Loans | 89 days Past due but still accruing Amortized Cost Basis of Non-accrual Loans without Related Allowance Non-owner occupied commercial $ 307 $ — $ — $ — Owner occupied commercial 10,322 — — 9,638 Non-owner occupied residential 868 — — 450 Commercial, industrial and other 3,623 — — — Equipment finance 226 — — — Residential mortgage 2,226 — — — Consumer 798 — 31 — Total $ 18,370 $ — $ 31 $ 10,088 December 31, 2021 (in thousands) Non-accrual Interest Income Recognized on Non-accrual Loans Amortized Cost Basis of Loans > 89 days Past due but still accruing Amortized Cost Basis of Non-accrual Loans without Related Allowance Non-owner occupied commercial $ 3,009 $ — $ — $ 2,624 Owner occupied commercial 2,810 — — 2,398 Non-owner occupied residential 2,852 — — 2,567 Commercial, industrial and other 6,763 — — 1,122 Equipment finance 43 — — — Residential mortgage 817 — — 694 Consumer 687 — 1 — Total $ 16,981 $ — $ 1 $ 9,405 At September 30, 2022, there was one loan with a recorded investment of $31,000 that was past due more than 89 days and still accruing and, at December 31, 2021, one loan with a recorded investment of $1,000 was past due more than 89 days and still accruing. The Company had $871,000 and $930,000 in residential mortgages and consumer home equity loans included in total non-accrual loans that were in the process of foreclosure at September 30, 2022 and December 31, 2021, respectively. Purchased Credit Deteriorated Loans The following summarizes the PCD loans acquired in the 1st Constitution acquisition as of the closing date, January 6, 2022. (in thousands) PCD Loans Gross amortized cost basis $ 140,300 Interest component of expected cash flows (accretable difference) (3,792) Allowance for credit losses on PCD loans (12,077) Net PCD loans $ 124,431 At September 30, 2022, net PCD loans acquired from 1st Constitution totaled $101.1 million. 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 and related legislation provided relief from TDR classification for certain loan modifications related to the COVID-19 pandemic beginning March 1, 2020 through December 31, 2021. 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 Company elected this provision of the CARES Act and excluded modified loans that met the required guidelines for relief from its TDR classification. At September 30, 2022, no loans were on COVID-related deferrals as any 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. At September 30, 2022 and December 31, 2021, TDRs totaled $3.1 million and $3.5 million, respectively. Accruing TDRs totaled $3.1 million and there were no non-accrual TDRs at September 30, 2022. Accruing TDRs and non-accrual TDRs totaled $3.3 million and $127,000, respectively, at December 31, 2021. There were no loans that were restructured during the three and nine months ended September 30, 2022 that met the definition of a TDR. During the three and nine months ended September 30, 2021, there was one consumer loan totaling $116,000 that was restructured that met the definition of a TDR. There were no restructured loans that subsequently defaulted in the nine months ended September 30, 2022 and 2021." id="sjs-B4">Loans The following sets forth the composition of the Company’s loan portfolio: (in thousands) September 30, 2022 December 31, 2021 Non-owner occupied commercial $ 2,873,824 $ 2,316,284 Owner occupied commercial 1,141,290 908,449 Multifamily 1,186,036 972,233 Non-owner occupied residential 222,597 177,097 Commercial, industrial and other 613,228 462,406 Construction 381,109 302,228 Equipment finance 137,999 123,212 Residential mortgage 690,453 438,710 Home equity and consumer 322,290 275,529 Total $ 7,568,826 $ 5,976,148 Loans are recorded 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 $20.9 million at September 30, 2022 and $13.9 million at December 31, 2021. 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 totaled $2.5 million at September 30, 2022 and $5.8 million at December 31, 2021. At September 30, 2022 and December 31, 2021, SBA Paycheck Protection Program ("PPP") loans totaled $734,000 and $56.6 million, respectively, and are included in the balance of commercial, industrial and other loans. Consumer loans included overdraft deposit balances of $345,000 and $184,000, at September 30, 2022 and December 31, 2021, respectively. At September 30, 2022 and December 31, 2021, the Company had $2.81 billion and $2.30 billion of loans pledged for potential borrowings at the Federal Home Loan Bank of New York ("FHLB"), respectively. The Company transferred approximately $6.6 million of commercial and residential mortgage loans from the loan portfolio to loans held for sale during the three months ended September 30, 2021 and subsequently sold these loans. For the nine months ended September 30, 2021, the Company transferred from the loan portfolio to loans held for sale and subsequently sold approximately $21.7 million of commercial and residential mortgage loans. Excluding these loan transfers, there were no other sales of loans from the held for investment portfolio during the nine months ended September 30, 2022 and 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. 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 September 30, 2022. Term Loans by Origination Year (in thousands) 2022 2021 2020 2019 2018 Pre-2018 Revolving Loans Revolving to Term Total Non-owner occupied commercial Pass $ 568,312 $ 387,895 $ 536,408 $ 276,115 $ 199,556 $ 727,912 $ 16,019 — $ 2,712,217 Watch — — 2,939 25,627 9,375 63,784 — — 101,725 Special mention — — 946 14,347 10,298 9,511 — — 35,102 Substandard — — — 852 134 23,754 40 — 24,780 Total 568,312 387,895 540,293 316,941 219,363 824,961 16,059 — 2,873,824 Owner occupied commercial Pass 145,236 201,964 183,610 89,761 62,778 328,032 11,800 83 1,023,264 Watch — 17,771 2,955 7,068 6,971 29,766 — — 64,531 Special mention 592 — 5,746 4,479 3,171 15,026 — — 29,014 Substandard — — 9,704 — 1,150 13,627 — — 24,481 Total 145,828 219,735 202,015 101,308 74,070 386,451 11,800 83 1,141,290 Multifamily Pass 222,643 223,070 265,900 64,363 94,302 262,993 1,149 — 1,134,420 Watch — 5,848 11,801 3,060 1,301 4,018 — — 26,028 Special mention 400 — 2,433 — — 11,344 — — 14,177 Substandard — — — 3,884 — 7,527 — — 11,411 Total 223,043 228,918 280,134 71,307 95,603 285,882 1,149 — 1,186,036 Non-owner occupied residential Pass 28,029 30,019 21,232 24,220 16,238 75,526 7,789 20 203,073 Watch — — 2,524 2,079 3,368 6,729 75 — 14,775 Special mention — — — 623 826 1,034 — — 2,483 Substandard — — — — — 2,266 — — 2,266 Total 28,029 30,019 23,756 26,922 20,432 85,555 7,864 20 222,597 Commercial, industrial and other Pass 41,596 55,217 29,656 64,466 15,274 41,636 328,418 329 576,592 Watch 500 1,035 126 322 — 1,239 18,680 138 22,040 Special mention — — — 3,104 41 639 937 — 4,721 Substandard 776 102 — 445 5,082 (119) 3,589 — 9,875 Total 42,872 56,354 29,782 68,337 20,397 43,395 351,624 467 613,228 Construction Pass 50,985 182,764 63,804 32,071 20,752 4,915 10,402 — 365,693 Watch 941 — — — — — 294 — 1,235 Special mention — — — — — — — — — Substandard — — 2,228 — — 11,953 — — 14,181 Total 51,926 182,764 66,032 32,071 20,752 16,868 10,696 — 381,109 Equipment finance Pass 51,471 39,053 22,714 18,269 5,351 909 — — 137,767 Substandard — 60 — 139 33 — — — 232 Total 51,471 39,113 22,714 18,408 5,384 909 — — 137,999 Residential mortgage Pass 241,176 170,411 111,322 35,659 20,801 108,824 — — 688,193 Substandard — — — 449 326 1,485 — — 2,260 Total 241,176 170,411 111,322 36,108 21,127 110,309 — — 690,453 Consumer Pass 38,954 32,160 9,036 4,357 3,469 23,034 210,084 — 321,094 Substandard 33 — — — 25 856 282 — 1,196 Total 38,987 32,160 9,036 4,357 3,494 23,890 210,366 — 322,290 Total loans $ 1,391,644 $ 1,347,369 $ 1,285,084 $ 675,759 $ 480,622 $ 1,778,220 $ 609,558 $ 570 $ 7,568,826 The following table presents the risk category of loans by class of loan and vintage as of December 31, 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 $ 363,459 $ 516,131 $ 295,944 $ 189,592 $ 195,733 $ 562,338 $ 18,795 — $ 2,141,992 Watch — — 25,292 14,660 4,641 47,011 130 — 91,734 Special mention — 458 — 5,749 14,639 6,602 — — 27,448 Substandard 119 431 332 2,656 8,000 43,572 — — 55,110 Total 363,578 517,020 321,568 212,657 223,013 659,523 18,925 — 2,316,284 Owner occupied commercial Pass 209,515 133,292 83,395 54,019 48,850 252,001 8,343 108 789,523 Watch — 5,757 2,134 900 280 24,873 — — 33,944 Special mention — 9,694 21,837 12,632 95 17,851 — — 62,109 Substandard 5 — — 2,597 1,299 18,972 — — 22,873 Total 209,520 148,743 107,366 70,148 50,524 313,697 8,343 108 908,449 Multifamily Pass 225,060 255,016 72,438 71,366 73,122 207,509 18,161 1,281 923,953 Watch — 966 — 13,709 854 6,497 — — 22,026 Special mention — 2,470 — — 8,944 2,948 — — 14,362 Substandard — — 5,485 1,321 — 4,987 99 — 11,892 Total 225,060 258,452 77,923 86,396 82,920 221,941 18,260 1,281 972,233 Non-owner occupied residential Pass 28,476 18,527 16,928 15,695 18,048 51,194 7,288 — 156,156 Watch — — — — 651 5,057 — — 5,708 Special mention — — 523 837 1,205 284 515 — 3,364 Substandard — 3,062 510 4,797 988 2,512 — — 11,869 Total 28,476 21,589 17,961 21,329 20,892 59,047 7,803 — 177,097 Commercial, industrial and other Pass 100,921 23,940 65,225 11,636 3,808 37,479 191,293 872 435,174 Watch 939 461 446 — 1,378 173 5,056 — 8,453 Special mention — — — — 1,896 443 1,365 — 3,704 Substandard 101 7,352 — 1,276 496 422 5,428 — 15,075 Total 101,961 31,753 65,671 12,912 7,578 38,517 203,142 872 462,406 Construction Pass 108,585 84,993 40,847 30,125 23,578 3,654 — — 291,782 Special mention — — — — 10,446 — — — 10,446 Total 108,585 84,993 40,847 30,125 34,024 3,654 — — 302,228 Equipment finance Pass 50,482 30,486 27,626 10,238 3,128 803 — — 122,763 Substandard — — 216 177 56 — — — 449 Total 50,482 30,486 27,842 10,415 3,184 803 — — 123,212 Residential mortgage Pass 171,442 112,680 27,228 20,784 9,103 96,510 — — 437,747 Substandard 12 — — 123 694 134 — — 963 Total 171,454 112,680 27,228 20,907 9,797 96,644 — — 438,710 Consumer Pass 35,283 10,476 5,358 4,561 3,260 24,888 190,481 34 274,341 Substandard 32 — — — — 630 526 — 1,188 Total 35,315 10,476 5,358 4,561 3,260 25,518 191,007 34 275,529 Total loans $ 1,294,431 $ 1,216,192 $ 691,764 $ 469,450 $ 435,192 $ 1,419,344 $ 447,480 $ 2,295 $ 5,976,148 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 were not reported as past due or placed on non-accrual status provided the borrowers met the criteria in the CARES Act or otherwise 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. September 30, 2022 Past Due (in thousands) Current 30 - 59 Days 60 - 89 Days Greater than 89 days Total Total Loans Non-owner occupied commercial $ 2,873,092 $ 421 $ — $ 311 $ 732 $ 2,873,824 Owner occupied commercial 1,131,553 1,051 8,198 488 9,737 1,141,290 Multifamily 1,186,036 — — — — 1,186,036 Non-owner occupied residential 221,212 517 — 868 1,385 222,597 Commercial, industrial and other 609,403 116 141 3,568 3,825 613,228 Construction 381,109 — — — — 381,109 Equipment finance 137,172 607 173 47 827 137,999 Residential mortgage 687,242 1,391 490 1,330 3,211 690,453 Consumer 321,679 518 4 89 611 322,290 Total $ 7,548,498 $ 4,621 $ 9,006 $ 6,701 $ 20,328 $ 7,568,826 December 31, 2021 Past Due (in thousands) Current 30 - 59 Days 60 - 89 Days Greater than 89 days Total Total Loans Non-owner occupied commercial $ 2,312,557 $ — $ 718 $ 3,009 $ 3,727 $ 2,316,284 Owner occupied commercial 905,751 20 — 2,678 2,698 908,449 Multifamily 972,233 — — — — 972,233 Non-owner occupied residential 174,245 — 136 2,716 2,852 177,097 Commercial, industrial and other 461,659 154 — 593 747 462,406 Construction 302,228 — — — — 302,228 Equipment finance 122,923 211 41 37 289 123,212 Residential mortgage 437,574 255 64 817 1,136 438,710 Consumer 274,426 705 135 263 1,103 275,529 Total $ 5,963,596 $ 1,345 $ 1,094 $ 10,113 $ 12,552 $ 5,976,148 The following tables present information on non-accrual loans at September 30, 2022 and December 31, 2021: September 30, 2022 (in thousands) Non-accrual Interest Income Recognized on Non-accrual Loans Amortized Cost Basis of Loans > 89 days Past due but still accruing Amortized Cost Basis of Non-accrual Loans without Related Allowance Non-owner occupied commercial $ 307 $ — $ — $ — Owner occupied commercial 10,322 — — 9,638 Non-owner occupied residential 868 — — 450 Commercial, industrial and other 3,623 — — — Equipment finance 226 — — — Residential mortgage 2,226 — — — Consumer 798 — 31 — Total $ 18,370 $ — $ 31 $ 10,088 December 31, 2021 (in thousands) Non-accrual Interest Income Recognized on Non-accrual Loans Amortized Cost Basis of Loans > 89 days Past due but still accruing Amortized Cost Basis of Non-accrual Loans without Related Allowance Non-owner occupied commercial $ 3,009 $ — $ — $ 2,624 Owner occupied commercial 2,810 — — 2,398 Non-owner occupied residential 2,852 — — 2,567 Commercial, industrial and other 6,763 — — 1,122 Equipment finance 43 — — — Residential mortgage 817 — — 694 Consumer 687 — 1 — Total $ 16,981 $ — $ 1 $ 9,405 At September 30, 2022, there was one loan with a recorded investment of $31,000 that was past due more than 89 days and still accruing and, at December 31, 2021, one loan with a recorded investment of $1,000 was past due more than 89 days and still accruing. The Company had $871,000 and $930,000 in residential mortgages and consumer home equity loans included in total non-accrual loans that were in the process of foreclosure at September 30, 2022 and December 31, 2021, respectively. Purchased Credit Deteriorated Loans The following summarizes the PCD loans acquired in the 1st Constitution acquisition as of the closing date, January 6, 2022. (in thousands) PCD Loans Gross amortized cost basis $ 140,300 Interest component of expected cash flows (accretable difference) (3,792) Allowance for credit losses on PCD loans (12,077) Net PCD loans $ 124,431 At September 30, 2022, net PCD loans acquired from 1st Constitution totaled $101.1 million. 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 and related legislation provided relief from TDR classification for certain loan modifications related to the COVID-19 pandemic beginning March 1, 2020 through December 31, 2021. 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 Company elected this provision of the CARES Act and excluded modified loans that met the required guidelines for relief from its TDR classification. At September 30, 2022, no loans were on COVID-related deferrals as any 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. At September 30, 2022 and December 31, 2021, TDRs totaled $3.1 million and $3.5 million, respectively. Accruing TDRs totaled $3.1 million and there were no non-accrual TDRs at September 30, 2022. Accruing TDRs and non-accrual TDRs totaled $3.3 million and $127,000, respectively, at December 31, 2021. There were no loans that were restructured during the three and nine months ended September 30, 2022 that met the definition of a TDR. During the three and nine months ended September 30, 2021, there was one consumer loan totaling $116,000 that was restructured that met the definition of a TDR. There were no restructured loans that subsequently defaulted in the nine months ended September 30, 2022 and 2021. |