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		June 30, 2019
	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 Road, Oak Ridge, New 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 August 1, 2019, there were 50,489,161 outstanding shares of Common Stock, no par value.

1

LAKELAND BANCORP, INC.

Form 10-Q Index

		PAGE
	Part I.     Financial Information
Item 1.	Financial Statements:
	Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018	3
	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)	5
	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2019 and 2018 (unaudited)	6
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018 (unaudited)	8
	Notes to Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	52
	Part II.     Other Information
Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	53
Signatures		54

2

PART I. FINANCIAL INFORMATION

Item 1.        Financial Statements

Lakeland Bancorp, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

	June 30, 2019			December 31, 2018
(dollars in thousands)	(unaudited)
ASSETS
Cash	$	223,684		$	205,199
Interest-bearing deposits due from banks	23,215			3,400
Total cash and cash equivalents	246,899			208,599
Investment securities available for sale, at fair value	664,122			638,618
Equity securities, at fair value	15,382			15,921
Investment securities held to maturity; fair value of $161,028 at June 30, 2019 and $150,932 at December 31, 2018	160,328			153,646
Federal Home Loan Bank and other membership bank stock, at cost	23,642			13,301
Loans held for sale	1,391			1,113
Loans, net of deferred fees	4,922,373			4,456,733
Allowance for loan losses	(38,662		)	(37,688		)
Net loans	4,883,711			4,419,045
Premises and equipment, net	50,106			49,175
Operating lease right-of-use assets	18,598			—
Accrued interest receivable	17,365			16,114
Goodwill	155,830			136,433
Other identifiable intangible assets	4,891			1,768
Bank owned life insurance	111,133			110,052
Other assets	53,797			42,308
TOTAL ASSETS	$	6,407,195		$	5,806,093
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing	$	1,089,474		$	950,218
Savings and interest-bearing transaction accounts	3,007,784			2,913,414
Time deposits $250 thousand and under	781,126			589,737
Time deposits over $250 thousand	204,214			167,301
Total deposits	5,082,598			4,620,670
Federal funds purchased and securities sold under agreements to repurchase	258,703			233,905
Other borrowings	175,820			181,118
Subordinated debentures	118,202			105,027
Operating lease liabilities	20,175			—
Other liabilities	53,234			41,634
TOTAL LIABILITIES	5,708,732			5,182,354
STOCKHOLDERS’ EQUITY
Common stock, no par value; authorized shares, 100,000,000; issued shares, 50,441,279 at June 30, 2019 and 47,486,250 at December 31, 2018	558,768			514,703
Retained earnings	137,887			116,874
Accumulated other comprehensive loss	1,808			(7,838		)
TOTAL STOCKHOLDERS’ EQUITY	698,463			623,739
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,407,195		$	5,806,093

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

3

Lakeland Bancorp, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands, except per share data)	2019		2018		2019		2018
INTEREST INCOME
Loans and fees	$	59,119	$	47,659	$	116,761	$	93,203
Federal funds sold and interest-bearing deposits with banks	348		145		602		311
Taxable investment securities and other	4,985		4,027		9,858		8,019
Tax-exempt investment securities	396		429		804		872
TOTAL INTEREST INCOME	64,848		52,260		128,025		102,405
INTEREST EXPENSE
Deposits	12,762		6,501		24,259		12,256
Federal funds purchased and securities sold under agreements to repurchase	494		233		1,102		367
Other borrowings	2,394		2,033		4,860		4,053
TOTAL INTEREST EXPENSE	15,650		8,767		30,221		16,676
NET INTEREST INCOME	49,198		43,493		97,804		85,729
Provision for loan losses	—		1,492		508		2,776
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	49,198		42,001		97,296		82,953
NONINTEREST INCOME
Service charges on deposit accounts	2,755		2,545		5,328		5,156
Commissions and fees	1,725		1,410		3,137		2,682
Income on bank owned life insurance	690		711		1,373		1,430
Gain on equity securities	100		73		453		55
Gains on sales of loans	428		300		799		546
Other income	691		670		1,022		1,174
TOTAL NONINTEREST INCOME	6,389		5,709		12,112		11,043
NONINTEREST EXPENSE
Salaries and employee benefits	19,379		16,708		38,610		33,569
Net occupancy expense	2,629		2,603		5,583		5,341
Furniture and equipment	2,165		2,011		4,281		4,217
FDIC insurance expense	401		400		851		825
Stationery, supplies and postage	401		443		848		859
Marketing expense	538		456		1,007		817
Data processing expense	1,225		976		2,552		1,442
Telecommunications expense	478		462		971		883
ATM and debit card expense	583		558		1,185		1,068
Core deposit intangible amortization	301		153		605		310
Other real estate and repossessed asset expense	108		21		194		67
Merger related expenses	318		—		3,178		—
Other expenses	3,160		2,783		5,805		5,313
TOTAL NONINTEREST EXPENSE	31,686		27,574		65,670		54,711
Income before provision for income taxes	23,901		20,136		43,738		39,285
Provision for income taxes	6,444		4,298		10,655		8,192
NET INCOME	$	17,457	$	15,838	$	33,083	$	31,093
PER SHARE OF COMMON STOCK
Basic earnings	$	0.34	$	0.33	$	0.65	$	0.65
Diluted earnings	$	0.34	$	0.33	$	0.65	$	0.65
Dividends	$	0.125	$	0.115	$	0.240	$	0.215

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

4

Lakeland Bancorp, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(in thousands)	2019			2018			2019			2018
NET INCOME	$	17,457		$	15,838		$	33,083		$	31,093
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Unrealized gains (losses) on securities available for sale	5,776			(1,690		)	10,139			(7,422		)
Unrealized (losses) gains on derivatives	(279		)	53			(493		)	336
Other comprehensive income (loss)	5,497			(1,637		)	9,646			(7,086		)
TOTAL COMPREHENSIVE INCOME	$	22,954		$	14,201		$	42,729		$	24,007

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

5

Lakeland Bancorp, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

For the Three Months Ended June 30, 2019 and 2018

(in thousands, except per share data)	Common Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
At April 1, 2018	$	513,232		$	85,257		$	(9,841	)	$	588,648
Net income	—			15,838			—			15,838
Other comprehensive loss, net of tax	—			—			(1,637		)	(1,637		)
Stock based compensation	465			—			—			465
Exercise of stock options	59			—			—			59
Cash dividends on common stock of $0.115 per share	—			(5,509		)	—			(5,509		)
At June 30, 2018	$	513,756		$	95,586		$	(11,478	)	$	597,864
At April 1, 2019	$	558,245		$	126,787		$	(3,689	)	$	681,343
Net income	—			17,457			—			17,457
Other comprehensive income, net of tax	—			—			5,497			5,497
Stock based compensation	568			—			—			568
Retirement of restricted stock	(45		)	—			—			(45		)
Cash dividends on common stock of $0.125 per share	—			(6,357		)	—			(6,357		)
At June 30, 2019	$	558,768		$	137,887		$	1,808		$	698,463

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

6

Lakeland Bancorp, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

For the Six Months Ended June 30, 2019 and 2018

(in thousands, except per share data)	Common Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
At January 1, 2018	$	512,734		$	72,737		$	(2,349	)	$	583,122
Cumulative adjustment for adoption of ASU 2016-01	—			2,043			(2,043		)	—
January 1, 2018, as adjusted	512,734			74,780			(4,392		)	583,122
Net income	—			31,093			—			31,093
Other comprehensive loss, net of tax	—			—			(7,086		)	(7,086		)
Stock based compensation	1,459			—			—			1,459
Exercise of stock options	307			—			—			307
Retirement of restricted stock	(744		)	—			—			(744		)
Cash dividends on common stock of $0.215 per share	—			(10,287		)	—			(10,287		)
At June 30, 2018	$	513,756		$	95,586		$	(11,478	)	$	597,864
At January 1, 2019	$	514,703		$	116,874		$	(7,838	)	$	623,739
Cumulative adjustment for adoption of ASU 2016-02	—			125			—			125
January 1, 2019, as adjusted	514,703			116,999			(7,838		)	623,864
Net income	—			33,083			—			33,083
Other comprehensive income, net of tax	—			—			9,646			9,646
Stock based compensation	1,264			—			—			1,264
Issuance of stock for Highlands acquisition	43,417			—			—			43,417
Retirement of restricted stock	(616		)	—			—			(616		)
Cash dividends on common stock of $0.24 per share	—			(12,195		)	—			(12,195		)
At June 30, 2019	$	558,768		$	137,887		$	1,808		$	698,463

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

7

Lakeland Bancorp, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Six Months Ended June 30,
(in thousands)	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	33,083		$	31,093
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization of premiums, discounts and deferred loan fees and costs	1,145			2,022
Depreciation and amortization	4,262			2,693
Amortization of intangible assets	605			310
Amortization of operating lease right-of-use assets	1,293			—
Provision for loan losses	508			2,776
Loans originated for sale	(19,791		)	(22,018		)
Proceeds from sales of loans held for sale	21,425			21,328
Change in market value of equity securities	(453		)	(33		)
Gains on sales of loans held for sale	(799		)	(546		)
Losses (gains) on other real estate and other repossessed assets	90			(46		)
Losses on sales of premises and equipment	165			—
Stock-based compensation	1,264			1,459
Excess tax benefits	140			313
Increase in other assets	(13,053		)	(1,354		)
Increase in other liabilities	10,049			5,900
NET CASH PROVIDED BY OPERATING ACTIVITIES	39,933			43,897
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash acquired in acquisitions	13,454			—
Proceeds from repayments and maturities of available for sale securities	64,505			43,026
Proceeds from repayments and maturities of held to maturity securities	13,335			13,720
Proceeds from sales of equity securities	1,153			1,734
Purchase of available for sale securities	(56,358		)	(32,800		)
Purchase of held to maturity securities	(18,897		)	(33,235		)
Purchase of equity securities	(161		)	(409		)
Proceeds from redemptions of Federal Home Loan Bank stock	51,576			2,939
Purchases of Federal Home Loan Bank stock	(60,150		)	(6,598		)
Net increase in loans	(41,280		)	(128,718		)
Proceeds from sales of other real estate and repossessed assets	310			918
Proceeds from dispositions and sales of premises and equipment	1,794			—
Purchases of premises and equipment	(2,593		)	(2,746		)
NET CASH USED IN INVESTING ACTIVITIES	(33,312		)	(142,169		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits	52,785			31,504
Increase in federal funds purchased and securities sold under agreements to repurchase	24,798			72,934
Proceeds from other borrowings	46,260			39,437
Repayments of other borrowings	(79,353		)	(35,000		)
Exercise of stock options	—			307
Retirement of restricted stock	(616		)	(744		)
Dividends paid	(12,195		)	(10,287		)
NET CASH PROVIDED BY FINANCING ACTIVITIES	31,679			98,151
Net increase (decrease) in cash and cash equivalents	38,300			(121		)
Cash and cash equivalents, beginning of period	208,599			142,933
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	246,899		$	142,812

8

	For the Six Months Ended June 30,
(in thousands)	2019		2018
Supplemental schedule of non-cash investing and financing activities:
Cash paid during the period for income taxes	$	8,637	$	2,909
Cash paid during the period for interest	29,118		16,153
Transfer of loans into other repossessed assets and other real estate owned	102		2,214
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 available for sale	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.

9

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 six months ended June 30, 2019 do not necessarily indicate the results that the Company will achieve for all of 2019.

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 for the year ended December 31, 2018. 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 will be 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. The fair values are preliminary estimates and subject to adjustment for up to one year after the closing date of the acquisition.

During the quarter ended June 30, 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.

10

The following table summarizes the estimated fair value of the acquired assets and liabilities assumed at the date of acquisition for Highlands.

(in thousands)
Cash and cash equivalents	$	13,454
Securities, available for sale	22,734
Federal Home Loan Bank stock	1,767
Loans held for sale	1,113
Loans	425,005
Premises and equipment	3,253
Goodwill	19,397
Identifiable intangible assets	3,728
Accrued interest receivable and other assets	6,051
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

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 and includes loans added during the second quarter of 2019.

(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 and six months ended June 30, 2019, the Company incurred $318,000 and $3.2 million of merger and acquisition integration-related expenses, respectively, which have been separately stated in the Company's Consolidated Statements of Income.

11

Supplemental Pro Forma Financial Information

The following table provides unaudited condensed pro forma financial information assuming that the Highlands acquisition had been completed as of January 1, 2019, for the six months ended June 30, 2019 and as of January 1, 2018 for the six months ended June 30, 2018. The table below has been prepared for comparative purposes only and is not necessarily indicative of the actual results that would have been attained had the acquisitions occurred as of the beginning of the periods presented, nor is it indicative of future results. Furthermore, the unaudited pro forma information does not reflect management’s estimate of any revenue-enhancing opportunities nor anticipated cost savings or the impact of conforming certain accounting policies of the acquired companies to the Company’s policies that may have occurred as a result of the integration and consolidation of Highlands' operations. The pro forma information shown reflects adjustments related to certain purchase accounting fair value adjustments; amortization of core deposit and other intangibles; and related income tax effects. The Company has not provided separate information regarding revenue and earnings of Highlands since the acquisition because of the manner in which Highlands' branches and lending team were immediately merged into Lakeland’s branches and lending team making such information impracticable to provide.

	Pro Forma Six Months Ended
(in thousands)	June 30, 2019		June 30, 2018
Net interest income	$	97,951	$	94,903
Provision for loan losses	508		3,095
Noninterest income	12,083		12,732
Noninterest expense	62,573		61,324
Net income	35,511		33,987
Earnings per share:
Fully diluted	$	0.70	$	0.67

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 the 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.

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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 and six months ended June 30, 2019 and 2018:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018
Deposit Related Fees and Charges
Debit card interchange income	$	1,412	$	1,277	$	2,630	$	2,395
Overdraft charges	981		900		1,977		2,009
ATM service charges	216		217		400		407
Demand deposit fees and charges	122		121		265		279
Savings service charges	24		30		56		66
Total	2,755		2,545		5,328		5,156
Commissions and Fees
Loan fees	531		363		879		685
Wire transfer charges	305		274		572		522
Investment services income	427		311		779		539
Merchant fees	200		174		384		390
Commissions from sales of checks	111		112		214		220
Safe deposit income	90		104		181		188
Other income	60		65		121		128
Total	1,724		1,403		3,130		2,672
Gains on Sales of Loans	428		300		799		546
Other Income