What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-25 compared with 2021-03-29 · 671 added, 454 removed, 2228 unchanged (34% of the section changed)

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 25, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgements.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for loan losses

Description of the matter The Company’s loan portfolio totaled $12.3 billion as of December 31, 2021.

As of December 31, 2021, management established an allowance for loan losses of $97.8 million.

The allowance for loan losses represents management’s estimate of incurred losses inherent in the loan portfolio at the balance sheet date.

As described in Note 2 and Note 5 to the consolidated financial statements, the Company uses both a formula-based approach and an analysis of certain individual loans to develop its allowance for loan losses estimate.

As part of developing the formula-based reserve, management considers both the Company’s historical loss experience and qualitative factors to determine the allowance for loan losses.

The Company’s qualitative factor methodology considers factors that may impact the loss experience during the incurred loss horizon period, including internal infrastructure factors, external macroeconomic factors, internal credit quality factors and external industry data, all customized to loan pools that include loans with similar characteristics.

Auditing the allowance for loan losses was challenging due to the subjectivity involved in assessing the judgment management applied in determining the adjustments to the formula-based reserve attributable to the qualitative risk factors for the Company’s commercial real estate, commercial and industrial, and residential real estate loan portfolios.

Management’s identification and measurement of the qualitative adjustments was highly judgmental and could have a significant effect on the allowance for loan losses.

How we addressed the matter in our audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the allowance for loan losses process, which included, among others, controls over management’s review of the adjustments to the formula-based reserve attributable to the qualitative risk factors identified.

We also evaluated other key allowance for loan losses controls including the review and approval of calculations used to estimate the allowance for loan losses.

We assessed management’s determination of qualitative risk factors for the Company’s commercial real estate, commercial and industrial, and residential real estate loan portfolios and tested these factors by comparing conclusions reached to independently-obtained third-party data or internally available Company-specific data.

We evaluated the measurement of the qualitative adjustments by performing procedures including, among others, recalculating management’s application of qualitative risk factors to the allowance for loan losses calculation in a manner consistent with the Company’s approved allowance for loan losses methodology.

Certain qualitative risk factors including management’s application of external macroeconomic factors and external industry data were more subjective in nature given an increased reliance on management judgement.

For these qualitative risk factors, we evaluated the identification and measurement of the qualitative adjustments, including the basis for concluding an adjustment was warranted when considering historical loss experience utilized in the formula-based reserve.

Additionally, we considered the existence of new or contrary evidence in evaluating the qualitative risk factors based on macroeconomic or external industry data.

Fair value of loans recognized as part of the acquisition of Century Bancorp

Description of the matter In 2021, the Company completed its acquisition of Century Bancorp (Century) for total consideration of $642 million, which was accounted for as a business combination.

As disclosed in Note 3 to the consolidated financial statements, the Company recognized acquired loans of $2.9 billion, net of a fair value adjustment of $13.5 million.

Auditing the Company's estimate of the fair value adjustment to acquired loans was complex due to the sensitivity of the fair values to underlying assumptions determined by management in estimating the fair values.

With the assistance of an external specialist, the Company utilized a discounted cash flow model to measure the fair values of acquired loans.

The most significant judgmental assumptions in measuring the fair values of the acquired loans included the estimates of future credit losses and prepayments along with the application of a market-based discount rate applied to those cash flows.

These assumptions were primarily based on market data and the Company’s industry experience.

These assumptions are forward looking and could be affected by future economic and market conditions.

How we addressed the matter in our audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s accounting for business combinations.

Our tests included controls supporting the recognition and measurement of consideration transferred along with acquired assets and liabilities.

We also tested management’s review controls over the assumptions used in the valuation models for acquired loans.

To test the estimated fair values of acquired loans, we involved our valuation specialists to assist with our evaluation of the methodology used by the Company, significant assumptions included in the fair value estimates, and assessment of the competence and objectivity of management’s external specialist.

We assessed the significant assumptions included in the fair value estimates by performing procedures over the estimates of future credit losses and prepayments and the market-based discount rate for the acquired loans.

In our assessment, we considered economic information and historical Company-specific information.

We tested, on a sample basis, both the market data and the internally-developed assumptions used by management to calculate the fair values and, on a sample basis, performed independent comparative calculations of the fair value adjustment to the acquired loans.

/s/ Ernst & Young LLP

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Boston, Massachusetts

March 29, 2021

February 25, 2022

EASTERN BANKSHARES, INC.

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Cash and cash equivalents 1,231,792 2,054,070

Trading — 961

Available for sale 3,183,861 1,508,236

Total securities 3,183,861 1,509,197

Available for sale securities 8,511,224 3,183,861

Loans held for sale 1,206 1,140

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Borrowed funds:

Federal funds purchased — 201,082

Federal Home Loan Bank advances 14,020 14,624

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Shareholders’ Equity

Common shares, $ 0.01 par value, 1,000,000,000 shares authorized, 186,758,154 shares issued and outstanding at December 31, 2020

Common shares, $ 0.01 par value, 1,000,000,000 shares authorized;

186,305,332 and 186,758,154 shares issued and outstanding at December 31, 2021 and 2020, respectively

Additional paid in capital 1,835,241 1,854,068

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Total shareholders’ equity 3,406,352 3,428,052

Total liabilities and equity $ 15,964,190 $ 11,628,775

Total liabilities and shareholders’ equity $ 23,512,128 $ 15,964,190

The accompanying notes are an integral part of these Consolidated Financial Statements.

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2021 2020 2019

(In thousands)

(In thousands, except per share data)

Interest and dividend income:

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Net interest income 429,827 401,251 411,264

Provision for allowance for credit losses 38,800 6,300 15,100

Net interest income after provision for credit losses 362,451 404,964 374,944

(Release of) provision for loan losses ( 9,686 ) 38,800 6,300

Net interest income after (release of) provision for loan losses 439,513 362,451 404,964

Noninterest income:

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Debit card processing fees 12,118 10,277 10,452

Interest rate swap (losses) income ( 1,381 ) 4,362 5,012

Income (losses) from investments held in rabbi trusts 10,337 9,866 ( 1,542 )

Interest rate swap income (losses) 5,634 ( 1,381 ) 4,362

Income from investments held in rabbi trusts 10,217 10,337 9,866

(Losses) gains on trading securities, net — ( 4 ) 1,297

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Marketing 8,741 8,879 9,619

Operational losses 7,786 2,493 3,215

Loan expenses 6,516 6,727 4,593

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Net income $ 154,665 $ 22,738 $ 135,098

Other comprehensive income, net of tax:

Other comprehensive (loss) income, net of tax:

Net change in fair value of securities available for sale ( 104,258 ) 23,874 41,158

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15,782 60,016 ( 21,880 )

Total other comprehensive income 98,081 31,914 ( 20,100 )

Total other comprehensive (loss) income ( 110,930 ) 98,081 31,914

Total comprehensive income $ 43,735 $ 120,819 $ 167,012

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Balance at December 31, 2018 — $ — $ — $ 1,508,902 $ ( 75,761 ) $ — $ 1,433,141

Opening balance reclassification (1)

Unrealized appreciation on securities available for sale — — — ( 1,953 ) 1,953 — —

Actuarial net loss of defined benefit pension plans 9,122 ( 9,122 ) —

Net income — — — 135,098 — — 135,098

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Balance at December 31, 2019 — — — 1,644,000 ( 43,847 ) — 1,600,153

Net income — — — 135,098 — — 135,098

Other comprehensive income, net of tax — — — — 31,914 — 31,914

Balance at December 31, 2019 — — — 1,644,000 ( 43,847 ) — 1,600,153

Cumulative effect accounting adjustment (1)

— — — ( 1,131 ) — — ( 1,131 )

Net income — — — 22,738 — — 22,738

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179,287,828 1,793 1,762,187 — — — 1,763,980

Issuance of common shares donated to the Eastern Bank Charitable Foundation 7,470,326 75 91,212 — — — 91,287

Issuance of common shares donated to the Eastern Bank Foundation 7,470,326 75 91,212 — — — 91,287

Purchase of common shares by the ESOP ( 14,940,652 shares)

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Balance at December 31, 2020 186,758,154 1,868 1,854,068 1,665,607 54,234 ( 147,725 ) 3,428,052

(1) Represents adjustments needed to reflect the cumulative impact on retained earnings for reclassification of the income tax effect attributable to accumulated other comprehensive income, as a result of the Tax Cuts and Jobs Act (the “Tax Act”).

Pursuant to the Company’s adoption of Accounting Standards Update 2018-02, the Company elected to reclassify amounts stranded in other comprehensive income to retained earnings.

Dividends to common shareholders — — — ( 51,619 ) — — ( 51,619 )

Repurchased common stock ( 1,135,878 ) ( 12 ) ( 23,212 ) — — — ( 23,224 )

Issuance of restricted stock awards 683,056 7 ( 7 ) — — — —

Net income — — — 154,665 — — 154,665

Other comprehensive income, net of tax — — — — ( 110,930 ) — ( 110,930 )

ESOP shares committed to be released — — 4,392 — — 5,016 9,408

Balance at December 31, 2021 186,305,332 $ 1,863 $ 1,835,241 $ 1,768,653 $ ( 56,696 ) $ ( 142,709 ) $ 3,406,352

(1) Represents cumulative impact on retained earnings pursuant to the Company’s adoption of Accounting Standards Update 2016-02 Leases.

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For the Year Ended December 31,

2020 2019 2018

(In thousands) 2021 2020 2019

Operating activities

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Adjustments to reconcile net income to net cash provided by operating activities

Provision for loan losses 38,800 6,300 15,100

(Release of) provision for allowance for loan losses ( 9,686 ) 38,800 6,300

Depreciation and amortization 14,479 15,827 19,482

Change in unamortized net loan costs and premiums ( 14,574 ) 5,130 1,491

Deferred income tax expense (benefit) ( 20,359 ) 1,376 ( 4,878 )

Amortization of investment security premiums and discounts 5,585 3,063 3,256

(Accretion) amortization of deferred loan fees and premiums, net ( 27,991 ) ( 14,574 ) 5,130

Deferred income tax (benefit) expense ( 5,313 ) ( 20,359 ) 1,376

Amortization of investment security premiums and discounts, net 16,713 5,585 3,063

Right-of-use asset amortization 12,703 12,082 —

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Gain on life insurance benefits ( 1,813 ) ( 174 ) —

Net gain on sale of securities available for sale ( 288 ) ( 2,016 ) ( 50 )

Mark to market on loans held for sale 19 — —

Gain on sale of securities available for sale, net ( 1,166 ) ( 288 ) ( 2,016 )

Loss on bank premises and equipment, net 4,715 73 271

Loss on lease termination/modification, net 2,182 — —

Amortization of gains from terminated interest rate swaps ( 31,234 ) ( 15,889 ) —

Loss on sale and impairment of premises and equipment held for use 73 271 145

Net gain on other real estate owned ( 606 ) — —

ESOP expense 9,408 2,351 —

Issuance of common shares donated to the Eastern Bank Charitable Foundation (1)

Issuance of common shares donated to the Eastern Bank Foundation (1)

Other ( 526 ) ( 587 ) —

Trading securities — 961 51,938

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Proceeds from life insurance policies — 1,347 —

Net increase in outstanding loans ( 719,041 ) ( 135,666 ) ( 637,518 )

Acquisition of businesses, net of cash acquired ( 1,363 ) — ( 11,500 )

Proceeds from sale of portion of insurance agency business — — 571

Net decrease (increase) in outstanding loans 380,807 ( 719,041 ) ( 135,666 )

Acquisitions, net of cash and cash equivalents acquired ( 13,439 ) ( 1,363 ) —

Purchased banking premises and equipment, net ( 5,728 ) ( 5,144 ) ( 7,187 )

Proceeds from sale of premises held for sale 21,981 — —

Proceeds from sale of other real estate owned 125 646 —

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Net increase in demand, savings, interest checking, and money market investment deposit accounts (2)

Net (decrease) increase in time deposits ( 70,280 ) ( 145,809 ) 98,954

Net decrease in borrowed funds ( 207,346 ) ( 98,892 ) ( 192,218 )

1,155,868 2,674,672 297,708

Net decrease in time deposits ( 58,144 ) ( 70,280 ) ( 145,809 )

Net increase (decrease) in borrowed funds 2,580 ( 207,346 ) ( 98,892 )

Repayment of acquired subordinated debentures (3)

( 36,277 ) — —

Contingent consideration paid ( 263 ) ( 165 ) ( 716 )

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Payment of deferred offering costs — ( 28,552 ) ( 346 )

Payments for repurchases of common stock ( 23,224 ) — —

Dividends declared and paid to common shareholders ( 51,564 ) — —

Net cash provided by financing activities 988,976 4,011,800 51,945

Net increase (decrease) in cash, cash equivalents, and restricted cash 1,691,468 102,894 ( 51,445 )

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 822,278 ) 1,691,468 102,894

Cash, cash equivalents, and restricted cash at beginning of period 2,054,070 362,602 259,708

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Net increase in capital commitments relating to low income housing tax credit projects $ 28,291 $ 25,816 $ 10,000

Maturity of acquired securities sold under agreements to repurchase (2)

Initial recognition of operating lease right-of-use assets upon adoption of ASU 2016-02 — 92,948 —

Initial recognition of operating lease liabilities upon adoption of ASU 2016-02 — 96,426 —

(1) Represents a non-cash common stock donation of 7,470,326 shares at a fair value of $ 91.3 million to the Eastern Bank Charitable Foundation.

(1) Represents a non-cash common stock donation of 7,470,326 shares at a fair value of $ 91.3 million to the Eastern Bank Foundation.

The donation is included in charitable contributions as a non-interest expense in the Consolidated Income Statement for the year ended December 31, 2020.

(2) Includes non-cash item representing maturity of acquired securities sold under agreements to repurchase which were converted to deposits upon maturity.

(3) The Company deposited funds into escrow prior to the Century acquisition date to pay the balance of subordinated debentures assumed in the Century acquisition which was considered to be a defeasance of the debt.

Accordingly, Century recorded a payable to the Company in the amount of the escrow deposit and the Company recorded a receivable from Century in the same amount.

The payable was reclassified to other assets upon acquisition and is reflected as such balance in the summary of net assets acquired included in Note 3 to the consolidated financial statements.

Subsequent to the closing of the acquisition and prior to December 31, 2021, the amounts placed in escrow were disbursed to the holders of the subordinated debentures resulting in a full pay-off of the outstanding balance of the debt.

The accompanying notes are an integral part of these Consolidated Financial Statements.

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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, the Company provides a variety of banking, trust and investment services, and insurance services, through its full-service bank branches and insurance offices, located primarily in Eastern Massachusetts, southern and coastal New Hampshire and Rhode Island.

Through its wholly-owned subsidiaries, Eastern Bank (the “Bank”) and Eastern Insurance Group LLC, 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 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 Federal Deposit Insurance Corporation (“FDIC”) and the Consumer Financial Protection Bureau (“CFPB”).

The Company and the activities of the Bank are also subject to various Massachusetts and New Hampshire business and banking regulations.

The activities of the Bank are subject to the regulatory supervision of the Massachusetts Commissioner of Banks, the Federal Deposit Insurance Corporation (“FDIC”) and the Consumer Financial Protection Bureau (“CFPB”).

The Company and the activities of the Bank are also subject to various Massachusetts and New Hampshire and Rhode Island business and banking regulations.

Conversion and Reorganization

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The Company completed the offering on October 14, 2020.

Effective as of October 15, 2020, the Company donated 7,470,326 shares of common stock to the Eastern Bank Charitable Foundation (the “Foundation”).

Effective as of October 15, 2020, the Company donated 7,470,326 shares of common stock to the Eastern Bank Charitable Foundation (now known as the Eastern Bank Foundation, or the “Foundation”).

A total of 186,758,154 shares of common stock of the Company were issued and outstanding immediately after the donation to the Foundation.

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Also pursuant to the Plan, a parallel liquidation account maintained at the Bank was established to support the Company’s liquidation account in the event the Company does not have sufficient assets to fund its obligations under its liquidation account.

The Company and the Bank will hold the liquidation accounts for the benefit of eligible account holders who continue to maintain deposits in the Bank.

The Company and the Bank hold the liquidation accounts for the benefit of eligible account holders who continue to maintain deposits in the Bank.

The Company is not permitted to pay dividends on its capital stock if the shareholders’ equity of the Company would be reduced below the amount of the liquidation account.

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In the event of a complete liquidation of the Bank, and only in such event, each account holder will be entitled to receive a distribution from the liquidation account in an amount proportionate to the adjusted qualifying account balances then held.

See “Regulation—Liquidation Account Effect on Dividends” included in Item 1A in this Annual Report on Form 10-K.

Basis of Presentation

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

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

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

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Debt securities are classified at the time of purchase as either “trading,” “available for sale” or “held to maturity.” Equity securities are measured at fair value with changes in the fair value recognized through net income.

Debt securities that are bought and held principally for the purpose of resale in the near terms are classified as trading securities and recorded at fair value, with subsequent changes in fair value included in net income.

Debt securities that are bought and held principally for the purpose of resale in the near term are classified as trading securities and recorded at fair value, with subsequent changes in fair value included in net income.

Debt securities that the Company has the positive intent and the ability to hold to maturity are classified as held to maturity securities and recorded at amortized cost.

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Unearned discount and unamortized premium are accreted and amortized, respectively, to interest and dividend income on a basis that results in level rates of return over the terms of the loans.

For originated loans, origination fees and related direct incremental origination costs are offset, and the resulting net amount is deferred and amortized over the life of the related loans using the interest method, assuming a certain level of prepayments.

For originated loans, origination fees and related direct incremental origination costs are offset, and the resulting net amount is deferred and amortized over the life of the related loans using the effective interest method, assuming a certain level of prepayments.

When loans are sold or repaid, the unamortized fees and costs are recorded to interest and dividend income.

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OREO consists of properties and other assets acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure.

OREO is recorded in other assets in consolidated balance sheets, on an individual asset basis at the lower of cost or fair value, less estimated selling costs.

OREO is recorded in other assets in the consolidated balance sheets, on an individual asset basis 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.

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.

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Federal Home Loan Bank Stock

The Company, as a member of the Federal Home Loan Bank ("FHLB") of Boston, is required to maintain an investment in capital stock of the FHLB.

The Company, as a member of the Federal Home Loan Bank (“FHLB”) of Boston (“FHLBB”), is required to maintain an investment in capital stock of the FHLB.

Based on redemption provisions, the stock has no quoted market value and is carried at cost.

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The Company considers factors including, but not limited to, changes in legal factors and business climate that could affect the value of the intangible asset.

Any impairment losses are charged to net income.

Any impairment losses are charged to net

The Company amortizes other intangible assets over their respective estimated useful lives.

The estimated useful lives

of core deposit identifiable intangible assets fall within a range of seven to ten years and the estimated useful life of customer lists from insurance agency acquisitions is ten years.

The estimated useful lives of core deposit identifiable intangible assets fall within a range of seven to ten years and the estimated useful life of customer lists from insurance agency acquisitions is ten years .

The estimated useful life of non-compete agreements resulting from insurance agency acquisitions are dependent upon the terms of the agreement.

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The Company provides benefits to its employees and executive officers through various retirement plans, including a defined benefit plan, a defined benefit supplemental executive retirement plan, a defined contribution plan, a benefit equalization plan, and an outside directors’ retainer continuance plan.

Effective November 1, 2020, the defined benefit plan and the benefit equalization plan were amended to convert the plans from a traditional final average earnings plan design to a cash balance plan design.

Effective November 1, 2020, the defined benefit plan (“Defined Benefit Plan”) and the benefit equalization plan (“BEP”) were amended to convert the plans from a traditional final average earnings plan design to a cash balance plan design.

Benefits earned under the final average earnings plan design were frozen at October 31, 2020.

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The defined benefit plan benefits are provided through membership in the Savings Banks Employees’ Retirement Association (“SBERA”).

The plan is a noncontributory, defined benefit plan (“Defined Benefit Plan”).

The Defined Benefit Plan is a noncontributory, defined benefit plan.

Under the final average earnings plan design, benefits became fully vested after three years of eligible service for individuals employed on or before October 31, 1989.

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The DB SERP has a plan year end of December 31.

The Company also has an unfunded Benefit Equalization Plan (“BEP”) to provide retirement benefits to certain employees whose retirement benefits under the Defined Benefit Plan are limited per the Internal Revenue Code.

The Company’s BEP, which is an unfunded plan, provides retirement benefits to certain employees whose retirement benefits under the Defined Benefit Plan are limited per the Internal Revenue Code.

The BEP has a plan year end of October 31.

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Employee Tax Deferred Incentive Plan

The Company has an employee tax deferred incentive plan (“401(k)”) under which the Company makes voluntary contributions within certain limitations.

The Company has an employee tax deferred incentive plan (“401(k) plan”) under which the Company makes voluntary contributions within certain limitations.

All employees who meet specified age and length of service requirements are eligible to participate in the 401(k) plan.

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These measurement funds are for tracking purposes and are used only to track the performance of a mutual fund, market index, savings instrument, or other designated investment or portfolio of investments.

Effective December 31, 2021, the Company closed the DC SERP to new participants and froze benefit accruals for active participants.

Deferred Compensation

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The loan receivable from the ESOP is not reported as an asset nor is the Company’s guarantee to fund the ESOP reported as a liability on the Company’s consolidated balance sheet.

Share-Based Compensation

The Company measures share-based compensation on the grant date fair value on a straight-line basis over the vesting period during which an employee is required to provide services in exchange for the award;

the requisite service period.

The Company uses various pricing models to estimate the fair value of stock awards granted.

The Company measures the fair value of the restricted stock using the closing market price of the Company’s common stock on the date of grant.

The Company records compensation expense equal to the grant date fair value of the Company’s restricted stock with a corresponding increase in equity.

Reductions in compensation expense associated with forfeited awards are accounted for as incurred.

Upon vesting, the fair value of the award in excess of recorded expense is recognized as a component of income tax expense.

Variable Interest Entities (“VIE”) and Voting Interest Entities (“VOE”)

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The primary beneficiary analysis is a qualitative analysis based on power and economics.

An enterprise has a controlling financial interest in a VIE if it has both 1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and 2) the obligation to absorb losses of the VIE that potentially could be significant to the VIE or the right to receive benefits from the VIE that potentially could be significant to the VIE.

An enterprise has a controlling financial interest in a VIE if it has both 1) the power to direct the activities of a VIE that most significantly impact the VIE’s

economic performance and 2) the obligation to absorb losses of the VIE that potentially could be significant to the VIE or the right to receive benefits from the VIE that potentially could be significant to the VIE.

VOEs are entities in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities.

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The Company established rabbi trusts to meet its obligations under certain executive non-qualified retirement benefits and deferred compensation plans and to mitigate the expense volatility of the aforementioned retirement plans.

The rabbi trusts are considered VIEs as the equity investment at risk is insufficient to permit the trust to finance its activities without

additional subordinated financial support from the Company.

The rabbi trusts are considered VIEs as the equity investment at risk is insufficient to permit the trust to finance its activities without additional subordinated financial support from the Company.

The Company is considered the primary beneficiary of the rabbi trusts as it has the power to direct the activities of the rabbi trusts that significantly affect the rabbi trust’s economic performance and it has the obligation to absorb losses of the rabbi trusts that could potentially be significant to the rabbi trusts by virtue of its contingent call options on the rabbi trust’s assets in the event of the Company’s bankruptcy.

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Bank Owned Life Insurance

The Company holds bank-owned life insurance on the lives of certain participating executives, primarily as a result of mergers and acquisitions of certain insurance agencies.

The Company holds bank-owned life insurance on the lives of certain participating executives, primarily as a result of mergers and acquisitions.

The amount reported as an asset on the balance sheet is the sum of the cash surrender values reported to the Company by the various insurance carriers.

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The Company has elected the short-term lease recognition exemption for all leases that qualify.

Common Share Repurchases

Shares repurchased by the Company under our share repurchase program have been classified as authorized but unissued shares.

The cost of shares repurchased by the Company has been accounted for as a reduction to common stock and additional paid in capital balances.

Massachusetts state law calls for repurchased shares to be classified as authorized but unissued shares.

GAAP states that the accounting for share repurchases shall conform to state law where applicable.

Earnings Per Share

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ESOP shares committed to be released are considered to be outstanding for purposes of the earnings per share computation.

ESOP shares that have not been legally released, but that relate to employee services rendered during an accounting period (interim or annual) ending before the related debt service payment is made, are considered committed to be released.

ESOP shares that have not been legally released, but that relate to employee services rendered during an

accounting period (interim or annual) ending before the related debt service payment is made, are considered committed to be released.

Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance.

Potential common shares that may be issued by the Company relate to outstanding stock options awards and are determined using the treasury stock method.

Potential common shares that may be issued by the Company relate to outstanding stock awards and are determined using the treasury stock method.

Segment Reporting

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Recent Accounting Pronouncements

The Company qualifies as an emerging growth company under the Jumpstart Our Business Act of 2012 (“JOBS Act”) and has elected to defer the adoption of new or revised accounting standards until the nonpublic company effective dates.

Until December 31, 2021, the Company had qualified as an emerging growth company under the Jumpstart Our Business Act of 2012 (“JOBS Act”) and had elected to defer the adoption of new or revised accounting standards until the nonpublic company effective dates.

Relevant standards that were recently issued but not yet adopted as of December 31, 2021:

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The Company will adopt this standard on the nonpublic company effective date and is currently in the process of reviewing its contracts and existing processes in order to assess the risks and potential impact of the transition away from LIBOR.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848) ( “ASU 2021-1”) which expands the scope of guidance in ASC 848 so that companies can apply the optional expedients to derivative instruments affected by the clearinghouse changes.

ASU 2021-01 also clarifies and updates several items in ASU 2020- 04 as part of the Board of Director’s monitoring of global reference rate reform activities.

ASU 2021-01 permits entities to elect certain optional expedients and exceptions to modifications of interest rate indexes used for discounting, margining, or contract price alignment of derivative contracts and certain hedging relationships.

ASU 2021-01 clarifies other aspects of the guidance in ASC 848 and provides new guidance on how to address the effects of the cash compensation adjustment that is provided as part of the above change on certain aspects of hedge accounting.

The guidance was effective upon issuance and allows for retrospective or prospective application with certain conditions.

The Company did not elect retrospective application.

The adoption of this update did not have a material impact on its Consolidated Financial Statements.

As of December 31, 2021, there has been no material impact from reference rate discontinuation.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses on Financial Instruments and relevant amendments (Topic 326) (“ASU 2016-13”).

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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 (See further discussion below).

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 .

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For all other entities, the guidance is effective for annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic in the United States to provide economic relief measures including the option to defer adoption of ASU 2016-13 to the earlier of the ending of the national emergency declaration related to the COVID-19 crisis or December 31, 2020.

December 31, 2020.

On December 27, 2020, the Consolidated Appropriations Act (the “Appropriations Act”) was enacted to fund the federal government through their fiscal year, extend certain expiring tax provisions and provide additional emergency relief to individuals and businesses related to the COVID-19 pandemic in the United States.

Included within the provisions of the Appropriations Act is an extension of the adoption date for ASU 2016-13 from December 31, 2020 to the earlier of January

1, 2022 or 60 days after the date on which the COVID-19 national emergency terminates.

The Company anticipates deferring adoption of this standard to January 1, 2022.

To address the impact of ASU 2016-13, the Company has formed a committee, including the Chief Credit Officer, the Chief Financial Officer, and Chief Information Officer, to assist in identifying, implementing, and evaluating the impact of the required changes to loan loss estimation models and processes.

The Company has evaluated portfolio segmentation and is currently evaluating methodologies and the control environment under the new standard.

A third party has been engaged to assist the Company in project management, documentation, model governance and related internal controls implementation.

The Company is currently assessing the impact of the new standard on its Consolidated Financial Statements.

Included within the provisions of the Appropriations Act is an extension of the adoption date for ASU 2016-13 from December 31, 2020 to the earlier of January 1, 2022 or 60 days after the date on which the COVID-19 national emergency terminates.

The Company deferred adoption of this standard to January 1, 2022.

On January 1, 2022, 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.

For purchased credit-deteriorated (“PCD”) financial assets that were previously classified as purchased-credit impaired (“PCI”) and accounted for under ASC 310-30, the Company adopted ASU 2016-13 using the prospective transition approach.

Accordingly, the Company did not assess whether PCI assets met the criteria of PCD assets as of the date of adoption.

To address the impact of ASU 2016-13, the Company formed a committee, including the Chief Credit Officer, the Chief Financial Officer, and Chief Information Officer, to assist in identifying, implementing, and evaluating the impact of the required changes to loan loss estimation models and processes.

Additionally, a third party was engaged to assist the Company in project management, documentation, model governance and related internal controls implementation.

As of December 31, 2021, the Company has evaluated portfolio segmentation and is finalizing model validation, model calibration, qualitative factors, new disclosures, formal policies and procedures, and other governance and control enhancements.

For regulatory capital purposes, the Company has elected to delay certain effects of the adoption of ASU 2016-13 on regulatory capital for two years, followed by a three-year transition period during which it will phase-in, over a period of three years, the day-one regulatory capital effects of adoption of ASU 2016-13 in accordance with the federal banking agencies interim final rule issued in March 2020.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”).

This update modifies how an acquiring entity measures contract assets and contract liabilities of an acquiree in a business combination in accordance with Topic 606.

The amendments in this update require the acquiring entity in a business combination to account for revenue contracts as if they had originated the contract and assess how the acquiree accounted for the contract under Topic 606.

ASU 2021-08 improves comparability of recognition and measurement of revenue contracts with customers both before and after a business combination.

For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2022.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023.

The amendments in this update should be applied prospectively to business combinations occurring on or after the effective date of the amendments with early adoption permitted.

The Company expects the adoption of this standard will not have a material impact on its consolidated financial statements.

Relevant standards that were adopted during the year ended December 31, 2021:

In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20) Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”).

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For nonpublic companies, ASU 2018-14 is effective for fiscal years ending after December 15, 2021.

Early adoption is permitted.

The Company will adopt this standard on the nonpublic company effective date.

The Company expects the adoption of this standard will not have a material impact on its Consolidated Financial Statements.

The adoption of this standard on December 31, 2021 did not have a material impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles–Goodwill and Other–Internal-use software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (“ASU 2018-15”).This update addresses accounting for fees paid by a customer for implementation, set-up and other upfront costs incurred in a cloud computing arrangement that is hosted by the vendor (i.e., a service contract).

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (“ASU 2018-15”).

This update addresses accounting for fees paid by a customer for implementation, set-up and other upfront costs incurred in a cloud computing arrangement that is hosted by the vendor (i.e., a service contract).

The new guidance aligns treatment for capitalization of implementation costs with guidance on internal-use software.

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For nonpublic entities, the guidance is effective for annual reporting periods beginning after December 15, 2020, and for all interim periods beginning after December 15, 2021.

The Company will adopt this standard on the nonpublic company effective date and is currently assessing the impact of the new standard on its Consolidated Financial Statements.

Relevant standards that were adopted during the year ended December 31, 2020:

In February 2016, the FASB issued ASU 2016-2, Leases (Topic 842) (“ASU 2016-2”).

Topic 842 was subsequently amended by ASU 2018-1, Land Easement Practical Expedient for Transition to Topic 842 (“ASU 2018-1”);

ASU 2018-10, Codification Improvements to Topic 842, Leases (“ASU 2018-10”);

ASU 2018-11, Targeted Improvements (“ASU 2018-11”);

and ASU 2018-20 Leases (Topic 842):

Narrow-Scope Improvements for Lessors (“ASU 2018-20”).

ASU 2018-1 permits an entity to elect an optional transition practical expedient to not evaluate under Topic 842 land easements that exist or expired before the entity’s adoption of Topic 842 and that were not previously accounted for as leases under Topic 840.

ASU 2018-10 was issued to clarify the Accounting Standards Codification (“Codification”) or to correct unintended application of guidance within ASU 2016-2.

ASU 2018-11 allows for an optional transition method in which the provisions of Topic 842 would be applied upon the adoption date and would not have to be retroactively applied to the earliest reporting period presented in the Consolidated Financial Statements.

Lastly, ASU 2018-20 provided narrow-scope improvements for lessors, which was issued to increase transparency and comparability among organizations.

ASU 2016-2 and the several additional amendments thereto are collectively referred to herein as ASC 842.

ASC 842 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors).

The standard represents a wholesale change to lease accounting and requires all leases with a term longer than 12 months to be reported on the balance sheet through recognition of a ROU asset and a corresponding liability for future lease obligations.

Leases will be classified as financing or operating, with classification affecting the pattern and grouping of expenses in the income statement.

The standard also requires extensive disclosures for assets, expenses, and cash flows associated with leases, as well as a maturity analysis of lease liabilities.

In November 2019, the FASB issued guidance delaying the effective date for all entities except for public business entities that are SEC filers.

For public business entities the guidance was effective for fiscal year beginning after December 15, 2018, and for all other entities the guidance is effective for fiscal years beginning after December 15, 2020.

Early adoption is permitted for all entities.

The Company early adopted this standard on January 1, 2020.

In accordance with ASU 2018-11, the Company used the effective date as the date of application and, therefore, periods prior to January 1, 2020, were not restated.

The new standard provides a number of optional practical expedients in transition.

The Company elected the “package of practical expedients,” which permitted the Company to not reassess prior conclusions about lease identification, lease classification, and initial direct costs under ASC 842.

The Company also elected the hindsight practical expedient and, therefore, used the hindsight knowledge as of the effective date when determining lease terms and impairment.

In addition, the Company elected the practical expedient to not separate lease and non-lease components and, therefore, accounts for each separate lease

component of a contract and its associated non-lease components as a single lease component.

The new standard also provides a practical expedient for an entity’s ongoing accounting relating to leases of 12 months or less (“short-term leases”).

The Company has elected the short-term lease recognition exemption for all leases that qualify and will not recognize ROU assets and lease liabilities for those leases.

The adoption of this standard resulted in the recognition of ROU assets and lease liabilities on the Company’s balance sheet for its real estate and equipment operating leases of $ 92.9 million and $ 96.4 million, respectively.

The Company recorded an adjustment to remove the Company’s existing deferred rent liability of approximately $ 3.5 million.

The Company also recognized a transition adjustment to the opening balance of retained earnings on January 1, 2020 amounting to $ 1.1 million, net of tax, related to an incremental accrued rent adjustment calculated as a result of electing the hindsight practical expedient.

The amount of ROU assets were determined based upon the present value of the remaining minimum rental payments under current leasing standards for existing operating leases, adjusted for options that the Company is reasonably certain to exercise, less accrued rent as of December 31, 2019 and the incremental accrued rent as a result of electing the hindsight practical expedient.

Lastly, the amount of lease liabilities was determined based upon the present value of the remaining minimum rental payments under current leasing standards for existing operating leases, adjusted for options that the Company is reasonably certain to exercise.

See Note 7, “Leases” for further discussion of the impact to the Company’s Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”) .

This update modifies the disclosure requirements related to the fair value measurements in Topic 820.

Specifically, this update amends disclosure around changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used in Level 3 fair value measurements and the description of measurement uncertainty.

The Company adopted ASU 2018-13 on January 1, 2020.

The adoption of this update did not have a material impact on its Consolidated Financial Statements.

In October 2018, the FASB issued ASU 2018-16, Derivatives and Hedging (Topic 815):

Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (“ASU 2018-16”).

This update permits the use of the Overnight Index Swap (“OIS”) rate based on the Secured Overnight Financing Rate (“SOFR”) as a U.S.

benchmark interest rate for hedge accounting purposes under Topic 815.

The amendments should be adopted on a prospective basis for qualifying new or re-structured hedging relationships entered into on or after the date of adoption.

The Company adopted this standard on January 1, 2020.

The adoption of this update did not have a material impact on its Consolidated Financial Statements.

The adoption of this standard on January 1, 2021 did not have a material impact on the Company's consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848) (“ASU 2021-01”) which expands the scope of guidance in ASC 848 so that companies can apply the optional expedients to derivative instruments affected by the clearing house changes.

ASU 2021-01 also clarifies and updates several items in ASU 2020-04 as part of the FASB’s monitoring of global reference rate reform activities.

ASU 2021-01 permits entities to elect certain optional expedients and exceptions to modifications of interest rate indexes used for computing when accounting derivative contracts and certain hedging relationships impacted by changes in interest rates used for discounting, margining, or contract price alignment.

ASU 2021-01 clarifies other aspects of the guidance in ASC 848 and provides new guidance on how to address the effects of the cash

compensation adjustment that is provided as part of the above change on certain aspects of hedge accounting.

The guidance was effective upon issuance and allows for retrospective or prospective application with certain conditions.

The Company did not elect retrospective application.

Changes made in connection with the adoption of this update did not have a material impact on the Company’s consolidated financial statements.

Mergers and Acquisitions

Century Bancorp, Inc.

On November 12, 2021, the Company completed its acquisition of Century Bancorp, Inc.

Under the terms of the Merger Agreement, each holder of Century Class A and B common stock received a cash payment of $ 115.28 per share.

The total consideration paid in the acquisition of Century was $ 641.9 million in cash.

In connection with the acquisition, Century Bank and Trust Company, a wholly owned subsidiary of Century, was merged with and into the Bank.

The acquisition added $ 7.1 billion to total assets, including goodwill and intangible assets, $ 2.9 billion to total loans, which included PCI loans totaling $ 67.3 million, and $ 6.1 billion to total deposits, and added 29 full-service banking offices in Massachusetts, as of the date of closing.

The acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations .

Under this method of accounting, the respective assets acquired and liabilities assumed were recorded at their estimated fair values.

The excess of consideration paid over the estimated fair value of the net assets acquired totaled $ 259.0 million and was recorded as goodwill.

The results of Century’s operations were included in the Company’s consolidated financial statements subsequent to the acquisition date.

The calculation of goodwill is subject to change for up to one year after the closing date of the transaction as additional information relative to closing date estimates and uncertainties becomes available.

As the Company finalizes its analysis of these assets and liabilities, there may be adjustments to the recorded carrying values.

The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of acquisition from Century:

Net Assets Acquired at Fair Value

(In thousands)

Cash and due from banks $ 56,831

Short-term investments 575,953

Investment securities 3,117,022

Loans 2,906,491

FHLB stock 6,690

Premises and equipment 64,521

Bank owned life insurance 95,478

Goodwill 259,024

Core deposit intangible 11,633

Other assets 18,915

Total assets acquired 7,112,558

Deposits 6,099,821

Securities sold under agreements to repurchase 274,982

Escrow deposits of borrowers 3,649

Other liabilities 92,237

Total liabilities assumed 6,470,689

Purchase price $ 641,869

Fair Value Measurement of Assets Assumed and Liabilities Assumed

The methods used to determine the fair value of the assets acquired and liabilities assumed in the Century acquisition were as follows:

Investment Securities

The estimated fair values of the available for sale debt securities and held-to-maturity debt securities, primarily comprised of U.S.

Government agency mortgage-backed securities, U.S.

government agencies, Small Business Administration (“SBA”) pooled securities, and municipal bonds carried on Century’s balance sheet, was confirmed using open market pricing provided by multiple independent securities brokers.

Based upon management’s determination, a fair value adjustment of $( 37.3 ) million, reflecting a net discount, was recorded on acquired securities and reflects the net unrealized loss position of such securities at the date of acquisition.

Securities acquired that were classified on Century’s balance sheet as held-to-maturity were reclassified as available for sale upon acquisition, reflecting management’s intent with respect to such securities.

Loans acquired in the Century acquisition were recorded at fair value, and there was no carryover of the allowance for loan losses.

The fair value of the loans acquired from Century was determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected, as adjusted for an estimate of future credit losses and prepayments, and then applying a market-based discount rate to those cash flows.

Management retained a third-party valuation specialist to assist with the determination of future credit losses, prepayments and a market-based discount rate, the results of which were reviewed by management.

A fair value adjustment of $ 13.3 million, reflecting a net discount, was recorded on the loans acquired in this transaction and was due primarily to anticipated credit loss, as well as considerations for liquidity and market interest rates.

A portion of the acquired loans exhibited evidence of more-than-insignificant deterioration in credit quality since origination and thus were reviewed to determine if any loans would be deemed PCI.

The following is a summary of the PCI loans identified as a result of the review performed as of the date acquired:

As of November 12, 2021

(In thousands)

Contractually required principal and interest at acquisition (1) $ 82,900

Contractual cash flows not expected to be collected 6,746

Expected cash flows at acquisition 76,154

Interest component of expected cash flows 8,896

Basis in PCI loans at acquisition - estimated fair value $ 67,258

(1) Contractually required principal and interest at acquisition includes interest not expected to be collected due to estimated prepayments.

Premises and Equipment

The Company acquired 29 branches from Century as of the date of closing, 13 of which were owned premises.

The fair value of properties acquired was derived by valuations prepared by an independent third party utilizing a combination of the cost approach and the sales comparison approach to value the property as improved.

Included in the acquired premises and equipment of $ 64.5 million was real estate previously owned by Century and located at 400 Mystic Avenue, Medford, Massachusetts (the “400 Mystic Parcel”).

On September 30, 2021, the Company executed a definitive Purchase and Sale Agreement that provided for Eastern Bank to sell the 400 Mystic Parcel, where Century maintained its executive offices.

The purchase price for the 400 Mystic Parcel was $ 20.5 million in cash payable at the closing of the sale which occurred in the mid-fourth quarter of 2021 after the Company completed the acquisition.

The fair value of the property was initially recorded at an amount equal to the agreed upon purchase price.

Accordingly, no gain or loss was recognized as a result of the sale.

As part of the Century acquisition the Company added 20 lease obligations.

The Company recorded a $ 13.9 million right-of-use asset and lease liability for these lease obligations.

Core Deposit Intangible

The fair value of the core deposit intangible was determined based on a discounted cash flow analysis using a discount rate commensurate with market participants.

To calculate cash flows, deposit account servicing costs (net of deposit

fee income) and interest expense on deposits were compared to the cost of alternative funding sources available through FHLBB borrowing rates and national brokered CD offering rates.

The projected cash flows were developed using projected deposit attrition rates.

Management retained a third-party valuation specialist to assist with the determination of projected cash flows, the results of which were reviewed by management.

The core deposit intangible totaled $ 11.6 million and is being amortized on a straight-line basis over its estimated useful life of approximately 10 years.

The calculation of goodwill is subject to change for up to one year after the date of acquisition as additional information relative to the closing date estimates and uncertainties become available.

As the Company finalizes its review of the acquired assets and liabilities, certain adjustments to the recorded carrying values may be required.

The goodwill will be evaluated annually for impairment.

The goodwill is no t deductible for tax purposes.

Bank Owned Life Insurance (“BOLI”)

Century’s BOLI cash surrender value was $ 95.5 million with no fair value adjustment.

Time Deposits

The fair value adjustment for time deposits represents a discount from the value of the contractual repayments of fixed-maturity deposits using prevailing market interest rates for similar-term time deposits.

The time deposit discount of approximately $ 1.8 million is being amortized into income on a level yield amortization method over the contractual life of the deposits.

Securities Sold Under Agreements to Repurchase

Acquired securities sold under agreements to repurchase were $ 275.0 million with no fair value adjustment as the fair value approximates carrying value.

Such agreements reached their maturity prior to December 31, 2021.

Accordingly, the Company had no obligations related to securities sold under agreements to repurchase as of December 31, 2021.

Securities sold under agreements to repurchase were customer-related and were converted to deposits upon maturity.

Escrow Deposits of Borrowers

Century’s escrow deposits of borrowers was $ 3.6 million with no fair value adjustment.

Merger-Related Expenses

The Company recorded merger and acquisition expenses of $ 35.5 million during the year ended December 31, 2021 related to the Century acquisition.

These merger and acquisition expenses were included in the following line items of the consolidated statements of income:

For the Year Ended December 31, 2021

(In thousands)

Salaries and employee benefits $ 15,947

Office occupancy and equipment 7,198

Data processing 1,286

Professional services 9,223

The following table presents certain unaudited pro forma information for the years ended December 31, 2021 and 2020.

This unaudited estimated pro forma financial information was calculated as if Century had been acquired as of the beginning of the year prior to the date of acquisition.

This unaudited pro forma information combines the historical results of Century with the Company’s consolidated historical results and includes certain adjustments reflecting the estimated impact of certain fair value adjustments for the respective periods.

The pro forma information is not indicative of what would have occurred had the acquisition occurred as of the beginning of the year prior to the acquisition.

The unaudited pro forma information does not consider any changes to the provision for loan losses resulting from recording loan assets at fair value, cost savings, or business synergies.

As a result, actual amounts would have differed from the unaudited pro forma information presented.

Unaudited Pro Forma Financial Information for the Years Ended December 31,

(In thousands)

Net interest income $ 522,621 $ 502,853

Net income 174,603 61,858

Financial results of Century from the date of acquisition through December 31, 2021 are not presented as management considers the determination of such amounts to be impracticable.

Insurance Agency Acquisitions

During the year ended December 31, 2021, the Company completed acquisitions of two insurance agencies for aggregate total consideration of $ 4.4 million in cash which is comprised of cash consideration paid for each insurance agency of $ 3.9 million and $ 0.5 million, respectively.

Both acquisitions were considered to be business combinations and were accounted for using the acquisition method.

The following table summarizes the estimate fair value of the assets acquired and liabilities assumed for the business combinations described above:

(In thousands)

Assets acquired:

Customer list intangible $ 1,860

Non-compete intangible 170

Total assets acquired 2,163

Consideration:

Total cash paid ( 4,354 )

Contingent consideration ( 449 )

Other liabilities assumed ( 355 )

Total fair value of consideration ( 5,158 )

Goodwill $ 2,995

In connection with these acquisitions, the Company recorded a contingent consideration liability related to attainment of revenue targets over a period of time after the acquisition date.

The amount of contingent consideration recorded was based upon management’s best estimate of possible outcomes as of the date of acquisition.

The Company recorded a contingent consideration liability of $ 0.4 million, and per the purchase agreement, the payouts ranged from $ 0 to $ 0.5 million.

During the year ended December 31, 2020 the Company did not have any material charges to expense or payments to adjust the acquisition-related contingent consideration liability recorded.

For tax purposes, the acquisitions were considered asset acquisitions and as such, the amortization of goodwill and intangible assets is deductible for tax purposes.

Acquisition-related legal and professional fee costs of less than $ 0.1 million were charged to expense during the year ended December 31, 2021, and was included in the professional services line item of the consolidated statements of income.

These acquisitions were not considered significant to the Company’s Consolidated Financial Statements and, therefore, pro forma data and certain other disclosures have been excluded.

During the year ended December 31, 2020, the Company completed an acquisition of an insurance agency for total consideration of $ 1.4 million in cash.

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For tax purposes, the acquisition was considered an asset acquisitions and as such, the amortization of goodwill and intangible assets is deductible for tax purposes.

Acquisition-related legal and professional fee costs of $ 0.1 million was charged to expense during the year ended December 31, 2020, and was included in the professional services line item of the consolidated statements of income.

Acquisition-related legal and professional fee costs of $ 0.1 million was charged to expense during the year ended December 31, 2020, and were included in the professional services line item of the consolidated statements of income.

This acquisition was not considered significant to the Company’s Consolidated Financial Statements and, therefore, pro forma data and certain other disclosures have been excluded.

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State and municipal bonds and obligations 263,910 16,460 ( 41 ) 280,329

Small Business Administration pooled securities 31,821 282 — 32,103

Other debt securities 1,597 — — 1,597

$ 8,587,179 $ 36,492 $ ( 112,447 ) $ 8,511,224

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Government-sponsored residential mortgage-backed securities $ 2,106,658 $ 42,142 $ — $ 2,148,800

Government-sponsored commercial mortgage-backed securities 17,054 27 — 17,081

Agency bonds 670,468 113 ( 3,872 ) 666,709

Treasury securities 70,106 263 — 70,369

State and municipal bonds and obligations 260,898 20,004 — 280,902

Qualified zone academy bond 6,155 155 — 6,310

$ 3,125,184 $ 62,549 $ ( 3,872 ) $ 3,183,861

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State and municipal bonds and obligations 6,137 6,116 33,692 34,704 72,226 75,416 151,855 164,093 263,910 280,329

Small Business Administration pooled securities — — 4,062 4,092 — — 27,759 28,011 31,821 32,103

Other debt securities 300 300 1,297 1,297 — — — — 1,597 1,597

Total $ 51,955 $ 51,932 $ 784,326 $ 773,349 $ 2,023,620 $ 1,994,423 $ 5,727,278 $ 5,691,520 $ 8,587,179 $ 8,511,224

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Government-sponsored residential mortgage-backed securities $ — $ — $ 46,293 $ 48,925 $ 96,338 $ 100,278 $ 1,964,027 $ 1,999,597 $ 2,106,658 $ 2,148,800

Government-sponsored commercial mortgage-backed securities — — — — 17,054 17,081 — — 17,054 17,081

Agency bonds — — 99,772 99,834 570,696 566,875 — — 670,468 666,709

Treasury securities 50,023 50,251 20,083 20,118 — — — — 70,106 70,369

State and municipal bonds and obligations 406 408 20,511 21,431 74,980 79,635 165,001 179,428 260,898 280,902

Qualified zone academy bond 6,155 6,310 — — — — — — 6,155 6,310

Total $ 50,429 $ 50,659 $ 186,659 $ 190,308 $ 759,068 $ 763,869 $ 2,129,028 $ 2,179,025 $ 3,125,184 $ 3,183,861

Mortgage-backed securities include investments in securities that are insured or guaranteed by Freddie Mac or Fannie Mae.

Mortgage-backed securities include investments in securities that are insured or guaranteed by Freddie Mac, Ginnie Mae or Fannie Mae.

Mortgage-backed securities are purchased to achieve positive interest rate spread with minimal administrative expense, and to lower the Company’s credit risk.

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However, both are expected to have shorter average lives due to expected prepayments and callable features, respectively.

Included in the available for sale securities as of December 31, 2020 and 2019 were $ 710.7 million, and $ 266.4 million, respectively, of callable securities at fair value.

Treasury securities are purchased for liquidity purposes at zero risk weighting for capital purposes and as collateral for interest rate derivative positions.

Agency bonds include securities issued by Fannie Mae, Freddie Mac, the Federal Home Loan Bank, and the Federal Farm Credit Bureau.

State and municipal securities include fixed rate investment grade bonds issued primarily by municipalities in local communities within Massachusetts, and 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.

As of December 31, 2020 and 2019, the Company had no investments in obligations of individual states, counties, or municipalities, which exceeded 10% of equity.

Included in the available for sale securities as of December 31, 2021 and 2020 were $ 1.1 billion, and $ 0.7 billion, respectively, of callable securities at fair value.

As of December 31, 2021 and 2020, the Company had no investments in obligations of individual states, counties, or municipalities which exceeded 10% of consolidated shareholders’ equity.

Gross realized gains from sales of available for sale securities were $ 1.2 million, $ 0.3 million and $ 2.1 million during the years ended December 31, 2021, 2020, and 2019, respectively.

The Company had no significant gross realized losses

from sales of securities available for sale during the years ended December 31, 2020, 2019, and 2018.

The Company had no significant gross realized losses from sales of securities available for sale during the years ended December 31, 2021, 2020, and 2019.

No other-than-temporary impairment (“OTTI”) was recorded during the years ended December 31, 2021, 2020, and 2019.

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(Dollars in thousands)

Government-sponsored residential mortgage-backed securities 264 $ 70,502 $ 4,615,457 $ — $ — $ 70,502 $ 4,615,457

Government-sponsored commercial mortgage-backed securities 165 12,218 1,102,444 422 15,682 12,640 1,118,126

Agency bonds 27 2,169 191,222 26,261 794,353 28,430 985,575

Treasury securities 3 834 78,588 — — 834 78,588

State and municipal bonds and obligations 11 41 5,436 — — 41 5,436

470 $ 85,764 $ 5,993,147 $ 26,683 $ 810,035 $ 112,447 $ 6,803,182

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(Dollars in thousands)

Government-sponsored residential mortgage-backed securities 1 $ 545 $ 74,550 $ — $ — $ 545 $ 74,550

State and municipal bonds and obligations 2 3 850 — — 3 850

Agency bonds 6 $ 3,872 $ 416,824 $ — $ — $ 3,872 $ 416,824

6 $ 3,872 $ 416,824 $ — $ — $ 3,872 $ 416,824

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 of December 31, 2021, the Company does not intend to sell these investments and has determined based upon available evidence that it is more likely than not that the Company will not be required to sell each security before the expected recovery of its amortized cost basis.

As a result, the Company does not consider these investments with gross unrealized losses to be OTTI.

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As a result of the Company’s review of these qualitative and quantitative factors, the causes of the impairments listed in the tables above by category are as follows as of December 31, 2021 and 2020:

Agency bonds - The securities with unrealized losses in this portfolio as of December 31, 2020 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.

• 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.

1 unchanged sentence

government or one of its agencies.

• Government-sponsored residential mortgage-backed securities - The security with an unrealized loss in this portfolio as of December 31, 2019 has 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 this security is attributable to changes in interest rates and not credit quality.

The security at a loss position as of December 31, 2019 was subsequently in a gain position as of December 31, 2020.

• 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 changes in interest rates and not credit quality.

Additionally, these securities are implicitly guaranteed by the U.S.

government or one of its agencies.

• State and municipal bonds and obligations - The securities with unrealized losses in this portfolio as of December 31, 2019 have contractual terms that generally do not permit the issuer to settle the securities at a price less than the current par value of the investment.

The decline in market value of these securities as of December 31, 2019 is attributable to changes in interest rates and not credit quality.

These securities were subsequently in a gain position as of December 31, 2020.

These bonds are investment grade and are rated AA by Standard and Poor’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.

Treasury securities – The securities with unrealized losses in this portfolio have contractual terms that generally do not permit the issuer to settle the security at a price less than the current par value of the investment.

The decline in market value of these securities is attributable to changes in interest rates and not credit quality.

Additionally, these securities are implicitly guaranteed by the U.S.

government or one of its agencies.

• State and municipal bonds and obligations – The securities with unrealized losses in this portfolio have contractual terms that generally do not permit the issuer to settle the security at a price less than the current par value of the investment.

The decline in market value of these securities is attributable to changes in interest rates and not credit quality.

Loans and Allowance for Loan Losses

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Gross loans before unamortized premiums, unearned discounts and deferred fees 12,281,510 9,730,525

Allowance for credit losses ( 113,031 ) ( 82,297 )

Allowance for loan losses ( 97,787 ) ( 113,031 )

Unamortized premiums, net of unearned discounts and deferred fees ( 26,442 ) ( 23,536 )

Loans after the allowance for credit losses, unamortized premiums, unearned discounts and deferred fees

$ 9,593,958 $ 8,899,184

Loans after the allowance for loan losses, unamortized premiums, unearned discounts and deferred fees $ 12,157,281 $ 9,593,958

(1) Home improvement loans and automobile loans are included in the other consumer portfolio above and amounted to $ 104.4 million and $ 53.3 million at December 31, 2021, respectively, and $ 81.8 million and $ 126.7 million at December 31, 2020, respectively.

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

1 unchanged sentence

The Company participates in the SNC Program in an effort to improve its industry and geographical diversification.

The SNC Program portfolio is included in the Company’s commercial and industrial, commercial real estate and commercial construction portfolios.

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.

3 unchanged sentences

Loans Pledged as Collateral

The carrying value of loans pledged to secure advances from the Federal Home Loan Bank ("FHLB") of Boston ("FHLBB") were $ 2.4 billion and $ 1.5 billion at December 31, 2020 and 2019, respectively.

The carrying value of loans pledged to secure advances from the FHLBB were $ 2.6 billion and $ 2.4 billion at December 31, 2021 and 2020, respectively.

The balance of funds borrowed from the FHLBB were $ 14.0 million and $ 14.6 million at December 31, 2021 and 2020, respectively.

The carrying value of loans pledged to secure advances from the Federal Reserve Bank (“FRB”) were $ 0.9 billion and $ 1.0 billion at December 31, 2020 and 2019, respectively.

The carrying value of loans pledged to secure advances from the Federal Reserve Bank (“FRB”) were $ 784.0 million and $ 884.1 million at December 31, 2021 and 2020, respectively.

There were no funds borrowed from the FRB outstanding at December 31, 2021 and 2020.

1 unchanged sentence

At December 31, 2021 and 2020, mortgage loans partially or wholly-owned by others and serviced by the Company amounted to approximately $ 95.8 million and $ 13.5 million, respectively.

The increase in serviced loans at December 31, 2021 compared to December 31, 2020 is primarily attributable to our acquisition of Century.

Accordingly, we acquired mortgage servicing rights (“MSRs”) which amounted to $ 0.6 million at December 31, 2021.

MSRs are included in other assets on the consolidated balance sheets.

Allowance for Loan Losses

4 unchanged sentences

For consumer loans, policies and procedures exist that require charge-off consideration upon a certain triggering event depending on the product type.

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

For the Year Ended December 31,

2020 2019 2018

(In thousands)

Balance at the beginning of period $ 82,297 $ 80,655 $ 74,111

Loans charged off ( 9,853 ) ( 9,499 ) ( 12,461 )

Recoveries 1,787 4,841 3,905

Provision for loan losses 38,800 6,300 15,100

Balance at end of period $ 113,031 $ 82,297 $ 80,655

The following tables summarize changes in the allowance for loan losses by loan category and bifurcates the amount of allowance allocated to each loan category based on collective impairment analysis and loans evaluated individually for impairment:

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Recoveries 935 4 — 1,524 122 185 674 — 3,444

Provision (benefit) 6,690 19,633 1,129 9,747 ( 70 ) 138 1,423 110 38,800

(Release of) provision ( 7,976 ) ( 1,953 ) ( 1,968 ) 1,398 34 ( 183 ) 1,214 ( 252 ) ( 9,686 )

Ending balance $ 18,018 $ 52,373 $ 2,585 $ 10,983 $ 6,556 $ 3,722 $ 3,308 $ 242 $ 97,787

28 unchanged sentences

Recoveries 778 230 — 292 125 153 209 — 1,787

Provision (benefit) ( 1,027 ) 2,318 ( 1,182 ) 5,463 ( 718 ) 67 1,384 ( 5 ) 6,300

Provision (release of) 6,690 19,633 1,129 9,747 ( 70 ) 138 1,423 110 38,800

Ending balance $ 26,617 $ 54,569 $ 4,553 $ 13,152 $ 6,435 $ 3,744 $ 3,467 $ 494 $ 113,031

29 unchanged sentences

Recoveries 3,748 12 — 604 105 52 320 — 4,841

Provision (benefit) 5,322 1,510 ( 982 ) 7,640 ( 20 ) 298 1,525 ( 193 ) 15,100

Provision (release of) ( 1,027 ) 2,318 ( 1,182 ) 5,463 ( 718 ) 67 1,384 ( 5 ) 6,300

Ending balance $ 20,919 $ 34,730 $ 3,424 $ 8,260 $ 6,380 $ 4,027 $ 4,173 $ 384 $ 82,297

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Other consumer :

The Company’s policy and underwriting in this category, which is comprised primarily of airplane and automobile loans, include the following factors, among others:

The Company’s policy and underwriting in this category, which is comprised primarily of home improvement and automobile loans, include the following factors, among others:

income sources and reliability, credit histories, term of repayment, and collateral value, as applicable.

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Specifically, the company utilizes a 15-point credit risk-rating system to manage risk and identify potential problem loans.

Prior to December 31, 2020, the Company utilized a 12-point credit risk-rating system to manage risk and identify potential problem loans.

In the fourth quarter of 2020, the Company realigned its credit risk-rating system, transitioning to a 15-point credit risk-rating system.

The expansion from the prior 12-point scale will provide more refinement in the pass grade categories;

new pass grades are 0-10.

There are no changes to non-pass categories, which continue to align with regulatory guidelines and are found in ratings:

special mention (11), substandard (12), doubtful (13) and loss (14).

The Company believes that increasing granularity of the risk rating system allows for more robust portfolio management and increased precision and effectiveness of credit risk identification.

Under both point systems, 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.

The risk-rating categories under the new 15-point credit risk-rating system are defined as follows:

0 Risk Rating- Unrated

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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.

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.

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Banking Total

(In thousands)

Unrated $ 171,537 $ 4,378 $ — $ 696,629 $ 872,544

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Banking Total

(In thousands)

Unrated $ 655,346 $ 6,585 $ — $ 918,921 $ 1,580,852

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Paycheck Protection Program (“PPP”) loans are included within the unrated category of the commercial and industrial and business banking portfolios in the table above.

Commercial and industrial PPP and business banking PPP loans amounted to $ 568.8 million and $ 457.4 million, respectively, at December 31, 2020.

Commercial and industrial PPP and business banking PPP loans amounted to $ 112.8 million and $ 218.6 million, respectively, at December 31, 2021 and $ 568.8 million and $ 457.4 million, respectively, at December 31, 2020.

The Company does not have an allowance for loan losses for PPP loans as they are 100% guaranteed by the SBA.

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Asset Quality

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 December 31, 2020 was $ 332.7 million.

The Company defines a modified loan to have resumed payment if it is one month past the modification end date and not more than 30 days past due.

These modifications with active deferrals met the criteria of either Section 4013 of the 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.

Additionally, loans that are performing in accordance with the contractual terms of the modification are not reflected as being past due and therefore are not impacting non-accrual or delinquency totals as of December 31, 2020.

The Company continued to accrue interest on these COVID-19 modified loans and evaluated the deferred interest for collectability as of December 31, 2020.

The Company manages its loan portfolio with careful monitoring.

1 unchanged sentence

Exceptions may be made if management believes that collateral held by the Company is clearly sufficient and in full satisfaction of both principal and interest, or the loan is accounted for as a PCI loan.

Therefore, as permitted by banking regulations, certain consumer loans past due 90 days or more may continue to accrue interest.

In addition, as permitted by banking regulations, certain consumer loans past due 90 days or more may continue to accrue interest.

The Company may also use discretion regarding other loans over 90 days delinquent if the loan is well secured and in the process of collection.

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Loans are considered past due based upon the number of days delinquent according to their contractual terms.

Specifically, non-accrual residential loans that have been restructured must perform for a period of six months before being considered for accrual status.

A loan is expected to remain on 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.

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Total $ 18,251 $ 7,250 $ 22,121 $ 47,622 $ 9,682,903 $ 9,730,525 $ 2,247

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.

However, based upon the Company’s past experiences, some of these loans with potential weaknesses will ultimately be restructured or placed in non-accrual status.

Based upon the Company’s past experiences, some of these loans with potential weaknesses will ultimately be restructured or placed in non-accrual status.

As of both December 31, 2021 and December 31, 2020, we are unable to reasonably estimate the amount of these loans that will be restructured or placed on non-accrual status.

Troubled Debt Restructurings (“TDR”)

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In such an instance, any shortfall between the value of the collateral and the book value of the loan is determined by measuring the recorded investment in the loan against the fair value of the collateral less costs to sell.

The Company’s policy is to have any TDR loans which are 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.

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 had not yet resumed payment as of December 31, 2021 and December 31, 2020 was $ 106.7 million and $ 332.7 million, respectively.

The Company defines a modified loan to have resumed payment if it is one month past the modification end date and not more than 30 days past due.

The Company continued to accrue interest on these COVID-19 modified loans and evaluated the deferred interest for collectability as of December 31, 2021 and December 31, 2020.

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 Company applied the TDR relief granted pursuant to such section to any qualifying loan modifications executed during the allowable time period.

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.

If the TDR loan is on accrual status prior to being modified, it is reviewed to determine if the modified loan should remain on accrual status.

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Consumer home equity 91 4,030 12 815 103 4,845

Other consumer 3 29 — — 3 29

Total 248 $ 41,095 53 $ 12,109 301 $ 53,204

The amount of specific reserve associated with the TDRs was $ 3.4 million and $ 3.5 million at December 31, 2021 and 2020, respectively.

The amount of additional commitments to lend to borrowers who have been a party to a TDR was $ 0 and $ 2.5 million at December 31, 2020 and 2019, respectively.

There were no additional commitments to lend to borrowers who have been party to a TDR as of December 31, 2021 and 2020.

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

18 unchanged sentences

These amounts may show an increase when modification includes capitalization of interest.

At December 31, 2020 and 2019, the outstanding recorded investment of loans that were new to TDR during the period was $ 3.9 million and $ 36.2 million, respectively.

At December 31, 2021 and 2020, the outstanding recorded investment of loans that were new TDR loans during the period was $ 0.8 million and $ 3.9 million, respectively.

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

14 unchanged sentences

Total $ 798 $ 4,239 $ 30,761

The following table shows the loans that have been modified during the prior 12 months which have subsequently defaulted during the periods indicated.

The following table shows the number of loans and the recorded investment amount of those loans, as of the respective date, that have been modified during the prior 12 months which have subsequently defaulted during the periods indicated.

There were no TDRs that were modified during the prior 12 months which had subsequently defaulted during the year ended December 31, 2021.

The Company considers a loan to have defaulted when it reaches 90 days past due or is transferred to non-accrual:

For the Year Ended December 31,

2020 2019 2018

Contracts Recorded

1 unchanged sentence

Contracts Recorded

Investment Number of

Contracts Recorded

(Dollars in thousands)

4 unchanged sentences

Residential real estate

— — — — 1 144

Consumer home equity 1 40 — —

1 unchanged sentence

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

During the years ended December 31, 2020, 2019, and 2018 the amounts charged-off on TDRs modified in the prior 12 months were $ 0.2 million, $ 0 and $ 1.5 million respectively.

During the years ended December 31, 2021 and 2019, no amounts were charged-off on TDRs modified in the prior 12 months.

During the year ended December 31, 2020, there were $ 0.2 million in charge-offs on TDRs modified in the prior 12 months.

Impaired Loans

2 unchanged sentences

The Company measures impairment of loans using a discounted cash flow method, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent.

The Company has defined the population of impaired loans to include certain non-accrual loans, TDR loans and residential and home equity loans that have been partially charged off.

The Company has defined the population of impaired

loans to include certain non-accrual loans, TDR loans and residential and home equity loans that have been partially charged off.

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

20 unchanged sentences

Consumer home equity 1,998 1,998 270 2,274 2,274 289

Other consumer 161 161 161 — — —

Sub-total 25,017 28,786 3,970 39,892 44,675 8,054

36 unchanged sentences

2021 2020 2019

(In thousands)

Balance at beginning of period $ 2,495 $ 3,923 $ 6,161

2 unchanged sentences

Other change in expected cash flows ( 1,475 ) ( 185 ) ( 898 )

Reclassification (to) from non-accretable difference for loans with (deteriorated) improved cash flows

131 792 1,782

Reclassification from non-accretable difference for loans with improved cash flows 1,649 131 792

Balance at end of period $ 10,371 $ 2,495 $ 3,923

1 unchanged sentence

A decrease in expected cash flows in subsequent periods may indicate that the loan is impaired which would require the establishment of an allowance for loan losses by a charge to the provision for loan losses.

An increase in expected cash flows in subsequent periods serves, first, to reduce any previously established allowance for loan losses by the increase in the present value of cash flows expected to be collected, and results in a recalculation of the amount of accretable yield for the loan.

An increase in expected cash flows in subsequent periods

serves, first, to reduce any previously established allowance for loan losses by the increase in the present value of cash flows expected to be collected, and results in a recalculation of the amount of accretable yield for the loan.

The adjustment of accretable yield due to an increase in expected cash flows is accounted for as a change in estimate.

3 unchanged sentences

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.

As of December 31, 2020 and 2019, the Company held commercial loan participation interests totaling $ 1.0 billion and $ 965.1 million, respectively.

The following table summarizes the Company’s loan participations:

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Net premises and equipment (1) $ 80,984 $ 49,398

(1) The Company classified a branch location as held for sale

The Company had depreciation expense related to premises and equipment of $ 13.0 million, $ 15.9 million, and $ 16.2 million during the years ended December 31, 2020, 2019, and 2018, respectively.

(1) In connection with the Company’s acquisition of Century, the Company acquired $ 64.5 million in premises and equipment.

The Company recorded depreciation expense related to premises and equipment of $ 12.0 million, $ 13.0 million, and $ 15.9 million during the years ended December 31, 2021, 2020, and 2019, respectively.

Properties transferred to held for sale during the year ended December 31, 2021 amounted to $ 37.6 million and included five branch locations, of which four were acquired from Century.

The company recorded a $ 1.2 million loss, representing estimated costs to sell, on properties transferred to held for sale during the year ended December 31, 2021.

In addition, proceeds from sales of premises and equipment were $ 22.0 million during the year ended December 31, 2021, which included the premises held for sale as of December 31, 2020.

In connection with these sales, the Company recognized no significant gain or loss.

No premises and equipment was transferred to held for sale or sold during the year ended December 31, 2020.

The Company leases certain office space and equipment under various non-cancelable operating leases.

1 unchanged sentence

Operating lease liabilities and 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 sheet.

As of December 31, 2020, the Company had the following related to operating leases:

As of December 31, 2020

Operating lease liabilities are recorded within other liabilities and ROU assets are recorded within other assets in the Company’s consolidated balance sheets.

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

As of December 31, 2021 As of December 31, 2020

(In thousands)

1 unchanged sentence

Lease liabilities 89,296 85,330

The following table is a summary of the Company’s components of net lease cost for the year ended December 31, 2020:

For the Year Ended December 31, 2020

Finance leases are not material.

Finance lease liabilities are recorded within other liabilities and finance ROU assets are recorded within other assets in the Company’s consolidated balance sheets.

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

For the Year Ended December 31, 2021 For the Year Ended December 31, 2020

(In thousands)

3 unchanged sentences

Total lease cost $ 16,549 $ 16,455

During the year ended December 31, 2020, the Company made $ 14.2 million in cash payments for operating and finance leases.

The rent expense for operating leases during the years ended December 31, 2019 and 2018 amounted to $ 16.2 million and $ 14.3 million, respectively.

The rent expense for equipment operating leases amounted to $ 0.7 million for both the years ended December 31, 2019 and 2018.

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 sheet.

Supplemental balance sheet information related to operating leases as of December 31, 2020 is as follows:

As of December 31, 2020

During the years ended December 31, 2021 and 2020, the Company made $ 15.6 million and $ 14.2 million in cash payments for operating and finance leases, respectively.

The rent expense for operating leases for the year ended December 31, 2019 amounted to $ 16.2 million.

The rent expense for equipment operating leases amounted to $ 0.7 million for the year ended December 31, 2019.

Supplemental balance sheet information related to operating leases as of the dates indicated is as follows:

As of December 31, 2021 As of December 31, 2020

Weighted-average remaining lease term (in years) 7.83 8.50

Weighted-average discount rate 2.52 % 2.65 %

The following table sets forth the undiscounted cash flows of base rent related to operating leases outstanding at December 31, 2020 with payments scheduled over the next five years and thereafter, including a reconciliation to the operating lease liability recognized in other liabilities in the Company’s consolidated balance sheet:

The following table sets forth the undiscounted cash flows of base rent related to operating leases outstanding as of December 31, 2021 with payments scheduled over the next five years and thereafter, including a reconciliation to the operating lease liability recognized in other liabilities in the Company’s consolidated balance sheets:

As of December 31, 2021

Year (In thousands)

4 unchanged sentences

Present value of future minimum lease payments $ 89,296

Lease Terminations:

As of December 31, 2021, management made the decision to terminate four leases, one of which was acquired from Century.

These leases are expected to be terminated in the first quarter of 2022.

Management is currently in the process of negotiating modifications to these leases to allow for a buyout of the leases.

Accordingly, the Company remeasured the ROU asset and lease liability which resulted in acceleration of the right of use asset amortization.

The additional amortization recorded as a result of the acceleration was $ 1.7 million during the year ended December 31, 2021.

Lease Abandonments:

As of December 31, 2021, management made the decision to close three lease locations.

Management performed an analysis pursuant to ASC 360 and determined that such closures represent lease abandonments.

As a result of that analysis, the Company recognized an impairment charge on these leases of $ 0.3 million.

As of December 31, 2021, management made the decision to and is pursuing the sublet of five leases, two of which were acquired from Century.

In connection with this decision, management performed a recoverability analysis pursuant to ASC 360.

As a result of that analysis, the Company recorded an impairment charge of $ 0.5 million.

Goodwill and Other Intangibles

11 unchanged sentences

Total goodwill and other intangible assets $ 569,207 $ 80,496 $ 649,703

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

As of December 31, 2020

9 unchanged sentences

Total goodwill and other intangible assets $ 298,769 $ 77,765 $ 376,534

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

The changes in the carrying value of goodwill for the periods indicated were as follows:

7 unchanged sentences

Balance at end of year $ 557,635 $ 73,861 $ 631,496

(1) The goodwill recorded during the year relates to the acquisition of Century and two insurance agencies.

For additional information refer to Note 3, Mergers and Acquisitions .

For the Year Ended December 31, 2020

6 unchanged sentences

Balance at end of year $ 298,611 $ 70,866 $ 369,477

The gross carrying amount and accumulated amortization of other intangible assets were as follows at the dates indicated:

As of December 31,

5 unchanged sentences

Total $ 48,757 $ ( 30,550 ) $ 18,207 $ 35,094 $ ( 28,037 ) $ 7,057

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

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 quantitative assessment was most recently performed as of September 30, 2020, and during the fourth quarter there were no events or changes in circumstances not already considered in the Company’s annual assessment.

The Company considered the economic conditions, including the potential impact of the COVID-19 pandemic in the goodwill impairment test and determined there was no indication of impairment related to goodwill during the year ended December 31, 2020.

The Company has identified and assigned goodwill to two reporting units - the banking business and insurance agency business.

The quantitative assessments for both the banking business and insurance agency business were most recently performed as of September 30, 2021.

The assessment for the banking business included a market capitalization analysis, as well as a comparison of the banking business’s book value to the implied fair value using a pricing multiple of the Company’s tangible book value.

The assessment for the insurance agency business included a price-to-earnings analysis, as well as an earnings before interest, taxes, depreciation, and amortization (“EBITDA”) multiplier valuation based upon recent and observed agency mergers and acquisitions.

The Company considered the economic conditions for the period including the potential impact of the COVID-19 pandemic as it pertains to the goodwill above and determined that there was no indication of impairment related to goodwill during the year ended December 31, 2021.

Additionally, the Company did not record any impairment charges during the years ended December 31, 2020 and 2019.

1 unchanged sentence

The total weighted-average original amortization period for intangible assets is ten years .

The Company has estimated the remaining useful life of its insurance agency intangible assets, comprising primarily of customer lists and non-compete agreements, and its core deposit intangible assets to have a weighted-average of five years and one year , respectively.

The Company has estimated the remaining useful life of its insurance agency intangible assets, comprised primarily of customer lists and non-compete agreements, and its core deposit intangible assets to have a weighted-average life of seven years and ten years , respectively.

The estimated amortization expense for each of the five succeeding years and thereafter is as follows:

5 unchanged sentences

Additionally, the Company did not record any impairment charges during the years ended December 31, 2020 and 2019.

In order to manage reserve requirements at the Federal Reserve Bank of Boston, the Company has established overnight programs which sweep certain demand and interest checking accounts into money market investment accounts.

The Company has established overnight programs which sweep certain demand and interest checking accounts into money market investment accounts.

Reported deposit balances do not reflect the impact of the overnight sweep programs.

At December 31, 2020 and 2019, the Company swept $ 6.6 billion, and $ 4.7 billion, respectively, from demand deposit and interest checking balances into money market investments for reserve requirement purposes.

Other time deposits of $100,000 and greater, including certificates of deposits of $100,000 and greater, at December 31, 2020 and 2019 totaled $ 115.3 million and $ 157.6 million, respectively.

The following table summarizes the certificate of deposits by maturity at December 31, 2020:

At December 31, 2021 and 2020, the Company swept $ 10.5 billion, and $ 6.6 billion, respectively, from demand deposit and interest checking balances into money market investments.

At December 31, 2021 and 2020, the Company had a balance of $ 1.6 million and $ 1.3 million, respectively, in overdrafts.

Overdrafts are included in loans in the consolidated balance sheets.

The following table summarizes certificate of deposits by maturity at December 31, 2021:

Balance Percentage of Total

7 unchanged sentences

Total certificates of deposit $ 526,381 100.0 %

Interest expense related to deposits held by the Company for the years ended December 31, 2020, 2019, and 2018, was $ 11.3 million, $ 27.3 million and $ 17.4 million, respectively.

At December 31, 2020 and 2019, securities with a carrying value of $ 31.3 million and $ 21.9 million, respectively, were pledged to secure public deposits and for other purposes required by law.

At December 31, 2020, securities pledged as collateral for deposits included Eastern Wealth Management cash accounts and municipal housing authority accounts.

At December 31, 2019, securities pledged as collateral for deposits included a debtor in possession account that exceeded the FDIC insurance limit, Eastern Wealth Management cash accounts and municipal housing authority accounts.

At December 31, 2021 and 2020, securities with a carrying value of $ 2.2 billion and $ 31.3 million, respectively, were pledged to secure public deposits and for other purposes required by law.

At December 31, 2021 and 2020, securities pledged as collateral for deposits included Eastern Wealth Management cash accounts and municipal accounts which, at December 31, 2021, included approximately $ 2.1 billion in securities pledged as collateral for municipal accounts acquired from Century.

The FDIC offers insurance coverage on deposits up to the federally insured limit of $250,000.

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(In thousands)

Federal funds purchased $ — $ 201,082

FHLB advances $ 14,020 $ 14,624

Escrow deposits of borrowers 20,258 13,425

Interest rate swap collateral funds — —

Total borrowed funds $ 34,278 $ 28,049

At December 31, 2021 and 2020, the Company had available and unused borrowing capacity of approximately $ 455.3 million and $ 503.5 million, respectively, at the Federal Reserve Discount Window.

In addition, at December 31, 2020, the Company had $ 1.0 billion in PPP loans that could have been pledged to the Paycheck Protection Program Liquidity Facility.

At December 31, 2020, we also had the ability to borrow from the Federal Reserve Paycheck Protection Program Liquidity Facility (“PPPLF”).

As of December 31, 2020, the Company had $ 1.0 billion in PPP loans that could have been pledged to the PPPLF.

The Federal Reserve ended the PPPLF as of July 30, 2021.

Accordingly, at December 31, 2021, the Company no longer had additional capacity under the PPPLF.

Interest expense on borrowed funds was as follows:

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Total interest expense on borrowed funds $ 165 $ 762 $ 6,452

A summary of FHLB of Boston advances, by maturities were as follows:

A summary of FHLBB advances, by maturities were as follows:

As of December 31,

8 unchanged sentences

Total Federal Home Loan Bank advances $ 14,020 1.11 % $ 14,624 1.14 %

At December 31, 2020, advances from the FHLB of Boston were secured by stock in FHLB of Boston, residential real estate loans and commercial real estate loans.

At December 31, 2019, advances from the FHLB of Boston were secured by stock in the FHLB of Boston, residential real estate loans, commercial real estate loans and government-sponsored residential mortgage-backed securities.

The collateral value of residential real estate and commercial real estate loans securing these advances was $ 913.7 million and $ 741.5 million, respectively, at December 31, 2020, and $ 952.5 million and $ 150.1 million, respectively, at December 31, 2019.

The collateral value of government-sponsored residential mortgage-backed securities was $ 801.1 million at December 31, 2019.

At December 31, 2020 and 2019, the Bank had available and unused borrowing capacity of approximately $ 1.6 billion and $ 1.8 billion, respectively, with the FHLB of Boston.

As a member of the FHLB of Boston, the Company is required to hold FHLB of Boston stock.

At December 31, 2020 and 2019, the Company had investments in the FHLB of Boston of $ 8.8 million and $ 9.0 million, respectively.

At its discretion, the FHLB of Boston may declare dividends on the stock.

At December 31, 2021 and 2020, advances from the FHLBB were secured by stock in FHLBB, residential real estate loans and commercial real estate loans.

The collateral value of residential real estate and commercial real estate loans securing these advances was $ 1.0 billion and $ 888.3 million, respectively, at December 31, 2021, and $ 913.7 million and $ 741.5 million, respectively, at December 31, 2020.

At December 31, 2021 and 2020, the Bank had available and unused borrowing capacity of approximately $ 1.8 billion and $ 1.6 billion, respectively, with the FHLBB.

As a member of the FHLBB, the Company is required to hold FHLBB stock.

At December 31, 2021 and 2020, the Company had investments in the FHLBB of $ 10.9 million and $ 8.8 million, respectively.

At its discretion, the FHLBB may declare dividends on the stock.

Included in other noninterest income in the consolidated statements of income are dividends received of $ 0.2 million, $ 0.4 million, and $ 0.8 million during the years ended December 31, 2021, 2020, and 2019, respectively.

1 unchanged sentence

Basic EPS represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the year.

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 entity.

Diluted EPS is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding for the year, 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 year ended December 31, 2020, and therefore the weighted-average common shares outstanding used to calculate both basic and diluted EPS are the same.

Unallocated ESOP shares are not deemed outstanding for earnings per share calculations.

Earnings per share data is not applicable for the years ended December 31, 2019 and 2018 as the Company had no shares outstanding.

For the Year Ended December 31, 2020

Shares held by the 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.

Earnings per share data is not applicable for the year ended December 31, 2019 as the Company had no shares outstanding.

For the Year Ended

December 31, 2021 December 31, 2020

(Dollars in thousands, except per share data)

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Average number of common shares outstanding used to calculate basic earnings per common share 172,192,336 171,812,535

Common stock equivalents —

Common stock equivalents - restricted stock awards 59,721 —

Average number of common shares outstanding used to calculate diluted earnings per common share 172,252,057 171,812,535

Earnings per common share

Basic and diluted $ 0.13

Basic $ 0.90 $ 0.13

Diluted $ 0.90 $ 0.13

All unallocated ESOP shares have been excluded from the calculation of basic and diluted EPS.

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The Company’s provision for income taxes was $ 34.0 million, $ 13.2 million and $ 39.5 million for the years ended December 31, 2021, 2020, and 2019, respectively.

The Company’s effective tax rate was 36.7 % and is higher than the effective tax rate of 22.6 % and 22.1 % for the prior years ending December 31, 2019, and 2018.

The decrease in income tax expense and the increase in the effective tax rate during the year ended December 31, 2020 compared to the year ended December 31, 2019, was primarily due to lower income before income tax expense, increasing the impact on the effective rate related to favorable permanent differences, including investment tax credits and tax-exempt income.

The reduction in income tax expense related to lower income before income tax expense is partially offset by the establishment of a $ 12.0 million valuation allowance against the Company’s charitable contribution carryover deferred tax asset.

The Company’s effective tax rate was 18.0 % and is lower than the effective tax rate of 36.7 % for the prior year ending December 31, 2020.

The increase in income tax expense and the decrease in the effective tax rate during the year ended December 31, 2021 compared to the year ended December 31, 2020, was primarily due to higher income before income tax expense, decreasing the impact on the effective rate related to favorable permanent differences, including investment tax credits and tax-exempt income.

The reduction in the effective tax rate during the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to a $ 11.3 million release of a $ 12.0 million valuation allowance against the Company’s 2020 charitable contribution carryover deferred tax asset which was established as of December 31, 2020.

The provision for income taxes is comprised of the following components:

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Charitable contribution limitation carryover 18,278 22,942

Pension and deferred compensation plans — 25,455

Employee benefits 13,996 —

Unrealized loss on available for sale securities 17,370 —

Investment losses 10,680 —

Accrued expenses 6,888 5,047

21 unchanged sentences

As of December 31, 2020, the Company established a valuation allowance of $ 12.0 million related to the $ 91.3 million stock donation and the $ 3.7 million cash contribution to the Foundation.

Based upon the level of available historical taxable income and projections for future taxable income over the periods which the deferred tax assets are realizable, the Company believes it is more likely than not that the Company will realize the remainder of the net deferred tax asset of $ 13.2 million at December 31, 2020.

Management has performed an evaluation of the Company’s uncertain tax positions and determined that a liability for unrecognized tax benefits at December 31, 2020 and 2019 was not needed.

Based upon the level of available historical taxable income and projections for future taxable income over the periods for which the deferred tax assets are realizable, a release of $ 11.3 million was recorded as of December 31, 2021.

Management believes it is more likely than not that the Company will realize the remainder of the net deferred tax asset of $ 76.5 million at December 31, 2021.

Management has performed an evaluation of the Company’s uncertain tax positions and determined that a liability for unrecognized tax benefits at December 31, 2021 of $ 8.2 million, which includes accrued interest and penalties, was needed related to state tax positions taken.

Management performed a similar evaluation as of December 31, 2020 and determined that no ne was needed.

The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits:

As of December 31, 2021

(In thousands)

Beginning $ —

Additions based on tax positions related to the current year —

Additions for tax positions of prior years 7,923

Reductions related to settlements with taxing authorities —

Reductions as a result of a lapse of the applicable statute of limitations —

Ending $ 7,923

The amount that would reduce the effective tax rate, if recognized, is $ 8.2 million.

The reduction in the effective tax rate is inclusive of the federal benefit for unrecognized state tax benefits, and accrued interest and penalties.

The entire balance of unrecognized tax benefits, if recognized, would favorably affect the Company’s effective income tax rate.

The Company recognizes penalties and accrued interest related to unrecognized tax benefits in tax expense.

Accrued penalties and interest amounted to $ 2.0 million at December 31, 2021.

There were no tax reserves recorded as of December 31, 2020.

The change in accrued penalties and interest for the current year impacted goodwill by $ 1.9 million and the consolidated statements of income as a component of the provision for income taxes by less than $ 0.1 million.

Management anticipates that approximately $ 2.1 million in unrecognized state tax benefits and $ 0.6 million of interest and penalties will reverse in 2022 upon expiration of the statute of limitations for the tax year to which the reserve is related.

The Company had no net operating loss carryforwards for federal or state income tax purposes at December 31, 2021 and 2020, respectively.

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The Company’s primary banking activities are in the states of Massachusetts, New Hampshire and Rhode Island;

however the Company also files additional state corporate income and/or franchise tax returns in states in which the Company has nexus.

however, the Company also files additional state corporate income and/or franchise tax returns in states in which the Company has a filing requirement.

The methods of filing, and the methods for calculating taxable and apportionable income, vary depending upon the laws of the taxing jurisdiction.

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The Company will continue to use the proportional amortization method on any new qualifying LIHTC investments.

During the year ended December 31, 2020, the Company generated federal and state tax credits of $ 7.1 million and $ 0.3 million, respectively, of associated tax credits that arose through direct investment.

During the year ended December 31, 2019, the Company generated approximately $ 7.6 million and $ 0.3 million in federal and state tax credits.

During the years ended December 31, 2021 and 2020, the Company generated federal tax credits primarily from LIHTC investments of $ 6.5 million and $ 7.1 million, respectively.

During the year ended December 31, 2021, the Company generated no state tax credits from LIHTC investments and generated $ 0.3 million of state tax credits from LIHTC investments during the year ended December 31, 2020.

The Company treats the investment tax credits received as a reduction of federal income taxes for the year in which the credit arises using the flow-through method (i.e., the credit flows directly through the statement of income in the year of purchase).

For additional information on these investments see footnote titled "Low Income Housing Tax Credits and Other Tax Credit Investments.

For additional information on these investments, refer to Note 13, “Low Income Housing Tax Credits and Other Tax Credit Investments.

Low Income Housing Tax Credits and Other Tax Credit Investments

2 unchanged sentences

The return on these investments is generally generated through tax credits and tax losses.

In addition to LIHTC projects, the Company invests in new market tax credit projects that qualify for CRA credits and eligible projects that qualify for renewable energy and historic tax credits.

In addition to LIHTC projects, the Company invests in new market tax credit

projects that qualify for CRA credits and eligible projects that qualify for renewable energy and historic tax credits.

As of December 31, 2021 and 2020, the Company had $ 83.8 million and $ 59.8 million, respectively, in tax credit investments that were included in other assets in the 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 performance in the housing projects is included in other assets.

The net investment in the housing projects is included in other assets in the consolidated balance sheets.

The Company will continue to use the proportional amortization method on any new qualifying LIHTC investments.

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(In thousands)

Investments in qualified affordable housing partnerships, net $ 58,504 $ 37,665

Current recorded investment included in other assets $ 81,035 $ 58,504

Commitments to fund qualified affordable housing projects included in recorded investment noted above

7 unchanged sentences

5,753 4,977 4,782

The Company is the sole member of a tax credit investment company through which it consolidates a VIE.

The VIE made an equity investment to fund the construction of solar energy facilities in a manner to qualify for renewable energy investment tax credits.

This equity investment is included in other assets on the consolidated balance sheet and totaled $ 0 and $ 4.2 million at December 31, 2020 and 2019, respectively.

The minority interest associated with this investment was immaterial at December 31, 2020 and 2019.

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 and totaled $ 2.8 million and $ 1.2 million at December 31, 2021 and 2020, respectively.

There was $ 1.7 million and $ 0 in outstanding commitments relating to these investments as of December 31, 2020 and 2019, respectively

In reviewing its tax credit equity investments for impairment, the Company identified an immaterial correction to the investment balances related to prior periods.

In the year ended December 31, 2020, the Company wrote off $ 7.6 million of the tax credit equity investment balances as a component of noninterest expense and other assets to reflect the remaining benefits from these investments.

Management evaluated the correction in relation to the current year, which is when the correction was recorded, as well as the preceding periods in which it originated.

There were no outstanding commitments related to these investments as of December 31, 2021.

There were $ 1.7 million in outstanding commitments relating to these investments as of December 31, 2020.

During the year ended December 31, 2020, in reviewing its tax credit equity investments for impairment, the Company identified an immaterial correction to the investment balances related to prior periods.

During the year ended December 31, 2020, the Company wrote off $ 7.6 million of the tax credit equity investment balances as a component of noninterest expense and other assets to reflect the remaining benefits from these investments.

Management evaluated the correction in relation to the year ended December 31, 2020, which is when the correction was recorded, as well as the preceding periods in which it originated.

Management believes this correction is immaterial to both the previous consolidated quarterly and annual financial statements.

During the year ended December 31, 2021, the Company performed a similar review and, accordingly, recorded a net recovery of an impairment of $ 0.2 million.

Management evaluated the correction in relation to the year ended December 31, 2021, which is when the correction was recorded, as well as the preceding periods in which it originated.

Management believes this correction is immaterial to the previous consolidated quarterly and annual financial statements.

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 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.

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 Maximum Number of Shares That May Yet Be Purchased Under the Share Repurchase Program

December 1, 2021 – December 31, 2021 1,135,878 $ 20.42 1,135,878 8,202,022

During the year ended December 31, 2021, the Company declared and paid aggregate dividends of $ 51.6 million at a weighted average dividend per share of $ 0.07 .

Minimum Regulatory Capital Requirements

32 unchanged sentences

Conversion of Defined Benefit Pension Plan and Benefit Equalization Plan to Cash Balance Plan Design

Effective November 1, 2020, the Qualified Defined Benefit Pension Plan ("Defined Benefit Plan") and the Non-Qualified Benefit Equalization Plan ("BEP") sponsored by the Company were amended to convert the plans from a traditional final average earnings plan design to a cash balance plan design.

Effective November 1, 2020, each of the Qualified Defined Benefit Pension Plan (“Defined Benefit Plan”) and the Non-Qualified Benefit Equalization Plan, referred to as the BEP, sponsored by the Company were amended to convert the plans from a traditional final average earnings plan design to a cash balance plan design.

Benefits earned under the final average earnings plan design were frozen at October 31, 2020.

2 unchanged sentences

Contribution credits equal to a percentage of a participant’s annual compensation (if the participant works at least 1,000 hours during the year) and interest credits equal to the greater of the 30 -Year Treasury rate for September preceding the current plan year or 3.5 % are added to a participant’s account each year.

For employees hired prior to November 1, 2020, annual contribution credits will generally increase as the participant remains employed with the Company.

Employees hired on and after November 1, 2020 will receive annual contribution credits equal to 5 % of annual compensation, with no future increases.

For employees hired prior to November 1, 2020, annual contribution credits generally increase as the participant remains employed with the Company.

Employees hired on and after November 1, 2020 receive annual contribution credits equal 5 % of annual compensation, with no future increases.

Notwithstanding the preceding sentence, since a cash balance plan is a defined benefit plan, the annual retirement benefit payable at normal retirement (age 65 ) is an annuity, which is the actuarial equivalent of the participant’s account balance under the cash balance plan design, plus their frozen benefit under the final average earnings plan design.

3 unchanged sentences

Pension Plans

The Company provides pension benefits for its employees using a noncontributory, defined benefit plan, through membership in the Savings Banks Employees Retirement Association ("SBERA").

The Company provides pension benefits for its employees using a noncontributory, qualified defined benefit plan, through membership in the Savings Banks Employees Retirement Association (“SBERA”).

The Company’s employees become eligible after attaining age 21 and completing one year of service.

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The Defined Benefit Plan has a plan year end of October 31.

In connection with the Company’s acquisition of Century, the Company acquired Century’s Qualified Defined Benefit Pension Plan.

At the time of the acquisition, the plan was frozen to new participants, which had occurred in 2006, and all participants in the plan were fully vested.

Additionally, all Century employees retained following the acquisition were eligible to join the Company’s Defined Benefit Plan to the extent that eligibility requirements were satisfied based upon such employees’ prior service with Century.

The Company has an unfunded Defined Benefit Supplemental Executive Retirement Plan (“DB SERP”) that provides certain retired and currently employed officers with defined pension benefits in excess of qualified plan limits imposed by U.S.

1 unchanged sentence

The DB SERP has a plan year end of December 31.

In connection with the Company’s acquisition of Century, the Company acquired Century’s Supplemental Executive Insurance/Retirement Plan (the “Supplemental Plan”).

Upon completion of the acquisition, the Supplemental Plan was merged for accounting purposes only into the Company’s DB SERP, but it will continue to be administered according to its terms.

Further, the plan document of the Century Supplemental Plan contained change in control provisions which became effective upon the Company’s acquisition of Century.

Accordingly, all participants of the Century Supplemental Plan were deemed to be fully vested upon the closing of the acquisition.

The Company has an unfunded Benefit Equalization Plan (“BEP”) to provide retirement benefits to certain employees whose retirement benefits under the Defined Benefit Plan are limited per the Internal Revenue Code.

The BEP has a plan year end of October 31.

In connection with the Company’s acquisition of Century, any Century employee retained following the acquisition and whose retirement benefits under the Defined Benefit Plan are limited per the Internal Revenue Code were added to the BEP.

Additionally, such Century employees were credited for prior service with Century for purposes of determining vesting and eligibility pursuant to the BEP.

The Company also has an unfunded Outside Directors’ Retainer Continuance Plan (“ODRCP”) that provides pension benefits to outside directors who retire from service.

The Outside Directors’ Retainer Continuance Plan has a plan year end of December 31.

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.

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Amendments ( 1,106 ) ( 133,439 ) —

Actuarial loss (gain) 78,095 74,828 ( 46,932 )

Actuarial (gain) loss ( 1,697 ) 78,095 74,828

Acquisitions 125,854 — —

Benefits paid ( 20,045 ) ( 15,905 ) ( 10,298 )

2 unchanged sentences

Fair value of plan assets at beginning of year $ 449,643 $ 378,879 $ 305,154

Actual return (loss) on plan assets 48,895 60,723 ( 18,918 )

Actual return on plan assets 50,879 48,895 60,723

Acquisitions 63,468 — —

Employer contribution 2,111 37,773 23,300

12 unchanged sentences

Net amount $ ( 5,471 ) $ ( 21,253 ) $ ( 81,269 )

Amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit cost over the next fiscal year:

Unrecognized past service (credit) cost $ ( 8,469 ) $ 18 $ 32

Unrecognized net loss 10,171 6,790 5,207

Net amount $ 1,702 $ 6,808 $ 5,239

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, 2021;

however, the Company expects to make a contribution of

$ 7.2 million during such plan year.

During the year ended December 31, 2020, the Company made contributions to the Defined Benefit Plan of $ 32.5 million.

In accordance with the Pension Protection Act, the Company was not required to make any contributions the Defined Benefit Plan for the plan year beginning November 1, 2020.

The net actuarial gain of $ 1.7 million during the year ended December 31, 2021 was primarily attributable to higher returns on plan assets than initially assumed and an increase in the discount rate assumption which was partially offset by changes in demographic assumptions and in the participant mortality rate assumption, which were revised to reflect management’s best estimate as of December 31, 2021, used for determining the benefit obligation.

The net actuarial loss of $ 78.1 million and $ 74.8 million during the years ended December 31, 2020 and 2019, was primarily attributable to a decrease in the discount rate assumption used for determining the benefit obligation in both years from the corresponding prior year.

Actuarial Assumptions

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Rate of increase in compensation levels 4.50 % 5.25 % 4.50 % 5.25 % — % — % — % — %

Interest rate credit for determining projected cash balance 3.50 % N/A 3.50 % N/A N/A N/A N/A N/A

Interest rate credit for determining projected cash balance 3.50 % 3.50 % 3.50 % 3.50 % N/A N/A N/A N/A

The assumptions used in determining the net periodic benefit cost for the years ended December 31, 2021, 2020, and 2019 were as follows:

20 unchanged sentences

In general, the Company has selected its assumptions with respect to the expected long-term rate of return based on prevailing yields on high quality fixed income investments increased by a premium for equity return expectations.

During the year ended December 31, 2018, upon the hiring of a new actuarial firm, the Company refined its methodology for determining the discount rate used in calculating the benefit obligation and the benefit cost for all of its defined benefit plans.

This change was effective in calculating the benefit obligations as of December 31, 2018 and the benefit costs beginning during the year ended December 31, 2019.

The Company now uses the spot rate approach whereby the individual spot rates on the FTSE above-median yield curve are applied to each corresponding year’s projected cash flow used to measure the respective plan’s service cost and interest cost.

The Company believes that the new methodology more accurately determines each plan’s service cost and interest cost for the fiscal year versus using the single equivalent discount rate by strengthening the correlation between the projected cash flows and the corresponding discount rate used to measure those components of net periodic pension cost.

To determine the discount rate used in calculating the benefit obligation and the benefit cost for all of its defined benefit plans, the Company uses the spot rate approach whereby the individual spot rates on the FTSE above-median yield curve are applied to each corresponding year’s projected cash flow used to measure the respective plan’s service cost and interest cost.

The Company owns a percentage of the SBERA defined benefit common collective trust.

Based upon this ownership percentage, plan assets managed by SBERA on behalf of the Company amounted to $ 449.6 million and $ 378.9

million at December 31, 2020 and 2019, respectively.

Based upon this ownership percentage, plan assets managed by SBERA on behalf of the Company amounted to $ 546.1 million and $ 449.6 million at December 31, 2021 and 2020, respectively.

Investments held by the common collective trust include Level 1, 2 and 3 assets such as:

9 unchanged sentences

Benefits paid ( 17,934 ) ( 10,646 )

Acquisition 63,469 —

Balance at end of year $ 546,056 $ 449,643

22 unchanged sentences

All employees who meet specified age and length of service requirements are eligible to participate in the 401(k) plan.

The amount contributed by the Company is included in salaries and

employee benefits expense.

The amount contributed by the Company is included in salaries and employee benefits expense.

The amounts contributed to the plan for the years ended December 31, 2021, 2020, and 2019, were $ 4.6 million, $ 4.4 million and $ 4.2 million, respectively.

11 unchanged sentences

Dividends on unallocated shares are used to pay the ESOP debt.

Total compensation expense recognized in connection with the ESOP was $ 2.4 million for the year ended December 31, 2020.

The ESOP made an upfront principal payment of $ 1.0 million on the loan in 2020 which resulted in the release and allocation of 63,690 shares and compensation expense of $ 0.9 million.

The Company recorded additional compensation expense of $ 1.5 million related to the accrual of the annual loan payment and 104,464 shares committed to be allocated.

Total compensation expense recognized in connection with the ESOP was $ 9.4 million for the year ended December 31, 2021, compared with a $ 2.4 million expense recognized during the year ended December 31, 2020.

The ESOP made an upfront principal payment of $ 1.0 million on the loan during year ended December 31, 2020 which resulted in the release and allocation of 63,690 shares and compensation expense of $ 0.9 million.

The Company recorded additional compensation expense of $ 1.5 million related to the accrual of the loan payment during year ended December 31, 2020.

The ESOP made a loan payment during the year ended December 31, 2021 of $ 7.9 million, of which $ 3.0 million was allocated to the principal portion of the payment, while $ 4.9 million was allocated to the interest portion of the payment.

During the year ended December 31, 2021, the Company committed 501,444 shares to be allocated.

The number of shares committed to be released per year is 501,426 through 2049 and 231,124 in the year 2050.

6 unchanged sentences

Total shares 14,940,652 14,940,652

Fair value of unallocated shares $ 240,939

Fair value of unallocated shares (in thousands) $ 287,847 $ 240,939

Defined Contribution Supplemental Executive Retirement Plan

3 unchanged sentences

The Company recorded expense related to the DC SERP of $ 0.9 million, $ 0.9 million and $ 1.3 million in the years ended December 31, 2021, 2020, and 2019, respectively.

The total amount due to participants under this plan was included in other liabilities on the Company’s balance sheet and amounted to $ 27.6 million and $ 24.5 million at December 31, 2020 and 2019, respectively.

The total amount due to participants under this plan was included in other liabilities on the Company’s balance sheets and amounted to $ 33.4 million and $ 27.6 million at December 31, 2021 and 2020, respectively.

Effective December 31, 2021, the Company closed the DC SERP to new participants and froze benefit accruals for active participants.

Deferred Compensation Plans

4 unchanged sentences

Deferred amounts, adjusted for deemed investment performance, are paid at the time of a participant designated date or event, such as separation from service, death, or disability.

The total amounts due to participants under the three plans were included in other liabilities on the Company’s balance sheet and amounted to $ 28.9 million and $ 21.0 million at December 31, 2020 and 2019, respectively.

The total amounts due to participants under the three plans were included in other liabilities on the Company’s balance sheets and amounted to $ 31.5 million and $ 28.9 million at December 31, 2021 and 2020, respectively.

Rabbi Trust Variable Interest Entity

3 unchanged sentences

As the primary beneficiary of this VIE, 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 on the Company’s consolidated balance sheet.

government agency obligations, equity securities, mutual funds and other exchange-traded funds, and are recorded at fair value in other assets in the Company's consolidated balance sheets.

Changes in fair value are recorded in noninterest income.

8 unchanged sentences

Total rabbi trust assets $ 104,371 $ 91,683

Investments in rabbi trust accounts are recorded at fair value within the Company’s consolidated balance sheet with changes in fair value recorded through noninterest income.

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 tables present the book value, net unrealized gain or loss, and market value of assets held in rabbi trust accounts by asset type for each of the plans included in the rabbi trust:

8 unchanged sentences

Total assets $ 14,998 $ 5,812 $ 20,810 $ 16,884 $ 5,732 $ 22,616