Company Quick10K Filing
Quick10K
Lakeland Bancorp
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$16.96 50 $853
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2019-01-28 Earnings, Other Events, Exhibits
8-K 2019-01-28 Earnings, Other Events, Exhibits
8-K 2019-01-04 Other Events, Exhibits
8-K 2018-12-13 Other Events, Exhibits
8-K 2018-11-26 Other Events, Exhibits
8-K 2018-10-25 Earnings, Other Events, Exhibits
8-K 2018-08-23 Enter Agreement, Regulation FD, Other Events, Exhibits
8-K 2018-07-26 Earnings, Other Events, Exhibits
8-K 2018-06-20 Officers, Exhibits
8-K 2018-05-09 Shareholder Rights, Officers, Amend Bylaw, Shareholder Vote, Exhibits
8-K 2018-04-25 Earnings, Other Events, Exhibits
8-K 2018-01-26 Earnings, Other Events, Exhibits
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BDGE Bridge Bancorp
OSBC Old Second Bancorp
BHB Bar Harbor Bankshares
MRLN Marlin Business Services
DNBF DNB Financial
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RNDB Randolph Bancorp
LBAI 2018-09-30
Part I. Financial Information
Item 1. Financial Statements
Note 1 - Significant Accounting Policies
Note 2 - Acquisitions
Note 3 - Revenue Recognition
Note 4 - Earnings per Share
Note 5 - Investment Securities
Note 6 - Loans, Leases and Other Real Estate
Note 7 - Derivatives
Note 8 - Goodwill and Intangible Assets
Note 9 - Borrowings
Note 10 - Share-Based Compensation
Note 11 - Comprehensive Income
Note 12 - Estimated Fair Value of Financial Instruments and Fair Value Measurement
Note 13 - Recent Accounting Pronouncments
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Not Applicable
Item 3. Defaults Upon Senior Securities Not Applicable
Item 4. Mine Safety Disclosures Not Applicable
Item 5. Other Information Not Applicable
Item 6. Exhibits
EX-31.1 lbaiq32018ex311.htm
EX-31.2 lbaiq32018ex312.htm
EX-32 lbaiq32018ex321.htm

Lakeland Bancorp Earnings 2018-09-30

LBAI 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 lbaiq32018doc.htm 10-Q Document


SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended 
 
September 30, 2018
 
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 Road, Oak Ridge, New Jersey 
07438
 (Address of principal executive offices)
(Zip Code)
 
 
(973) 697-2000
(Registrant’s telephone number, including area code)
 
(Former name, former address and former fiscal year, if changed since last report.)
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  [X]    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 (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files).  Yes  [ X ]    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: (Check one):
Large accelerated filer [X]    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 check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes  [  ]    No  [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
As of October 26, 2018, there were 47,485,620 outstanding shares of Common Stock, no par value.

1


LAKELAND BANCORP, INC.
Form 10-Q Index
 
 
 
PAGE
 
 
 
 
 
 
 
 
 
 
Consolidated Balance Sheets as of September 30, 2018 (unaudited) and December 31, 2017
 
Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2018 and 2017 (unaudited)
 
Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2018 and 2017 (unaudited)
 
Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2018 and 2017 (unaudited)
 
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017 (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2


PART I. FINANCIAL INFORMATION
 
Item 1.        Financial Statements

3


Lakeland Bancorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS 
 
September 30, 2018
 
December 31, 2017
 
(unaudited)
 
 
 
(dollars in thousands)
ASSETS
 
 
 
Cash
$
170,099

 
$
114,138

Interest-bearing deposits due from banks
10,137

 
28,795

Total cash and cash equivalents
180,236

 
142,933

Investment securities available for sale, at fair value
613,243

 
628,046

Equity securities, at fair value
16,038

 
18,089

Investment securities held to maturity; fair value of $153,975 at September 30, 2018 and $138,688 at December 31, 2017
158,576

 
139,685

Federal Home Loan Bank and other membership bank stock, at cost
13,458

 
12,576

Loans, net of deferred costs (fees)
4,328,118

 
4,152,720

Less: allowance for loan and lease losses
37,293

 
35,455

Net loans
4,290,825

 
4,117,265

Loans held for sale
1,340

 
456

Premises and equipment, net
50,127

 
50,313

Accrued interest receivable
15,435

 
14,416

Goodwill
136,433

 
136,433

Other identifiable intangible assets
1,910

 
2,362

Bank owned life insurance
109,338

 
107,489

Other assets
40,098

 
35,576

TOTAL ASSETS
$
5,627,057

 
$
5,405,639

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
LIABILITIES
 
 
 
Deposits:
 
 
 
Noninterest-bearing
$
996,296

 
$
967,335

Savings and interest-bearing transaction accounts
2,855,318

 
2,663,985

Time deposits $250 thousand and under
607,448

 
556,863

Time deposits over $250 thousand
183,381

 
180,565

Total deposits
4,642,443

 
4,368,748

Federal funds purchased and securities sold under agreements to repurchase
47,398

 
124,936

Other borrowings
184,640

 
192,011

Subordinated debentures
104,995

 
104,902

Other liabilities
40,026

 
31,920

TOTAL LIABILITIES
5,019,502

 
4,822,517

STOCKHOLDERS’ EQUITY
 
 
 
Common stock, no par value; authorized shares, 100,000,000 at September 30, 2018 and 70,000,000 at December 31, 2017; issued shares, 47,485,283 at September 30, 2018 and 47,353,864 at December 31, 2017
514,212

 
512,734

Retained earnings
106,834

 
72,737

Accumulated other comprehensive loss
(13,491
)
 
(2,349
)
TOTAL STOCKHOLDERS’ EQUITY
607,555

 
583,122

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
5,627,057

 
$
5,405,639

The accompanying notes are an integral part of these consolidated financial statements.

4


Lakeland Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands, except per share data)
 
(in thousands, except per share data)
INTEREST INCOME
 
 
 
 
 
 
 
Loans, leases and fees
$
49,181

 
$
44,302

 
$
142,384

 
$
127,453

Federal funds sold and interest-bearing deposits with banks
533

 
210

 
844

 
618

Taxable investment securities and other
4,141

 
3,720

 
12,160

 
11,137

        Tax-exempt investment securities
427

 
503

 
1,299

 
1,535

TOTAL INTEREST INCOME
54,282

 
48,735

 
156,687

 
140,743

INTEREST EXPENSE
 
 
 
 
 
 
 
Deposits
8,429

 
4,443

 
20,685

 
11,561

Federal funds purchased and securities sold under agreements to repurchase
42

 
52

 
409

 
160

Other borrowings
2,187

 
2,125

 
6,240

 
6,163

TOTAL INTEREST EXPENSE
10,658

 
6,620

 
27,334

 
17,884

NET INTEREST INCOME
43,624

 
42,115

 
129,353

 
122,859

Provision for loan and lease losses
1,046

 
1,827

 
3,822

 
4,872

NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES
42,578

 
40,288

 
125,531

 
117,987

NONINTEREST INCOME
 
 
 
 
 
 
 
Service charges on deposit accounts
2,614

 
2,797

 
7,770

 
7,926

Commissions and fees
1,414

 
1,258

 
4,096

 
3,549

Income on bank owned life insurance
1,127

 
624

 
2,557

 
1,550

Gain (loss) on equity securities
(439
)
 

 
(384
)
 

Gains on sales of loans
484

 
478

 
1,030

 
1,347

Gains on sales of investment securities, net

 

 

 
2,524

Other income
439

 
297

 
1,613

 
2,763

TOTAL NONINTEREST INCOME
5,639

 
5,454

 
16,682

 
19,659

NONINTEREST EXPENSE
 
 
 
 
 
 
 
Salaries and employee benefits
17,352

 
15,100

 
50,921

 
45,613

Net occupancy expense
2,316

 
2,327

 
7,657

 
7,670

Furniture and equipment
2,070

 
2,073

 
6,287

 
6,166

FDIC insurance expense
400

 
430

 
1,225

 
1,173

Stationery, supplies and postage
371

 
404

 
1,230

 
1,419

Marketing expense
343

 
442

 
1,160

 
1,351

Data processing expense
1,083

 
441

 
2,525

 
1,496

Telecommunications expense
438

 
380

 
1,321

 
1,156

ATM and debit card expense
556

 
546

 
1,624

 
1,504

Core deposit intangible amortization
142

 
104

 
452

 
489

Other real estate and repossessed asset expense
45

 
67

 
112

 
108

Long-term debt prepayment fee

 

 

 
2,828

Other expenses
2,677

 
2,535

 
7,990

 
7,712

TOTAL NONINTEREST EXPENSE
27,793

 
24,849

 
82,504

 
78,685

Income before provision for income taxes
20,424

 
20,893

 
59,709

 
58,961

Provision for income taxes
3,666

 
7,170

 
11,858

 
19,556

NET INCOME
$
16,758

 
$
13,723

 
$
47,851

 
$
39,405

PER SHARE OF COMMON STOCK
 
 
 
 
 
 
 
Basic earnings
$
0.35

 
$
0.29

 
$
1.00

 
$
0.82

Diluted earnings
$
0.35

 
$
0.29

 
$
0.99

 
$
0.82

Dividends
$
0.115

 
$
0.100

 
$
0.330

 
$
0.295

The accompanying notes are an integral part of these consolidated financial statements.

5


Lakeland Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
 
(in thousands)
NET INCOME
$
16,758

 
$
13,723

 
$
47,851

 
$
39,405

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
 
 
 
 
 
 
 
Unrealized (losses) gains on securities available for sale
(2,019
)
 
170

 
(9,441
)
 
1,933

Reclassification for securities losses (gains) included in net income

 

 

 
(1,640
)
Unrealized gains (losses) on derivatives
6

 
2

 
342

 
(105
)
Other comprehensive (loss) income

(2,013
)
 
172

 
(9,099
)
 
188

TOTAL COMPREHENSIVE INCOME
$
14,745

 
$
13,895

 
$
38,752

 
$
39,593

The accompanying notes are an integral part of these consolidated financial statements.

6


Lakeland Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
For the Three Months Ended September 30, 2018 and 2017
 
Common
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
 
(in thousands)
At July 1, 2017
$
511,967

 
$
54,969

 
$
609

 
$
567,545

Net income

 
13,723

 

 
13,723

Other comprehensive income, net of tax

 

 
172

 
172

Stock based compensation
416

 

 

 
416

Exercise of stock options

 

 

 

Retirement of restricted stock

 

 

 

Cash dividends, common stock

 
(4,775
)
 

 
(4,775
)
At September 30, 2017
$
512,383

 
$
63,917

 
$
781

 
$
577,081

 
 
 
 
 
 
 
 
At July 1, 2018
$
513,756

 
$
95,586

 
$
(11,478
)
 
$
597,864

Net income

 
16,758

 

 
16,758

Other comprehensive loss, net of tax

 

 
(2,013
)
 
(2,013
)
Stock based compensation
471

 

 

 
471

Exercise of stock options

 

 

 

Retirement of restricted stock
(15
)
 

 

 
(15
)
Cash dividends, common stock

 
(5,510
)
 

 
(5,510
)
At September 30, 2018
$
514,212

 
$
106,834

 
$
(13,491
)
 
$
607,555

The accompanying notes are an integral part of these consolidated financial statements.











7



Lakeland Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
For the Nine Months Ended September 30, 2018 and 2017
 
 
Common
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
 
(in thousands)
At January 1, 2017
$
510,861

 
$
38,590

 
$
593

 
$
550,044

Net income

 
39,405

 

 
39,405

Other comprehensive income, net of tax

 

 
188

 
188

Stock based compensation
1,982

 

 

 
1,982

Exercise of stock options
313

 

 

 
313

Retirement of restricted stock
(773
)
 

 

 
(773
)
Cash dividends, common stock

 
(14,078
)
 

 
(14,078
)
At September 30, 2017
$
512,383

 
$
63,917

 
$
781

 
$
577,081

 
 
 
 
 
 
 
 
At January 1, 2018
$
512,734

 
$
72,737

 
$
(2,349
)
 
$
583,122

Cumulative adjustment for adoption of ASU 2016-01

 
2,043

 
(2,043
)
 

January 1, 2018, as adjusted
512,734

 
74,780

 
(4,392
)
 
583,122

Net income

 
47,851

 

 
47,851

Other comprehensive loss, net of tax

 

 
(9,099
)
 
(9,099
)
Stock based compensation
1,930

 

 

 
1,930

Exercise of stock options
307

 

 

 
307

Retirement of restricted stock
(759
)
 

 

 
(759
)
Cash dividends, common stock

 
(15,797
)
 

 
(15,797
)
At September 30, 2018
$
514,212

 
$
106,834

 
$
(13,491
)
 
$
607,555

The accompanying notes are an integral part of these consolidated financial statements.

8


Lakeland Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
For the Nine Months Ended September 30,
 
2018
 
2017
 
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
47,851

 
$
39,405

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Net amortization of premiums, discounts and deferred loan fees and costs
3,548

 
3,763

Depreciation and amortization
4,114

 
3,272

Amortization of intangible assets
452

 
489

Provision for loan and lease losses
3,822

 
4,872

Loans originated for sale
(35,270
)
 
(42,575
)
Proceeds from sales of loans held for sale
34,932

 
43,444

Gains on sales of securities

 
(2,524
)
Change in market value of equity securities
366

 

Gains on proceeds from bank owned life insurance policies
(421
)
 
(45
)
Gains on sales of loans held for sale
(546
)
 
(1,347
)
Gains on other real estate and other repossessed assets
(98
)
 
(527
)
Losses (gains) on sales of premises and equipment
3

 
(850
)
Long-term debt prepayment penalty

 
2,828

Stock-based compensation
1,930

 
1,982

Deferred tax benefit
(1,263
)
 

Excess tax benefits
313

 
582

Increase in other assets
(1,438
)
 
(5,780
)
Increase in other liabilities
8,105

 
198

NET CASH PROVIDED BY OPERATING ACTIVITIES
66,400

 
47,187

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Proceeds from repayments and maturities of available for sale securities
68,240

 
68,852

Proceeds from repayments and maturities of held to maturity securities
18,229

 
33,345

Proceeds from sales of equity securities
2,155

 

Proceeds from sales of available for sale securities

 
4,500

Purchase of available for sale securities
(68,845
)
 
(113,770
)
Purchase of held to maturity securities
(37,655
)
 
(21,157
)
Purchase of equity securities
(469
)
 

Purchase of bank owned life insurance

 
(33,000
)
Death benefit proceeds from bank owned life insurance policy
755

 
148

Proceeds from redemptions of Federal Home Loan Bank stock
5,716

 
11,942

Purchases of Federal Home Loan Bank stock
(6,598
)
 
(9,626
)
Net increase in loans and leases
(181,561
)
 
(226,022
)
Proceeds from sales of other real estate and repossessed assets
1,795

 
3,972

Proceeds from dispositions and sales of premises and equipment
61

 
1,638

Purchases of premises and equipment
(3,899
)
 
(2,070
)
NET CASH USED IN INVESTING ACTIVITIES
(202,076
)
 
(281,248
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Net increase in deposits
274,029

 
264,654

(Decrease) increase in federal funds purchased and securities sold under agreements to repurchase
(77,538
)
 
77,606

Proceeds from other borrowings
39,437

 
276,212

Repayments of other borrowings
(46,700
)
 
(342,757
)
Exercise of stock options
307

 
313

Retirement of restricted stock
(759
)
 
(773
)
Dividends paid
(15,797
)
 
(14,078
)
NET CASH PROVIDED BY FINANCING ACTIVITIES
172,979

 
261,177

Net increase in cash and cash equivalents
37,303

 
27,116

Cash and cash equivalents, beginning of period
142,933

 
175,801

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
180,236

 
$
202,917


9


 
For the Nine Months Ended September 30,
 
2018
 
2017
 
(in thousands)
Supplemental schedule of non-cash investing and financing activities:
 
 
 
Cash paid during the period for income taxes
$
4,614

 
$
18,908

Cash paid during the period for interest
25,748

 
18,649

Transfer of loans and leases into other repossessed assets and other real estate owned
3,608

 
3,542

The accompanying notes are an integral part of these consolidated financial statements.

10


Lakeland Bancorp, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
This quarterly report presents the consolidated financial statements of Lakeland Bancorp, Inc. and its subsidiaries, including Lakeland Bank (“Lakeland”) and the Bank’s wholly owned subsidiaries (collectively, the “Company”). The accounting and reporting policies of the Company conform with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and predominant practices within the banking industry. The Company’s unaudited interim financial statements reflect all adjustments, such as normal recurring accruals that are, in the opinion of management, necessary for the fair presentation of the results of the interim periods. The results of operations for the nine months ended September 30, 2018 do not necessarily indicate the results that the Company will achieve for all of 2018.
Certain information and footnote disclosures required under U.S. GAAP have been condensed or omitted, as permitted by rules and regulations of the Securities and Exchange Commission. These unaudited interim financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes that are presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Certain reclassifications have been made in the consolidated financial statements to conform with current year classifications.
NOTE 2 – ACQUISITIONS
On August 23, 2018, the Company entered into an agreement and Plan of Merger (the "Merger Agreement") with Highlands Bancorp, Inc.("Highlands Bancorp") pursuant to which Highlands Bancorp (parent company of Highlands State Bank) will merge with and into the Company and Highlands State Bank will merge with and into Lakeland Bank. The merger agreement provides that the shareholders of Highlands Bancorp will receive for each outstanding share of Highlands Bancorp common stock that they own at the effective time of the merger, 1.015 shares of Lakeland Bancorp, Inc. common stock. The Company expects to issue an aggregate of approximately 2.8 million shares of its common stock in the merger. As of August 23, 2018, the transaction is valued at approximately $56.7 million on a fully diluted basis or $19.79 per share. As of September 30, 2018, Highlands Bancorp had consolidated total assets, total loans, total deposits and total stockholders' equity of $487.9 million, $430.1 million, $405.3 million and $31.3 million, respectively. Highlands Bancorp had net income of $2.7 million for the nine months ended September 30, 2018.
The transaction has been approved by the board of directors of the Company and Highlands Bancorp. Subject to the approval of the shareholders of Highlands Bancorp, regulatory approvals and other customary closing conditions, the Company anticipates completing the merger in the first quarter of 2019.
NOTE 3 – REVENUE RECOGNITION
The Company’s primary source of revenue is interest income generated from loans, leases and investment securities. Interest income is recognized according to the terms of the financial instrument agreement over the life of the loan, lease or investment security unless it is determined that the counterparty is unable to continue making interest payments. Interest income also includes prepaid interest fees from commercial customers, which approximates the interest foregone on the balance of the loan prepaid.
The Company’s additional source of income, also referred to as noninterest income, is generated from deposit related fees, interchange fees, loan and lease fees, merchant fees, loan sales and other miscellaneous income and is largely based on contracts with customers. In these cases, the Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. The Company considers a customer to be any party to which the Company will provide goods or services that are an output of the Company’s ordinary activities in exchange for consideration. There is little seasonality with regards to revenue from contracts with customers and all inter-company revenue is eliminated when the Company’s financial statements are consolidated.
Generally, the Company enters into contracts with customers that are short-term in nature where the performance obligations are fulfilled and payment is processed at the same time. Such examples include revenue related to merchant fees, interchange fees and investment services income. In addition, revenue generated from existing customer relationships such as deposit accounts are also considered short-term in nature, because the relationship may be terminated at any time and payment is

11


processed at the time performance obligations are fulfilled. As a result, the Company does not have contract assets, contract liabilities or related receivable accounts for contracts with customers. In cases where collectability is a concern, the Company does not record revenue.
Generally, the pricing of transactions between the Company and each customer is either (i) established within a legally enforceable contract between the two parties, as is the case with the loan sales, or (ii) disclosed to the customer at a specific point in time, as is the case when a deposit account is opened or before a new loan is underwritten. Fees are usually fixed at a specific amount or as a percentage of a transaction amount. No judgment or estimates by management are required to record revenue related to these transactions and pricing is clearly identified within these contracts.
The Company primarily operates in one geographic region, Northern and Central New Jersey and contiguous areas. Therefore, all significant operating decisions are based upon analysis of the Company as one operating segment or unit.
We disaggregate our revenue from contracts with customers by contract-type and timing of revenue recognition, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Noninterest income not generated from customers during the Company’s ordinary activities primarily relates to mortgage servicing rights, gains/losses on the sale of investment securities, gains/losses on the sale of other real estate owned, gains/losses on the sale of property, plant and equipment, and income from bank owned life insurance. The following table sets forth the components of noninterest income for the three and nine months ended September 30, 2018 and 2017:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Deposit Related Fees and Charges
 
 
 
 
 
 
 
  Debit card interchange income
$
1,280

 
$
1,138

 
$
3,675

 
$
3,274

  Overdraft charges
966

 
1,181

 
2,975

 
3,479

  ATM service charges
220

 
235

 
627

 
596

  Demand deposit fees and charges
119

 
199

 
398

 
493

  Savings service charges
29

 
44

 
95

 
84

Total
2,614

 
2,797

 
7,770

 
7,926

Commissions and Fees
 
 
 
 

 

  Loan and lease fees
267

 
310

 
952

 
745

  Wire transfer charges
291

 
263

 
813

 
736

  Investment services income
378

 
267

 
917

 
804

  Merchant fees
199

 
159

 
589

 
564

  Commissions from sales of checks
106

 
112

 
326

 
345

  Safe deposit income
92

 
67

 
280

 
194

  Other income
77

 
73

 
205

 
140

Total
1,410

 
1,251

 
4,082

 
3,528

Gains on Sale of Loans
484

 
478

 
1,030

 
1,347

Other Income
 
 
 
 

 

  Gains on customer swap transactions
319

 
(3
)
 
1,178

 
811

  Title insurance income
27

 
50

 
149

 
153

  Other income
48

 
59

 
203

 
474

Total
394

 
106

 
1,530

 
1,438

Revenue not from contracts with customers
737

 
822

 
2,270

 
5,420

Total Noninterest Income
5,639

 
5,454

 
16,682

 
19,659

Timing of Revenue Recognition
 
 
 
 

 

  Products and services transferred at a point in time
4,883

 
4,613

 
14,356

 
14,190

  Products and services transferred over time
19

 
19

 
56

 
49

  Revenue not from contracts with customers
737

 
822

 
2,270

 
5,420

Total Noninterest Income
$
5,639

 
$
5,454

 
$
16,682

 
$
19,659


12


NOTE 4 – EARNINGS PER SHARE
The following schedule shows the Company’s earnings per share calculations for the periods presented:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands, except per share data)
 
(in thousands, except per share data)
Net income available to common shareholders
$
16,758

 
$
13,723

 
$
47,851

 
$
39,405

Less: earnings allocated to participating securities
153

 
122

 
440

 
362

Net income allocated to common shareholders
$
16,605

 
$
13,601

 
$
47,411

 
$
39,043

Weighted average number of common shares outstanding - basic
47,605

 
47,466

 
47,570

 
47,429

Share-based plans
183

 
226

 
194

 
231

Weighted average number of common shares outstanding - diluted
47,788

 
47,692

 
47,764

 
47,660

Basic earnings per share
$
0.35

 
$
0.29

 
$
1.00

 
$
0.82

Diluted earnings per share
$
0.35

 
$
0.29

 
$
0.99

 
$
0.82

There were no antidilutive options to purchase common stock excluded from the computation for the three and nine months ended September 30, 2018 and 2017.
NOTE 5 – INVESTMENT SECURITIES
 
September 30, 2018
 
December 31, 2017
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(in thousands)
 
(in thousands)
AVAILABLE FOR SALE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and U.S. government agencies
$
148,402

 
$

 
$
(3,928
)
 
$
144,474

 
$
148,968

 
$
78

 
$
(1,791
)
 
$
147,255

Mortgage-backed securities, residential
412,979

 
77

 
(14,345
)
 
398,711

 
419,538

 
479

 
(5,763
)
 
414,254

Mortgage-backed securities, multifamily
19,166

 
18

 
(348
)
 
18,836

 
10,133

 
7

 
(63
)
 
10,077

Obligations of states and political subdivisions
47,099

 
98

 
(1,016
)
 
46,181

 
51,289

 
448

 
(417
)
 
51,320

Debt securities
5,000

 
41

 

 
5,041

 
5,000

 
140

 

 
5,140

 
$
632,646

 
$
234

 
$
(19,637
)
 
$
613,243

 
$
634,928

 
$
1,152

 
$
(8,034
)
 
$
628,046


13


 
September 30, 2018
 
December 31, 2017
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(in thousands)
 
(in thousands)
HELD TO MATURITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agencies
$
38,278

 
$

 
$
(1,081
)
 
$
37,197

 
$
33,415

 
$
24

 
$
(402
)
 
$
33,037

Mortgage-backed securities, residential
75,825

 
105

 
(2,890
)
 
73,040

 
54,991

 
249

 
(978
)
 
54,262

Mortgage-backed securities, multifamily
1,879

 

 
(59
)
 
1,820

 
1,957

 

 
(22
)
 
1,935

Obligations of states and political subdivisions
37,594

 
77

 
(570
)
 
37,101

 
43,318

 
306

 
(188
)
 
43,436

Debt securities
5,000

 

 
(183
)
 
4,817

 
6,004

 
14

 

 
6,018

 
$
158,576

 
$
182

 
$
(4,783
)
 
$
153,975

 
$
139,685

 
$
593

 
$
(1,590
)
 
$
138,688

The following table shows investment securities by stated maturity. Securities backed by mortgages have expected maturities that differ from contractual maturities because borrowers have the right to call or prepay, and are, therefore, classified separately with no specific maturity date (in thousands):
 
Available for Sale
 
Held to Maturity
September 30, 2018
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Due in one year or less
$
27,831

 
$
27,694

 
$
11,369

 
$
11,376

Due after one year through five years
106,416

 
103,528

 
42,149

 
41,398

Due after five years through ten years
37,758

 
36,465

 
24,093

 
23,204

Due after ten years
28,496

 
28,009

 
3,261

 
3,137

 
200,501

 
195,696

 
80,872

 
79,115

Mortgage-backed securities
432,145

 
417,547

 
77,704

 
74,860

Total securities
$
632,646

 
$
613,243

 
$
158,576

 
$
153,975

The following table shows proceeds from sales of securities and gross gains and losses on sales of securities for the periods indicated (in thousands):
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Sale proceeds
$

 
$

 
$

 
$
4,500

Gross gains

 

 

 
2,539

Gross losses

 

 

 
(15
)
There were no other-than-temporary impairments during the three and nine months ended September 30, 2018 or 2017.
Gains or losses on sales of investment securities are based on the net proceeds and the adjusted carrying amount of the securities sold using the specific identification method.
Securities with a carrying value of approximately $458.8 million and $400.4 million at September 30, 2018 and December 31, 2017, respectively, were pledged to secure public deposits and for other purposes required by applicable laws and regulations.

14


The following table indicates the length of time individual securities have been in a continuous unrealized loss position for the periods presented:
 
Less Than 12 Months
 
12 Months or Longer
 
Total
September 30, 2018
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Number of
Securities
 
Fair Value
 
Unrealized
Losses
 
(dollars in thousands)
AVAILABLE FOR SALE
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and U.S. government agencies
$
58,128

 
$
1,279

 
$
86,347

 
$
2,649

 
28

 
$
144,475

 
$
3,928

Mortgage-backed securities, residential
135,669

 
2,952

 
249,216

 
11,393

 
153

 
384,885

 
14,345

Mortgage-backed securities, multifamily
10,871

 
242

 
4,992

 
106

 
4

 
15,863

 
348

Obligations of states and political subdivisions
19,175

 
279

 
15,265

 
737

 
65

 
34,440

 
1,016

 
$
223,843

 
$
4,752

 
$
355,820

 
$
14,885

 
250

 
$
579,663

 
$
19,637

HELD TO MATURITY
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agencies
$
25,521

 
$
445

 
$
11,678

 
$
636

 
7

 
$
37,199

 
$
1,081

Mortgage-backed securities, residential
30,173

 
774

 
37,234

 
2,116

 
37

 
67,407

 
2,890

Mortgage-backed securities, multifamily

 

 
1,820

 
59

 
2

 
1,820

 
59

Obligations of states and political subdivisions
15,398

 
257

 
7,234

 
313

 
39

 
22,632

 
570

Debt securities
3,817

 
183

 

 

 
1

 
3,817

 
183

 
$
74,909

 
$
1,659

 
$
57,966

 
$
3,124

 
86

 
$
132,875

 
$
4,783

 
Less Than 12 Months
 
12 Months or Longer
 
Total
December 31, 2017
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Number of
Securities
 
Fair Value
 
Unrealized
Losses
 
(dollars in thousands)
AVAILABLE FOR SALE
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and U.S. government agencies
$
80,391

 
$
646

 
$
54,769

 
$
1,145

 
27

 
$
135,160

 
$
1,791

Mortgage-backed securities, residential
199,387

 
1,723

 
157,739

 
4,040

 
118

 
357,126

 
5,763

Mortgage-backed securities, multifamily

 

 
5,088

 
63

 
1

 
5,088

 
63

Obligations of states and political subdivisions
9,612

 
77

 
12,970

 
340

 
39

 
22,582

 
417

 
$
289,390

 
$
2,446

 
$
230,566

 
$
5,588

 
185

 
$
519,956

 
$
8,034

HELD TO MATURITY
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agencies
$
15,371

 
$
95

 
$
6,720

 
$
307

 
4

 
$
22,091

 
$
402

Mortgage-backed securities, residential
26,090

 
426

 
19,203

 
552

 
25

 
45,293

 
978

Mortgage-backed securities, multifamily
1,935

 
22

 

 

 
2

 
1,935

 
22

Obligations of states and political subdivisions
15,353

 
56

 
6,028

 
132

 
23

 
21,381

 
188

 
$
58,749

 
$
599

 
$
31,951

 
$
991

 
54

 
$
90,700

 
$
1,590

Management has evaluated the securities in the above table and has concluded that none of the securities are other-than-temporarily impaired. The fair values being below cost is due to interest rate movements and is deemed temporary. All investment securities are evaluated on a periodic basis to identify any factors that would require a further analysis. In evaluating the Company’s securities, management considers the following items:
The Company’s ability and intent to hold the securities, including an evaluation of the need to sell the security to meet certain liquidity measures, or whether the Company has sufficient levels of cash to hold the identified security in order to recover the entire amortized cost of the security;
The financial condition of the underlying issuer;

15


The credit ratings of the underlying issuer and if any changes in the credit rating have occurred;
The length of time the security’s fair value has been less than amortized cost; and
Adverse conditions related to the security or its issuer if the issuer has failed to make scheduled payments or other factors.
If the above factors indicate that an additional analysis is required, management will perform and consider the results of a discounted cash flow analysis.
Equity securities at fair value
The Company has an equity securities portfolio which consists of investments in other financial institutions for market appreciation purposes, and investments in Community Reinvestment funds. The market value of these investments was $16.0 million and $18.1 million as of September 30, 2018 and December 31, 2017, respectively. Upon implementation of Accounting Standards Update 2016-01 - Financial Instruments ("ASU 2016-01"), the Company made a cumulative adjustment of $2.0 million from other comprehensive income to retained earnings as of January 1, 2018. In the first nine months of 2018, the Company recorded $384,000 in market value loss on equity securities in noninterest income.
As of September 30, 2018, the equity investments in other financial institutions and Community Reinvestment funds had a market value of $3.0 million and $13.0 million, respectively.
The Community Reinvestment funds include $9.5 million that are invested in government guaranteed loans, mortgage-backed securities, small business loans and other instruments supporting affordable housing and economic development. The Company may redeem these funds at the net asset value calculated at the end of the current business day less any unpaid management fees. There are no restrictions on redemptions for the holdings in these investments other than the notice required by the fund manager. There are no unfunded commitments related to these investments.
The investment funds also include $3.5 million that are primarily invested in community development loans that are guaranteed by the Small Business Administration (“SBA”). Because the funds are primarily guaranteed by the federal government there are minimal changes in market value between accounting periods. These funds can be redeemed with 60 days notice at the net asset value less unpaid management fees with the approval of the fund manager. As of September 30, 2018, the net amortized cost equaled the market value of the investment. There are no unfunded commitments related to these investments.
NOTE 6 – LOANS, LEASES AND OTHER REAL ESTATE
The following sets forth the composition of the Company’s loan and lease portfolio:
 
September 30,
2018
 
December 31,
2017
 
(in thousands)
Commercial, secured by real estate
$
2,984,430

 
$
2,831,184

Commercial, industrial and other
334,241

 
340,400

Leases
82,881

 
75,039

Real estate - residential mortgage
315,135

 
322,880

Real estate - construction
297,516

 
264,908

Home equity and consumer
318,035

 
322,269

Total loans and leases
4,332,238

 
4,156,680

Less: deferred fees
(4,120
)
 
(3,960
)
Loans and leases, net of deferred fees
$
4,328,118

 
$
4,152,720

At September 30, 2018 and December 31, 2017, home equity and consumer loans included overdraft deposit balances of $310,000 and $966,000, respectively. At both September 30, 2018 and December 31, 2017, the Company had $1.1 billion in loans pledged for actual and potential borrowings at the Federal Home Loan Bank of New York (“FHLB”).
Purchased Credit Impaired Loans
The carrying value of loans acquired in the Pascack Community Bank ("Pascack") acquisition and accounted for in accordance with ASC Subtopic 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality,” was $170,000 at

16


September 30, 2018, which was $647,000 less than the balance at the time of acquisition on January 7, 2016. In first quarter of 2017, one of the Pascack purchased credit impaired (“PCI”) loans totaling $127,000 experienced further credit deterioration and was fully charged off. In the second quarter of 2017, a loan with a net value of $218,000 was fully paid off. The carrying value of PCI loans acquired in the Harmony Bank ("Harmony") acquisition was $503,000 at September 30, 2018 which was $266,000 less than the balance at acquisition date on July 1, 2016. In the second quarter of 2017, a loan with a net value of $247,000 was fully paid off.
The following table presents changes in the accretable yield for PCI loans:
 
For the Three Months Ended
 
For the Nine Months Ended
 
September 30, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
 
(in thousands)
 
(in thousands)
Balance, beginning of period
$
100

 
$
133

 
$
129

 
$
145

Accretion
(58
)
 
(40
)
 
(145
)
 
(138
)
Net reclassification non-accretable difference
41

 
35

 
99

 
121

Balance, end of period
$
83

 
$
128

 
$
83

 
$
128

Non-Performing Assets and Past Due Loans
The following schedule sets forth certain information regarding the Company’s non-performing assets and its accruing troubled debt restructurings, excluding PCI loans:
 
September 30,
2018
 
December 31,
2017
 
(in thousands)
Commercial, secured by real estate
$
5,737

 
$
5,890

Commercial, industrial and other
1,189

 
184

Leases
441

 
144

Real estate - residential mortgage
2,347

 
3,860

Real estate - construction

 
1,472

Home equity and consumer
1,410

 
2,105

Total non-accrual loans and leases
$
11,124

 
$
13,655

Other real estate and other repossessed assets
2,754

 
843

TOTAL NON-PERFORMING ASSETS
$
13,878

 
$
14,498

Troubled debt restructurings, still accruing
$
9,030

 
$
11,462

Non-accrual loans included $3.9 million and $2.7 million of troubled debt restructurings for the periods ended September 30, 2018 and December 31, 2017, respectively. Non-accrual real estate-construction loans declined from December 31, 2017 to September 30, 2018 due to a foreclosure on a property which resulted in the property moving into other real estate at the end of June 2018. At September 30, 2018 and December 31, 2017, the Company had $1.6 million and $2.7 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.

17


An age analysis of past due loans, segregated by class of loans as of September 30, 2018 and December 31, 2017, is as follows:
 
30-59 Days Past Due
 
60-89 Days Past Due
 
Greater Than 89 Days Past Due
 
Total Past Due
 
Current
 
Total Loans and Leases
 
Recorded Investment Greater than 89 Days and Still Accruing
 
(in thousands)
September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
6,068

 
$
1,393

 
$
1,328

 
$
8,789

 
$
2,975,641

 
$
2,984,430

 
$

Commercial, industrial and other
540

 
7

 
350

 
897

 
333,344

 
334,241

 

Leases
454

 
110

 
442

 
1,006

 
81,875

 
82,881

 

Real estate - residential mortgage
2,470

 
207

 
1,825

 
4,502

 
310,633

 
315,135

 
16

Real estate - construction
1,071

 

 

 
1,071

 
296,445

 
297,516

 

Home equity and consumer
2,051

 
616

 
1,010

 
3,677

 
314,358

 
318,035

 

 
$
12,654

 
$
2,333

 
$
4,955

 
$
19,942

 
$
4,312,296

 
$
4,332,238

 
$
16

December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
3,663

 
$
1,082

 
$
3,817

 
$
8,562

 
$
2,822,622

 
$
2,831,184

 
$

Commercial, industrial and other
80

 
121

 
56

 
257

 
340,143

 
340,400

 

Leases
496

 
139

 
144

 
779

 
74,260

 
75,039

 

Real estate - residential mortgage
939

 
908

 
3,137

 
4,984

 
317,896

 
322,880

 

Real estate - construction

 

 
1,472

 
1,472

 
263,436

 
264,908

 

Home equity and consumer
1,258

 
310

 
1,386

 
2,954

 
319,315

 
322,269

 
200

 
$
6,436

 
$
2,560

 
$
10,012

 
$
19,008

 
$
4,137,672

 
$
4,156,680

 
$
200


18


Impaired Loans
The Company defines impaired loans as all non-accrual loans and leases with recorded investments of $500,000 or greater. Impaired loans also include all loans that have been modified in troubled debt restructurings. Impaired loans as of September 30, 2018 and December 31, 2017 are as follows:
September 30, 2018
Recorded
Investment in
Impaired Loans
 
Contractual
Unpaid
Principal
Balance
 
Specific
Allowance
 
Average
Investment in
Impaired Loans
 
Interest
Income
Recognized
 
(in thousands)
Loans without specific allowance:
 
 
 
 
 
 
 
 
 
Commercial, secured by real estate
$
7,918

 
$
8,160

 
$

 
$
7,147

 
$
136

Commercial, industrial and other
1,329

 
1,610

 

 
1,799

 
14

Leases
301

 
597

 

 
258