

(in thousands)	March 31, 2020			December 31, 2019
Commercial, secured by real estate	$	3,740,319		$	3,589,593
Commercial, industrial and other	467,346			431,934
Equipment finance	116,421			111,076
Real estate - residential mortgage	334,114			335,191
Real estate - construction	333,592			335,169
Home equity and consumer	340,071			337,977
Total loans	5,331,863			5,140,940
Less: deferred fees	(3,240		)	(3,117		)
Loans, net of deferred fees	$	5,328,623		$	5,137,823

At March 31, 2020 and December 31, 2019, home equity and consumer loans included overdraft deposit balances of $281,000 and $789,000, respectively. At March 31, 2020 and December 31, 2019, the Company had $1.5 billion and $1.3 billion, respectively, in loans pledged for actual and potential borrowings at the Federal Home Loan Bank of New York (“FHLB”).



(in thousands)	March 31, 2020		December 31, 2019
Commercial, secured by real estate	$	23,851	$	12,314
Commercial, industrial and other	1,909		1,539
Equipment finance	199		284
Real estate - residential mortgage	2,837		3,428
Real estate - construction	919		967
Home equity and consumer	2,689		2,606
Total non-accrual loans	$	32,404	$	21,138
Other real estate and other repossessed assets	393		563
TOTAL NON-PERFORMING ASSETS	$	32,797	$	21,701
Troubled debt restructurings, still accruing	$	4,719	$	5,650

Non-accrual loans included $2.2 million and $1.6 million of troubled debt restructurings at March 31, 2020 and December 31, 2019, respectively. At March 31, 2020 and December 31, 2019, the Company had $1.5 million and $2.0 million, respectively, in residential mortgages and consumer home equity loans that were in the process of foreclosure which are included in non-accrual loans in the above table.



(in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due		Current		Total Loans		Recorded Investment Greater than 89 Days and Still Accruing
March 31, 2020
Commercial, secured by real estate	$	12,162	$	8,032	$	13,190	$	33,384	$	3,701,509	$	3,734,893	$	—
Commercial, industrial and other	2,101		1,010		1,057		4,168		462,284		466,452		—
Equipment finance	264		30		200		494		115,927		116,421		—
Real estate - residential mortgage	1,988		125		1,630		3,743		329,970		333,713		—
Real estate - construction	—		—		225		225		332,570		332,795		—
Home equity and consumer	1,645		299		1,243		3,187		336,368		339,555		99
	$	18,160	$	9,496	$	17,545	$	45,201	$	5,278,628	$	5,323,829	$	99
December 31, 2019
Commercial, secured by real estate	$	3,578	$	1,200	$	9,702	$	14,480	$	3,569,008	$	3,583,488	$	—
Commercial, industrial and other	353		71		1,064		1,488		429,502		430,990		—
Equipment finance	166		80		284		530		110,546		111,076		—
Real estate - residential mortgage	1,138		251		2,075		3,464		331,337		334,801		—
Real estate - construction	—		—		967		967		333,418		334,385		—
Home equity and consumer	1,573		287		1,533		3,393		334,059		337,452		—
	$	6,808	$	1,889	$	15,625	$	24,322	$	5,107,870	$	5,132,192	$	—

The Company defines impaired loans as all non-accrual loans with recorded investments of $500,000 or greater. Impaired loans also include all loans that have been modified in troubled debt restructurings, but excludes PCI loans. Impaired loans as of March 31, 2020 and December 31, 2019 are as follows:



(in thousands)	Recorded Investment in Impaired Loans		Contractual Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized
March 31, 2020
Loans without specific allowance:
Commercial, secured by real estate	$	23,705	$	23,965	$	—	$	13,594	$	30
Commercial, industrial and other	1,330		1,333		—		1,347		4
Equipment finance	—		—		—		—		—
Real estate - residential mortgage	1,525		1,651		—		1,581		—
Real estate - construction	694		694		—		702		10
Home equity and consumer	—		—		—		—		—
Loans with specific allowance:
Commercial, secured by real estate	3,263		3,505		202		3,406		38
Commercial, industrial and other	106		105		5		105		2
Equipment finance	19		19		8		21		—
Real estate - residential mortgage	654		835		2		659		5
Real estate - construction	—		—		—		—		—
Home equity and consumer	638		739		5		640		8
Total:
Commercial, secured by real estate	$	26,968	$	27,470	$	202	$	17,000	$	68
Commercial, industrial and other	1,436		1,438		5		1,452		6
Equipment finance	19		19		8		21		—
Real estate - residential mortgage	2,179		2,486		2		2,240		5
Real estate - construction	694		694		—		702		10
Home equity and consumer	638		739		5		640		8
	$	31,934	$	32,846	$	222	$	22,055	$	97



(in thousands)	Recorded Investment in Impaired Loans		Contractual Unpaid Principal Balance		Specific Allowance		Average Investment in Impaired Loans		Interest Income Recognized
December 31, 2019
Loans without specific allowance:
Commercial, secured by real estate	$	12,478	$	12,630	$	—	$	10,386	$	164
Commercial, industrial and other	1,391		1,381		—		1,334		16
Equipment finance	—		—		—		—		—
Real estate - residential mortgage	803		815		—		233		—
Real estate - construction	1,663		1,661		—		82		2
Home equity and consumer	—		—		—		—		—
Loans with specific allowance:
Commercial, secured by real estate	3,470		3,706		228		4,554		190
Commercial, industrial and other	113		113		5		113		6
Equipment finance	23		23		10		21		—
Real estate - residential mortgage	1,512		1,682		104		926		19
Real estate - construction	—		—		—		—		—
Home equity and consumer	671		765		5		693		29
Total:
Commercial, secured by real estate	$	15,948	$	16,336	$	228	$	14,940	$	354
Commercial, industrial and other	1,504		1,494		5		1,447		22
Equipment finance	23		23		10		21		—
Real estate - residential mortgage	2,315		2,497		104		1,159		19
Real estate - construction	1,663		1,661		—		82		2
Home equity and consumer	671		765		5		693		29
	$	22,124	$	22,776	$	352	$	18,342	$	426

Interest income recognized on impaired loans was $97,000 and $144,000 for the three months ended March 31, 2020 and 2019, respectively. Interest that would have been accrued on impaired loans during the first three months of 2020 and 2019 had the loans been performing under original terms would have been $297,000 and $268,000, respectively.

The class of loans is determined by internal risk rating. Management closely and continually monitors the quality of its loans and assesses the quantitative and qualitative risks arising from the credit quality of its loans. Lakeland assigns a credit risk rating to all commercial loans and loan commitments. The credit risk rating system has been developed by management to provide a methodology to be used by loan officers, department heads and senior management in identifying various levels of credit risk that exist within Lakeland’s commercial loan portfolios. The risk rating system assists senior management in evaluating Lakeland’s commercial loan portfolio, analyzing trends, and determining the proper level of required reserves to be recommended to the Board. In assigning risk ratings, management considers, among other things, a borrower’s debt service coverage, earnings strength, loan to value ratios, guarantor support, industry conditions and economic conditions. Management categorizes commercial loans and commitments into a one (1) to nine (9) numerical structure with rating 1 being the strongest rating and rating 9 being the weakest. Ratings 1 through 5W are considered ‘Pass’ ratings.



March 31, 2020	Commercial, Secured by Real Estate		Commercial, Industrial and Other		Real Estate - Construction		Total Commercial Loans
RISK RATING
1	$	—	$	554	$	—	$	554
2	—		18,099		—		18,099
3	73,368		35,528		—		108,896
4	986,743		117,485		17,899		1,122,127
5	2,329,762		203,708		301,455		2,834,925
5W - Watch	227,836		68,160		1,050		297,046
6 - Other assets especially mentioned	59,250		9,338		11,472		80,060
7 - Substandard	63,360		14,474		1,716		79,550
8 - Doubtful	—		—		—		—
9 - Loss	—		—		—		—
Total	$	3,740,319	$	467,346	$	333,592	$	4,541,257



December 31, 2019	Commercial, Secured by Real Estate		Commercial, Industrial and Other		Real Estate - Construction		Total Commercial Loans
RISK RATING
1	$	—	$	898	$	—	$	898
2	—		17,988		—		17,988
3	74,072		39,112		—		113,184
4	965,825		107,376		17,941		1,091,142
5	2,332,863		215,975		307,824		2,856,662
5W - Watch	100,347		30,192		6,959		137,498
6 - Other assets especially mentioned	55,438		11,328		—		66,766
7 - Substandard	61,048		9,065		2,445		72,558
8 - Doubtful	—		—		—		—
9 - Loss	—		—		—		—
Total	$	3,589,593	$	431,934	$	335,169	$	4,356,696

The Coronavirus Aid, Relief and Economic Security ("CARES") Act, a stimulus package signed into law on March 27, 2020 to address economic disruption caused by the COVID-19 pandemic, provides financial institutions with the option to defer adoption of the Financial Accounting Standards Board's Accounting Standard Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326) until the earlier of the end of the pandemic or December 31, 2020. The Company has elected to defer adoption of ASU 2016-13 and its Current Expected Credit Loss methodology ("CECL").



(in thousands)	Commercial, Secured by Real Estate			Commercial, Industrial and Other		Equipment Finance			Real Estate- Residential Mortgage			Real Estate- Construction		Home Equity and Consumer			Total
Three Months Ended March 31, 2020
Beginning Balance	$	28,950		$	3,289	$	957		$	1,725		$	2,672	$	2,410		$	40,003
Charge-offs	(169		)	—		(84		)	(116		)	—		(114		)	(483		)
Recoveries	26			30		14			20			32		19			141
Provision	5,986			2,170		370			(29		)	640		86			9,223
Ending Balance	$	34,793		$	5,489	$	1,257		$	1,600		$	3,344	$	2,401		$	48,884



(in thousands)	Commercial, Secured by Real Estate			Commercial, Industrial and Other			Equipment Finance			Real Estate- Residential Mortgage			Real Estate- Construction			Home Equity and Consumer			Total
Three Months Ended March 31, 2019
Beginning Balance	$	27,881		$	1,742		$	987		$	1,566		$	3,015		$	2,497		$	37,688
Charge-offs	(187		)	(147		)	(87		)	(50		)	—			(45		)	(516		)
Recoveries	115			97			2			9			5			71			299
Provision	(294		)	900			45			39			(133		)	(49		)	508
Ending Balance	$	27,515		$	2,592		$	947		$	1,564		$	2,887		$	2,474		$	37,979



(in thousands)	Commercial, Secured by Real Estate		Commercial, Industrial and Other		Equipment Finance		Real Estate- Residential Mortgage		Real Estate- Construction		Home Equity and Consumer		Total
March 31, 2020
Ending Balance: Individually evaluated for impairment	$	26,968	$	1,436	$	19	$	2,179	$	694	$	638	$	31,934
Ending Balance: Collectively evaluated for impairment	3,707,925		465,016		116,402		331,534		332,101		338,917		5,291,895
Ending Balance: Loans acquired with deteriorated credit quality	5,426		894		—		401		797		516		8,034
Ending Balance (1)	$	3,740,319	$	467,346	$	116,421	$	334,114	$	333,592	$	340,071	$	5,331,863



(in thousands)	Commercial, Secured by Real Estate		Commercial, Industrial and Other		Equipment Finance		Real Estate- Residential Mortgage		Real Estate- Construction		Home Equity and Consumer		Total
December 31, 2019
Ending Balance: Individually evaluated for impairment	$	15,948	$	1,504	$	23	$	2,315	$	1,663	$	671	$	22,124
Ending Balance: Collectively evaluated for impairment	3,567,540		429,486		111,053		332,486		332,722		336,781		5,110,068
Ending balance: Loans acquired with deteriorated credit quality	6,105		944		—		390		784		525		8,748
Ending Balance (1)	$	3,589,593	$	431,934	$	111,076	$	335,191	$	335,169	$	337,977	$	5,140,940



(in thousands)	Commercial, Secured by Real Estate		Commercial, Industrial and Other		Equipment Finance		Real Estate- Residential Mortgage		Real Estate- Construction		Home Equity and Consumer		Total
March 31, 2020
Ending Balance: Individually evaluated for impairment	$	202	$	5	$	8	$	2	$	—	$	5	$	222
Ending Balance: Collectively evaluated for impairment	34,591		5,484		1,249		1,598		3,344		2,396		48,662
Ending Balance	$	34,793	$	5,489	$	1,257	$	1,600	$	3,344	$	2,401	$	48,884



(in thousands)	Commercial, Secured by Real Estate		Commercial, Industrial and Other		Equipment Finance		Real Estate- Residential Mortgage		Real Estate- Construction		Home Equity and Consumer		Total
December 31, 2019
Ending Balance: Individually evaluated for impairment	$	228	$	5	$	10	$	104	$	—	$	5	$	352
Ending Balance: Collectively evaluated for impairment	28,722		3,284		947		1,621		2,672		2,405		39,651
Ending Balance	$	28,950	$	3,289	$	957	$	1,725	$	2,672	$	2,410	$	40,003

Lakeland also maintains a reserve for unfunded lending commitments which is included in other liabilities. This reserve was $2.0 million and $1.8 million as of March 31, 2020 and December 31, 2019, respectively. The Company analyzes the adequacy of the reserve for unfunded lending commitments quarterly.

Loans are classified as troubled debt restructured loans ("TDR") in cases where borrowers experience financial difficulties and Lakeland makes certain concessionary modifications to contractual terms. Restructured loans typically involve a modification of terms such as a reduction of the stated interest rate, a moratorium of principal payments and/or an extension of the maturity date at a stated interest rate lower than the current market rate of a new loan with similar risk. The Company considers the potential losses on these loans as well as the remainder of its impaired loans while considering the adequacy of the allowance for loan losses.

Section 4013 of the CARES Act, as interpreted by the "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers Affected by the Coronavirus (Revised)" (“Revised Statement”), dated April 17, 2020, includes criteria that enable financial institutions to exclude from TDR status loans that are modified in connection with COVID-19. Under these provisions, TDR status is not required for the term of a loan modification if (i) the loan modification is made in connection with COVID-19, (ii) the loan was not past due more than 30 days as of December 31, 2019 and (iii) the loan modification is entered into during the period between March 1, 2020, and the earlier of (a) 60 days after COVID-19 is no longer characterized as a National Emergency or (b) December 31, 2020. Furthermore, pursuant to the Revised Statement, for loan modifications that do not meet these criteria but are made in connection with COVID-19, such loans may be presumed not to be TDR if they are modified at a time when the borrower is current and the modifications are short-term (e.g., six months). If the criteria are not met under either Section 4013 or the Revised Statement, banks are required to follow their existing accounting policies to determine whether COVID-related modifications should be accounted for as a TDR. The Company has elected to suspend the classification of loan modifications as TDR if they qualify under Section 4013 or the Revised Statement.

The following table summarizes as of March 31, 2020 and 2019, loans that were restructured within the previous twelve months that have subsequently defaulted:



	March 31, 2020			March 31, 2019
(dollars in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment

Home equity and consumer	2	$	83	—	$	—
	2	$	83	—	$	—

At March 31, 2020 and December 31, 2019, the Company had other real estate owned of $393,000 and $563,000, respectively, consisting of residential property acquired as a result of foreclosure proceedings. There were no balances of other repossessed assets at both March 31, 2020 and December 31, 2019.