Debt

12 Months Ended

Dec. 31, 2019

DEBT

Overnight and Short-Term Borrowings

At December 31, 2019, overnight and short-term borrowings from FHLB totaled $200.0 million, while at December 31, 2018 there were no overnight or short-term borrowings from FHLB.

In addition, Lakeland had overnight and short-term borrowings from correspondent banks totaling $85.0 million and $192.1 million at December 31, 2019 and 2018, respectively. At December 31, 2019, Lakeland had overnight and short-term federal funds lines available to borrow up to $230.0 million from correspondent banks. Lakeland may also borrow from the discount window of the Federal Reserve Bank of New York based on the market value of collateral pledged. Lakeland had no borrowings with the Federal Reserve Bank of New York as of December 31, 2019 or 2018.

Other short-term borrowings at December 31, 2019 and 2018 consisted of short-term securities sold under agreements to repurchase totaling $43.7 million and $41.8 million, respectively. Securities underlying the agreements were under Lakeland’s control. At December 31, 2019, the Company had $44.0 million in mortgage-backed securities pledged for its short-term securities sold under agreements to repurchase.

FHLB Advances

Advances from the Federal Home Loan Bank ("FHLB") totaled $165.8 million at December 31, 2019, with a weighted average interest rate of 2.24%, with fixed maturity dates. At December 31, 2018, advances from the FHLB totaled $181.1 million, with a weighted average interest rate of 2.10%, with fixed maturity dates. These advances were collateralized by first mortgage loans. The advances have prepayment penalties. In 2017, the Company repaid an aggregate of $34.0 million in advances from the FHLB and recorded $638,000 in long-term debt prepayment fees.

The schedule of maturities of advances is as follows:



(in thousands)
2020	$	55,881
2021	44,972
2022	40,526
2023	24,437
	$	165,816

Long-term Securities Sold Under Agreements to Repurchase

At both December 31, 2019 and 2018, Lakeland had no long-term securities sold under agreements to repurchase. In the second quarter of 2018, the Company repaid all of its $20.0 million in matured long-term securities sold under agreements to repurchase. In the first quarter of 2017, the Company repaid an aggregate of $20.0 million in long-term securities sold under agreements to repurchase and recorded $2.2 million in long-term debt prepayment fees.

Subordinated Debentures

On January 4, 2019, the Company acquired subordinated notes from Highlands. Highlands issued $5.0 million of fixed rate notes in May 2014. The notes bear interest at a rate of 8.00% per annum until maturity on May 16, 2024. In October 2015, Highlands issued $7.5 million of fixed rate notes bearing an interest rate of 6.94% until maturity on October 1, 2025.

On September 30, 2016, the Company completed an offering of $75.0 million of fixed to floating rate subordinated notes due September 30, 2026. The notes will bear interest at a rate of 5.125% per annum until September 30, 2021 and will then reset quarterly to the then current three-month LIBOR plus 397 basis points until maturity in September 30, 2026 or their earlier redemption. The debt is included in Tier 2 capital for the Company. Debt issuance costs totaled $1.5 million and are being amortized to maturity. Subordinated debt is presented net of issuance costs on the consolidated balance sheet.

In May 2007, the Company issued $20.6 million of junior subordinated debentures due August 31, 2037 to Lakeland Bancorp Capital Trust IV, a Delaware business trust. The distribution rate on these securities was 6.61% for 5 years and floats at LIBOR plus 152 basis points thereafter. The debentures are the sole asset of the Trust. The Trust issued 20,000 shares of trust preferred securities, $1,000 face value, for total proceeds of $20.0 million. The Company’s obligations under the debentures and related documents, taken together, constitute a full, irrevocable and unconditional guarantee on a subordinated basis by the Company of the Trust’s obligations under the preferred securities. The preferred securities are callable by the Company on or after August 1, 2012, or earlier if the deduction of related interest for federal income taxes is prohibited, treatment as Tier I capital is no longer permitted, or certain other contingencies arise. The preferred securities must be redeemed upon maturity of the debentures in 2037. On August 3, 2015, the Company acquired and extinguished $10.0 million of Lakeland Bancorp Capital Trust IV debentures and recorded a $1.8 million gain on the extinguishment of debt.

In June 2003, the Company issued $20.6 million of junior subordinated debentures due June 30, 2033 to Lakeland Bancorp Capital Trust II, a Delaware business trust. The distribution rate on these securities was 5.71% for 5 years and floats at LIBOR plus 310 basis points thereafter. The debentures are the sole asset of the Trust. The Trust issued 20,000 shares of trust preferred securities, $1,000 face value, for total proceeds of $20.0 million. The Company’s obligations under the debentures and related documents, taken together, constitute a full, irrevocable and unconditional guarantee on a subordinated basis by the Company of the Trust’s obligations under the preferred securities. The preferred securities are callable by the Company on or after June 30, 2008, or earlier if the deduction of related interest for federal income taxes is prohibited, treatment as Tier I capital is no longer permitted, or certain other contingencies arise. The preferred securities must be redeemed upon maturity of the debentures in 2033.

In June 2016, the Company entered into two cash flow swaps totaling $30.0 million in order to hedge the variable cash outflows associated with the junior subordinated debentures issued to Lakeland Capital Trust II and Lakeland Capital Trust IV. For more information please see Note 19 – Derivatives.