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Item 8. Financial Statements and Supplementary Data

2025-02-27 compared with 2024-02-26 · 720 added, 642 removed, 2451 unchanged (36% of the section changed)

7 unchanged sentences

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report February 26, 2024 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 27, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

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

Critical Audit Matter

Critical Audit Matters

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

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As described in Note 2 and Note 5 to the consolidated financial statements, the Company uses its allowance methodology to systematically estimate the amount of expected lifetime losses in the loan portfolio.

Expected lifetime losses are estimated on a collective basis for loans sharing similar risk characteristics and are determined using a quantitative model based on management’s determination of a loan’s probability of default, loss given default and exposure at default, which are derived from the Company’s historical loss experience, industry loss experience and other factors, adjusted for economic forecasts.

Expected lifetime losses are estimated on a collective basis for loans sharing similar risk characteristics and are determined using a quantitative model based on management’s determination of a loan’s probability of default, loss given default and exposure at default, which are derived from the Company’s historical losses, industry loss experience and other factors, adjusted for economic forecasts.

The quantitative model is combined with an assessment of certain qualitative factors designed to address forecast risk and model risk inherent in the quantitative model output.

Auditing the Company’s allowance for loan losses was complex due to the quantitative modeling used and involved subjective judgment to evaluate management’s assessment of qualitative factors in determining adjustments to the quantitative model output.

How we addressed the matter in our audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s allowance for loan losses process, which included, among others, controls over the appropriateness of the methodology, the development, operation and monitoring of the quantitative model, management’s review of the qualitative adjustments to the quantitative model output and overall model result.

We tested management’s quantitative model including evaluating the model validation procedures performed over conceptual soundness of model methodology, and with the assistance of EY Specialists, we assessed model governance policies and procedures, as well as the conceptual soundness of the Company’s qualitative factor framework utilized in determining the overall allowance for loan losses.

Additionally, the Company estimates an allowance for loan losses on an individual basis for loans that do not share similar risk characteristics, based on discounted cash flows or fair value of collateral.

Auditing the Company’s allowance for loan losses was complex due to the quantitative modeling used, the subjective judgment involved to evaluate management’s assessment of qualitative factors in determining adjustments to the quantitative model output, and the subjective judgment involved to evaluate management’s individual allowance assessments.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s allowance for loan losses process, which included, among others, controls over the appropriateness of the methodology, the development, operation and monitoring of the quantitative model, management’s review of the qualitative adjustments to the quantitative model output and overall model result, and individual allowance assessments.

We tested management’s quantitative model including, among other procedures, evaluating the model validation procedures performed over conceptual soundness of model methodology, and with the assistance EY Specialists, we tested management’s quantitative model including an evaluation of the model validation procedures performed over conceptual soundness of model methodology, assessed model governance policies and procedures, and assessed the conceptual soundness of the Company’s qualitative factor framework utilized in determining the overall allowance for loan losses.

To test the qualitative risk factors, among other procedures, we assessed management’s methodology and considered whether relevant risks were reflected in the models and whether adjustments to the model output were appropriate.

We tested the completeness, accuracy and relevance of the underlying data used to estimate the qualitative adjustments.

We evaluated whether qualitative adjustments were reasonable based on changes in economic conditions, the loan portfolio, management’s policies and procedures, external legal and regulatory factors, and lending personnel.

We evaluated whether qualitative adjustments were reasonable based on changes in key model data, market conditions, the credit quality and composition of the loan portfolio, and the economic forecast.

We tested whether management’s final qualitative factor weighting was consistent with the external and internal evidence obtained.

Further, we performed an independent test over the existence of potential new or contrary information relating to risks impacting the qualitative adjustments to validate that management’s considerations were appropriate.

We performed an independent test over the existence of potential new or contrary information relating to risks impacting the qualitative adjustments to validate that management’s considerations were appropriate.

Additionally, we performed an analysis examining quarter-over-quarter changes to the Company’s qualitative factor adjustments to test reasonableness and timing of changes to the Company’s qualitative factors.

Goodwill Impairment Assessment of the Company's Reporting Business Reporting Unit

Description of the matter The Company’s Goodwill related to the banking business reporting unit totaled $566.2 million as of December 31, 2023.

As of December 31, 2023, management determined that goodwill of the banking business reporting unit was not impaired.

As described in Note 2 and Note 7 to the consolidated financial statements, the Company evaluates goodwill for impairment at least annually, as of September 30, or more often if warranted, using a quantitative impairment approach.

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

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

Specifically, the Company’s annual assessment performed as of September 30, 2023 included a comparison of the banking business’ book value to the implied fair value using an average of the income and market approaches.

The Company performed a qualitative assessment as of December 31, 2023 to update their goodwill impairment assessment of the banking business.

Auditing the Company’s goodwill impairment assessment of the banking business unit was complex due to the significant estimation involved in determining the fair value of the business unit.

In particular, the fair value was sensitive to certain assumptions used by management to develop the projected financial information used in the income approach, including the terminal forecasted net interest income assumption.

How we addressed the matter in our audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s goodwill impairment evaluation process, which included, among others, controls over the appropriateness of the methodology, management’s evaluation and oversight of external specialists, and management’s identification and review of significant assumptions utilized in the quantitative impairment test.

With the assistance of EY Specialists we tested management’s quantitative impairment assessment including evaluating the impairment methodology, performing a sensitivity analysis to identify significant assumptions, independently testing a selection of significant assumptions used in the model, and independently testing the completeness and accuracy of the Company’s fair value determination utilized in the goodwill impairment test.

Additionally, for both the annual impairment test as of September 30, 2023 and the qualitative impairment assessment performed as of December 31, 2023, we have compared the significant assumptions used by management to recent financial performance, the company's peer group and economic trends.

To test the allowance on loans individually assessed for impairment among other procedures, on a sample basis we assessed credit risk-rating assignments, evaluated the fair value of collateral, and involved EY specialists to evaluate assumptions and fair value of certain collateral.

Fair Value of Acquired Loans and Core Deposit Intangible Recognized as Part of the Cambridge Bancorp, Inc.

Description of the Matter As described in Note 3 to the consolidated financial statements, the Company acquired Cambridge Bancorp, Inc.

(Cambridge) on July 12, 2024.

The transaction has been accounted for as a business combination and accordingly, the assets acquired and liabilities assumed from Cambridge were recorded at fair value as of the merger date.

The fair value of loans acquired from Cambridge was approximately $3.65 billion as of July 12, 2024.

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

Additionally, the Company recognized a core deposit intangible asset of approximately $115 million as of July 12, 2024.

The fair value of the core deposit intangible asset was determined based on projected cash flows, discounted at a rate commensurate with market participants.

Auditing the Company’s estimates of the fair value of acquired loans and core deposit intangible asset was complex due to the judgment required by management in determining the discount rates and prepayment rates used in the discounted cash flow methodology for the fair value of acquired loans and the discount rate, projected deposit attrition rates, deposit account servicing costs, and the cost of alternate funding sources assumptions for the fair value of the core deposit intangible asset.

This required a high degree of auditor judgment and effort in performing procedures and evaluating audit evidence obtained related to the judgments made by management, and required the use of professionals with specialized skill and knowledge.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s process for estimating the acquired loans and core deposit intangible asset fair values, including management’s controls over completeness and accuracy of key inputs and assumptions used in the discounted cash flow methodology, including loan and deposit data.

To test the estimated fair value of acquired loans, our audit procedures included, among others, involving EY specialists to assist us in testing management’s methodology and significant assumptions used in measuring the fair value of the acquired loan portfolio.

We involved our specialists to test, on a sample basis, the determination and application of discount rates and prepayment rates by comparing management’s selected assumptions to independently developed ranges based on third party market data.

We tested, on a sample basis, completeness and accuracy of the underlying loan data provided by management that was used in the fair value calculation.

On a sample basis, we performed independent comparative calculations of the fair value adjustment to the acquired loans.

To test the estimated fair value of the core deposit intangible asset, our audit procedures included, among others, involving EY specialists to assist us in testing management’s methodology and significant assumptions used in measuring the fair value of the core deposit intangible.

We involved our specialists to test the determination and application of discount rate, projected deposit attrition rates, deposit account servicing costs, and cost of alternate funding sources assumptions by comparing management’s selected assumptions to independently developed ranges based on third party market data.

Additionally, we tested completeness and accuracy of the underlying deposit data provided by management that was used in the fair value calculation.

Lastly, we performed an independent comparative calculation of the core deposit intangible asset fair value.

/s/ Ernst & Young LLP

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Loans held for sale 372 1,124

Commercial and industrial 3,034,068 3,150,946

Commercial real estate 5,457,349 5,155,323

Commercial construction 386,999 336,276

Business banking 1,085,763 1,090,492

Residential real estate 2,565,485 2,460,849

Consumer home equity 1,208,231 1,187,547

Other consumer 235,533 194,098

Total loans 18,079,084 13,973,428

Allowance for loan losses ( 228,952 ) ( 148,993 )

Unamortized premiums, net of unearned discounts and deferred fees, net of costs ( 25,068 ) ( 13,003 )

Unearned discounts and deferred fees, net ( 300,730 ) ( 25,068 )

Net loans 17,549,402 13,799,367

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Other assets 667,473 536,267

Assets of discontinued operations — 128,219

Total assets $ 25,557,880 $ 21,133,278

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Borrowed funds:

Short-term Federal Home Loan Bank advances 95 691,297

Escrow deposits of borrowers 27,721 21,978

Interest rate swap collateral funds 48,590 8,500

Long-term Federal Home Loan Bank advances 17,643 12,787

Federal Home Loan Bank advances 17,589 17,738

Total borrowed funds 93,900 48,216

Other liabilities 560,394 513,990

Liabilities of discontinued operations — 34,930

Total liabilities 21,945,913 18,158,423

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Interest and fees on loans $ 808,041 $ 652,095 $ 476,041

Taxable interest and dividends on available for sale securities 101,233 118,690 58,312

Non-taxable interest and dividends on available for sale securities 5,736 7,179 7,376

Taxable interest and dividends on securities 90,582 101,233 118,690

Non-taxable interest and dividends on securities 5,766 5,736 7,179

Interest on federal funds sold and other short-term investments 42,377 37,395 3,271

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Net interest income 607,597 550,409 568,054

Provision for (release of) allowance for loan losses 20,052 17,925 ( 9,686 )

Net interest income after provision for (release of) allowance for loan losses 530,357 550,129 439,513

Noninterest (loss) income:

Service charges on deposit accounts 28,631 30,392 24,271

Provision for allowance for loan losses 67,380 20,052 17,925

Net interest income after provision for allowance for loan losses 540,217 530,357 550,129

Noninterest income (loss):

Trust and investment advisory fees 46,126 24,264 23,593

Service charges on deposit accounts 32,004 28,631 30,392

Debit card processing fees 14,177 13,469 12,644

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(Losses) gains on sales of mortgage loans held for sale, net ( 920 ) ( 507 ) 248

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

Losses on sales of securities available for sale, net ( 16,798 ) ( 333,170 ) ( 3,157 )

Other 36,834 21,457 17,783

Total noninterest (loss) income ( 237,753 ) 76,750 97,437

Total noninterest income (loss) 123,917 ( 237,753 ) 76,750

Noninterest expense:

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Marketing 7,824 7,592 9,294

Loan expenses 4,466 6,384 9,114

FDIC insurance 13,866 21,874 6,250

Amortization of core deposit intangible asset 1,804 1,198 219

Amortization of other intangible assets 14,569 1,804 1,198

Other 27,793 25,610 32,622

Total noninterest expense 508,368 418,602 388,649

(Loss) income from continuing operations before income tax expense ( 125,998 ) 238,230 175,995

Income tax (benefit) expense ( 63,309 ) 51,719 30,464

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

Income (loss) from continuing operations before income tax expense 155,766 ( 125,998 ) 238,230

Income tax expense (benefit) 36,205 ( 63,309 ) 51,719

Net income (loss) from continuing operations $ 119,561 $ ( 62,689 ) $ 186,511

Net income from discontinued operations — 294,866 13,248

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Basic earnings per share

Basic (loss) earnings per share from continuing operations $ ( 0.39 ) $ 1.13 $ 0.85

Basic earnings (loss) per share from continuing operations $ 0.66 $ ( 0.39 ) $ 1.13

Basic earnings per share from discontinued operations — 1.82 0.08

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Diluted earnings per share:

Diluted (loss) earnings per share from continuing operations $ ( 0.39 ) $ 1.13 $ 0.85

Diluted earnings (loss) per share from continuing operations $ 0.66 $ ( 0.39 ) $ 1.13

Diluted earnings per share from discontinued operations — 1.82 0.08

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

Cumulative effect accounting adjustment (1)

— — — ( 20,098 ) — ( 20,098 )

Dividends to common shareholders (2)

— — — ( 66,539 ) — — ( 66,539 )

Repurchased common stock ( 10,112,272 ) ( 101 ) ( 201,517 ) — — — ( 201,618 )

Issuance of restricted stock awards 31,559 1 ( 1 ) — — — —

Unvested restricted stock awards forfeited and subsequently cancelled ( 52,546 ) ( 1 ) 1 — — —

Share-based compensation — — 10,507 — — — 10,507

Net income — — — 199,759 — — 199,759

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Dividends to common shareholders (2)

Repurchased common stock ( 10,112,272 ) ( 101 ) ( 201,517 ) — — — ( 201,618 )

— — — ( 67,020 ) — — ( 67,020 )

Issuance of restricted stock awards 47,820 1 ( 1 ) — — — —

Unvested restricted stock awards forfeited and subsequently cancelled ( 52,546 ) ( 1 ) 1 —

Issuance of common stock under share-based compensation arrangements (4)

207,100 4 ( 1,400 ) ( 1,396 )

Share-based compensation — — 16,513 — — — 16,513

Net income — — — 232,177 — — 232,177

Other comprehensive loss, net of tax — — — — ( 866,496 ) — ( 866,496 )

Other comprehensive income, net of tax — — — — 314,840 — 314,840

ESOP shares committed to be released — — 2,188 — — 4,941 7,129

Balance at December 31, 2023 176,426,993 1,767 1,666,441 2,047,754 ( 608,352 ) ( 132,755 ) 2,974,855

Cumulative effect accounting adjustment (2)

— — — 822 — — 822

Dividends to common shareholders (2)

— — — ( 82,812 ) — — ( 82,812 )

Repurchased common stock ( 1,744,824 ) ( 17 ) ( 27,666 ) — — — ( 27,683 )

Issuance of restricted stock awards 56,352 1 ( 1 ) — — — —

Restricted stock awards cancelled (5)

( 18,513 ) ( 3 ) ( 235 ) — — — ( 238 )

Issuance of common stock under share-based compensation arrangements (4)

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ESOP shares committed to be released — — 2,443 — — 4,913 7,356

Merger consideration:

Common stock issued for acquisition 38,769,562 388 576,116 — — — 576,504

Stock issuance costs — — ( 941 ) — — — ( 941 )

Cambridge Bancorp restricted share awards converted to restricted share awards of the Company upon merger close (6)

118,693 1 1,052 — — — 1,053

Pre-merger service credit for restricted share units (7)

— — 3,030 — — — 3,030

Balance at December 31, 2024 213,909,472 $ 2,141 $ 2,237,494 $ 2,084,503 $ ( 584,329 ) $ ( 127,842 ) $ 3,611,967

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Refer to Note 5, “Loans and Allowance for Credit Losses” for additional discussion.

(2) The Company declared cumulative cash dividends of $ 0.45 , $ 0.41 , and $ 0.40 per share of common stock during the years ended December 31, 2024, 2023, and 2022, respectively.

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

Refer to Note 5, “Loans and Allowance for Credit Losses” for additional discussion.

(3) Represents shares issued, net of employee tax withheld, during the year ended December 31, 2023 upon the vesting of restricted stock units.

(4) Represents shares issued, net of employee tax withheld, upon the vesting of restricted stock units.

Refer to Note 16, “Share-Based Compensation” for additional discussion.

(5) Includes 15,487 restricted stock award shares cancelled upon vesting for employee payroll tax withholding and 3,026 restricted stock award shares cancelled upon forfeiture.

Shares withheld relate to awards issued by Cambridge Bancorp to its employees which were converted to awards of the Company upon completion of the Company' merger with Cambridge Bancorp effective July 12, 2024 ( “ the merger ” ).

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

(6) The Company issued 118,693 restricted stock award shares with a fair value of $ 1.1 million as part of the purchase consideration for the merger.

Refer to Note 3, “Mergers and Acquisitions” for additional discussion.

(7) Represents credit for service for former employees of Cambridge Bancorp retained following the merger related to restricted share unit awards converted to Company restricted share units at the merger date of July 12, 2024.

Refer to Note 3, “Mergers and Acquisitions” for additional discussion.

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

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Operating activities

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

Net income (loss) from continuing operations $ 119,561 $ ( 62,689 ) $ 186,511

Net income from discontinued operations — 294,866 13,248

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

Provision for (release of) allowance for loan losses 20,052 17,925 ( 9,686 )

Provision for allowance for loan losses 67,380 20,052 17,925

Depreciation and amortization 27,030 12,295 11,985

Amortization (accretion) of of deferred loan fees and premiums, net 6,445 ( 1,441 ) ( 27,991 )

Deferred income tax (benefit) expense ( 18,267 ) 5,262 ( 5,663 )

Amortization of investment security premiums and discounts, net 6,281 18,274 16,713

(Accretion) amortization of deferred loan fees and premiums, net ( 13,557 ) 6,445 ( 1,441 )

Deferred income tax expense (benefit) 36,059 ( 18,267 ) 5,262

Amortization of investment security premiums and discounts 4,539 6,281 18,274

Right-of-use asset amortization 11,277 11,348 11,432

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Increase in cash surrender value of bank-owned life insurance ( 4,326 ) ( 3,912 ) ( 3,699 )

Loss (gain) on life insurance benefits — 663 ( 1,813 )

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

(Gain) loss on sales of bank premises and equipment, net — ( 1,412 ) 4,715

Loss on lease termination/modification, net 395 593 2,582

Loss on life insurance benefits — — 663

Loss on sales of securities available for sale, net 16,798 333,170 3,157

Net loss (gain) on bank premises and equipment 2,871 — ( 1,412 )

Net loss on lease right-of-use assets 4,685 395 593

Accretion of gains from terminated interest rate swaps — ( 46 ) ( 10,193 )

Employee Stock Ownership Plan expense 7,356 7,129 9,923

Loss on sales of commercial loans 2,738 — —

Realized loss on sales of commercial loans (1)

Proceeds from sale of commercial loan transferred to held for sale — 22,126 —

Gain on sale of other equity investment ( 9,291 ) — —

Other ( 32 ) 25 17

Loans held for sale 784 3,403 ( 3,354 )

Prepaid pension expense 4,260 4,338 1,130

Prepaid pension (benefit) expense ( 10 ) 4,260 4,338

Other assets ( 61,851 ) ( 14,394 ) 5,431

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Distributions from other equity investments 387 362 1,170

Proceeds from sale of other equity investment 9,958 — —

Proceeds from life insurance policies — — 20,446

Net (increase) decrease in outstanding loans, excluding loan purchases and sales ( 586,584 ) ( 926,255 ) 380,807

Net cash acquired in business combination 24,879 — —

Net increase in outstanding loans, excluding loan purchases and sales ( 209,088 ) ( 586,584 ) ( 926,255 )

Proceeds from sales of commercial loans held for investment — 189,296 —

Purchases of loans — ( 31,980 ) ( 380,234 )

Acquisitions, net of cash and cash equivalents acquired — — ( 9,085 )

Purchased banking premises and equipment ( 13,539 ) ( 8,140 ) ( 8,627 )

Proceeds from sale of bank premises and equipment 15,116 — 17,313

Proceeds from sale of other real estate owned — — 125

Net cash provided by (used in) investing activities - continuing operations 1,059,397 1,911,760 ( 1,063,255 )

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Financing activities

Net (decrease) increase in demand, savings, interest checking, and money market investment deposit accounts ( 2,462,797 ) ( 1,751,953 ) 1,155,868

Net increase (decrease) in time deposits 1,084,655 1,098,001 ( 58,144 )

Net decrease in demand, savings, interest checking, and money market investment deposit accounts ( 386,830 ) ( 2,462,797 ) ( 1,751,953 )

Net increase in time deposits 208,515 1,084,655 1,098,001

Net (decrease) increase in borrowed funds (2)

Repayment of acquired subordinated debentures (1)

( 739,949 ) ( 692,612 ) 706,550

Payments for repurchases of common stock ( 27,683 ) — ( 201,618 )

Stock issuance costs ( 941 ) — —

Dividends declared and paid to common shareholders ( 82,541 ) ( 66,671 ) ( 65,886 )

Net cash (used in) provided by financing activities - continuing operations ( 2,137,425 ) ( 214,906 ) 989,239

Net cash used in financing activities - continuing operations ( 1,029,429 ) ( 2,137,425 ) ( 214,906 )

Net cash used in financing activities - discontinued operations — ( 961 ) ( 668 )

Net cash (used in) provided by financing activities ( 2,138,386 ) ( 215,574 ) 988,976

Net cash used in financing activities ( 1,029,429 ) ( 2,138,386 ) ( 215,574 )

Net increase (decrease) in cash, cash equivalents, and restricted cash 313,804 523,571 ( 1,062,287 )

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Net increase in capital commitments relating to low income housing tax credit projects $ 8,963 $ 102,001 $ 55,233

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

Net decrease in operating lease right of use assets and operating lease liabilities relating to lease remeasurements 3,881 14,836 —

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

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

The payable was reclassified to other assets upon acquisition and is reflected as such balance in the summary of net assets acquired.

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

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

Net increase (decrease) in operating lease right of use assets and operating lease liabilities relating to lease remeasurements 5,492 ( 3,881 ) ( 14,836 )

(1) Excludes the mark-to-market adjustment related to one commercial and industrial loan transferred to held for sale during the year ended December 31, 2023 which is included in the change in loans held for sale.

(2) Includes the repayment of FHLB advances assumed in connection with the Company’s merger with Cambridge Bancorp.

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

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On October 31, 2023, the Company completed its sale of its insurance agency business to Gallagher.

Substantially all of the historical results of our previously reported insurance agency business segment have been reflected as discontinued operations in our Consolidated Financial Statements for all periods presented herein, including, as of December 31, 2022 and 2021, the assets and liabilities associated with the discontinued operations being classified as assets and liabilities of discontinued operations in our Consolided Balance Sheets.

Refer to Note 23, “Discontinued Operations” for further discussion regarding discontinued operations.

1 unchanged sentence

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

The Company and the activities of the Bank and its subsidiaries are also subject to various Massachusetts, New Hampshire and Rhode Island business and banking regulations and, with regard to Eastern Insurance Group and through October 31, 2023, applicable insurance regulations.

The Company and the activities of the Bank and its subsidiaries are also subject to various Massachusetts, New Hampshire and Rhode Island business, banking and trust-related regulations.

Basis of Presentation

2 unchanged sentences

All intercompany accounts and transactions have been eliminated in consolidation.

Certain previously reported amounts have been reclassified to conform to the current year’s presentation which includes:

• certain loan servicing-related costs have been reclassified from professional services to loan expense;

• operational losses have been reclassified to other non-interest expense.

As a result of the decision to sell substantially all of the assets and transfer certain liabilities of Eastern Insurance Group, the Company reclassified certain amounts previously reported including:

• certain assets and liabilities previously reported in the insurance agency business were reclassified to assets and liabilities of discontinued operations, respectively, on the Consolidated Balance Sheets;

• certain components of noninterest income and noninterest expense, including the associated income tax effects, previously reported in the insurance agency business were reclassified to net income from discontinued operations on the Consolidated Statements of Income;

• certain operating, investing, and financing cash flows previously reported on their applicable lines within the Consolidated Statements of Cash Flows were reclassified to cash flows used in/provided by operating activities of, investment activities of and financing activities of discontinued operations, respectively.

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

Summary of Significant Accounting Policies

2 unchanged sentences

Actual results could differ from those estimates based on changing conditions, including economic conditions and future events.

Material estimates that are particularly susceptible to change relate to the determination of the allowance for loan losses, valuation and fair value measurements, allowance for credit losses on investment securities, the liabilities for benefit obligations (particularly pensions), the provision for income taxes and impairment of goodwill and the core deposit intangible.

Cash and Cash Equivalents

3 unchanged sentences

Equity securities are measured at fair value with changes in the fair value recognized through net income.

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

Debt securities that are bought and held principally for the purpose of resale in the near term are classified as trading securities

and recorded at fair value, with subsequent changes in fair value included in net income.

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

19 unchanged sentences

Gains and losses on sales of securities are recognized at the time of sale on the specific-identification basis.

Prior to the adoption of ASU 2016-13, management evaluated impaired securities for other-than-temporary impairment (“OTTI”) at least on a quarterly basis, and more frequently when economic or market concerns warranted such evaluation.

Consideration was given to the length of time and the extent to which the fair value was less than cost, current

market conditions, the financial condition and near-term prospects of the issuer, performance of collateral underlying the securities, the ratings of the individual securities, the interest rate environment, the Company’s intent to sell the security or whether it was more likely than not that the Company would be required to sell the debt security before its anticipated recovery, as well as other qualitative factors.

If a decline in fair value below the amortized cost basis of an investment was judged to be other than temporary, the investment was written down to fair value.

The portion of the impairment related to credit losses was included in net income, and the portion of the impairment related to other factors was included in other comprehensive income.

Refer to Note 4, “Securities” for additional information regarding the measurement of impairment losses on AFS securities.

15 unchanged sentences

Exceptions may be made if management believes that collateral held by the Company is clearly sufficient and in full satisfaction of both principal and interest.

When a loan is placed on non-accrual, all interest previously accrued but not collected is reversed against current period income and amortization of deferred loan fees and costs is discontinued.

When a loan is placed on non-accrual, all interest previously accrued but not collected is reversed against current period income and amortization of deferred loan fees and costs and unamortized premiums and unearned discounts is discontinued.

Interest received on non-accrual loans is either applied against principal or reported as income according to management’s judgment as to the collectability of principal.

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Loans Individually Assessed for Impairment

ASU 2016-13 indicates that a loan should be measured for impairment individually if that loan shares no similar risk characteristics with other loans.

For the Company, loans which have been identified as those to be individually assessed for

impairment under CECL include loans that do not share similar risk characteristics with other loans in the corresponding reserve segment.

ASC 326 indicates that a loan should be measured for impairment individually if that loan shares no similar risk characteristics with other loans.

For the Company, loans which have been identified as those to be individually assessed for impairment under CECL include loans that do not share similar risk characteristics with other loans in the corresponding reserve segment.

Characteristics of loans meeting this definition may include, but are not limited to:

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

• Loans to borrowers actively involved in bankruptcy proceeds;

• Loans to borrowers actively involved in bankruptcy proceedings;

• Loans that have been partially charged-off.

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Management considers a loan to be collateral-dependent when foreclosure of the underlying collateral is probable.

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

In addition, in accordance with ASC 326, the Company elected to apply the collateral-dependent practical expedient whereby the Company measures expected credit losses using the fair value of the collateral, less any estimated costs to sell, when foreclosure is not probable but repayment of the loan is expected to be provided substantially through the operation or sale of the collateral, and the borrower is experiencing financial difficulty.

Modifications of Loans to Borrowers Experiencing Financial Difficulty

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Accordingly, upon adoption, commercial loan TDRs existing at that time which were measured using a discounted cash flow methodology and all residential real estate and consumer home equity loan TDRs were transitioned to the applicable segment of loans collectively evaluated for impairment based upon their risk characteristics.

Commercial loan TDRs determined to be collateral dependent continue to be assessed for impairment on an individual basis.

Those commercial loans that were determined to be TDRs under previously effective accounting guidance, and which were determined to be collateral dependent, continue to be assessed for impairment on an individual basis.

Prior to the Company’s adoption of ASU 2022-02, in cases where a borrower was experiencing financial difficulties and the Company made certain concessionary modifications to contractual terms, the loan was classified as a TDR.

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

Refer to Note 4, “Loans and Allowance for Credit Losses” for additional information regarding the Company’s measurement of the allowance for loan losses as of December 31, 2023 and information regarding the Company’s TDR loans as of December 31, 2022 and for the year then ended.

Refer to Note 5, “Loans and Allowance for Credit Losses” for additional information regarding the Company’s measurement of the allowance for loan losses as of December 31, 2024 and 2023 and information regarding the Company’s TDR loans for the year ended December 31, 2022.

Purchased Credit-Deteriorated Loans

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A purchased loan that does not qualify as a PCD asset is accounted for similar to the Company’s method of accounting for originated assets, whereby an allowance for loan losses is recognized with a corresponding increase to the income statement provision for loan losses.

Evidence that purchased loans, measured at amortized cost, have more-than-insignificant deterioration in credit quality since origination and, therefore meet the PCD definition, may include past-due status, non-accrual status, risk rating and other standard indicators (i.e., TDRs, charge-offs, bankruptcy).

Allowance for Credit Losses

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

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

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

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

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

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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 both the Company’s and industry historical loss experience and other factors.

For the 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 both the Company’s and industry historical loss experience and other factors.

For residential real estate, consumer home equity and other consumer portfolios, the Company’s quantitative model uses historical loss experience.

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

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

Refer to Note 5, “Loans and Allowance for Credit Losses” for additional information regarding the Company’s measurement of credit losses on loans receivable and off-balance sheet commitments to lend as of December 31, 2024 and 2023 and comparative loan modification information for which ASC 310, “Receivables” was applied (i.e., prior to the Company’s adoption of ASU 2022-02) for the year ended December 31, 2022.

Mortgage Banking Activities

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

The Company relies primarily on third-party valuation information from certified appraisers and values are generally based upon recent appraisals of the underlying collateral, brokers’ opinions based upon recent sales of comparable properties, estimated equipment auction or liquidation values, income capitalization, or a combination of income capitalization and comparable sales.

equipment auction or liquidation values, income capitalization, or a combination of income capitalization and comparable sales.

As of December 31, 2024 and 2023, the Company held no OREO.

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Banking premises and equipment held for sale are carried at the lower of cost or estimated fair value, less estimated costs to sell.

Goodwill and Core Deposit Intangible

Goodwill and Other Intangible Assets

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

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Other intangible assets represent acquired assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights, or because the asset is capable of being sold or exchanged either on its own, or in combination with a related contract, asset, or liability.

The Company evaluates goodwill for impairment at least annually, as of September 30, or more often if warranted, using a quantitative impairment approach.

The Company evaluates goodwill for impairment at least annually, as of November 30, or more often if warranted, using a quantitative impairment approach.

Previously, the Company’s annual evaluation of its goodwill for impairment was performed on September 30 of each year.

Refer to Note 8, “Goodwill and Other Intangible Assets” for additional discussion of the change in impairment assessment date.

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

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Management has identified one reporting unit for purposes of testing goodwill for impairment which is referred to as “the banking business.”

The Company’s other intangible asset, which is a core deposit intangible, a definite-lived intangible asset, is stated at cost less accumulated amortization.

The Company evaluates its core deposit intangible asset for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be fully recovered.

Other intangible assets, all of which are definite-lived, are stated at cost less accumulated amortization.

The Company evaluates other intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be fully recovered.

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

Any impairment losses are charged to net income.

The Company amortizes its core deposit intangible over its estimated useful life.

The original estimated useful life of the core deposit identifiable intangible asset was ten years .

The Company reassesses the useful life of its core deposit intangible asset at least annually, or more frequently based on specific events or changes in circumstances.

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

The estimated useful lives of core deposit identifiable intangible assets fall within a range of five to seven years and the estimated useful lives of the customer list and trade name intangible assets from the Cambridge Bancorp (“Cambridge”) merger are eleven and five years , respectively.

The Company reassesses the useful lives of other intangible assets at least annually, or more frequently based on specific events or changes in circumstances.

Retirement Plans

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Under the cash balance plan design, hypothetical account balances are established for each participant and pension benefits are generally stated as the lump sum amount in that hypothetical account.

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

Contribution credits equal to a percentage of

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

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

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The lump sum is equal to the sum of the actuarial equivalent of their frozen benefit under the final average earnings plan design, plus their cash balance account.

Under the Company’s non-Qualified Benefit Equalization Plan (“BEP”), which is described further below, benefits are generally only payable as a lump sum, which is equal to the sum of the actuarial equivalent of their frozen benefit

under the final average earnings plan design, plus their cash balance account.

The Company’s annual contribution to the plan is based upon standards established by the Pension Protection Act.

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Effective December 31, 2020, the Company closed the ODRCP to new participants and froze benefit accruals for active participants.

Plan assets are invested in various investment funds and held at fair value which generally represents observable market prices.

In connection with the Company’s merger with Cambridge, the Company acquired Cambridge’s post-retirement health care plan.

Benefits for the postretirement health care plan are based on years of service.

Expenses for the postretirement health care plan are recognized over the employee's service life utilizing the projected unit credit actuarial cost method.

Effective November 7, 2019, the postretirement health care plan was frozen for employees hired after that date.

The frozen health care plan is not accruing and is only in payout status.

Defined Benefit Plan assets are invested in various investment funds and held at fair value which generally represents observable market prices.

Pension liability is determined based on the actuarial cost method factoring in assumptions such as salary increases, expected retirement date, mortality rate, and employee turnover.

The actuarial cost method used to compute the pension liabilities and related expense is the projected unit credit method.

The actuarial cost method used to compute the pension liabilities and related expense is the traditional unit credit method.

The projected benefit obligation is principally determined based on the present value of the projected benefit distributions at an assumed discount rate (which is the rate at which the projected benefit obligation could be effectively settled as of the measurement date).

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The amortization of actuarial gains and losses for the DB SERP and ODRCP is determined using the 10% corridor minimum amortization approach and is taken over the average remaining future service of the plan participants for the ODRCP, and over the average remaining future life expectancy of plan participants for the DB SERP.

The amortization of actuarial gains and losses for the Defined Benefit Plan and BEP is determined without using the 10% corridor minimum amortization approach and is taken over the average remaining future service of the plan participants.

The amortization of actuarial gains and losses for the Defined Benefit Plan is determined without using the 10% corridor minimum amortization approach and is taken over the average remaining future service of the plan participants.

The overfunded or underfunded status of the plans is recorded as an asset or liability on the Consolidated Balance Sheets, with changes in that status recognized through other comprehensive income, net of related taxes.

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

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

All employees who meet specified age and length of service requirements are

eligible to participate in the 401(k) plan.

The amount contributed by the Company is included in salaries and employee benefits expense.

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

The total amount due to participants under this plan is included in other liabilities on the Company’s Consolidated Balance Sheets.

Deferred Compensation

The Company sponsors three plans which allow for elective compensation deferrals by directors, former trustees, and certain senior-level employees.

The Company sponsors four plans which allow for elective compensation deferrals by directors, former trustees, and certain senior-level employees.

Each plan allows its participants to designate deemed investments for deferred amounts from certain options which include diversified choices, such as exchange traded funds and mutual funds.

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The Company purchases and sells investments which track the deemed investment choices, so that it has available funds to meet its payment liabilities.

amounts, adjusted for deemed investment performance, are paid at the time of a participant designated date or event, such as separation from service, death, or disability.

Deferred amounts, adjusted for deemed investment performance, are paid at the time of a participant designated date or event, such as separation from service, death, or disability.

The total amounts due to participants under these plans are included in other liabilities on the Company’s Consolidated Balance Sheets.

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

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

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

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

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

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government agency obligations, equity securities, mutual funds and other exchange-traded funds, and are recorded at fair value in the Company’s Consolidated Balance Sheets.

Changes in fair value are

recorded in noninterest income in the Consolidated Statements of Income.

Changes in fair value are recorded in noninterest income in the Consolidated Statements of Income.

These rabbi trust assets are included within other assets in the Company’s Consolidated Balance Sheets.

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Other tax credit investment projects are accounted for using either the cost method or equity method.

Advertising Costs

All advertising costs are expensed in the period in which they are incurred.

Advertising costs were not significant for any period presented.

Trust Operations

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Derivative instruments are carried at fair value in the Company’s Consolidated Financial Statements.

The accounting for changes in the fair value of a derivative instrument is determined by whether it has been designated and qualifies

as part of a hedging relationship, and further, by the type of hedging relationship.

The accounting for changes in the fair value of a derivative instrument is determined by whether it has been designated and qualifies as part of a hedging relationship, and further, by the type of hedging relationship.

At the inception of a hedge, the Company documents certain items, including, but not limited to, the following:

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The Company makes the decision on whether to renew an option to extend a lease by considering various factors.

The Company will recognize an adjustment to its ROU asset and lease liability when lease agreements are

amended and executed.

The Company will recognize an adjustment to its ROU asset and lease liability when lease agreements are amended and executed.

The discount rate used in determining the present value of lease payments is based on the Company’s incremental borrowing rate for borrowings with terms similar to each lease at commencement date.

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

The Company’s most recent authorized program expired during the third quarter of 2023.

Earnings Per Share

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An operating segment is defined as a component of a business for which separate financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and evaluate performance.

The Company has determined that its CODM is its Chair and Chief Executive Officer.

The Company has determined that its CODM is its Executive Chair.

The Company has one reportable segment:

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Relevant standards that were recently issued but not yet adopted as of December 31, 2024:

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.

The Company had previously made an accounting

policy election to account for its investments in low-income-housing tax credit investments using the proportional amortization method.

This election was made upon the Company’s adoption of ASU 2014-01, Investments–Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Qualified Affordable Housing Projects , which introduced the option to apply proportional amortization to low-income-housing tax credit investments .

For public business entities, the amendments in ASU 2023-02 are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted for all entities in an interim period.

The Company adopted this standard on January 1, 2024 using the modified retrospective method.

The adoption of this standard did not have a material impact on the Company’s 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.

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 the Company:

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The Company expects the adoption of this standard will not have a material impact on its 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 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 U.S.

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.

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

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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Adoption should be done on a prospective basis and retrospective application is permitted.

In November 2024, the FASB issued ASU 2024-03, Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40).

The amendments in this update require disclosure, in the notes to the financial statements, of specified information about certain costs and expenses.

The amendments require that at each interim and annual reporting period an entity:

Disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization recognized as part of oil and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption.

A relevant expense caption is an expense caption presented on the face of the income statement within continuing operations that contains any of the expense categories listed in (a)–(e).

Include certain amounts that are already required to be disclosed under current GAAP in the same disclosure as the other disaggregation requirements.

Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively.

Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses.

For public business entities, the amendments in ASU 2024-03 are effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027.

Early adoption is permitted.

The amendments in this update are to be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this update or (2) retrospectively to any or all prior periods presented in the financial statements.

Relevant standards that were adopted during the year ended December 31, 2024:

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

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

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

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

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

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

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

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

The adoption of this standard on January 1, 2023 did not have a material impact on the Company’s Consolidated Financial Statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments–Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”).

The amendments in this update eliminate the accounting guidance on troubled debt restructurings (“TDRs”) for creditors in ASC 310-40 and amends the guidance on vintage disclosures, referenced in ASC 326-20-50, to require disclosure of current-period gross write-offs by year of origination.

This update supersedes the existing accounting guidance for TDRs in ASC 310-40 in its entirety and requires entities to evaluate all receivable modifications under existing accounting guidance in ASC 310-20 to determine whether a modification made to a borrower results in a new loan or a continuation of an existing loan.

In addition to the elimination of TDR accounting guidance, entities that adopt this update will no longer consider renewals, modifications and extensions that result from reasonably expected TDRs in their calculation of the allowance for credit losses.

Further, if an entity employs a discounted cash flow method to calculate the allowance for credit losses, it will be required to use a post-modification-derived effective interest rate as part of its calculation.

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.

The amendments on TDR disclosures and vintage disclosures should be adopted prospectively.

On January 1, 2023, the Company adopted this standard by using the modified retrospective transition method, except with regard to amendments on TDR and vintage disclosures which were adopted prospectively.

Accordingly, the Company recorded a cumulative-effect adjustment to retained earnings as of January 1, 2023.