Loans | 89 days Past due but still accruing Amortized Cost Basis of Non-accrual Loans without Related Allowance Non-owner occupied commercial $ 908 $ — $ — $ — Owner occupied commercial 8,757 — — 8,482 Multifamily 584 — — — Non-owner occupied residential — — — — Commercial, industrial and other 2,221 — — — Construction 980 — — 980 Equipment finance 379 — — — Residential mortgage 1,918 — — — Consumer 1,131 — — 72 Total $ 16,878 $ — $ — $ 9,534 December 31, 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 $ 618 $ — $ — $ — Owner occupied commercial 9,439 — — 8,859 Non-owner occupied residential 441 — — 440 Commercial, industrial and other 2,978 — — — Construction 980 — — 980 Equipment finance 114 — — — Residential mortgage 2,011 — — — Consumer 781 — — 79 Total $ 17,362 $ — $ — $ 10,358 At March 31, 2023 and December 31, 2022, there were no loans that were past due more than 89 days and still accruing. The Company had no residential mortgages and consumer loans included in non-accrual and that were in the process of foreclosure at March 31, 2023 and $898,000 in residential mortgages and consumer home equity loans included in total non-accrual loans that were in the process of foreclosure at December 31, 2022. Purchased Credit Deteriorated ("PCD") 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 March 31, 2023, net PCD loans acquired from 1st Constitution totaled $81.1 million. Troubled Debt Restructurings and Modifications of Loans to Debtors Experiencing Financial Difficulty During the three months ended March 31, 2023, the Company adopted Accounting Standards Update 2022-02, "Troubled Debt Restructurings and Vintage Disclosures" ("ASU 2022-02"). Among other things, ASU 2022-02 eliminates the recognition and measurement guidance of troubled debt restructured loans ("TDRs") so that creditors will apply the same guidance to all modifications when determining whether a modification results in a new receivable or continuation of an existing receivable. ASU 2022-02 requires vintage disclosures of gross charge-offs as shown in the vintage disclosure above. It also replaces the historical disclosure of TDRs with the new disclosure of modifications of receivables to debtors experiencing financial difficulty. Prior to the adoption of ASU 2022-02, loans were classified as TDRs in cases where borrowers experienced financial difficulties and Lakeland made certain concessionary modifications to contractual terms. Restructured loans typically involved 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. During the three months ended March 31, 2023, there were no loan modifications that met the definition of a modification to a debtor experiencing financial difficulty. At December 31, 2022, TDRs totaled $2.6 million, all of which were accruing TDRs. There were no loans that were restructured during the three months ended March 31, 2022, that met the definition of a TDR. There were no restructured loans that subsequently defaulted in the three months ended March 31, 2023 and 2022." id="sjs-B4">Loans The following sets forth the composition of the Company’s loan portfolio: (in thousands) March 31, 2023 December 31, 2022 Non-owner occupied commercial $ 2,943,897 $ 2,906,014 Owner occupied commercial 1,205,635 1,246,189 Multifamily 1,275,771 1,260,814 Non-owner occupied residential 210,203 218,026 Commercial, industrial and other 562,677 606,711 Construction 404,994 380,100 Equipment finance 161,889 151,574 Residential mortgage 857,427 765,552 Home equity and consumer 330,060 331,070 Total $ 7,952,553 $ 7,866,050 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 $25.1 million at March 31, 2023 and $24.5 million at December 31, 2022. 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 $162,000 at March 31, 2023 and $2.1 million at December 31, 2022. At March 31, 2023 and December 31, 2022, SBA Paycheck Protection Program ("PPP") loans totaled $390,000 and $435,000, respectively, and are included in the balance of commercial, industrial and other loans. Consumer loans included overdraft deposit balances of $1.0 million and $1.3 million, at March 31, 2023 and December 31, 2022, respectively. At March 31, 2023 and December 31, 2022, the Company had $3.11 billion and $2.89 billion of loans pledged for potential borrowings at the Federal Home Loan Bank of New York ("FHLB"), respectively. 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 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 March 31, 2023. Term Loans by Origination Year (in thousands) 2023 2022 2021 2020 2019 Pre-2019 Revolving Loans Revolving to Term Total Non-owner occupied commercial Pass $ 76,797 $ 673,699 $ 385,422 $ 490,130 $ 285,439 $ 855,149 $ 16,413 — $ 2,783,049 Watch — 1,266 — 21,546 8,908 62,092 — — 93,812 Special mention — — — 5,476 824 29,599 — — 35,899 Substandard — — — — — 31,137 — — 31,137 Total 76,797 674,965 385,422 517,152 295,171 977,977 16,413 — 2,943,897 Owner occupied commercial Pass 9,281 264,688 192,035 155,887 81,383 376,200 13,061 337 1,092,872 Watch — — 3,926 1,697 3,428 31,468 1,540 — 42,059 Special mention — 578 16,933 5,705 4,924 18,671 — — 46,811 Substandard — — 97 14,669 1,883 7,244 — — 23,893 Total 9,281 265,266 212,991 177,958 91,618 433,583 14,601 337 1,205,635 Multifamily Pass 42,496 303,711 219,965 263,675 66,132 335,446 1,085 — 1,232,510 Watch — — 5,785 11,674 — 2,483 — — 19,942 Special mention — 500 — 2,408 3,844 11,203 — — 17,955 Substandard — — — — — 5,364 — — 5,364 Total 42,496 304,211 225,750 277,757 69,976 354,496 1,085 — 1,275,771 Non-owner occupied residential Pass 1,516 36,575 29,077 20,250 25,280 81,870 5,301 — 199,869 Watch — — — — — 5,412 75 — 5,487 Special mention — — — — 1,040 2,093 — — 3,133 Substandard — — — — — 1,714 — — 1,714 Total 1,516 36,575 29,077 20,250 26,320 91,089 5,376 — 210,203 Commercial, industrial and other Pass 5,943 48,052 47,449 26,114 42,404 49,927 296,529 462 516,880 Watch — 237 643 211 260 2,716 7,908 — 11,975 Special mention — 1,145 245 — 158 2,257 23,971 — 27,776 Substandard — — 217 — 434 3,058 2,337 — 6,046 Total 5,943 49,434 48,554 26,325 43,256 57,958 330,745 462 562,677 Construction Pass 9,154 101,953 177,536 25,512 32,093 4,685 20,934 — 371,867 Watch — 1,455 5,913 11,758 — — 323 — 19,449 Substandard — — 95 — — 13,583 — — 13,678 Total 9,154 103,408 183,544 37,270 32,093 18,268 21,257 — 404,994 Equipment finance Pass 22,953 71,381 32,882 17,975 13,314 3,000 — — 161,505 Substandard — 100 91 55 109 29 — — 384 Total 22,953 71,481 32,973 18,030 13,423 3,029 — — 161,889 Current YTD period: Gross charge-offs — — 61 — — — — — 61 Term Loans by Origination Year (in thousands) 2023 2022 2021 2020 2019 Pre-2019 Revolving Loans Revolving to Term Total Residential mortgage Pass 104,154 319,686 165,213 109,090 34,879 122,487 — — 855,509 Substandard — — — — 471 1,447 — — 1,918 Total 104,154 319,686 165,213 109,090 35,350 123,934 — — 857,427 Consumer Pass 5,440 44,471 30,291 8,383 3,966 22,741 213,637 — 328,929 Substandard — — — — — 768 31 332 1,131 Total 5,440 44,471 30,291 8,383 3,966 23,509 213,668 332 330,060 Current YTD period: Gross charge-offs 65 6 6 — 1 — — — 78 Total loans $ 277,734 $ 1,869,497 $ 1,313,815 $ 1,192,215 $ 611,173 $ 2,083,843 $ 603,145 $ 1,131 $ 7,952,553 Current YTD period: Gross charge-offs 65 6 67 — 1 — — — 139 The following table presents the risk category of loans by class of loan and vintage as of December 31, 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 $ 673,235 $ 391,748 $ 495,618 $ 271,109 $ 183,971 $ 703,852 $ 19,317 2,502 $ 2,741,352 Watch 1,272 — 21,720 26,906 12,099 48,314 — — 110,311 Special mention — — 494 830 15,586 16,304 — — 33,214 Substandard — — — — 133 21,004 — — 21,137 Total 674,507 391,748 517,832 298,845 211,789 789,474 19,317 2,502 2,906,014 Owner occupied commercial Pass 267,754 198,131 191,603 85,343 61,581 317,434 13,328 — 1,135,174 Watch — — 2,888 3,520 4,728 28,659 75 — 39,870 Special mention 585 17,778 5,749 1,862 3,701 20,292 — — 49,967 Substandard — 97 8,876 1,899 475 9,831 — — 21,178 Total 268,339 216,006 209,116 92,624 70,485 376,216 13,403 — 1,246,189 Multifamily Pass 312,910 221,306 265,187 67,072 95,432 249,021 5,288 — 1,216,216 Watch — 5,817 11,692 — — 2,504 — — 20,013 Special mention 500 — 2,421 — — 11,274 — — 14,195 Substandard — — — 3,864 — 6,526 — — 10,390 Total 313,410 227,123 279,300 70,936 95,432 269,325 5,288 — 1,260,814 Non-owner occupied residential Pass 37,445 29,365 22,133 24,205 18,489 67,114 7,513 21 206,285 Watch — — — 2,068 — 5,244 75 — 7,387 Special mention — — — 507 822 1,017 — — 2,346 Substandard — — — — — 2,008 — — 2,008 Total 37,445 29,365 22,133 26,780 19,311 75,383 7,588 21 218,026 Commercial, industrial and other Pass 48,719 51,894 27,644 57,124 13,936 39,892 339,040 245 578,494 Watch 251 704 237 211 — 1,424 10,001 — 12,828 Special mention 375 258 — 179 36 378 4,878 — 6,104 Substandard 776 242 — 450 4,722 183 2,912 — 9,285 Total 50,121 53,098 27,881 57,964 18,694 41,877 356,831 245 606,711 Construction Pass 79,420 172,849 35,295 31,447 7,245 4,005 19,294 — 349,555 Watch 1,159 5,480 10,299 — — — 171 — 17,109 Substandard — 95 — — — 13,341 — — 13,436 Total 80,579 178,424 45,594 31,447 7,245 17,346 19,465 — 380,100 Equipment finance Pass 74,840 36,087 20,382 15,738 3,862 546 — — 151,455 Substandard — — — 97 22 — — — 119 Total 74,840 36,087 20,382 15,835 3,884 546 — — 151,574 Residential mortgage Pass 323,636 167,791 110,199 35,180 20,218 106,391 — — 763,415 Substandard — — — 490 341 1,306 — — 2,137 Total 323,636 167,791 110,199 35,670 20,559 107,697 — — 765,552 Consumer Pass 47,282 31,368 8,658 4,143 3,093 21,482 213,857 — 329,883 Substandard 33 — — — 23 853 278 — 1,187 Total 47,315 31,368 8,658 4,143 3,116 22,335 214,135 — 331,070 Total loans $ 1,870,192 $ 1,331,010 $ 1,241,095 $ 634,244 $ 450,515 $ 1,700,199 $ 636,027 $ 2,768 $ 7,866,050 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. The following tables present the payment status of the recorded investment in past due loans as of the periods noted, by class of loans. March 31, 2023 Past Due (in thousands) Current 30 - 59 Days 60 - 89 Days Greater than 89 days Total Total Loans Non-owner occupied commercial $ 2,943,274 $ — $ — $ 623 $ 623 $ 2,943,897 Owner occupied commercial 1,197,244 1,288 — 7,103 8,391 1,205,635 Multifamily 1,275,187 — — 584 584 1,275,771 Non-owner occupied residential 210,186 — 17 — 17 210,203 Commercial, industrial and other 560,510 — — 2,167 2,167 562,677 Construction 404,014 — — 980 980 404,994 Equipment finance 160,504 946 408 31 1,385 161,889 Residential mortgage 852,974 3,395 — 1,058 4,453 857,427 Consumer 328,326 1,066 273 395 1,734 330,060 Total $ 7,932,219 $ 6,695 $ 698 $ 12,941 $ 20,334 $ 7,952,553 December 31, 2022 Past Due (in thousands) Current 30 - 59 Days 60 - 89 Days Greater than 89 days Total Total Loans Non-owner occupied commercial $ 2,905,049 $ 346 $ — $ 619 $ 965 $ 2,906,014 Owner occupied commercial 1,235,134 2,854 477 7,724 11,055 1,246,189 Multifamily 1,260,135 — 679 — 679 1,260,814 Non-owner occupied residential 217,407 178 — 441 619 218,026 Commercial, industrial and other 603,731 55 3 2,922 2,980 606,711 Construction 379,120 — — 980 980 380,100 Equipment finance 150,842 494 238 — 732 151,574 Residential mortgage 760,638 3,031 271 1,612 4,914 765,552 Consumer 330,119 841 62 48 951 331,070 Total $ 7,842,175 $ 7,799 $ 1,730 $ 14,346 $ 23,875 $ 7,866,050 The following tables present information on non-accrual loans at March 31, 2023 and December 31, 2022: March 31, 2023 (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 $ 908 $ — $ — $ — Owner occupied commercial 8,757 — — 8,482 Multifamily 584 — — — Non-owner occupied residential — — — — Commercial, industrial and other 2,221 — — — Construction 980 — — 980 Equipment finance 379 — — — Residential mortgage 1,918 — — — Consumer 1,131 — — 72 Total $ 16,878 $ — $ — $ 9,534 December 31, 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 $ 618 $ — $ — $ — Owner occupied commercial 9,439 — — 8,859 Non-owner occupied residential 441 — — 440 Commercial, industrial and other 2,978 — — — Construction 980 — — 980 Equipment finance 114 — — — Residential mortgage 2,011 — — — Consumer 781 — — 79 Total $ 17,362 $ — $ — $ 10,358 At March 31, 2023 and December 31, 2022, there were no loans that were past due more than 89 days and still accruing. The Company had no residential mortgages and consumer loans included in non-accrual and that were in the process of foreclosure at March 31, 2023 and $898,000 in residential mortgages and consumer home equity loans included in total non-accrual loans that were in the process of foreclosure at December 31, 2022. Purchased Credit Deteriorated ("PCD") 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 March 31, 2023, net PCD loans acquired from 1st Constitution totaled $81.1 million. Troubled Debt Restructurings and Modifications of Loans to Debtors Experiencing Financial Difficulty During the three months ended March 31, 2023, the Company adopted Accounting Standards Update 2022-02, "Troubled Debt Restructurings and Vintage Disclosures" ("ASU 2022-02"). Among other things, ASU 2022-02 eliminates the recognition and measurement guidance of troubled debt restructured loans ("TDRs") so that creditors will apply the same guidance to all modifications when determining whether a modification results in a new receivable or continuation of an existing receivable. ASU 2022-02 requires vintage disclosures of gross charge-offs as shown in the vintage disclosure above. It also replaces the historical disclosure of TDRs with the new disclosure of modifications of receivables to debtors experiencing financial difficulty. Prior to the adoption of ASU 2022-02, loans were classified as TDRs in cases where borrowers experienced financial difficulties and Lakeland made certain concessionary modifications to contractual terms. Restructured loans typically involved 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. During the three months ended March 31, 2023, there were no loan modifications that met the definition of a modification to a debtor experiencing financial difficulty. At December 31, 2022, TDRs totaled $2.6 million, all of which were accruing TDRs. There were no loans that were restructured during the three months ended March 31, 2022, that met the definition of a TDR. There were no restructured loans that subsequently defaulted in the three months ended March 31, 2023 and 2022. |