false--12-31FY201900008469010.06500.06500.02050.02130.01930.01950.02130.02050.01950.019300000.10000.1010000000010000000047486250504984100.03100.01520.03970.21P30YP50YP25YP2YP10YP10Y0P3YP2YP3YP2YP3Y00.05000.050.08000.080000 0000846901 2019-01-01 2019-12-31 0000846901 2019-06-30 0000846901 2020-02-25 0000846901 2019-12-31 0000846901 2018-12-31 0000846901 2017-01-01 2017-12-31 0000846901 2018-01-01 2018-12-31 0000846901 us-gaap:RetainedEarningsMember 2019-01-01 0000846901 us-gaap:CommonStockMember 2018-12-31 0000846901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 2018-12-31 0000846901 us-gaap:RetainedEarningsMember 2019-12-31 0000846901 us-gaap:CommonStockMember 2019-12-31 0000846901 us-gaap:RetainedEarningsMember 2018-01-01 0000846901 us-gaap:RetainedEarningsMember 2016-12-31 0000846901 us-gaap:CommonStockMember 2017-01-01 2017-12-31 0000846901 us-gaap:CommonStockMember 2019-01-01 2019-12-31 0000846901 us-gaap:RetainedEarningsMember 2018-01-01 2018-12-31 0000846901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2016-12-31 0000846901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0000846901 us-gaap:RetainedEarningsMember 2018-12-31 0000846901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0000846901 us-gaap:CommonStockMember 2017-12-31 0000846901 2019-01-01 0000846901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 0000846901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-01-01 2017-12-31 0000846901 us-gaap:RetainedEarningsMember 2019-01-01 2019-12-31 0000846901 us-gaap:RetainedEarningsMember 2017-01-01 2017-12-31 0000846901 us-gaap:CommonStockMember 2018-01-01 0000846901 2017-12-31 0000846901 us-gaap:CommonStockMember 2019-01-01 0000846901 us-gaap:CommonStockMember 2016-12-31 0000846901 2018-01-01 0000846901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0000846901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 0000846901 2016-12-31 0000846901 us-gaap:CommonStockMember 2018-01-01 2018-12-31 0000846901 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-12-31 0000846901 us-gaap:RetainedEarningsMember 2017-12-31 0000846901 lbai:HighlandsBancorpInc.Member 2019-01-04 0000846901 lbai:HighlandsBancorpInc.Member us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember 2019-01-04 0000846901 lbai:HighlandsBancorpInc.Member 2019-04-01 2019-06-30 0000846901 lbai:HighlandsBancorpInc.Member 2018-01-01 2018-12-31 0000846901 lbai:HighlandsBancorpInc.Member 2019-01-01 2019-12-31 0000846901 lbai:HighlandsBancorpInc.Member 2019-01-04 2019-01-04 0000846901 lbai:HighlandsBancorpInc.Member 2019-07-01 2019-09-30 0000846901 lbai:HighlandsBancorpInc.Member 2017-01-01 2017-12-31 0000846901 us-gaap:AccountingStandardsUpdate201601Member us-gaap:RetainedEarningsMember 2018-01-01 0000846901 2019-10-01 2019-12-31 0000846901 lbai:OtherFinancialInstitutionsMember 2019-12-31 0000846901 lbai:CommunityReinvestmentFundsMember 2019-12-31 0000846901 lbai:MortgageBackedSecuritiesMultiFamilyMember 2019-12-31 0000846901 us-gaap:USStatesAndPoliticalSubdivisionsMember 2018-12-31 0000846901 us-gaap:USStatesAndPoliticalSubdivisionsMember 2019-12-31 0000846901 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2019-12-31 0000846901 us-gaap:ResidentialMortgageBackedSecuritiesMember 2018-12-31 0000846901 us-gaap:DebtSecuritiesMember 2019-12-31 0000846901 us-gaap:DebtSecuritiesMember 2018-12-31 0000846901 us-gaap:USGovernmentAgenciesDebtSecuritiesMember 2018-12-31 0000846901 lbai:MortgageBackedSecuritiesMultiFamilyMember 2018-12-31 0000846901 us-gaap:ResidentialMortgageBackedSecuritiesMember 2019-12-31 0000846901 us-gaap:USTreasuryAndGovernmentMember 2018-12-31 0000846901 us-gaap:USTreasuryAndGovernmentMember 2019-12-31 0000846901 us-gaap:MortgageBackedSecuritiesMember 2019-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember 2018-12-31 0000846901 us-gaap:ResidentialPortfolioSegmentMember 2019-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember 2018-12-31 0000846901 lbai:HomeEquityAndConsumerMember 2018-12-31 0000846901 us-gaap:FinanceLeasesPortfolioSegmentMember 2018-12-31 0000846901 lbai:HomeEquityAndConsumerMember 2019-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember 2019-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember 2019-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember 2019-12-31 0000846901 us-gaap:ResidentialPortfolioSegmentMember 2018-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember 2018-12-31 0000846901 us-gaap:FinanceLeasesPortfolioSegmentMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:HomeEquityAndConsumerMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:CommercialIndustrialAndOtherMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:HomeEquityAndConsumerMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:ResidentialPortfolioSegmentMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:ConstructionRealEstatePortfolioSegmentMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:HomeEquityAndConsumerMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:FinanceLeasesPortfolioSegmentMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:ConstructionRealEstatePortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:CommercialIndustrialAndOtherMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:ConstructionRealEstatePortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:CommercialIndustrialAndOtherMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:CommercialIndustrialAndOtherMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:ConstructionRealEstatePortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:HomeEquityAndConsumerMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2019-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember 2017-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:LoansAndLeasesMember 2018-12-31 0000846901 lbai:LoansAndLeasesMember 2018-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember 2018-01-01 2018-12-31 0000846901 us-gaap:ResidentialPortfolioSegmentMember 2018-01-01 2018-12-31 0000846901 us-gaap:FinanceLeasesPortfolioSegmentMember lbai:LoansAndLeasesMember 2018-12-31 0000846901 lbai:HomeEquityAndConsumerMember 2018-01-01 2018-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember 2018-01-01 2018-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember 2018-01-01 2018-12-31 0000846901 lbai:HomeEquityAndConsumerMember lbai:LoansAndLeasesMember 2018-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember lbai:ConstructionRealEstatePortfolioSegmentMember lbai:LoansAndLeasesMember 2018-12-31 0000846901 us-gaap:FinanceLeasesPortfolioSegmentMember 2018-01-01 2018-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember 2017-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember lbai:LoansAndLeasesMember 2018-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:LoansAndLeasesMember 2018-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember lbai:HomeEquityAndConsumerMember lbai:LoansAndLeasesMember 2018-12-31 0000846901 us-gaap:ResidentialPortfolioSegmentMember lbai:LoansAndLeasesMember 2018-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:LoansAndLeasesMember 2018-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember lbai:CommercialIndustrialAndOtherMember lbai:LoansAndLeasesMember 2018-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember 2017-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:FinanceLeasesPortfolioSegmentMember lbai:LoansAndLeasesMember 2018-12-31 0000846901 us-gaap:ResidentialPortfolioSegmentMember 2017-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:ResidentialPortfolioSegmentMember lbai:LoansAndLeasesMember 2018-12-31 0000846901 lbai:HomeEquityAndConsumerMember 2017-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:LoansAndLeasesMember 2018-12-31 0000846901 us-gaap:FinanceLeasesPortfolioSegmentMember 2017-12-31 0000846901 lbai:HighlandsBancorpInc.Member 2019-12-31 0000846901 lbai:PascackBancorpIncMember 2018-12-31 0000846901 lbai:PascackBancorpIncMember 2019-12-31 0000846901 lbai:HarmonyBankMember 2018-12-31 0000846901 lbai:HighlandsBancorpInc.Member 2018-12-31 0000846901 lbai:HarmonyBankMember 2019-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember 2019-01-01 2019-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:LoansAndLeasesMember 2019-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember 2019-01-01 2019-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember lbai:LoansAndLeasesMember 2019-12-31 0000846901 lbai:HomeEquityAndConsumerMember lbai:LoansAndLeasesMember 2019-12-31 0000846901 us-gaap:FinanceLeasesPortfolioSegmentMember 2019-01-01 2019-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:FinanceLeasesPortfolioSegmentMember lbai:LoansAndLeasesMember 2019-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:LoansAndLeasesMember 2019-12-31 0000846901 us-gaap:ResidentialPortfolioSegmentMember lbai:LoansAndLeasesMember 2019-12-31 0000846901 us-gaap:FinanceLeasesPortfolioSegmentMember lbai:LoansAndLeasesMember 2019-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:LoansAndLeasesMember 2019-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember 2019-01-01 2019-12-31 0000846901 lbai:LoansAndLeasesMember 2019-12-31 0000846901 us-gaap:ResidentialPortfolioSegmentMember 2019-01-01 2019-12-31 0000846901 lbai:HomeEquityAndConsumerMember 2019-01-01 2019-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:ResidentialPortfolioSegmentMember lbai:LoansAndLeasesMember 2019-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember lbai:ConstructionRealEstatePortfolioSegmentMember lbai:LoansAndLeasesMember 2019-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:LoansAndLeasesMember 2019-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember lbai:CommercialIndustrialAndOtherMember lbai:LoansAndLeasesMember 2019-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember lbai:HomeEquityAndConsumerMember lbai:LoansAndLeasesMember 2019-12-31 0000846901 us-gaap:CommercialLoanMember lbai:WatchMember 2019-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:LossMember 2019-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember us-gaap:SubstandardMember 2019-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember us-gaap:DoubtfulMember 2019-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:PassTwoMember 2019-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:OtherAssetsEspeciallyMentionedMember 2019-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:DoubtfulMember 2019-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:PassThreeMember 2019-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:WatchMember 2019-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember us-gaap:SubstandardMember 2019-12-31 0000846901 us-gaap:CommercialLoanMember lbai:PassOneMember 2019-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:PassFourMember 2019-12-31 0000846901 us-gaap:CommercialLoanMember lbai:PassFiveMember 2019-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:PassFourMember 2019-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:OtherAssetsEspeciallyMentionedMember 2019-12-31 0000846901 us-gaap:CommercialLoanMember us-gaap:SubstandardMember 2019-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:PassFiveMember 2019-12-31 0000846901 us-gaap:CommercialLoanMember 2019-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:PassThreeMember 2019-12-31 0000846901 us-gaap:CommercialLoanMember us-gaap:DoubtfulMember 2019-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:PassTwoMember 2019-12-31 0000846901 us-gaap:CommercialLoanMember lbai:PassTwoMember 2019-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:LossMember 2019-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:PassOneMember 2019-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:PassFiveMember 2019-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:SubstandardMember 2019-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:OtherAssetsEspeciallyMentionedMember 2019-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:PassThreeMember 2019-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:PassFiveMember 2019-12-31 0000846901 us-gaap:CommercialLoanMember lbai:OtherAssetsEspeciallyMentionedMember 2019-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:PassTwoMember 2019-12-31 0000846901 us-gaap:CommercialLoanMember lbai:PassFourMember 2019-12-31 0000846901 us-gaap:CommercialLoanMember lbai:LossMember 2019-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:PassOneMember 2019-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:WatchMember 2019-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:PassOneMember 2019-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:LossMember 2019-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember us-gaap:DoubtfulMember 2019-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:PassFourMember 2019-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:WatchMember 2019-12-31 0000846901 us-gaap:CommercialLoanMember lbai:PassThreeMember 2019-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:ResidentialPortfolioSegmentMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:CommercialIndustrialAndOtherMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:HomeEquityAndConsumerMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:HomeEquityAndConsumerMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:CommercialIndustrialAndOtherMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:FinanceLeasesPortfolioSegmentMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:ConstructionRealEstatePortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:CommercialIndustrialAndOtherMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:ConstructionRealEstatePortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:CommercialRealEstatePortfolioSegmentMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:HomeEquityAndConsumerMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:ResidentialPortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:CommercialIndustrialAndOtherMember us-gaap:FinancingReceivables30To59DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:ConstructionRealEstatePortfolioSegmentMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember us-gaap:FinanceLeasesPortfolioSegmentMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:HomeEquityAndConsumerMember us-gaap:FinancingReceivables60To89DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinancialAssetOtherThanFinancialAssetAcquiredWithCreditDeteriorationMember lbai:ConstructionRealEstatePortfolioSegmentMember us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember 2018-12-31 0000846901 us-gaap:FinanceLeasesPortfolioSegmentMember 2017-01-01 2017-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember 2017-01-01 2017-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember 2017-01-01 2017-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember 2017-01-01 2017-12-31 0000846901 lbai:HomeEquityAndConsumerMember 2017-01-01 2017-12-31 0000846901 us-gaap:ResidentialPortfolioSegmentMember 2017-01-01 2017-12-31 0000846901 us-gaap:CommercialLoanMember 2018-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember us-gaap:SubstandardMember 2018-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:PassFiveMember 2018-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:OtherAssetsEspeciallyMentionedMember 2018-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:LossMember 2018-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:PassOneMember 2018-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:PassOneMember 2018-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:PassFourMember 2018-12-31 0000846901 us-gaap:CommercialLoanMember us-gaap:DoubtfulMember 2018-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:OtherAssetsEspeciallyMentionedMember 2018-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:PassOneMember 2018-12-31 0000846901 us-gaap:CommercialLoanMember lbai:PassFourMember 2018-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:PassFiveMember 2018-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:PassTwoMember 2018-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:PassTwoMember 2018-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:PassThreeMember 2018-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:WatchMember 2018-12-31 0000846901 us-gaap:CommercialLoanMember lbai:PassThreeMember 2018-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:PassFiveMember 2018-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember us-gaap:SubstandardMember 2018-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:PassFourMember 2018-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:LossMember 2018-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:OtherAssetsEspeciallyMentionedMember 2018-12-31 0000846901 us-gaap:CommercialLoanMember lbai:OtherAssetsEspeciallyMentionedMember 2018-12-31 0000846901 us-gaap:CommercialLoanMember lbai:WatchMember 2018-12-31 0000846901 us-gaap:CommercialLoanMember lbai:LossMember 2018-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:PassThreeMember 2018-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:SubstandardMember 2018-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember lbai:WatchMember 2018-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:PassFourMember 2018-12-31 0000846901 us-gaap:CommercialLoanMember lbai:PassTwoMember 2018-12-31 0000846901 us-gaap:CommercialRealEstatePortfolioSegmentMember us-gaap:DoubtfulMember 2018-12-31 0000846901 us-gaap:CommercialLoanMember lbai:PassOneMember 2018-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember us-gaap:DoubtfulMember 2018-12-31 0000846901 us-gaap:CommercialLoanMember lbai:PassFiveMember 2018-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember us-gaap:DoubtfulMember 2018-12-31 0000846901 us-gaap:CommercialLoanMember us-gaap:SubstandardMember 2018-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:WatchMember 2018-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:LossMember 2018-12-31 0000846901 lbai:CommercialIndustrialAndOtherMember lbai:PassThreeMember 2018-12-31 0000846901 lbai:ConstructionRealEstatePortfolioSegmentMember lbai:PassTwoMember 2018-12-31 0000846901 lbai:ResidentialMortgagesAndConsumerHomeEquityLoansMember 2018-12-31 0000846901 srt:FederalHomeLoanBankOfNewYorkMember 2019-12-31 0000846901 lbai:ResidentialPropertyMember 2018-12-31 0000846901 srt:FederalHomeLoanBankOfNewYorkMember 2018-12-31 0000846901 lbai:ResidentialMortgagesAndConsumerHomeEquityLoansMember 2019-12-31 0000846901 lbai:ImpairedLoansMember 2018-01-01 2018-12-31 0000846901 lbai:ImpairedLoansMember 2017-01-01 2017-12-31 0000846901 lbai:ImpairedLoansMember 2019-01-01 2019-12-31 0000846901 srt:MinimumMember 2019-12-31 0000846901 us-gaap:DirectorMember 2019-01-01 2019-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember 2019-01-01 2019-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember 2018-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember 2017-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember 2018-01-01 2018-12-31 0000846901 us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember 2019-12-31 0000846901 srt:MaximumMember us-gaap:BuildingAndBuildingImprovementsMember 2019-01-01 2019-12-31 0000846901 srt:MinimumMember lbai:FurnitureFixturesAndEquipmentMember 2019-01-01 2019-12-31 0000846901 srt:MaximumMember lbai:FurnitureFixturesAndEquipmentMember 2019-01-01 2019-12-31 0000846901 srt:MaximumMember us-gaap:LeaseholdImprovementsMember 2019-01-01 2019-12-31 0000846901 srt:MinimumMember us-gaap:BuildingAndBuildingImprovementsMember 2019-01-01 2019-12-31 0000846901 srt:MinimumMember us-gaap:LeaseholdImprovementsMember 2019-01-01 2019-12-31 0000846901 us-gaap:AccountingStandardsUpdate201602Member 2017-01-01 2017-12-31 0000846901 us-gaap:AccountingStandardsUpdate201602Member us-gaap:RetainedEarningsMember 2019-01-01 0000846901 us-gaap:AccountingStandardsUpdate201602Member 2018-01-01 2018-12-31 0000846901 lbai:RelatedPartiesLeaseTransactionMember 2019-01-01 2019-12-31 0000846901 lbai:FixedToFloatingMember us-gaap:SubordinatedDebtMember 2016-09-30 0000846901 lbai:LakelandBancorpCapitalTrustIIMember us-gaap:JuniorSubordinatedDebtMember 2003-06-01 2003-06-30 0000846901 lbai:LakelandBancorpCapitalTrustIIMember us-gaap:JuniorSubordinatedDebtMember 2003-06-30 0000846901 lbai:CollateralizedFhlbAdvancesMember srt:WeightedAverageMember 2018-12-31 0000846901 2018-04-01 2018-06-30 0000846901 lbai:HighlandsBancorpInc.Member lbai:FixedRateMember us-gaap:SubordinatedDebtMember 2015-10-31 0000846901 lbai:LakelandBancorpCapitalTrustIvMember us-gaap:JuniorSubordinatedDebtMember 2007-05-31 0000846901 lbai:DebtSecuritiesSoldUnderAgreementToRepurchaseMember 2017-01-01 2017-03-31 0000846901 lbai:LakelandBancorpCapitalTrustIvMember us-gaap:JuniorSubordinatedDebtMember 2015-08-03 2015-08-03 0000846901 lbai:ShortTermAndLongTermMortgageBackedSecuritiesSoldUnderAgreementsToRepurchaseMember 2019-12-31 0000846901 us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember 2016-06-30 0000846901 lbai:LakelandBancorpCapitalTrustIvMember us-gaap:JuniorSubordinatedDebtMember 2007-05-01 2007-05-31 0000846901 srt:FederalHomeLoanBankOfNewYorkMember us-gaap:LineOfCreditMember 2018-12-31 0000846901 lbai:CollateralizedFhlbAdvancesMember srt:WeightedAverageMember 2019-12-31 0000846901 lbai:FederalReserveBankofNewYorkMember us-gaap:LineOfCreditMember 2019-12-31 0000846901 lbai:HighlandsBancorpInc.Member lbai:FixedRateMember us-gaap:SubordinatedDebtMember 2019-01-04 0000846901 us-gaap:LineOfCreditMember 2019-12-31 0000846901 us-gaap:LineOfCreditMember 2018-12-31 0000846901 srt:FederalHomeLoanBankOfNewYorkMember us-gaap:LineOfCreditMember 2019-12-31 0000846901 lbai:CollateralizedFhlbAdvancesMember 2017-01-01 2017-12-31 0000846901 lbai:FederalReserveBankofNewYorkMember us-gaap:LineOfCreditMember 2018-12-31 0000846901 lbai:FixedToFloatingMember us-gaap:SubordinatedDebtMember us-gaap:LondonInterbankOfferedRateLIBORMember 2016-01-01 2016-09-30 0000846901 2019-10-22 0000846901 2019-09-30 0000846901 2018-07-01 2018-07-01 0000846901 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2003-01-01 2003-12-31 0000846901 lbai:SomersetHillsBancorpMember us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2019-01-01 2019-12-31 0000846901 lbai:DeferredCompensationAgreementMember us-gaap:ChiefExecutiveOfficerMember 2019-01-01 2019-12-31 0000846901 srt:MinimumMember lbai:ElectiveDeferralPlanMember us-gaap:ExecutiveOfficerMember 2015-01-01 2015-12-31 0000846901 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2008-01-01 2008-12-31 0000846901 lbai:ElectiveDeferralPlanMember 2019-01-01 2019-12-31 0000846901 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2016-01-01 2016-12-31 0000846901 lbai:SomersetHillsBancorpMember us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember us-gaap:ChiefFinancialOfficerMember 2013-01-01 2013-12-31 0000846901 lbai:DeferredCompensationAgreementMember us-gaap:ChiefExecutiveOfficerMember 2015-01-01 2015-12-31 0000846901 lbai:ElectiveDeferralPlanMember 2019-12-31 0000846901 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2018-01-01 2018-12-31 0000846901 srt:MaximumMember lbai:ElectiveDeferralPlanMember us-gaap:ExecutiveOfficerMember 2015-01-01 2015-12-31 0000846901 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2018-12-31 0000846901 lbai:SomersetHillsBancorpMember us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2019-12-31 0000846901 lbai:DeferredCompensationAgreementMember 2017-01-01 2017-12-31 0000846901 lbai:ElectiveDeferralPlanMember 2017-01-01 2017-12-31 0000846901 lbai:ElectiveDeferralPlanMember 2018-01-01 2018-12-31 0000846901 lbai:DeferredCompensationAgreementMember 2019-01-01 2019-12-31 0000846901 lbai:ElectiveDeferralPlanMember 2018-12-31 0000846901 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2017-01-01 2017-12-31 0000846901 lbai:DeferredCompensationAgreementMember 2018-12-31 0000846901 srt:MaximumMember lbai:DeferredCompensationAgreementMember us-gaap:ChiefExecutiveOfficerMember 2015-01-01 2015-12-31 0000846901 lbai:ElectiveDeferralPlanMember us-gaap:ExecutiveOfficerMember 2015-01-01 2015-12-31 0000846901 lbai:DeferredCompensationAgreementMember 2018-01-01 2018-12-31 0000846901 lbai:SomersetHillsBancorpMember us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2017-01-01 2017-12-31 0000846901 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2019-12-31 0000846901 lbai:SomersetHillsBancorpMember us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember us-gaap:ChiefExecutiveOfficerMember 2013-01-01 2013-12-31 0000846901 lbai:SomersetHillsBancorpMember us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2013-01-01 2013-12-31 0000846901 lbai:SomersetHillsBancorpMember us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2018-01-01 2018-12-31 0000846901 lbai:DeferredCompensationAgreementMember 2019-12-31 0000846901 srt:MinimumMember lbai:DeferredCompensationAgreementMember us-gaap:ChiefExecutiveOfficerMember 2015-01-01 2015-12-31 0000846901 us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2019-01-01 2019-12-31 0000846901 lbai:SomersetHillsBancorpMember us-gaap:SupplementalEmployeeRetirementPlanDefinedBenefitMember 2018-12-31 0000846901 lbai:DirectorsRetirementPlanMember 2019-01-01 2019-12-31 0000846901 lbai:DirectorsRetirementPlanMember 2017-01-01 2017-12-31 0000846901 lbai:DirectorsRetirementPlanMember 2018-01-01 2018-12-31 0000846901 us-gaap:DirectorMember 2018-12-31 0000846901 us-gaap:DirectorMember 2019-12-31 0000846901 srt:MaximumMember 2019-01-01 2019-12-31 0000846901 lbai:DirectorsRetirementPlanMember 2019-12-31 0000846901 srt:MinimumMember 2019-01-01 2019-12-31 0000846901 us-gaap:RestrictedStockMember lbai:TwoThousandAndNineEquityCompensationProgramMember 2018-01-01 2018-12-31 0000846901 us-gaap:RestrictedStockUnitsRSUMember lbai:TwoThousandAndNineEquityCompensationProgramMember 2017-01-01 2017-12-31 0000846901 lbai:TwoThousandAndNineEquityCompensationProgramMember 2019-12-31 0000846901 us-gaap:RestrictedStockUnitsRSUMember lbai:TwoThousandAndNineEquityCompensationProgramMember 2018-01-01 2018-12-31 0000846901 us-gaap:RestrictedStockUnitsRSUMember lbai:A2018OmnibusEquityIncentivePlanMember 2019-01-01 2019-12-31 0000846901 us-gaap:RestrictedStockMember lbai:TwoThousandAndNineEquityCompensationProgramMember 2017-01-01 2017-12-31 0000846901 lbai:NonVestedOptionsMember 2019-12-31 0000846901 us-gaap:RestrictedStockMember lbai:TwoThousandAndNineEquityCompensationProgramMember 2019-01-01 2019-12-31 0000846901 us-gaap:RestrictedStockUnitsRSUMember lbai:TwoThousandAndNineEquityCompensationProgramMember 2019-01-01 2019-12-31 0000846901 us-gaap:RestrictedStockMember 2019-12-31 0000846901 lbai:SomersetStockOptionPlanMember 2018-12-31 0000846901 lbai:TwoThousandAndEighteenOmnibusEquityIncentivePlanMember 2019-12-31 0000846901 lbai:SomersetStockOptionPlanMember 2019-12-31 0000846901 us-gaap:RestrictedStockMember 2017-01-01 2017-12-31 0000846901 srt:MaximumMember us-gaap:RestrictedStockUnitsRSUMember lbai:A2018OmnibusEquityIncentivePlanMember 2019-01-01 2019-12-31 0000846901 us-gaap:RestrictedStockUnitsRSUMember lbai:TwoThousandAndNineEquityCompensationProgramMember 2019-12-31 0000846901 lbai:NonVestedOptionsMember 2019-01-01 2019-12-31 0000846901 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-12-31 0000846901 us-gaap:EmployeeStockOptionMember lbai:TwoThousandAndNineEquityCompensationProgramMember 2019-12-31 0000846901 us-gaap:RestrictedStockMember 2018-01-01 2018-12-31 0000846901 us-gaap:EmployeeStockOptionMember 2017-01-01 2017-12-31 0000846901 us-gaap:RestrictedStockMember 2019-01-01 2019-12-31 0000846901 srt:MaximumMember us-gaap:RestrictedStockUnitsRSUMember lbai:TwoThousandAndNineEquityCompensationProgramMember 2018-01-01 2018-12-31 0000846901 lbai:TwoThousandAndNineEquityCompensationProgramMember 2019-01-01 2019-12-31 0000846901 us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-12-31 0000846901 us-gaap:RestrictedStockUnitsRSUMember 2018-12-31 0000846901 us-gaap:RestrictedStockUnitsRSUMember 2019-12-31 0000846901 us-gaap:RestrictedStockMember 2018-12-31 0000846901 srt:MinimumMember us-gaap:RestrictedStockUnitsRSUMember lbai:A2018OmnibusEquityIncentivePlanMember 2019-01-01 2019-12-31 0000846901 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-12-31 0000846901 srt:MinimumMember us-gaap:RestrictedStockUnitsRSUMember lbai:TwoThousandAndNineEquityCompensationProgramMember 2018-01-01 2018-12-31 0000846901 us-gaap:TransferredOverTimeMember 2018-01-01 2018-12-31 0000846901 lbai:ProductsAndServicesLoanFeesMember 2019-01-01 2019-12-31 0000846901 lbai:ProductsAndServicesSavingsServiceChargesMember 2019-01-01 2019-12-31 0000846901 lbai:ProductsAndServicesDepositRelatedFeesAndChargesMember 2018-01-01 2018-12-31 0000846901 lbai:ProductsAndServicesCommissionsFromSalesOfChecksMember 2019-01-01 2019-12-31 0000846901 lbai:ProductsAndServicesDemandDepositFeesAndChargesMember 2019-01-01 2019-12-31 0000846901 lbai:ProductsAndServicesCommissionsFromSalesOfChecksMember 2018-01-01 2018-12-31 0000846901 lbai:ProductsAndServicesMerchantFeesMember 2018-01-01 2018-12-31 0000846901 lbai:ProductsAndServicesMerchantFeesMember 2019-01-01 2019-12-31 0000846901 lbai:ProductsAndServicesDepositRelatedFeesAndChargesMember 2019-01-01 2019-12-31 0000846901 lbai:ProductsAndServicesLoanFeesMember 2017-01-01 2017-12-31 0000846901 lbai:ProductsAndServicesWireTransferChargesMember 2018-01-01 2018-12-31 0000846901 lbai:ProductsAndServicesInvestmentServicesIncomeMember 2019-01-01 2019-12-31 0000846901 lbai:ProductsAndServicesOtherIncomeMember 2018-01-01 2018-12-31 0000846901 lbai:ProductsAndServicesSafeDepositIncomeMember 2017-01-01 2017-12-31 0000846901 lbai:CommissionsAndFeesMember 2018-01-01 2018-12-31 0000846901 us-gaap:TransferredAtPointInTimeMember 2019-01-01 2019-12-31 0000846901 lbai:ProductsAndServicesOverdraftChargesMember 2018-01-01 2018-12-31 0000846901 lbai:ProductsAndServicesOverdraftChargesMember 2017-01-01 2017-12-31 0000846901 lbai:ProductsAndServicesDemandDepositFeesAndChargesMember 2018-01-01 2018-12-31 0000846901 lbai:ProductsAndServicesWireTransferChargesMember 2017-01-01 2017-12-31 0000846901 lbai:ProductsAndServicesSafeDepositIncomeMember 2019-01-01 2019-12-31 0000846901 lbai:ProductsAndServicesInvestmentServicesIncomeMember 2017-01-01 2017-12-31 0000846901 lbai:ProductsAndServicesOverdraftChargesMember 2019-01-01 2019-12-31 0000846901 lbai:ProductsAndServicesDebitCardInterchangeIncomeMember 2018-01-01 2018-12-31 0000846901 lbai:ProductsAndServicesSavingsServiceChargesMember 2018-01-01 2018-12-31 0000846901 lbai:ProductsAndServicesDemandDepositFeesAndChargesMember 2017-01-01 2017-12-31 0000846901 us-gaap:TransferredOverTimeMember 2017-01-01 2017-12-31 0000846901 lbai:ProductsAndServicesSavingsServiceChargesMember 2017-01-01 2017-12-31 0000846901 lbai:ProductsAndServicesOtherIncomeMember 2017-01-01 2017-12-31 0000846901 us-gaap:TransferredAtPointInTimeMember 2018-01-01 2018-12-31 0000846901 us-gaap:TransferredAtPointInTimeMember 2017-01-01 2017-12-31 0000846901 lbai:ProductsAndServicesATMServiceChargesMember 2018-01-01 2018-12-31 0000846901 lbai:ProductsAndServicesMerchantFeesMember 2017-01-01 2017-12-31 0000846901 lbai:ProductsAndServicesWireTransferChargesMember 2019-01-01 2019-12-31 0000846901 lbai:CommissionsAndFeesMember 2019-01-01 2019-12-31 0000846901 lbai:ProductsAndServicesCommissionsFromSalesOfChecksMember 2017-01-01 2017-12-31 0000846901 lbai:ProductsAndServicesDebitCardInterchangeIncomeMember 2017-01-01 2017-12-31 0000846901 lbai:ProductsAndServicesLoanFeesMember 2018-01-01 2018-12-31 0000846901 lbai:ProductsAndServicesATMServiceChargesMember 2019-01-01 2019-12-31 0000846901 lbai:CommissionsAndFeesMember 2017-01-01 2017-12-31 0000846901 lbai:ProductsAndServicesATMServiceChargesMember 2017-01-01 2017-12-31 0000846901 lbai:ProductsAndServicesDebitCardInterchangeIncomeMember 2019-01-01 2019-12-31 0000846901 lbai:ProductsAndServicesInvestmentServicesIncomeMember 2018-01-01 2018-12-31 0000846901 lbai:ProductsAndServicesDepositRelatedFeesAndChargesMember 2017-01-01 2017-12-31 0000846901 us-gaap:TransferredOverTimeMember 2019-01-01 2019-12-31 0000846901 lbai:ProductsAndServicesOtherIncomeMember 2019-01-01 2019-12-31 0000846901 lbai:ProductsAndServicesSafeDepositIncomeMember 2018-01-01 2018-12-31 0000846901 srt:MaximumMember 2019-12-31 0000846901 us-gaap:CommitmentsToExtendCreditMember 2019-12-31 0000846901 srt:MaximumMember 2018-12-31 0000846901 us-gaap:CommitmentsToExtendCreditMember 2018-12-31 0000846901 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2017-01-01 2017-12-31 0000846901 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2018-12-31 0000846901 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2017-01-01 2017-12-31 0000846901 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-12-31 0000846901 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-01-01 2017-12-31 0000846901 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2016-12-31 0000846901 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-01-01 2019-12-31 0000846901 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-12-31 0000846901 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2017-12-31 0000846901 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-12-31 0000846901 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-01-01 2018-12-31 0000846901 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2018-01-01 2018-12-31 0000846901 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2016-12-31 0000846901 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-01-01 2018-12-31 0000846901 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2017-12-31 0000846901 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2019-01-01 2019-12-31 0000846901 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2018-01-01 0000846901 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-12-31 0000846901 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-12-31 0000846901 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-01-01 0000846901 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2016-12-31 0000846901 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2019-12-31 0000846901 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-01-01 2019-12-31 0000846901 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-01-01 0000846901 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0000846901 us-gaap:FairValueMeasurementsNonrecurringMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel3Member 2019-12-31 0000846901 us-gaap:FairValueInputsLevel2Member 2019-12-31 0000846901 us-gaap:FairValueInputsLevel1Member 2019-12-31 0000846901 us-gaap:FairValueInputsLevel1Member 2018-12-31 0000846901 us-gaap:FairValueInputsLevel3Member 2018-12-31 0000846901 us-gaap:FairValueInputsLevel2Member 2018-12-31 0000846901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:NondesignatedMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasuryAndGovernmentMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000846901 us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:NondesignatedMember 2019-12-31 0000846901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:NondesignatedMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasuryAndGovernmentMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:NondesignatedMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasuryAndGovernmentMember 2019-12-31 0000846901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2019-12-31 0000846901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2019-12-31 0000846901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasuryAndGovernmentMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:NondesignatedMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasuryAndGovernmentMember 2018-12-31 0000846901 us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2018-12-31 0000846901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:NondesignatedMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2018-12-31 0000846901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2018-12-31 0000846901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2018-12-31 0000846901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasuryAndGovernmentMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:NondesignatedMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasuryAndGovernmentMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2018-12-31 0000846901 us-gaap:FairValueMeasurementsRecurringMember us-gaap:USStatesAndPoliticalSubdivisionsMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:USTreasuryAndGovernmentMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:CorporateDebtSecuritiesMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:NondesignatedMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:MortgageBackedSecuritiesMember 2018-12-31 0000846901 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsNonrecurringMember 2019-12-31 0000846901 us-gaap:FairValueMeasurementsNonrecurringMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsNonrecurringMember 2019-12-31 0000846901 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsNonrecurringMember 2019-12-31 0000846901 lbai:NonRatedMember 2019-12-31 0000846901 us-gaap:InterestRateSwapMember 2018-12-31 0000846901 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-12-31 0000846901 us-gaap:InterestRateSwapMember 2019-12-31 0000846901 us-gaap:InterestRateSwapMember us-gaap:CashFlowHedgingMember 2019-01-01 2019-12-31 0000846901 lbai:InterestRateSwapCashFlowHedgeMember 2018-12-31 0000846901 lbai:ThirdPartyInterestRateSwapMember 2018-12-31 0000846901 lbai:ThirdPartyInterestRateSwapMember 2018-12-31 2018-12-31 0000846901 lbai:CustomerInterestRateSwapMember 2018-12-31 2018-12-31 0000846901 lbai:CustomerInterestRateSwapMember 2018-12-31 0000846901 lbai:InterestRateSwapCashFlowHedgeMember 2018-12-31 2018-12-31 0000846901 lbai:CustomerInterestRateSwapMember 2019-12-31 2019-12-31 0000846901 lbai:ThirdPartyInterestRateSwapMember 2019-12-31 2019-12-31 0000846901 lbai:CustomerInterestRateSwapMember 2019-12-31 0000846901 lbai:InterestRateSwapCashFlowHedgeMember 2019-12-31 0000846901 lbai:ThirdPartyInterestRateSwapMember 2019-12-31 0000846901 lbai:InterestRateSwapCashFlowHedgeMember 2019-12-31 2019-12-31 0000846901 srt:AffiliatedEntityMember 2018-12-31 0000846901 srt:SubsidiariesMember 2018-12-31 0000846901 srt:SubsidiariesMember 2019-12-31 0000846901 srt:AffiliatedEntityMember 2019-12-31 0000846901 lbai:HighlandsBancorpInc.Member 2019-01-01 2019-01-31 0000846901 us-gaap:CoreDepositsMember 2018-12-31 0000846901 lbai:HighlandsBancorpInc.Member us-gaap:CoreDepositsMember 2019-12-31 0000846901 us-gaap:CoreDepositsMember 2019-12-31 0000846901 srt:ParentCompanyMember 2019-01-01 2019-12-31 0000846901 srt:ParentCompanyMember 2018-01-01 2018-12-31 0000846901 srt:ParentCompanyMember 2017-01-01 2017-12-31 0000846901 srt:ParentCompanyMember 2018-12-31 0000846901 srt:ParentCompanyMember 2019-12-31 0000846901 srt:ParentCompanyMember 2017-12-31 0000846901 srt:ParentCompanyMember 2016-12-31 iso4217:USD xbrli:shares iso4217:USD xbrli:shares lbai:Security lbai:Segment lbai:Branch xbrli:pure lbai:Contract lbai:Derivative lbai:Region lbai:Installment
Table of Contents
 
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549 
Form 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED December 31, 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 RoadOak RidgeNew 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

Securities registered pursuant to Section 12(g) of the Act: None


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes      No  
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes      No  
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 (§232.405 of this chapter) during the preceding 12 months (or for 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 a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of June 30, 2019, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $780,779,539, based on the closing sale price as reported on the NASDAQ Global Select Market.

-1-

Table of Contents
 
 
 

The number of shares outstanding of the registrant’s common stock, as of February 25, 2020, was 50,513,886.
DOCUMENTS INCORPORATED BY REFERENCE:
Lakeland Bancorp, Inc. Proxy Statement for its 2020 Annual Meeting of Shareholders (Part III).

-2-

Table of Contents


LAKELAND BANCORP, INC.
Form 10-K Index
 
 
PAGE
 
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 3A.
Item 4.
 
 
 
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
 
 
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
 
 
 
 
Item 15.
Item 16.

-i-

Table of Contents


PART I
ITEM 1 - Business.
GENERAL
Lakeland Bancorp, Inc. (the “Company” or “Lakeland Bancorp”) is a bank holding company headquartered in Oak Ridge, New Jersey. The Company was organized in March of 1989 and commenced operations on May 19, 1989, upon the consummation of the acquisition of all of the outstanding stock of Lakeland Bank, formerly named Lakeland State Bank (“Lakeland” or the “Bank” or “Lakeland Bank”). Lakeland currently operates 52 branch offices located throughout Bergen, Essex, Morris, Ocean, Passaic, Somerset, Sussex, and Union counties in New Jersey and in Highland Mills, New York; six New Jersey regional commercial lending centers in Bernardsville, Iselin, Jackson, Montville, Teaneck and Waldwick; and one New York commercial lending center to serve the Hudson Valley region. Lakeland offers an extensive suite of financial products and services for businesses and consumers.
The Company has grown through a combination of organic growth and acquisitions. Since 1998, the Company has acquired eight community banks with an aggregate asset total of approximately $2.28 billion, including its most recent acquisition of Highlands State Bank and its parent, Highlands Bancorp, Inc. ("Highlands Bancorp"), which was completed on January 4, 2019. All of the acquired banks have been merged into Lakeland and the acquired holding companies, if applicable, have been merged into the Company.
At December 31, 2019, Lakeland Bancorp had total consolidated assets of $6.7 billion, total consolidated deposits of $5.3 billion, total consolidated loans, net of the allowance for loan losses, of $5.1 billion and total consolidated stockholders’ equity of $725.3 million.
This Annual Report on Form 10-K contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“Forward-Looking Statements”). Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in such Forward-Looking Statements. Certain factors which could materially affect such results and the future performance of the Company are described in Item 1A - Risk Factors of this Annual Report on Form 10-K.
Commercial Bank Services
Through Lakeland, the Company offers a broad range of lending, depository, and related financial services to individuals and small to medium sized businesses located primarily in northern and central New Jersey, the Hudson Valley region in New York and surrounding areas. In the lending area, these services include commercial real estate loans, commercial and industrial loans, short and medium term loans, lines of credit, letters of credit, inventory and accounts receivable financing, real estate construction loans, mortgage loans, small business administration (“SBA”) loans and merchant credit card services. Through Lakeland’s equipment financing division, the Company provides a financing solution to small and medium sized companies who prefer to lease equipment over other financial alternatives. Lakeland’s asset based loan department provides commercial borrowers with another lending alternative.
Depository products include demand deposits, as well as savings, money market and time accounts. Lakeland offers internet banking, mobile banking, wire transfer and night depository services to the business community and municipal relationships. In addition, Lakeland offers cash management services, such as remote capture of deposits and overnight sweep repurchase agreements.
Consumer Banking
Lakeland also offers a broad range of consumer banking services, including checking accounts, savings accounts, interest-bearing checking accounts, money market accounts, certificates of deposit, internet banking, secured and unsecured loans, consumer installment loans, mortgage loans, and safe deposit services.
Other Services
Investment advisory services for individuals and businesses are also available. Additionally, through Lakeland Title Group LLC, the Bank provides commercial title insurance services and life insurance products through Lakeland Financial Services Agency, Inc.

-1-

Table of Contents


Competition
Lakeland faces considerable competition in its market areas for deposits and loans from other depository institutions. Many of Lakeland’s depository institution competitors have substantially greater resources, broader geographic markets, and higher lending limits than Lakeland and are also able to provide more services and make greater use of media advertising. In recent years, intense market demands, economic pressures, increased customer awareness of products and services and the availability of electronic services have forced banking institutions to diversify their services and become more cost-effective.
Lakeland also competes with credit unions, brokerage firms, insurance companies, money market mutual funds, consumer finance companies, mortgage companies and other financial companies, some of which are not subject to the same degree of regulation and restrictions as Lakeland in attracting deposits and making loans. Interest rates on deposit accounts, convenience of facilities, products and services, and marketing are all significant factors in the competition for deposits. Competition for loans comes from other commercial banks, savings institutions, insurance companies, consumer finance companies, credit unions, mortgage banking firms, financial technology and other institutional lenders. Lakeland primarily competes for loan originations through its structuring of loan transactions and the overall quality of service it provides. Competition is affected by the availability of lendable funds, general and local economic conditions, interest rates, and other factors that are not readily predictable. The Company expects that competition will continue in the future.
Concentration
The Company is not dependent on deposits or exposed by loan concentrations to a single customer or a few customers, the loss of any one or more of which would have a material adverse effect upon the financial condition of the Company.
Employees
At December 31, 2019, the Company had 692 full-time equivalent employees. None of these employees is covered by a collective bargaining agreement. The Company considers relations with its employees to be good.
SUPERVISION AND REGULATION
General
The Company is a registered bank holding company under the Federal Bank Holding Company Act of 1956, as amended (the “Holding Company Act”), and is required to file with the Federal Reserve Board an annual report and such additional information as the Federal Reserve Board may require pursuant to the Holding Company Act. The Company has also elected financial holding company status under the Modernization Act, as further discussed below. The Company is subject to examination by the Federal Reserve Board.
Lakeland is a state chartered commercial bank subject to supervision and examination by the Department of Banking and Insurance of the State of New Jersey (the “Department”) and the Federal Deposit Insurance Corporation (the “FDIC”). The regulations of the State of New Jersey and FDIC govern most aspects of Lakeland’s business, including reserves against deposits, loans, investments, mergers and acquisitions, borrowings, dividends, and location of branch offices. Lakeland is subject to certain restrictions imposed by law on, among other things, (i) the maximum amount of obligations of any one person or entity which may be outstanding at any one time, (ii) investments in stock or other securities of the Company or any subsidiary of the Company, and (iii) the taking of such stock or securities as collateral for loans to any borrower.
The Holding Company Act
The Holding Company Act limits the activities which may be engaged in by the Company and its subsidiaries to those of banking, the ownership and acquisition of assets and securities of banking organizations, and the management of banking organizations, and to certain non-banking activities which the Federal Reserve Board finds, by order or regulation, to be so closely related to banking or managing or controlling a bank as to be a proper incident thereto. The Federal Reserve Board is empowered to differentiate between activities by a bank holding company or a subsidiary thereof and activities commenced by acquisition of a going concern.
With respect to non-banking activities, the Federal Reserve Board has by regulation determined that several non-banking activities are closely related to banking within the meaning of the Holding Company Act and thus may be performed by bank holding companies. Although the Company’s management periodically reviews other avenues of business opportunities that are included in that regulation, the Company has no present plans to engage in any of these activities other than providing investment brokerage services.
With respect to the acquisition of banking organizations, the Company is required to obtain the prior approval of the Federal Reserve Board before it may, by merger, purchase or otherwise, directly or indirectly acquire all or substantially all of the assets of any bank or bank holding company, if, after such acquisition, it will own or control more than 5% of the voting shares of such bank or bank holding company.

-2-

Table of Contents


Regulation of Bank Subsidiaries
There are various legal limitations, including Sections 23A and 23B of the Federal Reserve Act, which govern the extent to which a bank subsidiary may finance or otherwise supply funds to its holding company or its holding company’s non-bank subsidiaries. Under federal law, no bank subsidiary may, subject to certain limited exceptions, make loans or extensions of credit to, or investments in the securities of, its parent or the non-bank subsidiaries of its parent (other than direct subsidiaries of such bank which are not financial subsidiaries) or take their securities as collateral for loans to any borrower. Each bank subsidiary is also subject to collateral security requirements for any loans or extensions of credit permitted by such exceptions.
Commitments to Affiliated Institutions
The policy of the Federal Reserve Board provides that a bank holding company is expected to act as a source of financial strength to its subsidiary banks and to commit resources to support such subsidiary banks in circumstances in which it might not do so absent such policy.
Interstate Banking
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 permits bank holding companies to acquire banks in states other than their home state, regardless of applicable state law. New Jersey enacted legislation to authorize interstate banking and branching and the entry into New Jersey of foreign country banks. New Jersey did not authorize de novo branching into the state. However, under federal law, federal savings banks, which meet certain conditions, may branch de novo into a state, regardless of state law. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) removes the restrictions on interstate branching contained in the Riegle-Neal Act, and allows national banks and state banks to establish branches in any state if, under the laws of the state in which the branch is to be located, a state bank chartered by that state would be permitted to establish the branch.
Gramm-Leach-Bliley Act of 1999
The Gramm-Leach-Bliley Financial Services Modernization Act of 1999 (the “Modernization Act”) became effective in early 2000. The Modernization Act:
allows bank holding companies meeting management, capital, and Community Reinvestment Act standards to engage in a substantially broader range of non-banking activities than previously was permissible, including insurance underwriting and making merchant banking investments in commercial and financial companies; if a bank holding company elects to become a financial holding company, it files a certification, effective in 30 days, and thereafter may engage in certain financial activities without further approvals (Lakeland Bancorp is such a financial holding company);
allows insurers and other financial services companies to acquire banks;
removes various restrictions that previously applied to bank holding company ownership of securities firms and mutual fund advisory companies; and
establishes the overall regulatory structure applicable to bank holding companies that also engage in insurance and securities operations.
The Modernization Act also modified other financial laws, including laws related to financial privacy and community reinvestment.
The USA PATRIOT Act
As part of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Congress adopted the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 (collectively, the “USA PATRIOT Act”). By way of amendments to the Bank Secrecy Act, Title III of the USA PATRIOT Act encourages information sharing among bank regulatory agencies and law enforcement bodies. Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions, including banks, thrifts, brokers, dealers, credit unions, money transfer agents and parties registered under the Commodity Exchange Act.
Among other requirements, Title III of the USA PATRIOT Act imposes the following requirements with respect to financial institutions:
All financial institutions must establish anti-money laundering programs that include, at a minimum: (i) internal policies, procedures, and controls; (ii) specific designation of an anti-money laundering compliance officer; (iii) ongoing employee training programs; and (iv) an independent audit function to test the anti-money laundering program.

-3-

Table of Contents


The Secretary of the Department of the Treasury, in conjunction with other bank regulators, was authorized to issue regulations that provide for minimum standards with respect to customer identification at the time new accounts are opened.
Financial institutions that establish, maintain, administer, or manage private banking accounts or correspondent accounts in the United States for non-United States persons or their representatives (including foreign individuals visiting the United States) are required to establish appropriate, specific and, where necessary, enhanced due diligence policies, procedures, and controls designed to detect and report money laundering.
Financial institutions are prohibited from establishing, maintaining, administering or managing correspondent accounts for foreign shell banks (foreign banks that do not have a physical presence in any country), and will be subject to certain record keeping obligations with respect to correspondent accounts of foreign banks.
Bank regulators are directed to consider a holding company’s effectiveness in combating money laundering when ruling on Federal Reserve Act and Bank Merger Act applications.
The United States Treasury Department has issued a number of implementing regulations which address various requirements of the USA PATRIOT Act and are applicable to financial institutions such as Lakeland. These regulations impose obligations on financial institutions to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to verify the identity of their customers. Banking agencies have strictly enforced various anti-money laundering and suspicious activity reporting requirements using formal and informal enforcement tools to cause banks to comply with these provisions.
Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002 (the “SOA”) imposes a variety of corporate governance, accounting and corporate reporting obligations upon public companies, designed in general to promote corporate responsibility and to protect investors.
The SOA addresses, among other matters:
audit committees for all reporting companies;
certification of financial statements by the chief executive officer and the chief financial officer;
the forfeiture of bonuses or other incentive-based compensation and profits from the sale of an issuer’s securities by directors and senior officers in the twelve month period following initial publication of any financial statements that later require restatement;
a prohibition on insider trading during pension plan blackout periods;
disclosure of off-balance sheet transactions;
a prohibition on personal loans to directors and officers (other than loans made by an insured depository institution (as defined in the Federal Deposit Insurance Act), if the loan is subject to the insider lending restrictions of Section 22(h) of the Federal Reserve Act);
expedited filing requirements for Form 4’s;
disclosure of a code of ethics and filing a Form 8-K for a change or waiver of such code;
“real time” filing of periodic reports;
the formation of a public accounting oversight board;
auditor independence; and
various increased criminal penalties for violations of the securities laws.
The Securities and Exchange Commission (the “SEC”) has enacted various rules to implement various provisions of the SOA with respect to, among other matters, disclosure in periodic filings pursuant to the Exchange Act. Each of the national stock exchanges, including the NASDAQ Stock Market where Lakeland Bancorp’s common stock is listed, have corporate governance listing standards, including rules strengthening director independence requirements for boards, and requiring the adoption of charters for the nominating and corporate governance, compensation and audit committees.

-4-

Table of Contents


Regulation W
Transactions between a bank and its “affiliates” are quantitatively and qualitatively restricted under the Federal Reserve Act. The Federal Deposit Insurance Act applies Sections 23A and 23B to insured nonmember banks in the same manner and to the same extent as if they were members of the Federal Reserve System. The Federal Reserve Board has also issued Regulation W, which codifies prior regulations under Sections 23A and 23B of the Federal Reserve Act and interpretative guidance with respect to affiliate transactions. Regulation W incorporates the exemption from the affiliate transaction rules but expands the exemption to cover the purchase of any type of loan or extension of credit from an affiliate. Affiliates of a bank include, among other entities, the bank’s holding company and companies that are under common control with the bank. The Company is considered to be an affiliate of Lakeland. In general, subject to certain specified exemptions, a bank or its subsidiaries are limited in their ability to engage in “covered transactions” with affiliates:
to an amount equal to 10% of the bank’s capital and surplus, in the case of covered transactions with any one affiliate; and
to an amount equal to 20% of the bank’s capital and surplus, in the case of covered transactions with all affiliates.
In addition, a bank and its subsidiaries may engage in covered transactions and other specified transactions only on terms and under circumstances that are substantially the same, or at least as favorable to the bank or its subsidiary, as those prevailing at the time for comparable transactions with nonaffiliated companies. A “covered transaction” includes:
a loan or extension of credit to an affiliate;
a purchase of, or an investment in, securities issued by an affiliate;
a purchase of assets from an affiliate, with some exceptions;
the acceptance of securities issued by an affiliate as collateral for a loan or extension of credit to any party; and
the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate.
In addition, under Regulation W:
a bank and its subsidiaries may not purchase a low-quality asset from an affiliate;
covered transactions and other specified transactions between a bank or its subsidiaries and an affiliate must be on terms and conditions that are consistent with safe and sound banking practices; and
with some exceptions, each loan or extension of credit by a bank to an affiliate must be secured by certain types of collateral with a market value ranging from 100% to 130%, depending on the type of collateral, of the amount of the loan or extension of credit.
Regulation W generally excludes all non-bank and non-savings association subsidiaries of banks from treatment as affiliates, except to the extent that the Federal Reserve Board decides to treat these subsidiaries as affiliates.
Community Reinvestment Act
Under the Community Reinvestment Act (“CRA”), as implemented by FDIC regulations, a state bank has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community. The CRA requires the FDIC, in connection with its examination of a state non-member bank, to assess the bank’s record of meeting the credit needs of its community and to take that record into account in its evaluation of certain applications by the bank. Under the FDIC’s CRA evaluation system, the FDIC focuses on three tests: (i) a lending test, to evaluate the institution’s record of making loans in its service areas; (ii) an investment test, to evaluate the institution’s record of investing in community development projects, affordable housing and programs benefiting low or moderate income individuals and businesses; and (iii) a service test, to evaluate the institution’s delivery of services through its branches, ATMs and other offices. The CRA also requires all institutions to make public disclosure of their CRA ratings. Lakeland Bank received an “outstanding” CRA rating in its most recent examination.

-5-

Table of Contents


Securities and Exchange Commission
The common stock of the Company is registered with the SEC under the Exchange Act. As a result, the Company and its officers, directors, and major stockholders are obligated to file certain reports with the SEC. The Company is subject to proxy and tender offer rules promulgated pursuant to the Exchange Act. The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, such as the Company.
The Company maintains a website at http://www.lakelandbank.com. The Company makes available on its website the proxy statements and reports on Forms 8-K, 10-K and 10-Q that it files with the SEC as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Additionally, the Company has adopted and posted on its website a Code of Ethics that applies to its principal executive officer, principal financial officer and principal accounting officer. The Company intends to disclose any amendments to or waivers of the Code of Ethics on its website.
Effect of Government Monetary Policies
The earnings of the Company are and will be affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The monetary policies of the Federal Reserve Board have had, and will likely continue to have, an important impact on the operating results of commercial banks through the Board’s power to implement national monetary policy in order to, among other things, curb inflation or combat a recession. The Federal Reserve Board has a major effect upon the levels of bank loans, investments and deposits through its open market operations in United States government securities and through its regulation of, among other things, the discount rate of borrowings of banks and the reserve requirements against bank deposits. It is not possible to predict the nature and impact of future changes in monetary fiscal policies.
Dividend Restrictions
The Company is a legal entity separate and distinct from Lakeland. Virtually all of the revenue of the Company available for payment of dividends on its capital stock will result from amounts paid to the Company by Lakeland. All such dividends are subject to various limitations imposed by federal and state laws and by regulations and policies adopted by federal and state regulatory agencies. Under New Jersey state law, a bank may not pay dividends unless, following the dividend payment, the capital stock of the bank would be unimpaired and either (a) the bank will have a surplus of not less than 50% of its capital stock, or, if not, (b) the payment of the dividend will not reduce the surplus of the bank.
If, in the opinion of the FDIC, a bank under its jurisdiction is engaged in or is about to engage in an unsafe or unsound practice (which could include the payment of dividends), the FDIC may require, after notice and hearing, that such bank cease and desist from such practice or, as a result of an unrelated practice, require the bank to limit dividends in the future. The Federal Reserve Board has similar authority with respect to bank holding companies. In addition, the Federal Reserve Board and the FDIC have issued policy statements which provide that insured banks and bank holding companies should generally only pay dividends out of current operating earnings. Regulatory pressures to reclassify and charge off loans and to establish additional loan loss reserves can have the effect of reducing current operating earnings and thus impacting an institution’s ability to pay dividends. Further, as described herein, the regulatory authorities have established guidelines with respect to the maintenance of appropriate levels of capital by a bank or bank holding company under their jurisdiction. Compliance with the standards set forth in these policy statements and guidelines could limit the amount of dividends which the Company and Lakeland may pay. Banking institutions that fail to maintain the minimum capital ratios, or that maintain the requisite minimum capital ratios but do so at a level below the minimum capital ratios plus the applicable capital conservation buffer, will face constraints on their ability to pay dividends. See “Capital Requirements” below.
Capital Requirements
Pursuant to the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA), each federal banking agency has promulgated regulations, specifying the levels at which a financial institution would be considered “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized,” and to take certain mandatory and discretionary supervisory actions based on the capital level of the institution. To qualify to engage in financial activities under the Gramm-Leach-Bliley Act, all depository institutions must be “well capitalized.” The financial holding company of a bank will be put under directives to raise its capital levels or divest its activities if the depository institution falls from that level.

-6-

Table of Contents


In July 2013, the Federal Reserve Board, the FDIC and the Comptroller of the Currency adopted final rules establishing a new comprehensive capital framework for U.S. banking organizations (the “Basel Rules”). The Basel Rules implemented the Basel Committee’s December 2010 framework, commonly referred to as Basel III, for strengthening international capital standards as well as certain provisions of the Dodd-Frank Act, as discussed below. The Basel Rules substantially revised the risk-based capital requirements applicable to bank holding companies and depository institutions, including Lakeland Bancorp and Lakeland Bank, compared to prior U.S. risk-based capital rules. The Basel Rules define the components of capital and address other issues affecting the numerator in banking institutions’ regulatory capital ratios. The Basel Rules also address risk weights and other issues affecting the denominator in banking institutions’ regulatory capital ratios and replace the existing risk-weighting approach, which was derived from Basel I capital accords of the Basel Committee, with a more risk-sensitive approach based, in part, on the standardized approach in the Basel Committee’s 2004 Basel II capital accords. The Basel Rules also implement the requirements of Section 939A of the Dodd-Frank Act to remove references to credit ratings from the federal banking agencies’ rules.
The Basel Rules became effective for us on January 1, 2015 (subject to phase-in periods for certain components).
For bank holding companies and banks like Lakeland Bancorp and Lakeland Bank, January 1, 2015 was the start date for compliance with the revised minimum regulatory capital ratios and for determining risk-weighted assets under what the Basel Rules call a “standardized approach.” As of January 1, 2015, Lakeland Bancorp and Lakeland Bank were required to maintain the following minimum capital ratios, expressed as a percentage of risk-weighted assets:
Common Equity Tier 1 Capital Ratio of 4.5% (this is referred to as the “CET1”);
Tier 1 Capital Ratio (CET1 capital plus “Additional Tier 1 capital”) of 6.0%; and
Total Capital Ratio (Tier 1 capital plus Tier 2 capital) of 8.0%.
In addition, Lakeland Bancorp and Lakeland Bank are subject to a leverage ratio of 4.0% (calculated as Tier 1 capital to average consolidated assets as reported on the consolidated financial statements).
The Basel Rules also require a “capital conservation buffer.” As of the full phase-in on January 1, 2019, Lakeland Bancorp and Lakeland Bank were required to maintain a 2.5% capital conservation buffer, in addition to the minimum capital ratios described above, effectively resulting in the following minimum capital ratios on January 1, 2019:
CET1 of 7.0%;
Tier 1 Capital Ratio of 8.5%; and
Total Capital Ratio of 10.5%.
The purpose of the capital conservation buffer is to ensure that banking organizations conserve capital when it is needed most, allowing them to weather periods of economic stress. Banking institutions with a CET1, Tier 1 Capital Ratio and Total Capital Ratio above the minimum capital ratios but below the minimum capital ratios plus the capital conservation buffer will face constraints on their ability to pay dividends, repurchase equity and pay discretionary bonuses to executive officers, based on the amount of the shortfall.
The Basel Rules also adopted a “countercyclical capital buffer,” which is not applicable to Lakeland Bancorp or Lakeland Bank. That buffer is applicable only to “advanced approaches banking organizations,” which generally are those with consolidated total assets of at least $250 billion.
The Basel Rules provide for several deductions from and adjustments to CET1, which were phased in as of January 1, 2018. For example, mortgage servicing rights, deferred tax assets dependent upon future taxable income and significant investments in common equity issued by nonconsolidated financial entities must be deducted from CET1 to the extent that any one of those categories exceeds 10% of CET1 or all such categories in the aggregate exceed 15% of CET1.
Under prior capital standards, the effects of accumulated other comprehensive income items included in capital were excluded for the purposes of determining regulatory capital ratios. Under the Basel Rules, the effects of certain accumulated other comprehensive income items are not excluded; however, banking organizations such as Lakeland Bancorp and Lakeland Bank were permitted to make a one-time permanent election to continue to exclude these items effective as of January 1, 2015. Lakeland Bancorp and Lakeland Bank made such an election to continue to exclude these items.
While the Basel Rules generally require the phase-out of non-qualifying capital instruments such as trust preferred securities and cumulative perpetual preferred stock, holding companies with less than $15 billion in total consolidated assets as of December 31, 2009, such as Lakeland Bancorp, may permanently include non-qualifying instruments that were issued and included in Tier 1 or Tier 2 capital prior to May 19, 2010 in Additional Tier 1 or Tier 2 capital until they redeem such instruments or until the instruments mature.

-7-

Table of Contents


The Basel Rules prescribe a standardized approach for calculating risk-weighted assets that expands the risk-weighting categories from the previous four categories (0%, 20%, 50% and 100%) to a much larger and more risk-sensitive number of categories, depending on the nature of the assets, generally ranging from 0% for U.S. Government and agency securities, to 600% for certain equity exposures, and resulting in higher risk weights for a variety of asset categories. In addition, the Basel Rules provide more advantageous risk weights for derivatives and repurchase-style transactions cleared through a qualifying central counterparty and increase the scope of eligible guarantors and eligible collateral for purposes of credit risk mitigation.
Consistent with the Dodd-Frank Act, the Basel Rules adopt alternatives to credit ratings for calculating the risk-weighting for certain assets.
With respect to Lakeland Bank, the Basel Rules revise the “prompt corrective action” regulations under Section 38 of the Federal Deposit Insurance Act by (i) introducing a CET1 ratio requirement at each capital quality level (other than critically undercapitalized), with the required CET1 ratio being 6.5% for well-capitalized status (a new standard); (ii) increasing the minimum Tier 1 capital ratio requirement for each category, with the minimum Tier 1 capital ratio for well-capitalized status being 8% (increased from 6%); and (iii) requiring a leverage ratio of 5% to be well-capitalized (increased from the previously required leverage ratio of 3% or 4%). The Basel Rules do not change the total risk-based capital requirement for any “prompt corrective action” category.
Effective as of January 1, 2015, the FDIC’s regulations implementing these provisions of FDICIA provide that an institution will be classified as “well capitalized” if it (i) has a total risk-based capital ratio of at least 10.0 percent, (ii) has a Tier 1 risk-based capital ratio of at least 8.0 percent, (iii) has a CET1 ratio of at least 6.5 percent, (iv) has a Tier 1 leverage ratio of at least 5.0 percent, and (v) meets certain other requirements. An institution will be classified as “adequately capitalized” if it (i) has a total risk-based capital ratio of at least 8.0 percent, (ii) has a Tier 1 risk-based capital ratio of at least 6.0 percent, (iii) has a CET1 ratio of at least 4.5 percent, (iv) has a Tier 1 leverage ratio of at least 4.0 percent, and (v) does not meet the definition of “well capitalized.” An institution will be classified as “undercapitalized” if it (i) has a total risk-based capital ratio of less than 8.0 percent, (ii) has a Tier 1 risk-based capital ratio of less than 6.0 percent, (iii) has a CET1 ratio of less than 4.5 percent or (iv) has a Tier 1 leverage ratio of less than 4.0 percent. An institution will be classified as “significantly undercapitalized” if it (i) has a total risk-based capital ratio of less than 6.0 percent, (ii) has a Tier 1 risk-based capital ratio of less than 4.0 percent, (iii) has a CET1 ratio of less than 3.0 percent or (iv) has a Tier 1 leverage ratio of less than 3.0 percent. An institution will be classified as “critically undercapitalized” if it has a tangible equity to total assets ratio that is equal to or less than 2.0 percent. An insured depository institution may be deemed to be in a lower capitalization category if it receives an unsatisfactory examination rating. Similar categories apply to bank holding companies. With the capital conservation buffer fully phased in as of January 1, 2019, the capital ratios applicable to depository institutions under the Basel Rules exceed the ratios to be considered well-capitalized under the prompt corrective action regulations.
As of December 31, 2019, Lakeland Bancorp and Lakeland Bank met all capital requirements under the Basel Rules as then in effect, including the fully phased-in capital conservation buffer requirement.
The Economic Growth, Regulatory Relief, and Consumer Protection Act (the “EGRRCPA”) was signed into law in May 2018. The EGRRCPA, among other matters, amended the Federal Deposit Insurance Act to require federal banking agencies to develop a specified Community Bank Leverage Ratio (the ratio of a bank's Tier 1 capital to its average total consolidated assets) for banks with assets of less than $10 billion. Qualifying participating banks that exceed this ratio shall be deemed to comply with all other capital and leverage requirements. In September 2019, the FDIC approved a final rule allowing community banks with a leverage capital ratio of at least 9% to be considered in compliance with Basel III capital requirements and exempt from the Basel Rules calculations. Under the final rule, banks with less than $10 billion in assets may elect the Community Bank Leverage Ratio framework if they meet the 9% ratio and if they hold 25% or less of assets in off-balance sheet exposures, and 5% or less of assets in trading assets and liabilities. For institutions that fall below the 9% capital requirement but remain above 8%, the final rule establishes a two-quarter grace period to either meet the qualifying criteria again or comply with the generally applicable capital rule. An eligible financial institution that opts into this new framework and then fails to satisfy this new framework after expiration of the grace period will then be required to satisfy the generally applicable capital requirements. Management is still reviewing the Community Bank Leverage Ratio framework, but does not expect that Lakeland Bancorp or Lakeland Bank will elect to use the Community Bank Leverage Ratio framework.
Volcker Rule
In December 2013, the Federal Reserve Board, the FDIC and several other governmental regulatory agencies issued final rules to implement the Volcker Rule contained in section 619 of the Dodd-Frank Act. The Volcker Rule prohibits a covered insured depository institution and its affiliates from (i) engaging in “proprietary trading” and (ii) investing in or sponsoring certain types of funds (defined as “Covered Funds”) subject to certain limited exceptions. In 2019, the federal regulators jointly issued final rules to amend the Volcker Rule in a manner consistent with statutory amendments made pursuant to EGRRCPA, to exclude from the Volcker Rule's prohibitions and restrictions banking entities that have total consolidated assets equal to $10 billion or less and total trading assets and liabilities equal to 5% or less of total consolidated assets. The Company does not own any interests in any hedge funds or private equity funds that are designated “Covered Funds” under the Volcker Rule.

-8-

Table of Contents


Federal Deposit Insurance and Premiums
Lakeland’s deposits are insured up to applicable limits by the Deposit Insurance Fund (“DIF”) of the FDIC and are subject to deposit insurance assessments to maintain the DIF. As a result of the Dodd-Frank Act, the basic federal deposit insurance limit was permanently increased to at least $250,000.
In November 2010, the FDIC approved a rule to change the assessment base from adjusted domestic deposits to average consolidated total assets minus average tangible equity, as required by the Dodd-Frank Act. Since the new base is larger than the current base, the FDIC’s rule lowered the total base assessment rates to between 2.5 and 9 basis points for banks in the lowest risk category, and 30 to 45 basis points for banks in the highest risk category.
Pursuant to the Dodd-Frank Act, the FDIC has established 2.0% as the designated reserve ratio (“DRR”), that is, the ratio of the DIF to insured deposits. The FDIC has adopted a plan under which it will meet the statutory minimum DRR of 1.35% by September 30, 2020, the deadline imposed by the Dodd-Frank Act. The Dodd-Frank Act requires the FDIC to offset the effect on institutions with assets less than $10 billion of the increase in the statutory minimum DRR to 1.35% from the former statutory minimum of 1.15%. In March 2016, the FDIC adopted a rule that imposes a surcharge on the quarterly assessments of insured depository institutions with total consolidated assets of $10 billion or more. The surcharge equals an annual rate of 4.5 basis points applied to the institution’s assessment base, with certain adjustments. When the Deposit Insurance Fund (DIF) Reserve Ratio is at or above 1.38% in a given quarter, credits will be applied to banks' assessment payments. The Company began receiving the Small Bank Assessment credit in the third quarter of 2019 and, as a result, made no FDIC assessment payments in the third and fourth quarter of 2019. The Company paid $908,000 in total FDIC assessments in 2019 and $1.6 million in 2018.
In addition to deposit insurance assessments, the FDIC was required to continue to collect from institutions payments for the servicing of obligations of the Financing Corporation (“FICO”) that were issued in connection with the resolution of savings and loan associations, so long as such obligations remained outstanding. The last of the remaining FICO bonds matured in September 2019 with the final FICO assessment collected in 2019. Lakeland paid FICO premiums of approximately $17,000 in 2019 and $149,000 in 2018.
The Dodd-Frank Act
The Dodd-Frank Act, which was signed into law on July 21, 2010, significantly changed the bank regulatory landscape and has impacted and will continue to have a broad impact on the financial services industry as a result of significant regulatory and compliance changes, including, among other things, (i) enhanced resolution authority over troubled and failing banks and their holding companies; (ii) increased capital and liquidity requirements; (iii) increased regulatory examination fees; (iv) changes to assessments to be paid to the FDIC for federal deposit insurance; and (v) numerous other provisions designed to improve supervision and oversight of, and strengthening safety and soundness for, the financial services sector. Generally, the Dodd-Frank Act became effective the day after it was signed into law, but different effective dates applied to specific sections of the law.
The following is a summary of certain provisions of the Dodd-Frank Act:
Minimum Capital Requirements. The Dodd-Frank Act requires new capital rules and the application of the same leverage and risk-based capital requirements that apply to insured depository institutions to most bank holding companies. In addition to making bank holding companies subject to the same capital requirements as their bank subsidiaries, these provisions (often referred to as the Collins Amendment to the Dodd-Frank Act) were also intended to eliminate or significantly reduce the use of hybrid capital instruments, especially trust preferred securities, as regulatory capital. See “Capital Requirements.”
Deposit Insurance. The Dodd-Frank Act makes permanent the $250,000 deposit insurance limit for insured deposits. Amendments to the Federal Deposit Insurance Act also revised the assessment base against which an insured depository institution’s deposit insurance premiums paid to the Deposit Insurance Fund (“DIF”) are calculated. See “Federal Deposit Insurance and Premiums.”
Shareholder Votes. The Dodd-Frank Act requires publicly traded companies like Lakeland Bancorp to give shareholders a non-binding vote on executive compensation and so-called “golden parachute” payments in certain circumstances.
Transactions with Affiliates. The Dodd-Frank Act enhances the requirements for certain transactions with affiliates under Section 23A and 23B of the Federal Reserve Act, including an expansion of the definition of “covered transactions” and increasing the amount of time for which collateral requirements regarding covered transactions must be maintained.
Transactions with Insiders. Insider transaction limitations are expanded through the strengthening of loan restrictions to insiders and the expansion of the types of transactions subject to the various limits, including derivative transactions, repurchase agreements, reverse repurchase agreements and securities lending or borrowing transactions. Restrictions are also placed on certain asset sales to and from an insider to an institution, including requirements that such sales be on market terms and, in certain circumstances, approved by the institution’s board of directors.

-9-

Table of Contents


Enhanced Lending Limits. The Dodd-Frank Act strengthened the previous limits on a depository institution’s credit exposure to one borrower which limited a depository institution’s ability to extend credit to one person (or group of related persons) in an amount exceeding certain thresholds. The Dodd-Frank Act expanded the scope of these restrictions to include credit exposure arising from derivative transactions, repurchase agreements, and securities lending and borrowing transactions.
Compensation Practices. The Dodd-Frank Act provides that the appropriate federal regulators must establish standards prohibiting as an unsafe and unsound practice any compensation plan of a bank holding company or other “covered financial institution” that provides an insider or other employee with “excessive compensation” or compensation that gives rise to excessive risk or could lead to a material financial loss to such firm. In June 2010, prior to the Dodd-Frank Act, the bank regulatory agencies promulgated the Interagency Guidance on Sound Incentive Compensation Policies, which sets forth three key principles concerning incentive compensation arrangements:
such arrangements should provide employees incentives that balance risk and financial results in a manner that does not encourage employees to expose the financial institution to imprudent risks;
such arrangements should be compatible with effective controls and risk management; and
such arrangements should be supported by strong corporate governance with effective and active oversight by the financial institution’s board of directors.
Together, the Dodd-Frank Act and guidance from the bank regulatory agencies on compensation may impact the Company’s compensation practices.
The Consumer Financial Protection Bureau (“Bureau”). The Dodd-Frank Act created the Bureau within the Federal Reserve. The Bureau is tasked with establishing and implementing rules and regulations under certain federal consumer protection laws with respect to the conduct of providers of certain consumer financial products and services. The Bureau has rulemaking authority over many of the statutes governing products and services offered to bank consumers. In addition, the Dodd-Frank Act permits states to adopt consumer protection laws and regulations that are more stringent than those regulations promulgated by the Bureau and state attorneys general are permitted to enforce consumer protection rules adopted by the Bureau against state-chartered institutions. The Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Institutions with $10 billion or less in assets, such as the Bank, will continue to be examined for compliance with the consumer laws by their primary bank regulators.
De Novo Banking. The Dodd-Frank Act allows de novo interstate branching by banks.
The ability-to-repay and qualified mortgage ("QM") provisions of the Truth in Lending Act, as amended by the Dodd-Frank Act (the "QM Rule") require creditors to make reasonable, good faith determinations that borrowers are able to repay their mortgages before extending the credit based on a number of factors and consideration of financial information about the borrower from reasonably reliable third-party documents. Under the Dodd-Frank Act and the QM Rule, loans meeting the definition of “qualified mortgage” are entitled to a presumption that the lender satisfied the ability-to-repay requirements. The presumption is a conclusive presumption/safe harbor for prime loans meeting the QM requirements, and a rebuttable presumption for higher-priced/subprime loans meeting the QM requirements. The definition of a “qualified mortgage” incorporates the statutory requirements, such as not allowing negative amortization or terms longer than 30 years. The QM Rule also adds an explicit maximum 43 percent debt-to-income ratio for borrowers if the loan is to meet the QM definition, though some mortgages that meet government-sponsored enterprise ("GSE"), Federal Housing Administration ("FHA") and Veterans Affairs ("VA") underwriting and eligibility guidelines may, for a period not to exceed seven years, meet the QM Rule definition without being subject to the 43 percent debt-to-income limits. We cannot assure you that existing or future regulations will not have a material adverse impact on our residential mortgage loan business or the housing markets in which we participate.  
In addition, provisions in the Dodd-Frank Act which have revised the capital requirements of the Company and the Bank could require the Company and the Bank to seek additional sources of capital in the future. See “Capital Requirements.”
The Dodd-Frank Act contains numerous other provisions affecting financial institutions of all types, many of which may have an impact on our operating environment in substantial and unpredictable ways. Consequently, the Dodd-Frank Act is likely to continue to increase our cost of doing business, it may limit or expand our permissible activities, and it may affect the competitive balance within our industry and market areas.

-10-

Table of Contents


2018 Regulatory Reform
The EGRRCPA, enacted in May 2018, repeals or modifies certain provisions of the Dodd-Frank Act and eases certain regulations on smaller banks. Highlights of the EGRRCPA include, among other items: (i) simplifying capital calculations for eligible community banks that elect to opt into the new Community Bank Leverage Ratio framework; (ii) modifying risk weight exposures, allowing banks to classify certain credit facilities as regular commercial real estate exposures instead of high volatility commercial real estate exposures for purposes of calculating their risk-weighted capital requirements; (iii) expanding the definition of qualified mortgages which may be held in portfolio; and (iv) excluding from “banking entities” subject to the Volcker Rule certain firms that have total consolidated assets equal to $10 billion or less and total trading assets and liabilities equal to 5% or less of total consolidated assets. See “Capital Requirements” and “Volcker Rule” above.
Proposed Legislation
From time to time proposals are made in the United States Congress, the New Jersey Legislature, and before various bank regulatory authorities, which would alter the powers of, and place restrictions on, different types of banking organizations. It is impossible to predict the impact, if any, of potential legislative trends on the business of the Company and its subsidiaries.
In accordance with federal law providing for deregulation of interest on all deposits, banks and thrift organizations are now unrestricted by law or regulation from paying interest at any rate on most time deposits. It is not clear whether deregulation and other pending changes in certain aspects of the banking industry will result in further increases in the cost of funds in relation to prevailing lending rates.
ITEM 1A - Risk Factors.
Our business, financial condition, operating results and cash flows can be affected by a number of factors, including, but not limited to, those set forth below, any one of which could cause our actual results to vary materially from recent results or from our anticipated future results.
Credit Risks
Our allowance for loan losses may not be adequate to cover actual losses.
Like all commercial banks, Lakeland Bank maintains an allowance for loan losses to provide for loan defaults and non-performance. If our allowance for loan losses is not adequate to cover actual loan losses, we may be required to significantly increase future provisions for loan losses, which could materially and adversely affect our operating results. Our allowance for loan losses is determined by analyzing historical loan losses, current trends in delinquencies and charge-offs, plans for problem loan resolution, the opinions of our regulators, changes in the size and composition of the loan portfolio and industry information. We also consider the possible effects of economic events, which are difficult to predict. The amount of future losses is affected by changes in economic, operating and other conditions, including changes in interest rates, many of which are beyond our control. These losses may exceed our current estimates. Federal regulatory agencies, as an integral part of their examination process, review our loans and the allowance for loan losses. While we believe that our allowance for loan losses in relation to our current loan portfolio is adequate to cover current losses, we cannot assure you that we will not need to increase our allowance for loan losses or that the regulators will not require us to increase this allowance. Future increases in our allowance for loan losses could materially and adversely affect our earnings and profitability.
A change in accounting standards, which is effective for the Company beginning January 1, 2020, could also cause an increase in Lakeland’s allowance for loan losses. In June 2016, the FASB issued an accounting standards update (ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments), pertaining to the measurement of credit losses on financial instruments ("CECL"). This update requires the measurement of all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions, such as Lakeland, and other organizations will now use forward-looking information to better inform their credit loss estimates. The new standard will be mandatory for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years. Under the CECL model, we will be required to present certain financial assets carried at amortized cost, such as loans held for investment and held-to-maturity debt securities, at the net amount expected to be collected. This differs significantly from the "incurred loss" model required under current GAAP, which delays recognition until it is probable a loss has been incurred. Accordingly, we expect that the adoption of the CECL model will significantly affect how we determine our allowance for loan losses and will require us to increase our allowance. Moreover, the CECL model may create more volatility in the level of our allowance for loan losses.

-11-

Table of Contents


On December 21, 2018, the banking agencies approved a final rule modifying their regulatory capital rules and providing an option to phase in over a period of three years the day-one regulatory capital effects of the CECL model. The final rule also revises the agencies' other rules to reflect the update to the accounting standards. The final rule became effective on April 1, 2019. In October 2019, four federal banking agencies issued a request for comment on a proposed interagency policy statement on the new CECL methodology. The policy statement proposes to harmonize the agencies' policies on allowances for credit losses with the FASB's new accounting standards. Specifically the statement (1) updates concepts and practices from prior policy statements issued in December 2006 and July 2001 and specifies which prior guidance documents are no longer relevant; (2) describes the appropriate CECL methodology, in light of Topic 326, for determining allowances for credit losses ("ACL") on financial assets measured at amortized cost, net investments in leases and certain off-balance sheet credit exposures; and (3) describes how to estimate an ACL for an impaired available-for-sale debt security in line with Topic 326. The proposed policy statement would be effective at the time that each institution adopts the new standards required by FASB. Management is still evaluating whether it will choose the three-year phase-in option.
Based on an analysis performed on our loan portfolio as of December 31, 2019, we expect an increase in our allowance for loan losses (and our reserves for unfunded commitments) ranging from 10% to 25%. The final number will be dependent on the refinement of our overall methodology primarily related to our qualitative adjustments and purchased credit deteriorated loans, and certain assumptions, which we are currently finalizing and expect to be completed in the coming weeks. The increase will result in a one-time cumulative effect adjustment to our allowance for loan losses, and a corresponding decrease to retained earnings as of the January 1, 2020 effective date. Any future quarterly changes to our allowance will depend on the current state of the economy, forecasted macroeconomic conditions and the composition of our loan portfolio at the time.
The concentration of our commercial real estate loan portfolio may subject us to increased regulatory analysis, or otherwise adversely affect our business and operating results.
The FDIC, the Federal Reserve and the OCC have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate (CRE) lending. The 2006 interagency guidance did not establish specific CRE lending limits or caps; rather, the guidance set forth supervisory criteria to serve as levels of bank CRE concentration above which certain financial institutions may be identified for further supervisory analysis. According to the guidelines, institutions could be subject to further analysis if (i) their loans for construction, land, and land development (CLD) represent 100% or more of the institution's total risk-based capital, or (ii) their total non-owner-occupied CRE loans (including CLD loans), as defined, represent 300% or more of the institution’s total risk-based capital, and further, that the institution’s non-owner-occupied CRE loan portfolio has increased by 50% or more during the previous 36 months.
The Bank’s total reported CLD loans represented 49% of total risk-based capital at December 31, 2019. The Bank’s total reported CRE loans to total capital was 431% at December 31, 2019, while the Bank’s CRE portfolio has increased by 49% over the preceding 36 months. The growth rate of the preceding 36 months included the acquisition of Highlands State Bank.
The Bank’s CRE portfolio is segmented and spread among various property types including retail, office, multi-family, mixed use, industrial, hospitality, healthcare, special use and residential and commercial construction. Management regularly reviews and evaluates its CRE portfolio, including concentrations within the various property types based on current market conditions and risk appetite as well as by utilizing stress testing on material exposures and believes its underwriting practices are sound.
There is no assurance that in the future we will not exceed the levels set forth in the guidelines. Furthermore, the concentration of our commercial real estate portfolio could materially and adversely affect our business and operating results, including our overall profitability, and/or adversely impact the growth of our business, including the growth and composition of our overall loan portfolio.
Our mortgage banking operations expose us to risks that are different than the risks associated with our retail banking operations.
The Bank’s mortgage banking operations are dependent upon the level of demand for residential mortgages. During higher and rising interest rate environments, the level of refinancing activity tends to decline, which can lead to reduced volumes of business and lower revenues that may not exceed our fixed costs to run the business. In addition, mortgages sold to third-party investors are typically subject to certain repurchase provisions related to borrower refinancing, defaults, fraud or other reasons stipulated in the applicable third-party investor agreements. If the fair value of a loan when repurchased is less than the fair value when sold, a bank may be required to charge such shortfall to earnings.
In addition, the “ability to repay” and “Qualified Mortgage” rules promulgated as required by the Dodd-Frank Act (as amended or supplemented to date, including by the EGRRCPA (see "2018 Regulatory Reform," above)), may expose the Company to greater losses, reduced volume and litigation related expenses and delays in taking title to collateral real estate, if these loans do not perform and borrowers challenge whether the rules were satisfied when originating the loans.

-12-

Table of Contents


We are subject to various lending and other economic risks that could adversely affect our results of operations and financial condition.
Economic, political and market conditions, trends in industry and finance, legislative and regulatory changes, changes in governmental monetary and fiscal policies and inflation affect our business. These factors are beyond our control. A deterioration in economic conditions, particularly in the markets we lend in, could have the following consequences, any of which could materially adversely affect our business:
loan delinquencies may increase;
problem assets and foreclosures may increase;
demand for our products and services may decrease; and
collateral for loans made by us may decline in value, in turn reducing the borrowing ability of our customers.
Deterioration in the real estate market, particularly in New Jersey and the metropolitan New York area, could adversely affect our business. A decline in real estate values in New Jersey and the metropolitan New York area would reduce our ability to recover on defaulted loans by selling the underlying real estate, which would increase the possibility that we may suffer losses on defaulted loans.
We may suffer losses in our loan portfolio despite our underwriting practices.
We seek to mitigate the risks inherent in our loan portfolio by adhering to specific underwriting practices. Although we believe that our underwriting criteria are appropriate for the various kinds of loans that we make, we may incur losses on loans that meet our underwriting criteria, and these losses may exceed the amounts set aside as reserves in our allowance for loan losses.
Liquidity and Interest Rate Risks
A decrease in our ability to borrow funds could adversely affect our liquidity.
Our ability to obtain funding from the Federal Home Loan Bank ("FHLB") or through our overnight federal funds lines with other banks could be negatively affected if we experienced a substantial deterioration in our financial condition or if such funding became restricted due to deterioration in the financial markets. While we have a contingency funds management plan to address such a situation if it were to occur (such plan includes deposit promotions, the sale of securities and the curtailment of loan growth, if necessary), a significant decrease in our ability to borrow funds could adversely affect our liquidity.
Public funds deposits are an important source of funds for us and a reduced level of those deposits may hurt our profits.
Public funds deposits are a significant source of funds for our lending and investment activities. The Company’s public funds deposits consist of deposits from local government entities, domiciled in the state of New Jersey, such as school districts, counties and other municipalities, and are collateralized by letters of credit from the FHLB and investment securities. Given our use of these high-average balance public funds deposits as a source of funds, our inability to retain such funds could adversely affect our liquidity. In addition, Governor Phil Murphy of New Jersey has proposed the creation of a state-owned bank which would accept public revenues to be invested in New Jersey. A bill was introduced in the New Jersey legislature in January 2018 that calls for the establishment of such a state-run bank. The legislation remains pending, and while no assurance can be provided that such a bank will be created, to the extent that a state-run bank is established and accepts public revenues, the amount of the Company’s public funds deposits could be reduced, which could adversely affect our liquidity.
Further, our public funds deposits are primarily demand deposit accounts or short-term time deposits and are therefore more sensitive to interest rate risks. If we are forced to pay higher rates on our public funds accounts to retain those funds, or if we are unable to retain such funds and we are forced to resort to other sources of funds for our lending and investment activities, such as borrowings from the FHLB, the interest expense associated with these other funding sources may be higher than the rates we are currently paying on our public funds deposits, which would adversely affect our net income.
We are subject to interest rate risk and variations in interest rates that may negatively affect our financial performance.
We are unable to predict actual fluctuations of market interest rates. Rate fluctuations are influenced by many factors, including:
inflation or deflation
excess growth or recession;
a rise or fall in unemployment;
tightening or expansion of the money supply;
domestic and international disorder;
instability in domestic and foreign financial markets; and

-13-

Table of Contents


actions taken or statements made by the Federal Reserve Board.
Both increases and decreases in the interest rate environment may reduce our profits. We expect that we will continue to realize income from the difference or “spread” between the interest we earn on loans, securities and other interest-earning assets and the interest we pay on deposits, borrowings and other interest-bearing liabilities. Our net interest spreads are affected by the differences between the maturities and repricing characteristics of our interest-earning assets and interest-bearing liabilities. Our interest-earning assets may not reprice as slowly or rapidly as our interest-bearing liabilities. Changes in market interest rates could materially and adversely affect our net interest spread, asset quality, levels of prepayments, cash flows, market value of our securities portfolio, loan and deposit growth, costs and yields on loans and deposits and our overall profitability. Competition for our deposits can increase significantly as a result of the interest rate environment.
The transition from LIBOR as a reference rate may adversely impact our net income.
In 2017, the United Kingdom's Financial Conduct Authority announced that after 2021 it would no longer compel banks to submit the rates required to calculate the London Interbank Offered Rate ("LIBOR"). This announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. Consequently, it is not possible to predict, at this time, whether and to what extent banks will continue to provide submissions for the calculation of LIBOR. Similarly, it is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or rates may become an accepted alternative to LIBOR, or what the effect of any such changes in views or alternative may be on the markets for LIBOR-indexed financial instruments.
In particular, regulators, industry groups and certain committees (e.g., the Alternative Reference Rates Committee) have, among other things, published recommended fall-back language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., the Secured Overnight Financing Rate as the recommended alternative to U.S. Dollar LIBOR), and proposed implementations of the recommended alternatives in floating rate instruments. At this time, it is not possible to predict whether these specific recommendations and proposals will be broadly accepted, whether they will continue to evolve, and what the effect of their implementation may be on the markets for floating-rate financial instruments.
We have a significant number of loans, derivative contracts, borrowings and other financial instruments with attributes that are either directly or indirectly dependent on LIBOR. The transition from LIBOR could create considerable costs and additional risk. Since proposed alternative rates are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR. The transition will change our market risk profiles, requiring changes to risk and pricing models, valuation tools, product design and hedging strategies. Furthermore, failure to adequately manage this transition process with our customers could adversely impact our reputation. Although we are currently unable to assess what the ultimate impact of the transition from LIBOR will be, failure to adequately manage the transition could have a material adverse effect on our business, financial condition and results of operations.
Declines in value may adversely impact our investment portfolio.
As of December 31, 2019, the Company had approximately $755.9 million and $124.0 million in available for sale and held to maturity investment securities, respectively. We may be required to record impairment charges on our investment securities if they suffer a decline in value that is considered other-than-temporary. Numerous factors, including lack of liquidity for sales of certain investment securities, absence of reliable pricing information for investment securities, adverse changes in business climate, adverse actions by regulators, or unanticipated changes in the competitive environment could have a negative effect on our investment portfolio in future periods. If an impairment charge is significant enough it could affect the ability of Lakeland to upstream dividends to the Company, which could have a material adverse effect on our liquidity and our ability to pay dividends to shareholders and could also negatively impact our regulatory capital ratios.
Information Technology or Cybersecurity Risks
The occurrence of any failure, breach, or interruption in service involving our systems or those of our service providers could damage our reputation, cause losses, increase our expenses, and result in a loss of customers, an increase in regulatory scrutiny, or expose us to civil litigation and possibly financial liability, any of which could adversely impact our financial condition, results of operations and the market price of our stock.
In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive data. Any failure, interruption or breach in security of these systems could result in significant disruption to our operations. Information security breaches and cybersecurity-related incidents may include, but are not limited to, attempts to access information, including customer and company information, malicious code, computer viruses and denial of service attacks that could result in unauthorized access, misuse, loss or destruction of data (including confidential customer information), account takeovers, unavailability of service or other events. These types of threats may derive from human error, fraud or malice on the part of external or internal parties, or may result from accidental technological failure. Further, to access our products and services our customers may use computers and mobile devices that are beyond our security control systems. Our technologies, systems, networks and software, and those of other financial institutions have been, and are likely to continue to be, the target of cybersecurity threats and attacks, which may range from uncoordinated individual attempts to sophisticated and targeted measures directed at

-14-

Table of Contents


us. The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, has increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
Our business requires the collection and retention of large volumes of customer data, including personally identifiable information in various information systems that we maintain and in those maintained by third parties with whom we contract to provide data services. We also maintain important internal company data such as personally identifiable information about our employees and information relating to our operations. The integrity and protection of that customer and company data is important to us. Our collection of such customer and company data is subject to extensive regulation and oversight.
Our customers and employees have been, and will continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate passwords, bank account information or other personal information or to introduce viruses or other malware through “Trojan horse” programs to our information systems and/or our customers' computers. Though we endeavor to mitigate these threats through product improvements, use of encryption and authentication technology and customer and employee education, such cyber attacks against us or our merchants and our third party service providers remain a serious issue. The pervasiveness of cybersecurity incidents in general and the risks of cyber crime are complex and continue to evolve. More generally, publicized information concerning security and cyber-related problems could inhibit the use or growth of electronic or web-based applications or solutions as a means of conducting commercial transactions.
Although we make significant efforts to maintain the security and integrity of our information systems and have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because attempted security breaches, particularly cyber attacks and intrusions, or disruptions will occur in the future, and because the techniques used in such attempts are constantly evolving and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is virtually impossible for us to entirely mitigate this risk. While we maintain specific “cyber” insurance coverage, which would apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case. Furthermore, because cyber threat scenarios are inherently difficult to predict and can take many forms, some breaches may not be covered under our cyber insurance coverage. A security breach or other significant disruption of our information systems or those related to our customers, merchants and our third party vendors, including as a result of cyber attacks, could (i) disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our customers; (ii) result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of confidential, sensitive or otherwise valuable information of ours or our customers; (iii) result in a violation of applicable privacy, data breach and other laws, subjecting us to additional regulatory scrutiny and expose us to civil litigation, governmental fines and possible financial liability; (iv) require significant management attention and resources to remedy the damages that result; or (v) harm our reputation or cause a decrease in the number of customers that choose to do business with us. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.
The inability to stay current with technological change could adversely affect our business model.
Financial institutions continually are required to maintain and upgrade technology in order to provide the most current products and services to their customers, as well as create operational efficiencies. This technology requires personnel resources, as well as significant costs to implement. Failure to successfully implement technological change could adversely affect the Company’s business, results of operations and financial condition.
The Company embarked on a digital strategy initiative in 2019, which impacts all operational areas of the Bank. There are no guarantees that enhancing the Company's digital capabilities will expand Lakeland's market presence as a community bank or result in an ability to better compete long-term in a fast-paced digital marketplace. In addition, the cost of implementation and the anticipated increase in revenue may not occur as expected.
Our operations rely on certain third party vendors.
We rely on certain external vendors to provide products and services necessary to maintain our day-to-day operations. These third party vendors are sources of operational and informational security risk to us, including risks associated with operational errors, information system interruptions or breaches and unauthorized disclosures of sensitive or confidential client or customer information. If these vendors encounter any of these issues, or if we have difficulty communicating with them, we could be exposed to disruption of operations, loss of service or connectivity to customers, reputational damage, and litigation risk that could have a material adverse effect on our business and, in turn, our financial condition and results of operations.

-15-

Table of Contents


In addition, our operations are exposed to risk that these vendors will not perform in accordance with the contracted arrangements under service level agreements. While we have selected these external vendors carefully, we do not control their actions. The failure of an external vendor to perform in accordance with the contracted arrangements under service level agreements, because of changes in the vendor’s organizational structure, financial condition, support for existing products and services or strategic focus or for any other reason, could be disruptive to our operations, which could have a material adverse effect on our business and, in turn, our financial condition and results of operations. Replacing these external vendors could also entail significant delay and expense.
Legal and Regulatory Risks
The Dodd-Frank Act could materially and adversely affect us by increasing compliance costs, heightening our risk of noncompliance with applicable regulations, and changing the competitive landscape in the banking industry.
The Dodd-Frank Act has resulted in sweeping changes in the regulation of financial institutions. As discussed in the section herein entitled “Business-Supervision and Regulation,” the Dodd-Frank Act contains numerous provisions that affect all banks and bank holding companies. Some of the provisions in the Dodd-Frank Act were subject to regulatory rule-making and implementation, the full effects of which are not yet fully known. Although we cannot predict the full and specific impact and long-term effects that the Dodd-Frank Act and the regulations promulgated thereunder will have on us and our prospects, our target markets and the financial industry more generally, we believe that the Dodd-Frank Act and the regulations promulgated thereunder are likely to continue to impose additional administrative and regulatory burdens that will obligate us to continue to incur additional expenses and will continue to adversely affect our margins and profitability. For example, the elimination of the prohibition on the payment of interest on demand deposits could materially increase our interest expense, depending on our competitors’ responses. Provisions in the legislation mandating modification of the capital requirements applicable to the Company and the Bank, and the resulting adoption by federal regulators of the new capital requirements described under “Business-Supervision and Regulation-Capital Requirements,” could require the Company and the Bank to seek additional sources of capital in the future. More stringent consumer protection regulations could materially and adversely affect our profitability.
The Company and the Bank are subject to more stringent capital and liquidity requirements.
The Dodd-Frank Act also imposes more stringent capital requirements on bank holding companies such as Lakeland Bancorp by, among other things, imposing leverage ratios on bank holding companies and prohibiting new trust preferred issuances from counting as Tier I capital. These restrictions will limit our future capital strategies. Under the Dodd-Frank Act, our currently outstanding trust preferred securities will continue to count as Tier I capital, but we will be unable to issue replacement or additional trust preferred securities which would count as Tier I capital.
As further described above under “Business-Supervision and Regulation-Capital Requirements,” banks and bank holding companies are required to maintain a capital conservation buffer on top of minimum risk-weighted asset ratios. The capital conservation buffer was fully phased in on January 1, 2019. In September 2019, the regulatory agencies adopted a final rule, effective January 1, 2020, creating a Community Bank Leverage Ratio framework for institutions with total consolidated assets of less than $10 billion and that meet other qualifying criteria. The Community Bank Leverage Ratio Framework provides for a simpler measure of capital adequacy for qualifying institutions. Qualifying institutions that elect to use the Community Bank Leverage Ratio framework and that maintain a leverage ratio of greater than 9% will be considered to have satisfied the generally applicable risk-based and leverage capital requirements in the regulatory agencies' capital rules and to have met the well-capitalized ratio requirements. Management is still reviewing the Community Bank Leverage Ratio framework, but does not expect that Lakeland Bancorp or Lakeland Bank will elect to use the framework.
Banking institutions which do not maintain capital in excess of the Basel Rule standards including the capital conservation buffer face constraints on the payment of dividends, equity repurchases and compensation based on the amount of the shortfall. Accordingly, if the Bank fails to maintain the applicable minimum capital ratios and the capital conservation buffer, distributions to Lakeland Bancorp may be prohibited or limited.
Future increases in minimum capital requirements could adversely affect our net income. Furthermore, our failure to comply with the minimum capital requirements could result in our regulators taking formal or informal actions against us which could restrict our future growth or operations.

-16-

Table of Contents


The extensive regulation and supervision to which we are subject impose substantial restrictions on our business.
The Company, Lakeland and certain non-bank subsidiaries are subject to extensive regulation and supervision. Banking regulations are primarily intended to protect depositors’ funds, federal deposit insurance funds and the banking system as a whole. Such laws are not designed to protect our shareholders. These regulations affect our lending practices, capital structure, investment practices, dividend policy and growth, among other things. Lakeland is also subject to a number of laws which, among other things, govern its lending practices and require the Bank to establish and maintain comprehensive programs relating to anti-money laundering and customer identification. The United States Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect us in substantial and unpredictable ways. Such changes could subject us to additional costs, limit the types of financial services and products we may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things. Failure to comply with laws, regulations or policies could result in sanctions by regulatory agencies, civil money penalties and/or reputational damage, which could have a material adverse effect on our business, financial condition and results of operations.
Lakeland’s ability to pay dividends is subject to regulatory limitations which, to the extent that our holding company requires such dividends in the future, may affect our holding company’s ability to pay its obligations and pay dividends to shareholders.
As a bank holding company, the Company is a separate legal entity from Lakeland Bank and its subsidiaries, and we do not have significant operations of our own. We currently depend on Lakeland Bank’s cash and liquidity to pay our operating expenses and dividends to shareholders. The availability of dividends from Lakeland Bank is limited by various statutes and regulations. The inability of the Company to receive dividends from Lakeland Bank could adversely affect our financial condition, results of operations, cash flows and prospects and the Company’s ability to pay dividends.
In addition, as described under “Business-Supervision and Regulation-Capital Requirements,” as a general matter, banks and bank holding companies are required to maintain a capital conservation buffer on top of minimum risk-weighted asset ratios. Banking institutions which do not maintain capital in excess of the capital conservation buffer will face constraints on the payment of dividends, equity repurchases and compensation based on the amount of the shortfall. Accordingly, if Lakeland Bank fails to maintain the applicable minimum capital ratios and the capital conservation buffer, distributions to Lakeland Bancorp may be prohibited or limited.
Strategic and External Risks
The effect of the Tax Cuts and Jobs Act and future tax reform is uncertain and may adversely affect our business.
It is now more than two years since the current Presidential administration and U.S. Congress passed significant reform of the Internal Revenue Code, known as the Tax Cuts and Jobs Act of 2017 (the "Tax Act"). As of year-end 2018, we had completed the process of determining the accounting under ASC Topic 740, Income Taxes, for the income tax effects of the Tax Act, as discussed in the related notes to the consolidated financial statements. The Company has therefore disclosed the impact that the Tax Act had on its financial position and the results of operations. However, additional technical corrections or other forthcoming guidance could change how we interpret provisions of the Tax Act, which may impact our effective tax rate and could affect our deferred tax assets, tax positions and/or our tax liabilities.
While the decline in the federal corporate tax rate from 35% to 21% lowered the Company's income tax expense as a percent of its taxable income in 2019 and 2018, other provisions of the Tax Act or future tax reform could negatively impact certain balance sheet and tax positions taken by the Company. The Tax Act imposed higher limitations on the deductibility of interest and property tax expenses, which may have adversely impacted, and may continue to adversely impact, the property values of real estate used to secure loans and may have created, and may continue to create, an additional tax burden for many borrowers, particularly in high tax jurisdictions such as the State of New Jersey where the Company operates. These and other federal and state tax changes could significantly impact the financial health of our customers, potentially resulting, in among other things, an inability to repay loans or maintain deposits at the Bank. Any negative financial impact to our customers resulting from tax reform could adversely impact our financial condition and earnings.
The ultimate impact of any tax reform on our business, customers and shareholders is uncertain and could be adverse.

-17-

Table of Contents


Recent New Jersey legislative changes may increase tax expense.
Legislation in New Jersey that was enacted in July 2018 increased our state income tax liability and could increase our overall tax expense. The legislation imposes a temporary surtax on corporations earning New Jersey allocated income in excess of $1.0 million of 2.5% for tax years beginning on or after January 1, 2018 through December 31, 2019, and of 1.5% for tax years beginning on or after January 1, 2020 through December 31, 2021. The new legislation also requires combined filing for members of an affiliated group for tax years ending on or after July 31, 2019, and limits the deductibility of dividends received. These changes are not temporary. Regulations implementing the legislative changes have not yet been issued, so we cannot yet fully evaluate the impact of the legislation on our overall tax expense. However, the new legislation may cause us to lose the benefit of certain of our tax management strategies and may cause our total tax expense to increase.
Severe weather, acts of terrorism and other external events could impact our ability to conduct business.
 Weather-related events have adversely impacted our market area in recent years, especially areas located near coastal waters and flood prone areas. Such events that may cause significant flooding and other storm-related damage may become more common events in the future. Financial institutions have been, and continue to be, targets of terrorist threats aimed at compromising operating and communication systems and the metropolitan New York area, including New Jersey, remain central targets for potential acts of terrorism. Such events could cause significant damage, impact the stability of our facilities and result in additional expenses, impair the ability of our borrowers to repay their loans, reduce the value of collateral securing repayment of our loans, and result in the loss of revenue. While we have established and regularly test disaster recovery procedures, the occurrence of any such event could have a material adverse effect on our business, operations and financial condition.
We face intense competition from other financial services and financial services technology companies, and competitive pressures could adversely affect our business or financial performance.
The Company faces intense competition in all of its markets and geographic regions. The Company expects competitive pressures to intensify in the future, especially in light of legislative and regulatory initiatives arising out of the recent global economic crisis, technological innovations that alter the barriers to entry, current economic and market conditions, and government monetary and fiscal policies. Competition with financial services technology companies, or technology companies partnering with financial services companies, may be particularly intense, due to, among other things, differing regulatory environments. Competitive pressures may drive the Company to take actions that the Company might otherwise eschew, such as lowering the interest rates or fees on loans or raising the interest rates on deposits in order to keep or attract high-quality customers. These pressures also may accelerate actions that the Company might otherwise elect to defer, such as substantial investments in technology or infrastructure. Whatever the reason, actions that the Company takes in response to competition may adversely affect its results of operations and financial condition. These consequences could be exacerbated if the Company is not successful in introducing new products and other services, achieving market acceptance of its products and other services, developing and maintaining a strong customer base, or prudently managing expenses.
The Company’s future growth may require the Company to raise additional capital in the future, but that capital may not be available when it is needed or may be available only at an excessive cost.
The Company is required by regulatory authorities to maintain adequate levels of capital to support its operations. The Company anticipates that current capital levels will satisfy regulatory requirements for the foreseeable future. The Company, however, may at some point choose to raise additional capital to support its continued growth. The Company’s ability to raise additional capital will depend, in part, on conditions in the capital markets at that time, which are outside of the Company’s control. Accordingly, the Company may be unable to raise additional capital, if and when needed, on terms acceptable to the Company, or at all. If the Company cannot raise additional capital when needed, its ability to further expand operations through internal growth and acquisitions could be materially impacted. In the event of a material decrease in the Company’s stock price, future issuances of equity securities could result in dilution of existing shareholder interests.
Operational Risks
The Company may incur impairment to goodwill.
We are required to test our goodwill at least annually. Our valuation methodology for assessing impairment requires management to consider a variety of factors, including the current market price of our common shares, the estimated net present value of our assets and liabilities and information concerning the terminal valuation of similarly situated insured depository institutions.  We operate in a competitive environment and projections of future operating results and cash flows may vary significantly from actual results. Additionally, if our analysis results in an impairment to our goodwill, we would be required to record a non-cash charge to earnings in our financial statements during the period in which such impairment is determined to exist. Any such charge could have a material adverse effect on our results of operations and our stock price.

-18-

Table of Contents


 We could be adversely affected by failure in our internal controls.
We continue to devote a significant amount of effort, time and resources to continually strengthen our controls and ensure compliance with complex accounting standards and banking regulations. A failure in our internal controls could have a significant negative impact not only on our earnings, but also on the perception that customers, regulators and investors may have of us.
Our risk management strategies may not be fully effective in mitigating our risk exposures in all market environments or against all types of risk.
We have devoted significant resources to develop our risk management policies and procedures and expect to continue to do so in the future. Nonetheless, our risk management strategies may not be fully effective in mitigating our risk exposure in all market environments or against all types of risk, including risks that are unidentified or unanticipated. As our products and services change and grow and the markets in which we operate evolve, our risk management strategies may not always adapt to those changes. Some of our methods of managing risk are based upon our use of observed historical market behavior and management’s judgment. As a result, these methods may not predict future risk exposures, which could be significantly greater than the historical measures indicate. Management of market, credit, liquidity, operational, legal, regulatory and compliance risks requires, among other things, policies and procedures to record properly and verify a large number of transactions and events and these policies and procedures may not be fully effective. While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, those techniques and the judgments that accompany their application cannot anticipate every economic and financial outcome or the timing of such outcomes. Any of these circumstances could have an adverse effect on our business, financial condition and results of operations.
The inability to attract and retain key personnel could adversely affect our Company’s business.
The success of the Company depends partially on the ability to attract and retain a high level of experienced personnel. The inability to attract and retain key employees, as well as find suitable replacements, if necessary, could adversely affect the Company’s customer relationships and internal operations.
The accuracy of our financial statements and related disclosures could be affected if the judgments, assumptions or estimates used in our critical accounting policies are inaccurate.
The preparation of financial statements and related disclosure in conformity with GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Our critical accounting policies, which are included in Item 7 of this report captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, describe those significant accounting policies and methods used in the preparation of our consolidated financial statements that we consider “critical” because they require judgments, assumptions and estimates that materially affect our consolidated financial statements and related disclosures. As a result, if future events differ significantly from the judgments, assumptions and estimates in our critical accounting policies, those events or assumptions could have a material impact on our consolidated financial statements and related disclosures.
If we do not successfully integrate any banks that we may acquire in the future, the combined company may be adversely affected.
If we make acquisitions in the future, we will need to integrate the acquired entities into our existing business and systems. We may experience difficulties in accomplishing this integration or in effectively managing the combined company after any future acquisition. Any actual cost savings or revenue enhancements that we may anticipate from a future acquisition will depend on future expense levels and operating results, the timing of certain events and general industry, regulatory and business conditions. Many of these events will be beyond our control, and we cannot assure you that if we make any acquisitions in the future, we will be successful in integrating those businesses into our own.
ITEM 1B - Unresolved Staff Comments.
Not Applicable.
ITEM 2 – Properties.
Lakeland currently operates 52 branch offices located throughout Bergen, Essex, Morris, Ocean, Passaic, Somerset, Sussex, and Union counties in New Jersey and in Highland Mills, New York; six New Jersey regional commercial lending centers in Bernardsville, Iselin, Jackson, Montville, Teaneck and Waldwick; and one New York commercial lending center to serve the Hudson Valley region. The Company’s principal office is located at 250 Oak Ridge Road, Oak Ridge, New Jersey 07438.
The aggregate net book value of premises and equipment was $47.6 million at December 31, 2019. As of December 31, 2019, 28 of the Company’s facilities were owned and 35 were leased for various terms.

-19-

Table of Contents


ITEM 3 - Legal Proceedings.
There are no pending legal proceedings involving the Company or Lakeland other than those arising in the normal course of business. Management does not anticipate that the potential liability, if any, arising out of such legal proceedings will have a material effect on the financial condition or results of operations of the Company and Lakeland on a consolidated basis.

-20-

Table of Contents


ITEM 3A - Information about our Executive Officers.
The following table sets forth the name and age of each current executive officer of the Company. Each officer is appointed by the Company’s Board of Directors. Unless otherwise indicated, the persons named below have held the position indicated for more than the past five years.
 
Name and Age
 
Officer of the
Company Since
 
Position with the Company, its Subsidiary
Banks, and Business Experience
Thomas J. Shara
Age 62
 
2008
 
President and CEO of the Company and the Bank (April 2008 - Present); President and Chief Credit Officer (May 2007 - April 2008) and Executive Vice President and Senior Commercial Banking Officer (February 2006 - May 2007), TD Banknorth, N.A.’s Mid-Atlantic Division.
Thomas F. Splaine, Jr.
Age 54
 
2016
 
Executive Vice President and Chief Financial Officer of the Company and the Bank (March 2017 - Present); First Senior Vice President and Chief Accounting Officer of the Company and the Bank (May 2016 - March 2017); Senior Vice President, Financial Planning and Analysis and Investor Relations of Investors Bancorp, Inc. (January 2015 - December 2015); Senior Vice President and Chief Financial Officer of Investors Bancorp, Inc. (2008 - 2015).
Ronald E. Schwarz
Age 65
 
2009
 
Senior Executive Vice President and Chief Operating Officer of the Company and the Bank (January 2017 - Present); Senior Executive Vice President and Chief Revenue Officer of the Company and the Bank (January 2016 - January 2017); Executive Vice President and Chief Retail Officer of the Company and the Bank (June 2009 - December 2015); Executive Vice President and Market Executive of Sovereign Bank (June 2006 - June 2009).

Paul Ho Sing Loy
Age 59
 
2019
 
Executive Vice President and Chief Information Officer of the Company (January 2019 - Present); Executive Vice President and Chief Information Officer of the Bank (May 2017 - Present); Senior Vice President and Director of Business Solutions, Associated Bank (2012 - 2017); Delivery Manager for Systems in Motion, a technology outsourcing firm (2011 - 2012); Principal Consultant for Jordan Jaden Partners, a technology and management consulting firm (2003 - 2011); Senior IT positions at Wells Fargo, Bank of America and Citibank (1983 - 2003).
Ellen Lalwani Age 56
 
2018
 
Executive Vice President and Chief Banking Officer of the Company and the Bank (January 2020); Executive Vice President and Chief Retail Officer of the Company and the Bank (January 2018 - January 2020); Senior Vice President and Director of Retail Sales of the Bank (August 2008 - January 2018).
Timothy J. Matteson, Esq.
Age 50
 
2008
 
Executive Vice President, Chief Administrative Officer, General Counsel and Corporate Secretary of the Company (January 2017 - Present); Executive Vice President, General Counsel and Corporate Secretary of the Company (March 2012 - January 2017); Senior Vice President and General Counsel of the Company (September 2008 - March 2012); Assistant General Counsel, Israel Discount Bank (November 2007 - September 2008); Senior Attorney and Senior Vice President, TD Banknorth, N.A. (February 2006 - May 2007); General Counsel and Senior Vice President, Hudson United Bancorp and Hudson United Bank (January 2005 - February 2006).
James M. Nigro
Age 52
 
2016
 
Executive Vice President, Chief Risk Officer of the Company (March 2016 - Present); Senior Vice President, Credit Risk Manager of The Provident Bank (December 2013 - March 2016); Senior Vice-President, Commercial Lending of Lakeland Bank (May 2013 - December 2013); Executive Vice President, Chief Lending Officer of Somerset Hills Bank (July 2001 - May 2013).
John F. Rath, III
Age 61
 
2018
 
Executive Vice President and Chief Lending Officer of the Company and the Bank (January 2018 - Present); First Senior Vice-President, Lending Group Manager of the Company (January 2016 - January 2018); Senior Vice-President, Commercial Lending of the Company (March 2015- January 2016); Senior Vice-President, Lending Group Manager of TD Bank (August 1998 - March 2015).



-21-

Table of Contents


ITEM 4 - Mine Safety Disclosures.
Not applicable.
PART II
Item 5 - Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Shares of the common stock of Lakeland Bancorp, Inc. have been traded under the symbol “LBAI” on the NASDAQ Global Select Market (or the NASDAQ National Market) since February 22, 2000 and in the over the counter market prior to that date. As of December 31, 2019, there were approximately 3,058 shareholders of record of the common stock.
The following chart compares the Company’s cumulative total shareholder return (on a dividend reinvested basis) over the past five years commencing December 31, 2014 and ending December 31, 2019 with the NASDAQ Market Index and the Peer Group Index. The Peer Group Index is the Zacks Regional Northeast Banks Index, which consists of 95 Regional Northeast Banks.
 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Assumes Initial Investment of $100
December 2019

chart-c6eefb4bcaf75466b72.jpg
Company/Market/Peer Group
 
12/31/2014
 
12/31/2015
 
12/31/2016
 
12/31/2017
 
12/31/2018
 
12/31/2019
Lakeland Bancorp, Inc.
 
$
100.00

 
$
103.90

 
$
177.66

 
$
178.99

 
$
141.01

 
$
170.54

NASDAQ Market Index
 
100.00

 
106.96

 
116.45

 
150.96

 
146.67

 
200.50

Regional Northeast Banks
 
100.00

 
104.61

 
145.41

 
152.23

 
132.88

 
160.72



-22-

Table of Contents


The following table presents information regarding shares of our common stock repurchased during the fourth quarter of 2019.
Period
 
Total Number of Shares (or Units) Purchased (1)
 
Weighted Average Price Paid per Share (or Unit)
 
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
 
Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
October 1 to October 31, 2019
 

 
$

 

 
2,524,458

November 1 to November 30, 2019
 

 

 

 
2,524,458

December 1 to December 31, 2019
 

 

 

 
2,524,458


(1)On October 24, 2019, the Company announced that its Board of Directors authorized a new share repurchase program. Under the repurchase program, the Company may repurchase up to 2,524,458 shares of its common stock, or approximately 5% of its outstanding shares of common stock at September 30, 2019. Repurchases may be made from time to time through a combination of open market and privately negotiated repurchases. The specific timing, price and quantity of repurchases will be at the discretion of the Company and will depend on a variety of factors, including general market conditions, the trading price of the common stock, legal and contractual requirements and the Company's financial performance. No shares were purchased by the Company pursuant to such share repurchase program or otherwise.


-23-

Table of Contents


Item 6 - Selected Financial Data.
SELECTED CONSOLIDATED FINANCIAL DATA
The following should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Company’s consolidated financial statements included in Items 7 and 8 of this report. The selected financial data set forth below has been derived from the Company’s audited consolidated financial statements.
 
 
At or for the Years Ended December 31,
(in thousands, except per share data)
 
2019
 
2018
 
2017
 
2016
 
2015
 
 
 
Income Statement
 
 
 
 
 
 
 
 
 
 
Interest income
 
$
256,487

 
$
213,121

 
$
190,204

 
$
163,296

 
$
127,514

Interest expense
 
60,453

 
39,562

 
24,966

 
17,647

 
10,874

Net interest income
 
196,034

 
173,559

 
165,238

 
145,649

 
116,640

Provision for loan losses
 
2,130

 
4,413

 
6,090

 
4,223

 
1,942

Noninterest income excluding gains on investment securities and gain on debt extinguishment
 
26,300

 
22,893

 
22,911

 
20,960

 
19,090

Gains on sales of investment securities
 

 

 
2,524

 
370

 
241

Gain (loss) on equity securities
 
496

 
(583
)
 

 

 

Gain on early debt extinguishment
 

 

 

 

 
1,830

Merger related expenses
 
3,178

 
464

 

 
4,103

 
1,152

Long-term debt prepayment fee
 

 

 
2,828

 

 
2,407

Noninterest expenses
 
123,578

 
110,703

 
101,706

 
95,814

 
83,652

Income before income taxes
 
93,944

 
80,289

 
80,049

 
62,839

 
48,648

Income tax provision
 
23,272

 
16,888

 
27,469

 
21,321

 
16,167

Net income
 
$
70,672

 
$
63,401

 
$
52,580

 
$
41,518

 
$
32,481

Per-Share Data
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
Basic
 
50,477

 
47,578

 
47,438

 
42,912

 
37,844

Diluted
 
50,642

 
47,766

 
47,674

 
43,114

 
37,993

Earnings per share:
 
 
 
 
 
 
 
 
 
 
Basic
 
$
1.39

 
$
1.32

 
$
1.10

 
$
0.96

 
$
0.85

Diluted
 
$
1.38

 
$
1.32

 
$
1.09

 
$
0.95

 
$
0.85

Cash dividend per common share
 
$
0.49

 
$
0.45

 
$
0.40

 
$
0.37

 
$
0.33

Book value per common share
 
$
14.36

 
$
13.14

 
$
12.31

 
$
11.65

 
$
10.57

Tangible book value per common share (1)
 
$
11.18

 
$
10.22

 
$
9.38

 
$
8.70

 
$
7.62

Balance Sheet
 
 
 
 
 
 
 
 
 
 
Investment securities available for sale and other (4)
 
$
794,878

 
$
667,840

 
$
658,711

 
$
621,803

 
$
456,436

Investment securities held to maturity
 
123,975

 
153,646

 
139,685

 
147,614

 
116,740

Loans, net of deferred fees
 
5,137,823

 
4,456,733

 
4,152,720

 
3,870,598

 
2,965,200

Goodwill and other identifiable intangible assets
 
160,591

 
138,201

 
138,795

 
139,091

 
111,519

Total assets
 
6,711,236

 
5,806,093

 
5,405,639

 
5,093,131

 
3,869,550

Total deposits
 
5,293,779

 
4,620,670

 
4,368,748

 
4,092,835

 
2,995,572

Total core deposits (2)
 
4,422,975

 
3,863,632

 
3,631,320

 
3,547,927

 
2,652,251

Term borrowings
 
284,036

 
286,145

 
296,913

 
365,650

 
303,143

Total stockholders’ equity
 
725,263

 
623,739

 
583,122

 
550,044

 
400,516

Performance Ratios
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.12
%
 
1.15
%
 
1.00
%
 
0.90
%
 
0.89
%
Return on average tangible common equity (1)
 
13.16
%
 
13.78
%
 
12.24
%
 
12.19
%
 
11.58
%
Return on average equity
 
10.14
%
 
10.59
%
 
9.25
%
 
8.75
%
 
8.28
%
Efficiency ratio (1)(3)
 
54.83
%
 
56.09
%
 
53.40
%
 
56.74
%
 
60.94
%
Net interest margin (tax equivalent basis)
 
3.33
%
 
3.36
%
 
3.38
%
 
3.41
%
 
3.47
%
Loans to deposits
 
97.05
%
 
96.45
%
 
95.06
%
 
94.57
%
 
98.99
%
Capital Ratios
 
 
 
 
 
 
 
 
 
 
Common equity to asset ratio
 
10.81
%
 
10.74
%
 
10.79
%
 
10.80
%
 
10.35
%
Tangible common equity to tangible assets (1)
 
8.62
%
 
8.57
%
 
8.44
%
 
8.30
%
 
7.69
%
Tier 1 leverage ratio
 
9.41
%
 
9.39
%
 
9.12
%
 
9.07
%
 
8.70
%
Tier 1 risk-based capital ratio
 
11.02
%
 
11.27
%
 
10.87
%
 
10.85
%
 
10.53
%
Total risk-based capital ratio
 
13.40
%
 
13.71
%
 
13.40
%
 
13.48
%
 
11.61
%
CET1 ratio
 
10.46
%
 
10.62
%
 
10.18
%
 
10.11
%
 
9.54%


1.
A non-GAAP financial measure. See “Non-GAAP Financial Measures” for a reconciliation of such measures to data calculated in accordance with generally accepted accounting principles.
2.
Core deposits represent all deposits with the exception of time deposits.
3.
Ratio represents noninterest expense, excluding long-term debt prepayment fee, merger related expenses and core deposit amortization, as a percentage of total revenue (calculated on a tax equivalent basis), excluding gains (losses) on securities and gain on debt extinguishment. Total revenue represents net interest income (calculated on a tax equivalent basis) plus noninterest income.
4.
Includes investment in equity securities, Federal Home Loan Bank and other membership stock, at cost.

-24-

Table of Contents


ITEM 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This section presents a review of Lakeland Bancorp, Inc.’s consolidated results of operations and financial condition. You should read this section in conjunction with the selected consolidated financial data that is presented on the preceding page as well as the accompanying consolidated financial statements and notes to financial statements. As used in the following discussion, the term “Company” refers to Lakeland Bancorp, Inc. and “Lakeland” refers to the Company’s wholly owned banking subsidiary, Lakeland Bank.
Statements Regarding Forward-Looking Information
The information disclosed in this document includes various forward-looking statements that are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to credit quality (including delinquency trends and the allowance for loan losses), corporate objectives and other financial and business matters. The words “anticipates,” “projects,” “intends,” “estimates,” “expects,” “believes,” “plans,” “may,” “will,” “should,” “could,” and other similar expressions are intended to identify such forward-looking statements. The Company cautions that these forward-looking statements are necessarily speculative and speak only as of the date made, and are subject to numerous assumptions, risks and uncertainties, all of which may change over time. Actual results could differ materially from such forward-looking statements.
In addition to the risk factors disclosed in Item 1A in this Annual Report on Form 10-K, the following factors, among others, could cause the Company’s actual results to differ materially and adversely from such forward-looking statements: changes in the financial services industry and the U.S. and global capital markets; changes in economic conditions nationally, regionally and in the Company’s markets; the nature and timing of actions of the Federal Reserve Board and other regulators; the nature and timing of legislation affecting the financial services industry; government intervention in the U.S. financial system; changes in levels of market interest rates; pricing pressures on loan and deposit products; credit risks of Lakeland’s lending and leasing activities; successful implementation, deployment and upgrades of new and existing technology, systems, services and products; and customers’ acceptance of Lakeland’s products and services.
The above-listed risk factors are not necessarily exhaustive, particularly as to possible future events, and new risk factors may emerge from time to time. Certain events may occur that could cause the Company’s actual results to be materially different than those described in the Company’s periodic filings with the Securities and Exchange Commission. Any statements made by the Company that are not historical facts should be considered to be forward-looking statements. The Company is not obligated to update and does not undertake to update any of its forward-looking statements made herein.
Strategy
The Company, through its wholly owned subsidiary, Lakeland Bank, currently operates 52 banking offices located in Northern and Central New Jersey and Highland Mills, New York. Lakeland offers a broad range of lending, depository, and related financial services to individuals and small to medium sized businesses located in its market areas. Lakeland also offers a broad range of consumer banking services, including lending, depository, safe deposit services and wealth management services.
Lakeland’s growth has come from a combination of organic growth and acquisitions. In addition to organic growth, through December 31, 2019, the Company has acquired eight community banks with an aggregate asset total of approximately $2.28 billion at the date of the respective acquisitions, including the recent acquisition of Highlands Bancorp. On January 4, 2019, the Company completed its acquisition of Highlands Bancorp, Inc., with four branches and assets totaling approximately $496.5 million. All acquired banks have been merged into Lakeland and their holding companies, if applicable, have been merged into the Company. The Company’s strategy is to continue growing both organically and through acquisition should opportunities allow. The Company continues to evaluate opportunities to increase market share by expanding within existing and contiguous markets.
The Company’s strategic aim is to provide an adequate return to its shareholders by focusing on profitable growth through services that meet the needs of its customers in its market areas. This will be accomplished by continuing to offer commercial and consumer loan, deposit and other financial product services in a changing economic and technological environment. The Company recognizes that there are more service delivery channels than the traditional branch office and has offered internet banking, mobile banking and cash management services to meet the needs of its business and consumer customers. In 2019, the Company embarked on a digital strategy initiative, impacting all operational areas of Lakeland. Enhancing the Company's digital capabilities will allow Lakeland to expand its market presence as a community bank, as well as compete long-term in a fast-paced digital marketplace.
The Company’s results of operations are primarily dependent upon net interest income, the difference between interest earned on interest-earning assets and the interest paid on interest-bearing liabilities. For information on how interest rate change can influence the Company’s net interest income and how the Company manages its net interest income, see “Interest Rate Risk” in the discussion below.

-25-

Table of Contents


The Company generates noninterest income such as income from retail and business account fees, loan servicing fees, loan origination fees, appreciation in the cash surrender value of bank owned life insurance, income from securities sales, fees from wealth management services and investment product sales, income from the origination and sale of residential mortgages and SBA loans and other fees. The Company’s operating expenses consist primarily of compensation and benefits expense, occupancy and equipment expense, data processing expense, ATM and debit card expense, marketing and advertising expense and other general and administrative expenses. The Company’s results of operations are also affected by general economic conditions, changes in market interest rates, changes in asset quality, changes in asset values, actions of regulatory agencies and government policies.
The Company continues to control its expenses by continually reviewing its ongoing noninterest expense, including evaluating its salary expense, ongoing service contract expense, marketing expenses and other expenses. The Company also controls its expenses by leveraging its technology investments that maximize the efficient delivery of products and services to its customers, which allows it further to evaluate its infrastructure. Through this process, Lakeland has consolidated and closed branches in markets where it may have more branches than necessary, including three branches in each of 2018 and 2019 (including two of the four acquired Highlands branches), permitting it to expand and open two new branches in areas of opportunity. One branch was opened during 2017 located in Highland Mills, New York, to support the Hudson Valley Region and another during 2019 in Clifton, New Jersey, to support the Paterson and Passaic markets.
Critical Accounting Policies, Judgments and Estimates
The accounting and reporting policies of the Company and Lakeland conform with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and predominant practices within the banking industry. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. These estimates and assumptions also affect reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The allowance for loan loss is a significant estimate implicit in these financial statements and is described below. For additional accounting policies and detail, refer to Note 1 to the consolidated financial statements included in Item 8 of this report.
Allowance for loan losses. The allowance for loan losses is the estimated amount considered necessary to cover probable and reasonably estimable incurred losses inherent in the loan portfolio at the balance sheet date. In determining the allowance, we make significant estimates and judgments, and, therefore, have identified the allowance as a critical accounting policy. The allowance is established through a provision for loan losses charged against income. Loan principal considered to be uncollectible by management is charged against the allowance.
The allowance for loan losses has been determined in accordance with U.S. GAAP. We are responsible for the timely and periodic determination of the amount of the allowance required. We believe that our allowance is adequate to cover identifiable losses, as well as estimated losses inherent in our portfolio for which certain losses are probable but not specifically identifiable.
The determination of the adequacy of the allowance for loan losses and the periodic provisioning for estimated losses included in the consolidated financial statements is the responsibility of management and the Board of Directors. Management performs a formal quarterly evaluation of the allowance for loan losses. This quarterly process is performed by the credit administration department and approved by the Chief Credit Officer. All supporting documentation with regard to the evaluation process is maintained by the credit administration department. Each quarter, the evaluation along with the supporting documentation is reviewed by the finance department before approval by the Chief Credit Officer. The allowance evaluation is then presented to an Allowance for Loan Losses committee, which gives final approval to the allowance evaluation before being presented to the Board of Directors for their approval.
The methodology employed for assessing the adequacy of the allowance consists of the following criteria:
The establishment of specific reserve amounts for impaired loans, including purchase-credit impaired loans.
The establishment of reserves for pools of homogeneous loans not subject to specific review, including impaired loans under $500,000, equipment finance loans, 1 - 4 family residential mortgages, and consumer 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 modified as troubled debt restructurings. Loans are considered impaired when, based on current information and events, it is probable that Lakeland will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments.

-26-

Table of Contents


Impairment is measured based on the present value of expected cash flows discounted at the loan’s effective interest rate, or as a practical expedient, Lakeland may measure impairment based on a loan’s observable market price, or the fair value of the collateral, less estimated costs to sell, if the loan is collateral-dependent. Regardless of the measurement method, Lakeland measures impairment based on the fair value of the collateral when it is determined that foreclosure is probable. Most of Lakeland’s impaired loans are collateral-dependent. Shortfalls in collateral or cash flows are charged-off or specifically reserved for in the period the shortfall is identified. Charge-offs are recommended by the Chief Credit Officer and approved by the Company's Board of Directors.
Lakeland groups impaired commercial loans under $500,000 into homogeneous pools and collectively evaluates them. Interest received on impaired loans may be recorded as interest income. However, if management is not reasonably certain that an impaired loan will be repaid in full, or if a specific time frame to resolve full collection cannot yet be reasonably determined, all payments received are recorded as reductions of principal.
The establishment of reserve amounts for pools of homogeneous loans are based upon the determination of historical loss rates, which are adjusted to reflect current conditions through the use of qualitative factors. The qualitative factors considered by the Company include an evaluation of the results of the Company’s independent loan review function, the Company's reporting capabilities, the adequacy and expertise of Lakeland’s lending staff, underwriting policies, loss histories, trends in the portfolio, delinquency trends, economic and business conditions and capitalization rates. Since many of Lakeland’s loans depend on the sufficiency of collateral as a secondary source of repayment, any adverse trends in the real estate market could affect the underlying values available to protect Lakeland from losses.
Additionally, management determines the loss emergence periods for each loan segment, which are used to define loss migration periods and establish appropriate ranges for qualitative adjustments for each loan segment. The loss emergence period is the estimated time from the date of a loss event (such as a personal bankruptcy) to the actual recognition of the loss (typically via the first partial or full loan charge-off) and is determined based upon a study of our past loss experience by loan segment. All of the factors considered in the analysis of the adequacy of the allowance for loan losses may be subject to change. To the extent actual outcomes differ from management estimates, additional provisions for loan losses may be required that would adversely impact earnings in future periods.
Use of Non-GAAP Disclosures
Reported amounts are presented in accordance with U.S. GAAP. The Company’s management believes that the supplemental non-GAAP information, which consists of measurements and ratios based on tangible equity, tangible assets and the efficiency ratio, which excludes certain items considered to be non-recurring from earnings, is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors. These disclosures should not be viewed as a substitute for financial results determined in accordance with U.S. GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies.
Financial Overview
The year ended December 31, 2019 represented a year of continued growth for the Company. As discussed in this management’s discussion and analysis:
Net income was $70.7 million, or $1.38 per diluted share, for the year ended December 31, 2019 compared to net income of $63.4 million, or $1.32 per diluted share, for 2018.
Excluding merger-related expenses pertaining to the Company’s January 2019 acquisition of Highlands Bancorp, Inc. ("Highlands") of $2.4 million, tax-effected, net income for the year ended December 31, 2019 was $73.0 million, or $1.43 per diluted share.
In 2019, return on average assets was 1.12%, return on average common equity was 10.14% and return on average tangible common equity was 13.16%. Excluding merger related expenses these ratios in 2019 were 1.16%, 10.48%, and 13.60%, respectively. This compared to 2018 ratios of return on average assets of 1.15%, return on average common equity of 10.59% and return on average tangible common equity of 13.78%.
Total loans increased by $681.1 million, or 15%, from December 31, 2018 to December 31, 2019, including $425.0 million from Highlands.
Total deposits increased $673.1 million, or 15%, from December 31, 2018 to December 31, 2019, including $409.6 million from Highlands.
The Company’s net interest margin was 3.33% for 2019 compared to 3.36% for 2018.
On January 4, 2019, the Company completed its acquisition of Highlands. This acquisition added $496.5 million in total assets. For more information, please see Note 2 in Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.

-27-

Table of Contents


Net Income
Net income for 2019 was $70.7 million, or $1.38 per diluted share, compared to net income of $63.4 million, or $1.32 per diluted share, in 2018. The major contributing factor to the increase in net income was an increase in net interest income of $22.5 million from 2018 to 2019 due primarily to an increase in average interest-earning assets resulting from the Highlands merger and organic growth. An increase in yield on interest-earning assets also contributed to the increase in net interest income, partially offset by an increase in the cost of interest-bearing liabilities.
Net Interest Income
Net interest income is the difference between interest income on earning assets and the cost of funds supporting those assets. The Company’s net interest income is determined by: (i) the volume of interest-earning assets that it holds and the yields that it earns on those assets, and (ii) the volume of interest-bearing liabilities that it has assumed and the rates that it pays on those liabilities.
Net interest income on a tax equivalent basis for 2019 was $196.4 million, compared to $174.0 million in 2018, resulting primarily from growth in average earning assets of $713.5 million. The net interest margin decreased from 3.36% in 2018 to 3.33% in 2019 primarily as a result of a 34 basis point increase in the cost of interest-bearing liabilities. The increase in the cost of interest-bearing liabilities is primarily attributable to the rise in short-term market interest rates and increasing competition for deposits. The effect of the increase in the cost of funds on net interest income was partially mitigated by an increase in the yield on interest-earning assets of 24 basis points and an increase in interest income earned on free funds (interest-earning assets funded by noninterest-bearing liabilities) resulting from an increase in average noninterest-bearing deposits of $108.4 million. The components of net interest income is discussed in greater detail below.
Interest income and expense volume/rate analysis. The following table shows the impact that changes in average balances of the Company’s assets and liabilities and changes in average interest rates have had on the Company’s net interest income over the past three years. This information for 2019 and 2018 is presented on a tax equivalent basis assuming a 21% tax rate, while rates for 2017 is presented on a tax equivalent basis assuming a 35% tax rate. If a change in interest income or expense is attributable to a change in volume and a change in rate, the amount of the change is allocated proportionately.
 
 
2019 vs. 2018
 
2018 vs. 2017
 
 
Increase (Decrease)
Due to Change in:
 
Total
Change
 
Increase (Decrease)
Due to Change in:
 
Total
Change
(in thousands)
 
Volume
 
Rate
 
Volume
 
Rate
 
INTEREST INCOME
 
 
 
 
 
 
 
 
 
 
 
 
Loans
 
$
30,622

 
$
9,770

 
$
40,392

 
$
11,420

 
$
9,381

 
$
20,801

Taxable investment securities and other
 
1,488

 
1,524

 
3,012

 
655

 
1,068

 
1,723

Tax-exempt investment securities
 
(277
)
 
25

 
(252
)
 
(657
)
 
(249
)
 
(906
)
Federal funds sold
 
114

 
47

 
161

 
(85
)
 
764

 
679

Total interest income
 
31,947

 
11,366


43,313


11,333


10,964


22,297

INTEREST EXPENSE
 
 
 
 
 
 
 
 
 
 
 
 
Savings deposits
 
7

 
35

 
42

 
2

 
15

 
17

Interest-bearing transaction accounts
 
3,191

 
9,255

 
12,446

 
279

 
8,246

 
8,525

Time deposits
 
2,396

 
3,744

 
6,140

 
1,782

 
3,696

 
5,478

Borrowings
 
1,233

 
1,030

 
2,263

 
(377
)
 
953

 
576

Total interest expense
 
6,827


14,064


20,891


1,686


12,910


14,596

NET INTEREST INCOME
 
$
25,120


$
(2,698
)

$
22,422


$
9,647


$
(1,946
)

$
7,701


-28-

Table of Contents


The following table reflects the components of the Company’s net interest income, setting forth for the years presented, (1) average assets, liabilities and stockholders’ equity, (2) interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities, (3) average yields earned on interest-earning assets and average rates paid on interest-bearing liabilities, (4) the Company’s net interest spread (i.e., the average yield on interest-earning assets less the average cost of interest-bearing liabilities) and (5) the Company’s net interest margin. Rates for 2019 and 2018 are computed on a tax equivalent basis assuming a 21% tax rate, while rates for 2017 is computed on a tax equivalent basis assuming a 35% tax rate. 
 
 
2019
 
2018
 
2017
(dollars in thousands)
 
Average
Balance
 
Interest
Income/
Expense
 
Average
Rates
Earned/
Paid
 
Average
Balance
 
Interest
Income/
Expense
 
Average
Rates
Earned/
Paid
 
Average
Balance
 
Interest
Income/
Expense
 
Average
Rates
Earned/
Paid
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans (1)
 
$
4,938,298

 
$
233,535

 
4.73
%
 
$
4,283,401

 
$
193,143

 
4.51
%
 
$
4,024,257

 
$
172,342

 
4.28
%
Taxable investment securities and other
 
799,103

 
19,722

 
2.47
%
 
736,241

 
16,710

 
2.27
%
 
706,167

 
14,987

 
2.12
%
Tax-exempt securities
 
70,271

 
1,911

 
2.72
%
 
80,456

 
2,163

 
2.69
%
 
104,267

 
3,069

 
2.94
%
Federal funds sold (2)
 
87,997

 
1,720

 
1.95
%
 
82,096

 
1,559

 
1.90
%
 
92,295

 
880

 
0.95
%
Total interest-earning assets
 
5,895,669

 
256,888

 
4.36
%
 
5,182,194

 
213,575

 
4.12
%
 
4,926,986

 
191,278

 
3.88
%
Noninterest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses
 
(39,840
)
 
 
 
 
 
(36,804