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Item 7. Management’s Discussion and Analysis

2024-02-26 compared with 2023-02-24 · 604 added, 469 removed, 824 unchanged (57% of the section changed)

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We are a bank holding company, and our principal subsidiary, Eastern Bank, is a Massachusetts-chartered bank that has served the banking needs of our customers since 1818.

Our business philosophy is to operate as a diversified financial services enterprise providing a broad array of banking and other financial services primarily to retail, commercial and small business customers.

Our business philosophy is to operate as a diversified financial services enterprise providing banking and other financial services primarily to retail, commercial and small business customers.

We had total assets of $21.1 billion and $22.6 billion at December 31, 2023 and 2022, respectively.

We are subject to comprehensive regulation and examination by the Massachusetts Commissioner of Banks, the Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve Board and the Consumer Financial Protection Bureau.

We manage our business under two business segments:

our banking business, which contributed revenue of $645.4 million, or 86.7% of our total revenue for the year ended December 31, 2022, and our insurance agency business, which contributed revenue of $98.8 million, or 13.3% of our total revenue for the year ended December 31, 2022.

Our banking business consists of a full range of banking, lending (commercial, residential and consumer), savings and small business offerings, including our wealth management and trust operations that we conduct through our Eastern Wealth Management division.

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

Refer to the section of this Annual Report on Form 10-K titled “Business” within Item 1 for further discussion of our banking business and insurance agency business.

Net income for the year ended December 31, 2022, computed in accordance with GAAP, was $199.8 million, as compared to $154.7 million for the year ended December 31, 2021, representing an increase of 29.2%.

This increase was primarily due to an increase in net interest income.

Our net interest income increased primarily due to an increase in our average interest-earning assets, which was primarily the result of our 2021 acquisition of Century.

Refer to the “Results of Operations” section below for further discussion.

Net income for the year ended December 31, 2022 and 2021 included items that our management considers non-core, which management excludes for purposes of assessing our operating net income, a non-GAAP financial measure.

In recent years, we managed our business under two business segments:

our banking business and our insurance agency business.

On October 31, 2023, we sold substantially all of the assets and transferred certain liabilities of our insurance agency business.

In the third quarter, following management’s decision to sell our insurance agency business, we reclassified the related assets and liabilities to assets and liabilities of discontinued operations, respectively, on our Consolidated Balance Sheets.

Accordingly, the results of discontinued operations were reclassified to “net income from discontinued operations” on our Consolidated Statements of Income.

For additional discussion of discontinued operations, refer to Note 23, “Discontinued Operations” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

The following discussion excludes the results of discontinued operations, unless otherwise indicated.

Net loss from continuing operations for the year ended December 31, 2023, computed in accordance with GAAP, was $62.7 million, as compared to net income from continuing operations of $186.5 million for the year ended December 31, 2022.

The net loss from continuing operations and resulting decline from net income during the year ended December 31, 2022 was primarily due to the sale of available for sale securities at a loss in connection with our balance sheet repositioning completed in March 2023.

Refer to the later sections titled “Outlook and Trends” and “Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies” within this Item 7 for additional discussion.

Net loss from continuing operations for the year ended December 31, 2023 and net income from continuing operations for the year ended December 31, 2022 included items that our management considers non-core, which management excludes for purposes of assessing our operating net income, a non-GAAP financial measure.

Operating net income for the year ended December 31, 2023 was $163.2 million compared to $199.9 million for the year ended December 31, 2022.

This increase was largely driven by the aforementioned change in average interest-earning assets.

Refer to the “Outlook and Trends” section below for further discussion.

Refer to the “Non-GAAP Financial Measures” below for a reconciliation of net operating earnings to GAAP net income.

The following chart shows our basic earnings per share on a GAAP and operating (non-GAAP) basis over the past three years (refer to the “Non-GAAP Financial Measures” section below for a reconciliation of GAAP earnings to operating earnings):

Earnings per share, on a GAAP basis, increased from $0.90 for the year ended December 31, 2021 to $1.21 for the year ended December 31, 2022 a 34.4% increase.

The increase was primarily due to an increase in net interest income and a decrease in the average number of common shares outstanding.

The decrease in the average number of common shares outstanding was attributable to share repurchases in connection with our previously announced share repurchase programs.

This decrease was primarily due to increased noninterest expense on an operating basis and decreased net interest income for the year ended December 31, 2023 compared to year ended December 31, 2022.

See “Non-GAAP Financial Measures” and “Results of Operations” below for a reconciliation of operating net income to net income on a GAAP basis and further discussion of noninterest income and noninterest expense.

The following chart shows our basic earnings per share from continuing operations on a GAAP and operating (non-GAAP) basis over the past four years (refer to the “Non-GAAP Financial Measures” section below for a reconciliation of GAAP earnings to operating earnings):

Earnings per share from continuing operations, on a GAAP basis, decreased from $1.13 for the year ended December 31, 2022 to a loss per share from continuing operations of $0.39 for the year ended December 31, 2023.

The decrease in earnings per share from continuing operations to a loss per share from continuing operations was due to a decrease in net income from continuing operations for the year ended December 31, 2022 to a net loss from continuing operations for the year ended December 31, 2023 as a result of a loss on sale of AFS securities in March 2023, which was part of our balance sheet repositioning, as described above.

Operating earnings per share decreased from $1.21 for the year ended December 31, 2022 to $1.01 for the year ended December 31, 2023, a 16.7% decrease.

The decrease was primarily due to an increase in noninterest expense and a decrease in net interest income.

Refer to the “Results of Operations” section below for additional discussion of the changes in net interest income, noninterest income and noninterest expense.

The following chart shows our efficiency ratio on a GAAP and operating (non-GAAP) basis over the past five years (refer to the “Non-GAAP Financial Measures” section below for additional information on the determination of each measure):

The GAAP efficiency ratio and non-GAAP operating efficiency ratio for the year ended December 31, 2022 decreased compared to the ratios for the year ended December 31, 2021.

The decreases were primarily attributable to increased net interest income, which resulted in a margin of increase in total revenue that exceeded the rates at which noninterest expense increased and noninterest income decreased for the same periods.

Both the GAAP efficiency ratio and non-GAAP operating efficiency ratio for the year ended December 31, 2023 increased compared to the year ended December 31, 2022.

The increase in the GAAP efficiency ratio was primarily due to our balance sheet repositioning which included a sale of AFS securities at a loss and which was completed in March 2023 as described above.

The increase in the non-GAAP operating efficiency ratio was primarily due to an increase in noninterest expense and decrease in net interest income.

Refer to the “Results of Operations” section below for additional discussion of the changes in net interest income, noninterest income and noninterest expense.

Outlook and Trends

Proposed Acquisition

On September 19, 2023, we entered into a definitive merger agreement with Cambridge Bancorp (“Cambridge”) and Cambridge Trust Company (“Cambridge Trust”) pursuant to which we have agreed to acquire Cambridge through a merger, with the Company as the surviving entity (the “Merger Agreement”).

Under the Merger Agreement, each share of Cambridge common stock will be exchanged for 4.956 shares of our common stock.

The transaction is intended to qualify as a tax-free reorganization for federal income tax purposes and will provide Cambridge shareholders with a tax-free exchange of their shares of Cambridge common stock in exchange for our common stock as the consideration they will receive in the merger.

We anticipate issuing approximately 39.4 million shares of our common stock in the merger.

Based upon the closing price of our common stock on September 18, 2023 of $13.41 per share, the transaction is valued at approximately $528.1 million.

The closing of the Cambridge acquisition remains subject to required shareholder and regulatory approvals and satisfaction of other customary closing conditions set forth in the Merger Agreement.

There can be no assurances as to whether, or when, we and Cambridge will obtain the required approvals or complete the merger.

Cambridge, a Massachusetts corporation, is a federally registered bank holding company headquartered in Cambridge, Massachusetts.

Cambridge Trust, a Massachusetts-chartered trust company formed in 1890, is a wholly-owned subsidiary of Cambridge that operates through a network of 22 full-service banking offices in eastern Massachusetts and New Hampshire with $5.4 billion in total assets and $4.3 billion in deposits as of December 31, 2023.

Cambridge’s core services also include wealth management.

Through its wealth management group, which has offices in Massachusetts and New Hampshire, it offers

comprehensive investment management, as well as trust administration, estate settlement, and financial planning services.

Cambridge had assets under management and administration of approximately $4.6 billion as of December 31, 2023.

During the year ended December 31, 2023, we incurred and recorded merger and acquisition costs related to our proposed acquisition of Cambridge of $5.5 million.

The following table presents Cambridge-related merger and acquisition costs by financial statement line item on the Consolidated Statements of Income for the year ended December 31, 2023:

For the Year Ended December 31, 2023

(In thousands)

Salaries and employee benefits $ 5

Office occupancy and equipment 2

Data processing 1,357

Professional services 4,080

Total $ 5,495

Interest Rates

We believe that increases in the federal funds rate we expect to occur in the first half of 2023 will reduce our net interest income in 2023 as the increases in interest-bearing liability costs are anticipated to exceed the increase in yield on interest-earning assets.

Beginning in March 2022, the FOMC voted to increase the federal funds rate multiple times from a range of 0.00% to 0.25% to a range of 4.50% to 4.75% on February 1, 2023, when the FOMC stated that it “anticipates that ongoing increases in the target range [for the federal funds rate] will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”

Beginning in March 2022, the Federal Open Market Committee (“FOMC”) voted to increase the federal funds rate multiple times from a range of 0.00% to 0.25% to a range of 5.25% to 5.50% on July 26, 2023, when the FOMC stated that it will continue to assess additional information and its implications for monetary policy.

At its most recent meeting on January 31, 2024, the FOMC decided to maintain the target range for the federal funds rate at the range set following its July 26, 2023 meeting.

The FOMC indicated, in consideration of adjustments to the target range for the federal funds rate, it will carefully assess incoming data, the evolving outlook, and the balance of risk.

Further, it indicated that it does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward its long-term target of 2%.

Inevitably, not all of our interest rate-sensitive assets and liabilities will re-price simultaneously and in equal volume in response to changes in the federal funds rate, and therefore the potential for interest rate exposure exists.

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Approximately 33% of the outstanding principal balance of our loans as of December 31, 2023 was indexed to a market rate that is expected to reprice along with the federal funds rate.

As rates have risen and the shape of the yield curve changed during the year ended December 31, 2022, a portion of these loans have been hedged using interest rate swaps to convert the floating rate interest receipts to a fixed rate.

A portion of these loans have been hedged using interest rate swaps to convert the floating rate interest receipts to a fixed rate.

The notional amount of floating rate loans swapped totaled $2.4 billion as of December 31, 2023, representing approximately 17% of the outstanding principal balance of our loans at that date.

For more detail regarding such hedging financial instruments, refer to Note 19, “Derivative Financial Instruments” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.

We anticipate that an increase in market interest rates, whether due to an increase in the federal funds rate or otherwise, will decrease the fair value of those interest rate swaps

and consequently reduce the positive impact on our net interest income that an interest rate increase would otherwise have.

For more detail regarding such hedging financial instruments, refer to Note 18, “Derivative Financial Instruments” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

Refer to the section titled “Management of Market Risk” within this Item 7 for additional discussion including the estimated change to our net interest income under interest rate risk measurement methodologies that use a variety of hypothetical scenarios assuming immediate and parallel changes in interest rates that may not reflect the manner in which actual yields and costs respond to changes in market interest rates.

Paycheck Protection Program Loans

We are a participating lender in the SBA’s Paycheck Protection Program, or PPP.

We concluded PPP loan originations in the second quarter of 2021 as the SBA announced in May 2021 that PPP funds were exhausted.

The majority of our PPP borrowers are existing commercial and small business borrowers, non-profit customers, retail banking customers and clients of our Eastern Wealth Management division and Eastern Insurance Group.

As of December 31, 2022 and 2021, the remaining balance of our PPP loans was $9.8 million and $331.4 million, respectively.

Net PPP loan fee accretion (fee accretion less cost amortization) for all PPP loans decreased by $25.3 million, or 73.8%, to $9.0 million for the year ended December 31, 2022 from $34.3 million for the year ended December 31, 2021.

Our net interest margin was adversely affected as a result of the decline in net fee accretion, which is associated with the decreased volume of PPP loan payoffs.

The impact to our net interest margin resulting from the decline in net PPP loan fee accretion during the year ended December 31, 2022 compared to the year ended December 31, 2021 was 0.25% (change computed based upon average total loans for the year ended December 31, 2021).

Increases in the federal funds rate, which began in March 2022, and greater industry-wide competition for deposits have had a significant impact on our cost of interest-bearing liabilities and funding betas.

See note (1) to the following table for a description of our deposit beta.

Beginning in the third quarter of 2022 and to assist in meeting our loan-growth needs, we placed additional reliance on wholesale funding in the form of borrowings and then, in the fourth quarter of 2022, we started to purchase brokered certificates of deposit.

These funding sources generally have a higher cost than deposits originating within the markets we serve and are not our preferred sources of funding.

During the first quarter of 2023, we completed a balance sheet repositioning by selling a portion of our AFS securities portfolio for total proceeds of $1.9 billion.

The proceeds from the sale of such securities have been used to increase cash levels and reduce wholesale funds and, in turn, reduce the impact of our increasing of rates paid on deposits on our funding betas.

In addition, in October 2023, we completed the sale of our insurance agency business, which included the sale of substantially all of the assets and transfer of certain liabilities of Eastern Insurance Group, for net cash proceeds at closing of $498.1 million.

The proceeds from the sale were used to reduce our short-term FHLB borrowings.

For additional discussion of the sale, refer to Note 23, “Discontinued Operations” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

The following chart depicts our funding betas and cost of interest bearing liabilities for the previous twelve months as of December 31, 2023:

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

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

The above chart demonstrates a flattening of our liabilities costs immediately following the sale of AFS securities in March 2023 as the cash generated from the sale was used to reduce wholesale funding.

Bank Closures and Related FDIC Matters

On March 12 and 13, 2023, following the closures of Silicon Valley Bank (“SVB”) and Signature Bank and the appointment of the FDIC as the receiver for those banks, the FDIC announced that, under the systemic risk exception set forth in the Federal Deposit Insurance Act (“FDIA”), all insured and uninsured deposits of those banks were transferred to the respective bridge banks for SVB and Signature Bank.

The FDIC also announced that, as required by the FDIA, any losses to the Deposit Insurance Fund (“DIF”) to support uninsured depositors would be recovered by a special assessment.

On November 16, 2023, the FDIC published in the Federal Register its final rule that imposes special assessments to recover the loss to the DIF arising from the protection of uninsured depositors in connection with the systemic risk determination announced on March 12, 2023, following the closures of SVB and Signature Bank, as required by the FDIA.

The assessment base for the special assessments is equal to an insured depository institution’s (“IDI”) estimated uninsured deposits, reported as of December 31, 2022, adjusted to exclude the first $5 billion in estimated uninsured deposits from the IDI, or for IDIs that are part of a holding company with one or more subsidiary IDIs, at the banking organization level.

The final rule calls for the FDIC to collect special assessments at an annual rate of approximately 13.4 basis points, over eight quarterly assessment periods.

Because the estimated loss pursuant to the systemic risk determination will be periodically adjusted, the FDIC retains the ability to cease collection early, extend the special assessment collection period one or more quarters beyond the initial eight-quarter collection period to collect the difference between actual or estimated losses and the amounts collected, and impose a final shortfall special assessment on a one-time basis after the receiverships for SVB and Signature Bank terminate.

The final rule set an effective date of April 1, 2024, with special assessments collected beginning with the first quarterly assessment period of 2024 (i.e., January 1 through March 31, 2024, with an invoice payment date of June 28, 2024).

We estimate, based on the FDIC’s November 2023 final rule, that the total pre-tax amount of the Bank’s special assessment will be approximately $10.8 million, although the timing, amount and allocation of that special assessment remains subject to any actions by the FDIC, as described above, to cease collection early, extend the collection period, and impose a final shortfall special assessment.

In accordance with ASC 450, Contingencies , we recognized the special assessment in full upon issuance of the final rule in the fourth quarter of 2023.

In February 2024, we received notification from the FDIC that the estimated loss attributable to the protection of uninsured depositors at SVB and Signature Bank is $20.4 billion, an increase of approximately $4.1 billion from the estimate of $16.3 billion described in the final rule.

The FDIC plans to provide institutions subject to the special assessment an updated estimate of each institution’s quarterly and total special assessment expense with its first quarter 2024 special assessment invoice, to be released in June 2024.

Non-GAAP Financial Measures

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Management believes excluding these items facilitates greater visibility for investors into our core businesses as well as underlying trends that may, to some extent, be obscured by inclusion of such items in the corresponding GAAP financial measures.

Except as otherwise indicated, the information presented within this section excludes discontinued operations.

Refer to Note 23, “Discontinued Operations” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

There are items in our financial statements that impact our results but which we believe are unrelated to our core business.

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We have included the tangible ratios because management believes that investors may find it useful to have access to the same analytical tools used by management to assess performance and identify trends.

Our non-GAAP financial measures should not be considered as an alternative or substitute to GAAP net income, or as an indication of our cash flows from operating activities, a measure of our liquidity or an indication of funds available for our cash needs.

Our non-GAAP financial measures should not be considered as an alternative or substitute to GAAP net income from continuing operations, or as an indication of our cash flows from operating activities, a measure of our liquidity or an indication of funds available for our cash needs.

An item which we consider to be non-core and exclude when computing these non-GAAP financial measures can be of substantial importance to our results for any particular period.

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(Dollars in thousands, except per share data)

Net income (GAAP) $ 199,759 $ 154,665 $ 22,738

Net (loss) income from continuing operations (GAAP) $ (62,689) $ 186,511 $ 145,531

Non-GAAP adjustments:

Noninterest income components:

Losses (income) from investments held in rabbi trusts 10,762 (10,217) (10,337)

(Income) losses from investments held in rabbi trusts (9,305) 10,762 (10,217)

Losses (gains) on sales of securities available for sale, net 333,170 3,157 (1,166)

(Gains) losses on sales of other assets (1,492) (571) 20

Losses (gains) on sales of other assets 3 (1,365) (26)

Noninterest expense components:

Rabbi trust employee benefit (income) expense (5,161) 5,515 4,789

Impairment (reversal) charge on tax credit investments — (170) 10,779

Indirect IPO costs (1) — — 1,199

Rabbi trust employee benefit expense (income) 3,742 (5,161) 5,515

Impairment reversal on tax credit investments — — (170)

Gain on sale of other real estate owned — — (87)

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Defined Benefit Plan settlement loss (2) — 12,045 —

Stock donation to the Eastern Bank Foundation — — 91,287

Total impact of non-GAAP adjustments 333,105 19,438 32,630

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Diluted 162,403,097 165,648,571 172,252,057

Earnings per share, basic $ 1.21 $ 0.90 $ 0.13

Earnings per share, diluted $ 1.21 $ 0.90 $ 0.13

(Loss) earnings per share from continuing operations, basic $ (0.39) $ 1.13 $ 0.85

(Loss) earnings per share from continuing operations, diluted $ (0.39) $ 1.13 $ 0.85

Operating earnings per share, basic (non-GAAP) $ 1.01 $ 1.21 $ 0.91

Operating earnings per share, diluted (non-GAAP) $ 1.00 $ 1.21 $ 0.91

(1) Reflects costs associated with the IPO that are indirectly related to the IPO and were not recorded as a reduction of capital.

(2) Represents a non-cash settlement charge related to the Defined Benefit Plan.

For additional information regarding this charge, refer to Note 17, “Employee Benefits” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.

(3) The net tax benefit associated with these items is determined by assessing whether each item is included or excluded from net taxable income and applying our combined statutory tax rate only to those items included in net taxable income.

(1) Comprised of merger and acquisition expenses incurred related to our acquisitions of Cambridge and Century Bancorp, Inc.

Merger and acquisition expenses previously reported for the years ended December 31, 2022 and 2021 related to acquisitions by Eastern Insurance Group were excluded from the above table as they were reclassified to discontinued operations.

Refer to Note 23, “Discontinued Operations” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K for additional discussion.

(2) Represents a non-cash settlement loss for the year ended December 31, 2022 related to the Defined Benefit Plan.

For additional information, refer to Note 15, “Employee Benefits” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

(3) The net tax benefit amount for the year ended December 31, 2023 primarily resulted from the sale of securities classified as available for sale in the first quarter of 2023 and a $23.7 million tax benefit resulting from the transfer of certain securities from Market Street Securities Corp., a wholly owned subsidiary which was liquidated during the first quarter of 2023, to Eastern Bank.

The net tax benefit amount for the years ended December 31, 2022 and 2021 reflects the impact of the reversal of a $12.0 million valuation allowance associated with the stock donation to the Eastern Bank Foundation in the amounts of $0.7 million and $11.3 million, respectively.

The reversal of the valuation allowance in each period was considered appropriate based upon our determination of the realizability of such deductions for tax purposes at that time.

The following table summarizes the impact of non-core items with respect to our total revenue, noninterest income, noninterest expense and the efficiency ratio, which reconciles to the most directly comparable respective GAAP financial measure, for the periods indicated:

The following table summarizes the impact of non-core items with respect to our total (loss) revenue, noninterest (loss) income, noninterest expense and the efficiency ratio, which reconciles to the most directly comparable respective GAAP financial measure, for the periods indicated:

For the Year Ended December 31,

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Fully-taxable equivalent net interest income (non-GAAP) 567,590 580,790 435,920 406,723 416,518

Noninterest income (GAAP) 176,161 193,155 178,373 182,299 180,595

(Losses) income from investments held in rabbi trusts (10,762) 10,217 10,337 9,866 (1,542)

Noninterest (loss) income (GAAP) (237,753) 76,750 97,437 83,679 91,476

Income (losses) from investments held in rabbi trusts 9,305 (10,762) 10,217 10,337 9,866

(Losses) gains on sales of securities available for sale, net (333,170) (3,157) 1,166 288 2,016

Gains (losses) on sales of other assets 1,492 571 (20) (15) 1,989

(Losses) gains on sales of other assets (3) 1,365 26 (136) (131)

Noninterest income on an operating basis (non-GAAP) 86,115 89,304 86,028 73,190 79,725

Noninterest expense (GAAP) $ 418,602 $ 388,649 $ 360,955 $ 429,491 $ 336,412

Rabbi trust employee benefit (income) expense (5,161) 5,515 4,789 4,604 (847)

Rabbi trust employee benefit expense (income) 3,742 (5,161) 5,515 4,789 4,604

Impairment (reversal) charge on tax credit investments — — (170) 10,779 —

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Noninterest expense on an operating basis (non-GAAP) $ 409,365 $ 381,765 $ 316,916 $ 322,043 $ 331,808

Total revenue (GAAP) $ 744,215 $ 622,982 $ 579,624 $ 593,563 $ 570,639

Total (loss) revenue (GAAP) $ 312,656 $ 644,804 $ 527,264 $ 484,930 $ 502,740

Total operating revenue (non-GAAP) $ 653,705 $ 670,094 $ 521,948 $ 479,913 $ 496,243

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Operating efficiency ratio (non-GAAP) 62.62 % 56.97 % 60.72 % 67.10 % 66.86 %

(1) Reflects costs associated with the IPO that are indirectly related to the IPO and were not recorded as a reduction of capital.

(1) Interest income on tax-exempt loans and investment securities has been adjusted to an FTE basis using a marginal tax rate of 21.8% for the year ended December 31, 2023, 21.6% for the year ended December 31, 2022, 21.0% for the year ended December 31, 2021, 21.8% for the year ended December 31, 2020, and 21.8% for the year ended December 31, 2019.

(2) Reflects costs associated with the IPO that are indirectly related to the IPO and were not recorded as a reduction of capital

(3) Comprised of merger and acquisition expenses incurred related to our acquisition of Cambridge and Century.

Merger and acquisition expenses previously reported for the years ended December 31, 2022, 2021, 2020 and 2018 related to acquisitions by Eastern Insurance Group were excluded from the above table as they were reclassified to discontinued operations.

Refer to Note 23, “Discontinued Operations” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

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

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Tangible book value per share (non-GAAP) $ 13.65 $ 10.28 $ 14.80 $ 16.34 $ —

The following table summarizes the calculation of our average tangible shareholders’ equity and ratio of net income and operating net income to average tangible shareholders’ equity (“operating return on average tangible shareholders’ equity”), which reconciles to the most directly comparable GAAP measure, for the periods indicated:

(1) Includes goodwill and other intangible assets which were associated with our insurance agency business for the years ended December 31, 2022, 2021, 2020, and 2019.

The following table summarizes the calculation of our average tangible shareholders’ equity and ratio of net income from continuing operations and operating net income to average tangible shareholders’ equity (“operating return on average tangible shareholders’ equity”), which reconciles to the most directly comparable GAAP measure, for the periods indicated:

As of December 31,

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(Dollars in thousands)

Net income (GAAP) $ 199,759 $ 154,665 $ 22,738 $ 135,098 $ 122,727

Net (loss) income from continuing operations (GAAP) $ (62,689) $ 186,511 $ 145,531 $ 8,861 $ 124,736

Operating net income (non-GAAP) (1) 163,186 199,902 157,140 88,276 119,450

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(1) Refer to the table above within this “Non-GAAP Financial Measures” section for a reconciliation of operating net income to net income.

(2) Includes goodwill and other intangible assets included in assets of discontinued operations within the Company’s Consolidated Balance Sheets.

Financial Position

The information presented within this section excludes discontinued operations, which was applicable for the period ended December 31, 2022.

Refer to Note 23, “Discontinued Operations” within the Notes to the Consolidated Financial

Statements included in Part II, Item 8 in this Annual Report on Form 10-K for further discussion regarding the sale of our insurance agency business and discontinued operations.

Summary of Financial Position

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Cash and cash equivalents

Total cash and cash equivalents decreased by $1.1 billion, or 86.2%, to $169.5 million at December 31, 2022 from $1.2 billion at December 31, 2021.

This decrease was primarily due to an increase in gross loans of $1.3 billion, a decrease in total customer deposits of $654.0 million, net of purchases of brokered certificates of deposit, and share repurchases of $201.6 million.

These items were partially offset by net cash inflows related to increased borrowed funds of $706.6 million and net cash inflows related to AFS and HTM securities of $263.7 million during the year ended December 31, 2022.

For further discussion of the change in deposits, refer to the later “Deposits” section in this Item 7.

For further discussion of the change in loans, refer to the later “Loans” section in this Item 7.

For more information regarding our share repurchase programs, refer to Note 15, “Shareholders’ Equity” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

For further discussion of the change in securities, refer to the later “Securities” section in this Item 7.

For further discussion of the change in borrowed funds, refer to the later “Borrowed Funds” section in this Item 7.

Total cash and cash equivalents increased by $523.6 million, or 308.9%, to $693.1 million at December 31, 2023 from $169.5 million at December 31, 2022.

This increase was primarily due to proceeds from sales of AFS securities of $1.9 billion during the first quarter of 2023, proceeds from maturities and principal paydowns of AFS and HTM securities of $451.3 million and proceeds from the sale of commercial and industrial loans during the third and fourth quarters of 2023 of $211.4 million.

Partially offsetting this increase was a decrease in deposits of $1.4 billion and an increase in gross loans of $397.9 million for the year ended December 31, 2023.

For further discussion of the change in securities, loans, and deposits, refer to the later “Securities,” “Loans,” and “Deposits,” sections in this Item 7.

Our current investment policy authorizes us to invest in various types of investment securities and liquid assets, including U.S.

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government securities:

At December 31, 2022 our U.S.

government securities consisted of U.S.

government securities consist of U.S.

Agency bonds and U.S.

Treasury securities.

At December 31, 2021, our U.S.

government securities consisted of U.S.

Agency bonds, U.S.

Treasury securities and Small Business Administration pooled securities.

We maintain these investments, to the extent appropriate, for liquidity purposes, at zero risk weighting for capital purposes, and as collateral for interest rate derivative positions.

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State and municipal bonds and obligations 191,344 183,092

Small business administration pooled securities — 32,103

Other debt securities — 1,285

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Our securities portfolio has decreased $2.3 billion, or 32.2%, to $4.9 billion at December 31, 2023 from $7.2 billion at December 31, 2022.

This decrease was primarily due to a decrease in the fair value of AFS securities, sales of AFS securities, and maturities and principal paydowns of our AFS and held to maturity (“HTM”) securities.

Partially offsetting this activity were AFS and HTM security purchases during the year ended December 31, 2022:

• At December 31, 2022, the unrealized loss on AFS securities was $1.1 billion compared to an unrealized loss of $0.1 billion at December 31, 2021, representing a $1.1 billion decrease in the fair value of such securities.

The change from December 31, 2021 to December 31, 2022 is primarily driven by rising market rates of interest.

• AFS securities sales totaled $431.2 million during the year ended December 31, 2022.

AFS and HTM security maturities and principal paydowns totaled $1.0 billion and $17.4 million, respectively, during the year ended December 31, 2022.

• Partially offsetting the decrease in the securities portfolio from December 31, 2021 to December 31, 2022 were purchases of AFS and HTM securities of $740.8 million and $493.7 million, respectively, during the year ended December 31, 2022.

This decrease was primarily due to the completion of a balance sheet repositioning in March 2023 through the sale of AFS securities for total proceeds of $1.9 billion.

Refer to the sections titled “Outlook and Trends” and “Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies” within this Item 2 for additional discussion of such sales.

We did not have trading investments at December 31, 2023 and 2022.

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As of both December 31, 2023 and 2022, we had no securities categorized as Level 3 within the fair value hierarchy.

The following tables show contractual maturities of our AFS and HTM securities and weighted average yields at and for the years ended December 31, 2023 and 2022.

Maturities of our securities portfolio are based on the final contractual payment dates, and do not reflect the effect of scheduled principal repayments, prepayments, or early redemptions that may occur.

The following tables show contractual maturities of our AFS and HTM securities and weighted average yields at and for the period ended December 31, 2022 and contractual maturities of our AFS securities and weighted average yields at and for the period ended December 31, 2021.

Weighted average yields in the tables below have been calculated based on the amortized cost of the security:

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State and municipal bonds and obligations 1.33 2.41 3.34 4.09 3.66

Other debt securities 0.84 — — — 0.84

Total available for sale securities 1.33 1.76 1.62 1.73 1.72

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State and municipal bonds and obligations 1.22 2.26 3.17 4.05 3.66

Small business administration pooled securities — 1.72 — 1.93 1.90

Other debt securities 0.84 — — — 0.84

Total available for sale securities 0.89 % 1.02 % 1.25 % 1.66 % 1.47 %

Held to maturity securities:

Government-sponsored residential mortgage-backed securities — % — % — % 2.86 % 2.86 %

Government-sponsored commercial mortgage-backed securities — — 2.23 — 2.23

Total held to maturity securities — % — % 2.23 % 2.86 % 2.59 %

Total 0.89 % 1.02 % 1.36 % 1.72 % 1.54 %

(1) Investment security weighted-average yields were calculated on a level-yield basis by weighting the tax equivalent yield for each security type by the book value of each maturity.

(2) The negative yield indicated in the “Within One Year” category is the result of premium amortization that is in excess of earned income.

The yield on tax-exempt obligations of states and political subdivisions has been adjusted to a FTE basis by adjusting tax-exempt income upward by an amount equivalent to the prevailing federal income taxes that would have been paid if the income had been fully taxable.

The following table shows the composition of our loan portfolio, by category, as of the dates indicated and net PPP loan activity for the year ended December 31, 2022:

As of December 31, Change (excluding net PPP loan activity)

2022 2021 Change ($) PPP Loan Activity, net Change ($) Percentage (%)

The yield on tax-exempt obligations of states and political subdivisions has been adjusted to a fully-taxable equivalent (“FTE”) basis by adjusting tax-exempt income upward by an amount equivalent to the prevailing federal income taxes that would have been paid if the income had been fully taxable.

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

As of December 31,

2023 2022 Change ($) Change (%)

(Dollars in thousands)

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Our loans increased $0.4 billion, or 2.9%, to $14.0 billion at December 31, 2023 from $13.6 billion at December 31, 2022.

The increase as of December 31, 2022 was primarily due to increases in our commercial real estate, residential real estate, and commercial and industrial portfolio balances, partially offset by a decrease in our business banking portfolio, as further noted below:

The increase as of December 31, 2023 was primarily due to increases in our commercial real estate and residential real estate portfolios, partially offset by a decrease in our commercial and industrial portfolio, as further noted below:

• Our commercial real estate portfolio increased by $302.0 million from December 31, 2022 to December 31, 2023 which was primarily attributable to an increase of $329.1 million in commercial real estate investment loan balances.

Such loans represent loans secured by commercial real estate that are non-owner-occupied.

The increase in such loan balances was primarily due to management’s active focus on originating loans collateralized by industrial/warehouse and multi-family property types, which are included in the commercial real estate investment loan category, due to management’s stable outlook as it relates to the credit performance of such loans.

• Our residential real estate portfolio increased by 534.0 million from December 31, 2021 to December 31, 2022 primarily due to the purchase of $380.2 million residential real estate loans from a third party during the year ended December 31, 2022.

Also contributing to the overall increase in the balance of our residential real estate loans was a reduction in the volume of loan sales, which was precipitated by rising market rates of interest, and led to us retaining more of our residential real estate mortgage loan originations.

• Our commercial and industrial portfolio, excluding PPP loan balances, increased by $299.6 million, which was primarily attributable to an increase of $291.7 million in commercial and industrial participation loans during the year ended December 31, 2022.

The majority of the increase in participation loans was in our SNC portfolio, which increased $205.0 million during the year ended December 31, 2022.

The increase in such loan balances was primarily due to management’s active focus in increasing our exposures related to such arrangements due to strong historical credit performance and management’s stable outlook as it relates to the future credit performance of such loans.

Partially offsetting this increase was a $109.2 million decrease in commercial and industrial PPP loan balances during the year ended December 31, 2022 as such loans were paid off or forgiven by the SBA resulting in a net portfolio increase of $190.4 million.

• Our business banking portfolio decreased by $244.2 million primarily as a result of a $212.4 million decrease in business banking PPP loan balances during the year ended December 31, 2022 as such loans were paid off or forgiven by the SBA.

The increase in such loan balances was primarily due to management’s active focus on originating loans collateralized by industrial/warehouse and multi-family property types, which are included in the commercial real estate investment loan category, due to management’s belief that the credit performance of such loans has a stable outlook.

The increase in commercial real estate investment loan balances was partially offset by a decrease in commercial real estate owner-occupied loans of $24.3 million which was due to net paydowns of such loans during the year ended December 31, 2023 and charge-offs taken in the fourth quarter of 2023 on several loans.

Refer to the later “Allowance for Credit Losses” section in this Item 7 for additional discussion of charge-offs on commercial real estate loans.

• Our residential real estate portfolio increased by $104.6 million during the year ended December 31, 2023.

The increase in residential real estate loan balances was primarily due to fewer sales of originated loans resulting in more loans being held for investment, and purchases of loans which totaled $32.0 million during the year ended December 31, 2023.

• Our commercial and industrial portfolio decreased by $116.9 million from December 31, 2022 to December 31, 2023 which was primarily due to sales of commercial and industrial loans from our Shared National Credit Program portfolio of $214.2 million during the year ended December 31, 2023.

This overall decrease was partially offset by new loan originations within the commercial and industrial portfolio which were primarily funded with the proceeds from the sales of loans.

We believe that our commercial loan portfolio composition is relatively diversified in terms of industry sectors, property types and various lending specialties.

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Educational services $ 707,984 23.4 %

Real estate 336,681 11.1 %

Accommodation 295,799 9.8 %

Professional, scientific, and technical services 289,023 9.6 %

Finance and insurance 303,024 9.7 %

Wholesale trade 278,151 9.2 %

Accomodation 199,353 6.4 %

Healthcare 197,684 6.3 %

Transportation 185,925 5.9 %

Manufacturing 176,993 5.7 %

Admin support 183,687 6.1 %

Real estate 113,947 3.6 %

Transportation 162,326 5.4 %

Healthcare 146,187 4.8 %

Arts & entertainment 136,004 4.5 %

Finance and insurance 111,361 3.7 %

Other industries 372,428 12.4 %

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Office 425,744 7.8 %

Mixed use - retail/office 428,650 8.3 %

Mixed use - retail/multi-family 357,127 6.9 %

School 351,581 6.8 %

Affordable housing 394,153 7.2 %

Mixed use - multi-family 377,239 6.9 %

School 365,840 6.7 %

Mixed use - office 263,556 4.8 %

Self storage 233,443 4.3 %

Mixed use - retail 222,830 4.1 %

Other property types 799,419 14.7 %

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(Dollars in thousands)

Affordable housing $ 85,802 25.7 %

Multi-family $ 165,048 42.9 %

Industrial/warehouse 54,772 16.4 %

Mixed use - retail/multi-family 26,150 7.8 %

For sale housing 20,646 6.2 %

Assisted living 14,767 4.4 %

Office 10,255 3.1 %

Affordable housing 131,663 34.2 %

Retail 17,099 4.4 %

1-4 family 7,575 2.3 %

Self storage 14,943 3.9 %

Medical office 14,915 3.9 %

Mixed use - multi-family 13,288 3.5 %

Industrial/warehouse 8,462 2.2 %

Service station 7,132 1.9 %

For sale housing 4,806 1.2 %

Other property types 7,281 1.9 %

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We believe that the loan to value ratio (“LTV”) is an important factor in monitoring the risk characteristics of our loans secured by real estate.

The following tables show the distribution of loan balances, on an amortized cost basis, by LTV

and year of origination for each of our portfolios of loans, including those acquired from Century, secured by real estate as of December 31, 2022:

The following tables show the distribution of loan balances, on an amortized cost basis, by LTV and year of origination for each of our portfolios of loans secured by real estate as of December 31, 2023:

Balance of Commercial Real Estate Loans Originated During the Year Ended December 31,

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Total $ 563,103 $ 1,476,753 $ 881,666 $ 581,117 $ 553,993 $ 1,397,215 $ 5,453,847

Average LTV 58.74 % 57.08 % 51.72 % 52.68 % 53.91 % 45.03 % 53.79 %

Weighted average LTV 57.57 % 55.36 % 57.13 % 50.15 % 50.61 % 45.86 % 52.43 %

Balance of Residential Real Estate Loans Originated During the Year Ended December 31,

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Total $ 258,421 $ 737,365 $ 669,681 $ 356,406 $ 95,602 $ 464,990 $ 2,582,465

Average LTV 76.11 % 62.43 % 63.02 % 63.03 % 60.32 % 55.58 % 65.46 %

Weighted average LTV 75.95 % 74.37 % 60.83 % 61.33 % 61.48 % 54.80 % 65.23 %

Balance of Consumer Home Equity Loans Originated During the Year Ended December 31,

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Total $ 171,351 $ 306,533 $ 180,232 $ 91,549 $ 100,110 $ 361,393 $ 1,211,168

Average LTV 61.32 % 63.28 % 55.56 % 60.65 % 57.99 % 61.96 % 59.55 %

Weighted average LTV 56.54 % 60.55 % 62.46 % 54.91 % 60.12 % 60.12 % 59.02 %

(1) Current LTV is calculated based upon exposure amount and the most recently available appraisal value as of the reporting period.

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Special mention, substandard and doubtful loans totaled 4.1% and 2.2% of total commercial loans outstanding at December 31, 2023 and 2022, respectively.

This decrease was driven by risk rating upgrades in the construction and commercial and industrial portfolios.

This increase was driven by several risk rating downgrades of loans in the commercial and industrial and commercial real estate portfolios.

Our philosophy toward managing our loan portfolios is predicated upon careful monitoring, which stresses early detection and response to delinquent and default situations.

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For the retail portfolio, which includes residential real estate, consumer home equity, and other consumer portfolios, we monitor credit quality using the borrower’s FICO score.

As of December 31, 2022, 72.3% of retail borrowers, based on loan balance, have a FICO score of 740 or greater.

As of December 31, 2023, 70.9% of retail borrowers, based on amortized cost balances, have a FICO score of 740 or greater.

The following table shows the balances by borrowers’ current FICO scores as of the dates indicated:

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Current FICO (1)

(Dollars in thousands) (Dollars in thousands)

(Dollars in thousands)

Not available (2) $ 1,873 $ 22,213 $ 14,030 $ 5,195 $ 15,284 $ 27,400

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Total 0.41 % 0.50 %

(1) In the calculation of the delinquency rate as of December 31, 2022 and 2021, the total amount of loans outstanding includes $9.8 million and $331.4 million, respectively, of PPP loans.

(2) Delinquency rates as of December 31, 2022 were computed based upon amortized cost balances while delinquency rates as of December 31, 2021 were computed based upon recorded investment balances.

The effect on the above delinquency rates of the difference in methodology is not significant.

As a general rule, loans more than 90 days past due with respect to principal or interest are classified as non-accrual loans.

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These properties are recorded at the fair value less estimated costs to sell on the date we obtain control.

Any write-downs to the

cost of the related asset upon transfer to OREO to reflect the asset at fair value less estimated costs to sell is recorded through the allowance for loan losses.

Any write-downs to the cost of the related asset upon transfer to OREO to reflect the asset at fair value less estimated costs to sell is recorded through the allowance for loan losses.

NPLs increased $14.0 million, or 36%, to $52.6 million at December 31, 2023 from $38.6 million at December 31, 2022.

NPLs as a percentage of total loans decreased to 0.28% at December 31, 2022 from 0.29% at December 31, 2021.

Refer to the later “Allowance for Credit Losses” section in this Item 7 for a discussion of the change in non-accrual loans which comprise our NPLs as of December 31, 2022.

As of December 31, 2021, NPLs included loans that were past due 90 days or more and still accruing which were comprised solely of purchased credit impaired (“PCI”) loans.

PCI loans were not subject to classification as non-accrual in the same manner as originated loans as their interest income related to the accretable yield recognized and not to contractual interest payments at the loan level.

In connection with our adoption of ASU 2016-13 on January 1, 2022, all PCI loans are now considered purchased credit deteriorated (“PCD”) loans.

Interest income recognition for PCD loans is consistent with originated loans and, therefore, PCD loans cease accruing interest at 90 days past due unless management believes that the applicable collateral held by the Company is clearly sufficient and in full satisfaction of both principal and interest.

There were no PCD or originated loans at December 31, 2022 that were past due 90 days or more and still accruing.

The total amount of interest recorded on NPLs was not significant for both the years ended December 31, 2022 and 2021.

NPLs as a percentage of total loans increased to 0.38% at December 31, 2023 from 0.28% at December 31, 2022.

Refer to the later “Allowance for Credit Losses” section in this Item 7 for a discussion of the change in non-accrual loans which comprise our NPLs as of December 31, 2023 and December 31, 2022.

The total amount of interest recorded on NPLs during both the years ended December 31, 2023 and 2022 was not significant.

The gross interest income that would have been recorded under the original terms of those loans if they had been performing amounted to $6.5 million and $3.9 million for the years ended December 31, 2023 and 2022, respectively.

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We attempt to work-out alternative payment schedules with the borrowers in order to avoid foreclosure actions.

We review each loan that is modified to identify whether a TDR has occurred.

TDRs involve situations in which, for economic or legal reasons related to the borrower’s financial difficulties, we grant a concession to the borrower that we would not otherwise consider.

As noted within Note 5, “Loans and Allowance for Credit Losses” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K, loan modifications made in response to the COVID-19 pandemic that met the criteria of either Section 4013 of the CARES Act or the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) are not deemed TDRs.

This election afforded by the CARES Act and Interagency guidance expired on January 1, 2022.

In cases where a borrower experiences financial difficulties and we make certain concessionary modifications to contractual terms, the loan is classified as a TDR.

Loans modified during the year ended December 31, 2022 and 2021 which were determined to be TDRs were $12.6 million (post modification balance) and $0.8 million (post modification balance), respectively.

The Company executed 51 and 5 TDRs during the years ended December 31, 2022 and 2021, respectively.

As discussed further in the “COVID-19 Modifications” section below, we elected to apply the treatment of modifications to borrowers impacted by the COVID-19 pandemic afforded by the CARES Act and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) which resulted in such loans not being deemed TDRs.

This election, which expired on January 1, 2022, contributed to a significant decline in new TDRs during the years ended December 31, 2021 and 2020.

Consequently, modifications designated as TDRs increased during the year ended December 31, 2022 as we are no longer executing COVID-19 modifications.

The overall increase in TDR loans modified during the aforementioned periods consisted of an increase of $8.2 million and $3.6 million in commercial and consumer loan TDR modifications, respectively.

One loan totaling $1.0 million that was modified during the preceding 12 months subsequently defaulted during the year ended December 31, 2022.

No loans were modified during the preceding 12 months which subsequently defaulted during the year ended December 31, 2021.

It is our policy to have any restructured loans that are on non-accrual status prior to being modified remain on non-accrual status for approximately six months subsequent to being modified before we consider its return to accrual status.

If the restructured loan is on accrual status prior to being modified, we review it to determine if the modified loan should remain on accrual status.

PCD loans are loans that we acquired that have shown evidence of deterioration of credit quality since origination and, therefore, it was deemed unlikely that all contractually required payments would be collected upon the acquisition date.

As noted within Note 2, “Summary of Significant Accounting Policies” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K, we adopted ASU 2022-02 on January 1, 2023 which eliminated TDR accounting.

Prior to the adoption of this standard, we reviewed each loan that was modified to identify whether a TDR had occurred.

TDRs involved situations in which, for economic or legal reasons related to the borrower’s financial difficulties, we granted a concession to the borrower that we would not otherwise have considered.

Subsequent to our adoption of this standard, we apply the loan refinancing and restructuring guidance codified in paragraphs 310-20-35-9 through 35-11 of the Accounting Standards Codification to determine whether a modification results in a new loan or a continuation of an existing loan.

ASU 2022-02 requires disclosure of loan modifications to borrowers experiencing financial difficulty.

The aggregate amortized cost balance as of December 31, 2023 of loans modified during the year ended December 31, 2023, determined in accordance with ASU 2022-02, which were determined to be modifications to borrowers experiencing financial difficulty was $19.4 million.

As of December 31, 2023, there were no loans that had been modified to borrowers experiencing financial difficulty during the year ended December 31, 2023 and which had subsequently defaulted during the period.

Under previous accounting guidance, in cases where a borrower experienced financial difficulties and we made certain concessionary modifications to contractual terms, the loan was classified as a TDR.

Loans modified during the year ended December 31, 2022 which were determined to be TDRs, determined in accordance with previous accounting guidance in effect through December 31, 2022, totaled $12.6 million.

As of December 31, 2022, there was one loan which totaled approximately $1.0 million that had been modified during the preceding 12 months, which was party to a TDR and which subsequently defaulted during the year ended December 31, 2022.

Our policy is that any restructured loan, which is on non-accrual status prior to being modified, remain on non-accrual status for approximately six months subsequent to being modified before we consider its return to accrual status.

restructured loan is on accrual status prior to being modified, we review it to determine if the modified loan should remain on accrual status.

Purchased credit deteriorated (“PCD”) loans are loans that we acquired that have shown evidence of deterioration of credit quality since origination and, therefore, it was deemed unlikely that all contractually required payments would be collected upon the acquisition date.

We consider factors such as payment history, collateral values and accrual status when determining whether there was evidence of deterioration at the acquisition date.

As of December 31, 2022, the carrying amount of PCD loans was $56.6 million.

As discussed further below, we adopted ASU 2016-13, commonly referred to as CECL, on January 1, 2022.

Prior to such adoption, our acquired loans that exhibited evidence of deterioration of credit quality since origination were designated as PCI loans.

As of December 31, 2021, the carrying amount of PCI loans was $69.6 million.

COVID-19 Modifications.

In light of the COVID-19 pandemic, we implemented loan modification programs for our borrowers that allowed for either full payment deferrals (both interest and principal) or deferral of principal only.

These modifications met the criteria of either Section 4013 of the CARES Act or the Interagency Statement on Loan Modifications

and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) and therefore are not deemed TDRs.

We have deemed these modified loans “COVID-19 modifications.”

The Appropriations Act, which was enacted on December 27, 2020, extended certain expiring tax provisions related to the COVID-19 pandemic in the United States and provided additional emergency relief to individuals and businesses.

Included within the provisions of the Appropriations Act is the extension of Section 4013 of the CARES Act to January 1, 2022.

As such, we applied CARES Act TDR relief to any qualifying loan modifications executed during the allowable time period.

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

Remaining COVID-19 Modifications

As of December 31, 2023 and December 31, 2022, the carrying amount of PCD loans was $49.1 million and $56.6 million, respectively.

Potential Problem Loans.

In the normal course of business, we become aware of possible credit problems in which borrowers exhibit potential for the inability to comply with the contractual terms of their loans, but which currently do not yet meet the criteria for classification as NPLs.

These loans are neither delinquent nor on non-accrual status.

Our potential problem loans, or loans with potential weaknesses that were not included in the non-accrual loans or in the loans 90 or more days past due categories, increased by $186.7 million, or 99.8%, to $373.7 million at December 31, 2023 from $187.0 million at December 31, 2022.

These loans as a percentage of total loans increased to 2.7% at December 31, 2023 from 1.4% at December 31, 2022.

The increase in potential problem loans from December 31, 2022 to December 31, 2023 was primarily due to the downgrade of certain commercial and industrial and commercial real estate loans during the year ended December 31, 2023, including certain commercial real estate loans collateralized by properties in the office risk segment.

Refer to the below “Commercial Real Estate Office Exposure” section of this Item 7 for additional information.

Commercial Real Estate Office Exposure.

Our total office-related commercial real estate (“CRE”) loans (which is comprised of loans within our commercial real estate and construction portfolios that are secured by office space, medical office space, and mixed-use properties where rental income is primarily from office space) totaled $818.9 million and $819.3 million as of December 31, 2023 and 2022, respectively.

As of December 31, 2023, our office-related CRE loans are primarily concentrated in Massachusetts, where approximately 84.0% of the total recorded investment balance of office-related CRE loans are located, and approximately 19.8% of the total recorded investment balance of office-related CRE loans are located in the City of Boston.

Given prevailing market conditions such as rising interest rates, reduced occupancy as a result of the increase in hybrid work arrangements post-COVID, and lower commercial real estate valuations, we are carefully monitoring these loans for signs of deterioration in credit quality.

Such monitoring includes incremental risk management strategies undertaken by management including monthly internal CRE office exposure portfolio reporting, more frequent portfolio reviews, ongoing monitoring of market conditions, and additional portfolio analysis such as maturity risk analysis and rent rollover risk analysis.

As of December 31, 2023, two of our office-related CRE loans, which had a total recorded investment balance of $14.0 million, were on non-accrual status and had transitioned to non-accrual status during the third and fourth quarters of 2023.

As of December 31, 2022, none of these loans were on non-accrual status.

The following table sets forth the unpaid principal balance of office-related CRE loans by loan segment and credit quality indicator as of the dates indicated:

As of December 31,

Remaining COVID-19 Modifications

(In thousands)

Commercial real estate

Pass $ 683,545 $ 739,117

Special mention — 14,713

Substandard 104,962 52,622

Doubtful 13,969 —

Total commercial real estate $ 802,476 $ 806,452

Commercial construction

Pass $ 15,986 $ 12,861

Special mention 454 —

Substandard — —

Total commercial construction $ 16,440 $ 12,861

Total $ 818,916 $ 819,313

The following table sets forth the unpaid principal balance of office-related CRE loans by loan segment and collateral use type as of the dates indicated:

As of December 31,

Balance % of Total Portfolio Balance % of Total Portfolio

(Dollars in thousands)

Commercial and industrial $ — 0.0 % $ 4,548 0.2 %

(In thousands)

Commercial real estate

Office $ 425,682 $ 429,574

Medical office 113,110 112,674

Mixed-use 263,684 264,204

Total commercial real estate $ 802,476 $ 806,452

Commercial construction

Business banking — 0.0 % 649 0.1 %

Residential real estate 262 0.0 % 5,870 0.3 %

Consumer home equity — — % 1,365 0.1 %

Other consumer — 0.0 % 706 0.3 %

$ 13,088 0.1 % $ 106,657 0.9 %

(1) Remaining COVID-19 modifications reflect only those loans which underwent a modification and have not yet resumed payment.

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

(2) As of December 31, 2022 and 2021, remaining COVID-19 modifications included $12.8 million and $71.0 million, respectively, of loans to borrowers in the hotel industry.

As of December 31, 2022 and 2021, the aggregate amount of loans that received a COVID-19 modification and have become a non-performing loan after the respective deferral period was $4.4 million and $4.7 million, respectively.

Potential Problem Loans.

These loans were neither delinquent nor on non-accrual status.

At December 31, 2022 and 2021, our potential problem loans, or loans with potential weaknesses that were not included in the non-accrual loans or in the loans 90 days or more past due categories, totaled $187.0 million and $470.9 million, respectively.

Office $ 454 $ 10,323

Medical office 14,961 —

Mixed-use 1,025 2,538

Total commercial construction $ 16,440 $ 12,861

Total $ 818,916 $ 819,313

Allowance for credit losses.

Because we continued to qualify for emerging growth company (“EGC”) status under the Jumpstart Our Business (“JOBS”) Act until December 31, 2021, we were permitted to delay adoption of the CECL standard until the earlier of the date at which non-public business entities are required to adopt the standard and the date that we ceased to be an EGC.

Included in the Appropriations Act was an extension of the adoption date to the earlier of January 1, 2022 or 60 days after the date on which the COVID-19 national emergency terminated.

We elected this extension and, accordingly, adopted the CECL standard on January 1, 2022.

As of December 31, 2021, we followed the incurred loss allowance GAAP accounting model.

For the purpose of estimating our allowance for loan losses, we segregate the loan portfolio into loan categories, for loans that share similar risk characteristics, that possess unique risk characteristics such as loan purpose, repayment source, and collateral that are considered when determining the appropriate level of the allowance for loan losses for each category.

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Additionally, various regulatory agencies, as an integral part of our examination process, periodically assess the adequacy of the allowance for loan losses to assess whether the allowance for loan losses was determined in accordance with GAAP and applicable guidance.

We perform an evaluation of our allowance for loan losses on a regular basis (at least quarterly), and establish the allowance for loan losses based upon an evaluation of our loan categories, as each possess unique risk characteristics that are considered when determining the appropriate level of allowance for loan losses, including:

• known increases within each category;

We perform an evaluation of our allowance for loan losses on a regular basis (at least quarterly), and establish the allowance for loan losses based upon an evaluation of our loan categories, as each possesses unique risk characteristics that are considered when determining the appropriate level of allowance for loan losses, including:

• known increases in concentrations within each category;

• certain higher risk classes of loans, or pledged collateral;

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The allowance for loan losses is allocated to loan categories using both a formula-based approach and an analysis of certain individual loans for impairment.

We use a methodology to systematically estimate the amount of expected credit loss in the loan portfolio.

We use a methodology to systematically estimate the amount of expected credit loss

in the loan portfolio.

Under our current methodology, the allowance for loan losses contains reserves related to loans for which the related allowance for loan losses is determined on individual loan basis and on a collective basis, and other qualitative components.

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The allowance for loan losses increased by $6.8 million, or 4.8%, to $149.0 million, or 1.07% of total loans, at December 31, 2023 from $142.2 million, or 1.05% of total loans at December 31, 2022.

The increase in the allowance for loan losses was primarily a result of our adoption of CECL, as previously described above, and increased loan balances, as previously described above.

The additional reserves required as a result of our adoption of CECL were primarily attributable to the loans we acquired in connection with our acquisition of Century which were recorded at fair value at the time of acquisition.

Under ASU 2016-13, the credit mark that is a component of the day-one fair value adjustment on acquired loans cannot be considered in the allowance computation, whereas under the incurred loss model, the credit mark could be considered for reserve determination purposes.

In connection with our adoption of this standard, we recorded an increase to the allowance for loan losses of $27.1 million which represented the one-time cumulative-effect adjustment.

The increase in the allowance for loan losses was primarily the result of additional reserves required due to increased loan balances, an increase in reserve rates for commercial real estate loans collateralized by properties in the office and retail risk segments, and increased specific reserve balances, particularly as they relate to several commercial real estate loans collateralized by properties in the office and retail risk segments which transitioned to non-accrual status during the year ended December 31, 2023.

Partially offsetting these increases in the allowance for loan losses, were partial charge-offs taken in the fourth quarter related to the previously discussed commercial real estate loans for which specific reserves had been previously established.

Also partially offsetting the increase in the allowance for loan losses was our adoption of ASU 2022-02, as previously described above, which resulted in a change in reserving method for loans previously classified as TDRs.

Upon adoption of ASU 2022-02, TDR loans for which the allowance for loan losses was determined by a discounted cash flow analysis transitioned to their respective pools of loans sharing similar risk characteristics and for which the allowance for loan losses is determined on a collective basis.

As a result, the allowance for loan losses for such loans was reduced by $1.1 million.

For additional discussion of our allowance for credit losses measurement methodology, see Note 2, “Summary of Significant Accounting Policies” and Note 4, “Loans and Allowance for Loan Losses” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

For additional discussion of the change in allowance for loan losses, refer to the later “ Provision for Loan Losses ,” included in the “Results of Operations” section within this Item 7.

For discussion of our previous methodology for estimating the allowance for loan losses, refer to Note 6, “Loans and Allowance for Loan Losses” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K and Note 2, “Summary of Significant Accounting Policies” included in Part II, Item 8 of the 2021 Form 10-K.

The following table summarizes credit ratios for the periods presented:

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Other consumer 1,953 1,625 1,373 2,129 1,811

Total net loan charge-offs (recoveries) $ 587 $ 5,558 $ 8,066 $ 4,658 $ 8,556

Total net loan charge-offs $ 12,127 $ 587 $ 5,558 $ 8,066 $ 4,658

Average loans:

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Other consumer 1.04 0.82 0.59 0.64 0.38

Total net charge-offs (recoveries) to average total loans outstanding during the period 0.00 % 0.06 % 0.08 % 0.05 % 0.10 %

Total net charge-offs to average total loans outstanding during the period 0.09 % 0.00 % 0.06 % 0.08 % 0.05 %

Total loans $ 13,973,428 $ 13,575,531 $ 12,281,510 $ 9,730,525 $ 8,987,046

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

Non-accrual loans increased $5.6 million, or 17%, to $38.6 million at December 31, 2022 from $33.0 million at December 31, 2021, primarily due to increases in non-accrual loans in our residential real estate and consumer home equity portfolios of $3.1 million and $2.3 million, respectively.

Non-accrual residential real estate and consumer home equity loans increased primarily due to several loans moving to non-accrual status which had been acquired in connection with our acquisition of Century.

Non-accrual loans increased $14.0 million, or 36%, to $52.6 million at December 31, 2023 from $38.6 million at December 31, 2022, primarily due to an increase in commercial real estate non-accrual loans of $30.1 million partially offset by a decrease in commercial and industrial non-accrual loans of $13.5 million.

Non-accrual commercial real estate loans increased due to three loans, which are collateralized by properties in the office risk segment, transitioning to non-accrual status during the third and fourth quarters of 2023.

No commercial real estate loans were delinquent as of December 31, 2023.

Non-accrual commercial and industrial loans decreased primarily due to payoffs and curing of delinquency of such loans, which included the payoff during the year ended December 31, 2023 of one commercial and industrial loan which was on non-accrual and had a balance of $8.5 million as of December 31, 2022.

For additional information regarding the credit quality of our loans, see Note 4, “Loans and Allowance for Credit Losses” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

The following tables sets forth the allocation of the allowance for loan losses by loan categories listed in loan portfolio composition and the related loan balances as a percentage of total loans as of the dates indicated:

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As of December 31,

Allowance for Loan Losses Percent of Allowance in Category to Total Allocated Allowance Percent of Loans in Category

Loans Allowance for Loan Losses Percent of Allowance in Category to Total Allocated Allowance Percent of Loans in Category

Allowance for Loan Losses Percent of Allowance in Category to Total Allowance Percent of Loans in Category

Loans Allowance for Loan Losses Percent of Allowance in Category to Total Allowance Percent of Loans in Category

(Dollars in thousands)

Commercial and industrial $ 26,959 18.09 % 21.71 % $ 26,859 18.89 % 23.21 %

$ 26,859 18.89 % 23.21 % $ 18,018 18.43 % 24.10 %

Commercial real estate 65,475 43.95 % 39.05 % 54,730 38.49 % 37.97 %

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Business banking 14,913 10.01 % 7.77 % 16,189 11.38 % 8.03 %

16,189 11.38 % 8.03 % 10,983 11.23 % 10.87 %

Residential real estate 25,954 17.42 % 18.36 % 28,129 19.78 % 18.13 %

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Other consumer 3,431 2.30 % 1.69 % 2,765 1.94 % 1.43 %

Other — — % — % 242 0.25 % — %

Total $ 148,993 100.00 % 100.00 % $ 142,211 100.00 % 100.00 %

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Total $ 97,787 100.00 % 100.00 % $ 113,031 100.00 % 100.00 % $ 82,297 100.00 % 100.00 %

(1) PPP loans are included within these portfolios as of December 31, 2022, December 31, 2021, and December 31, 2020;

however, as of each such date, no allowance for loan losses was recorded on these loans due to the SBA guarantee of 100% of the loans.

To determine if a loan should be charged-off, all possible sources of repayment are analyzed.

Possible sources of repayment include the potential for future cash flows, liquidation of the collateral and the strength of co-makers or guarantors.

When available information confirms that specific loans or portions thereof are uncollectible, these amounts are promptly charged-off against the allowance for loan losses and any recoveries of such previously charged-off amounts are credited to the allowance for loan losses.

When available information confirms that specific loans or portions thereof are uncollectible, these amounts are promptly

charged-off against the allowance for loan losses and any recoveries of such previously charged-off amounts are credited to the allowance for loan losses.

Regardless of whether a loan is unsecured or collateralized, we charge off the amount of any confirmed loan loss in the period when the loans, or portions of loans, are deemed uncollectible.

For troubled, collateral-dependent loans, loss confirming events may include an appraisal or other valuation that reflects a shortfall between the value of the collateral and the carrying value of the loan or receivable, or a deficiency balance following the sale of the collateral.

For additional information regarding our allowance for loan losses, see Note 5, “Loans and Allowance for Credit Losses” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.

For additional information regarding our allowance for loan losses, see Note 4, “Loans and Allowance for Credit Losses” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

Separately, during the year ended December 31, 2023, we increased by $0.9 million our reserve on unfunded lending commitments, which was primarily due to an increase in the total exposure on unfunded lending commitments.

This increase contributed to an increase in our non-interest expense during the year ended December 31, 2023.

Federal Home Loan Bank stock

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The amount of stock we are required to purchase is in proportional to our FHLB borrowings and level of total assets.

Accordingly, the increase in the FHLB stock is due to increased borrowing.

Goodwill and other intangible assets

Goodwill and other intangible assets were $661.1 million and $649.7 million at December 31, 2022 and 2021, respectively.

The increase in goodwill and other intangibles assets was due to the purchase of two insurance agencies during the year ended December 31, 2022.

The aggregate amount of goodwill that was added as a result of these acquisitions was $8.7 million.

For more information regarding our insurance agency acquisitions, refer to Note 3,“Mergers and Acquisitions” and Note 9,“Goodwill and Other Intangibles” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

We did not record any impairment to our goodwill or other intangible assets during the years ended December 31, 2022 and 2021.

We will continue to assess our goodwill and other intangible assets to determine if impairments are necessary.

Accordingly, the decrease in the FHLB stock is due to decreased borrowings.

Goodwill and core deposit intangible asset

The balance of our goodwill and core deposit intangible asset was $566.2 million and $568.0 million at December 31, 2023 and 2022, respectively, which excludes goodwill and other intangible assets included in discontinued operations as of December 31, 2022.

We did not record any impairment to our goodwill or core deposit intangible asset during the years ended December 31, 2023 and 2022.

For discussion of the impairment testing performed, refer to Note 7, “Goodwill and Core Deposit Intangible Asset” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

Deposits and other interest-bearing liabilities

Deposits originating within the markets we serve continue to be our primary source of funding our earning assets.

We have been able to compete effectively for deposits in our primary market areas.

The distribution and market share of deposits by type of deposit and by type of depositor are important considerations in our assessment of the stability of our fund sources and our access to additional funds.

Historically, we have been able to compete effectively for deposits in our primary market areas.

The distribution and market share of deposits by type of deposit and by type of depositor are important considerations in our assessment of the stability of our funding sources and our access to additional funds.

Furthermore, we shift the mix and maturity of the deposits depending on economic conditions and loan and investment policies in an attempt, within set policies, to minimize cost and maximize net interest margin.

In addition, we may occasionally raise funds through the use of brokered deposits.

The following table presents our deposits as of the dates presented:

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Total deposits $ 17,596,217 $ 18,974,359 $ (1,378,142) (7.3) %

(1) The Bank’s estimate of total uninsured deposits was $9.0 billion and $11.0 billion at December 31, 2022 and December 31, 2021, respectively.

(2) Brokered deposits are included in certificates of deposits and amounted to $928.6 million at December 31, 2022.

As of December 31, 2021, we had purchased no brokered certificates of deposit.

(1) Brokered certificates of deposit are included in certificates of deposit and amounted to $50.0 million and $928.6 million at December 31, 2023 and 2022, respectively.

Deposits decreased by $1.4 billion, or 7.3%, to $17.6 billion at December 31, 2023 from $19.0 billion at December 31, 2022.

This decrease was primarily the result of a decrease in money market investments of $0.8 billion, a decrease in demand deposits of $0.8 billion, and a decrease in savings deposits of $0.2 billion.

These decreases were partially offset by an increase of $1.1 billion in certificates of deposit.

The overall decrease is primarily due to a runoff of higher cost deposits acquired in connection with our acquisition of Century, the runoff of government stimulus funds which had been deposited by our customers, higher market rates resulting in greater industry-wide competition for deposits, and a transfer of deposits during the second quarter of 2022.

On January 14, 2022, we announced we had entered into an asset purchase agreement for the transfer of our cannabis-related and money service business deposits relationships, which we acquired from Century, to Needham Bank.

On April 1, 2022, we completed the transfer of such deposits, which was subject to a post-transfer settlement period of 60 days.

The total amount transferred, which includes amounts transferred during the post-transfer settlement period, was $278.0 million.

Partially offsetting these decreases was an increase of $1.1 billion in certificates of deposit which was primarily attributable to the purchase of $928.6 million of brokered certificates of deposit during the year ended December 31, 2022.

This decrease was primarily the result of an overall decline in deposits due to concerns around the banking industry as a whole in early 2023, as discussed in the earlier “Outlook and Trends” section in this Item 7, as well as industry-wide competition for deposits and a decrease in brokered certificates of deposit of $878.6 million.

Brokered certificates of deposit decreased as such accounts matured and were not renewed in full as we emphasized other means for increasing our overall liquidity as of December 31, 2023.

The decrease in brokered certificates of deposit was more than offset by a shift in deposit mix of certain core deposits from demand and interest checking deposits, which decreased by $1.1 billion and $0.8 billion, respectively, to certificates of deposit resulting in a net increase in certificates of deposit.

This shift in deposit mix during the year ended December 31, 2023 was due primarily to increases in rates paid on certificates of deposit, which attracted depositors to such products.

The Bank’s estimate of total uninsured deposits was $8.0 billion and $9.0 billion at December 31, 2023 and 2022, respectively.

In accordance with the FDIC’s Call Report instructions, these estimates include accounts of wholly-owned subsidiaries, the holding company, and internal operating deposit accounts (together referred to as “internal deposit accounts”).

In addition, these estimates include municipal deposit accounts for which securities were pledged by us to secure such deposits (“collateralized deposits”).

For liquidity monitoring purposes, we exclude internal deposit accounts and collateralized deposits from our estimate of uninsured deposits.

Our estimate of uninsured deposits, excluding internal deposit accounts and collateralized deposits, was $5.5 billion and $7.3 billion at December 31, 2023 and December 31, 2022, respectively.

The following table presents the classification of deposits on an average basis for the years indicated:

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Maintaining available borrowing capacity provides us with a contingent source of liquidity.

Our total borrowings increased by $706.6 million to $740.8 million at December 31, 2022 compared to $34.3 million at December 31, 2021.

The increase was primarily due to an increase in FHLB advances, which we borrowed primarily to fund loan originations.

The increase was also due, in part, to an increase in interest rate swap collateral funds, which represents collateral posted to us by our financial institution counterparties for over-the-counter interest rate swaps.

At December 31, 2021, our financial institution counterparties were not required to post collateral to us due to the low level of market interest rates.

Conversely, at December 31, 2022, following increases in market interest rates during the year ended December 31, 2022, our financial institution counterparties were required to post collateral to us of $14.4 million.

Our total borrowings decreased by $692.6 million to $48.2 million at December 31, 2023 compared to $740.8 million at December 31, 2022.

The decrease was primarily due to a decrease in FHLB advances, which were paid down primarily with the proceeds from the sale of substantially all of the assets and liabilities of our insurance agency business.

Refer to Note 23, “Discontinued Operations” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K for further discussion regarding the sale.

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

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Results of Operations

The information presented within this section excludes discontinued operations.

Summary of Results of Operations

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Net interest income 550,409 568,054 (17,645) (3.1) %

Provision for (release of) allowance for loan losses 17,925 (9,686) 27,611 (285.1) %

Noninterest income 176,161 193,155 (16,994) (8.8) %

Provision for allowance for loan losses 20,052 17,925 2,127 11.9 %

Noninterest (loss) income (237,753) 76,750 (314,503) (409.8) %

Noninterest expense 418,602 388,649 29,953 7.7 %

Income tax expense 56,929 34,047 22,882 67.2 %

Net income $ 199,759 $ 154,665 $ 45,094 29.2 %

Income tax (benefit) expense (63,309) 51,719 (115,028) (222.4) %

Net (loss) income from continuing operations $ (62,689) $ 186,511 $ (249,200) (133.6) %

Comparison of the Years Ended December 31, 2023 and 2022

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Interest and dividend income increased by $191.3 million, or 31.6%, to $796.5 million during the year ended December 31, 2023 from $605.2 million during the year ended December 31, 2022.

This increase was primarily a result of our acquisition of Century on November 12, 2021, which added approximately $6.6 billion in interest-earning assets.

Overall, the average balance of our interest-earning assets increased $4.9 billion, or 29.6%, to $21.6 billion as of December 31, 2022 compared to $16.7 billion as of December 31, 2021, reflecting the addition of Century assets.

Also contributing to the increase in interest and dividend income was an increase in the yield on average interest-earning assets which increased by 22 basis points to 2.86% during the year ended December 31, 2022.

Our yields on loans and securities are generally presented on an FTE basis where the embedded tax benefit on loans or securities are calculated and added to the yield.

Management believes that this presentation allows for better comparability between institutions with different tax structures.

• Interest income on securities and other short-term investments increased $61.6 million, or 91.1%, to $129.1 million for the year ended December 31, 2022 compared to $67.6 million for the year ended December 31, 2021.

The increase in interest income on securities was primarily due to an increase in the average balance and yield of such securities.

The average balance of our securities increased $2.4 billion, or 36.3%, to $9.1 billion as of December 31, 2022 compared to $6.7 billion as of December 31, 2021, which was primarily due to securities acquired in connection with our acquisition of Century of $3.1 billion partially offset by a net reduction in the balance of securities as a result of security sales, maturities and principal paydowns in excess of security purchases during the year ended December 31, 2022.

The yield on our securities increased 40 basis points during the year ended December 31, 2022 in comparison to the year ended December 31, 2021.

This increase is due primarily to HTM securities purchased at higher interest rates as well as an increase in yields on other short-term investments, the latter of which is due to increases in the rate received on reserve balances held at the Federal Reserve Bank of Boston, commensurate with increases in the federal funds rate.

• Interest income on loans increased by $108.5 million, or 29.5%, to $476.0 million during the year ended December 31, 2022 from $367.6 million during the year ended December 31, 2021.

The increase in interest

income on our loans was primarily due to an increase in the average balance of loans and an increase in the yield on loans partially offset by a decrease in net accretion of PPP loan deferred fees and costs.

The average balance of our loans increased $2.5 billion, or 25.1%, to $12.5 billion during the year ended December 31, 2022 from $10.0 billion during the year ended December 31, 2021, which was primarily due to loans acquired in connection with our acquisition of Century of $2.9 billion.

The FTE yield on average loans increased 17 basis points to 3.88% during the year ended December 31, 2022.

The slight increase in loan yields was primarily due to increases in market rates of interest and was partially offset by a decrease in net accretion of PPP loan deferred fees and costs which decreased $25.3 million to $9.0 million during year ended December 31, 2022 from $34.3 million during the year ended December 31, 2021.

The increase was primarily a result of an increase in the yield on average interest-earning assets which increased by 105 basis points compared with the year ended December 31, 2022.

Partially offsetting the impact of increased yields was a decrease in the average balance of our interest-earning assets which decreased by $0.8 billion, or 3.8%, to $20.8 billion during the year ended December 31, 2023 compared to $21.6 billion during the year ended December 31, 2022, which was attributable to a decrease in the average balance of securities.

• Interest income on loans increased $176.1 million, or 37.0%, to $652.1 million during the year ended December 31, 2023 from $476.0 million during the year ended December 31, 2022.

The increase in interest income on our loans was due to an increase in our yields and an increase in the average balance.

The overall yield on our loans increased 95 basis points during the year ended December 31, 2023 in comparison to the year ended December 31, 2022.

The increase in yield was primarily due to increases in market rates of interest which resulted in increased yields on variable rate loans which repriced and new loans originated at higher rates of interest.

The average balance of our loans increased $1.3 billion, or 10.3%, to $13.8 billion during the year ended December 31, 2023 from $12.5 billion during the year ended December 31, 2022.

For further discussion of the change in the balance of loans, refer to the earlier “Loans” discussion within the “Financial Position” within this Item 7.

• Interest income on securities and other short-term investments increased $15.2 million, or 11.8%, to $144.4 million during the year ended December 31, 2023 from $129.1 million during the year ended December 31, 2022.

The increase in interest income on our securities and other short-term investments was due to an increase in our

yield on such investments.

The yield on our securities and short-term investments increased 65 basis points during the year ended December 31, 2023 in comparison to the year ended December 31, 2022, primarily due to an increase in the yield on our cash held at the Federal Reserve Bank of Boston (“FRBB”) from an average of 1.76% during the year ended December 31, 2022 to an average of 5.10% during the year ended December 31, 2023.

In addition, our average cash balance at the FRBB increased by $299.7 million, or 73.4%, to $707.7 million during the year ended December 31, 2023 from $408.0 million during the year ended December 31, 2022 which compounded the effect on our interest income of the increase in rates paid by the FRBB.

The increase in the average balance of cash held at the FRBB was primarily due to the deposit of proceeds from the sale of AFS securities (discussed earlier) in March 2023.

Partially offsetting this increase was a decrease in our overall average securities balance, which decreased $2.1 billion, or 23.3%, to $7.0 billion for the year ended December 31, 2023 from $9.1 billion for the year ended December 31, 2022 primarily due to the sales of AFS securities in March 2023.

For additional discussion of the sales, refer to the section titled “Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies” within this Item 7.

Interest Expense

Interest expense increased $31.8 million, or 596.3%, to $37.1 million during the year ended December 31, 2022 from $5.3 million during the year ended December 31, 2021.

The increase was attributable to increases in both deposit interest expense and borrowings interest expense.

• Interest expense on our interest-bearing deposits increased by $23.5 million, or 453.9%, to $28.6 million during the year ended December 31, 2022 from $5.2 million during the year ended December 31, 2021.

This increase was due to an increase in rates paid on deposits and due to an increase in average interest-bearing deposits.

Rates paid on interest-bearing deposits increased by 17 basis points to 0.23% during the year ended December 31, 2022 from 0.06% during the year ended December 31, 2021, which were increased in response to an increase in market rates of interest.

Average interest-bearing deposits increased $3.9 billion, or 46.2%, to $12.4 billion for the year ended December 31, 2022 from $8.5 billion for the year ended December 31, 2021 which was primarily due to our acquisition of Century which added approximately $4.4 billion in interest-bearing deposits.

• Interest expense on borrowed funds increased by $8.3 million to $8.5 million during the year ended December 31, 2022 from $0.2 million during the year ended December 31, 2021 which was primarily attributable to an increase in the average balance.

Average borrowed funds increased by $230.1 million, or 868.6%, to $256.6 million for the year ended December 31, 2022 from $26.5 million for the year ended December 31, 2021, due to an increase in FHLB advances, which we borrowed to fund loan originations.

Interest expense increased $208.9 million to $246.1 million during the year ended December 31, 2023 from $37.1 million during the year ended December 31, 2022.

The overall increase was attributable to increases in both deposit interest expense and borrowings interest expense.

• Interest expense on our interest-bearing deposits increased by $197.5 million to $226.1 million during the year ended December 31, 2023 from $28.6 million during the year ended December 31, 2022.

This increase was due to an increase in rates paid on deposits and an increase in the balance of average interest-bearing deposits.

Rates paid on interest-bearing deposits increased by 154 basis points to 1.77% during the year ended December 31, 2023 from 0.23% during the year ended December 31, 2022.

This was primarily due to our increasing overall deposit rates paid in response to an increase in market rates of interest and heightened industry-wide competition for deposits and an increase in brokered certificates of deposit which generally bear a higher rate of interest compared to other interest-bearing deposits.

Average interest-bearing deposits increased $0.4 billion, or 3.1%, to $12.8 billion for the year ended December 31, 2023 from $12.4 billion for the year ended December 31, 2022 as a result of our increasing of rates paid on such deposits as well as purchases of brokered certificates of deposit.

During the years ended December 31, 2023 and 2022 our average balance of purchased brokered certificates of deposit amounted to $575.6 million and $26.3 million, respectively.

• Interest expense related to our borrowings increased by $11.5 million to $20.0 million during the year ended December 31, 2023 from $8.5 million during the year ended December 31, 2022.

The increase in borrowings interest expense during the year ended December 31, 2023 compared to the year ended December 31, 2022 is attributable to an increase in our utilization of our FHLB borrowing capacity and an increase in rates paid on such borrowings.

We increased utilization of our FHLB borrowing capacity in order to support ongoing operations.

Net Interest Income

Net interest income increased by $138.2 million, or 32.2%, to $568.1 million during the year ended December 31, 2022, from $429.8 million during the year ended December 31, 2021.

Net interest income increased due to an increase in yields on interest-earning assets which exceeded the increase in the costs of interest-bearing liabilities.

Also contributing to the increase in net interest income was an increase in net interest-earning assets of $0.8 billion, or 9.6%, to $8.9 billion during the year ended December 31, 2022 from $8.2 billion during the year ended December 31, 2021.

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

Net interest income decreased by $17.6 million, or 3.1%, to $550.4 million during the year ended December 31, 2023, from $568.1 million during the year ended December 31, 2022.

Net interest income decreased due to an increase in interest expense of $208.9 million, or 562.7%, to $246.1 million during the year ended December 31, 2023 from $37.1 million during the year ended December 31, 2022.

Also contributing to the decrease was a decrease in the balance of average net interest-earning assets of $824.4 million, or 3.8%, to $20.8 billion during the year ended December 31, 2023 from $21.6 billion during the year ended December 31, 2022 .

Partially offsetting this decrease was an increase in yields on interest-earning assets.

The following chart shows our net interest margin over the past five years:

Net interest margin is determined by dividing FTE net interest income by average-earning assets.

For purposes of the following discussion, income from tax-exempt loans and investment securities has been adjusted to an FTE basis, using a marginal tax rate of 21.8% for the year ended December 31, 2023, 21.6% for the year ended December 31, 2022 and 21.0% for the year ended December 31, 2021.

Net interest margin, including PPP loan interest income, increased 8 basis points to 2.69% during the year ended December 31, 2022, from 2.61% during the year ended December 31, 2021.

The increase in net interest margin for the year ended December 31, 2022 was primarily due to an increase in market rates of interest and was partially offset by a decline in PPP net fee accretion of $25.3 million in comparison to the year ended December 31, 2021.

For additional discussion of the decline in the PPP loan net fee accretion and increased interest rates, refer to the earlier “Outlook and Trends” section within this Item 7.

Net interest margin increased 4 basis points basis points to 2.73% during the year ended December 31, 2023, from 2.69% during the year ended December 31, 2022.

The increase in net interest margin for the year ended December 31, 2023 from the year ended December 31, 2022 was primarily due to an increase in market rates of interest which resulted in an increase in our average yield on interest-earning assets that exceeded the increase in the average cost of interest-bearing liabilities.

Also contributing to the increase was a decline in average interest earning assets for the year ended December 31, 2023 compared to the year ended December 31, 2022, which was a driven by the completion of a balance sheet repositioning in March 2023 through the sale of AFS securities

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

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Non-accrual loans were included in the computation of average balances but have been reflected in the table as loans carrying a zero yield.

The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.

The yields set forth below include the effect of deferred fees and costs, and discounts and premiums that are amortized or accreted to interest income or expense.

Average asset and liability balances included in discontinued operations are included in non-interest-earnings assets and liabilities, respectively.

Average Balances, Interest Earned/Paid, & Average Yields/Costs

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Refer to the earlier “ Non-GAAP Financial Measures” section within this Item 7 for additional information.

(5) Represents net income divided by average total assets.

(6) Represents net income divided by average equity.

(7) Federal funds purchased and the related interest expense for the 2020 period primarily related to federal funds purchased for correspondent bank customers.

(5) Represents net income, including net income from discontinued operations, divided by average total assets.

(6) Represents net income, including net income from discontinued operations, divided by average equity.

(7) Includes noninterest expenses included in results of discontinued operations.

Refer to Note 23, “Discontinued Operations ” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

The following table presents, on a tax equivalent basis, the effects of changing rates and volumes on our net interest income for the periods indicated.

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Change in net interest income $ 16,922 $ (30,122) $ (13,200) $ 13,841 $ 131,029 $ 144,870

The following chart shows the composition of our quarterly average interest-earning assets for the past five quarters:

The following chart shows the composition of our yearly average interest-earning assets for the past five years:

Provision for Loan Losses

The provision for loan losses represents the charge to expense that is required to maintain an appropriate level of allowance for loan losses.

During the year ended December 31, 2021, management determined the allowance for loan losses in accordance with ASC 450, “Contingencies” and ASC 310, “Receivables” (i.e., prior to our adoption of ASU 2016-13).

We recorded a provision for loan losses of $17.9 million for the year ended December 31, 2022, compared to a release of $9.7 million for the year ended December 31, 2021.

Management determined a provision to be necessary primarily due to increased loan balances.

Also contributing to the provision for the year ended December 31, 2022 was an increase in the overall reserve rate.

The reserve rate increased by 25 basis points to 1.05% at December 31, 2022 from 0.80% at December 31, 2021.

We recorded a transition adjustment in connection with our adoption of ASU 2016-13 on January 1, 2022 of $27.1 million which resulted in an increase in the reserve rate to 1.02% at that time based upon loan balances as of December 31, 2021.

Subsequently, the reserve rate further increased by 3 basis points to 1.05% as of December 31, 2022 which was the result of changes in macroeconomic conditions.

To determine our allowance for loan losses as of December 31, 2022 and the provision for loan losses for the year ended December 31, 2022, we used the Oxford Economics December 31, 2022 Baseline forecast (“the forecast”) to generate our modeled expected losses by loan portfolio in order to reflect management’s reasonable expectations of current and future economic conditions.

We recorded a provision for allowance for loan losses of $20.1 million for the year ended December 31, 2023, compared to a provision of $17.9 million for the year ended December 31, 2022.

Management determined a provision to be necessary primarily due to increased loan balances and higher reserve rates relative to an increase in non-performing commercial real estate loans, which were reserved for on a specific reserve basis.

The increase in our non-performing commercial real estate loans was primarily attributable to several commercial real estate loans, which are collateralized by properties in the investor office risk segment and retail risk segment, transitioning to non-accrual during the year ended December 31, 2023.

Management’s estimate of our allowance for loan losses as of December 31, 2023 and the provision for loan losses for the year ended December 31, 2023, was supported, in part, by Oxford Economics’ December 2023 Baseline forecast (“the forecast”) which was used to develop management’s estimate of the effect of expected future economic conditions on the allowance for loan losses.

The forecast assumed the U.S.

economy will enter a recession in the second quarter of 2023, reflecting the combination of persistently high inflation, aggressive Federal Reserve monetary policy tightening, slower global gross domestic product (“GDP”) activity, and weaker corporate earnings, all of which are expected to adversely impact consumers’ and businesses’ willingness to spend.

Primary macroeconomic assumptions included in management’s evaluation of the adequacy of the allowance for loan losses included continued low, but rising, unemployment rates which are expected to continue to rise until their peak in early 2024, and a peak-to-trough decline in GDP of 1.2%.

Further, the forecast assumed that the FOMC will continue to raise interest rates into early 2023 following its most recent December 2022 increase but then remain flat into early 2024.

For additional discussion of our allowance for credit losses measurement methodology, see Note 2, “Summary of Significant Accounting Policies” and Note 5, “Loans and Allowance for Loan Losses” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.

For discussion of our previous methodology for estimating the allowance for loan losses, refer to Note 6, “Loans and Allowance for Loan Losses” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K and Note 2, “Summary of Significant Accounting Policies” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“2021 Form 10-K”).

economy will continue slow at the start of 2024 following a decline in gross domestic product (“GDP”) in the fourth quarter of 2023, as growth in various metrics continues to slow but little to no contraction in the first quarter of 2024.

This forecast reflects the impact of positive consumer spending despite lower income growth.

Primary macroeconomic assumptions included in management’s evaluation of the adequacy of the allowance for loan losses included an unemployment rate that remained low and a decrease in GDP.

Further, the forecast assumed the FOMC will not begin to reduce the federal funds rate until late 2024 following an extended period of below-trend growth and further softening in the labor market conditions.

Although the core consumer price index declined in 2023 from the prior year, inflation is expected to remain slightly above the FOMC’s 2% target through 2024.

For discussion of our previous methodology for estimating the allowance for loan losses, refer to Note 4, “Loans and Allowance for Loan Losses” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

To illustrate the sensitivity of the modeled result to the impact of a hypothetical change in the economic forecast, management calculated the allowance for loan losses assuming the downside economic forecast scenario and, separately, the upside economic forecast scenario.

The downside scenario assumed the U.S.

economy will experience a decline in GDP in 2024 of 0.7%.

Use of the downside scenario would have resulted in an incremental increase in the allowance for loan losses of approximately $12.3 million as of December 31, 2023.

The upside scenario assumed GDP growth of 2.5% in 2024 along with

sustained recovery.

Use of the upside scenario would have resulted in an incremental decrease in the allowance for loan losses of approximately $6.3 million as of December 31, 2023.

Our periodic evaluation of the appropriate allowance for loan losses considers the risk characteristics of the loan portfolio, current economic conditions, and trends in loan delinquencies and charge-offs.

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

Noninterest Income

Noninterest (Loss) Income

For the Year Ended December 31, Change

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(Dollars in thousands)

Insurance commissions $ 99,232 $ 94,704 $ 4,528 4.8 %

Service charges on deposit accounts $ 28,631 $ 30,392 $ (1,761) (5.8) %

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Interest rate swap income 1,536 6,009 (4,473) (74.4) %

(Losses) income from investments held in rabbi trusts (10,762) 10,217 (20,979) (205.3) %

Gains on sales of mortgage loans held for sale, net 248 3,605 (3,357) (93.1) %

(Losses) gains on sales of securities available for sale, net (3,157) 1,166 (4,323) (370.8) %

Income (losses) from investments held in rabbi trusts 9,305 (10,762) 20,067 (186.5) %

Losses on sales of commercial and industrial loans (2,738) — (2,738) 100.0 %

(Losses) gains on sales of mortgage loans held for sale, net (507) 248 (755) (304.4) %

Losses on sales of securities available for sale, net (333,170) (3,157) (330,013) 10,453.4 %

Other 21,457 17,783 3,674 20.7 %

Total noninterest income $ 176,161 $ 193,155 $ (16,994) (8.8) %

Noninterest income decreased by $17.0 million, or 8.8%, to $176.2 million for the year ended December 31, 2022 from $193.2 million for the year ended December 31, 2021.

The decrease was primarily due to a $21.0 million decrease in income from investments held in rabbi trusts which resulted from a current period net loss from such investments, a $4.3 million decrease in gains on sales of securities available for sale which resulted from a current period net loss from such sales compared to a net gain in the comparative prior period, and a $3.4 million decrease in net gains on sales of mortgage loans.

These decreases were partially offset by a $6.1 million increase in service charges on deposit accounts and an $4.5 million increase in insurance commissions.

• Income from investments held in rabbi trusts decreased to a net loss primarily as a result of an unfavorable mark-to-market adjustment on equity securities held in these accounts resulting from a decline in the market value of equity securities held in rabbi trusts.

• Gains on sales of securities available for sale, net, decreased to a net loss due to the decision by management to sell certain available for sale securities during the year ended December 31, 2022, a portion of which were acquired in connection with our acquisition of Century and were in a net unrealized loss position at the time of sale.

• Net gains resulting from the sale of mortgage loans held for sale decreased due to a reduction in the volume of our mortgage loan sales on the secondary market which was primarily due to rising market rates of interest.

• Service charges on deposit accounts increased primarily as a result of increased corporate account analysis charges as a result of greater commercial deposit customer activity.

The increased customer deposit activity is primarily attributable to our acquisition of Century.

• Insurance commissions increased due to an increase in recurring commission income which was attributable to recent insurance agency acquisitions.

Refer to Note 3, “Mergers and Acquisitions” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K for additional discussion of such agency acquisitions.

Total noninterest (loss) income $ (237,753) $ 76,750 $ (314,503) (409.8) %

Noninterest income decreased $314.5 million, to a net loss of $237.8 million for the year ended December 31, 2023 from income of $76.8 million for the year ended December 31, 2022.

This decrease was primarily due to a $330.0 million increase in losses on sales of securities available for sale, a $4.5 million decrease in interest rate swap income, and losses on sales of commercial and industrial loans of $2.7 million.

These items were partially offset by an $20.1 million increase in income from investments held in rabbi trusts, and an $3.7 million increase in other noninterest income.

• Losses on sales of securities available for sale, net, increased by $330.0 million to $333.2 million for the year ended December 31, 2023 from $3.2 million for the year ended December 31, 2022 due to a balance sheet repositioning which was completed in March 2023 and included the sale of certain available for sale securities.

Refer to the section titled “Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies” within this Item 7 for additional discussion of such sales.

• Interest rate swap income decreased primarily as a result of a less favorable mark-to-market adjustment during the year ended December 31, 2023 compared to the year ended December 31, 2022.

• We realized a loss on sale of commercial and industrial loans of $2.7 million during the year ended December 31, 2023.

Management made the decision to sell a portion of our commercial and industrial loans included in the SNC Program in order to fund new loan originations and to provide additional liquidity to support ongoing operations.

No commercial loans were sold during the year ended December 31, 2022.

For additional discussion, refer to Note 4, “Loans and Allowance for Credit Losses” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

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

• Other noninterest income increased primarily as a result of an increase in FHLB dividend income during the year ended December 31, 2023 compared to the year ended December 31, 2022, which was primarily due to an increase in the average balance of FHLB stock from $15.4 million during the year ended December 31, 2022 to $21.0 million during the year ended December 31, 2023, as well as the FHLB’s overall increases in dividends.

Also contributing to the increase in noninterest income was an increase in commercial loan fee income, net of deferrals, which increased to $2.0 million as a result of increased commercial loan origination volume during the year ended December 31, 2023 compared to the year ended December 31, 2022.

Noninterest Expense

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Noninterest Expense

For the Year Ended December 31, Change Century Merger & Acquisition Expenses (1) Change Excluding Merger & Acquisition Expenses (1)

For the Year Ended December 31, Change

2023 2022 Amount %

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FDIC insurance 21,874 6,250 15,624 250.0 %

Amortization of intangible assets 3,864 2,512 1,352 53.8 % — 1,352

Amortization of core deposit intangible asset 1,804 1,198 606 50.6 %

Other 21,144 26,238 (5,094) (19.4) %

Total noninterest expense $ 418,602 $ 388,649 $ 29,953 7.7 %

(1) We recorded merger and acquisition expenses of $35.5 million during the year ended December 31, 2021 related to our acquisition of Century.

These merger and acquisition expenses were deducted from the corresponding financial statement line items in the above table to compute the related change excluding such expenses for purposes of the below discussion.

Noninterest expense increased by $30.0 million, or 7.7%, to $418.6 million during the year ended December 31, 2023 from $388.6 million during the year ended December 31, 2022.

The increase was primarily due to the following financial statement line items (changes excluding merger and acquisition expenses included in such financial statement line items):

an $18.2 million increase in salaries and employee benefits, a $22.1 million increase in other noninterest expenses, a $7.7 million increase in data processing, and a $7.5 million increase in office occupancy and equipment.

Partially offsetting these increases was a decrease in merger and acquisition expenses of $35.2 million to $0.3 million during the year ended December 31, 2022 from $35.5 million during the year ended December 31, 2021.

• Salaries and employee benefits, excluding merger and acquisition expenses, increased primarily due to salaries and wages for newly hired employees and former employees of Century who were retained following the acquisition.

In addition, share-based compensation, which is related to restricted stock awards (“RSAs”) granted in the fourth quarter of 2021 and second quarter of 2022 and awards of restricted stock units (“RSUs”) and performance stock units (“PSUs”) granted in the first quarter of 2022, increased $10.3 million.

The increase is due to a full year of expense recognized during the year ended December 31, 2022 related to RSAs granted in 2021 and a partial year of expense during the year ended December 31, 2022 related to RSAs, RSUs and PSUs granted in 2022.

During the year ended December 31, 2021, we recognized expense related to RSAs for approximately one month as such awards were granted on November 30, 2021.

As of December 31, 2021, we had not granted any awards of RSUs or PSUs.

Lastly, our deferrals of loan origination-related costs decreased by $9.9 million, resulting in a corresponding increase in salaries and employee benefits expenses.

These increases were partially offset by a decrease of $10.7 million in benefit expense related to our defined contribution supplemental executive retirement plan (“DC SERP”).

The overall increase was primarily due to an $19.9 million increase in salaries and employee benefits and a $15.6 million increase in FDIC insurance expense.

Partially offsetting these increases were a $5.1 million decrease in other noninterest expenses and a $1.9 million decrease in loan expenses.

• Salaries and employee benefits increased primarily due to an $8.9 million increase in benefit expense related to our defined contribution supplemental executive retirement plan (“DC SERP”).

Participant benefits are adjusted based upon deemed investment performance.

Accordingly, such investments experienced a decline in value during the year ended December 31, 2022 resulting in a corresponding decrease in the related benefit expense.

• Other noninterest expenses, excluding merger and acquisition expenses, increased primarily due to a pension settlement-related expense recorded during the year ended December 31, 2022 of $12.0 million related to the Defined Benefit Plan.

Also contributing to the overall increase was an $2.2 million increase in liability insurance expense, which was primarily due to regular insurance rate premium increases and our acquisition of Century, which increased the number of our properties and, therefore, the scope of our required insurance coverage, a $1.9 million increase in customer bad check losses during the year ended December 31, 2022 compared to the year ended December 31,

2021, consistent with a nationwide increase in mail-based check fraud, and a $1.5 million increase in our provision for off-balance sheet credit exposures which was primarily due to an increase in unfunded loan commitments.

Partially offsetting these items was a decrease of $3.3 million in legal expenses associated with the settlement of two putative consumer class action litigation matters related to overdraft and non-sufficient funds fees.

The accrual for such expenses was initially recorded during the second quarter of 2021 and final settlement of the legal matters occurred during the first quarter of 2022.

For additional information, refer to Note 18, “Commitments and Contingencies” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.

• Data processing expenses, excluding merger and acquisition expenses, are primarily comprised of costs associated with the processing of customer transactions including loans and deposits and are partially impacted by fluctuations in related transaction volume.

Such expenses increased during the year ended December 31, 2022 from the year ended December 31, 2021 primarily due to our acquisition of Century in the fourth quarter of 2021 which resulted in the acquisition of additional loan and deposit customers.

• Office occupancy and equipment, excluding merger and acquisition expenses, increased during the year ended December 31, 2022 as compared to the year ended December 31, 2021 primarily due to the addition of properties resulting from our acquisition of Century and which included a $2.1 million increase in depreciation expense, and lease impairment charges of $0.6 million, which were due to an early termination of a lease acquired from Century.

• Merger and acquisition expenses decreased $35.2 million to $0.3 million during the year ended December 31, 2022 from $35.5 million during the year ended December 31, 2021.

In connection with our acquisition of Century, which we completed on November 12, 2021, we incurred merger and acquisition costs of $35.5 million during the year ended December 31, 2021.

For additional information on our acquisition of Century, see Note 3, “Mergers and Acquisitions” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.

Accordingly, such investments experienced an increase in value during the year ended December 31, 2023 resulting in a corresponding increase in the related benefit expense.

Also contributing to the increase was an increase of $6.8 million in salaries and wages expense, which was primarily due to costs of living salary and wage increases and the addition of new employees.

Also contributing to the increase in salaries and employee benefits was an increase in the legacy long-term cash-based incentive plan compensation expense as well as an increase in the restricted stock award expense.

Expense related to the long-term cash-based incentive plan increased to a net expense during the year ended December 31, 2023 compared to a net credit (reduction of expense) during the year ended December 31, 2022, resulting from an increase in certain metrics to which the awards are tied during the year ended December 31, 2023 in contrast with a decrease in such metrics during year ended December 31, 2022.

Restricted stock award expense increased $5.5 million due to incremental expense recognized in relation to restricted stock units and restricted stock awards granted in December 2022 and during the first and second quarters of 2023.

Partially offsetting these items was a decrease of $4.1 million in the pension service cost, which was primarily driven by a change in the mix of employees which reduced the present value of benefits based upon salary growth levels in comparison to the year ended December 31, 2022.

• FDIC insurance expenses increased $15.6 million primarily due to the FDIC’s special assessment which we accrued for in the fourth quarter of 2023 following the finalization of the rule.

Refer to the section titled “Outlook and Trends” within this Item 7 for additional discussion of the FDIC’s special assessment.

• Other noninterest expenses decreased primarily due to a $2.8 million decrease in post-retirement bank-owned life insurance expense which was primarily caused by an increase in the discount rate used to determine the liability related to our split-dollar life insurance policies.

This increase in the discount rate resulted in a decrease in the expense associated with such liabilities.

Also contributing to this decrease was a $1.6 million decrease in other pension expense.

This is primarily due to a greater return than expected on plan assets in our Defined Benefit Plan.

For further discussion on the Company’s Defined Benefit Plan refer to Note 15, “Employee Benefits” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

Also contributing to this decrease was a $1.1 million decrease in the provision for credit losses on off balance sheet exposures, which was primarily due to a reduction in reserve rates.

• Loan expenses decreased primarily due to a decrease in the volume of consumer home equity line of credit (“HELOC”) applications received during the year ended December 31, 2023 compared to during the year ended December 31, 2022.

We had marketed our HELOC products during the first three quarters of 2022, which led to

increased volume during that period.

We ceased our HELOC promotion in the fourth quarter of 2022 which led to a subsequent decline in the volume of HELOC applications received.

We recognize the tax effect of all income and expense transactions in each year’s consolidated statements of income, regardless of the year in which the transactions are reported for income tax purposes.

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

The following table sets forth information regarding our tax provision included in continuing operations and applicable tax rates for the periods indicated:

Tax Provision and Applicable Tax Rates

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Blended statutory tax rate 28.2 % 28.1 %

Income tax expense increased by $22.9 million to $56.9 million in the year ended December 31, 2022 from $34.0 million in the year ended December 31, 2021.

The increase in income tax expense was due primarily to higher pre-tax income during the year ended December 31, 2022 compared to the year ended December 31, 2021 and an increase in our effective income tax rate.

The increase in our effective income tax rate was due primarily to a partial release of $11.3 million during the year ended December 31, 2021 related to a valuation allowance established as of December 31, 2020 against our charitable contribution carryover deferred tax asset in connection with our 2020 charitable contribution to the Eastern Bank Foundation compared to a release of $0.7 million during the year ended December 31, 2022.

For additional information related to our income taxes see Note 12, “Income Taxes” and Note 14, “Low Income Housing Tax Credits and Other Tax Credit Investments” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.

Financial Position and Results of Operations of our Business Segments

As of and for the Year Ended December 31,

Business Insurance

Business Other/

Eliminations Total Banking

Business Insurance

Business Other/

Eliminations Total

(Dollars in thousands)

Net interest income $ 568,054 $ — $ — $ 568,054 $ 429,827 $ — $ — $ 429,827

Provision for (release of) allowance for loan losses 17,925 — — 17,925 (9,686) — — (9,686)

Net interest income after provision for loan losses 550,129 — — 550,129 439,513 — — 439,513

Noninterest income 78,002 98,814 (655) 176,161 96,376 97,168 (389) 193,155

Noninterest expense 390,880 83,208 (4,486) 469,602 365,410 82,780 (4,234) 443,956

Income before income tax expense 237,251 15,606 3,831 256,688 170,479 14,388 3,845 188,712

Income tax expense 52,521 4,408 — 56,929 29,994 4,053 — 34,047

Net income $ 184,730 $ 11,198 $ 3,831 $ 199,759 $ 140,485 $ 10,335 $ 3,845 $ 154,665

Total assets $ 22,498,175 $ 215,190 $ (66,507) $ 22,646,858 $ 23,376,521 $ 204,768 $ (69,161) $ 23,512,128

Total liabilities $ 20,192,632 $ 48,943 $ (66,507) $ 20,175,068 $ 20,125,218 $ 49,719 $ (69,161) $ 20,105,776

Banking Segment

• Interest and dividend income increased by $170.0 million, or 39.1%, to $605.2 million during the year ended December 31, 2022 from $435.2 million during the year ended December 31, 2021 which was primarily due to an increase in average interest-earning assets.

Average interest-earning assets increased $4.9 billion, or 29.6%, to $21.6 billion for the year ended December 31, 2022 from $16.7 billion for the year ended December 31, 2021.

The increase was primarily due to the acquisition of Century, which closed on November 12, 2021 and added approximately $6.6 billion in interest-earning assets.

For additional discussion, refer to the earlier “Interest and Dividends” section.

• Interest expense increased $31.8 million, or 596.3%, to $37.1 million during the year ended December 31, 2022 from $5.3 million during the year ended December 31, 2021 which was primarily due to increased rates paid on deposits which increased 17 basis points during the year ended December 31, 2022 compared to the year ended December 31, 2021.

The overall change in average interest-bearing liabilities also contributed to the increase in interest expense and increased $4.2 billion, or 48.8%, to $12.7 billion for the year ended December 31, 2022 from $8.5 billion for the year ended December 31, 2021, with average total interest-bearing deposits, our largest category of average interest-bearing liabilities, growing $3.9 billion, or 46.2%, to $12.4 billion as of December 31, 2022 compared to $8.5 billion as of December 31, 2021.

Average interest-bearing deposits increased primarily due to our acquisition of Century, which added $4.4 billion in interest-bearing deposits.

Also contributing to the increase in average interest-bearing liabilities was average borrowings which increased $230.1 million to $256.6 million for the year ended December 31, 2022 from $26.5 million for the year ended December 31, 2021.

The increase in borrowings was primarily to provide additional liquidity for the funding of loan growth.

For additional discussion, refer to the earlier “Interest and Dividends” section.

• We recorded a provision for allowance for loan losses of $17.9 million for the year ended December 31, 2022, compared to a release of allowance for loan losses of $9.7 million for the year ended December 31, 2021.

We determined a provision to be appropriate primarily due to overall increased loan balances during the year ended December 31, 2022.

Comparatively, during the year ended December 31, 2021, following continued improvement in economic and credit conditions, we had determined that a release of the provision was necessary.

For additional discussion, refer to the earlier “Provision for Loan Losses” section.

• Losses from investments held in rabbi trust accounts were $9.5 million for the year ended December 31, 2022 which represents a decrease of $18.7 million, or 201.9%, from income of $9.3 million for the year ended December 31, 2021.

The decrease was primarily the result of an unfavorable mark-to-market adjustment on equity securities held in these accounts during the year ended December 31, 2022.

• Losses on sales of securities available for sale, net, were $3.2 million during the year ended December 31, 2022 which represents a decrease of $4.3 million from the year ended December 31, 2021, a period during which we recognized a net gain of $1.2 million.

The net loss on sale was due to the decision by management to sell certain

AFS securities during the year ended December 31, 2022, the majority of which were acquired in connection with our acquisition of Century and were in a net unrealized loss position at the time of sale.

• Gains on sales of mortgage loans held for sale, net, were $0.2 million during the year ended December 31, 2022 which represents a decrease of $3.4 million from gains of $3.6 million during the year ended December 31, 2021.

The decrease was primarily due to a reduction in the volume of our mortgage loan sales on the secondary market which was primarily due to rising market rates of interest.

• Partially offsetting the losses from investments held in rabbi trust accounts and losses on sales of securities available for sale during the year ended December 31, 2022 were service charges on deposit accounts which increased $6.1 million during the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily as a result of increased corporate account analysis charges as a result of greater commercial deposit customer activity during the year ended December 31, 2022.

• Noninterest expense increased $25.5 million, or 7.0%, to $390.9 million during the year ended December 31, 2022 from $365.4 million during the year ended December 31, 2021.

This increase was primarily due to an increase of $22.1 million in salaries and wages expense, a $10.4 million pension settlement-related expense during the year ended December 31, 2022 (representing the banking segment-only portion of the total settlement-related expense recognized), an increase of $10.3 million in share-based compensation, and an increase of $6.4 million in data processing expenses.

Partially offsetting these increases was a decrease of $19.0 million in other compensation which was primarily attributable to decreased merger and acquisition-related expenses.

For additional discussion, refer to the earlier “Noninterest Expense” section.

Insurance Agency Segment

• Noninterest income related to our insurance agency business increased by $1.6 million, or 1.7%, to $98.8 million during the year ended December 31, 2022 from $97.2 million during the year ended December 31, 2021 primarily due to increased commission income.

For additional discussion, refer to the earlier “Noninterest Income” section.

• Noninterest expense related to our insurance agency business remained relatively consistent during the year ended December 31, 2021 compared to the year ended December 31, 2021 with a slight increase of $0.4 million, or 0.5%, to $83.2 million during the year ended December 31, 2022 from $82.8 million during the year ended December 31, 2021.

The slight increase is primarily due to the previously mentioned pension settlement-related expense, of which $1.6 million related to the insurance agency segment.

Income tax expense decreased by $115.0 million to a benefit of $63.3 million in the year ended December 31, 2023 from a provision of $51.7 million in the year ended December 31, 2022.

The decrease in income tax expense, which resulted in a tax benefit for the year ended December 31, 2023, was primarily due to lower income before income tax expense, which was a net loss during the year ended December 31, 2023, as a consequence of losses realized on sales of available for sale securities in the first quarter of 2023.

For additional information related to the Company’s income taxes see Note 12, “Income Taxes” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

Critical Accounting Policies and Estimates

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Our actual results could differ from these estimates.

While our significant accounting policies are discussed in detail in Note 2, “Summary of Significant Accounting Policies” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

While our significant accounting policies are discussed in detail in Note 2, “Summary of Significant Accounting Policies” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Allowance for Loan Losses .

Through December 31, 2021, the allowance for loan losses represented management’s best estimate of incurred probable losses in our loan portfolios based upon management’s assessment of various factors, including the risk characteristics of our loan portfolio, current economic conditions, and trends in loan delinquencies and charge-offs.

Our methodology for determining the qualitative component through December 31, 2021 included an assessment of factors affecting the determination of incurred losses in the loan portfolio.

Such factors included trends in economic conditions, loan growth, credit underwriting policy exceptions, regulatory and audit findings, and peer comparisons, among others.

Upon adoption of ASU 2016-13, effective January 1, 2022, we changed our reserve methodology to estimate expected credit losses over the contractual life of loans and leases.

The allowance for credit losses, or ACL, is established to provide for our current estimate of expected lifetime credit losses on loans measured at amortized cost and unfunded lending commitments at the balance sheet date and is established through a provision for credit losses charged to net income.

Management uses a methodology to systematically estimate the amount of expected lifetime losses in the portfolio.

Expected lifetime losses are estimated on a collective basis for loans sharing similar risk characteristics and are determined using a quantitative model combined with an assessment of certain qualitative factors designed to address forecast

risk and model risk inherent in the quantitative model output.

For commercial and industrial, commercial real estate, commercial construction and business banking portfolios, the quantitative model uses a loan rating system which is comprised of management’s determination of a financial asset’s probability of default (“PD”), loss given default (“LGD”) and exposure at default (“EAD”), which are derived from historical loss experience and other factors.

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Economic forecasts, one of the most significant judgments influencing the ACL, are incorporated into the estimate over a reasonable and supportable forecast period of eight quarters, beyond which is a reversion to our historical loss average which occurs over a period of four quarters.

Management’s estimate of the ACL as of December 31, 2022 was supported, in part, by Oxford Economic’s, December 2022 Baseline forecast (“the forecast”).

The forecast assumed the U.S.

economy will enter a recession in the second quarter of 2023, reflecting the combination of persistently high inflation, aggressive Federal Reserve monetary policy tightening, slower GDP activity, and weaker corporate earnings, all of which are expected to adversely impact consumers’ and businesses’ willingness to spend.

Further, the forecast assumed that the FOMC will continue to raise interest rates into early 2023 following its December 2022 increase but then remain flat into early 2024.

Changes in the economic forecast could significantly affect the estimated credit losses which could potentially lead to materially different reserve amounts from one reporting period to the next.

The downside scenario assumed the US economy will enter a recession in the first quarter of 2023 and experience a decline in GDP of 3.2% peak-to-trough.

Use of the downside scenario would have resulted in an incremental increase in the allowance for loan losses of approximately $10.4 million as of December 31, 2022.

The upside scenario assumed GDP growth of 1.4% in 2023, 1.9% in 2024 and sustained recovery.

Use of the upside scenario would have resulted in an incremental decrease in the allowance for loan losses of approximately $3.1 million as of December 31, 2022.

For additional information on our allowance for loan losses, refer to Note 5, “Loans and Allowance for Loan Losses” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.

For further discussion of management’s economic forecast assumptions and our sensitivity analysis of the allowance for loan losses as of December 31, 2023, refer to the earlier “Provision for Loan Losses” discussion within the “Results of Operations” within this Item 7.

For additional information on our allowance for loan losses, refer to Note 4, “Loans

and Allowance for Credit Losses” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

Acquisitions of businesses are accounted for using the acquisition method of accounting.

Accordingly, the net assets of the companies acquired are recorded at their fair values at the date of acquisition.

Goodwill represents the excess of purchase price over the fair value of net assets acquired.

We evaluate goodwill for impairment at least annually, which we performed as of September 30, 2023, using a quantitative impairment approach.

An assessment is also performed to the extent relevant events and/or circumstances occur which may indicate it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount.

The quantitative impairment test compares the book value to the fair value of each reporting unit.

If the book value exceeds the fair value, an impairment is charged to net income.

As of December 31, 2023, management identified one reporting unit for purposes of testing goodwill for impairment:

the banking business.

We performed our annual assessment of impairment for the banking business as of September 30, 2023.

The assessment included a comparison of the banking business’ book value to the implied fair value using a pricing multiple of our tangible book value as well as a comparison of the banking business’ book value to its estimated fair value based upon its discounted cash flows.

The assessment also included a market capitalization analysis.

Based upon the assessment, we determined there was no impairment of our goodwill as of September 30, 2023.

Significant management judgment is necessary in the determination of the fair value of a reporting unit as the income approach (comparison of the business’ book value to its discounted cash flows) requires an estimation of future cash flows, considering after-tax results of operations, the extent and timing of credit losses, and appropriate discount and capital retention rates.

The determination of fair value is a highly subjective process, and actual future cash flows may differ from forecasted results.

Our discount rate was based upon the estimated cost of equity under the Capital Asset Pricing Model, which considers the risk-free interest rate, market risk premium, size premium, company specific premium and beta specific to a particular reporting unit.

For additional information on our goodwill and other intangibles, refer to Note 7, “Goodwill and Core Deposit Intangible Asset” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.

Income Taxes .

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The tax position is measured at the largest amount of benefit that we believe is greater than 50% likely of being realized upon settlement.

For additional information on our income taxes, refer to Note 12, “Income Taxes” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.

For additional information on our income taxes, refer to Note 12, “Income Taxes” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

Pension and other Post Retirement Benefit Plans .

For information regarding our pension and other postretirement benefit plans including our pension contributions, investment strategies, assumptions, the change in benefit obligation and related plan assets, pension funding requirements and future net benefit payments, refer to Note 2, “Summary of Significant Accounting Policies” and Note 17, “Employee Benefits” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.

For information regarding our pension and other postretirement benefit plans including our pension contributions, investment strategies, assumptions, the change in benefit obligation and related plan assets, pension funding requirements and future net benefit payments, refer to Note 2, “Summary of Significant Accounting Policies” and Note 15, “Employee Benefits” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

Our defined benefit pension plans are accounted for on an actuarial basis, which requires the selection of various assumptions, including an expected long-term rate of return on plan assets for our Qualified Defined Benefit Pension Plan (“Defined Benefit Plan”), a discount rate, lump sum conversion rates, compensation and benefit limitation increase assumptions, mortality rates of participants and expectation of mortality improvement.

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While the studies give appropriate consideration to recent plan performance and historical returns, the assumptions are primarily long-term, prospective rates of return.

An investment policy study was completed for the Defined Benefit Pension Plan as of December 31, 2022.

As a result of the study, it was determined that the weighted-average long-term rate of return on assets in effect at December 31, 2021 of 7.00%, should be increased to 7.50% at December 31, 2022.

In November 2023, an investment policy study was completed for the Defined Benefit Plan.

As a result of the study, it was determined that the weighted-average long-term rate of return on assets of 7.50% was reasonable as of December 31, 2023.

Another key assumption in determining net pension expense is the assumed discount rate used to discount plan obligations.

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The unamortized pre-tax actuarial loss on all of our pension plans was $69.7 million and $99.0 million at December 31, 2023 and December 31, 2022, respectively.

The year-over-year change was primarily due to an increase in discount rate assumptions used for determining the benefit obligation and lump sum conversion rates.

The year-over-year change was primarily due to an increase in plan assets and an increase in lump sum conversion rates, partially offset by a decrease in discount rate assumptions used for determining the benefit obligation.

The overfunded status of all of our pension plans improved during the year ended December 31, 2023 to $69.0 million from $56.8 million primarily due to:

(i) the favorable effect of an increase in discount rates of $97.6 million;

(i) actual pension plan investment returns less than expected of $33.7 million;

(ii) the favorable effect of an increase in lump sum conversion rates of $5.8 million;

and (iii) changes in other actuarial assumptions and demographic data updates;

partially offset by (iv) the unfavorable effect of increased service and interest costs of $4.6 million;

and (v) actual pension plan investment returns less than expected of $127.0 million.

partially offset by (iv) the unfavorable effect of a decrease in discount rates of $7.7 million.

The following table illustrates the sensitivity to a change in certain assumptions for the pension plans, holding all other assumptions constant:

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Recent Accounting Pronouncements

Relevant standards that we adopted during the year ended December 31, 2023:

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

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

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

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

We expect the adoption of this standard will not have a material impact on our Consolidated Financial Statements.

On January 1, 2023, we adopted this standard on a prospective basis.

The adoption of this standard did not have a material impact on our Consolidated Financial Statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments–Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”).

The amendments in this update eliminate the accounting guidance

on troubled debt restructurings (“TDRs”) for creditors in ASC 310-40 and amends the guidance on vintage disclosures, referenced in ASC 326-20-50, to require disclosure of current-period gross write-offs by year of origination.

The amendments in this update eliminate the accounting guidance on troubled debt restructurings (“TDRs”) for creditors in ASC 310-40 and amend the guidance on vintage disclosures, referenced in ASC 326-20-50, to require disclosure of current-period gross write-offs by year of origination.

This update supersedes the existing accounting guidance for TDRs in ASC 310-40 in its entirety and requires entities to evaluate all receivable modifications under existing accounting guidance in ASC 310-20 to determine whether a modification made to a borrower results in a new loan or a continuation of an existing loan.

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Further, if an entity employs a discounted cash flow method to calculate the allowance for credit losses, it will be required to use a post-modification-derived effective interest rate as part of its calculation.

The update also requires new disclosures for receivables for which there has been a modification in their contractual cash flows resulting from borrowers experiencing financial difficulties.

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

This update also requires new disclosures for receivables for which there has been a modification in their contractual cash flows resulting from borrowers experiencing financial difficulties.

For public business entities, the amendments in this update were effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Entities may elect to apply the updated guidance on TDR recognition and measurement by using a modified retrospective transition method.

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On January 1, 2023, we adopted this standard using the modified retrospective method with respect to the updated guidance on TDR recognition and measurement and the prospective approach with regard to the TDR and vintage disclosures.

Accordingly, we recorded a cumulative-effect adjustment to retained earnings as of January 1, 2023.

The adoption of this standard did not have a material impact on our Consolidated Financial Statements.

For a description of recent accounting pronouncements that may affect our financial position or results of operations, refer to Note 2, “Summary of Significant Accounting Policies” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.

Relevant standards that were recently issued but which we had not yet adopted as of December 31, 2023:

In March 2023, the FASB issued ASU 2023-02, Investments–Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (“ASU 2023-02”).

This update permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if the following conditions are met:

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

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

Substantially all of the projected benefits are from income tax credits and other income tax benefits.

Projected benefits include income tax credits, other income tax benefits, and other non-income-tax-related benefits.

The projected benefits are determined on a discounted basis, using a discount rate that is consistent with the cash flow assumptions used by the tax equity investor in making its decision to invest in the project.

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

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

Under existing accounting standards, the proportional amortization method is allowable only for equity investments in low-income-housing tax credit structures.

Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the income statement as a component of income tax expense (benefit).

Updates made by ASU 2023-02 allow a reporting entity to make an accounting policy election to apply the proportional amortization method on a tax-credit-program-by-tax-credit-program basis.

We had previously made an accounting policy election to account for our investments in low-income-housing tax credit investments using the proportional amortization method.

This election was made upon our adoption of ASU 2014-01, Investments–Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Qualified Affordable Housing Projects , which introduced the option to apply proportional amortization to low-income-housing tax credit investments.

For public business entities, the amendments in ASU 2023-02 are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted for all entities in an interim period.

On January 1, 2024, we adopted this standard using the modified retrospective method.

The adoption of this standard did not have a material impact on our Consolidated Financial Statements.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements–Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative (“ASU 2023-06”) .

The amendments in this update modify the disclosure or presentation requirements for a variety of topics in the codification.

Certain amendments represent

clarifications to or technical corrections of the current requirements.

The following is a summary of the topics included in the update and which pertain to us:

Statement of cash flows (Topic 230):

Requires an accounting policy disclosure in annual periods of where cash flows associated with derivative instruments and their related gains and loses are presented in the statement of cash flows;

Accounting changes and error corrections (Topic 250):

Requires that when there has been a change in the reporting entity, the entity disclose any material prior-period adjustment and the effect of the adjustment on retained earnings in interim financial statements;

Earnings per share (Topic 260):

Requires disclosure of the methods used in the diluted earnings-per-share computation for each dilutive security and clarifies that certain disclosures should be made during interim periods, and amends illustrative guidance to illustrate disclosure of the methods used in the diluted earnings per share computation;

Commitments (Topic 440):

Requires disclosure of assets mortgaged, pledged, or otherwise subject to lien and the obligations collateralized;

Debt (Topic 470):

Requires disclosure of amounts and terms of unused lines of credit and unfunded commitments and the weighted-average interest rate on outstanding short-term borrowings.

For public business entities, the amendments in ASU 2023-06 are effective on the date which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective.

If by June 30, 2027, the SEC has not removed the applicable requirement from Regulation and S-X or Regulation S-K, the pending content of the related amendment will be removed from the codification and will not become effective for any entity.

Early adoption is not permitted and the amendments are required to be applied on a prospective basis.

We expect the adoption of this standard will not have a material impact on our Consolidated Financial Statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

The amendments in this update are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendments in this update:

Require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss (collectively referred to as the “significant expense principle”).

Require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition.

The other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss.

Require that a public entity provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by ASC 280, Segment Reporting in interim periods.

Clarify that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit.

However, at least one of the reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with the measurement principles used in measuring the corresponding amounts in the public entity’s consolidated financial statements.

In other words, in addition to the measure that is most consistent with the measurement principles under generally accepted accounting principles (“GAAP”), a public entity is not precluded from reporting additional measures of a segment’s profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources.

Require that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.

Require that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this update and all existing segment disclosures in Topic 280.

For public business entities, the amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted and adoption is required to be done on a retrospective basis.

We expect the adoption of this standard will not have a material impact on our Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The amendments in this update are intended to improve income tax disclosure requirements, primarily through enhanced disclosures related to the existing requirements to disclose a rate reconciliation, income taxes paid and certain other required disclosures.

Specifically, the amendments in this update:

Require that a public entity disclose, on an annual basis:

(1) specific categories in the rate reconciliation and (2) additional information for reconciling items that meet a quantitative threshold.

The update requires disclosure of such reconciling items according to requirements indicated in the update.

Require that all entities disclose certain disaggregated information regarding income taxes paid.

Require that all entities disclose certain disaggregated information regarding income tax expense.

Eliminate the requirement to:

(1) disclose the nature and estimate of the range of reasonably possible changes in the unrecognized tax benefits balance in the next 12 months or (2) make a statement that an estimate of the range cannot be made.

Remove the requirement to disclose the cumulative amount of each type of temporary difference when a deferred tax liability is not recognized because of exceptions to comprehensive recognition of deferred taxes related to subsidiaries and corporate joint ventures.

For public business entities, the amendments in ASU 2023-09 are effective for annual periods beginning after December 15, 2024.

Adoption should be done on a prospective basis and retrospective application is permitted.

Management of Market Risk

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Interest rate risk arises directly from our core banking activities.

In addition to directly impacting net interest income, changes in the level of interest rates can also affect the amount of loans originated, the timing of cash flows on loans and securities, and the fair value of securities and derivatives, as well as other effects.

The primary goal of interest rate risk management is to control this risk within limits approved by the Risk Management Committee of our Board of Directors.

These limits reflect our tolerance for interest rate risk over both short-term and long-term horizons.

We attempt to manage interest rate risk by identifying, quantifying, and where appropriate, hedging our exposure.

In addition to directly impacting net interest income, changes in the level of interest rates can also affect the amount of loans originated, the timing of cash flows on loans and securities, and the fair value of assets and liabilities, as well as other aspects of our business.

The primary goal of interest rate risk management is to attempt to control this risk within policy limits approved by the Risk Management Committee of our Board of Directors, and within the Risk Appetite Statement formally adopted by the Board of Directors and described further below.

These limits reflect our tolerance for interest rate risk over both short-term and long-term horizons, are designed to encompass market rate shocks that would take place with both gradual and immediate effect and encompass a range of scenarios from mild to extreme market shocks.

More specifically, and as further described below, our policy limits govern:

• The maximum amount of acceptable earnings loss due to market risk in year one of a two-year earnings simulation, determined by net interest income analysis;

• The maximum amount of acceptable earnings loss due to market risk in year two of a two-year earnings simulation, determined by net interest income analysis;

• The maximum amount of acceptable decline in the present value of equity due to market risk, determined by economic value of equity analysis;

• The maximum acceptable size of the investment portfolio relative to total assets;

• Concentration limits on investment asset types to ensure appropriate portfolio diversification;

• Maximum maturity and weighted average life per security at time of purchase in both a base case and a shocked rate scenario to measure extension risk;

• The maximum acceptable duration of the investment and hedging derivatives portfolio;

• Guidelines on accounting classification of securities including held for trading, available for sale and held to maturity.

Policy limits are tested quarterly, and the results are reported to the Asset and Liability Management Committee (“ALCO”) and to the Risk Management Committee of the Board of Directors (“RMC”).

RMC advises the Board of Directors with respect to the adequacy of capital allocated based on the level of risk as well as risk issues that could impact liquidity and/

or capital adequacy.

From time to time, we expect we will exceed policy limits, in which case we may seek corrective action after considering, among other things, market conditions, customer reaction, and the estimated impact on profitability.

A remediation plan will be presented to ALCO, Enterprise Risk Management Committee (“ERMC”) and RMC that carefully outlines the proposed corrective action.

We attempt to manage interest rate risk by identifying, quantifying, and where appropriate, hedging our exposure to market risk.

If assets and liabilities do not re-price simultaneously and in equal volume, the potential for interest rate exposure exists.

Our objective is to maintain stability in the growth of net interest income through the maintenance of an appropriate mix of interest-earning assets and interest-bearing liabilities and, when necessary and within limits that management determines to be prudent, through the use of off-balance sheet hedging instruments including, but not limited to, interest rate swaps, floors and caps.

Net Interest Income.

We analyze our sensitivity to changes in interest rates through a net interest income model.

We estimate what our net interest income would be for a 12-month period assuming no changes in interest rates.

We then estimate what the net interest income would be for the same period under the assumption that market rates increase or decrease instantaneously by +200, +300, +400, -100 and -200 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

Our asset-liability management strategy is devised and monitored by our ALCO, a subcommittee of the ERMC, in accordance with policies approved by the RMC.

ALCO operates under a charter developed and approved by the ERMC.

ALCO meets at least monthly, or more frequently as needed, to review, among other things, our sensitivity to interest rate changes, loan pricing and activity, investment activity and strategy, hedging strategies, deposit pricing and funding strategies with respect to overall balance sheet composition, as well as earnings simulations over multiple years.

ALCO may meet more frequently if there are changes in the economic environment, such as rapid increases or decreases in interest rates due to or as a result of exogenous or unknown factors so that ALCO can make any necessary strategic adjustments to ensure risk is well-managed.

ALCO’s membership is comprised of executive management of the Company, and representatives from various lines of business are in regular attendance, including representation from Enterprise Risk Management (“ERM”).

ALCO reports regularly to RMC on these risks and objectives with independent oversight and reporting from our Financial and Model Risk Management group within ERM.

As a company offering banking and other financial services, certain elements of risk are inherent in our transactions and operations and are present in the business decisions we make.

We, therefore, encounter risk as part of the normal course of our business, and we design risk management processes to help manage these risks.

In its oversight of our risk management framework, the Board of Directors has adopted a formal Risk Appetite Statement (“RAS”) which defines the aggregate level of risk and the types of risk the Company is willing to assume to achieve its corporate strategy and objectives.

The Board ensures that approved policy limits, as described further above, conform to stated risk appetite.

The Board monitors, on at least a quarterly basis, a set of key risk metrics, including those, but not limited to those, pertaining to market risk.

Monitoring these metrics ensures that management is operating within the Board’s stated risk appetite, can help to identify trends in risk profile or emerging risks over time, and where applicable, determine where adjustments may be required to business strategy or tactics.

Within our risk management framework, the functional responsibilities of risk management are divided into a tiered model, involving three lines of defense:

The Finance Department to which primary market risk ownership belongs including monitoring and tracking of risk, model development and maintenance, and execution of strategy and tactics to mitigate market risk;

The ERM Department which conducts independent risk and controls assessments to ensure appropriate risk identification, management, and reporting.

The Model Risk Management group (“MRM”) within ERM is responsible for independent oversight of models used to measure market risk, including model and assumption implementation, development, and conceptual soundness;

The Internal Audit Department which independently assesses the operating effectiveness of the first- and second-line processes and controls.

Comments on Recent Developments.

As noted in the earlier section titled “Outlook and Trends” and the later section titled “Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies” in this Item 7, we completed a balance sheet repositioning during the first quarter of 2023 by selling a portion of our AFS investment securities portfolio for total proceeds of $1.9 billion.

Such securities were lower-yielding U.S.

Agency bonds and government-sponsored residential and commercial mortgage-backed securities which were purchased when interest rates were historically low.

In addition, as noted in the earlier section titled “Outlook and Trends” within this Item 2, we completed the sale of our insurance agency business in the fourth quarter of 2023 for net proceeds at closing of $498.1 million.

Prior to the sales of securities and of our insurance agency business, we placed greater reliance on wholesale funding, including brokered deposits, to meet our loan-growth needs.

Wholesale funding generally has a higher cost than deposits originating within the markets we serve and are not our preferred sources of funding.

Subsequent to such sales, a portion of the proceeds of which were used to reduce our wholesale funding balances, our reliance on such funding sources is lessened as we believe we have a stronger liquidity position.

As noted in the earlier section titled “Outlook and Trends” within this Item 7, beginning in March 2022, the Federal Open Market Committee (“FOMC”) voted to increase the federal funds rate multiple times from a range of 0.00% to 0.25% to a range of 5.25% to 5.50% on July 26, 2023, when the FOMC stated that it will continue to assess additional information and its implications for monetary policy.

Our market risk management framework is designed for the potential for such rapid changes in interest rates, by establishing policy limits on such rapid shocks and periodically back-testing modeled to actual results.

Back-testing of top-line results as well as key assumptions is performed against established thresholds as part of our ongoing monitoring governance of our models, and results are reported to ALCO and MRM.

Should back-testing results exceed established performance thresholds, the model and underlying assumptions will be reviewed for recalibration.

Net Interest Income Analysis.

We analyze our sensitivity to changes in interest rates through a net interest income (“NII”) model.

We model our NII over a 12-month and 24-month period assuming no changes in interest rates and a static balance sheet, where cash flows from financial assets and liabilities are replaced with new business of similar terms at current rates.

The impact of our interest rate derivatives designated as hedging instruments are included in the model results.

We then model NII for the same period under the assumption that market rates increase and decrease instantaneously by certain basis point increments, which vary by period depending upon market conditions, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

A basis point equals one-hundredth of one percent, and 100 basis points equals one percent.

An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Changes in Interest Rates” column below.

The model requires that interest rates remain positive for all points along the yield curve for each rate scenario which may preclude the modeling of certain falling rate scenarios during periods of lower market interest rates.

The relatively low level of market interest rates prevalent at December 31, 2021 precluded the modeling of certain falling rate scenarios.

An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Changes in Interest Rates” column in the table below.

Many assumptions are made in the modeling process for both NII and economic value of equity (“EVE”, discussed further below), including but not limited to the repricing and maturity characteristics of existing and new business, loan and security prepayments, administered deposit rate betas, duration of deposits without stated maturity dates, and other option risks.

Management believes these assumptions to be reasonable for the various interest rate environments modeled.

However, differences in actual results from these assumptions could change our exposure to interest rate risk.

The models assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assume that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities.

Additionally, the model requires that interest rates remain positive for all points along the yield curve for each rate scenario which may preclude the modeling of certain falling rate scenarios during periods of lower market interest rates.

We do not model negative interest rate scenarios.

Because of the limitations inherent in any modeling approach used to measure market risk, including NII and EVE sensitivity analysis, and because, in the event of changes in interest rates, management would take active steps to manage interest rate risk exposure among its financial assets and liabilities, modeling results, including those discussed in “Interest Rate Sensitivity” and “EVE Interest Rate Sensitivity” below, should not be relied upon as a forecast of actual NII or EVE, nor should they be interpreted as management’s expectations of actual results in the event of such interest rate fluctuations.

The tables provide an indication of our interest rate risk exposure at a particular point in time, and actual results may differ.

The tables below set forth, as of December 31, 2023 and 2022, the calculation of the estimated changes in our net interest income on an FTE basis that would result from the designated immediate changes in market interest rates:

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Forecast Year 1

Level Policy Limit

(Dollars in thousands)

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(200) 584,105 1.3 % (12) %

(400) 574,352 (0.4) % (20) %

As of December 31, 2022

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Forecast Year 1

Level Policy Limit

(Dollars in thousands)

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(100) 585,728 1.6 % (10) %

(1) Assumes an immediate uniform change in interest rates at all maturities, except in the down 100 basis points scenario, where rates are floored at zero at all maturities.

As of December 31, 2022, our models, as indicated above, show a decline in our net interest income in rising rate scenarios and an increase in our net interest income in falling rate scenarios.

In the rising rate scenarios, interest expense is expected to rise at a faster rate than interest income due, in part, to the extension of asset duration from our interest rate swap portfolio designated as cash flow hedges and the reduction of liability duration due to the increase in short term certificates of deposit and borrowings.

Conversely, in the declining rate scenarios, the reduction in interest expense exceeds the reduction in interest income.

The tables above indicate that at December 31, 2022 and December 31, 2021, in the event of an instantaneous parallel 200 basis points increase in rates, we would have experienced a 4.2% decrease and a 15.1% increase, respectively, in net interest income on an FTE basis, and in the event of an instantaneous 100 basis points decrease in interest rates, we would have experienced a 1.6% increase and a 5.9% decrease at December 31, 2022 and December 31, 2021, respectively, in net interest income, on an FTE basis.

We also modeled an instantaneous 200 basis point decrease in interest rates at December 31, 2022, the results of which showed we would have experienced a 1.8% increase in net interest income, on an FTE basis.

We did not model an instantaneous 200 basis points decrease in interest rates at December 31, 2021 given the relatively low level of interest rates.

(200) 586,771 1.8 % (12) %

(1) Assumes an immediate uniform change in interest rates at all maturities.

As of December 31, 2023, our model, as indicated above, shows a decline in our net interest income in rising rate scenarios.

In the rising rate scenarios, funding costs are modeled to rise faster than income on earning assets, due, in part, to the mix of funding which has shifted towards higher rate paying deposits.

As shown in the table above, the model generated similar results as of December 31, 2022.

That is, the model showed a decline in our net interest income in the rising rate scenarios as funding costs were modeled to rise faster than income on earning assets, due, in part, to the shift in our mix of funding.

The simulation results are within policy limits and management therefore does not expect a material change to our current strategy over the near term.

The rate scenarios that we model at each period end are dependent upon market conditions, which is why the rate scenarios that we model may differ from period-to-period.

As such, we did not previously model an instantaneous 400 basis point decrease in interest rates at December 31, 2022 given the lower level of interest rates compared to December 31, 2023.

Management may use investment strategy, loan and deposit pricing, non-core funding strategies, and interest rate derivative financial instruments, within internal policy guidelines, to manage interest rate risk as part of our asset/liability strategy.

These derivatives provide significant protection against falling interest rates.

Hedging strategies such as, for example, receive-fixed and pay-fixed swaps, interest rate caps, floors, or collars, may be used to protect against benchmark interest rates either rising or falling.

The type of derivatives we primarily use to hedge market risk are interest rate swap agreements designated as cash flow hedging instruments.

When the Federal Reserve began raising interest rates in March of 2022 from very low levels, management began evaluating a derivative strategy designed to limit our exposure to downward rate scenarios.

In 2022, management executed a total of $2.4 billion in notional value of receive-fixed interest rate swap agreements on floating-rate loans.

These swaps are designated as cash flow hedges and management believes these derivatives provide significant protection against falling interest rates.

These receive-fixed swaps constitute the entirety of our current hedge portfolio.

Management may, from time to time, due to actual or projected changes in market rates or our risk exposure, evaluate other hedging strategies, although we believe our current Net Interest Income and Economic Value of Equity simulation analyses support maintaining the current derivatives strategy.

For additional information related to our interest rate derivative financial instruments, see Note 18, “Derivative Financial Instruments” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.

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This analysis calculates the difference between the present value of expected cash flows from assets and liabilities assuming various changes in current interest rates.

The table below represents an analysis of our interest rate risk as measured by the estimated changes in our EVE, resulting from an instantaneous and sustained parallel shift in the yield curve (+200, +300, +400 basis points and -100, -200 basis points) at December 31, 2022 and (+200, +300, +400 basis points and -100 basis points) December 31, 2021.

The model requires that interest rates remain positive for all points along the yield curve for each rate scenario which may preclude the

modeling of certain falling rate scenarios during periods of lower market interest rates.

The relatively low level of interest rates prevalent at December 31, 2021 precluded the modeling of certain falling rate scenarios, including negative interest rates.

The impact of our interest rate derivatives designated as hedging instruments are included in the model results.

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

Our earnings are not directly or materially impacted by movements in foreign currency rates or commodity prices.

Movements in equity prices may have a modest impact on earnings by affecting the volume of activity or the amount of fees from investment-related business lines and by affecting the amount of unrealized gains and losses from securities held in rabbi trusts which are partially offset by a corresponding but opposite impact to the amount of employee benefit expense associated with the change in value of plan assets.

Movements in equity prices may have a modest impact on earnings by affecting the volume of activity or the amount of fees from investment-related business lines and by affecting the amount of unrealized gains and losses from securities held in rabbi trusts, the latter of which are partially offset by a corresponding but opposite impact to the amount of employee benefit expense associated with the change in value of plan assets.

EVE Interest Rate Sensitivity

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Estimated Increase (Decrease) in EVE from Level

Amount Percent

Amount Percent Policy Limit

(Dollars in thousands)

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200 3,709,501 (409,549) (9.9) % (20) % 19.37 %

200 4,007,265 (376,394) (8.6) % 19.04 %

100 3,890,531 (228,519) (5.5) % N/A 19.73 %

Flat 4,119,050 — — — 20.22 %

(100) 4,339,006 219,956 5.3 % N/A 20.62 %

(200) 4,498,088 379,038 9.2 % (20) % 20.73 %

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Estimated Increase (Decrease) in EVE from Level

Amount ($) Percent (%)

Amount ($) Percent (%) Policy Limit

(Dollars in thousands)

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Flat 4,383,659 — — — 19.66 %

(100) 4,527,743 144,084 3.3 % N/A 19.74 %

(200) 4,620,994 237,335 5.4 % (20) % 19.61 %

(1) Assumes an immediate uniform change in interest rates at all maturities, except in the down 100 basis points scenario, where rates are floored at zero at all maturities.

(1) Assumes an immediate uniform change in interest rates at all maturities.

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

(3) Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

Certain shortcomings are inherent in the interest rate risk measurement methodologies underlying the data presented in the tables in this section.

Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates.

For example, the models assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assume that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities.

Accordingly, although the tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates, and actual results may differ.

(3) Total assets is the net present value of expected future cash flows.

Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies

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Liquidity is primarily needed to meet deposit withdrawals and anticipated loan fundings, as well as current and planned expenditures.

We seek to maintain sources of liquidity that are deep and diversified and that may be used during the normal course of business as well as on a contingency basis.

We seek to maintain sources of liquidity that are reliable and diversified and that may be used during the normal course of business as well as on a contingency basis.

Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from calls, maturities and sales of securities, subject to market conditions.

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Our most liquid assets are unencumbered cash and due from banks and securities classified as available for sale, which could be liquidated, subject to market conditions.

In the future, our liquidity position will be affected by the level of customer deposits and payments, as well as acquisitions, dividends, and share

repurchases in which we may engage.

In the future, our liquidity

position will continue to be affected by the level of customer deposits and payments, as well as any acquisitions, dividends, and share repurchases in which we may engage.

For the next twelve months, we believe that our existing resources, including our capacity to use brokered deposits and wholesale borrowings, will be sufficient to meet the liquidity and capital requirements of our operations.

We may elect to raise additional capital through the sale of additional equity or debt financing to fund business activities such as strategic acquisitions, share repurchases, or other purposes beyond the next twelve months.

At December 31, 2022, we had $169.5 million of cash and cash equivalents, a decrease of $1.1 billion from $1.2 billion at December 31, 2021.

The reduction in cash levels was due primarily to a $1.3 billion increase in total loans, on a gross basis, and a $654.0 million decrease in total deposits.

Advances from the FHLBB were used to support ongoing operations and totaled $704.1 million at December 31, 2022.

We participate in the IntraFi Network, which allows us to provide access to multi-million dollar FDIC deposit insurance protection on customer deposits for consumers, businesses and public entities.

At December 31, 2023, we had $693.1 million of cash and cash equivalents, an increase of $523.6 million from $169.5 million at December 31, 2022.

The increase in cash levels was due primarily to a decrease of $2.3 billion in AFS securities from $6.7 billion at December 31, 2022 to $4.4 billion at December 31, 2023.

In March 2023, we completed a balance sheet repositioning by selling lower yielding AFS securities.

The sale allowed us to redeploy the proceeds in the current higher interest rate environment through increased cash levels and loan fundings, and the reduction of wholesale borrowings.

The increased cash levels following our balance sheet repositioning provided strong balance sheet liquidity to support the needs of our depositors as part of our liquidity contingency planning during the uncertain environment created by the bank failures in the months of March and May 2023.

Advances from the FHLBB were also used to support ongoing operations and totaled $17.7 million and $704.1 million at December 31, 2023 and 2022, respectively.

Such advances were reduced at December 31, 2023 following the sale of our insurance agency business as the net proceeds from the sale at closing of $498.1 million were primarily used to paydown our FHLBB borrowings.

We participate in the IntraFi Network, which allows us to provide access to FDIC deposit insurance protection on customer deposits for consumers, businesses and public entities that exceed same-bank FDIC insurance thresholds.

We can elect to sell or repurchase this funding as reciprocal deposits from other IntraFi Network banks depending on our funding needs.

At December 31, 2022, we had no IntraFi Network one-way sell deposits.

At December 31, 2021, we had $520.5 million of IntraFi Network one-way sell deposits.

At December 31, 2022, we had repurchased $665.0 million of previously sold reciprocal deposits.

At December 31, 2021, no amounts were repurchased of previously sold reciprocal deposits.

The additional capacity of $520.5 million at December 31, 2021 was considered a source of liquidity.

At both December 31, 2023 and 2022, we had no IntraFi Network one-way sell deposits.

At December 31, 2023 and December 31, 2022, we had repurchased $1.3 billion and $0.7 billion, respectively, of previously sold reciprocal deposits.

Although customer deposits remain our preferred source of funds, maintaining additional sources of liquidity is part of our prudent liquidity risk management practices.

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We also have the ability to borrow from the Federal Reserve Bank of Boston.

At December 31, 2022, we had a $538.9 million collateralized line of credit from the Federal Reserve Bank of Boston with no outstanding balance.

In addition, we are able to acquire brokered deposits at our discretion to raise additional funds.

At December 31, 2022, we had $928.6 million in brokered certificates of deposit of which $40.5 million were IntraFi Network deposits and which are excluded from the Intrafi Network reciprocal deposits shown in the table below.

At December 31, 2023, we had a $2.4 billion collateralized line of credit from the Federal Reserve Bank of Boston through the Bank Term Funding Program (“BTFP”).

The BTFP was created by the Federal Reserve in March 2023.

On January 24, 2024, the Federal Reserve Board announced the BTFP will cease making new loans as scheduled on March 11, 2024.

Following expiration of the BTFP, management expects to pledge the existing BTFP collateral to the Federal Reserve Discount Window.

At December 31, 2023, we had the ability to borrow up to $775.9 million from the Federal Reserve Bank of Boston Discount Window.

In addition, we were able to acquire brokered deposits at our discretion to raise additional funds.

At December 31, 2023, we had $50.0 million in brokered certificates of deposit.

At December 31, 2023, cash and cash equivalents were $693.1 million and secured borrowing capacity at the Federal Reserve Bank and Federal Home Loan Bank totaled $6.1 billion, providing total liquidity sources of $6.8 billion.

These liquidity sources provided 123% coverage of all customer uninsured and uncollateralized deposits, which totaled $5.5 billion, or 31% of total deposits, as of December 31, 2023.

For further discussion of uninsured deposits, refer to the “Deposits” discussion within the “Financial Position” within this Item 7.

Sources of Liquidity

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Federal Home Loan Bank (2) 17,738 2,865,582 704,084 1,976,166

Federal Reserve Bank of Boston (3) — 538,894 — 456,148

Federal Reserve Bank of Boston - Bank Term Funding Program (3) — 2,449,438 — —

Federal Reserve Bank of Boston - Discount Window (4) — 775,869 — 538,894

Total $ 1,377,554 $ 6,090,889 $ 2,297,703 $ 2,515,060

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

(2) As of December 31, 2022 and December 31, 2021, loans have been pledged to the FHLBB with a carrying value of $3.9 billion and $2.6 billion, respectively, to secure our total borrowing capacity.

(3) Loans with a carrying value of $1.1 billion and $0.8 billion at December 31, 2022 and 2021, respectively, have been pledged to the Federal Reserve Bank of Boston resulting in this additional unused borrowing capacity.

(2) As of December 31, 2023 and 2022, loans have been pledged to the FHLBB with a carrying value of $4.6 billion and $3.9 billion, respectively, to secure our total borrowing capacity.

(3) Securities with a carrying value of $2.4 billion at December 31, 2023 have been pledged to the Federal Reserve Bank of Boston under the Bank Term Funding Program, resulting in this additional unused borrowing capacity.

(4) Loans with a carrying value of $1.1 billion at both December 31, 2023 and 2022 and securities with a carrying value of $168.8 million at December 31, 2023 were pledged to the Discount Window, resulting in this additional borrowing capacity.

No securities were pledged to the Discount Window at December 31, 2022.

We believe that advanced preparation, early detection, and prompt responses can avoid, minimize, or shorten potential liquidity crises.

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In the ordinary course of our operations, we enter into certain contractual obligations.

Such obligations include operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.

Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.

The amounts below assume the contractual obligations and commitments will run through the end of the applicable term and, as such, do not include early termination fees or penalties where applicable.

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers.

The financial instruments include commitments to originate loans, unused lines of credit, unadvanced portions of construction loans and standby letters of credit, all of which involve elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets.

Our exposure to credit loss is represented by the contractual amount of the instruments.

We use the same credit policies in making commitments as we do for on-balance sheet instruments.

Commitments to originate loans are agreements to lend to a customer provided there is no violation of any condition established in the contract.

Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.

Since a portion of the commitments are expected to expire without being drawn upon, the total commitments do not necessarily represent future cash requirements.

The following table summarizes our short-term (e.g.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis