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 March 31, ~~2022~~2023


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

Commission File Number 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

~~182,674,973~~176,328,426 shares of the Registrant’s common stock, par value $0.01 per share, were outstanding as of May 4, ~~2022.~~2023.

Table of Contents

Index


		PAGE
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Unaudited Consolidated Balance Sheets	4
	Unaudited Consolidated Statements of Income	5
	Unaudited Consolidated Statements of Comprehensive Income	6
	Unaudited Consolidated Statements of Changes in Shareholders’ Equity	7
	Unaudited Consolidated Statements of Cash Flows	8
	Notes to Unaudited Consolidated Financial Statements	910

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5754

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	9190

Item 4.	Controls and Procedures	9190

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	9190

Item 1A.	Risk Factors	9291

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9291

Item 3.	Defaults Upon Senior Securities	9391

Item 4.	Mine Safety Disclosures	9391

Item 5.	Other Information	9391

Item 6.	Exhibits	9492

EXHIBIT INDEX		9492

SIGNATURES		9593

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements

EASTERN BANKSHARES, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS


(In thousands, except per share data)	(In thousands, except per share data)	March 31, 2022		December 31, 2021		(In thousands, except per share data)	March 31, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	118,362	$	144,634	Cash and due from banks	$	98,377	$	106,040
Short-term investments	Short-term investments	712,132		1,087,158		Short-term investments	2,039,439		63,465
Cash and cash equivalents	Cash and cash equivalents	830,494		1,231,792		Cash and cash equivalents	2,137,816		169,505
Securities:	Securities:					Securities:
Available for sale (amortized cost $8,456,620 and $8,587,179, respectively)		7,917,305		8,511,224
Held to maturity (fair value $392,123 and $0, respectively)		395,434		—
Available for sale (amortized cost $5,459,320 and $7,825,435, respectively)						Available for sale (amortized cost $5,459,320 and $7,825,435, respectively)	4,700,134		6,690,778
Held to maturity (fair value $425,427 and $423,226, respectively)						Held to maturity (fair value $425,427 and $423,226, respectively)	471,185		476,647
Total securities	Total securities	8,312,739		8,511,224		Total securities	5,171,319		7,167,425
Loans held for sale	Loans held for sale	1,166		1,206		Loans held for sale	3,068		4,543
Loans:	Loans:					Loans:
Commercial and industrial	Commercial and industrial	2,886,560		2,960,527		Commercial and industrial	3,169,438		3,150,946
Commercial real estate	Commercial real estate	4,609,824		4,522,513		Commercial real estate	5,201,196		5,155,323
Commercial construction	Commercial construction	246,093		222,328		Commercial construction	357,117		336,276
Business banking	Business banking	1,201,007		1,334,694		Business banking	1,078,678		1,090,492
Residential real estate	Residential real estate	1,936,182		1,926,810		Residential real estate	2,497,491		2,460,849
Consumer home equity	Consumer home equity	1,099,211		1,100,153		Consumer home equity	1,180,824		1,187,547
Other consumer	Other consumer	203,326		214,485		Other consumer	190,506		194,098
Total loans	Total loans	12,182,203		12,281,510		Total loans	13,675,250		13,575,531
Less: allowance for loan losses		(124,166)		(97,787)
Less: unamortized premiums, net of unearned discounts and deferred fees		(24,434)		(26,442)
Allowance for loan losses						Allowance for loan losses	(140,938)		(142,211)
Unamortized premiums, net of unearned discounts and deferred fees						Unamortized premiums, net of unearned discounts and deferred fees	(13,597)		(13,003)
Net loans	Net loans	12,033,603		12,157,281		Net loans	13,520,715		13,420,317
Federal Home Loan Bank stock, at cost	Federal Home Loan Bank stock, at cost	10,904		10,904		Federal Home Loan Bank stock, at cost	45,168		41,363
Premises and equipment	Premises and equipment	73,180		80,984		Premises and equipment	61,110		62,656
Bank-owned life insurance	Bank-owned life insurance	157,954		157,091		Bank-owned life insurance	161,755		160,790
Goodwill and other intangibles, net	Goodwill and other intangibles, net	654,759		649,703		Goodwill and other intangibles, net	660,165		661,126
Deferred income taxes, net	Deferred income taxes, net	183,137		76,535		Deferred income taxes, net	314,139		331,648
Prepaid expenses	Prepaid expenses	188,704		179,330		Prepaid expenses	163,018		165,900
Other assets	Other assets	389,432		456,078		Other assets	482,257		461,585
Total assets	Total assets	$	22,836,072	$	23,512,128	Total assets	$	22,720,530	$	22,646,858
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Deposits:	Deposits:					Deposits:
Demand	Demand	$	6,788,742	$	7,020,864	Demand	$	5,564,016	$	6,240,637
Interest checking accounts	Interest checking accounts	4,662,134		4,478,566		Interest checking accounts	4,240,780		4,568,122
Savings accounts	Savings accounts	2,089,427		2,077,495		Savings accounts	1,633,790		1,831,123
Money market investment	Money market investment	5,406,198		5,525,005		Money market investment	5,135,590		4,710,095
Certificates of deposit	Certificates of deposit	446,315		526,381		Certificates of deposit	1,967,404		1,624,382
Total deposits	Total deposits	19,392,816		19,628,311		Total deposits	18,541,580		18,974,359
Borrowed funds:	Borrowed funds:					Borrowed funds:
Federal Home Loan Bank advances		13,689		14,020
Short-term Federal Home Loan Bank advances						Short-term Federal Home Loan Bank advances	1,088,296		691,297
Escrow deposits of borrowers	Escrow deposits of borrowers	21,233		20,258		Escrow deposits of borrowers	25,671		22,314
Interest rate swap collateral funds						Interest rate swap collateral funds	11,780		14,430
Long-term Federal Home Loan Bank advances						Long-term Federal Home Loan Bank advances	12,656		12,787
Total borrowed funds	Total borrowed funds	34,922		34,278		Total borrowed funds	1,138,403		740,828
Other liabilities	Other liabilities	399,942		443,187		Other liabilities	461,424		459,881
Total liabilities	Total liabilities	19,827,680		20,105,776		Total liabilities	20,141,407		20,175,068
Commitments and contingencies (see footnote 12)		0		0
Commitments and contingencies (see footnote 13)						Commitments and contingencies (see footnote 13)
Shareholders’ equity	Shareholders’ equity					Shareholders’ equity
Common shares, $0.01 par value, 1,000,000,000 shares authorized, 183,438,711 and 186,305,332 shares issued and outstanding at, March 31, 2022 and December 31, 2021, respectively		1,834		1,863
Common shares, $0.01 par value, 1,000,000,000 shares authorized, 176,328,426 and 176,172,073 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively						Common shares, $0.01 par value, 1,000,000,000 shares authorized, 176,328,426 and 176,172,073 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	1,764		1,762
Additional paid in capital	Additional paid in capital	1,777,670		1,835,241		Additional paid in capital	1,651,524		1,649,141
Unallocated common shares held by the Employee Stock Ownership Plan	Unallocated common shares held by the Employee Stock Ownership Plan	(141,455)		(142,709)		Unallocated common shares held by the Employee Stock Ownership Plan	(136,470)		(137,696)
Retained earnings	Retained earnings	1,782,997		1,768,653		Retained earnings	1,672,169		1,881,775
Accumulated other comprehensive loss, net of tax		(412,654)		(56,696)
Accumulated other comprehensive income, net of tax						Accumulated other comprehensive income, net of tax	(609,864)		(923,192)
Total shareholders’ equity	Total shareholders’ equity	3,008,392		3,406,352		Total shareholders’ equity	2,579,123		2,471,790
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	22,836,072	$	23,512,128	Total liabilities and shareholders’ equity	$	22,720,530	$	22,646,858

The accompanying notes are an integral part of these ~~unaudited consolidated financial statements.~~Unaudited Consolidated Financial Statements.

Table of Contents

EASTERN BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
		(In thousands, except per share data)					(In thousands, except per share data)
Interest and dividend income:	Interest and dividend income:					Interest and dividend income:
Interest and fees on loans	Interest and fees on loans	$	101,367	$	88,639	Interest and fees on loans	$	153,540	$	101,367
Taxable interest and dividends on securities	Taxable interest and dividends on securities	27,876		10,206		Taxable interest and dividends on securities	28,642		27,876
Non-taxable interest and dividends on securities	Non-taxable interest and dividends on securities	1,806		1,856		Non-taxable interest and dividends on securities	1,434		1,806
Interest on federal funds sold and other short-term investments	Interest on federal funds sold and other short-term investments	436		432		Interest on federal funds sold and other short-term investments	5,264		436
Total interest and dividend income	Total interest and dividend income	131,485		101,133		Total interest and dividend income	188,880		131,485
Interest expense:	Interest expense:					Interest expense:
Interest on deposits	Interest on deposits	3,322		1,002		Interest on deposits	42,933		3,322
Interest on borrowings	Interest on borrowings	39		40		Interest on borrowings	7,638		39
Total interest expense	Total interest expense	3,361		1,042		Total interest expense	50,571		3,361
Net interest income	Net interest income	128,124		100,091		Net interest income	138,309		128,124
Release of allowance for loan losses		(485)		(580)
Net interest income after provision for loan losses		128,609		100,671
Noninterest income:
Provision for (release of) allowance for loan losses						Provision for (release of) allowance for loan losses	25		(485)
Net interest income after provision for (release of) allowance for loan losses						Net interest income after provision for (release of) allowance for loan losses	138,284		128,609
Noninterest (loss) income:						Noninterest (loss) income:
Insurance commissions	Insurance commissions	28,713		28,147		Insurance commissions	31,503		28,713
Service charges on deposit accounts	Service charges on deposit accounts	8,537		5,367		Service charges on deposit accounts	6,472		8,537
Trust and investment advisory fees	Trust and investment advisory fees	6,141		5,663		Trust and investment advisory fees	5,770		6,141
Debit card processing fees	Debit card processing fees	2,945		2,749		Debit card processing fees	3,170		2,945
Interest rate swap income		2,932		5,405
(Losses) income from investments held in rabbi trusts		(4,433)		1,846
Gains on sales of mortgage loans held for sale, net		169		1,479
(Losses) gains on sales of securities available for sale, net		(2,172)		1,164
Interest rate swap (losses) income						Interest rate swap (losses) income	(408)		2,932
Income (losses) from investments held in rabbi trusts						Income (losses) from investments held in rabbi trusts	2,857		(4,433)
(Losses) gains on sales of mortgage loans held for sale, net						(Losses) gains on sales of mortgage loans held for sale, net	(74)		169
Losses on sales of securities available for sale, net						Losses on sales of securities available for sale, net	(333,170)		(2,172)
Other	Other	3,583		3,392		Other	5,550		3,583
Total noninterest income		46,415		55,212
Total noninterest (loss) income						Total noninterest (loss) income	(278,330)		46,415
Noninterest expense:	Noninterest expense:					Noninterest expense:
Salaries and employee benefits	Salaries and employee benefits	69,526		64,040		Salaries and employee benefits	78,478		69,526
Office occupancy and equipment	Office occupancy and equipment	11,614		8,217		Office occupancy and equipment	9,878		11,614
Data processing	Data processing	15,320		12,129		Data processing	13,441		15,320
Professional services	Professional services	4,701		4,148		Professional services	3,420		3,950
Marketing		1,574		1,691
Marketing expenses						Marketing expenses	1,097		1,574
Loan expenses	Loan expenses	1,168		1,847		Loan expenses	1,095		1,919
FDIC insurance	FDIC insurance	1,412		948		FDIC insurance	2,546		1,412
Amortization of intangible assets	Amortization of intangible assets	827		532		Amortization of intangible assets	960		827
Other	Other	2,724		497		Other	5,379		2,724
Total noninterest expense	Total noninterest expense	108,866		94,049		Total noninterest expense	116,294		108,866
Income before income tax expense		66,158		61,834
Income tax expense		14,642		14,171
Net income		$	51,516	$	47,663
Basic earnings per share		$	0.30	$	0.28
Diluted earnings per share		$	0.30	$	0.28
(Loss) income before income tax (benefit) expense						(Loss) income before income tax (benefit) expense	(256,340)		66,158
Income tax (benefit) expense						Income tax (benefit) expense	(62,244)		14,642
Net (loss) income						Net (loss) income	$	(194,096)	$	51,516
Basic (loss) earnings per share						Basic (loss) earnings per share	$	(1.20)	$	0.30
Diluted (loss) earnings per share						Diluted (loss) earnings per share	$	(1.20)	$	0.30

The accompanying notes are an integral part of these ~~unaudited consolidated financial statements.~~Unaudited Consolidated Financial Statements.

Table of Contents

EASTERN BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31,
2022 2021
(In thousands)
Net income $ 51,516 $ 47,663
Other comprehensive loss, net of tax:
Net change in fair value of securities available for sale (352,025) (74,904)
Net change in fair value of cash flow hedges (3,809) (5,948)
Net change in other comprehensive income for defined benefit postretirement plans (124) 426
Total other comprehensive loss (355,958) (80,426)
Total comprehensive loss $ (304,442) $ (32,763)


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Net (loss) income	$	(194,096)	$	51,516
Other comprehensive income (loss), net of tax:
Net change in fair value of securities available for sale	292,031		(352,025)
Net change in fair value of cash flow hedges	21,678		(3,809)
Net change in other comprehensive income for defined benefit postretirement plans	(381)		(124)
Total other comprehensive income (loss)	313,328		(355,958)
Total comprehensive income (loss)	$	119,232	$	(304,442)

The accompanying notes are an integral part of these ~~unaudited consolidated financial statements.~~Unaudited Consolidated Financial Statements.

Table of Contents

EASTERN BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022


		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			Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		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		—	—		—		(10,324)		—		—		(10,324)
Net income		—	—		—		47,663		—		—		47,663
Other comprehensive loss, net of tax		—	—		—		—		(80,426)		—		(80,426)
ESOP shares committed to be released		—	—		827		—		—		1,253		2,080
Balance at March 31, 2021		186,758,154	$	1,868	$	1,854,895	$	1,702,946	$	(26,192)	$	(146,472)	$	3,387,045
																(In thousands, except share data)
Balance at December 31, 2021	Balance at December 31, 2021	186,305,332	$	1,863	$	1,835,241	$	1,768,653	$	(56,696)	$	(142,709)	$	3,406,352	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)	Cumulative effect of accounting adjustment (1)	—	—		—		(20,098)		—		—		(20,098)		Cumulative effect of accounting adjustment (1)	—	—		—		(20,098)		—		—		(20,098)
Dividends to common shareholders	Dividends to common shareholders	—	—		—		(17,074)		—		—		(17,074)		Dividends to common shareholders	—	—		—		(17,074)		—		—		(17,074)
Repurchased common stock	Repurchased common stock	(2,866,621)	(29)		(60,566)		—		—		—		(60,595)		Repurchased common stock	(2,866,621)	(29)		(60,566)		—		—		—		(60,595)
Share-based compensation	Share-based compensation	—	—		1,623		—		—		—		1,623		Share-based compensation	—	—		1,623		—		—		—		1,623
Net income	Net income	—	—		—		51,516		—		—		51,516		Net income	—	—		—		51,516		—		—		51,516
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—	—		—		—		(355,958)		—		(355,958)		Other comprehensive loss, net of tax	—	—		—		—		(355,958)		—		(355,958)
ESOP shares committed to be released	ESOP shares committed to be released	—	—		1,372		—		—		1,254		2,626		ESOP shares committed to be released	—	—		1,372		—		—		1,254		2,626
Balance at March 31, 2022	Balance at March 31, 2022	183,438,711	$	1,834	$	1,777,670	$	1,782,997	$	(412,654)	$	(141,455)	$	3,008,392	Balance at March 31, 2022	183,438,711	$	1,834	$	1,777,670	$	1,782,997	$	(412,654)	$	(141,455)	$	3,008,392

Balance at December 31, 2022															Balance at December 31, 2022	176,172,073	$	1,762	$	1,649,141	$	1,881,775	$	(923,192)	$	(137,696)	$	2,471,790
Cumulative effect of accounting adjustment (2)															Cumulative effect of accounting adjustment (2)	—	—		—		822		—		—		822
Dividends to common shareholders															Dividends to common shareholders	—	—		—		(16,332)		—		—		(16,332)
Issuance of common stock under share-based compensation arrangements (3)															Issuance of common stock under share-based compensation arrangements (3)	156,353	2		(1,165)		—		—		—		(1,163)
Share-based compensation															Share-based compensation	—	—		3,044		—		—		—		3,044
Net loss															Net loss	—	—		—		(194,096)		—		—		(194,096)
Other comprehensive income, net of tax															Other comprehensive income, net of tax	—	—		—		—		313,328		—		313,328
ESOP shares committed to be released															ESOP shares committed to be released	—	—		504		—		—		1,226		1,730
Balance at March 31, 2023															Balance at March 31, 2023	176,328,426	$	1,764	$	1,651,524	$	1,672,169	$	(609,864)	$	(136,470)	$	2,579,123

(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.

(2)Represents gross transition adjustment amount of $1.1 million, net of taxes of $0.3 million, to reflect the cumulative impact on retained earnings pursuant to the Company’s adoption of Accounting Standards Update 2022-02. 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.

(3)Represents shares issued, net of employee tax withheld, during the three months ended March 31, 2023 upon the vesting of restricted stock units. Refer to Note 11, “Share-Based Compensation” 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.~~Unaudited Consolidated Financial Statements.

Table of Contents

EASTERN BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS


		Three Months Ended March 31,					Three Months Ended March 31,
(In thousands)	(In thousands)	2022		2021		(In thousands)	2023		2022

Operating activities	Operating activities					Operating activities
Net income		$	51,516	$	47,663
Net (loss) income						Net (loss) income	$	(194,096)	$	51,516
Adjustments to reconcile net income to net cash provided by operating activities	Adjustments to reconcile net income to net cash provided by operating activities					Adjustments to reconcile net income to net cash provided by operating activities
Release of provision for loan losses		(485)		(580)
Provision for (release of) allowance for loan losses						Provision for (release of) allowance for loan losses	25		(485)
Depreciation and amortization	Depreciation and amortization	3,803		3,283		Depreciation and amortization	3,719		3,803
Accretion of deferred loan fees and premiums, net		(2,653)		(6,859)
Deferred income tax expense		14,129		5,118
Amortization of investment security premiums and discounts		4,669		3,277
Amortization (accretion) of deferred loan fees and premiums, net						Amortization (accretion) of deferred loan fees and premiums, net	742		(2,653)
Deferred income tax (benefit) expense						Deferred income tax (benefit) expense	(73,106)		14,129
Amortization of investment security premiums and discounts, net						Amortization of investment security premiums and discounts, net	2,559		4,669
Right-of-use asset amortization	Right-of-use asset amortization	3,272		2,862		Right-of-use asset amortization	3,139		3,272
Share-based compensation	Share-based compensation	1,623		—		Share-based compensation	3,044		1,623
Increase in cash surrender value of bank-owned life insurance	Increase in cash surrender value of bank-owned life insurance	(863)		(549)		Increase in cash surrender value of bank-owned life insurance	(965)		(863)
Loss (gain) on sale of securities available for sale, net		2,172		(1,164)
Amortization of gains from terminated interest rate swaps		(5,298)		(8,274)
Loss on sale of securities available for sale, net						Loss on sale of securities available for sale, net	333,170		2,172
Accretion of gains from terminated interest rate swaps						Accretion of gains from terminated interest rate swaps	(46)		(5,298)
Employee Stock Ownership Plan expense	Employee Stock Ownership Plan expense	2,626		2,080		Employee Stock Ownership Plan expense	1,730		2,626
Other	Other	1,013		(8)		Other	34		1,013
Change in:	Change in:					Change in:
Loans held for sale	Loans held for sale	40		(863)		Loans held for sale	1,446		40
Prepaid pension expense	Prepaid pension expense	(7,680)		838		Prepaid pension expense	1,202		(7,680)
Other assets	Other assets	40,300		43,683		Other assets	(8,768)		40,300
Other liabilities	Other liabilities	(39,806)		(25,597)		Other liabilities	26,691		(39,806)
Net cash provided by operating activities	Net cash provided by operating activities	68,378		64,910		Net cash provided by operating activities	100,520		68,378
Investing activities	Investing activities					Investing activities
Proceeds from sales of securities available for sale	Proceeds from sales of securities available for sale	232,561		23,236		Proceeds from sales of securities available for sale	1,899,724		232,561
Proceeds from maturities and principal paydowns of securities available for sale	Proceeds from maturities and principal paydowns of securities available for sale	362,680		214,085		Proceeds from maturities and principal paydowns of securities available for sale	130,553		362,680
Purchases of securities available for sale	Purchases of securities available for sale	(471,543)		(1,137,969)		Purchases of securities available for sale	—		(471,543)
Proceeds from maturities and principal paydowns of securities held to maturity	Proceeds from maturities and principal paydowns of securities held to maturity	421		—		Proceeds from maturities and principal paydowns of securities held to maturity	5,571		421
Purchases of securities held to maturity	Purchases of securities held to maturity	(395,835)		—		Purchases of securities held to maturity	—		(395,835)
Proceeds from sale of Federal Home Loan Bank stock						Proceeds from sale of Federal Home Loan Bank stock	105,704		—
Purchases of Federal Home Loan Bank stock						Purchases of Federal Home Loan Bank stock	(109,509)		—
Contributions to low income housing tax credit investments	Contributions to low income housing tax credit investments	(5,642)		(2,727)		Contributions to low income housing tax credit investments	(10,932)		(5,642)
Contributions to other equity investments						Contributions to other equity investments	(405)		—
Distributions from other equity investments	Distributions from other equity investments	606		7		Distributions from other equity investments	90		606
Net decrease (increase) in outstanding loans		99,847		(171,325)
Net (increase) decrease in outstanding loans, excluding loan purchases						Net (increase) decrease in outstanding loans, excluding loan purchases	(68,042)		99,847
Purchases of loans						Purchases of loans	(31,980)		—
Proceeds from life insurance policies	Proceeds from life insurance policies	19,736		—		Proceeds from life insurance policies	—		19,736
Acquisitions, net of cash and cash equivalents acquired	Acquisitions, net of cash and cash equivalents acquired	(5,200)		—		Acquisitions, net of cash and cash equivalents acquired	—		(5,200)
Purchased banking premises and equipment, net	Purchased banking premises and equipment, net	(3,280)		(719)		Purchased banking premises and equipment, net	(1,217)		(3,280)
Proceeds from sale of premises held for sale	Proceeds from sale of premises held for sale	8,390		736		Proceeds from sale of premises held for sale	—		8,390
Net cash used in investing activities		(157,259)		(1,074,676)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	1,919,557		(157,259)
Financing activities	Financing activities					Financing activities
Net (decrease) increase in demand, savings, interest checking, and money market investment deposit accounts		(155,429)		840,423
Net decrease in time deposits		(80,066)		(15,332)
Net decrease in demand, savings, interest checking, and money market investment deposit accounts						Net decrease in demand, savings, interest checking, and money market investment deposit accounts	(775,801)		(155,429)
Net increase (decrease) in time deposits						Net increase (decrease) in time deposits	343,022		(80,066)
Net increase in borrowed funds	Net increase in borrowed funds	644		1,302		Net increase in borrowed funds	397,575		644
Contingent consideration paid	Contingent consideration paid	(63)		(41)		Contingent consideration paid	(369)		(63)
Payments for repurchases of common stock	Payments for repurchases of common stock	(60,595)		—		Payments for repurchases of common stock	—		(60,595)
Dividends declared and paid to common shareholders	Dividends declared and paid to common shareholders	(16,908)		(10,324)		Dividends declared and paid to common shareholders	(16,193)		(16,908)
Net cash provided by financing activities		(312,417)		816,028
Net (decrease) increase in cash, cash equivalents, and restricted cash		(401,298)		(193,738)
Net cash used in financing activities						Net cash used in financing activities	(51,766)		(312,417)
Net increase (decrease) in cash, cash equivalents, and restricted cash						Net increase (decrease) in cash, cash equivalents, and restricted cash	1,968,311		(401,298)
Cash, cash equivalents, and restricted cash at beginning of period	Cash, cash equivalents, and restricted cash at beginning of period	1,231,792		2,054,070		Cash, cash equivalents, and restricted cash at beginning of period	169,505		1,231,792
Cash, cash equivalents, and restricted cash at end of period	Cash, cash equivalents, and restricted cash at end of period	$	830,494	$	1,860,332	Cash, cash equivalents, and restricted cash at end of period	$	2,137,816	$	830,494
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest paid		$	3,343	$	1,049
Income taxes		5,505		4,858
Non-cash activities
Net increase in capital commitments relating to low income housing tax credit projects		$	530	$	2,943


Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest paid on deposits and borrowings	$	46,708	$	3,343
Income taxes	5,862		5,505
Non-cash activities
Net increase in capital commitments relating to low income housing tax credit projects	$	51,525	$	530
Net increase in operating lease right of use assets and operating lease liabilities relating to lease remeasurements/modifications	$	1,523	$	—

The accompanying notes are an integral part of these ~~unaudited consolidated financial statements.~~Unaudited Consolidated Financial Statements.

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EASTERN BANKSHARES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Structure and Nature of Operations; Basis of Presentation

Corporate Structure and Nature of Operations

Eastern Bankshares, Inc., a Massachusetts corporation (the “Company”), is a 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 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. The Company and the activities of the Bank and ~~Eastern Insurance Group~~its subsidiaries are also subject to various Massachusetts, New Hampshire and Rhode Island business, banking and ~~banking~~insurance regulations.

Basis of Presentation

The Company’s ~~consolidated financial statements~~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~~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.~~presentation which included certain loan servicing-related costs which have been reclassified from professional services to loan expense.

The accompanying ~~consolidated balance sheet~~Consolidated Balance Sheet as of March 31, ~~2022,~~2023, the ~~consolidated statements~~Consolidated Statements of ~~income~~Income and ~~comprehensive income~~Comprehensive Income and of ~~changes~~Changes in ~~equity~~Shareholders’ Equity for the three months ended March 31, 2023 and 2022 and ~~2021 and statement~~Statements of ~~cash flows~~Cash Flows for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 are unaudited. The ~~consolidated balance sheet~~Consolidated Balance Sheet as of December 31, ~~2021~~2022 was derived from the ~~audited consolidated financial statements~~Audited Consolidated Financial Statements as of that date. The interim ~~consolidated financial statements~~Consolidated Financial Statements and the accompanying notes should be read in conjunction with the annual ~~consolidated financial statements~~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~~2022 (“~~2021~~2022 Form 10-K”), as filed with the SEC. In the opinion of management, the Company’s ~~consolidated financial statements~~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 months ended March 31, ~~2022~~2023 are not necessarily indicative of results to be expected for the year ending December 31, ~~2022,~~2023, 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 March 31, ~~2022~~2023 and those that were adopted during the three months ended March 31, ~~2022.~~2023. For a full discussion of significant accounting policies, refer to the ~~notes~~Notes to the Consolidated Financial Statements included within the Company’s ~~2021~~2022 Form 10-K.

Use of Estimates

In preparing the 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 credit losses, valuation and fair value measurements, the liabilities for benefit obligations (particularly pensions), the provision for income taxes and impairment of goodwill and other intangibles.

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Recent Accounting Pronouncements

Relevant standards that were recently issued but not yet adopted as ofMarch 31, ~~2022:~~2023:

In March 2023, the FASB issued ASU 2023-02, Investments–Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (“ASU 2023-02”). This update permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if the following conditions are met:

1.It is probable that the income tax credits allocable to the tax equity investor will be available.

2.The tax equity investor does not have the ability to exercise significant influence over the operating and financial policies of the underlying project.

3.Substantially all of the projected benefits are from income tax credits and other income tax benefits. Projected benefits include income tax credits, other income tax benefits, and other non-income-tax-related benefits. The projected benefits are determined on a discounted basis, using a discount rate that is consistent with the cash flow assumptions used by the tax equity investor in making its decision to invest in the project.

4.The tax equity investor’s projected yield based solely on the cash flows from the income tax credits and other income tax benefits is positive.

5.The tax equity investor is a limited liability investor in the limited liability entity for both legal and tax purposes, and the tax equity investor’s liability is limited to its capital investment.

Under existing accounting standards, the proportional amortization method is allowable only for equity investments in low-income-housing tax credit structures. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of income tax expense (benefit). Updates made by ASU 2023-02 allow a reporting entity to make an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis. The Company had previously made an accounting policy election to account for its investments in low-income-housing tax credit investments using the proportional amortization method. This election was made upon the Company’s adoption of ASU 2014-01, Investments–Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects, which introduced the option to apply proportional amortization to low-income-housing tax credit investments. For public business entities, the amendments in ASU 2023-02 are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for all entities in an interim period. The Company is currently assessing the impact of the new standard on its Consolidated Financial Statements.

Relevant standards that were adopted during the three months ended March 31, 2023:

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~~were 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~~on January 1, 2023 did not have a material impact on ~~its consolidated financial statements.~~the Company’s 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 ~~account~~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, ~~modification~~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

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amendments in this update ~~are~~were 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~~On January 1, 2023, the Company ~~expects~~adopted this standard by using the modified retrospective transition method, except with regard to amendments on TDR and vintage disclosures which were adopted prospectively. Accordingly, the Company recorded a cumulative-effect adjustment to retained earnings as of January 1, 2023. The adoption of this standard ~~will~~did not have a material impact on ~~its consolidated financial statements.~~

~~Relevant standards that were adopted during the three months ended March 31, 2022:~~

~~In June 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 replaces the existing 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 existing impairment guidance for available for sale securities, in which credit losses will be 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~~

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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~~Consolidated 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 as of December 31, 2022, that 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 does not apply to contract modifications made after December 31, 2022. The Company performed a review its contracts and existing processes to assess the risks and potential impact of the transition away from LIBOR and noted no material impact to the Company’s consolidated financial statements as of March 31, 2022.Statements.

Significant Accounting Policies

The adoption of ~~the ASUs 2016-13, 2018-19 and 2019-11~~ASU 2022-02 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 allowance for loan losses. The following describes the changes to the Company’s significant accounting policies from December 31, ~~2021,~~2022, that resulted from the adoption of ~~the ASUs described above:~~

~~Allowance for Credit Losses - Available for Sale Securities~~

ASU 2016-13 made targeted changes to ASC 320 to eliminate the concept of “other than temporary” from the impairment loss estimation 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” impairment 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.

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~~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 March 31, 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.~~2022-02:

Allowance for Loan Losses - Loans Held for Investment

Troubled Debt Restructured Loans ~~Individually Assessed~~

The amendments in ASU 2022-02 eliminated the accounting guidance for ~~Impairment~~

~~ASU 2016-13 indicates that~~TDRs by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when 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 is 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. Thus, as a result of adoption of this standard on January 1, 2023, rather than applying the recognition and measurement guidance for TDRs, the Company now applies the loan refinancing and restructuring guidance codified in paragraphs 310-20-35-9 through 35-11 of the Accounting Standards Codification to determine whether a modification results in a new loan or a continuation of an existing loan. As previously indicated, the Company adopted ASU 2022-02 using the modified retrospective transition method. Accordingly, upon adoption, commercial loan TDRs existing at that time which were measured using a discounted cash flow methodology and all residential real estate and consumer home equity loan TDRs were transitioned to the applicable segment of loans collectively evaluated for impairment based upon their risk characteristics. Commercial loan TDRs determined to be collateral dependent continue to be assessed for impairment on an individual basis.

~~Troubled Debt Restructured Loans~~

InPrior to the Company’s adoption of ASU 2022-02, in cases where a borrower ~~experiences~~was experiencing financial difficulties and the Company ~~makes~~made certain concessionary modifications to contractual terms, the loan iswas classified as a TDR. Modifications ~~may include~~included adjustments to interest rates, extensions of maturity, consumer loans where the borrower’s obligations ~~have~~had been effectively discharged through Chapter 7 bankruptcy and the borrower ~~has~~had 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 identifiesManagement identified loans as TDR loans when it ~~has~~had a reasonable expectation that it ~~will~~would execute a TDR modification with a borrower. In addition, ~~subsequent to adoption of ASU 2016-13,~~ management ~~estimates~~estimated expected credit losses on a collective basis if a group of TDR loans ~~share~~shared similar risk characteristics. If a TDR loan’s risk characteristics ~~are~~were not similar to those of any of the Company’s other TDR loans, expected credit losses on the TDR loan ~~are~~were measured individually. The impairment analysis ~~discounts~~discounted 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 iswas collateral dependent. The amount of credit loss, if any, iswas 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 iswas 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~~had been classified as a TDR and which subsequently ~~defaults is~~defaulted was 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 iswas 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.

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~~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 expected at the time of acquisition, or “gross up” of the amortized cost basis, if any. Changes in the current estimate of the allowance for loan losses subsequent to acquisition from the estimated allowance previously recorded are recognized in the income statement as provision for credit losses or reversal of 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 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 ACL is evaluated on a 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 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;~~

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•~~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 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 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.

Additionally, various regulatory agencies, as an integral part of the Company’s examination process, periodically assess the appropriateness of the allowance for credit losses and may require the Company to increase its allowance for loan losses or recognize further loan charge-offs, in accordance with GAAP.

Refer to Note 4, “Loans and Allowance for Credit Losses” for additional information regarding the Company’s measurement of ~~credit~~the allowance for loan losses ~~on loans receivable and off-balance sheet commitments to lend~~ as of March 31, ~~2022. For comparative allowance for loan loss~~2023 and information ~~for which ASC 450, “Contingencies” and ASC 310, “Receivables” were applied (i.e., prior to~~regarding the Company’s ~~adoption~~TDR loans as of December 31, 2022 and for the ~~CECL methodology previously described), refer to~~ ~~Note 5, “Loans and Allowance for Loan Losses.”~~three months ended March 31, 2022.

3. Securities

Available for Sale Securities

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The amortized cost, gross unrealized gains and losses, allowance for credit losses (“ACL”) and fair value of AFS securities as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022, respectively, were as follows:


		As of March 31, 2022											As of March 31, 2023
		Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value			Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value
		(In thousands)											(In thousands)
Debt securities:	Debt securities:											Debt securities:
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	$	5,329,748	$	264	$	(360,666)	$	—	$	4,969,346	Government-sponsored residential mortgage-backed securities	$	3,557,844	$	—	$	(533,284)	$	—	$	3,024,560
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	1,707,131		—		(91,204)		—		1,615,927		Government-sponsored commercial mortgage-backed securities	1,367,239		—		(187,199)		—		1,180,040
U.S. Agency bonds	U.S. Agency bonds	1,099,916		—		(86,017)		—		1,013,899		U.S. Agency bonds	235,540		—		(23,733)		—		211,807
U.S. Treasury securities	U.S. Treasury securities	59,458		—		(3,223)		—		56,235		U.S. Treasury securities	99,380		1		(5,098)		—		94,283
State and municipal bonds and obligations	State and municipal bonds and obligations	258,769		2,792		(1,245)		—		260,316		State and municipal bonds and obligations	198,017		118		(9,986)		—		188,149
Other debt securities	Other debt securities	1,598		—		(16)		—		1,582		Other debt securities	1,300		—		(5)		—		1,295
		$	8,456,620	$	3,056	$	(542,371)	$	—	$	7,917,305		$	5,459,320	$	119	$	(759,305)	$	—	$	4,700,134

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		As of December 31, 2021									As of December 31, 2022
		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value			Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value
		(In thousands)									(In thousands)
Debt securities:	Debt securities:									Debt securities:
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	$	5,577,292	$	17,918	$	(70,502)	$	5,524,708	Government-sponsored residential mortgage-backed securities	$	4,855,763	$	—	$	(743,855)	$	—	$	4,111,908
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	1,420,748		760		(12,640)		1,408,868		Government-sponsored commercial mortgage-backed securities	1,570,119		—		(221,165)		—		1,348,954
U.S. Agency bonds	U.S. Agency bonds	1,202,377		1,067		(28,430)		1,175,014		U.S. Agency bonds	1,100,891		—		(148,409)		—		952,482
U.S. Treasury securities	U.S. Treasury securities	89,434		5		(834)		88,605		U.S. Treasury securities	99,324		—		(6,267)		—		93,057
State and municipal bonds and obligations	State and municipal bonds and obligations	263,910		16,460		(41)		280,329		State and municipal bonds and obligations	198,039		9		(14,956)		—		183,092
Small business administration pooled securities		31,821		282		—		32,103
Other debt securities	Other debt securities	1,597		—		—		1,597		Other debt securities	1,299		—		(14)		—		1,285
		$	8,587,179	$	36,492	$	(112,447)	$	8,511,224		$	7,825,435	$	9	$	(1,134,666)	$	—	$	6,690,778

The Company did 0tnot record a provision for credit losses on any AFS securities for either the three months ended March 31, 2023 or 2022. Accrued interest receivable on AFS securities totaled ~~$13.8~~$12.3 million and ~~$14.3~~$12.9 million as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, and is included within other assets on the ~~consolidated balance sheets.~~Consolidated Balance Sheets. The Company did not record any write-offs of accrued interest income on AFS securities during either the three months ended March 31, 2023 or 2022. No securities held by the Company were delinquent on contractual payments as of March 31, 2023 and December 31, 2022, nor were any securities placed on non-accrual status for the ~~period~~three and twelve month periods then ~~ended.~~ended, respectively.

~~Gross~~The following table summarizes gross realized gains ~~from sales of AFS securities during the three months ended March 31, 2022~~ and ~~2021 were $1.0 million and $1.2 million, respectively. Gross realized~~ losses from sales of AFS securities ~~during~~for the three months ended March 31, 2022 were $3.2 million. The Company had 0 significant gross realized losses from sales of AFS securities during the three months ended March 31, 2021. There was 0 OTTI recorded during the three months ended March 31, 2021.periods indicated:

Prior to the Company’s adoption of ASU 2016-13, management prepared an estimate of the Company’s expected cash flows for AFS investment securities that potentially may be deemed to have been an OTTI. This estimate began with the contractual cash flows of the 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 considered the credit quality and the ability to pay of the underlying issuers. Indicators of diminished credit quality of the issuers included defaults, interest deferrals, or “payments in kind.” Management also considered those factors listed in the “Investments – Debt and Equity 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 was 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 was less than the current amortized cost basis, an OTTI was considered to have occurred and the security was written down to the fair value indicated by the cash flow analysis. As part of the analysis, management considered whether it intended to sell the security or whether it was more than likely that it would be required to sell the security before the expected recovery of its amortized cost basis.


	Three Months Ended March 31,
	2023		2022
	(In thousands)
Gross realized gains from sales of AFS securities	$	—	$	1,045
Gross realized losses from sales of AFS securities	(333,170)		(3,217)
Losses from sales of AFS securities, net	$	(333,170)	$	(2,172)

Information pertaining to AFS securities with gross unrealized losses as of March 31, 2023 and December 31, 2022, for which the Company did not 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~~current expected credit loss methodology (“CECL”), aggregated by investment category and length of time that individual securities had been in a continuous loss position, is as follows:

1513

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		As of March 31, 2022														As of March 31, 2023
			Less than 12 Months				12 Months or Longer				Total						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			# of Holdings	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
		(Dollars in thousands)														(Dollars in thousands)
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	322	$	223,347	$	3,513,073	$	137,319	$	1,403,234	$	360,666	$	4,916,307	Government-sponsored residential mortgage-backed securities	324	$	4,106	$	84,144	$	529,178	$	2,940,416	$	533,284	$	3,024,560
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	205	85,425		1,548,080		5,779		67,847		91,204		1,615,927		Government-sponsored commercial mortgage-backed securities	189	2,277		38,532		184,922		1,141,508		187,199		1,180,040
U.S. Agency bonds	U.S. Agency bonds	37	12,573		226,708		73,444		787,191		86,017		1,013,899		U.S. Agency bonds	23	—		—		23,733		211,807		23,733		211,807
U.S. Treasury securities	U.S. Treasury securities	2	3,223		56,235		—		—		3,223		56,235		U.S. Treasury securities	5	913		43,924		4,185		45,410		5,098		89,334
State and municipal bonds and obligations	State and municipal bonds and obligations	103	1,245		82,709		—		—		1,245		82,709		State and municipal bonds and obligations	197	2,015		62,057		7,971		97,811		9,986		159,868
Other debt securities	Other debt securities	3	16		1,582		—		—		16		1,582		Other debt securities	2	—		—		5		1,295		5		1,295
		672	$	325,829	$	5,428,387	$	216,542	$	2,258,272	$	542,371	$	7,686,659		740	$	9,311	$	228,657	$	749,994	$	4,438,247	$	759,305	$	4,666,904


		As of December 31, 2021														As of December 31, 2022
			Less than 12 Months				12 Months or Longer				Total						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			# of Holdings	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
		(Dollars in thousands)														(Dollars in thousands)
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	264	$	70,502	$	4,615,457	$	—	$	—	$	70,502	$	4,615,457	Government-sponsored residential mortgage-backed securities	322	$	42,196	$	435,690	$	701,659	$	3,676,218	$	743,855	$	4,111,908
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	165	12,218		1,102,444		422		15,682		12,640		1,118,126		Government-sponsored commercial mortgage-backed securities	199	38,944		300,476		182,221		1,048,478		221,165		1,348,954
U.S. Agency bonds	U.S. Agency bonds	27	2,169		191,222		26,261		794,353		28,430		985,575		U.S. Agency bonds	37	645		4,145		147,764		948,337		148,409		952,482
U.S. Treasury securities	U.S. Treasury securities	3	834		78,588		—		—		834		78,588		U.S. Treasury securities	5	1,311		48,451		4,956		44,606		6,267		93,057
State and municipal bonds and obligations	State and municipal bonds and obligations	11	41		5,436		—		—		41		5,436		State and municipal bonds and obligations	237	14,942		179,614		14		225		14,956		179,839
Other debt securities															Other debt securities	2	—		—		14		1,285		14		1,285
		470	$	85,764	$	5,993,147	$	26,683	$	810,035	$	112,447	$	6,803,182		802	$	98,038	$	968,376	$	1,036,628	$	5,719,149	$	1,134,666	$	6,687,525

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 did not recognize ~~a provision for credit losses~~an ACL on these investments as of both March 31, ~~2022. As it relates to securities with gross unrealized losses as of~~2023 and December 31, 2021, the Company did not consider these investments to be 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.2022.

~~As a result of the Company’s review of these qualitative and quantitative factors, the~~The causes of the impairments listed in the tables above by category are as follows as of March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:

•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

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

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•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.~~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~~two 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 ~~March 31, 2022~~the dates indicated were as follows:

As of March 31, 2022
Amortized
Cost Unrealized
Gains Unrealized
Losses Allowance for Credit Losses Fair
Value
(In thousands)
Debt securities:
Government-sponsored residential mortgage-backed securities $ 192,231 $ — $ (3,318) $ — $ 188,913
Government-sponsored commercial mortgage-backed securities 203,203 17 (10) — 203,210
$ 395,434 $ 17 $ (3,328) $ — $ 392,123

~~The Company held 0 HTM securities as of December 31, 2021.~~


	As of March 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value
	(In thousands)
Debt securities:
Government-sponsored residential mortgage-backed securities	$	271,655	$	—	$	(24,829)	$	—	$	246,826
Government-sponsored commercial mortgage-backed securities	199,530		—		(20,929)		—		178,601
	$	471,185	$	—	$	(45,758)	$	—	$	425,427


	As of December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses		Allowance for Credit Losses		Fair Value
	(In thousands)
Debt securities:
Government-sponsored residential mortgage-backed securities	$	276,493	$	—	$	(30,150)	$	—	$	246,343
Government-sponsored commercial mortgage-backed securities	200,154		—		(23,271)		—		176,883
	$	476,647	$	—	$	(53,421)	$	—	$	423,226

The Company did 0tnot record a provision for estimated credit losses on any HTM securities for either the three months ended March 31, 2023 or 2022. ~~Accrued~~The accrued interest receivable on HTM securities totaled ~~$0.8~~$1.0 million as of both March 31, 2023 and December 31, 2022 and is included within other assets on the ~~consolidated balance sheets.~~Consolidated Balance Sheets. The Company did not record any write-offs of accrued interest ~~income~~receivable on HTM securities during either the three months ended March 31, 2023 or 2022. No securities held by the Company were delinquent on contractual payments as of March 31, 2023 and December 31, 2022 nor were any securities placed on non-accrual status for the ~~period~~periods then ended.

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Available for Sale and Held to Maturity Securities Contractual Maturity

The amortized cost and estimated fair value of AFS and HTM securities by contractual maturities as of March 31, ~~2022~~2023 and December 31, ~~2021~~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.

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


		As of March 31, 2022																					As of March 31, 2023
		Due in one year or less				Due after one year to five years				Due after five to ten years				Due after ten years				Total					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			Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
		(In thousands)																					(In thousands)
Available for sale securities
AFS securities																						AFS securities
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	$	1	$	1	$	20,992	$	21,143	$	832,510	$	790,125	$	4,476,245	$	4,158,077	$	5,329,748	$	4,969,346	Government-sponsored residential mortgage-backed securities	$	—	$	—	$	19,044	$	18,333	$	42,405	$	40,021	$	3,496,395	$	2,966,206	$	3,557,844	$	3,024,560
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	—		—		190,509		182,639		700,994		658,732		815,628		774,556		1,707,131		1,615,927		Government-sponsored commercial mortgage-backed securities	—		—		105,580		96,920		540,677		472,689		720,982		610,431		1,367,239		1,180,040
U.S. Agency bonds	U.S. Agency bonds	—		—		578,810		537,301		521,106		476,598		—		—		1,099,916		1,013,899		U.S. Agency bonds	—		—		201,660		181,969		33,880		29,838		—		—		235,540		211,807
U.S. Treasury securities	U.S. Treasury securities	10,000		9,955		49,458		46,280		—		—		—		—		59,458		56,235		U.S. Treasury securities	—		—		99,380		94,283		—		—		—		—		99,380		94,283
State and municipal bonds and obligations	State and municipal bonds and obligations	4,659		4,653		36,766		36,723		68,574		68,850		148,770		150,090		258,769		260,316		State and municipal bonds and obligations	212		209		24,605		24,093		41,409		40,921		131,791		122,926		198,017		188,149
Other debt securities	Other debt securities	300		299		1,298		1,283		—		—		—		—		1,598		1,582		Other debt securities	1,300		1,295		—		—		—		—		—		—		1,300		1,295
Total available for sale securities	Total available for sale securities	14,960		14,908		877,833		825,369		2,123,184		1,994,305		5,440,643		5,082,723		8,456,620		7,917,305		Total available for sale securities	1,512		1,504		450,269		415,598		658,371		583,469		4,349,168		3,699,563		5,459,320		4,700,134
Held to maturity securities
HTM securities																						HTM securities
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	—		—		—		—		—		—		192,231		188,913		192,231		188,913		Government-sponsored residential mortgage-backed securities	—		—		—		—		—		—		271,655		246,826		271,655		246,826
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	—		—		—		—		203,203		203,210		—		—		203,203		203,210		Government-sponsored commercial mortgage-backed securities	—		—		—		—		199,530		178,601		—		—		199,530		178,601
Total held to maturity securities	Total held to maturity securities	—		—		—		—		203,203		203,210		192,231		188,913		395,434		392,123		Total held to maturity securities	—		—		—		—		199,530		178,601		271,655		246,826		471,185		425,427
Total	Total	$	14,960	$	14,908	$	877,833	$	825,369	$	2,326,387	$	2,197,515	$	5,632,874	$	5,271,636	$	8,852,054	$	8,309,428	Total	$	1,512	$	1,504	$	450,269	$	415,598	$	857,901	$	762,070	$	4,620,823	$	3,946,389	$	5,930,505	$	5,125,561

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		As of December 31, 2021																					As of December 31, 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					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			Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value			Amortized Cost		Fair Value		Amortized Cost		Fair Value
		(In thousands)																					(In thousands)
Available for sale securities
AFS securities																						AFS securities
Government-sponsored residential mortgage-backed 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 residential mortgage-backed securities	$	—	$	—	$	21,221	$	20,284	$	727,908	$	648,132		$	4,106,634	$	3,443,492	$	4,855,763	$	4,111,908
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	—		—		139,095		137,755		387,177		378,414		894,476		892,699		1,420,748		1,408,868		Government-sponsored commercial mortgage-backed securities	—		—		191,762		171,992		649,659		556,641			728,698		620,321		1,570,119		1,348,954
U.S. Agency bonds	U.S. Agency bonds	5,508		5,515		531,821		520,935		665,048		648,564		—		—		1,202,377		1,175,014		U.S. Agency bonds	—		—		877,371		767,464		223,520		185,018			—		—		1,100,891		952,482
U.S. Treasury securities	U.S. Treasury securities	40,010		40,001		49,424		48,604		—		—		—		—		89,434		88,605		U.S. Treasury securities	—		—		99,324		93,057		—		—			—		—		99,324		93,057
State and municipal bonds and obligations	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		State and municipal bonds and obligations	213		209		22,100		21,283		42,554		40,970			133,172		120,630		198,039		183,092
Small Business Administration pooled securities		—		—		4,062		4,092		—		—		27,759		28,011		31,821		32,103
Other debt securities	Other debt securities	300		300		1,297		1,297		—		—		—		—		1,597		1,597		Other debt securities	1,299		1,285		—		—		—		—			—		—		1,299		1,285
Total available for sale securities																						Total available for sale securities	1,512		1,494		1,211,778		1,074,080		1,643,641		1,430,761			4,968,504		4,184,443		7,825,435		6,690,778
HTM securities																						HTM securities
Government-sponsored residential mortgage-backed securities																						Government-sponsored residential mortgage-backed securities	—		—		—		—		—		—			276,493		246,343		276,493		246,343
Government-sponsored commercial mortgage-backed securities																						Government-sponsored commercial mortgage-backed securities	—		—		—		—		200,154		176,883		0	—		—		200,154		176,883
Total held to maturity securities																						Total held to maturity securities	—		—		—		—		200,154		176,883			276,493		246,343		476,647		423,226
Total	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	Total	$	1,512	$	1,494	$	1,211,778	$	1,074,080	$	1,843,795	$	1,607,644		$	5,244,997	$	4,430,786	$	8,302,082	$	7,114,004

Securities Pledged as Collateral

As of both March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, securities with a carrying value of ~~$491.2~~$440.3 million and ~~$2.2 billion,~~$437.9 million, respectively, were pledged to secure public deposits and for other purposes required by law. As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, deposits with associated pledged collateral included cash accounts from the Company’s wealth management division (“Eastern Wealth ~~Management cash accounts~~Management”) and municipal deposit accounts. At

In March 2023 the Federal Reserve created the Bank Term Funding Program (the “Program”) in order to support American businesses and households. The Program helps make available additional funding to eligible depository institutions in order to help assure banks have the ability to meet the needs of their depositors. The Program offers loans up to one year in length to banks in return for any collateral eligible for purchase by the Federal Reserve Banks in open market operations, such as U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed securities. As of March 31, ~~2022 and December 31, 2021, the~~2023, securities with a carrying value of ~~securities~~$2.6 billion were pledged as collateral ~~with respect to municipal accounts acquired from Century Bancorp, Inc. (“Century”) was approximately $461.9 million and $2.1 billion, respectively. During~~through the ~~first quarter of 2022,~~Program. In addition, the Company ~~eliminated certain pledging arrangements acquired from Century which resulted in~~pledged securities with a carrying value of $376.8 million to the ~~decrease in securities pledged at~~Federal Reserve Discount Window (the “Discount Window”) as of March 31, ~~2022 compared~~2023. No securities were pledged to the Program or the Discount Window as of December 31, ~~2021.~~2022.

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4. Loans and Allowance for Credit Losses

Loans

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


		At March 31,		At December 31,
		2022		2021			March 31, 2023		December 31, 2022
		(In thousands)					(In thousands)
Commercial and industrial	Commercial and industrial	$	2,886,560	$	2,960,527	Commercial and industrial	$	3,169,438	$	3,150,946
Commercial real estate	Commercial real estate	4,609,824		4,522,513		Commercial real estate	5,201,196		5,155,323
Commercial construction	Commercial construction	246,093		222,328		Commercial construction	357,117		336,276
Business banking	Business banking	1,201,007		1,334,694		Business banking	1,078,678		1,090,492
Residential real estate	Residential real estate	1,936,182		1,926,810		Residential real estate	2,497,491		2,460,849
Consumer home equity	Consumer home equity	1,099,211		1,100,153		Consumer home equity	1,180,824		1,187,547
Other consumer		203,326		214,485
Other consumer (2)						Other consumer (2)	190,506		194,098
Gross loans before unamortized premiums, unearned discounts and deferred fees	Gross loans before unamortized premiums, unearned discounts and deferred fees	12,182,203		12,281,510		Gross loans before unamortized premiums, unearned discounts and deferred fees	13,675,250		13,575,531
Allowance for loan losses (1)	Allowance for loan losses (1)	(124,166)		(97,787)		Allowance for loan losses (1)	(140,938)		(142,211)
Unamortized premiums, net of unearned discounts and deferred fees	Unamortized premiums, net of unearned discounts and deferred fees	(24,434)		(26,442)		Unamortized premiums, net of unearned discounts and deferred fees	(13,597)		(13,003)
Loans after the allowance for loan losses, unamortized premiums, unearned discounts and deferred fees	Loans after the allowance for loan losses, unamortized premiums, unearned discounts and deferred fees	$	12,033,603	$	12,157,281	Loans after the allowance for loan losses, unamortized premiums, unearned discounts and deferred fees	$	13,520,715	$	13,420,317

(1)The ~~Company adopted ASU 2016-13 on January 1, 2022 with a modified retrospective approach. Accordingly, at March 31, 2022~~balance of accrued interest receivable excluded from amortized cost and the calculation of the allowance for loan losses ~~at was determined in accordance with ASC 326, “Financial Instruments-Credit Losses”~~amounted to $46.2 million and ~~ASC 310, “Receivables,”~~$45.2 million as ~~amended. At~~of March 31, 2023 and December 31, ~~2021~~2022, respectively, and is included within other assets on the ~~allowance for loan losses was determined~~Consolidated Balance Sheets.

(2)Automobile loans are included in ~~accordance with ASC 450, “Contingencies”~~the other consumer portfolio and ~~ASC 310, “Receivables.”~~amounted to $13.3 million and $18.1 million at March 31, 2023 and December 31, 2022, 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 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.

Loans Pledged as Collateral

The carrying value of loans pledged to secure advances from the Federal Home Loan Bank (“FHLB”) of Boston (“FHLBB”) were ~~$3.0~~$4.1 billion and ~~$2.6~~$3.9 billion at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The balance of funds borrowed from the FHLBB were ~~$13.7 million~~$1.1 billion and ~~$14.0~~$704.1 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

The carrying value of loans pledged to secure advances from the Federal Reserve Bank (“FRB”) were ~~$799.9 million and $784.0 million~~$1.1 billion at both March 31, ~~2022~~2023 and December 31, ~~2021, respectively.~~2022. There were no funds borrowed from the FRB outstanding at March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

Serviced Loans

At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, mortgage loans partially or wholly-owned by others and serviced by the Company amounted to approximately ~~$91.2~~$82.5 million and ~~$95.8~~$84.0 million, respectively.

~~Allowance for Loan Losses~~Purchased Loans

The Company began purchasing residential real estate mortgage loans during the third quarter of 2022. Loans purchased were subject to the same underwriting criteria as those loans originated directly by the Company. During the three months ended March 31, 2023, the Company purchased $32.0 million of residential real estate mortgage loans. No residential

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real estate mortgage loans were purchased during the three months ended March 31, 2022. As of March 31, 2023 and December 31, 2022, the amortized cost balance of loans purchased was $399.9 million and $376.1 million, respectively. As of March 31, 2023, the Company had ceased purchases of residential real estate mortgage loans.

Allowance for Loan Losses

The allowance for loan losses is established to provide for management’s estimate of expected lifetime credit losses 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~~tables summarize the ~~change~~changes in the allowance for loan losses by loan category for the ~~three months ended March 31, 2022:~~periods indicated:


		Three Months Ended March 31, 2022																			For the Three Months Ended March 31, 2023
		Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Residential Real Estate		Consumer Home Equity		Other Consumer		Other		Total			Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Residential Real Estate		Consumer Home Equity		Other Consumer		Total
		(In thousands)																			(In thousands)
Allowance for loan losses:	Allowance for loan losses:																			Allowance for loan losses:
Beginning balance, prior to adoption of ASU 2016-13		$	18,018	$	52,373	$	2,585	$	10,983	$	6,556	$	3,722	$	3,308	$	242	$	97,787
Beginning balance																				Beginning balance	$	26,859	$	54,730	$	7,085	$	16,189	$	28,129	$	6,454	$	2,765	$	142,211
Cumulative effect of change in accounting principle (1)	Cumulative effect of change in accounting principle (1)	11,533		(6,655)		1,485		6,160		13,489		1,857		(541)		(242)		27,086		Cumulative effect of change in accounting principle (1)	47		—		—		(140)		(849)		(201)		—		(1,143)
Charge-offs	Charge-offs	(1)		—		—		(945)		—		—		(661)		—		(1,607)		Charge-offs	—		—		—		(343)		—		(7)		(561)		(911)
Recoveries	Recoveries	250		14		—		928		10		4		179		—		1,385		Recoveries	139		4		—		481		15		1		116		756
(Release of) provision		(2,959)		(1,120)		344		143		2,188		435		484		—		(485)
Provision (release)																				Provision (release)	(116)		459		493		(1,102)		(165)		(65)		521		25
Ending balance ~~(2)~~	Ending balance ~~(2)~~	$	26,841	$	44,612	$	4,414	$	17,269	$	22,243	$	6,018	$	2,769	$	—	$	124,166	Ending balance ~~(2)~~	$	26,929	$	55,193	$	7,578	$	15,085	$	27,130	$	6,182	$	2,841	$	140,938


	For the Three Months Ended March 31, 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 (2)	11,533		(6,655)		1,485		6,160		13,489		1,857		(541)		(242)		27,086
Charge-offs	(1)		—		—		(945)		—		—		(661)		—		(1,607)
Recoveries	250		14		—		928		10		4		179		—		1,385
Provision (release)	(2,959)		(1,120)		344		143		2,188		435		484		—		(485)
Ending balance	$	26,841	$	44,612	$	4,414	$	17,269	$	22,243	$	6,018	$	2,769	$	—	$	124,166

(1)Represents the adjustment needed to reflect the cumulative day one impact pursuant to the Company’s adoption of ASU 2022-02 (i.e., cumulative effect adjustment related to the adoption of ASU 2022-02 as of January 1, 2023). The adjustment represents a $1.1 million decrease 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.

(2)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 the 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 for loan losses amounted to $31.4 million at March 31, 2022.~~

Reserve for Unfunded Commitments

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Management evaluates the need for a reserve on unfunded lending commitments in a manner consistent with loans held for investment. The Company’s adoption of ASU 2022-02 on January 1, 2023 did not impact the reserve for unfunded lending commitments. 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 March 31, 2023 and December 31, 2022, the Company’s reserve for unfunded lending commitments was ~~$10.4~~$13.9 million and $13.2 million, respectively, which is recorded within other ~~liabilities.~~liabilities in the Company's Consolidated Balance Sheets.

Portfolio Segmentation

Management uses a methodology to systematically estimate the amount of 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 loans are evaluated based upon loan-level risk characteristics, historical losses and other factors which form the basis for estimating expected losses. Other portfolios, including owner occupied commercial real estate ~~which~~(which includes ~~commercial and industrial and~~ business banking owner occupied commercial real ~~estate,~~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. For the purposes of estimating the allowance for loan losses, management segregates the loan portfolio into loan categories 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

~~Table of Contents~~

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, aircraft and equipment. The primary repayment source is operating cash flow and, secondarily, the liquidation of assets. Under its lending guidelines, the Company generally requires a corporate or personal guarantee from individuals that hold material ownership in the borrowing 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, liquidation of the collateral. Under its lending guidelines, the Company generally requires a corporate or personal guarantee from individuals that hold material ownership in the borrowing 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.~~lending. The SBA guarantees reduce the Company’s loss due to default and are considered a credit enhancement to the loan structure.

Residential Lending

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. 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.

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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 home improvement, automobile ~~loans~~ and 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 aircraft and automobile loans.

Credit Quality

Commercial Lending Credit Quality

~~Table of Contents~~

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 15-point credit risk-rating system to manage risk and identify potential problem loans. 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 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 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 commercial and business banking loans are generally restricted to commercial exposure of less than $1$1.5 million. Loans included in this category generally are not required to provide regular financial reporting or regular covenant monitoring.

For purposes of estimating the allowance for loan losses, unrated loans are considered in the same manner as ~~pass~~“Pass” rated loans. Unrated loans are included with “Pass” rated loans for disclosure purposes.

1-10 Risk Rating – Pass

Loans with a risk rating of 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 “low pass” which indicates acceptable rated loans that may be experiencing weak cash flow, impending lease rollover or minor liquidity concerns.

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. The Company does 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 12 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

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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. Non-accrual is possible, but not mandatory, in this class.

13 Risk Rating – Doubtful (Loss 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 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. Specific reserves will be the amount identified after specific review. Non-accrual is mandatory in this class.

~~Table of Contents~~

14 Risk Rating – Loss

Loans to borrowers in this category are deemed incapable of repayment. Loans to such borrowers are considered 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.

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 March 31, ~~2022:~~2023, and gross charge-offs for the three month period then ended:


		2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term Loans (1)		Total			2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term Loans (1)		Total
		(In thousands)																			(In thousands)
Commercial and industrial	Commercial and industrial																			Commercial and industrial
Pass	Pass	$	117,534	$	566,764	$	498,791	$	231,968	$	142,428	$	689,728	$	504,127	$	686	$	2,752,026	Pass	$	189,328	$	692,186	$	448,560	$	361,146	$	196,510	$	682,862	$	481,097	$	86	$	3,051,775
Special Mention	Special Mention	—		886		—		514		278		4,459		51,581		—		57,718		Special Mention	—		27,526		17,902		15,934		4,749		812		9,127		448		76,498
Substandard	Substandard	—		11,302		3,756		340		23,031		8,275		790		346		47,840		Substandard	—		202		8,973		2,311		42		8,751		3,787		—		24,066
Doubtful	Doubtful	—��		4,996		—		—		—		114		3,384		—		8,494		Doubtful	—		—		—		—		—		8		—		—		8
Loss	Loss	—		—		—		—		—		—		—		—		—		Loss	—		—		—		—		—		—		—		—		—
Total commercial and industrial	Total commercial and industrial	117,534		583,948		502,547		232,822		165,737		702,576		559,882		1,032		2,866,078		Total commercial and industrial	189,328		719,914		475,435		379,391		201,301		692,433		494,011		534		3,152,347
Current period gross charge-offs																				Current period gross charge-offs	—		—		—		—		—		—		—		—		—

Commercial real estate	Commercial real estate																			Commercial real estate
Pass	Pass	378,744		845,405		641,300		676,903		495,084		1,304,769		43,970		3,478		4,389,653		Pass	153,788		1,473,014		832,060		567,662		542,707		1,420,263		48,963		2,604		5,041,061
Special Mention	Special Mention	26,613		—		16,142		3,796		19,562		19,776		—		—		85,889		Special Mention	—		—		8,598		760		12,683		23,470		—		—		45,511
Substandard	Substandard	29,903		58		4,663		1,654		38,038		49,327		8,000		—		131,643		Substandard	—		—		3,896		4,988		19,716		74,041		8,012		—		110,653
Doubtful	Doubtful	—		—		—		—		—		—		—		—		—		Doubtful	—		—		—		—		—		—		—		—		—
Loss	Loss	—		—		—		—		—		—		—		—		—		Loss	—		—		—		—		—		—		—		—		—
Total commercial real estate	Total commercial real estate	435,260		845,463		662,105		682,353		552,684		1,373,872		51,970		3,478		4,607,185		Total commercial real estate	153,788		1,473,014		844,554		573,410		575,106		1,517,774		56,975		2,604		5,197,225
Current period gross charge-offs																				Current period gross charge-offs	—		—		—		—		—		—		—		—		—

Commercial construction	Commercial construction																			Commercial construction
Pass	Pass	3,623		124,777		59,181		32,857		—		—		15,760		—		236,198		Pass	15,881		108,260		176,497		29,946		20,643		—		979		—		352,206
Special Mention		—		—		2,097		—		—		—		—		—		2,097
Substandard		—		—		—		6,743		—		—		—		—		6,743
Doubtful		—		—		—		—		—		—		—		—		—
Loss		—		—		—		—		—		—		—		—		—
Total commercial construction		3,623		124,777		61,278		39,600		—		—		15,760		—		245,038

Business banking
Pass		54,881		309,961		200,726		141,974		69,341		285,849		77,782		3,436		1,143,950
Special Mention		2,174		2,176		3,219		9,152		7,181		14,498		1,908		—		40,308
Substandard		—		464		1,617		4,993		564		9,542		1,244		680		19,104
Doubtful		—		—		—		203		—		103		—		—		306
Loss		—		—		—		—		—		—		—		—		—
Total business banking		57,055		312,601		205,562		156,322		77,086		309,992		80,934		4,116		1,203,668

Residential real estate
Current and accruing		81,889		740,106		406,401		112,976		78,320		505,432		—		—		1,925,124
30-89 days past due and accruing		—		2,553		1,387		201		1,513		6,808		—		—		12,462
Accruing loans past 90 days due		—		—		—		—		—		—		—		—		—

2422

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Special Mention																				Special Mention	3,118		—		—		—		—		—		—		—		3,118
Substandard																				Substandard	—		—		—		—		—		—		—		—		—
Doubtful																				Doubtful	—		—		—		—		—		—		—		—		—
Loss																				Loss	—		—		—		—		—		—		—		—		—
Total commercial construction																				Total commercial construction	18,999		108,260		176,497		29,946		20,643		—		979		—		355,324
Current period gross charge-offs																				Current period gross charge-offs	—		—		—		—		—		—		—		—		—

Business banking																				Business banking
Pass																				Pass	31,314		171,278		195,911		162,752		126,140		281,499		75,251		1,989		1,046,134
Special Mention																				Special Mention	—		375		984		3,888		3,781		10,787		139		—		19,954
Substandard																				Substandard	261		1,354		3,804		1,158		992		7,481		927		—		15,977
Doubtful																				Doubtful	—		—		—		22		1,132		59		—		—		1,213
Loss																				Loss	—		—		—		—		—		—		—		—		—
Total business banking																				Total business banking	31,575		173,007		200,699		167,820		132,045		299,826		76,317		1,989		1,083,278
Current period gross charge-offs																				Current period gross charge-offs	—		13		23		7		36		169		—		95		343

Residential real estate																				Residential real estate
Current and accruing																				Current and accruing	62,874		761,978		693,767		375,434		100,129		495,727		—		—		2,489,909
30-89 days past due and accruing																				30-89 days past due and accruing	2,529		1,662		1,771		2,288		1,064		7,919		—		—		17,233
Loans 90 days or more past due and still accruing																				Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	Non-accrual	—		—		129		582		784		6,761		—		—		8,256		Non-accrual	—		470		—		279		860		7,994		—		—		9,603
Total residential real estate	Total residential real estate	81,889		742,659		407,917		113,759		80,617		519,001		—		—		1,945,842		Total residential real estate	65,403		764,110		695,538		378,001		102,053		511,640		—		—		2,516,745
Current period gross charge-offs																				Current period gross charge-offs	—		—		—		—		—		—		—		—		—

Consumer home equity	Consumer home equity																			Consumer home equity
Current and accruing	Current and accruing	15,321		12,792		6,903		6,448		26,582		91,599		929,383		1,788		1,090,816		Current and accruing	10,241		94,319		10,484		5,570		4,874		96,340		943,832		2,786		1,168,446
30-89 days past due and accruing	30-89 days past due and accruing	—		33		31		—		170		1,490		2,004		67		3,795		30-89 days past due and accruing	—		142		—		—		—		458		7,837		—		8,437
Accruing loans past 90 days due		—		—		—		—		—		—		—		—		—
Loans 90 days or more past due and still accruing																				Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	Non-accrual	—		—		74		679		1,293		1,948		3,147		—		7,141		Non-accrual	—		50		—		—		—		2,185		5,192		—		7,427
Total consumer home equity	Total consumer home equity	15,321		12,825		7,008		7,127		28,045		95,037		934,534		1,855		1,101,752		Total consumer home equity	10,241		94,511		10,484		5,570		4,874		98,983		956,861		2,786		1,184,310
Current period gross charge-offs																				Current period gross charge-offs	—		—		—		—		—		—		7		—		7

Other consumer	Other consumer																			Other consumer
Current and accruing	Current and accruing	15,652		39,868		22,534		25,531		33,967		33,664		15,295		—		186,511		Current and accruing	21,022		45,668		30,172		16,159		16,360		27,606		14,593		—		171,580
30-89 days past due and accruing	30-89 days past due and accruing	12		107		76		117		449		429		—		—		1,190		30-89 days past due and accruing	—		97		85		42		76		239		33		—		572
Accruing loans past 90 days due		—		—		—		—		—		—		—		—		—
Loans 90 days or more past due and still accruing																				Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	Non-accrual	—		95		27		37		174		172		—		—		505		Non-accrual	—		57		71		18		40		31		55		—		272
Total other consumer	Total other consumer	15,664		40,070		22,637		25,685		34,590		34,265		15,295		—		188,206		Total other consumer	21,022		45,822		30,328		16,219		16,476		27,876		14,681		—		172,424
Current period gross charge-offs																				Current period gross charge-offs	238		83		63		39		6		104		28		—		561

Total	Total	$	726,346	$	2,662,343	$	1,869,054	$	1,257,668	$	938,759	$	3,034,743	$	1,658,375	$	10,481	$	12,157,769	Total	$	490,356	$	3,378,638	$	2,433,535	$	1,550,357	$	1,052,498	$	3,148,532	$	1,599,824	$	7,913	$	13,661,653

(1)The amounts presented represent the amortized cost as of March 31, ~~2022~~2023 of revolving loans that were converted to term loans during the three months ended March 31, ~~2022.~~2023.

~~Paycheck Protection Program (“PPP”) loans are included within~~The following table details the ~~unrated category~~amortized cost balances of the ~~commercial~~Company’s loan portfolios, presented by credit quality indicator and ~~industrial and business banking portfolios in~~origination year as of December 31, 2022:


	2022	2021	2020	2019	2018	Prior	Revolving Loans	Revolving Loans Converted to Term Loans (1)	Total
	(In thousands)
Commercial and industrial

Table of Contents


Pass	$	778,144	$	479,317	$	415,990	$	199,865	$	100,716	$	639,825	$	473,148	$	50	$	3,087,055
Special Mention	2,298		1,307		7,267		4,841		147		—		1,196		670		17,726
Substandard	294		4,954		2,644		46		2,598		7,854		485		346		19,221
Doubtful	—		5,249		—		—		—		23		3,254		—		8,526
Loss	—		—		—		—		—		—		—		—		—
Total commercial and industrial	780,736		490,827		425,901		204,752		103,461		647,702		478,083		1,066		3,132,528

Commercial real estate
Pass	1,510,675		825,620		586,567		581,840		461,296		1,006,160		52,590		4,187		5,028,935
Special Mention	—		—		771		4,204		15,366		12,255		—		—		32,596
Substandard	—		—		2,621		19,796		24,532		34,883		8,000		—		89,832
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total commercial real estate	1,510,675		825,620		589,959		605,840		501,194		1,053,298		60,590		4,187		5,151,363

Commercial construction
Pass	91,397		178,648		28,956		20,767		—		—		12,130		—		331,898
Special Mention	—		—		2,361		—		—		—		—		—		2,361
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total commercial construction	91,397		178,648		31,317		20,767		—		—		12,130		—		334,259

Business banking
Pass	178,806		202,230		170,088		128,282		59,452		233,484		78,080		4,770		1,055,192
Special Mention	—		991		4,635		4,605		3,740		7,584		145		—		21,700
Substandard	—		3,482		1,424		2,663		570		7,505		2,230		221		18,095
Doubtful	—		—		—		181		—		70		—		—		251
Loss	—		—		—		—		—		—		—		—		—
Total business banking	178,806		206,703		176,147		135,731		63,762		248,643		80,455		4,991		1,095,238

Residential real estate
Current and accruing	761,442		696,959		382,262		99,494		66,702		434,720		—		—		2,441,579
30-89 days past due and accruing	4,652		5,470		1,245		2,762		2,951		11,646		—		—		28,726
Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	—		—		144		1,491		1,015		7,100		—		—		9,750
Total residential real estate	766,094		702,429		383,651		103,747		70,668		453,466		—		—		2,480,055

Consumer home equity
Current and accruing	97,395		10,774		5,840		5,015		21,092		73,927		953,829		7,320		1,175,192
30-89 days past due and accruing	559		—		—		—		72		944		7,239		247		9,061
Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	—		—		—		61		274		1,303		5,120		296		7,054
Total consumer home equity	97,954		10,774		5,840		5,076		21,438		76,174		966,188		7,863		1,191,307

Other consumer
Current and accruing	55,414		32,390		17,641		18,298		18,832		16,603		17,476		—		176,654
30-89 days past due and accruing	143		68		43		61		240		178		58		7		798
Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	31		93		39		2		92		44		15		10		326
Total other consumer	55,588		32,551		17,723		18,361		19,164		16,825		17,549		17		177,778

Table of Contents



Total	$	3,481,250	$	2,447,552	$	1,630,538	$	1,094,274	$	779,687	$	2,496,108	$	1,614,995	$	18,124	$	13,562,528

(1)The amounts presented represent the ~~tables above. Commercial and industrial PPP loans and business banking PPP loans amounted to $51.7 million and $89.5 million, respectively, at March~~amortized cost as of December 31, 2022 ~~and $112.8 million and $218.6 million, respectively, at~~of revolving loans that were converted to term loans during the year ended 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.~~2022.

~~Asset Quality~~Allowance for Loan Losses

The ~~Company manages its~~allowance for loan ~~portfolio with careful monitoring. As a general rule,~~losses is established to provide for management’s estimate of expected lifetime credit losses on loans ~~more than 90 days past due with respect to principal and interest are classified as non-accrual loans. Exceptions may be made if management believes that collateral held by~~measured at amortized cost at the Company is clearly sufficient and in full satisfaction of both principal and 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. Non-accrual loans and loans that are more than 90 days past due but still accruing interest are considered non-performing loans.

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.

~~A loan is expected to remain on 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~~balance sheet date and is ~~charged-off against~~established through a provision for loan losses charged to net income. Charge-offs, net of recoveries, are charged directly to the 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 tables ~~show~~summarize the ~~age analysis~~changes in the allowance for loan losses by loan category for the periods indicated:


	For the Three Months Ended March 31, 2023
	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	$	26,859	$	54,730	$	7,085	$	16,189	$	28,129	$	6,454	$	2,765	$	142,211
Cumulative effect of change in accounting principle (1)	47		—		—		(140)		(849)		(201)		—		(1,143)
Charge-offs	—		—		—		(343)		—		(7)		(561)		(911)
Recoveries	139		4		—		481		15		1		116		756
Provision (release)	(116)		459		493		(1,102)		(165)		(65)		521		25
Ending balance	$	26,929	$	55,193	$	7,578	$	15,085	$	27,130	$	6,182	$	2,841	$	140,938


	For the Three Months Ended March 31, 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 (2)	11,533		(6,655)		1,485		6,160		13,489		1,857		(541)		(242)		27,086
Charge-offs	(1)		—		—		(945)		—		—		(661)		—		(1,607)
Recoveries	250		14		—		928		10		4		179		—		1,385
Provision (release)	(2,959)		(1,120)		344		143		2,188		435		484		—		(485)
Ending balance	$	26,841	$	44,612	$	4,414	$	17,269	$	22,243	$	6,018	$	2,769	$	—	$	124,166

(1)Represents the adjustment needed to reflect the cumulative day one impact pursuant to the Company’s adoption of ~~past due loans~~ASU 2022-02 (i.e., cumulative effect adjustment related to the adoption of ASU 2022-02 as of January 1, 2023). The adjustment represents a $1.1 million decrease to the ~~dates indicated:~~allowance attributable to the change in accounting methodology for estimating the allowance for loan losses resulting from the Company’s adoption of the standard.

Reserve for Unfunded Commitments

2519

Table of Contents

As of March 31, 2022
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 $ 146 $ — $ 1,994 $ 2,140 $ 2,863,938 $ 2,866,078
Commercial real estate 600 — 501 1,101 4,606,084 4,607,185
Commercial construction 6,743 — — 6,743 238,295 245,038
Business banking 4,599 875 3,294 8,768 1,194,900 1,203,668
Residential real estate 10,384 2,162 6,379 18,925 1,926,917 1,945,842
Consumer home equity 2,517 1,348 6,726 10,591 1,091,161 1,101,752
Other consumer 971 219 505 1,695 186,511 188,206
Total $ 25,960 $ 4,604 $ 19,399 $ 49,963 $ 12,107,806 $ 12,157,769

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)~~Management evaluates the need for a reserve on unfunded lending commitments in a manner consistent with loans held for investment. The ~~amounts presented~~Company’s adoption of ASU 2022-02 on January 1, 2023 did not impact the reserve for unfunded lending commitments. 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 ~~the table above represent the recorded investment balance~~a total reserve for unfunded lending commitments of ~~loans~~$11.1 million as of ~~December 31, 2021.~~

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

As of and for the Three Months Ended March 31, 2022 As of December 31, 2021
Non-Accrual Loans With ACL Non-Accrual Loans Without ACL (4) 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 $ 3,496 $ 6,990 $ 10,486 $ — $ 12,400 $ —
Commercial real estate — 501 501 — — 1,196
Commercial construction — — — — — —
Business banking 6,410 522 6,932 — 8,230 —
Residential real estate 8,256 — 8,256 — 6,681 769
Consumer home equity 7,141 — 7,141 — 4,732 25
Other consumer 505 — 505 — 950 —
Total non-accrual loans $ 25,808 $ 8,013 $ 33,821 $ — $ 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 amount of interest income recognized on non-accrual loans during the three months ended March 31, 2022 was not significant.~~

~~(4)The loans on non-accrual status and without an ACL as~~January 1, 2022. As of March 31, 2023 and December 31, 2022, ~~were primarily comprised~~the Company’s reserve for unfunded lending commitments was $13.9 million and $13.2 million, respectively, which is recorded within other liabilities in the Company's Consolidated Balance Sheets.

Portfolio Segmentation

Management uses a methodology to systematically estimate the amount of ~~collateral~~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 loans are evaluated based upon loan-level risk characteristics, historical losses and other factors which form the basis for estimating expected losses. Other portfolios, including owner occupied commercial real estate (which includes 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. For the purposes of estimating the allowance for loan losses, management segregates the loan portfolio into loan categories 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

Business banking: These loans ~~for which~~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 ~~fair~~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. The SBA guarantees reduce the Company’s loss due to default and are considered a credit enhancement to the loan structure.

Residential Lending

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 ~~underlying~~collateral. The Company maintains 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 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 ~~collateral exceeded~~portfolio. Decisions about whether to sell or retain residential loans are made based on the ~~loan carrying value.~~interest rate characteristics, pricing for loans in the secondary mortgage market, competitive factors and the Company’s capital needs.

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ItConsumer Lending

Other consumer: The Company’s policy and underwriting in this category, which is comprised primarily of home improvement, automobile and 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 aircraft and automobile loans.

Credit Quality

Commercial Lending Credit Quality

The credit quality of the Company’s ~~policy~~commercial loan portfolio is actively monitored and supported by a comprehensive credit approval process and all large dollar transactions are sent for approval to ~~reverse any accrued interest when~~ a ~~loan is put on non-accrual status,~~committee of seasoned business line and ~~as such,~~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 ~~did~~utilizes a 15-point credit risk-rating system to manage risk and identify potential problem loans. 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 ~~record any interest income on non-accrual~~rated. These segments include aircraft loans, ~~during~~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 which includes the ~~three months ended March 31, 2022. Accrued interest reversed against interest income~~review of the business score and loan and deposit account performance. The Company supplements performance data with current business credit scores for the ~~three months ended March 31, 2022 was insignificant.~~business banking portfolio on a quarterly basis. Unrated commercial and business banking loans are generally restricted to commercial exposure of less than $1.5 million. Loans included in this category generally are not required to provide regular financial reporting or regular covenant monitoring.

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 appraisalspurposes of the underlying collateral, brokers’ opinions based upon recent sales of comparable properties, estimated equipment auction or liquidation values less estimated costs to sell. As of March 31, 2022 and December 31, 2021, the Company had collateral-dependent residential mortgage and home equity loans totaling $0.8 million and $0.6 million, respectively.

~~For collateral-dependent commercial loans, the amount of~~estimating the allowance for loan losses, unrated loans are considered in the same manner as “Pass” rated loans. Unrated loans are included with “Pass” rated loans for disclosure purposes.

1-10 Risk Rating – Pass

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 ~~individually assessed based upon~~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. The Company does 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 12 exhibit well-defined weaknesses that, if not corrected, may jeopardize the ~~fair value~~orderly liquidation 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 March 31, 2022 and December 31, 2021, the Company had collateral-dependent commercial loans totaling $11.6 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 March 31, 2022 and December 31, 2021, the Company had no residential real estate held in other real estate owned (“OREO”). As of both March 31, 2022 and December 31, 2021, there were no mortgage loans collateralized by residential real estate property for which formal foreclosure proceedings were in-process.

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 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 the loans with potential weaknesses will ultimately be restructured or placed in non-accrual status. As of both March 31, 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~~

~~As described above 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~~debt. A loan is classified as a TDR. The process through which management identifies loans as TDR loans, the methodology employed to record any loan losses, and the calculation of any shortfall on collateral dependent loans, is also described above.

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 March 31, 2022 and December 31, 2021 was $49.0 million and $106.7 million, respectively. The Company defines a modified loan to have resumed paymentsubstandard 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 CARES Act or the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affectedinadequately protected by the ~~Coronavirus (Revised) and therefore are not deemed troubled debt restructurings, or TDRs. Additionally, loans that are performing in accordance with the contractual terms~~repayment capacity of the modification are not reflected as being past due and therefore are not impacting non-accrual or delinquency totals as of March 31, 2022 and December 31, 2021. The Company continued to accrue interest on these COVID-19 modified loans and evaluated the deferred interest for collectability as of March 31, 2022 and December 31, 2021.

The Consolidated Appropriations Act, which was enacted on December 27, 2020, extended certain provisions related to the COVID-19 pandemic in the United States (which were due to expire) and provided additional emergency relief to individuals and businesses. Included within the provisions of the Consolidated Appropriations Act is the extension to January 1, 2022 of Section 4013 of the CARES Act, which provides relief from a requirement to evaluate loans that had received a COVID-19 modification to determine if the loans required TDR treatment, provided certain criteria were met. As such, the

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~~Company applied~~obligor or by the ~~TDR relief granted pursuant~~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. Non-accrual is possible, but not mandatory, in this class.

13 Risk Rating – Doubtful (Loss Probable)

14 Risk Rating – Loss

Loans to borrowers in this category are deemed incapable of repayment. Loans to such ~~section~~borrowers are considered 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 ~~any qualifying loan modification executed during~~defer writing off these assets even though partial recovery may occur in the ~~allowable~~future. Loans in this category have a recorded investment of $0 at the time ~~period.~~of the downgrade.

~~The~~Residential and Consumer Lending Credit Quality

For the Company’s policy is to have any TDR loan which is on non-accrual status prior to being modified remain on non-accrual status for approximately six months subsequent to being modified before management considers its return to accrual status. Ifresidential and consumer portfolios, the ~~TDR~~quality of the loan is onbest 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 ~~prior to being modified, it is reviewed to determine if the modified loan should remain on accrual status.~~

~~TDR loan information as~~may be determined using a combination of ~~December 31, 2021~~payment performance, expected borrower viability and ~~the period then ended was prepared in accordance with U.S. GAAP effective for the Company as~~collateral value. Delinquent consumer loans are handled by a team of ~~December 31, 2021, or prior to our adoption of ASU 2016-13.~~seasoned collection specialists.

The following ~~tables show~~table details the ~~TDR loans on accrual~~amortized cost balances of the Company’s loan portfolios, presented by credit quality indicator and ~~non-accrual status~~origination year as of ~~the dates indicated:~~

As of March 31, 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 1 $ 3,894 7 $ 8,381 8 $ 12,275
Commercial real estate 1 3,520 — — 1 3,520
Business banking 5 3,771 8 814 13 4,585
Residential real estate 116 17,786 29 3,583 145 21,369
Consumer home equity 66 3,028 15 859 81 3,887
Other consumer 2 17 — — 2 17
Total 191 $ 32,016 59 $ 13,637 250 $ 45,653

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 allowance for loan losses associated with the TDR loans was $2.5 million and $3.4 million at~~ March 31, ~~2022~~2023, and ~~December 31, 2021, respectively. There were no additional commitments to lend to borrowers who have been a party to a TDR loan as of both March 31, 2022 and December 31, 2021.~~gross charge-offs for the three month period then ended:


	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term Loans (1)		Total
	(In thousands)
Commercial and industrial
Pass	$	189,328	$	692,186	$	448,560	$	361,146	$	196,510	$	682,862	$	481,097	$	86	$	3,051,775
Special Mention	—		27,526		17,902		15,934		4,749		812		9,127		448		76,498
Substandard	—		202		8,973		2,311		42		8,751		3,787		—		24,066
Doubtful	—		—		—		—		—		8		—		—		8
Loss	—		—		—		—		—		—		—		—		—
Total commercial and industrial	189,328		719,914		475,435		379,391		201,301		692,433		494,011		534		3,152,347
Current period gross charge-offs	—		—		—		—		—		—		—		—		—

Commercial real estate
Pass	153,788		1,473,014		832,060		567,662		542,707		1,420,263		48,963		2,604		5,041,061
Special Mention	—		—		8,598		760		12,683		23,470		—		—		45,511
Substandard	—		—		3,896		4,988		19,716		74,041		8,012		—		110,653
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total commercial real estate	153,788		1,473,014		844,554		573,410		575,106		1,517,774		56,975		2,604		5,197,225
Current period gross charge-offs	—		—		—		—		—		—		—		—		—

Commercial construction
Pass	15,881		108,260		176,497		29,946		20,643		—		979		—		352,206

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~~The following 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 March 31, 2022					For the Three Months Ended March 31, 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)
Special Mention												Special Mention	3,118		—		—		—		—		—		—		—		3,118
Substandard												Substandard	—		—		—		—		—		—		—		—		—
Doubtful												Doubtful	—		—		—		—		—		—		—		—		—
Loss												Loss	—		—		—		—		—		—		—		—		—
Total commercial construction												Total commercial construction	18,999		108,260		176,497		29,946		20,643		—		979		—		355,324
Current period gross charge-offs												Current period gross charge-offs	—		—		—		—		—		—		—		—		—
		(Dollars in thousands)
Business banking	Business banking	5	$	440	$	448	—	$	—	$	—	Business banking
Pass												Pass	31,314		171,278		195,911		162,752		126,140		281,499		75,251		1,989		1,046,134
Special Mention												Special Mention	—		375		984		3,888		3,781		10,787		139		—		19,954
Substandard												Substandard	261		1,354		3,804		1,158		992		7,481		927		—		15,977
Doubtful												Doubtful	—		—		—		22		1,132		59		—		—		1,213
Loss												Loss	—		—		—		—		—		—		—		—		—
Total business banking												Total business banking	31,575		173,007		200,699		167,820		132,045		299,826		76,317		1,989		1,083,278
Current period gross charge-offs												Current period gross charge-offs	—		13		23		7		36		169		—		95		343

Residential real estate	Residential real estate	1	134		134		1	295		295		Residential real estate
Current and accruing												Current and accruing	62,874		761,978		693,767		375,434		100,129		495,727		—		—		2,489,909
30-89 days past due and accruing												30-89 days past due and accruing	2,529		1,662		1,771		2,288		1,064		7,919		—		—		17,233
Loans 90 days or more past due and still accruing												Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual												Non-accrual	—		470		—		279		860		7,994		—		—		9,603
Total residential real estate												Total residential real estate	65,403		764,110		695,538		378,001		102,053		511,640		—		—		2,516,745
Current period gross charge-offs												Current period gross charge-offs	—		—		—		—		—		—		—		—		—

Consumer home equity	Consumer home equity	1	210		210		—	—		—		Consumer home equity
Current and accruing												Current and accruing	10,241		94,319		10,484		5,570		4,874		96,340		943,832		2,786		1,168,446
30-89 days past due and accruing												30-89 days past due and accruing	—		142		—		—		—		458		7,837		—		8,437
Loans 90 days or more past due and still accruing												Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual												Non-accrual	—		50		—		—		—		2,185		5,192		—		7,427
Total consumer home equity												Total consumer home equity	10,241		94,511		10,484		5,570		4,874		98,983		956,861		2,786		1,184,310
Current period gross charge-offs												Current period gross charge-offs	—		—		—		—		—		—		7		—		7

Other consumer												Other consumer
Current and accruing												Current and accruing	21,022		45,668		30,172		16,159		16,360		27,606		14,593		—		171,580
30-89 days past due and accruing												30-89 days past due and accruing	—		97		85		42		76		239		33		—		572
Loans 90 days or more past due and still accruing												Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual												Non-accrual	—		57		71		18		40		31		55		—		272
Total other consumer												Total other consumer	21,022		45,822		30,328		16,219		16,476		27,876		14,681		—		172,424
Current period gross charge-offs												Current period gross charge-offs	238		83		63		39		6		104		28		—		561

Total	Total	7	$	784	$	792	1	$	295	$	295	Total	$	490,356	$	3,378,638	$	2,433,535	$	1,550,357	$	1,052,498	$	3,148,532	$	1,599,824	$	7,913	$	13,661,653

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

At March 31, ~~2022 and December 31, 2021, the outstanding recorded investment~~2023 of revolving loans that were ~~new TDR~~converted to term loans during ~~both~~ the three months ended March 31, ~~2022 and the year ended December 31, 2021 was $0.8 million.~~2023.

The following table ~~shows~~details the amortized cost balances of the Company’s ~~post-modification balance of TDRs listed~~loan portfolios, presented by ~~type of modification during the periods indicated:~~

For the Three Months Ended March 31,
2022 2021
(In thousands)
Extended maturity $ 402 $ —
Adjusted interest rate and extended maturity 390 —
Court-ordered concession — 295
Total $ 792 $ 295

~~The following table shows the number of loans~~credit quality indicator and ~~the recorded investment amount of those loans,~~origination year 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 non-accrual:December 31, 2022:

For the Three Months Ended March 31,
2022 2021
Number of
Contracts Recorded
Investment Number of
Contracts Recorded
Investment
(Dollars in thousands)
Troubled debt restructurings that subsequently defaulted (1):
Business banking — $ — 1 $ 419
Consumer home equity — — 1 59
Total — $ — 2 $ 478

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

~~During both the three months ended March 31, 2022 and 2021, no amounts were charged-off on TDR loans modified in the prior 12 months.~~

~~Loan Participations~~

The Company occasionally purchases commercial loan participations, or participates in syndications through the SNC Program. These 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.


	2022	2021	2020	2019	2018	Prior	Revolving Loans	Revolving Loans Converted to Term Loans (1)	Total
	(In thousands)
Commercial and industrial

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~~The following table summarizes the Company’s loan participations:~~


Pass	$	778,144	$	479,317	$	415,990	$	199,865	$	100,716	$	639,825	$	473,148	$	50	$	3,087,055
Special Mention	2,298		1,307		7,267		4,841		147		—		1,196		670		17,726
Substandard	294		4,954		2,644		46		2,598		7,854		485		346		19,221
Doubtful	—		5,249		—		—		—		23		3,254		—		8,526
Loss	—		—		—		—		—		—		—		—		—
Total commercial and industrial	780,736		490,827		425,901		204,752		103,461		647,702		478,083		1,066		3,132,528

Commercial real estate
Pass	1,510,675		825,620		586,567		581,840		461,296		1,006,160		52,590		4,187		5,028,935
Special Mention	—		—		771		4,204		15,366		12,255		—		—		32,596
Substandard	—		—		2,621		19,796		24,532		34,883		8,000		—		89,832
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total commercial real estate	1,510,675		825,620		589,959		605,840		501,194		1,053,298		60,590		4,187		5,151,363

Commercial construction
Pass	91,397		178,648		28,956		20,767		—		—		12,130		—		331,898
Special Mention	—		—		2,361		—		—		—		—		—		2,361
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total commercial construction	91,397		178,648		31,317		20,767		—		—		12,130		—		334,259

Business banking
Pass	178,806		202,230		170,088		128,282		59,452		233,484		78,080		4,770		1,055,192
Special Mention	—		991		4,635		4,605		3,740		7,584		145		—		21,700
Substandard	—		3,482		1,424		2,663		570		7,505		2,230		221		18,095
Doubtful	—		—		—		181		—		70		—		—		251
Loss	—		—		—		—		—		—		—		—		—
Total business banking	178,806		206,703		176,147		135,731		63,762		248,643		80,455		4,991		1,095,238

Residential real estate
Current and accruing	761,442		696,959		382,262		99,494		66,702		434,720		—		—		2,441,579
30-89 days past due and accruing	4,652		5,470		1,245		2,762		2,951		11,646		—		—		28,726
Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	—		—		144		1,491		1,015		7,100		—		—		9,750
Total residential real estate	766,094		702,429		383,651		103,747		70,668		453,466		—		—		2,480,055

Consumer home equity
Current and accruing	97,395		10,774		5,840		5,015		21,092		73,927		953,829		7,320		1,175,192
30-89 days past due and accruing	559		—		—		—		72		944		7,239		247		9,061
Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	—		—		—		61		274		1,303		5,120		296		7,054
Total consumer home equity	97,954		10,774		5,840		5,076		21,438		76,174		966,188		7,863		1,191,307

Other consumer
Current and accruing	55,414		32,390		17,641		18,298		18,832		16,603		17,476		—		176,654
30-89 days past due and accruing	143		68		43		61		240		178		58		7		798
Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	31		93		39		2		92		44		15		10		326
Total other consumer	55,588		32,551		17,723		18,361		19,164		16,825		17,549		17		177,778

As of and for the Three Months Ended March 31, 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 $ 744,231 1.13 % $ — $ 732,425 1.36 % $ —
Commercial real estate 390,540 0.00 % — 362,898 0.00 % —
Commercial construction 42,661 0.00 % — 37,081 0.00 % —
Business banking 143 0.00 % — 98 0.00 % —
Total loan participations $ 1,177,575 0.71 % $ — $ 1,132,502 0.88 % $ —

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Total	$	3,481,250	$	2,447,552	$	1,630,538	$	1,094,274	$	779,687	$	2,496,108	$	1,614,995	$	18,124	$	13,562,528

(1)The ~~balance of loan participations as of March 31, 2022 represents~~amounts presented represent the amortized cost ~~basis and the balance~~ as of December 31, ~~2021 represents~~2022 of revolving loans that were converted to term loans during the ~~recorded investment balance. The difference between amortized cost basis and recorded investment basis as of March~~year ended December 31, ~~2022 is not material.~~2022.

~~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 U.S. 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~~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 ~~was~~is established through a provision for loan losses charged to net income. Charge-offs, net of recoveries, ~~were~~are charged directly to the ~~allowance.~~allowance for loan losses. Commercial and residential loans ~~were~~are charged-off in the period in which they are deemed uncollectible. Delinquent loans in these product types ~~were~~are subject to ongoing review and analysis to determine if a charge-off in the current period ~~was~~is appropriate. For consumer loans, policies and procedures ~~existed~~exist that ~~required~~require 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.~~

The following tables summarize the changes in the allowance for loan losses by loan category for the ~~three months ended March 31, 2021:~~periods indicated:


	For the Three Months Ended March 31, 2023
	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	$	26,859	$	54,730	$	7,085	$	16,189	$	28,129	$	6,454	$	2,765	$	142,211
Cumulative effect of change in accounting principle (1)	47		—		—		(140)		(849)		(201)		—		(1,143)
Charge-offs	—		—		—		(343)		—		(7)		(561)		(911)
Recoveries	139		4		—		481		15		1		116		756
Provision (release)	(116)		459		493		(1,102)		(165)		(65)		521		25
Ending balance	$	26,929	$	55,193	$	7,578	$	15,085	$	27,130	$	6,182	$	2,841	$	140,938


	For the Three Months Ended March 31, 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 (2)	11,533		(6,655)		1,485		6,160		13,489		1,857		(541)		(242)		27,086
Charge-offs	(1)		—		—		(945)		—		—		(661)		—		(1,607)
Recoveries	250		14		—		928		10		4		179		—		1,385
Provision (release)	(2,959)		(1,120)		344		143		2,188		435		484		—		(485)
Ending balance	$	26,841	$	44,612	$	4,414	$	17,269	$	22,243	$	6,018	$	2,769	$	—	$	124,166

Reserve for Unfunded Commitments

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For the Three Months Ended March 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:
Beginning balance $ 26,617 $ 54,569 $ 4,553 $ 13,152 $ 6,435 $ 3,744 $ 3,467 $ 494 $ 113,031
Charge-offs — (234) — (1,384) — — (364) — (1,982)
Recoveries 9 — — 365 10 71 156 — 611
(Release of) Provision (1,220) 803 (1,203) 1,371 (210) (239) 239 (121) (580)
Ending balance $ 25,406 $ 55,138 $ 3,350 $ 13,504 $ 6,235 $ 3,576 $ 3,498 $ 373 $ 111,080
Management evaluates the need for a reserve on unfunded lending commitments in a manner consistent with loans held for investment. The Company’s adoption of ASU 2022-02 on January 1, 2023 did not impact the reserve for unfunded lending commitments. 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 March 31, 2023 and December 31, 2022, the Company’s reserve for unfunded lending commitments was $13.9 million and $13.2 million, respectively, which is recorded within other liabilities in the Company's Consolidated Balance Sheets.

Portfolio Segmentation

~~The following tables bifurcate~~Management uses a methodology to systematically estimate the amount of 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 loans are evaluated based upon loan-level risk characteristics, historical losses and other factors which form the basis for estimating expected losses. Other portfolios, including owner occupied commercial real estate (which includes 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. For the purposes of estimating the allowance for loan losses, ~~allocated~~management segregates the loan portfolio into loan categories 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

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. The SBA guarantees reduce the Company’s loss due to default and are considered a credit enhancement to the loan structure.

Residential Lending

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 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. Decisions about whether to sell or retain residential loans are made 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~~interest rate characteristics, pricing for loans in the ~~internal risk-rating categories for~~secondary mortgage market, competitive factors and the Company’s ~~commercial and industrial, commercial real estate, commercial construction and business banking portfolios:~~capital needs.

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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
Consumer Lending

~~PPP~~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.

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.

0 Risk Rating - Unrated

Certain segments of the portfolios are not rated. These segments include 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 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 commercial and business banking loans are generally restricted to commercial exposure of less than $1.5 million. Loans included in this category generally are not required to provide regular financial reporting or regular covenant monitoring.

For purposes of estimating the allowance for loan losses, unrated loans are considered in the same manner as “Pass” rated loans. Unrated loans are included ~~within the unrated~~with “Pass” rated loans for disclosure purposes.

1-10 Risk Rating – Pass

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 ~~the commercial~~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 ~~industrial and business banking portfolios~~may be 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.~~declining industries. An element of asset quality, financial flexibility or management is below average. The Company does not ~~have an allowance for~~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 12 exhibit well-defined weaknesses that, if not corrected, may jeopardize the orderly liquidation of the debt. A loan ~~losses for PPP loans~~is classified as ~~they are 100% guaranteed~~substandard if it is inadequately protected by the ~~SBA.~~repayment capacity of the

~~Impaired Loans~~

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~~Under previous accounting guidance, impaired~~

13 Risk Rating – Doubtful (Loss Probable)

Loans classified as doubtful have comparable weaknesses as found in the loans ~~consisted~~classified as substandard, with the added provision that such weaknesses make collection of ~~all loans for which management had determined it was probable~~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 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. Specific reserves will be the amount identified after specific review. 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 uncollectible and of such little value that continuance as active assets of the Company is not warranted. This classification does not mean that the ~~Company would be unable~~loans have no recovery or salvage value, but rather, it is not practical or desirable to ~~collect all amounts due according to~~defer writing off these assets even though partial recovery may occur in the ~~contractual terms~~future. Loans in this category have a recorded investment of $0 at the time of the downgrade.

Residential and Consumer Lending Credit Quality

For the Company’s residential and consumer portfolios, the quality of the loan ~~agreements. Factors considered~~is best indicated by ~~management in determining impairment included payment status, collateral~~the repayment performance of an individual borrower. Updated appraisals, broker opinions of value and other collateral valuation methods are employed in the ~~probability~~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 ~~collecting scheduled~~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 March 31, 2023, and gross charge-offs for the three month period then ended:


	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term Loans (1)		Total
	(In thousands)
Commercial and industrial
Pass	$	189,328	$	692,186	$	448,560	$	361,146	$	196,510	$	682,862	$	481,097	$	86	$	3,051,775
Special Mention	—		27,526		17,902		15,934		4,749		812		9,127		448		76,498
Substandard	—		202		8,973		2,311		42		8,751		3,787		—		24,066
Doubtful	—		—		—		—		—		8		—		—		8
Loss	—		—		—		—		—		—		—		—		—
Total commercial and industrial	189,328		719,914		475,435		379,391		201,301		692,433		494,011		534		3,152,347
Current period gross charge-offs	—		—		—		—		—		—		—		—		—

Commercial real estate
Pass	153,788		1,473,014		832,060		567,662		542,707		1,420,263		48,963		2,604		5,041,061
Special Mention	—		—		8,598		760		12,683		23,470		—		—		45,511
Substandard	—		—		3,896		4,988		19,716		74,041		8,012		—		110,653
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total commercial real estate	153,788		1,473,014		844,554		573,410		575,106		1,517,774		56,975		2,604		5,197,225
Current period gross charge-offs	—		—		—		—		—		—		—		—		—

Commercial construction
Pass	15,881		108,260		176,497		29,946		20,643		—		979		—		352,206

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Special Mention	3,118		—		—		—		—		—		—		—		3,118
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total commercial construction	18,999		108,260		176,497		29,946		20,643		—		979		—		355,324
Current period gross charge-offs	—		—		—		—		—		—		—		—		—

Business banking
Pass	31,314		171,278		195,911		162,752		126,140		281,499		75,251		1,989		1,046,134
Special Mention	—		375		984		3,888		3,781		10,787		139		—		19,954
Substandard	261		1,354		3,804		1,158		992		7,481		927		—		15,977
Doubtful	—		—		—		22		1,132		59		—		—		1,213
Loss	—		—		—		—		—		—		—		—		—
Total business banking	31,575		173,007		200,699		167,820		132,045		299,826		76,317		1,989		1,083,278
Current period gross charge-offs	—		13		23		7		36		169		—		95		343

Residential real estate
Current and accruing	62,874		761,978		693,767		375,434		100,129		495,727		—		—		2,489,909
30-89 days past due and accruing	2,529		1,662		1,771		2,288		1,064		7,919		—		—		17,233
Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	—		470		—		279		860		7,994		—		—		9,603
Total residential real estate	65,403		764,110		695,538		378,001		102,053		511,640		—		—		2,516,745
Current period gross charge-offs	—		—		—		—		—		—		—		—		—

Consumer home equity
Current and accruing	10,241		94,319		10,484		5,570		4,874		96,340		943,832		2,786		1,168,446
30-89 days past due and accruing	—		142		—		—		—		458		7,837		—		8,437
Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	—		50		—		—		—		2,185		5,192		—		7,427
Total consumer home equity	10,241		94,511		10,484		5,570		4,874		98,983		956,861		2,786		1,184,310
Current period gross charge-offs	—		—		—		—		—		—		7		—		7

Other consumer
Current and accruing	21,022		45,668		30,172		16,159		16,360		27,606		14,593		—		171,580
30-89 days past due and accruing	—		97		85		42		76		239		33		—		572
Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	—		57		71		18		40		31		55		—		272
Total other consumer	21,022		45,822		30,328		16,219		16,476		27,876		14,681		—		172,424
Current period gross charge-offs	238		83		63		39		6		104		28		—		561

Total	$	490,356	$	3,378,638	$	2,433,535	$	1,550,357	$	1,052,498	$	3,148,532	$	1,599,824	$	7,913	$	13,661,653

(1)The amounts presented represent the amortized cost as of March 31, 2023 of revolving loans that were converted to term loans during the three months ended March 31, 2023.

The following table details the amortized cost balances of the Company’s loan portfolios, presented by credit quality indicator and origination year as of December 31, 2022:


	2022	2021	2020	2019	2018	Prior	Revolving Loans	Revolving Loans Converted to Term Loans (1)	Total
	(In thousands)
Commercial and industrial

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Pass	$	778,144	$	479,317	$	415,990	$	199,865	$	100,716	$	639,825	$	473,148	$	50	$	3,087,055
Special Mention	2,298		1,307		7,267		4,841		147		—		1,196		670		17,726
Substandard	294		4,954		2,644		46		2,598		7,854		485		346		19,221
Doubtful	—		5,249		—		—		—		23		3,254		—		8,526
Loss	—		—		—		—		—		—		—		—		—
Total commercial and industrial	780,736		490,827		425,901		204,752		103,461		647,702		478,083		1,066		3,132,528

Commercial real estate
Pass	1,510,675		825,620		586,567		581,840		461,296		1,006,160		52,590		4,187		5,028,935
Special Mention	—		—		771		4,204		15,366		12,255		—		—		32,596
Substandard	—		—		2,621		19,796		24,532		34,883		8,000		—		89,832
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total commercial real estate	1,510,675		825,620		589,959		605,840		501,194		1,053,298		60,590		4,187		5,151,363

Commercial construction
Pass	91,397		178,648		28,956		20,767		—		—		12,130		—		331,898
Special Mention	—		—		2,361		—		—		—		—		—		2,361
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—
Total commercial construction	91,397		178,648		31,317		20,767		—		—		12,130		—		334,259

Business banking
Pass	178,806		202,230		170,088		128,282		59,452		233,484		78,080		4,770		1,055,192
Special Mention	—		991		4,635		4,605		3,740		7,584		145		—		21,700
Substandard	—		3,482		1,424		2,663		570		7,505		2,230		221		18,095
Doubtful	—		—		—		181		—		70		—		—		251
Loss	—		—		—		—		—		—		—		—		—
Total business banking	178,806		206,703		176,147		135,731		63,762		248,643		80,455		4,991		1,095,238

Residential real estate
Current and accruing	761,442		696,959		382,262		99,494		66,702		434,720		—		—		2,441,579
30-89 days past due and accruing	4,652		5,470		1,245		2,762		2,951		11,646		—		—		28,726
Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	—		—		144		1,491		1,015		7,100		—		—		9,750
Total residential real estate	766,094		702,429		383,651		103,747		70,668		453,466		—		—		2,480,055

Consumer home equity
Current and accruing	97,395		10,774		5,840		5,015		21,092		73,927		953,829		7,320		1,175,192
30-89 days past due and accruing	559		—		—		—		72		944		7,239		247		9,061
Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	—		—		—		61		274		1,303		5,120		296		7,054
Total consumer home equity	97,954		10,774		5,840		5,076		21,438		76,174		966,188		7,863		1,191,307

Other consumer
Current and accruing	55,414		32,390		17,641		18,298		18,832		16,603		17,476		—		176,654
30-89 days past due and accruing	143		68		43		61		240		178		58		7		798
Loans 90 days or more past due and still accruing	—		—		—		—		—		—		—		—		—
Non-accrual	31		93		39		2		92		44		15		10		326
Total other consumer	55,588		32,551		17,723		18,361		19,164		16,825		17,549		17		177,778

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Total	$	3,481,250	$	2,447,552	$	1,630,538	$	1,094,274	$	779,687	$	2,496,108	$	1,614,995	$	18,124	$	13,562,528

(1)The amounts presented represent the amortized cost as of December 31, 2022 of revolving loans that were converted to term loans during the year ended December 31, 2022.

Asset Quality

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 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. 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. Non-accrual loans and loans that are more than 90 days past due but still accruing interest are considered non-performing loans.

Non-accrual loans may be returned to an accrual status when principal and interest payments ~~when due.~~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.

A loan is expected to remain on 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 ~~Company measured impairment~~following tables show the age analysis of past due loans ~~using a discounted cash flow method, the loan’s observable market price, or the fair value~~as 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.dates indicated:


	As of March 31, 2023
	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	$	300	$	—	$	468	$	768	$	3,151,579	$	3,152,347
Commercial real estate	—		—		—		—		5,197,225		5,197,225
Commercial construction	—		—		—		—		355,324		355,324
Business banking	5,771		755		2,544		9,070		1,074,208		1,083,278
Residential real estate	12,885		4,755		7,180		24,820		2,491,925		2,516,745
Consumer home equity	7,377		1,061		7,241		15,679		1,168,631		1,184,310
Other consumer	403		184		257		844		171,580		172,424
Total	$	26,736	$	6,755	$	17,690	$	51,181	$	13,610,472	$	13,661,653


	As of December 31, 2022
	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	$	1,300	$	385	$	2,074	$	3,759	$	3,128,769	$	3,132,528
Commercial real estate	—		—		—		—		5,151,363		5,151,363
Commercial construction	—		—		—		—		334,259		334,259
Business banking	6,642		845		3,517		11,004		1,084,234		1,095,238
Residential real estate	25,877		3,852		6,456		36,185		2,443,870		2,480,055
Consumer home equity	8,262		1,108		6,525		15,895		1,175,412		1,191,307
Other consumer	634		170		320		1,124		176,654		177,778
Total	$	42,715	$	6,360	$	18,892	$	67,967	$	13,494,561	$	13,562,528

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The following table ~~summarizes the Company’s impaired~~presents information regarding non-accrual loans ~~by loan portfolio~~ as of the dates indicated:


	As of March 31, 2023						As of December 31, 2022
	Non-Accrual Loans With ACL		Non-Accrual Loans Without ACL (1)		Total Non-Accrual Loans		Non-Accrual Loans With ACL		Non-Accrual Loans Without ACL (1)		Total Non-Accrual Loans
	(In thousands)
Commercial and industrial	$	10	$	10,741	$	10,751	$	3,270	$	10,707	$	13,977
Commercial real estate	—		—		—		—		—		—
Commercial construction	—		—		—		—		—		—
Business banking	5,350		1,170		6,520		5,844		1,653		7,497
Residential real estate	9,603		—		9,603		9,750		—		9,750
Consumer home equity	7,427		—		7,427		7,054		—		7,054
Other consumer	272		—		272		326		—		326
Total non-accrual loans	$	22,662	$	11,911	$	34,573	$	26,244	$	12,360	$	38,604

(1)The loans on non-accrual status and without an ACL as of both March 31, 2023 and December 31, ~~2021:~~2022, were primarily comprised of collateral dependent loans for which the fair value of the underlying loan collateral exceeded the loan carrying value.

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
Commercial real estate — — —
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

The ~~following table displays information regarding~~amount of interest income recognized on ~~impaired~~non-accrual loans ~~by portfolio,~~during the three months ended March 31, 2023 and 2022 was not significant. As of both March 31, 2023 and December 31, 2022, there were no loans greater than 90 days past due and still accruing.

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 months ended March 31, ~~2021:~~
For the Three Months Ended March 31, 2021
Average
Recorded
Investment Total
Interest
Recognized
(In thousands)
With no related allowance recorded:
Commercial and industrial $ 9,899 $ 46
Commercial real estate 4,176 44
Business banking 5,024 26
Residential real estate 14,648 144
Consumer home equity 2,438 20
Other consumer 27 —
Sub-total 36,212 280
With an allowance recorded:
Commercial and industrial 7,965 —
Commercial real estate 657 —
Business banking 16,325 14
Residential real estate 12,248 127
Consumer home equity 2,150 18
Sub-total 39,345 159
Total $ 75,557 $ 439
2023 and 2022 was insignificant.

~~Purchased Credit Impaired Loans~~

~~The following table displays~~For collateral values for residential mortgage and home equity loans, the ~~outstanding~~Company relies primarily upon third-party valuation information from certified appraisers and ~~carrying amounts~~values are generally based upon recent appraisals of ~~PCI loans as~~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 March 31, 2023 and December 31, ~~2021:~~2022, the Company had collateral-dependent residential mortgage and home equity loans totaling $0.5 million and $0.6 million, respectively.

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 March 31, 2023 and December 31, 2022, the Company had collateral-dependent commercial loans totaling $12.3 million and $16.2 million, respectively.

As of both March 31, 2023 and December 31, 2022, the Company had no residential real estate held in other real estate owned (“OREO”). As of both March 31, 2023 and December 31, 2022, there were no mortgage loans collateralized by residential real estate property for which formal foreclosure proceedings were in-process.

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Loan Modifications to Borrowers Experiencing Financial Difficulty

The following tables show the amortized cost balance as of March 31, 2023 of loans modified during the three months ended March 31, 2023 to borrowers experiencing financial difficulty by the type of concession granted:


	Interest Rate Reduction				Other-than-Insignificant Delay in Repayment				Combination—Interest Rate Reduction & Other-than-Insignificant Delay in Repayment
	Amortized Cost Balance		% of Total Portfolio		Amortized Cost Balance		% of Total Portfolio		Amortized Cost Balance		% of Total Portfolio
	(Dollars in thousands)
Business banking	$	47	0.00	%	$	—	—	%	$	64	0.01	%
Residential real estate	—		—		327		0.01		—		—
Consumer home equity	813		0.07		23		0.00		175		0.01
Total	$	860	0.01	%	$	350	0.00	%	$	239	0.00	%


	Combination—Interest Rate Reduction & Term Extension				Combination—Term Extension & Other-than-Insignificant Delay in Repayment				Combination—Interest Rate Reduction, Term Extension & Other-than-Insignificant Delay in Repayment
	Amortized Cost Balance		% of Total Portfolio		Amortized Cost Balance		% of Total Portfolio		Amortized Cost Balance		% of Total Portfolio
	(Dollars in thousands)
Business banking	$	460	0.04	%	$	29	0.00	%	$	131	0.01	%
Residential real estate	—		—		—		—		—		—
Consumer home equity	220		0.02		—		—		—		—
Total	$	680	0.00	%	$	29	0.00	%	$	131	0.00	%


	Total
	Amortized Cost Balance		% of Total Portfolio
	(Dollars in thousands)
Business banking	$	731	0.07	%
Residential real estate	327		0.01
Consumer home equity	1,231		0.10
Total	$	2,289	0.02	%

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The following table describes the financial effect of the modifications made during the three months ended March 31, 2023 to borrowers experiencing financial difficulty:

Loan Type

~~As of December 31, 2021~~

~~(In thousands)~~Financial Effect (1)

~~Outstanding balance~~Interest Rate Reduction

~~78,074~~

~~Carrying amount~~Business banking

Reduced weighted-average contractual interest rate from 9.5% to 6.9%.

~~69,639~~ Consumer home equity

Reduced weighted-average contractual interest rate from 7.0% to 4.4%.

Other-than-Insignificant Delay in Repayment

Business banking

Deferred a weighted average of twelve payments. For principal and interest deferrals, the loans were re-amortized over an extended payment period resulting in reduced monthly payment amounts for the borrowers. For interest-only deferrals, interest accrued at the time of the modification was added to the end of the loan life.

Residential real estate

Deferred a weighted average of nine principal and interest payments which were added to the end of the loan life.

Consumer home equity

Deferred a weighted average of six principal and interest payments which were added to the end of the loan life.

Term Extension

Business banking

Added a weighted-average 4.2 years to the life of loans, which reduced monthly payment amounts for the borrowers.

Consumer home equity

Added a weighted-average 0.6 years to the life of loans, which reduced monthly payment amounts for the borrowers.

~~Under previous accounting guidance,~~(1)Loans that were modified in more than one manner are included in each modification type corresponding to the ~~excess~~type of ~~cash flows expected~~modifications performed.

As of March 31, 2023, no loans to ~~be collected over~~borrowers experiencing financial difficulty modified during the ~~carrying amount~~three months ended March 31, 2023 had a payment default during the three months ended March 31, 2023.

Management closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the ~~loans, referred to as the “accretable yield,” was accreted into interest income over the life~~effectiveness of ~~the loans using the effective yield method.~~its modification efforts. The following table ~~summarizes activity~~shows the age analysis of past due loans to borrowers experiencing financial difficulty as of March 31, 2023 that were modified during the three months ended March 31, 2023:


	As of March 31, 2023
	30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
	(In thousands)
Business banking	$	28	$	—	$	—	$	28	$	703	$	731
Residential real estate	—		—		—		—		327		327
Consumer home equity	—		—		—		—		1,231		1,231
Total	$	28	$	—	$	—	$	28	$	2,261	$	2,289

As of March 31, 2023, there were no additional commitments to lend to borrowers experiencing financial difficulty and which were modified during the three months ended March 31, 2023 in the ~~accretable yield~~form of principal forgiveness, an interest rate reduction, an other-than-insignificant delay in repayment, or a term extension.

Troubled Debt Restructurings (“TDR”)

As described previously in Note 2, “Summary of Significant Accounting Policies,” the Company adopted ASU 2022-02 on January 1, 2023 which eliminated TDR accounting. Previously, in cases where a borrower experienced financial difficulty and the Company made certain concessionary modifications to contractual terms, the loan was classified as a TDR. The process through which management identified loans as TDR loans, the methodology employed to record any loan losses, and the calculation of any shortfall on collateral dependent loans is described within Note 2, “Summary of Significant Accounting Policies” within the Notes to the Consolidated Financial Statements included within the Company’s 2022 Form 10-K. The below disclosures regarding TDRs relate to prior periods and were included for comparative purposes.

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

Table of Contents

TDR loan information as of December 31, 2022 and the three months ended March 31, 2022 was prepared in accordance with GAAP effective for the ~~PCI~~Company as of December 31, 2022, or prior to the Company’s adoption of ASU 2022-02.

The following table shows the TDR loans on accrual and non-accrual status as of December 31, 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	$	4,449	9	$	11,317	11	$	15,766
Business banking	11	4,124		22	2,101		33	6,225
Residential real estate	114	17,618		28	4,016		142	21,634
Consumer home equity	51	2,632		19	1,917		70	4,549
Other consumer	1	11		—	—		1	11
Total	179	$	28,834	78	$	19,351	257	$	48,185

At December 31, 2022, the outstanding recorded investment of loans that were new TDR loans during the year ended December 31, 2022 was $11.0 million. The amount of allowance for loan ~~portfolio:~~losses associated with the TDR loans was $1.8 million at December 31, 2022. There were no additional commitments to lend to borrowers who have been party to a TDR as of December 31, 2022.

The following table shows the modifications which occurred during the three months ended March 31, 2022 and the change in the recorded investment subsequent to the modifications occurring:


	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment (1)
	(Dollars in thousands)
Business banking	5	$	440	$	448
Residential real estate	1	134		134
Consumer home equity	1	210		210
Total	7	$	784	$	792

(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.

The following table shows the Company’s post-modification balance of TDRs listed by type of modification during the three months ended March 31, 2022:


	For the Three Months Ended March 31, ~~2021~~2022
	(In thousands)
~~Balance at beginning of period~~Extended maturity	$	~~2,495~~402
~~Accretion~~Adjusted interest rate and extended maturity	~~(216)~~390
~~Other change in expected cash flows~~	~~(248)~~
~~Balance at end of period~~Total	$	~~2,031~~792

During the three months ended March 31, 2022, there were no loans that had been modified during the prior 12 months which had subsequently defaulted. The ~~estimate of cash flows expected~~Company considers a loan to ~~be collected was regularly re-assessed subsequent~~have defaulted when it reaches 90 days past due or is transferred to ~~acquisition. A decrease~~non-accrual. During the three months ended March 31, 2022, no amounts were charged-off on TDRs modified in ~~expected cash flows~~the prior 12 months.

Loan Participations

The Company occasionally purchases commercial loan participations, or participates in ~~subsequent periods may have indicated that~~syndications through the ~~loan was impaired which would require~~SNC Program. These participations meet the ~~establishment of an~~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 ~~by a charge to~~as other loans.

The following table summarizes the ~~provision for~~Company’s 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~~participations:

Table 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.Contents


	As of and for the Three Months Ended March 31, 2023						As of and for the Year Ended December 31, 2022
	Balance (1)		Non-performing Loan Rate (%)		Gross Charge-offs		Balance (1)		Non-performing Loan Rate (%)		Gross Charge-offs
	(Dollars in thousands)
Commercial and industrial	$	1,103,559	0.70	%	$	—	$	1,024,131	0.83	%	$	—
Commercial real estate	420,114		0.00	%	—		422,042		0.00	%	—
Commercial construction	124,179		0.00	%	—		96,134		0.00	%	—
Business banking	98		0.00	%	—		51		0.00	%	3
Total loan participations	$	1,647,950	0.47	%	$	—	$	1,542,358	0.55	%	$	3

6.5. Leases

The Company leases certain office space and equipment under various non-cancelable operating leases. These leases have original terms ranging from 1 year to 25 years. Operating lease liabilities and right-of-use (“ROU”) assets are recognized at the lease commencement date based upon 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.~~Consolidated Balance Sheets.

As of the dates indicated, the Company had the following related to operating leases:


		As of March 31, 2022		As of December 31, 2021			As of March 31, 2023		As of December 31, 2022
		(In thousands)					(In thousands)
Right-of-use assets	Right-of-use assets	$	80,408	$	83,821	Right-of-use assets	$	55,903	$	57,428
Lease liabilities	Lease liabilities	85,573		89,296		Lease liabilities	59,457		61,209

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.~~Consolidated Balance Sheets.

The following ~~tables are~~table is a summary of the Company’s components of net lease cost for the periods indicated:


		For the Three Months Ended March 31,					For the Three Months Ended March 31,
		2022		2021			2023		2022
		(In thousands)					(In thousands)
Operating lease cost	Operating lease cost	$	3,694	$	3,561	Operating lease cost	$	3,421	$	3,694
Finance lease cost	Finance lease cost	88		31		Finance lease cost	93		88
Variable lease cost	Variable lease cost	829		490		Variable lease cost	691		829
Total lease cost	Total lease cost	$	4,611	$	4,082	Total lease cost	$	4,205	$	4,611

During the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 the Company made ~~$4.7~~$3.7 million and ~~$3.6~~$4.7 million, respectively, in cash payments for operating and finance lease payments.

~~Table of Contents~~

Supplemental balance sheet information related to operating leases are as follows:


		As of March 31, 2022		As of December 31, 2021			As of March 31, 2023		As of December 31, 2022
Weighted-average remaining lease term (in years)	Weighted-average remaining lease term (in years)	7.65		7.83		Weighted-average remaining lease term (in years)	7.21		7.20
Weighted-average discount rate	Weighted-average discount rate	2.54	%	2.52	%	Weighted-average discount rate	2.73	%	2.63	%

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7.6. Goodwill and Other Intangibles

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


		As of March 31, 2022							As of March 31, 2023
		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							Balances not subject to amortization
Goodwill	Goodwill	$	557,635	$	77,144	$	634,779	Goodwill	$	557,635	$	82,587	$	640,222
Balances subject to amortization	Balances subject to amortization							Balances subject to amortization
Insurance agency (1)	Insurance agency (1)	—		8,708		8,708		Insurance agency (1)	—		9,860		9,860
Core deposit intangible	Core deposit intangible	11,272		—		11,272		Core deposit intangible	10,083		—		10,083
Total other intangible assets	Total other intangible assets	11,272		8,708		19,980		Total other intangible assets	10,083		9,860		19,943
Total goodwill and other intangible assets	Total goodwill and other intangible assets	$	568,907	$	85,852	$	654,759	Total goodwill and other intangible assets	$	567,718	$	92,447	$	660,165

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


		As of December 31, 2021							As of December 31, 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							Balances not subject to amortization
Goodwill	Goodwill	$	557,635	$	73,861	$	631,496	Goodwill	$	557,635	$	82,587	$	640,222
Balances subject to amortization	Balances subject to amortization							Balances subject to amortization
Insurance agency (1)	Insurance agency (1)	—		6,635		6,635		Insurance agency (1)	—		10,530		10,530
Core deposit intangible	Core deposit intangible	11,572		—		11,572		Core deposit intangible	10,374		—		10,374
Total other intangible assets	Total other intangible assets	11,572		6,635		18,207		Total other intangible assets	10,374		10,530		20,904
Total goodwill and other intangible assets	Total goodwill and other intangible assets	$	569,207	$	80,496	$	649,703	Total goodwill and other intangible assets	$	568,009	$	93,117	$	661,126

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

~~The Company acquired 1 insurance agency during the three months ended March 31, 2022. The purchase price and goodwill recorded as a result of the acquisition were not material.~~

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 2two 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, ~~2021.~~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"~~(“EBITDA”) multiplier valuation based upon recent and observed insurance agency mergers and acquisitions. ~~The~~

In accordance with the accounting guidance codified in ASC 350-20, the Company ~~considered the economic conditions~~performs a test of goodwill for ~~the period, including the potential impact of the COVID-19 pandemic, as it pertains~~impairment at least on an annual basis. An assessment is also required to be performed to the ~~goodwill above~~extent relevant events and/or circumstances occur which may indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The recent events regarding the failure of several banks has led to economic uncertainty and ~~determined that there was no indication of impairment related to goodwill~~an increase in volatility in the capital markets, particularly in the banking industry. Accordingly, the Company performed a qualitative assessment as of March 31, ~~2022 or December~~2023 which included an assessment of current industry conditions and the impacts of those conditions on the Company's financial position and results of operations. As a result of that assessment, the Company determined it was not more-likely-than-not that the carrying value was greater than the fair value of either reporting unit subject to our analysis as of March 31, ~~2021.~~2023. Therefore, a quantitative goodwill impairment test was not considered necessary.

~~Table of Contents~~

~~Other~~Similarly, 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~~Management performed a review of the ~~COVID-19 pandemic as it pertains to these~~Company’s intangible assets as of March 31, 2023 in response to the circumstances indicated above. Based upon that review, the Company

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concluded that it was not more-likely-than-not that the carrying amount of the core deposit intangible and other intangible assets may not be recoverable. Management performed an assessment as of December 31, 2022 and determined ~~that~~ there was no indication of impairment related to ~~other~~ intangible ~~assets as of March 31, 2022 or December 31, 2021.~~assets.

8.7. (Loss) Earnings Per Share (“EPS”)

Basic EPS represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the ~~year.~~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 ~~year,~~period, plus the effect of potential dilutive common share equivalents computed using the treasury stock method. ~~There were no securities that had a dilutive effect during the three months ended March 31, 2021.~~ Shares held by the Employee Stock Ownership Plan (“ESOP”) that have not been allocated to employees in accordance with the terms of the ESOP, referred to as “unallocated ESOP shares,” are not deemed outstanding for earnings per share calculations.

For the Three Months Ended March 31,
2022 2021
(Dollars in thousands, except per share data)
Net income applicable to common shares $ 51,516 $ 47,663
Average number of common shares outstanding 184,066,326 186,758,154
Less: Average unallocated ESOP shares (14,208,376) (14,709,110)
Average number of common shares outstanding used to calculate basic earnings per common share 169,857,950 172,049,044
Common stock equivalents - share-based compensation 110,206 —
Average number of common shares outstanding used to calculate diluted earnings per common share 169,968,156 172,049,044
Earnings per common share
Basic $ 0.30 $ 0.28
Diluted $ 0.30 $ 0.28


	For the Three Months Ended March 31,
	2023		2022
	(Dollars in thousands, except per share data)
Net (loss) income applicable to common shares	$	(194,096)	$	51,516

Average number of common shares outstanding	175,699,876		184,066,326
Less: Average unallocated ESOP shares	(13,708,503)		(14,208,376)
Average number of common shares outstanding used to calculate basic (loss) earnings per common share	161,991,373		169,857,950
Common stock equivalents	68,058		110,206
Average number of common shares outstanding used to calculate diluted (loss) earnings per common share	162,059,431		169,968,156
(Loss) earnings per common share
Basic	$	(1.20)	$	0.30
Diluted	$	(1.20)	$	0.30

9.8. 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 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. The return on these investments is generally generated through tax credits and tax losses. In addition to LIHTC projects, the Company invests in new ~~markets~~market tax credit projects that qualify for CRA credits and eligible projects that qualify for renewable energy and historic tax credits.

As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had ~~$82.5~~$180.0 million and ~~$83.8~~$131.3 million, respectively, in tax credit investments that were included in other assets in the ~~consolidated balance sheets.~~Consolidated Balance Sheets.

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 that amortization as a component of income tax expense. The net investment in the housing projects is included in other ~~assets.~~assets in the Consolidated Balance Sheets. The Company will continue to use the proportional amortization method on any new qualifying LIHTC investments.

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


	As of March 31, 2023		As of December 31, 2022
	(In thousands)
Current recorded investment included in other assets	$	177,525	$	128,765
Commitments to fund qualified affordable housing projects included in recorded investment noted above	124,738		84,145

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~~The following table presents the Company’s investments in LIHTC projects accounted for using the proportional amortization method for the periods indicated:~~
As of March 31, 2022 As of December 31, 2021
(In thousands)
Current recorded investment included in other assets $ 79,722 $ 81,035
Commitments to fund qualified affordable housing projects included in recorded investment noted above 43,287 48,399

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


		For the Three Months Ended March 31,					For the Three Months Ended March 31,
		2022		2021			2023		2022
		(In thousands)					(In thousands)
Tax credits and benefits recognized	Tax credits and benefits recognized	$	2,321	$	1,464	Tax credits and benefits recognized	$	3,262	$	2,321
Amortization expense included in income tax expense	Amortization expense included in income tax expense	1,843		1,264		Amortization expense included in income tax expense	2,766		1,843

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 sheet~~Consolidated Balance Sheets and totaled ~~$2.8~~$2.5 million and $2.6 million as of ~~both~~ March 31, ~~2022~~2023 and December 31, ~~2021.~~2022, respectively. There were no outstanding commitments related to these investments as of both March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

~~10.~~9. 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 ~~authorizes~~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 third quarter of 2022.

On September 7, 2022, the Company announced receipt of a notice of non-objection from the Board of Governors of the Federal Reserve System 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. ~~The program is limited to $225.0 million through November 30, 2022.~~

~~Information regarding the shares repurchased under the plan 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 Program at the end of Each Respective Period Maximum Number of Shares That May Yet Be Purchased Under the Share Repurchase Program 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

~~The Company repurchased 0 shares of its common stock during~~During the three months ended March 31, ~~2021.~~

~~Dividends~~

2023, there were no share repurchases. During the three months ended March 31, 2022, the Company repurchased 2,866,621 shares at a weighted average price per share of $21.12. As of March 31, 2023, the Company had purchased a total of 1,910,250 shares under the September 7, 2022 repurchase program. There were 6,989,750 shares that may yet be repurchased under such plan as of March 31, 2023.

Dividends

Information regarding dividends declared and paid ~~aggregate dividends of $16.9 million at a dividend per share of $0.10. During~~is presented in the ~~three months ended March 31, 2021, the Company declared and paid aggregate dividends of $10.3 million at a dividend per share of $0.06.~~following table:


	Dividends Declared per Share		Dividends Declared		Dividends Paid
	(In millions, except per share data)
Three Months Ended March 31, 2023	$	0.10	$	16.3	$	16.2
Three Months Ended March 31, 2022	0.10		17.1		16.9

~~11.~~10. Employee Benefits

Pension Plans

~~Table of Contents~~

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.

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The Company has an unfunded Defined Benefit Supplemental Executive Retirement Plan (“DB SERP”) that provides certain ~~retired~~Company officers upon their retirement 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 March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
		(In thousands)					(In thousands)
Components of net periodic benefit cost:	Components of net periodic benefit cost:					Components of net periodic benefit cost:
Service cost	Service cost	$	8,092	$	7,896	Service cost	$	6,339	$	8,092
Interest cost	Interest cost	2,430		1,269		Interest cost	4,298		2,430
Expected return on plan assets	Expected return on plan assets	(9,281)		(8,141)		Expected return on plan assets	(7,532)		(9,281)
Past service credit		(2,970)		(2,946)
Prior service credit						Prior service credit	(2,970)		(2,970)
Recognized net actuarial loss	Recognized net actuarial loss	2,798		3,538		Recognized net actuarial loss	2,468		2,798
Net periodic benefit cost	Net periodic benefit cost	$	1,069	$	1,616	Net periodic benefit cost	$	2,603	$	1,069

Service costs for the Defined Benefit Plan ~~the BEP,~~ and the ~~DB SERP~~BEP are recognized within salaries and employee benefits in the ~~consolidated statement~~Consolidated Statements of ~~income. Service~~Income. There were no service costs ~~for~~associated with the DB SERP or ODRCP ~~are recognized within professional services in~~during the ~~consolidated statements of income.~~three months ended March 31, 2023 and March 31, 2022. The remaining components of net periodic benefit cost are recognized in other noninterest expense in the ~~consolidated statements~~Consolidated Statements of ~~income.~~Income.

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~~years beginning November 1, 2022 and 2021. Accordingly, during the three months ended March 31, 2023 there were no contributions to the Defined Benefit Plan. The Company ~~chose to make~~made discretionary contributions to the Defined Benefit Plan of $7.2 million during the three months ended March 31, 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 months ended March 31, 2021, there were no contributions made to the Defined Benefit Plan.

Rabbi Trust Variable Interest ~~Entity~~Entities

The Company established a rabbi ~~trust~~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 ~~trust is~~trusts are considered a variable interest ~~entity~~entities (“VIE”) as the equity investment at risk is insufficient to permit the ~~trust~~trusts to finance ~~its~~their activities without additional subordinated financial support from the Company. The Company is considered the primary beneficiary of the rabbi ~~trust~~trusts as it has the power to direct the activities of the rabbi ~~trust~~trusts that significantly affect the rabbi ~~trust’s~~trusts’ economic performance and it has the obligation to absorb losses of the rabbi ~~trust~~trusts that could potentially be significant to the rabbi ~~trust~~trusts by virtue of its contingent call options on the rabbi ~~trust’s~~trusts’ assets in the event of the Company’s bankruptcy. As the primary beneficiary of ~~this VIE,~~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~~Company’s Consolidated Balance Sheets. Changes in fair value are recorded in noninterest income in the Company’s Consolidated Statements of Income.

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balance sheet. Changes in fair value are recorded in noninterest income. At March 31, 2022 and December 31, 2021 the amount of rabbi trust investments at fair value were $87.3 million and $104.4 million, respectively.

~~Investments in rabbi trust accounts are recorded at fair value within the Company's consolidated balance sheets with changes in fair value recorded through noninterest income.~~ The following table presents the book value, mark-to-market, and fair value of assets held in rabbi trust accounts by asset ~~type:~~type as of the dates indicated:


		As of March 31, 2022						As of December 31, 2021							As of March 31, 2023						As of December 31, 2022
		Book Value		Mark-to-Market		Fair Value		Book Value		Mark-to-Market		Fair Value			Book Value		Mark-to-Market		Fair Value		Book Value		Mark-to-Market		Fair Value
Asset Type	Asset Type	(In thousands)												Asset Type	(In thousands)
Cash and cash equivalents	Cash and cash equivalents	$	5,445	$	—	$	5,445	$	4,494	$	—	$	4,494	Cash and cash equivalents	$	6,361	$	—	$	6,361	$	5,575	$	—	$	5,575
Equities (1)	Equities (1)	59,487		14,257		73,744		67,401		24,295		91,696		Equities (1)	59,678		6,491		66,169		60,056		3,626		63,682
Fixed income	Fixed income	8,466		(363)		8,103		8,126		56		8,182		Fixed income	7,521		(644)		6,877		7,799		(770)		7,029
Total assets	Total assets	$	73,398	$	13,894	$	87,292	$	80,021	$	24,351	$	104,372	Total assets	$	73,560	$	5,847	$	79,407	$	73,430	$	2,856	$	76,286

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

11. Share-Based Compensation

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 3three 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

During the three months ended March 1,31, 2023, the Company granted to all of the Company’s executive officers and certain other employees a total of 318,577 RSUs, which vest pro-rata on an annual basis over a period of three years from the date of the grant, and a total of 108,984 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 from the date of the grant, that the Company has attained a threshold level of certain performance criteria over such period. During the three months ended March 31, 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 from the date of the grant, and a total of 533,676 ~~performance stock units (“PSUs”),~~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 from the date of the grant, that the Company has attained a threshold level of certain performance criteria over ~~a three-year~~such period. As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, there were ~~5,275,230~~4,874,695 shares and ~~6,787,270~~5,302,256 shares that remained available for issuance as restricted stock or RSU awards (including those that may be issued as performance shares and PSUs), respectively, and 18,675,815 shares that ~~remain~~remained available for issuance upon the exercise of stock options ~~respectively.~~at both dates. As of both March 31, ~~2022~~2023 and December 31, ~~2021, 0~~2022, no stock options had been awarded under the 2021 Plan.

The following table summarizes the Company’s restricted stock award activity for the ~~three months ended March 31, 2022:~~periods indicated:

Number of Shares Weighted-Average Grant Price Per Share
Non-vested restricted stock as of December 31, 2021 683,056 $ 20.13
Granted — —
Non-vested restricted stock as of March 31, 2022 683,056 $ 20.13

~~The following table summarizes the Company’s restricted stock unit activity for the three months ended March 31, 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
Non-vested restricted stock units as of March 31, 2022 978,364 $ 21.08


	For the Three Months Ended March 31,
	2023			2022
	Number of Shares	Weighted-Average Grant Price Per Share		Number of Shares	Weighted-Average Grant Price Per Share
Non-vested restricted stock as of the beginning of the respective period	525,460	$	20.08	683,056	$	20.13
Granted	—	—		—	—
Vested	—	—		—	—
Forfeited	—	—		—	—
Non-vested restricted stock as of the end of the respective period	525,460	$	20.08	683,056	$	20.13

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The following table summarizes the Company’s restricted stock unit activity for the periods indicated:


	For the Three Months Ended March 31,
	2023			2022
	Number of Shares	Weighted-Average Grant Price Per Share		Number of Shares	Weighted-Average Grant Price Per Share
Non-vested restricted stock units as of the beginning of the respective period	972,325	$	21.08	—	$	—
Granted	318,577	15.63		978,364	21.08
Vested (1)	(230,768)	21.08		—	—
Forfeited	—	—		—	—
Non-vested restricted stock units as of the end of the respective period	1,060,134	$	19.44	978,364	$	21.08

(1)Includes 74,415 shares withheld upon settlement for employee taxes.

The following table summarizes the Company’s performance stock unit activity for the periods indicated:


	For the Three Months Ended March 31,
	2023			2022
	Number of Shares	Weighted-Average Grant Price Per Share		Number of Shares	Weighted-Average Grant Price Per Share
Non-vested performance stock units as of the beginning of the respective period	533,676	$	21.12	—	$	—
Granted	108,984	10.16		533,676	21.12
Vested	—	—		—	—
Forfeited	—	—		—	—
Non-vested performance stock units as of the end of the respective period	642,660	$	19.26	533,676	$	21.12

As of March 31, 2023, no PSU awards had vested. As of December 31, 2022, no RSU or PSU awards had vested. During the three months ended March 31, ~~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 March 31, 2022 533,676 $ 21.12

As2023, 230,768 RSU awards vested. Such awards had a grant date fair value of ~~both~~$4.9 million. During the three months ended March 31, 2022, ~~and December 31, 2021, 0~~no awards had vested.

For the three months ended March 31, 2023, share-based compensation expense under the 2021 Plan and the related tax benefit totaled $3.0 million and $0.8 million, respectively. For the three months ended March 31, 2022, share-based compensation expense under the 2021 Plan and the related tax benefit totaled $1.6 million and $0.4 million, respectively. ~~NaN share-based compensation expense was incurred for the three months ended March 31, 2021 as the Company began issuing awards in November 2021.~~

As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, there was ~~$44.0~~$37.6 million and ~~$13.5~~$44.0 million, respectively, of total unrecognized compensation expense related to ~~non-vested~~unvested restricted stock awards, restricted stock units and performance stock units granted and issued under the 2021 ~~Plan. This~~Plan, as applicable. As of March 31, 2023, this cost is expected to be recognized over a weighted average remaining period of approximately 3.0 years. As of December 31, 2022, this cost was expected to be recognized over a weighted average remaining period of approximately 4.1 years.

12. Income Taxes

The following table sets forth information regarding the Company’s tax provision and applicable tax rates for the periods indicated:


	For the Three Months Ended March 31,
	2023			2022
	(Dollars in thousands)
Combined federal and state income tax provisions	$	(62,244)		$	14,642
Effective income tax rates	24.3		%	22.1		%

The Company recorded a net income tax benefit of $62.2 million for the three months ended March 31, 2023 compared to a provision of $14.6 million for the three months ended March 31, 2022. The income tax benefit for the three months ended March 31, 2023 was primarily due to pretax losses which largely resulted from losses on sales of available for

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sale securities. The Company established a $17.4 million valuation allowance against the capital loss carryforward deferred tax asset which resulted from the sale of securities for the amount of deferred tax asset management believes is not more-likely-than-not to be realized.

In addition, during the three months ended March 31, 2023, the Company liquidated Market Street Securities Corporation (“MSSC”), a wholly owned subsidiary, and transferred all of MSSC’s assets to Eastern Bank. In connection with the liquidation and subsequent transfer of securities previously held by MSSC to Eastern Bank, the Company recognized an additional deferred income tax benefit of $23.7 million during the three months ended March 31, 2023. This deferred income tax benefit resulted from a state tax rate change applied to the deferred tax asset related to the securities transferred to Eastern Bank.

13. 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.~~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:


		As of March 31, 2022		As of December 31, 2021			As of March 31, 2023		As of December 31, 2022
		(In thousands)					(In thousands)
Commitments to extend credit	Commitments to extend credit	$	5,306,596	$	5,175,521	Commitments to extend credit	$	5,690,131	$	5,680,438
Standby letters of credit	Standby letters of credit	65,687		65,602		Standby letters of credit	62,809		65,154
Forward commitments to sell loans	Forward commitments to sell loans	12,917		24,440		Forward commitments to sell loans	10,488		10,008

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 2 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 quarter ended March 31, 2022 and the total settlement expense, including related costs, was $3.3

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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 quarter ended March 31, 2022, the Company was informed by its regulators that no additional remediation on this issue would be required. As a result, as of March 31, 2022, management no longer believes that a loss contingency for restitution associated with this issue is probable.

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 (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 either March 31, 2022 or December 31, 2021.Consolidated Financial Statements.

~~13.~~14. Derivative Financial Instruments

The Company uses derivative financial instruments to manage 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.~~Consolidated 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

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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 ~~may enter~~has entered into interest rate swaps in which it pays floating and 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. Such interest rate swaps 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 loans to a fixed rate and consequently reduce the Company’s exposure to variability in short-term interest rates. For interest rate swaps that are accounted for as cash flow hedges, 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. ~~As of March 31, 2022 and December 31, 2021,~~The following table reflects the ~~Company did not have any active~~Company’s derivative positions for interest rate swaps which qualify as cash flow hedges for accounting ~~purposes.~~purposes as of the dates indicated:


As of March 31, 2023
				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	4.32	4.64	%	3.02	%	$	2,642
Total	$	2,400,000						$	2,642

~~Due~~(1)The fair value included a net accrued interest payable balance of $1.9 million as of March 31, 2023. In addition, the fair value includes netting adjustments which represent the amounts recorded to convert derivative assets and liabilities cleared through the ~~phase-out,~~CME from a gross basis to a net basis in accordance with applicable accounting guidance.


As of December 31, 2022
				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	4.57	4.07	%	3.02	%	$	(2,401)
Total	$	2,400,000						$	(2,401)

(1)The fair value included a net accrued interest payable balance of $1.5 million as of December 31, 2022. In addition, the fair value includes netting adjustments which represent the amounts recorded to convert derivative assets and ~~eventual discontinuation,~~liabilities cleared through the CME from a gross basis to a net basis in accordance with applicable accounting guidance.

The maximum amount of ~~LIBOR, central clearinghouses have begun to transition to alternative rates for valuation purposes. As~~ ~~of October 16, 2020, the Company changed its valuation methodology to reflect changes made by the Chicago Mercantile Exchange (“CME”), through~~time over which the Company ~~clears derivative~~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 that are eligible for clearing. The changes from the CME changed the discounting methodology and interest calculation of cash margin from Overnight Index Swap to the Secured Overnight Financing Rate, or SOFR, for U.S. dollar cleared interest rate swaps. is 4.5 years.

The Company ~~believes that the improvements to its valuation methodology~~expects approximately $37.5 million will ~~result in valuations for cleared~~be reclassified into interest ~~rate swaps that better reflect prices obtainable in the markets in which the Company transacts. The changes in valuation methodology are applied prospectively~~income, as a ~~change in accounting estimate and are immaterial~~reduction of such income, from other comprehensive income related to the Company’s ~~financial statements.~~active cash flow hedges in the next 12 months as of March 31, 2023. The reclassification is due to anticipated net payments on the swaps based upon the forward curve as of March 31, 2023.

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 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.

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The following table presents the pre-tax impact of terminated cash flow hedges on ~~accumulated other comprehensive income (“AOCI”)~~AOCI for the ~~three months ended March 31, 2022 and March 31, 2021:~~periods indicated:

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For the Three Months Ended March 31,
2022 2021
(In thousands)
Unrealized gains on terminated hedges included in AOCI – beginning of respective period $ 10,239 $ 41,473
Unrealized gains on terminated hedges arising during the period — —
Reclassification adjustments for amortization of unrealized (gains) into net income (5,298) (8,274)
Unrealized gains on terminated hedges included in AOCI – end of respective period $ 4,941 $ 33,199

The balance of terminated cash flow hedges in AOCI will be amortized into earnings through January 2023. The Company expects the remaining $4.9 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 March 31, 2022.


	For the Three Months Ended March 31,
	2023		2022
	(In thousands)
Unrealized gains on terminated hedges included in AOCI – beginning of respective period	$	46	$	10,239
Unrealized gains on terminated hedges arising during the period	—		—
Reclassification adjustments for amortization of unrealized gains into net income	(46)		(5,298)
Unrealized gains on terminated hedges included in AOCI – end of respective period	$	—	$	4,941

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 non-performance 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 non-performance 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 tables present the Company’s customer-related derivative positions as of the dates indicated below for those derivatives not designated as hedging.


		March 31, 2022				March 31, 2023
		Number of Positions	Total Notional			Number of Positions	Total Notional
		(Dollars in thousands)				(Dollars in thousands)
Interest rate swaps	Interest rate swaps	468	$	2,867,637	Interest rate swaps	382	$	2,387,490
Risk participation agreements	Risk participation agreements	63	263,496		Risk participation agreements	65	245,278
Foreign exchange contracts:	Foreign exchange contracts:				Foreign exchange contracts:
Matched commercial customer book	Matched commercial customer book	70	10,343		Matched commercial customer book	52	7,578
Foreign currency loan	Foreign currency loan	5	11,586		Foreign currency loan	5	14,898

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

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	December 31, 2022
	Number of Positions	Total Notional
	(Dollars in thousands)
Interest rate swaps	382	$	2,404,003
Risk participation agreements	63	241,029
Foreign exchange contracts:
Matched commercial customer book	32	7,877
Foreign currency loan	5	13,948

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.

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The table below presents the fair value of the Company’s derivative financial instruments, as well as their classification on the ~~consolidated balance sheet~~Consolidated Balance Sheets for the periods indicated. ~~There were no derivatives designated as hedging instruments at March 31, 2022 or December 31, 2021.~~


		Asset Derivatives					Liability Derivatives						Asset Derivatives					Liability Derivatives
		Balance Sheet Location	Fair Value at March 31, 2022		Fair Value at December 31, 2021		Balance Sheet Location	Fair Value at March 31, 2022		Fair Value at December 31, 2021			Balance Sheet Location	Fair Value at March 31, 2023		Fair Value at December 31, 2022		Balance Sheet Location	Fair Value at March 31, 2023		Fair Value at December 31, 2022
		(In thousands)											(In thousands)
Derivatives designated as hedging instruments												Derivatives designated as hedging instruments
Interest rate swaps												Interest rate swaps	Other assets	$	2,648	$	16	Other liabilities	$	6	$	2,417
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments											Derivatives not designated as hedging instruments
Customer-related positions:	Customer-related positions:											Customer-related positions:
Interest rate swaps	Interest rate swaps	Other assets	$	23,725	$	64,338	Other liabilities	$	24,988	$	17,880	Interest rate swaps	Other assets	$	16,996	$	23,567	Other liabilities	$	61,644	$	78,577
Risk participation agreements	Risk participation agreements	Other assets	196		315		Other liabilities	401		580		Risk participation agreements	Other assets	130		78		Other liabilities	161		130
Foreign currency exchange contracts - matched customer book	Foreign currency exchange contracts - matched customer book	Other assets	91		61		Other liabilities	78		46		Foreign currency exchange contracts - matched customer book	Other assets	145		198		Other liabilities	138		205
Foreign currency exchange contracts - foreign currency loan	Foreign currency exchange contracts - foreign currency loan	Other assets	7		—		Other liabilities	16		87		Foreign currency exchange contracts - foreign currency loan	Other assets	45		2		Other liabilities	—		93
														$	17,316	$	23,845		$	61,943	$	79,005
Total	Total		$	24,019	$	64,714		$	25,483	$	18,593	Total		$	19,964	$	23,861		$	61,949	$	81,422

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


		Three Months Ended March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
		(In thousands)					(In thousands)
Derivatives designated as hedges:	Derivatives designated as hedges:					Derivatives designated as hedges:
(Loss) gain in OCI on derivatives		$	—	$	—
Gain reclassified from OCI into interest income (effective portion)		$	5,298	$	8,274
Gain in OCI on derivatives						Gain in OCI on derivatives	$	19,747	$	—
(Loss) gain reclassified from OCI into interest income (effective portion)						(Loss) gain reclassified from OCI into interest income (effective portion)	$	(8,905)	$	5,298
Gain recognized in income on derivatives (ineffective portion and amount excluded from effectiveness test)	Gain recognized in income on derivatives (ineffective portion and amount excluded from effectiveness test)					Gain recognized in income on derivatives (ineffective portion and amount excluded from effectiveness test)
Interest income	Interest income	—		—		Interest income	—		—
Other income	Other income	—		—		Other income	—		—
Total	Total	$	—	$	—	Total	$	—	$	—
Derivatives not designated as hedges:	Derivatives not designated as hedges:					Derivatives not designated as hedges:
Customer-related positions:	Customer-related positions:					Customer-related positions:
Gain recognized in interest rate swap income		$	2,298	$	4,851
(Loss) gain recognized in interest rate swap income						(Loss) gain recognized in interest rate swap income	$	(530)	$	2,298
Gain recognized in interest rate swap income for risk participation agreements	Gain recognized in interest rate swap income for risk participation agreements	60		369		Gain recognized in interest rate swap income for risk participation agreements	21		60
(Loss) gain recognized in other income for foreign currency exchange contracts:
Gain (loss) recognized in other income for foreign currency exchange contracts:						Gain (loss) recognized in other income for foreign currency exchange contracts:
Matched commercial customer book	Matched commercial customer book	(2)		6		Matched commercial customer book	14		(2)
Foreign currency loan	Foreign currency loan	78		73		Foreign currency loan	136		78
Total gain for derivatives not designated as hedges		$	2,434	$	5,299
Total (loss) gain for derivatives not designated as hedges						Total (loss) gain for derivatives not designated as hedges	$	(359)	$	2,434

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,

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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 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 March 31, ~~2022 and December 31, 2021,~~2023, 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 $1.4 million~~of $1.7 million. At December 31, 2022, the Company had no exposure to CME for settled variation margin in excess of the customer-related and ~~$0.4 million, respectively.~~non-customer-related interest rate swap termination values. In addition, at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had posted initial-margin collateral in the form of U.S. Treasury notes amounting to ~~$37.0~~$85.2 million and ~~$48.9~~$84.1 million, respectively, to CME for these derivatives. The U.S. Treasury notes were considered restricted assets and were included in ~~AFS securities.~~available for sale securities within the Company’s Consolidated Balance Sheets.

At both March 31, ~~2022~~2023 and December 31, ~~2021 the fair value of all~~2022, there were no customer-related interest rate swap derivatives with credit-risk ~~related~~ contingent features ~~that were~~ in a net liability ~~position, which includes accrued interest but excludes any adjustment for non-performance risk, was $0.2 million and $13.7 million, respectively.~~position. The Company has minimum collateral posting thresholds with its 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 both March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had posted collateral in the form of cash amounting to ~~$5.5~~$1.0 million, ~~and $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 March 31, ~~2022~~2023 or December 31, ~~2021,~~2022, it would have been required to settle its 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.

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~~Consolidated Statements of ~~income.~~Income. As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had an outstanding notional balance of residential mortgage loan origination commitments of ~~$22.8~~$14.7 million and ~~$31.9~~$8.3 million, respectively and forward sale commitments of ~~$12.9~~$10.5 million and ~~$24.4~~$10.0 million, respectively. During ~~both~~ the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, the Company recorded ~~$0.2 million of~~ net losses related to the change in fair value of commitments to originate and sell mortgage ~~loans. The aggregate fair value~~loans of ~~the Company’s mortgage banking derivative asset and liability as of March 31, 2022 was $0.2~~less than $0.1 million and $0.2 million, respectively. The aggregate fair value of the Company’s mortgage banking derivative asset and liability as of March 31, 2023 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~~2022 was ~~$0.3~~$0.1 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 sheet.~~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.~~15. Balance Sheet Offsetting

Certain financial instruments, including derivatives, may be eligible for offset in the ~~consolidated balance sheets~~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 March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, it was determined that no additional collateral would have to be posted to immediately settle these instruments.

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


		As of March 31, 2022																					As of March 31, 2023
		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			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	Description									Financial Instruments				Collateral Pledged (Received)				Description								Financial Instruments						Collateral Pledged/ (Received)
		(In thousands)																								(In thousands)
Derivative Assets	Derivative Assets																					Derivative Assets
Interest rate swaps																						Interest rate swaps	$	2,648				$	—	$	2,648		$	—	$	—	$	2,648
Customer-related positions:	Customer-related positions:																					Customer-related positions:
Interest rate swaps	Interest rate swaps	$	23,725			$	—			$	23,725			$	3,470			$	—					$	20,255		Interest rate swaps	16,996		—			16,996		1,463		(11,020)		4,513
Risk participation agreements	Risk participation agreements	196		—				196				—				—				196		Risk participation agreements	130					—		130			—		—		130
Foreign currency exchange contracts – matched customer book	Foreign currency exchange contracts – matched customer book	91		—				91				—				—				91		Foreign currency exchange contracts – matched customer book	145					—		145			—		—		145
Foreign currency exchange contracts – foreign currency loan	Foreign currency exchange contracts – foreign currency loan	7		—				7				—				—				7		Foreign currency exchange contracts – foreign currency loan	45					—		45			—		—		45
		$	24,019	$	—			$	24,019			$	3,470			$	—			$	20,549		$	19,964				$	—	$	19,964		$	1,463	$	(11,020)	$	7,481
Derivative Liabilities	Derivative Liabilities																					Derivative Liabilities
Interest rate swaps																						Interest rate swaps	$	6				$	—	$	6		$	—	$	6	$	—
Customer-related positions:	Customer-related positions:																					Customer-related positions:
Interest rate swaps	Interest rate swaps	$	24,988	$	—			$	24,988			$	3,470			$	21,518			$	—	Interest rate swaps	61,644					—		61,644			1,463		928		59,253
Risk participation agreements	Risk participation agreements	401		—				401				—				—				401		Risk participation agreements	161					—		161			—		—		161
Foreign currency exchange contracts – matched customer book	Foreign currency exchange contracts – matched customer book	78		—				78				—				—				78		Foreign currency exchange contracts – matched customer book	138					—		138			—		—		138
Foreign currency exchange contracts – foreign currency loan	Foreign currency exchange contracts – foreign currency loan	16		—				16				—				—				16		Foreign currency exchange contracts – foreign currency loan	—					—		—			—		—		—
		$	25,483	$	—			$	25,483			$	3,470			$	21,518			$	495		$	61,949				$	—	$	61,949		$	1,463	$	934	$	59,552

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		As of December 31, 2021																					As of December 31, 2022
		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			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	Description									Financial Instruments				Collateral Pledged (Received)				Description								Financial Instruments						Collateral Pledged/ (Received)
		(In thousands)																								(In thousands)
Derivative Assets	Derivative Assets																					Derivative Assets
Interest rate swaps																						Interest rate swaps	$	16				$	—	$	16		$	—	$	—	$	16
Customer-related positions:	Customer-related positions:																					Customer-related positions:
Interest rate swaps	Interest rate swaps	$	64,338			$	—			$	64,338			$	1,440			$	—					$	62,898		Interest rate swaps	23,567		—			23,567		381		(14,430)		8,756
Risk participation agreements	Risk participation agreements	315		—				315				—				—				315		Risk participation agreements	78					—		78			—		—		78
Foreign currency exchange contracts – matched customer book	Foreign currency exchange contracts – matched customer book	61		—				61				—				—				61		Foreign currency exchange contracts – matched customer book	198					—		198			—		—		198
Foreign currency exchange contracts – foreign currency loan	Foreign currency exchange contracts – foreign currency loan	—		—				—				—				—				—		Foreign currency exchange contracts – foreign currency loan	2					—		2			—		—		2
		$	64,714	$	—			$	64,714			$	1,440			$	—			$	63,274		$	23,861				$	—	$	23,861		$	381	$	(14,430)	$	9,050
Derivative Liabilities	Derivative Liabilities																					Derivative Liabilities
Interest rate swaps																						Interest rate swaps	$	2,417				$	—	$	2,417		$	—	$	2,417	$	—
Customer-related positions:	Customer-related positions:																					Customer-related positions:
Interest rate swaps	Interest rate swaps	$	17,880	$	—			$	17,880			$	1,440			$	16,440			$	—	Interest rate swaps	78,577					—		78,577			381		—		78,196
Risk participation agreements	Risk participation agreements	580		—				580				—				—				580		Risk participation agreements	130					—		130			—		—		130
Foreign currency exchange contracts – matched customer book	Foreign currency exchange contracts – matched customer book	46		—				46				—				—				46		Foreign currency exchange contracts – matched customer book	205					—		205			—		—		205
Foreign currency exchange contracts – foreign currency loan	Foreign currency exchange contracts – foreign currency loan	87		—				87				—				—				87		Foreign currency exchange contracts – foreign currency loan	93					—		93			—		—		93
		$	18,593	$	—			$	18,593			$	1,440			$	16,440			$	713		$	81,422				$	—	$	81,422		$	381	$	2,417	$	78,624

~~15.~~16. Fair Value of Assets and Liabilities

~~The Company uses~~ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”) defines 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~~as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date. Market participants are buyers and sellers in the principal market that are independent, knowledgeable, able and willing to transact. ASC 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements), and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 – Prices or valuations that require unobservable inputs that reflect the Company’s own assumptions that are significant to the fair value measurement.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in

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determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The Company uses fair value measurements to record adjustments to certain assets and liabilities and to determine fair value disclosures. 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~~Consolidated Balance Sheets approximate fair value.

Securities

Securities consisted of U.S. Treasury securities, U.S. Agency bonds, U.S. government-sponsored residential and commercial mortgage-backed securities, ~~U.S. Agency bonds and~~ state and municipal ~~bonds.~~bonds, and 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 U.S. Agency bonds, ~~including SBA pooled securities, are~~were 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 were estimated using either a matrix or benchmarks. The inputs used include benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Therefore, these securities were categorized as Level 2 given the use of observable inputs.

The fair value of state and municipal bonds were 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 given the use of observable inputs.

The fair value of other debt securities were 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 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, by type, is disclosed in Note 3, “Securities.”

Loans Held for Sale

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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.

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 collateral-dependent, as described in Note 2, “Summary of Significant Accounting Policies” within the Notes to the Consolidated Financial Statements included within the Company’s 2022 Form 10-K, were recorded at the fair value of the underlying 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.

Rabbi Trust Investments

~~Table of Contents~~

Rabbi trust investments consisted primarily of cash and cash equivalents, U.S. 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~~were 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 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 as they were valued based upon quoted prices from the market. Mutual funds at net asset value amounted to ~~$45.8~~$41.0 million at March 31, ~~2022~~2023 and ~~$58.1~~$38.9 million at December 31, ~~2021.~~2022. 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).

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

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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 volatility. In addition, for customer-related interest rate swaps, the analysis reflects a credit valuation adjustment to reflect the Company’s own non-performance risk and the respective counterparty’s non-performance risk in the fair value measurements. The majority of inputs used to value the ~~Company's~~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 March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, 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.

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 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

~~Table of Contents~~

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

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Fair Value of Assets and 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 March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:


				Fair Value Measurements at Reporting Date Using																Fair Value Measurements at Reporting Date Using
		Balance as of March 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)			Balance as of March 31, 2023					Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Description	Description									Description
		(In thousands)																(In thousands)
Assets	Assets													Assets
Securities available for sale	Securities available for sale													Securities available for sale
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	$	4,969,346			$	—			$	4,969,346					$	—		Government-sponsored residential mortgage-backed securities	$	3,024,560	$	—	$	3,024,560	$	—
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	1,615,927		—				1,615,927				—		Government-sponsored commercial mortgage-backed securities	1,180,040					—		1,180,040		—
U.S. Agency bonds	U.S. Agency bonds	1,013,899		—				1,013,899				—		U.S. Agency bonds	211,807					—		211,807		—
U.S. Treasury securities	U.S. Treasury securities	56,235		56,235				—				—		U.S. Treasury securities	94,283					94,283		—		—
State and municipal bonds and obligations	State and municipal bonds and obligations	260,316		—				260,316				—		State and municipal bonds and obligations	188,149					—		188,149		—
Other debt securities	Other debt securities	1,582		—				1,582				—		Other debt securities	1,295					—		1,295		—
Rabbi trust investments	Rabbi trust investments	87,292		79,189				8,103				—		Rabbi trust investments	79,407					72,530		6,877		—
Loans held for sale	Loans held for sale	1,166		—				1,166				—		Loans held for sale	3,068					—		3,068		—
Interest rate swap contracts	Interest rate swap contracts													Interest rate swap contracts
Cash flow hedges - interest rate positions														Cash flow hedges - interest rate positions	2,648					—		2,648		—
Customer-related positions	Customer-related positions	23,725		—				23,725				—		Customer-related positions	16,996					—		16,996		—
Risk participation agreements	Risk participation agreements	196		—				196				—		Risk participation agreements	130					—		130		—
Foreign currency forward contracts	Foreign currency forward contracts													Foreign currency forward contracts
Matched customer book	Matched customer book	91		—				91				—		Matched customer book	145					—		145		—
Foreign currency loan	Foreign currency loan	7		—				7				—		Foreign currency loan	45					—		45		—
Mortgage derivatives	Mortgage derivatives	239		—				239				—		Mortgage derivatives	79					—		79		—
Total	Total	$	8,030,021	$	135,424			$	7,894,597			$	—	Total	$	4,802,652				$	166,813	$	4,635,839	$	—
Liabilities	Liabilities													Liabilities
Interest rate swap contracts	Interest rate swap contracts													Interest rate swap contracts
Cash flow hedges - interest rate positions														Cash flow hedges - interest rate positions	$	6				$	—	$	6	$	—
Customer-related positions	Customer-related positions	$	24,988	$	—			$	24,988			$	—	Customer-related positions	61,644					—		61,644		—
Risk participation agreements	Risk participation agreements	401		—				401				—		Risk participation agreements	161					—		161		—
Foreign currency forward contracts	Foreign currency forward contracts													Foreign currency forward contracts
Matched customer book	Matched customer book	78		—				78				—		Matched customer book	138					—		138		—
Foreign currency loan		16		—				16				—
Mortgage derivatives	Mortgage derivatives	168		—				168				—		Mortgage derivatives	38					—		38		—
Total	Total	$	25,651	$	—			$	25,651			$	—	Total	$	61,987				$	—	$	61,987	$	—

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				Fair Value Measurements at Reporting Date Using									Fair Value Measurements at Reporting Date Using
Description	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)		Description	Balance as of December 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
		(In thousands)									(In thousands)
Assets	Assets									Assets
Securities available for sale	Securities available for sale									Securities available for sale
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	$	5,524,708	$	—	$	5,524,708	$	—	Government-sponsored residential mortgage-backed securities	$	4,111,908	$	—	$	4,111,908	$	—
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	1,408,868		—		1,408,868		—		Government-sponsored commercial mortgage-backed securities	1,348,954		—		1,348,954		—
U.S. Agency bonds	U.S. Agency bonds	1,175,014		—		1,175,014		—		U.S. Agency bonds	952,482		—		952,482		—
U.S. Treasury securities	U.S. Treasury securities	88,605		88,605		—		—		U.S. Treasury securities	93,057		93,057		—		—
State and municipal bonds and obligations	State and municipal bonds and obligations	280,329		—		280,329		—		State and municipal bonds and obligations	183,092		—		183,092		—
Small Business Administration pooled securities		32,103		—		32,103		—
Other debt securities	Other debt securities	1,597		—		1,597		—		Other debt securities	1,285		—		1,285		—
Rabbi trust investments	Rabbi trust investments	104,372		96,190		8,182		—		Rabbi trust investments	76,286		69,257		7,029		—
Loans held for sale	Loans held for sale	1,206		—		1,206		—		Loans held for sale	4,543		—		4,543		—
Interest rate swap contracts	Interest rate swap contracts									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
Cash flow hedges - interest rate positions										Cash flow hedges - interest rate positions	16		—		16		—
Customer-related positions	Customer-related positions	$	17,880	$	—	$	17,880	$	—	Customer-related positions	23,567		—		23,567		—
Risk participation agreements	Risk participation agreements	580		—		580		—		Risk participation agreements	78		—		78		—
Foreign currency forward contracts	Foreign currency forward contracts									Foreign currency forward contracts
Matched customer book	Matched customer book	46		—		46		—		Matched customer book	198		—		198		—
Foreign currency loan	Foreign currency loan	87		—		87		—		Foreign currency loan	2		—		2		—
Mortgage derivatives	Mortgage derivatives	16		—		16		—		Mortgage derivatives	62		—		62		—
Total	Total	$	18,609	$	—	$	18,609	$	—	Total	$	6,795,530	$	162,314	$	6,633,216	$	—
Liabilities										Liabilities
Interest rate swap contracts										Interest rate swap contracts
Cash flow hedges - interest rate positions										Cash flow hedges - interest rate positions	$	2,417	$	—	$	2,417	$	—
Customer-related positions										Customer-related positions	78,577		—		78,577		—
Risk participation agreements										Risk participation agreements	130		—		130		—
Foreign currency forward contracts										Foreign currency forward contracts
Matched customer book										Matched customer book	205		—		205		—
Foreign currency loan										Foreign currency loan	93		—		93		—
Mortgage derivatives										Mortgage derivatives	58		—		58		—
Total										Total	$	81,480	$	—	$	81,480	$	—

There were no transfers to or from Level 1, 2 and 3 during the three months ended March 31, ~~2022~~2023 and twelve months ended December 31, ~~2021.~~2022.

The Company held no assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of March 31, ~~2022~~2023 or December 31, ~~2021.~~2022.

Fair Value of Assets and 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 March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

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				Fair Value Measurements at Reporting Date Using									Fair Value Measurements at Reporting Date Using
Description	Description	Balance as of March 31, 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 March 31, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
		(In thousands)									(In thousands)
Assets	Assets									Assets
Individually assessed collateral-dependent loans whose fair value is based upon appraisals	Individually assessed collateral-dependent loans whose fair value is based upon appraisals	$	11,879	$	—	$	—	$	11,879	Individually assessed collateral-dependent loans whose fair value is based upon appraisals	$	12,500	$	—	$	—	$	12,500


				Fair Value Measurements at Reporting Date Using									Fair Value Measurements at Reporting Date Using
Description	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)		Description	Balance as of December 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
		(In thousands)									(In thousands)
Assets	Assets									Assets
Collateral-dependent impaired loans whose fair value is based upon appraisals		$	12,068	$	—	$	—	$	12,068
Individually assessed collateral-dependent loans whose fair value is based upon appraisals										Individually assessed collateral-dependent loans whose fair value is based upon appraisals	$	16,432	$	—	$	—	$	16,432

For the valuation of the collateral-dependent 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. ~~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 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.~~

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:


					Fair Value Measurements at Reporting Date Using
Description	Carrying Value as of March 31, 2023		Fair Value as of March 31, 2023		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	$	271,655	$	246,826	$	—	$	246,826	$	—
Government-sponsored commercial mortgage-backed securities	199,530		178,601		—		178,601		—
Loans, net of allowance for loan losses	13,520,715		13,402,133		—		—		13,402,133
FHLB stock	45,168		45,168		—		45,168		—
Bank-owned life insurance	161,755		161,755		—		161,755		—
Liabilities
Deposits	$	18,541,580	$	18,526,927	$	—	$	18,526,927	$	—
FHLB advances	1,100,952		1,099,681		—		1,099,681		—
Escrow deposits of borrowers	25,671		25,671		—		25,671		—
Interest rate swap collateral funds	11,780		11,780		—		11,780		—

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Fair Value Measurements at Reporting Date Using
Description Carrying Value as of March 31, 2022 Fair Value as of March 31, 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 $ 192,231 $ 188,913 $ — $ 188,913 $ —
Government-sponsored commercial mortgage-backed securities 203,203 203,210 — 203,210 —
Loans, net of allowance for loan losses 12,033,603 11,817,706 — — 11,817,706
FHLB stock 10,904 10,904 — 10,904 —
Bank-owned life insurance 157,954 157,954 — 157,954 —
Liabilities
Deposits $ 19,392,816 $ 19,387,023 $ — $ 19,387,023 $ —
FHLB advances 13,689 12,767 — 12,767 —
Escrow deposits from borrowers 21,233 21,233 — 21,233 —


						Fair Value Measurements at Reporting Date Using											Fair Value Measurements at Reporting Date Using
Description	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)		Description	Carrying Value as of December 31, 2022		Fair Value as of December 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
		(In thousands)											(In thousands)
Assets	Assets											Assets
Held to maturity securities:												Held to maturity securities:
Government-sponsored residential mortgage-backed securities												Government-sponsored residential mortgage-backed securities	$	276,493	$	246,343	$	—	$	246,343	$	—
Government-sponsored commercial mortgage-backed securities												Government-sponsored commercial mortgage-backed securities	200,154		176,883		—		176,883		—
Loans, net of allowance for loan losses	Loans, net of allowance for loan losses	$	12,157,281	$	12,282,323	$	—	$	—	$	12,282,323	Loans, net of allowance for loan losses	13,420,317		13,149,096		—		—		13,149,096
FHLB stock	FHLB stock	10,904		10,904		—		10,904		—		FHLB stock	41,363		41,363		—		41,363		—
Bank-owned life insurance	Bank-owned life insurance	157,091		157,091		—		157,091		—		Bank-owned life insurance	160,790		160,790		—		160,790		—
Liabilities	Liabilities											Liabilities
Deposits	Deposits	$	19,628,311	$	19,626,376	$	—	$	19,626,376	$	—	Deposits	$	18,974,359	$	18,960,407	$	—	$	18,960,407	$	—
FHLB advances	FHLB advances	14,020		13,558		—		13,558		—		FHLB advances	704,084		702,954		—		702,954		—
Escrow deposits from borrowers		20,258		20,258		—		20,258		—
Escrow deposits of borrowers												Escrow deposits of borrowers	22,314		22,314		—		22,314		—
Interest rate swap collateral funds												Interest rate swap collateral funds	14,430		14,430		—		14,430		—

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.~~17. Revenue from Contracts with Customers

Revenue from contracts with customers within the scope of ASC 606, Revenue from 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 and 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:

1.Identify the contract(s) with the customers.

2.Identify the performance obligations.

3.Determine the transaction price.

4.Allocate the transaction price to the performance obligations.

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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.~~Consolidated Financial Statements.

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A portion of the ~~Company's~~Company’s noninterest (loss) income is derived from contracts with customers within the scope of ASC 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 March 31,					Three Months Ended March 31,
		2022		2021			2023		2022
		(In thousands)					(In thousands)
Insurance commissions	Insurance commissions	$	28,713	$	28,147	Insurance commissions	$	31,503	$	28,713
Service charges on deposit accounts	Service charges on deposit accounts	8,537		5,367		Service charges on deposit accounts	6,472		8,537
Trust and investment advisory fees	Trust and investment advisory fees	6,141		5,663		Trust and investment advisory fees	5,770		6,141
Debit card processing fees	Debit card processing fees	2,945		2,749		Debit card processing fees	3,170		2,945
Other noninterest income	Other noninterest income	2,361		1,792		Other noninterest income	2,287		2,361
Total noninterest income in-scope of ASC 606	Total noninterest income in-scope of ASC 606	48,697		43,718		Total noninterest income in-scope of ASC 606	49,202		48,697
Total noninterest (loss) income out-of-scope of ASC 606		(2,282)		11,494
Total noninterest income		$	46,415	$	55,212
Total noninterest loss out-of-scope of ASC 606						Total noninterest loss out-of-scope of ASC 606	(327,532)		(2,282)
Total noninterest (loss) income						Total noninterest (loss) income	$	(278,330)	$	46,415

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. The Company earns a fixed commission rate on the sales of these products and services. The Company may also earn ~~bonus~~additional commissions from the insurers based upon meeting certain criteria, such as premium levels, growth rates, new business volume ~~thresholds. In general, the~~and loss experience. The Company recognizes commission revenues when earned based upon the effective date of the ~~policy. For certain~~policy or when services are rendered. Certain revenues are deferred to reflect delivery of services over the contract period.

Commissions are earned on the contract effective date and generally are based upon a percentage of premiums for insurance ~~products,~~coverage. Commission rates depend upon a large number of factors, including the type of risk being placed, the particular underwriting enterprise’s demand, the expected loss experience of the particular risk coverage, and historical benchmarks surrounding the level of effort necessary for the Company ~~may also earn~~to place and ~~recognize annual residual~~service the insurance contract. The vast majority of the Company’s services and revenues are associated with the placement of an insurance contract. Insurance commissions ~~commensurate with annual premiums being paid.~~earned but not yet received amounted to $13.2 million and $15.1 million as of March 31, 2023, and December 31, 2022, respectively, and were included in other assets on the Consolidated Balance Sheets.

The Company also earns profit-sharing orrevenues, also referred to as contingency ~~revenues~~revenue, 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~~These amounts are in excess of the commission revenues discussed above, and not all business placed with underwriting enterprises is eligible for contingent revenues. Contingent revenues are variable and generally based upon the Company’s expectation of the ultimate profit-sharing revenue amounts to be earned and can vary from period to period. The Company’s contracts are generally calendar year contracts whereby revenues from underwriting enterprises are received in the calendar year following placement, generally the first and second quarters, after verification of the performance indicators outlined in the contracts. Accordingly, during each reporting period, management must make its best estimate of the amounts that have been earned using historical averages and other factors to project revenues. The Company bases its estimates each period on a contract-by-contract basis. As estimates may change significantly 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 $11.9 million as of March 31, 2022, and $15.6 million as of December 31, 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.

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~~may charge 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

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considers that its performance obligations are fulfilled when customers are provided deposit account access or when the requested deposit transaction is completed.

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 fees earned but not yet received amounted to ~~$2.3~~$1.7 million and ~~$1.8~~$2.1 million as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 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.

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 March 31, ~~2022~~2023 and December 31, ~~2021~~2022 and were included in other assets.

Other Noninterest Income

The Company earns various types of other noninterest income that have been aggregated into one general revenue stream in the table noted above. 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. Individually, these sources of noninterest income are ~~immaterial.~~not material.

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~~17.~~18. Other Comprehensive Income

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


															For the Three Months Ended March 31,
		Three Months Ended March 31, 2022						Three Months Ended March 31, 2021							2023						2022
		Pre Tax Amount		Tax Benefit (Expense)		After Tax Amount		Pre Tax Amount		Tax Benefit (Expense)		After Tax Amount			Pre Tax Amount		Tax (Expense) Benefit		After Tax Amount		Pre Tax Amount		Tax Benefit (Expense)		After Tax Amount
		(In thousands)													(In thousands)
Unrealized losses on securities available for sale:	Unrealized losses on securities available for sale:													Unrealized losses on securities available for sale:
Change in fair value of securities available for sale	Change in fair value of securities available for sale	$	(465,532)	$	112,008	$	(353,524)	$	(94,979)	$	20,982	$	(73,997)	Change in fair value of securities available for sale	$	42,301	$	(8,810)	$	33,491	$	(465,532)	$	112,008	$	(353,524)
Less: reclassification adjustment for gains included in net income		(2,172)		673		(1,499)		1,164		(257)		907
Less: reclassification adjustment for losses included in net income														Less: reclassification adjustment for losses included in net income	(333,170)		74,630		(258,540)		(2,172)		673		(1,499)
Net change in fair value of securities available for sale	Net change in fair value of securities available for sale	(463,360)		111,335		(352,025)		(96,143)		21,239		(74,904)		Net change in fair value of securities available for sale	375,471		(83,440)		292,031		(463,360)		111,335		(352,025)
Unrealized gains (losses) on cash flow hedges:	Unrealized gains (losses) on cash flow hedges:													Unrealized gains (losses) on cash flow hedges:
Change in fair value of cash flow hedges	Change in fair value of cash flow hedges	—		—		—		—		—		—		Change in fair value of cash flow hedges	19,746		(4,458)		15,288		—		—		—
Less: net cash flow hedge gains reclassified into interest income(1)	Less: net cash flow hedge gains reclassified into interest income(1)	5,298		(1,489)		3,809		8,274		(2,326)		5,948		Less: net cash flow hedge gains reclassified into interest income(1)	(8,905)		2,515		(6,390)		5,298		(1,489)		3,809
Net change in fair value of cash flow hedges	Net change in fair value of cash flow hedges	(5,298)		1,489		(3,809)		(8,274)		2,326		(5,948)		Net change in fair value of cash flow hedges	28,651		(6,973)		21,678		(5,298)		1,489		(3,809)
Defined benefit pension plans:	Defined benefit pension plans:													Defined benefit pension plans:
Change in actuarial net loss	Change in actuarial net loss	—		—		—		—		—		—		Change in actuarial net loss	—		—		—		—		—		—
Less: amortization of actuarial net loss	Less: amortization of actuarial net loss	(2,798)		787		(2,011)		(3,537)		994		(2,543)		Less: amortization of actuarial net loss	(2,468)		697		(1,771)		(2,798)		787		(2,011)
Less: accretion of prior service credit	Less: accretion of prior service credit	2,970		(835)		2,135		2,945		(828)		2,117		Less: accretion of prior service credit	2,970		(818)		2,152		2,970		(835)		2,135
Net change in other comprehensive income for defined benefit postretirement plans		(172)		48		(124)		592		(166)		426
Total other comprehensive loss		$	(468,830)	$	112,872	$	(355,958)	$	(103,825)	$	23,399	$	(80,426)
Net change in other comprehensive income for defined benefit pension plans														Net change in other comprehensive income for defined benefit pension plans	(502)		121		(381)		(172)		48		(124)
Total other comprehensive income (loss)														Total other comprehensive income (loss)	$	403,620	$	(90,292)	$	313,328	$	(468,830)	$	112,872	$	(355,958)

(1)~~Represents~~Includes amortization of realized gains on terminated cash flow hedges for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022. The total realized gain of $41.2 million, net of tax, ~~will be~~was fully recognized in earnings ~~through January~~as of March 31, 2023. The balance of this unamortized gain ~~had amortized to~~was $3.6 ~~million and $7.4~~ million, net of tax, atas of March 31, ~~2022 and December 31, 2021, respectively.~~2022.

The following table illustrates the changes in the balances of each component of accumulated other comprehensive ~~income (loss),~~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			Unrealized Gains and (Losses) on Available for Sale Securities		Unrealized Gains and (Losses) on Cash Flow Hedges		Defined Benefit Pension Plans		Total
		(In thousands)									(In thousands)
Beginning Balance: January 1, 2023										Beginning Balance: January 1, 2023	$	(880,156)	$	(50,159)	$	7,123	$	(923,192)
Other comprehensive income before reclassifications										Other comprehensive income before reclassifications	33,491		15,288		—		48,779
Less: Amounts reclassified from accumulated other comprehensive loss										Less: Amounts reclassified from accumulated other comprehensive loss	(258,540)		(6,390)		381		(264,549)
Net current-period other comprehensive income (loss)										Net current-period other comprehensive income (loss)	292,031		21,678		(381)		313,328
Ending Balance: March 31, 2023										Ending Balance: March 31, 2023	$	(588,125)	$	(28,481)	$	6,742	$	(609,864)
Beginning Balance: January 1, 2022	Beginning Balance: January 1, 2022	$	(58,586)	$	7,361	$	(5,471)	$	(56,696)	Beginning Balance: January 1, 2022	$	(58,586)	$	7,361	$	(5,471)	$	(56,696)
Other comprehensive loss before reclassifications	Other comprehensive loss before reclassifications	(353,524)		—		—		(353,524)		Other comprehensive loss before reclassifications	(353,524)		—		—		(353,524)
Less: Amounts reclassified from accumulated other comprehensive (loss) income		(1,499)		3,809		124		2,434
Less: Amounts reclassified from accumulated other comprehensive loss										Less: Amounts reclassified from accumulated other comprehensive loss	(1,499)		3,809		124		2,434
Net current-period other comprehensive loss	Net current-period other comprehensive loss	(352,025)		(3,809)		(124)		(355,958)		Net current-period other comprehensive loss	(352,025)		(3,809)		(124)		(355,958)
Ending Balance: March 31, 2022	Ending Balance: March 31, 2022	$	(410,611)	$	3,552	$	(5,595)	$	(412,654)	Ending Balance: March 31, 2022	$	(410,611)	$	3,552	$	(5,595)	$	(412,654)
Beginning Balance: January 1, 2021		$	45,672	$	29,815	$	(21,253)	$	54,234
Other comprehensive loss before reclassifications		(73,997)		—		—		(73,997)
Less: Amounts reclassified from accumulated other comprehensive income (loss)		907		5,948		(426)		6,429
Net current-period other comprehensive (loss) income		(74,904)		(5,948)		426		(80,426)
Ending Balance: March 31, 2021		$	(29,232)	$	23,867	$	(20,827)	$	(26,192)

~~18. Segment Reporting~~

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19. Segment Reporting

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~~Consolidated Financial Statements as of and for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 was as follows:

As of and for the three months ended March 31,
2022 2021
Banking
Business Insurance
Agency
Business Other /
Eliminations Total Banking
Business Insurance
Agency
Business Other /
Eliminations Total
(In thousands)
Net interest income $ 128,124 $ — $ — $ 128,124 $ 100,091 $ — $ — $ 100,091
(Release of) provision for loan losses (485) — — (485) (580) — — (580)
Net interest income after provision for loan losses 128,609 — — 128,609 100,671 — — 100,671
Noninterest income 18,137 28,449 (171) 46,415 26,960 28,284 (32) 55,212
Noninterest expense 90,446 19,473 (1,053) 108,866 75,274 19,811 (1,036) 94,049
Income before provision for income taxes 56,300 8,976 882 66,158 52,357 8,473 1,004 61,834
Income tax provision 12,108 2,534 — 14,642 11,793 2,378 — 14,171
Net income $ 44,192 $ 6,442 $ 882 $ 51,516 $ 40,564 $ 6,095 $ 1,004 $ 47,663
Total assets $ 22,695,895 $ 211,401 $ (71,224) $ 22,836,072 $ 16,595,311 $ 194,664 $ (63,180) $ 16,726,795
Total liabilities $ 19,848,995 $ 49,909 $ (71,224) $ 19,827,680 $ 13,359,075 $ 43,855 $ (63,180) $ 13,339,750


	As of and for the three months ended March 31,
	2023								2022
	Banking Business		Insurance Agency Business		Other / Eliminations		Total		Banking Business		Insurance Agency Business		Other / Eliminations		Total
	(In thousands)
Net interest income	$	138,309	$	—	$	—	$	138,309	$	128,124	$	—	$	—	$	128,124
Provision for (release of) allowance for loan losses	25		—		—		25		(485)		—		—		(485)
Net interest income after provision for (release of) allowance for loan losses	138,284		—		—		138,284		128,609		—		—		128,609
Noninterest (loss) income	(310,206)		32,044		(168)		(278,330)		18,137		28,449		(171)		46,415
Noninterest expense	95,946		21,588		(1,240)		116,294		90,446		19,473		(1,053)		108,866
(Loss) income before income tax (benefit) expense	(267,868)		10,456		1,072		(256,340)		56,300		8,976		882		66,158
Income tax (benefit) expense	(65,193)		2,949		—		(62,244)		12,108		2,534		—		14,642
Net (loss) income	$	(202,675)	$	7,507	$	1,072	$	(194,096)	$	44,192	$	6,442	$	882	$	51,516
Total assets	$	22,579,422	$	218,582	$	(77,474)	$	22,720,530	$	22,695,895	$	211,401	$	(71,224)	$	22,836,072
Total liabilities	$	20,174,053	$	44,828	$	(77,474)	$	20,141,407	$	19,848,995	$	49,909	$	(71,224)	$	19,827,680

~~19. Subsequent Events~~

On January 14, 2022, the Company announced it had entered into an asset purchase agreement for the transfer of the Company’s cannabis-related and money service business deposits relationships, which it had acquired from Century, to Needham Bank. On April 1, 2022, the Company completed the transfer of such deposits which amounted to $297.7 million. The Company did not recognize a material gain or loss in connection with this transaction. The terms of the transfer included a post-transfer settlement period of 60 days from the date of the initial transfer of April 1, 2022.

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 March 31, ~~2022,~~2023, and our results of operations for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022. 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 ~~2021~~2022 Form 10-K.

Forward-Looking Statements

When we use the terms “we,” “us,” “our,” and 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

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~~“may,~~ “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, the following factors:

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•the ongoing 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 we operate, including potential impacts resulting from delays in raising or a failure to raise the ~~Company operates;~~national debt ceiling;

•changes in customer ~~behavior;~~behavior and perceptions;

•changes in regional, national or international macroeconomic conditions, including especially changes in inflation, recessionary pressures 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;~~markets and within the banking industry;

•decreases in the value of securities and other assets;

•decreases in deposit levels necessitating increased borrowing to fund loans, investments and ~~investments;~~other needs;

•competitive pressures from other financial institutions;

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

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

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

•changes in accounting standards and practices;

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

•the risk that deferred tax assets will not be realized in full;

•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~~2022 Form ~~10-K.~~10-K 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,~~Consolidated Financial Statements, which have been prepared in accordance with 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~~2022 Form 10-K, as updated by the notes to our ~~unaudited interim condensed consolidated financial statements~~Unaudited Interim Condensed Consolidated Financial Statements accompanying this Quarterly Report on Form 10-Q. Effective January 1, ~~2022,~~2023, we adopted ASU ~~2016-13 (“CECL”),~~2022-02, the accounting 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 Unaudited Consolidated Financial Statements 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 months ended March 31, ~~2022.~~2023.

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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 ~~$22.8~~$22.7 billion and ~~$23.5~~$22.6 billion at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. We are subject to comprehensive regulation and examination by the Massachusetts Commissioner of Banks, the FDIC, the Federal Reserve Board and the Consumer Financial Protection Bureau.

We manage our business under two business segments: our banking business, which contributed ~~$146.3~~$171.9 million, or ~~83.7%~~122.9%, of our total ~~income~~loss (pre-provision net interest and dividend income and noninterest loss/income) for the three months

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ended March 31, 2023, and our insurance agency business, which partially offset the banking business loss by $32.0 million, or 22.9%, of our total loss for the three months ended March 31, ~~2022, and our insurance agency business, which contributed $28.4 million, or 16.3%, of our total income for the three months ended March 31, 2022.~~2023. 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 loss for the three months ended March 31, 2023 computed in accordance with GAAP was $194.1 million as compared to net income of $51.5 million for the three months ended March 31, 2022. This decrease was primarily due to the sale of available for sale securities at a loss in connection with our balance sheet repositioning completed in March 2023. Refer to the later sections titled “Outlook and Trends” and “Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies” within this Item 2 for additional discussion. Net loss for the three months ended March 31, 2023 and net income for the three months ended March 31, 2022 computed in accordance with GAAP was $51.5 million, as compared to $47.7 million for the three months ended March 31, 2021, representing an 8.1% increase. This increase was primarily due to an increase in average interest earning assets, which primarily was the result of our 2021 acquisition of Century. Refer to the ~~“Results of Operations”~~ ~~section below for additional discussion. Net income for the three months ended March 31, 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 months ended March 31, ~~2022~~2023 was ~~$55.1~~$61.1 million compared to operating net income for the three months ended March 31, ~~2021~~2022 of ~~$46.5~~$55.1 million representing an increase of ~~18.4%~~10.9%. This increase was ~~largely driven by the aforementioned change~~primarily due to an increase in ~~average interest-earning assets.~~net interest income. See “Non-GAAP Financial Measures” below for a reconciliation of operating net income to GAAP net income.

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~~decreased from ~~$0.28 for the three months ended March 31, 2021 to~~ $0.30 for the three months ended March 31, 2022 to a ~~9.5% increase.~~loss per share of $1.20 for the three months ended March 31, 2023. This ~~increase~~decrease was due to ~~an increase in net income~~our balance sheet repositioning which included a sale of AFS securities at a loss and ~~a decrease in average number of common shares outstanding,~~ which was ~~caused by our previously announced share repurchase program.~~completed in March 2023 as described above.

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Our GAAP efficiency ratio is our noninterest expenses divided by the sum of our net interest income and noninterest income. 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 ratio for the three months ended March 31, ~~2022 remained consistent with~~2023 decreased compared to the three months ended March 31, ~~2021 and decreased quarter-over-quarter.~~2022. The decrease in the GAAP efficiency ratio ~~from~~during the ~~prior quarter~~three months ended March 31, 2023 was ~~primarily~~ attributable to ~~higher prior~~a net loss for the period, ~~noninterest expenses associated with our acquisition of Century which were primarily incurred during~~while in all other periods shown we had net income. The net loss for the ~~fourth quarter of 2021.~~three months ended March 31, 2023 was due to the balance sheet repositioning completed in March 2023 described above. The ~~decrease in the~~non-GAAP operating efficiency ratio ~~from~~during the ~~prior quarter is primarily attributable~~three months ended March 31, 2023 remained relatively consistent compared to ~~increased~~the three months ended March 31, 2022. Refer to the “Results of Operations” section below for additional discussion of the changes in net interest income, noninterest ~~income.~~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 relatively 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 FHLBB advances and 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~~lines of credit 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 March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, we had total commercial and industrial loans of ~~$2.9 billion and $3.0~~$3.2 billion, representing ~~23.7% and 24.2%, respectively,~~23.2% of our total ~~loans.~~loans as of each period end. 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 SNC Program. As of March 31, 2022 and December 31, 2021, our SNC Program portfolio totaled $499.7 million and $480.9 million, or 17.3% and 16.2%, respectively, of our commercial and industrial portfolio, and 37.9% and 40.3%, respectively, of our SNC Program portfolio were

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syndicated loan market and the SNC Program. As of March 31, 2023 and December 31, 2022, our SNC Program portfolio totaled $790.5 million and $685.8 million, or 24.9% and 21.9%, respectively, of our commercial and industrial portfolio, and 37.3% for both periods, 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”). , and industrial revenue bonds (“IRBs”), the balances of which are detailed below:

◦As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, our ABL Portfolio totaled ~~$225.2~~$211.5 million and ~~$224.8~~$208.8 million, or ~~7.8%~~6.7% and ~~7.6%~~6.6%, respectively, of our commercial and industrial portfolio. ~~Our commercial and industrial portfolio also includes a portion of our PPP loans.~~

◦As of March 31, ~~2022~~2023 and December 31, ~~2021, the amount of PPP loans included in~~2022, our commercial and industrial IRB portfolio, ~~was $51.7 million and $112.8 million, respectively. Our commercial and industrial portfolio also includes industrial revenue bonds (“IRBs”),~~ which ~~are~~is comprised of municipal bonds issued to finance major capital ~~projects. As~~projects, totaled $0.9 billion and $1.0 billion, or 29.6% and 31.7%, respectively, of ~~both March 31, 2022 and December 31, 2021,~~ our commercial ~~and industrial IRB portfolio totaled $1.0 billion.~~real estate portfolio.

•Commercial real estate: Loans in this category include mortgage loans and lines of credit on commercial real estate, both investment and owner occupied. Property types financed include office, industrial, multi-family, affordable housing, retail, hotel, and other type properties. As of both March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, we had total commercial real estate loans of ~~$4.6 billion and $4.5~~$5.2 billion, representing ~~37.9%~~38.1% and ~~36.9%~~38.0%, respectively, of our total ~~loans.~~loans as of each period end. As of March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, owner occupied loans totaled ~~$966.8 million~~$0.9 billion and ~~$958.5 million,~~$1.0 billion, representing ~~21.0%~~17.2% and ~~21.2%~~17.8%, 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 March 31, 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 ~~includes~~included IRB loans of ~~$601.5~~$587.0 million and ~~$629.6~~$608.0 million as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, we had total commercial construction loans of ~~$246.1~~$357.1 million and ~~$222.3~~$336.3 million, representing ~~2.0%~~2.6% and ~~1.8%~~2.5%, respectively, of our total loans. Our commercial construction loan portfolio also included IRB loans as of $43.1 million and $36.9 million as of March 31, 2023 and December 31, 2022, respectively

•Business banking: Loans in this category are comprised of loans to small businesses with exposures of under $1$1.0 million and small investment real estate projects with exposures of under $3$3.0 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 both March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, we had total business banking loans of ~~$1.2~~$1.1 billion, representing 7.9% and ~~$1.3 billion,~~8.0%, respectively, ~~representing 9.9% and 10.9%~~ of our total loans ~~for~~as of each period ~~end, respectively.~~end. In this category, commercial and industrial loans and commercial real estate loans totaled ~~$304.3~~$200.3 million and ~~$896.7~~$878.3 million, respectively, as of March 31, ~~2022,~~2023, and ~~$440.6~~$208.4 million and ~~$894.1~~$882.1 million, respectively, as of December 31, ~~2021.~~ 2022.

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 March 31, 2022 and December 31, 2021, the amount of PPP loans included in our business banking portfolio was $89.5 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 March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, we had total residential loans of ~~$1.9~~$2.5 billion, representing ~~15.9%~~18.3% and ~~15.7%~~18.1%, respectively, of our total loans ~~for such periods.~~as of each period end. 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~~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.

~~Table~~ During the three months ended March 31, 2023, residential real estate mortgage originations were $57.2 million, of ~~Contents~~

~~During~~which $9.1 million were sold on the secondary markets. Comparatively, during the three months ended March 31, 2022, residential real estate mortgage originations were $118.3 million, of which $29.2 million were sold on the secondary markets. ~~Comparatively,~~We began purchasing residential real estate mortgage loans

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during the third quarter of 2022. Loans purchased were subject to the same underwriting criteria as those loans originated directly by us. During the three months ended March 31, 2023, we purchased $32.0 million of residential real estate mortgage loans. No residential real estate mortgage loans were purchased during the three months ended March 31, 2021, residential real estate mortgage originations were $260.1 million of which $57.2 million were sold on the secondary markets. We generally do not continue to service residential loans that we sell in the secondary market.2022.

Consumer Lending

•Consumer home equity: Loans in this category consist of home equity lines of credit and home equity loans. As of both March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, we had total consumer home equity loans of ~~$1.1~~$1.2 billion, representing ~~9.0%~~8.6% and ~~9.0%~~8.8%, respectively, of our total ~~loans.~~loans as of each period end. 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 March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, we had total other consumer loans of ~~$203.3~~$190.5 million and ~~$214.5~~$194.1 million, representing ~~1.7% and 1.8%, respectively,~~1.4% of our total ~~loans.~~loans as of each period end. 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 ~~automated lock box collection services,~~ cash management ~~services and account reconciliation~~ services to our corporate and ~~institutional customers, as well as cash management services to our~~ 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 March 31, 2022 and December 31, 2021, our total commercial deposits were $7.9 billion and $8.1 billion, respectively. During the three months ended March 31, 2022 our commercial noninterest income was $5.8 million compared to $5.1 million for the three months ended March 31, 2021.

Other Consumer Deposit Products

•We offer a wide variety of deposit products and services to our consumer customers. We service these customers through our 9697 branches located in eastern Massachusetts and New Hampshire, through our call center in our facility in Lynn, ~~Massachusetts~~MA and through our online and mobile banking applications.

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 March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, we held ~~$3.2~~$3.1 billion and ~~$3.4~~$2.9 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~~Consolidated Balance Sheets included in this Quarterly Report on Form 10-Q. For the three months ended March 31, ~~2022,~~2023, we had noninterest income of ~~$6.1~~$5.8 million from providing these services compared to ~~$5.7~~$6.1 million for the three months ended March 31, ~~2021.~~2022, respectively.

Insurance Agency Business

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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 agency, Eastern Insurance 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 executive

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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 ~~$28.7~~$31.5 million ~~and $28.1 million, respectively,~~ or ~~61.9% and 51.0%, respectively,~~11.3% of our noninterest loss on a GAAP basis and 60.6%% of our noninterest income on an operating basis during the three months ended March 31, ~~2022.~~2023. Comparatively, during the three months ended March 31, 2022, such income represented $28.7 million, or 61.9%, of our noninterest income on a GAAP basis and 53.9% of our noninterest income on an operating basis. Refer to the “Non-GAAP Financial Measures” section below for additional information on the determination of noninterest income on an operating basis. Our insurance business operates through 22 non-branch offices located primarily in eastern Massachusetts and had ~~399~~408 full-time equivalent employees as of March 31, ~~2022.~~

~~Acquisitions~~

During the three months ended March 31, 2022, Eastern Insurance Group completed one insurance agency acquisition. The purchase price and goodwill recorded as a result of the acquisition were not material.2023.

Outlook and Trends

Interest Rates

~~We expect additional increases~~Beginning in ~~the federal funds rate in 2022 which is anticipated to be beneficial to our net interest income and net interest margin. On~~ March ~~16,~~ 2022, the Federal Open Market Committee ~~(the “Committee”~~(“FOMC”) voted to increase ~~interest rates by~~the federal funds rate multiple times from a ~~quarter~~range of ~~a percentage point~~0.00% to 0.25% to a range of ~~0.25%~~5.00% to ~~0.50%. The Committee then further raised the target range~~5.25% on May ~~4, 2022 to a range of 0.75% to 1.00% and~~3, 2023, when the FOMC stated that it ~~anticipates that ongoing increases~~will closely monitor incoming information and assess the implications for monetary policy. In determining the extent to which additional policy firming may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.

Inevitably, not all of our interest rate-sensitive assets and liabilities will re-price simultaneously and in equal volume in response to changes in the ~~target range~~federal funds rate, and therefore the potential for interest rate exposure exists. Management believes that several factors will ~~be appropriate.~~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 ~~40%~~34% of the outstanding principal balance of our loans ~~are~~as of March 31, 2023 was indexed to a market rate that is expected to reprice along with the federal funds rate. 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 March 31, 2023, representing approximately 17.5% of the outstanding principal balance of our loans at that date. For more detail regarding such hedging financial instruments, refer to Note 14, “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 that an interest rate increase would otherwise have. Refer to the section titled “Management of Market Risk” within this Item 2 for additional discussion including the estimated change to our net interest income ~~which assumes~~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 ~~U.S. Treasury yield curve.~~manner in which actual yields and costs respond to changes in market interest rates.

~~Paycheck Protection Program Loans~~

~~We are a participating lender~~Increases in the ~~SBA’s Paycheck Protection Program, or PPP. We concluded PPP loan originations~~federal funds rate over the last twelve months and greater industry-wide competition for deposits have had a significant impact on our cost of interest-bearing liabilities and funding betas. Beginning in the ~~second~~third quarter of 2021 as the SBA announced in May 2021 that PPP funds were exhausted. The 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. As of March 31, 2022 and ~~December 31, 2021,~~to assist in meeting our loan-growth needs, we placed additional reliance on wholesale funding in the ~~remaining balance~~form of borrowings and then, in the fourth quarter of 2022, we started to purchase brokered certificates of deposit. These funding sources generally have a higher cost than deposits originating within the markets we serve and are not our ~~PPP loans was $141.2 million~~preferred sources of funding. We expect both our cost of interest bearing liabilities and ~~$331.4 million, respectively. Net PPP loan fee accretion (fee accretion less cost amortization) for all PPP loans for~~funding betas to improve in 2023, as during the three months ended March 31, ~~2022~~2023, we completed a balance sheet repositioning by selling a portion of our AFS securities portfolio for total proceeds of $1.9 billion. The proceeds from the sale of such securities have been used to increase cash levels and ~~2021 was $5.8 million~~may be used to reduce wholesale funds over time and, ~~$8.3 million, respectively. We expect to recognize~~in turn, improve our net interest margin.

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The following chart depicts our funding betas and cost of interest bearing liabilities for the ~~remaining net unearned fees of $3.4 million~~previous twelve months as of March 31, 2023:

(1)The total cost of interest bearing liabilities is charted on the left-hand y-axis and cycle beta data is charted on the right-hand y-axis.

(2)Cycle beta calculated as the change in monthly average total interest-bearing liabilities cost in each respective month from the beginning of the cycle, defined as February, 2022, divided by the respective change in the average monthly upper bound of the Federal Funds target range during the ~~remainder~~same period.

Liquidity and Uninsured Deposits

As noted previously, we completed a balance sheet repositioning during the three months ended March 31, 2023 by selling a portion of our AFS investment securities portfolio for total proceeds of $1.9 billion. Such securities were lower-yielding U.S. Agency bonds and government-sponsored residential and commercial mortgage-backed securities which were purchased when interest rates were historically low. The record rise in interest rates over the ~~year~~last twelve months caused the fair value of such securities to decline and, after careful consideration, management made the decision in early March and prior to the failures of Silicon Valley Bank and Signature Bank to sell these securities to improve liquidity and future earnings.

We also took steps to strengthen our backup sources of liquidity during the three months ended March 31, 2023 by pledging securities to the Federal Reserve’s Bank Term Funding Program. As of March 31, 2023, cash and cash equivalents were $2.1 billion and secured borrowing capacity at the Federal Reserve Bank and Federal Home Loan Bank totaled $5.0 billion, providing total liquidity sources of $7.1 billion. These liquidity sources provide 107% coverage of all customer uninsured and uncollateralized deposits, which totaled $6.7 billion, or 36% of total deposits, on March 31, 2023. For further discussion of liquidity, refer to “Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies” within this Item 2 and for further discussion of uninsured deposits, refer to the “Deposits” discussion within “Financial Position” within this Item 2.

Commercial Real Estate Office Exposure

Our total office-related CRE loans (which is comprised of loans secured by office space, medical office space, and mixed-use retail/office space in our commercial real estate, business banking, and construction portfolios) totaled $1.2 billion as of both March 31, 2023 and December 31, ~~2022 resulting in total recognized net fee accretion of $9.2 million for the year ended December 31, 2022 compared to $34.3 million recognized during the year ended December 31, 2021. Our net~~2022. Given prevailing market conditions such as rising interest ~~margin is expected to be adversely affected~~rates, reduced occupancy as a result of the ~~decline~~increase in net fee accretion, which is associated with the decreased volume of PPP loan payoffs. The impact to our net interest margin resulting from the decline in net PPP loan fee accretion is estimated to be 0.25% (change computed based upon average totalhybrid work arrangements post-COVID, and lower commercial real estate valuations, we are carefully monitoring these loans for ~~the year ended~~signs of deterioration in credit quality. As of March 31, 2023, three of these loans, totaling $0.8 million and within our business banking portfolio, were on non-accrual status. As of December 31, ~~2021).~~2022, five of these loans, totaling $0.6 million and within our business banking portfolio, were on non-accrual status.

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Non-GAAP Financial Measures

We present certain non-GAAP financial measures, which 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 as well as underlying trends that may, to some extent, be obscured by inclusion of such items in the corresponding GAAP financial measures.

There are items in our financial statements that impact our results but which we believe are unrelated to our core business. Accordingly, we present operating net 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, each of which excludes the impact of such items because we believe such exclusion can provide greater visibility into our core business and underlying trends. 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 benefits, (v) impairment charges on tax credit investments and associated tax credit benefits, (vi)

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~~expenses indirectly associated with our initial public offering (“IPO”), (vii)~~ OREO gains and losses, ~~(viii)~~(vii) merger and acquisition expenses, ~~(ix)~~(viii) the ~~stock donation to the Eastern Bank Foundation (the “Foundation”) in connection with our mutual-to-stock conversion and IPO, and (x)~~non-cash pension settlement ~~of putative consumer class action litigation matters~~charge recognized related to ~~overdraft~~our Defined Benefit Plan, and ~~non-sufficient funds fees, and associated settlement expenses.~~(ix) certain discrete tax items. There were no expenses indirectly associated with ~~our IPO, stock donations to the Foundation,~~ OREO gains or losses, or impairment charges on tax credit investments and associated tax credit benefits ~~or expenses associated with the settlement for putative consumer class action matters~~ during the ~~three-month~~ periods presented in this Quarterly Report on Form 10-Q.

We also present tangible shareholders’ equity, tangible assets, the ratio of tangible shareholders’ equity to tangible assets, average tangible shareholders’ equity, the ratios of net (loss) 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 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.

Our non-GAAP financial measures should not be considered as an alternative or substitute to GAAP net (loss) 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 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.

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The following table summarizes the impact of non-core items recorded for the time periods indicated below and reconciles them to the most directly comparable GAAP financial measure:

Three Months Ended March 31,
2022 2021
(Dollars in thousands, except per share data)
Net income (GAAP) $ 51,516 $ 47,663
Non-GAAP adjustments:
Add:
Noninterest income components:
Losses (income) from investments held in rabbi trusts 4,433 (1,846)
Losses (gains) on sales of securities available for sale, net 2,172 (1,164)
Losses (gains) on sales of other assets 274 (18)
Noninterest expense components:
Rabbi trust employee (income) benefit expense (2,087) 986
Merger and acquisition expenses 34 589
Total impact of non-GAAP adjustments 4,826 (1,453)
Less net tax benefit (expense) associated with non-GAAP adjustment (2)
1,235 (327)
Non-GAAP adjustments, net of tax $ 3,591 $ (1,126)
Operating net income (non-GAAP) $ 55,107 $ 46,537
Weighted average common shares outstanding during the period:
Basic 169,857,950 172,049,044
Diluted 169,968,156 172,049,044
Earnings per share, basic $ 0.30 $ 0.28
Earnings per share, diluted $ 0.30 $ 0.28
Operating earnings per share, basic (non-GAAP) $ 0.32 $ 0.27
Operating earnings per share, diluted (non-GAAP) $ 0.32 $ 0.27

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	Three Months Ended March 31,
	2023		2022
	(Dollars in thousands, except per share data)
Net (loss) income (GAAP)	$	(194,096)	$	51,516
Non-GAAP adjustments:
Add:
Noninterest income components:
(Income) losses from investments held in rabbi trusts	(2,857)		4,433
Losses on sales of securities available for sale, net	333,170		2,172
(Gains) losses on sales of other assets	(1)		274
Noninterest expense components:
Rabbi trust employee benefit expense (income)	1,274		(2,087)
Merger and acquisition expenses	—		34
Total impact of non-GAAP adjustments	331,586		4,826
Less net tax benefit associated with non-GAAP adjustment (1)	76,377		1,235
Non-GAAP adjustments, net of tax	$	255,209	$	3,591
Operating net income (non-GAAP)	$	61,113	$	55,107

Weighted average common shares outstanding during the period:
Basic	161,991,373		169,857,950
Diluted	162,059,431		169,968,156

(Losses) earnings per share, basic	$	(1.20)	$	0.30
(Losses) earnings per share, diluted	$	(1.20)	$	0.30

Operating earnings per share, basic (non-GAAP)	$	0.38	$	0.32
Operating earnings per share, diluted (non-GAAP)	$	0.38	$	0.32

(1)The net tax benefit ~~(expense)~~ 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. For the three months ended March 31, 2023, this amount is primarily comprised of a $53.2 million tax benefit, net of a valuation allowance, resulting from the sale of securities classified as available for sale and a $23.7 million tax benefit resulting from the transfer of certain securities from Market Street Securities Corp., a wholly owned subsidiary which was liquidated during the three months ended March 31, 2023, to Eastern Bank. Upon the sale of securities, we established a valuation allowance of $17.4 million as it was determined at that time it was not more likely than not that the entirety of the deferred tax asset related to the loss on such securities would be realized.

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The following table summarizes the impact of non-core items with respect to our total (loss) revenue, noninterest (loss) 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 March 31,
2022 2021
(Dollars in thousands)
Net interest income (GAAP) $ 128,124 $ 100,091
Add:
Tax-equivalent adjustment (non-GAAP) 2,261 1,297
Fully-taxable equivalent net interest income (non-GAAP) 130,385 101,388
Noninterest income (GAAP) 46,415 55,212
Less:
(Loss) income from investments held in rabbi trusts (4,433) 1,846
Gains (losses) on sales of securities available for sale, net (2,172) 1,164
Gains (losses) on sales of other assets (274) 18
Noninterest income on an operating basis (non-GAAP) 53,294 52,184
Noninterest expense (GAAP) $ 108,866 $ 94,049
Less:
Rabbi trust (income) benefit expense (2,087) 986
Merger and acquisition expenses 34 589
Noninterest expense on an operating basis (non- GAAP) $ 110,919 $ 92,474
Total revenue (GAAP) $ 174,539 $ 155,303
Total operating revenue (non-GAAP) $ 183,679 $ 153,572
Ratios:
Efficiency ratio (GAAP) 62.37 % 60.56 %
Operating efficiency ratio (non-GAAP) 60.39 % 60.22 %

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	Three Months Ended March 31,
	2023			2022
	(Dollars in thousands)
Net interest income (GAAP)	$	138,309		$	128,124
Add:
Tax-equivalent adjustment (non-GAAP)	4,445			2,261
Fully-taxable equivalent net interest income (non-GAAP)	142,754			130,385
Noninterest (loss) income (GAAP)	(278,330)			46,415
Less:
Income (losses) from investments held in rabbi trusts	2,857			(4,433)
Losses on sales of securities available for sale, net	(333,170)			(2,172)
Gains (losses) on sales of other assets	1			(274)
Noninterest income on an operating basis (non-GAAP)	51,982			53,294
Noninterest expense (GAAP)	$	116,294		$	108,866
Less:
Rabbi trust employee benefit expense (income)	1,274			(2,087)
Merger and acquisition expenses	—			34
Noninterest expense on an operating basis (non- GAAP)	$	115,020		$	110,919
Total (loss) revenue (GAAP)	$	(140,021)		$	174,539
Total operating revenue (non-GAAP)	$	194,736		$	183,679
Ratios:
Efficiency ratio (GAAP)	(83.05)		%	62.37		%
Operating efficiency ratio (non-GAAP)	59.06		%	60.39		%

The following table summarizes the calculation of our tangible shareholders’ equity, tangible assets, the ratio of tangible shareholders’ equity to tangible assets, and tangible book value per share, which reconciles to the most directly comparable respective GAAP measure, as of the dates indicated:


		As of March 31,			As of December 31,				As of March 31,			As of December 31,
		2022			2021				2023			2022
		(Dollars in thousands, except per share data)							(Dollars in thousands, except per share data)
Tangible shareholders’ equity:	Tangible shareholders’ equity:							Tangible shareholders’ equity:
Total shareholders’ equity (GAAP)	Total shareholders’ equity (GAAP)	$	3,008,392		$	3,406,352		Total shareholders’ equity (GAAP)	$	2,579,123		$	2,471,790
Less: Goodwill and other intangibles	Less: Goodwill and other intangibles	654,759			649,703			Less: Goodwill and other intangibles	660,165			661,126
Tangible shareholders’ equity (non-GAAP)	Tangible shareholders’ equity (non-GAAP)	2,353,633			2,756,649			Tangible shareholders’ equity (non-GAAP)	1,918,958			1,810,664
Tangible assets:	Tangible assets:							Tangible assets:
Total assets (GAAP)	Total assets (GAAP)	22,836,072			23,512,128			Total assets (GAAP)	22,720,530			22,646,858
Less: Goodwill and other intangibles	Less: Goodwill and other intangibles	654,759			649,703			Less: Goodwill and other intangibles	660,165			661,126
Tangible assets (Non-GAAP)		$	22,181,313		$	22,862,425
Tangible assets (non-GAAP)								Tangible assets (non-GAAP)	$	22,060,365		$	21,985,732
Shareholders’ equity to assets ratio (GAAP)	Shareholders’ equity to assets ratio (GAAP)	13.2		%	14.5		%	Shareholders’ equity to assets ratio (GAAP)	11.4		%	10.9		%
Tangible shareholders’ equity to tangible assets ratio (Non-GAAP)		10.6		%	12.1		%
Tangible shareholders’ equity to tangible assets ratio (non-GAAP)								Tangible shareholders’ equity to tangible assets ratio (non-GAAP)	8.7		%	8.2		%
Book value per share:	Book value per share:							Book value per share:
Common shares issued and outstanding	Common shares issued and outstanding	183,438,711			186,305,332			Common shares issued and outstanding	176,328,426			176,172,073
Book value per share (GAAP)	Book value per share (GAAP)	$	16.40		$	18.28		Book value per share (GAAP)	$	14.63		$	14.03
Tangible book value per share (non-GAAP)	Tangible book value per share (non-GAAP)	$	12.83		$	14.80		Tangible book value per share (non-GAAP)	$	10.88		$	10.28

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The following table summarizes the calculation of our average tangible shareholders’ equity and ratio of net (loss) 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 March 31,
	2023			2022
	(Dollars in thousands)
Net (loss) income (GAAP)	$	(194,096)		$	51,516
Operating net income (non-GAAP) (1)	61,113			55,107
Average tangible shareholders’ equity:
Average total shareholders’ equity (GAAP)	$	2,460,170		$	3,273,447
Less: Average goodwill and other intangibles	660,795			649,497
Average tangible shareholders’ equity (non-GAAP)	$	1,799,375		$	2,623,950
Ratios:
(Loss) return on average total shareholders’ equity (GAAP) (2)	(32.00)		%	6.38		%
(Loss) return on average tangible shareholders’ equity (non-GAAP) (2)	(43.75)		%	7.96		%
Operating return on average tangible shareholders’ equity (non-GAAP) (2)	13.78		%	8.52		%

(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.

Financial Position

Summary of Financial Position


		As of March 31, 2022		As of December 31, 2021		Change					As of March 31, 2023		As of December 31, 2022		Change
						Amount ($)		Percentage (%)							Amount ($)		Percentage (%)
		(Dollars in thousands)									(Dollars in thousands)
Cash and cash equivalents	Cash and cash equivalents	$	830,494	$	1,231,792	$	(401,298)	(32.6)	%	Cash and cash equivalents	$	2,137,816	$	169,505	$	1,968,311	1,161.2	%
Securities available for sale	Securities available for sale	7,917,305		8,511,224		(593,919)		(7.0)	%	Securities available for sale	4,700,134		6,690,778		(1,990,644)		(29.8)	%
Securities held to maturity	Securities held to maturity	395,434		—		395,434		100.0	%	Securities held to maturity	471,185		476,647		(5,462)		(1.1)	%
Loans, net of allowance for loan losses	Loans, net of allowance for loan losses	12,033,603		12,157,281		(123,678)		(1.0)	%	Loans, net of allowance for loan losses	13,520,715		13,420,317		100,398		0.7	%
Federal Home Loan Bank Stock	Federal Home Loan Bank Stock	10,904		10,904		—		—	%	Federal Home Loan Bank Stock	45,168		41,363		3,805		9.2	%
Goodwill and other intangible assets	Goodwill and other intangible assets	654,759		649,703		5,056		0.8	%	Goodwill and other intangible assets	660,165		661,126		(961)		(0.1)	%
Deposits	Deposits	19,392,816		19,628,311		(235,495)		(1.2)	%	Deposits	18,541,580		18,974,359		(432,779)		(2.3)	%
Borrowed funds	Borrowed funds	34,922		34,278		644		1.9	%	Borrowed funds	1,138,403		740,828		397,575		53.7	%

Cash and cash equivalents

Total cash and cash equivalents ~~decreased~~increased by ~~$0.4~~$2.0 billion ~~or 32.6%,~~ to ~~$0.8~~$2.1 billion at March 31, ~~2022~~2023 from ~~$1.2 billion~~$169.5 million at December 31, ~~2021.~~2022. This ~~decrease~~increase was primarily due to ~~security purchases and a decrease~~proceeds from sales of AFS securities of $1.9 billion during the three months ended March 31, 2023. For further discussion of the change in ~~total customer deposits.~~securities, refer to the later “Securities” 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

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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 securities: At March 31, 2023 and December 31, 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.~~

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~~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. U.S. Agency bonds include securities issued by Fannie Mae, Freddie Mac, the FHLB, and 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, 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~~accretion 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 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 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.

~~The~~ following table shows the fair value of our securities by investment category as of the dates indicated:

Securities Portfolio Composition


		As of March 31, 2022		As of December 31, 2021			As of March 31, 2023		As of December 31, 2022
		(In thousands)					(In thousands)
Available for sale securities, at fair value:	Available for sale securities, at fair value:					Available for sale securities, at fair value:
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	$	4,969,346	$	5,524,708	Government-sponsored residential mortgage-backed securities	$	3,024,560	$	4,111,908
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	1,615,927		1,408,868		Government-sponsored commercial mortgage-backed securities	1,180,040		1,348,954
U.S. Agency bonds	U.S. Agency bonds	1,013,899		1,175,014		U.S. Agency bonds	211,807		952,482
U.S. Treasury securities	U.S. Treasury securities	56,235		88,605		U.S. Treasury securities	94,283		93,057
State and municipal bonds and obligations	State and municipal bonds and obligations	260,316		280,329		State and municipal bonds and obligations	188,149		183,092
Small Business Administration pooled securities		—		32,103
Other debt securities	Other debt securities	1,582		1,597		Other debt securities	1,295		1,285
Total available for sale securities, at fair value	Total available for sale securities, at fair value	7,917,305		8,511,224		Total available for sale securities, at fair value	4,700,134		6,690,778
Held to maturity securities, at amortized cost:	Held to maturity securities, at amortized cost:					Held to maturity securities, at amortized cost:
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	192,231		—		Government-sponsored residential mortgage-backed securities	271,655		276,493
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	203,203		—		Government-sponsored commercial mortgage-backed securities	199,530		200,154
Total held to maturity securities, at amortized cost	Total held to maturity securities, at amortized cost	395,434		—		Total held to maturity securities, at amortized cost	471,185		476,647
Total	Total	$	8,312,739	$	8,511,224	Total	$	5,171,319	$	7,167,425

Our securities portfolio has decreased ~~year-to-date. Available for sale (“AFS”) securities decreased $0.6~~$2.0 billion, or ~~7.0%~~27.8%, to ~~$7.9~~$5.2 billion at March 31, ~~2022~~2023 from ~~$8.5~~$7.2 billion at December 31, ~~2021.~~2022. This decrease iswas primarily due to ~~a decrease~~the completion of balance sheet repositioning in March 2023 through the ~~fair value~~sale of AFS ~~securities. At March 31, 2022, the unrealized loss was $539.3 million compared to an unrealized loss~~securities for total proceeds of $76.0 million at December 31, 2021, representing a $463.4 million decrease in the fair value of AFS securities. The change from December 31, 2021 to March 31, 2022 is primarily driven by rising market rates of interest. In addition, AFS securities sales, maturities and principal paydowns totaled $595.2 million during the three months ended March 31, 2022 which also contributed$1.9 billion. Refer to the ~~overall decline. Partially offsetting the decrease in the securities portfolio from December 31, 2021 to March 31, 2022 were purchases~~sections titled “Outlook and Trends” and “Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies” within this Item 2 for additional discussion of ~~available for sale securities of $471.5 million. In addition, during the three months ended~~

~~Table of Contents~~such sales.

~~March 31, 2022, we purchased $395.8 million of securities classified as held to maturity (“HTM”). We did not have any securities classified as HTM at December 31, 2021.~~

We did not have trading investments at March 31, ~~2022~~2023 or December 31, ~~2021.~~2022.

A portion of our securities portfolio continues to be tax-exempt. Investments in federally tax-exempt securities totaled ~~$259.9~~$187.9 million at March 31, ~~2022~~2023 compared to ~~$279.8~~$182.9 million at December 31, ~~2021.~~2022.

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Our 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 unobservable are classified as Level 3 within the fair value hierarchy. As of both March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, we had no securities categorized as 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 AFS and HTM securities and weighted average yields at and for the ~~period~~periods ended March 31, ~~2022~~2023 and ~~contractual maturities of our AFS and weighted average yields at and for the period ended~~ December 31, ~~2021.~~2022. Weighted average yields in the tables below have been calculated based on the amortized cost of the security:

Securities Portfolio, ~~Weighted-Average~~Weighted Average Yield


		Securities Maturing as of March 31, 2022						Securities Maturing as of March 31, 2023 (1)
		Within One Year	After One Year But Within Five Years	After Five Years But Within Ten Years	After Ten Years	Total		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:						Available for sale securities:
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	2.74%	2.64%	0.96%	1.48%	1.41%	Government-sponsored residential mortgage-backed securities	—	%	2.30	%	2.10	%	1.59	%	1.60	%
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	—	1.34	1.23	1.94	1.58	Government-sponsored commercial mortgage-backed securities	—		1.76		1.57		1.94		1.78
U.S. Agency bonds	U.S. Agency bonds	—	0.72	0.93	—	0.82	U.S. Agency bonds	—		1.30		1.62		—		1.35
U.S. Treasury securities	U.S. Treasury securities	0.13	0.78	—	—	0.67	U.S. Treasury securities	—		1.97		—		—		1.97
State and municipal bonds and obligations	State and municipal bonds and obligations	0.75	2.50	3.19	4.04	3.54	State and municipal bonds and obligations	1.22		2.29		3.22		4.06		3.66
Other debt securities	Other debt securities	1.01	0.84	—	—	0.87	Other debt securities	0.84		—		—		—		0.84
Total available for sale securities	Total available for sale securities	0.34	0.98	1.11	1.62	1.43	Total available for sale securities	0.89		1.65		1.71		1.73		1.72
Held to maturity securities:	Held to maturity securities:						Held to maturity securities:
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	—	—	—	2.64	2.64	Government-sponsored residential mortgage-backed securities	—		—		—		2.86		2.86
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	—	—	2.23	—	2.23	Government-sponsored commercial mortgage-backed securities	—		—		2.22		—		2.22
Total held to maturity securities	Total held to maturity securities	—	—	2.23	2.64	2.43	Total held to maturity securities	—		—		2.22		2.86		2.59
Total	Total	0.34%	0.98%	1.21%	1.66%	1.47%	Total	0.89	%	1.65	%	1.83	%	1.79	%	1.79	%


	Securities Maturing as of December 31, 2022 (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	—	%	2.27	%	1.00	%	1.53	%	1.45	%
Government-sponsored commercial mortgage-backed securities	—		1.29		1.51		1.94		1.68
U.S. Agency bonds	—		0.79		0.97		—		0.82
U.S. Treasury securities	—		1.97		—		—		1.97
State and municipal bonds and obligations	1.22		2.26		3.17		4.05		3.66
Other debt securities	0.84		—		—		—		0.84
Total available for sale securities	0.89	%	1.02	%	1.25	%	1.66	%	1.47	%
Held to maturity securities:
Government-sponsored residential mortgage-backed securities	—		—		—		2.86		2.86
Government-sponsored commercial mortgage-backed securities	—		—		2.23		—		2.23
Total held to maturity securities	—		—		2.23		2.86		2.59
Total	0.89	%	1.02	%	1.36	%	1.72	%	1.54	%

6867

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Securities Maturing as of December 31, 2021
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 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.~~

The yield on tax-exempt obligations of states and political subdivisions has been adjusted to aan FTE basis 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 losses on AFS securities as of March 31, 2022 and December 31, 2021 totaled $539.3 million and $76.0 million, respectively. The change from December 31, 2021 to March 31, 2022 is primarily driven by rising market rates of interest.

Loans

We consider our loan portfolio to be relatively diversified by borrower and industry. Our gross loans ~~decreased $99.3~~increased $99.7 million, or ~~0.8%~~0.7%, to ~~$12.2~~$13.7 billion at March 31, ~~2022~~2023 from ~~$12.3~~$13.6 billion at December 31, ~~2021.~~2022. The ~~decrease~~increase as of March 31, ~~2022~~2023 was primarily due to ~~a decrease in our PPP loan balances within the C&I and business banking portfolios, as further noted below.~~

•Our business banking portfolio decreased by $133.7 million primarily as a result of a $129.1 million decrease in business banking PPP loan balances during the three months ended March 31, 2022 as such loans were paid off or forgiven by the SBA.

•Similarly, our commercial and industrial portfolio decreased by $74.0 million primarily as a result of a decrease of $61.1 million in commercial and industrial PPP loan balances during the three months ended March 31, 2022.

•Our retail portfolio decreased slightly by $2.7 million which was primarily attributable to our other consumer portfolio which decreased by $11.2 million and was partially offset by an increase of $9.4 million in our residential real estate loans during the three months ended March 31, 2022.

•~~Partially offsetting the above balance declines was an increase~~increases in our commercial real estate ~~loans of $87.3~~and residential real estate portfolio balances.

•Our commercial real estate portfolio increased by $45.9 million from December 31, ~~2021~~2022 to March 31, ~~2022~~2023 which was primarily attributable to an increase of ~~$81.1~~$70.1 million in commercial real estate investment loan balances. Such loans represent loans secured by commercial real estate that are non-owner-occupied. The increase in such loan balances was primarily 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 belief that the credit performance of such loans has a stable outlook. The increase in commercial real estate investment loan balances was partially offset by a decrease in commercial real estate owner-occupied loans of $24.0 million which was due to net paydowns of such loans during the three months ended March 31, 2023.

•Our residential real estate portfolio increased by $36.6 million during the three months ended March 31, 2023. The increase in residential real estate loan balances was primarily due to purchases of such loans which totaled $32.0 million during the three months ended March 31, 2023.

The following table shows the composition of our loan portfolio, by category, as of the dates indicated:

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Loan Portfolio Composition


		As of March 31, 2022		As of December 31, 2021			As of March 31, 2023		As of December 31, 2022
		(In thousands)					(In thousands)
Commercial and industrial	Commercial and industrial	$	2,886,560	$	2,960,527	Commercial and industrial	$	3,169,438	$	3,150,946
Commercial real estate	Commercial real estate	4,609,824		4,522,513		Commercial real estate	5,201,196		5,155,323
Commercial construction	Commercial construction	246,093		222,328		Commercial construction	357,117		336,276
Business banking	Business banking	1,201,007		1,334,694		Business banking	1,078,678		1,090,492
Residential real estate	Residential real estate	1,936,182		1,926,810		Residential real estate	2,497,491		2,460,849
Consumer home equity	Consumer home equity	1,099,211		1,100,153		Consumer home equity	1,180,824		1,187,547
Other consumer	Other consumer	203,326		214,485		Other consumer	190,506		194,098
Total loans	Total loans	12,182,203		12,281,510		Total loans	13,675,250		13,575,531
Allowance for loan losses	Allowance for loan losses	(124,166)		(97,787)		Allowance for loan losses	(140,938)		(142,211)
Unamortized premiums, net of unearned discounts and deferred fees	Unamortized premiums, net of unearned discounts and deferred fees	(24,434)		(26,442)		Unamortized premiums, net of unearned discounts and deferred fees	(13,597)		(13,003)
Total loans receivable, net	Total loans receivable, net	$	12,033,603	$	12,157,281	Total loans receivable, net	$	13,520,715	$	13,420,317

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 ~~83.3%~~81.5% of our commercial loans in Massachusetts and New Hampshire as of March 31, ~~2022.~~2023.

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 or non-performing and further assessed to determine if non-accrual status is appropriate.

For the commercial portfolio, which includes our commercial and industrial, commercial real estate, commercial construction and business banking loans, we monitor credit quality using a 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).

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Risk rating assignment is determined using one of 1415 separate scorecards developed for distinctive portfolio segments based on common attributes. Key factors 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.

Special mention, substandard and doubtful loans totaled ~~4.5%~~3.0% and ~~5.8%~~2.2% of total commercial loans outstanding at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. This ~~decrease~~increase was driven by risk rating ~~upgrades~~downgrades of several credits in the ~~construction and~~ commercial and industrial and commercial real estate portfolios. Management is not aware of any pervasive credit trends leading to this increase and the the percentage of such loans to total commercial loans as of March 31, 2023 remains consistent with our long-term average.

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 ~~decreased~~improved to ~~0.41%~~0.37% at March 31, ~~2022 from 0.65%~~2023, compared to 0.50% at December 31, ~~2021.~~

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2022.

The following table provides details regarding our delinquency rates as of the dates indicated:

Loan Delinquency Rates

Delinquency Rate as of (1)(2)
March 31, 2022 December 31, 2021
Portfolio
Commercial and industrial 0.07 % 0.06 %
Commercial real estate 0.02 % 0.60 %
Commercial construction 2.74 % — %
Business banking 0.73 % 0.86 %
Residential real estate 0.98 % 1.38 %
Consumer home equity 0.96 % 0.90 %
Other consumer 0.83 % 1.23 %
Total 0.41 % 0.65 %

~~(1)In the calculation of the delinquency rate as of March 31, 2022 and December 31, 2021, the total amount of loans outstanding includes $0.1 billion and $0.3 billion, respectively, of PPP loans.~~

~~(2)~~Delinquency rates as of March 31, 2022 were computed based upon amortized cost balances while delinquency rates as of December 31, 2021 were computed based upon recorded investment balances. The effect on the above delinquency rates of the difference in methodology is not significant.


	Delinquency Rate as of
	March 31, 2023		December 31, 2022
Portfolio
Commercial and industrial	0.02	%	0.12	%
Commercial real estate	—	%	—	%
Commercial construction	—	%	—	%
Business banking	0.84	%	1.00	%
Residential real estate	0.99	%	1.46	%
Consumer home equity	1.32	%	1.33	%
Other consumer	0.49	%	0.63	%
Total	0.37	%	0.50	%

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 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 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 non-performing loans (“NPLs”), OREO and non-performing securities. NPLs consist of 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 fair value less estimated costs to sell on the date we obtain control. Any write-downs to the cost of the 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 decreased ~~$1.2~~$4.0 million, or ~~3.3%~~10.4%, to ~~$33.8~~$34.6 million at March 31, ~~2022~~2023 from ~~$35.0~~$38.6 million at December 31, ~~2021.~~2022. NPLs as a percentage of total loans decreased to ~~0.28%~~0.25% at March 31, ~~2022~~2023 from ~~0.29%~~0.28% at December 31, ~~2021 primarily due~~2022. Refer to a decrease in business banking non-accrual loans, commercial and industrial non-accrual loans, and commercial real estate nonperforming loans. Loans that were past due 90 days or more and still accruing at December 31, 2021 were comprised solely

Table of purchased credit impaired (PCI) loans. PCI loans were not subject to classification as non-accrual in the 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 ASU 2016-13 on January 1, 2022, all PCI loans are now considered purchased credit deteriorated (PCD) loans. Interest income recognition for PCD loans is consistent with originated loans and, therefore, PCD loans cease accruing interest at 90 days past due unless management believes that the applicable collateral held by the Company is clearly sufficient and in full satisfaction of both principal and interest. There were no PCD or originated loans at March 31, 2022 that were past due 90 days or more and still accruing. For additional discussion of non-accrual loans, refer to Contents

the later “~~Credit Ratios”~~Allowance for Loan Losses” section in this Item 2.2 for a discussion of the change in non-accrual loans which comprise our NPLs as of March 31, 2023.

The total amount of interest recorded on NPLs during both the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 was not significant. The gross interest income that would have been recorded under the original terms of those loans if they had been performing amounted to ~~$0.5~~$1.1 million and ~~$0.8~~$0.5 million for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively.

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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”~~2, “Summary of Significant Accounting Policies” 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 expiredwe adopted ASU 2022-02 on January 1, ~~2022.~~2023 which eliminated TDR accounting. Prior to the adoption of this standard, we reviewed each loan that was modified to identify whether a TDR had occurred. TDRs involved situations in which, for economic or legal reasons related to the borrower’s financial difficulties, we granted a concession to the borrower that we would not otherwise have considered. Subsequent to our adoption of this standard, we apply the loan refinancing and restructuring guidance codified in paragraphs 310-20-35-9 through 35-11 of the Accounting Standards Codification to determine whether a modification results in a new loan or a continuation of an existing loan.

InASU 2022-02 requires disclosure of loan modifications to borrowers experiencing financial difficulty. The aggregate amortized cost balance as of March 31, 2023 of loans modified during the three months ended March 31, 2023, determined in accordance with ASU 2022-02, which were determined to be modifications to borrowers experiencing financial difficulty was $2.3 million. As of March 31, 2023, there were no loans that had been modified to borrowers experiencing financial difficulty during the three months ended March 31, 2023 and which subsequently defaulted during the period.

Under previous accounting guidance, in cases where a borrower ~~experiences~~experienced financial difficulties and we ~~make~~made certain concessionary modifications to contractual terms, the loan iswas classified as a TDR. Loans modified during the three months ended March 31, 2022 ~~and 2021~~ which were determined to be TDRs, determined in accordance with previous accounting guidance in effect through December 31, 2022, totaled $0.8 million. As of March 31, 2022, there were ~~$0.8 million (post modification balance) and $0.3 million, respectively. The overall increase in TDR~~no loans ~~modified during the aforementioned periods consisted of an increase of $0.5 million in commercial loan TDR modifications. No loans were~~that had been modified during the preceding 12 months, which were party to a TDR and which subsequently defaulted during the three months ended March 31, ~~2022 or 2021.~~2022.

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 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~~Purchased credit deteriorated (“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. As of March 31, 2023 and December 31, 2022, the carrying amount of PCD loans was $67.6 million. As discussed further below, we adopted ASU 2016-13, which is 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, 2021, the carrying amount of PCI loans was $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 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.

~~The following table presents the balance of loans that received a COVID-19 modification and have not yet resumed repayment as of March 31, 2022 and December 31, 2021:~~

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Remaining COVID-19 Modifications as of March 31, 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 39,438 0.9 % 93,519 2.1 %
Commercial construction — — % — — %
Business banking 882 0.1 % 649 0.1 %
Residential real estate 6,660 0.3 % 5,870 0.3 %
Consumer home equity 1,521 0.1 % 1,365 0.1 %
Other consumer 532 0.3 % 706 0.3 %
Total $ 49,033 0.4 % $ 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.

~~As of March 31, 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 $4.6~~$56.0 million and ~~$4.7~~$56.6 million, respectively.

~~COVID-19 Pandemic-Impacted Industries.~~Potential Problem Loans. As of March 31, 2022, we believe loans to our borrowers in office, retail, restaurant, and hotel industry categories represent those which have experienced and will likely continue to experience the most adverse effects of the COVID-19 pandemic. As of March 31, 2022, the aggregate outstanding loan balance of loans to our borrowers in office, retail, restaurant, and hotel industry categories was $1.1 billion, $586.6 million, $197.1 million and $170.6 million, respectively, representing 8.9%, 4.8%, 1.6% and 1.4% of total loans, respectively. As of December 31, 2021, the aggregate outstanding loan balance of loans to our borrowers in 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.

As of March 31, 2022, the percentage of loans to our borrowers in the hotel industry category that we modified primarily due to the effects on borrowers of the COVID-19 pandemic and related economic slowdown beginning in late March 2020 and which have not yet resumed repayment was 23.1%. As of December 31, 2021, the percentage of loans to our borrowers in retail, restaurant, and hotel industry categories that we modified primarily due to the effects on borrowers of the COVID-19 pandemic and related economic slowdown beginning in late March 2020 and which had not yet resumed repayment were less than 0.1%, 2.9% and 37.6%, respectively. As of March 31, 2022 there were no loans to our borrowers in office, retail or restaurant industries that had been modified primarily due to the effects on borrowers of the COVID-19 pandemic and related economic slowdown beginning in late March 2020 and which had not yet resumed repayment. As of December 31, 2021, there were no loans to our borrowers in office industries that were modified primarily due to the effects on borrowers of the COVID-19 pandemic and related economic slowdown beginning in late March 2020 and which had not yet resumed repayment.

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. These loans are neither delinquent nor on non-accrual status. ~~At March 31, 2022 and December 31, 2021, our~~Our potential problem loans, ~~(including 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 $382.7~~increased by $70.2 million, ~~and $470.9 million, respectively. Of these potential problem loans, $266.6 million and $335.9~~or 37.5%, to $257.2 million at March 31, ~~2022 and~~2023 from $187.0 million at December 31, ~~2021, respectively, are~~2022. These loans as a percentage of total loans increased to 1.9% at March 31, 2023 from 1.4% at December 31, 2022. The increase in ~~COVID-19 impacted industries.~~potential problem loans from December 31, 2022 to March 31, 2023 was primarily due to the downgrade of several commercial and industrial and commercial real estate loans during the three months ended March 31, 2023.

Allowance for 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

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~~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 our allowance for loan losses, we segregate the loan portfolio into loan 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.

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:

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•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, ~~the Company’s~~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~~we enter 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.~~Consolidated Balance Sheet.

The allowance for loan losses ~~increased~~decreased by ~~$26.4~~$1.3 million, or ~~27.0%~~0.9%, to ~~$124.2~~$140.9 million, or ~~1.02%~~1.03% of total loans, at March 31, ~~2022~~2023 from ~~$97.8~~$142.2 million, or ~~0.80%~~1.05% of total loans at December 31, ~~2021.~~2022. The ~~increase~~decrease in the allowance for loan losses was primarily athe result of our adoption of ~~CECL,~~ASU 2022-02, as previously described ~~above. The additional reserves required~~above, which resulted in a change in reserving method for loans previously classified as ~~a result of our~~TDRs. Upon adoption of ~~CECL were primarily attributable to the~~ASU 2022-02, TDR loans ~~we acquired in connection with our acquisition of Century~~for which were recorded at fair value at the 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

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~~model, the credit mark could be considered for reserve determination purposes. In connection with our adoption of this standard, we recorded an increase to~~ the allowance for loan losses was determined by a discounted cash flow analysis, transitioned to their respective pools of ~~$27.1~~loans sharing similar risk characteristics for which the allowance for loan losses is determined on a collective basis. As a result, the allowance for loan losses for such loans was reduced by $1.1 million.

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 additional discussion of ~~our previous methodology for estimating~~ the change in allowance for loan losses, refer to the later “~~Note 5, “Loans and Allowance~~Provision for Loan ~~Losses”~~Losses ~~within the Notes to the Consolidated Financial Statements~~,” included in ~~Part I,~~the “Results of Operations” section within this Item ~~1 in this Quarterly Report on Form 10-Q and~~ 2.

~~Note 2, “Summary~~Table of ~~Significant Accounting Policies”~~Contents

~~included in Part II, Item 8 of the 2021 Form 10-K.~~

The following table summarizes credit ratios for the periods presented:

Credit Ratios


		Three Months Ended March 31,							Three Months Ended March 31,
		2022			2021				2023			2022
		(Dollars in thousands)							(Dollars in thousands)
Net loan charge-offs (recoveries):	Net loan charge-offs (recoveries):							Net loan charge-offs (recoveries):
Commercial and industrial	Commercial and industrial	$	(249)		$	(9)		Commercial and industrial	$	(139)		$	(249)
Commercial real estate	Commercial real estate	(14)			234			Commercial real estate	(4)			(14)
Commercial construction	Commercial construction	—			—			Commercial construction	—			—
Business banking	Business banking	17			1,019			Business banking	(138)			17
Residential real estate	Residential real estate	(10)			(10)			Residential real estate	(15)			(10)
Consumer home equity	Consumer home equity	(4)			(71)			Consumer home equity	6			(4)
Other consumer	Other consumer	482			208			Other consumer	445			482
Total net loan charge-offs	Total net loan charge-offs	222			1,371			Total net loan charge-offs	155			222
Average loans:	Average loans:							Average loans:
Commercial and industrial	Commercial and industrial	2,963,414			2,029,252			Commercial and industrial	3,187,533			2,963,414
Commercial real estate	Commercial real estate	4,735,257			3,761,767			Commercial real estate	5,270,526			4,735,257
Commercial construction	Commercial construction	169,608			206,315			Commercial construction	334,979			169,608
Business banking	Business banking	1,104,815			1,320,617			Business banking	972,198			1,104,815
Residential real estate	Residential real estate	1,936,629			1,391,935			Residential real estate	2,509,313			1,936,629
Consumer home equity	Consumer home equity	1,088,487			843,120			Consumer home equity	1,169,727			1,088,487
Other consumer	Other consumer	205,002			262,578			Other consumer	188,889			205,002
Average total loans (1)	Average total loans (1)	$	12,203,212		$	9,815,584		Average total loans (1)	$	13,633,165		$	12,203,212
Net charge-offs (recoveries) to average loans outstanding during the period:	Net charge-offs (recoveries) to average loans outstanding during the period:							Net charge-offs (recoveries) to average loans outstanding during the period:
Commercial and industrial	Commercial and industrial	(0.01)		%	0.00		%	Commercial and industrial	0.00		%	(0.01)		%
Commercial real estate	Commercial real estate	—			0.01			Commercial real estate	0.00			0.00
Commercial construction	Commercial construction	—			—			Commercial construction	—			—
Business banking	Business banking	—			0.08			Business banking	(0.01)			0.00
Residential real estate	Residential real estate	—			—			Residential real estate	0.00			0.00
Consumer home equity	Consumer home equity	—			(0.01)			Consumer home equity	0.00			0.00
Other consumer	Other consumer	0.24			0.08			Other consumer	0.24			0.24
Total net charge-offs (recoveries) to average loans outstanding during the period:		0.00		%	0.01		%
Total net charge-offs to average loans outstanding during the period:								Total net charge-offs to average loans outstanding during the period:	0.00		%	0.00		%
Total loans	Total loans	$	12,157,769		$	9,883,802		Total loans	$	13,661,653		$	12,157,769
Total non-accrual loans	Total non-accrual loans	33,821			42,275			Total non-accrual loans	$	34,573		$	33,821
Allowance for loan losses	Allowance for loan losses	124,166			109,138			Allowance for loan losses	$	140,938		$	124,166
Allowance for loan losses as a percent of total loans	Allowance for loan losses as a percent of total loans	1.02		%	1.10		%	Allowance for loan losses as a percent of total loans	1.03		%	1.02		%
Non-accrual loans as a percent of total loans	Non-accrual loans as a percent of total loans	0.28		%	0.43		%	Non-accrual loans as a percent of total loans	0.25		%	0.28		%
Allowance for loan losses as a percent of non-accrual loans	Allowance for loan losses as a percent of non-accrual loans	367.13		%	258.16		%	Allowance for loan losses as a percent of non-accrual loans	407.65		%	367.13		%

(1)Average loan balances exclude loans held for sale

7572

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~~(1)Average loan balances exclude loans held for sale.~~

Non-accrual loans ~~decreased $8.5~~increased $0.8 million, or ~~20.0%~~2.2%, to $34.6 million at March 31, 2023 from $33.8 million at March 31, 2022, ~~from $42.3 million at March 31, 2021,~~ primarily due to ~~a decrease~~an increase in residential real estate non-accrual loans ~~in our business banking portfolio~~of $1.3 million which was partially offset by ana decrease in commercial real estate and business banking non-accrual loans of $0.5 million and $0.4 million, respectively. The increase in non-accrual residential real estate loans is primarily due to an overall increase in ~~our consumer home equity portfolio.~~the residential real estate loan portfolio which increased 29.0% from March 31, 2022 to March 31, 2023. Non-accrual ~~business banking~~residential real estate loans as a percentage of total gross residential loans decreased ~~$10.1 million, or 59.2%, to $6.9 million~~from 0.43% at March 31, 2022 ~~from $17.0 million~~to 0.38% at March 31, ~~2021~~2023. Non-accrual commercial real estate loans and business banking loans decreased primarily due to payoffs and curing of delinquency of such loans. Non-accrual consumer home equity loans increased $3.6 million, or 102.6%, to $7.1 million at March 31, 2022 from $3.5 million at March 31, 2021 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 March 31, 2022						As of December 31, 2021							As of March 31, 2023						As of December 31, 2022
		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			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 (1)
		(Dollars in thousands)													(Dollars in thousands)
Commercial and industrial ~~(1)~~	Commercial and industrial ~~(1)~~	$	26,841	21.62	%	23.57	%	$	18,018	18.43	%	24.10	%	Commercial and industrial ~~(1)~~	$	26,929	19.11	%	23.07	%	$	26,859	18.89	%	23.10	%
Commercial real estate	Commercial real estate	44,612		35.93	%	37.90	%	52,373		53.56	%	36.82	%	Commercial real estate	55,193		39.15	%	38.04	%	54,730		38.49	%	37.98	%
Commercial construction	Commercial construction	4,414		3.55	%	2.02	%	2,585		2.64	%	1.81	%	Commercial construction	7,578		5.38	%	2.60	%	7,085		4.98	%	2.46	%
Business banking ~~(1)~~	Business banking ~~(1)~~	17,269		13.91	%	9.90	%	10,983		11.23	%	10.87	%	Business banking ~~(1)~~	15,085		10.70	%	7.93	%	16,189		11.38	%	8.08	%
Residential real estate	Residential real estate	22,243		17.91	%	16.00	%	6,556		6.70	%	15.69	%	Residential real estate	27,130		19.25	%	18.42	%	28,129		19.78	%	18.29	%
Consumer home equity	Consumer home equity	6,018		4.85	%	9.06	%	3,722		3.81	%	8.96	%	Consumer home equity	6,182		4.39	%	8.67	%	6,454		4.54	%	8.78	%
Other consumer	Other consumer	2,769		2.23	%	1.55	%	3,308		3.38	%	1.75	%	Other consumer	2,841		2.02	%	1.26	%	2,765		1.94	%	1.31	%
Other		—		—	%	—	%	242		0.25	%	—	%
Total	Total	$	124,166	100.00	%	100.00	%	$	97,787	100.00	%	100.00	%	Total	$	140,938	100.00	%	100.00	%	$	142,211	100.00	%	100.00	%

(1)~~PPP loans are included within these portfolios as of March 31,~~Percentages were revised from the percentages presented in our 2022 ~~and December 31, 2021; however, as of March 31,~~10-K. The revised figures were computed based upon loan amortized cost balances whereas the percentages presented in the 2022 ~~and December 31, 2021 no allowance for loan losses was~~10-K were computed based upon recorded ~~on these loans due to the SBA guarantee of 100% of the loans~~investment balances.

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 $45.2 million and $41.4 million at March 31, 2023 and December 31, 2022, respectively. The amount of stock we are required to purchase is proportional to our FHLB borrowings and level of total assets. Accordingly, the increase in FHLB stock is due to increased borrowings.

Goodwill and other intangible assets

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~~We held an investment in the FHLBB of $10.9 million at both March 31, 2022 and December 31, 2021.~~

~~Goodwill and other intangible assets~~

Goodwill and other intangible assets were ~~$654.8~~$660.2 million and ~~$649.7~~$661.1 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. ~~The increase in goodwill and other intangibles assets was due to the purchase of one insurance agency during the three months ended March 31, 2022.~~ We did not record any impairment to our goodwill or other intangible assets during the three months ended March 31, ~~2022.~~2023. We ~~regularly~~will continue to assess our goodwill and other intangible assets to determine if impairments are necessary.

Deposits ~~and other interest-bearing liabilities~~

Deposits originating within the markets we serve continue to be our primary source of funding our earning assets. WeHistorically, 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 stability of our fund sources and our access to additional funds. Furthermore, we shift the mix and 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 March 31, 2022		As of December 31, 2021		Change					As of March 31, 2023		As of December 31, 2022		Change
						Amount ($)		Percentage (%)							Amount ($)		Percentage (%)
		(Dollars in thousands)									(Dollars in thousands)
Demand	Demand	$	6,788,742	$	7,020,864	$	(232,122)	(3.3)	%	Demand	$	5,564,016	$	6,240,637	$	(676,621)	(10.8)	%
Interest checking	Interest checking	4,662,134		4,478,566		183,568		4.1	%	Interest checking	4,240,780		4,568,122		(327,342)		(7.2)	%
Savings	Savings	2,089,427		2,077,495		11,932		0.6	%	Savings	1,633,790		1,831,123		(197,333)		(10.8)	%
Money market investments	Money market investments	5,406,198��		5,525,005		(118,807)		(2.2)	%	Money market investments	5,135,590		4,710,095		425,495		9.0	%
Certificate of deposits		446,315		526,381		(80,066)		(15.2)	%
Certificates of deposit (1)										Certificates of deposit (1)	1,967,404		1,624,382		343,022		21.1	%
Total deposits	Total deposits	$	19,392,816	$	19,628,311	$	(235,495)	(1.2)	%	Total deposits	$	18,541,580	$	18,974,359	$	(432,779)	(2.3)	%

(1)~~The Bank’s estimate~~Brokered certificates of deposit are included in total ~~uninsured deposits was $10.6~~certificates of deposit and amounted to $609.7 million and $928.6 million at March 31, 2023 and December 31, 2022, respectively.

Deposits decreased by $0.4 billion, ~~and $11.0~~or 2.3%, to $18.5 billion at March 31, ~~2022 and December 31, 2021, respectively.~~

~~Deposits decreased by $0.2 billion, or 1.2%, to $19.4 billion at March 31, 2022~~2023 from ~~$19.6~~$19.0 billion at December 31, ~~2021.~~2022. This decrease was primarily the result of a decrease in ~~demand deposits~~brokered certificates of ~~$232.1 million, a~~deposit of $318.9 million. Brokered certificates of deposit decreased as such accounts matured and were not renewed in full as we emphasized other means for increasing our overall liquidity as of March 31, 2023. The decrease in ~~money market deposits~~brokered certificates of ~~$118.8 million and a decrease in certificate of deposits of $80.1 million. These decreases were partially~~deposit was more than offset by ~~an increase~~a shift in deposit mix of certain core deposits from demand and interest checking deposits, which decreased by $0.7 billion and $0.3 billion, respectively, to certificates of ~~$183.6 million and reflected normal~~ deposit ~~activity~~resulting in a net increase in certificates of deposit. This shift in deposit mix during the three months ended March 31, ~~2022.~~2023 was due primarily to increases in rates paid on certificates of deposit, which attracted depositors to such products. Money market investments increased $0.4 billion primarily due to increased IntraFi Network deposits. Refer to the later “Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies” section in this Item 2 for additional discussion of such deposits.

The Bank’s estimate of total uninsured deposits was $8.4 billion and $9.0 billion at March 31, 2023 and December 31, 2022, respectively. In accordance with the FDIC’s Call Report instructions, these estimates include accounts of wholly-owned subsidiaries, the holding company, and internal operating deposit accounts (together referred to as “internal deposit accounts”). In addition, these estimates include municipal deposit accounts for which securities were pledged by us to secure such deposits (“collateralized deposits”). For liquidity monitoring purposes, we exclude internal deposit accounts and collateralized deposits from our estimate of uninsured deposits. Our estimate of uninsured deposits, excluding internal deposit accounts and collateralized deposits, was $6.7 billion and $7.3 billion at March 31, 2023 and December 31, 2022, respectively.

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The following table presents the classification of deposits on an average basis for the periods below:

Classification of Deposits on an Average Basis

For the Three Months Ended March 31, 2022 For the Year Ended December 31, 2021
Average
Amount Average
Rate Average
Amount Average
Rate
(Dollars in thousands)
Demand $ 6,821,811 — % $ 5,547,615 — %
Interest checking 4,596,026 0.18 % 2,866,091 0.07 %
Savings 2,076,754 0.01 % 1,483,271 0.02 %
Money market investments 5,568,264 0.07 % 3,870,712 0.06 %
Certificate of deposits 481,833 0.27 % 280,141 0.21 %
Total deposits $ 19,544,688 0.07 % $ 14,047,830 0.04 %

~~Table of Contents~~


	For the Three Months Ended March 31, 2023				For the Year Ended December 31, 2022
	Average Amount		Average Rate		Average Amount		Average Rate
	(Dollars in thousands)
Demand	$	5,825,269	—	%	$	6,647,518	—	%
Interest checking	4,363,528		0.44	%	4,890,709		0.24	%
Savings	1,721,143		0.02	%	2,015,651		0.01	%
Money market investments	5,040,330		1.63	%	5,057,445		0.27	%
Certificate of deposits	1,931,860		3.74	%	463,261		0.70	%
Total deposits	$	18,882,130	0.92	%	$	19,074,584	0.15	%

Other time deposits in excess of the FDIC insurance limit of $250,000, including certificates of deposits as of the dates indicated, had maturities as follows:

~~Maturities of Time Certificates of Deposit $250,000 and Over~~


		As of March 31, 2022		As of December 31, 2021			As of March 31, 2023		As of December 31, 2022
Maturing in	Maturing in	(In thousands)				Maturing in	(In thousands)
Three months or less	Three months or less	$	61,465	$	113,019	Three months or less	$	50,023	$	39,322
Over three months through six months	Over three months through six months	51,411		53,899		Over three months through six months	93,093		45,053
Over six months through 12 months	Over six months through 12 months	28,945		33,295		Over six months through 12 months	352,145		149,107
Over 12 months	Over 12 months	23,368		23,827		Over 12 months	4,566		5,569
Total	Total	$	165,189	$	224,040	Total	$	499,827	$	239,051

Borrowings

Our borrowings consist of both short-term and long-term borrowings and provide us with sources of funding. Maintaining available borrowing capacity provides us with a contingent source of liquidity.

Our total borrowings increased by ~~$0.6~~$397.6 million ~~or 1.9%,~~ to ~~$34.9 million~~$1.1 billion at March 31, ~~2022~~2023 compared to ~~$34.3~~$740.8 million at December 31, ~~2021.~~2022. The increase was primarily due to an increase in ~~escrow deposits~~FHLB short-term advances, which we borrowed to increase our liquidity. Refer to the later “Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies” section in this Item 2 for additional discussion of our ~~borrowers.~~liquidity position.

The following table sets forth information concerning balances on our borrowings as of the dates and for the periods indicated:

Borrowings by Category


						Change									Change
		As of March 31, 2022		As of December 31, 2021		Amount ($)		Percentage (%)			As of March 31, 2023		As of December 31, 2022		Amount ($)		Percentage (%)
		(In thousands)									(Dollars in thousands)
FHLB advances		$	13,689	$	14,020	$	(331)	(2.4)	%
FHLB short-term advances										FHLB short-term advances	$	1,088,296	$	691,297	$	396,999	57.4	%
Escrow deposits of borrowers	Escrow deposits of borrowers	21,233		20,258		975		4.8	%	Escrow deposits of borrowers	25,671		22,314		3,357		15.0	%
Interest rate swap collateral funds										Interest rate swap collateral funds	11,780		14,430		(2,650)		(18.4)	%
FHLB long-term advances										FHLB long-term advances	12,656		12,787		(131)		(1.0)	%
Total	Total	$	34,922	$	34,278	$	644	1.9	%	Total	$	1,138,403	$	740,828	$	397,575	53.7	%

Results of Operations

Summary of Results of Operations

Three Months Ended March 31,
Change
2022 2021 Amount
($) Percentage
(Dollars in thousands)
Interest and dividend income $ 131,485 $ 101,133 $ 30,352 30.0 %
Interest expense 3,361 1,042 2,319 222.6 %
Net interest income 128,124 100,091 28,033 28.0 %
Release of allowance for loan losses (485) (580) 95 (16.4) %
Noninterest income 46,415 55,212 (8,797) (15.9) %
Noninterest expense 108,866 94,049 14,817 15.8 %
Income tax expense 14,642 14,171 471 3.3 %
Net income 51,516 47,663 3,853 8.1 %

~~Comparison of the three months ended March 31, 2022 and 2021~~

~~Interest and Dividend Income~~

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	Three Months Ended March 31,
					Change
	2023		2022		Amount ($)		Percentage
	(Dollars in thousands)
Interest and dividend income	$	188,880	$	131,485	$	57,395	43.7	%
Interest expense	50,571		3,361		47,210		1,404.6	%
Net interest income	138,309		128,124		10,185		7.9	%
Provision for (release of) allowance for loan losses	25		(485)		510		(105.2)	%
Noninterest income	(278,330)		46,415		(324,745)		(699.7)	%
Noninterest expense	116,294		108,866		7,428		6.8	%
Income tax (benefit) expense	(62,244)		14,642		(76,886)		(525.1)	%
Net (loss) income	(194,096)		51,516		(245,612)		(476.8)	%

Comparison of the three months ended March 31, 2023 and 2022

Interest and Dividend Income

Interest and dividend income increased by ~~$30.4~~$57.4 million, or ~~30.0%~~43.7%, to $188.9 million during the three months ended March 31, 2023 from $131.5 million during the three months ended March 31, ~~2022 from $101.1 million during the three months ended March 31, 2021.~~2022. The increase was primarily a result of our acquisition of Century on November 12, 2021, which added approximately $6.6 billion in interest-earning assets. Overall, the average balance of our interest-earning assets increased $6.7 billion, or 43.9%, to $21.9 billion as of March 31, 2022 compared to $15.2 billion as of March 31, 2021, reflecting the addition of Century assets. Partially offsetting thisan increase ~~was a decrease~~ in the yield on average interest-earning assets which ~~decreased~~increased by 25112 basis points compared with the three months ended March 31, ~~2021.~~2022. Our yields on loans and securities are generally presented on an FTE basis where the embedded tax benefit on loans orand securities are calculated and added to the yield. Management believes that this presentation allows for better comparability between institutions with different tax structures. Partially offsetting the impact of increased yields was a decrease in the average balance of our interest-earning assets which decreased slightly by $83.2 million, or 0.4%, to $21.8 billion during the three months ended March 31, 2023 compared to $21.9 billion during the three months ended March 31, 2022, which was primarily attributable to a decrease in the average balance of securities.

•Interest income on loans increased $52.2 million, or 51.5%, to $153.5 million during the three months ended March 31, 2023 from $101.4 million during the three months ended March 31, 2022. The increase in interest income on our loans was due to an increase in our yields on loans and an increase in the average balance of loans. The overall yield on our loans increased 126 basis points during the three months ended March 31, 2023 in comparison to the three months ended March 31, 2022. The increase in yield was primarily due to increases in market rates of interest which resulted in increased yields on variable rate loans which repriced and new loans originated at higher rates of interest. The average balance of our loans increased $1.4 billion, or 11.7%, to $13.6 billion during the three months ended March 31, 2023 from $12.2 billion during the three months ended March 31, 2022. Refer to the earlier “Loans” discussion within the “Financial Position” section within this Item 2 for additional discussion of changes in our loans balances.

•Interest income on securities and ~~federal funds sold and~~ other short-term investments increased ~~$17.6~~$5.2 million, or ~~141.1%~~17.3%, to $35.3 million during the three months ended March 31, 2023 from $30.1 million during the three months ended March 31, ~~2022 from $12.5 million during the three months ended March 31, 2021.~~2022. The increase in interest income on our securities was due to an increase in the average yield of such securities. The yield on our securities and short-term investments increased 50 basis points during the three months ended March 31, 2023 in comparison to the three months ended March 31, 2022 primarily due to an increase in the rate paid on our cash held at the Federal Reserve Bank of Boston from an average of 0.19% during the three months ended March 31, 2022 to an average of 4.59% during the three months ended March 31, 2023. In addition, our cash deposited at the Federal Reserve Bank of Boston increased during the three months ended March 31, 2023 compared to the three months ended March 31, 2022 due primarily to the deposit of proceeds from the sale of AFS securities (discussed earlier) in March 2023. Partially offsetting this increase was a corresponding decrease in our average securities balance, ~~of such securities of $4.3~~which decreased $1.5 billion, or ~~79.6%~~15.7%, to $8.1 billion for the three months ended March 31, 2023 from $9.7 billion for the three months ended March 31, 2022 ~~from $5.4 billion for the three months ended March 31, 2021, which was~~ primarily due to the sales of AFS securities ~~acquired~~ in ~~connection with our acquisition~~March 2023. For additional discussion of ~~Century of $3.1 billion combined with security purchases.~~the sales, refer to the section titled “Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies” within this Item 2.

•Interest income on loans increased $12.7 million, or 14.4%, to $101.4 million during the three months ended March 31, 2022 from $88.6 million during the three months ended March 31, 2021. The increase in interest income on our loans was primarily due to a $2.4 billion, or 24%, increase in average totals loans. Average loans increased to $12.2 billion during the three months ended March 31, 2022 from $9.8 billion during the three months ended March 31, 2021. The increase in interest income on our loans was partially offset by a decrease in net accretion of PPP loan deferred fees and costs of $2.5 million, or 30.1%, to $5.8 million during the three months ended March 31, 2022 from $8.3 million during three months ended March 31, 2021.

Interest Expense

~~Interest~~

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During the three months ended March 31, 2023, interest expense increased ~~$2.3~~$47.2 million ~~or 222.6%,~~ to $50.6 million from $3.4 million during the three months ended March 31, ~~2022 from $1.0 million during the three months ended March 31, 2021.~~2022. The increase was primarily attributable to an increase in deposit interest ~~expense.~~expense, which was primarily attributable to an increase in the deposit rates we offered.

~~Interest~~During the three months ended March 31, 2023, interest expense on our interest-bearing deposits increased by ~~$2.3~~$39.6 million ~~or 231.5%,~~ to $42.9 million from $3.3 million during the three months ended March 31, ~~2022 from $1.0 million~~2022. This increase was due to an increase in the rates paid on deposits and an increase in average interest-bearing deposits. Rates paid on deposits increased by 122 basis points to 1.33% during the three months ended March 31, 2021. This increase was primarily due to an increase in average interest-bearing deposits which increased $5.3 billion, or 72.3%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021, primarily due to the Century acquisition. An increase in rates paid on deposits also contributed to the overall increase in deposit interest expense. Rates paid on deposits increased by 5 basis points to2023 from 0.11% during the three months ended March 31, 2022, ~~from 0.06%~~which we increased in response to an increase in market rates of interest and heightened industry-wide competition for deposits. In addition, beginning in the fourth quarter of 2022, we began purchasing brokered certificates of deposit. Such deposits bear higher rates of interest in comparison to our core deposits. Consequently, the purchases of brokered certificates of deposit contributed to the increase in rates paid on deposits.

Interest expense related to our borrowings increased by $7.6 million to $7.6 million during the three months ended March 31, ~~2021.~~2023 from less than $0.1 million during the three months ended March 31, 2022. The increase in borrowings interest expense is attributable to an increase in our utilization of our FHLB borrowing capacity. For additional discussion of the increase in borrowings, refer to the section titled “Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies” within this Item 2.

Net Interest Income

Net interest income increased by ~~$28.0~~$10.2 million, or ~~28.0%~~7.9%, to ~~$128.1~~$138.3 million during the three months ended March 31, ~~2022~~2023 from ~~$100.1~~$128.1 million for the three months ended March 31, 2022. Net interest income increased due to an increase in yield on interest-earning assets which exceeded the increase in the cost of interest-bearing liabilities. Partially offsetting the increase in yields on our interest-earning assets was the decrease in the balance of average net interest-earning assets of $1.1 billion, or 11.7%, to $8.0 billion during the three months ended March 31, ~~2021. Net interest income increased primarily due to an increase in net interest-earning assets of $1.3 billion, or 17.0%, to~~2023 from $9.1 billion during the three months ended March 31, ~~2022 from $7.8 billion during the three months ended March 31, 2021.~~2022.

The following chart shows our net interest margin over the past five ~~quarters including and excluding net PPP loan fee accretion:~~quarters:

~~Table of Contents~~

Net interest margin is determined by dividing FTE net interest income by ~~average-earning~~average interest-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% for the three months ended March 31, 2023 and 21.5% for the three months ended March 31, ~~2022 and 21.0% for~~2022. Net interest margin increased 24 basis points to 2.66% during the three months ended March 31, ~~2021. Net interest margin, including PPP loan interest income, decreased 29 basis points to~~2023, from 2.42% during the three months ended March 31, ~~2022, from 2.71% during~~2022. The increase in net interest margin for the three months ended March 31, ~~2021, which~~

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2023 from the three months ended March 31, 2022 was primarily due to ~~the downward repricing~~an increase in market rates of interest which resulted in an increase in our commercial loans and investment securities since March 31, 2021. Refer to the above “Interest and Dividend Income” and “Interest Expense” sections for a description of the primary causes of the decline in net interest margin.

yield on interest-earning assets.

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The following tables set forth average balance sheet items, annualized average yields and costs, and certain other information for the periods indicated. All average balances 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


		As of and for the three months ended March 31,															As of and for the three months ended March 31,
		2022							2021								2023							2022
		Average Outstanding Balance			Interest		Average Yield/Cost (5)		Average Outstanding Balance			Interest		Average Yield /Cost (5)			Average Outstanding Balance			Interest		Average Yield/Cost (5)		Average Outstanding Balance			Interest		Average Yield /Cost (5)
		(Dollars in thousands)															(Dollars in thousands)
Interest-earning assets:	Interest-earning assets:															Interest-earning assets:
Loans (1)	Loans (1)															Loans (1)
Residential	Residential	$	1,937,494		$	14,471	3.03	%	$	1,393,139		$	11,274	3.28	%	Residential	$	2,513,413		$	21,614	3.49	%	$	1,937,494		$	14,471	3.03	%
Commercial	Commercial	8,973,094			78,226		3.54	%	7,317,951			69,210		3.84	%	Commercial	9,765,236			115,929		4.81	%	8,973,094			78,226		3.54	%
Consumer	Consumer	1,293,489			10,450		3.28	%	1,105,698			8,937		3.28	%	Consumer	1,358,616			20,059		5.99	%	1,293,489			10,450		3.28	%
Total loans	Total loans	12,204,077			103,147		3.43	%	9,816,788			89,421		3.69	%	Total loans	13,637,265			157,602		4.69	%	12,204,077			103,147		3.43	%
Non-taxable investment securities	Non-taxable investment securities	259,908			2,287		3.57	%	260,870			2,371		3.69	%	Non-taxable investment securities	197,766			1,817		3.73	%	259,908			2,287		3.57	%
Taxable investment securities	Taxable investment securities	8,387,292			27,876		1.35	%	3,370,660			10,206		1.23	%	Taxable investment securities	7,486,899			28,642		1.55	%	8,387,292			27,876		1.35	%
Federal funds sold and other short-term investments		1,003,416			436		0.18	%	1,740,561			432		0.10	%
Other short-term investments																Other short-term investments	449,543			5,264		4.75	%	1,003,416			436		0.18	%
Total interest-earning assets	Total interest-earning assets	21,854,693			133,746		2.48	%	15,188,879			102,430		2.73	%	Total interest-earning assets	$	21,771,473		$	193,325	3.60	%	$	21,854,693		$	133,746	2.48	%
Non-interest-earning assets	Non-interest-earning assets	1,436,702							1,120,603							Non-interest-earning assets	739,270							1,436,702
Total assets	Total assets	$	23,291,395						$	16,309,482						Total assets	$	22,510,743						$	23,291,395
Interest-bearing liabilities:	Interest-bearing liabilities:															Interest-bearing liabilities:
Deposits:	Deposits:															Deposits:
Savings account	Savings account	$	2,076,754		$	51	0.01	%	$	1,300,057		$	64	0.02	%	Savings account	$	1,721,143		$	81	0.02	%	$	2,076,754		$	51	0.01	%
Interest checking account	Interest checking account	4,596,026			2,032		0.18	%	2,391,025			234		0.04	%	Interest checking account	4,363,528			4,711		0.44	%	4,596,026			2,032		0.18	%
Money market investment	Money market investment	5,568,264			920		0.07	%	3,440,214			587		0.07	%	Money market investment	5,040,330			20,305		1.63	%	5,568,264			920		0.07	%
Time account	Time account	481,833			319		0.27	%	251,115			117		0.19	%	Time account	1,931,860			17,836		3.74	%	481,833			319		0.27	%
Total interest-bearing deposits	Total interest-bearing deposits	12,722,877			3,322		0.11	%	7,382,411			1,002		0.06	%	Total interest-bearing deposits	13,056,861			42,933		1.33	%	12,722,877			3,322		0.11	%
Borrowings	Borrowings	30,669			39		0.52	%	25,625			40		0.63	%	Borrowings	675,056			7,638		4.59	%	30,669			39		0.52	%
Total interest-bearing liabilities	Total interest-bearing liabilities	12,753,546			3,361		0.11	%	7,408,036			1,042		0.06	%	Total interest-bearing liabilities	$	13,731,917		$	50,571	1.49	%	$	12,753,546		$	3,361	0.11	%
Demand accounts	Demand accounts	6,821,811							5,125,831							Demand accounts	5,825,269							6,821,811
Other noninterest-bearing liabilities	Other noninterest-bearing liabilities	442,591							358,087							Other noninterest-bearing liabilities	493,387							442,591
Total liabilities	Total liabilities	20,017,948							12,891,954							Total liabilities	20,050,573							20,017,948
Shareholders’ equity	Shareholders’ equity	3,273,447							3,417,528							Shareholders’ equity	2,460,170							3,273,447
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	23,291,395						$	16,309,482						Total liabilities and shareholders’ equity	$	22,510,743						$	23,291,395
Net interest income – FTE	Net interest income – FTE				$	130,385						$	101,388			Net interest income – FTE				$	142,754						$	130,385
Net interest rate spread (2)	Net interest rate spread (2)						2.37	%						2.67	%	Net interest rate spread (2)						2.11	%						2.37	%
Net interest-earning assets (3)	Net interest-earning assets (3)	$	9,101,147						$	7,780,843						Net interest-earning assets (3)	$	8,039,556						$	9,101,147
Net interest margin – FTE (4)	Net interest margin – FTE (4)						2.42	%						2.71	%	Net interest margin – FTE (4)						2.66	%						2.42	%
Average interest-earning assets to interest-bearing liabilities	Average interest-earning assets to interest-bearing liabilities	171.36		%					205.03		%					Average interest-earning assets to interest-bearing liabilities	158.55		%					171.36		%
Return on average assets (5)		0.90		%					1.19		%
Return on average equity (6)		6.38		%					5.66		%
Noninterest expenses to average assets		1.90		%					2.34		%
(Loss) return on average assets (5)(6)																(Loss) return on average assets (5)(6)	(3.50)		%					0.90		%
(Loss) return on average equity (5)(7)																(Loss) return on average equity (5)(7)	(32.00)		%					6.38		%
Noninterest expense to average assets																Noninterest expense to average assets	2.10		%					1.90		%

(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.~~

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(4)Net interest margin - FTE represents fully-taxable equivalent net interest income divided by average total interest-earning assets. Refer to the earlier “Non-GAAP Financial Measures” section within this Item 2 for additional information.

(5)Presented on an annualized basis.

(6)Represents net (loss) income divided by average total assets.

~~(6)~~(7)Represents net (loss) income divided by average equity.

The following chart shows the composition of our quarterly average interest-earning assets ~~as of the end of~~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.

We recorded a ~~release of the allowance~~provision for loan losses of less than $0.1 million for the three months ended March 31, 2023, compared to a release of $0.5 million for the three months ended March 31, ~~2022, compared~~2022. Management determined a provision to ~~a release~~be necessary due primarily to increased loan balances.

Management’s estimate of our allowance for loan losses as of March 31, 2023 and the provision ~~of $0.6 million~~for loan losses for the three months ended March 31, ~~2021. Given relatively consistent~~2023, was supported, in part, by Oxford Economics’ March 2023 Baseline forecast (“the forecast”) which was used to develop management’s estimate of the effect of expected future economic ~~and credit~~ conditions ~~during~~on the ~~three months ended March~~allowance for loan losses. The forecast assumed the U.S. economy will enter a recession in the third quarter of 2023 compared to the assumption used as of December 31, 2022 ~~compared with three months ended March 31, 2021, we determined that~~which had assumed the U.S. economy would enter a ~~slight release~~recession in the second quarter of 2023. This forecast reflects the combination of continued strong consumer product demand, consistent labor market metrics, and stronger economic growth rates than anticipated following the recent increases to the federal funds rate by the FOMC. Primary macroeconomic assumptions included in management’s evaluation of the adequacy of the allowance ~~was necessary.~~for loan losses included continued low unemployment rates and a steady gross domestic product (“GDP”). Further, the forecast assumed that the FOMC will continue to raise interest rates into mid-2023 following its most recent March 2023 increase. The core consumer price index remained steady, and is expected to remain well above the FOMC’s 2% target through 2023. Refer to the 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 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.

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To illustrate the sensitivity of the modeled result to the impact of a hypothetical change in the economic forecast, management calculated the allowance for loan losses assuming the downside economic forecast scenario and, separately, the upside economic forecast scenario. The downside scenario assumed the U.S. economy will enter a more severe recession in the third quarter of 2023 and experience a decline in GDP of 3.0% peak-to-trough. Use of the downside scenario would have resulted in an incremental increase in the allowance for loan losses of approximately $9.0 million as of March 31, 2023. The upside scenario assumed GDP growth of 1.8% in 2023, 2.0% in 2024 and sustained recovery. Use of the upside scenario would have resulted in an incremental decrease in the allowance for loan losses of approximately $4.9 million as of March 31, 2023.

Our periodic evaluation of the appropriate allowance for loan losses considers ~~among other criteria,~~ the risk characteristics of the loan portfolio, current ~~and expected future~~ 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 March 31,
					Change
	2023		2022		Amount		%
	(Dollars in thousands)
Insurance commissions	$	31,503	$	28,713	$	2,790	9.7	%
Service charges on deposit accounts	6,472		8,537		(2,065)		(24.2)	%
Trust and investment advisory fees	5,770		6,141		(371)		(6.0)	%
Debit card processing fees	3,170		2,945		225		7.6	%
Interest rate swap (losses) income	(408)		2,932		(3,340)		(113.9)	%
Income (losses) from investments held in rabbi trusts	2,857		(4,433)		7,290		(164.4)	%
(Losses) gains on sales of mortgage loans held for sale, net	(74)		169		(243)		(143.8)	%
(Losses) on sales of securities available for sale, net	(333,170)		(2,172)		(330,998)		15,239.3	%
Other	5,550		3,583		1,967		54.9	%
Total noninterest (loss) income	$	(278,330)	$	46,415	$	(324,745)	(699.7)	%

Noninterest income decreased $324.7 million, to a net loss of $278.3 million for the three months ended March 31, 2023 from income of $46.4 million for the three months ended March 31, 2022. This decrease was primarily due to a $331.0 million increase in losses on sales of securities available for sale, a $3.3 million decrease in interest rate swap income which resulted from a current period net loss from such swaps compared to net income in the comparative prior period, and a $2.1 million decrease in service charges on deposit accounts. These unfavorable items were partially offset by a $7.3 million increase in income from investments held in rabbi trusts and a $2.8 million increase in insurance commissions.

•Losses on sales of securities available for sale, net, increased by $331.0 million to $333.2 million for the three months ended March 31, 2023 from $2.2 million for the three months ended March 31, 2022 due to balance sheet repositioning which was completed in March 2023 and included the decision by management to sell certain available for sale securities. Refer to the section titled“Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies” within this Item 2 for additional discussion of such sales.

•Interest rate swap income decreased to a loss primarily as a result of an unfavorable mark-to-market adjustment for the three months ended March 31, 2023 compared a favorable mark-to-market adjustment for the three months ended March 31, 2022.

•Service charges on deposit accounts decreased primarily as a result of decreased corporate account analysis charges which was due primarily to lower commercial deposit account customer activity because of heightened industry-wide competition for deposits. Also contributing to the decrease was a decrease in customer overdraft charges which decreased primarily as a result of our decision to reduce the amount of the overdraft fees charged to our customers beginning in the third quarter of 2022.

•Income from investments held in rabbi trusts increased primarily as a result of a favorable mark-to-market adjustment on equity securities held in these accounts for the three months ended March 31, 2023 resulting from an increase in the market value of equity securities held in the rabbi trusts as compared to an unfavorable mark-to-market adjustment for the three months ended March 31, 2022.

•Insurance commissions increased primarily as a result of an increase in recurring commission income which was attributable to recent agency acquisitions consummated during the year ended December 31, 2022.

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Three Months Ended March 31,
Change
2022 2021 Amount %
(Dollars in thousands)
Insurance commissions $ 28,713 $ 28,147 $ 566 2.0 %
Service charges on deposit accounts 8,537 5,367 3,170 59.1 %
Trust and investment advisory fees 6,141 5,663 478 8.4 %
Debit card processing fees 2,945 2,749 196 7.1 %
Interest swap income 2,932 5,405 (2,473) (45.8) %
(Losses) income from investments held in rabbi trusts (4,433) 1,846 (6,279) (340.1) %
Gains on sales of mortgage loans held for sale, net 169 1,479 (1,310) (88.6) %
(Losses) gains on sales of securities available for sale, net (2,172) 1,164 (3,336) (286.6) %
Other 3,583 3,392 191 5.6 %
Total noninterest income $ 46,415 $ 55,212 $ (8,797) (15.9) %

Noninterest income decreased by $8.8 million, or 15.9%, to $46.4 million for the three months ended March 31, 2022 from $55.2 million for the three months ended March 31, 2021. This decrease was primarily due to a $6.3 million decrease in income from investments held in rabbi trusts which resulted from a current period net loss, a $3.3 million decrease in gain on sales of securities available for sale which resulted from a current period net loss on sale, and a $2.5 million decrease in interest swap income. The decreases in these line items were partially offset by a $3.2 million increase in service charges on deposit accounts.

•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.

•Gains on sales of securities available for sale, net, decreased to a net loss due to the decision by management to sell certain available for sale securities during the three months ended March 31, 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.

•~~Interest rate swap income decreased primarily as a result of a less favorable mark-to-market adjustment during the three months ended March 31, 2022 compared to the three months ended March 31, 2021.~~

•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.

Noninterest Expense

The following table sets forth information regarding noninterest expense for the periods shown:

~~Table of Contents~~

Noninterest Expense


		Three Months Ended March 31,									Three Months Ended March 31,
						Change									Change
		2022		2021		Amount		%			2023		2022		Amount		%
		(Dollars in thousands)									(Dollars in thousands)
Salaries and employee benefits	Salaries and employee benefits	$	69,526	$	64,040	$	5,486	8.6	%	Salaries and employee benefits	$	78,478	$	69,526	$	8,952	12.9	%
Office occupancy and equipment	Office occupancy and equipment	11,614		8,217		3,397		41.3	%	Office occupancy and equipment	9,878		11,614		(1,736)		(14.9)	%
Data processing	Data processing	15,320		12,129		3,191		26.3	%	Data processing	13,441		15,320		(1,879)		(12.3)	%
Professional services	Professional services	4,701		4,148		553		13.3	%	Professional services	3,420		3,950		(530)		(13.4)	%
Marketing	Marketing	1,574		1,691		(117)		(6.9)	%	Marketing	1,097		1,574		(477)		(30.3)	%
Loan expenses	Loan expenses	1,168		1,847		(679)		(36.8)	%	Loan expenses	1,095		1,919		(824)		(42.9)	%
FDIC insurance	FDIC insurance	1,412		948		464		48.9	%	FDIC insurance	2,546		1,412		1,134		80.3	%
Amortization of intangible assets	Amortization of intangible assets	827		532		295		55.5	%	Amortization of intangible assets	960		827		133		16.1	%
Other	Other	2,724		497		2,227		448.1	%	Other	5,379		2,724		2,655		97.5	%
Total noninterest expense	Total noninterest expense	$	108,866	$	94,049	$	14,817	15.8	%	Total noninterest expense	$	116,294	$	108,866	$	7,428	6.8	%

Noninterest expense increased by ~~$14.8~~$7.4 million, or ~~15.8%~~6.8%, to $116.3 million during the three months ended March 31, 2023 from $108.9 million during the three months ended March 31, ~~2022 from $94.0 million during the three months ended March 31, 2021.~~2022. This increase was primarily due to ~~an $5.5~~a $9.0 million increase in salaries and employee benefits and a ~~$3.4~~$2.7 million increase in other noninterest expenses. Partially offsetting these increases were a $1.9 million decrease in data processing expenses and a $1.7 million decrease in office occupancy and equipment ~~expenses, a $3.2 million increase in data processing, and a $2.2 million increase in other noninterest~~ expenses.

•Salaries and employee benefits increased primarily due to an increase of $3.7 million in regular salaries and wages ~~for former employees~~expense, which was primarily due to costs of ~~Century who were retained subsequent~~living salary and wage increases and the addition of new employees. Also contributing to the ~~acquisition. In addition, we incurred $1.6~~increase was a $3.4 million increase in ~~share-based compensation~~benefit expense related to ~~restricted stock awards granted~~our defined contribution supplemental executive retirement plan (“DC SERP”). Participant benefits are adjusted based upon deemed investment performance. Accordingly, such investments experienced an increase in ~~the fourth quarter of 2021 and awards of restricted stock units and performance stock units granted in the first quarter of 2022. No related expenses were incurred~~value during the three months ended March 31, ~~2021~~2023 resulting in a corresponding increase in the related benefit expense. Also contributing to the increase in salaries and employee benefits was an increase in the legacy long-term cash-based incentive plan compensation expense as nowell as an increase in the restricted stock award expense. Expense related to the long-term cash-based incentive plan was a net credit (reduction of expense) during the three months ended March 31, 2023 and 2022, which resulted from a decline in certain metrics to which the awards are tied during such periods. The decline in expense during the three months ended March 31, 2023 was less than the decline during the three months ended March 31, 2022. Also contributing to the increase was a $1.4 million increase in restricted stock award expense, which increased due to the restricted stock awards ~~had been granted.~~granted during the second quarter of 2022. Partially offsetting this increase was a decrease of $1.5 million in the pension service cost, which was primarily driven by a decrease in the assumed rate of compensation increase.

•~~Office occupancy and equipment~~Other noninterest expenses increased primarily due to a $3.1 million increase in other pension expense. This is primarily due to a decrease in expected return on plan assets in our Defined Benefit Plan. For further discussion on the Company’s Defined Benefit Plan refer to see Note 10, “Employee Benefits” within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q. Also contributing to this increase was a $1.4 million increase in the provision for credit losses on off balance sheet exposures, which is primarily due to an increase in unfunded commercial loan commitments. Partially offsetting these items was a $1.0 million decrease in bad check losses, which is primarily due to recuperated losses from the year ended December 31, 2022. Also partially offsetting these increases was a $0.7 million decrease in other professional fees, which was driven by a decrease in printed check costs, which was higher than usual during the three months ended March 31, 2022 ~~as compared~~in order to ~~the three months ended March 31, 2021 primarily due to a $0.8 million increase in depreciation expense, which was related to fixed assets acquired~~accommodate new customers from ~~Century, lease impairment charges~~our acquisition of $0.6 million, which were due to an early termination of a lease acquired from Century, and a $0.6 million increase in outsourced facilities maintenance expenses, which was primarily due to janitorial services at properties 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 during the three months ended March 31, 2022 from the three months ended March 31, 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.

•Other noninterest expenses increased primarily due to a $1.1 million increase in customer bad check losses during the three months ended March 31, 2022 compared to during three months ended March 31, 2021, consistent with a nationwide increase in mail-based check fraud, and a $0.7 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, our required insurance coverage.

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volume. Such expenses, including core data processing expenses, decreased during the three months ended March 31, 2023 from the three months ended March 31, 2022, primarily due to decreased customer deposit activity.

•Office occupancy and equipment expenses decreased primarily due to a decrease in depreciation expense during the three months ended March 31, 2023 compared to during the three months ended March 31, 2022.

Income Taxes

We recognize the tax effect of all income and expense transactions in each year’s ~~consolidated statements~~Consolidated Statements of ~~income,~~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 March 31,
2022 2021
(Dollars in thousands)
Combined federal and state income tax provisions $ 14,642 $ 14,171
Effective income tax rates 22.1 % 22.9 %
Blended statutory tax rate 28.1 % 28.1 %


	Three Months Ended March 31,
	2023			2022
	(Dollars in thousands)
Combined federal and state income tax (benefit) provision	$	(62,244)		$	14,642
Effective income tax rate	24.3		%	22.1		%
Blended statutory tax rate	28.2		%	28.1		%

Income tax expense ~~increased~~decreased by ~~$0.4~~$76.9 million ~~or 3.3%,~~ to ~~$14.6~~a $62.2 million ~~during~~benefit in the three months ended March 31, ~~2022~~2023 from ~~$14.2~~a $14.6 million ~~during~~expense in the three months ended March 31, ~~2021.~~2022. The ~~effective~~decrease in income tax ~~rate was 22.1%~~expense, which resulted in a tax benefit for the three months ended March 31, ~~2022 as compared~~2023, was primarily due to ~~22.9% for the three months ended March 31, 2021. The increase in~~lower income before income tax expense, ~~was due primarily~~which decreased to higher pre-tax income during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The decrease in the effective tax rate primarily resulted from increases in favorable permanent differences, including investment tax credits and tax exempt income.a loss as a consequence of losses realized on sales of available for sale securities. For additional information related to the Company’s income taxes see Note 12, “Income Taxes” within the Notes to the Unaudited Consolidated Financial Statements included in Part ~~II,~~I, Item 81 in ~~the Company’s 2021 10-K.~~this Quarterly Report on Form 10-Q.

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Financial Position and Results of Operations of our Business Segments

Comparison of the three months ended March 31, ~~2022~~2023 and ~~2021~~2022


		As of and for the three months ended March 31,																	As of and for the three months ended March 31,
		2022								2021									2023								2022
		Banking Business		Insurance Agency Business		Other/ Eliminations		Total		Banking Business		Insurance Agency Business		Other/ Eliminations		Total			Banking Business		Insurance Agency Business		Other/ Eliminations		Total		Banking Business		Insurance Agency Business		Other/ Eliminations		Total
		(In thousands)																	(In thousands)
Net interest income	Net interest income	$	128,124	$	—	$	—	$	128,124	$	100,091	$	—	$	—	$	100,091	Net interest income	$	138,309	$	—	$	—	$	138,309	$	128,124	$	—	$	—	$	128,124
(Release of) provision for loan losses		(485)		—		—		(485)		(580)		—		—		(580)
Provision for (release of) allowance for loan losses																		Provision for (release of) allowance for loan losses	25		—		—		25		(485)		—		—		(485)
Net interest income after provision for loan losses	Net interest income after provision for loan losses	128,609		—		—		128,609		100,671		—		—		100,671		Net interest income after provision for loan losses	138,284		—		—		138,284		128,609		—		—		128,609
Noninterest income		18,137		28,449		(171)		46,415		26,960		28,284		(32)		55,212
Noninterest (loss) income																		Noninterest (loss) income	(310,206)		32,044		(168)		(278,330)		18,137		28,449		(171)		46,415
Noninterest expense	Noninterest expense	90,446		19,473		(1,053)		108,866		75,274		19,811		(1,036)		94,049		Noninterest expense	95,946		21,588		(1,240)		116,294		90,446		19,473		(1,053)		108,866
Income before provision for income taxes		56,300		8,976		882		66,158		52,357		8,473		1,004		61,834
Income tax provision		12,108		2,534		—		14,642		11,793		2,378		—		14,171
Net income		$	44,192	$	6,442	$	882	$	51,516	$	40,564	$	6,095	$	1,004	$	47,663
(Loss) income before income tax expense																		(Loss) income before income tax expense	(267,868)		10,456		1,072		(256,340)		56,300		8,976		882		66,158
Income tax (benefit) expense																		Income tax (benefit) expense	(65,193)		2,949		—		(62,244)		12,108		2,534		—		14,642
Net (loss) income																		Net (loss) income	$	(202,675)	$	7,507	$	1,072	$	(194,096)	$	44,192	$	6,442	$	882	$	51,516
Total assets	Total assets	$	22,695,895	$	211,401	$	(71,224)	$	22,836,072	$	16,595,311	$	194,664	$	(63,180)	$	16,726,795	Total assets	$	22,579,422	$	218,582	$	(77,474)	$	22,720,530	$	22,695,895	$	211,401	$	(71,224)	$	22,836,072
Total liabilities	Total liabilities	$	19,848,995	$	49,909	$	(71,224)	$	19,827,680	$	13,359,075	$	43,855	$	(63,180)	$	13,339,750	Total liabilities	$	20,174,053	$	44,828	$	(77,474)	$	20,141,407	$	19,848,995	$	49,909	$	(71,224)	$	19,827,680

Banking Segment

•~~Average interest-earning assets~~Interest and dividend income increased ~~$6.7 billion,~~by $57.4 million, or ~~43.9%~~43.7%, to ~~$21.9 billion~~$188.9 million for the three months ended March 31, 2023 from $131.5 million for the three months ended March 31, 2022 which was primarily driven by an increase in the yields on interest-earning assets. The overall increase in our yield on interest-earning assets, which increased 112 basis points from ~~$15.2 billion for~~2.48% during the three months ended March 31, ~~2021. The increase is primarily due~~2022 to 3.60% during the ~~acquisition of Century, which closed on November 12, 2021 and added $6.6 billion in interest-earning assets. The increase~~three months ended March 31, 2023, was partially offset by a decrease in average interest-earning assets, which resulted in an increase in interest ~~income which was partially offset by a decline in yields on interest-earning assets.~~income. For additional discussion, refer to the earlier “Interest and Dividends” section.

•~~Average interest-bearing liabilities grew $5.3 billion, or 72%,~~Interest expense increased by $47.2 million to ~~$12.8 billion for~~$50.6 million during the three months ended March 31, 2023 from $3.4 million during the three months ended March 31, 2022, which was driven by an increase in the rates paid on deposits. There was an increase of 122 basis points in rates paid on deposits, which increased from $7.4 billion for the three months ended March 31, 2021, with average total interest-bearing deposits, our largest category of average interest-bearing liabilities, growing $5.3 billion, or 72%, to $12.7 billion for0.11% during the three months ended March 31, 2022 ~~compared~~ to ~~$7.4 billion for~~1.33% during the three months ended March 31, 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 expense was an increase of 5 basis points in rates paid on deposits.2023. For additional discussion, refer to the earlier “Interest and Dividends” section.

•~~Losses from investments held in rabbi trust accounts were $3.9~~We recorded a provision for loan losses of less than $0.1 million for the three months ended March 31, ~~2022, which represents a decrease of $5.7 million,~~2023, compared to ~~gains~~a release of ~~$1.8~~$0.5 million ~~during~~for the three months ended March 31, ~~2021.~~2022. We determined a provision to be appropriate due to overall increased loan balances during the three months ended March 31, 2023 in comparison to the first quarter of 2022. During the three months ended March 31, 2022 and following continued improved economic and credit conditions, we determined that a release of the provision was necessary. For additional discussion, refer to the earlier “Provision for Loan Losses” section.

•Losses on sales of securities available for sale, net, were $333.2 million during the three months ended March 31, 2023 which represents an increase of $331.0 million compared to a loss of $2.2 million during the three months ended March 31, 2022. The loss on sale was due to the decision by management to sell certain available for sale securities in March 2023, the majority of which were in a net unrealized loss position at the time of sale.

•Also contributing to the decrease in noninterest income during the three months ended March 31, 2023 was a $3.3 million decrease in our interest rate swap income resulting in a loss position, primarily as a result of an unfavorable mark-to-market adjustment during the three months ended March 31, 2023 compared to a favorable mark-to-market adjustment during the three months ended March 31, 2022.

•Partially offsetting the decrease in noninterest income was income from investments held in rabbi trust accounts, which were $2.5 million for the three months ended March 31, 2023 which represents an increase of $6.5 million from a $3.9 million loss recorded for the three months ended March 31, 2022. The increase was primarily a result of ~~an unfavorable~~a favorable mark-to-market adjustment on equity securities held in these accounts during the three months ended March 31, ~~2022.~~

•Interest rate swap income decreased $2.5 million primarily as a result of a less favorable mark-to-market adjustment during the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

•Gains on sales of securities available for sale, net, decreased $3.2 million to a net loss due to the decision by management to sell certain AFS securities during the three months ended March 31, 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.

•Service charges on deposit accounts increased $3.2 million 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.2023.

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•Noninterest expense increased ~~$15.2~~$5.5 million, or ~~20.2%~~6.1%, to $95.9 million during the three months ended March 31, 2023 from $90.4 million during the three months ended March 31, ~~2022 from $75.3 million during the three months ended March 31, 2021.~~2022. This increase was driven primarily by a ~~$4.5~~$3.0 million increase in ~~salary~~regular salaries and wages expenses, a ~~$3.4~~$2.8 million increase in other pension expenses, a $1.6 million increase in the legacy long-term cash-based incentive plan compensation expense, and a $1.4 million increase in the provision for credit losses on off balance sheet exposures. Partially offsetting these increases were a $1.9 million decrease in data processing expenses, a $1.8 million decrease in office occupancy and equipment expenses, ~~a $3.2 million increase in data processing expenses,~~ and a ~~$1.8~~$1.0 million ~~increase in operational losses, which was driven by a $1.1 million increase~~decrease in bad check losses. Refer to the earlier ~~“Noninterest~~“Noninterest Expense” section for additional discussion of ~~this~~these items.

Insurance Agency Segment

•Noninterest income related to our insurance agency business ~~remained relatively consistent with a slight increase of $0.2~~increased by $3.6 million, or ~~0.58%~~12.6%, to $32.0 million during the three months ended March 31, 2023 from $28.4 million during the three months ended March 31, ~~2022 from $28.3 million during~~2022. This increase is primarily attributable to increased commission income. Refer to the ~~three months ended March 31, 2021.~~earlier “Noninterest Income”section for additional discussion of this items.

•Noninterest expense related to our insurance agency business ~~decreased $0.3~~increased by $2.1 million, ~~1.7%~~or 10.9%, to $21.6 million during three months ended March 31, 2023 from $19.5 million during three months ended March 31, ~~2022 from $19.8 million during~~2022. The increase in noninterest expense for the three months ended March 31, ~~2021.~~2023, compared to the three months ended March 31, 2022 was primarily due to an increase in benefit expense related to our DC SERP and increases in salaries and wages expenses. Refer to the earlier

“Noninterest Expense”section for additional discussion of this items

Management of Market Risk

General. Market risk is the sensitivity of the 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 the 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~~assets and ~~derivatives,~~liabilities, as well as other effects. The primary goal of interest rate risk management is to attempt 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~~our 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.

As noted in the earlier section titled “Outlook and Trends” and the later section titled “Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies” in this Item 2, we completed a balance sheet repositioning during the three months ended March 31, 2023 by selling a portion of our AFS investment securities portfolio for total proceeds of $1.9 billion. Such securities were lower-yielding U.S. Agency bonds and government-sponsored residential and commercial mortgage-backed securities which were purchased when interest rates were historically low. As a result of such sales, we expect our net interest margin to be less susceptible to decline as a result of future increases to the federal funds rate which may occur. Prior to the sale, we placed reliance on wholesale funding, including brokered deposits, to meet our loan-growth needs which have a higher cost than deposits originating within the markets we serve and are not our preferred sources of funding. Subsequent to the sale, our reliance on such funding sources is lessened as we believe we have a stronger liquidity position.

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~~estimate what the net interest income would be for the same period under the assumption that ~~the U.S. Treasury yield curve increases~~market rates increase or ~~decreases~~decrease instantaneously by +100, +200, ~~+300,~~ +400, -100, -200, and ~~-100~~-400 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 interest rates prevalent at March 31, 2022 and December 31, 2021 precluded the modeling of certain falling rate scenarios.~~ We do not model negative interest rate scenarios.

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The tables below set forth, as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 U.S. Treasury yield curve:~~market interest rates:

Interest Rate Sensitivity

~~Table of Contents~~


							As of March 31, 2023
Change in Interest Rates (basis points) (1)						Change in Interest Rates (basis points) (1)	Net Interest Income Year 1 Forecast		Year 1 Change from Level
							(Dollars in thousands)
400						400	$	610,178	(1.8)	%
200						200	615,483		(0.9)	%
100						100	617,211		(0.7)	%
Flat						Flat	621,337		—	%
(100)						(100)	621,173		—	%
(200)						(200)	610,142		(1.8)	%
(400)						(400)	563,371		(9.3)	%
		As of March 31, 2022					As of December 31, 2022
Change in Interest Rates (basis points) (1)	Change in Interest Rates (basis points) (1)	Net Interest Income Year 1 Forecast		Year 1 Change from Flat		Change in Interest Rates (basis points) (1)	Net Interest Income Year 1 Forecast		Year 1 Change from Level
		(Dollars in thousands)					(Dollars in thousands)
400	400	$	659,394	22.4	%	400	$	528,247	(8.4)	%
300	300	628,624		16.7	%	300	539,739		(6.4)	%
200	200	598,666		11.2	%	200	552,231		(4.2)	%
Flat	Flat	538,605		—	%	Flat	576,477		—	%
(100)	(100)	506,509		(6.0)	%	(100)	585,728		1.6	%

		As of December 31, 2021
Change in Interest Rates (basis points) (1)		Net Interest Income Year 1 Forecast		Year 1 Change from Flat
		(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)	%
(200)						(200)	586,771		1.8	%

(1)Assumes an immediate uniform change in market interest rates at all maturities, except in the down ~~100~~400 basis ~~points~~point scenario as it relates to information as of March 31, 2023 and the down 200 basis point scenario as it relates to information as of December 31, 2022, where rates are floored at zero at all maturities.

As of March 31, 2023, our models, as indicated above, show a decline in our net interest income in rising rate and falling rate scenarios. In the rising rate scenarios, funding costs are modeled to rise faster than the yield on earning assets, due, in part, to the mix of funding which has shifted towards higher rate paying deposits and wholesale funding in recent quarters. In the falling rate scenarios, particularly the 400 basis point decrease scenario, faster prepayment speeds on certain loan and investment types are modeled to reduce earning asset yields at a faster rate than the rate of decline in funding costs. The tables above indicate that at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, in the event of an instantaneous parallel 200 basis points increase in rates, we would have experienced ~~an 11.2%~~a 0.9% decrease and ~~15.1% increase,~~a 4.2% decrease, respectively, in net interest income on an FTE basis, and in the event of an instantaneous ~~100~~200 basis points decrease in interest rates, we would have experienced a ~~6.0%~~1.8% decrease and a ~~5.9% decrease~~1.8% increase at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, in net interest income, on an FTE basis. We also modeled an instantaneous 400 basis point decrease in interest rates at March 31, 2023, the results of which showed we would have experienced a 9.3% decrease in net interest income on an FTE basis. We did not model an instantaneous 400 basis point decrease in interest rates at December 31, 2022 given the lower level of interest rates compared to March 31, 2023. 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. For additional information related to our interest rate derivative financial instruments see Note 14, “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.

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~~tables below ~~represents~~represent an analysis of our interest rate risk ~~(excluding the effect of our pension plans)~~ as measured by the estimated changes in our EVE, resulting from an instantaneous and sustained parallel shift in the yield curve (+100, +200, +400 basis points and -100, -200, and -400 basis points) at March 31, 2023 and (+200, +300, +400 basis points and -100, -200 basis points) at ~~March 31, 2022 and~~ December 31, ~~2021.~~

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2022. 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 March 31, 2022 and December 31, 2021 precluded the modeling of certain falling rate scenarios, including negative~~ interest rates.

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.~~

~~Table~~lines and by affecting the amount of ~~Contents~~unrealized gains and losses from securities held in rabbi trusts which are partially offset by a corresponding but opposite impact to the amount of employee benefit expense associated with the change in value of plan assets.

EVE Interest Rate Sensitivity


Change in Interest Rate (basis points) (1)					As of March 31, 2022
		Estimated EVE (2)			Estimated Increase (Decrease) in��EVE from Flat					EVE as a Percentage of Total Assets (3)
				Amount			Percent
Change in Interest Rates (basis points) (1)												Change in Interest Rates (basis points) (1)						As of March 31, 2023
															Estimated EVE (2)			Estimated Increase (Decrease) in EVE from Level							EVE as a Percentage of Total Assets (3)
																Amount			Percent
				(Dollars in thousands)														(Dollars in thousands)
400	400	$	4,383,545		$	(92,836)		(2.1)	%			21.61	%	400		$	3,676,017		$	(595,597)			(13.9)	%			18.00	%
300		4,398,598			(77,783)			(1.7)	%	21.20	%
200	200	4,438,315			(38,066)			(0.9)	%	20.88	%	200			3,950,478			(321,136)			(7.5)	%			18.47	%
100												100			4,085,847			(185,767)			(4.3)	%			18.64	%
Flat	Flat	4,476,381			—			—		20.02	%	Flat			4,271,614			—			—				18.97	%
(100)	(100)	4,409,709			(66,672)			(1.5)	%	19.22	%	(100)			4,379,782			108,168			2.5	%			18.97	%
(200)												(200)			4,435,168			163,554			3.8	%			18.76	%
(400)												(400)			4,464,245			192,631			4.5	%			18.16	%


Change in Interest Rate (basis points) (1)					As of December 31, 2021
		Estimated EVE (2)			Estimated Increase (Decrease) in EVE from Flat					EVE as a Percentage of Total Assets (3)
				Amount			Percent
Change in Interest Rates (basis points)												Change in Interest Rates (basis points)						As of December 31, 2022
															Estimated EVE (2)			Estimated Increase (Decrease) in EVE from Level							EVE as a Percentage of Total Assets (3)
																Amount			Percent
				(Dollars in thousands)														(Dollars in thousands)
400	400	$	4,573,359		$	27,408		0.6	%			21.30	%	400		$	3,691,963		$	(691,696)			(15.8)	%			18.48	%
300	300	4,565,019			19,068			0.4	%	20.80	%	300			3,834,512			(549,147)			(12.5)	%			18.72	%
200	200	4,589,035			43,084			0.9	%	20.39	%	200			4,007,265			(376,394)			(8.6)	%			19.04	%
Flat	Flat	4,545,951			—			—		17.06	%	Flat			4,383,659			—			—				19.66	%
(100)	(100)	4,270,433			(275,518)			(6.1)	%	17.75	%	(100)			4,527,743			144,084			3.3	%			19.74	%
(200)												(200)			4,620,994			237,335			5.4	%			19.61	%

(2)EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.

(3)~~Present value of~~Total assets ~~represents~~is the ~~discounted~~net present value of ~~incoming~~expected cash ~~flows on interest-earning assets.~~flows.

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, 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 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, subject to market conditions. While maturities and scheduled amortization of loans

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and securities are predictable sources of funds, deposit flows and loan and securities prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are unencumbered cash and ~~cash equivalents~~due from banks and securities classified as available for ~~sale.~~sale, which could be liquidated, subject to market conditions. In the future, our liquidity position will be affected by the level of customer deposits and payments, as well as acquisitions, dividends, and ~~stock~~share repurchases in which we may engage. WeFor the next twelve months, we believe that our existing resources, including our capacity to use brokered deposits and wholesale borrowings, will be sufficient to meet the liquidity and capital requirements of our operations. We may elect to raise additional capital through the sale of additional equity or debt financing to fund business activities such as strategic acquisitions, share repurchases, or other purposes beyond the next twelve months.

At March 31, 2023, we had $2.1 billion of cash and cash equivalents, an increase of $2.0 billion from $169.5 million at December 31, 2022. The increase in cash levels was due primarily to a decrease of $2.0 billion in AFS securities from $6.7 billion at December 31, 2022 to $4.7 billion at March 31, 2023. In March 2023, we completed a balance sheet repositioning by selling lower yielding AFS securities. The sale allowed us to redeploy the proceeds in the current higher interest rate environment either through increased cash levels or the reduction of wholesale funds over time. The increased cash levels at March 31, 2023 provided strong balance sheet liquidity to support the needs of our depositors as part of our liquidity contingency planning during the uncertain environment created by the bank failures in the month of March 2023. Advances from the FHLBB were used to support ongoing operations ~~for the foreseeable future.~~and bolster on-balance sheet liquidity and totaled $1.1 billion and $0.7 billion at March 31, 2023 and December 31, 2022, respectively.

We participate in the IntraFi Network, which allows us to provide access to ~~multi-million dollar~~ FDIC deposit insurance protection on customer deposits for consumers, businesses and public ~~entities.~~entities that exceed same-bank FDIC insurance thresholds. We can elect to sell or repurchase this funding as reciprocal deposits from other IntraFi Network banks depending on our funding needs. At both March 31, ~~2022~~2023 and December 31, ~~2021,~~2022 we had ~~a total of $656.3 million and $520.5 million of~~no IntraFi Network one-way sell ~~deposits, respectively.~~deposits. At March 31, 2023 and December 31, 2022, we had repurchased ~~$29.1~~$863.4 million and $665.0 million, respectively, of previously sold reciprocal deposits. ~~At December 31, 2021, no~~

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amounts were repurchased of previously sold reciprocal deposits. The additional capacity of $656.3 million and $520.5 million at March 31, 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 FHLBB. At March 31, ~~2022,~~2023, we had ~~$13.7 million~~$1.1 billion in outstanding advances and the ability to borrow up to an additional ~~$2.1~~$1.5 billion. We also have the ability to borrow from the Federal Reserve Bank of Boston. At March 31, ~~2022,~~2023, we had a ~~$412.9 million~~$2.6 billion collateralized line of credit from the ~~FRBB with no outstanding balance. We had a total~~Federal Reserve Bank of ~~$790.0 million of discretionary lines of credit at~~Boston through the Bank Term Funding Program. The Bank Term Funding Program was created by the Federal Reserve in March 2023. At March 31, ~~2022.~~2023 we had the ability to borrow up to $879.1 million from the Federal Reserve Bank of Boston Discount Window In addition, we were able to acquire brokered deposits at our discretion to raise additional funds. At March 31, 2023, we had $609.7 million in brokered certificates of deposit. At March 31, 2023, cash and cash equivalents were $2.1 billion and secured borrowing capacity at the Federal Reserve Bank and Federal Home Loan Bank totaled $5.0 billion, providing total liquidity sources of $7.1 billion. These liquidity sources provided 107% coverage of all customer uninsured and uncollateralized deposits, which totaled $6.7 billion, or 36% of total deposits, as of March 31, 2023.

Sources of Liquidity

As of March 31, 2022 As of December 31, 2021
Outstanding Additional
Capacity Outstanding Additional
Capacity
(In thousands)
IntraFi Network deposits $ 29,098 $ 656,295 $ — $ 520,461
Federal Home Loan Bank (1) 13,689 2,138,705 14,020 1,839,540
Federal Reserve Bank of Boston (2) — 412,902 — 456,148
Unsecured lines of credit — 790,000 — 790,000
Total deposits $ 42,787 $ 3,997,902 $ 14,020 $ 3,606,149


	As of March 31, 2023				As of December 31, 2022
	Outstanding		Additional Capacity		Outstanding		Additional Capacity
			(In thousands)
IntraFi Network deposits	$	863,368	$	—	$	664,971	$	—
Brokered certificates of deposit (1)	609,663		—		928,648		—
Federal Home Loan Bank (2)	1,100,952		1,522,215		704,084		1,976,166
Federal Reserve Bank of Boston- Bank Term Funding Program (3)	—		2,597,181		—		—
Federal Reserve Bank of Boston- Discount Window (4)	—		879,136				538,894
Total	$	2,573,983	$	4,998,532	$	2,297,703	$	2,515,060

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(1)The additional borrowing capacity has not been assessed for this category.

(2)As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, loans have been pledged to the FHLBB with a carrying value of ~~$3.0~~$4.1 billion and ~~$2.6~~$3.9 billion ~~respectively, to secure~~resulting in this additional unused borrowing capacity.

~~(2)~~(3)Securities with a carrying value of $2.6 billion at March 31, 2023 have been pledged to the Federal Reserve Bank of Boston under the Bank Term Funding Program, resulting in this additional unused borrowing capacity.

(4)Loans with a carrying value of ~~$799.9 million~~$1.1 billion at both March 31, 2023 and ~~$784.0~~December 31, 2022, and securities with a carrying value of $376.8 million at March 31, ~~2022 and December 31, 2021, respectively, have been~~2023 were pledged to the ~~FRBB~~Discount Window, resulting in this additional ~~unused~~ borrowing capacity. No securities were pledged to the Discount Window at December 31, 2022.

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~~management’s Asset Liability Committee have put a 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 our risk management framework, we perform periodic liquidity stress testing to assess ~~its~~our 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 March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, 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~~regulatory capital ratio of ~~10%~~10.0%; (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%; (3) a minimum Tier 1 capital ratio of 8.0%; and (4) a minimum of Tier 1 leverage ratio of 5%5.0%. Management believes that the Company met all capital adequacy requirements to which it is subject to as of March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. There have been no conditions or events that management believes would cause a change in the Company’s categorization.

In March 2015, the FDIC issued a Financial Institution Letter (FIL-12-2015) indicating that non-advanced approaches institutions may make a one-time, permanent election to opt out of the requirement to include most components of accumulated other comprehensive income (“AOCI”) in regulatory capital. At that time, we opted to make such an election. Accordingly, unrealized gains and losses on our AFS securities portfolio are not included in regulatory capital. Consequently, the balance sheet repositioning we completed in March 2023 with the sale of AFS securities reduced our regulatory capital and related capital ratios, as the unrealized loss on such securities (which was included in AOCI and excluded from regulatory capital) was effectively reclassified to retained earnings (which is included in regulatory capital).

The Company’s actual capital ratios are presented in the following table:


		As of March 31, 2022		As of December 31, 2021			As of March 31, 2023		As of December 31, 2022
Capital Ratios:	Capital Ratios:					Capital Ratios:
Average equity to average assets(1)	Average equity to average assets(1)	14.05	%	19.17	%	Average equity to average assets(1)	10.93	%	12.52	%
Total regulatory capital (to risk-weighted assets)	Total regulatory capital (to risk-weighted assets)	19.42	%	19.77	%	Total regulatory capital (to risk-weighted assets)	16.76	%	17.89	%
Common equity Tier 1 capital (to risk-weighted assets)	Common equity Tier 1 capital (to risk-weighted assets)	18.53	%	19.04	%	Common equity Tier 1 capital (to risk-weighted assets)	15.80	%	16.94	%
Tier 1 capital (to risk-weighted assets)	Tier 1 capital (to risk-weighted assets)	18.53	%	19.04	%	Tier 1 capital (to risk-weighted assets)	15.80	%	16.94	%
Tier 1 capital (to average assets) leverage	Tier 1 capital (to average assets) leverage	12.18	%	13.96	%	Tier 1 capital (to average assets) leverage	11.09	%	12.03	%

(1)The ratio presented as of March 31, 2023 represents quarter-to-date average equity as a percentage of quarter-to-date average total assets.

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Contractual Obligations, Commitments and 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. At March 31, ~~2022,~~2023, there were no material changes in our contractual obligations, other commitments and contingencies from those disclosed in our ~~2021~~2022 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.~~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 March 31, ~~2022,~~2023, we had ~~$5.3~~$5.7 billion of commitments to originate loans, comprised of ~~$3.1~~$3.3 billion of commitments under commercial loans and lines of credit (including ~~$473.8~~$702.1 million of unadvanced portions of construction loans), ~~$1.9~~$2.1 billion of commitments under home equity loans and lines of credit, ~~$196.9~~$199.5 million in standard overdraft coverage commitments, ~~$41.7~~$20.9 million of unfunded commitments related to residential real estate loans and $60.5 million in other consumer loans and lines of credit. In addition, at March 31, ~~2022,~~2023, we had ~~$65.7~~$62.8 million in standby letters of credit outstanding. We also had ~~$12.9~~$10.5 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(c) promulgated under the Exchange Act of 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 March 31, ~~2022,~~2023, the end of the period covered by this Quarterly Report on Form 10-Q.

Changes to Internal Controls over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended March 31, ~~2022~~2023 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 pandemic.~~and/or hybrid. The Company is continually monitoring and assessing the impact of ~~the COVID-19 pandemic~~working remotely and/or hybrid 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 ~~2021~~2022 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 the outcome of which we believe would be material to our financial condition or results of operations.

~~Table of Contents~~

For additional information related to the Company’s ongoing legal proceedings see Note ~~12,~~13, “Commitments and

Table of Contents

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~~“Risk Factors” in our ~~2021~~2022 Form 10-K. ~~Other than the additional risk factor set forth below, as~~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~~2022 Form 10-K. 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. The risk factors disclosure in our 2021 Form 10-K is therefore qualified by the information relating to COVID-19 that is described in this Quarterly Report on Form 10-Q.

~~Regulatory developments could adversely affect our business by increasing our costs and thereby making our business less profitable.~~

Our profitability may be adversely affected by current and future rulemaking and enforcement activity by the various federal, state and self-regulatory organizations to which we are subject. Regulations can adversely affect our compliance costs and other non-interest expenses, and failure to comply with regulations could subject us to regulatory actions or litigation, which could have a material adverse effect on our business, results of operations, or financial condition.

New laws, rules and regulations, or changes to the interpretation or enforcement of existing laws, rules or regulations, from time to time could increase our expenses, causing our recent historical expenses not to be indicative of future expenses, and could result in limitations on the lines of business we conduct or plan to conduct, modifications to our current or future business practices, and increased capital requirements. For example, in March 2022 the SEC proposed extensive rules to standardize climate-related disclosures for investors. In addition, regulators, including the FDIC, have also proposed principles for banks to manage exposures to climate-related financial risks. We expect that these developments could negatively impact our results, including by increasing our legal, compliance, and information technology expenditures and could result in other costs, as well as greater risks of lawsuits and enforcement activity by regulators. These changes may also affect the array of products and services we offer to our customers.

It is unclear how and whether our regulators, including the SEC, FDIC, other banking regulators and other state insurance regulators may respond to, or enforce elements of, these new regulations or develop their own similar laws and regulations. The impacts, degree and timing of the effect of applicable laws, future regulations and industry principles on our business cannot now be anticipated and may have further impacts on our products and services and the results of operations. Please consult the “Regulation” section within Part I, “Item 1. Business” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, for specific information about risks associated with various regulations and their potential impact on our operations.

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 three months ended March 31, 2022:~~

Period Total Number of Shares Average Price Paid per Share Total Number of Shares Purchased as Part of the Publicly Announced Share Repurchase Program Maximum Number of Shares That May Yet Be Purchased Under the Share Repurchase Program (1)
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
Total 2,866,621 $ 21.12

~~(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.

~~Table of Contents~~

~~See~~ ~~Note 10, Shareholders’ Equity, within the Notes to the Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q for additional information.~~None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

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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 March 31, ~~2022~~2023 (and are numbered in accordance with Item 601 of Regulation S-K):


Exhibit No.						Description

~~10.1~~						~~Form of On~~e ~~-Time RSU Award Agreement (incorporated by reference to Exhibit 10.1 to Form 8-K filed with the Securities and Exchange Commission on January 19, 2022)~~

~~10.2~~						~~Form of Annual RSU Award Agreement (incorporated by reference to Exhibit 10.2 to Form 8-K filed with the Securities and Exchange Commission on January 19, 2022)~~

~~10.3~~						~~Form of One-~~T ~~ime PSU Award Agreement (incorporated by reference to Exhibit 10.3 to Form 8-K filed with the Securities and Exchange Commission on January 19, 2022)~~

~~10.4~~						~~Form of Annual PSU~~ ~~Award Agreement (incorporated by reference to Exhibit 10.4 to Form 8-K filed with the Securities and Exchange Commission on January 19, 2022)~~

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 March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, (ii) the Unaudited Consolidated Statements of Income for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (iii) the Unaudited Consolidated Statements of Comprehensive Income for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, (iv) the Unaudited Consolidated Statements of Changes in Equity for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, (v) the Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, and (vi) the Notes to the Unaudited Consolidated Financial Statements.

104						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

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, ~~as amended,~~ the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	EASTERN BANKSHARES, INC.

~~Date :~~Date: May ~~10, 2022~~8, 2023	/s/ Robert F. Rivers
	By:	Robert F. Rivers
		Chief Executive Officer and Chair of the Board
		(Principal Executive Officer)

~~Date :~~Date: May ~~10, 2022~~8, 2023	/s/ James B. Fitzgerald
	By:	James B. Fitzgerald
		Chief Financial Officer and Chief Administrative Officer
		(Principal Financial Officer)

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			Page
Part I Financial Information

Item I. Unaudited Consolidated Financial Statements

Unaudited Consolidated Balance Sheets as of March 31, ~~2022~~2023 and December 31, 202 ~~2021~~2			4
Unaudited Consolidated Statements of Income for the three months ended ~~March~~M arch 31, ~~2022~~2023 and 202 ~~2021~~2			5
Unaudited Consolidated Statements of Comprehensive Income for the three months ended March 31 ~~2022~~, 202 3 and 202 ~~2021~~2			6
Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March ~~31, 2022~~ 3 1 , 202 3 and 202 ~~2021~~2			7
Unaudited Consolidated Statements of Cash Flows for the t ~~hree~~three months ended March ~~31, 2022~~ 3 1 , 202 3 and 202 ~~2021~~2			8
Notes to the Unaudited Consolidated Financial Statements			910


	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


	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
Commercial real estate	—		—		—
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


	For the Three Months Ended March 31, 2021
	Average Recorded Investment		Total Interest Recognized
	(In thousands)
With no related allowance recorded:
Commercial and industrial	$	9,899	$	46
Commercial real estate	4,176		44
Business banking	5,024		26
Residential real estate	14,648		144
Consumer home equity	2,438		20
Other consumer	27		—
Sub-total	36,212		280
With an allowance recorded:
Commercial and industrial	7,965		—
Commercial real estate	657		—
Business banking	16,325		14
Residential real estate	12,248		127
Consumer home equity	2,150		18
Sub-total	39,345		159
Total	$	75,557	$	439


Period	Total Number of Shares Repurchased	Average Price Paid per Share		Total Number of Shares Repurchased as Part of the Share Repurchase Program at the end of Each Respective Period	Maximum Number of Shares That May Yet Be Purchased Under the Share Repurchase Program 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


	Number of Shares	Weighted-Average Grant Price Per Share
Non-vested restricted stock as of December 31, 2021	683,056	$	20.13
Granted	—	—
Non-vested restricted stock as of March 31, 2022	683,056	$	20.13


					Fair Value Measurements at Reporting Date Using
Description	Carrying Value as of March 31, 2022		Fair Value as of March 31, 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	$	192,231	$	188,913	$	—	$	188,913	$	—
Government-sponsored commercial mortgage-backed securities	203,203		203,210		—		203,210		—
Loans, net of allowance for loan losses	12,033,603		11,817,706		—		—		11,817,706
FHLB stock	10,904		10,904		—		10,904		—
Bank-owned life insurance	157,954		157,954		—		157,954		—
Liabilities
Deposits	$	19,392,816	$	19,387,023	$	—	$	19,387,023	$	—
FHLB advances	13,689		12,767		—		12,767		—
Escrow deposits from borrowers	21,233		21,233		—		21,233		—


	Delinquency Rate as of (1)(2)
	March 31, 2022		December 31, 2021
Portfolio
Commercial and industrial	0.07	%	0.06	%
Commercial real estate	0.02	%	0.60	%
Commercial construction	2.74	%	—	%
Business banking	0.73	%	0.86	%
Residential real estate	0.98	%	1.38	%
Consumer home equity	0.96	%	0.90	%
Other consumer	0.83	%	1.23	%
Total	0.41	%	0.65	%


	Remaining COVID-19 Modifications as of March 31, 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	39,438		0.9	%	93,519		2.1	%
Commercial construction	—		—	%	—		—	%
Business banking	882		0.1	%	649		0.1	%
Residential real estate	6,660		0.3	%	5,870		0.3	%
Consumer home equity	1,521		0.1	%	1,365		0.1	%
Other consumer	532		0.3	%	706		0.3	%
Total	$	49,033	0.4	%	$	106,657	0.9	%


	For the Three Months Ended March 31, 2022				For the Year Ended December 31, 2021
	Average Amount		Average Rate		Average Amount		Average Rate
	(Dollars in thousands)
Demand	$	6,821,811	—	%	$	5,547,615	—	%
Interest checking	4,596,026		0.18	%	2,866,091		0.07	%
Savings	2,076,754		0.01	%	1,483,271		0.02	%
Money market investments	5,568,264		0.07	%	3,870,712		0.06	%
Certificate of deposits	481,833		0.27	%	280,141		0.21	%
Total deposits	$	19,544,688	0.07	%	$	14,047,830	0.04	%


Period	Total Number of Shares	Average Price Paid per Share		Total Number of Shares Purchased as Part of the Publicly Announced Share Repurchase Program	Maximum Number of Shares That May Yet Be Purchased Under the Share Repurchase Program (1)
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
Total	2,866,621	$	21.12