Loans

3 Months Ended

Mar. 31, 2024

The following sets forth the composition of the Company’s loan portfolio:


(in thousands)	March 31, 2024		December 31, 2023
Non-owner occupied commercial	$	2,973,652	$	2,987,959
Owner occupied commercial	1,264,061		1,283,221
Multifamily	1,405,399		1,408,905
Non-owner occupied residential	202,014		213,986
Commercial, industrial and other	642,151		638,894
Construction	317,253		302,745
Equipment finance	178,157		179,171
Residential mortgage	997,569		985,768
Home equity and consumer	340,168		343,212
Total	$	8,320,424	$	8,343,861

Loans are recorded 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 $29.5 million at March 31, 2024 and $29.1 million at December 31, 2023. 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 totaled $2.5 million at March 31, 2024 and $1.8 million at December 31, 2023.

Consumer loans included overdraft deposit balances of $459,000 and $619,000, at March 31, 2024 and December 31, 2023, respectively. At March 31, 2024 and December 31, 2023, the Company had $4.64 billion and $4.58 billion of loans pledged for potential borrowings at the Federal Home Loan Bank of New York ("FHLB"), 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 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 March 31, 2024.


	Term Loans by Origination Year
(in thousands)	2024		2023		2022		2021		2020		Pre-2020		Revolving Loans		Revolving to Term	Total
Non-owner occupied commercial
Pass	$	21,283	$	314,967	$	621,297	$	366,130	$	484,530	$	1,019,546	$	18,135	303	$	2,846,191
Watch	—		—		3,946		—		12,129		50,573		—		—	66,648
Special mention	—		3,494		—		—		—		27,084		—		—	30,578
Substandard	—		—		—		—		—		29,914		321		—	30,235
Total	21,283		318,461		625,243		366,130		496,659		1,127,117		18,456		303	2,973,652
Owner occupied commercial
Pass	15,707		58,590		335,849		162,969		148,880		391,368		8,535		—	1,121,898
Watch	—		—		—		3,769		3,052		52,826		41		—	59,688
Special mention	—		—		548		2,507		—		6,605		300		—	9,960
Substandard	—		—		960		43,341		19,854		8,360		—		—	72,515
Total	15,707		58,590		337,357		212,586		171,786		459,159		8,876		—	1,264,061
Multifamily
Pass	18,453		142,805		297,810		259,825		243,041		392,509		3,936		—	1,358,379
Watch	—		—		6,263		2,477		14,288		10,255		—		—	33,283
Special mention	—		—		—		—		555		11,611		—		—	12,166
Substandard	—		—		—		1,073		—		498		—		—	1,571
Total	18,453		142,805		304,073		263,375		257,884		414,873		3,936		—	1,405,399
Non-owner occupied residential
Pass	3,810		12,717		35,957		27,107		19,217		90,081		5,552		23	194,464
Watch	—		—		—		—		—		2,443		75		—	2,518
Special mention	—		—		2,102		—		—		1,161		—		—	3,263
Substandard	—		—		—		—		—		1,769		—		—	1,769
Total	3,810		12,717		38,059		27,107		19,217		95,454		5,627		23	202,014



Commercial, industrial and other
Pass	4,913		20,668		37,220		33,002		14,374		66,749		422,265		386	599,577
Watch	279		2,848		179		6,695		1,275		1,094		22,581		—	34,951
Special mention	—		404		1,657		722		38		246		3,527		—	6,594
Substandard	—		—		—		542		23		349		115		—	1,029
Total	5,192		23,920		39,056		40,961		15,710		68,438		448,488		386	642,151







Construction
Pass	7,704		57,258		159,684		62,976		2,706		8,809		2,817		—	301,954
Watch	—		2,499		1,104		—		—		—		—		—	3,603
Special mention	—		—		—		11,696		—		—		—		—	11,696
Substandard	—		—		—		—		—		—		—		—	—
Total	7,704		59,757		160,788		74,672		2,706		8,809		2,817		—	317,253
Current YTD period:
Gross charge-offs	—		—		—		—		—		564		—		—	564
Equipment finance
Pass	14,817		76,086		52,159		20,549		8,955		4,123		—		—	176,689


Substandard	—		70		877		380		50		91		—		—	1,468
Total	14,817		76,156		53,036		20,929		9,005		4,214		—		—	178,157


	Term Loans by Origination Year
(in thousands)	2024		2023		2022		2021		2020		Pre-2020		Revolving Loans		Revolving to Term		Total




Residential mortgage
Pass	25,164		268,808		310,079		155,979		98,625		136,182		—		—		994,837


Substandard	—		—		—		1,163		417		1,152		—		—		2,732
Total	25,164		268,808		310,079		157,142		99,042		137,334		—		—		997,569




Consumer
Pass	3,548		24,618		39,872		27,283		6,832		20,921		215,543		346		338,963


Substandard	—		—		—		9		—		1,157		39		—		1,205
Total	3,548		24,618		39,872		27,292		6,832		22,078		215,582		346		340,168
Current YTD period:
Gross charge-offs	21		21		—		—		—		11		—		—		53

Total loans	$	115,678	$	985,832	$	1,907,563	$	1,190,194	$	1,078,841	$	2,337,476	$	703,782	$	1,058	$	8,320,424
Current YTD period:
Gross charge-offs	$	21	$	21	$	—	$	—	$	—	$	575	$	—	$	—	$	617

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
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


	Term Loans by Origination Year
(in thousands)	2023		2022		2021		2020		2019		Pre-2019		Revolving Loans		Revolving to Term		Total
Residential mortgage
Pass	270,695		312,166		157,716		100,900		33,022		108,868		—		—		983,367
Watch	—		—		—		—		—		—		—		—		—
Special mention	—		—		—		—		—		—		—		—		—
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

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.


March 31, 2024			Past Due
(in thousands)	Current		30 - 59 Days		60 - 89 Days		Greater than 89 days		Total		Total Loans
Non-owner occupied commercial	$	2,973,184	$	256	$	—	$	212	$	468	$	2,973,652
Owner occupied commercial	1,256,517		352		423		6,769		7,544		1,264,061
Multifamily	1,404,901		405		—		93		498		1,405,399
Non-owner occupied residential	201,040		457		—		517		974		202,014
Commercial, industrial and other	641,850		—		1		300		301		642,151
Construction	317,253		—		—		—		—		317,253
Equipment finance	176,169		1,254		77		657		1,988		178,157
Residential mortgage	988,884		5,734		2,010		941		8,685		997,569
Consumer	338,579		1,135		17		437		1,589		340,168
Total	$	8,298,377	$	9,593	$	2,528	$	9,926	$	22,047	$	8,320,424


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

The following tables present information on non-accrual loans at March 31, 2024 and December 31, 2023:


March 31, 2024
(in thousands)	Non-accrual		Interest Income Recognized on Non-accrual Loans		Amortized Cost Basis of Loans > 89 days Past due but still accruing		Amortized Cost Basis of Non-accrual Loans without Related Allowance
Non-owner occupied commercial	$	745	$	—	$	—	$	—
Owner occupied commercial	7,018		—		—		6,703
Multifamily	1,167		—		—		1,073
Non-owner occupied residential	517		—		—		517
Commercial, industrial and other	323		—		—		—
Construction	—		—		—		—
Equipment finance	1,147		—		—		—
Residential mortgage	2,732		—		—		—
Consumer	1,204		—		—		—
Total	$	14,853	$	—	$	—	$	8,293


December 31, 2023
(in thousands)	Non-accrual		Interest Income Recognized on Non-accrual Loans		Amortized Cost Basis of Loans > 89 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

At March 31, 2024 and December 31, 2023, there were no loans that were past due more than 89 days and still accruing. The Company had $659,000 and $621,000 in residential mortgages and consumer loans included in non-accrual and that were in the process of foreclosure at March 31, 2024 and December 31, 2023, respectively.

Purchased Credit Deteriorated ("PCD") Loans

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


(in thousands)	PCD Loans
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 March 31, 2024, net PCD loans acquired from 1st Constitution totaled $68.4 million.

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

The Company adopted Accounting Standards Update 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 three months ended March 31, 2024 and for three months ended March 31, 2023, there were no loan modifications that met the definition of a modification to a debtor experiencing financial difficulty. At December 31, 2023, there were no loans that were modified that met the definition of a modification to a debtor experiencing financial difficulty.