XML 24 R14.htm IDEA: XBRL DOCUMENT v3.19.2
Loans and Other Real Estate
 6 Months Ended
Jun. 30, 2019
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)
June 30, 2019
 
December 31, 2018
 
 
 
 
Commercial, secured by real estate
$
3,431,709

 
$
3,057,779

Commercial, industrial and other
407,776

 
336,735

Equipment finance
99,351

 
87,925

Real estate - residential mortgage
336,810

 
329,854

Real estate - construction
305,738

 
319,545

Home equity and consumer
343,916

 
328,609

Total loans
4,925,300

 
4,460,447

Less: deferred fees
(2,927
)
 
(3,714
)
Loans, net of deferred fees
$
4,922,373

 
$
4,456,733


At June 30, 2019 and December 31, 2018, home equity and consumer loans included overdraft deposit balances of $465,000 and $452,000, respectively. At June 30, 2019 and December 31, 2018, the Company had $1.32 billion and $1.16 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)
June 30, 2019
 
December 31, 2018
Acquisition
 
 
 
  Highlands
$
13,446

 
$
—

  Pascack Community Bank ("Pascack")
134

 
157

  Harmony Bank ("Harmony")
470

 
495

Total
$
14,050

 
$
652


The carrying value of loans acquired in the Highlands merger and accounted for in accordance with ASC Subtopic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality,” was $13.8 million at acquisition on January 4, 2019.
The following table presents changes in the accretable yield for PCI loans:
 
For the Three Months Ended
 
For the Six Months Ended
(in thousands)
June 30, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
 
 
 
 
 
 
 
 
Balance, beginning of period
$
1,338

 
$
113

 
$
81

 
$
129

Acquisitions
11

 
—

 
1,431

 
—

Accretion
(188
)
 
(43
)
 
(381
)
 
(87
)
Net reclassification non-accretable difference
30

 
30

 
60

 
58

Balance, end of period
$
1,191

 
$
100

 
$
1,191

 
$
100


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)
June 30, 2019
 
December 31, 2018
 
 
 
 
Commercial, secured by real estate
$
10,205

 
$
7,192

Commercial, industrial and other
662

 
1,019

Equipment finance
136

 
501

Real estate - residential mortgage
1,548

 
1,986

Home equity and consumer
1,873

 
1,432

Total non-accrual loans
$
14,424

 
$
12,130

Other real estate and other repossessed assets
532

 
830

TOTAL NON-PERFORMING ASSETS
$
14,956

 
$
12,960

Troubled debt restructurings, still accruing
$
5,139

 
$
9,293


Non-accrual loans included $3.3 million and $3.6 million of troubled debt restructurings at June 30, 2019 and December 31, 2018, respectively. At June 30, 2019 and December 31, 2018, the Company had $1.4 million and $1.5 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 June 30, 2019 and December 31, 2018, 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
June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
5,398

 
$
4,947

 
$
6,210

 
$
16,555

 
$
3,408,255

 
$
3,424,810

 
$
—

Commercial, industrial and other
1,321

 
154

 
131

 
1,606

 
403,654

 
405,260

 
—

Equipment finance
248

 
68

 
136

 
452

 
98,899

 
99,351

 
—

Real estate - residential mortgage
3,038

 
223

 
1,262

 
4,523

 
331,825

 
336,348

 
—

Real estate - construction
493

 
—

 
—

 
493

 
301,607

 
302,100

 
—

Home equity and consumer
1,588

 
217

 
1,689

 
3,494

 
339,887

 
343,381

 
—

 
$
12,086

 
$
5,609

 
$
9,428

 
$
27,123

 
$
4,884,127

 
$
4,911,250

 
$
—

December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
1,477

 
$
639

 
$
2,080

 
$
4,196

 
$
3,052,931

 
$
3,057,127

 
$
—

Commercial, industrial and other
173

 
243

 
750

 
1,166

 
335,569

 
336,735

 
—

Equipment finance
533

 
13

 
501

 
1,047

 
86,878

 
87,925

 
—

Real estate - residential mortgage
743

 
111

 
1,776

 
2,630

 
327,224

 
329,854

 
—

Real estate - construction
—

 
—

 
—

 
—

 
319,545

 
319,545

 
—

Home equity and consumer
1,917

 
216

 
850

 
2,983

 
325,626

 
328,609

 
—

 
$
4,843

 
$
1,222

 
$
5,957

 
$
12,022

 
$
4,447,773

 
$
4,459,795

 
$
—


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 June 30, 2019 and December 31, 2018 are as follows:
(in thousands)
Recorded
Investment in
Impaired  Loans
 
Contractual
Unpaid
Principal
Balance
 
Specific
Allowance
 
Average
Investment in
Impaired  Loans
 
Interest
Income
Recognized
June 30, 2019
 
 
 
 
 
 
 
 
 
Loans without specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
11,465

 
$
11,863

 
$
—

 
$
10,074

 
$
103

Commercial, industrial and other
644

 
633

 
—

 
1,146

 
9

Equipment finance
—

 
—

 
—

 
255

 
—

Real estate - residential mortgage
—

 
—

 
—

 
—

 
—

Real estate - construction
—

 
—

 
—

 
—

 
—

Home equity and consumer
—

 
—

 
—

 
—

 
—

Loans with specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
3,758

 
4,033

 
219

 
5,201

 
112

Commercial, industrial and other
128

 
128

 
7

 
128

 
4

Equipment finance
23

 
23

 
10

 
28

 
13

Real estate - residential mortgage
700

 
865

 
3

 
708

 
10

Real estate - construction
—

 
—

 
—

 
—

 
—

Home equity and consumer
667

 
713

 
5

 
680

 
15

Total:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
15,223

 
$
15,896

 
$
219

 
$
15,275

 
$
215

Commercial, industrial and other
772

 
761

 
7

 
1,274

 
13

Equipment finance
23

 
23

 
10

 
283

 
13

Real estate - residential mortgage
700

 
865

 
3

 
708

 
10

Real estate - construction
—

 
—

 
—

 
—

 
—

Home equity and consumer
667

 
713

 
5

 
680

 
15

 
$
17,385

 
$
18,258

 
$
244

 
$
18,220

 
$
266

(in thousands)
Recorded
Investment in
Impaired  Loans
 
Contractual
Unpaid
Principal
Balance
 
Specific
Allowance
 
Average
Investment in
Impaired  Loans
 
Interest
Income
Recognized
December 31, 2018
 
 
 
 
 
 
 
 
 
Loans without specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
9,284

 
$
9,829

 
$
—

 
$
7,369

 
$
188

Commercial, industrial and other
1,151

 
1,449

 
—

 
1,834

 
19

Equipment finance
301

 
597

 
—

 
376

 
—

Real estate - residential mortgage
—

 
—

 
—

 
242

 
4

Real estate - construction
—

 
—

 
—

 
726

 
—

Home equity and consumer
—

 
—

 
—

 
—

 
—

Loans with specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
7,270

 
7,597

 
307

 
7,594

 
317

Commercial, industrial and other
209

 
209

 
7

 
209

 
12

Equipment finance
30

 
30

 
14

 
19

 
—

Real estate - residential mortgage
730

 
884

 
4

 
745

 
20

Real estate - construction
—

 
—

 
—

 
—

 
—

Home equity and consumer
727

 
765

 
6

 
898

 
32

Total:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
16,554

 
$
17,426

 
$
307

 
$
14,963

 
$
505

Commercial, industrial and other
1,360

 
1,658

 
7

 
2,043

 
31

Equipment finance
331

 
627

 
14

 
395

 
—

Real estate - residential mortgage
730

 
884

 
4

 
987

 
24

Real estate - construction
—

 
—

 
—

 
726

 
—

Home equity and consumer
727

 
765

 
6

 
898

 
32

 
$
19,702

 
$
21,360

 
$
338

 
$
20,012

 
$
592


Interest income recognized on impaired loans was $266,000 and $308,000 for the six months ended June 30, 2019 and 2018, respectively. Interest that would have been accrued on impaired loans during the first six months of 2019 and 2018 had the loans been performing under original terms would have been $500,000 and $566,000, 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 June 30, 2019 and December 31, 2018, by the risk ratings discussed above (in thousands):
June 30, 2019
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Real Estate -
Construction
RISK RATING
 
 
 
 
 
1
$
—

 
$
2,414

 
$
—

2
—

 
19,465

 
—

3
72,155

 
37,113

 
—

4
937,855

 
96,762

 
17,086

5
2,222,710

 
217,158

 
274,322

5W - Watch
96,095

 
17,997

 
7,738

6 - Other assets especially mentioned
51,572

 
4,942

 
2,267

7 - Substandard
51,322

 
11,925

 
4,325

8 - Doubtful
—

 
—

 
—

9 - Loss
—

 
—

 
—

Total
$
3,431,709

 
$
407,776

 
$
305,738

December 31, 2018
Commercial,
Secured by
Real Estate
 
Commercial,
Industrial
and Other
 
Real Estate -
Construction
RISK RATING
 
 
 
 
 
1
$
—

 
$
1,119

 
$
—

2
—

 
18,462

 
—

3
69,995

 
36,367

 
—

4
933,577

 
91,145

 
17,375

5
1,910,423

 
168,474

 
297,625

5W - Watch
61,626

 
7,798

 
3,493

6 - Other assets especially mentioned
38,844

 
2,033

 
—

7 - Substandard
43,314

 
11,337

 
1,052

8 - Doubtful
—

 
—

 
—

9 - Loss
—

 
—

 
—

Total
$
3,057,779

 
$
336,735

 
$
319,545


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 following table details activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2019 and 2018:
(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 June 30, 2019
 
Beginning Balance
$
27,515

 
$
2,592

 
$
947

 
$
1,564

 
$
2,887

 
$
2,474

 
$
37,979

Charge-offs
—

 
(38
)
 
(293
)
 
—

 
—

 
(82
)
 
(413
)
Recoveries
25

 
947

 
—

 
2

 
60

 
62

 
1,096

Provision
555

 
(868
)
 
401

 
40

 
(239
)
 
111

 
—

Ending Balance
$
28,095

 
$
2,633

 
$
1,055

 
$
1,606

 
$
2,708

 
$
2,565

 
$
38,662

(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 June 30, 2018
 
Beginning Balance
$
25,817

 
$
1,768

 
$
1,042

 
$
1,589

 
$
2,932

 
$
2,496

 
$
35,644

Charge-offs
(210
)
 
(289
)
 
(72
)
 
—

 
(248
)
 
(144
)
 
(963
)
Recoveries
274

 
76

 
3

 
3

 
3

 
72

 
431

Provision
293

 
457

 
291

 
(7
)
 
376

 
82

 
1,492

Ending Balance
$
26,174

 
$
2,012

 
$
1,264

 
$
1,585

 
$
3,063

 
$
2,506

 
$
36,604

(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
Six Months Ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance
$
27,881

 
$
1,742

 
$
987

 
$
1,566

 
$
3,015

 
$
2,497

 
$
37,688

Charge-offs
(187
)
 
(185
)
 
(380
)
 
(50
)
 
—

 
(127
)
 
(929
)
Recoveries
140

 
1,044

 
2

 
11

 
65

 
133

 
1,395

Provision
261

 
32

 
446

 
79

 
(372
)
 
62

 
508

Ending Balance
$
28,095

 
$
2,633

 
$
1,055

 
$
1,606

 
$
2,708

 
$
2,565

 
$
38,662

(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
Six Months Ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning Balance
$
25,704

 
$
2,313

 
$
630

 
$
1,557

 
$
2,731

 
$
2,520

 
$
35,455

Charge-offs
(232
)
 
(1,301
)
 
(95
)
 
(93
)
 
(248
)
 
(244
)
 
(2,213
)
Recoveries
305

 
96

 
5

 
5

 
8

 
167

 
586

Provision
397

 
904

 
724

 
116

 
572

 
63

 
2,776

Ending Balance
$
26,174

 
$
2,012

 
$
1,264

 
$
1,585

 
$
3,063

 
$
2,506

 
$
36,604



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
June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance: Individually evaluated for impairment
$
15,223

 
$
772

 
$
23

 
$
700

 
$
—

 
$
667

 
$
17,385

Ending Balance: Collectively evaluated for impairment
3,409,587

 
404,488

 
99,328

 
335,648

 
302,100

 
342,714

 
4,893,865

Ending Balance: Loans acquired with deteriorated credit quality
6,899

 
2,516

 
—

 
462

 
3,638

 
535

 
14,050

Ending Balance (1)
$
3,431,709

 
$
407,776

 
$
99,351

 
$
336,810

 
$
305,738

 
$
343,916

 
$
4,925,300

(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, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance: Individually evaluated for impairment
$
16,554

 
$
1,360

 
$
331

 
$
730

 
$
—

 
$
727

 
$
19,702

Ending Balance: Collectively evaluated for impairment
3,040,573

 
335,375

 
87,594

 
329,124

 
319,545

 
327,882

 
4,440,093

Ending balance: Loans acquired with deteriorated credit quality
652

 
—

 
—

 
—

 
—

 
—

 
652

Ending Balance (1)
$
3,057,779

 
$
336,735

 
$
87,925

 
$
329,854

 
$
319,545

 
$
328,609

 
$
4,460,447

(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
June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance: Individually evaluated for impairment
$
219

 
$
7

 
$
10

 
$
3

 
$
—

 
$
5

 
$
244

Ending Balance: Collectively evaluated for impairment
27,876

 
2,626

 
1,045

 
1,603

 
2,708

 
2,560

 
38,418

Ending Balance
$
28,095

 
$
2,633

 
$
1,055

 
$
1,606

 
$
2,708

 
$
2,565

 
$
38,662

(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, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Balance: Individually evaluated for impairment
$
307

 
$
7

 
$
14

 
$
4

 
$
—

 
$
6

 
$
338

Ending Balance: Collectively evaluated for impairment
27,574

 
1,735

 
973

 
1,562

 
3,015

 
2,491

 
37,350

Ending Balance
$
27,881

 
$
1,742

 
$
987

 
$
1,566

 
$
3,015

 
$
2,497

 
$
37,688


Lakeland also maintains a reserve for unfunded lending commitments which is included in other liabilities. This reserve was $1.8 million and $2.3 million as of June 30, 2019 and December 31, 2018, 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 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.
The following table summarizes loans that have been restructured during the three and six months ended June 30, 2019 and 2018:
 
For the Three Months Ended June 30, 2019
 
For the Three Months Ended June 30, 2018
(dollars in thousands)
Number of
Contracts
 
Pre-
Modification
Outstanding
Recorded
Investment
 
Post-
Modification
Outstanding
Recorded
Investment
 
Number of
Contracts
 
Pre-
Modification
Outstanding
Recorded
Investment
 
Post-
Modification
Outstanding
Recorded
Investment
 
 
Commercial, secured by real estate
—

 
$
—

 
$
—

 
1

 
$
170

 
$
170

Commercial, industrial and other
—

 
—

 
—

 
1

 
950

 
950

 
—

 
$
—

 
$
—

 
2

 
$
1,120

 
$
1,120

 
For the Six Months Ended June 30, 2019
 
For the Six Months Ended June 30, 2018
(dollars in thousands)
Number of
Contracts
 
Pre-
Modification
Outstanding
Recorded
Investment
 
Post-
Modification
Outstanding
Recorded
Investment
 
Number of
Contracts
 
Pre-
Modification
Outstanding
Recorded
Investment
 
Post-
Modification
Outstanding
Recorded
Investment
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
—

 
$
—

 
$
—

 
3

 
$
1,827

 
$
1,827

Commercial, industrial and other
—

 
—

 
—

 
1

 
950

 
950

 
—

 
$
—

 
$
—

 
4

 
$
2,777

 
$
2,777


The following table summarizes as of June 30, 2019 and 2018, loans that were restructured within the previous twelve months that have subsequently defaulted:
 
June 30, 2019
 
June 30, 2018
(dollars in thousands)
Number of
Contracts
 
Recorded
Investment
 
Number of
Contracts
 
Recorded
Investment
 
 
Commercial, secured by real estate
—

 
$
—

 
2

 
$
1,234

Commercial, industrial and other
—

 
—

 
1

 
950

Equipment financing
—

 
—

 
1

 
11

 
—

 
$
—

 
4

 
$
2,195


Other Real Estate and Other Repossessed Assets
At June 30, 2019 and December 31, 2018, the Company had other real estate owned of $532,000 and $830,000, respectively. Included in other real estate owned was residential property acquired as a result of foreclosure proceedings totaling $467,000 and $702,000 at June 30, 2019 and December 31, 2018, respectively. There were no balances of other repossessed assets at both June 30, 2019 and December 31, 2018.