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		September 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 November 1, 2019, there were 50,498,410 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 September 30, 2019 (unaudited) and December 31, 2018	3
	Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)	4
	Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)	5
	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)	6
	Consolidated Statements of Cash Flows for the Nine Months Ended September 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	38
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

	September 30, 2019			December 31, 2018
(dollars in thousands)	(unaudited)
ASSETS
Cash	$	249,553		$	205,199
Interest-bearing deposits due from banks	32,405			3,400
Total cash and cash equivalents	281,958			208,599
Investment securities available for sale, at fair value	720,405			638,618
Equity securities, at fair value	15,552			15,921
Investment securities held to maturity; fair value of $152,495 at September 30, 2019 and $150,932 at December 31, 2018	151,115			153,646
Federal Home Loan Bank and other membership bank stock, at cost	18,006			13,301
Loans held for sale	3,077			1,113
Loans, net of deferred fees	4,923,414			4,456,733
Allowance for loan losses	(38,655		)	(37,688		)
Net loans	4,884,759			4,419,045
Premises and equipment, net	47,372			49,175
Operating lease right-of-use assets	17,953			—
Accrued interest receivable	16,573			16,114
Goodwill	156,277			136,433
Other identifiable intangible assets	4,602			1,768
Bank owned life insurance	111,717			110,052
Other assets	63,108			42,308
TOTAL ASSETS	$	6,492,474		$	5,806,093
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing	$	1,101,083		$	950,218
Savings and interest-bearing transaction accounts	3,196,323			2,913,414
Time deposits $250 thousand and under	682,677			589,737
Time deposits over $250 thousand	230,536			167,301
Total deposits	5,210,619			4,620,670
Federal funds purchased and securities sold under agreements to repurchase	199,326			233,905
Other borrowings	165,818			181,118
Subordinated debentures	118,211			105,027
Operating lease liabilities	19,509			—
Other liabilities	65,787			41,634
TOTAL LIABILITIES	5,779,270			5,182,354
STOCKHOLDERS’ EQUITY
Common stock, no par value; authorized shares, 100,000,000; issued shares, 50,489,161 at September 30, 2019 and 47,486,250 at December 31, 2018	559,595			514,703
Retained earnings	150,399			116,874
Accumulated other comprehensive income (loss)	3,210			(7,838		)
TOTAL STOCKHOLDERS’ EQUITY	713,204			623,739
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,492,474		$	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 September 30,						For the Nine Months Ended September 30,
(in thousands, except per share data)	2019			2018			2019		2018
INTEREST INCOME
Loans and fees	$	58,563		$	49,181		$	175,324	$	142,384
Federal funds sold and interest-bearing deposits with banks	695			533			1,297		844
Taxable investment securities and other	5,007			4,141			14,865		12,160
Tax-exempt investment securities	361			427			1,165		1,299
TOTAL INTEREST INCOME	64,626			54,282			192,651		156,687
INTEREST EXPENSE
Deposits	13,267			8,429			37,526		20,685
Federal funds purchased and securities sold under agreements to repurchase	231			42			1,333		409
Other borrowings	2,446			2,187			7,306		6,240
TOTAL INTEREST EXPENSE	15,944			10,658			46,165		27,334
NET INTEREST INCOME	48,682			43,624			146,486		129,353
Provision for loan losses	536			1,046			1,044		3,822
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	48,146			42,578			145,442		125,531
NONINTEREST INCOME
Service charges on deposit accounts	2,851			2,614			8,179		7,770
Commissions and fees	1,545			1,414			4,682		4,096
Income on bank owned life insurance	691			1,127			2,064		2,557
Gain on equity securities	72			(439		)	525		(384		)
Gains on sales of loans	486			484			1,285		1,030
Other income	1,055			439			2,077		1,613
TOTAL NONINTEREST INCOME	6,700			5,639			18,812		16,682
NONINTEREST EXPENSE
Salaries and employee benefits	19,062			17,352			57,672		50,921
Net occupancy expense	2,767			2,316			8,350		7,657
Furniture and equipment	2,084			2,070			6,365		6,287
FDIC insurance expense	(420		)	400			431		1,225
Stationery, supplies and postage	366			371			1,214		1,230
Marketing expense	423			343			1,430		1,160
Data processing expense	1,248			1,083			3,800		2,525
Telecommunications expense	480			438			1,451		1,321
ATM and debit card expense	588			556			1,773		1,624
Core deposit intangible amortization	288			142			893		452
Other real estate and repossessed asset expense	29			45			223		112
Merger related expenses	—			—			3,178		—
Other expenses	2,648			2,677			8,453		7,990
TOTAL NONINTEREST EXPENSE	29,563			27,793			95,233		82,504
Income before provision for income taxes	25,283			20,424			69,021		59,709
Provision for income taxes	6,409			3,666			17,064		11,858
NET INCOME	$	18,874		$	16,758		$	51,957	$	47,851
PER SHARE OF COMMON STOCK
Basic earnings	$	0.37		$	0.35		$	1.02	$	1.00
Diluted earnings	$	0.37		$	0.35		$	1.02	$	0.99
Dividends	$	0.125		$	0.115		$	0.365	$	0.330

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 September 30,						For the Nine Months Ended September 30,
(in thousands)	2019			2018			2019			2018
NET INCOME	$	18,874		$	16,758		$	51,957		$	47,851
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Unrealized gains (losses) on securities available for sale	1,480			(2,019		)	11,619			(9,441		)
Unrealized (losses) gains on derivatives	(78		)	6			(571		)	342
Other comprehensive income (loss)	1,402			(2,013		)	11,048			(9,099		)
TOTAL COMPREHENSIVE INCOME	$	20,276		$	14,745		$	63,005		$	38,752

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 September 30, 2019 and 2018

(in thousands, except per share data)	Common Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
At July 1, 2018	$	513,756		$	95,586		$	(11,478	)	$	597,864
Net income	—			16,758			—			16,758
Other comprehensive loss, net of tax	—			—			(2,013		)	(2,013		)
Stock based compensation	471			—			—			471
Retirement of restricted stock	(15		)	—			—			(15		)
Cash dividends on common stock of $0.115 per share	—			(5,510		)	—			(5,510		)
At September 30, 2018	$	514,212		$	106,834		$	(13,491	)	$	607,555
At July 1, 2019	$	558,768		$	137,887		$	1,808		$	698,463
Net income	—			18,874			—			18,874
Other comprehensive income, net of tax	—			—			1,402			1,402
Stock based compensation	558			—			—			558
Exercise of stock options	307			—			—			307
Retirement of restricted stock	(38		)	—			—			(38		)
Cash dividends on common stock of $0.125 per share	—			(6,362		)	—			(6,362		)
At September 30, 2019	$	559,595		$	150,399		$	3,210		$	713,204

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 Nine Months Ended September 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	—			47,851			—			47,851
Other comprehensive loss, net of tax	—			—			(9,099		)	(9,099		)
Stock based compensation	1,930			—			—			1,930
Exercise of stock options	307			—			—			307
Retirement of restricted stock	(759		)	—			—			(759		)
Cash dividends on common stock of $0.33 per share	—			(15,797		)	—			(15,797		)
At September 30, 2018	$	514,212		$	106,834		$	(13,491	)	$	607,555
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	—			51,957			—			51,957
Other comprehensive income, net of tax	—			—			11,048			11,048
Stock based compensation	1,822			—			—			1,822
Exercise of stock options	307			—			—			307
Issuance of stock for Highlands acquisition	43,417			—			—			43,417
Retirement of restricted stock	(654		)	—			—			(654		)
Cash dividends on common stock of $0.365 per share	—			(18,557		)	—			(18,557		)
At September 30, 2019	$	559,595		$	150,399		$	3,210		$	713,204

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 Nine Months Ended September 30,
(in thousands)	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	51,957		$	47,851
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization of premiums, discounts and deferred loan fees and costs	1,838			3,548
Depreciation and amortization	1,162			4,114
Amortization of intangible assets	893			452
Amortization of operating lease right-of-use assets	1,938			—
Provision for loan losses	1,044			3,822
Loans originated for sale	(40,074		)	(35,270		)
Proceeds from sales of loans held for sale	40,508			34,932
Change in market value of equity securities	(525		)	366
Gains on proceeds from bank owned life insurance policies	—			(421		)
Gains on sales of loans held for sale	(1,285		)	(546		)
Losses (gains) on other real estate and other repossessed assets	87			(98		)
Losses on sales of premises and equipment	486			3
Stock-based compensation	1,822			1,930
Deferred tax benefit	—			(1,263		)
Excess tax benefits	183			313
Increase in other assets	(20,386		)	(1,438		)
Increase in other liabilities	21,935			8,105
NET CASH PROVIDED BY OPERATING ACTIVITIES	61,583			66,400
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash acquired in acquisitions	13,454			—
Proceeds from repayments and maturities of available for sale securities	102,133			68,240
Proceeds from repayments and maturities of held to maturity securities	22,330			18,229
Proceeds from sales of equity securities	1,153			2,155
Purchase of available for sale securities	(149,182		)	(68,845		)
Purchase of held to maturity securities	(18,897		)	(37,655		)
Purchase of equity securities	(259		)	(469		)
Death benefit proceeds from bank owned life insurance policy	121			755
Proceeds from redemptions of Federal Home Loan Bank stock	79,217			5,716
Purchases of Federal Home Loan Bank stock	(82,155		)	(6,598		)
Net increase in loans	(38,613		)	(181,561		)
Proceeds from sales of other real estate and repossessed assets	399			1,795
Proceeds from dispositions and sales of premises and equipment	1,827			61
Purchases of premises and equipment	(4,166		)	(3,899		)
NET CASH USED IN INVESTING ACTIVITIES	(72,638		)	(202,076		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits	180,990			274,029
Decrease in federal funds purchased and securities sold under agreements to repurchase	(34,579		)	(77,538		)
Proceeds from other borrowings	46,260			39,437
Repayments of other borrowings	(89,353		)	(46,700		)
Exercise of stock options	307			307
Retirement of restricted stock	(654		)	(759		)
Dividends paid	(18,557		)	(15,797		)
NET CASH PROVIDED BY FINANCING ACTIVITIES	84,414			172,979
Net increase in cash and cash equivalents	73,359			37,303
Cash and cash equivalents, beginning of period	208,599			142,933
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	281,958		$	180,236

8

	For the Nine Months Ended September 30,
(in thousands)	2019		2018
Supplemental schedule of non-cash investing and financing activities:
Cash paid during the period for income taxes	$	10,847	$	4,614
Cash paid during the period for interest	46,532		25,748
Transfer of loans into other repossessed assets and other real estate owned	599		3,608
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 nine months ended September 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.

As a result of new information obtained during the quarter ended September 30, 2019, about facts and circumstances that existed as of the acquisition date, the Company revised the estimated fair value on two Highlands branches acquired. The adjustment resulted in an increase in goodwill of $447,000.

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	2,613
Goodwill	19,844
Identifiable intangible assets	3,728
Accrued interest receivable and other assets	6,244
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.

(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 nine months ended September 30, 2019, the Company incurred $0 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 nine months ended September 30, 2019 and as of January 1, 2018 for the nine months ended September 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 Nine Months Ended
(in thousands)	September 30, 2019		September 30, 2018
Net interest income	$	146,633	$	143,250
Provision for loan losses	1,044		4,219
Noninterest income	18,783		19,029
Noninterest expense	92,136		92,344
Net income	54,373		52,244
Earnings per share:
Fully diluted	$	1.07	$	1.03

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 nine months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(in thousands)	2019		2018		2019		2018
Deposit Related Fees and Charges:
Debit card interchange income	$	1,429	$	1,280	$	4,059	$	3,675
Overdraft charges	1,047		966		3,024		2,975
ATM service charges	226		220		626		627
Demand deposit fees and charges	124		119		389		398
Savings service charges	25		29		81		95
Total	2,851		2,614		8,179		7,770
Commissions and Fees:
Loan fees	303		267		1,182		952
Wire transfer charges	316		291		888		813
Investment services income	474		378		1,253		917
Merchant fees	202		199		586		589
Commissions from sales of checks	85		106		299		326
Safe deposit income	94		92		275		280
Other income	66		77		187