Owner occupied commercial Pass 116,512 76,224 80,244 81,215 62,118 245,330 11,072 179 672,894 Watch 11,347 22,932 411 3,651 8,038 23,612 673 — 70,664 Special mention — 2,218 929 113 4,317 38,638 — — 46,215 Substandard 434 16 3,038 641 5,770 27,376 44 — 37,319 Total 128,293 101,390 84,622 85,620 80,243 334,956 11,789 179 827,092 Multifamily Pass 251,708 59,694 85,748 93,368 117,155 145,786 21,713 — 775,172 Watch — — 600 — — 8,472 — — 9,072 Special mention 9,781 — — 2,399 — 1,124 — — 13,304 Substandard — 5,481 — — 9,512 684 — — 15,677 Total 261,489 65,175 86,348 95,767 126,667 156,066 21,713 — 813,225 Term Loans by Origination Year (in thousands) 2020 2019 2018 2017 2016 Pre-2016 Revolving Loans Revolving to Term Total Non owner occupied residential Pass 23,506 24,378 27,752 24,344 21,488 53,200 8,180 171 183,019 Watch — 300 — 1,174 — 5,757 — — 7,231 Special mention — 496 1,199 392 293 656 655 — 3,691 Substandard 876 512 1,200 1,295 692 1,713 — — 6,288 Total 24,382 25,686 30,151 27,205 22,473 61,326 8,835 171 200,229 Commercial, industrial and other Pass 299,091 84,917 16,245 7,216 18,358 41,900 208,519 531 676,777 Watch 287 3,701 156 1,643 301 369 2,324 — 8,781 Special mention — — 884 764 2,275 — 4,727 — 8,650 Substandard 7,177 50 3,559 1,547 1,497 729 9,422 — 23,981 Total 306,555 88,668 20,844 11,170 22,431 42,998 224,992 531 718,189 Construction Pass 56,734 77,117 69,627 29,303 7,681 328 2,190 — 242,980 Watch — — 2,183 11,959 — — — — 14,142 Special mention — — — 8,321 — — — — 8,321 Substandard — — — 206 719 515 — — 1,440 Total 56,734 77,117 71,810 49,789 8,400 843 2,190 — 266,883 Equipment finance Pass 41,528 41,717 20,697 8,834 3,162 426 — — 116,364 Substandard — 98 88 74 64 2 — — 326 Total 41,528 41,815 20,785 8,908 3,226 428 — — 116,690 Residential mortgage Pass 127,336 43,910 34,252 17,548 12,108 139,616 — — 374,770 Substandard — 52 233 1,015 — 1,310 — — 2,610 Total 127,336 43,962 34,485 18,563 12,108 140,926 — — 377,380 Consumer Pass 15,999 9,844 7,490 5,333 4,632 31,861 224,549 166 299,874 Substandard 33 57 31 2 — 2,208 263 130 2,724 Total 16,032 9,901 7,521 5,335 4,632 34,069 224,812 296 302,598 Total loans $ 1,537,184 $ 834,164 $ 594,181 $ 585,062 $ 522,144 $ 1,397,462 $ 547,612 $ 3,423 $ 6,021,232 Past Due and Non-accrual Loans Loans are considered past due if required principal and interest payments have not been received as of the date such payments were contractually due. A loan is generally considered non-performing when it is placed on non-accrual status. A loan is generally placed on non-accrual status when it becomes 90 days past due if such loan has been identified as presenting uncertainty with respect to the collectability of interest and principal. A loan past due 90 days or more may remain on accruing status if such loan is both well secured and in the process of collection. In the absence of other intervening factors, loans granted payment deferrals related to COVID-19 are not reported as past due or placed on non-accrual status provided the borrowers have met the criteria in the CARES Act or otherwise have met the criteria included in an interagency statement issued by bank regulatory agencies. The following tables present the payment status of the recorded investment in past due loans as of the periods noted, by class of loans. June 30, 2021 Past Due (in thousands) Current 30 - 59 Days 60 - 89 Days Greater than 89 days Total Total Loans Non-owner occupied commercial $ 2,323,132 $ 521 $ 434 $ 6,289 $ 7,244 $ 2,330,376 Owner occupied commercial 861,430 2,942 138 6,025 9,105 870,535 Multifamily 902,394 — — — — 902,394 Non-owner occupied residential 186,653 137 2,160 815 3,112 189,765 Commercial, industrial and other 564,271 264 26 1,143 1,433 565,704 Construction 334,652 — — 515 515 335,167 Equipment finance 120,671 133 93 199 425 121,096 Residential mortgage 391,123 466 — — 466 391,589 Consumer 281,091 831 275 9 1,115 282,206 Total $ 5,965,417 $ 5,294 $ 3,126 $ 14,995 $ 23,415 $ 5,988,832 December 31, 2020 Past Due (in thousands) Current 30 - 59 Days 60 - 89 Days Greater than 89 days Total Total Loans Non-owner occupied commercial $ 2,384,233 $ 1,256 $ 306 $ 13,151 $ 14,713 $ 2,398,946 Owner occupied commercial 811,408 2,759 350 12,575 15,684 827,092 Multifamily 812,597 208 — 420 628 813,225 Non-owner occupied residential 197,802 482 294 1,651 2,427 200,229 Commercial, industrial and other 716,337 125 — 1,727 1,852 718,189 Construction 265,649 — — 1,234 1,234 266,883 Equipment finance 115,124 1,338 98 130 1,566 116,690 Residential mortgage 374,370 1,046 156 1,808 3,010 377,380 Consumer 300,127 1,041 73 1,357 2,471 302,598 Total $ 5,977,647 $ 8,255 $ 1,277 $ 34,053 $ 43,585 $ 6,021,232 The following tables present information on non-accrual loans at June 30, 2021 and December 31, 2020: June 30, 2021 (in thousands) Non-accrual Interest Income Recognized on Non-accrual Loans Amortized Cost Basis of Loans >= 90 days Past due but still accruing Amortized Cost Basis of Non-accrual Loans without Related Allowance Non-owner occupied commercial $ 11,427 $ — $ — $ 6,403 Owner occupied commercial 7,152 — — 5,811 Multifamily 195 — — — Non-owner occupied residential 1,305 — — 853 Commercial, industrial and other 1,449 — — 723 Construction 515 — — 515 Equipment finance 264 — — — Consumer 308 — — — Total $ 22,615 $ — $ — $ 14,305 December 31, 2020 (in thousands) Non-accrual Interest Income Recognized on Non-accrual Loans Amortized Cost Basis of Loans >= 90 days Past due but still accruing Amortized Cost Basis of Non-accrual Loans without Related Allowance Non-owner occupied commercial $ 16,537 $ — $ — $ 14,719 Owner occupied commercial 14,271 — — 12,371 Multifamily 626 — — — Non-owner occupied residential 2,217 — — 1,580 Commercial, industrial and other 2,633 — — 1,418 Construction 1,440 — — 1,234 Equipment finance 327 — — — Residential mortgage 2,469 — — 1,015 Consumer 2,243 — 1 — Total $ 42,763 $ — $ 1 $ 32,337 At June 30, 2021, there were no loans that were past due more than 89 days and still accruing and at December 31, 2020, one loan with a recorded investment of $1,000 was past due more than 89 days and still accruing. The Company had $797,000 and $1.7 million in residential mortgages and consumer home equity loans included in total non-accrual loans that were in the process of foreclosure at June 30, 2021 and December 31, 2020, respectively. 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 CARES Act provided relief from TDR classification for certain loan modifications related to the COVID-19 pandemic beginning March 1, 2020 through the earlier of 60 days after the end of the pandemic or December 31, 2020. Additionally, banking regulatory agencies issued interagency guidance that COVID-19 related short-term modifications (i.e., six months or less) granted to borrowers that were current as of the loan modification program implementation date do not need to be considered TDRs. The Consolidated Appropriations Act, 2021 (the "CAA"), which was signed into law on December 27, 2020, extended this guidance to modifications made until the earlier of January 1, 2022 or 60 days after the end of the COVID-19 national emergency. The Company elected this provision of the CARES Act and excluded modified loans that met the required guidelines for relief from its TDR classification. At June 30, 2021, no loans were on COVID-related deferrals as the remaining 90-day loan deferments expired and borrowers began paying their pre-deferral loan payments in the first quarter of 2021. For most commercial loans, borrowers are paying their pre-deferral loan payments plus an additional monthly amount to catch up on the payments that were deferred. None of these modifications were considered TDRs. |