Loans

12 Months Ended

Dec. 31, 2023

The following table summarizes the composition of the Company’s loan portfolio.


(in thousands)	December 31, 2023		December 31, 2022
Non-owner occupied commercial	$	2,987,959	$	2,906,014
Owner occupied commercial	1,283,221		1,246,189
Multifamily	1,408,905		1,260,814
Non-owner occupied residential	213,986		218,026
Commercial, industrial and other	638,894		606,711
Construction	302,745		380,100
Equipment finance	179,171		151,574
Residential mortgage	985,768		765,552
Consumer	343,212		331,070
Total	$	8,343,861	$	7,866,050

Loans are recognized at amortized cost, which includes principal balance and net deferred loan fees and costs. The Company elected to exclude accrued interest receivable from amortized cost. Accrued interest receivable is reported separately in the Consolidated Balance Sheets and totaled $29.1 million at December 31, 2023 and $24.5 million at December 31, 2022. Loan origination fees and certain direct loan origination costs are deferred and the net fee or cost is recognized in interest income as an adjustment of yield. Net deferred loan fees are included in loans by respective segment and total $1.8 million and $2.1 million at December 31, 2023 and December 31, 2022, respectively.

Consumer loans included overdraft deposit balances of $619,000 and $1.3 million at December 31, 2023 and December 31, 2022, respectively. Loans pledged for potential borrowings at the FHLB totaled $4.58 billion and $2.89 billion at December 31, 2023 and December 31, 2022, respectively.

Credit Quality Indicators

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 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 the loan portfolios. The risk rating system assists senior management in evaluating the loan portfolio and analyzing trends. In assigning risk ratings, management considers, among other things, the borrower’s ability to service the debt based on relevant information such as current financial information, historical payment experience, credit documentation, public information and current economic conditions.

Management categorizes loans and commitments into the following risk ratings:

Pass: "Pass" assets are well protected by the current net worth and paying capacity of the obligor or guarantors, if any, or by the fair value of any underlying collateral.

Watch: "Watch" assets require more than the usual amount of monitoring due to declining earnings, strained cash flow, increasing leverage and/or weakening market. These borrowers generally have limited additional debt capacity and modest coverage and average or below average asset quality, margins and market share.

Special Mention: "Special mention" assets exhibit identifiable credit weakness, which if not checked or corrected could weaken the loan quality or inadequately protect the bank’s credit position at some future date.

Substandard: "Substandard" assets are inadequately protected by the current sound worth and paying capacity of the obligors or of the collateral pledged, if any. A substandard loan has a well-defined weakness or weaknesses that may jeopardize the liquidation of the debt.

Doubtful: "Doubtful" assets that exhibit all of the weaknesses inherent in substandard loans, but have the added characteristics that the weaknesses make collection or liquidation in full improbable on the basis of existing facts.

Loss: “Loss” is a rating for loans or portions of loans that are considered uncollectible and of such little value that their continuance as bankable loans is not warranted.

The following table presents the risk category of loans by class of loan and vintage as of December 31, 2023.


	Term Loans by Origination Year
(in thousands)	2023		2022		2021		2020		2019		Pre-2019		Revolving Loans		Revolving to Term		Total
Non-owner occupied commercial
Pass	$	315,447	$	611,051	$	371,828	$	489,642	$	266,172	$	793,791	$	16,498	$	—	$	2,864,429
Watch	2,512		3,237		—		7,328		—		49,126		—		—		62,203
Special mention	—		740		—		4,886		2,977		25,104		—		—		33,707
Substandard	—		—		—		—		—		27,325		295		—		27,620
Total	317,959		615,028		371,828		501,856		269,149		895,346		16,793		—		2,987,959
Owner occupied commercial
Pass	58,328		342,669		187,089		150,210		68,978		334,536		9,315		—		1,151,125
Watch	—		—		23,554		1,673		23,288		33,480		644		—		82,639
Special mention	—		556		3,512		1,403		1,646		5,262		—		960		13,339
Substandard	—		—		8,643		19,847		1,836		5,792		—		—		36,118
Total	58,328		343,225		222,798		173,133		95,748		379,070		9,959		960		1,283,221
Multifamily
Pass	143,030		300,128		263,154		250,089		63,413		328,095		5,496		—		1,353,405
Watch	—		1,383		8		29,538		3,783		6,509		—		—		41,221
Special mention	—		—		—		—		—		11,682		—		—		11,682
Substandard	—		—		1,095		—		—		1,502		—		—		2,597
Total	143,030		301,511		264,257		279,627		67,196		347,788		5,496		—		1,408,905




Non-owner occupied residential
Pass	14,720		36,596		27,974		19,708		23,560		75,250		6,261		—		204,069
Watch	—		2,117		—		—		—		3,499		75		—		5,691
Special mention	—		—		—		—		494		1,683		—		—		2,177
Substandard	—		—		—		—		531		1,518		—		—		2,049
Total	14,720		38,713		27,974		19,708		24,585		81,950		6,336		—		213,986





Commercial, industrial and other
Pass	19,628		38,783		41,152		20,639		24,297		43,755		415,925		557		604,736
Watch	4,137		1,558		878		49		272		1,129		16,771		1,875		26,669
Special mention	90		—		—		—		1		1,219		625		—		1,935
Substandard	—		375		820		29		126		325		3,879		—		5,554
Total	23,855		40,716		42,850		20,717		24,696		46,428		437,200		2,432		638,894
Current YTD period:
Gross charge-offs	—		—		13		—		—		14		—		—		27




Construction
Pass	46,970		145,072		60,681		2,688		4,912		3,999		8,079		3,039		275,440
Watch	2,337		1,101		10,512		—		—		—		657		—		14,607

Substandard	—		—		—		—		—		12,698		—		—		12,698
Total	49,307		146,173		71,193		2,688		4,912		16,697		8,736		3,039		302,745
Current YTD period:
Gross charge-offs	—		13		—		—		—		—		—		—		13


	Term Loans by Origination Year
(in thousands)	2023		2022		2021		2020		2019		Pre-2019		Revolving Loans		Revolving to Term		Total
Equipment finance
Pass	80,831		56,719		23,839		10,917		5,742		605		—		—		178,653


Substandard	76		219		126		32		65		—		—		—		518
Total	80,907		56,938		23,965		10,949		5,807		605		—		—		179,171
Current YTD period:
Gross charge-offs	29		44		194		—		31		9		—		—		307
Residential mortgage
Pass	270,695		312,166		157,716		100,900		33,022		108,868		—		—		983,367


Substandard	—		—		1,176		424		454		347		—		—		2,401
Total	270,695		312,166		158,892		101,324		33,476		109,215		—		—		985,768



Current YTD period:
Gross charge-offs	—		128		—		—		—		—		—		—		128
Consumer
Pass	25,790		40,640		27,989		7,117		3,445		18,865		218,035		99		341,980


Substandard	—		—		—		—		—		1,196		—		36		1,232
Total	25,790		40,640		27,989		7,117		3,445		20,061		218,035		135		343,212
Current YTD period:
Gross charge-offs	$	237	$	6	$	23	$	7	$	1	$	20	$	—	$	—	$	294
Total loans	$	984,591	$	1,895,110	$	1,211,746	$	1,117,119	$	529,014	$	1,897,160	$	702,555	$	6,566	$	8,343,861
Current YTD period:
Gross charge-offs	266		191		230		7		32		43		—		—		769

The following table presents the risk category of loans by class of loan and vintage as of December 31, 2022.


	Term Loans by Origination Year
(in thousands)	2022		2021		2020		2019		2018		Pre-2018		Revolving Loans		Revolving to Term		Total
Non-owner occupied commercial
Pass	$	673,235	$	391,748	$	495,618	$	271,109	$	183,971	$	703,852	$	19,317	2,502		$	2,741,352
Watch	1,272		—		21,720		26,906		12,099		48,314		—		—		110,311
Special mention	—		—		494		830		15,586		16,304		—		—		33,214
Substandard	—		—		—		—		133		21,004		—		—		21,137
Total	674,507		391,748		517,832		298,845		211,789		789,474		19,317		2,502		2,906,014
Owner occupied commercial
Pass	267,754		198,131		191,603		85,343		61,581		317,434		13,328		—		1,135,174
Watch	—		—		2,888		3,520		4,728		28,659		75		—		39,870
Special mention	585		17,778		5,749		1,862		3,701		20,292		—		—		49,967
Substandard	—		97		8,876		1,899		475		9,831		—		—		21,178
Total	268,339		216,006		209,116		92,624		70,485		376,216		13,403		—		1,246,189
Multifamily
Pass	312,910		221,306		265,187		67,072		95,432		249,021		5,288		—		1,216,216
Watch	—		5,817		11,692		—		—		2,504		—		—		20,013
Special mention	500		—		2,421		—		—		11,274		—		—		14,195
Substandard	—		—		—		3,864		—		6,526		—		—		10,390
Total	313,410		227,123		279,300		70,936		95,432		269,325		5,288		—		1,260,814






Non-owner occupied residential
Pass	37,445		29,365		22,133		24,205		18,489		67,114		7,513		21		206,285
Watch	—		—		—		2,068		—		5,244		75		—		7,387
Special mention	—		—		—		507		822		1,017		—		—		2,346
Substandard	—		—		—		—		—		2,008		—		—		2,008
Total	37,445		29,365		22,133		26,780		19,311		75,383		7,588		21		218,026








Commercial, industrial and other
Pass	48,719		51,894		27,644		57,124		13,936		39,892		339,040		245		578,494
Watch	251		704		237		211		—		1,424		10,001		—		12,828
Special mention	375		258		—		179		36		378		4,878		—		6,104
Substandard	776		242		—		450		4,722		183		2,912		—		9,285
Total	50,121		53,098		27,881		57,964		18,694		41,877		356,831		245		606,711






Construction
Pass	79,420		172,849		35,295		31,447		7,245		4,005		19,294		—		349,555
Watch	1,159		5,480		10,299		—		—		—		171		—		17,109

Substandard	—		95		—		—		—		13,341		—		—		13,436
Total	80,579		178,424		45,594		31,447		7,245		17,346		19,465		—		380,100






Equipment finance
Pass	74,840		36,087		20,382		15,738		3,862		546		—		—		151,455


Substandard	—		—		—		97		22		—		—		—		119
Total	74,840		36,087		20,382		15,835		3,884		546		—		—		151,574
Residential mortgage
Pass	323,636		167,791		110,199		35,180		20,218		106,391		—		—		763,415


Substandard	—		—		—		490		341		1,306		—		—		2,137
Total	323,636		167,791		110,199		35,670		20,559		107,697		—		—		765,552
Consumer
Pass	47,282		31,368		8,658		4,143		3,093		21,482		213,857		—		329,883


Substandard	33		—		—		—		23		853		278		—		1,187
Total	47,315		31,368		8,658		4,143		3,116		22,335		214,135		—		331,070
Total loans	$	1,870,192	$	1,331,010	$	1,241,095	$	634,244	$	450,515	$	1,700,199	$	636,027	$	2,768	$	7,866,050

Past Due and Non-accrual Loans

Loans are considered past due if required principal and interest payments have not been received as of the date such payments were contractually due. A loan is generally considered non-performing when it is placed on non-accrual status. A loan is generally placed on non-accrual status when it becomes 90 days past due if such loan has been identified as presenting uncertainty with respect to the collectability of interest and principal. A loan past due 90 days or more may remain on accruing status if such loan is both well secured and in the process of collection.

The following tables present the payment status of the recorded investment in past due loans as of the periods noted, by class of loans.


December 31, 2023			Past Due
(in thousands)	Current		30 - 59 Days		60 - 89 Days		Greater than 89 days		Total		Total Loans
Non-owner occupied commercial	$	2,987,738	$	—	$	—	$	221	$	221	$	2,987,959
Owner occupied commercial	1,276,251		405		—		6,565		6,970		1,283,221
Multifamily	1,407,309		1,503		93		—		1,596		1,408,905
Non-owner occupied residential	213,324		662		—		—		662		213,986
Commercial, industrial and other	638,493		—		—		401		401		638,894
Construction	290,047		—		12,698		—		12,698		302,745
Equipment finance	177,657		249		928		337		1,514		179,171
Residential mortgage	975,408		7,469		1,660		1,231		10,360		985,768
Consumer	341,827		662		231		492		1,385		343,212
Total	$	8,308,054	$	10,950	$	15,610	$	9,247	$	35,807	$	8,343,861


December 31, 2022			Past Due
(in thousands)	Current		30-59 Days		60-89 Days		Greater than 89 days		Total		Total Loans
Non-owner occupied commercial	$	2,905,049	$	346	$	—	$	619	$	965	$	2,906,014
Owner occupied commercial	1,235,134		2,854		477		7,724		11,055		1,246,189
Multifamily	1,260,135		—		679		—		679		1,260,814
Non-owner occupied residential	217,407		178		—		441		619		218,026
Commercial, industrial and other	603,731		55		3		2,922		2,980		606,711
Construction	379,120		—		—		980		980		380,100
Equipment finance	150,842		494		238		—		732		151,574
Residential mortgage	760,638		3,031		271		1,612		4,914		765,552
Consumer	330,119		841		62		48		951		331,070
Total	$	7,842,175	$	7,799	$	1,730	$	14,346	$	23,875	$	7,866,050

The following tables present information on non-accrual loans at December 31, 2023 and December 31, 2022.


December 31, 2023
(in thousands)	Non-accrual		Interest Income Recognized on Non-accrual Loans		Amortized Cost Basis of Loans >= 90 days Past due but still accruing		Amortized Cost Basis of Non-accrual Loans without Related Allowance
Non-owner occupied commercial	$	769	$	—	$	—	$	—
Owner occupied commercial	6,849		—		—		6,630
Multifamily	1,096		—		—		1,095
Non-owner occupied residential	—		—		—		—
Commercial, industrial and other	401		—		—		—
Construction	12,698		—		—		12,698
Equipment finance	518		—		—		—
Residential mortgage	2,400		—		—		—
Consumer	1,232		—		—		—
Total	$	25,963	$	—	$	—	$	20,423


December 31, 2022
(in thousands)	Non-accrual		Interest Income Recognized on Non-accrual Loans		Amortized Cost Basis of Loans >= 90 days Past due but still accruing		Amortized Cost Basis of Non-accrual Loans without Related Allowance
Non-owner occupied commercial	$	618	$	—	$	—	$	—
Owner occupied commercial	9,439		—		—		8,859

Non-owner occupied residential	441		—		—		440
Commercial, industrial and other	2,978		—		—		—
Construction	980		—		—		980
Equipment finance	114		—		—		—
Residential mortgage	2,011		—		—		—
Consumer	781		—		—		79
Total	$	17,362	$	—	$	—	$	10,358

At December 31, 2023 and December 31, 2022, there were no loans that were past due more than 89 days and still accruing. At December 31, 2023 and 2022, the Company had $621,000 and $898,000, respectively, in residential mortgages and consumer home equity loans included in total non-accrual loans that were in the process of foreclosure.

Purchased Credit Deteriorated Loans

The following summarized the PCD loans acquired in the 1st Constitution acquisition as of the closing date, January 6, 2022.


(in thousands)
Gross amortized cost basis	$	140,300
Interest component of expected cash flows (accretable difference)	(3,792)
Allowance for credit losses on PCD loans	(12,077)
Net PCD loans	$	124,431

At December 31, 2023, net PCD loans acquired from 1st Constitution totaled $69.5 million.

Troubled Debt Restructurings and Modifications of Loans to Debtors Experiencing Financial Difficulty

The Company adopted ASU 2022-02, "Troubled Debt Restructurings and Vintage Disclosures" ("ASU 2022-02") as of January 1, 2023. Among other things, ASU 2022-02 eliminates the recognition and measurement guidance of troubled debt restructured loans ("TDRs") so that creditors will apply the same guidance to all modifications when determining whether a modification results in a new receivable or continuation of an existing receivable. ASU 2022-02 requires vintage disclosures of gross charge-offs as shown in the vintage disclosure above. It also replaces the historical disclosure of TDRs with the new disclosure of modifications of receivables to debtors experiencing financial difficulty.

Prior to the adoption of ASU 2022-02, loans were classified as TDRs in cases where borrowers experienced financial difficulties and Lakeland made certain concessionary modifications to contractual terms. Restructured loans typically involved 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.

During the Year Ended December 31, 2023, there were no loan modifications that met the definition of a modification to a debtor experiencing financial difficulty. At December 31, 2022, TDRs totaled $2.6 million, all of which were accruing TDRs. There were no loans that were restructured during the year ended December 31, 2022, that met the definition of a TDR. There were no restructured loans that subsequently defaulted during the years ended December 31, 2023 and 2022, respectively.

Related Party Loans

Lakeland has entered into lending transactions in the ordinary course of business with directors, executive officers, principal stockholders and affiliates of such persons on similar terms, including interest rates and collateral, as those prevailing for comparable transactions with other borrowers not related to Lakeland. At December 31, 2023 and 2022, loans to these related parties amounted to $69.1 million and $67.5 million, respectively. There were new loans of $10.1 million to related parties and repayments of $8.6 million from related parties in 2023.

Mortgages Held for Sale

Residential mortgages originated by the bank and held for sale in the secondary market are carried at the lower of cost or fair market value. Fair value is generally determined by the value of purchase commitments on individual loans. Losses are recorded as a valuation allowance and charged to earnings. As of December 31, 2023, Lakeland had $664,000 in mortgages held for sale compared to $536,000 as of December 31, 2022.

Equipment Finance Receivables

Future minimum payments of equipment finance receivables at December 31, 2023 are expected as follows:


(in thousands)
2024	$	56,874
2025	48,231
2026	37,546
2027	24,975
2028	9,754
Thereafter	1,791
	$	179,171

Other Real Estate and Other Repossessed Assets

At December 31, 2023 and December 31, 2022, Lakeland had no other real estate owned and held no other repossessed assets. For the years ended December 31, 2023, December 31, 2022, and December 31, 2021, Lakeland had no writedowns of other real estate owned.