UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, ~~2020~~

2022

☐
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number ~~333-239251~~

001-39610

___________________________

Eastern Bankshares, Inc.

(Exact name of the registrant as specified in its charter)

___________________________


Massachusetts						84-4199750
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification Number)

265 Franklin Street, Boston, Massachusetts						02110
(Address of principal executive offices)						(Zip Code)

(800) 327-8376

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock	EBC	Nasdaq Global Select Market

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 and (2) has been subject to such filing requirements for the past 90 days. ☐☒ Yes ☒☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☒

☐

Accelerated filer

☐

Non-accelerated filer

☐

☒

Smaller reporting company

☐

(Do not check if a 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. ☐ Yes ☐ No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

176,678,504 shares of the Registrant’s common stock, par value $0.01 per share, were ~~issued and~~ outstanding as of ~~September 23, 2020.~~

~~Index~~

November 2, 2022.

Table of Contents

Index


		PAGE
PART I.	FINANCIAL INFORMATION

~~ITEM~~ Item 1.	Financial Statements

	Unaudited Consolidated Balance Sheets		2	4
	Unaudited Consolidated Statements of Income		4	5
	Unaudited Consolidated Statements of Comprehensive Income		6
	Unaudited Consolidated Statements of Changes in Shareholders’ Equity		7
	Unaudited Consolidated Statements of Cash Flows		8	9
	Notes to Unaudited Consolidated Financial Statements		10	11

~~ITEM~~ Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		55	66

~~ITEM~~ Item 3.	Quantitative and Qualitative Disclosures about Market Risk		85	106

~~ITEM~~ Item 4.	Controls and Procedures		85	106

PART II.	OTHER INFORMATION

~~ITEM~~ Item 1.	Legal Proceedings		86	107

~~ITEM~~ Item 1A.	Risk Factors		86	107

~~ITEM~~ Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		86	107

~~ITEM~~ Item 3.	Defaults Upon Senior Securities		86	108

~~ITEM~~ Item 4.	Mine Safety Disclosures		86	108

~~ITEM~~ Item 5.	Other Information		86	108

~~ITEM~~ Item 6.	Exhibits		86	109

EXHIBIT INDEX				87	109

SIGNATURES		89	110

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements

EASTERN ~~BANK CORPORATION~~

BANKSHARES, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

   As of June 30, As of
December 31,
   2020 2019
   (In Thousands)
ASSETS

Cash and due from banks
   $ 67,264 $ 135,503
Short-term investments
   1,365,297 227,099


Cash and cash equivalents
   1,432,561 362,602


Securities:

Trading
   —   961
Available for sale
   1,600,354 1,508,236


Total securities
   1,600,354 1,509,197


Loans held for sale
   2,972 26
Loans:

Commercial and industrial
   2,271,700 1,642,184
Commercial real estate
   3,584,358 3,535,441
Commercial construction
   282,246 273,774
Business banking
   1,234,961 771,498
Residential real estate
   1,400,855 1,428,630
Consumer home equity
   905,484 933,088
Other consumer
   334,734 402,431


Total Loans
   10,014,338 8,987,046
Less: allowance for loan losses
   (116,636 ) (82,297 )
Less: unamortized premiums, net of unearned discounts and deferred fees
   (34,722 ) (5,565 )


Net Loans
   9,862,980 8,899,184


Federal Home Loan Bank stock, at cost
   8,805 9,027
Premises and equipment
   52,475 57,453
Bank-owned life insurance
   77,528 77,546
Goodwill and other intangibles, net
   376,331 377,734
Deferred income taxes, net
   7,663 28,207
Prepaid expenses
   92,517 61,336
Other assets
   482,337 246,463


Total Assets
   $ 13,996,523 $ 11,628,775


(In thousands, except per share data)						(In thousands, except per share data)	September 30, 2022		December 31, 2021
ASSETS						ASSETS
Cash and due from banks						Cash and due from banks	$	102,776	$	144,634
Short-term investments						Short-term investments	55,661		1,087,158
Cash and cash equivalents						Cash and cash equivalents	158,437		1,231,792
Securities:						Securities:
Available for sale (amortized cost $8,029,283 and $8,587,179, respectively)						Available for sale (amortized cost $8,029,283 and $8,587,179, respectively)	6,844,615		8,511,224
Held to maturity (fair value $431,477 and $0, respectively)						Held to maturity (fair value $431,477 and $0, respectively)	481,963		—
Total securities						Total securities	7,326,578		8,511,224
Loans held for sale						Loans held for sale	951		1,206
Loans:						Loans:
Commercial and industrial						Commercial and industrial	3,023,729		2,960,527
Commercial real estate						Commercial real estate	4,985,654		4,522,513
Commercial construction						Commercial construction	314,193		222,328
Business banking						Business banking	1,096,436		1,334,694
Residential real estate						Residential real estate	2,118,852		1,926,810
Consumer home equity						Consumer home equity	1,168,476		1,100,153
Other consumer						Other consumer	196,614		214,485
Total loans						Total loans	12,903,954		12,281,510
Allowance for loan losses						Allowance for loan losses	(131,663)		(97,787)
Unamortized premiums, net of unearned discounts and deferred fees						Unamortized premiums, net of unearned discounts and deferred fees	(19,349)		(26,442)
Net loans						Net loans	12,752,942		12,157,281
Federal Home Loan Bank stock, at cost						Federal Home Loan Bank stock, at cost	18,714		10,904
Premises and equipment						Premises and equipment	63,261		80,984
Bank-owned life insurance						Bank-owned life insurance	159,838		157,091
Goodwill and other intangibles, net						Goodwill and other intangibles, net	662,222		649,703
Deferred income taxes, net						Deferred income taxes, net	342,550		76,535
Prepaid expenses						Prepaid expenses	180,742		179,330
Other assets						Other assets	376,698		456,078
Total assets						Total assets	$	22,042,933	$	23,512,128
LIABILITIES AND EQUITY						LIABILITIES AND EQUITY
Deposits:						Deposits:
Demand	$	4,740,125	$	3,517,447		Demand	$	6,582,122	$	7,020,864
Interest checking accounts		2,385,912		1,814,327		Interest checking accounts	5,047,018		4,478,566
Savings accounts		1,157,606		971,119		Savings accounts	1,990,188		2,077,495
Money market investment		3,254,202		2,919,360		Money market investment	4,757,477		5,525,005
Certificate of deposits		308,920		329,139

Certificates of deposit						Certificates of deposit	356,576		526,381
Total deposits		11,846,765		9,551,392		Total deposits	18,733,381		19,628,311

Borrowed funds:						Borrowed funds:
Federal funds purchased		—		201,082
Federal Home Loan Bank advances		14,922		18,964		Federal Home Loan Bank advances	384,215		14,020
Escrow deposits of borrowers		14,233		15,349		Escrow deposits of borrowers	21,853		20,258

Interest rate swap collateral funds						Interest rate swap collateral funds	16,650		—
Total borrowed funds		29,155		235,395		Total borrowed funds	422,718		34,278

Other liabilities		426,973		241,835		Other liabilities	470,671		443,187

Total Liabilities		12,302,893		10,028,622

Commitments and contingencies
Total liabilities						Total liabilities	19,626,770		20,105,776
Commitments and contingencies (see footnote 12)						Commitments and contingencies (see footnote 12)
Shareholders’ equity						Shareholders’ equity
Common shares, $0.01 par value, 1,000,000,000 shares authorized, 177,772,553 and 186,305,332 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively						Common shares, $0.01 par value, 1,000,000,000 shares authorized, 177,772,553 and 186,305,332 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	1,778		1,863
Additional paid in capital						Additional paid in capital	1,676,396		1,835,241
Unallocated common shares held by the Employee Stock Ownership Plan						Unallocated common shares held by the Employee Stock Ownership Plan	(138,950)		(142,709)
Retained earnings		1,681,164		1,644,000		Retained earnings	1,855,757		1,768,653
Accumulated other comprehensive income, net of tax		12,466		(43,847	)	Accumulated other comprehensive income, net of tax	(978,818)		(56,696)

Total equity		1,693,630		1,600,153

Total liabilities and equity	$	13,996,523	$	11,628,775

Total shareholders’ equity						Total shareholders’ equity	2,416,163		3,406,352
Total liabilities and shareholders’ equity						Total liabilities and shareholders’ equity	$	22,042,933	$	23,512,128

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

Table of Contents

EASTERN ~~BANK CORPORATION~~

BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

   Three months ended June 30, Six months ended June 30,
   2020 2019 2020 2019
   (In Thousands)
Interest and dividend income:

Interest and fees on loans
   $ 92,143 $ 102,216 $ 187,681 $ 202,772
Taxable interest and dividends on available for sale securities
   7,600 7,901 15,778 15,953
Non-taxable interest and dividends on available for sale securities
   1,905 2,049 3,826 4,403
Interest on federal funds sold and other short-term investments
   284 612 801 965
Interest and dividends on trading securities
   1 60 6 228


Total interest and dividend income
   101,933 112,838 208,092 224,321


Interest expense:

Interest on deposits
   3,104 7,313 8,518 13,832
Interest on borrowings
   74 2,002 673 4,294


Total interest expense
   3,178 9,315 9,191 18,126


Net interest income
   98,755 103,523 198,901 206,195
Provision for allowance for credit losses
   8,600 1,500 37,200 4,500


Net interest income after provision for credit losses
   90,155 102,023 161,701 201,695


Noninterest income:

Insurance commissions
   22,697 24,135 50,174 48,897
Service charges on deposit accounts
   4,364 6,771 10,462 13,175
Trust and investment advisory fees
   5,194 4,980 10,289 9,608
Debit card processing fees
   2,337 2,638 4,807 5,048
Interest rate swap income (losses)
   771 (810 ) (5,238 ) (470 )
Income from investments held in rabbi trusts
   7,745 1,822 1,002 5,969
(Losses) gains on trading securities, net
   (1 ) 152 (3 ) 1,294
Gains on sales of mortgage loans held for sale, net
   1,420 159 1,513 209
Gains on sales of securities available for sale, net
   163 1,966 285 2,016
Other
   2,967 3,819 7,735 7,686


Total noninterest income
   47,657 45,632 81,026 93,432


Noninterest expense:

Salaries and employee benefits
   63,335 62,364 124,924 129,670
Office occupancy and equipment
   8,615 8,383 17,304 17,182
Data processing
   12,180 10,912 22,184 21,588


														Three Months Ended September 30,				Nine Months Ended September 30,
														2022		2021		2022		2021
														(In thousands, except per share data)
Interest and dividend income:													Interest and dividend income:
Interest and fees on loans													Interest and fees on loans	$	124,992	$	86,735	$	333,595	$	266,310
Taxable interest and dividends on securities													Taxable interest and dividends on securities	29,280		14,314		88,277		36,977
Non-taxable interest and dividends on securities													Non-taxable interest and dividends on securities	1,917		1,848		5,585		5,561
Interest on federal funds sold and other short-term investments													Interest on federal funds sold and other short-term investments	1,638		571		2,726		1,434
Total interest and dividend income													Total interest and dividend income	157,827		103,468		430,183		310,282
Interest expense:													Interest expense:
Interest on deposits													Interest on deposits	4,781		736		11,164		2,769
Interest on borrowings													Interest on borrowings	867		41		959		123
Total interest expense													Total interest expense	5,648		777		12,123		2,892
Net interest income													Net interest income	152,179		102,691		418,060		307,390
Provision for (release of) allowance for loan losses													Provision for (release of) allowance for loan losses	6,480		(1,488)		7,045		(5,368)
Net interest income after provision for loan losses													Net interest income after provision for loan losses	145,699		104,179		411,015		312,758
Noninterest income:													Noninterest income:
Insurance commissions													Insurance commissions	23,788		21,956		77,183		73,767
Service charges on deposit accounts													Service charges on deposit accounts	6,708		5,935		23,558		17,010
Trust and investment advisory fees													Trust and investment advisory fees	5,832		6,310		17,967		18,047
Debit card processing fees													Debit card processing fees	3,249		3,030		9,417		8,949
Interest rate swap income													Interest rate swap income	1,562		881		6,087		5,122
(Losses) income from investments held in rabbi trusts													(Losses) income from investments held in rabbi trusts	(2,248)		(289)		(13,997)		5,773
Gains on sales of mortgage loans held for sale, net													Gains on sales of mortgage loans held for sale, net	22		717		240		3,044
(Losses) gains on sales of securities available for sale, net													(Losses) gains on sales of securities available for sale, net	(198)		1		(2,474)		1,166
Other													Other	4,638		4,668		13,664		11,276
Total noninterest income													Total noninterest income	43,353		43,209		131,645		144,154
Noninterest expense:													Noninterest expense:
Salaries and employee benefits													Salaries and employee benefits	78,060		66,238		220,582		199,554
Office occupancy and equipment													Office occupancy and equipment	9,703		7,960		31,205		24,271
Data processing													Data processing	13,294		12,191		42,959		37,892
Professional services		4,396			3,966			8,085			7,104		Professional services	5,826		4,024		14,561		14,611
Charitable contributions		2,797			3,683			3,984			7,331
Marketing		1,645			2,683			4,113			4,406
Marketing expenses													Marketing expenses	2,219		1,598		6,444		6,786
Loan expenses		2,036			886			3,148			1,551		Loan expenses	1,152		1,586		3,444		5,287
FDIC insurance		944			927			1,850			1,800		FDIC insurance	1,578		1,056		4,710		2,989
Amortization of intangible assets		701			886			1,403			1,773		Amortization of intangible assets	1,033		629		2,767		1,786
Net periodic benefit cost, excluding service cost		(2,443	)		(1,334	)		(4,885	)		(2,668	)
Other		6,559			8,214			13,827			16,662		Other	3,975		3,688		10,173		7,178

Total noninterest expense		100,765			101,570			195,937			206,399		Total noninterest expense	116,840		98,970		336,845		300,354

Income before income tax expense		37,047			46,085			46,790			88,728		Income before income tax expense	72,212		48,418		205,815		156,558
Income tax expense		7,197			11,032			8,495			20,710		Income tax expense	17,435		11,312		48,350		36,980

Net Income	$	29,850		$	35,053		$	38,295		$	68,018

Net income													Net income	$	54,777	$	37,106	$	157,465	$	119,578
Basic earnings per share													Basic earnings per share	$	0.33	$	0.22	$	0.94	$	0.69
Diluted earnings per share													Diluted earnings per share	$	0.33	$	0.22	$	0.94	$	0.69

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

Table of Contents

EASTERN ~~BANK CORPORATION~~

BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

   Three Months Ended June 30,    Six Months Ended June 30,
   2020 2019    2020    2019
   (In Thousands)
Net income
   $ 29,850 $ 35,053    $ 38,295    $ 68,018






Other comprehensive income, net of tax:

Net change in fair value of securities available for sale
   287 10,134    26,479    35,124
Net change in fair value of cash flow hedges
   (2,645 ) 11,375    26,430    15,377
Net change in other comprehensive income for defined benefit postretirement plans
   3,404 —      3,404    —






Total other comprehensive income
   1,046 21,509    56,313    50,501






Total comprehensive income
   $ 30,896 $ 56,562    $ 94,608    $ 118,519


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(In thousands)
Net income	$	54,777	$	37,106	$	157,465	$	119,578
Other comprehensive (loss) income, net of tax:
Net change in fair value of securities available for sale	(261,469)		(21,610)		(860,269)		(71,086)
Net change in fair value of cash flow hedges	(56,062)		(5,644)		(61,482)		(17,501)
Net change in other comprehensive income for defined benefit postretirement plans	(124)		426		(371)		1,278
Total other comprehensive (loss) income	(317,655)		(26,828)		(922,122)		(87,309)
Total comprehensive (loss) income	$	(262,878)	$	10,278	$	(764,657)	$	32,269

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

Table of Contents

EASTERN ~~BANK CORPORATION~~

BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

   Retained
Earnings Accumulated
Other
Comprehensive
Income Total
   (In Thousands)
Balance at December 31, 2019
   $ 1,644,000 $ (43,847 ) $ 1,600,153
Cumulative effect accounting adjustment ⁽¹⁾
   (1,131 ) (1,131 )
Net income
   8,445 —   8,445
Other comprehensive income, net of tax
   —   55,267 55,267


Balance at March 31, 2020
   $ 1,651,314 $ 11,420 $ 1,662,734


Net income
   29,850 —   29,850
Other comprehensive income, net of tax
   —   1,046 1,046


Balance at June 30, 2020
   $ 1,681,164 $ 12,466 $ 1,693,630


Balance at December 31, 2018
   $ 1,508,902 $ (75,761 ) $ 1,433,141
Net income
   32,965 —   32,965
Other comprehensive income, net of tax
   —   28,992 28,992


Balance at March 31, 2019
   $ 1,541,867 $ (46,769 ) $ 1,495,098


Net income
   35,053 —   35,053
Other comprehensive income, net of tax
   —   21,509 21,509


Balance at June 30, 2019
   $ 1,576,920 $ (25,260 ) $ 1,551,660

~~(1)~~

Represents cumulative impact on retained earnings pursuant to the Company’s adoption of Accounting Standards Update 2016-02 Leases. The transition adjustment to the opening balance of retained earnings on January 1, 2020 amounted to $1.1 million, net of tax, related to an incremental accrued rent adjustment calculated as a result of electing the hindsight practical expedient.

Three Months Ended September 30, 2022 and 2021


	Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Unallocated Common Stock Held by ESOP		Total
	(In thousands, except share data)
Balance at June 30, 2021	186,758,154	$	1,868	$	1,856,241	$	1,723,979	$	(6,247)	$	(145,219)	$	3,430,622
Dividends to common shareholders	—	—		—		(13,785)		—		—		(13,785)
Net income	—	—		—		37,106		—		—		37,106
Other comprehensive income, net of tax	—	—		—		—		(26,828)		—		(26,828)
ESOP shares committed to be released	—	—		924		—		—		1,253		2,177
Balance at September 30, 2021	186,758,154	$	1,868	$	1,857,165	$	1,747,300	$	(33,075)	$	(143,966)	$	3,429,292

Balance at June 30, 2022	179,253,801	$	1,793	$	1,700,495	$	1,817,474	$	(661,163)	$	(140,203)	$	2,718,396
Dividends to common shareholders	—	—		—		(16,494)		—		—		(16,494)
Repurchased common stock	(1,481,248)	(15)		(28,935)		—		—		—		(28,950)
Share-based compensation	—	—		3,561		—		—		—		3,561
Net income	—	—		—		54,777		—		—		54,777
Other comprehensive income, net of tax	—	—		—		—		(317,655)		—		(317,655)
ESOP shares committed to be released	—	—		1,275		—		—		1,253		2,528
Balance at September 30, 2022	177,772,553	$	1,778	$	1,676,396	$	1,855,757	$	(978,818)	$	(138,950)	$	2,416,163

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

EASTERN ~~BANK CORPORATION~~

BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~

   Six Months Ended June 30,
   2020 2019
   (In Thousands)
Operating activities

Net income
   $ 38,295 $ 68,018
Adjustments to reconcile net income to net cash provided by operating activities

Provision for loan losses
   37,200 4,500
Depreciation and amortization
   8,471 9,781
Change in unamortized net loan costs and premiums
   (3,155 ) 2,501
Deferred income tax expense (benefit)
   1,773 6,052
Amortization of investment security premiums and discounts
   1,656 1,502
Right-of-use asset amortization
   6,042 —
Increase in cash surrender value of bank-owned life insurance
   (1,155 ) (1,092 )
Gain on life insurance benefits
   (147 ) —
Net gain on sale of securities available for sale
   (285 ) (2,016 )
Net gain on sale of mortgage loans held for sale
   (1,513 ) (209 )
Mark-to-market on loans held for sale
   19 —
Proceeds from sale of loans held for sale
   172,872 53,104
Originations of loans held for sale
   (174,324 ) (54,857 )
Amortization of gains from terminated interest rate swaps
   (373 ) —
Loss on sale of premises and equipment
   —   131
Change in:

Trading securities
   961 51,444
Prepaid pension expense
   (28,432 ) (15,515 )
Other assets
   (133,413 ) (30,070 )
Other liabilities
   77,509 (8,620 )


Net cash provided by operating activities
   2,001 84,654


Investing activities

Proceeds from sales of securities available for sale
   9,098 47,986
Proceeds from maturities and principal paydowns of securities available for sale
   153,542 85,226
Purchases of securities available for sale
   (171,226 ) (35,981 )
Proceeds from sale of Federal Home Loan Bank stock
   749 31,862
Purchases of Federal Home Loan Bank stock
   (527 ) (27,453 )
Contributions to low income housing tax credit investments
   (7,435 ) (946 )
Distributions from low income housing tax credit investments
   —   3
Contributions to other equity investments
   (1,092 ) —
Distributions from equity investments
   54 15
Net increase in outstanding loans
   (997,881 ) (176,135 )
Purchased banking premises and equipment, net
   (2,146 ) (3,780 )


Net cash used in investing activities
   (1,016,864 ) (79,203 )


Financing activities

Net increase in demand, savings, interest checking, and money market investment deposit accounts
   2,315,592 107,136
Net decrease in time deposits
   (20,219 ) (65,525 )
Net decrease in borrowed funds
   (206,240 ) (14,714 )
CHANGES IN SHAREHOLDERS’ EQUITY

Contingent consideration paid
   (158 ) (447 )
Payment of initial public offering costs
   (4,153 ) —


Net cash provided by financing activities
   2,084,822 26,450


Net increase in cash, cash equivalents, and restricted cash
   1,069,959 31,901
Cash, cash equivalents, and restricted cash at beginning of period
   362,602 259,708


Cash, cash equivalents, and restricted cash at end of period
   $ 1,432,561 $ 291,609


Supplemental disclosure of cash flow information

Cash paid during the period for:

Interest paid
   $ 10,533 $ 17,697
Income taxes
   14,976 20,335
Non-cash activities

Net increase in capital commitments relating to low income housing tax credit projects
   $ 13,214 $ —
Initial recognition of operating lease right-of-use assets upon adoption of Accounting Standards Update 2016-02
   92,948 —
Initial recognition of operating lease liabilities upon adoption of Accounting Standards Update 2016-02
   96,426 —

Nine Months Ended September 30, 2022 and 2021


	Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Unallocated Common Stock Held by ESOP		Total
	(In thousands, except share data)
Balance at December 31, 2020	186,758,154	$	1,868	$	1,854,068	$	1,665,607	$	54,234	$	(147,725)	$	3,428,052
Dividends to common shareholders	—	—		—		(37,885)		—		—		(37,885)
Net income	—	—		—		119,578		—		—		119,578
Other comprehensive income, net of tax	—	—		—		—		(87,309)		—		(87,309)
ESOP shares committed to be released	—	—		3,097		—		—		3,759		6,856
Balance at September 30, 2021	186,758,154	$	1,868	$	1,857,165	$	1,747,300	$	(33,075)	$	(143,966)	$	3,429,292

Balance at December 31, 2021	186,305,332	$	1,863	$	1,835,241	$	1,768,653	$	(56,696)	$	(142,709)	$	3,406,352
Cumulative effect of accounting adjustment (1)	—	—		—		(20,098)		—		—		(20,098)
Dividends to common shareholders	—	—		—		(50,263)		—		—		(50,263)
Repurchased common stock	(8,564,338)	(86)		(170,685)		—		—		—		(170,771)
Issuance of restricted stock awards	31,559	1		(1)		—		—		—		—
Share-based compensation	—	—		8,092		—		—		—		8,092
Net income	—	—		—		157,465		—		—		157,465
Other comprehensive loss, net of tax	—	—		—		—		(922,122)		—		(922,122)
ESOP shares committed to be released	—	—		3,749		—		—		3,759		7,508
Balance at September 30, 2022	177,772,553	$	1,778	$	1,676,396	$	1,855,757	$	(978,818)	$	(138,950)	$	2,416,163

(1)Represents gross transition adjustment amount of $28.0 million, net of taxes of $7.9 million, to reflect the cumulative impact on retained earnings pursuant to the Company’s adoption of Accounting Standards Update 2016-13. Refer to Note 4, “Loans and Allowance for Credit Losses” within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q for additional discussion.

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

Table of Contents

EASTERN ~~BANK CORPORATION~~

BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,
(In thousands) 2022 2021
Operating activities
Net income $ 157,465 $ 119,578
Adjustments to reconcile net income to net cash provided by operating activities
Provision for (release of) allowance for loan losses 7,045 (5,368)
Depreciation and amortization 11,021 9,932
Accretion of deferred loan fees and premiums, net (3,499) (19,126)
Deferred income tax expense 12,929 5,606
Amortization of investment security premiums and discounts 15,251 11,084
Right-of-use asset amortization 9,822 9,172
Share-based compensation 8,092 —
Increase in cash surrender value of bank-owned life insurance (2,747) (1,598)
Loss (gain) on sale of securities available for sale, net 2,474 (1,166)
Net (gain) loss on sale of premises and equipment (1,423) 259
Amortization of gains from terminated interest rate swaps (9,653) (24,344)
Employee Stock Ownership Plan expense 7,508 6,856
Other 1,266 (1,014)
Change in:
Loans held for sale 245 (610)
Prepaid pension expense (8,599) 2,515
Other assets 70,088 34,227
Other liabilities (50,781) (18,904)
Net cash provided by operating activities 226,504 127,099
Investing activities
Proceeds from sales of securities available for sale 400,543 23,237
Proceeds from maturities and principal paydowns of securities available for sale 880,145 573,135
Purchases of securities available for sale (740,770) (3,202,995)
Proceeds from maturities and principal paydowns of securities held to maturity 11,968 —
Purchases of securities held to maturity (493,678) —
Proceeds from sale of Federal Home Loan Bank stock 16,214 —
Purchases of Federal Home Loan Bank stock (24,024) (1,796)
Contributions to low income housing tax credit investments (14,967) (10,168)
Contributions to other equity investments (450) (2,294)
Distributions from other equity investments 762 258
Net (increase) decrease in outstanding loans, excluding loan purchases (546,296) 240,354
Purchases of loans (79,880) —
Proceeds from life insurance policies 20,446 —
Acquisitions, net of cash and cash equivalents acquired (13,400) (4,354)
Purchased banking premises and equipment, net (6,381) (3,791)
Proceeds from sale of premises held for sale 17,313 736
Proceeds from sale of other real estate owned — 125
Net cash used in investing activities (572,455) (2,387,553)
Financing activities
Net (decrease) increase in demand, savings, interest checking, and money market investment deposit accounts (725,125) 1,527,724
Net decrease in time deposits (169,805) (33,544)
Net increase in borrowed funds 388,440 2,023
Contingent consideration paid (384) (173)
Payments for repurchases of common stock (170,771) —
Dividends declared and paid to common shareholders (49,759) (37,885)
Net cash (used in) provided by financing activities (727,404) 1,458,145
Net decrease in cash, cash equivalents, and restricted cash (1,073,355) (802,309)
Cash, cash equivalents, and restricted cash at beginning of period 1,231,792 2,054,070
Cash, cash equivalents, and restricted cash at end of period $ 158,437 $ 1,251,761

Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest paid $ 12,036 $ 2,943
Income taxes 24,540 42,432
Non-cash activities
Net increase in capital commitments relating to low income housing tax credit projects $ 30,378 $ 28,291
Net decrease in operating lease right-of-use assets and operating lease liabilities relating to lease remeasurements (see footnote 6 in the Notes to the Unaudited Consolidated Financial Statements) 14,082 —
The accompanying notes are an integral part of these unaudited consolidated financial statements.
10
Table of Contents

EASTERN BANKSHARES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Structure and Nature of ~~the Business and~~Operations; Basis of Presentation

Corporate Structure and Nature of Operations

Eastern ~~Bank Corporation~~Bankshares, Inc., a Massachusetts corporation (the “Company”), is a ~~Massachusetts-chartered mutual~~ bank holding company. Through its wholly-owned subsidiaries, Eastern Bank (the “Bank”) and Eastern Insurance Group LLC (“Eastern Insurance Group”), the Company provides a variety of banking services, trust and investment services, and insurance services, through its full-service bank branches and insurance offices, located primarily in ~~Eastern~~eastern Massachusetts, southern and coastal New Hampshire and Rhode Island.

Eastern Insurance Group LLC is a wholly-owned subsidiary of the Bank.

The activities of the Company are subject to the regulatory supervision of the Board of Governors of the Federal Reserve ~~Board.~~System (“Federal Reserve”). The activities of the Bank are subject to the regulatory supervision of the Massachusetts Commissioner of Banks, the Federal Deposit Insurance Corporation (“FDIC”) and the Consumer Financial Protection ~~Bureau (“CFPB”).~~Bureau. The Company and the activities of the Bank and its subsidiaries are also subject to various Massachusetts, ~~and~~ New Hampshire and Rhode Island business, banking and ~~banking~~insurance regulations.

Basis of Presentation

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) as set forth by the Financial Accounting Standards Board (“FASB”) and its Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) as well as the rules and interpretive releases of the U.S. Securities and Exchange Commission (“SEC”) under the authority of federal securities laws.

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and entities in which it holds a controlling financial interest through being the primary beneficiary or through holding a majority of the voting interest. All intercompany accounts and transactions have been eliminated in consolidation.

Certain previously reported amounts have been reclassified to conform to the current period’s presentation.

The accompanying consolidated balance sheet as of September 30, 2022, the consolidated statements of income and comprehensive income and of changes in shareholders’ equity for the three and nine months ended September 30, 2022 and 2021 and statements of cash flows for the nine months ended September 30, 2022 and 2021 are unaudited. The consolidated balance sheet as of December 31, 2021 was derived from the audited consolidated financial statements as of that date. The interim consolidated financial statements and the accompanying notes should be read in conjunction with the annual consolidated financial statements and the accompanying notes contained within the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“2021 Form 10-K”), as filed with the SEC. In the opinion of management, the Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) as set forth by the Financial Accounting Standards Board (“FASB”) and its Accounting Standards Codification and Accounting Standards Update as well as the rules and interpretive releasesreflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the ~~Securities~~results of operations for the periods presented. The results for the three and ~~Exchange Commission (“SEC”) under~~nine months ended September 30, 2022 are not necessarily indicative of results to be expected for the ~~authority of federal securities laws.~~

year ending December 31, 2022, any other interim periods, or any future year or period.

2. Summary of Significant Accounting Policies

The following describes the Company’s use of estimates as well as relevant accounting pronouncements that were recently issued but not yet adopted as of September 30, 2022 and those that were adopted during the nine months ended September 30, 2022. For a full discussion of significant accounting policies, refer to the Notes to the Consolidated Financial Statements included within the Company’s 2021 Form 10-K.

Use of Estimates

In preparing the ~~consolidated financial statements,~~Consolidated Financial Statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheets and income and expenses for the periods reported. Actual results could differ from those estimates based on changing conditions, including economic conditions and future events. Material estimates that are particularly susceptible to change relate to the determination of the allowance for ~~loan~~credit losses, valuation and fair value measurements, ~~other-than-temporary impairment on investment securities,~~ the liabilities for benefit obligations (particularly pensions), the provision for income taxes and impairment of goodwill and other intangibles.

~~Unaudited Interim Financial Information~~

~~The accompanying consolidated balance sheet as~~

Table of June 30, 2020, the consolidated statements of income and comprehensive income, of changes in equity and of cash flows for the three and six months ended June 30, 2020 and 2019 are unaudited. The consolidated balance sheet as of December 31, 2019 was derived from the audited consolidated financial statements as of that date. The interim consolidated financial statements and the accompanying notes should be read in conjunction with the annual consolidated financial statements and the accompanying notes contained within the Company’s prospectus, filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on August 18, 2020. In the opinion of management, the Company’s consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The results for the three and six months ended June 30, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020, any other interim periods, or any future year or period.

~~Leases~~

On January 1, 2020, the Company adopted Accounting Standards Update (‘ASU”) 2016-02, “Leases” (“Topic 842”), using the modified retrospective method. The new guidance was applied to leases that existed or were entered into on or after January 1, 2020. The Company’s results for the reporting period beginning on January 1, 2020 have been presented under Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with previous guidance. See “Note 5 – Leases” for further discussion of the adoption and the impact on the Company’s consolidated financial statements.

Contents

Recent Accounting Pronouncements

Relevant standards that were recently issued but not yet adopted as of September 30, 2022:

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). This update modifies how an acquiring entity measures contract assets and contract liabilities of an acquiree in a business combination in accordance with Topic 606. The amendments in this update require the acquiring entity in a business combination to account for revenue contracts as if they had originated the contract and assess how the acquiree accounted for the contract under Topic 606. ASU 2021-08 improves comparability of recognition and measurement of revenue contracts with customers both before and after a business combination. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2022. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023. The amendments in this update should be applied prospectively to business combinations occurring on or after the effective date of the amendments with early adoption permitted. The Company expects the adoption of this standard will not have a material impact on its consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments–Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”). The amendments in this update eliminate the accounting guidance on troubled debt restructurings (“TDRs”) for creditors in ASC 310-40 and amends the guidance on vintage disclosures, referenced in ASC 326-20-50, to require disclosure of current-period gross write-offs by year of origination. This update supersedes the existing accounting guidance for TDRs in ASC 310-40 in its entirety and requires entities to evaluate all receivable modifications under existing accounting guidance in ASC 310-20 to determine whether a modification made to a borrower results in a new loan or a continuation of an existing loan. In addition to the elimination of TDR accounting guidance, entities that adopt this update will no longer consider renewals, modifications and extensions that result from reasonably expected TDRs in their calculation of the allowance for credit losses. Further, if an entity employs a discounted cash flow method to calculate the allowance for credit losses, it will be required to use a post-modification-derived effective interest rate as part of its calculation. The update also requires new disclosures for receivables for which there has been a modification in their contractual cash flows resulting from borrowers experiencing financial difficulties. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Entities may elect to apply the updated guidance on TDR recognition and measurement by using a modified retrospective transition method. The amendments on TDR disclosures and vintage disclosures should be adopted prospectively. The Company expects the adoption of this standard will not have a material impact on its consolidated financial statements.

Relevant standards that were adopted during the nine months ended September 30, 2022:

In June ~~30, 2020:~~

2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses on Financial Instruments and relevant amendments (Topic 326) (“ASU 2016-13”). This update was created to replace the then-current GAAP method of calculating credit losses. Specifically, the standard replaced the previous incurred loss impairment guidance by requiring immediate recognition of expected credit losses. For financial assets carried at amortized cost that are held at the reporting date (including trade and other receivables, loans and commitments, held-to-maturity debt securities and other financial assets), credit losses are measured based on historical experience, current conditions and reasonable supportable forecasts. The standard also amends previous impairment guidance for available for sale securities, in which credit losses are recorded as an allowance versus a write-down of the amortized cost basis of the security. It also allows for a reversal of impairment loss when the credit of the issuer improves. The guidance requires a cumulative effect of the initial application to be recognized in retained earnings at the date of initial application.

In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses (“ASU 2018-19”). The amendments in ASU 2018-19 were intended to clarify that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. This update requires entities to include expected recoveries of the amortized cost basis previously written off or expected to be written off in the valuation account for purchased financial assets with credit deterioration. In addition, the amendments in this update clarify and improve various aspects of the guidance for ASU 2016-13.

On January 1, 2022, the Company adopted ASUs 2016-13, 2018-19 and 2019-11 (codified in ASC 326, “Financial Instruments-Credit Losses”), which replaced the incurred loss methodology (codified in ASC 450, “Contingencies,” ASC 310, “Receivables” and ASC 320, “Debt Securities”) with an expected loss methodology that is referred to as current expected credit losses methodology (“CECL methodology”). The Company adopted ASU 2016-13 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures by means of a cumulative-effect adjustment to the opening retained earnings balance on the Company’s consolidated balance sheet as of the Company’s date of adoption of January 1, 2022. Accordingly, results for reporting periods beginning after December

Table of Contents

31, 2021 are presented under ASU 2016-13, while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a net decrease to retained earnings of $20.1 million, net of deferred taxes of $7.9 million, as of January 1, 2022, for the cumulative effect of adopting ASU 2016-13. The Company adopted ASU 2016-13 using the prospective transition approach for purchased credit-deteriorated (“PCD”) financial assets that were previously classified as purchased credit-impaired (“PCI”) financial assets and accounted for under ASC 310-30. In accordance with ASU 2016-13, the Company did not reassess whether its assets previously classified as PCI assets met the criteria of PCD assets as of the date of adoption. Rather, loans previously determined to be PCI loans are considered to be PCD loans as of January 1, 2022. On January 1, 2022, the amortized cost basis of the PCD assets was adjusted to reflect the addition of the allowance for loan losses on PCD loans. The remaining noncredit discount will be accreted into the Company’s interest income at the then-effective interest rate as of January 1, 2022. The amount of the adjustment for PCD assets was not material to the Company.

In March 2020, the FASB issued ASU 2020-4, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). This update addresses optional expedients and exceptions for applying GAAP to certain contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The new guidance applies only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships ~~existing~~that exist as of December 31, 2022, ~~that~~for which an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. For public and nonpublic entities, the guidance is effective as of March 12, 2020 through December 31, 2022 and dodoes not apply to contract modifications made after December 31, 2022. The Company qualifies as an emerging growth company (“EGC”) under the Jumpstart Our Business Act of 2012 and has elected to defer the adoption of new or revised accounting standards until the nonpublic company effective dates. As such, the Company will adopt this standard on the nonpublic company effective date and is currently in the process of reviewingperformed a review its contracts and existing processes ~~in order~~ to assess the risks and potential impact of the transition away from ~~LIBOR.~~

~~In June 2016, FASB issued~~ LIBOR and noted no material impact to the Company’s consolidated financial statements as of September 30, 2022.

Significant Accounting Policies

The adoption of the ASUs 2016-13, 2018-19 and 2019-11 resulted in changes in the Company’s accounting policies and estimates as it relates to available for sale securities, held to maturity securities, loans receivable and off-balance sheet commitments to lend. The following describes the changes to the Company’s significant accounting policies from December 31, 2021, that resulted from the adoption of the ASUs described above:

Allowance for Credit Losses - Available for Sale Securities

ASU 2016-13 ~~Financial Instruments–Credit Losses on Financial Instruments and relevant amendments~~ ~~(Topic 326) (“ASU 2016-13”). This update was created~~made targeted changes to ~~replace~~ASC 320 to eliminate the ~~current GAAP method~~concept of ~~calculating credit losses Specifically,~~“other than temporary” from the ~~standard replaces the existing incurred~~impairment loss impairment guidance by requiring immediate recognition of expected credit losses. For financial assets carried at amortized cost that are held at the reporting date (including trade and other receivables, loans and commitments, held-to-maturity debt securities and other financial assets). Credit losses are measured based on historical experience, current conditions and reasonable supportable forecasts. The standard also amends existing impairment guidanceestimation model for available for sale (“AFS”) securities. A summary of the changes made by the Company to the existing impairment model (previously referred to as the “OTTI” model) as a result of adoption of ASU 2016-13 is as follows:

•The use of an allowance approach, rather than a permanent write-down of a security’s cost basis upon determination of an impairment loss.

•The amount of the allowance is limited to the amount at which the security’s fair value is less than its amortized cost basis.

•The Company may not consider the length of time a security’s fair value has been less than amortized cost.

•The Company may not consider recoveries in fair value after the balance sheet date when assessing whether a credit loss exists.

The Company’s AFS securities are carried at fair value. For AFS securities in an unrealized loss position, management will first evaluate whether there is intent to sell a security, or if it is more likely than not that the Company will be required to sell a security prior to anticipated recovery of its amortized cost basis. If either of these criteria are met, the Company will record a write-down of the security’s amortized cost basis to fair value through income. For those AFS securities which do not meet the intent or requirement to sell criteria, management will evaluate whether the decline in fair value is a result of credit related matters or other factors. In performing this assessment, management considers the creditworthiness of the issuer including whether the security is guaranteed by the U.S. federal government or other government agency, the extent to which fair value is less than amortized cost, and changes in credit rating during the period, among other factors. If this assessment indicates the existence of credit losses, the security will be written down to fair value, as determined by a discounted cash flow analysis. To the extent the estimated cash flows do not support the amortized cost, the deficiency is considered to be due to credit loss and is recognized in earnings.

Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense. Losses are charged against the allowance when the security is determined to be uncollectible, or when either of the aforementioned criteria surrounding intent or requirement to sell have been met. On January 1, 2022, the date on which the Company adopted ASU 2016-13, no allowance for credit losses was recorded for AFS securities.

Table of Contents

Refer to Note 3, “Securities” for additional information regarding the measurement of impairment losses on AFS securities.

Allowance for Credit Losses - Held to Maturity Securities

The Company measures expected credit losses on held to maturity (“HTM”) securities on a collective basis by major security type which, as of September 30, 2022, includes government-sponsored residential and commercial mortgage-backed securities. Securities in the Company’s held to maturity portfolio are guaranteed by either the U.S. federal government or other government sponsored agencies with a long history of no credit losses. As a result, management has determined that these securities have a zero loss expectation and therefore does not estimate an allowance for credit losses on these securities. The Company held no securities classified as held to maturity at December 31, 2021. Refer to Note 3, “Securities” for additional information regarding the measurement of credit losses on HTM securities.

Allowance for Loan Losses - Loans Held for Investment

Loans Individually Assessed for Impairment

ASU 2016-13 indicates that a loan should be measured for impairment individually if that loan shares no similar risk characteristics with other loans. For the Company, loans which have been identified as those to be individually assessed for impairment under CECL include loans that do not share similar risk characteristics with other loans in the corresponding reserve segment. Characteristics of loans meeting this definition may include, but are not limited to:

•Loans previously restructured and determined to be TDR loans;

•Loans on non-accrual status; and

•Loans with a risk rating of 12 under the Company’s risk rating scale, substandard (well-defined weakness) or worse.

Collateral-Dependent Loans

Management considers a loan to be collateral-dependent when foreclosure of the underlying collateral is probable. In addition, in accordance with ASU 2016-13, the Company elected to apply the collateral-dependent practical expedient whereby the Company measures expected credit losses using the fair value of the collateral, less any estimated costs to sell, when foreclosure is not probable but repayment of the loan is expected to be provided substantially through the operation or sale of the collateral, and the borrower is experiencing financial difficulty.

Troubled Debt Restructured Loans

In cases where a borrower experiences financial difficulties and the Company makes certain concessionary modifications to contractual terms, the loan is classified as a TDR. Modifications may include adjustments to interest rates, extensions of maturity, consumer loans where the borrower’s obligations have been effectively discharged through Chapter 7 bankruptcy and the borrower has not reaffirmed the debt to the Company, and other actions intended to minimize economic loss and avoid foreclosure or repossession of collateral. Prior to the Company’s adoption of ASU 2016-13, all TDR loans were subject to a specific review for impairment loss each period beginning in the period in which the modification was executed. Subsequent to the adoption of ASU 2016-13, management identifies loans as TDR loans when it has a reasonable expectation that it will execute a TDR modification with a borrower. In addition, subsequent to adoption of ASU 2016-13, management estimates expected credit losses on a collective basis if a group of TDR loans share similar risk characteristics. If a TDR loan’s risk characteristics are not similar to those of any of the Company’s other TDR loans, expected credit losses on the TDR loan are measured individually. The impairment analysis discounts the present value of the anticipated cash flows by the loan’s contractual rate of interest in effect prior to the loan’s modification or the fair value of collateral if the loan is collateral dependent. The amount of credit loss, if any, is recorded as a specific loss allocation to each individual loan or as a loss allocation to the pool of loans, for those loans for which credit loss is measured on a collective basis, in the allowance for credit losses. Any commercial (commercial and industrial, commercial real estate, commercial construction, and business banking loans) or residential loan that has been classified as a TDR and which subsequently defaults is reviewed to determine if the loan should be deemed collateral-dependent. In such an instance, any shortfall between the value of the collateral and the book value of the loan is determined by measuring the recorded investment in the loan against the fair value of the collateral less costs to sell.

The Company’s policy is to retain any restructured loan, which is on non-accrual status prior to being modified, on non-accrual status for approximately six months subsequent to being modified before the Company considers its return to accrual status. If the restructured loan is on accrual status prior to being modified, the Company reviews it to determine if the modified loan should remain on accrual status.

Table of Contents

Purchased Credit-Deteriorated Loans

As described above, the Company applied the prospective transition approach with respect to PCD assets upon adoption of ASU 2016-13. Under this approach, loans previously determined to be PCI loans are considered to be PCD loans as of January 1, 2022. PCD loans are acquired individual loans (or acquired groups of loans with similar risk characteristics) that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the Company’s assessment. A PCD loan is recorded at its purchase price plus the allowance for loan losses ~~will be recorded as an allowance versus a write-down~~expected at the time of acquisition, or “gross up” of the amortized cost basis, if any. Changes in the current estimate of the ~~security. It will also allow~~allowance for aloan losses subsequent to acquisition from the estimated allowance previously recorded are recognized in the income statement as provision for credit losses or reversal of ~~impairment loss when~~provision for credit losses in subsequent periods as they arise. A purchased loan that does not qualify as a PCD asset is accounted for similar to the Company’s method of accounting for originated assets, whereby an allowance for loan losses is recognized with a corresponding increase to the income statement provision for loan losses. Evidence that purchased loans, measured at amortized cost, have more-than-insignificant deterioration in credit quality since origination and, therefore meet the PCD definition, may include past-due status, non-accrual status, risk rating and other standard indicators (i.e., TDRs, charge-offs, bankruptcy).

Allowance for Credit Losses

Through December 31, 2021, the allowance for loan losses represented management’s best estimate of incurred probable losses in the Company’s loan portfolios based upon management’s assessment of various factors, including the risk characteristics of its loan portfolio, current economic conditions, and trends in loan delinquencies and charge-offs. The Company’s methodology for determining the qualitative component through December 31, 2021 included an assessment of factors affecting the determination of incurred losses in the loan portfolio. Such factors included trends in economic conditions, loan growth, credit underwriting policy exceptions, regulatory and audit findings, and peer comparisons, among others. Upon adoption of ASU 2016-13, effective January 1, 2022, the Company changed its reserve methodology to estimate expected credit losses over the contractual life of loans and leases.

The allowance for credit losses, or ACL, is established to provide for the Company’s current estimate of expected lifetime credit losses on loans measured at amortized cost and unfunded lending commitments at the balance sheet date and is established through a provision for credit losses charged to net income. Credit losses are charged directly to the ACL. Subsequent recoveries, if any, are credited to the ACL. Commercial and residential loans are charged-off in the period in which they are deemed uncollectible. Delinquent loans in these product types are subject to ongoing review and analysis to determine if a charge-off in the current period is appropriate. For consumer finance loans, policies and procedures exist that require charge-off consideration upon a certain triggering event depending on the product type. Charge-off triggers include: 120 days delinquent for automobile, home equity, and other consumer loans with the exception of cash reserve loans for which the trigger is 150 days delinquent; death of the ~~issuer improves.~~ borrower; or Chapter 7 bankruptcy. In addition to those events, the charge-off determination includes other loan quality indicators, such as collateral position and adequacy or the presence of other repayment sources.

The ~~guidance requires~~ACL is evaluated on a ~~cumulative~~regular basis by management. Management uses a methodology to systematically estimate the amount of expected lifetime losses in the portfolio. Expected lifetime losses are estimated on a collective basis for loans sharing similar risk characteristics and are determined using a quantitative model combined with an assessment of certain qualitative factors designed to address forecast risk and model risk inherent in the quantitative model output. For commercial and industrial, commercial real estate, commercial construction and business banking portfolios, the quantitative model uses a loan rating system which is comprised of management’s determination of a financial asset’s probability of default (“PD”), loss given default (“LGD”) and exposure at default (“EAD”), which are derived from historical loss experience and other factors. For residential real estate, consumer home equity and other consumer portfolios, the Company’s quantitative model uses historical loss experience.

The quantitative model estimates expected credit losses using loan level data over the estimated life of the exposure, considering the effect of prepayments. Economic forecasts are incorporated into the ~~initial application~~estimate over a reasonable and supportable forecast period, beyond which is a reversion to the Company’s historical loss average. Management has determined that a reasonable and supportable forecast period of eight quarters, and a straight-line reversion period of four quarters, are appropriate forecast periods for purposes of estimating expected credit losses. As described above, quantitative model results are adjusted for risk factors not considered within the model but which are relevant in estimating the expected credit losses within the loan portfolio. The qualitative risk factors impacting the expected risk of loss within the loan portfolio include the following:

•Lending policies and procedures, including underwriting standards and collection, charge-off and recovery practices;

•Nature and volume of the portfolio;

Table of Contents

•Volume and severity of past-due, non-accrual and classified loans;

•The value of the underlying collateral for loans that are not collateral dependent;

•Concentrations of credit risk;

•Model and data limitations; and

•Other external factors, such as changes in legal, regulatory or competitive environments.

Loans that do not share similar risk characteristics with any pools of assets are subject to individual evaluation and are removed from the collectively assessed pools. For loans that are individually evaluated, the Company uses either a discounted cash flow (“DCF”) approach or, for loans deemed to be ~~recognized~~collateral dependent or when foreclosure is probable, a fair value of collateral approach.

Accrued interest receivable amounts are excluded from balances of loans held at amortized cost and are included within other assets on the consolidated balance sheet. Management has elected not to measure an allowance for credit losses on these amounts as the Company employs a timely write-off policy. Consistent with the Company's policy for non-accrual loans, accrued interest receivable is typically written off when loans reach 90 days past due and are placed on non-accrual status.

In the ordinary course of business, the Company enters into commitments to extend credit and standby letters of credit. Such financial instruments are recorded in ~~retained earnings at~~ the ~~date~~financial statements when they become payable. The credit risk associated with these commitments is evaluated in a manner similar to the reserving method for loans receivable previously described. The reserve for unfunded lending commitments is included in other liabilities in the balance sheet.

Additionally, various regulatory agencies, as an integral part of ~~initial application.~~

~~In November 2018,~~ the ~~FASB issued ASU 2018-19, Codification Improvements~~Company’s examination process, periodically assess the appropriateness of the allowance for credit losses and may require the Company to Topic 326, Financial Instruments – Credit Losses. The amendments in Update No. 2018-19 was intended to clarify that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accountedincrease its allowance for loan losses or recognize further loan charge-offs, in accordance with ~~Topic 842, Leases. In November 2019, FASB issued ASU 2019-11,~~ ~~Codification Improvements~~GAAP.

Refer to ~~Topic 326, Financial Instruments –~~Note 4, “Loans and Allowance for Credit ~~Losses~~~~. This update requires entities~~Losses” for additional information regarding the Company’s measurement of credit losses on loans receivable and off-balance sheet commitments to include expected recoveries of the amortized cost basis previously written off or expected to be written off in the valuation account for purchased financial assets with credit deterioration. In addition, the amendments in this update clarify and improve various aspects of the guidance for ASU 2016-13.

For public entities that meet the definition of an SEC filer (excluding smaller reporting entities) the guidance is effective for annual reporting periods beginning after December 15, 2019. Early adoption is permitted for all entitieslend as of ~~the fiscal years beginning after December 15, 2018.~~September 30, 2022. For ~~all other entities, the guidance is effective~~comparative allowance for ~~annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years.~~

The Company, which currently qualifies as an EGC, anticipates to early adopt this standard during the year ending on December 31, 2021 and is currently assessing the impact of the adoption of this standard on its consolidated financial statements. To date, the Company has been assessing the key differences and gaps between its current allowance methodology and model and those it is considering using upon adoption. The Company has contracted with a vendor and is currently assessing the adequacy of existingloan loss data and developing models for default and loss estimates. While currently unable to reasonably estimate the impact of adopting this ASU, it is expected that the impact of adoption will be influenced by the composition, characteristics and quality of the loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date.

~~Relevant standards that were adopted during the six months ended June 30, 2019 and 2020:~~

In accordance with the nonpublic company requirements, the Company adopted ASC 606 on January 1, 2019. In completing its assessment of the Company’s revenue streams within the scope of ASC 606, the Company did not identify any revenue sourcesinformation for which the timing of recognition needed to change under the new standard. The adoption of this standard on January 1, 2019 did not have a material impact on the Company’s consolidated financial statements, its current accounting policiesASC 450, “Contingencies” and practices, or the timing or amount of revenue recognized. As a result, no adjustment has been made to retained earnings. Additionally, the Company evaluated and made necessary changes, where appropriate, to business processes, systems, and internal controls in order to support the recognition, measurement, and disclosure requirements of the new standard. The Company also considered the impact of ASC 606 subtopic ASC 340-40. Under ASC 340-40, the Company is required to capitalize and amortize incremental costs of obtaining a contract, such as sales commissions, over the period of benefit. The Company does not pay sales commissions and has not identified any other incremental cost to obtain a contract, therefore ASC 340-40 had no impact to its consolidated financial statements.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842)~~ ~~(“ASU 2016-02”). Topic 842 was subsequently amended by ASU 2018-01,~~ ~~Land Easement Practical Expedient for Transition to Topic 842~~ ~~(“ASU 2018-01”); ASU 2018-10,~~ ~~Codification Improvements to Topic 842, Leases~~ ~~(“ASU 2018-10”); ASU 2018-11,~~ ~~Targeted Improvements~~ ~~(“ASU 2018-11”); and ASU 2018-20~~ ~~Leases (Topic 842): Narrow-Scope Improvements for Lessors~~ (“ASU 2018-20”). ASU 2018-01 permits an entity to elect an optional transition practical expedient to not evaluate under Topic 842 land easements that exist or expired before the entity’s adoption of Topic 842 and that310, “Receivables” were not previously accounted for as leases under Topic 840. ASU 2018-10 was issued to clarify the Codification or to correct unintended application of guidance within ASU 2016-02. ASU 2018-11 allows for an optional transition method in which the provisions of Topic 842 would be applied upon the adoption date and would not have to be retroactively applied to the earliest reporting period presented in the consolidated financial statements. Lastly, ASU 2018-20 provided narrow-scope improvements for lessors, which was issued to increase transparency and comparability among organizations. ASU 2016-02 and the several additional amendments thereto are collectively referred to herein as ASC 842.

~~ASC 842 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract~~ (i.e., lessees and lessors). The standard represents a wholesale change to lease accounting and requires all leases with a term longer than 12 months to be reported on the balance sheet through recognition of a right-of-use asset and a corresponding liability for future lease obligations. Leases will be classified as financing or operating, with classification affecting the pattern and grouping of expenses in the income statement. The standard also requires extensive disclosures for assets, expenses, and cash flows associated with leases, as well as a maturity analysis of lease liabilities. In November 2019, FASB issued guidance delaying the effective date for all entities except for public business entities that are SEC filers. For public business entities the guidance is effective for fiscal year beginning after December 15, 2018, for all other entities the guidance is effective for fiscal year beginning after December 15, 2020, early adoption is permitted for all entities.

~~The Company early adopted this standard on January 1, 2020. In accordance with ASU 2018-11, the Company used the effective date as the date of application and, therefore, periods~~ prior to January 1, 2020, were not restated. The new standard provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients”, which permits the Company to not reassess prior conclusions about lease identification, lease classification, and initial direct costs under ASC 842. The Company also elected the hindsight practical expedient and, therefore, used the hindsight knowledge as of the effective date when determining lease terms and impairment. In addition, the Company elected the practical expedient to not separate lease and non-lease components and, therefore, accounts for each separate lease component of a contract and its associated non-lease components as a single lease component. The new standard also provides a practical expedient for an entity’s ongoing accounting relating to leases of 12 months or less (“short-term leases”). The Company has elected the short-term lease recognition exemption for all leases that qualify and will not recognize right-of-use assets and lease liabilities for those leases. The adoption of this standard resulted in the recognition of right-of-use asset and lease liabilities on the Company’s balance sheet for its real estate and equipment operating leases of $92.9 million and $96.4 million, respectively. The Company recorded an adjustment to remove the Company’s existing deferred rent liability of approximately $3.5 million. The Company also recognized a transition adjustment to the opening balance of retained earnings on January 1, 2020 amounting to $1.1 million, net of tax, related to an incremental accrued rent adjustment calculated as a result of electing the hindsight practical expedient. The amount of right-of-use assets were determined based upon the present value of the remaining minimal rental payments under current leasing standards for existing operating leases, adjusted for options that the Company is reasonably certain to exercise, less accrued rent as of December 31, 2019 and the incremental accrued rent as a result of electing the hindsight practical expedient. Lastly, the amount of lease liabilities was determined based upon the present value of the remaining minimum rental payments under current leasing standards for existing operating leases, adjusted for options that the Company is reasonably certain to exercise.

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement~~ ~~(“ASU 2018-13”)~~. This update modifies the disclosure requirements related to the fair value measurements in Topic 820. Specifically, this update amends disclosure around changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used in Level 3 fair value measurements and the description of measurement uncertainty. The Company adopted ASU 2018-13 on January 1, 2020. This update did not have a material impact on its consolidated financial statements.

~~In October 2018, the FASB issued ASU 2018-16,~~ ~~Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes~~ (“ASU 2018-16”). This update permits the use of the Overnight Index Swap (“OIS”) rate based on the Secured Overnight Financing Rate (“SOFR”) as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815. The amendments should be adopted on a prospective basis for qualifying new or re-structured hedging relationships entered into on or after the date of adoption. The Company adopted this standard on January 1, 2020. This update did not have a material impact on its consolidated financial statements

~~3. Securities~~

~~Trading Securities~~

~~The Company had trading securities of $0 and $1.0 million as of June 30, 2020 and December 31, 2019, respectively. The reduction in the Company’s trading portfolio was due~~ to the Company’s ~~exit~~adoption of ~~its capital markets business during~~ the ~~year ended December 31, 2019.~~

CECL methodology previously described), refer to Note 5, “Loans and Allowance for Loan Losses.”

3. Securities

Available for Sale Securities

The amortized cost, gross unrealized gains and losses, and fair value of ~~available~~AFS securities as of September 30, 2022 and December 31, 2021 were as follows:


	As of September 30, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value
	(In thousands)
Debt securities:
Government-sponsored residential mortgage-backed securities	$	4,995,267	$	—	$	(786,178)	$	—	$	4,209,089
Government-sponsored commercial mortgage-backed securities	1,603,046		—		(205,819)		—		1,397,227
U.S. Agency bonds	1,100,565		—		(158,968)		—		941,597
U.S. Treasury securities	99,267		—		(6,807)		—		92,460
State and municipal bonds and obligations	229,539		58		(26,933)		—		202,664
Other debt securities	1,599		—		(21)		—		1,578
	$	8,029,283	$	58	$	(1,184,726)	$	—	$	6,844,615

Table of Contents


	As of December 31, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
	(In thousands)
Debt securities:
Government-sponsored residential mortgage-backed securities	$	5,577,292	$	17,918	$	(70,502)	$	5,524,708
Government-sponsored commercial mortgage-backed securities	1,420,748		760		(12,640)		1,408,868
U.S. Agency bonds	1,202,377		1,067		(28,430)		1,175,014
U.S. Treasury securities	89,434		5		(834)		88,605
State and municipal bonds and obligations	263,910		16,460		(41)		280,329
Small business administration pooled securities	31,821		282		—		32,103
Other debt securities	1,597		—		—		1,597
	$	8,587,179	$	36,492	$	(112,447)	$	8,511,224

The Company did not record a provision for ~~sale~~credit losses on any AFS securities for the three and nine months ended September 30, 2022. Accrued interest receivable on AFS securities totaled $13.6 million and $14.3 million as of September 30, 2022 and December 31, 2021, respectively, and is included within other assets on the consolidated balance sheets. The Company did not record any write-offs of accrued interest income on AFS securities during the three and nine months ended September 30, 2022. No securities held by the Company were delinquent on contractual payments as of September 30, 2022, nor were any securities placed on non-accrual status for the period then ended.

The following table summarizes gross realized gains and losses from sales of AFS securities for the periods ~~below were as follows:~~

   As of and for the six months ended June 30, 2020
   Amortized
Cost    Unrealized
Gains    Unrealized
Losses    Fair
Value
   (In Thousands)
Debt securities:

Government-sponsored residential mortgage-backed securities
   $ 1,207,274    $ 44,750    $ (225 )    $ 1,251,799
U.S. Treasury securities
   60,189    747    —      60,936
State and municipal bonds and obligations
   264,615    16,725    —      281,340
Qualified zone academy bond
   6,209    70    —      6,279








   $ 1,538,287    $ 62,292    $ (225 )    $ 1,600,354

   As of and for the year ended December 31, 2019
   Amortized
Cost    Unrealized
Gains    Unrealized
Losses    Fair
Value
   (In Thousands)
Debt securities:

Government-sponsored residential mortgage-backed securities
   $ 1,151,305    $ 17,208    $ (545 )    $ 1,167,968
U.S. Treasury securities
   50,155    265    —      50,420
State and municipal bonds and obligations
   272,582    10,959    (3 )    283,538
Qualified zone academy bond
   6,155    155    —      6,310








   $ 1,480,197    $ 28,587    $ (548 )    $ 1,508,236








indicated:

~~The amortized cost and estimated fair value~~
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(In thousands)
Gross realized gains from sales of AFS securities $ 725 $ 1 $ 1,770 $ 1,166
Gross realized losses from sales of AFS securities 923 — 4,244 —
Net (losses) gains from sales of AFS securities $ (198) $ 1 $ (2,474) $ 1,166

Prior to the Company’s adoption of available for sale securities by contractual maturities as of June 30, 2020 and December 31, 2019 are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties. The scheduled contractual maturities of available for sale securities as of the dates indicated were as follows:

As of June 30, 2020
Due in one year or less Due after one year to five years Due after five to ten years Due after ten years Total
Amortized Fair Value Amortized Fair Value Amortized Fair Value Amortized Fair Value Amortized Fair Value
(In Thousands)
Available for sale securities:

Government-sponsored residential mortgage-backed securities
$ —   $ —   $ 24,413 �� $ 25,733 $ 150,726 $ 157,290 $ 1,032,135 $ 1,068,776 $ 1,207,274 $ 1,251,799
U.S. Treasury securities
50,070 50,778 10,119 10,158 —   —   —   —   60,189 60,936
State and municipal bonds and obligations
407 411 18,205 18,966 73,890 77,868 172,113 184,095 264,615 281,340
Qualified zone academy bond
6,209 6,279 —   —   —   —   —   —   6,209 6,279

Total available for sale securities
$ 56,686 $ 57,468 $ 52,737 $ 54,857 $ 224,616 $ 235,158 $ 1,204,248 $ 1,252,871 $ 1,538,287 $ 1,600,354

As of December 31, 2019
Due in one year or less Due after one year to five years Due after five to ten years Due after ten years Total
Amortized Fair Value Amortized Fair Value Amortized Fair Value Amortized Fair Value Amortized Fair Value
(In Thousands)
Available for sale securities:

Government-sponsored residential mortgage-backed securities
$ —   $ —   $ 8,139 $ 8,464 $ 199,428 $ 203,706 $ 943,738 $ 955,798 $ 1,151,305 $ 1,167,968
U.S. Treasury securities
40 40 50,115 50,380 —   —   —   —   50,155 50,420
State and municipal bonds and obligations
381 381 8,889 9,109 77,227 79,504 186,085 194,544 272,582 283,538
Qualified zone academy bond
6,155 6,310 —   —   —   —   —   —   6,155 6,310

Total available for sale securities
$ 6,576 $ 6,731 $ 67,143 $ 67,953 $ 276,655 $ 283,210 $ 1,129,823 $ 1,150,342 $ 1,480,197 $ 1,508,236

Gross realized gains from sales of available for sale securities were $0.2 million and $2.0 million during the three months ended June 30, 2020 and 2019, respectively, and $0.3 million and $2.1 million during the six months ended June 30, 2020 and 2019, respectively. The Company had no significant gross realized losses from sales of securities available for sale during both the six months ended June 30, 2020 and 2019. No other-than-temporary impairment was recorded during the six months ended June 30, 2020 and 2019.

~~Management prepares~~ASU 2016-13, management prepared an estimate of the Company’s expected cash flows for AFS investment securities ~~available for sale~~ that potentially may be deemed to have been an OTTI. This estimate ~~begins~~began with the contractual cash flows of the ~~security. This amount is~~security which was then reduced by an estimate of probable credit losses associated with the security. When estimating the extent of probable losses on the securities, management ~~considers~~considered the credit quality and the ability to pay of the underlying issuers. Indicators of diminished credit quality of the issuers ~~include~~included defaults, interest deferrals, or “payments in kind.” Management also ~~considers~~considered those factors listed in the ~~Investments~~“Investments – Debt and Equity ~~Securities~~Securities” topic of the FASB ASC when estimating the ultimate realizability of the cash flows for each individual security.

The resulting estimate of expected cash flows after considering credit iswas then subject to a present value computation using a discount rate equal to the current yield used to accrete the beneficial interest or the effective interest rate implicit in the security at the date of acquisition. If the present value of the estimated expected cash flows iswas less than the current amortized cost basis, an OTTI iswas considered to have occurred and the security iswas written down to the fair value indicated by the cash flow analysis. As part of the analysis, management ~~considers~~considered whether it ~~intends~~intended to sell the security or whether it iswas more than likely that it would be required to sell the security before the expected recovery of its amortized cost basis.

There was no OTTI recorded during the three and nine months ended September 30, 2021.

Information pertaining to ~~available for sale~~AFS securities with gross unrealized losses as of ~~June~~September 30, ~~2020 and December 31, 2019,~~2022, for which the Company ~~has~~did not ~~deemed~~recognize a provision for credit losses under CECL, and as of December 31, 2021, for which the Company did not deem to be OTTI under its prior methodology, aggregated by investment category and length of time that individual securities ~~have~~had been in a continuous loss position, follows:

   June 30, 2020
      Less than 12 Months    12 Months or Longer    Total
   # of
Holdings    Gross
Unrealized
Losses    Fair
Value    Gross
Unrealized
Losses    Fair
Value    Gross
Unrealized
Losses    Fair
Value
   (Dollars In Thousands)
Government-sponsored residential mortgage-backed securities
   1    225    100,685    —      —      225    100,685














   1    $ 225    $ 100,685    $ —      $ —      $ 225    $ 100,685














   December 31, 2019
      Less than 12 Months    12 Months or Longer    Total
   # of
Holdings    Gross
Unrealized
Losses    Fair
Value    Gross
Unrealized
Losses    Fair
Value    Gross
Unrealized
Losses    Fair
Value
   (Dollars In Thousands)
Government-sponsored residential mortgage-backed securities
   1    $ 545    $ 74,550    $ —      $ —      $ 545    $ 74,550
State and municipal bonds and obligations
   2    3    850    —      —      3    850














   3    $ 548    $ 75,400    $ —      $ —      $ 548    $ 75,400

Table of Contents


	As of September 30, 2022
		Less than 12 Months				12 Months or Longer				Total
	# of Holdings	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
	(Dollars in thousands)
Government-sponsored residential mortgage-backed securities	322	$	278,329	$	1,541,349	$	507,849	$	2,667,740	$	786,178	$	4,209,089
Government-sponsored commercial mortgage-backed securities	200	145,210		1,050,544		60,609		346,683		205,819		1,397,227
U.S. Agency bonds	37	29,820		210,070		129,148		731,527		158,968		941,597
U.S. Treasury securities	5	5,399		44,127		1,408		48,333		6,807		92,460
State and municipal bonds and obligations	283	26,933		200,184		—		—		26,933		200,184
Other debt securities	3	21		1,578		—		—		21		1,578
	850	$	485,712	$	3,047,852	$	699,014	$	3,794,283	$	1,184,726	$	6,842,135


	As of December 31, 2021
		Less than 12 Months				12 Months or Longer				Total
	# of Holdings	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
	(Dollars in thousands)
Government-sponsored residential mortgage-backed securities	264	$	70,502	$	4,615,457	$	—	$	—	$	70,502	$	4,615,457
Government-sponsored commercial mortgage-backed securities	165	12,218		1,102,444		422		15,682		12,640		1,118,126
U.S. Agency bonds	27	2,169		191,222		26,261		794,353		28,430		985,575
U.S. Treasury securities	3	834		78,588		—		—		834		78,588
State and municipal bonds and obligations	11	41		5,436		—		—		41		5,436
	470	$	85,764	$	5,993,147	$	26,683	$	810,035	$	112,447	$	6,803,182

The Company does not intend to sell these investments and has determined based upon available evidence that it is more likely than not that the Company will not be required to sell each security before the expected recovery of its amortized cost basis. As a result, the Company ~~does~~did not recognize an ACL on these investments as of September 30, 2022. As it relates to AFS securities with gross unrealized losses as of December 31, 2021, the Company did not consider these investments to be ~~OTTI.~~OTTI under its prior methodology. The Company made this determination by reviewing various qualitative and quantitative factors regarding each investment category, such as current market conditions, extent and nature of changes in fair value, issuer rating changes and trends, and volatility of earnings.

As a result of the Company’s review of these qualitative and quantitative factors, the causes of the impairments listed in the tables above by category are as follows as of ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019:~~

•

~~Government-sponsored residential mortgage-backed securities~~ - The securities with unrealized losses in this portfolio have contractual terms that generally do not permit the issuer to settle the security at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality. The security at a loss position as of December 31, 2019 was subsequently in a gain position as of June 30, 2020. Additionally, these securities are implicitly guaranteed by the U.S. Government or one of its agencies.

•

~~State and municipal bonds and obligations~~ - The securities with unrealized losses in this portfolio as of December 31, 2019 have contractual terms that generally do not permit the issuer to settle the securities at a price less than the current par value of the investment. The decline in market value of these securities as of December 31, 2019 is attributable to changes in interest rates and not credit quality. These securities were subsequently in a gain position as of June 30, 2020. These bonds are investment grade and are rated AA Standard and Poor’s.

2021:

•Government-sponsored residential mortgage-backed securities – The securities with unrealized losses in this portfolio have contractual terms that generally do not permit the issuer to settle the security at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality. Additionally, these securities are implicitly guaranteed by the U.S. government or one of its agencies.

•Government-sponsored commercial mortgage-backed securities – The securities with unrealized losses in this portfolio have contractual terms that generally do not permit the issuer to settle the security at a price less than the current par value of the investment. The decline in market value of these securities is attributable to

Table of Contents

changes in interest rates and not credit quality. Additionally, these securities are implicitly guaranteed by the U.S. government or one of its agencies.

•U.S. Agency bonds – The securities with unrealized losses in this portfolio have contractual terms that generally do not permit the issuer to settle the security at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality. Additionally, these securities are implicitly guaranteed by the U.S. government or one of its agencies.

•U.S. Treasury securities – The securities with unrealized losses in this portfolio have contractual terms that generally do not permit the issuer to settle the security at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality. Additionally, these securities are implicitly guaranteed by the U.S. government or one of its agencies.

•State and municipal bonds and obligations – The securities with unrealized losses in this portfolio have contractual terms that generally do not permit the issuer to settle the security at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality.

•Other debt securities – This securities portfolio consists of three foreign debt securities which are performing in accordance with the terms of the respective contractual agreements. The decline in market value of these securities is attributable to changes in interest rates and not credit quality.

Held to Maturity Securities

The amortized cost, gross unrealized gains and losses, and fair value of HTM securities as of September 30, 2022 were as follows:


	As of September 30, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value
	(In thousands)
Debt securities:
Government-sponsored residential mortgage-backed securities	$	281,253	$	—	$	(30,972)	$	—	$	250,281
Government-sponsored commercial mortgage-backed securities	200,710		—		(19,514)		—		181,196
	$	481,963	$	—	$	(50,486)	$	—	$	431,477

The Company held no HTM securities as of December 31, 2021.

The Company did not record a provision for estimated credit losses on any HTM securities for the three and nine months ended September 30, 2022. The accrued interest receivable on HTM securities totaled $1.0 million as of September 30, 2022 and is included within other assets on the consolidated balance sheets. The Company did not record any write-offs of accrued interest receivable on HTM securities during the three and nine months ended September 30, 2022. No securities held by the Company were delinquent on contractual payments as of September 30, 2022, nor were any securities placed on non-accrual status for the period then ended.

Available for Sale and Held to Maturity Securities Contractual Maturity

The amortized cost and estimated fair value of AFS securities by contractual maturities as of September 30, 2022 and December 31, 2021 and amortized cost and estimated fair value of HTM securities by contractual maturities as of

Table of Contents

September 30, 2022 are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties.

The scheduled contractual maturities of AFS and HTM securities as of the dates indicated were as follows:


	As of September 30, 2022
	Due in one year or less				Due after one year to five years				Due after five to ten years				Due after ten years				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
AFS securities
Government-sponsored residential mortgage-backed securities	$	—	$	—	$	17,984	$	17,288	$	760,135	$	677,552	$	4,217,148	$	3,514,249	$	4,995,267	$	4,209,089
Government-sponsored commercial mortgage-backed securities	—		—		185,582		168,760		664,204		575,694		753,260		652,773		1,603,046		1,397,227
U.S. Agency bonds	—		—		727,838		631,834		372,727		309,763		—		—		1,100,565		941,597
U.S. Treasury securities	—		—		99,267		92,460		—		—		—		—		99,267		92,460
State and municipal bonds and obligations	80		80		27,379		25,738		54,859		50,773		147,221		126,073		229,539		202,664
Other debt securities	1,599		1,578		—		—		—		—		—		—		1,599		1,578
Total available for sale securities	1,679		1,658		1,058,050		936,080		1,851,925		1,613,782		5,117,629		4,293,095		8,029,283		6,844,615
HTM securities
Government-sponsored residential mortgage-backed securities	—		—		—		—		—		—		281,253		250,281		281,253		250,281
Government-sponsored commercial mortgage-backed securities	—		—		—		—		200,710		181,196		—		—		200,710		181,196
Total held to maturity securities	—		—		—		—		200,710		181,196		281,253		250,281		481,963		431,477
Total	$	1,679	$	1,658	$	1,058,050	$	936,080	$	2,052,635	$	1,794,978	$	5,398,882	$	4,543,376	$	8,511,246	$	7,276,092

Table of Contents


	As of December 31, 2021
	Due in one year or less				Due after one year to five years				Due after five to ten years				Due after ten years				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
AFS securities
Government-sponsored residential mortgage-backed securities	$	—	$	—	$	24,935	$	25,962	$	899,169	$	892,029	$	4,653,188	$	4,606,717	$	5,577,292	$	5,524,708
Government-sponsored commercial mortgage-backed securities	—		—		139,095		137,755		387,177		378,414		894,476		892,699		1,420,748		1,408,868
U.S. Agency bonds	5,508		5,515		531,821		520,935		665,048		648,564		—		—		1,202,377		1,175,014
U.S. Treasury securities	40,010		40,001		49,424		48,604		—		—		—		—		89,434		88,605
State and municipal bonds and obligations	6,137		6,116		33,692		34,704		72,226		75,416		151,855		164,093		263,910		280,329
Small Business Administration pooled securities	—		—		4,062		4,092		—		—		27,759		28,011		31,821		32,103
Other debt securities	300		300		1,297		1,297		—		—		—		—		1,597		1,597
Total	$	51,955	$	51,932	$	784,326	$	773,349	$	2,023,620	$	1,994,423	$	5,727,278	$	5,691,520	$	8,587,179	$	8,511,224

Securities Pledged as Collateral

As of September 30, 2022 and December 31, 2021, securities with a carrying value of $438.8 million and $2.2 billion, respectively, were pledged to secure public deposits and for other purposes required by law. As of September 30, 2022 and December 31, 2021, deposits with associated pledged collateral included cash accounts from the Company’s wealth management division (“Eastern Wealth Management”) and municipal deposit accounts. At September 30, 2022 and December 31, 2021, the carrying value of securities pledged as collateral with respect to municipal deposit accounts acquired from Century Bancorp, Inc. (“Century”) was approximately $422.3 million and $2.1 billion, respectively. During the first and second quarter of 2022, the Company eliminated certain pledging arrangements acquired from Century which resulted in the decrease in securities pledged at September 30, 2022 compared to December 31, 2021.

Table of Contents

4. Loans and Allowance for ~~Loan~~Credit Losses

Loans

The following table provides a summary of the Company’s loan portfolio as of the dates indicated:

   At June 30,    At December 31,
   2020    2019
   (In thousands)
Commercial and industrial
   $ 2,271,700    $ 1,642,184
Commercial real estate
   3,584,358    3,535,441
Commercial construction
   282,246    273,774
Business banking
   1,234,961    771,498
Residential real estate
   1,400,855    1,428,630
Consumer home equity
   905,484    933,088
Other consumer
   334,734    402,431




Gross loans before unamortized premiums, unearned discounts and deferred fees
   10,014,338    8,987,046




Allowance for credit losses
   (116,636 )    (82,297 )
Unamortized premiums, net of unearned discounts and deferred fees
   (34,722 )    (5,565 )




Loans after the allowance for credit losses, unamortized premiums, unearned discounts and deferred fees
   $ 9,862,980    $ 8,899,184

September 30, 2022 December 31, 2021
(In thousands)
Commercial and industrial $ 3,023,729 $ 2,960,527
Commercial real estate 4,985,654 4,522,513
Commercial construction 314,193 222,328
Business banking 1,096,436 1,334,694
Residential real estate 2,118,852 1,926,810
Consumer home equity 1,168,476 1,100,153
Other consumer (2) 196,614 214,485
Gross loans before unamortized premiums, unearned discounts and deferred fees 12,903,954 12,281,510
Allowance for loan losses (1) (131,663) (97,787)
Unamortized premiums, net of unearned discounts and deferred fees (19,349) (26,442)
Loans after the allowance for loan losses, unamortized premiums, unearned discounts and deferred fees $ 12,752,942 $ 12,157,281

(1)The Company adopted ASU 2016-13 on January 1, 2022 with a modified retrospective approach. Accordingly, at September 30, 2022 the allowance for loan losses was determined in accordance with ASC 326, “Financial Instruments-Credit Losses” and ASC 310, “Receivables,” as amended. At December 31, 2021 the allowance for loan losses was determined in accordance with ASC 450, “Contingencies” and ASC 310, “Receivables.”

(2)Automobile loans are included in the other consumer portfolio and amounted to $24.0 million and $53.3 million at September 30, 2022 and December 31, 2021, respectively.

There are no other loan categories that exceed 10% of total loans not already reflected in the preceding table.

The Company’s lending activities are conducted principally in the New England area with the exception of its Shared National Credit Program (“SNC Program”) portfolio. The Company participates in the SNC Program in an effort to improve its industry and geographical diversification. The SNC Program portfolio is included in the Company’s commercial and industrial ~~commercial real estate and commercial construction portfolios.~~portfolio. The SNC Program portfolio is defined as loan syndications with exposure over $100 million and with three or more lenders participating.

Most loans originated by the Company are either collateralized by real estate or other assets or guaranteed by federal and local governmental authorities. The ability and willingness of the single-family residential and consumer borrowers to honor their repayment commitments is generally dependent on the level of overall economic activity within the borrowers’ geographic areas and real estate values. The ability and willingness of commercial real estate, commercial and industrial, and construction loan borrowers to honor their repayment commitments is generally dependent on the health of the real estate economy in the borrowers’ geographic areas and the general economy. ~~The ability and willingness of airplane loan borrowers to repay is generally dependent on the health of the general economy.~~

Loans Pledged as Collateral

The carrying value of loans pledged to secure advances from the ~~FHLB~~Federal Home Loan Bank (“FHLB”) of Boston (“FHLBB”) were ~~$2.1~~$3.3 billion and ~~$1.5~~$2.6 billion at ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively.

~~At June~~ The balance of funds borrowed from the FHLBB were $384.2 million and $14.0 million at September 30, ~~2020~~2022 and December 31, ~~3019,~~2021, respectively.

The carrying value of loans pledged to secure advances from the Federal Reserve Bank (“FRB”) were $1.1 billion and $784.0 million at September 30, 2022 and December 31, 2021, respectively. There were no funds borrowed from the FRB outstanding at September 30, 2022 and December 31, 2021.

Serviced Loans

At September 30, 2022 and December 31, 2021, mortgage loans partially or wholly-owned by others and serviced by the Company amounted to approximately ~~$14.9~~$85.7 million and ~~$15.6~~$95.8 million, respectively.

Table of Contents

Purchased Loans
The Company began purchasing jumbo mortgage loans during the three months ended September 30, 2022. Loans purchased were subject to the same underwriting criteria as those loans originated directly by the Company. During the three and nine months ended September 30, 2022, the Company purchased $79.9 million of residential real estate loans.

Allowance for Loan Losses

The allowance for loan losses is established to provide for ~~probable~~management’s estimate of expected lifetime credit losses ~~incurred in the Company’s loan portfolio~~on loans measured at amortized cost at the balance sheet date and is established through a provision for loan losses charged to net income. Charge-offs, net of recoveries, are charged directly to the ~~allowance.~~allowance for loan losses. Commercial and residential loans are charged-off in the period in which they are deemed uncollectible. Delinquent loans in these product types are subject to ongoing review and analysis to determine if a charge-off in the current period is appropriate. For consumer loans, policies and procedures exist that require charge-off consideration upon a certain triggering event depending on the product type.

~~The following table summarizes the changes in the allowance for loan losses for the periods indicated:~~

   For the Three Months Ended
June 30,    For the Six Months Ended
June 30,
   2020    2019    2020    2019

(In thousands)

Balance at the beginning of period
   $ 109,138    $ 82,493    $ 82,297    $ 80,655
Loans charged off
   (1,264 )    (2,563 )    (3,607 )    (4,487 )
Recoveries
   162    1,232    746    1,994
Provision charged to expense
   8,600    1,500    37,200    4,500








Balance at end of period
   $ 116,636    $ 82,662    $ 116,636    $ 82,662

The following tables summarize the changes in the allowance for loan losses by loan category for the periods indicated:


	For the Three Months Ended September 30, 2022
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Residential Real Estate		Consumer Home Equity		Other Consumer		Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	25,852	$	47,555	$	5,474	$	16,699	$	21,663	$	5,662	$	2,626	$	125,531
Charge-offs	(11)		—		—		(369)		—		—		(603)		(983)
Recoveries	126		3		—		286		56		6		158		635
Provision (release)	874		3,545		507		(354)		1,288		174		446		6,480
Ending balance (2)	$	26,841	$	51,103	$	5,981	$	16,262	$	23,007	$	5,842	$	2,627	$	131,663


	For the Nine Months Ended September 30, 2022
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Residential Real Estate		Consumer Home Equity		Other Consumer		Other		Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	18,018	$	52,373	$	2,585	$	10,983	$	6,556	$	3,722	$	3,308	$	242	$	97,787
Cumulative effect of change in accounting principle (1)	11,533		(6,655)		1,485		6,160		13,489		1,857		(541)		(242)		27,086
Charge-offs	(13)		—		—		(1,922)		—		—		(1,754)		—		(3,689)
Recoveries	1,074		53		—		1,678		80		16		533		—		3,434
Provision (release)	(3,771)		5,332		1,911		(637)		2,882		247		1,081		—		7,045
Ending balance (2)	$	26,841	$	51,103	$	5,981	$	16,262	$	23,007	$	5,842	$	2,627	$	—	$	131,663

(1)Represents the adjustment needed to reflect the cumulative day one impact pursuant to the Company’s adoption of ASU 2016-13 (i.e., cumulative effect adjustment related to the adoption of ASU 2016-13 as of January 1, 2022). The adjustment represents a $27.1 million increase to the allowance attributable to the change in accounting methodology for estimating the allowance for loan losses resulting from the Company’s adoption of the standard. The adjustment also includes the adjustment needed to reflect the day one reclassification of the Company’s PCI loan balances to PCD and ~~bifurcates~~ the ~~amount~~associated gross-up of $0.1 million, pursuant to the Company’s adoption of ASU 2016-13.

(2)The balance of accrued interest receivable excluded from amortized cost and the calculation of the allowance ~~allocated~~for loan losses amounted to ~~each loan category based~~$35.9 million at September 30, 2022.

Reserve for Unfunded Commitments

Table of Contents

Management evaluates the need for a reserve on ~~collective impairment analysis and~~unfunded lending commitments in a manner consistent with loans ~~evaluated individually~~held for ~~impairment:~~

   For the Three Months Ended June 30, 2020
   Commercial
and
Industrial Commercial
Real Estate Commercial
Construction    Business
Banking Residential
Real
Estate Consumer
Home
Equity Other
Consumer Other Total
   (In Thousands)
Allowance for Loan Losses:

Beginning balance
   $ 30,531 $ 49,227 $ 4,712    $ 10,181 $ 6,228 $ 3,913 $ 4,019 $ 327 $ 109,138
Charge-offs
   (27 ) (24 ) —      (1,198 ) —   —   (15 ) —   (1,264 )
Recoveries
   58 5 —      27 13 8 51 —   162
Provision (benefit)
   2,667 5,020 104    795 328 (46 ) (293 ) 25 8,600




Ending balance
   $ 33,229 $ 54,228 $ 4,816    $ 9,805 $ 6,569 $ 3,875 $ 3,762 $ 352 $ 116,636




   For the Three Months Ended June 30, 2019
   Commercial
and
Industrial Commercial
Real Estate Commercial
Construction    Business
Banking Residential
Real
Estate Consumer
Home
Equity Other
Consumer Other Total
   (In Thousands)
Allowance for Loan Losses:

Beginning balance
   $ 20,844 $ 33,170 $ 4,225    $ 8,175 $ 7,169 $ 4,105 $ 4,390 $ 415 $ 82,493
Charge-offs
   (272 ) (169 ) —      (1,371 ) (46 ) (124 ) (581 ) —   (2,563 )
Recoveries
   908 2 —      193 12 20 97 —   1,232
Provision (benefit)
   (651 ) 583 537    1,057 (335 ) 96 418 (205 ) 1,500




Ending balance
   $ 20,829 $ 33,586 $ 4,762    $ 8,054 $ 6,800 $ 4,097 $ 4,324 $ 210 $ 82,662

   For the Six Months Ended June, 2020
   Commercial
and
Industrial Commercial
Real Estate Commercial
Construction    Business
Banking Residential
Real Estate    Consumer
Home Equity Other
Consumer Other Total
   (In thousands)
Allowance for loan losses:

Beginning balance
   $ 20,919 $ 34,730 $ 3,424    $ 8,260 $ 6,380    $ 4,027 $ 4,173 $ 384 $ 82,297
Charge-offs
   (27 ) (24 ) —      (2,535 ) —      (473 ) (548 ) —   (3,607 )
Recoveries
   380 6 —      154 73    22 111 —   746
Provision (benefit)
   11,957 19,516 1,392    3,926 116    299 26 (32 ) 37,200






Ending balance
   $ 33,229 $ 54,228 $ 4,816    $ 9,805 $ 6,569    $ 3,875 $ 3,762 $ 352 $ 116,636






Ending balance: individually evaluated for impairment
   $ 3,028 $ 230 $ 22    $ 578 $ 1,639    $ 277 $ —   $ —   $ 5,774






Ending balance: acquired with deteriorated credit quality
   $ 1,732 $ 1,066 $ —      $ —   $ 293    $ —   $ —   $ —   $ 3,091






Ending balance: collectively evaluated for impairment
   $ 28,469 $ 52,932 $ 4,794    $ 9,227 $ 4,637    $ 3,598 $ 3,762 $ 352 $ 107,771






Loans ending balance:

Individually evaluated for impairment
   $ 18,864 $ 4,920 $ 280    $ 20,301 $ 28,301    $ 5,947 $ 22 $ —   $ 78,635
Acquired with deteriorated credit quality
   3,572 5,413 —      —   3,426    —   —   —   12,411
Collectively evaluated for impairment
   2,249,264 3,574,025 281,966    1,214,660 1,369,128    899,537 334,712 —   9,923,292






Total loans by group
   $ 2,271,700 $ 3,584,358 $ 282,246    $ 1,234,961 $ 1,400,855    $ 905,484 $ 334,734 $ —   $ 10,014,338






investment. Upon adoption of ASU 2016-13 on January 1, 2022, the Company recorded a transition adjustment related to the reserve for unfunded lending commitments of $1.0 million, resulting in a total reserve for unfunded lending commitments of $11.1 million as of January 1, 2022. As of September 30, 2022, the Company’s reserve for unfunded lending commitments was $11.4 million which is recorded within other liabilities.

   For the Six Months Ended June 30, 2019
   Commercial
and
Industrial Commercial
Real Estate Commercial
Construction    Business
Banking Residential
Real Estate Consumer
Home Equity Other
Consumer Other Total
   (In thousands)
Allowance for loan losses:

Beginning balance
   $ 19,321 $ 32,400 $ 4,606    $ 8,167 $ 7,059 $ 4,113 $ 4,600 $ 389 $ 80,655
Charge-offs
   (272 ) (169 ) —      (2,810 ) (63 ) (124 ) (1,049 ) —   (4,487 )
Recoveries
   1,368 4 —      320 71 28 203 —   1,994
Provision (benefit)
   412 1,351 156    2,377 (267 ) 80 570 (179 ) 4,500




Ending balance
   $ 20,829 $ 33,586 4,762    $ 8,054 $ 6,800 $ 4,097 $ 4,324 $ 210 $ 82,662




Ending balance: individually evaluated for impairment
   $ 1,918 $ 40 $ —      $ 198 $ 1,663 $ 296 $ —   $ —   $ 4,115




Ending balance: acquired with deteriorated credit quality
   $ 227 $ 85 $ —      $ —   $ 213 $ —   $ —   $ —   $ 525




Ending balance: collectively evaluated for impairment
   $ 18,684 $ 33,461 $ 4,762    $ 7,856 $ 4,924 $ 3,801 $ 4,324 $ 210 $ 78,022




Loans ending balance:

Individually evaluated for impairment
   $ 21,098 $ 10,421 $ —      $ 9,043 $ 27,287 $ 4,642 $ —   $ —   $ 72,491
Acquired with deteriorated credit quality
   4,109 7,591 —      —   3,405 —   —   —   15,105
Collectively evaluated for impairment
   1,726,510 3,331,951 310,860    736,417 1,414,741 950,713 470,858 —   8,942,050




Total loans by group
   $ 1,751,717 $ 3,349,963 $ 310,860    $ 745,460 $ 1,445,433 $ 955,355 $ 470,858 $ —   $ 9,029,646

Portfolio Segmentation

Management uses a methodology to systematically estimate the amount of ~~loss incurred~~expected losses in each segment of loans in the Company’s portfolio. Commercial and industrial business banking, investment commercial real estate, and commercial and industrial ~~commercial construction and business banking~~ loans are evaluated ~~using a loan rating system,~~based upon loan-level risk characteristics, historical losses and other factors which form the basis for estimating ~~incurred~~expected losses. ~~Portfolios of more homogeneous populations of loans,~~Other portfolios, including owner occupied commercial real estate, which includes commercial and industrial and business banking owner occupied commercial real estate, commercial construction, residential mortgages, home equity and consumer loans, are analyzed as groups taking into account delinquency ratios, and the Company’s and peer banks’ historical loss ~~experience and charge-offs.~~experience. For the ~~purpose~~purposes of estimating the allowance for loan losses, management segregates the loan portfolio into ~~the categories noted in the above tables. Each of these~~ loan categories ~~possess unique~~that share similar risk characteristics such as the purpose of the loan, repayment source, and collateral. These characteristics are considered when determining the appropriate level of the allowance for each category. Some examples of these risk characteristics unique to each loan category include:

Commercial Lending

Commercial and industrial: The primary risk associated with commercial and industrial loans is the ability of borrowers to achieve business results consistent with those projected at origination. Collateral frequently consists of a first lien position on business assets including, but not limited to, accounts receivable, inventory, ~~airplanes~~aircraft and equipment. The primary repayment source is operating cash flow and, secondarily, the liquidation of assets. ~~The~~Under its lending guidelines, the Company ~~often obtains~~generally requires a corporate or personal ~~guarantees~~guarantee from individuals ~~holding~~that hold material ownership in the borrowing ~~entity.~~

entity when the loan-to-value of a commercial and industrial loan is in excess of a specified threshold.

Commercial real estate: Collateral values are established by independent third-party appraisals and evaluations. Primary repayment sources include operating income generated by the real estate, permanent debt refinancing, sale of the real estate and, secondarily, by liquidation of the collateral. ~~The~~Under its lending guidelines, the Company ~~often obtains~~generally requires a corporate or personal ~~guarantees~~guarantee from individuals ~~holding~~that hold material ownership in the borrowing ~~equity.~~

entity when the loan-to-value of a commercial real estate loan is in excess of a specified threshold.

Commercial construction: These loans are generally considered to present a higher degree of risk than other real estate loans and may be affected by a variety of factors, such as adverse changes in interest rates and the borrower’s ability to control costs and adhere to time schedules. Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the completed project. Construction loan repayment is substantially dependent on the ability of the borrower to complete the project and obtain permanent financing.

Business banking: These loans are typically secured by all business assets or commercial real estate. Business banking originations include traditionally underwritten loans as well as partially automated scored loans. Business banking scored loans are determined by utilizing the Company’s proprietary decision matrix that has a number of quantitative factors including, but not limited to, a guarantor’s credit score, industry risk, and time in business. The Company also engages in Small Business Association (“SBA”) lending, both in the business banking and commercial banking divisions. The SBA guarantees reduce the Company’s loss due to default and are considered a credit enhancement to the loan structure.

Residential Lending

~~Residential real estate~~:

These loans are made to borrowers who demonstrate the ability to repay principal and interest on a monthly basis. Underwriting considerations include, among others, income sources and their reliability, willingness to repay as evidenced by credit repayment history, financial resources (including cash reserves) and the value of the collateral. The Company maintains policy standards for minimum credit score and cash reserves and maximum ~~loan to value~~loan-to-value consistent with a “prime” portfolio. Collateral consists of mortgage liens on 1-4 family residential dwellings. The policy standards applied to loans originated by the Company are the same as those applied to purchased loans. The Company does not originate or purchase sub-prime or other high-risk loans. Residential loans are originated either for sale to investors or retained in the Company’s loan portfolio.

Table of Contents

Decisions about whether to sell or retain residential loans are made based on the interest rate characteristics, pricing for loans in the secondary mortgage market, competitive factors and the Company’s capital needs.

Consumer Lending

Consumer home equity: Home equity lines of credit are granted for ten years with monthly interest-only repayment requirements. Full principal repayment is required at the end of the ten-year draw period. Home equity loans are term loans that require the monthly payment of principal and interest such that the loan will be fully amortized at maturity. Underwriting considerations are materially consistent with those utilized in residential real estate. Collateral consists of a senior or subordinate lien on owner-occupied residential property.

Other consumer: The Company’s policy and underwriting in this category, which is comprised primarily of ~~airplane~~home improvement, automobile and ~~automobile~~aircraft loans, include the following factors, among others: income sources and reliability, credit histories, term of repayment, and collateral value, as applicable. These are typically granted on an unsecured basis, with the exception of ~~airplane~~aircraft and automobile loans.

Credit Quality

Commercial Lending Credit Quality

The credit quality of the Company’s commercial loan portfolio is actively monitored and supported by a comprehensive credit approval process and all large dollar transactions are sent for approval to a committee of seasoned business line and credit professionals. The Company maintains an independent credit risk review function that reports directly to the Risk Management Committee of the Board of Directors. Credits that demonstrate significant deterioration in credit quality are transferred to a specialized group of experienced officers for individual attention.

The Company monitors credit quality indicators and utilizes portfolio scorecards to assess the risk of its commercial portfolio. Specifically, the Company utilizes a ~~12-point~~15-point credit risk-rating system to manage risk and identify potential problem loans. ~~Risk-rating~~Under this point system, risk-rating assignments are based upon a number of quantitative and qualitative factors that are under continual review. Factors include cash flow, collateral coverage, liquidity, leverage, position within the industry, internal controls and management, financial reporting, and other considerations. Commercial loan risk ratings are (re)evaluated for each loan at least once-per-year. The risk-rating categories under the credit risk-rating system are defined as follows:

0 Risk Rating - Unrated

Certain segments of the portfolios are not rated. These segments include ~~airplane~~aircraft loans, business banking scored loan products, and other commercial loans managed by exception. Loans within this unrated loan segment are monitored by delinquency status; and for lines of credit greater than $100,000 in exposure, an annual review is ~~conducted.~~conducted which includes the review of the business score and loan and deposit account performance. The Company supplements performance data with current business credit scores for the business banking portfolio on a quarterly basis. Unrated ~~loans managed outside of airplane loans~~commercial and business banking loans are generally restricted to commercial exposure of less than ~~$1 million with a line of credit component restricted~~

~~to $350,000.~~$1.5 million. Loans included in this category ~~have qualification requirements that include risk rating of 6W~~generally are not required to provide regular financial reporting or better at time of recommendation for unrated status, acceptable management of deposit accounts, and no known negative changes in management, operations or financial performance. Restricted from this category are lines of credit managed with borrowing base requirements.

regular covenant monitoring.

For purposes of estimating the allowance for loan losses, unrated loans are considered in the same manner as pass rated loans.

~~1-6W~~

1-10 Risk Rating – Pass

Loans with a ~~risk-rating~~risk rating of ~~1-6W~~1-10 are classified as “Pass” and are comprised of loans that range from “substantially risk free” which indicates borrowers of unquestioned credit standing, well-established national companies with a very strong financial condition, and loans fully secured by policy conforming cash levels, through ~~“acceptable risk”~~“low pass” which indicates acceptable rated loans that may be experiencing weak cash flow, impending lease rollover or minor liquidity concerns. The top end of the risk-rating category (6W) includes loans that, although contain the same risk-rating as those with a rating of 6, are being more closely monitored to determine if a downgrade is necessary.

11 Risk Rating – Special Mention (Potential Weakness)

Loans to borrowers in this category exhibit potential weaknesses or downward trends deserving management’s close attention. While potentially weak, no loss of principal or interest is envisioned. Included in this category are borrowers who are performing as agreed, are weak when compared to industry standards, may be experiencing an interim loss and may be in declining industries. An element of asset quality, financial flexibility or management is below average. ~~Management and owners may have limited depth, particularly when operating under strained circumstances.~~ The Company does

Table of Contents

not consider borrowers within this category as new business prospects. Borrowers rated special mention may find it difficult to obtain alternative financing from traditional bank sources.

12 Risk Rating – Substandard (Well-Defined Weakness)

Loans with a risk-rating of 812 exhibit well-defined weaknesses that, if not corrected, may jeopardize the orderly liquidation of the debt. A loan is classified as substandard if it is inadequately protected by the repayment capacity of the obligor or by the collateral pledged. Specifically, repayment under market rates and terms, or by the requirements under the existing loan documents, is in jeopardy, but no loss of principal or interest is envisioned. There is a possibility that a partial loss of principal and/or interest will occur in the future if the deficiencies are not corrected. Loss potential, while existing in the aggregate portfolio of substandard assets, does not have to exist in individual assets classified as substandard. Credits in this category often may have reported a loss in the most recent fiscal year end and are likely to continue to report losses in the interim period, or interim losses are expected to result in a fiscal year-end loss. NonaccrualNon-accrual is possible, but not mandatory, in this class.

13 Risk Rating – Doubtful (Loss ~~Probably)~~

Probable)

Loans classified as doubtful have comparable weaknesses as found in the loans classified as substandard, with the added provision that such weaknesses make collection of the debt in full (based on currently existing facts, conditions and values) highly questionable and improbable. Serious problems exist such that a partial loss of principal is likely. The probability of loss ~~exceeds 50%, however,~~exists, but because of reasonably specific pending factors that may work to strengthen the credit, estimated losses are deferred until a more exact status can be determined. ~~Pending factors may include the sale of the company, a merger, capital injection, new profitable purchase orders, and refinancing plans.~~ Specific reserves will be the amount identified after specific review. ~~Nonaccrual~~Non-accrual is mandatory in this class.

14 Risk Rating – Loss

Loans to borrowers in this category are deemed incapable of repayment. Loans to such borrowers are considered ~~uncollectable~~uncollectible and of such little value that continuance as active assets of the Company is not warranted. This classification does not mean that the loans have no recovery or salvage value, but rather, it is not practical or desirable to defer writing off these assets even though partial recovery may occur in the future. Loans in this category have a recorded investment of $0 at the time of the downgrade.

The credit quality of the commercial loan portfolio is actively monitored and supported by a comprehensive credit approval process; and all large dollar transactions are sent for approval to a committee of seasoned business line and credit professionals. Risk ratings are periodically reviewed and the Company maintains an independent credit risk review function that reports directly to the Risk Management Committee of the Board of Directors. Credits that demonstrate significant deterioration in credit quality are transferred to a specialized group of seasoned workout officers for individual attention.

~~The following table details the internal risk-rating categories for the Company’s commercial and industrial, commercial real estate, commercial construction and business banking portfolios:~~

      As of June 30, 2020
Category
   Risk
Rating    Commercial and
Industrial    Commercial
Real Estate    Commercial
Construction    Business
Banking    Total
   (In thousands)
Unrated
   0    $ 753,943    $ 42,919    $ 332    $ 900,296    $ 1,697,490
Pass
   1-6W    1,269,284    3,211,054    248,400    291,751    5,020,489
Special mention
   7    180,485    297,016    29,671    32,406    539,578
Substandard
   8    51,338    30,654    3,843    10,508    96,343
Doubtful
   9    16,650    2,715    —      —      19,365
Loss
   10    —      —      —      —      —










Total
      $ 2,271,700    $ 3,584,358    $ 282,246    $ 1,234,961    $ 7,373,265










      As of December 31, 2019
Category
   Risk
Rating    Commercial and
Industrial    Commercial
Real Estate    Commercial
Construction    Business
Banking    Total
   (In thousands)
Unrated
   0    $ 150,226    $ 48,266    $ 331    $ 445,201    $ 644,024
Pass
   1-6W    1,405,902    3,436,267    260,615    315,194    5,417,978
Special mention
   7    24,171    28,606    9,438    2,006    64,221
Substandard
   8    42,894    21,635    3,390    8,207    76,126
Doubtful
   9    18,991    667    —      890    20,548
Loss
   10    —      —      —      —      —










Total
      $ 1,642,184    $ 3,535,441    $ 273,774    $ 771,498    $ 6,222,897

Paycheck Protection Program (“PPP”) loans are included within the unrated category of the commercial and industrial and business banking portfolios in the table above. Commercial and industrial and business banking PPP loans amounted to $633.0 million and $467.2 million, respectively, at June 30, 2020. The Company does not have an allowance for loan losses for PPP loans as they are 100% guaranteed by the SBA.

Residential and Consumer Lending Credit Quality

For the Company’s residential and consumer portfolios, the quality of the loan is best indicated by the repayment performance of an individual borrower. Updated appraisals, broker opinions of value and other collateral valuation methods are employed in the residential and consumer portfolios, typically for credits that are deteriorating. Delinquency status is determined using payment performance, while accrual status may be determined using a combination of payment performance, expected borrower viability and collateral value. Delinquent consumer loans are handled by a team of seasoned collection specialists.

The following table details the amortized cost balances of the Company’s loan portfolios, presented by credit quality indicator and origination year as of September 30, 2022:


	2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term Loans (1)		Total
	(In thousands)
Commercial and industrial
Pass	$	602,715	$	467,826	$	439,013	$	225,164	$	115,237	$	647,820	$	463,873	$	3,407	$	2,965,055
Special Mention	—		—		—		185		3,667		12		900		—		4,764
Substandard	304		13,387		2,963		47		2,688		7,948		390		346		28,073
Doubtful	—		3,912		—		—		—		37		3,331		—		7,280
Loss	—		—		—		—		—		—		—		—		—
Total commercial and industrial	603,019		485,125		441,976		225,396		121,592		655,817		468,494		3,753		3,005,172

Commercial real estate
Pass	1,179,141		835,810		592,293		620,120		463,910		1,092,428		45,902		4,231		4,833,835
Special Mention	—		—		16,144		703		35,360		9,986		—		—		62,193
Substandard	3,520		50		2,683		19,877		15,837		36,532		8,000		—		86,499
Doubtful	—		—		—		—		—		—		—		—		—

Table of Contents


Loss	—		—		—		—		—		—		—		—		—
Total commercial real estate	1,182,661		835,860		611,120		640,700		515,107		1,138,946		53,902		4,231		4,982,527

Commercial construction
Pass	71,700		169,318		24,920		32,909		—		—		11,524		—		310,371
Special Mention	—		—		2,101		—		—		—		—		—		2,101
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total commercial construction	71,700		169,318		27,021		32,909		—		—		11,524		—		312,472

Business banking
Pass	139,053		224,855		175,102		130,091		62,448		246,849		78,458		3,908		1,060,764
Special Mention	—		—		4,704		4,139		3,820		5,729		1,070		—		19,462
Substandard	—		2,160		1,679		4,072		769		10,418		652		770		20,520
Doubtful	—		—		—		191		—		82		—		—		273
Loss	—		—		—		—		—		—		—		—		—
Total business banking	139,053		227,015		181,485		138,493		67,037		263,078		80,180		4,678		1,101,019

Residential real estate
Current and accruing	378,210		711,207		389,001		104,011		70,055		455,291		—		—		2,107,775
30-89 days past due and accruing	723		2,671		707		1,574		1,281		7,453		—		—		14,409
Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	—		—		202		293		1,016		7,002		—		—		8,513
Total residential real estate	378,933		713,878		389,910		105,878		72,352		469,746		—		—		2,130,697

Consumer home equity
Current and accruing	74,271		11,284		6,113		5,145		22,589		78,717		956,474		6,378		1,160,971
30-89 days past due and accruing	—		—		—		83		101		646		5,110		—		5,940
Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	—		—		—		—		382		1,148		3,390		160		5,080
Total consumer home equity	74,271		11,284		6,113		5,228		23,072		80,511		964,974		6,538		1,171,991

Other consumer
Current and accruing	42,452		34,736		19,085		20,170		23,645		20,694		18,490		10		179,282
30-89 days past due and accruing	77		114		94		59		354		220		52		—		970
Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	41		25		56		74		80		107		92		—		475
Total other consumer	42,570		34,875		19,235		20,303		24,079		21,021		18,634		10		180,727

Total	$	2,492,207	$	2,477,355	$	1,676,860	$	1,168,907	$	823,239	$	2,629,119	$	1,597,708	$	19,210	$	12,884,605

(1)The amounts presented represent the amortized cost as of September 30, 2022 of revolving loans that were converted to term loans during the nine months ended September 30, 2022.

Paycheck Protection Program (“PPP”) loans are included within the unrated category of the commercial and industrial and business banking portfolios in the table above. Commercial and industrial PPP loans and business banking PPP loans amounted to $5.3 million and $17.8 million, respectively, at September 30, 2022 and $112.8 million and $218.6 million respectively, at December 31, 2021 on a recorded investment basis. The Company does not have an allowance for loan losses for PPP loans as they are 100% guaranteed by the SBA.

Asset Quality

Table of Contents

The Company manages its loan portfolio with careful monitoring. As a general rule, loans more than 90 days past due with respect to principal and interest are classified as ~~nonaccrual~~non-accrual loans. Exceptions may be made if management believes that collateral held by the Company is clearly sufficient and in full satisfaction of both principal and ~~interest, or the loan is accounted for as a PCI loan. Therefore, as permitted by banking regulations, certain consumer loans past due 90 days or more may continue to accrue~~ interest. The Company may also use discretion regarding other loans over 90 days delinquent if the loan is well secured and in the process of collection. ~~Nonaccrual~~Non-accrual loans and loans that are more than 90 days past due but still accruing interest are considered ~~nonperforming~~non-performing loans.

~~Nonaccrual~~Non-accrual loans may be returned to an accrual status when principal and interest payments are no longer delinquent, and the risk characteristics of the loan have improved to the extent that there no longer exists a concern as to the collectability of principal and interest. Loans are considered past due based upon the number of days delinquent according to their contractual terms. ~~Specifically, nonaccrual residential loans that have been restructured must perform for a period of six months before being considered for accrual status.~~

A loan is expected to remain on ~~nonaccrual~~non-accrual status until it becomes current with respect to principal and interest, the loan is liquidated, or the loan is determined to be uncollectible and is charged-off against the allowance for loan losses.

The following ~~is a summary pertaining to the breakdown of the Company’s nonaccrual loans:~~

   As of June 30,    As of December 31,
   2020    2019
   (In Thousands)
Commercial and industrial
   $ 13,435    $ 21,471
Commercial real estate
   1,399    4,120
Commercial construction
   281    —
Business banking
   16,158    8,502
Residential real estate
   11,693    5,598
Consumer home equity
   6,403    2,137
Other consumer
   2,971    623




Total non-accrual loans
   $ 52,340    $ 42,451

~~The following table shows~~tables show the age analysis of past due loans as of the dates indicated:

   As of June 30, 2020
   30-59
Days Past
Due    60-89
Days Past
Due    90 or More
Days Past
Due    Total Past
Due    Current    Total
Loans    Recorded
Investment
> 90 Days
and Accruing
   (In thousands)
Commercial and industrial
   $ 681    $ 671    $ 1,508    $ 2,860    $ 2,268,840    $ 2,271,700    $ 471
Commercial real estate
   —      257    3,045    3,302    3,581,056    3,584,358    2,331
Commercial construction
   —      —      280    280    281,966    282,246    —
Business banking
   4,541    4,160    13,021    21,722    1,213,239    1,234,961    —
Residential real estate
   26,859    2,084    8,981    37,924    1,362,931    1,400,855    244
Consumer home equity
   3,413    1,971    4,511    9,895    895,589    905,484    9
Other consumer
   2,992    1,734    2,971    7,697    327,037    334,734    —














Total
   $ 38,486    $ 10,877    $ 34,317    $ 83,680    $ 9,930,658    $ 10,014,338    $ 3,055


	As of December 31, 2019															As of September 30, 2022
	30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total Loans		Recorded Investment >90 Days and Accruing			30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total Loans
	(In thousands)															(In thousands)
Commercial and industrial	$	1,407	$	—	$	963	$	2,370	$	1,639,814	$	1,642,184	$	—	Commercial and industrial	$	—	$	304	$	1,994	$	2,298	$	3,002,874	$	3,005,172
Commercial real estate		1,290		100		1,856		3,246		3,532,195		3,535,441		1,315	Commercial real estate	—		—		—		—		4,982,527		4,982,527
Commercial Construction		—		—		—				273,774		273,774		—
Commercial construction															Commercial construction	—		—		—		—		312,472		312,472
Business banking		3,031		763		6,095		9,889		761,609		771,498		—	Business banking	5,591		1,188		3,609		10,388		1,090,631		1,101,019
Residential real estate		14,030		2,563		3,030		19,623		1,409,007		1,428,630		—	Residential real estate	12,572		1,905		6,588		21,065		2,109,632		2,130,697
Consumer home equity		2,497		430		1,636		4,563		928,525		933,088		9	Consumer home equity	4,560		1,752		4,485		10,797		1,161,194		1,171,991
Other consumer		3,451		514		579		4,544		397,887		402,431		—	Other consumer	720		286		439		1,445		179,282		180,727

Total	$	25,706	$	4,370	$	14,159	$	44,235	$	8,942,811	$	8,987,046	$	1,324	Total	$	23,443	$	5,435	$	17,115	$	45,993	$	12,838,612	$	12,884,605


	As of December 31, 2021
	30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total Loans
	(In thousands)
Commercial and industrial	$	45	$	31	$	1,672	$	1,748	$	2,958,779	$	2,960,527
Commercial real estate	25,931		—		1,196		27,127		4,495,386		4,522,513
Commercial construction	—		—		—		—		222,328		222,328
Business banking	5,043		1,793		4,640		11,476		1,323,218		1,334,694
Residential real estate	17,523		3,511		5,543		26,577		1,900,233		1,926,810
Consumer home equity	3,774		1,510		4,571		9,855		1,090,298		1,100,153
Other consumer	1,194		548		889		2,631		211,854		214,485
Total (1)	$	53,510	$	7,393	$	18,511	$	79,414	$	12,202,096	$	12,281,510

(1)The amounts presented in the table above represent the recorded investment balance of loans as of December 31, 2021.

Table of Contents

The following table presents information regarding non-accrual loans as of the dates indicated:


	As of September 30, 2022								As of December 31, 2021
	Non-Accrual Loans With ACL		Non-Accrual Loans Without ACL (3)		Total Non-Accrual Loans		Amortized Cost of Loans >90 DPD and Still Accruing (2)		Total Non-Accrual Loans (1)		Recorded Investment >90 DPD and Still Accruing
	(In thousands)
Commercial and industrial	$	3,363	$	8,910	$	12,273	$	—	$	12,400	$	—
Commercial real estate	—		—		—		—		—		1,196
Commercial construction	—		—		—		—		—		—
Business banking	6,934		679		7,613		—		8,230		—
Residential real estate	8,513		—		8,513		—		6,681		769
Consumer home equity	5,080		—		5,080		—		4,732		25
Other consumer	461		14		475		—		950		—
Total non-accrual loans	$	24,351	$	9,603	$	33,954	$	—	$	32,993	$	1,990

(1)The amounts presented represent the recorded investment balance of loans as of December 31, 2021.

(2)“DPD” indicated in the table above refers to “days past due.”

(3)The loans on non-accrual status and without an ACL as of September 30, 2022, were primarily comprised of collateral dependent loans for which the fair value of the underlying loan collateral exceeded the loan carrying value.

The amount of interest income recognized on non-accrual loans during the three and nine months ended September 30, 2022 was not significant.

It is the Company’s policy to reverse any accrued interest when a loan is put on non-accrual status and, generally, to record any payments received from a borrower related to a loan on non-accrual status as a reduction of the amortized cost basis of the loan. Accrued interest reversed against interest income for the three and nine months ended September 30, 2022 was insignificant.

For collateral values for residential mortgage and home equity loans, the Company relies primarily upon third-party valuation information from certified appraisers and values are generally based upon recent appraisals of the underlying collateral, brokers’ opinions based upon recent sales of comparable properties, or estimated auction or liquidation values less estimated costs to sell. As of both September 30, 2022 and December 31, 2021, the Company had collateral-dependent residential mortgage and home equity loans totaling $0.6 million.

For collateral-dependent commercial loans, the amount of the allowance for loan losses is individually assessed based upon the fair value of the collateral. Various types of collateral are used, including real estate, inventory, equipment, accounts receivable, securities and cash, among others. For commercial real estate loans, the Company relies primarily upon third-party valuation information from certified appraisers and values are generally based upon recent appraisals of the underlying collateral, brokers’ opinions based upon recent sales of comparable properties, estimated equipment auction or liquidation values, income capitalization, or a combination of income capitalization and comparable sales. As of September 30, 2022 and December 31, 2021, the Company had collateral-dependent commercial loans totaling $12.8 million and $13.1 million, respectively.

Appraisals for all loan types are obtained at the time of loan origination as part of the loan approval process and are updated at the time of a loan modification and/or refinance and as considered necessary by management for impairment review purposes. In addition, appraisals are updated as required by regulatory pronouncements.

As of both September 30, 2022 and December 31, 2021, the Company had no residential real estate held in other real estate owned (“OREO”). As of both September 30, 2022 and December 31, 2021, there were no mortgage loans collateralized by residential real estate property for which formal foreclosure proceedings were in-process.

Table of Contents

In the normal course of business, the Company may become aware of possible credit problems in which borrowers exhibit potential for the inability to comply with the contractual terms of their loans, but which currently do not yet meet the criteria for classification as ~~nonperforming loans. However, based~~non-performing loans (which consist of non-accrual loans and loans that are more than 90 days past due but still accruing interest). Based upon the Company’s past experiences, some of ~~these~~the loans with potential weaknesses will ultimately be restructured or placed in non-accrual status.

As of both September 30, 2022 and December 31, 2021, management is unable to reasonably estimate the amount of these loans that will be restructured or placed on non-accrual status.

Troubled Debt Restructurings (“TDR”)

As described previously in Note 2, “Summary of Significant Accounting Policies,” in cases where a borrower experiences financial difficulty and the Company makes certain concessionary modifications to contractual terms, the loan is classified as a ~~troubled debt restructured loan.~~TDR. The ~~objective is to aid in the resolution of nonperforming~~process through which management identifies loans ~~by modifying the contractual obligation to avoid the possibility of foreclosure.~~

~~All~~as TDR loans, ~~are considered impaired~~the methodology employed to record any loan losses, and the calculation of any shortfall on collateral dependent loans, is also described within Note 2, “Summary of Significant Accounting Policies".

In response to the novel coronavirus (“COVID-19”) pandemic, the Company has granted loan modifications to allow deferral of payments for borrowers negatively impacted by the COVID-19 pandemic. Modifications granted to customers allowed for full payment deferrals (principal and interest) or deferral of only principal payments. The balance of loans which underwent a modification and have not yet resumed payment as of September 30, 2022 and December 31, 2021 was $17.7 million and $106.7 million, respectively. The Company defines a modified loan to have resumed payment if it is one month past the modification end date and not more than 30 days past due. These modifications with active deferrals met the criteria of either Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) or the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) at the time of such modification, and therefore are ~~subject~~not deemed troubled debt restructurings, referred to ~~a specific review~~as TDRs. Additionally, loans that are performing in accordance with the contractual terms of the modification are not reflected as being past due and therefore are not impacting non-accrual or delinquency totals as of September 30, 2022 and December 31, 2021. The Company continued to accrue interest on these COVID-19 modified loans and evaluated the deferred interest for ~~impairment loss.~~ collectability as of September 30, 2022 and December 31, 2021.

The ~~amount of impairment loss, if any, is recorded as a specific loss allocation~~Consolidated Appropriations Act, which was enacted on December 27, 2020, extended certain provisions related to ~~each individual loan~~the COVID-19 pandemic in the ~~allowance for loan losses. Commercial loans~~United States (which were due to expire) and ~~residential~~provided additional emergency relief to individuals and businesses. Included within the provisions of the Consolidated Appropriations Act was the extension to January 1, 2022 of Section 4013 of the CARES Act, which provided relief from a requirement to evaluate loans that ~~have been classified as TDRs and which subsequently default are reviewed~~had received a COVID-19 modification to determine if the loans required TDR treatment, provided certain criteria were met. As such, the Company applied the TDR relief granted pursuant to such section to any qualifying loan ~~should be deemed collateral dependent. In such an instance, any shortfall between~~modification executed during the ~~value of the collateral and the book value of the loan is determined by measuring the recorded investment in the loan against the fair value of the collateral less costs to sell.~~

allowable time period.

The Company’s policy is to have any TDR ~~loans~~loan which ~~are~~is on ~~nonaccrual~~non-accrual status prior to being modified remain on ~~nonaccrual~~non-accrual status for approximately six months subsequent to being modified before management considers its return to accrual status. If the TDR loan is on accrual status prior to being modified, it is reviewed to determine if the modified loan should remain on accrual status.

TDR loan information as of December 31, 2021 and the period then ended was prepared in accordance with GAAP effective for the Company as of December 31, 2021, or prior to the Company's adoption of ASU 2016-13.

Table of Contents

The following ~~table shows~~tables show the TDR loans on accrual and ~~nonaccrual~~non-accrual status as of the dates indicated:

   As of June 30, 2020
   TDRs on Accrual Status    TDRs on Nonaccrual Status    Total TDRs
      Balance of    Number of    Balance of    Number of    Balance of
   Number of Loans    Loans    Loans    Loans    Loans    Loans
   (Dollars in thousands)
Commercial and industrial
   2    $ 5,429    10    $ 11,259    12    $ 16,688
Commercial real estate
   1    3,521    2    707    3    4,228
Business banking
   5    4,143    2    224    7    4,367
Residential real estate
   149    23,714    28    4,172    177    27,886
Consumer home equity
   86    3,862    12    2,085    98    5,947
Other consumer
   1    22    —      —      1    22












Total
   244    $ 40,691    54    $ 18,447    298    $ 59,138












   As of December 31, 2019
   TDRs on Accrual Status    TDRs on Nonaccrual Status    Total TDRs
      Balance of    Number of    Balance of    Number of    Balance of
   Number of Loans    Loans    Loans    Loans    Loans    Loans
   (Dollars in thousands)
Commercial and industrial
   4    $ 10,899    14    $ 19,781    18    $ 30,680
Commercial real estate
   1    3,520    3    3,338    4    6,858
Business banking
   2    3,156    1    204    3    3,360
Residential real estate
   152    25,093    27    3,977    179    29,070
Consumer home equity
   89    5,955    5    600    94    6,555












Total
   248    $ 48,623    50    $ 27,900    298    $ 76,523


	As of September 30, 2022
	TDRs on Accrual Status			TDRs on Non-Accrual Status			Total TDRs
	Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans
	(Dollars in thousands)
Commercial and industrial	2	$	7,087	10	$	10,248	12	$	17,335
Commercial real estate	1	3,520		—	—		1	3,520
Business banking	7	3,729		20	998		27	4,727
Residential real estate	117	18,268		26	3,340		143	21,608
Consumer home equity	55	3,671		16	855		71	4,526
Other consumer	—	—		1	14		1	14
Total	182	$	36,275	73	$	15,455	255	$	51,730


	As of December 31, 2021
	TDRs on Accrual Status			TDRs on Non-Accrual Status			Total TDRs
	Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans
	(Dollars in thousands)
Commercial and industrial	1	$	3,745	6	$	9,983	7	$	13,728
Commercial real estate	1	3,520		—	—		1	3,520
Business banking	5	3,830		3	383		8	4,213
Residential real estate	121	19,119		27	3,015		148	22,134
Consumer home equity	67	3,104		16	818		83	3,922
Other consumer	2	18		—	—		2	18
Total (1)	197	$	33,336	52	$	14,199	249	$	47,535

(1)The amounts presented in the table above represent the recorded investment balance of loans as of December 31, 2021.

The amount of ~~specific reserve~~allowance for loan losses associated with the ~~TDRs~~TDR loans was ~~$4.4~~$1.8 million and ~~$3.2~~$3.4 million at ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively. ~~During the six months ended June 30, 2020 and the year ended December 31, 2019, $0 and $0.3 million, respectively, in TDRs moved from nonaccrual to accrual. The amount of~~There were no additional commitments to lend to borrowers who have been a party to a TDR ~~was $0 and $2.5 million at June~~as of both September 30, ~~2020~~2022 and December 31, ~~2019, respectively.~~

2021.

The following ~~table shows~~tables show the modifications which occurred during the periods and the change in the recorded investment subsequent to the modifications occurring:

   For the Three Months Ended June 30, 2020    For the Six Months Ended June 30, 2020
   Number
of
Contracts    Pre-
Modification
Outstanding
Recorded
Investment    Post-
Modification
Modification
Outstanding
Recorded
Investment (1)    Number
of
Contracts    Pre-Modification
Modification
Outstanding
Recorded
Investment    Post-
Modification
Modification
Outstanding
Recorded
Investment (1)
   (Dollars in thousands)
Commercial and industrial
   1    $ 141    $ 141    1    $ 141    $ 141
Commercial real estate
   1    506    506    1    506    506
Business banking
   4    1,165    1,165    4    1,165    1,165
Residential real estate
   2    155    155    3    399    399
Consumer home equity
   4    113    113    12    527    531
Other consumer
   —      —      —      1    24    24












Total
   12    $ 2,080    $ 2,080    22    $ 2,762    $ 2,766

   For the Three Months Ended June 30, 2019    For the Six Months Ended June 30, 2019
   Number
of
Contracts    Pre-
Modification
Outstanding
Recorded
Investment    Post-
Modification
Modification
Outstanding
Recorded
Investment (1)    Number
of
Contracts    Pre-Modification
Modification
Outstanding
Recorded
Investment    Post-
Modification
Modification
Outstanding
Recorded
Investment (1)
   (Dollars in thousands)
Commercial and industrial
   5    $ 7,141    $ 7,441    7    $ 7,462    $ 7,762
Commercial real estate
   2    3,277    3,277    2    3,277    3,277
Residential real estate
   3    433    445    3    433    445
Consumer home equity
   3    154    156    3    154    156












Total
   13    $ 11,005    $ 11,319    15    $ 11,326    $ 11,640

~~(1)~~

~~The post-modification balances represent the balance of the loan on the date of modification. These amounts may show an increase when modification includes capitalization of interest.~~

For the Three Months Ended September 30, 2022 For the Nine Months Ended September 30, 2022
Number
of
Contracts Pre-
Modification
Outstanding
Recorded
Investment Post-
Modification
Outstanding
Recorded
Investment (1) Number
of
Contracts Pre-Modification
Outstanding
Recorded
Investment Post-
Modification
Outstanding
Recorded
Investment (1)
(Dollars in thousands)
Commercial and industrial 3 $ 2,997 $ 2,997 4 $ 5,415 $ 5,415
Business banking 9 284 284 20 854 862
Residential real estate 5 1,170 1,170 8 1,899 1,899
Consumer home equity 4 1,236 1,236 6 1,468 1,468
Total 21 $ 5,687 $ 5,687 38 $ 9,636 $ 9,644

(1)The post-modification balances represent the balance of the loan on the date of modification. These amounts may show an increase when modification includes capitalization of interest.

Table of Contents


	For the Three Months Ended September 30, 2021					For the Nine Months Ended September 30, 2021
	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)
	(Dollars in thousands)
Business banking	—	$	—	$	—	1	$	462	$	462
Residential real estate	—	—		—		1	295		295
Consumer home equity	2	200		200		2	200		200
Total	2	$	200	$	200	4	$	957	$	957

(1)The post-modification balances represent the balance of the loan on the date of modification. These amounts may show an increase when modification includes capitalization of interest.

At ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, the outstanding recorded investment of loans that were new to TDR loans during the ~~period were $2.7~~nine months ended September 30, 2022 and the year ended December 31, 2021 was $9.2 million and ~~$36.2~~$0.8 million, respectively.

The difference between such balances reported on an amortized cost basis and recorded investment basis at both September 30, 2022 and December 31, 2021 was not significant.

The following table shows the Company’s post-modification balance of TDRs listed by type of modification during the periods indicated:

   For the Three Months Ended June 30,    For the Six Months Ended June 30,
   2020    2019    2020    2019
   (In Thousands)
Adjusted interest rate and extended maturity
   $ —      $ 668    $ —      $ 668
Adjusted interest rate and principal deferred
   —      39    —      39
Interest only/principal deferred
   1,305    40    1,305    40
Extended maturity
   35    —      35    —
Extended maturity and interest only/principal deferred
   381    —      427    —
Additional underwriting - increased exposure
   —      10,572    —      10,572
Court-ordered concession
   359    —      999    321








Total
   $ 2,080    $ 11,319    $ 2,766    $ 11,640

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2022 2021 2022 2021
(In thousands)
Extended maturity $ — $ 200 $ 997 $ 200
Adjusted interest rate and extended maturity 123 — 535 —
Interest only/principal deferred — — 130 —
Covenant modification — — 2,418 —
Court-ordered concession — — — 295
Principal and interest deferred 2,343 — 2,343 462
Extended maturity and interest only/principal deferred 2,997 — 2,997 —
Other 224 — 224 —
Total $ 5,687 $ 200 $ 9,644 $ 957

The following table shows the number of loans and the recorded investment amount of those loans, as of the respective date, that have been modified during the prior 12 months which have subsequently defaulted during the periods indicated. The Company considers a loan to have defaulted when it reaches 90 days past due or is transferred to ~~nonaccrual:~~

   For the Three Months Ended June 30,    For the Six Months Ended June 30,
   2020    2019    2020    2019
   Number of
Contracts    Recorded
Investment    Number of
Contracts    Recorded
Investment    Number of
Contracts    Recorded
Investment    Number of
Contracts    Recorded
Investment
   (Dollars in thousands)
Troubled debt restructurings that subsequently defaulted (1):

Commercial and industrial
   —      $ —      5    $ 6,435    —      $ —      5    $ 6,435
Commercial real estate
   —      —      1    338    —      —      1    338
Residential real estate
   —      —      1    107    —      —      1    107
Consumer Home Equity
   —      —      —      —      1    1,317    —      —
















Total
   —      $ —      7    $ 6,880    1    $ 1,317    7    $ 6,880

~~(1)~~

~~This table does not reflect any TDRs which were charged off during the periods indicated.~~

non-accrual:


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	(Dollars in thousands)
Troubled debt restructurings that subsequently defaulted (1):
Business banking	—	$	—	—	$	—	—	$	—	1	$	404
Consumer home equity	—	—		—	—		—	—		1	56
Total	—	$	—	—	$	—	—	$	—	2	$	460

(1)This table does not reflect any TDRs which were fully charged off, paid off, or otherwise settled during the period.

During both the three ~~and six~~ months ended ~~June~~September 30, ~~2020 the~~2022 and 2021, no amounts were charged-off on TDRs modified in the prior 12 ~~months were $0 and $0.4 million, respectively.~~months. During ~~both~~ the ~~three and six~~nine months ended ~~June~~September 30, ~~2019 there~~2022 no amounts were ~~no charge-offs~~charged-off on ~~TDR loans~~TDRs modified in the prior 12 months.

~~Impaired Loans~~

~~Impaired loans consist~~

Table of all loans for which management has determined it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreements. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.

The Company measures impairment of loans using a discounted cash flow method, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. The Company has defined the population of impaired loans to include certain nonaccrual loans, TDR loans and residential and home equity loans that have been partially charged off.

~~The following table summarizes the Company’s impaired loans by loan portfolio as of the dates indicated:~~

   As of June 30, 2020    As of December 31, 2019
   Recorded
Investment    Unpaid
Principal
Balance    Related
Allowance    Recorded
Investment    Unpaid
Principal
Balance    Related
Allowance
   (In thousands)
With no related allowance recorded:

Commercial and industrial
   $ 13,052    $ 14,152    $ —      $ 22,074    $ 22,819    $ —
Commercial real estate
   4,419    4,635    —      7,553    7,808    —
Business banking
   3,076    4,369    —      2,738    4,062    —
Residential real estate
   12,502    14,205    —      16,517    17,858    —
Consumer home equity
   3,279    3,697    —      3,666    3,697    —
Other Consumer
   22    22    —      —      —      —












Sub-total
   36,350    41,080    —      52,548    56,244    —












With an allowance recorded:

Commercial and industrial
   5,812    6,041    3,028    10,296    10,503    2,337
Commercial real estate
   501    506    230    88    90    40
Commercial construction
   280    280    22    —      —      —
Business banking
   17,225    21,418    578    8,920    13,176    571
Residential real estate
   15,799    15,799    1,639    13,015    14,072    1,399
Consumer home equity
   2,688    2,688    277    2,889    2,913    322












Sub-total
   42,285    46,712    5,774    35,208    40,754    4,669












Total
   $ 78,635    $ 87,792    $ 5,774    $ 87,756    $ 96,998    $ 4,669












Contents

~~The following tables display information regarding interest income recognized on impaired loans, by portfolio, for the periods indicated:~~

   For the Three Months Ended    For the Six Months Ended
   June 30, 2020    June 30, 2020
   Average
Recorded
Investment    Total
Interest
Recognized    Average
Recorded
Investment    Total
Interest
Recognized
   (In Thousands)
With no related allowance recorded:

Commercial and industrial
   $ 12,304    $ 49    $ 16,592    $ 119
Commercial real estate
   4,401    44    5,946    89
Business banking
   2,392    17    2,339    36
Residential real estate
   11,678    125    11,728    252
Consumer home equity
   3,315    16    3,155    37
Other Consumer

22


—


23

   1








Sub-total
   34,112    251    39,783
534









With an allowance recorded:

Commercial and industrial
   6,545    —      9,138    —
Commercial real estate
   510    —      429    —
Commercial construction
   93    —      47    —
Business banking
   12,955    15    10,869    30
Residential real estate
   14,664    169    14,707    343
Consumer home equity
   2,706    22    3,087    51








Sub-total
   37,473    206    38,277    424








Total
   $ 71,585    $ 457    $ 78,060    $ 958

   For the Three Months Ended    For the Six Months Ended
   June 30, 2019    June 30, 2019
   Average
Recorded
Investment    Total
Interest
Recognized    Average
Recorded
Investment    Total
Interest
Recognized
   (In Thousands)
With no related allowance recorded:

Commercial and industrial
   $ 12,022    $ 108    $ 11,343    $ 177
Commercial real estate
   11,443    74    11,176    148
Business banking
   1,465    —      1,332    —
Residential real estate
   11,935    131    11,978    259
Consumer home equity
   1,989    26    2,034    51








Sub-total
   38,854    339    37,863    635








With an allowance recorded:

Commercial and industrial
   $ 4,386    $ —      $ 3,629    $ —
Commercial real estate
   1,179    —      634    —
Business banking
   7,314    —      6,937    —
Residential real estate
   12,606    153    12,625    302
Consumer home equity
   2,320    30    2,373    59








Sub-total
   27,805    183    26,198    361








Total
   $ 66,659    $ 522    $ 64,061    $ 996

~~Purchased Credit Impaired Loans~~

~~The following table displays the outstanding and carrying amounts of PCI loans as of the dates indicated:~~

   June 30,    December 31,
   2020    2019
   (In Thousands)
Outstanding balance
   $ 13,572    $ 15,149
Carrying amount
   12,411    13,451

The excess of cash flows expected to be collected over the carrying amount of the loans, referred to as the “accretable yield,” is accreted into interest income over the life of the loans using the effective yield method. The following summarizes activity in the accretable yield for the PCI loan portfolio:

   For the Three Months Ended June 30, For the Six Months Ended June 30,
   2020 2019 2020 2019
   (In Thousands)
Balance at beginning of period
   $ 3,346 $ 5,526 $ 3,923 $ 6,161
Acquisition
   —   —   —   —
Accretion
   (338 ) (569 ) (760 ) (1,142 )
Other change in expected cash flows
   (10 ) (338 ) (165 ) (400 )
Reclassification (to) from non-accretable difference for loans with (deteriorated) improved cash flows
   (4 ) 855 (4 ) 855


Balance at end of period
   $ 2,994 $ 5,474 $ 2,994 $ 5,474

The estimate of cash flows expected to be collected is regularly re-assessed subsequent to acquisition. A decrease in expected cash flows in subsequent periods may indicate that the loan is impaired which would require the establishment of an allowance for loan losses by a charge to the provision for loan losses. An increase in expected cash flows in subsequent periods serves, first, to reduce any previously established allowance for loan losses by the increase in the present value of cash flows expected to be collected, and results in a recalculation of the amount of accretable yield for the loan. The adjustment of accretable yield due to an increase in expected cash flows is accounted for as a change in estimate. The additional cash flows expected to be collected are reclassified from the nonaccretable difference to the accretable yield, and the amount of periodic accretion is adjusted accordingly over the remaining life of the loans.

Loan Participations

The Company occasionally purchases commercial loan ~~participations.~~participations, or participates in syndications through the SNC Program. These ~~loan~~ participations meet the same underwriting, credit and portfolio management standards as the Company’s other loans and are applied against the same criteria to determine the allowance for loan losses as other loans. ~~As of June 30, 2020 and December 31, 2019, the Company held commercial loan participation interests totaling $1.1 billion and $965.1 million, respectively.~~

The following table summarizes the Company’s loan participations:

   As of and for the six months ended June 30, 2020    As of and for the year ended December 31, 2019
   Balance    NPL
Rate
(%) Impaired
(%) Gross
Charge-offs    Balance    NPL
Rate
(%) Impaired
(%) Gross
Charge-offs
   (Dollars in thousands)
Commercial and industrial
   $ 668,667    1.62 % 1.62 % $ —      $ 586,346    2.76 % 2.76 % $ —
Commercial real estate
   305,676    0.00 % 0.00 % —      314,487    0.00 % 0.00 % —
Commercial construction
   86,636    0.00 % 0.00 % —      64,259    0.00 % 0.00 % —
Business banking
   38    0.00 % 0.00 % 15    57    0.00 % 0.00 % —








Total loan participations
   $ 1,061,017    1.02 % 1.02 % $ 15    $ 965,149    1.68 % 1.68 % $ —


	As of and for the Nine Months Ended September 30, 2022						As of and for the Year Ended December 31, 2021
	Balance (1)		Non-performing Loan Rate (%)		Gross Charge-offs		Balance (1)		Non-performing Loan Rate (%)		Gross Charge-offs
	(Dollars in thousands)
Commercial and industrial	$	878,861	0.82	%	$	—	$	732,425	1.36	%	$	—
Commercial real estate	406,089		0.00	%	—		362,898		0.00	%	—
Commercial construction	76,913		0.00	%	—		37,081		0.00	%	—
Business banking	56		0.00	%	3		98		0.00	%	—
Total loan participations	$	1,361,919	0.53	%	$	3	$	1,132,502	0.88	%	$	—

(1)The balance of loan participations as of September 30, 2022 represents the amortized cost basis and the balance as of December 31, 2021 represents the recorded investment balance. The difference between amortized cost basis and recorded investment basis as of September 30, 2022 is not material.

5. Loans and Allowance for Loan Losses

Allowance for Loan Losses

As disclosed in Note 2, “Summary of Significant Accounting Policies,” the Company adopted ASU 2016-13 effective January 1, 2022. As required by GAAP, the Company has included comparative prior period disclosures of its allowance for loan losses which were prepared in accordance with ASC 450, “Contingencies” and ASC 310, “Receivables” (i.e., prior to the Company’s adoption of ASU 2016-13). Refer to the Company’s 2021 Form 10-K for significant accounting policies related to the Company’s allowance for loan losses as of December 31, 2021. A discussion of the Company’s calculation of its allowance for loan losses for such prior periods follows.

The allowance for loan losses was established to provide for probable losses incurred in the Company’s loan portfolio at the balance sheet date and was established through a provision for loan losses charged to net income. Charge-offs, net of recoveries, were charged directly to the allowance. Commercial and residential loans were charged-off in the period in which they are deemed uncollectible. Delinquent loans in these product types were subject to ongoing review and analysis to determine if a charge-off in the current period was appropriate. For consumer loans, policies and procedures existed that required charge-off consideration upon a certain triggering event depending on the product type.

Management used a methodology to systematically estimate the amount of loss incurred in the portfolio. Commercial real estate, commercial and industrial, commercial construction and business banking loans were evaluated using a loan rating system, historical losses and other factors which formed the basis for estimating incurred losses. Portfolios of more homogeneous populations of loans, including residential mortgages and consumer loans, were analyzed as groups taking into account delinquency ratios, historical loss experience and charge-offs. For the purpose of estimating the allowance for loan losses, management segregated the loan portfolio into the categories noted in the credit quality tables presented in the “Credit Quality” section below. Each of these loan categories possesses unique risk characteristics such as the purpose of the loan, repayment source, and collateral. These characteristics were considered when determining the appropriate level of the allowance for each category. The Company’s historical approach to loan portfolio segmentation by risk characteristics and monitoring of credit quality for commercial loans under previous accounting guidance was consistent with that applied under the newly adopted CECL standard. See Note 4, “Loans and Allowance for Credit Losses” for further discussion regarding the Company’s policies for loan segmentation and credit monitoring.

Table of Contents

The following tables summarize the changes in the allowance for loan losses by loan category for the three and nine months ended September 30, 2021:


	For the Three Months Ended September 30, 2021
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Residential Real Estate		Consumer Home Equity		Other Consumer		Other		Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	22,596	$	52,759	$	3,446	$	12,705	$	6,478	$	3,588	$	3,626	$	439	$	105,637
Charge-offs	—		(8)		—		(867)		—		—		(742)		—		(1,617)
Recoveries	40		—		—		469		88		63		206		—		866
(Release of) Provision	(2,007)		1,435		(44)		(929)		(136)		(16)		297		(88)		(1,488)
Ending balance	$	20,629	$	54,186	$	3,402	$	11,378	$	6,430	$	3,635	$	3,387	$	351	$	103,398


	For the Nine Months Ended September 30, 2021
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Residential Real Estate		Consumer Home Equity		Other Consumer		Other		Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	26,617	$	54,569	$	4,553	$	13,152	$	6,435	$	3,744	$	3,467	$	494	$	113,031
Charge-offs	(550)		(242)		—		(4,089)		—		—		(1,381)		—		(6,262)
Recoveries	62		4		—		1,125		115		137		554		—		1,997
(Release of) Provision	(5,500)		(145)		(1,151)		1,190		(120)		(246)		747		(143)		(5,368)
Ending balance	$	20,629	$	54,186	$	3,402	$	11,378	$	6,430	$	3,635	$	3,387	$	351	$	103,398

Table of Contents

The following tables bifurcate the amount of loans and the allowance for loan losses allocated to each loan category based on the type of impairment analysis as of December 31, 2021:


	As of December 31, 2021
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Residential Real Estate		Consumer Home Equity		Other Consumer		Other		Total
	(In thousands)
Allowance for loan losses ending balance:
Individually evaluated for impairment	$	1,540	$	—	$	—	$	450	$	1,549	$	270	$	161	$	—	$	3,970
Acquired with deteriorated credit quality	5		298		—		—		243		—		—		—		546
Collectively evaluated for impairment	16,473		52,075		2,585		10,533		4,764		3,452		3,147		242		93,271
Total allowance for loan losses by group	$	18,018	$	52,373	$	2,585	$	10,983	$	6,556	$	3,722	$	3,308	$	242	$	97,787
Loans ending balance:
Individually evaluated for impairment	$	16,145	$	3,520	$	—	$	12,060	$	22,378	$	3,922	$	179	$	—	$	58,204
Acquired with deteriorated credit quality	19,028		47,553		—		—		3,058		—		—		—		69,639
Collectively evaluated for impairment	2,925,354		4,471,440		222,328		1,322,634		1,901,374		1,096,231		214,306		—		12,153,667
Total loans by group	$	2,960,527	$	4,522,513	$	222,328	$	1,334,694	$	1,926,810	$	1,100,153	$	214,485	$	—	$	12,281,510

Credit Quality

The following tables detail the internal risk-rating categories for the Company’s commercial and industrial, commercial real estate, commercial construction and business banking portfolios:


	As of December 31, 2021
Category	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Total
	(In thousands)
Unrated	$	171,537	$	4,378	$	—	$	696,629	$	872,544
Pass	2,656,873		4,199,803		213,744		569,956		7,640,376
Special mention	70,141		104,517		1,889		50,085		226,632
Substandard	50,339		213,815		6,695		17,814		288,663
Doubtful	11,637		—		—		210		11,847
Loss	—		—		—		—		—
Total	$	2,960,527	$	4,522,513	$	222,328	$	1,334,694	$	9,040,062

PPP loans are included within the unrated category of the commercial and industrial and business banking portfolios in the table above. Commercial and industrial PPP loans and business banking PPP loans amounted to $112.8 million and $218.6 million, respectively, at December 31, 2021. The Company does not have an allowance for loan losses for PPP loans as they are 100% guaranteed by the SBA.

Impaired Loans

Under previous accounting guidance, impaired loans consisted of all loans for which management had determined it was probable that the Company would be unable to collect all amounts due according to the contractual terms of the loan

Table of Contents

agreements. Factors considered by management in determining impairment included payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.

The Company measured impairment of loans using a discounted cash flow method, the loan’s observable market price, or the fair value of the collateral if the loan was collateral dependent. The Company defined the population of impaired loans to include certain non-accrual loans, TDR loans, and residential and home equity loans that had been partially charged off.

The following table summarizes the Company’s impaired loans by loan portfolio as of December 31, 2021:


	As of December 31, 2021
	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(In thousands)
With no related allowance recorded:
Commercial and industrial	$	12,309	$	13,212	$	—
Commercial real estate	3,520		3,520		—
Business banking	4,199		5,069		—
Residential real estate	11,217		12,587		—
Consumer home equity	1,924		1,924		—
Other consumer	18		18		—
Sub-total	33,187		36,330		—
With an allowance recorded:
Commercial and industrial	3,836		4,226		1,540
Business banking	7,861		11,240		450
Residential real estate	11,161		11,161		1,549
Consumer home equity	1,998		1,998		270
Other consumer	161		161		161
Sub-total	25,017		28,786		3,970
Total	$	58,204	$	65,116	$	3,970

Table of Contents

The following table displays information regarding interest income recognized on impaired loans, by portfolio, for the three and nine months ended September 30, 2021:


	For the Three Months Ended September 30, 2021				For the Nine Months Ended September 30, 2021
	Average Recorded Investment		Total Interest Recognized		Average Recorded Investment		Total Interest Recognized
	(In thousands)
With no related allowance recorded:
Commercial and industrial	$	12,517	$	39	$	11,405	$	131
Commercial real estate	3,909		45		4,047		133
Business banking	3,988		25		4,586		75
Residential real estate	11,561		113		12,349		344
Consumer home equity	1,877		13		1,988		47
Other consumer	22		—		24		—
Sub-total	33,874		235		34,399		730
With an allowance recorded:
Commercial and industrial	7,808		—		7,849		—
Commercial real estate	—		—		271		—
Business banking	12,642		14		14,560		43
Residential real estate	12,290		127		13,093		387
Consumer home equity	2,108		15		2,232		53
Other consumer	67		—		22		—
Sub-total	34,915		156		38,027		483
Total	$	68,789	$	391	$	72,426	$	1,213

Purchased Credit Impaired Loans

The following table displays the outstanding and carrying amounts of PCI loans as of December 31, 2021:


	As of December 31, 2021
	(In thousands)
Outstanding balance	$	78,074
Carrying amount	69,639

Under previous accounting guidance, the excess of cash flows expected to be collected over the carrying amount of the loans, referred to as the “accretable yield,” was accreted into interest income over the life of the loans using the effective yield method. The following table summarizes activity in the accretable yield for the PCI loan portfolio:


	For the Three Months Ended September 30, 2021		For the Nine Months Ended September 30, 2021
	(In thousands)
Balance at beginning of period	$	2,981	$	2,495
Accretion	(245)		(877)
Other change in expected cash flows	(1,161)		(1,370)
Reclassification from non-accretable difference for loans with improved cash flows	—		1,327
Balance at end of period	$	1,575	$	1,575

Table of Contents

The estimate of cash flows expected to be collected was regularly re-assessed subsequent to acquisition. A decrease in expected cash flows in subsequent periods may have indicated that the loan was impaired which would require the establishment of an allowance for loan losses by a charge to the provision for loan losses. An increase in expected cash flows in subsequent periods served, first, to reduce any previously established allowance for loan losses by the increase in the present value of cash flows expected to be collected, and resulted in a recalculation of the amount of accretable yield for the loan. The adjustment of accretable yield due to an increase in expected cash flows was accounted for as a change in estimate. The additional cash flows expected to be collected were reclassified from the non-accretable difference to the accretable yield, and the amount of periodic accretion was adjusted accordingly over the remaining life of the loans.

6. Leases

The Company leases certain office space and equipment under various ~~noncancelable~~non-cancelable operating leases. These leases have original terms ranging from 1 year to 25 years. Operating lease liabilities and ~~right of use (ROU)~~right-of-use (“ROU”) assets are recognized at the lease commencement date based onupon the present value of the future minimum lease payments over the lease term. Operating lease liabilities are recorded within other liabilities and ROU assets are recorded within other assets in the Company’s consolidated balance sheets.

As of ~~June 30, 2020,~~the dates indicated, the Company had the following related to operating leases:

   As of
June 30, 2020
   (in thousands)
Right-of-use assets
   $ 87,573
Lease liabilities
   $ 91,221


	As of September 30, 2022		As of December 31, 2021
	(In thousands)
Right-of-use assets	$	60,247	$	83,821
Lease liabilities	64,265		89,296

Finance leases are not material. Finance lease liabilities are recorded within other liabilities and finance ROU assets are recorded within other assets in the Company’s consolidated balance sheets.

The following ~~table is~~tables are a summary of the Company’s components of net lease cost for the ~~three and six months ended June 30, 2020:~~

   Three months ended
June 30, 2020    Six months ended
June 30, 2020
   (in thousands)    (in thousands)
Operating lease cost
   $ 3,601    $ 7,215
Finance lease cost
   17    20
Variable lease cost
   448    970




Total lease cost
   $ 4,066    $ 8,205




periods indicated:

The rent expense under real estate operating leases for the three and six months ended June 30, 2019 amounted to $3.5 million and $7.1 million, respectively. The rent expense under equipment operating leases for the three and six months ended June 30, 2019 amounted to $0.2 million and $0.3 million, respectively.

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(In thousands)
Operating lease cost $ 3,620 $ 3,478 $ 10,999 $ 10,560
Finance lease cost 90 50 270 116
Variable lease cost 606 617 2,036 1,564
Total lease cost $ 4,316 $ 4,145 $ 13,305 $ 12,240

During the three and ~~six~~nine months ended ~~June~~September 30, ~~2020,~~2022, the Company made ~~$3.5~~$3.8 million and ~~$7.1~~$13.3 million, respectively, in cash payments for operating and finance lease payments.

~~Finance leases are not material~~ During the three and ~~are included~~nine months ended September 30, 2021, the Company made $3.5 million and $10.6 million, respectively, in ~~other assets, net in the Company’s consolidated balance sheets.~~

cash payments for operating and finance lease payments.

Supplemental balance sheet information related to operating leases ~~as of June 30, 2020 is~~are as follows:


	~~As of~~ ~~June 30, 2020~~
~~Weighted-average remaining lease term (in years)~~		~~8.84~~
~~Weighted-average discount rate~~		~~2.63~~	%


	As of September 30, 2022		As of December 31, 2021
Weighted-average remaining lease term (in years)	7.17		7.83
Weighted-average discount rate	2.58	%	2.52	%

During the three months ended September 30, 2022, management determined not to exercise a future lease term extension option related to one lease, which had previously been included in its determination of future lease payments, and to terminate another lease. Accordingly, the Company remeasured the present value of the future lease payments related to such

Table of Contents

leases which resulted in a reduction of the lease liabilities and a corresponding reduction of the lease ROU assets of $14.1 million.

The following table sets forth the undiscounted cash flows of base rent related to operating leases outstanding ~~at June~~as of September 30, ~~2020~~2022 with payments scheduled over the next five years and thereafter, including a reconciliation to the operating lease liability recognized in other liabilities in the Company’s ~~Consolidated Balance Sheet in other liabilities.~~

   (in thousands)
Remainder of 2020
   $ 7,098
2021
   13,746
2022
   12,746
2023
   12,206
2024
   11,402
Thereafter
   45,534


Total minimum lease payments
   $ 102,732
Less: amount representing interest
   11,511


Present value of future minimum lease payments
   $ 91,221

6.consolidated balance sheets:


	As of September 30, 2022
Year	(In thousands)
Remainder of 2022	$	3,715
2023	14,255
2024	11,446
2025	9,350
2026	7,868
Thereafter	24,086
Total minimum lease payments	70,720
Less: amount representing interest	6,455
Present value of future minimum lease payments	$	64,265

7. Goodwill and Other Intangibles

The following tables ~~sets~~set forth the carrying amount of goodwill and other intangible assets, net of accumulated amortization, by reporting unit atas of the dates indicated below:


	June 30, 2020							As of September 30, 2022
	Banking Business		Insurance Agency Business		Net Carrying Amount			Banking Business		Insurance Agency Business		Net Carrying Amount
	(In Thousands)							(In thousands)
Balances not subject to amortization							Balances not subject to amortization
Goodwill	$	298,611	$	70,420	$	369,031	Goodwill	$	557,635	$	82,587	$	640,222
Balances subject to amortization							Balances subject to amortization
Insurance agency		—		6,844		6,844
Core deposits		456		—		456

Insurance agency (1)							Insurance agency (1)	—		11,327		11,327
Core deposit intangible							Core deposit intangible	10,673		—		10,673
Total other intangible assets		456		6,844		7,300	Total other intangible assets	10,673		11,327		22,000

Total goodwill and other intangible assets	$	299,067	$	77,264	$	376,331	Total goodwill and other intangible assets	$	568,308	$	93,914	$	662,222


	December 31, 2019
	Banking Business		Insurance Agency Business		Net Carrying Amount
	(In Thousands)
Balances not subject to amortization
Goodwill	$	298,611	$	70,420	$	369,031
Balances subject to amortization
Insurance agency		—		7,949		7,949
Core deposits		754		—		754

Total other intangible assets		754		7,949		8,703

Total goodwill and other intangible assets	$	299,365	$	78,369	$	377,734

(1)Insurance agency intangible assets include customer list, non-compete agreement and supplier relationship intangible assets.


	As of December 31, 2021
	Banking Business		Insurance Agency Business		Net Carrying Amount
	(In thousands)
Balances not subject to amortization
Goodwill	$	557,635	$	73,861	$	631,496
Balances subject to amortization
Insurance agency (1)	—		6,635		6,635
Core deposit intangible	11,572		—		11,572
Total other intangible assets	11,572		6,635		18,207
Total goodwill and other intangible assets	$	569,207	$	80,496	$	649,703

(1)Insurance agency intangible assets include customer list, non-compete agreement and supplier relationship intangible assets.

Table of Contents

During the nine months ended September 30, 2022, the Company completed acquisitions of two insurance agencies for cash consideration of $5.2 million and $8.2 million, respectively, for aggregate total consideration of $13.4 million. Both acquisitions were categorized as business combinations and were accounted for using the acquisition method. The following table summarizes the aggregate estimated fair value of the assets acquired and liabilities assumed for these acquisitions:


	For the Nine Months Ended September 30, 2022
	(In thousands)
Assets acquired:
Customer list intangible	$	6,120
Non-compete intangible	440
Other	40
Total assets acquired	6,600
Consideration:
Total cash paid	(13,400)
Contingent consideration	(1,926)
Other liabilities assumed	—
Total fair value of consideration	(15,326)
Goodwill	$	8,726

The Company quantitatively assesses goodwill for impairment at the reporting unit level on an annual basis or sooner if an event occurs or circumstances change which might indicate that the fair value of a reporting unit is below its carrying amount. The Company has identified and assigned goodwill to two reporting units - the banking business and insurance agency business. The quantitative assessments for both the banking business and insurance agency business were most recently performed as of September 30, 2022. The assessment for the banking business included a market capitalization analysis, as well as a comparison of the banking business’ book value to the implied fair value using a pricing multiple of the Company’s tangible book value. The assessment for the insurance agency business included a price-to-earnings analysis, as well as an earnings before interest, taxes, depreciation, and amortization (“EBITDA”) multiplier valuation based upon recent and observed agency mergers and acquisitions. The Company considered the ~~current~~ economic conditions for the period, including the potential impact of the COVID-19 pandemic, as it pertains to the goodwill above and determined that there was no indication of impairment related to goodwill as of ~~June~~September 30, ~~2020. Additionally, the Company did not record any impairment charges during the year ended~~2022 or December 31, ~~2019.~~

2021.

Other intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company also considered the impact of the COVID-19 pandemic as it pertains to these intangible assets and determined that there was no indication of impairment related to other intangible assets as of ~~June~~September 30, ~~2020.~~

~~7. Income Taxes~~

~~The following table sets forth information regarding~~2022 or December 31, 2021.

Table of Contents

8. Earnings Per Share (“EPS”)

Basic EPS represents income available to common shareholders divided by the ~~Company’s tax provision and applicable tax rates~~weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares (such as stock options) were exercised or converted into additional common shares that would then share in the earnings of the Company. Diluted EPS is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding for the ~~periods indicated:~~

   Three Months Ended June 30, Six Months Ended June 30,
   2020 2019 2020 2019
   (In thousands)
Combined federal and state income tax provisions
   $ 7,197 $ 11,032 $ 8,495 $ 20,710
Effective income tax rates
   19.4 % 23.9 % 18.2 % 23.3 %

~~The Company’s provision for income taxes was $7.2 million and $11.0 million for~~period, plus the ~~three months ended June 30, 2020 and 2019, respectively, and $8.5 million and $20.7 million for~~effect of potential dilutive common share equivalents computed using the ~~six months ended June 30, 2020 and 2019, respectively. The decrease in~~

~~income tax expense was due primarily to lower pre-tax income~~treasury stock method. There were no securities that had a dilutive effect during the three and ~~six~~nine months ended ~~June~~September 30, ~~2020 compared to the three and six months ended June 30, 2019, while investment tax credits and other favorable permanent differences remained relatively constant.~~

The Company believes that it is more likely than not that its deferred tax assets as of June 30, 2020 and December 31, 2019 will be realized. As such, there was no deferred tax asset valuation allowance as of June 30, 2020 and December 31, 2019.

~~The Company files tax returns in the U.S. federal jurisdiction and various states. As of June 30, 2020, the Company’s open tax years for examination~~2021. Shares held by the ~~Internal Revenue Services~~Employee Stock Ownership Plan (“~~IRS”~~ESOP”) ~~were 2016, 2017 and 2018. The Company’s open tax years for examination by state tax authorities varies by state, but no years prior~~that have not been allocated to ~~2013 are open. The Company believes that its income tax returns have been filed based upon applicable statutes, regulations and case law~~employees in ~~effect at the time of filing, however the IRS and/or state jurisdiction, upon examination, could disagree~~accordance with the ~~Company’s interpretation.~~

~~Management has performed an evaluation~~terms of the ~~Company’s uncertain tax positions and determined that a liability~~ESOP, referred to as “unallocated ESOP shares,” are not deemed outstanding for ~~unrecognized tax benefits at June 30, 2020 and December 31, 2019 was not needed.~~

8.earnings per share calculations.
For the Three Months Ended September 30, 2022 For the Nine Months Ended September 30, 2022
(Dollars in thousands, except per share data)
Net income applicable to common shares $ 54,777 $ 157,465
Average number of common shares outstanding 177,677,074 180,764,479
Less: Average unallocated ESOP shares (13,958,112) (14,082,257)
Average number of common shares outstanding used to calculate basic earnings per common share 163,718,962 166,682,222
Common stock equivalents 310,687 185,421
Average number of common shares outstanding used to calculate diluted earnings per common share 164,029,649 166,867,643
Earnings per common share
Basic $ 0.33 $ 0.94
Diluted $ 0.33 $ 0.94


	For the Three Months Ended September 30, 2021		For the Nine Months Ended September 30, 2021
	(Dollars in thousands, except per share data)
Net income applicable to common shares	$	37,106	$	119,578

Average number of common shares outstanding	186,758,154		186,758,154
Less: Average unallocated ESOP shares	(14,459,539)		(14,583,685)
Average number of common shares outstanding used to calculate basic earnings per common share	172,298,615		172,174,469
Common stock equivalents	—		—
Average number of common shares outstanding used to calculate diluted earnings per common share	172,298,615		172,174,469
Earnings per common share
Basic	$	0.22	$	0.69
Diluted	$	0.22	$	0.69

9. Low Income Housing Tax Credits and Other Tax Credit Investments

The Community Reinvestment Act (“CRA”) encourages banks to meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate income. The Company has primarily invested in ~~several~~ separate Low Income Housing Tax Credits (“LIHTC”) projects, also referred to as qualified affordable housing projects, which provide the Company with tax credits and operating loss tax benefits over a period of approximately 15 years. ~~Typically, none of the original investment is expected to be repaid.~~ The return on these investments is generally generated through tax credits and tax losses. ~~The~~In addition to LIHTC projects, the Company invests in new markets tax credit projects that qualify for CRA credits and eligible projects that qualify for renewable energy and historic tax credits.

As of September 30, 2022 and December 31, 2021, the Company had $108.5 million and $83.8 million, respectively, in tax credit investments that were included in other assets in the consolidated balance sheets.

Table of Contents

When permissible, the Company accounts for its investments in LIHTC projects using the proportional amortization method, under which it amortizes the initial cost of the investment in proportion to the amount of the tax credits and other tax benefits received and recognizes ~~the net investment performance in the income statement~~that amortization as a component of income tax ~~expense (benefit).~~expense. The ~~Company’s maximum exposure to loss~~net investment in ~~its investments in qualified affordable~~the housing projects is ~~limited to its carrying value~~ included in other assets. The Company will continue to use the proportional amortization method on any new ~~investments going forward.~~

qualifying LIHTC investments.

The following table presents the Company’s investments in low income housing projects accounted for using the proportional amortization method for the periods indicated:

   Six Months Ended
June 30, 2020    Year Ended
December 31, 2019
   (In Thousands)
Current recorded investment included in other assets
   $ 46,552    $ 37,665
Commitments to fund qualified affordable housing projects included in recorded investment noted above
   23,821    18,042
Tax credits and benefits ⁽¹⁾
   3,058    5,962
Amortization of investments included in current tax expense ⁽²⁾
   2,452    4,782

~~(1)~~

~~Amount reflects tax credits and tax benefits recognized in the consolidated statement of income for the six months ended June 30, 2020 (unaudited) and the year ended December 31, 2019.~~

~~(2)~~

~~Amount reflects amortization of qualified affordable housing projects for the six months ended June 30, 2020 (unaudited) and the year ended December 31, 2019.~~


	As of September 30, 2022		As of December 31, 2021
	(In thousands)
Current recorded investment included in other assets	$	105,797	$	81,035
Commitments to fund qualified affordable housing projects included in recorded investment noted above	63,809		48,399

9.The following table presents additional information related to the Company’s investments in LIHTC projects for the periods indicated:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
	(In thousands)
Tax credits and benefits recognized	$	2,333	$	1,730	$	6,988	$	4,717
Amortization expense included in income tax expense	1,886		1,496		5,616		4,255

The Company accounts for certain other investments in renewable energy projects using the equity method of accounting. These investments in renewable energy projects are included in other assets on the consolidated balance sheets and totaled $2.7 million and $2.8 million as of September 30, 2022 and December 31, 2021, respectively. There were no outstanding commitments related to these investments as of both September 30, 2022 and December 31, 2021.

10. Shareholders’ Equity

Share Repurchases

On November 12, 2021, the Company announced receipt of a notice of non-objection from the Board of Governors of the Federal Reserve System to its previously announced share repurchase program which was approved by the Company’s Board of Directors on October 1, 2021. The program authorized the purchase of up to 9,337,900 shares, or 5% of the Company’s then-outstanding shares of common stock over a 12-month period. The program was limited to $225.0 million through November 30, 2022. The Company completed the repurchase of the total number of shares authorized through this program during the three months ended September 30, 2022.

On September 7, 2022, the Company announced receipt of a notice of non-objection from the Federal Reserve for a new share repurchase program. The program, which authorizes the purchase of up to 8,900,000 shares, or 5% of the Company’s then-outstanding shares of common stock over a 12-month period, is limited to $200.0 million through August 31, 2023.

Repurchases are made at management’s discretion from time to time at prices management considers to be attractive and in the best interests of both the Company and its shareholders, subject to the availability of shares, general market conditions, the trading price of the shares, alternative uses for capital, and the Company’s financial performance. Repurchases may be suspended, terminated or modified by the Company at any time for any reason.

Table of Contents

Information regarding the shares repurchased under the plans is presented in the following table:


Period	Total Number of Shares Repurchased	Average Price Paid per Share		Total Number of Shares Repurchased as Part of the Share Repurchase Programs at the end of Each Respective Period	Maximum Number of Shares That May Yet Be Purchased Under the Share Repurchase Programs at the end of Each Respective Period
January 1, 2022 – January 31, 2022	987,526	$	21.02	2,123,404	7,214,496
February 1, 2022 – February 28, 2022	1,109,697	21.08		3,233,101	6,104,799
March 1, 2022 – March 31, 2022	769,398	21.31		4,002,499	5,335,401
April 1, 2022 – April 30, 2022	1,194,185	20.19		5,196,684	4,141,216
May 1, 2022 – May 31, 2022	1,880,381	18.93		7,077,065	2,260,835
June 1, 2022 – June 30, 2022	1,141,903	18.78		8,218,968	1,118,932
July 1, 2022 – July 31, 2022	909,785	19.02		9,128,753	209,147
August 1, 2022 - August 31, 2022	—	—		9,128,753	209,147
September 1, 2022 – September 30, 2022	571,463	20.33		9,700,216	8,537,684

The Company repurchased no shares of its common stock during the three and nine months ended September 30, 2021.

Dividends

Information regarding dividends declared and paid is presented in the following table:


	Dividends Declared per Share		Dividends Declared		Dividends Paid
	(In millions, except per share data)
Three Months Ended March 31, 2022	$	0.10	$	17.1	$	16.9
Three Months Ended June 30, 2022	0.10		16.7		16.5
Three Months Ended September 30, 2022	0.10		16.5		16.3

Three Months Ended March 31, 2021	$	0.06	$	10.3	$	10.3
Three Months Ended June 30, 2021	0.08		13.8		13.8
Three Months Ended September 30, 2021	0.08		13.8		13.8

11. Employee Benefits

Pension Plans

The Company provides pension benefits for its employees through membership in the Savings Banks Employees’ Retirement Association. The plan through which benefits are provided is a noncontributory, qualified defined benefit plan and is referred to as the Defined Benefit Plan. The Company’s annual contribution to the Defined Benefit Plan is based upon standards established by the Pension Protection Act. The contribution is based on an actuarial method intended to provide not only for benefits attributable to service to date, but also for those expected to be earned in the future. The Defined Benefit Plan has a plan year end of October 31.

The Company has an unfunded Defined Benefit Supplemental Executive Retirement Plan (“DB SERP”) that provides certain retired officers with defined pension benefits in excess of qualified plan limits imposed by U.S. federal tax law. The DB SERP has a plan year end of December 31.

In addition, the Company has an unfunded Benefit Equalization Plan (“BEP”) to provide retirement benefits to certain employees whose retirement benefits under the qualified pension plan are limited per the Internal Revenue Code. The BEP has a plan year end of October 31.

The Company also has an unfunded Outside Directors’ Retainer Continuance Plan (“ODRCP”) that provides pension benefits to outside directors who retire from service. The ODRCP has a plan year end of December 31. Effective December 31, 2020, the Company closed the ODRCP to new participants and froze benefit accruals for active participants.

Components of Net Periodic Benefit Cost

The components of net pension expense for the plans for the periods indicated are as follows:

   Three Months Ended June 30,    Six Months Ended June 30,
   2020    2019    2020    2019
   (In Thousands)
Components of net periodic benefit cost:

Service cost
   $ 6,231    $ 4,730    $ 12,463    $ 9,463
Interest cost
   2,615    2,750    5,232    5,500
Expected return on plan assets
   (7,425 )    (5,906 )    (14,850 )    (11,812 )
Past service cost
   6    11    12    22
Recognized net actuarial loss
   2,361    1,811    4,721    3,622








Net periodic benefit cost
   $ 3,788    $ 3,396    $ 7,578    $ 6,795

Table of Contents


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(In thousands)
Components of net periodic benefit cost:
Service cost	$	8,094	$	7,896	$	24,278	$	23,690
Interest cost	2,429		1,269		7,289		3,805
Expected return on plan assets	(9,280)		(8,141)		(27,842)		(24,424)
Prior service credit	(2,971)		(2,945)		(8,911)		(8,835)
Recognized net actuarial loss	2,799		3,537		8,395		10,612
Net periodic benefit cost	$	1,071	$	1,616	$	3,209	$	4,848

Service costs for the Defined Benefit Plan ~~the BEP,~~ and the ~~DB SERP~~BEP are recognized within salaries and employee benefits in the ~~statement~~consolidated statements of income. ~~Service~~There were no service costs associated with the DB SERP or ODRCP during the three and nine months ended September 30, 2022 and September 30, 2021. The remaining components of net periodic benefit cost are recognized in other noninterest expense in the consolidated statements of income.

In accordance with the Pension Protection Act, the Company was not required to make any contributions to the Defined Benefit Plan for the ~~Outside Directors’ Retainer Continuance Plan are recognized within professional services in the statement of income. During the six months ended June 30, 2020,~~plan year beginning November 1, 2021. However, the Company made ~~contributions for~~a discretionary contribution to the Defined Benefit Plan of ~~$32.5 million.~~

~~10.~~$7.2 million during the nine months ended September 30, 2022. In accordance with the Pension Protection Act, the Company was not required to make any contributions to the Defined Benefit Plan for the plan year beginning November 1, 2020. Accordingly, during the three and nine months ended September 30, 2021, there were no contributions made to the Defined Benefit Plan.

Rabbi Trust Variable Interest Entities

The Company established rabbi trusts to meet its obligations under certain executive non-qualified retirement benefits and deferred compensation plans and to mitigate the expense volatility of the aforementioned retirement plans. The rabbi trusts are considered variable interest entities (“VIE”) as the equity investment at risk is insufficient to permit the trusts to finance their activities without additional subordinated financial support from the Company. The Company is considered the primary beneficiary of the rabbi trusts as it has the power to direct the activities of the rabbi trusts that significantly affect the rabbi trusts’ economic performance and it has the obligation to absorb losses of the rabbi trusts that could potentially be significant to the rabbi trusts by virtue of its contingent call options on the rabbi trusts’ assets in the event of the Company’s bankruptcy. As the primary beneficiary of these VIEs, the Company consolidates the rabbi trust investments. In general, the rabbi trust investments and any earnings received thereon are accumulated, reinvested and used exclusively for trust purposes. These rabbi trust investments consist primarily of cash and cash equivalents, U.S. government agency obligations, equity securities, mutual funds and other exchange-traded funds, and are recorded at fair value in other assets in the Company's consolidated balance sheets. Changes in fair value are recorded in noninterest income in the Company's consolidated statements of income. At September 30, 2022 and December 31, 2021 the amount of rabbi trust investments at fair value were $71.7 million and $104.4 million, respectively.

The following table presents the book value, mark-to-market, and fair value of assets held in rabbi trust accounts by asset type:


	As of September 30, 2022						As of December 31, 2021
	Book Value		Mark-to-Market		Fair Value		Book Value		Mark-to-Market		Fair Value
Asset Type	(In thousands)
Cash and cash equivalents	$	5,427	$	—	$	5,427	$	4,494	$	—	$	4,494
Equities (1)	59,424		(132)		59,292		67,401		24,295		91,696
Fixed income	7,810		(879)		6,931		8,126		56		8,182
Total assets	$	72,661	$	(1,011)	$	71,650	$	80,021	$	24,351	$	104,372

Table of Contents

(1)Equities include mutual funds and other exchange-traded funds.

Share-Based Compensation Plan

On November 29, 2021, the shareholders of the Company approved the Eastern Bankshares, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the issuance of up to 26,146,141 shares of common stock pursuant to grants of restricted stock, restricted stock units (“RSUs”), non-qualified stock options and incentive stock options, any or all of which can be granted with performance-based vesting conditions. Under the 2021 Plan, 7,470,326 shares may be issued as restricted stock or RSUs, including those issued as performance shares and performance share units (“PSUs”), and 18,675,815 shares may be issued upon the exercise of stock options. These shares may be awarded from the Company’s authorized but unissued shares. However, the 2021 Plan permits the grant of additional awards of restricted stock or RSUs above the aforementioned limit, provided that, for each additional share of restricted stock or RSU awarded in excess of such limit, the pool of shares available to be issued upon the exercise of stock options will be reduced by three shares. Pursuant to the terms of the 2021 Plan, each of the Company’s non-employee directors were automatically granted awards of restricted stock on November 30, 2021. Such restricted stock awards vest pro-rata on an annual basis over a five-year period. The maximum term for stock options is ten years.

On March 1, 2022, the Company granted to all of the Company’s executive officers and certain other employees a total of 978,364 RSUs, which vest pro-rata on an annual basis over a period of three or five years, and a total of 533,676 PSUs, for which vesting is contingent upon the Compensation Committee of the Board of Director’s certification, after the conclusion of a three-year period, that the Company has attained a threshold level of certain performance criteria over such period. On May 17, 2022, the Company granted a total of 31,559 shares of restricted stock to the Company’s non-employee directors which vest after approximately one year from the date of grant. As of September 30, 2022 and December 31, 2021, there were 5,243,671 shares and 6,787,270 shares that remained available for issuance as restricted stock or RSU awards, respectively, and 18,675,815 shares that remain available for issuance upon the exercise of stock options at both dates. As of both September 30, 2022 and December 31, 2021, no stock options had been awarded under the 2021 Plan.

The following table summarizes the Company’s restricted stock award activity for the nine months ended September 30, 2022:


	Number of Shares	Weighted-Average Grant Price Per Share
Non-vested restricted stock as of December 31, 2021	683,056	$	20.13
Granted	31,559	19.17
Non-vested restricted stock as of September 30, 2022	714,615	$	20.09

The following table summarizes the Company’s restricted stock unit activity for the nine months ended September 30, 2022:


	Number of Shares	Weighted-Average Grant Price Per Share
Non-vested restricted stock units as of December 31, 2021	—	$	—
Granted	978,364	21.08
Forfeited	(6,039)	21.08
Non-vested restricted stock units as of September 30, 2022	972,325	$	21.08

The following table summarizes the Company’s performance stock unit activity for the nine months ended September 30, 2022:


	Number of Shares	Weighted-Average Grant Price Per Share
Non-vested performance stock units as of December 31, 2021	—	$	—
Granted	533,676	21.12
Non-vested performance stock units as of September 30, 2022	533,676	$	21.12

As of both September 30, 2022 and December 31, 2021, no awards had vested.

For the three months ended September 30, 2022, share-based compensation expense under the 2021 Plan and the related tax benefit totaled $3.6 million and $1.0 million, respectively. For the nine months ended September 30, 2022, share-

Table of Contents

based compensation expense under the 2021 Plan and the related tax benefit totaled $8.1 million and $2.3 million, respectively. No share-based compensation expense was incurred for the three and nine months ended September 30, 2021 as the Company began granting awards in November 2021.

As of September 30, 2022 and December 31, 2021, there was $40.8 million and $13.5 million, respectively, of total unrecognized compensation expense related to unvested restricted stock awards, restricted stock units and performance stock units granted and issued under the 2021 Plan, as applicable. As of September 30, 2022, this cost is expected to be recognized over a weighted average remaining period of approximately 3.6 years. As of December 31, 2021, this cost was expected to be recognized over a weighted average remaining period of approximately 4.9 years.

12. Commitments and Contingencies

Financial Instruments with Off-Balance Sheet Risk

In order to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates, the Company is party to financial instruments with off-balance sheet risk in the normal course of business. These financial instruments include commitments to extend credit, standby letters of credit, and forward commitments to sell loans, all of which involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in each particular class of financial instruments.

Substantially all of the Company’s commitments to extend credit, which normally have fixed expiration dates or termination clauses, are contingent upon customers maintaining specific credit standards at the time of loan funding. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. In the event the customer does not perform in accordance with the terms of agreement with the third party, the Company would be required to fund the commitment. The maximum potential amount of future payments the Company could be required to make is represented by the contractual amount of the commitment. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. For forward loan sale commitments, the contract or notional amount does not represent exposure to credit loss. The Company does not sell loans with recourse.

The following table summarizes the above financial instruments as of the dates indicated:

   June 30, 2020    December 31, 2019
   (In Thousands)
Commitments to extend credit
   $ 3,745,517    $ 3,606,182
Standby letters of credit
   57,402    60,124
Forward commitments to sell loans
   67,745    21,357

As of September 30, 2022 As of December 31, 2021
(In thousands)
Commitments to extend credit $ 5,605,713 $ 5,175,521
Standby letters of credit 66,467 65,602
Forward commitments to sell loans 8,139 24,440

Other Contingencies

The Company has been named a defendant in various legal proceedings arising in the normal course of business. Set out below are descriptions of significant legal matters involving the Company and its subsidiaries. In the opinion of management, based on the advice of legal counsel, the ultimate resolution of these proceedings will not have a material effect on the Company’s consolidated financial statements.

In the second quarter of 2021, the Company entered into a preliminary settlement of two purported class action matters concerning overdraft and nonsufficient funds fees. The matters were filed in the Massachusetts Superior Court in November 2019 and April 2021, respectively, and were consolidated into one matter for final settlement purposes. The matters were settled during the first quarter of 2022 and the total settlement expense, including related costs, was $3.3 million. The Company incurred no costs in 2022 related to these matters as the total settlement expense had been accrued in 2021 when management determined the loss contingency to be both probable and estimable. The Company’s regulators conducted inquiries and reviewed data related to one of these class action matters and, in February 2022, made an additional request for data and notified management that they may require additional restitution for certain matters associated with the nonsufficient funds fees matter. Based on this discussion, management believed that a loss contingency for this restitution was probable but was not able to determine a reasonable estimate for the loss. However, later during the first quarter of 2022, the Company was informed by its regulators that no additional remediation on this issue would be required. As a result, as of September 30, 2022, management no longer believes that a loss contingency for restitution associated with this issue is probable.

Table of Contents

As a member of the Federal Reserve System, the Bank is required to maintain certain reserves of vault cash and/or deposits with the Federal Reserve Bank of ~~Boston.~~Boston (the “FRBB”). However, in response to the COVID-19 pandemic, the Federal Reserve temporarily eliminated reserve requirements and therefore there was no minimum reserve requirement as of ~~June~~either September 30, ~~2020. The amount of this reserve requirement included in cash and cash equivalents was approximately $3.7 million on~~2022 or December 31, ~~2019.~~

~~11.~~2021.

13. Derivative Financial Instruments

The Company uses derivative financial instruments to manage ~~the Company’s~~its interest rate risk resulting from the differences in the amount, timing, and duration of known or expected cash receipts and known or expected cash payments. Additionally, the Company enters into interest rate derivatives and foreign exchange contracts to accommodate the business requirements of its customers (“customer-related positions”) and risk participation agreements entered into as financial guarantees of performance on customer-related interest rate swap derivatives. The Company also enters into residential mortgage loan commitments to fund mortgage loans at specified rates and times in the future and enters into forward sale commitments to sell such residential mortgage loans at specified prices and times in the future, both of which are considered derivative instruments. Derivative instruments are carried at fair value in the Company’s financial statements. The accounting for changes in the fair value of a derivative instrument is dependent upon whether or not the instrument qualifies as a hedge for accounting purposes, and further, by the type of hedging relationship.

By using derivatives, the Company is exposed to credit risk to the extent that counterparties to the derivative contracts do not perform as required. Should a counterparty fail to perform under the terms of a derivative contract, the Company’s credit exposure on interest rate swaps is limited to the net positive fair value and accrued interest of all swaps with each counterparty plus any initial margin collateral posted. The Company seeks to minimize counterparty credit risk through credit approvals, limits, monitoring procedures, and obtaining collateral, where appropriate. As such, management believes the risk of incurring credit losses on derivative contracts with those counterparties is remote.

The Company’s discounting methodology and interest calculation of cash margin uses the Secured Overnight Financing Rate, or SOFR, for U.S. dollar cleared interest rate swaps.

Interest Rate Positions

An interest rate swap is an agreement whereby one party agrees to pay a floating rate of interest on a notional principal amount in exchange for receiving a fixed rate of interest on the same notional amount, for a predetermined period of time, from a second party. The amounts relating to the notional principal amount are not actually exchanged. The Company has entered into interest rate swaps in which ~~they pay~~it pays floating and ~~receive~~receives fixed interest in order to manage its interest rate risk exposure to the variability in interest cash flows on certain floating-rate ~~commercial~~ loans. ~~The Company has~~Such interest rate swaps ~~that~~include those which effectively convert the floating rate one-month LIBOR, SOFR or overnight indexed swap rate, or prime rate interest payments received on the ~~commercial~~ loans to a fixed rate and consequently reduce the ~~Bank’s~~Company’s exposure to variability in short-term interest rates. ~~The Company also has~~For interest rate swaps that ~~are based on overnight indexed swap rates. These swaps~~ are accounted for as cash flow hedges, ~~and therefore~~ changes in fair value are included in other comprehensive income and reclassified into net income in the same period or periods during which the hedged forecasted transaction affects net income.

The following table reflects the Company’s derivative positions as of ~~June~~September 30, ~~2020 and December 31, 2019~~2022 for interest rate swaps which qualify as cash flow hedges for accounting ~~purposes.~~

June 30, 2020

         Weighted Average Rate
   Notional
Amount    Weighted Average
Maturity    Current
Rate Paid Receive Fixed
Swap Rate Fair Value ⁽¹⁾
   (In Thousands)    (In Years)    (In Thousands)
Interest rate swaps on loans
   900,000    1.27    0.18 % 2.57 % (38 )




Total
   $ 900,000       $ (38 )




purposes:

December 31, 2019

         Weighted Average Rate
   Notional
Amount    Weighted Average
Maturity    Current
Rate Paid Receive Fixed
Swap Rate Fair Value ⁽¹⁾
   (In Thousands)    (In Years)    (In Thousands)
Interest rate swaps on loans
   2,120,000    2.16    1.74 % 2.11 % (321 )




Total
   $ 2,120,000       $ (321 )

~~(1)~~

~~Fair value included net accrued interest receivable of $1.0 million at June 30, 2020 and $0.4 million at December 31, 2019.~~

~~Central banks around~~
Weighted Average Rate
Notional
Amount Weighted Average
Maturity Current
Rate Paid Receive Fixed
Swap Rate
Fair Value (1)
(In thousands) (In Years) (In thousands)
Interest rate swaps on loans $ 2,400,000 4.82 2.62 % 3.02 % $ (3,201)
Total $ 2,400,000 $ (3,201)

(1)The fair value included a net accrued interest receivable balance of $0.2 million as of September 30, 2022. In addition, the ~~world, including~~fair value includes netting adjustments which represent the Federal Reserve, have commissioned working groups of market participants and official sector representatives with the goal of finding suitable replacements for the London Interbank Offered Rate (“LIBOR”) based on observable market transactions because of the probable phase-out of LIBOR. It is expected that a transition away from the widespread use of LIBORamounts recorded to alternative rates will occur over the course of the next few years. Although the full impact of a transition, including the potential or actual discontinuance of LIBOR publication, remains unclear, this change may have an adverse impact on the value of, return on and trading markets for a broad array of financial products, including any LIBOR-based securities, loans and derivatives that are included in the Company’s financialconvert derivative assets and ~~liabilities. A transition away~~liabilities cleared through the CME from ~~LIBOR may also require extensive changes~~a gross basis to a net basis in accordance with applicable accounting guidance.

As of December 31, 2021, the ~~contracts that govern these LIBOR-based products,~~Company did not have any active interest rate swaps which qualified as ~~well as the Company’s systems and processes.~~

cash flow hedges for accounting purposes.

The maximum amount of time over which the Company is currently hedging its exposure to the variability in future cash flows of forecasted transactions related to the receipt of variable interest on existing financial instruments is 25 years.

The Company expects approximately ~~$20.6~~$27.6 million ~~and $10.7 million to~~will be reclassified into interest income, as a reduction of such income, from other comprehensive income related to the Company’s active cash flow hedges in the next ~~twelve~~12 months as of ~~June~~

Table of Contents

September 30, ~~2020 and December 31, 2019, respectively. This~~2022. The reclassification is due to anticipated net payments ~~that will be received~~ on the swaps based upon the forward curve as of ~~June~~September 30, ~~2020~~2022.

The Company discontinues cash flow hedge accounting if it is probable the forecasted hedged transactions will not occur in the initially identified time period. At such time, the associated gains and ~~December 31, 2019.~~

losses deferred in accumulated other comprehensive income (“AOCI”) are reclassified immediately into earnings and any subsequent changes in the fair value of such derivatives are recognized directly in earnings.

The following table presents the pre-tax impact of terminated cash flow hedges on AOCI for the three and nine months ended September 30, 2022 and September 30, 2021:


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2022		2021		2022		2021
	(In thousands)
Unrealized gains on terminated hedges included in AOCI – beginning of respective period	$	1,850	$	24,980	$	10,239	$	41,473
Unrealized gains on terminated hedges arising during the period	—		—		—		—
Reclassification adjustments for amortization of unrealized gains into net income	(1,263)		(7,851)		(9,652)		(24,344)
Unrealized gains on terminated hedges included in AOCI – end of respective period	$	587	$	17,129	$	587	$	17,129

The balance of terminated cash flow hedges in AOCI will be amortized into earnings through January 2023. The Company expects ~~approximately $12.8~~the remaining $0.6 million to be reclassified into interest income from other comprehensive income related to the Company’s terminated cash flow hedges in the next 12 months as of ~~June~~September 30, 2020. This reclassification is due to the amortization of realized but unrecognized gains from the termination of interest rate swaps during the period ended June 30, 2020. At June 30, 2020, the remaining unamortized gain on terminated cash flow hedges is $30.6 million.

As of June 30, 2020 and December 31, 2019, the Company’s exposure to CME and the fair value of interest rate swap derivatives which qualify as cash flow hedges that contain credit-risk related contingent features that are in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, was less than $0.1 million and $0.3 million, respectively. In addition, at June 30, 2020 and December 31, 2019, the Company had posted initial-margin collateral in the form of cash and a U.S. Treasury Note, to CME for these derivatives amounting to $18.7 million and $22.8 million, respectively. The cash and U.S. Treasury Note were considered restricted assets and were included in cash and due from banks and in available for sale securities, respectively.

2022.

Customer-Related Positions

Interest rate swaps offered to commercial customers do not qualify as hedges for accounting purposes. These swaps allow the Company to retain variable rate commercial loans while allowing the commercial customer to synthetically fix the loan rate by entering into a variable-to-fixed rate interest rate swap. The Company believes that its exposure to commercial customer derivatives is limited to nonperformance by either the customer or the dealer because these contracts are simultaneously matched at inception with an offsetting ~~dealer~~ transaction.

Risk participation agreements are entered into as financial guarantees of performance on interest rate swap derivatives. The purchased (asset) or sold (liability) guarantee allow the Company to participate-out (fee paid) or participate-in (fee received) the risk associated with certain derivative positions executed with the borrower by the lead bank in a customer-related interest rate swap derivative.

Foreign exchange contracts consist of those offered to commercial customers and those entered into to hedge the Company’s foreign currency risk associated with a foreign-currency loan. Neither qualifies as a hedge for accounting purposes. These commercial customer derivatives are offset with matching derivatives with correspondent-bank counterparties in order to minimize foreign exchange rate risk to the Company. Exposure with respect to these derivatives is largely limited to nonperformance by either the customer or the other counterparty. Neither the Company nor the correspondent-bank counterparty are required to post collateral but each has established foreign-currency transaction limits to manage the exposure risk. The Company requires its customers to post collateral to minimize risk exposure.

The following ~~table presents~~tables present the Company’s customer-related derivative positions as of the dates indicated below for those derivatives not designated as hedging.

   June 30, 2020
   Number of Positions    Total Notional
   (Dollars in Thousands)
Interest rate swaps
   603    $ 3,775,850
Risk participation agreements
   66    290,131
Foreign exchange contracts:

Matched commercial customer book
   86    9,252
Foreign currency loan
   23    7,986
   December 31, 2019
   Number of Positions    Total Notional
Interest rate swaps
   603    $ 3,749,474
Risk participation agreements
   67    299,576
Foreign exchange contracts:

Matched commercial customer book
   62    29,990
Foreign currency loan
   23    7,310

Table of Contents


	September 30, 2022
	Number of Positions	Total Notional
	(Dollars in thousands)
Interest rate swaps	400	$	2,549,355
Risk participation agreements	60	252,553
Foreign exchange contracts:
Matched commercial customer book	72	12,016
Foreign currency loan	4	12,030


	December 31, 2021
	Number of Positions	Total Notional
	(Dollars in thousands)
Interest rate swaps	494	$	3,009,150
Risk participation agreements	64	238,772
Foreign exchange contracts:
Matched commercial customer book	72	7,922
Foreign currency loan	6	10,830

The level of interest rate swaps, risk participation agreements and foreign currency exchange contracts at the end of each period noted above was commensurate with the activity throughout those periods.

The table below presents the fair value of the Company’s derivative financial instruments, as well as their classification on the consolidated balance ~~sheet~~sheets for the periods indicated.

   Asset Derivatives    Liability Derivatives
   Balance
Sheet
Location    Fair Value
at June 30,
2020    Fair Value at
December 31,
2019    Balance Sheet
Location    Fair Value at
June 30,
2020    Fair Value at
December 31,
2019
   (In Thousands)
Derivatives designated as hedging instruments

Interest rate swaps
   Other assets    $ —      $ —      Other liabilities    $ 38    $ 321








Derivatives not designated as hedging instruments

Customer-related positions:

Interest rate swaps
   Other assets    $ 171,433    $ 64,463    Other liabilities    $ 51,319    $ 18,057
Risk participation agreements
   Other assets    995    482    Other liabilities    1,500    606
Foreign currency exchange contracts - matched customer book
   Other assets    151    469    Other liabilities    40    428
Foreign currency exchange contracts - foreign currency loan
   Other assets    —      —      Other liabilities    173    203








      $ 172,579    $ 65,414       $ 53,032    $ 19,294








Total
      $ 172,579    $ 65,414       $ 53,070    $ 19,615








There were no derivatives designated as hedging instruments at December 31, 2021.

Asset Derivatives Liability Derivatives
Balance
Sheet
Location Fair Value at September 30,
2022 Fair Value at December 31,
2021 Balance Sheet
Location Fair Value at September 30,
2022 Fair Value at December 31,
2021
(In thousands)
Derivatives designated as hedging instruments
Interest rate swaps Other assets $ 5 $ — Other liabilities $ 3,206 $ —
Derivatives not designated as hedging instruments
Customer-related positions:
Interest rate swaps Other assets $ 23,818 $ 64,338 Other liabilities $ 82,404 $ 17,880
Risk participation agreements Other assets 55 315 Other liabilities 134 580
Foreign currency exchange contracts - matched customer book Other assets 428 61 Other liabilities 414 46
Foreign currency exchange contracts - foreign currency loan Other assets 54 — Other liabilities 132 87
$ 24,355 $ 64,714 $ 83,084 $ 18,593
Total $ 24,360 $ 64,714 $ 86,290 $ 18,593

The table below presents the net effect of the Company’s derivative financial instruments on the consolidated income statements as well as the effect of the Company’s derivative financial instruments included in ~~OCI~~other comprehensive income (“OCI”) as follows:

   Three Months Ended
June 30,    Six Months Ended
June 30,
   2020    2019    2020    2019
Derivatives designated as hedges:

Gain in OCI on derivatives
   $ 3,455    $ 16,054    $ 47,011    $ 21,914








Gain reclassified from OCI into interest income (effective portion)
   7,134    231    10,246    524








Gain recognized in income on derivatives (ineffective portion and amount excluded from effectiveness test)

Interest income
   —      —      —      —
Other income
   —      —      —      —








Total
   —      —      —      —








Derivatives not designated as hedges:

Customer-related positions:

(Loss) recognized in interest rate swap income
   $ (687 )    $ (2,129 )    $ (6,967 )    $ (3,356 )
(Loss) recognized in interest rate swap income for risk participation agreements
   (80 )    (157 )    (381 )    (98 )
Gain (loss) recognized in other income for foreign currency exchange contracts:

Matched commercial customer book
   96    (41 )    69    (40 )
Foreign currency loan
   (367 )    (32 )    30    (24 )








Total (loss) for derivatives not designated as hedges
   $ (1,039 )    $ (2,359 )    $ (7,249 )    $ (3,518 )

Table of Contents


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(In thousands)
Derivatives designated as hedges:
Loss in OCI on derivatives	$	(72,667)	$	—	$	(71,182)	$	—
Gain reclassified from OCI into interest income (effective portion)	$	3,755	$	7,851	$	12,797	$	24,344
Gain recognized in income on derivatives (ineffective portion and amount excluded from effectiveness test)
Interest income	—		—		—		—
Other income	—		—		—		—
Total	$	—	$	—	$	—	$	—
Derivatives not designated as hedges:
Customer-related positions:
Gain recognized in interest rate swap income	$	1,035	$	832	$	4,760	$	4,596
Gain (loss) recognized in interest rate swap income for risk participation agreements	38		(4)		186		260
Gain recognized in other income for foreign currency exchange contracts:
Matched commercial customer book	(1)		8		(1)		—
Foreign currency loan	(136)		72		9		181
Total gain for derivatives not designated as hedges	$	936	$	908	$	4,954	$	5,037

The Company has agreements with its customer-related interest rate swap derivative counterparties that contain a provision whereby if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

The Company also has agreements with certain of its customer-related interest rate swap derivative correspondent-bank counterparties that contain a provision whereby if the Company fails to maintain its status as a well-capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

The Company’s exposure related to its customer-related interest rate swap ~~derivative~~derivatives consists of exposure on cleared derivative transactions and exposure on non-cleared derivative transactions.

Cleared derivative transactions are with the Chicago Mercantile Exchange, or CME, and exposure is settled to market daily, with additional credit exposure related to initial-margin collateral pledged to CME at trade execution. At ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, the ~~Company’s~~Company had exposure to CME for settled variation margin in excess of the customer-related and non-customer-related interest rate swap termination values ~~was $0.3~~of $0.6 million and ~~$1.5~~$0.4 million, respectively. In addition, at ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, the Company had posted initial-margin collateral in the form of a U.S. Treasury ~~Note~~notes amounting to ~~$42.2~~$83.7 million and ~~$27.6~~$48.9 million, respectively, to CME for these derivatives. The ~~cash and~~ U.S. Treasury ~~Note~~notes were considered restricted assets and were included in ~~cash and due from banks and in~~ available for sale securities ~~respectively.~~

within the Company’s consolidated balance sheets.

At ~~June~~September 30, ~~2020 and December 31, 2019 the fair value of non-cleared~~2022, there were no customer-related interest rate swap derivatives ~~that contain~~with credit-risk contingent features in a net liability position. At December 31, 2021 the fair value of all customer-related interest rate swap derivatives with credit-risk related contingent features that ~~are~~were in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, ~~related to these agreements was $51.3 million and $14.6 million, respectively.~~totaled $13.7 million. The Company has minimum collateral posting thresholds with its ~~non-cleared~~ customer-related interest rate swap derivative correspondent-bank counterparties to the extent that the Company has a liability position with the correspondent-bank counterparties. At ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, the Company had posted collateral in the form of cash amounting to ~~$51.7~~$2.0 million and ~~$22.2~~$21.3 million, respectively, which was considered to be a restricted asset and was included in other short-term ~~investments.~~investments within the Company's consolidated balance sheets. If the Company had breached any of these provisions at ~~June~~September 30, ~~2020~~2022 or December 31, ~~2019,~~2021, it would have been required to settle its

Table of Contents

obligations under the agreements at the termination value. In addition, the Company had cross-default provisions with its commercial customer loan agreements which provide cross-collateralization with the customer loan collateral.

~~12.~~

Mortgage Banking Derivatives

The Company enters into residential mortgage loan commitments in connection with its consumer mortgage banking activities to fund mortgage loans at specified rates and times in the future. In addition, the Company enters into forward sale commitments to sell such residential mortgage loans at specified prices and times in the future. These commitments are short-term in nature and generally expire in 30 to 60 days. The residential mortgage loan commitments that relate to the origination of mortgage loans that will be held for sale and the related forward sale commitments are considered derivative instruments under ASC Topic 815, “Derivatives and Hedging” and are reported at fair value. Changes in fair value are reported in earnings and included in other non-interest income on the consolidated statements of income. As of September 30, 2022 and December 31, 2021, the Company had an outstanding notional balance of residential mortgage loan origination commitments of $9.4 million and $31.9 million, respectively and forward sale commitments of $8.1 million and $24.4 million, respectively. During both the three months ended September 30, 2022 and September 30, 2021, the Company recorded net losses related to the change in fair value of commitments to originate and sell mortgage loans of less than $0.1 million. During the nine months ended September 30, 2022 and September 30, 2021, the Company recorded net losses related to the change in fair value of commitments to originate and sell mortgage loans of $0.2 million and $0.5 million, respectively. The aggregate fair value of the Company’s mortgage banking derivative asset and liability as of September 30, 2022 was $0.1 million and less than $0.1 million, respectively. The aggregate fair value of the Company’s mortgage banking derivative asset and liability as of December 31, 2021 was $0.3 million and $0.1 million, respectively. Mortgage banking derivative assets and liabilities are included in other assets and other liabilities, respectively, on the consolidated balance sheets. Residential mortgages sold are generally sold with servicing rights released. Mortgage banking derivatives do not qualify as hedges for accounting purposes.

14. Balance Sheet Offsetting

Certain financial instruments, including derivatives, may be eligible for offset in the consolidated balance sheets and/or subject to master netting arrangements or similar agreements. The Company’s derivative transactions with upstream financial institution counterparties are generally executed under International Swaps and Derivative Association master agreements which include “right of set-off” provisions. In such cases there is generally a legally enforceable right to offset recognized amounts. However, the Company does not offset fair value amounts recognized for derivative instruments. The Company nets the amount recognized for the right to reclaim cash collateral against the obligation to return cash collateral arising from derivative instruments executed with the same counterparty under a master netting arrangement. Collateral legally required to be maintained at dealer banks by the Company is monitored and adjusted as necessary. As of ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, it was determined that no additional collateral would have to be posted to immediately settle these instruments.

Table of Contents

The following ~~table presents~~tables present the Company’s asset and liability positions that were eligible for offset and the potential effect of netting arrangements on its ~~financial position,~~consolidated balance sheet, as of the dates indicated:

Gross
Amounts

Net
Amounts

Gross Amounts Not Offset
in the Statement of

      Offset in the    Presented in    Financial Position
   Gross    Statement of    the Statement       Collateral
   Amounts    Financial    of Financial    Financial
Instruments    Pledged
(Received) Net
Amount
Description
   Recognized    Position    Position
   (In Thousands)
   As of June 30, 2020
Derivative Assets

Interest rate swaps
   $ —      $ —      $ —      $ —      $ —   $ —
Customer-related positions:

Interest rate swaps
   171,433    —      171,433    8    —   171,425
Risk participation agreements
   995    —      995    —      —   995
Foreign currency exchange contracts - matched customer book
   151    —      151    1    —   150










   $ 172,579    $ —      $ 172,579    $ 9    $ —   $ 172,570










Derivative Liabilities

Interest rate swaps
   $ 38    $ —      $ 38    $ 38    $ —   $ —
Customer-related positions:

Interest rate swaps
   51,319    —      51,319    8    51,311 —
Risk participation agreements
   1,500    —      1,500    —      —   1,500
Foreign currency exchange contracts - matched customer book
   40    —      40    1    (7 ) 46
Foreign currency exchange contracts - foreign currency loan
   173    —      173    —      —   173










   $ 53,070    $ —      $ 53,070    $ 47    $ 51,304 $ 1,719


			Gross Amounts		Net Amounts		Gross Amounts Not Offset in the Statement of
			Offset in the		Presented in		Financial Position
	Gross		Statement of		the Statement				Collateral						As of September 30, 2022
	Amounts		Financial		of Financial		Financial		Pledged			Net			Gross Amounts Recognized		Gross Amounts Offset in the Consolidated Balance Sheet				Net Amounts Presented in the Consolidated Balance Sheet				Gross Amounts Not Offset in the Consolidated Balance Sheet								Net Amount
Description	Recognized		Position		Position		Instruments		(Received)			Amount		Description									Financial Instruments				Collateral Pledged/ (Received)
	(In Thousands)
	As of December 31, 2019														(In thousands)
Derivative Assets														Derivative Assets
Interest rate swaps	$	—	$	—	$	—	$	—	$	—		$	—	Interest rate swaps	$	5			$	—			$	5			$	—			$	—			$	5
Customer-related positions:														Customer-related positions:
Interest rate swaps		64,463		—		64,463		1,434		—			63,029	Interest rate swaps	23,818		—				23,818				14				(16,650)				7,154
Risk participation agreements		482		—		482		—		—			482	Risk participation agreements	55		—				55				—				—				55
Foreign currency exchange contracts - matched customer book		469		—		469		7		(462	)		—

	$	65,414	$	—	$	65,414	$	1,441	$	(462	)	$	63,511
Foreign currency exchange contracts – matched customer book														Foreign currency exchange contracts – matched customer book	428		—				428				—				—				428
Foreign currency exchange contracts – foreign currency loan														Foreign currency exchange contracts – foreign currency loan	54		—				54				—				—				54
															$	24,360	$	—			$	24,360			$	14			$	(16,650)			$	7,696
Derivative Liabilities														Derivative Liabilities
Interest rate swaps	$	321	$	—	$	321	$	321	$	—		$	—	Interest rate swaps	$	3,206	$	—			$	3,206			$	—			$	3,206			$	—
Customer-related positions:														Customer-related positions:
Interest rate swaps		18,057		—		18,057		1,434		16,623			—	Interest rate swaps	82,404		—				82,404				14				2,000				80,390
Risk participation agreements		606		—		606		—		—			606	Risk participation agreements	134		—				134				—				—				134
Foreign currency exchange contracts - matched customer book		428		—		428		7		—			421
Foreign currency exchange contracts - foreign currency loan		203		—		203		—		—			203
Foreign currency exchange contracts – matched customer book														Foreign currency exchange contracts – matched customer book	414		—				414				—				—				414
Foreign currency exchange contracts – foreign currency loan														Foreign currency exchange contracts – foreign currency loan	132		—				132				—				—				132
															$	86,290	$	—			$	86,290			$	14			$	5,206			$	81,070
	$	19,615	$	—	$	19,615	$	1,762	$	16,623		$	1,230

~~13.~~

Table of Contents


	As of December 31, 2021
	Gross Amounts Recognized		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts Presented in the Consolidated Balance Sheet		Gross Amounts Not Offset in the Consolidated Balance Sheet				Net Amount
Description							Financial Instruments		Collateral Pledged/ (Received)
	(In thousands)
Derivative Assets
Customer-related positions:
Interest rate swaps	$	64,338	$	—	$	64,338	$	1,440	$	—	$	62,898
Risk participation agreements	315		—		315		—		—		315
Foreign currency exchange contracts – matched customer book	61		—		61		—		—		61
Foreign currency exchange contracts – foreign currency loan	—		—		—		—		—		—
	$	64,714	$	—	$	64,714	$	1,440	$	—	$	63,274
Derivative Liabilities
Customer-related positions:
Interest rate swaps	$	17,880	$	—	$	17,880	$	1,440	$	16,440	$	—
Risk participation agreements	580		—		580		—		—		580
Foreign currency exchange contracts – matched customer book	46		—		46		—		—		46
Foreign currency exchange contracts – foreign currency loan	87		—		87		—		—		87
	$	18,593	$	—	$	18,593	$	1,440	$	16,440	$	713

15. Fair Value of Assets and Liabilities

The Company uses fair value measurements to record adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that the Company believes market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or from Level 2 to Level 3.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no active market exists for a portion of the Company’s financial instruments, fair value estimates are based on judgements regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgement, and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

Table of Contents

The following methods and assumptions were used by the Company in estimating fair value disclosures:

Cash and Cash Equivalents

For these financial instruments, which have original maturities of 90 days or less, their carrying amounts reported in the consolidated balance sheets approximate fair value.

~~Trading~~

Securities

Trading securities consisted of fixed income municipal securities and were recorded at fair value. All fixed income securities were categorized as Level 2 as the valuations were estimated by a third-party pricing vendor using a valuation matrix with inputs including observable bond interest rate tables, recent transactions, and yield relationships.

~~Available for Sale~~ Securities

~~Available for sale securities~~ consisted of U.S. Treasury securities, U.S. Agency bonds (including SBA pooled securities), U.S. government-sponsored residential and commercial mortgage-backed securities, state and municipal bonds, and ~~others such as a qualified zone academy bond, and were~~other debt securities. AFS securities are recorded at fair value.

The Company’s U.S. Treasury securities are traded on active markets and therefore these securities were classified as Level 1.

The fair value of ~~other~~U.S. Agency bonds, including SBA pooled securities, are evaluated using relevant trade data, benchmark quotes and spreads obtained from publicly available trade data, and generated on a price, yield or spread basis as determined by the observed market data. Therefore, these securities were categorized as Level 2 given the use of observable inputs.

The fair value of U.S. government-sponsored residential and commercial mortgage-backed securities ~~was~~were estimated using either a matrix or benchmarks. The inputs used include benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. ~~These~~Therefore, these securities were categorized as Level 2.

~~Municipal~~2 given the use of observable inputs.

The fair value of state and municipal bonds were ~~classified~~estimated using a valuation matrix with inputs including observable bond interest rate tables, recent transactions, and yield relationships. Therefore, these securities were categorized as Level 2 ~~for~~given the ~~same reasons described for the trading municipal securities.~~

use of observable inputs.

The fair value of other debt securities were estimated using a valuation ~~technique for the qualified zone academy~~matrix with inputs including observable bond ~~was a discounted cash flow methodology using market discount rates. The assumptions used included at least one significant model assumption or input that was unobservable,~~interest rate tables, recent transactions, and ~~therefore, this security was classified~~yield relationships. Therefore, these securities were categorized as Level 3.

2 given the use of observable inputs.

Fair value was based on the value of one unit without regard to any premium or discount that may result from concentrations of ownership of a financial instrument, possible tax ramifications, or estimated transaction costs. The estimated fair value of the Company’s securities, ~~available for sale,~~ by type, is disclosed in Note 3.

3, “Securities.”

Loans Held for Sale

~~Fair~~

The fair value of loans held for sale, whose carrying amounts approximate fair value, was estimated using the anticipated market price based upon pricing indications provided by investor banks.

These assets were classified as Level 2 given the use of observable inputs.

Loans

The fair value of commercial construction, commercial and industrial lines of credit, and certain other consumer loans was estimated by discounting the contractual cash flows using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

For commercial, commercial real estate, residential real estate, automobile, and consumer home equity loans, fair value was estimated by discounting contractual cash flows adjusted for prepayment estimates using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. ~~For loans held for sale, whose carrying amounts approximate fair value, the fair value was estimated by the anticipated market price based upon pricing indications provided by investor banks.~~

The fair value of PPP loans, which are fully guaranteed by the SBA, approximates the carrying amount.

Loans are classified as Level 3 since the valuation methodology utilizes significant unobservable inputs. Loans that are deemed to be ~~impaired~~collateral-dependent, as described in Note 2, “Summary of Significant Accounting Policies” were recorded at the fair value of the underlying ~~collateral, if the loan is collateral-dependent, or at a carrying value based upon expected cash flows discounted using the loan’s effective interest rate.~~

collateral.

FHLB Stock

The fair value of FHLB stock approximates the carrying amount based on the redemption provisions of the FHLB.

These assets were classified as Level 2.

Table of Contents

Rabbi Trust Investments

Rabbi trust investments consisted primarily of cash and cash equivalents, U.S. ~~Government~~government agency obligations, equity securities, mutual funds and other exchange-traded funds, and were recorded at fair value and included in other assets. The purpose of these rabbi trust investments is to fund certain executive non-qualified retirement benefits and deferred compensation.

The fair value of other U.S. government agency obligations was estimated using either a matrix or benchmarks. The inputs used include benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. These securities were categorized as Level 2.2 given the use of observable inputs. The equity securities, mutual funds and other exchange-traded funds were valued based on quoted prices from the market. The equities, mutual funds and exchange-traded funds traded in an active market were categorized as Level 1.1 as they were valued based upon quoted prices from the market. Mutual funds at net asset value amounted to ~~$46.4~~$36.5 million at ~~June~~September 30, ~~2020~~2022 and ~~$16.2~~$58.1 million at December 31, ~~2019.~~2021. There were no redemption restrictions on these mutual funds at the end of any period presented.

Bank-Owned Life Insurance

The fair value of bank-owned life insurance was based upon quotations received from bank-owned life insurance dealers.

These assets were classified as Level 2 given the use of observable inputs.

Deposits

The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings and interest checking accounts, and money market accounts, was equal to their carrying amount. The fair value of time deposits was based on the discounted value of contractual cash flows using current market interest rates.

Deposits were classified as Level 2 given the use of observable market inputs.

The fair value estimates of deposits do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the wholesale market (core deposit intangibles).

~~Other Borrowed Funds~~

For other borrowed funds that mature in 90 days or less, the carrying amount reported in the consolidated balance sheets approximates fair value. For borrowed funds that mature in more than 90 days, the fair value was based on the discounted value of the contractual cash flows applying interest rates currently being offered in the market.

FHLB Advances

The fair value of FHLB advances was based on the discounted value of contractual cash flows. The discount rates used are representative of approximate rates currently offered on instruments with similar remaining maturities.

FHLB advances were classified as Level 2.

Escrow Deposits of Borrowers

The fair value of escrow deposits of borrowers, which have no stated maturity, approximates the carrying amount.

Escrow deposits of borrowers were classified as Level 2.

Interest Rate Swap Collateral Funds

The fair value of interest rate swap collateral funds approximates the carrying amount. Interest rate swap collateral funds were classified as Level 2.

Interest Rate Swaps

The fair value of interest rate swaps was determined using discounted cash flow analysis on the expected cash flows of the interest rate swaps. This analysis reflects the contractual terms of the interest rate swaps, including the period of maturity, and uses observable market-based inputs, including interest rate curves and implied ~~volatilities.~~volatility. In addition, for customer-related interest rate swaps, the analysis reflects a credit valuation adjustment to reflect the Company’s own ~~nonperformance~~non-performance risk and the respective counterparty’s ~~nonperformance~~non-performance risk in the fair value measurements. The majority of inputs used to value ~~its~~the Company’s interest rate swaps fall within Level 2 of the fair value hierarchy, but the credit valuation adjustments associated with the interest rate swaps utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, at ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, the impact of the Level 3 inputs on the overall valuation of the interest rate swaps was deemed insignificant to the overall valuation. As a result, the interest rate swaps were categorized as Level 2 within the fair value hierarchy.

Table of Contents

Risk Participations

The fair value of risk participations was determined based upon the total expected exposure of the derivative which considers the present value of cash flows discounted using market-based inputs and ~~was~~were therefore categorized as Level 2 within the fair value hierarchy. The fair value also included a credit valuation adjustment which evaluates the credit risk of its counterparties by considering factors such as the likelihood of default by the counterparties, its net exposures, the remaining contractual life, as well as the amount of collateral securing the position. The change in value of derivative assets and liabilities attributable to credit risk was not significant during the reported periods.

Foreign Currency Forward Contracts

The fair values of foreign currency forward contracts were based upon the remaining expiration period of the contracts and bid quotations received from foreign exchange contract dealers and were categorized as Level 2 within the fair value hierarchy.

Mortgage Derivatives

The ~~carrying amounts~~fair value of mortgage derivatives is determined based upon current market prices for similar assets in the secondary market and, ~~estimated~~therefore are classified as Level 2 within the fair ~~values~~value hierarchy.

Table of ~~the Company’s financial instruments as~~Contents

Fair Value of ~~June 30, 2020~~Assets and ~~December 31, 2019 were as follows:~~

   As of June 30, 2020    As of December 31, 2019
   Carrying
Amount    Fair
Value    Carrying
Amount    Fair
Value
   (In Thousands)
Assets

Cash and cash equivalents
   $ 1,432,561    $ 1,432,561    $ 362,602    $ 362,602
Trading securities
   —      —      961    961
Securities available for sale
   1,600,354    1,600,354    1,508,236    1,508,236
Loans held for sale
   2,972    2,972    26    26
Loans, net of allowance for loan losses
   9,862,980    10,191,776    8,889,184    9,116,018
Accrued interest receivable
   28,017    28,017    26,835    26,835
FHLB stock
   8,805    8,805    9,027    9,027
Rabbi trust investments
   78,808    78,808    78,012    78,012
Bank-owned life insurance
   77,528    77,528    77,546    77,546
Interest rate swap contracts

Customer-related positions
   171,433    171,433    64,463    64,463
Risk participation agreements
   995    995    482    482
Foreign currency forward contracts

Matched customer book
   151    151    469    469
Liabilities

Deposits
   $ 11,846,765    $ 11,847,001    $ 9,551,392    $ 9,548,889
Other borrowed funds
   —      —      201,082    201,082
FHLB advances
   14,922    14,847    18,964    18,188
Escrow deposits of borrowers
   14,233    14,233    15,349    15,349
Accrued interest payable
   370    370    1,712    1,712
Interest rate swap contracts

Cash flow hedges - interest rate positions
   38    38    321    321
Customer-related positions
   51,319    51,319    18,057    18,057
Risk participation agreements
   1,500    1,500    606    606
Foreign currency forward contracts

Matched customer book
   40    40    428    428
Foreign currency loan
   173    173    203    203
Liabilities Measured on a Recurring Basis

The following tables present the balances of assets and liabilities measured at fair value on a recurring basis as of ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019:~~

      Fair Value Measurements at Reporting Date Using
      Quoted Prices in    Significant
Description
      Active Markets    Other    Significant
   Balance as of    for Identical    Observable    Unobservable
   June 30, 2020    Assets (Level 1)    Inputs (Level 2)    Inputs (Level 3)
   (Dollars in thousands)
Assets

Securities available for sale

U.S. Treasury securities
   $ 60,936    $ 60,936    $ —      $ —
Government-sponsored residential mortgage-backed securities
   1,251,799    —      1,251,799    —
State and municipal bonds and obligations
   281,340    —      281,340    —
Other bonds
   6,279    —      —      6,279
Rabbi trust investments
   78,808    71,248    7,560    —
Interest rate swap contracts

Customer-related positions
   171,433    —      171,433    —
Risk participation agreements
   995    —      995    —
Foreign currency forward contracts

Matched customer book
   151    —      151    —








Total
   $ 1,851,741    $ 132,184    $ 1,713,278    $ 6,279








Liabilities

Interest rate swap contracts

Cash flow hedges - interest rate positions
   $ 38    $ —      $ 38    $ —
Customer-related positions
   51,319    —      51,319    —
Risk participation agreements
   1,500    —      1,500    —
Foreign currency forward contracts

Matched customer book
   40    —      40    —
Foreign currency loan
   173    —      173    —








Total
   $ 53,070    $ —      $ 53,070    $ —








2021:


			Fair Value Measurements at Reporting Date Using
												Fair Value Measurements at Reporting Date Using
			Quoted Prices in		Significant					Balance as of September 30, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Description	Balance as of		Active Markets		Other		Significant		Description
	December 31, 2019		for Identical Assets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)			(In thousands)
	(Dollars In Thousands)
Assets									Assets
Trading securities
Municipal bonds	$	961	$	—	$	961	$	—
Securities available for sale									Securities available for sale
Government-sponsored residential mortgage-backed securities									Government-sponsored residential mortgage-backed securities	$	4,209,089			$	—			$	4,209,089			$	—
Government-sponsored commercial mortgage-backed securities									Government-sponsored commercial mortgage-backed securities	1,397,227		—				1,397,227				—
U.S. Agency bonds									U.S. Agency bonds	941,597		—				941,597				—
U.S. Treasury securities		50,420		50,420					U.S. Treasury securities	92,460		92,460				—				—
Government-sponsored residential mortgage-backed securities		1,167,968		—		1,167,968		—
State and municipal bonds and obligations		283,538		—		283,538		—	State and municipal bonds and obligations	202,664		—				202,664				—
Other bonds		6,310		—		—		6,310
Other debt securities									Other debt securities	1,578		—				1,578				—
Rabbi trust investments		78,012		63,945		14,067		—	Rabbi trust investments	71,650		64,719				6,931				—
Loans held for sale									Loans held for sale	951		—				951				—
Interest rate swap contracts									Interest rate swap contracts
Cash flow hedges - interest rate positions									Cash flow hedges - interest rate positions	5		—				5				—
Customer-related positions		64,463		—		64,463		—	Customer-related positions	23,818		—				23,818				—
Risk participation agreements		482		—		482		—	Risk participation agreements	55		—				55				—
Foreign currency forward contracts									Foreign currency forward contracts
Matched customer book		469		—		469		—	Matched customer book	428		—				428				—

Foreign currency loan									Foreign currency loan	54		—				54				—
Mortgage derivatives									Mortgage derivatives	112		—				112				—
Total	$	1,652,623	$	114,365	$	1,531,948	$	6,310	Total	$	6,941,688	$	157,179			$	6,784,509			$	—


Liabilities									Liabilities
Interest rate swap contracts									Interest rate swap contracts
Cash flow hedges - interest rate positions	$	321	$	—	$	321	$	—	Cash flow hedges - interest rate positions	$	3,206	$	—			$	3,206			$	—
Customer-related positions		18,057		—		18,057		—	Customer-related positions	82,404		—				82,404				—
Risk participation agreements		606		—		606		—	Risk participation agreements	134		—				134				—
Foreign currency forward contracts									Foreign currency forward contracts
Matched customer book		428		—		428		—	Matched customer book	414		—				414				—
Foreign currency loan		203		—		203		—	Foreign currency loan	132		—				132				—

Mortgage derivatives									Mortgage derivatives	98		—				98				—
Total	$	19,615	$	—	$	19,615	$	—	Total	$	86,388	$	—			$	86,388			$	—

Table of Contents


			Fair Value Measurements at Reporting Date Using
Description	Balance as of December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Assets
Securities available for sale
Government-sponsored residential mortgage-backed securities	$	5,524,708	$	—	$	5,524,708	$	—
Government-sponsored commercial mortgage-backed securities	1,408,868		—		1,408,868		—
U.S. Agency bonds	1,175,014		—		1,175,014		—
U.S. Treasury securities	88,605		88,605		—		—
State and municipal bonds and obligations	280,329		—		280,329		—
Small Business Administration pooled securities	32,103		—		32,103		—
Other debt securities	1,597		—		1,597		—
Rabbi trust investments	104,372		96,190		8,182		—
Loans held for sale	1,206		—		1,206		—
Interest rate swap contracts
Customer-related positions	64,338		—		64,338		—
Risk participation agreements	315		—		315		—
Foreign currency forward contracts
Matched customer book	61		—		61		—
Mortgage derivatives	256		—		256		—
Total	$	8,681,772	$	184,795	$	8,496,977	$	—
Liabilities
Interest rate swap contracts
Customer-related positions	$	17,880	$	—	$	17,880	$	—
Risk participation agreements	580		—		580		—
Foreign currency forward contracts
Matched customer book	46		—		46		—
Foreign currency loan	87		—		87		—
Mortgage derivatives	16		—		16		—
Total	$	18,609	$	—	$	18,609	$	—

There were no transfers to or from Level 1, 2 and 3 during the ~~six~~nine months ended ~~June~~September 30, ~~2020~~2022 and ~~year~~twelve months ended December 31, ~~2019.~~

For the fair value measurements which are classified as Level 3 within the fair value hierarchy, the Company’s Treasury and Finance groups determine the valuation policies and procedures. For the valuation of the qualified zone academy bond, the2021.

The Company ~~uses third-party valuation information. Management determined that~~held no changes to the quantitative unobservable inputs were necessary. Management employs various techniques to analyze the valuation it receives from third parties, such as analyzing changes in market yields. Management reviews changes in fair value from period to period to ensure that values received from the third parties are consistent with their expectation of the market.

~~The tables below presents a reconciliation for all~~ assets ~~and~~or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) ~~during the three~~as of September 30, 2022 or December 31, 2021.

Fair Value of Assets and ~~six months ended June 30, 2020 and 2019:~~

   Securities
Available for Sale
   (Dollars In Thousands)
Balance at January 1, 2019
   $ 6,045
Gains and losses (realized/unrealized):

Included in earnings
   55


Balance at June 30, 2019
   $ 6,100


Balance at January 1, 2020
   $ 6,310
Gains and losses (realized/unrealized):

Included in net income
   55
Included in other comprehensive income
   (86 )


Balance at June 30, 2020
   $ 6,279


Balance at April 1, 2019
   $ 6,073
Gains and losses (realized/unrealized):

Included in earnings
   27


Balance at June 30, 2019
   $ 6,100


Balance at April 1, 2020
   $ 6,249
Gains and losses (realized/unrealized):

Included in earnings
   27
Included in other comprehensive income
   3


Balance at June 30, 2020
   $ 6,279

Liabilities Measured on a Nonrecurring Basis

The Company may also be required, from time to time, to measure certain other assets on a nonrecurring basis in accordance with generally accepted accounting principles. The following tables summarize the fair value of assets and liabilities measured at fair value on a nonrecurring basis, as of ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019.~~

2021.

      Fair Value Measurements at Reporting Date Using
      Quoted Prices
in Active    Significant
Description
      Markets for    Other    Significant
   Balance as of June
30, 2020    Identical Assets
(Level 1)    Observable
Inputs (Level 2)    Unobservable
Inputs (Level 3)
   (Dollars in thousands)
Assets

Other real estate owned
   $ 40    $ —      $ —      $ 40
Collateral-dependent impaired loans whose fair value is based upon appraisals
   13,011    —      —      13,011








Total
   $ 13,051    $ —      $ —      $ 13,051

      Fair Value Measurements at Reporting Date Using
      Quoted Prices
in Active    Significant
Description
      Markets for    Other    Significant
   Balance as of
December 31, 2019    Identical Assets
(Level 1)    Observable
Inputs (Level 2)    Unobservable
Inputs (Level 3)
   (Dollars in thousands)
Assets

Collateral-dependent impaired loans whose fair value is based upon appraisals
   $ 4,261    $ —      $ —      4,261

Table of Contents


			Fair Value Measurements at Reporting Date Using
Description	Balance as of September 30, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Assets
Individually assessed collateral-dependent loans whose fair value is based upon appraisals	$	13,194	$	—	$	—	$	13,194


			Fair Value Measurements at Reporting Date Using
Description	Balance as of December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Assets
Collateral-dependent impaired loans whose fair value is based upon appraisals	$	12,068	$	—	$	—	12,068

For the valuation of the ~~other real estate owned and~~ collateral-dependent ~~impaired~~ loans, the Company relies primarily on third-party valuation information from certified appraisers and values are generally based upon recent appraisals of the underlying collateral, brokers’ opinions based upon recent sales of comparable properties, estimated equipment auction or liquidation values, income capitalization, or a combination of income capitalization and comparable sales. Depending on the type of underlying collateral, valuations may be adjusted by management for qualitative factors such as economic factors and estimated liquidation expenses. The range of these possible adjustments may vary.

~~Impaired loans in~~ Refer to Note 2, “Summary of Significant Accounting Policies” and Note 4,“Loans and Allowance for Credit Losses” for further discussion regarding the Company’s adoption of ASU 2016-13 and the effect of that adoption on the management’s process for estimating the allowance for loan losses.

Loans for which ~~the~~a reserve was established based upon expected cash flows discounted at the loan’s effective interest rate are not deemed to be measured at fair value.

~~14.~~

Disclosures about Fair Value of Financial Instruments

The estimated fair values and related carrying amounts for assets and liabilities for which fair value is only disclosed are shown below as of the dates indicated:

Table of Contents


					Fair Value Measurements at Reporting Date Using
Description	Carrying Value as of September 30, 2022		Fair Value as of September 30, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Assets
Held to maturity securities:
Government-sponsored residential mortgage-backed securities	$	281,253	$	250,281	$	—	$	250,281	$	—
Government-sponsored commercial mortgage-backed securities	200,710		181,196		—		181,196		—
Loans, net of allowance for loan losses	12,752,942		12,378,276		—		—		12,378,276
FHLB stock	18,714		18,714		—		18,714		—
Bank-owned life insurance	159,838		159,838		—		159,838		—
Liabilities
Deposits	$	18,733,381	$	18,723,364	$	—	$	18,723,364	$	—
FHLB advances	384,215		382,779		—		382,779		—
Escrow deposits of borrowers	21,853		21,853		—		21,853		—
Interest rate swap collateral funds	16,650		16,650		—		16,650		—


					Fair Value Measurements at Reporting Date Using
Description	Carrying Value as of December 31, 2021		Fair Value as of December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Assets
Loans, net of allowance for loan losses	$	12,157,281	$	12,282,323	$	—	$	—	$	12,282,323
FHLB stock	10,904		10,904		—		10,904		—
Bank-owned life insurance	157,091		157,091		—		157,091		—
Liabilities
Deposits	$	19,628,311	$	19,626,376	$	—	$	19,626,376	$	—
FHLB advances	14,020		13,558		—		13,558		—
Escrow deposits of borrowers	20,258		20,258		—		20,258		—

This summary excludes certain financial assets and liabilities for which the carrying value approximates fair value. For financial assets, these may include cash and due from banks, federal funds sold and short-term investments. For financial liabilities, these may include federal funds purchased. These instruments would all be considered to be classified as Level 1 within the fair value hierarchy. Also excluded from the summary are financial instruments measured at fair value on a recurring and nonrecurring basis, as previously described.

16. Revenue from Contracts with Customers

~~The Company adopted the new revenue recognition standard under ASC 606 on January 1, 2019 using the modified retrospective approach.~~

Revenue recognition remained substantially unchanged following adoption of ASC 606 and, therefore, there were no material changes to the Company’s consolidated financial statements at or for the year ended December 31, 2019, as a result of adopting the new guidance.

~~The Company derives a portion of its noninterest income~~ from contracts with customers ~~as such, revenue~~within the scope of ASC 606, Revenue from ~~such arrangements~~Contracts with Customers (Topic 606) (“ASC 606”) is recognized when control of goods or services is transferred to the customer, in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods orand services. The Company considers the terms of the contract and all relevant facts and circumstances when applying this guidance. The Company measures revenue and timing of recognition by applying the following five steps:

~~Identify the contract(s) with the customers~~

~~Identify the performance obligations~~

~~Determine the transaction price~~

~~Allocate the transaction price to the performance obligations~~

~~Recognize revenue when (or as) the entity satisfies a performance obligation~~

1.Identify the contract(s) with the customers

2.Identify the performance obligations

Table of Contents

3.Determine the transaction price

4.Allocate the transaction price to the performance obligations

5.Recognize revenue when (or as) the entity satisfies a performance obligation

The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

Performance obligations

The Company’s performance obligations are generally satisfied either at a point in time or over time, as services are rendered. Unsatisfied performance obligations at the report date are not material to the Company’s consolidated financial statements.

~~The Company has disaggregated its revenue~~

A portion of the Company's noninterest income is derived from contracts with customers within the scope of ASC ~~606~~606. The Company has disaggregated such revenues by type of service, as presented in the table below. These categories reflect how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

   Three months ended June 30,    Six months ended June 30,
   2020    2019    2020    2019
   (Dollars In Thousands)
Insurance commissions
   $ 22,697    $ 24,135    $ 50,174    $ 48,897
Service charges on deposit accounts
   4,364    6,771    10,462    13,175
Trust and investment advisory fees
   5,194    4,980    10,289    9,608
Debit card processing fees
   2,337    2,638    4,807    5,048
Other non-interest income
   1,485    2,045    3,537    3,919








Total noninterest income in-scope of ASC 606
   36,077    40,569    79,269    80,647
Total noninterest income out-of-scope of ASC 606
   11,580    5,063    1,757    12,785








Total noninterest income
   $ 47,657    $ 45,632    $ 81,026    $ 93,432


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(In thousands)
Insurance commissions	$	23,788	$	21,956	$	77,183	$	73,767
Service charges on deposit accounts	6,708		5,935		23,558		17,010
Trust and investment advisory fees	5,832		6,310		17,967		18,047
Debit card processing fees	3,249		3,030		9,417		8,949
Other noninterest income	2,735		2,318		8,102		6,233
Total noninterest income in-scope of ASC 606	42,312		39,549		136,227		124,006
Total noninterest income out-of-scope of ASC 606	1,041		3,660		(4,582)		20,148
Total noninterest income	$	43,353	$	43,209	$	131,645	$	144,154

Additional information related to each of the revenue streams is further noted below.

Insurance Commissions

The Company acts as an agent in offering property, casualty, and life and health insurance to both commercial and consumer customers though Eastern Insurance ~~Group LLC.~~Group. The Company earns a fixed commission on the sales of these products and services. The Company may also earn bonus commissions based upon meeting certain volume thresholds. In general, the Company recognizes commission revenues when earned based upon the effective date of the policy. For certain insurance products, the Company may also earn and recognize annual residual commissions commensurate with annual premiums being paid.

The Company also earns profit-sharing, or contingency revenues from the insurers with whom the Company places business. These profit-sharing revenues are performance bonuses from the insurers based upon certain performance metrics such as floors on written premiums, loss rates, and growth rates. Because the Company’s expectation of the ultimate profit-sharing revenue amounts to be earned can vary from period to period, the Company does not recognize this revenue until it has concluded that, based on all the facts and information available, it is probable that a significant revenue reversal will not occur in future periods.

Insurance commissions earned but not yet received amounted to ~~$7.7~~$14.4 million as of ~~June~~September 30, ~~2020,~~2022, and ~~$3.9~~$15.6 million as of December 31, ~~2019,~~2021, and were included in other assets.

Deposit Service Charges

The Company offers various deposit account products to its customers governed by specific deposit agreements applicable to either personal customers or business customers. These agreements identify the general conditions and obligations of both parties and include standard information regarding deposit account-related fees.

Table of Contents

Deposit account services include providing access to deposit accounts as well as access to the various deposit transactional services of the Company. These transactional services are primarily those that are identified in the standard fee schedule, and include, but are not limited to, services such as overdraft protection, wire transfer, and check collection. The Company charges monthly fixed service fees associated with the customer having access to the deposit account as well as separate fixed fees associated with and at the time specific transactions are entered into by the customer. As such, the Company considers that its performance obligations are fulfilled when customers are provided deposit account access or when the requested deposit transaction is completed.

~~Cash Management~~

Cash management services are a subset of the deposit service charges revenue stream. These services include automated clearing house, or ACH, transaction processing, positive pay, lockbox, and remote deposit services. These services are also governed by separate agreements entered into by the customer. The fee arrangement for these services is structured as a fixed fee per transaction which may be offset by earnings credits. An earnings credit is a discount that a customer receives based upon the investable balance in the applicable covered

deposit account(s) for a given month. Earnings credits are only good for the given month. That is, if cash management fees for a given month are less than the month’s earnings credit, the remainder of the credit does not carry over to the following month. Cash management fees are recognized as revenue in the month that the services are provided. Cash ~~Management~~management fees earned but not yet received amounted to ~~$0.8~~$2.1 million and $1.8 million as of ~~both June~~September 30, ~~2020~~2022 and December 31, ~~2019~~2021 and were included in other assets.

Trust and Investment Advisory Fees

The Company offers investment management and trust services to individuals, institutions, small businesses and charitable institutions through its Eastern Wealth Management division. Each investment management product is governed by its own contract along with a separate identifiable fee schedule unique to that product. The Company also offers additional services, such as estate settlement, financial planning, tax services, and other special services quoted at the customer’s request.

The asset management and/or custody fees are primarily based upon a percentage of the monthly valuation of the principal assets in the customer’s account. Customers are also charged a base fee which is prorated over a twelve-month period. Fees for additional or special services are generally fixed in nature and are charged as services are rendered. All revenue is recognized in correlation to the monthly management fee determinations or as transactional services are provided.

Debit Card Processing Fees

The Company provides debit cards to its customers which are authorized and settled through various card payment networks, and in exchange, the Company earns revenue as determined by each payment network’s interchange program. Regardless of the network that is utilized to authorize and settle the payment, the merchant that provides the product or service to the debit card holder is ultimately responsible for the interchange payment to the Company. Debit card processing fees are recognized as card transactions are settled within each network. Debit card processing fees earned but not yet received amounted to $0.3 million as of both ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019~~2021 and were included in other assets.

~~Trust and Investment Advisory Fees~~

The Company offers investment management and trust services to individuals, institutions, small businesses and charitable institutions. Each investment management product is governed by its own contract along with a separate identifiable fee schedule unique to that product. The Company also offers additional services, such as estate settlement, financial planning, tax services, and other special services quoted at the customer’s request.

Other Noninterest Income

The Company earns various types of other noninterest income that ~~fall within the scope of the new revenue recognition rules and~~ have been aggregated into one general revenue stream in the table noted above. ~~The amount~~Other noninterest income includes, but is not limited to, the following types of revenue with customers: safe deposit rent, ATM surcharge fees and customer checkbook ~~fees and insured cash sweep fee income.~~fees. Individually, these sources of noninterest income are immaterial.

~~15.~~

Table of Contents

17. Other Comprehensive Income

The following tables present a reconciliation of the changes in the components of other comprehensive (loss) income ~~(loss)~~ for the dates indicated including the amount of income tax (expense) benefit allocated to each component of other comprehensive ~~income~~ (loss):

   Three months ended June 30, 2020 Six months ended June 30, 2020
   Pre Tax
Amount Tax
(Expense)
Benefit After Tax
Amount Pre Tax
Amount    Tax
(Expense)
Benefit After Tax
Amount

   (Dollars In Thousands)
Unrealized gains (losses) on securities available for sale:

Change in fair value of securities available for sale
   $ 511 $ (97 ) $ 414 $ 34,313    $ (7,612 ) $ 26,701
Less: reclassification adjustment for gains included in net income
   163 (36 ) 127 285    (63 ) 222




Net change in fair value of securities available for sale
   348 (61 ) 287 34,028    (7,549 ) 26,479
Unrealized gains (losses) on cash flow hedges:

Change in fair value of cash flow hedges
   3,455 (971 ) 2,484 47,011    (13,215 ) 33,796
Less: net cash flow hedge losses reclassified into interest income
   7,134 (2,005 ) 5,129 10,246    (2,880 ) 7,366




Net change in fair value of cash flow hedges
   (3,679 ) 1,034 (2,645 ) 36,765    (10,335 ) 26,430
Defined benefit pension plans:

Amortization of actuarial net loss
   4,721 (1,326 ) 3,395 4,721    (1,326 ) 3,395
Amortization of prior service cost
   12 (3 ) 9 12    (3 ) 9




Net change in other comprehensive income for defined benefit postretirement plans
   4,733 (1,329 ) 3,404 4,733    (1,329 ) 3,404




Total other comprehensive income
   $ 1,402 $ (356 ) $ 1,046 $ 75,526    $ (19,213 ) $ 56,313




income:

   Three months ended June 30, 2019    Six months ended June 30, 2019
   Pre Tax
Amount    Tax
(Expense)
Benefit After Tax
Amount    Pre Tax
Amount    Tax
(Expense)
Benefit After Tax
Amount

   (Dollars In Thousands)
Unrealized gains (losses) on securities available for sale:

Change in fair value of securities available for sale
   $ 15,006    $ (3,354 ) $ 11,652    $ 47,135    $ (10,454 ) $ 36,681
Less: reclassification adjustment for gains included in net income
   1,966    (448 ) 1,518    2,016    (459 ) 1,557








Net change in fair value of securities available for sale
   13,040    (2,906 ) 10,134    45,119    (9,995 ) 35,124
Unrealized gains (losses) on cash flow hedges:

Change in fair value of cash flow hedges
   16,054    (4,513 ) 11,541    21,914    (6,160 ) 15,754
Less: net cash flow hedge losses reclassified into interest income
   231    (65 ) 166    524    (147 ) 377








Net change in fair value of cash flow hedges
   15,823    (4,448 ) 11,375    21,390    (6,013 ) 15,377








Total other comprehensive income
   $ 28,863    $ (7,354 ) $ 21,509    $ 66,509    $ (16,008 ) $ 50,501

~~(1)~~

Includes amortization of $0.3 million of the remaining balance of realized but unrecognized gains, net of tax, from the termination of interest rate swaps during Q2 2020. The original gain of $22.3 million, net of tax, will be recognized in earnings through January 2023. The balance of this gain had amortized to $22.0 million, net of tax, at June 30, 2020.


	Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022
	Pre Tax Amount		Tax Benefit (Expense)		After Tax Amount		Pre Tax Amount		Tax Benefit (Expense)		After Tax Amount
	(In thousands)
Unrealized losses on securities available for sale:
Change in fair value of securities available for sale	$	(337,762)	$	76,107	$	(261,655)	$	(1,111,187)	$	249,158	$	(862,029)
Less: reclassification adjustment for losses included in net income	(198)		12		(186)		(2,474)		714		(1,760)
Net change in fair value of securities available for sale	(337,564)		76,095		(261,469)		(1,108,713)		248,444		(860,269)
Unrealized losses on cash flow hedges:
Change in fair value of cash flow hedges	(72,667)		19,304		(53,363)		(71,182)		18,899		(52,283)
Less: net cash flow hedge gains reclassified into interest income(1)	3,755		(1,056)		2,699		12,797		(3,598)		9,199
Net change in fair value of cash flow hedges	(76,422)		20,360		(56,062)		(83,979)		22,497		(61,482)
Defined benefit pension plans:
Change in actuarial net loss	—		—		—		—		—		—
Less: amortization of actuarial net loss	(2,799)		787		(2,012)		(8,395)		2,360		(6,035)
Less: accretion of prior service credit	2,971		(835)		2,136		8,911		(2,505)		6,406
Net change in other comprehensive income for defined benefit postretirement plans	(172)		48		(124)		(516)		145		(371)
Total other comprehensive loss	$	(414,158)	$	96,503	$	(317,655)	$	(1,193,208)	$	271,086	$	(922,122)

(1)Includes amortization of realized gains on terminated cash flow hedges for the three and nine months ended September 30, 2022. The total realized gain of $41.2 million, net of tax, will be recognized in earnings through January 2023. The balance of this gain had amortized to $0.4 million, net of tax, at September 30, 2022.

Table of Contents


	Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021
	Pre Tax Amount		Tax Benefit (Expense)		After Tax Amount		Pre Tax Amount		Tax Benefit (Expense)		After Tax Amount
	(In thousands)
Unrealized losses on securities available for sale:
Change in fair value of securities available for sale	$	(27,741)	$	6,132	$	(21,609)	$	(90,088)	$	19,911	$	(70,177)
Less: reclassification adjustment for gains included in net income	1		—		1		1,166		(257)		909
Net change in fair value of securities available for sale	(27,742)		6,132		(21,610)		(91,254)		20,168		(71,086)
Unrealized gains on cash flow hedges:
Change in fair value of cash flow hedges	—		—		—		—		—		—
Less: net cash flow hedge gains reclassified into interest income(1)	7,851		(2,207)		5,644		24,344		(6,843)		17,501
Net change in fair value of cash flow hedges	(7,851)		2,207		(5,644)		(24,344)		6,843		(17,501)
Defined benefit pension plans:
Change in actuarial net loss	—		—		—		—		—		—
Less: amortization of actuarial net loss	(3,537)		994		(2,543)		(10,612)		2,983		(7,629)
Less: accretion of prior service credit	2,945		(828)		2,117		8,835		(2,484)		6,351
Net change in other comprehensive income for defined benefit postretirement plans	592		(166)		426		1,777		(499)		1,278
Total other comprehensive (loss)	$	(35,001)	$	8,173	$	(26,828)	$	(113,821)	$	26,512	$	(87,309)

(1)Represents amortization of realized gains on terminated cash flow hedges for the three and nine months ended September 30, 2021. The original realized gain of $41.2 million, net of tax, will be recognized in earnings through January 2023. The balance of this gain had amortized to $12.3 million, net of tax, at September 30, 2021.

The following table illustrates the changes in the balances of each component of accumulated other comprehensive income (loss), net of tax:

   Unrealized
Gains and
(Losses) on
Available for
Sale Securities    Unrealized
Gains and
(Losses) on
Cash Flow
Hedges    Defined Benefit
Pension Plans    Total
   (In Thousands)
Beginning balance: January 1, 2020
   $ 21,798    $ 15,624    $ 81,269    $ (43,847 )
Other comprehensive income (loss) before reclassifications
   26,701    33,796    —      60,497
Less: Amounts reclassified from accumulated other comprehensive income
   222    7,366    3,404    4,184








Net current-period other comprehensive income
   26,479    26,430    (3,404 )    56,313








Ending Balance: June 30, 2020
   $ 48,277    $ 42,054    $ 77,865    $ 12,466








Beginning Balance: January 1, 2019
   $ (19,360 )    $ 2,988    $ 59,389    $ (75,761 )
Other comprehensive income (loss) before reclassifications
   36,681    15,754    —      52,435
Less: Amounts reclassified from accumulated other comprehensive income
   1,557    377    —      1,934








Net current-period other comprehensive income
   35,124    15,377    —      50,501








Ending Balance: June 30, 2019
   $ 15,764    $ 18,365    $ 59,389    $ (25,260 )

~~16.~~


	Unrealized Gains and (Losses) on Available for Sale Securities		Unrealized Gains and (Losses) on Cash Flow Hedges		Defined Benefit Pension Plans		Total
	(In thousands)
Beginning Balance: January 1, 2022	$	(58,586)	$	7,361	$	(5,471)	$	(56,696)
Other comprehensive loss before reclassifications	(862,029)		(52,283)		—		(914,312)
Less: Amounts reclassified from accumulated other comprehensive loss	(1,760)		9,199		371		7,810
Net current-period other comprehensive loss	(860,269)		(61,482)		(371)		(922,122)
Ending Balance: September 30, 2022	$	(918,855)	$	(54,121)	$	(5,842)	$	(978,818)
Beginning Balance: January 1, 2021	$	45,672	$	29,815	$	(21,253)	$	54,234
Other comprehensive loss before reclassifications	(70,177)		—		—		(70,177)
Less: Amounts reclassified from accumulated other comprehensive loss	909		17,501		(1,278)		17,132
Net current-period other comprehensive (loss) income	(71,086)		(17,501)		1,278		(87,309)
Ending Balance: September 30, 2021	$	(25,414)	$	12,314	$	(19,975)	$	(33,075)

18. Segment Reporting

Table of Contents

The Company’s primary reportable segment is its banking business, which offers a range of commercial, retail, wealth management and banking services and consists primarily of attracting deposits from the general public and investing those deposits, together with borrowings and funds generated from operations, to originate loans in a variety of sectors and to invest in securities. Revenue from the banking business reportable segment consists primarily of interest earned on loans and investment securities. In addition to its banking business reportable segment, the Company has an insurance agency business reportable segment, which consists of insurance-related activities, acting as an independent agent in offering commercial, personal and employee benefits insurance products to individual and commercial clients. Revenue from the insurance agency business consists primarily of commissions on sales of insurance products and services.

Results of operations and selected financial information by segment and reconciliation to the consolidated financial statements as of and for the three months ended ~~June~~September 30, ~~2020~~2022 and ~~2019,~~2021, and for the ~~six~~nine months ended ~~June~~September 30, ~~2020~~2022 and ~~2019,~~2021, was as follows:

As of and for the three months ended June 30,
2020 2019
Banking
Business Insurance
Agency
Business Other /
Eliminations Total Banking
Business Insurance
Agency
Business Other /
Eliminations Total
(dollars in thousands)
Net interest income
$ 98,755 $ —   $ —   $ 98,755 $ 103,523 $ —   $ —   $ 103,523
Provision for loan losses
8,600 —   —   8,600 1,500 —   —   1,500

Net interest income after provision for loan losses
90,155 —   —   90,155 102,023 —   —   102,023
Noninterest income
23,779 23,886 (8 ) 47,657 21,143 24,489 —   45,632
Noninterest expense
81,713 20,084 (1,032 ) 100,765 83,205 19,200 (835 ) 101,570

Income before provision for income taxes
32,221 3,802 1,024 37,047 39,961 5,289 835 46,085
Income tax provision
6,121 1,076 —   7,197 9,517 1,515 —   11,032

Net income
$ 26,100 $ 2,726 $ 1,024 $ 29,850 $ 30,444 $ 3,774 $ 835 $ 35,053

Total assets
$ 13,867,746 $ 193,320 $ (64,543 ) $ 13,996,523 $ 11,397,392 $ 164,576 $ (48,284 ) $ 11,513,684

Total liabilities
$ 12,314,286 $ 53,150 $ (64,543 ) $ 12,302,893 $ 9,975,081 $ 35,228 $ (48,284 ) $ 9,962,025

For the six months ended June 30,
2020 2019
Banking
Business Insurance
Agency
Business Other /
Eliminations Total Banking
Business Insurance
Agency
Business Other /
Eliminations Total
(dollars in thousands)
Net interest income
$ 198,901 $ —   $ —   $ 198,901 $ 206,195 $ —   $ —   $ 206,195
Provision for loan losses
37,200 —   —   37,200 4,500 —   —   4,500

Net interest income after provision for loan losses
161,701 —   —   161,701 201,695 —   —   201,695
Noninterest income
30,647 50,408 (29 ) 81,026 43,405 50,048 (21 ) 93,432
Noninterest expense
160,178 37,725 (1,966 ) 195,937 169,096 39,067 (1,764 ) 206,399

Income before provision for income taxes
32,170 12,683 1,937 46,790 76,004 10,981 1,743 88,728
Income tax provision
4,906 3,589 —   8,495 17,576 3,134 —   20,710

Net income
$ 27,264 $ 9,094 $ 1,937 $ 38,295 $ 58,428 $ 7,847 $ 1,743 $ 68,018

~~17.~~


	As of and for the three months ended September 30,
	2022								2021
	Banking Business		Insurance Agency Business		Other / Eliminations		Total		Banking Business		Insurance Agency Business		Other / Eliminations		Total
	(In thousands)
Net interest income	$	152,179	$	—	$	—	$	152,179	$	102,691	$	—	$	—	$	102,691
Provision for (release of) allowance for loan losses	6,480		—		—		6,480		(1,488)		—		—		(1,488)
Net interest income after provision for loan losses	145,699		—		—		145,699		104,179		—		—		104,179
Noninterest income	19,777		23,714		(138)		43,353		20,783		22,508		(82)		43,209
Noninterest expense	96,749		21,197		(1,106)		116,840		80,474		19,538		(1,042)		98,970
Income before income tax expense	68,727		2,517		968		72,212		44,488		2,970		960		48,418
Income tax expense	16,717		718		—		17,435		10,471		841		—		11,312
Net income	$	52,010	$	1,799	$	968	$	54,777	$	34,017	$	2,129	$	960	$	37,106
Total assets	$	21,894,550	$	221,941	$	(73,558)	$	22,042,933	$	17,324,816	$	207,996	$	(71,589)	$	17,461,223
Total liabilities	$	19,644,824	$	55,504	$	(73,558)	$	19,626,770	$	14,051,100	$	52,420	$	(71,589)	$	14,031,931


	For the nine months ended September 30,
	2022								2021
	Banking Business		Insurance Agency Business		Other / Eliminations		Total		Banking Business		Insurance Agency Business		Other / Eliminations		Total
	(In thousands)
Net interest income	$	418,060	$	—	$	—	$	418,060	$	307,390	$	—	$	—	$	307,390
Provision for (release of) allowance for loan losses	7,045		—		—		7,045		(5,368)		—		—		(5,368)
Net interest income after provision for loan losses	411,015		—		—		411,015		312,758		—		—		312,758
Noninterest income	55,919		76,054		(328)		131,645		69,308		74,959		(113)		144,154
Noninterest expense	279,823		60,186		(3,164)		336,845		243,549		59,844		(3,039)		300,354
Income before income tax expense	187,111		15,868		2,836		205,815		138,517		15,115		2,926		156,558
Income tax expense	43,870		4,480		—		48,350		32,728		4,252		—		36,980
Net income	$	143,241	$	11,388	$	2,836	$	157,465	$	105,789	$	10,863	$	2,926	$	119,578

19. Subsequent Events

Subsequent to September 30, 2022, management determined it was probable that the lump sum payments from the Defined Benefit Plan ~~of Reorganization and Conversion~~

~~On June 12, 2020,~~for the ~~Board of Trustees~~year ending December 31, 2022 would exceed the sum of the ~~Company adopted a Plan of Conversion~~service cost and interest cost components (the ~~“Plan”~~“threshold”). Pursuant to the Plan, the Company will reorganize from a mutual holding company into a publicly traded stock form of organization. In connection with the reorganization, the Company will transfer to Eastern Bankshares, Inc., a recently formed Massachusetts corporation, 100% of the ~~Bank’s common stock, and~~Defined Benefit Plan’s net periodic pension cost. ASC 715-20, “Compensation-Retirement Benefits - Defined Benefit Plans,” requires that upon determining it is probable that such threshold will be met, management shall immediately ~~thereafter~~recognize in earnings a pro rata portion of the ~~Company will merge into Eastern Bankshares, Inc. Pursuant~~aggregate unamortized gain or loss (e.g., “non-cash settlement charge”). As of the date of this Quarterly Report on Form 10-Q, management estimates the amount of such non-cash settlement charge to ~~the Plan, Eastern Bankshares, Inc. will issue shares of common stock in~~be a public offering. Eastern Bankshares, Inc. will offer 100% of its outstanding common stock to the Company’s eligible depositors, the employee stock ownership plan (“ESOP”) and certain other persons. Eastern Bankshares, Inc. will determineloss within the range of ~~the offering value and the number of shares of common stock~~$10.0 million to ~~be issued based upon an independent appraiser’s valuation.~~$15.0 million. The ~~stock will be priced at $10.00 per share. In addition, the Boards of Directors of Eastern Bankshares, Inc. and the Company have adopted an ESOP, which is permitted to subscribe for up to 8%~~actual amount of the ~~common stock to~~non-cash settlement charge

Table of Contents

cannot be outstanding following the completion of the reorganization and the offering. The Plan provides for Eastern Bankshares, Inc. to donate to the Eastern Bank Charitable Foundation (the “Foundation”) immediately after the offering a number of authorized but previously unissued shares of Eastern Bankshares, Inc. common stock equal to 4% of the number of shares of common stock that will be issued and outstanding immediately after the offering (including the shares donated to the Foundation) (the “Stock Donation”).

On August 6, 2020, the corporators of the Company separately approved the Plan and the Stock Donation. The Board of Governors of the Federal Reserve System approved the application of Eastern Bankshares, Inc. to become a bank holding company upon the completion of the conversion, although the approval of the Federal Reserve Board is required before Eastern Bankshares, Inc. can consummate the offering. The Company has filed an application with respect to the offering with the Massachusetts Commissioner of Banks, and the Massachusetts Commissioner of Banks authorized Eastern Bankshares, Inc. to commence the offering. However, final regulatory approval is required before Eastern Bankshares, Inc. can consummate the offering. The subscription offering commenced on August 18, 2020 and expired on September 16, 2020. The Company expects that the offering will close and the conversion will be completed in October 2020.

The Plan provides that eligible account holders will receive an interest in a liquidation account maintained by Eastern Bankshares, Inc. in an amount equal to (i) the Company’s ownership interest in the Bank’s total shareholders’ equitydetermined as of the date of this report as the ~~latest statement of financial position included in the latest prospectus filed with the U.S. Securities and Exchange Commission~~actual amount is dependent upon various factors, including final lump sum benefit amounts paid for the ~~offering, plus (ii) the value~~year ending December 31, 2022 and an actuarial remeasurement of the net assets of the Company as of the date of the latest statement of financial position of the Company prior to the consummation of the conversion (excluding its ownership of the Bank). The Plan also provides for the establishment of a parallel liquidation account maintained at the Bank to support Eastern Bankshares, Inc.’s liquidation account in the event Eastern Bankshares, Inc. does not have sufficient assets to fund its obligations under Eastern Bankshares, Inc.’s liquidation account. Eastern Bankshares, Inc. and the Bank will hold the liquidation accounts for the benefit of eligible account holders who continue to maintain deposits in the Bank after the conversion. Following the completion of the offering, Eastern Bankshares, Inc. will not be permitted to pay dividends on its capital stock if the shareholders’ equity of Eastern Bankshares, Inc. would be reduced below the amount of the liquidation account. The liquidation account will be reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holder’s interest in the liquidation accounts. In the event of a complete liquidation of the Bank, and only in such event, each account holder will be entitled to receive a distribution from the liquidation account in an amount proportionate to the adjusted qualifying account balances then held.

Costs associated with the stock offering have been deferred and will be deducted from the proceeds of the shares sold in the stock issuance. If the stock offering is not completed, all costs will be charged to expense. At June 30, 2020, approximately $4.5 million of stock offering costs had been incurred and deferred.

Defined Benefit Plan.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section is intended to assist in the understanding of the financial performance of the Company and its subsidiaries through a discussion of our financial condition at ~~June~~September 30, ~~2020,~~2022, and our results of operations for the ~~three-~~three and ~~six-month periods~~nine months ended ~~June~~September 30, ~~2020~~2022 and ~~2019.~~2021. This section should be read in conjunction with the unaudited interim condensed consolidated financial statements and notes thereto of the Company appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q and the Company’s ~~prospectus, filed with~~2021 Form 10-K.

Forward-Looking Statements

When we use the ~~Securities~~terms “we,” “us,” “our,” and ~~Exchange Commission pursuant to Rule 424(b)(3) on August 18, 2020.~~

~~Forward-Looking Statements~~

the “Company,” we mean Eastern Bankshares, Inc., a Massachusetts corporation, and its consolidated subsidiaries, taken as a whole, unless the context otherwise indicates.

Certain statements contained in this Quarterly Report on Form 10-Q that are not historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements, which are based on certain current assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions.

Forward-looking statements are based on the current assumptions and beliefs of management and are only expectations of future results. The Company’s actual results could differ materially from those projected in the forward-looking statements as a result of, among others, ~~factors;~~ factors:

•the negative impacts and disruptions of the COVID-19 pandemic and measures taken to contain its spread on our employees, customers, business operations, credit quality, financial position, liquidity and results of operations;

•the length and extent of the economic contraction as a result of the COVID-19 pandemic; continued deterioration in employment levels and other general business and economic conditions on a national basis and in the local markets in which the Company operates;

•changes in customer behavior;

•changes in regional, national or international macroeconomic conditions, including especially changes in inflation or interest rates in the United States;

•the possibility that future credit losses, loan defaults and charge-off rates are higher than expected due to changes in economic assumptions or adverse economic developments;

•turbulence in the capital and debt markets; ~~changes in interest rates;~~

•decreases in the value of securities and other assets;

•decreases in deposit levels necessitating increased borrowing to fund loans and investments;

•competitive pressures from other financial institutions;

•operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics;

•changes in ~~regulation;~~ regulation and associated increases in compliance costs, as well as enforcement and litigation risk;

•reputational risks relating to the Company’s participation in the ~~Paycheck Protection Program~~PPP and other pandemic-related legislative and regulatory initiatives and programs;

•changes in accounting standards and practices;

•the risk that goodwill and intangibles recorded in our financial statements will become impaired;

•risks related to the implementation of acquisitions, dispositions, and restructurings, including the risk that acquisitions may not produce results at levels or within time frames originally anticipated;

•the risk that we may not be successful in the implementation of our business strategy;

•changes in assumptions used in making such forward-looking statements; and

•other risks and uncertainties detailed in Part I, Item 1A of our 2021 Form 10-K, as updated by Part II, Item 1A “Risk Factors” of the ~~other risks.~~ Quarterly Report on Form 10-Q for the three months ended March 31, 2022 (“Q1 Form 10-

Table of Contents

Q”), as updated by Part II, Item 1A “Risk Factors” of the Quarterly Report on Form 10-Q for the period ended June 30, 2022 (“Q2 Form 10-Q”), as updated by Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q, and as may be further updated in our filings with the SEC from time to time.

Forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with ~~U.S.~~ GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results could differ from these estimates. Our significant accounting policies are discussed in detail in our 2021 Form 10-K, as updated by the ~~Company’s prospectus, filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on August 18, 2020. There have been no material changes~~notes to our ~~critical~~unaudited interim condensed consolidated financial statements accompanying this Quarterly Report on Form 10-Q. Effective January 1, 2022, we adopted ASU 2016-13, or CECL, the accounting ~~policies as compared~~policy for which is described in Note 2, “Summary of Significant Accounting Policies,”Note 3, “Securities,” and Note 4, “Loans and Allowance for Credit Losses” within the Notes to the ~~critical accounting policies described in the Company’s prospectus.~~

~~Selected Financial Data~~

~~The selected consolidated financial and other data of the Company set forth below should be read in conjunction with more detailed information, including the~~Unaudited Consolidated Financial Statements ~~and related notes, appearing elsewhere~~included in Part I, Item 1 in this Quarterly Report on Form 10-Q.

There have been no other material changes in critical accounting policies during the three and nine months ended September 30, 2022.

   As of June 30,
2020    As of December 31,
2019
   (Dollars in thousands)
Selected Financial Condition Data:

Total assets
   $ 13,996,523    $ 11,628,775
Cash and cash equivalents
   1,432,561    362,602
Trading securities
   —      961
Securities available for sale
   1,600,354    1,508,236
Loans, net of allowance for loan losses and unamortized premiums, net of unearned discounts and deferred fees
   9,862,980    8,899,184
Federal Home Loan Bank stock, at cost
   8,805    9,027
Goodwill and other intangibles, net
   376,331    377,734
Total liabilities
   12,302,893    10,028,622
Total deposits
   11,846,765    9,551,392
Total borrowings
   29,155    235,395
Total equity
   1,693,630    1,600,153
Nonperforming loans
   55,395    43,775
Nonperforming assets
   55,435    43,775
   Six months ended June 30,
   2020    2019
   (Dollars in thousands)
Selected Operating Data:

Interest and dividend income
   $ 208,092    $ 224,321
Interest expense
   9,191    18,126




Net interest income
   198,901    206,195
Provision for loan losses
   37,200    4,500




Net interest income after provision for loan losses
   161,701    201,695
Noninterest income
   81,026    93,432
Noninterest expense
   195,937    206,399




Income before income taxes
   46,790    88,728
Provision for income taxes
   8,495    20,710




Net income
   $ 38,295    $ 68,018

   As of and for the six months ended June 30,
   2020 2019
Performance Ratios:

Return on average assets ^{(1) (6)}
   0.61 % 1.21 %
Return on average equity ^{(2) (6)}
   4.64 % 9.20 %
Interest rate spread (FTE) ^{(3) (6)}
   3.38 % 3.80 %
Net interest margin (FTE) ^{(4) (6)}
   3.49 % 4.03 %
Noninterest expenses to average assets ⁽⁶⁾
   3.11 % 3.68 %
Efficiency ratio ⁽⁵⁾
   70.00 % 68.89 %
Average interest-earning assets to average interest-bearing liabilities
   172.86 % 165.60 %
Capital Ratios:

Average equity to average assets
   13.09 % 13.16 %
Total capital to risk weighted assets
   14.00 % 12.79 %
Tier 1 capital to risk weighted assets
   12.77 % 11.89 %
Common equity tier 1 capital to risk weighted assets
   12.77 % 11.89 %
Tier 1 capital to average assets
   9.99 % 10.99 %
Asset Quality Ratios:

Allowance for loan losses as a percentage of total loans
   1.17 % 0.92 %
Allowance for loan losses as a percentage of nonperforming loans
   210.55 % 251.34 %
Net charge-offs (recoveries) to average outstanding loans during the period ⁽⁶⁾
   0.06 % 0.06 %
Nonperforming loans as a percentage of total loans
   0.56 % 0.36 %
Nonperforming loans as a percentage of total assets
   0.40 % �� 0.29 %
Total nonperforming assets as a percentage of total assets
   0.40 % 0.29 %

~~(1)~~

~~Represents net income divided by average total assets.~~

~~(2)~~

~~Represents net income divided by average equity.~~

~~(3)~~

~~Represents the difference between average yield on average interest-earning assets and the average cost of interest-bearing liabilities for the periods on a fully~~ ~~tax-equivalent~~ ~~(FTE) basis.~~

~~(4)~~

~~Represents net interest income as a percentage of average interest-earning assets adjusted on a FTE basis.~~

~~(5)~~

~~Represents noninterest expenses divided by the sum of net interest income and noninterest income.~~

~~(6)~~

~~Ratios have been annualized.~~

Overview

We are a bank holding company, and our principal subsidiary, Eastern Bank, is a Massachusetts-chartered bank that has served the banking needs of our customers since 1818. Our business philosophy is to operate as a diversified financial services enterprise providing a broad array of banking and other financial services primarily to retail, commercial and small business customers. We had total assets of ~~$14.0~~$22.0 billion and ~~$11.6~~$23.5 billion at ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively. We are subject to comprehensive regulation and examination by the Massachusetts Commissioner of Banks, the ~~Federal Deposit Insurance Corporation (“FDIC”),~~FDIC, the Federal Reserve Board and the Consumer Financial Protection Bureau.

We manage our business under two business segments: our banking business, which contributed ~~$125.7~~$172.0 million, or ~~84.0%~~87.9%, of our total income ~~(interest~~(pre-provision net interest and dividend income and noninterest income) for the three months ended ~~June~~September 30, ~~2020~~2022 and ~~contributed $238.7~~$474.0 million, or ~~82.6%~~86.2%, of our total income for the ~~six~~nine months ended ~~June~~September 30, ~~2020,~~2022, and our insurance agency business, which contributed ~~$23.9~~$23.7 million, or ~~16.0%~~12.1%, of our total income for the three months ended ~~June~~September 30, ~~2020~~2022 and ~~$50.4~~$76.1 million, or ~~17.4%~~13.8%, of our total income for the ~~six~~nine months ended ~~June~~September 30, ~~2020.~~2022. Our banking business consists of a full range of banking, lending (commercial, residential and consumer), savings and small business offerings, including our wealth management and trust operations that we conduct through our Eastern Wealth Management division.

Our insurance agency business consists of insurance-related activities, acting as an independent agent in offering commercial, personal and employee benefits insurance products to individual and commercial clients.

Net income for the three and nine months ended September 30, 2022 computed in accordance with GAAP was $54.8 million and $157.5 million, respectively, as compared to $37.1 million and $119.6 million for the three and nine months ended September 30, 2021, respectively, representing increases of 47.6% and 31.7%, respectively. These increases were primarily due to an increase in average interest earning assets, which was primarily the result of our 2021 acquisition of Century. Refer to the “Results of Operations” section below for additional discussion. Net income for the three and nine months ended September 30, 2022 and 2021 included items that our management considers non-core, which management excludes for purposes of assessing our operating net income, a non-GAAP financial measure. Operating net income for the three and nine months ended September 30, 2022 was $55.7 million and $163.4 million, respectively, compared to operating net income for the three and nine months ended September 30, 2021 of $37.4 million and $121.0 million, respectively, representing increases of 49.1% and 35.0%, respectively. These increases were largely driven by the aforementioned change in average interest-earning assets. See “Non-GAAP Financial Measures” below for a reconciliation of operating net income to GAAP net income.

Table of Contents

The following chart shows our basic earnings per share on a GAAP and operating basis over the past five quarters (refer to the “Non-GAAP Financial Measures” section below for a reconciliation of GAAP earnings to operating earnings):
Earnings per share increased from $0.22 for the three months ended September 30, 2021 to $0.33 for the three months ended September 30, 2022, a 55.4% increase. Earnings per share increased from $0.69 for the nine months ended September 30, 2021 to $0.94 for the nine months ended September 30, 2022, a 36.0% increase. These increases were due to increases in net interest income and decreases in the average number of common shares outstanding during each such period. The decreases in the average number of common shares outstanding are attributable to share repurchases in connection with our previously announced share repurchase program.
68
Table of Contents

The following chart shows our efficiency ratio on a GAAP and operating basis over the past five quarters (refer to the “Non-GAAP Financial Measures” section below for additional information on the determination of each measure):
The GAAP efficiency and non-GAAP operating efficiency ratios for both the three and nine months ended September 30, 2022 decreased compared to the ratios for the three and nine months ended September 30, 2021. The decrease in the efficiency ratios for such periods was primarily attributable to increased net interest income, which resulted in a margin of increase in total revenue that exceeded the rate at which noninterest expense increased for the same periods. Refer to the “Results of Operations” section below for additional discussion of the changes in net interest income, noninterest income and noninterest expense.

Banking Business

Our banking business offers a range of commercial, retail, wealth management and banking services, and consists primarily of attracting deposits from the general public, including municipalities, and investing those deposits, together with borrowings and funds generated from operations, to originate loans in a variety of sectors and to invest in securities. The financial condition and results of operations of our banking business depend primarily on (i) attracting and retaining low cost, stable deposits, (ii) using those deposits to originate and acquire loans and earn net interest income and (iii) operating expenses incurred.

Lending Activities

We use funds obtained from deposits, as well as funds obtained from the ~~Federal Home Loan Bank (“FHLB”) of Boston (“FHLBB”)~~FHLBB advances and ~~Federal~~federal funds, primarily to originate loans and to invest in securities. Our lending focuses on the following categories of loans:

Commercial Lending

•

~~Commercial and industrial~~: Loans in this category consist of revolving and term loans extended to businesses and corporate enterprises for the purpose of financing working capital, facilitating equipment purchases and facilitating acquisitions. As of June 30, 2020 and December 31, 2019, we had total commercial and industrial loans of $2.3 billion and $1.6 billion, representing 22.7% and 18.3%, respectively, of our total loans. The primary risk associated with commercial and industrial loans is the ability of borrowers to achieve business results

consistent with those projected at origination. Our primary focus for commercial and industrial loans is middle-market companies located in the markets we serve. In addition, we participate in the syndicated loan market and the Shared National Credit Program (“SNC Program”). As of June 30, 2020 and December 31, 2019, our SNC Program portfolio totaled $514.5 million and $419.0 million, or 22.6%% and 25.5%, respectively, of our commercial and industrial portfolio, and 41.0% and 47.0%, respectively, of our SNC Program portfolio were loans to borrowers headquartered in our primary lending market. Our commercial and industrial portfolio also includes our Asset Based Lending Portfolio (“ABL Portfolio”). As of June 30, 2020 and December 31, 2019, our ABL Portfolio totaled $159.1 million and $163.0 million, or 7.0% and 9.9%, respectively, of our commercial and industrial portfolio.

•

~~Commercial real estate~~: Loans in this category include mortgage loans on commercial real estate, both investment and owner occupied. As of June 30, 2020 and December 31, 2019, we had total commercial real estate loans of $3.6 billion and $3.5 billion, representing 35.8% and 39.3%, respectively, of our total loans. Property types financed include office, industrial, multi-family, affordable housing, retail, hotel and other types of properties. Collateral values are established by independent third-party appraisals and evaluations. The primary repayment sources include operating income generated by the real estate, permanent debt refinancing and/or the sale of the real estate.

•

~~Commercial construction~~: Loans in this category include construction project financing and are comprised of commercial real estate, business banking and residential loans for the purpose of constructing and developing real estate. Substantially all of our commercial construction portfolio is in commercial real estate. As of June 30, 2020 and December 31, 2019, we had total commercial construction loans of $282.2 million and $273.8 million, representing 2.8% and 3.0%, respectively, of our total loans.

•

~~Business banking~~: Loans in this category are comprised of loans to small businesses with exposures of under $ 1 million and small investment real estate projects with exposures of under $3 million. These loans are separate and distinct from our commercial and industrial and commercial real estate portfolios described above due to the size of the loans. As of June 30, 2020 and December 31, 2019, we had total business banking loans of $1.2 billion and $771.5 million, respectively, representing 12.3% and 8.6% of our total loans for each period, respectively. In this category, commercial and industrial loans and commercial real estate loans totaled $676.2 million and $558.8 million, respectively, as of June 30, 2020, and $229.0 million and $542.0 million, respectively, as of December 31, 2019. Business banking originations include traditionally underwritten loans as well as partially automated scored loans. Our proprietary decision matrix, which includes a number of quantitative factors including, but not limited to, a guarantor’s credit score, industry risk, and time in business, is used to determine whether to make business banking loans. We also engage in Small Business Association (“SBA”) lending. SBA guarantees reduce our risk of loss when default occurs and are considered a credit enhancement to the loan structure. During the three months ended June 30, 2020, we originated $1.1 billion of loans to approximately 8,100 borrowers under the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), as described in further detail elsewhere in this Quarterly Report.

•Commercial and industrial: Loans in this category consist of revolving and term loans extended to businesses and corporate enterprises for the purpose of financing working capital, facilitating equipment purchases and facilitating acquisitions. As of both September 30, 2022 and December 31, 2021, we had total commercial and industrial loans of $3.0 billion, representing 23.5% and 24.2%, respectively, of our total loans. The primary risk associated with commercial and industrial loans is the ability of borrowers to achieve business results consistent with those projected at origination. Our primary focus for commercial and industrial loans is middle-market companies located in the markets we serve. In addition, we participate in the syndicated loan

Table of Contents

market and the SNC Program. As of September 30, 2022 and December 31, 2021, our SNC Program portfolio totaled $578.5 million and $480.9 million, or 19.1% and 16.2%, respectively, of our commercial and industrial portfolio, and 34.4% and 40.3%, respectively, of our SNC Program portfolio were loans to borrowers headquartered in our primary lending market. Our commercial and industrial portfolio also includes our Asset Based Lending Portfolio (“ABL Portfolio”), a portion of our PPP loans, and industrial revenue bonds (“IRBs”), the balances of which are detailed below:

◦As of September 30, 2022 and December 31, 2021, our ABL Portfolio totaled $230.4 million and $224.8 million, or 7.6% and 7.6%, respectively, of our commercial and industrial portfolio.

◦As of September 30, 2022 and December 31, 2021, the amount of PPP loans included in our commercial and industrial portfolio was $5.3 million and $112.8 million, respectively.

◦As of both September 30, 2022 and December 31, 2021, our commercial and industrial IRB portfolio, which is comprised of municipal bonds issued to finance major capital projects, totaled $1.0 billion.

•Commercial real estate: Loans in this category include mortgage loans on commercial real estate, both investment and owner occupied. As of September 30, 2022 and December 31, 2021, we had total commercial real estate loans of $5.0 billion and $4.5 billion, representing 38.7% and 36.9%, respectively, of our total loans. As of both September 30, 2022, and December 31, 2021, owner occupied loans totaled $1.0 billion, representing 20.2% and 21.2%, respectively, of our commercial real estate loans. In connection with our adoption of ASU 2016-13, we revised our methodology for determining owner occupied commercial real estate loans in order to conform with our corresponding pools for CECL reserve modeling purposes, and our totals as of September 30, 2022 reflect such revision. Accordingly, the amount of our owner occupied commercial real estate loans as of December 31, 2021 was also revised from the amount disclosed in our 2021 Form 10-K to accommodate comparability. Collateral values are established by independent third-party appraisals and evaluations. The primary repayment sources include operating income generated by the real estate, permanent debt refinancing and/or the sale of the real estate. Our commercial real estate loan portfolio also included IRB loans of $591.6 million and $629.6 million as of September 30, 2022 and December 31, 2021, respectively.

•Commercial construction: Loans in this category include construction project financing and are comprised of commercial real estate, business banking and residential loans for the purpose of constructing and developing real estate. As of September 30, 2022 and December 31, 2021, we had total commercial construction loans of $314.2 million and $222.3 million, representing 2.4% and 1.8%, respectively, of our total loans.

•Business banking: Loans in this category are comprised of loans to small businesses with exposures of under $1 million and small investment real estate projects with exposures of under $3 million. These loans are separate and distinct from our commercial and industrial and commercial real estate portfolios described above due to the size of the loans. As of September 30, 2022 and December 31, 2021, we had total business banking loans of $1.1 billion and $1.3 billion, respectively, representing 8.5% and 10.9% of our total loans for each period end, respectively. In this category, commercial and industrial loans and commercial real estate loans totaled $222.3 million and $874.1 million, respectively, as of September 30, 2022, and $440.6 million and $894.1 million, respectively, as of December 31, 2021.

Business banking originations include traditionally underwritten loans as well as partially automated scored loans. Our proprietary decision matrix, which includes a number of quantitative factors including, but not limited to, a guarantor’s credit score, industry risk, and time in business, is used to determine whether to make business banking loans. We also engage in SBA lending. SBA guarantees reduce our risk of loss when default occurs and are considered a credit enhancement to the loan structure.

Our business banking portfolio also includes a portion of our PPP loans which are included in the aforementioned commercial and industrial business banking total. As of September 30, 2022 and December 31, 2021, the amount of PPP loans included in our business banking portfolio was $17.8 million and $218.6 million, respectively.

Residential Lending

•

~~Residential real estate~~: Loans in this category consist of mortgage loans on residential real estate. As of both June 30, 2020 and December 31, 2019, we had total residential loans of $1.4 billion, representing 14.0% and 15.9%, respectively, of our total loans. Underwriting considerations include, among others, income sources and their reliability, willingness to repay as evidenced by credit repayment history, financial resources including cash reserves and the value of the collateral. We maintain policy standards for minimum credit score and cash reserves and maximum loan to value consistent with a “prime” portfolio. Collateral consists of mortgage liens on residential dwellings. We do not originate or purchase ~~sub-prime~~ or other high-risk loans. Residential loans are originated either for sale to investors or to retain in our loan portfolio. Decisions about whether to sell or retain residential loans are made based on the interest rate characteristics, pricing for loans in the secondary mortgage market, competitive factors and our capital needs. During the three and six months ended June 30, 2020 and year ended December 31, 2019, residential real estate mortgage originations were $256.9 million, $380.3 million and $443.0 million, respectively, of which $130.9 million, $201.4 million and $209.0 million, respectively, were sold on the secondary markets. We generally do not continue to service residential loans that we sell in the secondary market.

•Residential real estate: Loans in this category consist of mortgage loans on residential real estate. As of September 30, 2022 and December 31, 2021, we had total residential loans of $2.1 billion and $1.9 billion,

Table of Contents

respectively, representing 16.4% and 15.7%, respectively, of our total loans. Underwriting considerations include, among others, income sources and their reliability, willingness to repay as evidenced by credit repayment history, financial resources including cash reserves and the value of the collateral. We maintain policy standards for minimum credit scores and cash reserves and maximum loan to value consistent with a “prime” portfolio. Collateral consists of mortgage liens on residential dwellings. We do not originate or purchase sub-prime or other high-risk loans. Residential loans are originated either for sale to investors or to retain in our loan portfolio. Decisions about whether to sell or retain residential loans are made based on the interest rate characteristics, pricing for loans in the secondary mortgage market, competitive factors and our capital needs. During the three and nine months ended September 30, 2022, residential real estate mortgage originations were $119.8 million and $397.5 million, respectively, of which $8.1 million and $53.2 million, respectively, were sold on the secondary markets. Comparatively, during the three and nine months ended September 30, 2021, residential real estate mortgage originations were $232.1 million and $743.5 million, respectively, of which $67.8 million and $171.1 million, respectively, were sold on the secondary markets. In addition, during the three and nine months ended September 30, 2022, the Company purchased $79.9 million of residential real estate loans originated by a third party.

Consumer Lending

•

~~Consumer home equity~~: Loans in this category consist of home equity lines of credit and home equity loans. As of June 30, 2020 and December 31, 2019, we had total consumer home equity loans of $905.5 million and $933.1 million, representing 9.0% and 10.4%, respectively, of our total loans. Home equity lines of credit are granted for ten years with monthly interest-only repayment requirements. Home equity lines of credit can be converted to term loans that are fully amortized. Underwriting considerations are materially consistent with those utilized in residential real estate. Collateral consists of a senior or subordinate lien on owner-occupied residential property.

•

~~Other consumer~~: Loans in this category consist of unsecured personal lines of credit, overdraft protection, automobile and aircraft loans, and other personal loans. As of June 30, 2020 and December 31, 2019, we had total other consumer loans of $334.7 million and $402.4 million, representing 3.3% and 4.5%, respectively, of our total loans. Our policy and underwriting in this category include the following factors, among others, income sources and reliability, credit histories, term of repayment and collateral value, as applicable. Included in this category are $181.3 million and $243.9 million of automobile loans, respectively, at June 30, 2020 and December 31, 2019.

•Consumer home equity: Loans in this category consist of home equity lines of credit and home equity loans. As of September 30, 2022 and December 31, 2021, we had total consumer home equity loans of $1.2 billion and $1.1 billion, representing 9.1% and 9.0%, respectively, of our total loans. Home equity lines of credit are granted for ten years with monthly interest-only repayment requirements. Full principal repayment is required at the end of the ten-year draw period. Home equity lines of credit can be converted to term loans that are fully amortized. Underwriting considerations are materially consistent with those utilized in the residential real estate category. Collateral consists of a senior or subordinate lien on owner-occupied residential property.

•Other consumer: Loans in this category consist of unsecured personal lines of credit, overdraft protection, automobile and aircraft loans, home improvement loans and other personal loans. As of September 30, 2022 and December 31, 2021, we had total other consumer loans of $196.6 million and $214.5 million, representing 1.5% and 1.8%, respectively, of our total loans. Our policy and underwriting in this category include the following factors, among others: income sources and reliability, credit histories, term of repayment and collateral value, as applicable.

Other Banking Products and Services

In addition to our lending activities, which are the core part of our banking business, we offer other banking products and services primarily related to (i) other commercial banking products, (ii) other consumer deposit products and (iii) wealth management services.

Other Commercial Banking Products

•We offer a variety of deposit, treasury management, electronic banking, interest rate protection and foreign exchange products to our customers. In addition, we offer cash management services to our corporate and municipal clients. Deposit products include checking products, both interest-bearing and noninterest-bearing, as well as money market deposits, savings deposits and certificates of deposits. Our treasury management products include a variety of cash management and payment products. Our interest rate protection and foreign exchange products include interest rate swaps and currency related transactions. As of ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, our total commercial deposits were ~~$4.6~~$7.3 billion and ~~$3.2~~$8.1 billion, ~~respectively,~~respectively. During the three and nine months ended September 30, 2022 our commercial noninterest income ~~during~~was $7.4 million and $19.0 million, respectively, compared to $4.1 million and $12.4 million for the three and ~~six~~nine months ended ~~June~~September 30, ~~2020 and year ended December 31, 2019 were $21.1 million, $26.1 million and $29.8 million,~~2021, respectively. As of June 30, 2020, there were no Federal funds provided to us by financial institution customers. During the month of March 2020, Federal funds provided to us by our financial institution customers were transferred to interest-bearing deposits and totaled $299.5 million as of June 30, 2020. As of December 31, 2019, Federal funds provided to us by our financial institution customers were $201.1 million.

Other Consumer Deposit Products

•We offer a wide variety of deposit products and services to our consumer customers. We service these customers through our 8998 branches located in eastern Massachusetts and New Hampshire, through our call center in our facility in Lynn, MA and through our online and mobile banking applications.

Table of Contents

Wealth Management Services

•Through our Eastern Wealth Management division, we provide a wide range of trust services, including (i) managing customer investments, (ii) serving as custodian for customer assets, and (iii) providing other fiduciary services, including serving as the trustee and personal representative of estates. As of ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, we held ~~$2.6~~$2.7 billion and ~~$2.7~~$3.4 billion, respectively, of assets in a fiduciary, custodial or agency capacity for customers, which are not our assets and therefore not included on the consolidated balance sheets included in this Quarterly ~~Report.~~Report on Form 10-Q. For the three and ~~six~~nine months ended ~~June~~September 30, ~~2020 and the year ended December 31, 2019,~~2022, we had noninterest income of ~~$5.2 million, $10.3~~$5.8 million and ~~$19.7~~$18.0 million, respectively, from providing these ~~services.~~

services compared to $6.3 million and $18.0 million for the three and nine months ended September 30, 2021, respectively.

Insurance Agency Business

Our insurance agency business consists of insurance-related activities such as acting as an independent agent in offering commercial, personal and employee benefits insurance products to individual and commercial clients through our ~~wholly owned~~wholly-owned agency, Eastern Insurance ~~Group LLC.~~Group. Our insurance products include commercial property and liability, workers compensation, life, accident and health and automobile insurance. We also offer a wide range of employee benefits products and services, including professional advice related to health care cost management, employee engagement and ~~retirement and~~ executive services. As an agency business, we do not assume any underwriting or insurance risk. The commissions we earn on the sale of these insurance products and services is the most significant portion of our noninterest income, representing ~~$22.7 million, $50.2~~$23.8 million and ~~$90.6~~$77.2 million, respectively, or ~~47.6%, 62.0%~~54.9% and ~~49.7%~~58.6%, respectively of our noninterest income during the three and ~~six~~nine months ended ~~June~~September 30, ~~2020~~2022. Comparatively, during the three and ~~year~~nine months ended ~~December 31, 2019.~~September 30, 2021, such income represented $22.0 million and $73.8 million, respectively, or 50.8% and 51.2%, respectively, of our noninterest income. Our insurance business operates through 22 21 non-branch offices located primarily in eastern Massachusetts and had ~~406~~401 full-time equivalent employees as of ~~June~~September 30, ~~2020.~~

2022.

Acquisitions

During the nine months ended September 30, 2022, we completed acquisitions of two insurance agencies for cash consideration of $5.2 million and $8.2 million, respectively, for aggregate total consideration of $13.4 million. For further information regarding our acquisitions, refer to Note 7, “Goodwill and Other Intangibles” within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q.

Outlook and Trends

~~The~~ ~~COVID-19~~ ~~pandemic has had and continues to have an adverse effect on our business and the markets in which we operate.~~

Interest Rates

We ~~expect the short-term and long-term economic consequences of the~~ ~~COVID-19~~ ~~pandemic to our customers will continue to be significant, and~~believe that the ~~continuing health and safety concerns relating to~~increases in the ~~ongoing pandemic will change the way we conduct our business and interact with our customers. Consistent with our philosophy of seeking to be a source of economic strength to our communities, we~~federal funds rate that have ~~taken a broad range of steps to help our colleagues, our borrowers and our communities during the~~ ~~COVID-19~~ ~~pandemic.~~

~~Our Colleagues.~~ ~~For our colleagues, we have enabled more than half of our employees to work remotely~~occurred in 2022 and we ~~are providing premium pay~~anticipate will occur in early 2023 will improve our net interest income for ~~those colleagues who travel to our workplaces to serve in customer-facing positions or other positions that require them to work~~ ~~on-site.~~ ~~We have taken significant measures to ensure~~ the ~~health of our colleagues who must work in our branches, including promoting online and mobile banking and automatic teller machine/interactive teller machine transactions in an effort to limit~~ ~~in-branch~~ ~~transactions and limiting access to lobbies in branches with drive-through banking.~~

~~Our Borrowers.~~ ~~In light of the~~ ~~COVID-19~~ pandemic, we have temporarily modified our practices with respect to the collection of delinquent loans to assist our customers during this difficult economic time, and during the three months ended June 30, 2020, we originated $1.1 billion of PPP loans.

For our retail customers, we suspended all collection of overdue payments beginning March 16, 2020, including residential property foreclosure and related property sales. We resumed collection activities with respect to delinquent consumer loans beginning in late July 2020.

For our commercial and small business customers, starting in March 2020, we began modifying the terms of loans with customers impacted by the COVID-19 pandemic. Through June 30, 2020, we had modified approximately $946.1 million of loans, of which approximately 56% were for full payment deferrals (both interest and principal) and 44% were for deferral of only principal payments, and included $558.9 million of commercial real estate loans, including construction loans, $157.4 million of commercial and industrial loans, $106.9 million of business banking loans, $92.8 million of residential real estate loans and $30.1 million of consumer loans, including home equity loans. Most of these deferrals will end in the third or fourth quarter ~~of the year~~ ending December 31, ~~2020. We have~~2022 and into 2023 on a year over year basis, although there is greater uncertainty regarding the impact in 2023. Beginning in March 2022, the Federal Open Market Committee (the “FOMC”) voted to increase the federal funds rate multiple times from a range of 0.00% to 0.25% to a range of 3.75% to 4.00% on November 2, 2022, when the FOMC stated that it “anticipates that ongoing increases in the target range [for the federal funds rate] will be appropriate.”

Inevitably, not ~~deferred~~all of our ~~recognition~~interest rate-sensitive assets and liabilities will re-price simultaneously and in equal volume in response to changes in the federal funds rate, and therefore the potential for interest rate exposure exists. Management believes that several factors will affect the actual impact of interest rate changes on our balance sheet and operating results, including, but not limited to, actual changes in interest rates or expectations of future changes, the degree of volatility in the securities markets, inflation rates or expectations of inflation, and the slope of the interest rate yield curve. We attempt to manage interest rate risk by identifying, quantifying, and, where appropriate, hedging our exposure. Approximately 36% of the outstanding principal balance of our loans as of September 30, 2022 was indexed to a market rate that is expected to reprice along with the federal funds rate. As rates have risen and the shape of the yield curve has changed during the first three quarters of 2022, a portion of these loans have been hedged using interest rate swaps to convert the floating rate interest receipts to a fixed rate. The notional amount of floating rate loans swapped totaled $2.4 billion on September 30, 2022, representing approximately 18.6% of the outstanding principal balance of our loans at that date. For more detail regarding such hedging financial instruments, refer to Note 13, “Derivative Financial Instruments” within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q. We anticipate that an increase in market interest rates, whether due to an increase in the federal funds rate or otherwise, will decrease the fair value of those interest rate swaps and consequently reduce the positive impact on our net interest income ~~with respect~~that an interest rate increase would otherwise

Table of Contents

have. Refer to ~~loans subject~~the section titled “Management of Market Risk” within this Item 2 for additional discussion including the estimated change to ~~modifications.~~

our net interest income under interest rate risk measurement methodologies that use a variety of hypothetical scenarios assuming immediate and parallel changes in interest rates that may not reflect the manner in which actual yields and costs respond to changes in market interest rates.

Defined Benefit Plan

We expect to recognize a non-cash settlement charge during the quarter ending December 31, 2022 related to the required use of settlement accounting for 2022 for our Defined Benefit Plan. As of the date of this Quarterly Report ~~we are unable to reasonably estimate~~on Form 10-Q, management estimates the ~~aggregate~~ amount of ~~loans that will likely become delinquent after~~such non-cash settlement charge to be a loss within the ~~respective deferral period. The following table shows certain data, as~~range of ~~June 30, 2020, related~~$10.0 million and $15.0 million. For more information, refer to ~~loans~~Note 19, “Subsequent Events” within the Notes to ~~our borrowers~~the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q.

Paycheck Protection Program Loans

We are a participating lender in the ~~industry categories that we believe will likely experience the most adverse effects of the~~ ~~COVID-19~~ ~~pandemic. Loans included~~SBA’s Paycheck Protection Program, or PPP. We concluded PPP loan originations in the ~~table~~second quarter of 2021 as the SBA announced in May 2021 that had been modified as of June 30, 2020 represented approximately 28.9% of our aggregate outstanding loan balances to all borrowers in those categories as of June 30, 2020. However, the table does not include all loans that had been modified on or before June 30, 2020.

Loan Balance Credit
Exposure ⁽¹⁾ Number of
Borrowers⁽²⁾ COVID-19
Modification % ⁽³⁾
(Dollars in thousands)
Commercial and Industrial: Commercial and Business Banking

Restaurants
$ 148,373 $ 156,747 420 60.6 %
Construction contractors
105,127 281,435 1,036 11.0 %
Non-essential retail
41,859 101,736 436 2.5 %
Entertainment and recreation
34,368 49,664 158 31.1 %
Educational and child care services
16,219 50,948 196 5.3 %
Private medical and dental offices
16,299 34,602 294 20.2 %
Water and air passenger transportation
19,811 30,557 12 0.1 %
Auto and other vehicle dealerships
7,557 10,138 21 — %
Hotels
377 527 12 37.3 %
Commercial Real Estate: Commercial and Business Banking

Retail
437,267 458,839 298 26.7 %
Hotels
179,577 181,076 45 37.6 %
Auto dealerships
78,152 80,361 36 2.8 %
Restaurants
51,566 52,766 67 48.5 %

Total
$ 1,136,552 $ 1,489,396 3,031 28.9 %

~~(1)~~

~~Our aggregate potential credit exposure as of June 30, 2020, considering all loan agreements and lines of credit that permit a borrower to increase the borrower’s indebtedness to us.~~

~~(2)~~

Each individual obligor is a single borrower for purposes of this column. Affiliated borrowers under common control are not aggregated as a single borrower even if in the same industry category, and therefore the actual concentration of credit exposure may be greater than indicated

~~(3)~~

The percentage of loans in each category, calculated as a percentage of aggregate outstanding loan balances for each category as of June 30, 2020, that we modified primarily due to the effects on borrowers of the ~~COVID-19~~ ~~pandemic and related economic slowdown beginning in late March 2020.~~

~~During the quarter ended June 30, 2020, we originated $1.1 billion of loans to approximately 8,100 borrowers under the~~ PPP ~~under the CARES Act.~~funds were exhausted. The ~~vast~~ majority of our PPP borrowers are existing commercial and small business borrowers, non-profit customers, retail banking customers and clients of our Eastern Wealth Management division and Eastern Insurance ~~Group LLC. We anticipate that~~Group. As of September 30, 2022 and December 31, 2021, the ~~vast majority~~remaining balance of our PPP ~~exposure will be forgiven late~~loans was $23.1 million and $331.4 million, respectively. Net PPP loan fee accretion (fee accretion less cost amortization) for all PPP loans for the three and nine months ended September 30, 2022 was $0.5 million and $8.8 million, respectively. Net PPP loan fee accretion (fee accretion less cost amortization) for all PPP loans for the three and nine months ended September 30, 2021 was $5.9 million and $23.5 million, respectively. We expect to recognize the remaining net unearned fees of $0.4 million as of September 30, 2022 during the remainder of the year ended December 31, 2022 resulting in total recognized net fee accretion of $9.2 million for the year ending December 31, 2020 or early in the year ending December 31, 2021. Only $4.9 million of our PPP exposure at June 30, 2020 had a maturity of five years; all of our other PPP loans outstanding at June 30, 2020 have a ~~two-year~~ ~~maturity.~~

~~We received approximately $35.8 million of PPP loan origination fees from the SBA. We also deferred certain origination costs, totaling $3.5 million, related to PPP loans.~~

~~The following table shows certain data related to our PPP loans as of June 30, 2020:~~

Loan Size
   Loan Balance    Number
of Loans    Fees
Collected
   (Dollars in thousands)
$0 to $50 thousand
   $ 95,528    4,987    $ 4,826
$50 thousand to $150 thousand
   148,994    1,731    7,419
$150 thousand to $1 million
   410,872    1,176    15,374
$1 million to $2 million
   190,254    137    5,618
$2 million to $5 million
   176,277    59    1,744
Over $5 million
   78,256    13    785






Total
   $ 1,100,181    8,103    $ 35,766

~~Our Operating Results.~~ ~~The~~ ~~COVID-19~~ pandemic has had a significant impact on our operating results for the six months ended June 30, 2020, and we believe it will continue to have a significant impact for at least the remainder of the year ending December 31, 2020 and likely continuing into the year ending December 31, 2021.

~~During March 2020, the Federal Reserve took multiple steps to lower interest rates and reduced the target range for the federal funds rate to between 0.0% and 0.25%,~~2022 compared to the previous target of between 1.00% and 1.25%. These interest rate reductions, combined with the decline in longer term rates, will lower our net interest income over time from the levels we experienced in$34.3 million recognized during the year ended December 31, ~~2019.~~

2021. Our net interest margin has been and is expected to continue to be adversely affected as a result of the decline in net fee accretion, which is associated with the decreased volume of PPP loan ~~loss provision~~payoffs. The impact to our net interest margin resulting from the decline in net PPP loan fee accretion is estimated to be 0.25% on an annualized basis (change computed based upon average total loans for the ~~quarter~~year ended June 30, 2020 was $8.6 million compared to $28.6 million for the quarter ended March 31, 2020. We experienced negative migrations in our loan risk ratings in the quarter ended June 30, 2020, although the extent of negative migrations was less than we experienced in the quarter ended March 31, 2020. We expect our loan loss provision to be greater in the remainder of the year ending December 31, ~~2020 as compared to comparable prior periods, as the positive impacts of the modifications and PPP loans wane. The economic uncertainties caused by the~~ ~~COVID-19~~ ~~pandemic are significant, and the timing and pace of the economic recovery both locally and nationally will determine the severity and timing of our future loan losses.~~

2021).

~~Our Communities.~~ To continue providing critical banking services in underbanked inner-city communities served by branches without drive-through banking capabilities, we have committed to remaining open in these communities to ensure our customers continue to have a place to bank. To further support our communities, the Eastern Bank Charitable Foundation has directed approximately $8 million through June 30, 2020 in charitable donations to help address food, shelter, small business and housing stability, particularly for vulnerable populations, as well as providing help to public health organizations fighting to contain the spread of ~~COVID-19.~~

Non-GAAP Financial Measures

We present certain non-GAAP financial measures, which ~~are used~~management uses to evaluate our performance and which exclude the effects of certain transactions, non-cash items and GAAP adjustments that we believe are unrelated to our core business and are therefore not necessarily indicative of our current performance or financial position. Management believes excluding these items facilitates greater visibility for investors into our core businesses ~~and~~as well as underlying trends that may, to some extent, be obscured by inclusion of such ~~items.~~

items in the corresponding GAAP financial measures.

There are items in our financial statements that impact our results ~~that~~but which we believe are unrelated to our core business. ~~Therefore,~~Accordingly, we present operating net ~~operating earnings,~~income, noninterest income on an operating basis, noninterest expense on an operating basis, total operating revenue, operating earnings per share, operating net income to average tangible shareholders’ equity, tangible book value per share and the operating efficiency ratio, ~~on an operating basis,~~ each of which excludes the impact of ~~the~~such items ~~that we do not believe are related to our core business as~~because we believe ~~excluding these items provides~~such exclusion can provide greater visibility into our core business and underlying trends. ~~Items~~Such items that we do not consider to be core to our business include (i) income and expenses from investments held in rabbi trusts, (ii) gains and losses on sales of securities available for sale, net, (iii) gains and losses on the sale of other assets, (iv) rabbi trust employee ~~benefit~~benefits, (v) impairment charges on tax credit investments and ~~(v)~~associated tax credit benefits, (vi) expenses indirectly associated with our initial public offering (“IPO”), (vii) OREO gains and losses, (viii) merger and acquisition expenses, (ix) the stock donation to the Eastern Bank Foundation (the “Foundation”) in connection with our mutual-to-stock conversion and IPO, and (x) settlement of putative consumer class action litigation matters related to overdraft and non-sufficient funds fees, and associated settlement expenses.

There were no expenses indirectly associated with our IPO or stock donations to the Foundation during the periods presented in this Quarterly Report on Form 10-Q.

We also present tangible shareholders’ equity, tangible assets, ~~and~~the ratio of tangible shareholders’ equity to tangible assets, average tangible shareholders’ equity, the ratios of net income and operating net income to average tangible shareholders’ equity and tangible book value per share, each of which excludes the impact of goodwill and other intangible assets, as we believe these financial measures provide investors with the ability to further assess our performance, identify trends in our core business and provide a comparison of our capital adequacy to other companies. We have included ~~information on these~~the tangible ratios because management believes that investors may find it useful to have access to the same analytical tools used by management to assess performance and identify trends.

Table of Contents

Our non-GAAP financial measures should not be considered as an alternative or substitute to GAAP net income, or as an indication of our cash flows from operating activities, a measure of our liquidity or an indication of funds available for our cash needs. An item which we consider to be ~~noncore~~non-core and exclude when computing these non-GAAP financial measures can be of substantial importance to our results for any particular period. In addition, our methodology for calculating non-GAAP financial measures may differ from the methodologies employed by other companies to calculate the same or similar performance measures and, accordingly, our reported non-GAAP financial measures may not be comparable to the same or similar performance measures reported by other companies.

The following table summarizes the impact of ~~noncore~~non-core items recorded for the time periods indicated below and reconciles them to the most directly comparable GAAP ~~measure.~~

   Three months ended June 30,    Six months ended June 30,
   2020    2019    2020    2019
      (Dollars in thousands)
Net income (GAAP)
   $ 29,850    $ 35,053    $ 38,295    $ 68,018








Non-GAAP adjustments:

Noninterest income components:

(Income) from investments held in rabbi trusts
   (7,745 )    (1,822 )    (1,002 )    (5,969 )
(Gain) on sales of securities available for sale, net
   (163 )    (1,966 )    (285 )    (2,016 )
(Gains) losses on sale of other assets
   27    102    (2 )    73
Noninterest expense components:

Rabbi trust employee benefit
   3,985    808    506    2,754








Total impact of Non-GAAP adjustments
   (3,896 )    (2,878 )    (783 )    (5,158 )








Less net tax benefit associated with Non-GAAP adjustment⁽^l)
   1,073    675    179    1,301








Non-GAAP adjustments, net of tax
   $ (2,823 )    $ (2,203 )    $ (604 )    $ (3,857 )








Net operating earnings (Non-GAAP)
   $ 27,027    $ 32,850    $ 37,691    $ 64,161

~~(1)~~

The net tax (expense) benefit associated with these items is determined by assessing whether each item is included or excluded from net taxable income and applying our combined statutory tax rate only to those items included in net taxable income.

financial measure:

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(Dollars in thousands, except per share data)
Net income (GAAP) $ 54,777 $ 37,106 $ 157,465 $ 119,578
Non-GAAP adjustments:
Add:
Noninterest income components:
Losses (income) from investments held in rabbi trusts 2,248 289 13,997 (5,773)
Losses (gains) on sales of securities available for sale, net 198 (1) 2,474 (1,166)
Gains on sales of other assets (501) (490) (1,478) (537)
Noninterest expense components:
Rabbi trust employee benefit (income) expense (867) (53) (6,264) 2,996
Impairment reversal (charge) on tax credit investments — 1,133 — (286)
Gain on sale of other real estate owned — (87) — (87)
Merger and acquisition expenses 271 740 305 4,808
Settlement and expenses for putative consumer class action matters — — — 3,325
Total impact of non-GAAP adjustments 1,349 1,531 9,034 3,280
Less net tax benefit associated with non-GAAP adjustment (1) 384 1,246 3,132 1,833
Non-GAAP adjustments, net of tax $ 965 $ 285 $ 5,902 $ 1,447
Operating net income (non-GAAP) $ 55,742 $ 37,391 $ 163,367 $ 121,025
Weighted average common shares outstanding during the period:
Basic 163,718,962 172,298,615 166,682,222 172,174,469
Diluted 164,029,649 172,298,615 166,867,643 172,174,469
Earnings per share, basic $ 0.33 $ 0.22 $ 0.94 $ 0.69
Earnings per share, diluted $ 0.33 $ 0.22 $ 0.94 $ 0.69
Operating earnings per share, basic (non-GAAP) $ 0.34 $ 0.22 $ 0.98 $ 0.70
Operating earnings per share, diluted (non-GAAP) $ 0.34 $ 0.22 $ 0.98 $ 0.70

(1)The net tax benefit associated with these items is determined by assessing whether each item is included or excluded from net taxable income and applying our combined statutory tax rate only to those items included in net taxable income. The net tax benefit amount for the nine months ended September 30, 2022 reflects the impact of the reversal of the remaining $0.7 million of a $12.0 million valuation allowance (“EBF Valuation Allowance”) established in 2020 associated with the 2020 stock donation to the Foundation. The reversal of the valuation allowance, which occurred during the second quarter of 2022, was considered appropriate based upon our determination of the realizability of such deductions for tax purposes at that time. The initial $11.3 million reversal of the EBF Valuation Allowance occurred in 2021.

Table of Contents

The following table summarizes the impact of ~~noncore~~non-core items with respect to our total ~~income,~~revenue, noninterest income, noninterest expense, and the efficiency ratio, which reconciles to the most directly comparable respective GAAP financial measure, for the periods indicated:

   Three months ended June 30, Six months ended June 30,
   2020 2019 2020 2019
   (Dollars in thousands)
Net interest income (GAAP)
   $ 98,755 $ 103,523 $ 198,901 $ 206,195
Add:

Tax-equivalent adjustment (non-GAAP)
   1,378 1,269 2,746 2,649


Net interest income (non-GAAP)
   100,133 104,792 201,647 208,844
Noninterest income (GAAP)
   47,657 45,632 81,026 93,432
Less:

Income from investments held in rabbi trusts
   7,745 1,822 1,002 5,969
Gains on sales of securities available for sale, net
   163 1,966 285 2,016
Gains (losses) on sale of other assets
   (27 ) (102 ) 2 (73 )


Noninterest income on an operating basis (non-GAAP)
   39,776 41,946 79,737 85,520


Noninterest expense (GAAP)
   $ 100,765 $ 101,570 $ 195,937 $ 206,399


Plus:

Rabbi trust benefit expense (income)
   3,985 808 506 2,754


Noninterest expense on an operating basis (non- GAAP)
   $ 104,750 $ 102,378 $ 196,443 $ 209,153


Total income (GAAP)
   $ 146,412 $ 149,155 $ 279,927 $ 299,627


Total operating income (non-GAAP)
   $ 139,909 $ 146,738 $ 281,384 $ 294,364


Ratios

Efficiency ratio (GAAP)
   68.82 % 68.10 % 70.00 % 68.89 %
Efficiency ratio on an operating basis (non-GAAP)
   74.87 % 69.77 % 69.81 % 71.05 %


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	(Dollars in thousands)
Net interest income (GAAP)	$	152,179		$	102,691		$	418,060		$	307,390
Add:
Tax-equivalent adjustment (non-GAAP)	3,672			1,316			8,956			3,882
Fully-taxable equivalent net interest income (non-GAAP)	155,851			104,007			427,016			311,272
Noninterest income (GAAP)	43,353			43,209			131,645			144,154
Less:
(Losses) income from investments held in rabbi trusts	(2,248)			(289)			(13,997)			5,773
(Losses) gains on sales of securities available for sale, net	(198)			1			(2,474)			1,166
Gains on sales of other assets	501			490			1,478			537
Noninterest income on an operating basis (non-GAAP)	45,298			43,007			146,638			136,678
Noninterest expense (GAAP)	$	116,840		$	98,970		$	336,845		$	300,354
Less:
Rabbi trust employee benefit (income) expense	(867)			(53)			(6,264)			2,996
Impairment reversal (charge) on tax credit investments	—			1,133			—			(286)
Merger and acquisition expenses	271			740			305			4,808
Settlement and expenses for putative consumer class action matters	—			—			—			3,325
Plus:
Gain on sale of other real estate owned	—			87			—			87
Noninterest expense on an operating basis (non- GAAP)	$	117,436		$	97,237		$	342,804		$	289,598
Total revenue (GAAP)	$	195,532		$	145,900		$	549,705		$	451,544
Total operating revenue (non-GAAP)	$	201,149		$	147,014		$	573,654		$	447,950
Ratios:
Efficiency ratio (GAAP)	59.75		%	67.83		%	61.28		%	66.52		%
Operating efficiency ratio (non-GAAP)	58.38		%	66.14		%	59.76		%	64.65		%

Table of Contents

The following table summarizes the calculation of our tangible shareholders’ equity, tangible assets, the ratio of tangible shareholders’ equity to tangible assets, and tangible ~~equity to tangible assets ratio,~~book value per share, which reconciles to the most directly comparable respective GAAP measure, as of the dates indicated:

   As of June 30, As of December 31,
   2020 2019
   (Dollars in Thousands)
Tangible equity:

Total equity
   $ 1,693,630 $ 1,600,153
Less: Goodwill and other intangibles
   376,331 377,734


Tangible equity (Non-GAAP)
   1,317,299 1,222,419


Tangible assets:

Total assets (GAAP)
   13,996,523 11,628,775
Less: Goodwill and other intangibles
   376,331 377,734


Tangible assets (Non-GAAP)
   $ 13,620,192 $ 11,251,041


Equity to assets ratio (GAAP)
   12.1 % 13.8 %
Tangible equity to tangible assets ratio (Non-GAAP)
   9.7 % 10.9 %

As of September 30, As of December 31,
2022 2021
(Dollars in thousands, except per share data)
Tangible shareholders’ equity:
Total shareholders’ equity (GAAP) $ 2,416,163 $ 3,406,352
Less: Goodwill and other intangibles 662,222 649,703
Tangible shareholders’ equity (non-GAAP) 1,753,941 2,756,649
Tangible assets:
Total assets (GAAP) 22,042,933 23,512,128
Less: Goodwill and other intangibles 662,222 649,703
Tangible assets (non-GAAP) $ 21,380,711 $ 22,862,425
Shareholders’ equity to assets ratio (GAAP) 11.0 % 14.5 %
Tangible shareholders’ equity to tangible assets ratio (non-GAAP) 8.2 % 12.1 %
Book value per share:
Common shares issued and outstanding 177,772,553 186,305,332
Book value per share (GAAP) $ 13.59 $ 18.28
Tangible book value per share (non-GAAP) $ 9.87 $ 14.80

The following table summarizes the calculation of our average tangible shareholders’ equity and ratio of net income and operating net income to average tangible shareholders’ equity (“operating return on average tangible shareholders’ equity”), which reconciles to the most directly comparable GAAP measure, for the periods indicated:

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(Dollars in thousands)
Net income (GAAP) $ 54,777 $ 37,106 $ 157,465 $ 119,578
Operating net income (non-GAAP) (1) 55,742 37,391 163,367 121,025
Average tangible shareholders’ equity:
Average total shareholders’ equity (GAAP) $ 2,776,691 $ 3,450,679 $ 2,970,159 $ 3,425,023
Less: Average goodwill and other intangibles 656,684 380,185 653,567 378,536
Average tangible shareholders’ equity (non-GAAP) 2,120,007 3,070,494 2,316,592 3,046,487
Ratios:
Return on average total shareholders’ equity (GAAP) (2) 7.83 % 4.27 % 7.09 % 4.67 %
Return on average tangible shareholders’ equity (non-GAAP) (2) 10.25 % 4.79 % 9.09 % 5.25 %
Operating return on average tangible shareholders’ equity (non-GAAP) (2) 10.44 % 4.84 % 9.43 % 5.31 %

(1)Refer to the table above within this “Non-GAAP Financial Measures” section for a reconciliation of operating net income to net income.

(2)Presented on an annualized basis.

Table of Contents

Financial Position

Summary of Financial Position

   As of June 30,
2020    As of December 31,
2019    Change
   Amount ($)    Percentage (%)
      (Dollars in thousands)
Cash and cash equivalents
   $ 1,432,561    $ 362,602    $ 1,069,959    295.1 %
Securities available for sale
   1,600,354    1,508,236    92,118    6.1 %
Loans, net of allowance for credit losses
   9,862,980    8,899,184    963,796    10.8 %
Federal Home Loan Bank Stock
   8,805    9,027    (222 )    (2.5 )%
Goodwill and other intangible assets
   376,331    377,734    (1,403 )    (0.4 )%
Deposits
   11,846,765    9,551,392    2,295,373    24.0 %
Borrowed funds
   29,155    235,395    (206,240 )    (87.6 )%

As of September 30, 2022 As of December 31, 2021 Change
Amount ($) Percentage (%)
(Dollars in thousands)
Cash and cash equivalents $ 158,437 $ 1,231,792 $ (1,073,355) (87.1) %
Securities available for sale 6,844,615 8,511,224 (1,666,609) (19.6) %
Securities held to maturity 481,963 — 481,963 100.0 %
Loans, net of allowance for loan losses 12,752,942 12,157,281 595,661 4.9 %
Federal Home Loan Bank Stock 18,714 10,904 7,810 71.6 %
Goodwill and other intangible assets 662,222 649,703 12,519 1.9 %
Deposits 18,733,381 19,628,311 (894,930) (4.6) %
Borrowed funds 422,718 34,278 388,440 1,133.2 %

Cash and cash equivalents

Total cash and cash equivalents ~~increased~~decreased by $1.1 billion, or ~~295.1%~~87.1%, to ~~$1.4~~$158.4 million at September 30, 2022 from $1.2 billion ~~at June 30, 2020 from $362.6 million~~ at December 31, ~~2019.~~2021. This decrease was primarily due to a decrease in total customer deposits of $894.9 million, an increase ~~resulted primarily from customer deposit growth, which exceeded our funding needs for new lending activities.~~

in gross loans of $622.4 million, and share repurchases of $170.8 million during the nine months ended September 30, 2022. These items were partially offset by net cash inflows related to increased borrowed funds of $388.4 million and net cash inflows related to AFS and HTM securities of $58.2 million during the nine months ended September 30, 2022. For further discussion of the change in deposits, refer to the later “Deposits” section in this Item 2. For further discussion of the change in loans, refer to the later “Loans” section in this Item 2. For more information regarding the Company’s share repurchase programs, refer to Note 10, “Shareholders’ Equity” within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q. For further discussion of the change in securities, refer to the later “Securities” section in this Item 2. For further discussion of the change in borrowed funds, refer to the later “Borrowed Funds” section in this Item 2.

Securities

Our current investment policy authorizes us to invest in various types of investment securities and liquid assets, including U.S. Treasury obligations, securities of government-sponsored enterprises, mortgage-backed securities, collateralized mortgage obligations, corporate notes, asset-backed securities and municipal securities. The Risk Management Committee of our Board of Directors is responsible for approving and overseeing our investment policy, which it reviews at least annually. This policy dictates that investment decisions be made based on the safety of the investment, liquidity requirements, potential returns and market risk considerations. We do not engage in any investment hedging activities or trading activities, nor do we purchase any high-risk investment products. We typically invest in the following types of securities:

U.S. ~~Government~~government securities: At September 30, 2022 our U.S. government securities consisted of U.S. Agency bonds and U.S. Treasury securities. At December 31, 2021, our U.S. government securities consisted of U.S. Agency bonds, U.S. Treasury securities and Small Business Administration pooled securities. We maintain these investments, to the extent appropriate, for liquidity purposes, at zero risk weighting for capital purposes, and as collateral for interest rate derivative positions. ~~At June 30, 2020~~U.S. Agency bonds include securities issued by Fannie Mae, Freddie Mac, the FHLB, and ~~December 31, 2019, our U.S. Government securities consisted solely of U.S. Treasury securities.~~

the Federal Farm Credit Bureau.

Mortgage-backed securities:We invest in residential and commercial mortgage-backed securities insured or guaranteed by Freddie Mac, Ginnie Mae or Fannie ~~Mae.~~Mae, including collateralized mortgage obligations. We have not purchased any privately-issued mortgage-backed securities. We invest in mortgage-backed securities to achieve a positive interest rate spread with minimal administrative expense, and to lower our credit risk as a result of the guarantees provided by Freddie Mac, Ginnie Mae or Fannie Mae.

Investments in residential mortgage-backed securities involve a risk that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or acceleration of any discount relating to such interests, thereby affecting the net yield on our securities. We periodically review current prepayment speeds to determine whether prepayment estimates require modification that could cause

Table of Contents

amortization or accretion adjustments. There is also reinvestment risk associated with the cash flows from such securities. In addition, the market value of such securities may be adversely affected by changes in interest rates.

State and municipal securities:We invest in fixed rate investment grade bonds issued primarily by municipalities in our local communities within Massachusetts and by the Commonwealth of Massachusetts. The market value of these securities may be affected by call options, long dated maturities, general market liquidity and credit factors.

The following table shows the fair value of our securities by investment category as of the dates indicated:

Securities Portfolio Composition

   As of June 30,
2020    As of December 31,
2019
   (Dollars in thousands)
Available for sale securities:

Government-sponsored residential mortgage-backed securities
   $ 1,251,799    $ 1,167,968
U.S. treasury securities
   60,936    50,420
State and municipal bonds and obligations
   281,340    283,538
Other
   6,279    6,310
Trading Securities:

Municipal bonds and obligations
   —      961




Total
   $ 1,600,354    $ 1,509,197


	As of September 30, 2022		As of December 31, 2021
	(In thousands)
Available for sale securities, at fair value:
Government-sponsored residential mortgage-backed securities	$	4,209,089	$	5,524,708
Government-sponsored commercial mortgage-backed securities	1,397,227		1,408,868
U.S. Agency bonds	941,597		1,175,014
U.S. Treasury securities	92,460		88,605
State and municipal bonds and obligations	202,664		280,329
Small Business Administration pooled securities	—		32,103
Other debt securities	1,578		1,597
Total available for sale securities, at fair value	6,844,615		8,511,224
Held to maturity securities, at amortized cost:
Government-sponsored residential mortgage-backed securities	281,253		—
Government-sponsored commercial mortgage-backed securities	200,710		—
Total held to maturity securities, at amortized cost	481,963		—
Total	$	7,326,578	$	8,511,224

Our securities portfolio has ~~grown~~ ~~year-to-date.~~ ~~Available for sale securities increased $92.0 million,~~decreased $1.2 billion, or ~~6.1%~~13.9%, to ~~$1.6~~$7.3 billion at ~~June~~September 30, ~~2020~~2022 from ~~$1.5~~$8.5 billion at December 31, ~~2019.~~2021. This ~~increase is~~decrease was primarily due to ~~investment~~a decrease in the fair value of AFS securities, sales of AFS securities, and maturities and principal paydowns of our AFS and held to maturity (“HTM”) securities. Partially offsetting this activity were AFS and HTM security purchases ~~as well as an increase in unrealized gains~~ during the ~~six~~nine months ended ~~June~~September 30, ~~2020. Trading~~2022.

•At September 30, 2022, the unrealized loss on AFS securities ~~totaled $1.0 million~~was $1.2 billion compared to an unrealized loss of $0.1 billion at December 31, ~~2019,~~2021, representing a $1.1 billion decrease in the fair value of such securities. The change from December 31, 2021 to September 30, 2022 is primarily driven by rising market rates of interest.

•AFS securities sales totaled $400.5 million during the nine months ended September 30, 2022. AFS and ~~all~~HTM security maturities and principal paydowns totaled $880.1 million and $12.0 million, respectively, during the nine months ended September 30, 2022.

•Partially offsetting the decrease in the securities ~~have matured as~~portfolio from December 31, 2021 to September 30, 2022 were purchases of ~~June~~AFS and HTM securities of $740.8 million and $493.7 million, respectively, during the nine months ended September 30, ~~2020.~~

2022.

We did not have ~~held-to-maturity~~trading investments at ~~June~~September 30, ~~2020~~2022 or December 31, ~~2019.~~

2021.

A portion of our securities portfolio continues to be tax-exempt. Investments in federally tax-exempt securities totaled ~~$281.3~~$202.4 million at ~~June~~September 30, ~~2020~~2022 compared to ~~$284.5~~$279.8 million at December 31, ~~2019.~~

2021.

Our ~~available for sale~~AFS securities are carried at fair value and are categorized within the fair value hierarchy based on the observability of model inputs. Securities which require inputs that are both significant to the fair value measurement and

Table of Contents

unobservable are classified as ~~level~~Level 3 within the fair value hierarchy. As of both ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, we had ~~$6.3 million of~~no securities categorized as ~~level~~Level 3 within the fair value hierarchy.

Maturities of our securities portfolio are based on the final contractual payment dates, and do not reflect the effect of scheduled principal repayments, prepayments, or early redemptions that may occur.

The following tables show contractual maturities of our ~~available for sale~~AFS and HTM securities and weighted average yields at and for the ~~periods~~period ended ~~June~~September 30, ~~2020~~2022 and contractual maturities of our AFS securities and weighted average yields at and for the period ended December 31, ~~2019.~~2021. Weighted average yields in the ~~table~~tables below have been calculated based on the amortized cost of the security:

Securities Portfolio, Amounts Maturing

   Securities Maturing as of June 30, 2020
   Within One
Year After One
Year But
Within Five
Years After Five
Years But
Within Ten
Years After Ten
Years Total
   (Dollars in thousands)
Available for sale securities:

Government-sponsored residential mortgage-backed securities
   $ —   $ 25,733 $ 157,290 $ 1,068,776 $ 1,251,799
U.S. Treasury securities
   50,778 10,158 —   —   60,936
State and municipal bonds and obligations
   411 18,966 77,868 184,095 281,340
Other
   6,279 —   —   —   6,279
Trading securities:

Municipal bonds and obligations
   —   —   —   —   —


Total
   $ 57,468 $ 54,857 $ 235,158 $ 1,252,871 $ 1,600,354


Weighted-average yield
   2.50 % 2.69 % 2.80 % 2.49 % 2.54 %


	Securities Maturing as of December 31, 2019
	Within One Year			After One Year But Within Five Years			After Five Years But Within Ten Years			After Ten Years			Total				Securities Maturing as of September 30, 2022 (1)
	(Dollars in thousands)																Within One Year		After One Year But Within Five Years		After Five Years But Within Ten Years		After Ten Years		Total
Available for sale securities:																Available for sale securities:
Government-sponsored residential mortgage-backed securities	$	—		$	8,464		$	203,706		$	955,798		$	1,167,968		Government-sponsored residential mortgage-backed securities	—	%	2.59	%	0.97	%	1.51	%	1.44	%
Government-sponsored commercial mortgage-backed securities																Government-sponsored commercial mortgage-backed securities	—		1.31		1.45		1.94		1.66
U.S. Agency bonds																U.S. Agency bonds	—		0.77		0.93		—		0.82
U.S. Treasury securities		40			50,380			—			—			50,420		U.S. Treasury securities	—		1.97		—		—		1.97
State and municipal bonds and obligations		381			9,109			79,504			194,544			283,538		State and municipal bonds and obligations	—		2.34		3.22		4.05		3.64
Other		6,310			—			—			—			6,310
Trading securities:
Municipal bonds and obligations		961			—			—			—			961

Other debt securities																Other debt securities	0.87		—		—		—		0.87
Total available for sale securities																Total available for sale securities	0.83		1.05		1.20		1.65		1.47
Held to maturity securities:																Held to maturity securities:
Government-sponsored residential mortgage-backed securities																Government-sponsored residential mortgage-backed securities	—		—		—		2.87		2.87
Government-sponsored commercial mortgage-backed securities																Government-sponsored commercial mortgage-backed securities	—		—		2.23		—		2.23
Total held to maturity securities																Total held to maturity securities	—		—		2.23		2.87		2.60
Total	$	7,692		$	67,953		$	283,210		$	1,150,342		$	1,509,197		Total	0.83	%	1.05	%	1.30	%	1.71	%	1.53	%

Weighted-average yield		5.44	%		2.38	%		2.95	%		2.92	%		2.90	%


	Securities Maturing as of December 31, 2021 (1)
	Within One Year		After One Year But Within Five Years		After Five Years But Within Ten Years		After Ten Years		Total
Available for sale securities:
Government-sponsored residential mortgage-backed securities	—	%	2.64	%	1.01	%	1.44	%	1.38	%
Government-sponsored commercial mortgage-backed securities	—		1.14		1.20		1.95		1.67
U.S. Agency bonds	1.11		0.73		1.00		—		0.88
U.S. Treasury securities	0.15		0.78		—		—		0.50
State and municipal bonds and obligations (2)	(1.24)		2.46		3.17		4.04		3.48
Small Business Administration pooled securities	—		1.72		—		1.93		1.90
Other debt securities	1.01		0.84		—		—		0.87
Total available for sale securities	0.10	%	0.95	%	1.12	%	1.60	%	1.42	%

(1)Investment security weighted-average yields were calculated on a level-yield basis by weighting the tax equivalent yield for each security type by the book value of each maturity.

(2)The negative yield indicated in the “Within One Year” category is the result of premium amortization that is in excess of earned income.

Table of Contents

The yield on tax-exempt obligations of states and political subdivisions has been adjusted to a ~~fully taxable equivalent~~FTE basis ~~(“FTE”)~~ by adjusting tax-exempt income upward by an amount equivalent to the prevailing federal income taxes that would have been paid if the income had been fully taxable.

~~Net unrealized gains on available for sale securities as of June 30, 2020 and December 31, 2019 totaled $62.1 million and $28.0 million, respectively.~~

Loans

We consider our ~~loans~~loan portfolio to be relatively diversified by borrower and industry. Our gross loans increased ~~$1.0 billion,~~$622.4 million, or ~~11.4%~~5.1%, to ~~$10.0~~$12.9 billion at ~~June~~September 30, ~~2020~~2022 from ~~$9.0~~$12.3 billion at December 31, ~~2019.~~2021. The increase as of ~~June~~September 30, ~~2020~~2022 was primarily due to ~~$1.1 billion PPP loan originations,~~increases in our commercial real estate, retail, and commercial construction portfolio balances, partially offset by a decrease in ~~other consumer~~our business banking portfolio, as further noted below.

•Our commercial real estate portfolio increased by $463.1 million from December 31, 2021 to September 30, 2022 which was primarily attributable to an increase of $436.6 million in commercial real estate investment loan balances. Such loans ~~of $67.7 million.~~

represent loans secured by commercial real estate that are non-owner-occupied. The increase in ~~our commercial and industrial loans from December 31, 2019 to June 30, 2020~~such loan balances was primarily ~~a result~~due to management’s active focus on originating loans collateralized by industrial/warehouse and multi-family property types, which are included in the commercial real estate investment loan category, due to management’s stable outlook as it relates to the credit performance of ~~the $633.2~~such loans.

•Our retail portfolio increased by $242.5 million, ~~PPP~~which was attributable to increases of $192.0 million and $68.3 million in residential and consumer home equity loan ~~originations~~balances, respectively, during the ~~six~~nine months ended ~~June~~September 30, ~~2020.~~

2022. The increase in residential real estate loan balances was, in part, due to reduced volume of loan sales, which was precipitated by rising market rates of interest, and led to us retaining a larger number of residential real estate mortgage loan originations. In addition, during the nine months ended September 30, 2022 we purchased $79.9 million in residential real estate loans from a third party. Consumer home equity loan balances increased primarily due to additional customer draws on home equity lines of credit during the period attributable to normal customer activity.

•Our commercial construction portfolio increased by $91.9 million which was primarily attributable to increases of $32.0 million and $20.2 million in our industrial/warehouse and multi-family collateral type loan balances, respectively, during the nine months ended September 30, 2022. The increase in the balance of loans collateralized by industrial/warehouse and multi-family property types is due to management’s active focus on originating these types of loans as mentioned above.

•Our business banking ~~loans from December 31, 2019 to June 30, 2020 was~~portfolio decreased by $238.3 million primarily ~~a result of $467.0 million in PPP loan originations during the six months ended June 30, 2020.~~

~~The decrease in other consumer loans from December 31, 2019 to June 30, 2020 was primarily~~as a result of a $200.8 million decrease ~~of $62.6 million~~ in ~~our automobile portfolio~~business banking PPP loan balances during the ~~six~~nine months ended ~~June~~September 30, ~~2020 due to our exit from our indirect automobile lending business, which commenced during~~2022 as such loans were paid off or forgiven by the ~~year ended December 31, 2018.~~

SBA.

Table of Contents

The following table shows the composition of our loan portfolio, by category, as of the dates indicated:

Loan Portfolio Composition

   June 30,
2020    December 31,
2019
   Amount    Amount
   (In thousands)
Commercial and industrial
   $ 2,271,700    $ 1,642,184
Commercial real estate
   3,584,358    3,535,441
Commercial construction
   282,246    273,774
Business banking
   1,234,961    771,498
Residential real estate
   1,400,855    1,428,630
Consumer home equity
   905,484    933,088
Other consumer
   334,734    402,431




Total loans
   $ 10,014,338    $ 8,987,046
Less:

Allowance for loan losses
   (116,636 )    (82,297 )
Unamortized premiums, net of unearned discounts and deferred fees
   (34,722 )    (5,565 )




Total loans receivable, net
   $ 9,862,980    $ 8,899,184


	As of September 30, 2022		As of December 31, 2021
	(In thousands)
Commercial and industrial	$	3,023,729	$	2,960,527
Commercial real estate	4,985,654		4,522,513
Commercial construction	314,193		222,328
Business banking	1,096,436		1,334,694
Residential real estate	2,118,852		1,926,810
Consumer home equity	1,168,476		1,100,153
Other consumer	196,614		214,485
Total loans	12,903,954		12,281,510
Allowance for loan losses	(131,663)		(97,787)
Unamortized premiums, net of unearned discounts and deferred fees	(19,349)		(26,442)
Total loans receivable, net	$	12,752,942	$	12,157,281

We believe that our commercial loan portfolio composition is relatively diversified in terms of industry sectors, property types and various lending specialties, and is concentrated in the New England geographical area, with ~~88.5%~~82.1% of our commercial loans in Massachusetts and New Hampshire as of ~~June~~September 30, ~~2020.~~

2022.

Asset quality. We continually monitor the asset quality of our loan portfolio utilizing portfolio scorecards and various credit quality indicators. Based on this process, loans meeting certain criteria are categorized as delinquent ~~impaired,~~ or ~~nonperforming~~non-performing and further assessed to determine if ~~nonaccrual~~non-accrual status is appropriate.

For the commercial portfolio, which includes our commercial and industrial, commercial real estate, ~~and~~ commercial construction and business banking loans, we monitor credit quality using a ~~12-point~~ ~~commercial risk-rating system is utilized,~~risk rating scale, which assigns a risk-grade to each borrower based on a number of quantitative and qualitative factors associated with a commercial loan transaction. Management utilizes a loan risk rating methodology based on a 15-point scale with the assistance of risk rating scorecard tools. Pass grades are 0-10 and non-pass categories, which align with regulatory guidelines, are: special mention (11), substandard (12), doubtful (13) and loss (14).

Risk rating assignment is determined using one of 15 separate scorecards developed for distinctive portfolio segments based on common attributes. Key factors ~~include~~include: industry and market conditions, position within the industry, earnings trends, operating cash flow, asset/liability values, debt capacity, guarantor strength, management and controls, financial reporting, collateral and other considerations. ~~The risk rating categories are as follows: unrated (0), pass~~ ~~(1-6W),~~ ~~special mention (7), substandard (8), doubtful (9) and loss (10).~~

Special mention, substandard and doubtful loans totaled ~~8.9%~~2.5% and ~~2.6%~~5.8% of total commercial loans outstanding at ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively. This ~~increase~~decrease was driven by ~~an increase~~risk rating upgrades in the ~~special mention category, due to the downgrading of our hotel~~commercial real estate and ~~restaurant loan portfolios as a result of the~~ ~~COVID-19~~ ~~pandemic.~~

commercial and industrial portfolios.

Our philosophy toward managing our loan portfolios is predicated upon careful monitoring, which stresses early detection and response to delinquent and default situations. We seek to make arrangements to resolve any delinquent or default situation over the shortest possible time frame.

The delinquency rate of our total loan portfolio ~~increased~~improved to ~~0.84%~~0.36% at ~~June~~September 30, ~~2020 from 0.49%~~2022, compared to 0.65% at December 31, 2019, primarily due to an increase in delinquencies in our (i) residential real estate portfolio, (ii) other consumer portfolio, (iii) consumer home equity portfolio and (iv) business banking portfolio, partially offset by a decrease in our commercial and industrial portfolio.

2021.

Table of Contents

The following table provides details regarding our delinquency rates as of the dates indicated:

Loan Delinquency Rates

   Delinquency Rate as of ⁽¹⁾
   June 30, 2020 December 31, 2019
Portfolio

Commercial and industrial
   0.13 % 0.14 %
Commercial real estate
   0.09 % 0.09 %
Commercial construction
   0.10 % —   %
Business banking
   1.76 % 1.28 %
Residential real estate
   2.71 % 1.37 %
Consumer home equity
   1.09 % 0.49 %
Other consumer
   2.30 % 1.13 %


Total
   0.84 % 0.49 %

~~(1)~~

~~In the calculation of the delinquency rate as of June 30, 2020, the total amount of loans outstanding includes $1.1 billion of PPP loans.~~


	Delinquency Rate as of (1)(2)
	September 30, 2022		December 31, 2021
Portfolio
Commercial and industrial	0.08	%	0.06	%
Commercial real estate	—	%	0.60	%
Commercial construction	—	%	—	%
Business banking	0.94	%	0.86	%
Residential real estate	0.99	%	1.38	%
Consumer home equity	0.92	%	0.90	%
Other consumer	0.80	%	1.23	%
Total	0.36	%	0.65	%

(1)In the calculation of the delinquency rate as of September 30, 2022 and December 31, 2021, the total amount of loans outstanding includes $23.1 million and $331.4 million, respectively, of PPP loans.

(2)Delinquency rates as of September 30, 2022 were computed based upon amortized cost balances while delinquency rates as of December 31, 2021 were computed based upon recorded investment balances. The ~~following table provides details regarding~~effect on the ~~age analysis~~above delinquency rates of the difference in methodology is not significant.

As a general rule, loans more than 90 days past due with respect to principal or interest are classified as non-accrual loans. However, based on our assessment of collateral and/or payment prospects, certain loans ~~as of~~that are more than 90 days past due may be kept on an accruing status. Income accruals are suspended on all non-accrual loans and all previously accrued and uncollected interest is reversed against current income. A loan is expected to remain on non-accrual status until it becomes current with respect to principal and interest, the ~~dates indicated:~~

~~Age Analysis of Past Due Loans~~

   As of June 30, 2020    As of December 31, 2019
   30-59 Days
Past Due    60-89 Days
Past Due    90 Days or
More Past
Due    30-59 Days
Past Due    60-89 Days
Past Due    90 Days or
More Past
Due
   (In thousands)
Commercial and industrial
   $ 681    $ 671    $ 1,508    $ 1,407    $ —      $ 963
Commercial real estate
   —      257    3,045    1,290    100    1,856
Commercial construction
   —      —      280    —      —      —
Business banking
   4,541    4,160    13,021    3,031    763    6,095
Residential real estate
   26,859    2,084    8,981    14,030    2,563    3,030
Consumer home equity
   3,413    1,971    4,511    2,497    430    1,636
Other Consumer
   2,992    1,734    2,971    3,451    514    579












Total
   $ 38,486    $ 10,877    $ 34,317    $ 25,706    $ 4,370    $ 14,159

~~Nonperforming~~loan is liquidated, or the loan is determined to be uncollectible and is charged-off against the allowance for loan losses.

Non-performing assets (“NPAs”) are comprised of ~~nonperforming~~non-performing loans (“NPLs”), ~~other real estate owned (“OREO”)~~OREO and ~~nonperforming~~non-performing securities. NPLs consist of ~~nonaccrual~~non-accrual loans and loans that are more than 90 days past due but still accruing interest. OREO consists of real estate properties, which primarily serve as collateral to secure our loans, that we control due to foreclosure. These properties are recorded at the ~~lower of cost or~~ fair value less estimated costs to sell on the date we obtain control.

~~The following table sets forth information regarding NPAs held as~~ Any write-downs to the cost of the ~~dates indicated:~~

~~Nonperforming Assets~~

   As of
June 30, 2020 As of
December 31, 2019
   (In thousands)
Non-accrual loans:

Commercial
   $ 31,273 $ 34,093
Residential
   11,693 5,598
Consumer
   9,374 2,760


Total non-accrual loans
   52,340 42,451


Accruing loans past due 90 days or more:

Commercial
   2,802 1,315
Residential
   244 —
Consumer
   9 9


Total accruing loans past due 90 days or more
   3,055 1,324


Total non-performing loans
   55,395 43,775
Total real estate owned
   40 —


Other non-performing assets:
   —   —


Total non-performing assets
   $ 55,435 $ 43,775


Total accruing troubled debt restructured loans
   $ 40,691 $ 48,623
Total non-performing loans to total loans
   0.56 % 0.49 %
Total non-performing assets to total assets
   0.40 % 0.38 %

related asset upon transfer to OREO to reflect the asset at fair value less estimated costs to sell is recorded through the allowance for loan losses.

NPLs ~~increased $11.6~~decreased $1.0 million, or ~~26.5%~~2.9%, to ~~$55.4~~$34.0 million at ~~June~~September 30, ~~2020~~2022 from ~~$43.8~~$35.0 million at December 31, ~~2019.~~2021. NPLs as a percentage of total loans ~~increased~~decreased to ~~0.56%~~0.26% at ~~June~~September 30, ~~2020~~2022 from ~~0.49%~~0.29% at December 31, ~~2019~~2021. Refer to the later “Allowance for Loan Losses” section in this Item 2 for a discussion of the change in non-accrual loans which comprise our NPLs as ~~a result~~ of ~~an increase in our business banking~~September 30, 2022. As of December 31, 2021, NPLs included loans that were past due 90 days or more and ~~residential real estate portfolios, partially offset by a decrease in our commercial and industrial portfolio due~~still accruing which were comprised solely of purchased credit impaired (“PCI”) loans. PCI loans were not subject to ~~a single, larger loan payoff and a reduction~~classification as non-accrual in the ~~outstanding balance~~same manner as originated loans as their interest income related to the accretable yield recognized and not to contractual interest payments at the loan level. In connection with our adoption of ~~a single, larger Asset Based Lending~~ASU 2016-13 on January 1, 2022, all PCI loans are now considered purchased credit deteriorated (“~~ABL”~~PCD”) ~~credit.~~

~~Non-accrual~~loans. Interest income recognition for PCD loans ~~increased $9.9 million, or 23.3%, to $52.3 million~~is consistent with originated loans and, therefore, PCD loans cease accruing interest at ~~June 30, 2020 from $42.5 million at December 31, 2019, primarily~~90 days past due ~~to a $7.7 million increase in our business banking portfolio and $6.1 million increase in our residential real estate portfolio, partially offset~~unless management believes that the applicable collateral held by the ~~paydowns~~Company is clearly sufficient and in full satisfaction of ~~certain NPLs as discussed above.~~

both principal and interest. There were no PCD or originated loans at September 30, 2022 that were past due 90 days or more and still accruing.

The total amount of interest recorded on NPLs ~~was $0.3 million for~~during both the ~~six~~nine months ended ~~June~~September 30, ~~2020.~~2022 and 2021 was not significant. The gross interest income that would have been recorded under the original terms of those loans if they had

Table of Contents

been performing amounted to ~~$2.0~~$2.7 million and $2.1 million for the ~~six~~nine months ended ~~June~~September 30, ~~2020.~~

~~Troubled debt restructuring (“TDR”)~~2022 and 2021, respectively.

In the course of resolving NPLs, we may choose to restructure the contractual terms of certain loans. We attempt to work-out alternative payment schedules with the borrowers in order to avoid foreclosure actions. We review each loan that is modified to identify whether a TDR has occurred. TDRs involve situations in which, for economic or legal reasons related to the borrower’s financial difficulties, we grant a concession to the borrower that we would not otherwise consider. As noted within Note 4, “Loans and Allowance for Credit Losses” within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item I in this Quarterly Report on Form 10-Q, loan modifications made in response to the COVID-19 pandemic that met the criteria of either Section 4013 of the CARES Act or the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) are not deemed TDRs. This election afforded by the CARES Act and Interagency guidance expired on January 1, 2022.

In cases where a borrower experiences financial difficulties and we make certain concessionary modifications to contractual terms, the loan is classified as a TDR. Loans modified during the nine months ended September 30, 2022 and 2021 which were determined to be TDRs were $9.6 million (post modification balance) and $1.0 million (post modification balance), respectively. The overall increase in TDR loans modified during the ~~six~~aforementioned periods consisted of an increase of $5.8 million and $2.8 million in commercial and consumer loan TDR modifications, respectively. There were no loans that had been modified during the preceding 12 months and which subsequently defaulted during the nine months ended ~~June~~September 30, ~~2020~~2022. Two loans totaling $0.5 million were ~~$2.8 million (post modification balance). There was one loan with a balance of $1.3 million~~ modified during the preceding 12 months, which subsequently defaulted during the nine months ended September 30, 2021.

It is our policy to have any restructured loan, which is on non-accrual status prior to being modified, remain on non-accrual status for approximately six months ~~ended June 30, 2020. The increase in TDR loans was driven by $1.8 million in commercial loans and $1.0 million in consumer loans.~~

~~Purchase credit impaired (“PCI”)~~subsequent to being modified before we consider its return to accrual status. If the restructured loan is on accrual status prior to being modified, we review it to determine if the modified loan should remain on accrual status.

PCD loans are loans that we acquired that have shown evidence of deterioration of credit quality since origination and, therefore, it was deemed unlikely that all contractually required payments would be collected upon the acquisition date. We consider factors such as payment history, collateral values and accrual status when determining whether there was evidence of deterioration at the acquisition date. ~~The carrying value and prospective income recognition of PCI loans are predicated on future cash flows expected to be collected.~~ As of ~~June~~September 30, ~~2020 and~~2022, the carrying amount of PCD loans was $57.4 million. As discussed further below, we adopted ASU 2016-13, commonly referred to as CECL, on January 1, 2022. Prior to such adoption, our acquired loans that exhibited evidence of deterioration of credit quality since origination were designated as PCI loans. As of December 31, ~~2019~~2021, the carrying amount of PCI loans was ~~$12.4 million~~$69.6 million.

COVID-19 Modifications. In light of the COVID-19 pandemic, we implemented loan modification programs for our borrowers that allowed for either full payment deferrals (both interest and ~~$13.5 million, respectively.~~

principal) or deferral of principal only. These modifications met the criteria of either Section 4013 of the CARES Act or the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) and therefore are not deemed TDRs. We have deemed these modified loans “COVID-19 modifications.”

The Appropriations Act, which was enacted on December 27, 2020, extended certain expiring tax provisions related to the COVID-19 pandemic in the United States and provided additional emergency relief to individuals and businesses. Included within the provisions of the Appropriations Act is the extension of Section 4013 of the CARES Act to January 1, 2022. As such, we applied CARES Act TDR relief to any qualifying loan modifications executed during the allowable time period.

Table of Contents

The following table ~~provides additional details related~~presents the balance of loans that received a COVID-19 modification and have not yet resumed repayment as of September 30, 2022 and December 31, 2021:


	Remaining COVID-19 Modifications as of September 30, 2022 (1)				Remaining COVID-19 Modifications as of December 31, 2021 (1)
	Balance		% of Total Portfolio		Balance		% of Total Portfolio
	(Dollars in thousands)
Portfolio
Commercial and industrial	$	—	—	%	$	4,548	0.2	%
Commercial real estate	12,825		0.3	%	93,519		2.1	%
Commercial construction	—		—	%	—		—	%
Business banking	518		0.1	%	649		0.1	%
Residential real estate	3,258		0.2	%	5,870		0.3	%
Consumer home equity	789		0.1	%	1,365		0.1	%
Other consumer	292		0.2	%	706		0.3	%
Total (2)	$	17,682	0.1	%	$	106,657	0.9	%

(1)Remaining COVID-19 modifications reflect only those loans which underwent a modification and have not yet resumed repayment. We define a modified loan to have resumed payment if it is one month past the modification end date and not more than 30 days past due.

(2)As of September 30, 2022 and December 31, 2021, remaining COVID-19 modifications included $12.8 million and $71.0 million, respectively, of loans to borrowers in the hotel industry.

As of September 30, 2022 and December 31, 2021, the aggregate amount of loans that received a COVID-19 modification and have become a non-performing loan after the respective deferral period is $4.5 million and $4.7 million, respectively.

COVID-19 Pandemic-Impacted Industries. As of September 30, 2022, we believe loans to our ~~loan portfolio~~borrowers in the categories of office, retail, restaurant, and hotel industry to represent those which have experienced and will likely continue to experience the ~~distribution of NPLs as~~most adverse effects of the ~~dates indicated:~~

~~Distribution~~COVID-19 pandemic. As of ~~Nonperforming Loans~~

   As of June 30, 2020
   Outstanding    90+ Days Due
Still Accruing    Non-accruing
Loans    Troubled Debt
Restructured
Loans, but
Accruing    NPLs    NPLs as a %
of Outstanding
         (Dollars in thousands)
Loans:

Commercial
   $ 7,373,265    $ 2,802    $ 31,273    $ 13,093    $ 34,075    0.46 %
Residential
   1,400,855    244    11,693    23,714    11,937    0.85 %
Consumer
   1,240,218    9    9,374    3,884    9,383    0.76 %












Total
   $ 10,014,338    $ 3,055    $ 52,340    $ 40,691    $ 55,395    0.55 %

   As of December 31, 2019
   Outstanding    90+ Days Due
Still Accruing    Non-accruing
Loans    Troubled Debt
Restructured
Loans, but
Accruing    NPLs    NPLs as a %
of Outstanding
         (Dollars in thousands)
Loans:

Commercial
   $ 6,222,897    $ 1,315    $ 34,093    $ 17,575    $ 35,408    0.57 %
Residential
   1,428,630    —      5,598    25,093    5,598    0.39 %
Consumer
   1,335,519    9    2,760    5,955    2,769    0.21 %












Total
   $ 8,987,046    $ 1,324    $ 42,451    $ 48,623    $ 43,775    0.49 %

September 30, 2022, the aggregate outstanding loan balance of loans to our borrowers in the office, retail, restaurant, and hotel industry categories was $1.1 billion, $605.6 million, $198.8 million, and $144.7 million respectively, representing 8.8%, 4.7%, 1.5%, and 1.1% of total loans, respectively. As of December 31, 2021, the aggregate outstanding loan balance of loans to our borrowers in the office, retail, restaurant, and hotel industry categories was $1.1 billion, $549.0 million, $188.9 million and $189.0 million, respectively, representing 8.8%, 4.5%, 1.5% and 1.5% of total loans, respectively.

Potential Problem Loans. In the normal course of business, we become aware of possible credit problems in which borrowers exhibit potential for the inability to comply with the contractual terms of their loans, but which currently do not yet meet the criteria for classification as NPLs. ~~In response to the~~ ~~COVID-19~~ pandemic, we reviewed all of our credit exposures in industries that were expected to experience significant problems due to the pandemic and resulting economic contraction. As part of that review, we downgraded our hotel loans, restaurant loans and other loans that we expected to have associated challenges in the current economic environment. These loans ~~were~~are neither delinquent nor on non-accrual status. At ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, our potential problem loans (including ~~these~~ COVID-19-related loans), or loans with potential weaknesses that were not included in the non-accrual loans or in the loans 90 days or more past due categories, totaled ~~$660.6~~$214.9 million and ~~$157.3~~$470.9 million, respectively.

Of these potential problem loans, $129.5 million and $335.9 million at September 30, 2022 and December 31, 2021, respectively, are loans in COVID-19 pandemic-impacted industries.

Allowance for ~~loan~~credit losses.Because we continued to qualify for emerging growth company (“EGC”) status under the Jumpstart Our Business (“JOBS”) Act until December 31, 2021, we were permitted to delay adoption of the CECL standard until the earlier of the date at which non-public business entities are required to adopt the standard and the date that we ceased to be an EGC. Included in the Appropriations Act was an extension of the adoption date to the earlier of January 1, 2022 or 60 days after the date on which the COVID-19 national emergency terminates. We elected this extension and, accordingly, adopted the CECL standard on January 1, 2022. As of December 31, 2021, we followed the incurred loss allowance GAAP accounting model.

For the purpose of estimating ~~the~~our allowance for loan losses, we segregate the loan portfolio into ~~the homogenous~~ loan ~~pools~~categories, for loans that share similar risk characteristics, that possess unique risk characteristics such as loan purpose, repayment source, and collateral that are considered when determining the appropriate level of the allowance for loan losses for each category.

Loans that do not share similar risk characteristics with other loans are evaluated individually.

Table of Contents

While we use available information to recognize losses on loans, future additions or subtractions to/from the allowance for loan losses may be necessary based on changes in NPLs, changes in economic conditions, or other reasons. Additionally, various regulatory agencies, as an integral part of our examination process, periodically assess the adequacy of the allowance for loan losses to assess whether the allowance for loan losses was determined in accordance with GAAP and applicable guidance.

We perform an evaluation of our allowance for loan losses on a regular basis (at least quarterly), and establish the allowance for loan losses based upon an evaluation of our loan categories, as each possesses unique risk characteristics that are considered when determining the appropriate level of allowance for loan losses, including:

•known increases in concentrations within each category;

•certain higher risk classes of loans, or pledged collateral;

•historical loan loss experience within each category;

•results of any independent review and evaluation of the category’s credit quality;

•trends in volume, maturity and composition of each category;

•volume and trends in delinquencies and non-accruals;

•national and local economic conditions and downturns in specific local industries;

•corporate goals and objectives;

•lending policies and procedures, including underwriting standards and collection, charge-off and recovery practices; and

•current and forecasted banking industry conditions, as well as the regulatory and competitive environment.

Loans are evaluated on a regular basis by management. Expected lifetime losses are estimated on a collective basis for loans sharing similar risk characteristics and are determined using a quantitative model combined with an assessment of certain qualitative factors designed to address forecast risk and model risk inherent in the quantitative model output. For commercial and industrial, commercial real estate, commercial construction and business banking portfolios, the quantitative model uses a loan rating system which is comprised of management’s determination of probability of default, or PD, loss given default, or LGD and exposure at default, or EAD, which are derived from historical loss experience and other factors. For residential real estate, consumer home equity and other consumer portfolios, our quantitative model uses historical loss experience

The allowance for loan losses is allocated to loan categories using both a formula-based approach and an analysis of certain individual loans for impairment. We use a methodology to systematically estimate the amount of expected credit loss in the loan portfolio. Under our current methodology, the allowance for loan losses contains reserves related to loans for which the related allowance for loan losses is determined on individual loan basis and on a collective basis, and other qualitative components.

In the ordinary course of business, the Company enters into commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable. The credit risk associated with these commitments is evaluated in a manner similar to the reserving method for loans receivable previously described. The reserve for unfunded lending commitments is included in other liabilities in the balance sheet.

The allowance for loan losses increased by ~~$34.3~~$33.9 million, or ~~41.7%~~34.6%, to ~~$116.6~~$131.7 million, or ~~1.17%~~1.02% of total loans, at ~~June~~September 30, ~~2020~~2022 from ~~$82.3~~$97.8 million, or ~~0.92%~~0.80% of total loans at December 31, ~~2019.~~2021. The increase in the allowance for loan losses was primarily a result of our ~~response~~adoption of CECL, as previously described above, and increased loan balances, as previously described above. The additional reserves required as a result of our adoption of CECL were primarily attributable to the ~~COVID-19-related~~ ~~economic impact. During~~loans we acquired in connection with our acquisition of Century which were recorded at fair value at the ~~three and six months ended, June 30, 2020,~~time of acquisition. Under ASU 2016-13, the credit mark that is a component of the day-one fair value adjustment on acquired loans cannot be considered in the allowance computation, whereas under the incurred loss model, the credit mark could be considered for reserve determination purposes. In connection with our adoption of this standard, we ~~downgraded our risk ratings for all loans secured by hotels and restaurants, and any of our other commercial loans for which our customers are expecting~~recorded an increase to face financial difficulties due to the current economic environment, and the lower risk ratings resulted in higher levels of reserves for the allowance. In total, we downgraded the risk rating on $1.7 billion of commercial loans, of which $511.9 million were transferred into the special mention, or worse, risk rating category. This, along with other factors, resulted in a provision for loan loss of $8.6 million and $37.2 million for the three and six months ended June 30, 2020.

~~The following table summarizes changes in~~ the allowance for loan losses of $27.1 million which represented the one-time cumulative-effect adjustment.

For additional discussion of our allowance for credit losses measurement methodology, see Note 2, “Summary of Significant Accounting Policies”and ~~other selected statistics~~Note 4, “Loans and Allowance for Loan Losses” within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q. For additional discussion of the change in allowance for loan losses, refer to the later “Provision for Loan Losses,” included in the “Results of Operations” section within this Item 2. For discussion of our previous methodology for estimating the allowance for loan

Table of Contents

losses, refer to Note 5, “Loans and Allowance for Loan Losses” within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q and Note 2, “Summary of Significant Accounting Policies” included in Part II, Item 8 of the 2021 Form 10-K.

The following table summarizes credit ratios for the periods presented:

Summary of Changes in the Allowance for Loan Losses

   Three months ended June 30, Six months ended June 30,
   2020 2019 2020 2019
   (Dollars in thousands)
Average total loans
   $ 9,445,666 $ 8,916,224 $ 9,445,666 $ 8,916,224


Allowance for loan losses, beginning of the period
   $ 109,138 $ 82,493 $ 82,297 $ 80,655
Charged-off loans:

Commercial and industrial
   27 272 27 272
Commercial real estate
   24 169 24 169
Commercial construction
   —   —   —   —
Business banking
   1,198 1,371 2,535 2,810
Residential real estate
   —   46 —   63
Consumer home equity
   —   124 473 124
Other consumer
   15 581 548 1,049


Total charged-off loans
   1,264 2,563 3,607 4,487


Recoveries on loans previously charged-off:

Commercial and industrial
   58 908 380 1,368
Commercial real estate
   5 2 6 4
Commercial construction
   —   —   —   —
Business banking
   27 193 154 320
Residential real estate
   13 12 73 71
Consumer home equity
   8 20 22 28
Other consumer
   51 97 111 203


Total recoveries
   162 1,232 746 1,994


Net loans charged-off (recoveries):

Commercial and industrial
   (31 ) (636 ) (353 ) (1,096 )
Commercial real estate
   19 167 18 165
Commercial construction
   —   —   —   —
Business banking
   1,171 1,178 2,381 2,490
Residential real estate
   (13 ) 34 (73 ) (8 )
Consumer home equity
   (8 ) 104 451 96
Other consumer
   (36 ) 484 437 846


Total net loans charged-off
   1,102 1,331 2,861 2,493


Provision for loan losses
   8,600 1,500 37,200 4,500


Total allowance for loan losses, end of period
   $ 116,636 $ 82,662 $ 116,636 $ 82,662


Net charge-offs to average total loans outstanding during this period
   0.01 % 0.01 % 0.03 % 0.03 %
Allowance for loan losses as a percent of total loans
   1.17 % 0.92 % 1.17 % 0.92 %
Allowance for loan losses as a percent of nonperforming loans
   210.55 % 251.34 % 210.55 % 251.34 %

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
(Dollars in thousands)
Net loan charge-offs (recoveries):
Commercial and industrial $ (115) $ (40) $ (1,061) $ 488
Commercial real estate (3) 8 (53) 238
Commercial construction — — — —
Business banking 83 398 244 2,964
Residential real estate (56) (88) (80) (115)
Consumer home equity (6) (63) (16) (137)
Other consumer 445 536 1,221 827
Total net loan charge-offs 348 751 255 4,265
Average loans:
Commercial and industrial 2,882,511 1,717,722 2,903,239 1,896,900
Commercial real estate 4,939,754 3,905,280 4,796,453 3,786,625
Commercial construction 329,199 219,730 282,647 252,939
Business banking 986,565 1,152,823 1,036,857 1,267,439
Residential real estate 2,041,869 1,476,136 1,979,615 1,433,131
Consumer home equity 1,146,547 833,626 1,116,270 833,467
Other consumer 194,981 221,449 198,866 240,572
Average total loans (1) $ 12,521,426 $ 9,526,766 $ 12,313,947 $ 9,711,073
Net charge-offs (recoveries) to average loans outstanding during the period:
Commercial and industrial 0.00 % 0.00 % (0.04) % 0.03 %
Commercial real estate 0.00 0.00 0.00 0.01
Commercial construction — — — —
Business banking 0.01 0.03 0.02 0.23
Residential real estate 0.00 (0.01) 0.00 (0.01)
Consumer home equity 0.00 (0.01) 0.00 (0.02)
Other consumer 0.23 0.24 0.61 0.34
Total net charge-offs to average loans outstanding during the period: 0.01 % 0.01 % 0.01 % 0.04 %
Total loans $ 12,884,605 $ 9,481,458 $ 12,884,605 $ 9,481,458
Total non-accrual loans $ 33,954 $ 40,613 $ 33,954 $ 40,613
Allowance for loan losses $ 131,663 $ 103,398 $ 131,663 $ 103,398
Allowance for loan losses as a percent of total loans 1.02 % 1.09 % 1.02 % 1.09 %
Non-accrual loans as a percent of total loans 0.26 % 0.43 % 0.26 % 0.43 %
Allowance for loan losses as a percent of non-accrual loans 387.77 % 254.59 % 387.77 % 254.59 %

(1)Average loan balances exclude loans held for sale

Table of Contents

Non-accrual loans decreased $6.7 million, or 16.4%, to $34.0 million at September 30, 2022 from $40.6 million at September 30, 2021, primarily due to decreases in non-accrual loans in our commercial and industrial and business banking portfolios of $5.4 million and $3.6 million, respectively. Partially offsetting these decreases were increases in non-accrual loans in our consumer home equity and residential real estate portfolios of $1.6 million and $1.3 million, respectively. Non-accrual commercial and industrial loans and business banking loans decreased primarily due to payoffs and curing of delinquency of such loans. Non-accrual consumer home equity loans and non-accrual residential real estate loans increased primarily due to several loans moving to non-accrual status which had been acquired in connection with our acquisition of Century.

The following table sets forth the allocation of the allowance for loan losses by loan categories listed in loan portfolio composition as of the dates indicated:

Summary of Allocation of Allowance for Loan Losses

   As of June 30, 2020 As of December 31, 2019
   Allowance
for Loan
Losses    Percent of
Allowance
in Category
to Total
Allocated
Allowance Percent of
Loans in
Category to
Total Loans Allowance
for Loan
Losses    Percent of
Allowance
in Category
to Total
Allocated
Allowance Percent of
Loans in
Category to
Total Loans
   (Dollars in thousands)
Commercial and industrial ⁽¹⁾
   $ 33,229    28.49 % 22.69 % $ 20,919    25.42 % 18.27 %
Commercial real estate
   54,228    46.49 % 35.79 % 34,730    42.20 % 39.34 %
Commercial construction
   4,816    4.13 % 2.82 % 3,424    4.16 % 3.05 %
Business banking⁽¹⁾
   9,805    8.41 % 12.33 % 8,260    10.04 % 8.58 %
Residential real estate
   6,569    5.63 % 13.99 % 6,380    7.75 % 15.90 %
Consumer home equity
   3,875    3.32 % 9.04 % 4,027    4.89 % 10.38 %
Other consumer
   3,762    3.23 % 3.34 % 4,173    5.07 % 4.48 %
Unallocated
   352    0.30 % —   % 384    0.47 % —   %






Total
   $ 116,636    100.00 % 100.00 % $ 82,297    100.00 % 100.00 %

~~(1)~~

~~PPP loans are included within this portfolio; however, no allowance for loan losses have been recorded on these loans due to the SBA guarantee of 100% of the loans~~

As of September 30, 2022 As of December 31, 2021
Allowance for Loan Losses Percent of Allowance in Category to Total Allocated Allowance Percent of Loans in Category to Total Loans Allowance for Loan Losses Percent of Allowance in Category to Total Allocated Allowance Percent of Loans in Category to Total Loans
(Dollars in thousands)
Commercial and industrial (1)
$ 26,841 20.39 % 23.43 % $ 18,018 18.43 % 24.10 %
Commercial real estate 51,103 38.81 % 38.64 % 52,373 53.56 % 36.82 %
Commercial construction 5,981 4.54 % 2.43 % 2,585 2.64 % 1.81 %
Business banking (1)
16,262 12.35 % 8.50 % 10,983 11.23 % 10.87 %
Residential real estate 23,007 17.47 % 16.42 % 6,556 6.70 % 15.69 %
Consumer home equity 5,842 4.44 % 9.06 % 3,722 3.81 % 8.96 %
Other consumer 2,627 2.00 % 1.52 % 3,308 3.38 % 1.75 %
Other — — % — % 242 0.25 % — %
Total $ 131,663 100.00 % 100.00 % $ 97,787 100.00 % 100.00 %

(1)PPP loans are included within these portfolios as of September 30, 2022 and December 31, 2021; however, as of September 30, 2022 and December 31, 2021 no allowance for loan losses was recorded on these loans due to the SBA guarantee of 100% of the loans

To determine if a loan should be charged-off, all possible sources of repayment are analyzed. Possible sources of repayment include the potential for future cash flows, liquidation of the collateral and the strength of co-makers or guarantors. When available information confirms that specific loans or portions thereof are uncollectible, these amounts are promptly charged-off against the allowance for loan losses and any recoveries of such previously charged-off amounts are credited to the allowance for loan losses.

Regardless of whether a loan is unsecured or collateralized, we charge off the amount of any confirmed loan loss in the period when the loans, or portions of loans, are deemed uncollectible. For troubled, collateral-dependent loans, loss confirming events may include an appraisal or other valuation that reflects a shortfall between the value of the collateral and the carrying value of the loan or receivable, or a deficiency balance following the sale of the collateral.

For additional information regarding our allowance for loan losses, see Note 4, “Loans and Allowance for Credit Losses” within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q.

Federal Home Loan Bank stock

The FHLBB is a cooperative that provides services to its member banking institutions. The primary reason for our membership in the FHLBB is to gain access to a reliable source of wholesale funding and as a tool to manage interest rate risk. The purchase of stock in the FHLB is a requirement for a member to gain access to funding. We purchase and/or are subject to redemption of FHLBB stock proportional to the volume of funding received and view the holdings as a necessary long-term investment for the purpose of balance sheet liquidity and not for investment return.

We held an investment in the FHLBB of ~~$8.8~~$18.7 million and ~~$9.0~~$10.9 million at ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively.

Table of Contents

Goodwill and other intangible assets

Goodwill and other intangible assets were ~~$376.3~~$662.2 million and ~~$377.7~~$649.7 million at ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively. The ~~decrease~~increase in goodwill and other intangibles assets was due to the ~~amortization~~purchase of ~~definite- lived intangibles~~two insurance agencies during the ~~six~~nine months ended ~~June~~September 30, ~~2020.~~2022. For more information regarding our insurance agency acquisitions, refer to Note 7, “Goodwill and Other Intangibles” within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q. We did not record any impairment to our goodwill or other intangible assets ~~at June~~during the nine months ended September 30, ~~2020.~~2022. We will continue to assess our goodwill and other intangible assets to determine if impairments are ~~necessary during~~necessary.

Deposits

Deposits originating within the ~~remainder~~markets we serve continue to be our primary source of funding our earning assets. We have been able to compete effectively for deposits in our primary market areas. The distribution and market share of deposits by type of deposit and by type of depositor are important considerations in our assessment of the ~~year ending December 31, 2020~~stability of our fund sources and ~~beyond as it relates~~our access to additional funds. Furthermore, we shift the ~~COVID-19~~ ~~pandemic.~~

~~Deposits~~mix and ~~other interest-bearing liabilities~~

maturity of the deposits depending on economic conditions and loan and investment policies in an attempt, within set policies, to minimize cost and maximize net interest margin. We do not rely upon, and in recent years have not obtained, deposit funding through brokered deposits.

The following table presents our deposits as of the dates presented:

Components of Deposits

   As of June 30, 2020 As of December 31, 2019
   Amount    % Change Amount    % Change
      (Dollars in thousands)
Demand
   $ 4,740,125    34.8 % $ 3,517,447    2.11 %
Interest checking
   2,385,912    31.5 % 1,814,327    (4.48 )%
Savings
   1,157,606    19.2 % 971,119    (2.85 )%
Money market investments
   3,254,202    11.5 % 2,919,360    13.12 %
Certificate of deposits
   308,920    (6.1 )% 329,139    (30.70 )%





Total deposits
   $ 11,846,765    24.0 % $ 9,551,392    1.62 %


	As of September 30, 2022		As of December 31, 2021		Change
					Amount ($)		Percentage (%)
	(Dollars in thousands)
Demand	$	6,582,122	$	7,020,864	$	(438,742)	(6.2)	%
Interest checking	5,047,018		4,478,566		568,452		12.7	%
Savings	1,990,188		2,077,495		(87,307)		(4.2)	%
Money market investments	4,757,477		5,525,005		(767,528)		(13.9)	%
Certificate of deposits	356,576		526,381		(169,805)		(32.3)	%
Total deposits	$	18,733,381	$	19,628,311	$	(894,930)	(4.6)	%

(1)The Bank’s estimate of total uninsured deposits was $9.8 billion and $11.0 billion at September 30, 2022 and December 31, 2021, respectively.

Deposits ~~increased~~decreased by ~~$2.3~~$0.9 billion, or ~~24.0%~~4.6%, to ~~$11.8~~$18.7 billion at ~~June~~September 30, ~~2020~~2022 from ~~$9.6~~$19.6 billion at December 31, ~~2019.~~2021. This ~~increase~~decrease was primarily the result of a decrease in money market investments of $0.8 billion, a decrease in demand deposits of $0.4 billion, and a decrease in certificate of deposits of $0.2 billion. These decreases were partially offset by an increase of $0.6 billion in interest checking deposits. The overall decrease is primarily due to a runoff of higher cost deposits acquired in connection with our acquisition of ~~$571.6 million~~Century, the runoff of government stimulus funds which had been deposited by our customers, higher market rates resulting in greater industry-wide competition for deposits, and a transfer of deposits during the second quarter of 2022. On January 14, 2022, we announced we had entered into an ~~increase~~asset purchase agreement for the transfer of ~~$1.2 billion in demand deposits. During~~our cannabis-related and money service business deposits relationships, which we acquired from Century, to Needham Bank. On April 1, 2022, we completed the ~~six months ended June 30, 2020, we~~transfer of such deposits, which was subject to a post-transfer settlement period of 60 days. The total amount transferred, ~~a product for our Financial Institutions customers from borrowings to deposits totaling $299.5~~which includes amounts transferred during the post-transfer settlement period, was $278.0 million.

Table of Contents

The following table presents the classification of deposits on an average basis for the years below. We believe the presentation of average deposits for the respective years below provide a better understanding of the business mix and low cost structure of our deposit portfolio than the composition of deposits as of the respective year ends below, due to the overnight program of the Federal Reserve Bank of Boston described above.

periods below:

Classification of ~~deposits~~Deposits on an Average Basis

   As of June 30, 2020 As of December 31, 2019
   Average
Amount    Average
Rate Average
Amount    Average
Rate
   (Dollars in thousands)
Demand
   $ 3,963,066    0.00 % $ 3,369,375    0.00 %
Interest checking
   2,158,242    0.14 % 1,842,993    0.21 %
Savings
   1,036,344    0.02 % 991,244    0.02 %
Money market investments
   3,087,048    0.38 % 2,769,934    0.69 %
Certificate of deposits
   320,277    0.69 % 392,035    1.02 %





Total deposits
   $ 10,564,977    0.16 % $ 9,365,581    0.29 %


	For the Nine Months Ended September 30, 2022				For the Year Ended December 31, 2021
	Average Amount		Average Rate		Average Amount		Average Rate
	(Dollars in thousands)
Demand	$	6,698,640	—	%	$	5,547,615	—	%
Interest checking	4,897,321		0.19	%	2,866,091		0.07	%
Savings	2,046,254		0.01	%	1,483,271		0.02	%
Money market investments	5,151,384		0.09	%	3,870,712		0.06	%
Certificate of deposits	429,401		0.21	%	280,141		0.21	%
Total deposits	$	19,223,000	0.08	%	$	14,047,830	0.04	%

Other time deposits in excess of ~~$100,000 and greater,~~the FDIC insurance limit of $250,000, including certificates of deposits ~~of $100,000 and greater,~~ as of the dates indicated, had maturities as follows:

   As of
June 30, 2020    As of
December 31, 2019
Maturing in
   Amount    Amount
   (Dollars in thousands)
Three months or less
   $ 74,297    $ 58,958
Over three months through six months
   39,072    43,008
Over six months through 12 months
   19,433    44,643
Over 12 months
   12,794    11,029




Total
   $ 145,596    $ 157,638

As of September 30, 2022 As of December 31, 2021
Maturing in (In thousands)
Three months or less $ 39,179 $ 113,019
Over three months through six months 25,785 53,899
Over six months through 12 months 28,106 33,295
Over 12 months 9,246 23,827
Total $ 102,317 $ 224,040

Borrowings

Our borrowings consist of both short-term and long-term borrowings and provide us with ~~one of our~~ sources of funding. Maintaining available borrowing capacity provides us with a ~~continent~~contingent source of liquidity.

Our total borrowings ~~decreased~~increased by ~~$206.2~~$388.4 million ~~or 87.6%,~~ to ~~$29.2~~$422.7 million at ~~June~~September 30, ~~2020 from $235.4~~2022 compared to $34.3 million at December 31, ~~2019.~~2021. The ~~decrease~~increase was primarily due to ~~a reduction~~an increase in FHLB advances, which we borrowed to fund loan originations. The increase was also due, in part, to an increase in interest rate swap collateral funds, which represents collateral posted to us by our financial institution counterparties for over-the-counter interest rate swaps. At December 31, 2021, our financial institution counterparties were not required to post collateral to us due to the low level of ~~$201.1 million~~market interest rates. Conversely, at September 30, 2022, following increases in market interest rates during the second quarter of ~~federal funds purchased. The reduction in~~2022, our ~~federal funds purchased was a result~~financial institutions counterparties were required to post collateral to us of ~~the transfer of a product for our Financial Institution customers from borrowings to deposits.~~

$16.7 million.

The following table sets forth information concerning balances on our borrowings as of the dates and for the periods indicated:

Borrowings by Category

   As of June 30,    As of December 31,    % Change from
December 31, 2019
to June 30, 2020 % Change from
June 30, 2019
to June 30, 2020
   2020    2019    2019
         (Dollars in thousands)
Federal funds purchased
   $ —      $ 182,814    $ 201,082    (100.0 )% (100.0 )%
Federal Home Loan Bank advances
   14,922    121,888    18,964    (21.3 )% (87.8 )%
Escrow deposits of borrowers
   14,233    14,871    15,349    (7.3 )% (4.3 )%







Total
   $ 29,155    $ 319,573    $ 235,395    (87.6 )% (90.9 )%

Change
As of September 30, 2022 As of December 31, 2021 Amount ($) Percentage (%)
(In thousands)
FHLB advances $ 384,215 $ 14,020 $ 370,195 2640.5 %
Escrow deposits of borrowers 21,853 20,258 1,595 7.9 %
Interest rate swap collateral funds 16,650 — 16,650 100.0 %
Total $ 422,718 $ 34,278 $ 388,440 1,133.2 %

Results of Operations

Summary of Results of Operations

   Three months ended June 30, Six months ended June 30,
         Change       Change
   2020    2019    Amount ($) Percentage 2020    2019    Amount ($) Percentage
   (dollars in thousands)
Interest and dividend income
   $ 101,933    $ 112,838    (10,905 ) (9.7 )% $ 208,092    $ 224,321    $ (16,229 ) (7.2 )%
Interest expense
   3,178    9,315    (6,137 ) (65.9 )% 9,191    18,126    (8,935 ) (49.3 )%
Net interest income
   98,755    103,523    (4,768 ) (4.6 )% 198,901    206,195    (7,294 ) (3.5 )%
Provision for loan losses
   8,600    1,500    7,100 473.3 % 37,200    4,500    32,700 726.7 %
Noninterest income
   47,657    45,632    2,025 4.4 % 81,026    93,432    (12,406 ) (13.3 )%
Noninterest expense
   100,765    101,570    (805 ) (0.8 )% 195,937    206,399    (10,462 ) (5.1 )%
Income taxes
   7,197    11,032    (3,835 ) (34.8 )% 8,495    20,710    (12,215 ) (59.0 )%
Net income
   29,850    35,053    (5,203 ) (14.8 )% 38,295    68,018    (29,723 ) (43.7 )%

Table of Contents


	Three Months Ended September 30,								Nine Months Ended September 30,
					Change								Change
	2022		2021		Amount ($)		Percentage		2022		2021		Amount ($)		Percentage
	(Dollars in thousands)
Interest and dividend income	$	157,827	$	103,468	$	54,359	52.5	%	$	430,183	$	310,282	$	119,901	38.6	%
Interest expense	5,648		777		4,871		626.9	%	12,123		2,892		9,231		319.2	%
Net interest income	152,179		102,691		49,488		48.2	%	418,060		307,390		110,670		36.0	%
Provision for (release of) allowance for loan losses	6,480		(1,488)		7,968		(535.5)	%	7,045		(5,368)		12,413		(231.2)	%
Noninterest income	43,353		43,209		144		0.3	%	131,645		144,154		(12,509)		(8.7)	%
Noninterest expense	116,840		98,970		17,870		18.1	%	336,845		300,354		36,491		12.1	%
Income tax expense	17,435		11,312		6,123		54.1	%	48,350		36,980		11,370		30.7	%
Net income	54,777		37,106		17,671		47.6	%	157,465		119,578		37,887		31.7	%

Comparison of the three and ~~six~~nine months ended ~~June~~September 30, ~~2020~~2022 and ~~2019~~

2021

Interest and Dividend Income

Interest and dividend income ~~decreased~~increased by ~~$10.9~~$54.4 million, or ~~9.7%~~52.5%, to ~~$101.9~~$157.8 million during the three months ended ~~June~~September 30, ~~2020~~2022 from ~~$112.8~~$103.5 million during the three months ended ~~June~~September 30, ~~2019.~~2021. The ~~decrease~~increase was ~~a result~~primarily attributable to our acquisition of Century on November 12, 2021, which added approximately $6.6 billion in interest-earning assets. Overall, the ~~negative impact~~average balance of ~~a lower interest rate environment.~~

~~Interest income on loans decreased by $10.1 million,~~our interest-earning assets increased $5.2 billion, or ~~9.9%~~32.2%, to ~~$92.1 million~~$21.5 billion during the three months ended ~~June~~September 30, ~~2020 from $102.2 million~~2022 compared to $16.3 billion during the three months ended ~~June~~September 30, ~~2019.~~

~~Interest income on securities decreased $0.8 million, or 7.8%,~~2021, reflecting the addition of Century assets. Also contributing to ~~$9.8 million for~~ the ~~three months ended June 30, 2020 compared to $10.6 million for the three months ended June 30, 2019.~~

~~Interest~~increase in interest and dividend income ~~decreased by $16.2 million, or 7.2%, to $208.1 million during the six months ended June 30, 2020 from $224.3 million during the six months ended June 30, 2019. This decrease~~ was ~~a result of lower interest income on our loans as~~an increase in the yield on average interest-earning assets ~~decreased 73~~which increased by 43 basis points ~~during~~compared with the ~~six~~three months ended ~~June~~September 30, 2020, partially offset by our recording of deferred fees related to our PPP loans. Our average interest-earning assets increased by $1.2 billion, or 11.1%, to $11.6 billion as of June 30, 2020 compared to $10.5 billion as of June 30, 2019.2021. Our yields on loans and securities are generally presented on an FTE basis where the embedded tax benefit on loans or securities are calculated and added to the yield. ~~This~~Management believes that this presentation allows for better comparability between institutions with different tax structures.

•Interest income on securities and other short-term investments increased $16.1 million, or 96.2%, to $32.8 million during the three months ended September 30, 2022 from $16.7 million during the three months ended September 30, 2021. The increase in interest income on our securities was due to an increase in the average balance and yield of such securities. The average balance of our securities increased $2.2 billion, or 33.2%, to $9.0 billion for the three months ended September 30, 2022 from $6.8 billion for the three months ended September 30, 2021 which was primarily due to securities acquired in connection with our acquisition of Century of $3.1 billion, partially offset by maturities, principal paydowns and sales in excess of purchases during the three months ended September 30, 2022. The yield on our securities increased 46 basis points during the three months ended September 30, 2022 in comparison to the three months ended September 30, 2021 due to increases in market rates of interest.

•Interest income on loans ~~decreased by $15.1~~increased $38.3 million, or ~~7.4%~~44.1%, to ~~$187.7~~$125.0 million during the ~~six~~three months ended ~~June~~September 30, ~~2020~~2022 from ~~$202.8~~$86.7 million during the ~~six~~three months ended ~~June~~September 30, ~~2019.~~2021. The ~~decrease~~increase in interest income on our loans was primarily due to ~~the decrease~~an increase in the yield on average loans. The decrease in the average yield on our loans was primarily due to the downward adjustment of the interest rates on our existing adjustable-rate loans as a result of the lowering interest rate environment, whereas the average balance of loans ~~increased due to continued efforts to expand~~and an increase in our ~~loan portfolio. The FTE~~ yield on ~~average~~ loans ~~decreased 59 basis points to 4.03% during the six months ended June 30, 2020.~~and was partially offset by a decrease in net accretion of PPP loan deferred fees and costs. The average balance of our loans increased $3.0 billion, or 31.4%, to $12.5 billion during the three months ended September 30, 2022 from $9.5 billion during the three months ended September 30, 2021 which was primarily due to loans acquired in connection with our acquisition of Century of $2.9 billion. The yield on our loans increased 41 basis points during the three months ended September 30, 2022 in comparison to the three months ended September 30, 2021 due to increases in market rates of interest. The increase in interest income attributable to the increase in average total loans and yields was partially offset by ~~$529.4~~a decrease in net accretion of PPP loan deferred fees and costs of $5.4 million, or ~~5.9%~~91.5%, to ~~$9.4~~$0.5 million during the three months ended September 30, 2022 from $5.9 million during three months ended September 30, 2021.

Interest and dividend income increased by $119.9 million, or 38.6%, to $430.2 million during the nine months ended September 30, 2022 from $310.3 million during the nine months ended September 30, 2021. This increase was primarily a result of our acquisition of Century on November 12, 2021, which added approximately $6.6 billion asin interest-earning assets. Overall, the average balance of ~~June~~our interest-earning assets increased $5.9 billion, or 37.2%, to $21.6 billion during the nine

Table of Contents

months ended September 30, ~~2020~~2022 compared to ~~$8.9~~$15.7 billion asduring the nine months ended September 30, 2021, reflecting the addition of ~~June~~Century assets. Also contributing to this increase was an increase in the yield on average interest-earning assets which increased by 5 basis points compared with the nine months ended September 30, ~~2019.~~

2021.

•Interest income on securities ~~decreased $1.1~~and other short-term investments increased $52.6 million, or ~~5.3%~~119.7%, to ~~$20.4~~$96.6 million for the ~~six~~nine months ended ~~June~~September 30, ~~2020~~2022 compared to ~~$21.5~~$44.0 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019.~~2021. The ~~decrease~~increase in interest income on securities was due to ~~lower overall market rates. The FTE~~an increase in the average balance and yield ~~on average securities decreased 100 basis points to 2.0% during the six months ended June 30, 2019.~~of such securities. The average balance of our securities increased $3.3 billion, or 54.0%, to $9.3 billion during the nine months ended September 30, 2022 compared to $6.0 billion during the nine months ended September 30, 2021, which was primarily due to securities acquired in connection with our acquisition of Century of $3.1 billion combined with security purchases in excess of sales, maturities and ~~other interest earning assets~~principal paydowns. The yield on our securities increased 40 basis points during the nine months ended September 30, 2022 in comparison to the nine months ended September 30, 2021 due to increases in market rates of interest.

•Interest income on loans increased by ~~$628.2~~$67.3 million, or ~~40.7%~~25.3%, to ~~$2.2 billion as~~$333.6 million during the nine months ended September 30, 2022 from $266.3 million during the nine months ended September 30, 2021. The increase in interest income on our loans was primarily due to an increase in the average balance of ~~June 30, 2020 compared to $1.5 billion as of June 30, 2019.~~

~~We received approximately $35.8 million~~loans and was partially offset by a decrease in net accretion of PPP loan ~~origination fees from the SBA. We also~~ deferred ~~certain origination costs, totaling $3.5 million, related to our PPP loans. The loan~~ fees and costs. The average balance of our loans increased $2.6 billion, or 26.8%, to $12.3 billion during the ~~deferred costs will be amortized through~~nine months ended September 30, 2022 from $9.7 billion during the nine months ended September 30, 2021 which was primarily due to loans acquired in connection with our acquisition of Century of $2.9 billion. The increase in interest income ~~over~~attributable to the ~~life~~increase in average total loans was partially offset by a decrease in net accretion of PPP loan deferred fees and costs of $14.7 million, or 62.6%, to $8.8 million during the ~~PPP loans, which is expected to be 24~~nine months ~~but~~ended September 30, 2022 from $23.5 million during the ~~amortization period will be adjusted as PPP loans are forgiven or repaid.~~ nine months ended September 30, 2021.

Interest Expense

During the ~~six~~three and nine months ended ~~June~~September 30, ~~2020, we recorded $4.1~~2022, interest expense increased $4.9 million and $9.2 million, respectively, or 626.9% and 319.2%, respectively, to $5.6 million and $12.1 million, respectively, from $0.8 million and $2.9 million during the three and nine months ended September 30, 2021, respectively. The increase was primarily attributable to an increase in ~~PPP loan fees, net in~~deposit interest ~~income.~~

expense.

~~Interest Expense~~

~~Interest~~

During the three months ended September 30, 2022, interest expense ~~decreased $6.1~~on our interest-bearing deposits increased by $4.0 million, or ~~65.9%~~549.6%, to ~~$3.2~~$4.8 million from $0.7 million during the three months ended ~~June~~September 30, ~~2020~~2021. This increase was due to an increase in average interest-bearing deposits and due to an increase in the rates paid on deposits. Average interest-bearing deposits increased $4.3 billion, or 53.1%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021, primarily as a result of the Century acquisition which added approximately $4.4 billion in interest-bearing deposits. Rates paid on deposits increased by 11 basis points to 0.15% during the three months ended September 30, 2022 from ~~$9.3~~0.04% during the three months ended September 30, 2021, which were increased in response to an increase in market rates of interest. Interest expense related to our borrowings also contributed to the overall increase in interest expense and increased by $0.8 million, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. The increase in borrowings interest expense is attributable to an increase in our utilization of our FHLB borrowing capacity which was drawn to fund loan originations.

During the nine months ended September 30, 2022, interest expense on our interest-bearing deposits increased by $8.4 million, or 303.2%, to $11.2 million from $2.8 million during the nine months ended September 30, 2021. This increase was due to an increase in average interest-bearing deposits and due to an increase in the rates paid on deposits. Average interest-bearing deposits increased $4.8 billion, or 61.9%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021, primarily due to the Century acquisition as previously mentioned. Rates paid on deposits increased by 7 basis points to 0.12% during the nine months ended September 30, 2022 from 0.05% during the nine months ended September 30, 2021.

Net Interest Income

Net interest income increased by $49.5 million, or 48.2%, to $152.2 million during the three months ended ~~June~~September 30, ~~2019. The decrease~~2022 from $102.7 million for the three months ended September 30, 2021. Net interest income increased due to an increase in yields on interest-earning assets which exceeded the increase in the costs of interest-bearing liabilities. Also contributing to the increase in net interest income was ~~a result~~an increase in net interest-earning assets of ~~lower funding costs associated with the decline in market interest rates.~~

~~Interest expense on our interest-bearing deposits decreased by $4.2 million,~~$0.8 billion, or ~~57.6%~~9.8%, to ~~$3.1 million~~$8.9 billion during the three months ended ~~June~~September 30, ~~2020~~2022 from ~~$7.3 million~~$8.1 billion during the three months ended ~~June~~September 30, ~~2019.~~

2021.

~~Interest expense on borrowed funds decreased~~

Table of Contents

Net interest income increased by ~~$1.9~~$110.7 million, or ~~96.3%~~36.0%, to ~~$0.1~~$418.1 million during the ~~three~~nine months ended ~~June~~September 30, ~~2020~~2022 from ~~$2.0~~$307.4 million ~~during~~for the ~~three~~nine months ended ~~June~~September 30, ~~2019.~~

Interest expense decreased $8.9 million, or 49.3%, to $9.2 million during the six months ended June 30, 2020 from $18.1 million during the six months ended June 30, 2019. The decrease was a result of decreased rates paid on deposits. The overall rates paid on average interest-bearing liabilities decreased 31 basis points to 0.27% during the six months ended June 30, 2020. Average interest-bearing liabilities2021. Net interest income increased ~~$404.3 million, or 6.4%, to $6.7 billion as of six months ended June 30, 2020 compared to $6.3 billion as of six months ended June 30, 2019.~~

Interest expense on our interest-bearing deposits decreased by $5.3 million, or 38.4%, to $8.5 million during the six months ended June 30, 2020 from $13.8 million during the six months ended June 30, 2019. The decrease in our interest expense on interest-bearing deposits was due to a decrease in the cost of deposits. The average balance of deposits increased due to our increasing core deposits to help fund loan growth, whereas the average cost of deposits decreased due to the interest rate decreases occurring in the six months ended June 30, 2020. The average cost of our interest-bearing deposits decreased 21 basis points to 0.26% during the six months ended June 30, 2020. The average balance of our interest-bearing deposits increased by $637.5 million, or 10.7%, to $6.6 billion as of June 30, 2020 compared to $6.0 billion as of June 30, 2019.

Interest expense on borrowed funds decreased by $3.6 million, or 84.3%, to $0.7 million during the six months ended June 30, 2020 from $4.3 million during the six months ended June 30, 2019. The decrease in interest expense on borrowed funds was primarily due to ~~the average balance~~an increase in net interest-earning assets of ~~the FHLB advances decreasing by $143.8 million~~$1.0 billion, or 12.8%, to ~~$16.2 million~~$9.0 billion during the ~~six~~nine months ended ~~June~~September 30, ~~2020 compared to $160.0 million~~2022 from $8.0 billion during the ~~six~~nine months ended ~~June~~September 30, ~~2019.~~ 2021.

The ~~average balance of borrowed funds decreased by $233.2 million, or 66.2%, to $119.2 million as of June 30, 2020 compared to $352.5 million as of June 30, 2019.~~

~~Net Interest Income~~

~~Net~~following chart shows our net interest ~~income decreased by $4.8 million, or 4.6%, to $98.8 million during~~margin over the three months ended June 30, 2020 from $103.5 million during the three months ended June 30, 2019. The decrease was a result of the Bank’s asset sensitivity combined with a lower interest rate environment. The decline in interest income was only partially offset by a decline in interest expense.

Net interest income decreased by $7.3 million, or 3.5%, to $198.9 million during the six months ended June 30, 2020 from $206.2 million during the six months ended June 30, 2019. The decrease was primarily a result of the decrease in interestpast five quarters including and ~~dividend income partially offset by the decrease in interest expense, both due to the decrease in interest rates during the six months ended June 30, 2020.~~

excluding net PPP loan fee accretion:

Net interest margin is determined by dividing FTE net interest income by average-earning assets. For purposes of the following discussion, income from tax-exempt loans and investment securities has been adjusted to an FTE basis, using a marginal tax rate of ~~21.7%~~21.5% for the ~~six~~three and nine months ended ~~June~~September 30, ~~2020~~2022 and ~~21.8%~~21.0% for the ~~six~~three and nine months ended ~~June~~September 30, ~~2019.~~2021. Net interest margin, ~~decreased 54~~including PPP loan interest income, increased 34 basis points to ~~3.49%~~2.87% during the ~~six~~three months ended ~~June~~September 30, ~~2020.~~

2022, from 2.53% during the three months ended September 30, 2021. Net interest margin, including PPP loan interest income, remained flat at 2.64% during the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021. The increase in net interest margin for the three months ended September 30, 2022 from the three months ended September 30, 2021 was primarily due to an increase in market rates of interest and was partially offset by a decline in PPP net fee accretion of $5.4 million for such periods. The consistency in our net interest margin during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 is due to the impact of recent increases in market rates having been offset by a reduction in PPP net fee accretion for the same periods. For additional discussion of the decline in the PPP loan net fee accretion and increased interest rates, refer to the earlier “Outlook and Trends” section.

Table of Contents

The following tables set forth average balance sheet items, annualized average yields and costs, and certain other information for the periods indicated. ~~Interest income on~~ ~~tax-exempt~~ ~~loans and investment securities has been adjusted to an FTE basis using a marginal tax rate of 21.7% and 21.8% for the six months ended June 30, 2020 and 2019, respectively.~~ All average balances ~~are~~in the table reflect daily average balances. Non-accrual loans were included in the computation of average balances but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees and costs, discounts and premiums that are amortized or accreted to interest income or expense.

Average Balances, Interest Earned/Paid, & Average Yields

   Three months ended June 30,
   2020 2019
   Average
Outstanding
Balance Interest    Average
Yield/Cost
⁽⁵⁾ Average
Outstanding
Balance Interest    Average
Yield /Cost
⁽⁵⁾
   (Dollars in thousands)
Interest-earning assets:

Loans ⁽¹⁾

Residential
   $ 1,423,161 $ 12,555    3.51 % $ 1,435,561 $ 13,439    3.72 %
Commercial
   6,735,075 69,779    4.12 % 6,024,268 74,064    4.89 %
Consumer
   1,287,430 10,610    3.28 % 1,456,395 15,349    4.19 %






Total loans
   9,445,666 92,944    3.91 % 8,916,224 102,852    4.59 %
Investment securities
   1,478,156 10,083    2.71 % 1,460,262 10,644    2.90 %
Federal funds sold and other short-term investments
   694,386 284    0.16 % 84,044 612    2.90 %






Total interest-earning assets
   11,618,208 103,311    3.54 % 10,460,530 114,108    4.34 %
Non-interest-earning assets
   1,064,218    859,928





Total assets
   $ 12,682,426    $ 11,320,458





Interest-bearing liabilities:

Deposits:

Savings account
   $ 1,036,344 $ 64    0.02 % $ 1,008,737 $ 52    0.02 %
Interest checking account
   2,158,242 648    0.12 % 1,877,777 1,075    0.23 %
Money market investment
   3,087,048 1,928    0.25 % 2,634,820 4,997    0.75 %
Time account
   320,277 462    0.57 % 443,070 1,188    1.07 %






Total interest-bearing deposits
   6,601,911 3,102    0.19 % 5,964,404 7,312    0.49 %
Borrowings
   119,211 74    0.25 % 352,453 2,001    2.26 %






Total interest-bearing liabilities
   6,721,122 3,176    0.19 % 6,316,857 9,313    0.59 %
Demand accounts
   3,963,066    3,320,873
Other noninterest-bearing liabilties
   337,679    192,521





Total liabilities
   11,021,867    9,830,251





Total net worth
   1,660,559    1,490,207





Total liabilities and retained earnings
   $ 12,682,426    $ 11,320,458





Net interest income - FTE
   $ 100,135    $ 104,795





Net interest rate spread ⁽²⁾
      3.35 %    3.75 %




Net interest-earning assets ⁽³⁾
   $ 4,897,086    $ 4,143,673





Net interest margin - FTE ⁽⁴⁾
      3.43 %    4.02 %




Average interest-earning assets to interest-bearing liabilities
   172.86 %    165.60 %

~~(1)~~

~~Non-accrual~~ ~~loans are included in Loans.~~

~~(2)~~

~~Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.~~

~~(3)~~

~~Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.~~

~~(4)~~

~~Net interest margin represents net interest income divided by average total interest-earning assets.~~

~~(5)~~

~~Annualized.~~

   Six months ended June 30,
   2020 2019
   Average
Outstanding
Balance Interest    Average
Yield /Cost
⁽⁵⁾ Average
Outstanding
Balance Interest    Average
Yield/Cost
⁽⁵⁾
   (Dollars in thousands)
Interest-earning assets:

Loans ⁽¹⁾

Residential
   $ 1,423,161 $ 25,858    3.65 % $ 1,435,561 $ 26,861    3.77 %
Commercial
   6,735,075 139,394    4.16 % 6,024,268 146,483    4.90 %
Consumer
   1,287,430 24,017    3.75 % 1,456,395 30,706    4.25 %






Total loans
   9,445,666 189,269    4.03 % 8,916,224 204,050    4.61 %
Investment securities
   1,478,156 20,768    2.83 % 1,460,262 21,956    3.03 %
Federal funds sold and other short-term investments
   694,386 801    0.23 % 84,044 965    2.32 %






Total interest-earning assets
   11,618,208 210,838    3.65 % 10,460,530 226,971    4.38 %
Non-interest-earning assets
   1,064,218    859,928





Total assets
   $ 12,682,426    $ 11,320,458





Interest-bearing liabilities:

Deposits:

Savings account
   $ 1,036,344 $ 118    0.02 % $ 1,008,737 $ 105    0.02 %
Interest checking account
   2,158,242 1,467    0.14 % 1,877,777 1,973    0.21 %
Money market investment
   3,087,048 5,832    0.38 % 2,634,820 9,287    0.71 %
Time account
   320,277 1,100    0.69 % 443,070 2,467    1.12 %






Total interest-bearing deposits
   6,601,911 8,517    0.26 % 5,964,404 13,832    0.47 %
Borrowings
   119,211 673    1.14 % 352,453 4,293    2.46 %






Total interest-bearing liabilities
   6,721,122 9,190    0.27 % 6,316,857 18,125    0.58 %
Demand accounts
   3,963,066    3,320,873
Other noninterest-bearing liabilties
   337,679    192,521





Total liabilities
   11,021,867    9,830,251





Total net worth
   1,660,559    1,490,207





Total liabilities and retained earnings
   $ 12,682,426    $ 11,320,458





Net interest income - FTE
   $ 201,648    $ 208,846





Net interest rate spread ⁽²⁾
      3.38 %    3.80 %




Net interest-earning assets ⁽³⁾
   $ 4,897,086    $ 4,143,673





Net interest margin - FTE ⁽⁴⁾
      3.49 %    4.03 %




Average interest-earning assets to interest-bearing liabilities
   172.86 %    165.60 %

~~(1)~~

~~Non-accrual~~ ~~loans are included in Loans.~~

~~(2)~~

~~Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.~~

~~(3)~~

~~Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.~~

~~(4)~~

~~Net interest margin represents net interest income divided by average total interest-earning assets.~~

~~(5)~~

~~Annualized.~~


	As of and for the three months ended September 30,
	2022							2021
	Average Outstanding Balance			Interest		Average Yield/Cost (5)		Average Outstanding Balance			Interest		Average Yield /Cost (5)
	(Dollars in thousands)
Interest-earning assets:
Loans (1)
Residential	$	2,043,219		$	15,811	3.07	%	$	1,477,891		$	11,479	3.08	%
Commercial	9,138,029			96,270		4.18	%	6,995,556			67,276		3.82	%
Consumer	1,341,528			16,072		4.75	%	1,055,075			8,803		3.31	%
Total loans	12,522,776			128,153		4.06	%	9,528,522			87,558		3.65	%
Non-taxable investment securities	269,900			2,428		3.57	%	259,040			2,341		3.59	%
Taxable investment securities	8,446,205			29,280		1.38	%	4,990,702			14,314		1.14	%
Other short-term investments	282,629			1,638		2.30	%	1,503,919			571		0.15	%
Total interest-earning assets	$	21,521,510		$	161,499	2.98	%	$	16,282,183		$	104,784	2.55	%
Non-interest-earning assets	911,025							1,141,168
Total assets	$	22,432,535						$	17,423,351
Interest-bearing liabilities:
Deposits:
Savings account	$	2,021,125		$	51	0.01	%	$	1,441,385		$	36	0.01	%
Interest checking account	5,211,914			2,686		0.20	%	2,687,196			244		0.04	%
Money market investment	4,824,452			1,893		0.16	%	3,762,855			360		0.04	%
Time account	380,560			151		0.16	%	233,145			96		0.16	%
Total interest-bearing deposits	12,438,051			4,781		0.15	%	8,124,581			736		0.04	%
Federal funds purchased	3,804			24		2.50	%	—			—		—	%
Other borrowings	153,882			843		2.17	%	26,074			41		0.62	%
Total interest-bearing liabilities	$	12,595,737		$	5,648	0.18	%	$	8,150,655		$	777	0.04	%
Demand accounts	6,614,467							5,471,906
Other noninterest-bearing liabilities	445,640							350,111
Total liabilities	19,655,844							13,972,672
Shareholders’ equity	2,776,691							3,450,679
Total liabilities and shareholders’ equity	$	22,432,535						$	17,423,351
Net interest income – FTE				$	155,851						$	104,007
Net interest rate spread (2)						2.80	%						2.51	%
Net interest-earning assets (3)	$	8,925,773						$	8,131,528
Net interest margin – FTE (4)						2.87	%						2.53	%
Average interest-earning assets to interest-bearing liabilities	170.86		%					199.77		%
Return on average assets (5)(6)	0.97		%					0.84		%
Return on average equity (5)(7)	7.83		%					4.27		%
Noninterest expense to average assets	2.07		%					2.25		%

(1)Non-accrual loans are included in loans.

(2)Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(3)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(4)Net interest margin represents net interest income divided by average total interest-earning assets.

Table of Contents

(5)Presented on an annualized basis.
(6)Represents net income divided by average total assets.
(7)Represents net income divided by average equity.
As of and for the nine months ended September 30,
2022 2021
Average
Outstanding
Balance Interest Average
Yield /Cost
(5) Average
Outstanding
Balance Interest Average
Yield/Cost
(5)
(Dollars in thousands)
Interest-earning assets:
Loans (1)
Residential $ 1,980,630 $ 44,966 3.04 % $ 1,435,006 $ 34,150 3.18 %
Commercial 9,019,196 258,082 3.83 % 7,203,903 208,228 3.86 %
Consumer 1,315,136 38,016 3.86 % 1,074,039 26,337 3.28 %
Total loans 12,314,962 341,064 3.70 % 9,712,948 268,715 3.70 %
Non-taxable investment securities 264,717 7,072 3.57 % 260,102 7,038 3.62 %
Taxable investment securities 8,484,540 88,277 1.39 % 4,154,480 36,977 1.19 %
Other short-term investments 541,285 2,726 0.67 % 1,619,873 1,434 0.12 %
Total interest-earning assets $ 21,605,504 $ 439,139 2.72 % $ 15,747,403 $ 314,164 2.67 %
Non-interest-earning assets 1,099,406 1,106,967
Total assets $ 22,704,910 $ 16,854,370
Interest-bearing liabilities:
Deposits:
Savings account $ 2,046,254 $ 153 0.01 % $ 1,376,243 $ 169 0.02 %
Interest checking account 4,897,321 6,778 0.19 % 2,541,113 730 0.04 %
Money market investment 5,151,384 3,559 0.09 % 3,576,648 1,553 0.06 %
Time account 429,401 674 0.21 % 243,621 317 0.17 %
Total interest-bearing deposits 12,524,360 11,164 0.12 % 7,737,625 2,769 0.05 %
Federal funds purchased 1,282 24 2.50 % — — — %
Other borrowings 73,745 935 1.70 % 25,582 123 0.64 %
Total interest-bearing liabilities $ 12,599,387 $ 12,123 0.13 % $ 7,763,207 $ 2,892 0.05 %
Demand accounts 6,698,640 5,318,903
Other noninterest-bearing liabilities 436,724 347,237
Total liabilities 19,734,751 13,429,347
Shareholders’ equity 2,970,159 3,425,023
Total liabilities and shareholders’ equity $ 22,704,910 $ 16,854,370
Net interest income – FTE $ 427,016 $ 311,272
Net interest rate spread (2) 2.59 % 2.62 %
Net interest-earning assets (3) $ 9,006,117 $ 7,984,196
Net interest margin – FTE (4) 2.64 % 2.64 %
Average interest-earning assets to interest-bearing liabilities 171.48 % 202.85 %
Return on average assets (5)(6) 0.93 % 0.95 %
Return on average equity (5)(7) 7.09 % 4.67 %
Noninterest expense to average assets 1.98 % 2.38 %
(1)Non-accrual loans are included in loans.
(2)Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(3)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(4)Net interest margin represents net interest income divided by average total interest-earning assets.
(5)Presented on an annualized basis.
(6)Represents net income divided by average total assets.
(7)Represents net income divided by average equity.
94
Table of Contents

The following chart shows the composition of our quarterly average interest-earning assets for the past five quarters:

Provision for Loan Losses

The provision for loan losses represents the charge to expense that is required to maintain an appropriate level of allowance for loan losses. ~~The~~

We recorded a provision for loan losses ~~increased by $7.1 million, or 473.3%, to $8.6~~of $6.5 million for the three months ended ~~June~~September 30, ~~2020,~~2022, compared to a release of $1.5 million for the three months ended ~~June~~September 30, ~~2019. This increase was~~2021. Management determined a provision to be necessary due to increased loan balances, which were partially offset by continued low historical losses during the three months ended September 30, 2022, compared with average historical losses for periods preceding the three months ended September 30, 2022. With respect to the three months ended September 30, 2021, management had determined that a release was necessary given the continued improved economic and credit conditions experienced at that time. Overall, we recorded a net provision for allowance for loan ~~risk rating migration~~losses of $7.0 million for the nine months ended September 30, 2022 compared to a release of $5.4 million for the nine months ended September 30, 2021 during which period management determined the Company’s allowance for loan losses in ~~commercial~~accordance with ASC 450, “Contingencies” and ~~industrial~~ASC 310, “Receivables” (i.e., prior to our adoption of ASU 2016-13).

To determine our allowance for loan losses as of September 30, 2022 and ~~commercial real estate portfolios to reflect~~ the ~~impact of the current economic environment resulting from the COVID-19 pandemic.~~

~~The~~ provision for loan losses ~~increased by $32.7 million, or 726.7%, to $37.2 million~~ for the ~~six~~three and nine months ended ~~June~~September 30, ~~2020, compared~~2022, we used Oxford Economics September 2022 Baseline forecast (“the forecast”) to ~~$4.5 million~~generate our modeled expected losses by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions, which remained relatively stable in comparison to the first and second quarters of 2022. The forecast assumed overall positive but slower economic growth supported by strong employment and consumer spending for the ~~six months ended June 30, 2019. The~~remainder of 2022 and expects a mild recession in 2023. Recession expectations were supported by high inflation, rising interest rates, lingering supply chain difficulties, and softer labor market dynamics. Primary macroeconomic assumptions included in management’s evaluation of the adequacy of the allowance for loan losses included continued low, but rising, unemployment rates and slowing gross domestic product growth. Further, the forecast assumed that the FOMC will continue to raise interest rates into early 2023 following its most recent September 2022 increase ~~was primarily due~~and a decrease in the core consumer price index which is expected to remain above the FOMC’s 2% target until mid-2023. Refer to the ~~change~~section titled “Outlook and Trends” within this Item 2 for additional discussion. For additional discussion of our allowance for credit losses measurement methodology, see Note 2, “Summary of Significant Accounting Policies” and Note 4, “Loans and Allowance for Loan Losses” within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q. For discussion of our previous methodology for estimating the allowance for loan ~~risk ratings~~losses, refer to ~~reflect~~Note 5, “Loans and Allowance for Loan Losses” within the ~~impact~~Notes to the Unaudited Consolidated Financial Statements included in Part

Table of Contents

I, Item 1 in this Quarterly Report on Form 10-Q and Note 2, “Summary of Significant Accounting Policies” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of the ~~increased concerns about customers that are expecting to face financial difficulties due to the current economic environment resulting from the~~ ~~COVID-19~~ pandemic, primarily related to the downgrading of our hotel and restaurant loan portfolios. The increase in the provision also reflects the increased concern about the performance of the loan portfolio given the increase in the ~~non-performing~~ ~~loans and delinquent loans during the quarter ended June 30, 2020.~~

2021 Form 10-K.

Our periodic evaluation of the appropriate allowance for loan losses considers the risk characteristics of the loan portfolio, current economic conditions, and trends in loan delinquencies and charge-offs.

Noninterest Income

The following table sets forth information regarding noninterest income for the periods shown:

Noninterest Income

   Three Months Ended June 30, Six Months Ended June 30,
   Change Change
   2020 2019 Amount % 2020 2019 Amount %
   (Dollars in thousands)
Insurance commissions
   $ 22,697 $ 24,135 (1,438 ) (6.0 )% $ 50,174 $ 48,897 1,277 2.6 %
Service charges on deposit accounts
   4,364 6,771 (2,407 ) (35.5 )% 10,462 13,175 (2,713 ) (20.6 )%
Debit card processing fees
   5,194 4,980 214 4.3 % 10,289 9,608 681 7.1 %
Trust and investment advisory fees
   2,337 2,638 (301 ) (11.4 )% 4,807 5,048 (241 ) (4.8 ) %
Interest swap income
   771 (810 ) 1,581 (195.2 )% (5,238 ) (470 ) (4,768 ) (1,014.5 )%
Income from investments held in rabbi trusts
   7,745 1,822 5,923 325.1 % 1,002 5,969 (4,967 ) (83.2 )%
Trading securities gains, net
   (1 ) 152 (153 ) (100.7 )% (3 ) 1,294 (1,297 ) (100.2 )%
Net gain on sales of mortgage loans held for sale
   1,420 159 1,261 793.1 % 1,513 209 1,304 623.9 %
Gains on sales of securities available for sale, net
   163 1,966 (1,803 ) (91.7 )% 285 2,016 (1,731 ) (85.9 )%
Other
   2,967 3,819 (852 ) (22.3 )% 7,735 7,686 49 0.6 %


Total noninterest income
   $ 47,657 $ 45,632 $ 2,025 4.4 % $ 81,026 $ 93,432 $ (12,406 ) (13.3 )%


	Three Months Ended September 30,								Nine Months Ended September 30,
					Change								Change
	2022		2021		Amount		%		2022		2021		Amount		%
	(Dollars in thousands)
Insurance commissions	$	23,788	$	21,956	$	1,832	8.3	%	$	77,183	$	73,767	$	3,416	4.6	%
Service charges on deposit accounts	6,708		5,935		773		13.0	%	23,558		17,010		6,548		38.5	%
Trust and investment advisory fees	5,832		6,310		(478)		(7.6)	%	17,967		18,047		(80)		(0.4)	%
Debit card processing fees	3,249		3,030		219		7.2	%	9,417		8,949		468		5.2	%
Interest rate swap income	1,562		881		681		77.3	%	6,087		5,122		965		18.8	%
(Losses) income from investments held in rabbi trusts	(2,248)		(289)		(1,959)		677.9	%	(13,997)		5,773		(19,770)		(342.5)	%
Gains on sales of mortgage loans held for sale, net	22		717		(695)		(96.9)	%	240		3,044		(2,804)		(92.1)	%
(Losses) gains on sales of securities available for sale, net	(198)		1		(199)		(19,900.0)	%	(2,474)		1,166		(3,640)		(312.2)	%
Other	4,638		4,668		(30)		(0.6)	%	13,664		11,276		2,388		21.2	%
Total noninterest income	$	43,353	$	43,209	$	144	0.3	%	$	131,645	$	144,154	$	(12,509)	(8.7)	%

Noninterest income ~~increased by $2.0~~remained flat with a slight increase of $0.1 million, or ~~4.4%~~0.3%, to ~~$47.7~~$43.4 million for the three months ended ~~June~~September 30, ~~2020~~2022 from ~~$45.6~~$43.2 million for the three months ended ~~June~~September 30, ~~2019.~~2021. This increase was primarily due to a ~~$5.9~~$1.8 million increase in insurance commissions, a $0.8 million increase in service charges on deposit accounts, and a $0.7 million increase in interest rate swap income. These increases were partially offset by a $2.0 million decrease in income from investments held in rabbi trusts, ~~a $1.6 million increase in interest rate swap income,~~ and a ~~$1.3~~$0.7 million ~~increase~~decrease in net gains on sales of mortgage loans held for ~~sale and partially offset by a $2.4 million decrease~~sale.

•Insurance commissions increased due to an increase in ~~service~~recurring commissions which was attributable to recent insurance agency acquisitions. Refer to the section titled “Overview” within this Item 2 for additional discussion of such agency acquisitions.

•Service charges on deposit accounts increased primarily as a ~~$1.8~~result of increased corporate account analysis charges as a result of greater commercial deposit customer activity. The increased customer deposit activity is primarily attributable to our acquisition of Century.

•Interest rate swap income increased primarily as a result of a favorable mark-to-market adjustment during the three months ended September 30, 2022 compared to the three months ended September 30, 2021.

•Income from investments held in rabbi trusts decreased to a net loss primarily as a result of an unfavorable mark-to-market adjustment on equity securities held in these accounts resulting from a decline in the market value of equity securities held in the rabbi trusts.

•Net gains on sales of mortgage loans held for sale decreased due to a reduction in the volume of our mortgage loan sales on the secondary market which was primarily attributable to rising market rates of interest.

Noninterest income decreased by $12.5 million, or 8.7%, to $131.6 million for the nine months ended September 30, 2022 from $144.2 million for the nine months ended September 30, 2021. The decrease was primarily due to a $19.8 million decrease in income from investments held in rabbi trusts which resulted from a current period net loss from such investments, a $3.6 million decrease in gains on sales of securities available for sale which resulted from a current period net loss from such sales compared to a net gain in the comparative prior period, and a ~~$1.4~~$2.8 million decrease in net gains on sales of

Table of Contents

mortgage loans. These decreases were partially offset by a $6.5 million increase in service charges on deposit accounts and a $3.4 million increase in insurance commissions.

Noninterest income decreased by $12.4 million, or 13.3%, to $81.0 million for the six months ended June 30, 2020 from $93.4 million for the six months ended June 30, 2019. The decrease was primarily due to a $5.0 million decrease in income

•Income from investments held in rabbi trusts decreased to a ~~$4.8 million decrease in interest rate swap income, and a $2.7 million decrease in deposit service charges,~~ net ~~partially offset by a $1.3 million increase in insurance commissions.~~

~~Insurance commissions increased primarily as a result of an increase in our profit-sharing revenues and commissions.~~

~~Income (loss) from investments held in rabbi trust decreased primarily as a result of a less favorable~~ ~~mark-to-market~~ ~~adjustment during the six months ended June 30, 2020, compared to the six months ended June 30, 2019.~~

~~Swap income decreased~~loss primarily as a result of an unfavorable mark-to-market adjustment on equity securities held in these accounts resulting from a decline in the market value of equity securities held in the rabbi trusts.

•Gains on sales of securities available for sale, net, decreased to a net loss due to the ~~current interest rate~~decision by management to sell certain available for sale securities during the nine months ended September 30, 2022, a portion of which were acquired in connection with our acquisition of Century and ~~economic environment.~~

were in a net unrealized loss position at the time of sale.

•Net gains on sales of mortgage loans decreased due to a reduction in the volume of our mortgage loan sales on the secondary market which was primarily attributable to rising market rates of interest.

•Service charges on deposit accounts increased primarily as a result of increased corporate account analysis charges as a result of greater commercial deposit customer activity and increased overdraft fees as a result of greater customer deposit activity. The increased customer deposit activity is primarily attributable to our acquisition of Century. Partially offsetting the increase in overdraft fees attributable to greater customer activity was a reduction in overdraft fees charged to customers which went into effect during the three months ended September 30, 2022.

•Insurance commissions increased due to an increase in recurring commissions and profit sharing income which was attributable to recent insurance agency acquisitions. Refer to the section titled “Overview” within this Item 2 for additional discussion of such agency acquisitions.

Noninterest Expense

The following table sets forth information regarding noninterest expense for the periods shown:

Noninterest Expense

   Three Months Ended June 30, Six Months Ended June 30,
   Change Change
   2020 2019 Amount % 2020 2019 Amount %
   (Dollars in thousands)
Salaries and employee benefits
   $ 63,335 $ 62,364 971 1.6 % $ 124,924 $ 129,670 (4,746 ) (3.7 )%
Office occupancy and equipment
   8,615 8,383 232 2.8 % 17,304 17,182 122 0.7 %
Data processing
   12,180 10,912 1,268 11.6 % 22,184 21,588 596 2.8 %
Professional services
   4,396 3,966 430 10.8 % 8,085 7,104 981 13.8 %
Charitable contributions
   2,797 3,683 (886 ) (24.1 )% 3,984 7,331 (3,347 ) (45.7 )%
Marketing
   1,645 2,683 (1,038 ) (38.7 )% 4,113 4,406 (293 ) (6.7 )%
Loan expenses
   2,036 886 1,150 129.8 % 3,148 1,551 1,597 103.0
FDIC insurance
   944 927 17 1.8 % 1,850 1,800 50 2.8 %
Amortization of intangible assets
   701 886 (185 ) (20.9 )% 1,403 1,773 (370 ) (20.9 )%
Net periodic benefit cost, excluding service cost
   (2,443 ) (1,334 ) (1,109 ) (83.1 )% (4,885 ) (2,668 ) (2,217 ) (83.1 )%
Other
   6,559 8,214 (1,655 ) (20.1 )% 13,827 16,662 (2,835 ) (17.0 )%


Total noninterest expense
   $ 100,765 $ 101,570 $ (805 ) (0.8 )% $ 195,937 $ 206,399 $ (10,462 ) (5.1 )%


	Three Months Ended September 30,								Nine Months Ended September 30,
					Change								Change
	2022		2021		Amount		%		2022		2021		Amount		%
							(Dollars in thousands)
Salaries and employee benefits	$	78,060	$	66,238	$	11,822	17.8	%	$	220,582	$	199,554	$	21,028	10.5	%
Office occupancy and equipment	9,703		7,960		1,743		21.9	%	31,205		24,271		6,934		28.6	%
Data processing	13,294		12,191		1,103		9.0	%	42,959		37,892		5,067		13.4	%
Professional services	5,826		4,024		1,802		44.8	%	14,561		14,611		(50)		(0.3)	%
Marketing	2,219		1,598		621		38.9	%	6,444		6,786		(342)		(5.0)	%
Loan expenses	1,152		1,586		(434)		(27.4)	%	3,444		5,287		(1,843)		(34.9)	%
FDIC insurance	1,578		1,056		522		49.4	%	4,710		2,989		1,721		57.6	%
Amortization of intangible assets	1,033		629		404		64.2	%	2,767		1,786		981		54.9	%
Other	3,975		3,688		287		7.8	%	10,173		7,178		2,995		41.7	%
Total noninterest expense	$	116,840	$	98,970	$	17,870	18.1	%	$	336,845	$	300,354	$	36,491	12.1	%

Noninterest expense ~~decreased~~increased by ~~$0.8~~$17.9 million, or ~~0.8%~~18.1%, to ~~$100.8~~$116.8 million during the three months ended ~~June~~September 30, ~~2020~~2022 from ~~$101.6~~$99.0 million during the three months ended ~~June~~September 30, ~~2019.~~2021. This ~~decrease~~increase was primarily due to ~~a decrease in other noninterest expense of $1.7~~an $11.8 million ~~a $1.1 million~~ increase in net periodic benefit cost, excluding service cost, and a $1.0 million decrease in marketing expenses and partially offset by an increase in loan expenses of $1.2 million and an increase in data processing expenses of $1.3 million.

Noninterest expense decreased by $10.5 million, or 5.1%, to $195.9 million during the six months ended June 30, 2020 from $206.4 million during the six months ended June 30, 2019. The decrease was primarily due to a $4.7 million decrease in salaries and employee benefits, a ~~$3.3 million decrease in charitable contributions and a $2.2 million decrease in net periodic benefit cost, excluding service cost, partially offset by a $1.0~~$1.8 million increase in professional services, ~~expense and $1.6~~a $1.7 million increase in ~~loan expenses.~~

office occupancy and equipment, and a $1.1 million increase in data processing.

•Salaries and employee benefits ~~decreased~~increased primarily due to salaries and wages for newly hired employees and former employees of Century who were retained subsequent to the acquisition. In addition, we incurred $3.6 million in share-based compensation expense related to restricted stock awards granted in the fourth quarter of 2021 and awards of restricted stock units and performance stock units granted in the first quarter of 2022 and restricted stock awards granted in the second quarter of 2022. No related expenses were incurred during the three months ended September 30, 2021 as ~~a result of a favorable defined contribution supplemental executive retirement plan expense as a result of the less favorable~~ ~~mark-to-market~~ ~~adjustment on securities held in rabbi trust accounts, lower incentive expenses and~~no such awards had been granted. Lastly, our deferrals of ~~nonrefundable fees~~loan

Table of Contents

origination-related costs decreased by $2.1 million resulting in a corresponding increase in salaries and ~~costs associated with originating or acquiring loans (primarily due to the PPP loans), partially offset by higher commissions.~~

employee benefits expenses.

Charitable contributions decreased primarily as a result of lower contributions to the Eastern Bank Charitable Foundation, as a result of lower taxable income for the six months ended June 30, 2020, compared to the six months ended June 30, 2019.

~~Net period benefit cost, excluding service cost, decreased primarily as a result of a reduction in the expected return on plan assets.~~

•Professional services increased primarily as a result of ~~higher legal costs related~~interest rate swap professional transactional fees which were associated with our interest swaps qualifying for hedge accounting, which we had not entered into during the three months ended September 30, 2021. Also contributing to ~~(i) corporate-related matters, (ii) loan- related matters~~the increase in professional fees were increased fees incurred for employee search and ~~(iii) our commercial banking strategy~~placement.

•Office occupancy and ~~development services.~~

~~Loan~~equipment expenses increased primarily due to the addition of properties resulting from our acquisition of Century which included a $0.6 million increase in depreciation expense.

•Data processing expenses are primarily comprised of costs associated with the processing of customer transactions including loans and deposits and are partially impacted by fluctuations in related transaction volume. Such expenses increased during the three months ended September 30, 2022 from the three months ended September 30, 2021, primarily due to our acquisition of Century in the fourth quarter of 2022 which resulted in the acquisition of additional loan and deposit customers.

Noninterest expense increased by $36.5 million, or 12.1%, to $336.8 million during the nine months ended September 30, 2022 from $300.4 million during the nine months ended September 30, 2021. The increase was primarily due to a $21.0 million increase in salaries and employee benefits, a $6.9 million increase in office occupancy and equipment expenses, a $5.1 million increase in data processing expenses and a $3.0 million increase in other noninterest expenses.

•Salaries and employee benefits increased primarily due to salaries and wages for newly hired employees and former employees of Century who were retained subsequent to the acquisition. In addition, we incurred $8.1 million in share-based compensation expense related to restricted stock awards granted in the fourth quarter of 2021 and awards of restricted stock units and performance stock units granted in the first quarter of 2022 and restricted stock awards granted in the second quarter of 2022. No comparable expenses were incurred during the nine months ended September 30, 2021, during which period the Company did not have an equity incentive plan and no such awards were granted. Lastly, our deferrals of loan origination-related costs decreased by $7.8 million, resulting in a corresponding increase in salaries and employee benefits expenses.

•Office occupancy and equipment increased during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 primarily due to the addition of properties resulting from our acquisition of Century which included a ~~result~~$2.0 million increase in depreciation expense, and lease impairment charges of $0.6 million, which were due to an early termination of a lease acquired from Century.

•Data processing expenses are primarily comprised of costs associated with the processing of customer transactions including loans and deposits and are partially impacted by fluctuations in related transaction volume. Such expenses increased ~~mortgage~~during the nine months ended September 30, 2022 from the nine months ended September 30, 2021 primarily due to our acquisition of Century in the fourth quarter of 2022 which resulted in the acquisition of additional loan ~~originations.~~

and deposit customers.

•Other noninterest expenses increased primarily due to a $2.1 million increase in liability insurance expense, which was primarily due to regular insurance rate premium increases and our acquisition of Century, which increased the number of our properties and, therefore, the scope of our required insurance coverage, and a $1.7 million increase in customer bad check losses during the nine months ended September 30, 2022 compared to during nine months ended September 30, 2021, consistent with a nationwide increase in mail-based check fraud. Partially offsetting the effect of these items was a decrease of $3.3 million in legal expenses associated with the settlement of two putative class action litigation matters related to overdraft and non-sufficient funds fees. The accrual for such expenses was initially recorded during the second quarter of 2021 and final settlement of the legal matters occurred during the first quarter of 2022. For additional information, refer to Note 12, “Commitments and Contingencies” within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q.

Table of Contents

Income Taxes

We recognize the tax effect of all income and expense transactions in each year’s consolidated statements of income, regardless of the year in which the transactions are reported for income tax purposes. The following table sets forth information regarding our tax provision and applicable tax rates for the periods indicated:

Tax Provision and Applicable Tax Rates

   Three months ended June 30, Six months ended June 30,
   2020 2019 2020 2019
   (Dollars in thousands)
Combined federal and state income tax provisions
   $ 7,197 $ 11,032 $ 8,495 $ 20,710
Effective income tax rates
   19.4 % 23.9 % 18.2 % 23.3 %
Blended statutory tax rate
   28.1 % 28.1 % 28.1 % 28.1 %


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
	(Dollars in thousands)
Combined federal and state income tax provisions	$	17,435		$	11,312		$	48,350		$	36,980
Effective income tax rates	24.1		%	23.4		%	23.5		%	23.6		%
Blended statutory tax rate	28.1		%	28.1		%	28.1		%	28.1		%

Income tax expense ~~decreased~~increased by ~~$3.8~~$6.1 million, or ~~34.8%~~54.1%, to ~~$7.2~~$17.4 million in the three months ended ~~June~~September 30, ~~2020~~2022 from ~~$11.0~~$11.3 million in the three months ended ~~June~~September 30, ~~2019. This decrease~~2021 and increased by $11.4 million, or 30.7%, to $48.4 million in the nine months ended September 30, 2022 from $37.0 million in the nine months ended September 30, 2021. The increase in income tax expense was due primarily to ~~lower~~higher pre-tax income during the three and nine months ended ~~June~~September 30, ~~2020~~2022 compared to the three and nine months ended ~~June~~September 30, ~~2019, while investment tax credits and other favorable permanent differences have remained relatively constant.~~

Income tax expense decreased by $12.2 million, or 59.0%, to $8.5 million in the six months ended June 30, 2020 from $20.7 million in the six months ended June 30, 2019. The decrease was due primarily to lower ~~pre-tax~~ ~~income during the six months ended June 30, 2020 compared~~2021. For additional information related to the ~~six months ended June 30, 2019, while investment tax credits and other favorable permanent differences have remained relatively constant.~~

Company’s income taxes see Note 12, “Income Taxes” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in our 2021 Form 10-K.

Table of Contents

Financial Position and Results of Operations of our Business Segments

Comparison of the three and ~~six~~nine months ended ~~June~~September 30, ~~2020~~2022 and ~~2019~~

As of and for the three months ended June 30,
2020 2019
Banking
Business Insurance
Agency
Business Other/
Eliminations Total Banking
Business Insurance
Agency
Business Other/
Eliminations Total
(Dollars In Thousands)
Net interest income
$ 98,755 $ —   $ —   $ 98,755 $ 103,523 $ —   $ —   $ 103,523
Provision for loan losses
8,600 —   —   8,600 1,500 —   —   1,500

Net interest income after provision for loan losses
90,155 —   —   90,155 102,023 —   —   102,023
Noninterest income
23,779 23,886 (8 ) 47,657 21,143 24,489 —   45,632
Noninterest expense
81,713 20,084 (1,032 ) 100,765 83,205 19,200 (835 ) 101,570

Income before provision for income taxes
32,221 3,802 1,024 37,047 39,961 5,289 835 46,085
Income tax provision (benefit)
6,121 1,076 —   7,197 9,517 1,515 —   11,032

Net income
$ 26,100 $ 2,726 $ 1,024 $ 29,850 $ 30,444 $ 3,774 $ 835 $ 35,053

Total assets
$ 13,867,746 $ 193,320 $ (64,543 ) $ 13,996,523 $ 11,397,392 $ 164,576 $ (48,284 ) $ 11,513,684

Total liabilities
$ 12,314,286 $ 53,150 $ (64,543 ) $ 12,302,893 $ 9,975,081 $ 35,228 $ (48,284 ) $ 9,962,025

For the six months ended June 30
2020 2019
Banking
Business Insurance
Agency
Business Other/
Eliminations Total Banking
Business Insurance
Agency
Business Other/
Eliminations Total
(Dollars in Thousands)
Net interest income
$ 198,901 $ —   $ —   $ 198,901 $ 206,195 —   —   206,195
Provision for loan losses
37,200 —   —   37,200 4,500 —   —   4,500

Net interest income after provision for loan losses
161,701 —   —   161,701 201,695 —   —   201,695
Noninterest income
30,647 50,408 (29 ) 81,026 43,405 50,048 (21 ) 93,432
Noninterest expense
160,178 37,725 (1,966 ) 195,937 169,096 39,067 (1,764 ) 206,399

Income before provision for income taxes
32,170 12,683 1,937 46,790 76,004 10,981 1,743 88,728
Income tax provision
4,906 3,589 —   8,495 17,576 3,134 —   20,710

Net income
$ 27,264 $ 9,094 $ 1,937 $ 38,295 $ 58,428 $ 7,847 $ 1,743 $ 68,018

2021

As of and for the three months ended September 30,
2022 2021
Banking
Business Insurance
Agency
Business Other/
Eliminations Total Banking
Business Insurance
Agency
Business Other/
Eliminations Total
(In thousands)
Net interest income $ 152,179 $ — $ — $ 152,179 $ 102,691 $ — $ — $ 102,691
Provision for (release of) allowance for loan losses 6,480 — — 6,480 (1,488) — — (1,488)
Net interest income after provision for loan losses 145,699 — — 145,699 104,179 — — 104,179
Noninterest income 19,777 23,714 (138) 43,353 20,783 22,508 (82) 43,209
Noninterest expense 96,749 21,197 (1,106) 116,840 80,474 19,538 (1,042) 98,970
Income before income tax expense 68,727 2,517 968 72,212 44,488 2,970 960 48,418
Income tax expense 16,717 718 — 17,435 10,471 841 — 11,312
Net income $ 52,010 $ 1,799 $ 968 $ 54,777 $ 34,017 $ 2,129 $ 960 $ 37,106
Total assets $ 21,894,550 $ 221,941 $ (73,558) $ 22,042,933 $ 17,324,816 $ 207,996 $ (71,589) $ 17,461,223
Total liabilities $ 19,644,824 $ 55,504 $ (73,558) $ 19,626,770 $ 14,051,100 $ 52,420 $ (71,589) $ 14,031,931
For the nine months ended September 30,
2022 2021
Banking
Business Insurance
Agency
Business Other/
Eliminations Total Banking
Business Insurance
Agency
Business Other/
Eliminations Total
(In thousands)
Net interest income $ 418,060 $ — $ — $ 418,060 $ 307,390 $ — $ — $ 307,390
Provision for (release of) allowance for loan losses 7,045 — — 7,045 (5,368) — — (5,368)
Net interest income after provision for loan losses 411,015 — — 411,015 312,758 — — 312,758
Noninterest income 55,919 76,054 (328) 131,645 69,308 74,959 (113) 144,154
Noninterest expense 279,823 60,186 (3,164) 336,845 243,549 59,844 (3,039) 300,354
Income before income tax expense 187,111 15,868 2,836 205,815 138,517 15,115 2,926 156,558
Income tax expense 43,870 4,480 — 48,350 32,728 4,252 — 36,980
Net income $ 143,241 $ 11,388 $ 2,836 $ 157,465 $ 105,789 $ 10,863 $ 2,926 $ 119,578

Banking Segment

•Average interest-earning assets grew ~~$1.2~~$5.2 billion, or ~~11.1%~~32.2%, to ~~$11.6~~$21.5 billion asfor the three months ended September 30, 2022 from $16.3 billion for the three months ended September 30, 2021. The increase is primarily due to the acquisition of ~~June 30, 2020 from $10.5~~Century, which closed on November 12, 2021 and added $6.6 billion ~~as of June 30, 2019, with average total loans, our largest category of~~in interest-earning assets. The increase in average interest-earning assets, ~~growing $529.4 million, or 5.9%,~~combined with an overall increase in our yield on interest-earning assets of 43 basis points, resulted in an increase in interest income. For additional discussion, refer to ~~$9.4 billion as of June 30, 2020 from $8.9 billion as of June 30, 2019.~~

the earlier “Interest and Dividends” section.

•Average interest-bearing liabilities grew ~~$404.3 million,~~$4.4 billion, or ~~6.4%~~54.5%, to ~~$6.7~~$12.6 billion ~~as of June~~for the three months ended September 30, ~~2020~~2022 from ~~$6.3~~$8.2 billion ~~as of June~~for the three months ended September 30, ~~2019,~~2021, with average total interest-bearing deposits, our largest category of average interest-bearing liabilities, growing ~~$637.5 million,~~$4.3 billion, or ~~10.7%~~53.1%, to $12.4 billion for the three months ended September 30, 2022 compared to $8.1 billion for the three months ended September 30, 2021. Average deposits increased due to our acquisition of Century, which added $4.4 billion in interest-bearing deposits. Also contributing to the increase in interest expenses was an increase of 11 basis points in rates paid on deposits. For additional discussion, refer to the earlier “Interest and Dividends” section.

•Average interest-earning assets grew $5.9 billion, or 37.2%, to $21.6 billion for the nine months ended September 30, 2022 from $15.7 billion for the nine months ended September 30, 2021. The increase was

100

Table of Contents

primarily due to the acquisition of Century, which closed on November 12, 2021 and added $6.6 billion ~~as of June 30, 2020 from $6.0~~in interest-earning assets. For additional discussion, refer to the earlier “Interest and Dividends” section.

•Average interest-bearing liabilities grew $4.8 billion, ~~as of June 30, 2019.~~

~~Assets under management in our wealth management business increased by $134.5 million,~~ or ~~5.5%~~62.3%, to ~~$2.6~~$12.6 billion asfor the nine months ended September 30, 2022 from $7.8 billion for the nine months ended September 30, 2021, with average total interest-bearing deposits, our largest category of ~~June~~average interest-bearing liabilities, growing $4.8 billion, or 61.9%, to $12.5 billion for the nine months ended September 30, ~~2020 from $2.4~~2022 compared to $7.7 billion ~~as of June~~for the nine months ended September 30, ~~2019. Our income related~~2021. Average deposits increased due to our ~~asset management business,~~acquisition of Century, which ~~we record as noninterest income, increased by $0.2 million, or 4.3%,~~added $4.4 billion in interest-bearing deposits. Also contributing to ~~$5.2~~the increase in interest expenses was an increase of 7 basis points in rates paid on deposits. For additional discussion, refer to the earlier “Interest and Dividends” section.

•We recorded a provision for loan losses of $6.5 million for the three months ended ~~June~~September 30, ~~2020,~~2022, compared to ~~$5.0~~a release of $1.5 million for the three months ended ~~June~~September 30, ~~2019. The increase was~~2021. We determined a provision to be appropriate due to ~~the fees we earned~~overall increased loan balances during the three months ended ~~June~~September 30, 2022 in comparison to the second quarter of 2022. Comparatively, in March 2020, ~~primarily due~~in response to ~~higher valuations~~the COVID-19 pandemic, we downgraded the risk ratings for all commercial loans we expected to be significantly impacted by the COVID-19 pandemic, including our hotel and restaurant loan portfolios. During the three months ended September 30, 2021 and following continued improved economic and credit conditions, we determined that a release of ~~our assets under management.~~

~~Our income related~~the provision was necessary. For additional discussion, refer to ~~our asset management business increased by $0.7 million, or 7.3%, to $10.3~~the earlier “Provision for Loan Losses” section.

•Losses from investments held in rabbi trust accounts were $2.0 million for the ~~six~~three months ended ~~June~~September 30, ~~2020 compared to $9.6~~2022 which represents a decrease of $1.8 million, or 926.4%, from $0.2 million recorded for the three months ended September 30, 2021. The decrease was primarily a result of an unfavorable mark-to-market adjustment on equity securities held in these accounts during the three months ended September 30, 2022.

•Losses from investments held in rabbi trust accounts were $12.4 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019.~~2022 which represents a decrease of $17.7 million, or 330.2%, from income of $5.4 million for the nine months ended September 30, 2021. The ~~increase~~decrease was primarily as a result of an unfavorable mark-to-market adjustment on equity securities held in these accounts during the nine months ended September 30, 2022.

•Losses on sales of securities available for sale, net, were $2.5 million during the nine months ended September 30, 2022 which represents a decrease of $3.6 million from the nine months ended September 30, 2021, a period during which we recognized a net gain of $1.2 million. The net loss on sale was due to the ~~fees we earned~~decision by management to sell certain AFS securities during the ~~six~~nine months ended ~~June~~September 30, ~~2020,~~2022, the majority of which were acquired in connection with our acquisition of Century and were in a net unrealized loss position at the time of sale.

•Partially offsetting the losses from investments held in rabbi trust accounts during the three months ended September 30, 2022 was interest rate swap income which increased $0.7 million primarily ~~due~~as a result of a favorable mark-to-market adjustment during the three months ended September 30, 2022 compared to ~~higher valuations~~the three months ended September 30, 2021.

•Partially offsetting the losses from investments held in rabbi trust accounts during the three and nine months ended September 30, 2022 and losses on sales of ~~our assets under management.~~

securities available for sale during the nine months ended September 30, 2022 were service charges on deposit accounts which increased $0.8 million and $6.5 million during the three and nine months ended September 30, 2022, respectively, compared to the three and nine months ended September 30, 2021, primarily as a result of increased corporate account analysis charges as a result of greater commercial deposit customer activity and increased overdraft fees during the nine months ended September 30, 2022 as a result of greater customer deposit activity.

~~Insurance Agency Segment~~

•Noninterest ~~income related to our insurance agency business decreased by $0.6~~expense increased $16.3 million, or ~~2.5%~~20.2%, to ~~$23.9~~$96.7 million during the three months ended ~~June~~September 30, ~~2020~~2022 from ~~$24.5~~$80.5 million during the three months ended ~~June~~September 30, ~~2019. The decrease~~2021. This increase was driven primarily by a ~~decrease in negotiated commissions and profit sharing revenues of $1.5~~$7.8 million ~~and $0.2 million, respectively, partially offset by an~~ increase in ~~income from investments held in rabbi trusts of $0.8~~salaries and wages expense, a $1.8 million ~~and in~~ increase in ~~recurring commissions~~office occupancy and equipment expenses and a $0.9 million increase in data processing expenses. Refer to the earlier “Noninterest Expense” section for additional discussion of ~~$0.3~~this items.

101

Table of Contents

•Noninterest expense increased $36.3 million, ~~due~~or 14.9%, to ~~organic growth.~~

$279.8 million during the nine months ended September 30, 2022 from $243.5 million during the nine months ended September 30, 2021. This increase was driven primarily by a $17.7 million increase in salaries and wages expense, a $7.0 million increase in office occupancy and equipment expenses, and a $5.1 million increase in data processing expenses. Partially offsetting these increases was a decrease of $3.3 million in legal expenses associated with the settlement of two putative class action litigation matters related to overdraft and non-sufficient funds fees. The accrual for such expenses was initially recorded during the second quarter of 2021 and final settlement of the legal matters occurred during the first quarter of 2022. Refer to the earlier “Noninterest Expense” section for additional discussion of this items.

Insurance Agency Segment

•Noninterest income related to our insurance agency business increased by ~~$0.4~~$1.2 million, or ~~0.8 %,~~5.4%, to ~~$50.4~~$23.7 million during the ~~six~~three months ended ~~June~~September 30, ~~2020~~2022 from ~~$50.0~~$22.5 million during the ~~six~~three months ended ~~June~~September 30, ~~2019.~~2021. Similarly, noninterest income related to our insurance agency business increased by $1.1 million, or 1.5%, to $76.1 million during the nine months ended September 30, 2022 from $75.0 million during the nine months ended September 30, 2021. These increases are primarily attributable to increased commission income. Refer to the earlier “Noninterest Income” section for additional discussion of this items.

•Noninterest expense related to our insurance agency business increased by $1.7 million, or 8.5%, to $21.2 million during three months ended September 30, 2022 from $19.5 million during three months ended September 30, 2021. Noninterest expense related to our insurance agency business remained relatively consistent with a slight increase of $0.3 million, or 0.6%, to $60.2 million during the nine months ended September 30, 2022 from $59.8 million during the nine months ended September 30, 2021. The increase in noninterest expense for both the three and nine months ended September 30, 2022, compared to the three and nine months ended September 30, 2021 was ~~driven~~ primarily ~~by an increase in our combined negotiated commission and profit sharing income of $0.8 million, in addition~~due to an increase in ~~our recurring commissions of $0.5 million due to organic growth, partially offset by a $0.9 million decrease in income from investments held in rabbi trusts.~~

executive retirement benefit costs.

~~Off-Balance~~ ~~Sheet Arrangements~~

~~We are a party to financial instruments with~~ ~~off-balance~~ sheet risk in the normal course of business to meet the financing needs of our customers. The financial instruments include commitments to originate loans, unused lines of credit, unadvanced portions of construction loans and standby letters of credit, which involve elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. Our exposure to credit loss is represented by the contractual amount of the instruments. We use the same credit policies in making commitments as we do for ~~on-balance~~ ~~sheet instruments.~~

At June 30, 2020, we had $3.7 billion of commitments to originate loans, comprised of $2.2 billion of commitments under commercial loans and lines of credit (including $291.8 million of unadvanced portions of construction loans), $1.2 billion of commitments under home equity loans and lines of credit, $213.9 million in overdraft coverage commitments, and $45.3 million of unfunded commitments related to residential real estate loans and $20.0 million in other consumer loans and lines of credit. In addition, at June 30, 2020, we had $57.4 million in standby letters of credit outstanding. Finally, we had $67.7 million in forward commitments to sell loans.

Management of Market Risk

General. Market risk is the sensitivity of net present value of assets and liabilities and/or income to changes in interest rates, foreign exchange rates, commodity prices and other market-driven rates or prices. Interest rate sensitivity is the most significant market risk to which we are exposed. Interest rate risk is the sensitivity of net present value of assets and liabilities and/or income to changes in interest rates. Changes in interest rates, as well as fluctuations in the level and duration of assets and liabilities, affect net interest income, our primary source of income. Interest rate risk arises directly from our core banking activities. In addition to directly impacting net interest income, changes in the level of interest rates can also affect the amount of loans originated, the timing of cash flows on loans and securities, and the fair value of securities and derivatives, as well as other effects. The primary goal of interest rate risk management is to control this risk within limits approved by the Risk Management Committee of our Board of Directors.

These limits reflect our tolerance for interest rate risk over both short-term and long-term horizons. We attempt to manage interest rate risk by identifying, quantifying, and where appropriate, hedging its exposure. If assets and liabilities do not re-price simultaneously and in equal volume, the potential for interest rate exposure exists. Our objective is to maintain stability in the growth of net interest income through the maintenance of an appropriate mix of interest-earning assets and interest-bearing liabilities and, when necessary and within limits that management determines to be prudent, through the use of off-balance sheet hedging instruments ~~such as~~including, but not limited to, interest rate swaps, floors and caps.

Net Interest Income. We analyze our sensitivity to changes in interest rates through a net interest income model. We estimate what our net interest income would be for a 12-month period assuming no changes in interest rates. We then calculate what the net interest income would be for the same period under the assumption that ~~the United States Treasury yield curve increases~~market rates increase or ~~decreases~~decrease instantaneously by +200, +300, +400, -100 and ~~-100~~-200 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Changes in Interest Rates” column below. The model requires that interest rates remain positive for all points along the yield curve for each rate scenario which may preclude the modeling of certain falling rate scenarios during periods of lower market interest rates. The relatively low level of market interest rates prevalent at ~~June 30, 2020~~December 31, 2021 precluded the modeling of certain falling rate ~~scenarios, including~~scenarios. We do not model negative interest ~~rates.~~

rate scenarios.

102

Table of Contents

The tables below set forth, as of ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, the calculation of the estimated changes in our net interest income on an FTE basis that would result from the designated immediate changes in ~~the United States Treasury yield curve.~~

market interest rates:

Interest Rate Sensitivity

As of June 30, 2020
Change in
Interest Rates
(basis points) ⁽¹⁾ Net Interest
Income Year 1
Forecast Year 1
Change from
Level
(Dollars in thousands)
400 $526,813 34.0%
300   493,129 25.4%
200   459,940 17.0%
Flat   393,163   0.0%
-100   383,847 (2.4)%
As of December 31, 2019
Change in
Interest Rates
(basis points) ⁽¹⁾ Net Interest
Income Year 1
Forecast Year 1
Change from
Level
(Dollars in thousands)
400 $433,300 5.2%
300   428,186 4.0%
200   422,881 2.7%
Flat   411,704 —  %
-100   395,697 (3.9)%


	As of September 30, 2022
Change in Interest Rates (basis points)	Net Interest Income Year 1 Forecast		Year 1 Change from Level
	(Dollars in thousands)
400	$	667,725	(2.5)	%
300	671,459		(2.0)	%
200	676,242		(1.3)	%
Flat	685,079		—	%
(100)	669,475		(2.3)	%
(200)	639,707		(6.6)	%

	As of December 31, 2021
Change in Interest Rates (basis points) (1)	Net Interest Income Year 1 Forecast		Year 1 Change from Level
	(Dollars in thousands)
400	$	663,207	30.2	%
300	624,384		22.6	%
200	586,319		15.1	%
Flat	509,379		—	%
(100)	479,489		(5.9)	%

(1)Assumes an immediate uniform change in market interest rates at all maturities, except in the down 100 basis point scenario, where rates are floored at zero at all maturities.

As of September 30, 2022, our models, as indicated above, show a decline in our net interest income in both rising and falling rate scenarios. In the rising rate scenarios, interest expense is expected to rise at a faster rate than interest income due, in part, to the extension of asset duration from our interest rate swap portfolio designated as cash flow hedges. In the declining rate scenarios, the reduction of interest income exceeds the reduction in interest expense due primarily to the relatively low level of deposit costs at September 30, 2022. The tables above indicate that at ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, in the event of an instantaneous parallel 200 basis points increase in rates, we would have experienced a ~~17.0%~~1.3% decrease and ~~2.7%~~a 15.1% increase, respectively, in net interest income on an FTE basis, and in the event of an instantaneous 100 basis points decrease in interest rates, we would have experienced a ~~2.4%~~2.3% and a ~~3.9%~~5.9% decrease at ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively, in net interest income, on an FTE basis. We also modeled an instantaneous 200 basis point decrease in interest rates at September 30, 2022, the results of which showed we would have experienced a 6.6% decrease in net interest income, on an FTE basis. We did not model an instantaneous 200 basis points decrease in interest rates at December 31, 2021, as indicated above, given the ~~ability to~~relatively low level of interest rates. Management may use investment strategy, loan and deposit pricing, non-core funding strategies, and interest rate derivative financial instruments, within internal policy guidelines, to manage interest rate risk as part of our asset/liability strategy. These derivatives provide significant protection against falling interest rates. ~~Without~~For additional information related to our interest rate derivative financial instruments, see Note 13, “Derivative Financial Instruments” within the ~~derivatives, our FTE net interest income would decline by 2.8% with an instantaneous 100 basis point decrease~~Notes to the Unaudited Consolidated Financial Statements included in ~~interest rates, rather than the 2.4% decrease shown~~Part I, Item 1 in ~~the table above at June 30, 2020.~~

this Quarterly Report on Form 10-Q.

Economic Value of Equity Analysis.We also analyze the sensitivity of our financial condition in interest rates through our economic value of equity (“EVE”) model. This analysis calculates the difference between the present value of expected cash flows from assets and liabilities assuming various changes in current interest rates.

The table below represents an analysis of our interest rate risk (excluding the effect of our pension ~~plan)~~plans) as measured by the estimated changes in our EVE, resulting from an instantaneous and sustained parallel shift in the yield curve (+200, +300, +400 basis points and -100, -200 basis points) at ~~June~~September 30, ~~2020~~2022 and (+200, +300, +400 basis points and -100

103

Table of Contents

basis points) December 31, ~~2019.~~2021. The model requires that interest rates remain positive for all points along the yield curve for each rate scenario which may preclude the modeling of certain falling rate scenarios during periods of lower market interest rates. The relatively low level of interest rates prevalent at ~~June 30, 2020~~December 31, 2021 precluded the modeling of certain falling rate scenarios, including negative interest rates.

~~EVE Interest Rate Sensitivity~~

Our earnings are not directly or materially impacted by movements in foreign currency rates or commodity prices. Movements in equity prices may have a modest impact on earnings by affecting the volume of activity or the amount of fees from investment-related business lines.

Change in Interest
Rate (basis points) ⁽¹⁾
      As of June 30, 2020

   Estimated EVE ⁽²⁾    Estimated Increase (Decrease in EVE) from
Level EVE as a
Percentage of
Total Assets ⁽³⁾
      Amount    Percent
   (Dollars in thousands)
400
   $ 2,769,212    $ 544,896    24.5 % 0.20 %
300
   2,666,631    442,316    19.9 % 0.19 %
200
   2,552,682    328,367    14.8 % 0.18 %
Flat
   2,224,315    —      —   % 0.16 %
-100
   2,051,131    (173,184 )    (7.8 )% 0.15 %

Change in Interest
Rate (basis points) ⁽¹⁾
      As of December 31, 2019

   Estimated EVE ⁽²⁾    Estimated Increase (Decrease in EVE) from
Level EVE as a
Percentage of
Total Assets ⁽³⁾
      Amount    Percent
   (Dollars in thousands)
400
   $ 2,446,754    $ 14,005    0.6 % 22.51 %
300
   2,453,287    20,538    0.8 % 22.11 %
200
   2,457,642    24,893    1.0 % 21.67 %
Flat
   2,432,749    —      —   % 20.52 %
-100
   2,364,175    (68,574 )    (2.8 )% 19.54 %

~~(1)~~

~~Assumes an immediate uniform change in interest rates at all maturities~~

~~(2)~~

~~EVE is the discounted present value of expected cash flows from assets, liabilities and~~ ~~off-balance~~ ~~sheet contracts.~~

~~(3)~~

~~Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.~~

EVE Interest Rate Sensitivity


Change in Interest Rates (basis points)			As of September 30, 2022
	Estimated EVE (2)		Estimated Increase (Decrease) in EVE from Level				EVE as a Percentage of Total Assets (3)
			Amount		Percent
	(Dollars in thousands)
400	$	3,909,354	$	(621,310)	(13.7)	%	20.23	%
300	4,033,461		(497,204)		(11.0)	%	20.34	%
200	4,185,619		(345,046)		(7.6)	%	20.53	%
Flat	4,530,664		—		—		20.92	%
(100)	4,620,091		89,426		2.0	%	20.74	%
(200)	4,694,030		163,365		3.6	%	20.46	%


Change in Interest Rates (basis points) (1)			As of December 31, 2021
	Estimated EVE (2)		Estimated Increase (Decrease) in EVE from Level				EVE as a Percentage of Total Assets (3)
			Amount		Percent
	(Dollars in thousands)
400	$	4,573,359	$	27,408	0.6	%	21.30	%
300	4,565,019		19,068		0.4	%	20.80	%
200	4,589,035		43,084		0.9	%	20.39	%
Flat	4,545,951		—		—		17.06	%
(100)	4,270,433		(275,518)		(6.1)	%	17.75	%

(1)Assumes an immediate uniform change in market interest rates at all maturities, except in the down 100 basis points scenario, where rates are floored at zero at all maturities.

(2)EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.

(3)Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

Certain shortcomings are inherent in the interest rate risk measurement methodologies underlying the data presented in the tables in this section. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. For example, the models assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assume that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates, and actual results may differ.

Liquidity, ~~and~~ Capital Resources,

Contractual Obligations, Commitments and Contingencies

Liquidity. Liquidity describes our ability to meet the financial obligations that arise in the normal course of business. Liquidity is primarily needed to meet deposit withdrawals and anticipated loan fundings, as well as current and planned expenditures. We seek to maintain sources of liquidity that are deep and diversified and that may be used during the normal course of business as well as on a contingency basis.

The net proceeds from our IPO significantly increased our liquidity and capital resources at both Eastern Bankshares, Inc. and Eastern Bank. Over time, the initial level of liquidity has been and will continue to be reduced as net proceeds from the IPO are used for general corporate purposes. Our financial condition and results of operations were enhanced by the net proceeds from the stock offering and resulted in increased net interest-earning assets and net interest and dividend income. On November 12, 2021, we completed our merger with Century for $641.9 million in cash. Although the transaction reduced the net proceeds from the IPO, we continue to expect that, due to the increase in equity resulting from the net proceeds

104

Table of Contents

raised in our IPO, our return on equity has been and will continue to be adversely affected until we can effectively deploy the remaining proceeds of the IPO.

Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from calls, maturities and sales of ~~securities.~~securities, subject to market conditions. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are unencumbered cash and ~~due from banks~~cash equivalents and securities classified as available for sale.

In the future, our liquidity position will be affected by the level of customer deposits and payments, as well as acquisitions, dividends, and stock repurchases in which we may engage. We believe that our existing resources will be sufficient to meet the liquidity and capital requirements of our operations for the foreseeable future.

We participate in the ~~Promontory Interfinancial~~IntraFi Network, ~~allowing~~which allows us to provide access to multi-million dollar FDIC deposit insurance protection on customer deposits for consumers, businesses and public entities. We can elect to sell or repurchase this funding as reciprocal deposits from other ~~Promontory network~~IntraFi Network banks depending on our funding needs. At ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, we had a total of ~~$409.0~~$12.2 million and ~~$270.0~~$520.5 million of ~~Promontory~~IntraFi Network one-way sell deposits, respectively. ~~These deposits could have been~~At September 30, 2022, we had repurchased as$656.9 million of previously sold reciprocal ~~deposits~~deposits. At December 31, 2021, no amounts were repurchased of previously sold reciprocal deposits. The additional capacity of $12.2 million and $520.5 million at September 30, 2022 and December 31, 2021, respectively, should be considered a source of liquidity.

Although customer deposits remain our preferred source of funds, maintaining additional back up sources of liquidity is part of our prudent liquidity risk management practices. We have the ability to borrow from the ~~Federal Home Loan Bank of Boston.~~FHLBB. At ~~June~~September 30, ~~2020,~~2022, we had ~~$14.9~~$384.2 million in outstanding advances and the ability to borrow up to an additional ~~$1.4~~$1.8 billion. ~~We also have the ability to borrow from the Federal Reserve Bank of Boston as well as the Paycheck Protection Program Liquidity Facility.~~ At ~~June~~September 30, ~~2020,~~2022, we had a ~~$485.0~~$543.2 million collateralized line of credit from the ~~Federal Reserve Bank of Boston~~FRBB with no outstanding balance. ~~Additionally, we had $1.1 billion in Paycheck Protection Program Loans that could have been pledged to the Paycheck Protection Program Liquidity Facility.~~ We had a total of ~~$620.0~~$790.0 million of discretionary lines of credit at ~~June~~September 30, ~~2020.~~

2022.

Sources of Liquidity

   June 30, 2020 December 31, 2019
   Outstanding    Additional
Capacity Outstanding    Additional
Capacity
      (Dollars in thousands)
Promontory deposits
   $ —      $ 408,527 $ 93,539    $ 176,346
Federal Home Loan Bank
   14,922    1,424,505 ⁽¹⁾ 18,964    1,822,955 ⁽¹⁾
Federal Reserve Bank of Boston
   —      485,424 ⁽²⁾ —      636,960 ⁽²⁾
Federal Reserve Paycheck Protection Program Liquidity Facility
   —      1,100,181 —      —
Unsecured lines of credit
   —      620,000 —      555,000






Total deposits
   $ 14,922    $ 4,038,637 $ 112,503    $ 3,191,261

~~(1)~~

As of June 30, 2020, loans have been pledged to the Federal Home Loan Bank of Boston with a carrying value of $2.1 billion to secure additional borrowing capacity. As of December 31, 2019, loans and securities have been pledged to the Federal Home Loan Bank of Boston with a carrying value of $1.5 billion and $0.9 billion, respectively, to secure additional borrowing capacity

~~(2)~~

Loans with a carrying value of $0.9 billion and $1.0 billion at June 30, 2020 and December 31, 2019, respectively, have been pledged to the Federal Reserve Bank of Boston resulting in this additional unused borrowing capacity


	As of September 30, 2022				As of December 31, 2021
	Outstanding		Additional Capacity		Outstanding		Additional Capacity
			(In thousands)
IntraFi Network deposits	$	656,850	$	12,160	$	—	$	520,461
Federal Home Loan Bank (1)	384,215		1,848,035		14,020		1,839,540
Federal Reserve Bank of Boston (2)	—		543,176		—		456,148
Unsecured lines of credit	—		790,000		—		790,000
Total deposits	$	1,041,065	$	3,193,371	$	14,020	$	3,606,149

(1)As of September 30, 2022 and December 31, 2021, loans have been pledged to the FHLBB with a carrying value of $3.3 billion and $2.6 billion to secure additional borrowing capacity.

(2)Loans with a carrying value of $1.1 billion and $784.0 million at September 30, 2022 and December 31, 2021, respectively, have been pledged to the FRBB resulting in this additional unused borrowing capacity.

We believe that advanced preparation, early detection, and prompt responses can avoid, minimize, or shorten potential liquidity crises. Our Board of Directors and our management's Asset Liability Committee have put a ~~Liquidity Contingency Plan~~liquidity contingency plan in place to establish methods for assessing and monitoring risk levels, as well as potential responses during unanticipated stress events. As part of ~~its~~our risk management framework, we perform periodic liquidity stress testing to assess its need for liquid assets as well as backup sources of liquidity.

Capital Resources. We are subject to various regulatory capital requirements administered by the Massachusetts Commissioner of Banks, the FDIC and the Federal Reserve (with respect to our consolidated capital requirements). At ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, we exceeded all applicable regulatory capital requirements, and were considered “well capitalized” under regulatory guidelines.

To be categorized as well-capitalized, the Company must maintain (1) a minimum of total risk-based capital ratio of 10%; (2) a minimum of Tier 1 risk-based capital ratio of 8%; (3) a minimum of common equity Tier 1 capital ratio of 6.5%; and (4) a minimum of Tier 1 leverage ratio of 5%. Management believes that the Company met all capital adequacy requirements to which it is subject as of September 30, 2022 and December 31, 2021. There have been no conditions or events that management believes would cause a change in the Company’s categorization. The Company has also received a notice of non-objection from the Federal Reserve with respect to a new share repurchase program through August 31, 2023. For more information regarding the Company’s share repurchase programs, see Note 10,

105

Table of Contents

“Shareholders’ Equity – Share Repurchases” within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q.

The Company’s actual capital ratios are presented in the following table:


	As of September 30, 2022		As of December 31, 2021
Capital Ratios:
Average equity to average assets (1)	12.38	%	19.17	%
Total regulatory capital (to risk-weighted assets)	18.47	%	19.77	%
Common equity Tier 1 capital (to risk-weighted assets)	17.56	%	19.04	%
Tier 1 capital (to risk-weighted assets)	17.56	%	19.04	%
Tier 1 capital (to average assets) leverage	12.18	%	13.96	%

(1)The ratio presented as of September 30, 2022 represents quarter-to-date average equity as a percentage of quarter-to-date average total assets.

Contractual Obligations, Commitments and ~~Contingencies~~

Contingencies.In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities. ~~There~~At September 30, 2022, there were no material changes in our contractual obligations, other commitments and contingencies from those disclosed in our 2021 Form 10-K.

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. The financial instruments include commitments to originate loans, unused lines of credit, unadvanced portions of construction loans and standby letters of credit, all of which involve elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. Our exposure to credit loss is represented by the contractual amount of the instruments. We use the same credit policies in making commitments as we do for on-balance sheet instruments.

At September 30, 2022, we had $5.6 billion of commitments to originate loans, comprised of $3.2 billion of commitments under commercial loans and lines of credit (including $629.4 million of unadvanced portions of construction loans), $2.1 billion of commitments under home equity loans and lines of credit, $198.9 million in standard overdraft coverage commitments, $41.6 million of unfunded commitments related to residential real estate loans and $58.4 million in other consumer loans and lines of credit. In addition, at ~~June~~September 30, ~~2020.~~

2022, we had $66.5 million in standby letters of credit outstanding. We also had $8.1 million in forward commitments to sell loans.

Commitments to originate loans are agreements to lend to a customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments are expected to expire without being drawn upon, the total commitments do not necessarily represent future cash requirements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES

The information required by this Item is included in Part I, Item 2 of this Quarterly Report on Form 10-Q under the heading “Management of Market Risk.”

ITEM 4. CONTROLS AND PROCEDURES

Effectiveness of Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and ~~15d-15(e)~~15d-15(c) promulgated under the ~~Securities~~ Exchange Act of ~~1934, as amended.~~1934. Based upon that evaluation, the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of ~~June~~September 30, ~~2020,~~2022, the end of the period covered by this Quarterly ~~Report.~~

Report on Form 10-Q.

Changes to Internal Controls over Financial Reporting

106

Table of Contents

There were no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended ~~June~~September 30, ~~2020~~2022 that have materially affected or are reasonably likely to materially affect the Company’s internal controls over financial reporting. The Company has not experienced any material impact to the Company’s internal controls over financial reporting due to the fact that most of the Company’s employees responsible for financial reporting are working remotely during the ~~Covid-19~~COVID-19 pandemic. The Company is continually monitoring and assessing the impact of the ~~Covid-19~~COVID-19 pandemic on the Company’s internal controls to minimize the impact to their design and operating effectiveness.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We operate in a legal and regulatory environment that exposes us to potentially significant risks. For more information regarding the Company’s exposure generally to legal and regulatory risks, see “Business—Legal and Regulatory Proceedings” in Part I, Item 1 of the ~~Company’s prospectus, filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on August 18, 2020.~~

2021 Form 10-K.

As of the date of this Quarterly Report on Form 10-Q, we are not involved in any pending legal proceeding as a plaintiff or a defendant ~~other than routine legal proceedings occurring in the ordinary course of business, and we are not involved in any legal proceeding~~ the outcome of which we believe would be material to our financial condition or results of operations.

For additional information related to the Company’s ongoing legal proceedings see Note 12, “Commitments and Contingencies” within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

For information regarding the Company’s risk factors, see Part I, Item 1A “Risk Factors” in our 2021 Form 10-K, as updated by Part II, Item 1A “Risk Factors” in our Q1 Form 10-Q and by Part II, Item 1A “Risk Factors” in our Q2 Form 10-Q. Except for the ~~Company’s prospectus, filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on August 18, 2020. As~~revised risk factor below regarding “an increase in FDIC insurance assessments could significantly increase our expenses,” as of the date of this Quarterly Report on Form 10-Q, the risk factors of the Company have not changed materially from those disclosed in our 2021 Form 10-K, as updated by the ~~prospectus.~~

~~ITEM 2.~~

~~UNREGISTERED SALES OF EQUITY SECURITIES~~

Q1 Form 10-Q and by the Q2 Form 10-Q. The COVID-19 pandemic has led to general uncertainty and adverse changes in economic conditions and has heightened, and in some cases manifested, certain of the risks we normally face in operating our business, including those disclosed in our 2021 Form 10-K, updated in the Q1 Form 10-Q and the Q2 Form 10-Q. The risk factors disclosure in our 2021 Form 10-K, our Q1 Form 10-Q, and our Q2 Form 10-Q is therefore qualified by the information relating to COVID-19 that is described in this Quarterly Report on Form 10-Q.

An increase in FDIC insurance assessments could significantly increase our expenses.

The Dodd-Frank Act eliminated the maximum Deposit Insurance Fund (“DIF”) ratio of 1.5% of estimated deposits, and the FDIC has established a long-term ratio of 2.0%. On September 30, 2021, the Deposit Insurance Fund reserve ratio was 1.27%. In September 2020, the FDIC adopted a restoration plan designed to ensure that the DIF reserve ratio reaches 1.35% by September 2028. In October 2020, the FDIC increased the initial base deposit insurance assessment rate schedules for all FDIC insured depository institutions by 2 basis points, beginning with the quarterly assessment period ending March 31, 2023. The new assessment rate schedules will remain in effect unless and until the DIF reserve ratio meets or exceeds 2%, absent further FDIC action. In addition, if our regulators issue downgraded ratings of Eastern Bank in connection with their examinations, the FDIC could impose significant additional fees and assessments on us.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth information regarding the Company’s repurchases of its common stock during the nine months ended September 30, 2022:

107

Table of Contents


Period	Total Number of Shares	Average Price Paid per Share		Total Number of Shares Purchased as Part of the Publicly Announced Share Repurchase Programs	Maximum Number of Shares That May Yet Be Purchased Under the Share Repurchase Programs (1)(2)
January 1, 2022 – January 31, 2022	987,526	$	21.02	2,123,404	7,214,496
February 1, 2022 – February 28, 2022	1,109,697	21.08		3,233,101	6,104,799
March 1, 2022 – March 31, 2022	769,398	21.31		4,002,499	5,335,401
April 1, 2022 – April 30, 2022	1,194,185	20.19		5,196,684	4,141,216
May 1, 2022 – May 31, 2022	1,880,381	18.93		7,077,065	2,260,835
June 1, 2022 – June 30, 2022	1,141,903	18.78		8,218,968	1,118,932
July 1, 2022 – July 31, 2022	909,785	19.02		9,128,753	209,147
August 1, 2022 - August 31, 2022	—	—		9,128,753	209,147
September 1, 2022 – September 30, 2022	571,463	20.33		9,700,216	8,537,684
Total	8,564,338	$	19.92

(1)On October 28, 2021, the Company announced that its Board of Directors had approved a share repurchase program, subject to receipt of a notice of non-objection from the Board of Governors of the Federal Reserve System (“Non-Objection Notice”). On November 12, 2021, the Company announced it had received the Non-Objection Notice to the share repurchase program, which authorizes the purchase of up to 9,337,900 shares over a 12-month period. The program is limited to $225 million through November 30, 2022. The Company completed the repurchase of the total number of shares authorized through this program during the three months ended September 30, 2022.

(2)On September 7, 2022, the Company announced receipt of a notice of non-objection from the Federal Reserve for a new share repurchase program. The program, which authorizes the purchase of up to 8,900,000 shares over a 12-month period, is limited to $200.0 million through August 31, 2023.

See Note 10, “Shareholders’ Equity,” within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q for additional information.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

~~ITEM 3.~~

~~DEFAULTS UPON SENIOR SECURITIES~~

~~None.~~

~~ITEM 4.~~

~~MINE SAFETY DISCLOSURES~~

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

~~ITEM 5.~~

~~OTHER INFORMATION~~

ITEM 5.OTHER INFORMATION

None.

~~ITEM 6.~~

~~EXHIBITS~~

108

Table of Contents

ITEM 6.EXHIBITS

The exhibits listed in the Exhibit Index (following the signatures section of this report) are included in, or incorporated by reference into, this Quarterly Report on Form 10-Q.

EXHIBIT INDEX

The following exhibits are included in this Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, ~~2020~~2022 (and are numbered in accordance with Item 601 of Regulation S-K):


Exhibit No.			Description

2		~~Plan of Conversion~~ ~~(incorporated by reference to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on June 18, 2020)~~

~~3.1~~	~~Form of Amended and Restated Articles of Organization of Eastern Bankshares, Inc.~~ ~~(incorporated by reference to Amendment No. 1 to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on July 24, 2020)~~

3.2*	~~Bylaws of Eastern Bankshares, Inc.~~

4	~~Form of Common Stock Certificate of Eastern Bankshares, Inc.~~ ~~(incorporated by reference to Amendment No. 2 to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on August 5, 2020)~~

~~10.1†~~	~~Eastern Bank Employee Stock Ownership Plan~~ ~~(incorporated by reference to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on June 18, 2020)~~

~~10.2†~~	~~Executive Severance Benefits Agreement with Robert F. Rivers~~ ~~(incorporated by reference to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on June 18, 2020)~~

~~10.3†~~	~~Executive Retention and Severance Benefits Agreement with Quincy L. Miller~~ ~~(incorporated by reference to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on June 18, 2020)~~

~~10.4†~~	~~Change in Control Agreement with Robert F. Rivers, dated June 15, 2020~~ ~~(incorporated by reference to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on June 18, 2020)~~

~~10.5†~~	~~Change in Control Agreement with Quincy L. Miller, dated June 15, 2020~~ ~~(incorporated by reference to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on June 18, 2020)~~

~~10.6†~~	~~Form of Change in Control Agreement with other executive officers~~ ~~(incorporated by reference to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on June 18, 2020)~~

~~10.7†~~	~~Supplemental Executive Retirement Plan~~ ~~(incorporated by reference to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on June 18, 2020)~~

~~10.8†~~	~~Benefit Equalization Plan~~ ~~(incorporated by reference to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on June 18, 2020)~~

10.9*	~~Outside Directors’ Retainer Continuance Plan, as amended~~

~~10.10†~~	~~409A Long Term Incentive Plan, as amended~~ ~~(incorporated by reference to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on June 18, 2020)~~

~~10.11†~~	~~409A Deferred Compensation Plan, as amended~~ ~~(incorporated by reference to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on June 18, 2020)~~

~~10.12†~~	~~Eastern Insurance Group LLC Supplemental Executive Retirement Plan~~ ~~(incorporated by reference to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on June 18, 2020)~~

~~10.13†~~	~~The Eastern Bank Deferred Compensation Plan, as amended~~ ~~(incorporated by reference to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on June 18, 2020)~~

31.1*
~~10.14†~~	~~Management Incentive Plan~~ ~~(incorporated by reference to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on June 18, 2020)~~

~~10.15†~~	~~Eastern Insurance Group LLC Management Incentive Plan~~ ~~(incorporated by reference to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on June 18, 2020)~~

~~23.1~~	~~Consent of Nutter, McClennen & Fish, LLP~~ ~~(incorporated by reference to the Registrant’s Registration Statement on Form~~ ~~S-1~~ ~~(file number~~ ~~333-239251)~~ ~~filed with the Securities and Exchange Commission on June 18, 2020)~~

31.1*	Certification of Chief Executive Officer Required by Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act

31.2*		Certification of Chief Financial Officer Required by Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act

32.1+		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2+		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101*		Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Unaudited Consolidated Balance Sheets as of ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019,~~2021, (ii) the Unaudited Consolidated Statements of Income for the three and ~~six~~nine months ended ~~June~~September 30, ~~2020~~2022 and ~~2019~~2021 (iii) the Unaudited Consolidated Statements of Comprehensive Income for the three and ~~six~~nine months ended ~~June~~September 30, ~~2020~~2022 and ~~2019,~~2021, (iv) the Unaudited Consolidated Statements of Changes in Equity for the three and ~~six~~nine months ended ~~June~~September 30, ~~2020~~2022 and ~~2019,~~2021, (v) the Unaudited Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, ~~2020~~2022 and ~~2019,~~2021, and (vi) the Notes to the Unaudited Consolidated Financial Statements.

†

~~Management contract or compensation plan or arrangement~~

*104

~~Filed herewith~~

~~Furnished herewith~~

Cover page interactive data file (formatted as inline XBRL with applicable taxonomy extension information) contained in Exhibit 101 to this report+

*Filed herewith

+ Furnished herewith

109

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

EASTERN BANKSHARES, INC.

Date: November 4, 2022

/s/ Robert F. Rivers

By:

Robert F. Rivers

~~Date: September 24, 2020~~

~~/s/ Robert F. Rivers~~

~~By:~~

~~Robert F. Rivers~~

Chief Executive Officer and Chair of the Board

~~(Principal Executive Officer)~~

(Principal Executive Officer)

~~Date: September 24, 2020~~

Date: November 4, 2022

~~/s/~~/s/ James B. Fitzgerald

By:

~~By:~~

James B. Fitzgerald

Chief Financial Officer

(Principal Financial Officer)

110


	~~Page~~
		Page
Part I Financial Information

Item 1.I. Unaudited Consolidated Financial Statements

Unaudited Consolidated Balance Sheets as of ~~June~~September 30, ~~2020~~2022 and December 31, ~~2019~~2021			2	4
Unaudited Consolidated Statements of Income for the three and ~~six~~nine months ended ~~June~~September 30, ~~2020~~2022 and ~~2019~~2021			4	5
Unaudited Consolidated Statements of Comprehensive Income for the three and ~~six~~nine months ended ~~June~~September 30, ~~2020~~2022 and ~~2019~~2021			6
Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the three and ~~six~~nine months ended ~~June~~September 30, ~~2020~~2022 and ~~2019~~2021			7
Unaudited Consolidated Statements of Cash Flows for the ~~six~~ nine months ended ~~June~~September 30, ~~2020~~2022 and ~~2019~~2021			8	9
Notes to the Unaudited Consolidated Financial Statements			10	11


	As of June 30,			As of December 31,
	2020			2019
	(In Thousands)
ASSETS
Cash and due from banks	$	67,264		$	135,503
Short-term investments		1,365,297			227,099

Cash and cash equivalents		1,432,561			362,602

Securities:
Trading		—			961
Available for sale		1,600,354			1,508,236

Total securities		1,600,354			1,509,197

Loans held for sale		2,972			26
Loans:
Commercial and industrial		2,271,700			1,642,184
Commercial real estate		3,584,358			3,535,441
Commercial construction		282,246			273,774
Business banking		1,234,961			771,498
Residential real estate		1,400,855			1,428,630
Consumer home equity		905,484			933,088
Other consumer		334,734			402,431

Total Loans		10,014,338			8,987,046
Less: allowance for loan losses		(116,636	)		(82,297	)
Less: unamortized premiums, net of unearned discounts and deferred fees		(34,722	)		(5,565	)

Net Loans		9,862,980			8,899,184

Federal Home Loan Bank stock, at cost		8,805			9,027
Premises and equipment		52,475			57,453
Bank-owned life insurance		77,528			77,546
Goodwill and other intangibles, net		376,331			377,734
Deferred income taxes, net		7,663			28,207
Prepaid expenses		92,517			61,336
Other assets		482,337			246,463

Total Assets	$	13,996,523		$	11,628,775


	Three months ended June 30,						Six months ended June 30,
	2020			2019			2020			2019
	(In Thousands)
Interest and dividend income:
Interest and fees on loans	$	92,143		$	102,216		$	187,681		$	202,772
Taxable interest and dividends on available for sale securities		7,600			7,901			15,778			15,953
Non-taxable interest and dividends on available for sale securities		1,905			2,049			3,826			4,403
Interest on federal funds sold and other short-term investments		284			612			801			965
Interest and dividends on trading securities		1			60			6			228

Total interest and dividend income		101,933			112,838			208,092			224,321

Interest expense:
Interest on deposits		3,104			7,313			8,518			13,832
Interest on borrowings		74			2,002			673			4,294

Total interest expense		3,178			9,315			9,191			18,126

Net interest income		98,755			103,523			198,901			206,195
Provision for allowance for credit losses		8,600			1,500			37,200			4,500

Net interest income after provision for credit losses		90,155			102,023			161,701			201,695

Noninterest income:
Insurance commissions		22,697			24,135			50,174			48,897
Service charges on deposit accounts		4,364			6,771			10,462			13,175
Trust and investment advisory fees		5,194			4,980			10,289			9,608
Debit card processing fees		2,337			2,638			4,807			5,048
Interest rate swap income (losses)		771			(810	)		(5,238	)		(470	)
Income from investments held in rabbi trusts		7,745			1,822			1,002			5,969
(Losses) gains on trading securities, net		(1	)		152			(3	)		1,294
Gains on sales of mortgage loans held for sale, net		1,420			159			1,513			209
Gains on sales of securities available for sale, net		163			1,966			285			2,016
Other		2,967			3,819			7,735			7,686

Total noninterest income		47,657			45,632			81,026			93,432

Noninterest expense:
Salaries and employee benefits		63,335			62,364			124,924			129,670
Office occupancy and equipment		8,615			8,383			17,304			17,182
Data processing		12,180			10,912			22,184			21,588


	Retained Earnings			Accumulated Other Comprehensive Income			Total
	(In Thousands)
Balance at December 31, 2019	$	1,644,000		$	(43,847	)	$	1,600,153
Cumulative effect accounting adjustment ⁽¹⁾		(1,131	)					(1,131	)
Net income		8,445			—			8,445
Other comprehensive income, net of tax		—			55,267			55,267

Balance at March 31, 2020	$	1,651,314		$	11,420		$	1,662,734

Net income		29,850			—			29,850
Other comprehensive income, net of tax		—			1,046			1,046

Balance at June 30, 2020	$	1,681,164		$	12,466		$	1,693,630


Balance at December 31, 2018	$	1,508,902		$	(75,761	)	$	1,433,141
Net income		32,965			—			32,965
Other comprehensive income, net of tax		—			28,992			28,992

Balance at March 31, 2019	$	1,541,867		$	(46,769	)	$	1,495,098

Net income		35,053			—			35,053
Other comprehensive income, net of tax		—			21,509			21,509

Balance at June 30, 2019	$	1,576,920		$	(25,260	)	$	1,551,660


Contingent consideration paid		(158	)		(447	)
Payment of initial public offering costs		(4,153	)		—

Net cash provided by financing activities		2,084,822			26,450

Net increase in cash, cash equivalents, and restricted cash		1,069,959			31,901
Cash, cash equivalents, and restricted cash at beginning of period		362,602			259,708

Cash, cash equivalents, and restricted cash at end of period	$	1,432,561		$	291,609


Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest paid	$	10,533		$	17,697
Income taxes		14,976			20,335
Non-cash activities
Net increase in capital commitments relating to low income housing tax credit projects	$	13,214		$	—
Initial recognition of operating lease right-of-use assets upon adoption of Accounting Standards Update 2016-02		92,948			—
Initial recognition of operating lease liabilities upon adoption of Accounting Standards Update 2016-02		96,426			—


	As of and for the six months ended June 30, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(In Thousands)
Debt securities:
Government-sponsored residential mortgage-backed securities	$	1,207,274	$	44,750	$	(225	)	$	1,251,799
U.S. Treasury securities		60,189		747		—			60,936
State and municipal bonds and obligations		264,615		16,725		—			281,340
Qualified zone academy bond		6,209		70		—			6,279

	$	1,538,287	$	62,292	$	(225	)	$	1,600,354


	As of June 30, 2020
	Due in one year or less				Due after one year to five years					Due after five to ten years				Due after ten years				Total
	Amortized		Fair Value		Amortized			Fair Value		Amortized		Fair Value		Amortized		Fair Value		Amortized		Fair Value
	(In Thousands)
Available for sale securities:
Government-sponsored residential mortgage-backed securities	$	—	$	—	$	24,413	��	$	25,733	$	150,726	$	157,290	$	1,032,135	$	1,068,776	$	1,207,274	$	1,251,799
U.S. Treasury securities		50,070		50,778		10,119			10,158		—		—		—		—		60,189		60,936
State and municipal bonds and obligations		407		411		18,205			18,966		73,890		77,868		172,113		184,095		264,615		281,340
Qualified zone academy bond		6,209		6,279		—			—		—		—		—		—		6,209		6,279

Total available for sale securities	$	56,686	$	57,468	$	52,737		$	54,857	$	224,616	$	235,158	$	1,204,248	$	1,252,871	$	1,538,287	$	1,600,354


	As of December 31, 2019
	Due in one year or less				Due after one year to five years					Due after five to ten years				Due after ten years				Total
	Amortized		Fair Value		Amortized			Fair Value		Amortized		Fair Value		Amortized		Fair Value		Amortized		Fair Value
	(In Thousands)
Available for sale securities:
Government-sponsored residential mortgage-backed securities	$	—	$	—	$	8,139		$	8,464	$	199,428	$	203,706	$	943,738	$	955,798	$	1,151,305	$	1,167,968
U.S. Treasury securities		40		40		50,115			50,380		—		—		—		—		50,155		50,420
State and municipal bonds and obligations		381		381		8,889			9,109		77,227		79,504		186,085		194,544		272,582		283,538
Qualified zone academy bond		6,155		6,310		—			—		—		—		—		—		6,155		6,310

Total available for sale securities	$	6,576	$	6,731	$	67,143		$	67,953	$	276,655	$	283,210	$	1,129,823	$	1,150,342	$	1,480,197	$	1,508,236


	At June 30,			At December 31,
	2020			2019
	(In thousands)
Commercial and industrial	$	2,271,700		$	1,642,184
Commercial real estate		3,584,358			3,535,441
Commercial construction		282,246			273,774
Business banking		1,234,961			771,498
Residential real estate		1,400,855			1,428,630
Consumer home equity		905,484			933,088
Other consumer		334,734			402,431

Gross loans before unamortized premiums, unearned discounts and deferred fees		10,014,338			8,987,046

Allowance for credit losses		(116,636	)		(82,297	)
Unamortized premiums, net of unearned discounts and deferred fees		(34,722	)		(5,565	)

Loans after the allowance for credit losses, unamortized premiums, unearned discounts and deferred fees	$	9,862,980		$	8,899,184


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019
	(In thousands)
Balance at the beginning of period	$	109,138		$	82,493		$	82,297		$	80,655
Loans charged off		(1,264	)		(2,563	)		(3,607	)		(4,487	)
Recoveries		162			1,232			746			1,994
Provision charged to expense		8,600			1,500			37,200			4,500

Balance at end of period	$	116,636		$	82,662		$	116,636		$	82,662


	For the Three Months Ended June 30, 2020
	Commercial and Industrial			Commercial Real Estate			Commercial Construction		Business Banking			Residential Real Estate			Consumer Home Equity			Other Consumer			Other			Total
	(In Thousands)
Allowance for Loan Losses:
Beginning balance	$	30,531		$	49,227		$	4,712	$	10,181		$	6,228		$	3,913		$	4,019		$	327		$	109,138
Charge-offs		(27	)		(24	)		—		(1,198	)		—			—			(15	)		—			(1,264	)
Recoveries		58			5			—		27			13			8			51			—			162
Provision (benefit)		2,667			5,020			104		795			328			(46	)		(293	)		25			8,600

Ending balance	$	33,229		$	54,228		$	4,816	$	9,805		$	6,569		$	3,875		$	3,762		$	352		$	116,636


	For the Three Months Ended June 30, 2019
	Commercial and Industrial			Commercial Real Estate			Commercial Construction		Business Banking			Residential Real Estate			Consumer Home Equity			Other Consumer			Other			Total
	(In Thousands)
Allowance for Loan Losses:
Beginning balance	$	20,844		$	33,170		$	4,225	$	8,175		$	7,169		$	4,105		$	4,390		$	415		$	82,493
Charge-offs		(272	)		(169	)		—		(1,371	)		(46	)		(124	)		(581	)		—			(2,563	)
Recoveries		908			2			—		193			12			20			97			—			1,232
Provision (benefit)		(651	)		583			537		1,057			(335	)		96			418			(205	)		1,500

Ending balance	$	20,829		$	33,586		$	4,762	$	8,054		$	6,800		$	4,097		$	4,324		$	210		$	82,662


	For the Six Months Ended June, 2020
	Commercial and Industrial			Commercial Real Estate			Commercial Construction		Business Banking			Residential Real Estate		Consumer Home Equity			Other Consumer			Other			Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	20,919		$	34,730		$	3,424	$	8,260		$	6,380	$	4,027		$	4,173		$	384		$	82,297
Charge-offs		(27	)		(24	)		—		(2,535	)		—		(473	)		(548	)		—			(3,607	)
Recoveries		380			6			—		154			73		22			111			—			746
Provision (benefit)		11,957			19,516			1,392		3,926			116		299			26			(32	)		37,200

Ending balance	$	33,229		$	54,228		$	4,816	$	9,805		$	6,569	$	3,875		$	3,762		$	352		$	116,636

Ending balance: individually evaluated for impairment	$	3,028		$	230		$	22	$	578		$	1,639	$	277		$	—		$	—		$	5,774

Ending balance: acquired with deteriorated credit quality	$	1,732		$	1,066		$	—	$	—		$	293	$	—		$	—		$	—		$	3,091

Ending balance: collectively evaluated for impairment	$	28,469		$	52,932		$	4,794	$	9,227		$	4,637	$	3,598		$	3,762		$	352		$	107,771

Loans ending balance:
Individually evaluated for impairment	$	18,864		$	4,920		$	280	$	20,301		$	28,301	$	5,947		$	22		$	—		$	78,635
Acquired with deteriorated credit quality		3,572			5,413			—		—			3,426		—			—			—			12,411
Collectively evaluated for impairment		2,249,264			3,574,025			281,966		1,214,660			1,369,128		899,537			334,712			—			9,923,292

Total loans by group	$	2,271,700		$	3,584,358		$	282,246	$	1,234,961		$	1,400,855	$	905,484		$	334,734		$	—		$	10,014,338


	For the Six Months Ended June 30, 2019
	Commercial and Industrial			Commercial Real Estate			Commercial Construction		Business Banking			Residential Real Estate			Consumer Home Equity			Other Consumer			Other			Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	19,321		$	32,400		$	4,606	$	8,167		$	7,059		$	4,113		$	4,600		$	389		$	80,655
Charge-offs		(272	)		(169	)		—		(2,810	)		(63	)		(124	)		(1,049	)		—			(4,487	)
Recoveries		1,368			4			—		320			71			28			203			—			1,994
Provision (benefit)		412			1,351			156		2,377			(267	)		80			570			(179	)		4,500

Ending balance	$	20,829		$	33,586			4,762	$	8,054		$	6,800		$	4,097		$	4,324		$	210		$	82,662

Ending balance: individually evaluated for impairment	$	1,918		$	40		$	—	$	198		$	1,663		$	296		$	—		$	—		$	4,115

Ending balance: acquired with deteriorated credit quality	$	227		$	85		$	—	$	—		$	213		$	—		$	—		$	—		$	525

Ending balance: collectively evaluated for impairment	$	18,684		$	33,461		$	4,762	$	7,856		$	4,924		$	3,801		$	4,324		$	210		$	78,022

Loans ending balance:
Individually evaluated for impairment	$	21,098		$	10,421		$	—	$	9,043		$	27,287		$	4,642		$	—		$	—		$	72,491
Acquired with deteriorated credit quality		4,109			7,591			—		—			3,405			—			—			—			15,105
Collectively evaluated for impairment		1,726,510			3,331,951			310,860		736,417			1,414,741			950,713			470,858			—			8,942,050

Total loans by group	$	1,751,717		$	3,349,963		$	310,860	$	745,460		$	1,445,433		$	955,355		$	470,858		$	—		$	9,029,646


			As of June 30, 2020
Category	Risk Rating		Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Total
	(In thousands)
Unrated		0	$	753,943	$	42,919	$	332	$	900,296	$	1,697,490
Pass		1-6W		1,269,284		3,211,054		248,400		291,751		5,020,489
Special mention		7		180,485		297,016		29,671		32,406		539,578
Substandard		8		51,338		30,654		3,843		10,508		96,343
Doubtful		9		16,650		2,715		—		—		19,365
Loss		10		—		—		—		—		—

Total			$	2,271,700	$	3,584,358	$	282,246	$	1,234,961	$	7,373,265


			As of December 31, 2019
Category	Risk Rating		Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Total
	(In thousands)
Unrated		0	$	150,226	$	48,266	$	331	$	445,201	$	644,024
Pass		1-6W		1,405,902		3,436,267		260,615		315,194		5,417,978
Special mention		7		24,171		28,606		9,438		2,006		64,221
Substandard		8		42,894		21,635		3,390		8,207		76,126
Doubtful		9		18,991		667		—		890		20,548
Loss		10		—		—		—		—		—

Total			$	1,642,184	$	3,535,441	$	273,774	$	771,498	$	6,222,897


	As of June 30,		As of December 31,
	2020		2019
	(In Thousands)
Commercial and industrial	$	13,435	$	21,471
Commercial real estate		1,399		4,120
Commercial construction		281		—
Business banking		16,158		8,502
Residential real estate		11,693		5,598
Consumer home equity		6,403		2,137
Other consumer		2,971		623

Total non-accrual loans	$	52,340	$	42,451


	As of June 30, 2020
	TDRs on Accrual Status				TDRs on Nonaccrual Status				Total TDRs
			Balance of		Number of		Balance of		Number of		Balance of
	Number of Loans		Loans		Loans		Loans		Loans		Loans
	(Dollars in thousands)
Commercial and industrial		2	$	5,429		10	$	11,259		12	$	16,688
Commercial real estate		1		3,521		2		707		3		4,228
Business banking		5		4,143		2		224		7		4,367
Residential real estate		149		23,714		28		4,172		177		27,886
Consumer home equity		86		3,862		12		2,085		98		5,947
Other consumer		1		22		—		—		1		22

Total		244	$	40,691		54	$	18,447		298	$	59,138


	As of December 31, 2019
	TDRs on Accrual Status				TDRs on Nonaccrual Status				Total TDRs
			Balance of		Number of		Balance of		Number of		Balance of
	Number of Loans		Loans		Loans		Loans		Loans		Loans
	(Dollars in thousands)
Commercial and industrial		4	$	10,899		14	$	19,781		18	$	30,680
Commercial real estate		1		3,520		3		3,338		4		6,858
Business banking		2		3,156		1		204		3		3,360
Residential real estate		152		25,093		27		3,977		179		29,070
Consumer home equity		89		5,955		5		600		94		6,555

Total		248	$	48,623		50	$	27,900		298	$	76,523


	For the Three Months Ended June 30, 2020						For the Six Months Ended June 30, 2020
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Modification Outstanding Recorded Investment (1)		Number of Contracts		Pre-Modification Modification Outstanding Recorded Investment		Post- Modification Modification Outstanding Recorded Investment (1)
	(Dollars in thousands)
Commercial and industrial		1	$	141	$	141		1	$	141	$	141
Commercial real estate		1		506		506		1		506		506
Business banking		4		1,165		1,165		4		1,165		1,165
Residential real estate		2		155		155		3		399		399
Consumer home equity		4		113		113		12		527		531
Other consumer		—		—		—		1		24		24

Total		12	$	2,080	$	2,080		22	$	2,762	$	2,766


	For the Three Months Ended June 30, 2019						For the Six Months Ended June 30, 2019
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Modification Outstanding Recorded Investment (1)		Number of Contracts		Pre-Modification Modification Outstanding Recorded Investment		Post- Modification Modification Outstanding Recorded Investment (1)
	(Dollars in thousands)
Commercial and industrial		5	$	7,141	$	7,441		7	$	7,462	$	7,762
Commercial real estate		2		3,277		3,277		2		3,277		3,277
Residential real estate		3		433		445		3		433		445
Consumer home equity		3		154		156		3		154		156

Total		13	$	11,005	$	11,319		15	$	11,326	$	11,640


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019
	(In Thousands)
Adjusted interest rate and extended maturity	$	—	$	668	$	—	$	668
Adjusted interest rate and principal deferred		—		39		—		39
Interest only/principal deferred		1,305		40		1,305		40
Extended maturity		35		—		35		—
Extended maturity and interest only/principal deferred		381		—		427		—
Additional underwriting - increased exposure		—		10,572		—		10,572
Court-ordered concession		359		—		999		321

Total	$	2,080	$	11,319	$	2,766	$	11,640


	For the Three Months Ended				For the Six Months Ended
	June 30, 2020				June 30, 2020
	Average Recorded Investment		Total Interest Recognized		Average Recorded Investment		Total Interest Recognized
	(In Thousands)
With no related allowance recorded:
Commercial and industrial	$	12,304	$	49	$	16,592	$	119
Commercial real estate		4,401		44		5,946		89
Business banking		2,392		17		2,339		36
Residential real estate		11,678		125		11,728		252
Consumer home equity		3,315		16		3,155		37
Other Consumer		22		—		23		1

Sub-total		34,112		251		39,783		534

With an allowance recorded:
Commercial and industrial		6,545		—		9,138		—
Commercial real estate		510		—		429		—
Commercial construction		93		—		47		—
Business banking		12,955		15		10,869		30
Residential real estate		14,664		169		14,707		343
Consumer home equity		2,706		22		3,087		51

Sub-total		37,473		206		38,277		424

Total	$	71,585	$	457	$	78,060	$	958


	For the Three Months Ended				For the Six Months Ended
	June 30, 2019				June 30, 2019
	Average Recorded Investment		Total Interest Recognized		Average Recorded Investment		Total Interest Recognized
	(In Thousands)
With no related allowance recorded:
Commercial and industrial	$	12,022	$	108	$	11,343	$	177
Commercial real estate		11,443		74		11,176		148
Business banking		1,465		—		1,332		—
Residential real estate		11,935		131		11,978		259
Consumer home equity		1,989		26		2,034		51

Sub-total		38,854		339		37,863		635

With an allowance recorded:
Commercial and industrial	$	4,386	$	—	$	3,629	$	—
Commercial real estate		1,179		—		634		—
Business banking		7,314		—		6,937		—
Residential real estate		12,606		153		12,625		302
Consumer home equity		2,320		30		2,373		59

Sub-total		27,805		183		26,198		361

Total	$	66,659	$	522	$	64,061	$	996


	June 30,		December 31,
	2020		2019
	(In Thousands)
Outstanding balance	$	13,572	$	15,149
Carrying amount		12,411		13,451


	As of June 30, 2020
	(in thousands)
Right-of-use assets	$	87,573
Lease liabilities	$	91,221


	Three months ended June 30, 2020		Six months ended June 30, 2020
	(in thousands)		(in thousands)
Operating lease cost	$	3,601	$	7,215
Finance lease cost		17		20
Variable lease cost		448		970

Total lease cost	$	4,066	$	8,205


	(in thousands)
Remainder of 2020	$	7,098
2021		13,746
2022		12,746
2023		12,206
2024		11,402
Thereafter		45,534

Total minimum lease payments	$	102,732
Less: amount representing interest		11,511

Present value of future minimum lease payments	$	91,221


	Six Months Ended June 30, 2020		Year Ended December 31, 2019
	(In Thousands)
Current recorded investment included in other assets	$	46,552	$	37,665
Commitments to fund qualified affordable housing projects included in recorded investment noted above		23,821		18,042
Tax credits and benefits ⁽¹⁾		3,058		5,962
Amortization of investments included in current tax expense ⁽²⁾		2,452		4,782


June 30, 2020
					Weighted Average Rate
	Notional Amount		Weighted Average Maturity		Current Rate Paid			Receive Fixed Swap Rate			Fair Value ⁽¹⁾
	(In Thousands)		(In Years)								(In Thousands)

Interest rate swaps on loans		900,000		1.27		0.18	%		2.57	%		(38	)

Total	$	900,000									$	(38	)


	Asset Derivatives						Liability Derivatives
	Balance Sheet Location		Fair Value at June 30, 2020		Fair Value at December 31, 2019		Balance Sheet Location		Fair Value at June 30, 2020		Fair Value at December 31, 2019
	(In Thousands)
Derivatives designated as hedging instruments
Interest rate swaps		Other assets	$	—	$	—		Other liabilities	$	38	$	321

Derivatives not designated as hedging instruments
Customer-related positions:
Interest rate swaps		Other assets	$	171,433	$	64,463		Other liabilities	$	51,319	$	18,057
Risk participation agreements		Other assets		995		482		Other liabilities		1,500		606
Foreign currency exchange contracts - matched customer book		Other assets		151		469		Other liabilities		40		428
Foreign currency exchange contracts - foreign currency loan		Other assets		—		—		Other liabilities		173		203

			$	172,579	$	65,414			$	53,032	$	19,294

Total			$	172,579	$	65,414			$	53,070	$	19,615


	Asset Derivatives					Liability Derivatives
	Balance Sheet Location	Fair Value at September 30, 2022		Fair Value at December 31, 2021		Balance Sheet Location	Fair Value at September 30, 2022		Fair Value at December 31, 2021
	(In thousands)
Derivatives designated as hedging instruments
Interest rate swaps	Other assets	$	5	$	—	Other liabilities	$	3,206	$	—
Derivatives not designated as hedging instruments
Customer-related positions:
Interest rate swaps	Other assets	$	23,818	$	64,338	Other liabilities	$	82,404	$	17,880
Risk participation agreements	Other assets	55		315		Other liabilities	134		580
Foreign currency exchange contracts - matched customer book	Other assets	428		61		Other liabilities	414		46
Foreign currency exchange contracts - foreign currency loan	Other assets	54		—		Other liabilities	132		87
		$	24,355	$	64,714		$	83,084	$	18,593
Total		$	24,360	$	64,714		$	86,290	$	18,593


	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019

Derivatives designated as hedges:
Gain in OCI on derivatives	$	3,455		$	16,054		$	47,011		$	21,914

Gain reclassified from OCI into interest income (effective portion)		7,134			231			10,246			524

Gain recognized in income on derivatives (ineffective portion and amount excluded from effectiveness test)

Interest income		—			—			—			—

Other income		—			—			—			—


Total		—			—			—			—

Derivatives not designated as hedges:
Customer-related positions:
(Loss) recognized in interest rate swap income	$	(687	)	$	(2,129	)	$	(6,967	)	$	(3,356	)
(Loss) recognized in interest rate swap income for risk participation agreements		(80	)		(157	)		(381	)		(98	)
Gain (loss) recognized in other income for foreign currency exchange contracts:
Matched commercial customer book		96			(41	)		69			(40	)
Foreign currency loan		(367	)		(32	)		30			(24	)

Total (loss) for derivatives not designated as hedges	$	(1,039	)	$	(2,359	)	$	(7,249	)	$	(3,518	)


	As of June 30, 2020				As of December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In Thousands)
Assets
Cash and cash equivalents	$	1,432,561	$	1,432,561	$	362,602	$	362,602
Trading securities		—		—		961		961
Securities available for sale		1,600,354		1,600,354		1,508,236		1,508,236
Loans held for sale		2,972		2,972		26		26
Loans, net of allowance for loan losses		9,862,980		10,191,776		8,889,184		9,116,018
Accrued interest receivable		28,017		28,017		26,835		26,835
FHLB stock		8,805		8,805		9,027		9,027
Rabbi trust investments		78,808		78,808		78,012		78,012
Bank-owned life insurance		77,528		77,528		77,546		77,546
Interest rate swap contracts
Customer-related positions		171,433		171,433		64,463		64,463
Risk participation agreements		995		995		482		482
Foreign currency forward contracts
Matched customer book		151		151		469		469

Liabilities
Deposits	$	11,846,765	$	11,847,001	$	9,551,392	$	9,548,889
Other borrowed funds		—		—		201,082		201,082
FHLB advances		14,922		14,847		18,964		18,188
Escrow deposits of borrowers		14,233		14,233		15,349		15,349
Accrued interest payable		370		370		1,712		1,712
Interest rate swap contracts
Cash flow hedges - interest rate positions		38		38		321		321
Customer-related positions		51,319		51,319		18,057		18,057
Risk participation agreements		1,500		1,500		606		606
Foreign currency forward contracts
Matched customer book		40		40		428		428
Foreign currency loan		173		173		203		203


	Securities Available for Sale
	(Dollars In Thousands)
Balance at January 1, 2019	$	6,045
Gains and losses (realized/unrealized):
Included in earnings		55

Balance at June 30, 2019	$	6,100


Balance at January 1, 2020	$	6,310
Gains and losses (realized/unrealized):
Included in net income		55
Included in other comprehensive income		(86	)

Balance at June 30, 2020	$	6,279


Balance at April 1, 2019	$	6,073
Gains and losses (realized/unrealized):
Included in earnings		27

Balance at June 30, 2019	$	6,100


Balance at April 1, 2020	$	6,249
Gains and losses (realized/unrealized):
Included in earnings		27
Included in other comprehensive income		3

Balance at June 30, 2020	$	6,279