Eastern Bankshares, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Eastern Bankshares, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Eastern Bankshares, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income (loss), changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. 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, 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 These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. 92 Allowance for loan losses Description of the Matter The Company’s loan portfolio totaled $18.1 billion as of December 31, 2024. As of December 31, 2024, management established an allowance for loan losses of $229 million. 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 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. 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 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. 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. 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. 93 Fair Value of Acquired Loans and Core Deposit Intangible Recognized as Part of the Cambridge Bancorp, Inc. Merger 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 We have served as the Company’s auditor since 2002. Boston, Massachusetts February 27, 2025 94 EASTERN BANKSHARES, INC. CONSOLIDATED BALANCE SHEETS As of December 31, (In thousands, except per share data) 2024 2023 ASSETS Cash and due from banks $ 92,590 $ 87,233 Short-term investments 914,290 605,843 Cash and cash equivalents 1,006,880 693,076 Securities: Available for sale (amortized cost $ 4,778,644 and $ 5,161,904 , respectively) 4,021,598 4,407,521 Held to maturity (fair value $ 371,724 and $ 404,822 , respectively) 420,715 449,721 Total securities 4,442,313 4,857,242 Loans held for sale 372 1,124 Total loans 18,079,084 13,973,428 Allowance for loan losses ( 228,952 ) ( 148,993 ) Unearned discounts and deferred fees, net ( 300,730 ) ( 25,068 ) Net loans 17,549,402 13,799,367 Federal Home Loan Bank stock, at cost 5,865 5,904 Premises and equipment 66,641 60,133 Bank-owned life insurance 204,704 164,702 Goodwill and other intangibles, net 1,050,158 566,205 Deferred income taxes, net 332,128 266,185 Prepaid expenses 231,944 183,073 Other assets 667,473 536,267 Total assets $ 25,557,880 $ 21,133,278 LIABILITIES AND EQUITY Deposits: Demand $ 5,992,082 $ 5,162,218 Interest checking accounts 4,606,250 3,737,361 Savings accounts 1,620,602 1,323,126 Money market investment 5,736,362 4,664,475 Certificates of deposit 3,336,323 2,709,037 Total deposits 21,291,619 17,596,217 Borrowed funds: Escrow deposits of borrowers 27,721 21,978 Interest rate swap collateral funds 48,590 8,500 Federal Home Loan Bank advances 17,589 17,738 Total borrowed funds 93,900 48,216 Other liabilities 560,394 513,990 Total liabilities 21,945,913 18,158,423 Commitments and contingencies (see Note 17) — — Shareholders’ equity Common shares, $ 0.01 par value, 1,000,000,000 shares authorized; 213,909,472 and 176,426,993 shares issued and outstanding at December 31, 2024 and 2023, respectively 2,141 1,767 Additional paid in capital 2,237,494 1,666,441 Unallocated common shares held by the Employee Stock Ownership Plan ( 127,842 ) ( 132,755 ) Retained earnings 2,084,503 2,047,754 Accumulated other comprehensive income, net of tax ( 584,329 ) ( 608,352 ) Total shareholders’ equity 3,611,967 2,974,855 Total liabilities and shareholders’ equity $ 25,557,880 $ 21,133,278 The accompanying notes are an integral part of these Consolidated Financial Statements. 95 EASTERN BANKSHARES, INC. CONSOLIDATED STATEMENTS OF INCOME For the Year Ended December 31, 2024 2023 2022 (In thousands, except per share data) Interest and dividend income: Interest and fees on loans $ 808,041 $ 652,095 $ 476,041 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 Total interest and dividend income 946,766 796,459 605,181 Interest expense: Interest on deposits 337,367 226,075 28,621 Interest on borrowings 1,802 19,975 8,506 Total interest expense 339,169 246,050 37,127 Net interest income 607,597 550,409 568,054 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 Interest rate swap income 2,819 1,536 6,009 Income (losses) from investments held in rabbi trusts 9,675 9,305 ( 10,762 ) Losses on sale of commercial and industrial loans — ( 2,738 ) — (Losses) gains on sales of mortgage loans held for sale, net ( 920 ) ( 507 ) 248 Losses on sales of securities available for sale, net ( 16,798 ) ( 333,170 ) ( 3,157 ) Other 36,834 21,457 17,783 Total noninterest income (loss) 123,917 ( 237,753 ) 76,750 Noninterest expense: Salaries and employee benefits 302,345 253,037 233,097 Office occupancy and equipment 46,515 35,992 37,445 Data processing 75,383 55,308 52,938 Professional services 20,073 17,385 15,805 Marketing 7,824 7,592 9,294 FDIC insurance 13,866 21,874 6,250 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 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 Net income $ 119,561 $ 232,177 $ 199,759 Basic earnings per share 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 Basic earnings per share $ 0.66 $ 1.43 $ 1.21 Diluted earnings per share: 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 Diluted earnings per share $ 0.66 $ 1.43 $ 1.21 The accompanying notes are an integral part of these Consolidated Financial Statements. 96 EASTERN BANKSHARES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the Year Ended December 31, 2024 2023 2022 (In thousands) Net income $ 119,561 $ 232,177 $ 199,759 Other comprehensive income (loss), net of tax: Net change in fair value of securities available for sale 368 295,913 ( 821,570 ) Net change in fair value of cash flow hedges 5,101 18,588 ( 57,520 ) Net change in other comprehensive income for defined benefit postretirement plans 18,554 339 12,594 Total other comprehensive income (loss) 24,023 314,840 ( 866,496 ) Total comprehensive income (loss) $ 143,584 $ 547,017 $ ( 666,737 ) The accompanying notes are an integral part of these Consolidated Financial Statements. 97 EASTERN BANKSHARES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY Shares of Common Stock Outstanding Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Unallocated Common Stock Held by ESOP Total (In thousands, except share data) Balance at December 31, 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 Other comprehensive loss, net of tax — — — — ( 866,496 ) — ( 866,496 ) ESOP shares committed to be released — — 4,910 — — 5,013 9,923 Balance at December 31, 2022 176,172,073 1,762 1,649,141 1,881,775 ( 923,192 ) ( 137,696 ) 2,471,790 Cumulative effect accounting adjustment (3) — — — 822 — — 822 Dividends to common shareholders (2) — — — ( 67,020 ) — — ( 67,020 ) Issuance of restricted stock awards 47,820 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 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 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) 301,209 4 ( 2,014 ) — — — ( 2,010 ) Share-based compensation — — 19,269 — — — 19,269 Net income — — — 119,561 — — 119,561 Other comprehensive income, net of tax — — — — 24,023 — 24,023 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 (1) Represents gross transition adjustment amount of $ 28.0 million, net of taxes of $ 7.9 million, to reflect the cumulative impact on retained earnings pursuant to the Company’s adoption of Accounting Standards Update 2016-13. Refer to Note 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. 98 (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. (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. 99 EASTERN BANKSHARES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Year Ended December 31, (In thousands) 2024 2023 2022 Operating activities Net income (loss) from continuing operations $ 119,561 $ ( 62,689 ) $ 186,511 Net income from discontinued operations — 294,866 13,248 Net income 119,561 232,177 199,759 Adjustments to reconcile net income to net cash provided by operating activities Provision for allowance for loan losses 67,380 20,052 17,925 Depreciation and amortization 27,030 12,295 11,985 (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 Share-based compensation 19,269 16,047 10,507 Increase in cash surrender value of bank-owned life insurance ( 4,326 ) ( 3,912 ) ( 3,699 ) 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 Realized loss on sales of commercial loans (1) — 2,738 — 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 Change in: Loans held for sale 784 3,403 ( 3,354 ) Prepaid pension (benefit) expense ( 10 ) 4,260 4,338 Other assets ( 61,851 ) ( 14,394 ) 5,431 Other liabilities 55,294 39,035 ( 52,800 ) Net cash provided by operating activities - continuing operations 283,836 385,441 213,119 Net cash (used in) provided by operating activities - discontinued operations — ( 123,749 ) 16,823 Net cash provided by operating activities 283,836 261,692 229,942 Investing activities Proceeds from sales of securities available for sale 1,071,021 1,899,724 431,193 Proceeds from maturities and principal paydowns of securities available for sale 373,017 423,885 1,049,522 Purchases of securities available for sale ( 199,527 ) — ( 740,770 ) Proceeds from maturities and principal paydowns of securities held to maturity 29,439 27,397 17,399 Purchases of securities held to maturity — — ( 493,678 ) Proceeds from sale of Federal Home Loan Bank stock 30,906 286,309 63,715 Purchases of Federal Home Loan Bank stock ( 3,612 ) ( 250,850 ) ( 94,174 ) Contributions to low income housing tax credit investments ( 68,555 ) ( 36,939 ) ( 19,487 ) Contributions to other equity investments ( 1,005 ) ( 720 ) ( 788 ) 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 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 ) Purchased banking premises and equipment ( 13,539 ) ( 8,140 ) ( 8,627 ) Proceeds from sale of bank premises and equipment 15,116 — 17,313 Net cash provided by (used in) investing activities - continuing operations 1,059,397 1,911,760 ( 1,063,255 ) Net cash provided by (used in) investing activities - discontinued operations — 488,505 ( 13,400 ) Net cash provided by (used in) investing activities 1,059,397 2,400,265 ( 1,076,655 ) Financing activities 100 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) ( 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 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 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 ) Cash, cash equivalents, and restricted cash at beginning of period 693,076 169,505 1,231,792 Cash, cash equivalents, and restricted cash at end of period $ 1,006,880 $ 693,076 $ 169,505 Supplemental disclosure of cash flow information Cash paid during the period for: Interest paid on deposits and borrowings $ 316,128 $ 231,765 $ 35,241 Income taxes 18,786 65,921 41,751 Non-cash activities Net increase in capital commitments relating to low income housing tax credit projects $ 8,963 $ 102,001 $ 55,233 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. 101 EASTERN BANKSHARES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Corporate Structure and Nature of Operations; Basis of Presentation Corporate Structure and Nature of Operations Eastern Bankshares, Inc., a Massachusetts corporation (the “Company”), is a bank holding company. Through its wholly-owned subsidiary, Eastern Bank (the “Bank”), the Company provides a variety of banking services and trust and investment services, through its full-service bank branches, located primarily in eastern Massachusetts, and southern and coastal New Hampshire. Eastern Insurance Group was a wholly-owned subsidiary of the Bank. On September 19, 2023, the Company and the Bank entered into an asset purchase agreement in which Arthur J. Gallagher & Co. (“Gallagher”) agreed to purchase substantially all of Eastern Insurance Group’s assets for cash consideration and to assume certain liabilities. On October 31, 2023, the Company completed its sale of its insurance agency business to Gallagher. Refer to Note 23, “Discontinued Operations” for further discussion regarding discontinued operations. The activities of the Company are subject to the regulatory supervision of the Board of Governors of the Federal Reserve System (“Federal Reserve”). The activities of the Bank are subject to the regulatory supervision of the Massachusetts Commissioner of Banks, the Federal Deposit Insurance Corporation (“FDIC”) and the Consumer Financial Protection Bureau (“CFPB”). 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 The Company’s Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) as set forth by the Financial Accounting Standards Board (“FASB”) and its Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) as well as the rules and interpretive releases of the SEC under the authority of federal securities laws. The Consolidated Financial Statements include the accounts of the Company, its wholly-owned subsidiaries, and entities in which it holds a controlling financial interest through being the primary beneficiary or through holding a majority of the voting interest. 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. 2. Summary of Significant Accounting Policies Use of Estimates In preparing the Consolidated Financial Statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheets and income and expenses for the periods reported. Actual results could differ from those estimates based on changing conditions, including economic conditions and future events. Material estimates that are particularly susceptible to change relate to the determination of the allowance for 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 other intangible assets. Cash and Cash Equivalents Cash and cash equivalents include cash on hand and amounts due from banks, federal funds sold, and other short-term investments including restricted cash pledged, all of which have an original maturity of 90 days or less. Cash and cash equivalents includes $ 30.0 million and $ 11.5 million of restricted cash pledged as collateral at December 31, 2024 and 2023, respectively, which for purposes of the Company’s Consolidated Statements of Cash Flows, is included in cash, cash equivalents and restricted cash. Securities Debt securities are classified at the time of purchase as either “trading,” “available for sale” (“AFS”) or “held to maturity” (“HTM”). 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 102 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. Debt securities not classified as either trading or HTM are classified as AFS and recorded at fair value, with changes in fair value excluded from net income and reported in other comprehensive income, net of related tax. Amortization of premiums and accretion of discounts are computed using the effective interest rate method. ASU 2016-13 made targeted changes to ASC 320 to eliminate the concept of “other than temporary” from the impairment loss estimation model for AFS securities. A summary of the changes made by the Company to the existing impairment model (previously referred to as the “OTTI” model) as a result of adoption of ASU 2016-13 is as follows: • The use of an allowance approach, rather than a permanent write-down of a security’s cost basis upon determination of an impairment loss. • The amount of the allowance is limited to the amount at which the security’s fair value is less than its amortized cost basis. • The Company may not consider the length of time a security’s fair value has been less than amortized cost. • The Company may not consider recoveries in fair value after the balance sheet date when assessing whether a credit loss exists. The Company’s AFS securities are carried at fair value. For AFS securities in an unrealized loss position, management will first evaluate whether there is intent to sell a security, or if it is more likely than not that the Company will be required to sell a security prior to anticipated recovery of its amortized cost basis. If either of these criteria are met, the Company will record a write-down of the security’s amortized cost basis to fair value through income. For those AFS securities which do not meet the intent or requirement to sell criteria, management will evaluate whether the decline in fair value is a result of credit related matters or other factors. In performing this assessment, management considers the creditworthiness of the issuer including whether the security is guaranteed by the U.S. federal government or other government agency, the extent to which fair value is less than amortized cost, and changes in credit rating during the period, among other factors. If this assessment indicates the existence of credit losses, an allowance for credit losses will be established, as determined by a discounted cash flow analysis. To the extent the estimated cash flows do not support the amortized cost, the deficiency is considered to be due to credit loss and is recognized in earnings. Changes in the allowance for credit losses are recorded as a provision for (or reversal of) credit loss expense. Losses are charged against the allowance when the security is determined to be uncollectible, or when either of the aforementioned criteria surrounding intent or requirement to sell have been met. On January 1, 2022, the date on which the Company adopted ASU 2016-13, no allowance for credit losses was recorded for AFS securities. Gains and losses on sales of securities are recognized at the time of sale on the specific-identification basis. Refer to Note 4, “Securities” for additional information regarding the measurement of impairment losses on AFS securities. Allowance for Credit Losses - Held to Maturity Securities The Company measures expected credit losses on HTM securities on a collective basis by major security type which, as of December 31, 2024, included government-sponsored residential and commercial mortgage-backed securities. Securities in the Company’s HTM portfolio are guaranteed by either the U.S. federal government or other government sponsored agencies with a long history of no credit losses. As a result, management has determined that these securities have a zero loss expectation and therefore does not record an allowance for credit losses on these securities. Refer to Note 4, “Securities” for additional information regarding the measurement of credit losses on HTM securities. Loans Loans are reported at their principal amount outstanding, net of deferred loan fees and costs and any unearned discount or unamortized premium for acquired loans. Unearned discount and unamortized premium are accreted and amortized, respectively, to interest and dividend income on a basis that results in level rates of return over the terms of the loans. For originated loans, origination fees and related direct incremental origination costs are offset, and the resulting net amount is deferred and amortized over the life of the related loans using the effective interest method, assuming a certain level of prepayments. When loans are sold or repaid, the unamortized fees and costs are recorded to interest and dividend income. Interest income on loans is accrued based upon the daily principal amount outstanding except for loans on non-accrual status. For acquired loans, interest income is also accrued based upon the daily principal amount outstanding and is adjusted further by the accretion of any discount or amortization of any premium associated with the loan. 103 Non-performing Loans (“NPLs”) Non-accrual Loans Interest accruals are generally discontinued when management has determined that the borrower may be unable to meet contractual obligations and/or when loans are 90 days or more past due. 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 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. Non-accrual loans may be returned to an accrual status when principal and interest payments are no longer delinquent, and the risk characteristics of the loan have improved to the extent that there no longer exists a concern as to the collectability of principal and interest. Loans are considered past due based upon the number of days delinquent according to their contractual terms. Non-accrual loans and loans that are more than 90 days past due but still accruing interest are considered NPLs. Loans Individually Assessed for Impairment 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: • Loans determined to be collateral dependent as defined below; • Loans on non-accrual status; • 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 proceedings; and • Loans that have been partially charged-off. Collateral-Dependent Loans Management considers a loan to be collateral-dependent when foreclosure of the underlying collateral is probable. 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 The amendments in ASU 2022-02 eliminated the accounting guidance for TDRs by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors , while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Thus, as a result of adoption of this standard on January 1, 2023, rather than applying the recognition and measurement guidance for TDRs, the Company now applies the loan refinancing and restructuring guidance codified in paragraphs 310-20-35-9 through 35-11 of the Accounting Standards Codification to determine whether a modification results in a new loan or a continuation of an existing loan. Modifications to borrowers experiencing financial difficulty include principal forgiveness, interest rate reductions, term extensions, other-than-insignificant payment delays and combinations thereof. Expected losses or recoveries related to loans where modifications have been granted to borrowers experiencing financial difficulty have been included in the Company’s determination of the allowance for loan losses. Upon adoption of ASU 2022-02, the Company is no longer required to use a discounted cash flow method to measure the allowance for loan losses resulting from a modification to a borrower experiencing financial difficulty. Accordingly, the Company now applies the same credit methodology it uses for similar loans that were not modified. The Company adopted ASU 2022-02 using the modified retrospective transition method. Accordingly, upon adoption, commercial loan TDRs existing at that time which were measured using a discounted cash flow methodology and all residential real estate and consumer home equity loan TDRs were transitioned to the applicable segment of loans collectively evaluated for impairment based upon their risk characteristics. 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. 104 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. Modifications included adjustments to interest rates, extensions of maturity, consumer loans where the borrower’s obligations had been effectively discharged through Chapter 7 bankruptcy and the borrower had not reaffirmed the debt to the Company, and other actions intended to minimize economic loss and avoid foreclosure or repossession of collateral. Management identified loans as TDR loans when it had a reasonable expectation that it would execute a TDR modification with a borrower. In addition, management estimated expected credit losses on a collective basis if a group of TDR loans shared similar risk characteristics. If a TDR loan’s risk characteristics were not similar to those of any of the Company’s other TDR loans, expected credit losses on the TDR loan were measured individually. The impairment analysis discounted the present value of the anticipated cash flows by the loan’s contractual rate of interest in effect prior to the loan’s modification or the fair value of collateral if the loan was collateral dependent. The amount of credit loss, if any, was recorded as a specific loss allocation to each individual loan or as a loss allocation to the pool of loans, for those loans for which credit loss was measured on a collective basis, in the allowance for credit losses. Any commercial (commercial and industrial, commercial real estate, commercial construction, and business banking loans) or residential loan that had been classified as a TDR and which subsequently defaulted was reviewed to determine if the loan should be deemed collateral-dependent. In such an instance, any shortfall between the value of the collateral and the book value of the loan was determined by measuring the recorded investment in the loan against the fair value of the collateral less costs to sell. 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 The Company applied the prospective transition approach with respect to PCD assets upon adoption of ASU 2016-13. Under this approach, loans previously determined to be PCI loans are considered to be PCD loans as of January 1, 2022. PCD loans are acquired individual loans (or acquired groups of loans with similar risk characteristics) that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the Company’s assessment. A PCD loan is recorded at its purchase price plus the allowance for loan losses expected at the time of acquisition, or “gross up” of the amortized cost basis, if any. Changes in the current estimate of the allowance for loan losses subsequent to acquisition from the estimated allowance previously recorded are recognized in the income statement as provision for credit losses or reversal of provision for credit losses in subsequent periods as they arise. A purchased loan that does not qualify as a PCD asset is accounted for similar to the Company’s method of accounting for originated assets, whereby an allowance for loan losses is recognized with a corresponding increase to the income statement provision for loan losses. Evidence that purchased loans, measured at amortized cost, have more-than-insignificant deterioration in credit quality since origination and, therefore meet the PCD definition, may include past-due status, non-accrual status, risk rating and other standard indicators (i.e., modification due to financial difficulty, charge-offs, bankruptcy). Allowance for Credit Losses The allowance for credit losses, or “ACL,” is established to provide for the Company’s current estimate of expected lifetime credit losses on loans measured at amortized cost and unfunded lending commitments at the balance sheet date and is established through a provision for credit losses charged to net income. Credit losses are charged directly to the ACL. Subsequent recoveries, if any, are credited to the ACL. Commercial and residential loans are charged-off in the period in which they are deemed uncollectible. Delinquent loans in these product types are subject to ongoing review and analysis to determine if a charge-off in the current period is appropriate. For consumer finance loans, policies and procedures exist that require charge-off consideration upon a certain triggering event depending on the product type. Charge-off triggers include: 120 days delinquent for automobile, home equity, and other consumer loans with the exception of cash reserve loans for which the trigger is 150 days delinquent; death of the borrower; or Chapter 7 bankruptcy. In addition to those events, the charge-off determination includes other loan quality indicators, such as collateral position and adequacy or the presence of other repayment sources. The ACL is evaluated on a regular basis by management. Management uses a methodology to systematically estimate the amount of expected lifetime losses in the portfolio. Expected lifetime losses are estimated on a collective basis for loans sharing similar risk characteristics and are determined using a quantitative model combined with an assessment of certain qualitative factors designed to address forecast risk and model risk inherent in the quantitative model output. For 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. 105 The quantitative model estimates expected credit losses using loan level data over the estimated life of the exposure, considering the effect of prepayments. Economic forecasts are incorporated into the estimate over a reasonable and supportable forecast period, beyond which is a reversion to the Company’s and/or industry historical loss average. Management has determined that a reasonable and supportable forecast period of eight quarters, and a straight-line reversion period of four quarters, are appropriate forecast periods for purposes of estimating expected credit losses. As described above, quantitative model results are adjusted for risk factors not considered within the model but which are relevant in estimating the expected credit losses within the loan portfolio. The qualitative risk factors impacting the expected risk of loss within the loan portfolio include the following: • Lending policies and procedures, including underwriting standards and collection, charge-off and recovery practices; • Nature and volume of the portfolio; • Volume and severity of past-due, non-accrual and classified loans; • The value of the underlying collateral for loans that are not collateral dependent; • Concentrations of credit risk; • Model and data limitations; and • Other external factors, such as changes in legal, regulatory or competitive environments. Loans that do not share similar risk characteristics with any pools of assets are subject to individual evaluation and are removed from the collectively assessed pools. For loans that are individually evaluated, the Company uses either a discounted cash flow (“DCF”) approach or, for loans deemed to be collateral dependent or when foreclosure is probable, a fair value of collateral approach. Accrued interest receivable amounts are excluded from balances of loans held at amortized cost and are included within other assets on the Consolidated Balance Sheet. Management has elected not to measure an allowance for credit losses on these amounts as the Company employs a timely write-off policy. Consistent with the Company's policy for non-accrual loans, accrued interest receivable is typically written off when loans reach 90 days past due and are placed on non-accrual status. In the ordinary course of business, the Company enters into commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable. The credit risk associated with these commitments is evaluated in a manner similar to the reserving method for loans receivable previously described. The reserve for unfunded lending commitments is included in other liabilities in the Consolidated Balance Sheets. 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 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 Mortgage loans held for sale to the secondary market are carried at the lower of cost or estimated market value on an individual loan basis. The Company enters into commitments to fund residential mortgage loans with an offsetting forward commitment to sell them in the secondary markets in order to mitigate interest rate risk. Gains or losses on sales of mortgage loans are recognized in the Consolidated Statements of Income at the time of sale. Interest income is recognized on loans held for sale between the time the loan is funded and the loan is sold. Direct loan origination costs and fees are deferred upon origination and are recognized in the Consolidated Statements of Income on the date of sale. Other Real Estate Owned OREO consists of properties and other assets acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. OREO is recorded in other assets in the Consolidated Balance Sheets, on an individual asset basis at the fair value less estimated costs to sell on the date control is obtained. 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 106 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. Federal Home Loan Bank Stock The Company, as a member of the Federal Home Loan Bank (“FHLB”) of Boston (“FHLBB”), is required to maintain an investment in capital stock of the FHLB. Based on redemption provisions, the stock has no quoted market value and is carried at cost. Premises and Equipment Land is carried at cost. Buildings, leasehold improvements and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of the lease terms or the estimated lives of the improvements. Expected lease terms include lease options to the extent that the exercise of such options is reasonably assured. 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 Other Intangible Assets 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. 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 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. If the book value exceeds the fair value, an impairment is charged to net income. Management has identified one reporting unit for purposes of testing goodwill for impairment which is referred to as “the banking business.” 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 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 The Company provides benefits to its employees and executive officers through various retirement plans, including a defined benefit plan, a defined benefit supplemental executive retirement plan, a defined contribution plan, a benefit equalization plan, and an outside directors’ retainer continuance plan. The Company provides pension benefits for its employees using a noncontributory, qualified defined benefit plan, through membership in the Savings Banks Employees Retirement Association (“SBERA”). The Qualified Defined Benefit Pension Plan (“Defined Benefit Plan”) is a noncontributory, defined benefit plan. The Company’s employees become eligible after attaining age 21 and completing one year of service. Effective November 1, 2020, the Defined Benefit Plan, sponsored by the Company, was amended to convert the plan from a traditional final average earnings plan design to a cash balance plan design. Under the final average earnings plan design, benefits became fully vested after three years of eligible service for individuals employed on or before October 31, 1989. For individuals employed subsequent to October 31, 1989 and who were already in the Defined Benefit Plan as of November 1, 2020, benefits became fully vested after five years of eligible service. 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 107 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. Employees hired on and after November 1, 2020 receive annual contribution credits equal to 5 % of annual compensation, with no future increases. Notwithstanding the preceding sentence, since a cash balance plan is a defined benefit plan, the annual retirement benefit payable at normal retirement (age 65 ) is an annuity, which is the actuarial equivalent of the participant’s account balance under the cash balance plan design, plus their frozen benefit under the final average earnings plan design. However, under the Defined Benefit Plan, participants may elect, with the consent of their spouses if they are married, to have the benefits distributed as a lump sum rather than an annuity. 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. The contribution is based on an actuarial method intended to provide not only for benefits attributable to service to date, but also for those expected to be earned in the future. The Company also has an unfunded Defined Benefit Supplemental Executive Retirement Plan (“DB SERP”) that provides certain retired officers with defined pension benefits in excess of qualified plan limits imposed by U.S. federal tax law. The DB SERP has a plan year end of December 31. The Company’s BEP, which is an unfunded plan, provides retirement benefits to certain employees whose retirement benefits under the Defined Benefit Plan are limited per the Internal Revenue Code. The BEP has a plan year end of October 31. Effective November 1, 2020, the BEP, sponsored by the Company, was amended to convert the plan from a traditional final average earnings plan design to a cash balance plan design. The Company also has an unfunded Outside Directors’ Retainer Continuance Plan (“ODRCP”) that provides pension benefits to outside directors who retire from service. The Outside Directors’ Retainer Continuance Plan has a plan year end of December 31. Effective December 31, 2020, the Company closed the ODRCP to new participants and froze benefit accruals for active participants. 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 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). The discount rate which is utilized is determined using the spot rate approach whereby the individual spot rates on the Financial Times and Stock Exchange (“FTSE”) above-median yield curve are applied to each corresponding year’s projected cash flow used to measure the respective plan’s service cost and interest cost. Periodic pension expense (or income) includes service costs, interest costs based on the assumed discount rate, the expected return on plan assets, if applicable, based on the market value of assets and amortization of actuarial gains and losses. Net periodic benefit cost excluding service cost is included within other noninterest expense in the Consolidated Statements of Income. Service cost for all plans is included in salaries and employee benefits in the Consolidated Statements of Income. 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 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. Funded status represents the difference between the projected benefit obligation of the plan and the market value of the plan’s assets. Employee Tax Deferred Incentive Plan 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 108 eligible to participate in the 401(k) plan. The amount contributed by the Company is included in salaries and employee benefits expense. Defined Contribution Supplemental Executive Retirement Plan The Company has a defined contribution supplemental executive retirement plan (“DC SERP”), which allows certain senior officers to earn benefits calculated as a percentage of their compensation. The participant benefits are adjusted based upon a deemed investment performance of measurement funds selected by the participant. These measurement funds are for tracking purposes and are used only to track the performance of a mutual fund, market index, savings instrument, or other designated investment or portfolio of investments. Effective December 31, 2021, the Company closed the DC SERP to new participants and froze benefit accruals for active participants. 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 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. Portfolios with various risk profiles are available to participants with the approval of the Compensation Committee. The Company purchases and sells investments which track the deemed investment choices, so that it has available funds to meet its payment liabilities. 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. Employee Stock Ownership Plan (“ESOP”) Unallocated ESOP shares are shown as a reduction of equity and are presented in the Consolidated Statements of Shareholders’ Equity as unallocated common stock held by ESOP. Compensation expense for the Company’s ESOP is recorded at an amount equal to the shares committed to be allocated by the ESOP multiplied by the average fair market value of the shares during the year. The Company recognizes compensation expense ratably over the year based upon the Company’s estimate of the number of shares committed to be allocated by the ESOP. When the shares are committed to be released, unallocated common stock held by ESOP is reduced by the cost of the ESOP shares released and the difference between the average fair market value and the cost of the shares committed to be allocated by the ESOP is recorded as an adjustment to additional paid-in capital. The Company’s ESOP is classified as an internally leveraged plan as defined by ASC 718, “Compensation-Stock Compensation.” Accordingly, the loan receivable from the ESOP is not reported as an asset nor is the Company’s guarantee to fund the ESOP reported as a liability on the Company’s Consolidated Balance Sheet. Share-Based Compensation The Company measures share-based compensation on the grant date fair value on a straight-line basis over the vesting period during which an employee is required to provide services in exchange for the award; the requisite service period. The Company uses various pricing models to estimate the fair value of stock awards granted. The Company measures the fair value of the restricted stock using the closing market price of the Company’s common stock on the date of grant. The Company records compensation expense equal to the grant date fair value of the Company’s restricted stock with a corresponding increase in equity. Reductions in compensation expense associated with forfeited awards are accounted for as incurred. Upon vesting, the tax effect of the difference between the fair value of the award and the recorded expense is recognized as a component of income tax expense. Refer to Note 16, “Share-Based Compensation” for additional information regarding the Company’s share-based compensation plan. Variable Interest Entities (“VIE”) and Voting Interest Entities (“VOE”) The Company is involved in the normal course of business with various types of special purpose entities, some of which meet the definition for VIEs and VOEs. VIEs are entities that possess any of the following characteristics: 1) the total equity investment at risk is insufficient to permit the legal entity to finance its activities without additional subordinated financial support from other parties; 2) as a group, the holders of the equity investment at risk lack any of the characteristics of a controlling financial interest; or 3) the equity investors’ voting rights are not proportional to the economics, and substantially all of the activities of the entity either involve or are conducted on behalf of an investor that has disproportionately few voting rights. The Company consolidates entities deemed to be VIEs when it, or a wholly-owned subsidiary, is determined to be the primary beneficiary. 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 109 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. The Company generally consolidates VOEs when it, or a wholly-owned subsidiary, holds the majority of the voting interest in the VOE. Rabbi Trusts The Company established rabbi trusts to meet its obligations under certain executive non-qualified retirement benefits and deferred compensation plans and to mitigate the expense volatility of the aforementioned retirement plans. The rabbi trusts are considered VIEs as the equity investment at risk is insufficient to permit the trust to finance its activities without additional subordinated financial support from the Company. The Company is considered the primary beneficiary of the rabbi trusts as it has the power to direct the activities of the rabbi trusts that significantly affect the rabbi trust’s economic performance and it has the obligation to absorb losses of the rabbi trusts that could potentially be significant to the rabbi trusts by virtue of its contingent call options on the rabbi trust’s assets in the event of the Company’s bankruptcy. As the primary beneficiary of these VIEs, the Company consolidates the rabbi trust investments. In general, the rabbi trust investments and any earnings received thereon are accumulated, reinvested and used exclusively for trust purposes. These rabbi trust investments consist primarily of cash and cash equivalents, U.S. government agency obligations, equity securities, mutual funds and other exchange-traded funds, and are recorded at fair value in the Company’s Consolidated Balance Sheets. 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. Bank Owned Life Insurance The Company holds bank-owned life insurance on the lives of certain participating executives, primarily as a result of mergers and acquisitions. The amount reported as an asset on the Consolidated Balance Sheets is the sum of the cash surrender values reported to the Company by the various insurance carriers. Certain policies are split-dollar life insurance policies whereby the Company recognizes a liability for the postretirement benefit related to the arrangement. This postretirement benefit is included in other liabilities on the Consolidated Balance Sheets. Income Taxes The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are established for the temporary differences between the accounting basis and the tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when the amounts related to such temporary differences are realized or settled. A valuation allowance is established if it is considered more-likely-than-not that all or a portion of the deferred tax assets will not be realized. Interest and penalties paid on the underpayment of income taxes are classified as income tax expense. The Company periodically evaluates the potential uncertainty of its tax positions as to whether it is more-likely than-not its position would be upheld upon examination by the appropriate taxing authority. A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the Consolidated Financial Statements. The tax position is measured at the largest amount of benefit that management believes is greater than 50% likely of being realized upon settlement. Low Income Housing Tax Credits and Other Tax Credit Investments As part of its community reinvestment initiatives, the Company primarily invests in qualified affordable housing projects in addition to other tax credit investment projects. The Company receives low-income housing tax credits, investment tax credits, rehabilitation tax credits, solar tax credits and other tax credits as a result of its investments in these limited partnership investments. The Company accounts for its investments in qualified affordable housing projects using the proportional amortization method and amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits allocated to the Company. The amortization of the excess of the carrying amount of the investment over its estimated residual value is included as a component of income tax expense. At investment inception, the Company records a liability for the committed amount of the investment; this liability is reduced as contributions are made. The Company evaluates investments in tax credit investment companies for consolidation based on the variable or voting interest entity guidance, as appropriate. Other tax credit investment projects are accounted for using either the cost method or equity method. 110 Trust Operations The Bank is a full-service trust company that provides a wide range of trust services to customers that includes managing customer investments, safekeeping customer assets, supplying disbursement services, and providing other fiduciary services. Trust assets held in a fiduciary or agency capacity for customers are not included in the accompanying Consolidated Balance Sheets as they are not assets of the Company. The fees charged are variable based on various factors such as the Company’s responsibility, the type of account, and account size. Customers are also charged a base fee which is prorated over a twelve-month period. Fees for additional or special services are generally fixed in nature and are charged as services are rendered. Revenue from administrative and management activities associated with these assets is recognized as performance obligations of underlying agreements are satisfied. Derivative Financial Instruments 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. At the inception of a hedge, the Company documents certain items, including, but not limited to, the following: the relationship between hedging instruments and hedged items, the Company’s risk management objectives, hedging strategies, and the evaluation of hedge transaction effectiveness. Documentation includes linking all derivatives that are designated as hedges to specific assets or liabilities on the balance sheet or to specific forecasted transactions. The Company’s derivative instruments that are designated and qualify for hedge accounting are classified as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows associated with a recognized asset or liability, or a forecasted transaction). As such, changes in the fair value of the designated hedging instrument that is included in the assessment of hedge effectiveness are recorded in other comprehensive income and reclassified into net income in the same period or periods during which the hedged forecasted transaction affects net income. Such reclassifications are presented in the same income statement line item as the net income effect of the hedged item. If the hedging instrument is not highly effective at achieving offsetting cash flows attributable to the revised contractually specified interest rate(s), hedge accounting will be discontinued. At that time, accumulated other comprehensive income would be frozen and amortized, as long as the forecasted transactions are still probable of occurring. If a cash flow hedge is terminated, hedge accounting treatment would be retained, and accumulated other comprehensive income would be frozen and amortized, as long as the forecasted transactions are still probable of occurring. The Company’s derivative instruments not designated as hedging instruments are recorded at fair value and changes in fair value are recognized in other noninterest income. Derivative instruments not designated as hedging instruments include interest rate swaps, foreign exchange contracts offered to commercial customers to assist them in meeting their financing and investing objectives for their risk management purposes, and risk participation agreements entered into as financial guarantees of performance on customer-related interest rate swap derivatives. The interest rate and foreign exchange risks associated with customer interest rate swaps and foreign exchange contracts are mitigated by entering into similar derivatives having offsetting terms with correspondent bank counterparties. All derivative financial instruments eligible for clearing are cleared through the Chicago Mercantile Exchange (“CME”). In accordance with its amended rulebook, CME legally characterizes variation margin payments made to and received from the CME as settlement of derivatives rather than as collateral against derivatives. Fair Value Measurements ASC 820 “ Fair Value Measurements and Disclosures ” (“ASC 820”) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date. Market participants are buyers and sellers in the principal market that are independent, knowledgeable, able and willing to transact. ASC 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements), and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. 111 Level 3 – Prices or valuations that require unobservable inputs that reflect the Company’s own assumptions that are significant to the fair value measurement. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Leases The Company leases certain office space and equipment under various non-cancelable operating leases, some of which have renewal options to extend lease terms. At lease inception, the Company evaluates the lease terms to determine if the lease should be classified as an operating lease or a finance lease and recognizes a right of use (“ROU”) asset and corresponding lease liability. 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 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. The Company has lease agreements with lease and non-lease components, which are generally accounted for as a single lease component. The Company has elected the short-term lease recognition exemption for all leases that qualify. Common Share Repurchases Shares repurchased by the Company under the Company’s share repurchase programs have been classified as authorized but unissued shares. The cost of shares repurchased by the Company has been accounted for as a reduction to common stock and additional paid in capital balances. Massachusetts state law calls for repurchased shares to be classified as authorized but unissued shares. U.S. GAAP states that the accounting for share repurchases shall conform to state law where applicable. Earnings Per Share Basic earnings per share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations. ESOP shares committed to be released are considered to be outstanding for purposes of the earnings per share computation. ESOP shares that have not been legally released, but that relate to employee services rendered during an accounting period (interim or annual) ending before the related debt service payment is made, are considered committed to be released. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate to outstanding stock awards and are determined using the treasury stock method. Segment Reporting 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 Executive Chair. The Company has one reportable segment: its banking business, which consists of a full range of banking lending, savings, and small business offerings, and its wealth management and trust operations. Recent Accounting Pronouncements Relevant standards that were recently issued but not yet adopted as of December 31, 2024: 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 112 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: 1. 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; 2. 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; 3. 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; 4. Commitments (Topic 440): Requires disclosure of assets mortgaged, pledged, or otherwise subject to lien and the obligations collateralized; and 5. 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. 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): 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: 1. 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. 2. Require that all entities disclose certain disaggregated information regarding income taxes paid. 3. Require that all entities disclose certain disaggregated information regarding income tax expense. 4. 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. 5. 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. 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: 1. 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). 2. Include certain amounts that are already required to be disclosed under current GAAP in the same disclosure as the other disaggregation requirements. 3. Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. 113 4. 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 March 2023, the FASB issued ASU 2023-02, Investments–Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (“ASU 2023-02”). This update permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if the following conditions are met: 1. It is probable that the income tax credits allocable to the tax equity investor will be available. 2. The tax equity investor does not have the ability to exercise significant influence over the operating and financial policies of the underlying project. 3. Substantially all of the projected benefits are from income tax credits and other income tax benefits. Projected benefits include income tax credits, other income tax benefits, and other non-income-tax-related benefits. The projected benefits are determined on a discounted basis, using a discount rate that is consistent with the cash flow assumptions used by the tax equity investor in making its decision to invest in the project. 4. The tax equity investor’s projected yield based solely on the cash flows from the income tax credits and other income tax benefits is positive. 5. The tax equity investor is a limited liability investor in the limited liability entity for both legal and tax purposes, and the tax equity investor’s liability is limited to its capital investment. Under previously effective accounting standards, the proportional amortization method was 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 . The Company adopted this standard on January 1, 2024 and such adoption did 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: 1. 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”). 2. 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. 3. 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. 4. 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 114 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. 5. 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. 6. 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. The adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements. 3. Mergers and Acquisitions Cambridge Bancorp, Inc. Merger On July 12, 2024, the Company completed its merger with Cambridge. In accordance with the merger agreement, each share of Cambridge common stock was exchanged for 4.956 shares of Company common stock. The transaction qualified as a tax-free reorganization for federal income tax purposes and provided Cambridge shareholders with a tax-free exchange of their shares of Cambridge common stock for Company common stock as the consideration they received in the merger. In connection with the merger, Citadel MS 2023, Inc. (“Merger Sub”), a wholly-owned subsidiary of the Company, merged with and into Cambridge, with Cambridge continuing as the surviving entity. Immediately after the merger, Cambridge merged with and into the Company, with the Company continuing as the surviving entity. Immediately following, Cambridge Trust, a wholly owned subsidiary of Cambridge, merged with and into Eastern Bank, with Eastern Bank continuing as the surviving entity. The Company issued 38.9 million shares of its common stock in the merger. Based upon the closing price of Company common stock on July 12, 2024 of $ 14.87 per share, the transaction is valued at $ 580.6 million, which includes cash paid in-lieu of fractional shares and recognition of restricted stock units (“RSU”) and performance share units (“PSU”) service accruals for service accrued by Cambridge personnel prior to the merger. In addition to increasing its loan and deposit base, the merger enabled the Company to expand its wealth management customer base and service offerings, which includes comprehensive investment management, as well as trust administration, estate settlement, and financial planning services. The merger was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations . Under this method of accounting, the respective assets acquired and liabilities assumed were recorded at their estimated fair values. The excess of consideration paid over the estimated fair value of the net assets acquired totaled $ 357.3 million and was recorded as goodwill. The results of Cambridge’s operations were included in the Company’s consolidated financial statements subsequent to the merger date. The calculation of goodwill is subject to change for up to one year after the closing date of the transaction as additional information relative to closing date estimates and uncertainties becomes available, including the filing of the 2024 tax return for Cambridge. As the Company finalizes its analysis of these assets and liabilities, there may be adjustments to the recorded carrying values. The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the date of merger from Cambridge: 115 Net Assets Acquired at Fair Value (In thousands) Assets Cash and due from banks $ 20,008 Short-term investments 4,877 Investment securities 883,021 Loans 3,650,600 Allowance for loan losses ( 55,830 ) FHLB stock 27,255 Premises and equipment 23,417 Bank owned life insurance 35,676 Goodwill 357,322 Intangible assets 141,200 Deferred income taxes, net 107,989 Other assets 134,608 Total assets acquired 5,330,143 Liabilities Deposits (1) 3,873,717 FHLB advances (2) 782,000 Escrow deposits of borrowers 3,633 Other liabilities 90,200 Total liabilities assumed 4,749,550 Purchase price $ 580,593 (1) Includes certificates of deposit, at fair value, of $ 418.7 million . (2) The FHLB advances assumed were overnight borrowings which matured immediately following the completion of the merger and therefore were not adjusted to fair value. Fair Value Measurement of Assets Assumed and Liabilities Assumed The methods used to determine the fair value of the assets acquired and liabilities assumed in the Cambridge merger were as follows: Investment Securities The estimated fair values of the available for sale debt securities and held-to-maturity debt securities, primarily comprised of U.S. Government Sponsored Enterprises mortgage-backed securities, U.S. Government Sponsored Enterprises obligations, corporate debt securities, municipal securities, and U.S. Treasury securities carried on Cambridge’s balance sheet, was confirmed using actual sales quotations from sales of the securities, as the Company sold all of the acquired securities immediately following the closing of the merger. Based upon management’s determination, a fair value adjustment of $ 158.9 million, reflecting a net discount, was recorded on acquired securities and reflects the net unrealized loss position of such securities at the date of merger. Securities acquired that were classified on Cambridge’s balance sheet as held-to-maturity were reclassified as available for sale upon the completion of the merger and prior to sale by the Company, reflecting management’s intent with respect to such securities. Immediately following the completion of the merger, investment securities acquired through its merger with Cambridge paid down or were sold in their entirety. No gain or loss was recognized upon sale as such securities had been recorded by the Company based upon the quoted sale prices in determination of the purchase accounting fair value adjustment. Loans Loans acquired in the Cambridge merger were recorded at fair value, and there was no carryover of the allowance for loan losses. The fair value of the loans acquired from Cambridge 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 116 of future credit losses and prepayments, and then applying a market-based discount rate to those cash flows. Management retained a third-party valuation specialist to assist with the determination of fair values of loans acquired, the results of which were reviewed by management. The resulting total fair value mark was estimated to be a discount of $ 277.0 million. Acquired loans were reviewed to determine if any had experienced a more-than-insignificant deterioration in credit quality since origination. Loans meeting established criteria to indicate more-than-insignificant deterioration were identified as purchased credit deteriorated (“PCD”) loans, and an allowance for loan losses was calculated using management’s best estimate of projected losses over the remaining life of the loan in accordance with current expected credit loss (“CECL”) methodology. In connection with the Cambridge merger, the Company recorded an allowance for loan losses on PCD loans of approximately $ 55.8 million, which was added to the amortized cost of loans. The following is a reconciliation of the difference between the purchase price and par value of PCD loans acquired in the merger: As of July 12, 2024 (In thousands) Gross amortized cost basis at July 12, 2024 $ 356,148 Allowance for loan losses on PCD loans ( 55,830 ) Interest and liquidity discount ( 26,019 ) Purchase price of PCD loans (at fair value) $ 274,299 For loans acquired without evidence of more-than-insignificant deterioration in credit quality since origination, also referred to as non-PCD loans, the Company estimated an allowance for loan losses based on the Company's methodology for determining the allowance under CECL. The resulting allowance on non-PCD loans was $ 40.9 million, which was recorded through a charge to provision for loan losses on the date of merger. Premises and Equipment The Company acquired 18 branches in the merger as of the date of closing, five of which were owned premises. In addition, the Company acquired two corporate properties in the merger with Cambridge. The fair value of properties acquired was derived by valuations prepared by an independent third party utilizing a combination of the income approach and the sales comparison approach to value the property as improved. Leases As part of the merger the Company added 23 lease obligations. The Company recorded a $ 25.5 million right-of-use asset and a $ 32.0 million lease liability for these lease obligations. Lease assets and liabilities were measured using a methodology to estimate the future rental payments over the remaining lease term with discounting using the Company’s incremental borrowing rate. The lease term was determined for individual leases based on the Company’s assessment of the probability of exercising renewal options. The net effect of any off-market terms in a lease was also discounted and applied to the balance of the lease asset. Core Deposit Intangible The fair value of the core deposit intangible was determined based on a discounted cash flow analysis using a discount rate commensurate with market participants. To calculate cash flows, deposit account servicing costs (net of deposit fee income) and interest expense on deposits were compared to the cost of alternative funding sources available through FHLBB borrowing rates and national brokered CD offering rates. The projected cash flows were developed using projected deposit attrition rates. Management retained a third-party valuation specialist to assist with the determination of projected cash flows, the results of which were reviewed by management. The core deposit intangible totaled $ 115.0 million and is being amortized on a cash-flow weighted basis over its estimated useful life of 7 years. Cambridge Trust Wealth Management Customer List and Trade Name Intangibles The fair value of the Cambridge Trust wealth management customer list intangible (“customer list intangible”) and trade name intangible (“trade name intangible”) were determined based upon discounted cash flow analyses using discount rates commensurate with market participants. The projected cash flows for the customer list intangible were developed using current revenue grown at a constant rate, and projected customer attrition rates were used to allocate those revenues to existing customers. Adjustments were made to the projected cash flows to account for sales and marketing expenses as well as contributory asset charges associated with the customer list. The discounted cash flows for the trade name intangible were developed using current revenue grown at a constant rate, multiplied by a royalty rate determined based on market observations. 117 Management retained a third-party valuation specialist to assist with the determination of the projected cash flows, the results of which were reviewed by management. The estimated fair value of the customer list and trade name intangibles amounted to $ 25.0 million and $ 1.2 million, respectively, and are being amortized on a cash-flow weighted basis over their estimated useful lives of 11 years and 5 years, respectively. Goodwill The calculation of goodwill is subject to change for up to one year after the date of merger as additional information relative to the closing date estimates and uncertainties become available. As the Company finalizes its review of the acquired assets and liabilities, certain adjustments to the recorded carrying values may be required. The goodwill will be evaluated annually for impairment. The goodwill is no t deductible for tax purposes. Bank Owned Life Insurance (“BOLI”) Cambridge’s BOLI cash surrender value was $ 35.7 million with no fair value adjustment. Certificates of Deposit The fair value adjustment for certificates of deposit represents a discount from the value of the contractual repayments of fixed-maturity deposits using prevailing market interest rates for similar-term time deposits. The certificate of deposit discount, which was estimated to be $ 1.6 million, is being amortized into income on a level yield amortization method over the contractual life of the deposits. Escrow Deposits of Borrowers Cambridge’s escrow deposits of borrowers was $ 3.6 million with no fair value adjustment. Merger-Related Expenses The Company recorded merger and acquisition expenses of $ 36.7 million and $ 5.5 million during the years ended December 31, 2024 and 2023, respectively, related to the Cambridge merger. These merger and acquisition expenses were included in the following line items of the Consolidated Statements of Income: For the Years Ended December 31, 2024 2023 (In thousands) Salaries and employee benefits $ 14,719 $ 5 Office occupancy and equipment 4,583 2 Data processing 4,919 1,357 Professional services 7,320 4,080 Marketing 70 — Other noninterest expense 5,053 51 $ 36,664 $ 5,495 The following table presents certain unaudited pro forma information for the years ended December 31, 2024 and 2023. This unaudited estimated pro forma financial information was calculated as if the merger had occurred as of January 1, 2023. This unaudited pro forma information combines the historical results of Cambridge with the Company’s consolidated historical results and includes certain adjustments reflecting the estimated impact of certain fair value adjustments for the respective periods. The pro forma information is not indicative of what would have occurred had the merger occurred as of the beginning of the year prior to the merger. The unaudited pro forma information does not consider any changes to the provision for loan losses resulting from recording loan assets at fair value, cost savings, or business synergies. As a result, actual amounts would have differed from the unaudited pro forma information presented. 118 Unaudited Pro Forma Financial Information for the Years Ended December 31, 2024 2023 (In thousands) Net interest income $ 681,467 $ 722,380 Net income (loss) 126,158 ( 4,342 ) Financial results of Cambridge from the date of merger through December 31, 2024 are not presented as management considers the determination of such amounts to be impracticable. 4. Securities Available for Sale Securities The amortized cost, gross unrealized gains and losses, ACL and fair value of available for sale securities as of the dates indicated were as follows: As of December 31, 2024 Amortized Cost Unrealized Gains Unrealized Losses Allowance for Credit Losses Fair Value (In thousands) Debt securities: Government-sponsored residential mortgage-backed securities $ 3,099,328 $ — $ ( 537,433 ) $ — $ 2,561,895 Government-sponsored commercial mortgage-backed securities 1,362,519 — ( 201,408 ) — 1,161,111 U.S. Agency bonds 19,608 — ( 1,936 ) — 17,672 U.S. Treasury securities 99,784 — ( 2,165 ) — 97,619 State and municipal bonds and obligations 197,405 — ( 14,104 ) — 183,301 $ 4,778,644 $ — $ ( 757,046 ) $ — $ 4,021,598 As of December 31, 2023 Amortized Cost Unrealized Gains Unrealized Losses Allowance for Credit Losses Fair Value (In thousands) Debt securities: Government-sponsored residential mortgage-backed securities $ 3,302,165 $ — $ ( 521,527 ) $ — $ 2,780,638 Government-sponsored commercial mortgage-backed securities 1,326,029 — ( 201,653 ) — 1,124,376 U.S. Agency bonds 236,454 — ( 20,443 ) — 216,011 U.S. Treasury securities 99,552 — ( 4,400 ) — 95,152 State and municipal bonds and obligations 197,704 172 ( 6,532 ) — 191,344 $ 5,161,904 $ 172 $ ( 754,555 ) $ — $ 4,407,521 The Company did no t record a provision for credit losses on any AFS securities during either the year ended December 31, 2024 or 2023. Accrued interest receivable on AFS securities totaled $ 8.9 million and $ 9.2 million as of December 31, 2024 and 2023, respectively, and is included within other assets on the Consolidated Balance Sheets. The Company did no t record any write-offs of accrued interest income on AFS securities during either the year ended December 31, 2024 or 2023. No securities held by the Company were delinquent on contractual payments as of December 31, 2024 nor 2023, nor were any such securities placed on non-accrual status during the periods then ended. As of December 31, 2024 and 2023, the Company had no investments in obligations of individual states, counties, or municipalities which exceeded 10% of consolidated shareholders’ equity. 119 The following table summarizes gross realized gains and losses from sales of AFS securities for the periods indicated: For the Years Ended December 31, 2024 2023 2022 (In thousands) Gross realized gains from sales of AFS securities $ — $ — $ 1,775 Gross realized losses from sales of AFS securities ( 16,798 ) ( 333,170 ) ( 4,932 ) Net losses from sales of AFS securities $ ( 16,798 ) $ ( 333,170 ) $ ( 3,157 ) Information pertaining to AFS securities with gross unrealized losses as of December 31, 2024 and 2023, for which the Company did not recognize a provision for credit losses under CECL, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is as follows: As of December 31, 2024 Less than 12 Months 12 Months or Longer Total # of Holdings Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value (Dollars in thousands) Government-sponsored residential mortgage-backed securities 324 $ 9 $ 113,326 $ 537,424 $ 2,448,569 $ 537,433 $ 2,561,895 Government-sponsored commercial mortgage-backed securities 187 27 86,201 201,381 1,074,910 201,408 1,161,111 U.S. Agency bonds 1 — — 1,936 17,672 1,936 17,672 U.S. Treasury securities 6 — — 2,165 97,619 2,165 97,619 State and municipal bonds and obligations 238 819 19,361 13,285 163,940 14,104 183,301 756 $ 855 $ 218,888 $ 756,191 $ 3,802,710 $ 757,046 $ 4,021,598 As of December 31, 2023 Less than 12 Months 12 Months or Longer Total # of Holdings Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value (Dollars in thousands) Government-sponsored residential mortgage-backed securities 324 $ — $ — $ 521,527 $ 2,780,638 $ 521,527 $ 2,780,638 Government-sponsored commercial mortgage-backed securities 187 — — 201,653 1,124,376 201,653 1,124,376 U.S. Agency bonds 23 — — 20,443 216,011 20,443 216,011 U.S. Treasury securities 6 36 4,927 4,364 90,225 4,400 95,152 State and municipal bonds and obligations 196 233 22,894 6,299 135,279 6,532 158,173 736 $ 269 $ 27,821 $ 754,286 $ 4,346,529 $ 754,555 $ 4,374,350 As of December 31, 2024, the Company did not intend to sell these investments and has determined based upon available evidence that it is more-likely-than-not that the Company will not be required to sell each security before the expected recovery of its amortized cost basis. As a result, the Company did not recognize an ACL on these investments as of either December 31, 2024 or 2023. The causes of the impairments listed in the tables above by category are as follows as of December 31, 2024 and 2023: 120 • Government-sponsored mortgage-backed securities, U.S. Agency bonds and U.S. Treasury securities – The securities with unrealized losses in these portfolios have contractual terms that generally do not permit the issuer to settle the security at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality. Additionally, these securities are implicitly guaranteed by the U.S. government or one of its agencies. • State and municipal bonds and obligations – The securities with unrealized losses in this portfolio have contractual terms that generally do not permit the issuer to settle the security at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality. Held to Maturity Securities The amortized cost, gross unrealized gains and losses, ACL and fair value of HTM securities as of the dates indicated were as follows: As of December 31, 2024 Amortized Cost Unrealized Gains Unrealized Losses Allowance for Credit Losses Fair Value (In thousands) Debt securities: Government-sponsored residential mortgage-backed securities $ 231,709 $ — $ ( 29,438 ) $ — $ 202,271 Government-sponsored commercial mortgage-backed securities 189,006 — ( 19,553 ) — 169,453 $ 420,715 $ — $ ( 48,991 ) $ — $ 371,724 As of December 31, 2023 Amortized Cost Unrealized Gains Unrealized Losses Allowance for Credit Losses Fair Value (In thousands) Debt securities: Government-sponsored residential mortgage-backed securities $ 254,752 $ — $ ( 24,433 ) $ — $ 230,319 Government-sponsored commercial mortgage-backed securities 194,969 — ( 20,466 ) — 174,503 $ 449,721 $ — $ ( 44,899 ) $ — $ 404,822 The Company did no t record a provision for estimated credit losses on any HTM securities during either the year ended December 31, 2024 or 2023. As of both December 31, 2024 and 2023, the accrued interest receivable on HTM securities totaled $ 0.9 million, and is included within other assets on the Consolidated Balance Sheets. The Company did no t record any write-offs of accrued interest receivable on HTM securities during either the year ended December 31, 2024 or 2023. No HTM securities held by the Company were delinquent on contractual payments as of either December 31, 2024 or 2023, nor were any such securities placed on non-accrual status during the periods then ended. 121 Available for Sale and Held to Maturity Securities Contractual Maturity The amortized cost and estimated fair value of AFS and HTM securities by scheduled contractual maturities as of dates indicated were as follows: As of December 31, 2024 Due in one year or less Due after one year to five years Due after five to ten years Due after ten years Total Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value (In thousands) AFS securities Government-sponsored residential mortgage-backed securities $ 561 $ 557 $ 21,535 $ 20,940 $ 13,212 $ 12,268 $ 3,064,020 $ 2,528,130 $ 3,099,328 $ 2,561,895 Government-sponsored commercial mortgage-backed securities — — 436,515 404,181 270,546 235,853 655,458 521,077 1,362,519 1,161,111 U.S. Agency bonds — — 19,608 17,672 — — — — 19,608 17,672 U.S. Treasury securities 49,947 49,717 49,837 47,902 — — — — 99,784 97,619 State and municipal bonds and obligations 5,368 5,319 33,497 32,284 51,326 48,743 107,214 96,955 197,405 183,301 Total available for sale securities 55,876 55,593 560,992 522,979 335,084 296,864 3,826,692 3,146,162 4,778,644 4,021,598 HTM securities Government-sponsored residential mortgage-backed securities — — — — — — 231,709 202,271 231,709 202,271 Government-sponsored commercial mortgage-backed securities — — 133,168 121,471 55,838 47,982 — — 189,006 169,453 Total held to maturity securities — — 133,168 121,471 55,838 47,982 231,709 202,271 420,715 371,724 Total $ 55,876 $ 55,593 $ 694,160 $ 644,450 $ 390,922 $ 344,846 $ 4,058,401 $ 3,348,433 $ 5,199,359 $ 4,393,322 122 As of December 31, 2023 Due in one year or less Due after one year to five years Due after five to ten years Due after ten years Total Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value (In thousands) AFS securities Government-sponsored residential mortgage-backed securities $ — $ — $ 29,288 $ 28,188 $ 22,735 $ 21,235 $ 3,250,142 $ 2,731,215 $ 3,302,165 $ 2,780,638 Government-sponsored commercial mortgage-backed securities — — 256,229 234,725 379,749 327,198 690,051 562,453 1,326,029 1,124,376 U.S. Agency bonds — — 236,454 216,011 — — — — 236,454 216,011 U.S. Treasury securities — — 99,552 95,152 — — — — 99,552 95,152 State and municipal bonds and obligations 213 209 30,131 29,393 44,047 43,260 123,313 118,482 197,704 191,344 Total available for sale securities 213 209 651,654 603,469 446,531 391,693 4,063,506 3,412,150 5,161,904 4,407,521 HTM securities Government-sponsored residential mortgage-backed securities — — — — — — 254,752 230,319 254,752 230,319 Government-sponsored commercial mortgage-backed securities — — 80,014 72,952 114,955 101,551 — — 194,969 174,503 Total held to maturity securities — — 80,014 72,952 114,955 101,551 254,752 230,319 449,721 404,822 Total $ 213 $ 209 $ 731,668 $ 676,421 $ 561,486 $ 493,244 $ 4,318,258 $ 3,642,469 $ 5,611,625 $ 4,812,343 Mortgage-backed securities include investments in securities that are insured or guaranteed by Freddie Mac, Ginnie Mae or Fannie Mae. Mortgage-backed securities are purchased to achieve positive interest rate spread with minimal administrative expense, and to lower the Company’s credit risk. Mortgage-backed securities and callable securities are shown at their contractual maturity dates. However, both are expected to have shorter average lives due to expected prepayments and callable features, respectively. Included in the above maturity tables as of December 31, 2024 and 2023 were $ 196.4 million, and $ 394.4 million, respectively, of callable securities at fair value. Securities Pledged as Collateral As of December 31, 2024 and 2023, securities with a carrying value of $ 687.9 million and $ 615.7 million, respectively, were pledged to secure public deposits and for other purposes required by law. As of December 31, 2024 and 2023, deposits with associated pledged collateral included cash accounts from the Company’s wealth management division (“Cambridge Trust Wealth Management”), which was formerly operated under the name “Eastern Wealth Management,” and municipal deposit accounts. As of December 31, 2024, securities with a carrying value of $ 1.0 billion were pledged as collateral to the FHLBB. No securities were pledged to the FHLBB as collateral as of December 31, 2023. In March 2023 the Federal Reserve created the Bank Term Funding Program (the “Program”) that offered eligible depository institutions loans up to one year in length in return for any collateral eligible for purchase by the Federal Reserve Banks in open market operations, such as U.S. Treasuries. As of December 31, 2023, securities with a carrying value of $ 2.4 123 billion were pledged as collateral through the Program. On January 24, 2024, the Federal Reserve Board announced the Program would cease making new loans as scheduled on March 11, 2024. Accordingly, no securities were pledged as collateral under the Program as of December 31, 2024. Separately, as of December 31, 2024 and 2023, the Company pledged securities with a carrying value of $ 794.8 million and $ 168.8 million, respectively, to the Federal Reserve Discount Window (the “Discount Window”). 5. Loans and Allowance for Credit Losses Loans The following table provides a summary of the Company’s loan portfolio as of the dates indicated: As of December 31, 2024 2023 (In thousands) Commercial and industrial $ 3,296,068 $ 3,034,068 Commercial real estate 7,119,523 5,457,349 Commercial construction 494,842 386,999 Business banking 1,448,176 1,085,763 Residential real estate 4,063,659 2,565,485 Consumer home equity 1,385,394 1,208,231 Other consumer 271,422 235,533 Gross loans before unearned discounts and deferred fees, net 18,079,084 13,973,428 Allowance for loan losses (1) ( 228,952 ) ( 148,993 ) Unearned discounts and deferred fees, net ( 300,730 ) ( 25,068 ) Loans after the allowance for loan losses and net unearned discounts and deferred fees $ 17,549,402 $ 13,799,367 (1) The balance of accrued interest receivable excluded from amortized cost and the calculation of the allowance for loan losses amounted to $ 66.7 million and $ 53.9 million as of December 31, 2024 and 2023 , respectively, and is included within other assets on the Consolidated Balance Sheets. There are no other loan categories that exceed 10% of total loans not already reflected in the preceding table. The Company’s lending activities are conducted principally in the New England area with the exception of its Shared National Credit Program (“SNC Program”) portfolio and certain purchased loans. The Company participates in the SNC Program in an effort to improve its industry and geographical diversification. The SNC Program portfolio is included in the Company’s commercial and industrial, commercial real estate and commercial construction portfolios. The SNC Program portfolio is defined as loan syndications with exposure over $ 100 million and with three or more lenders participating. Most loans originated by the Company are either collateralized by real estate or other assets or guaranteed by federal and local governmental authorities. The ability and willingness of the single-family residential and consumer borrowers to honor their repayment commitments is generally dependent on the level of overall economic activity within the borrowers’ geographic areas and real estate values. The ability and willingness of commercial real estate, commercial and industrial, and construction loan borrowers to honor their repayment commitments is generally dependent on the health of the real estate economy in the borrowers’ geographic areas and the general economy. Loans Pledged as Collateral The carrying value of loans pledged to secure advances from the FHLBB were $ 2.3 billion and $ 4.6 billion at December 31, 2024 and 2023, respectively. The balance of funds borrowed from the FHLBB were $ 17.6 million and $ 17.7 million at December 31, 2024 and 2023, respectively. The carrying value of loans pledged to secure advances from the Federal Reserve Bank (“FRB”) was $ 3.1 billion and $ 1.1 billion at December 31, 2024 and 2023, respectively. There were no funds borrowed from the FRB outstanding at either December 31, 2024 or 2023. Serviced Loans At December 31, 2024 and 2023, mortgage loans partially or wholly-owned by others and serviced by the Company amounted to $ 228.4 million and $ 77.2 million, respectively. The increase in loans serviced from December 31, 2023 124 to December 31, 2024 was primarily due to the merger and the acquisition of the portfolio of mortgage loans partially or wholly-owned by others and previously serviced by Cambridge. Purchased Loans The Company began purchasing residential real estate mortgage loans during the third quarter of 2022 and ceased such purchases in the first quarter of 2023. Loans purchased were subject to the same underwriting criteria as those loans originated directly by the Company. During the year ended December 31, 2024, the Company did not purchase any residential real estate mortgage loans. During the year ended December 31, 2023, the Company purchased $ 32.0 million of residential real estate mortgage loans. As of December 31, 2024 and 2023, the amortized cost balance of loans purchased was $ 367.0 million and $ 385.5 million, respectively. Commercial Loan Sales During the year ended December 31, 2024, the Company did not sell any commercial and industrial loans. During the year ended December 31, 2023, the Company sold $ 214.2 million of commercial and industrial loans previously included in the SNC program portfolio and recognized a loss on sale of $ 2.7 million. Allowance for Loan Losses The allowance for loan losses is established to provide for management’s estimate of expected lifetime credit losses on loans measured at amortized cost at the balance sheet date through a provision for loan losses charged to net income. Charge-offs, net of recoveries, are charged directly to the allowance for loan losses. Commercial and residential loans are charged-off in the period in which they are deemed uncollectible. Delinquent loans in these product types are subject to ongoing review and analysis to determine if a charge-off in the current period is appropriate. For consumer loans, policies and procedures exist that require charge-off consideration upon a certain triggering event depending on the product type. The following tables summarize the change in the allowance for loan losses by loan category for the periods indicated: For the Year Ended December 31, 2024 Commercial and Industrial Commercial Real Estate Commercial Construction Business Banking Residential Real Estate Consumer Home Equity Other Consumer Total (In thousands) Allowance for loan losses: Beginning balance $ 26,959 $ 65,475 $ 6,666 $ 14,913 $ 25,954 $ 5,595 $ 3,431 $ 148,993 Initial reserve on PCD loans at merger 6,589 45,656 26 581 2,919 40 19 55,830 Charge-offs ( 40 ) ( 42,556 ) — ( 2,498 ) ( 28 ) ( 59 ) ( 2,576 ) ( 47,757 ) Recoveries 99 2,207 — 1,189 205 136 670 4,506 Provision 7,483 45,393 1,770 5,714 3,241 1,760 2,019 67,380 Ending balance $ 41,090 $ 116,175 $ 8,462 $ 19,899 $ 32,291 $ 7,472 $ 3,563 $ 228,952 For the Year Ended December 31, 2023 Commercial and Industrial Commercial Real Estate Commercial Construction Business Banking Residential Real Estate Consumer Home Equity Other Consumer Total (In thousands) Allowance for loan losses: Beginning balance $ 26,859 $ 54,730 $ 7,085 $ 16,189 $ 28,129 $ 6,454 $ 2,765 $ 142,211 Cumulative effect of change in accounting principle (1) 47 — — ( 140 ) ( 849 ) ( 201 ) — ( 1,143 ) Charge-offs ( 13 ) ( 8,008 ) — ( 4,645 ) — ( 7 ) ( 2,419 ) ( 15,092 ) Recoveries 296 198 — 1,867 97 41 466 2,965 Provision (release) ( 230 ) 18,555 ( 419 ) 1,642 ( 1,423 ) ( 692 ) 2,619 20,052 Ending balance $ 26,959 $ 65,475 $ 6,666 $ 14,913 $ 25,954 $ 5,595 $ 3,431 $ 148,993 125 (1) Represents the adjustment needed to reflect the cumulative day one impact pursuant to the Company’s adoption of ASU 2022-02 (i.e., cumulative effect adjustment related to the adoption of ASU 2022-02 as of January 1, 2023). The adjustment represents a $ 1.1 million decrease to the allowance attributable to the change in accounting methodology for estimating the allowance for loan losses resulting from the Company’s adoption of the standard. For the Year Ended December 31, 2022 Commercial and Industrial Commercial Real Estate Commercial Construction Business Banking Residential Real Estate Consumer Home Equity Other Consumer Other Total (In thousands) Allowance for loan losses: Beginning balance $ 18,018 $ 52,373 $ 2,585 $ 10,983 $ 6,556 $ 3,722 $ 3,308 $ 242 $ 97,787 Cumulative effect of change in accounting principle (1) 11,533 ( 6,655 ) 1,485 6,160 13,489 1,857 ( 541 ) ( 242 ) 27,086 Charge-offs ( 269 ) — — ( 2,292 ) — ( 1 ) ( 2,269 ) — ( 4,831 ) Recoveries 1,322 91 — 2,069 94 24 644 — 4,244 Provision (release) ( 3,745 ) 8,921 3,015 ( 731 ) 7,990 852 1,623 — 17,925 Ending balance $ 26,859 $ 54,730 $ 7,085 $ 16,189 $ 28,129 $ 6,454 $ 2,765 $ — $ 142,211 (1) R epresents the adjustment needed to reflect the cumulative day one impact pursuant to the Company’s adoption of ASU 2016-13 (i.e., cumulative effect adjustment related to the adoption of ASU 2016-13 as of January 1, 2022). The adjustment represents a $ 27.1 million increase to the allowance attributable to the change in accounting methodology for estimating the allowance for loan losses resulting from the Company’s adoption of the standard. The adjustment also includes the adjustment needed to reflect the day one reclassification of the Company’s PCI loan balances to PCD and the associated gross-up of $ 0.1 million, pursuant to the Company’s adoption of ASU 2016-13. The Company recorded provisions for allowance for loan losses of $ 67.4 million and $ 20.1 million for the years ended December 31, 2024 and 2023, respectively. During the year ended December 31, 2024, the Company recorded a provision for allowance for loan losses of $ 40.9 million related to non-PCD loans acquired in the merger which closed on July 12, 2024. Excluding this amount, the provision for the year ended December 31, 2024 amounted to $ 26.5 million. Management determined a provision to be necessary for the year ended December 31, 2024 primarily due to $ 42.6 million in charge-offs of commercial real estate loans and due to an increase in specific reserves for commercial real estate loans collateralized by property in the office risk segment. Included in charge-offs of commercial real estate loans during the year ended December 31, 2024 was $ 41.3 million of charge-offs on loans collateralized by property in the office risk segment which transitioned to non-accrual status during the year ended December 31, 2024 and were not reserved for on a specific reserve basis as of December 31, 2023, and $ 19.8 million of charge-offs on PCD loans acquired in the merger with Cambridge. Also contributing to the increase in the allowance for loan losses was an initial reserve of $ 55.8 million recorded by the Company related to PCD loans acquired in the merger with Cambridge. This amount represented the initial allowance on such loans and was recorded with a corresponding gross-up of the loan amortized cost balance in connection with purchase accounting therefore not increasing the provision for allowance for loan losses. Refer to Note 3, “Mergers and Acquisitions” for additional discussion. Change in Accounting Estimate In connection with its quarterly computation of the allowance for loan losses, management performs back-testing of the model results compared to actual balances and losses as a part of generating the accounting estimate. In the third quarter of 2024, in response to back-testing results, management updated its prepayment estimate, resulting in an increase to the loan portfolio’s weighted average life, and qualitative reserve framework which reflects management’s best estimate of expected credit losses. The net effect of the such changes to the allowance for loan losses estimation process was an increase of approximately $ 5.6 million. Reserve for Unfunded Commitments Management evaluates the need for a reserve on unfunded lending commitments in a manner consistent with loans held for investment. As of December 31, 2024 and December 31, 2023, the Company’s reserve for unfunded lending commitments was $ 13.1 million and $ 14.1 million, respectively, which is recorded within other liabilities in the Company’s Consolidated Balance Sheets. Portfolio Segmentation 126 Management uses a methodology to systematically estimate the amount of expected losses in each segment of loans in the Company’s portfolio. Commercial and industrial business banking, investment commercial real estate, and commercial and industrial loans are evaluated based upon loan-level risk characteristics, historical losses and other factors which form the basis for estimating expected losses. Other portfolios, including owner occupied commercial real estate (which includes business banking owner occupied commercial real estate), commercial construction, residential mortgages, home equity and consumer loans, are analyzed as groups taking into account delinquency ratios, and the Company’s and peer banks’ historical loss experience. For the purposes of estimating the allowance for loan losses, management segregates the loan portfolio into loan categories that share similar risk characteristics such as the purpose of the loan, repayment source, and collateral. These characteristics are considered when determining the appropriate level of the allowance for each category. Some examples of these risk characteristics unique to each loan category include: Commercial Lending Commercial and industrial : The primary risk associated with commercial and industrial loans is the ability of borrowers to achieve business results consistent with those projected at origination. Collateral frequently consists of a first lien position on business assets including, but not limited to, accounts receivable, inventory, aircraft and equipment. The primary repayment source is operating cash flow and, secondarily, the liquidation of assets. Under its lending guidelines, the Company generally requires a corporate or personal guarantee from any entity or individual that holds a material ownership in the borrowing entity when the loan-to-value of a commercial and industrial loan is in excess of a specified threshold. Commercial real estate : Collateral values are established by independent third-party appraisals and evaluations. Primary repayment sources include operating income generated by the real estate, permanent debt refinancing, sale of the real estate and, secondarily, liquidation of the collateral. Under its lending guidelines, the Company generally requires a corporate or personal guarantee from individuals that hold material ownership in the borrowing entity when the loan-to-value of a commercial real estate loan is in excess of a specified threshold. Commercial construction : These loans are generally considered to present a higher degree of risk than other real estate loans and may be affected by a variety of factors, such as adverse changes in interest rates and the borrower’s ability to control costs and adhere to time schedules. Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the completed project. Construction loan repayment is substantially dependent on the ability of the borrower to complete the project and obtain permanent financing. Business banking : These loans are typically secured by all business assets or commercial real estate. Business banking originations include traditionally underwritten loans as well as partially automated scored loans. Business banking scored loans are determined by utilizing the Company’s proprietary decision matrix that has a number of quantitative factors including, but not limited to, a guarantor’s credit score, industry risk, and time in business. The Company also engages in Small Business Association (“SBA”) lending. The SBA guarantees reduce the Company’s loss due to default and are considered a credit enhancement to the loan structure. Residential Lending These loans are made to borrowers who demonstrate the ability to repay principal and interest on a monthly basis. Underwriting considerations include, among others, income sources and their reliability, willingness to repay as evidenced by credit repayment history, financial resources (including cash reserves) and the value of the collateral. The Company maintains policy standards for minimum credit score and cash reserves and maximum loan-to-value consistent with a “prime” portfolio. Collateral consists of mortgage liens on 1-4 family residential dwellings. The policy standards applied to loans originated by the Company are the same as those applied to purchased loans. The Company does not originate or purchase sub-prime or other high-risk loans. Residential loans are originated either for sale to investors or retained in the Company’s loan portfolio. Decisions about whether to sell or retain residential loans are made based on the interest rate characteristics, pricing for loans in the secondary mortgage market, competitive factors and the Company’s liquidity and capital needs. Consumer Lending Consumer home equity : Home equity lines of credit are granted for ten years with monthly interest-only repayment requirements. At the end of the ten-year draw period, home equity lines of credit are amortized over the remaining maturity period and monthly payments of principal and interest are required. Home equity loans are term loans that require the monthly payment of principal and interest such that the loan will be fully amortized at maturity. Underwriting considerations are materially consistent with those utilized in residential real estate. Collateral consists of a senior or subordinate lien on owner-occupied residential property. 127 Other consumer : The Company’s policy and underwriting in this category, which is comprised primarily of home improvement, automobile and aircraft loans, include the following factors, among others: income sources and reliability, credit histories, term of repayment, and collateral value, as applicable. These are typically granted on an unsecured basis, with the exception of aircraft and automobile loans. Credit Quality Commercial Lending Credit Quality The credit quality of the Company’s commercial loan portfolio is actively monitored and supported by a comprehensive credit approval process and all large dollar transactions are sent for approval to a committee of seasoned business line and credit professionals. The Company maintains an independent credit risk review function that reports directly to the Risk Management Committee of the Board of Directors. Credits that demonstrate significant deterioration in credit quality are transferred to a specialized group of experienced officers for individual attention. The Company monitors credit quality indicators and utilizes portfolio scorecards to assess the risk of its commercial portfolio. Specifically, the Company utilizes a 15-point credit risk-rating system to manage risk and identify potential problem loans. Under this point system, risk-rating assignments are based upon a number of quantitative and qualitative factors that are under continual review. Factors include cash flow, collateral coverage, liquidity, leverage, position within the industry, internal controls and management, financial reporting, and other considerations. Commercial loan risk ratings are (re)evaluated for each loan at least once-per-year. The risk-rating categories under the credit risk-rating system are defined as follows: 0 Risk Rating- Unrated Certain segments of the portfolios are not rated. These segments include aircraft loans, business banking scored loan products, and other commercial loans managed by exception. Loans within this unrated loan segment are monitored by delinquency status; and for lines of credit greater than $ 100,000 in exposure, an annual review is conducted which includes the review of the business score and loan and deposit account performance. The Company supplements performance data with current business credit scores for the business banking portfolio on a quarterly basis. Unrated commercial and business banking loans are generally restricted to commercial exposure of less than $ 1.5 million. Loans included in this category generally are not required to provide regular financial reporting or regular covenant monitoring. For purposes of estimating the allowance for loan losses, unrated loans are considered in the same manner as “Pass” rated loans. Unrated loans are included with “Pass” rated loans for disclosure purposes. 1-10 Risk Rating – Pass Loans with a risk rating of 1-10 are classified as “Pass” and are comprised of loans that range from “substantially risk free” which indicates borrowers of unquestioned credit standing, well-established national companies with a very strong financial condition, and loans fully secured by policy conforming cash levels, through “low pass” which indicates acceptable rated loans that may be experiencing weak cash flow, impending lease rollover or minor liquidity concerns. 11 Risk Rating – Special Mention (Potential Weakness) Loans to borrowers in this category exhibit potential weaknesses or downward trends deserving management’s close attention. While potentially weak, no loss of principal or interest is envisioned. Included in this category are borrowers who are performing as agreed, are weak when compared to industry standards, may be experiencing an interim loss and may be in declining industries. An element of asset quality, financial flexibility or management is below average. The Company does not consider borrowers within this category as new business prospects. Borrowers rated special mention may find it difficult to obtain alternative financing from traditional bank sources. 12 Risk Rating – Substandard (Well-Defined Weakness) Loans with a risk-rating of 12 exhibit well-defined weaknesses that, if not corrected, may jeopardize the orderly liquidation of the debt. A loan is classified as substandard if it is inadequately protected by the repayment capacity of the obligor or by the collateral pledged. Specifically, repayment under market rates and terms, or by the requirements under the existing loan documents, is in jeopardy, but no loss of principal or interest is envisioned. There is a possibility that a partial loss of principal and/or interest will occur in the future if the deficiencies are not corrected. Loss potential, while existing in the aggregate portfolio of substandard assets, does not have to exist in individual assets classified as substandard. Non-accrual is possible, but not mandatory, in this class. 128 13 Risk Rating – Doubtful (Loss Probable) Loans classified as doubtful have comparable weaknesses as found in the loans classified as substandard, with the added provision that such weaknesses make collection of the debt in full (based on currently existing facts, conditions and values) highly questionable and improbable. Serious problems exist such that a partial loss of principal is likely. The probability of loss exists, but because of reasonably specific pending factors that may work to strengthen the credit, estimated losses are deferred until a more exact status can be determined. Specific reserves will be the amount identified after specific review. Non-accrual is mandatory in this class. 14 Risk Rating – Loss Loans to borrowers in this category are deemed incapable of repayment. Loans to such borrowers are considered uncollectible and of such little value that continuance as active assets of the Company is not warranted. This classification does not mean that the loans have no recovery or salvage value, but rather, it is not practical or desirable to defer writing off these assets even though partial recovery may occur in the future. Loans in this category have a recorded investment of $0 at the time of the downgrade. Residential and Consumer Lending Credit Quality For the Company’s residential and consumer portfolios, the quality of the loan is best indicated by the repayment performance of an individual borrower. Updated appraisals, broker opinions of value and other collateral valuation methods are employed in the residential and consumer portfolios, typically for credits that are deteriorating. Delinquency status is determined using payment performance, while accrual status may be determined using a combination of payment performance, expected borrower viability and collateral value. Delinquent consumer loans are handled by a team of seasoned collection specialists. The following table details the amortized cost balances of the Company’s loan portfolios, presented by credit quality indicator and origination year as of December 31, 2024, and gross charge-offs for the year ended December 31, 2024: 2024 2023 2022 2021 2020 Prior Revolving Loans Revolving Loans Converted to Term Loans (1) Total (In thousands) Commercial and industrial Pass $ 358,054 $ 365,372 $ 407,129 $ 310,250 $ 341,049 $ 745,815 $ 522,236 $ 22,800 $ 3,072,705 Special Mention 19,721 25,719 5,963 24,199 43 4,563 26,522 508 107,238 Substandard 996 21,858 30,731 1,019 2,124 1,366 22,525 710 81,329 Doubtful — — 5,295 — — 8 — — 5,303 Loss — — — — — — — — — Total commercial and industrial 378,771 412,949 449,118 335,468 343,216 751,752 571,283 24,018 3,266,575 Current period gross charge-offs — — 30 — — 10 — — 40 Commercial real estate Pass 531,193 575,929 1,740,688 1,020,015 722,669 1,988,069 82,661 10,595 6,671,819 Special Mention 9,457 45,188 26,551 14,613 8,855 35,952 2,976 — 143,592 Substandard — 45,762 17,404 18,051 293 44,713 1 — 126,224 Doubtful 3,450 17,081 — — 4,237 77,675 — — 102,443 Loss — — — — — — — — — Total commercial real estate 544,100 683,960 1,784,643 1,052,679 736,054 2,146,409 85,638 10,595 7,044,078 Current period gross charge-offs 1,113 4,220 — — 5,182 32,041 — — 42,556 Commercial construction Pass 96,423 228,979 132,389 16,836 — — 15,616 — 490,243 Special Mention — 621 — — — — — — 621 Substandard 785 — — — — — — — 785 Doubtful — — — — — — — — — Loss — — — — — — — — — Total commercial construction 97,208 229,600 132,389 16,836 — — 15,616 — 491,649 129 Current period gross charge-offs — — — — — — — — — Business banking Pass 173,110 141,000 178,696 208,835 156,366 441,532 103,222 5,040 1,407,801 Special Mention 533 60 1,409 1,929 — 6,203 20 262 10,416 Substandard 314 1,102 1,000 911 1,516 9,402 197 297 14,739 Doubtful — 49 1,098 16 — 366 — 718 2,247 Loss — — — — — — — — — Total business banking 173,957 142,211 182,203 211,691 157,882 457,503 103,439 6,317 1,435,203 Current period gross charge-offs 31 647 145 671 329 270 — 405 2,498 Residential real estate Current and accruing 213,244 321,097 970,831 1,032,297 548,987 800,995 — — 3,887,451 30-89 days past due and accruing 944 2,300 6,480 5,437 3,209 9,606 — — 27,976 Loans 90 days or more past due and still accruing — — — — — — — — — Non-accrual 884 103 3,721 1,092 575 6,580 — — 12,955 Total residential real estate 215,072 323,500 981,032 1,038,826 552,771 817,181 — — 3,928,382 Current period gross charge-offs — — — — — 28 — — 28 Consumer home equity Current and accruing 10,425 32,573 74,385 7,954 4,293 76,953 1,143,767 15,629 1,365,979 30-89 days past due and accruing — 275 103 — — 1,179 6,965 574 9,096 Loans 90 days or more past due and still accruing — — — — — — — — — Non-accrual — 63 61 — — 1,223 8,151 715 10,213 Total consumer home equity 10,425 32,911 74,549 7,954 4,293 79,355 1,158,883 16,918 1,385,288 Current period gross charge-offs — — — — — 2 57 — 59 Other consumer Current and accruing 61,430 62,170 26,869 16,970 8,453 16,914 32,914 19 225,739 30-89 days past due and accruing 116 146 143 75 25 646 135 15 1,301 Loans 90 days or more past due and still accruing — — — — — — — — — Non-accrual — 11 31 17 7 4 44 25 139 Total other consumer 61,546 62,327 27,043 17,062 8,485 17,564 33,093 59 227,179 Current period gross charge-offs 1,100 420 426 248 64 131 139 48 2,576 Total $ 1,481,079 $ 1,887,458 $ 3,630,977 $ 2,680,516 $ 1,802,701 $ 4,269,764 $ 1,967,952 $ 57,907 $ 17,778,354 (1) The amounts presented represent the amortized cost as of December 31, 2024 of revolving loans that were converted to term loans during the year ended December 31, 2024. The following table details the amortized cost balances of the Company’s loan portfolios, presented by credit quality indicator and origination year as of December 31, 2023: 2023 2022 2021 2020 2019 Prior Revolving Loans Revolving Loans Converted to Term Loans (1) Total (In thousands) Commercial and industrial Pass $ 477,138 $ 442,896 $ 350,782 $ 341,243 $ 140,641 $ 641,342 $ 485,448 $ 3,255 $ 2,882,745 Special Mention 4,229 25,796 14,994 13,563 89 553 51,106 455 110,785 Substandard 1,534 11,995 1,775 405 — 2,581 7,803 — 26,093 Doubtful — — — — — 8 — — 8 Loss — — — — — — — — — 130 Total commercial and industrial 482,901 480,687 367,551 355,211 140,730 644,484 544,357 3,710 3,019,631 Commercial real estate Pass 498,590 1,435,893 855,014 573,370 516,689 1,291,189 47,581 2,556 5,220,882 Special Mention 15,200 7,990 — 736 2,281 34,803 — — 61,010 Substandard 19,738 12,589 15,237 3,938 33,413 48,978 8,006 — 141,899 Doubtful 10,615 — — — — 19,441 — — 30,056 Loss — — — — — — — — — Total commercial real estate 544,143 1,456,472 870,251 578,044 552,383 1,394,411 55,587 2,556 5,453,847 Commercial construction Pass 133,463 151,957 96,147 — — — 2,614 — 384,181 Special Mention 456 — — — — — — — 456 Substandard — — — — — — — — — Doubtful — — — — — — — — — Loss — — — — — — — — — Total commercial construction 133,919 151,957 96,147 — — — 2,614 — 384,637 Business banking Pass 139,237 165,247 182,606 146,180 110,638 229,636 73,054 3,996 1,050,594 Special Mention 1,474 2,553 1,009 4,294 4,692 11,479 23 27 25,551 Substandard 1,310 596 2,684 2,071 1,464 3,423 594 579 12,721 Doubtful — — — — 507 220 — — 727 Loss — — — — — — — — — Total business banking 142,021 168,396 186,299 152,545 117,301 244,758 73,671 4,602 1,089,593 Residential real estate Current and accruing 257,671 728,997 665,811 354,003 93,817 451,812 — — 2,552,111 30-89 days past due and accruing 750 6,615 2,437 2,112 1,496 8,219 — — 21,629 Loans 90 days or more past due and still accruing — — — — — — — — — Non-accrual — 1,755 1,433 291 288 4,958 — — 8,725 Total residential real estate 258,421 737,367 669,681 356,406 95,601 464,989 — — 2,582,465 Consumer home equity Current and accruing 30,393 84,065 9,151 4,899 4,166 80,687 970,882 9,472 1,193,715 30-89 days past due and accruing 148 483 — — — 558 7,509 223 8,921 Loans 90 days or more past due and still accruing — — — — — — — — — Non-accrual — 66 — — — 1,466 6,770 230 8,532 Total consumer home equity 30,541 84,614 9,151 4,899 4,166 82,711 985,161 9,925 1,211,168 Other consumer Current and accruing 93,659 36,601 23,962 12,427 11,367 14,609 13,353 85 206,063 30-89 days past due and accruing 170 271 153 25 12 92 40 — 763 Loans 90 days or more past due and still accruing — — — — — — — — — Non-accrual 50 61 25 2 14 34 7 — 193 Total other consumer 93,879 36,933 24,140 12,454 11,393 14,735 13,400 85 207,019 Total $ 1,685,825 $ 3,116,426 $ 2,223,220 $ 1,459,559 $ 921,574 $ 2,846,088 $ 1,674,790 $ 20,878 $ 13,948,360 (1) The amounts presented represent the amortized cost as of December 31, 2023 of revolving loans that were converted to term loans during the year ended December 31, 2023. Asset Quality 131 The Company manages its loan portfolio with careful monitoring. As a general rule, loans more than 90 days past due with respect to principal and interest are classified as non-accrual loans. Exceptions may be made if management believes that collateral held by the Company is clearly sufficient and in full satisfaction of both principal and interest. The Company may also use discretion regarding other loans over 90 days delinquent if the loan is well secured and in the process of collection. Non-accrual loans and loans that are more than 90 days past due but still accruing interest are considered non-performing loans. Non-accrual loans may be returned to an accrual status when principal and interest payments are no longer delinquent, and the risk characteristics of the loan have improved to the extent that there no longer exists a concern as to the collectability of principal and interest. Loans are considered past due based upon the number of days delinquent according to their contractual terms. A loan is expected to remain on non-accrual status until it becomes current with respect to principal and interest, the loan is liquidated, or the loan is determined to be uncollectible and is charged-off against the allowance for loan losses. The following tables show the age analysis of past due loans as of the dates indicated: As of December 31, 2024 30-59 Days Past Due 60-89 Days Past Due 90 or More Days Past Due Total Past Due Current Total Loans (In thousands) Commercial and industrial $ 28 $ — $ 90 $ 118 $ 3,266,457 $ 3,266,575 Commercial real estate 17,081 6,432 9,180 32,693 7,011,385 7,044,078 Commercial construction — — — — 491,649 491,649 Business banking 13,680 1,605 1,826 17,111 1,418,092 1,435,203 Residential real estate 21,037 6,947 12,786 40,770 3,887,612 3,928,382 Consumer home equity 7,254 2,195 8,449 17,898 1,367,390 1,385,288 Other consumer 1,130 171 109 1,410 225,769 227,179 Total $ 60,210 $ 17,350 $ 32,440 $ 110,000 $ 17,668,354 $ 17,778,354 As of December 31, 2023 30-59 Days Past Due 60-89 Days Past Due 90 or More Days Past Due Total Past Due Current Total Loans (In thousands) Commercial and industrial $ 3,316 $ — $ 465 $ 3,781 $ 3,015,850 $ 3,019,631 Commercial real estate — — — — 5,453,847 5,453,847 Commercial construction — — — — 384,637 384,637 Business banking 3,455 1,647 1,202 6,304 1,083,289 1,089,593 Residential real estate 17,116 4,888 6,764 28,768 2,553,697 2,582,465 Consumer home equity 6,517 2,600 8,204 17,321 1,193,847 1,211,168 Other consumer 532 235 189 956 206,063 207,019 Total $ 30,936 $ 9,370 $ 16,824 $ 57,130 $ 13,891,230 $ 13,948,360 132 The following table presents information regarding non-accrual loans as of the dates indicated: As of December 31, 2024 As of December 31, 2023 Non-Accrual Loans With ACL Non-Accrual Loans Without ACL (1) Total Non-Accrual Loans Non-Accrual Loans With ACL Non-Accrual Loans Without ACL (1) Total Nonaccrual Loans (In thousands) Commercial and industrial $ 5,395 $ 8 $ 5,403 $ 4 $ 464 $ 468 Commercial real estate 90,003 12,555 102,558 13,969 16,087 30,056 Commercial construction — — — — — — Business banking 4,551 1 4,552 4,572 11 4,583 Residential real estate 12,955 — 12,955 8,725 — 8,725 Consumer home equity 10,213 — 10,213 8,532 — 8,532 Other consumer 139 — 139 193 — 193 Total non-accrual loans $ 123,256 $ 12,564 $ 135,820 $ 35,995 $ 16,562 $ 52,557 (1) The loans on non-accrual status and without an ACL as of both December 31, 2024 and December 31, 2023, were primarily comprised of collateral dependent loans for which the fair value of the underlying loan collateral exceeded the loan carrying value. The amount of interest income recognized on non-accrual loans during the year ended December 31, 2024 and 2023 was not significant. As of both December 31, 2024 and December 31, 2023, there were no loans greater than 90 days past due and still accruing. It is the Company’s policy to reverse any accrued interest when a loan is put on non-accrual status and, generally, to record any payments received from a borrower related to a loan on non-accrual status as a reduction of the amortized cost basis of the loan. Accrued interest reversed against interest income for the years ended December 31, 2024 and 2023 was not significant. For collateral values for residential mortgage and home equity loans, the Company relies primarily upon third-party valuation information from certified appraisers and values are generally based upon recent appraisals of the underlying collateral, brokers’ opinions based upon recent sales of comparable properties, or estimated auction or liquidation values less estimated costs to sell. As of December 31, 2024 and December 31, 2023, the Company had collateral-dependent residential mortgage and home equity loans totaling $ 1.1 million and $ 0.8 million, respectively. For collateral-dependent commercial loans, the amount of the allowance for loan losses is individually assessed based upon the fair value of the collateral. Various types of collateral are used, including real estate, inventory, equipment, accounts receivable, securities and cash, among others. For commercial real estate loans, the Company relies primarily upon third-party valuation information from certified appraisers and values are generally based upon recent appraisals of the underlying collateral, brokers’ opinions based upon recent sales of comparable properties, estimated equipment auction or liquidation values, income capitalization, or a combination of income capitalization and comparable sales. As of December 31, 2024 and December 31, 2023, the Company had collateral-dependent commercial loans totaling $ 107.7 million and $ 30.7 million, respectively. The increase in collateral-dependent commercial loans at December 31, 2024 from December 31, 2023 was primarily due to collateral-dependent PCD loans acquired in connection with the Company’s merger with Cambridge. Appraisals for all loan types are obtained at the time of loan origination as part of the loan approval process and are updated at the time of a loan modification and/or refinance and as considered necessary by management for impairment review purposes. In addition, appraisals are updated as required by regulatory pronouncements. As of both December 31, 2024 and December 31, 2023, the Company had no residential real estate held in other real estate owned (“OREO”). As of December 31, 2024, there were four residential real estate loans, which had an aggregate balance of $ 0.4 million, collateralized by residential real estate property for which formal foreclosure proceedings were in-process. As of December 31, 2023, there were two residential real estate loans, which had an aggregate balance of $ 0.2 million, collateralized by residential real estate property for which formal foreclosure proceedings were in-process. As of December 31, 2024, there were six consumer home equity loans, which had an aggregate balance of $ 0.5 million, collateralized by residential real estate property for which formal foreclosure proceedings were in-process. As of December 31, 2023, there were three consumer home equity loans, which had an aggregate balance of $ 0.2 million, collateralized by residential real estate property for which formal foreclosure proceedings were in-process. Loan Modifications to Borrowers Experiencing Financial Difficulty 133 The following table shows the amortized cost balance as of December 31, 2024 and 2023 of loans modified during the years then ended to borrowers experiencing financial difficulty by the type of concession granted: As of December 31, 2024 As of December 31, 2023 Amortized Cost Balance % of Total Portfolio Amortized Cost Balance % of Total Portfolio (Dollars in thousands) Interest Rate Reduction: Business banking $ 390 0.03 % $ 43 0.00 % Residential real estate — — % 301 0.01 % Consumer home equity 869 0.06 % 1,883 0.16 % Total interest rate reduction $ 1,259 0.01 % $ 2,227 0.02 % Other-than-Insignificant Delay in Repayment: Commercial real estate $ 11,453 0.16 % $ — — % Business banking 244 0.02 % 20 0.00 % Residential real estate 1,320 0.03 % 3,284 0.13 % Consumer home equity 1,387 0.10 % 1,004 0.08 % Total other-than-insignificant delay in repayment $ 14,404 0.08 % $ 4,308 0.03 % Term Extension: Commercial real estate $ 7,595 0.11 % $ — — % Business banking 18 0.00 % 274 0.03 % Residential real estate 189 0.00 % — — % Consumer home equity 2 0.00 % — — % Total term extension $ 7,804 0.04 % $ 274 0.00 % Combination—Interest Rate Reduction & Other-than-Insignificant Delay in Repayment: Commercial real estate $ — — % $ 10,615 0.19 % Business banking — — % 86 0.01 % Consumer home equity 387 0.03 % 603 0.05 % Total combination—interest rate reduction & other-than-insignificant delay in repayment $ 387 0.00 % $ 11,304 0.08 % Combination—Interest Rate Reduction & Term Extension: Business banking $ 116 0.01 % $ 561 0.05 % Consumer home equity — — % 213 0.02 % Total combination—interest rate reduction & term extension $ 116 0.00 % $ 774 0.01 % Combination—Term Extension & Other-than-Insignificant Delay in Repayment: Commercial real estate $ 6,692 0.10 % $ — — % Business banking — — % 24 0.00 % Residential real estate — — % 140 0.01 % Total combination—term extension & other-than-insignificant delay in repayment $ 6,692 0.04 % $ 164 0.00 % Combination—Interest Rate Reduction, Term Extension & Other-than-Insignificant Delay in Repayment Business banking $ 35 0.00 % $ 180 0.02 % Residential real estate — — % 81 0.00 % Consumer home equity 5 0.00 % 51 0.00 % Total combination—interest rate reduction, term extension & other-than-insignificant delay in repayment $ 40 0.00 % $ 312 0.00 % Total by portfolio segment Commercial real estate $ 25,740 0.37 % $ 10,615 0.19 % Business banking 803 0.06 % 1,188 0.11 % Residential real estate 1,509 0.04 % 3,806 0.15 % Consumer home equity 2,650 0.19 % 3,754 0.31 % Total $ 30,702 0.17 % $ 19,363 0.14 % The following table describes the financial effect of the modifications made during the year ended December 31, 2024 to borrowers experiencing financial difficulty: 134 Loan Type Financial Effect (1) Interest Rate Reduction Business banking Reduced weighted average contractual interest rate from 9.5 % to 5.2 %. Consumer home equity Reduced weighted average contractual interest rate from 8.1 % to 4.7 %. Other-than-Insignificant Delay in Repayment Commercial real estate Deferred a weighted average of 6 payments. The loans were re-amortized over an extended payment period resulting in reduced monthly payments for the borrowers. Business banking Deferred a weighted average of 6 payments. For principal and interest deferrals, the loans were re-amortized over an extended payment period resulting in reduced monthly payment amounts for the borrowers. For interest-only deferrals, interest accrued at the time of the modification was added to the end of the loan life. Residential real estate Deferred a weighted average of 6 principal and interest payments which were added to the end of the loan life. Consumer home equity Deferred a weighted average of 11 principal and interest payments which were added to the end of the loan life. Term Extension Commercial real estate Added a weighted average 2.3 years to the life of loans, which reduced monthly payment amounts for the borrowers. Business banking Added a weighted average 2.3 years to the life of loans, which reduced monthly payment amounts for the borrowers. Residential real estate Added 2.0 years to the life of the loan, which reduced the monthly payment amount for the borrower. Consumer home equity Added a weighted average 7.4 years to the life of loans, which reduced monthly payment amounts for the borrowers. (1) Loans that were modified in more than one manner are included in each modification type corresponding to the type of modifications performed. The following table describes the financial effect of the modifications made during the year ended December 31, 2023 to borrowers experiencing financial difficulty: Loan Type Financial Effect (1) Interest Rate Reduction Commercial real estate Reduced weighted average contractual interest rate from 7.4 % to 3.4 %. Business banking Reduced weighted average contractual interest rate from 9.8 % to 7.6 %. Residential real estate Reduced weighted average contractual interest rate from 5.4 % to 3.6 %. Consumer home equity Reduced weighted average contractual interest rate from 7.5 % to 4.5 %. Other-than-Insignificant Delay in Repayment Commercial real estate Interest-only period of 9 months for one borrower. Principal deferred to the end of the loan life. Business banking Deferred a weighted average of 4 payments. For principal and interest deferrals, the loans were re-amortized over an extended payment period resulting in reduced monthly payment amounts for the borrowers. For interest-only deferrals, interest accrued at the time of the modification was added to the end of the loan life. Residential real estate Deferred a weighted average of 7 principal and interest payments which were added to the end of the loan life. Consumer home equity Deferred a weighted average of 8 principal and interest payments which were added to the end of the loan life. Term Extension Business banking Added a weighted average 4.3 years to the life of loans, which reduced monthly payment amounts for the borrowers. Residential real estate Added a weighted average 23.7 years to the life of loans, which reduced monthly payment amounts for the borrowers. Consumer home equity Added a weighted average 16.8 years to the life of loans, which reduced monthly payment amounts for the borrowers. (1) Loans that were modified in more than one manner are included in each modification type corresponding to the type of modifications performed. As of December 31, 2024, loans to borrowers experiencing financial difficulty modified during the year ended December 31, 2024 and which had a payment default during the year ended December 31, 2024 totaled $ 0.5 million. As of 135 December 31, 2023, no loans to borrowers experiencing financial difficulty modified during the year ended December 31, 2023 had a payment default during the year ended December 31, 2023. Management closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following tables show the age analysis of past due loans to borrowers experiencing financial difficulty as of December 31, 2024 and 2023 that were modified during the 12-month periods then ended: As of December 31, 2024 30-59 Days Past Due 60-89 Days Past Due 90 or More Days Past Due Total Past Due Current Total (In thousands) Commercial real estate $ — $ — $ — $ — $ 25,740 $ 25,740 Business banking — — — — 803 803 Residential real estate 116 — — 116 1,393 1,509 Consumer home equity 5 223 390 618 2,032 2,650 Total $ 121 $ 223 $ 390 $ 734 $ 29,968 $ 30,702 As of December 31, 2023 30-59 Days Past Due 60-89 Days Past Due 90 or More Days Past Due Total Past Due Current Total (In thousands) Commercial real estate $ — $ — $ — $ — $ 10,615 $ 10,615 Business banking — — — — 1,188 1,188 Residential real estate 366 227 — 593 3,213 3,806 Consumer home equity 51 — 400 451 3,303 3,754 Total $ 417 $ 227 $ 400 $ 1,044 $ 18,319 $ 19,363 As of December 31, 2024, there was one additional commitment to lend amounting to $ 0.3 million to borrowers experiencing financial difficulty and which were modified during the year ended December 31, 2024 in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant delay in repayment, or a term extension. As of December 31, 2023, there were no additional commitments to lend to borrowers experiencing financial difficulty and which were modified during year ended December 31, 2023 in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant delay in repayment, or a term extension. Loan Participations The Company occasionally purchases commercial loan participations, or participates in syndications through the SNC Program. These participations meet the same underwriting, credit and portfolio management standards as the Company’s other loans and are applied against the same criteria to determine the allowance for loan losses as other loans. The following table summarizes the Company’s loan participations: As of and for the Year Ended December 31, 2024 2023 Balance Non-performing Loan Rate (%) Gross Charge-offs Balance Non-performing Loan Rate (%) Gross Charge-offs (Dollars in thousands) Commercial and industrial $ 1,031,237 0.00 % $ — $ 985,394 0.00 % $ — Commercial real estate 944,371 3.87 % 10,290 447,550 0.00 % — Commercial construction 159,237 0.00 % — 146,043 0.00 % — Business banking 1,612 0.00 % — 72 0.00 % 22 Total loan participations $ 2,136,457 1.71 % $ 10,290 $ 1,579,059 0.00 % $ 22 136 Troubled Debt Restructurings (“TDR”) As described previously in Note 2, “Summary of Significant Accounting Policies,” the Company adopted ASU 2022-02 on January 1, 2023 which eliminated TDR accounting. Previously, in cases where a borrower experienced financial difficulty and the Company made certain concessionary modifications to contractual terms, the loan was classified as a TDR. The process through which management identified loans as TDR loans, the methodology employed to record any loan losses, and the calculation of any shortfall on collateral dependent loans is described within Note 2, “Summary of Significant Accounting Policies.” The below disclosures regarding TDRs relate to prior periods and were included for comparative purposes. The Company’s policy was to have any TDR loan which was on non-accrual status prior to being modified remain on non-accrual status for approximately six months subsequent to being modified before management considered its return to accrual status. If the TDR loan was on accrual status prior to being modified, it was reviewed to determine if the modified loan should remain on accrual status. TDR loan information for the year ended December 31, 2022 was prepared in accordance with GAAP effective for the Company prior to the Company’s adoption of ASU 2022-02. The following tables show the modifications which occurred during the periods indicated and the change in the recorded investment subsequent to the modifications occurring: For the Year Ended December 31, 2022 Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment (1) (Dollars in thousands) Commercial and industrial 4 $ 5,415 $ 5,415 Business banking 30 2,779 2,798 Residential real estate 10 2,842 2,842 Consumer home equity 7 1,535 1,535 Total 51 $ 12,571 $ 12,590 (1) The post-modification balances represent the balance of the loan on the date of modification. These amounts may show an increase when modification includes capitalization of interest. The following table shows the Company’s post-modification balance of TDRs listed by type of modification during the year ended December 31, 2022: For the Year Ended December 31, 2022 (In thousands) Extended maturity $ 1,011 Adjusted interest rate and extended maturity 1,088 Interest only/principal deferred 1,499 Covenant modification 2,418 Court-ordered concession — Principal and interest deferred 3,353 Extended maturity and interest only/principal deferred 2,997 Other 224 Total $ 12,590 One loan totaling approximately $ 1.0 million that was modified during the preceding 12 months subsequently defaulted during the year ended December 31, 2022. The Company considers a loan to have defaulted when it reaches 90 days past due or is transferred to non-accrual. During the year ended December 31, 2022, no amounts were charged-off on TDRs modified in the prior 12 months. 137 6. Premises and Equipment The information presented within this Note excludes discontinued operations with respect to information pertaining to the years ended December 31, 2023 and 2022. Refer to Note 23, “Discontinued Operations” for further discussion regarding discontinued operations. The following table summarizes the Company’s premises and equipment as of the dates indicated: As of December 31, Estimated 2024 2023 Useful Life (In thousands) (In years) Premises and equipment used in operations: Land $ 13,133 $ 12,585 N/A Buildings 52,205 70,597 5 - 30 Equipment 42,769 37,756 3 - 5 Leasehold improvements 44,262 34,790 5 - 25 Total cost 152,369 155,728 Accumulated depreciation ( 87,816 ) ( 95,595 ) Premises and equipment used in operations, net 64,553 60,133 Premises and equipment held for sale 2,088 — Net premises and equipment $ 66,641 $ 60,133 The Company recorded depreciation expense related to premises and equipment of $ 12.5 million, $ 10.5 million, and $ 10.7 million during the years ended December 31, 2024, 2023, and 2022, respectively. During the year ended December 31, 2024, four properties were transferred to held for sale with an aggregate book value of $ 17.1 million, one of which is located in Lynn, Massachusetts, housed Company offices and was comprised of an office building, and land and two of which were acquired in the merger with Cambridge. In connection with the transfer of properties to held for sale, the Company recorded an aggregate write-down of $ 3.0 million, which includes estimated costs to sell. In addition, during the year ended December 31, 2024, the Company sold three properties at an aggregate sale price of $ 15.1 million, two of which were acquired in the merger with Cambridge and one of which was the previously mentioned property located in Lynn, Massachusetts. In connection with such sales, the Company recorded a net gain on sale of $ 0.4 million. During the year ended December 31, 2023, no properties were transferred to held for sale and no properties were sold. During the year ended December 31, 2022, no properties were transferred to held for sale. During the year ended December 31, 2022, the Company sold five properties, four of which were acquired in connection with the Company’s acquisition of Century Bancorp, Inc. (“Century”). The properties sold during the year ended December 31, 2022 were included in premises and equipment held for sale as of December 31, 2021. The aggregate proceeds from such sales of premises and equipment were $ 17.3 million. In connection with these sales, the Company recognized a gain on sale of $ 1.4 million, which is included in other noninterest income in the Consolidated Statements of Income. 7. Leases The Company leases certain office space and equipment under various non-cancelable operating leases. These leases have original terms ranging from 2 years to 24 years. Operating lease liabilities and ROU assets are recognized at the lease commencement date based upon the present value of the future minimum lease payments over the lease term. Operating lease liabilities are recorded within other liabilities and ROU assets are recorded within other assets in the Company’s Consolidated Balance Sheets. The information presented within this Note excludes discontinued operations with regard to information pertaining to December 31, 2023 and 2022 and the years then ended. Refer to Note 23, “Discontinued Operations” for further discussion regarding discontinued operations. 138 As of the dates indicated, the Company had the following related to operating leases: As of December 31, 2024 As of December 31, 2023 (In thousands) Right-of-use assets $ 68,393 $ 50,641 Lease liabilities 81,901 55,617 Finance leases are not material. Finance lease liabilities are recorded within other liabilities and finance ROU assets are recorded within other assets in the Company’s Consolidated Balance Sheets. The following table is a summary of the Company’s components of net lease cost for the periods indicated: For the Year Ended December 31, 2024 2023 2022 (In thousands) Operating lease cost $ 13,295 $ 12,439 $ 12,716 Finance lease cost 468 338 309 Variable lease cost 3,017 2,766 2,547 Total lease cost $ 16,780 $ 15,543 $ 15,572 During the years ended December 31, 2024, 2023, and 2022 the Company made $ 16.3 million, $ 13.3 million, and $ 15.2 million in cash payments for operating and finance leases, respectively. Supplemental balance sheet information related to operating leases as of the dates indicated is as follows: As of December 31, 2024 As of December 31, 2023 Weighted-average remaining lease term (in years) 7.54 8.26 Weighted-average discount rate 4.08 % 3.76 % The following table sets forth the undiscounted cash flows of base rent related to operating leases outstanding as of December 31, 2024 with payments scheduled over the next five years and thereafter, including a reconciliation to the operating lease liability recognized in other liabilities in the Company’s Consolidated Balance Sheets: As of December 31, 2024 Year (In thousands) 2025 $ 15,277 2026 14,043 2027 12,349 2028 11,980 2029 10,221 Thereafter 32,648 Total minimum lease payments 96,518 Less: amount representing interest 14,617 Present value of future minimum lease payments $ 81,901 Lease Modifications and Terminations: During the year ended December 31, 2024, management determined not to exercise future lease term extension options related to one lease, which had previously been included in its determination of future lease payments, to exercise future lease term extension options related to eleven leases, which had not previously been included in its determination of future lease payments, and to terminate eight leases. Accordingly, the Company remeasured the present value of the future lease payments related to such leases which resulted in a net increase of the lease liabilities and a corresponding net increase of the lease ROU assets of $ 5.5 million. In connection with the lease terminations, the Company recorded an impairment charge of $ 4.7 million. During the year ended December 31, 2023, management determined not to exercise future lease term extension options related to four leases, which had previously been included in its determination of future lease payments, to exercise future lease term extension options related to ten leases, which had not previously been included in its determination of future lease payments, and to terminate one lease. Accordingly, the Company remeasured the present value of the future lease payments related to such leases which resulted in a net reduction of the lease liabilities and a corresponding net reduction of the 139 lease ROU assets of $ 2.4 million. In connection with the lease terminations, the Company recorded an impairment charge of $ 0.4 million. 8. Goodwill and Other Intangible Assets The table below sets forth the carrying amount of goodwill and other intangible assets, net of accumulated amortization as of the dates indicated below. With regard to the years ended December 31, 2023 and 2022, the information presented within this Note excludes discontinued operations. Refer to Note 23, “Discontinued Operations” for further discussion regarding discontinued operations. As of December 31, 2024 2023 (In thousands) Balances not subject to amortization Goodwill $ 914,957 $ 557,635 Balances subject to amortization Core deposit intangibles 111,296 8,570 Customer list intangible 22,841 — Trade name intangible 1,064 — Total balances subject to amortization 135,201 8,570 Total goodwill and other intangible assets (1) $ 1,050,158 $ 566,205 (1) The increase in goodwill and other intangible assets from December 31, 2023 to December 31, 2024 was due to goodwill and other intangible assets recorded during the third quarter of 2024 in connection with the merger. The Company identified acquired intangible assets related to core deposits (e.g., core deposit intangible) and Cambridge Trust Wealth Management, which included a customer list intangible and trade name intangible. Refer to Note 3, Mergers and Acquisitions for further information regarding the Company’s merger with Cambridge. The changes in the carrying value of goodwill for the periods indicated were as follows: For the Years Ended December 31, 2024 2023 (In thousands) Balance at beginning of year $ 557,635 $ 557,635 Goodwill recorded during the year 357,322 — Balance at end of year $ 914,957 $ 557,635 The following table sets forth the carrying amount of the Company’s other intangible assets, net of accumulated amortization, as of the dates indicated below: As of December 31, 2024 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount (In thousands) Core deposit intangible $ 126,633 $ ( 15,337 ) $ 111,296 $ 11,633 $ ( 3,063 ) $ 8,570 Customer list intangible 25,000 ( 2,159 ) 22,841 — — — Trade name intangible 1,200 ( 136 ) 1,064 — — — Total $ 152,833 $ ( 17,632 ) $ 135,201 $ 11,633 $ ( 3,063 ) $ 8,570 The Company assesses goodwill for impairment at the reporting unit level on an annual basis or sooner if an event occurs or circumstances change which might indicate that the fair value of a reporting unit is below its carrying amount. The Company has identified and assigned goodwill to one reporting unit - the banking business unit. In accordance with the accounting guidance codified in ASC 350-20, the Company performs a test of goodwill for impairment at least on an annual basis. An assessment is also required to be performed to the extent relevant events and/or 140 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 Company performed its annual assessment for the banking business as of September 30, 2024. The assessment included a comparison of the banking reporting unit’s carrying value of equity to estimated fair value of equity using the market capitalization method of the market approach. The Company evaluated conditions as of the assessment date and how a market participant would evaluate a control premium for the banking reporting unit. The implied control premium was estimated using the discounted cash flow method of the income approach by evaluating the present value of market participant cost savings and synergies. Based upon the assessment, it was determined there was no impairment of the Company’s goodwill as of September 30, 2024. In the fourth quarter of 2024, management elected to change the annual date at which it assesses goodwill for impairment from September 30 to November 30. Management considered the accounting guidance codified in ASC 250 in assessing the appropriateness of the change and the method for applying the change. The assessment included an evaluation of the justification of the change noting an assessment date of November 30 is preferable to September 30 as management’s process for determining future period forecasted earnings for budgeting purposes, a key input in the quantitative goodwill impairment assessment, occurs in the fourth quarter. Previously, future period forecasted earnings were estimated as of September 30 to support the annual goodwill impairment assessment and later updated in the fourth quarter for budgeting purposes and to support impairment evaluations performed as of December 31. Thus, moving the annual assessment date to November 30 allows for a more accurate estimate of future forecasted earnings to be used in its quantitative assessment of goodwill for impairment. In addition, based upon the assessment performed, management determined the change should be applied prospectively beginning with an assessment performed as of November 30, 2024 as a retrospective application of this change in accounting principle would require the use of assumptions and estimations developed with the use of hindsight, which is not appropriate for the annual goodwill impairment assessment. Management believes the change in goodwill impairment testing date does not represent a material change to the method of applying an accounting principle in light of the internal controls over financial reporting and requirements to assess goodwill impairment upon certain triggering events, and does not delay, accelerate or avoid any impairment charges. In addition, the Company last performed an assessment as of November 30, 2024 as an update to the September 30, 2024 annual test. As such, no more than 12 months will have elapsed between the previous assessment and the next annual assessment as of November 30, 2025. The Company performed its annual assessment for the banking business as of November 30, 2024, the Company’s new annual assessment date as described above. The assessment included a comparison of the banking reporting unit’s carrying value of equity to estimated fair value of equity based on the Company’s market capitalization. The assessment also considered the changes in market conditions from the September 30, 2024 assessment. Based upon the assessment, it was determined there was no impairment of the Company’s goodwill as of November 30, 2024. As of December 31, 2024, there was no effect to the Company’s Consolidated Financial Statements as a result of the change in annual assessment date. The amortization expense of the Company’s other intangible assets was $ 14.6 million, $ 1.8 million, and $ 1.2 million during the years ended December 31, 2024, 2023, and 2022, respectively. The increase in amortization expense for the year ended December 31, 2024 from 2023 was attributable to amortization expense recorded in the third and fourth quarter of 2024 related to other intangible assets acquired in connection with the Company’s merger with Cambridge. The weighted average original amortization period and weighted average remaining useful life of the Company’s other intangible assets is 7.8 years and 7.0 years, respectively. Management performs an assessment of the remaining useful lives of the Company’s intangible assets on a quarterly basis to determine if such lives remain appropriate. The estimated amortization expense for the remaining useful life of the Company’s other intangible assets is as follows: Year (In thousands) 2025 $ 31,231 2026 29,464 2027 22,219 2028 16,175 2029 13,454 Thereafter 22,658 Total amortization expense $ 135,201 141 9. Deposits The following table provides a summary of the Company’s deposits as of the dates indicated: As of December 31, 2024 2023 (In thousands) Demand $ 5,992,082 $ 5,162,218 Interest checking accounts 4,606,250 3,737,361 Savings accounts 1,620,602 1,323,126 Money market investment 5,736,362 4,664,475 Certificates of deposit 3,336,323 2,709,037 Total deposits $ 21,291,619 $ 17,596,217 At December 31, 2024 and 2023, the Company had a balance of $ 3.2 million and $ 2.4 million, respectively, in overdrafts. Overdrafts are included in loans in the Consolidated Balance Sheets. The following table summarizes certificate of deposits by maturity at December 31, 2024: Balance Percentage of Total Year (Dollars in thousands) 2025 $ 3,299,740 98.8 % 2026 27,311 0.8 % 2027 5,578 0.2 % 2028 1,673 0.1 % 2029 2,003 0.1 % Thereafter 18 0.0 % Total certificates of deposit $ 3,336,323 100.0 % The FDIC offers insurance coverage on deposits up to the federally insured limit of $250,000. The amount of certificates of deposit equal to or greater than $250,000, as of December 31, 2024 and 2023, was $ 1.1 billion and $ 0.9 billion, respectively. 10. Borrowed Funds Borrowed funds were comprised of the following: As of December 31, 2024 2023 (In thousands) Escrow deposits of borrowers $ 27,721 $ 21,978 Interest rate swap collateral funds 48,590 8,500 FHLB advances 17,589 17,738 Total borrowed funds $ 93,900 $ 48,216 At December 31, 2024 and 2023, the Company had available and unused borrowing capacity of approximately $ 2.8 billion and $ 0.8 billion, respectively, at the Federal Reserve Discount Window. At December 31, 2024 and 2023, loans with collateral value of $ 2.1 billion and $ 0.6 billion, respectively, and securities with a collateral value of $ 769.4 million and $ 139.1 million, respectively, were pledged to the Discount Window. At December 31, 2023, the Company had a $ 2.4 billion collateralized line of credit from the Federal Reserve Bank of Boston through the Bank Term Funding Program. Securities with a collateral value of $ 2.4 billion at December 31, 2023 were pledged to the Federal Reserve Bank of Boston under the Bank Term Funding Program . The Bank Term Funding Program was created by the Federal Reserve in March 2023. The Bank Term Funding Program ceased extending new loans on March 11, 2024. Accordingly, we had no additional capacity nor any securities pledged to the Federal Reserve Bank of Boston under the Bank Term Funding Program as of December 31, 2024. 142 Interest expense on borrowed funds was as follows: For the Year Ended December 31, 2024 2023 2022 (In thousands) Federal funds purchased $ — $ — $ 24 Federal Home Loan Bank advances 553 19,247 8,263 Escrow deposits of borrowers 36 6 3 Interest rate swap collateral funds 1,213 722 216 Total interest expense on borrowed funds $ 1,802 $ 19,975 $ 8,506 A summary of FHLBB advances by maturities were as follows: As of December 31, 2024 2023 Amount Weighted Average Interest Rate Amount Weighted Average Interest Rate (Dollars in thousands) Within one year $ 2,515 0.67 % $ 95 1.50 % Over one year to three years 2,148 1.82 % 3,409 0.73 % Over three years to five years 2,833 0.56 % 2,685 1.59 % Over five years 10,093 1.34 % 11,549 1.31 % Total Federal Home Loan Bank advances $ 17,589 1.18 % $ 17,738 1.25 % At December 31, 2024, advances from the FHLBB were secured by stock in the FHLBB, residential real estate loans, and investment securities. At December 31, 2023, advances from the FHLBB were secured by stock in the FHLBB, residential real estate loans and commercial real estate loans. At December 31, 2024, the collateral value of residential real estate loans and securities securing these advances was $ 1.5 billion and $ 1.0 billion, respectively. At December 31, 2023, the collateral value of residential and commercial real estate loans securing these advances was $ 1.4 billion and $ 1.5 billion, respectively. At December 31, 2024 and 2023, the Bank had available and unused borrowing capacity with the FHLBB of approximately $ 2.4 billion and $ 2.9 billion, respectively. As a member of the FHLBB, the Company is required to hold FHLBB stock. At both December 31, 2024 and 2023, the Company had investments in the FHLBB of $ 5.9 million. At its discretion, the FHLBB may declare dividends on the stock. Included in other noninterest income in the Consolidated Statements of Income are dividends received of $ 0.9 million, $ 2.0 million, and $ 0.3 million during the years ended December 31, 2024, 2023, and 2022, respectively. 143 11. Earnings Per Share ( “ EPS ” ) Basic EPS represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares (such as stock options) were exercised or converted into additional common shares that would then share in the earnings of the Company. Diluted EPS is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding for the year, plus the effect of potential dilutive common share equivalents computed using the treasury stock method. Shares held by the ESOP that have not been allocated or committed to be allocated to employees in accordance with the terms of the ESOP, referred to as “unallocated ESOP shares,” are not deemed outstanding for earnings per share calculations. For the Year Ended December 31, 2024 2023 2022 (Dollars in thousands, except per share data) Net income applicable to common shares: Net income (loss) from continuing operations $ 119,561 $ ( 62,689 ) $ 186,511 Net income from discontinued operations — 294,866 13,248 Total net income $ 119,561 $ 232,177 $ 199,759 Average number of common shares outstanding 194,154,984 175,814,954 179,529,613 Less: Average unallocated ESOP shares ( 13,028,664 ) ( 13,521,934 ) ( 14,019,256 ) Average number of common shares outstanding used to calculate basic earnings per common share 181,126,320 162,293,020 165,510,357 Common stock equivalents - restricted stock awards and units 1,054,753 110,077 138,214 Average number of common shares outstanding used to calculate diluted earnings per common share 182,181,073 162,403,097 165,648,571 Basic earnings per share 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 Basic earnings per share $ 0.66 $ 1.43 $ 1.21 Diluted earnings per share 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 Diluted earnings per share $ 0.66 $ 1.43 $ 1.21 12. Low Income Housing Tax Credits and Other Tax Credit Investments The Community Reinvestment Act (“CRA”) encourages banks to meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate income. The Company has primarily invested in separate LIHTC projects, also referred to as qualified affordable housing projects, which provide the Company with tax credits and operating loss tax benefits over a period of 15 years. The return on these investments is generally generated through tax credits and tax losses. In addition to LIHTC projects, the Company invests in new market tax credit projects that qualify for CRA credits and eligible projects that qualify for renewable energy and historic tax credits. As of December 31, 2024 and 2023, the Company had $ 222.7 million and $ 223.4 million, respectively, in tax credit investments that were included in other assets in the Consolidated Balance Sheets. When permissible, the Company accounts for its investments in LIHTC projects and other qualifying investments using the proportional amortization method, under which it amortizes the initial cost of the investment in proportion to the amount of the tax credits and other tax benefits received and recognizes that amortization as a component of income tax expense. The net investment in the housing projects is included in other assets in the Company’s Consolidated Balance Sheets. The Company will continue to use the proportional amortization method on any new qualifying investments. 144 The following table presents the Company’s investments in LIHTC projects using the proportional amortization method as of the dates indicated: As of December 31, 2024 2023 (In thousands) Current recorded investment included in other assets (1) $ 220,845 $ 221,190 Commitments to fund qualified affordable housing projects included in recorded investment noted above 89,801 149,207 (1) Includes LIHTC investments acquired in connection with our merger with Cambridge of $ 7.4 million. The amount of associated remaining commitments assumed was not significant. Refer to Note 3, “Mergers and Acquisitions” for further discussion of the merger. The following table presents additional information related to the Company’s investments in LIHTC projects for the periods indicated: For the Year Ended December 31, 2024 2023 2022 (In thousands) Tax credits and other tax benefits recognized $ 20,750 $ 11,624 $ 9,146 Amortization expense included in income tax expense 16,452 9,577 7,503 The Company accounts for certain other investments in renewable energy projects using the equity method of accounting. These investments in renewable energy projects are included in other assets on the Consolidated Balance Sheets and totaled $ 1.9 million and $ 2.2 million at December 31, 2024 and 2023, respectively. There were no outstanding commitments related to these investments as of either December 31, 2024 or December 31, 2023. 145 13. Income Taxes The information presented within this Note excludes discontinued operations with respect to the years ended December 31, 2023 and 2022. Refer to Note 23, “Discontinued Operations” for further discussion regarding discontinued operations. The following table sets forth information regarding the Company’s tax provision and applicable tax rates for the periods indicated: For the Year Ended December 31, 2024 2023 2022 (Dollars in thousands) Combined federal and state income tax provisions $ 36,205 $ ( 63,309 ) $ 51,719 Effective income tax rates 23.2 % 50.2 % 21.7 % The Company recorded net income tax expense of $ 36.2 million for the year ended December 31, 2024 compared to a net income tax benefit of $ 63.3 million and net income tax expense of $ 51.7 million for the years ended December 31, 2023 and 2022, respectively. Tax expense for the year ended December 31, 2024 includes a $ 7.4 million lost state tax benefit for Massachusetts as the Company was in a tax loss position for 2024 and loss carryover is not allowed by the state. The income tax benefit for the year ended December 31, 2023 was primarily due to pretax losses which largely resulted from losses on sales of available for sale securities in the first quarter of 2023. In addition, during the first quarter of 2023, the Company liquidated Market Street Securities Corporation (“MSSC”), a wholly owned subsidiary, and transferred all of MSSC’s assets to Eastern Bank. In connection with the liquidation and subsequent transfer of securities previously held by MSSC to Eastern Bank, the Company recognized an additional deferred income tax benefit of $ 23.7 million during the first quarter of 2023. This deferred income tax benefit resulted from a state tax rate change applied to the deferred tax asset related to the securities transferred to Eastern Bank. The provision for income taxes is comprised of the following components: For the Year Ended December 31, 2024 2023 2022 (In thousands) Current tax expense (benefit): Federal $ 2,088 $ ( 39,710 ) $ 36,436 State ( 1,942 ) ( 5,332 ) 10,021 Total current tax expense (benefit) 146 ( 45,042 ) 46,457 Deferred tax expense (benefit): Federal 19,204 1,219 ( 1,028 ) State 16,855 ( 19,486 ) 6,290 Total deferred tax expense (benefit) 36,059 ( 18,267 ) 5,262 Total income tax expense (benefit) $ 36,205 $ ( 63,309 ) $ 51,719 146 A reconciliation of the U.S. federal statutory rate to the Company’s effective income tax rate is detailed below: For the Year Ended December 31, 2024 2023 2022 (Dollars in thousands) Income tax expense (benefit) at statutory rate $ 32,711 21.00 % $ ( 26,458 ) 21.00 % $ 50,029 21.00 % Increase (decrease) resulting from: State income tax, net of federal tax benefit (1) 11,781 7.56 % ( 19,606 ) 15.56 % 12,885 5.41 % Valuation allowance 2,781 1.79 % — — % ( 700 ) ( 0.29 ) % Amortization of qualified low-income housing investments 16,452 10.56 % 9,577 ( 7.60 ) % 7,503 3.15 % Tax credits ( 16,456 ) ( 10.56 ) % ( 9,183 ) 7.29 % ( 7,300 ) ( 3.06 ) % Tax-exempt income ( 14,911 ) ( 9.57 ) % ( 14,161 ) 11.24 % ( 10,298 ) ( 4.32 ) % 162(m) remuneration of services 2,423 1.56 % 1,684 ( 1.34 ) % 1,446 0.61 % Other, net 1,424 0.91 % ( 5,162 ) 4.10 % ( 1,846 ) ( 0.77 ) % Actual income tax expense (benefit) $ 36,205 23.24 % $ ( 63,309 ) 50.25 % $ 51,719 21.71 % (1) Includes state tax benefit associated with MSSC liquidation of $ 23.7 million for the year ended December 31, 2023 described above. Significant components of the Company’s deferred tax assets and deferred tax liabilities are presented below: As of December 31, 2024 2023 (In thousands) Deferred tax assets: Unrealized loss on available for sale securities $ 194,324 $ 193,134 Allowance for loan losses 69,531 45,189 Cash flow hedges 10,347 12,302 Leases 22,946 15,664 Charitable contribution limitation carryover 5,214 4,844 Investment losses 5,843 7,339 Accrued expenses 9,952 10,042 Fixed assets 659 4,142 Loan basis difference fair value adjustments 75,301 3,455 Tax attribute and NOL carryover 24,120 — Other 1,195 2,061 Total deferred tax assets before valuation allowance 419,432 298,172 Valuation allowance ( 2,781 ) — Total deferred tax assets net of valuation allowance 416,651 298,172 Deferred tax liabilities: Amortization of intangibles 44,736 9,660 Lease obligation 19,199 14,284 Partnerships 3,417 1,971 Trading securities 5,203 3,405 Employee benefits 11,102 824 Other 866 1,843 Total deferred tax liabilities 84,523 31,987 Net deferred income tax assets $ 332,128 $ 266,185 The Company assesses the realizability of deferred tax assets and whether it is more likely than not that all or a portion of the deferred tax assets will be realized. The Company considers projections of future taxable income during the 147 periods in which deferred tax assets and liabilities are scheduled to reverse. Additionally, in determining the availability of operating loss carrybacks and other tax attributes, both projected future taxable income and tax planning strategies are considered in making this assessment. Tax losses from the sale of investments acquired in the merger, which occurred in the third quarter of 2024, resulted in lower projections of 2025 taxable income. As a result of those losses, as of December 31, 2024, the Company believes that a portion of the associated charitable contribution carryforward will expire on December 31, 2025 unutilized and therefore has recorded a valuation allowance for $ 2.8 million. As of December 31, 2024, management believes it is more likely than not that the Company will realize the remainder of its net deferred tax assets. Management performed an evaluation of the Company’s uncertain tax positions as of December 31, 2024 and 2023 and determined that liabilities for unrecognized tax benefits of $ 1.8 million and $ 3.8 million, respectively, was needed related to state tax positions. The decrease was primarily due to a reversal of $ 1.9 million recognized during the year ended December 31, 2024. The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits for the periods indicated: For the Years Ended December 31, 2024 2023 2022 (In thousands) Beginning $ 3,503 $ 5,782 $ 7,923 Additions based on tax positions related to the current year — — — Additions for tax positions of prior years — — — Reductions related to settlements with taxing authorities — — — Reductions as a result of a lapse of the applicable statute of limitations ( 1,939 ) ( 2,279 ) ( 2,141 ) Ending $ 1,564 $ 3,503 $ 5,782 As of December 31, 2024, the amount that would reduce the effective tax rate, if recognized, is $ 1.8 million. The reduction in the effective tax rate is inclusive of the federal benefit for unrecognized state tax benefits, and accrued interest and penalties. The entire balance of unrecognized tax benefits, if recognized, would favorably affect the Company’s effective income tax rate. The Company recognizes penalties and accrued interest related to unrecognized tax benefits in tax expense. Accrued penalties and interest amounted to $ 0.5 million and $ 1.0 million at December 31, 2024 and 2023, respectively. The change in accrued penalties and interest for the current year impacted the Consolidated Statements of Income as a component of income tax expense by $ 0.5 million. During the year ended December 31, 2024, $ 1.9 million of unrecognized state tax benefits and $ 0.7 million of interest and penalties reversed upon expiration of the statute of limitations for the tax year to which the reserve was related. Management anticipates that approximately $ 1.6 million of unrecognized state tax benefits and $ 0.6 million of interest and penalties will reverse in 2025 upon expiration of the statute of limitations for the tax year to which the reserve is related. The Company had $ 23.8 million in net operating loss carryforwards for federal or state income tax purposes at December 31, 2024. The Company had no net operating loss carryforwards for federal or state income tax purposes at December 31, 2023. At December 31, 2024, the Bank’s federal pre-1988 reserve, for which no federal income tax provision has been made, was approximately $ 20.8 million. Under current federal law, these reserves are subject to recapture into taxable income, should the Company make non-dividend distributions, make distributions in excess of earnings and profits retained, as defined, or cease to maintain a banking type charter. A deferred tax liability is not recognized for the base year amount unless it becomes apparent that those temporary differences will reverse into taxable income in the foreseeable future. No deferred tax liability has been established as these two events are not expected to occur in the foreseeable future. The Company’s primary banking activities are in the states of Massachusetts, New Hampshire and Rhode Island; however, the Company also files additional state corporate income and/or franchise tax returns in states in which the Company has a filing requirement. The methods of filing, and the methods for calculating taxable and apportionable income, vary depending upon the laws of the taxing jurisdiction. The Company is subject to routine audits of its tax returns by the Internal Revenue Service and various state taxing authorities. The Company is no longer subject to federal and state income tax examinations by tax authorities for years before 2021. The Company invests in low-income affordable housing and renewable energy projects which provide the Company with tax benefits, including tax credits, generally over a period of approximately 5-15 years. When permissible, the 148 Company accounts for its investments in Low Income Housing Tax Credit (“LIHTC”) projects using the proportional amortization method, under which it amortizes the initial cost of the investment in proportion to the amount of the tax credits and other tax benefits received and recognizes that amortization as a component of income tax expense. The net investment performance in the housing projects is included in other assets in the Consolidated Balance Sheets. The Company will continue to use the proportional amortization method on any new qualifying LIHTC investments. During the years ended December 31, 2024 and 2023, the Company generated federal tax credits primarily from LIHTC investments of $ 16.5 million and $ 9.2 million, respectively. During the years ended December 31, 2024 and 2023, the Company generated flow-through state tax credits from LIHTC investments of $ 0.3 million and $ 0.4 million, respectively. During the year ended December 31, 2024, the Company generated $ 3.2 million in directly purchased Massachusetts state tax credits associated LIHTC investments. The Company treats the investment tax credits received as a reduction of federal income taxes for the year in which the credit arises using the flow-through method (i.e., the credit flows directly through the statement of income in the year of purchase). For additional information on these investments, refer to Note 12, “Low Income Housing Tax Credits and Other Tax Credit Investments.” 14. Minimum Regulatory Capital Requirements The Company is subject to various regulatory capital requirements administered by federal banking agencies, including U.S. Basel III. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company’s Consolidated Financial Statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classification are also subject to qualitative judgements by the regulators about components, risk weightings, and other factors. Quantitative measures established by the regulators to ensure capital adequacy require the Company to maintain minimum capital amounts and ratios. All banking companies are required to have total regulatory capital of at least 8% of risk-weighted assets, common equity Tier 1 capital of at least 4.5% of risk-weighted assets, core capital (“Tier 1”) of at least 6% of risk-weighted assets, and a minimum Tier 1 leverage ratio of 4% of adjusted average assets. As of December 31, 2024 and 2023, the Company was categorized as “well-capitalized” based on the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the Company must maintain (1) a minimum total regulatory capital ratio of 10%; (2) a minimum common equity Tier 1 capital ratio of 6.5%; (3) a minimum Tier 1 capital ratio of 8% and (4) a minimum Tier 1 leverage ratio of 5%. Management believes that the Company met all capital adequacy requirements to which it is subject as of December 31, 2024 and 2023. There have been no conditions or events that management believes would cause a change in the Company’s categorization. The Company’s actual capital amounts and ratios are presented in the following table as of the dates indicated: Actual For Capital Adequacy To Be Well- Capitalized Under Prompt Corrective Action Provisions Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) As of December 31, 2024 Total regulatory capital (to risk-weighted assets) $ 3,363,799 16.78 % $ 1,603,864 ≥ 8.0 % $ 2,004,830 ≥ 10.0 % Common equity Tier 1 capital (to risk-weighted assets) 3,152,907 15.73 % 902,174 ≥ 4.5 % 1,303,140 ≥ 6.5 % Tier 1 capital (to risk-weighted assets) 3,152,907 15.73 % 1,202,898 ≥ 6.0 % 1,603,864 ≥ 8.0 % Tier 1 capital (to average assets) leverage 3,152,907 12.43 % 1,014,319 ≥ 4.0 % 1,267,899 ≥ 5.0 % As of December 31, 2023 Total regulatory capital (to risk-weighted assets) $ 3,187,130 19.55 % $ 1,304,508 ≥ 8.0 % $ 1,630,634 ≥ 10.0 % Common equity Tier 1 capital (to risk-weighted assets) 3,024,288 18.55 % 733,785 ≥ 4.5 % 1,059,912 ≥ 6.5 % Tier 1 capital (to risk-weighted assets) 3,024,288 18.55 % 978,381 ≥ 6.0 % 1,304,508 ≥ 8.0 % Tier 1 capital (to average assets) leverage 3,024,288 14.00 % 864,206 ≥ 4.0 % 1,080,258 ≥ 5.0 % The Company is subject to various capital requirements in connection with seller/servicer agreements that have been entered into with secondary market investors. Failure to maintain minimum capital requirements could result in an inability to originate and service loans for the respective investor and, therefore, could have a direct material effect on the Company’s financial statements. Management believes that the Company met all capital requirements in connection with seller/servicer agreements as of December 31, 2024 and 2023. 149 15. Employee Benefits Pension Plans The Company provides pension benefits for its employees using a noncontributory, qualified defined benefit plan, through membership in SBERA. SBERA offers a common and collective trust as the underlying investment structure for pension plans participating in the association. The target allocation mix for the common and collective trust portfolio calls for an equity-based investment deployment range of 49 % to 63 % of total common and collective trust portfolio assets. The remainder of the common and collective trust’s portfolio is allocated to fixed income securities with a target range of 28 % to 42 % and other investments, including global asset allocation and hedge funds, from 3 % to 12 %. The Trustees of SBERA, through SBERA's Investment Committee, select investment managers for the common and collective trust portfolio. A professional investment advisory firm is retained by the Investment Committee to provide allocation analysis and performance measurement, and to assist with manager searches. The overall investment objective is to diversify investments across a spectrum of investment types to limit risks from large market swings. In connection with the Company’s merger with Cambridge, the Company acquired Cambridge’s defined benefit plan. The plan was frozen to new participants in 2011 and the accrual of benefits for all participants in the plan was frozen effective in 2017. At the time of the merger, all participants in the plan were fully vested. The Company assumed a $ 35.3 million pension benefit obligation from Cambridge following the merger and, effective December 31, 2024, the acquired plan was merged with the Company’s Defined Benefit Plan. All Cambridge employees retained following the merger were credited with prior service, which counted for vesting and eligibility into the Company’s Defined Benefit Plan, but not for benefit accrual. Additionally, all Cambridge employees retained following the merger were eligible to join the Company’s Defined Benefit Plan to the extent that eligibility requirements were satisfied based upon such employees’ prior service with Cambridge. In connection with the sale of its insurance agency business, the Company amended its Defined Benefit Plan to allow for accelerated vesting for any employees of the insurance agency business and several employees of the Bank transitioning to Gallagher who were otherwise not vested in the Defined Benefit Plan at the time of sale. The Company has a BEP to provide retirement benefits to certain employees whose retirement benefits under the Defined Benefit Plan are limited per the Internal Revenue Code. In connection with the sale of its insurance agency business, the Company amended the BEP to allow for accelerated vesting for all employees of the insurance agency business and several employees of the Bank transitioning to Gallagher who were participating in the BEP and were otherwise not vested in the BEP at the time of sale. In addition, the Company amended the vesting criteria for the BEP to align with that of the Defined Benefit Plan, so that all BEP participants have been credited with service vesting in the same manner and vest according to the same three year cliff vesting schedule as provided under the Defined Benefit Plan. The Company has a DB SERP which provides certain retired officers with defined pension benefits in excess of qualified plan limits imposed by U.S. federal tax law. In connection with the Company’s merger with Cambridge, the Company acquired Cambridge’s DB SERP. In 2016, Cambridge’s Board of Directors discontinued the use of DB SERPs for new entrants to Cambridge’s non-qualified retirement programs. Expense for the DB SERPs is recognized over the executive’s service life utilizing the projected unit credit actuarial cost method. All participants of Cambridge’s DB SERP were deemed to be fully vested upon the closing of the merger. The Company has a ODRCP which provides pension benefits to outside directors who retire from service. Effective December 31, 2020, the Company closed the ODRCP to new participants and froze benefit accruals for active participants. In connection with the Company’s merger with Cambridge, the Company acquired Cambridge’s post-retirement health care plan (“PHCP”). Benefits for the PHCP are based on years of service. Expenses for the PHCP are recognized over the employee's service life utilizing the projected unit credit actuarial cost method. Effective November 7, 2019, the PHCP was frozen for employees hired after that date. The frozen health care plan is not accruing and is only in payout status. Refer to Note 2, Summary of Significant Accounting Policies , for additional discussion of the Company’s pension plans. 150 Obligations and Funded Status The funded status and amounts recognized in the Company’s Consolidated Financial Statements for the Defined Benefit Plan, the BEP, the DB SERP, the ODRCP, and the PHCP are set forth in the following table: As of and for the Year Ended December 31, 2024 2023 2022 (In thousands) Change in benefit obligation: Benefit obligation at beginning of the year $ 399,364 $ 362,530 $ 501,507 Service cost (1) 22,470 24,474 31,382 Interest cost 19,601 17,559 10,582 Amendments — 1,351 — Actuarial (gain) loss ( 15,280 ) 13,943 ( 133,282 ) Acquisitions 42,952 — — Benefits paid ( 34,770 ) ( 20,493 ) ( 47,659 ) Benefit obligation at end of the year $ 434,337 $ 399,364 $ 362,530 Change in plan assets: Fair value of plan assets at beginning of year $ 468,364 $ 419,366 $ 546,056 Actual return (loss) on plan assets 48,629 63,811 ( 91,474 ) Acquisitions 56,201 — — Employer contribution 6,798 5,680 12,443 Benefits paid ( 34,770 ) ( 20,493 ) ( 47,659 ) Fair value of plan assets at end of year 545,222 468,364 419,366 Overfunded status $ 110,885 $ 69,000 $ 56,836 Reconciliation of funding status: Past service credit $ 70,137 $ 80,090 $ 108,909 Unrecognized net loss ( 34,088 ) ( 69,697 ) ( 99,002 ) Prepaid benefit cost 74,836 58,607 46,929 Overfunded status $ 110,885 $ 69,000 $ 56,836 Accumulated benefit obligation $ 434,337 $ 399,364 $ 362,530 Amounts recognized in accumulated other comprehensive income (“AOCI”), net of tax: Unrecognized past service credit $ 50,304 $ 57,501 $ 78,295 Unrecognized net loss ( 24,288 ) ( 50,039 ) ( 71,172 ) Net amount $ 26,016 $ 7,462 $ 7,123 (1) Includes service costs related to employees of the insurance agency business as it relates to the years ended December 31, 2023 and 2022. Refer to the later discussion within the “Components of Net Periodic Benefit Cost” section within this Note for further discussion. In accordance with the Pension Protection Act, the Company was not required to make any contributions to the Defined Benefit Plan for the plan years beginning November 1, 2023, 2022 and 2021. Accordingly, during the years ended December 31, 2024 and 2023, there were no contributions to the Defined Benefit Plan. The Company made a discretionary contribution to the Defined Benefit Plan of $ 7.2 million during the year ended December 31, 2022. The Company expects to make no contribution during the plan year beginning November 1, 2024. The net actuarial gain of $ 15.3 million during the year ended December 31, 2024 was primarily attributable to an increase in the discount rate assumptions used for determining the benefit obligation and higher returns on plan assets than initially expected. The net actuarial loss of $ 13.9 million during the year ended December 31, 2023 was primarily attributable to a decrease in the discount rate assumptions used for determining the benefit obligation which was partially offset by higher returns on plan assets than initially expected. The net actuarial gain of $ 133.3 million during the year ended December 31, 2022 151 was primarily attributable to higher returns on plan assets than initially expected and an increase in the discount rate assumptions which were partially offset by changes in demographic assumptions and in the participant mortality rate assumption. Actuarial Assumptions The assumptions used in determining the benefit obligations at December 31, 2024 and 2023 were as follows: DB Plan BEP DB SERP ODRCP PHCP As of December 31, As of December 31, As of December 31, As of December 31, As of December 31, 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 Discount rate 5.55 % 4.99 % 5.36 % 4.89 % 5.51 % 4.96 % 5.44 % 4.91 % 5.42 % N/A Rate of increase in compensation levels 4.50 % 4.50 % 4.50 % 4.50 % — % — % — % — % — % N/A Interest rate credit for determining projected cash balance 4.60 % 4.47 % 4.60 % 4.47 % — % — % — % — % — % N/A The assumptions used in determining the net periodic benefit cost for the years ended December 31, 2024, 2023, and 2022 were as follows: DB Plan For the Year Ended December 31, 2024 2023 2022 Discount rate - benefit cost 4.99 % 5.18 % 2.65 % Rate of compensation increase 4.50 % 4.50 % 4.50 % Expected rate of return on plan assets 7.50 % 7.50 % 7.00 % Interest rate credit for determining projected cash balance 4.47 % 3.55 % 3.50 % BEP For the Year Ended December 31, 2024 2023 2022 Discount rate - benefit cost 4.89 % 5.07 % 2.32 % Rate of compensation increase 4.50 % 4.50 % 4.50 % Interest rate credit for determining projected cash balance 4.47 % 3.55 % 3.50 % DB SERP For the Year Ended December 31, 2024 2023 2022 Discount rate - benefit cost 4.96 % 5.18 % 2.68 % ODRCP For the Year Ended December 31, 2024 2023 2022 Discount rate - benefit cost 4.91 % 5.13 % 2.32 % PHCP For the Year Ended December 31, 2024 2023 2022 Discount rate - benefit cost 5.04 % N/A N/A In general, the Company has selected its assumptions with respect to the expected long-term rate of return based on prevailing yields on high quality fixed income investments increased by a premium for equity return expectations. To determine the discount rate used in calculating the benefit obligation and the benefit cost for all of its defined benefit plans, the Company uses the spot rate approach whereby the individual spot rates on the FTSE above-median yield curve are applied to each corresponding year’s projected cash flow used to measure the respective plan’s service cost and interest cost. Plan Assets 152 The Company owns a percentage of the SBERA defined benefit common collective trust. Based upon this ownership percentage, plan assets managed by SBERA on behalf of the Company amounted to $ 545.2 million and $ 468.4 million at December 31, 2024 and 2023, respectively. Investments held by the common collective trust include Level 1, 2 and 3 assets such as: collective funds, equity securities, mutual funds, hedge funds and short-term investments. The Fair Value Measurements and Disclosures Topic of the FASB ASC stipulates that an asset’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. As such, the Company classifies its interest in the common collective trust as a Level 3 asset. The table below presents a reconciliation of the Company’s interest in the SBERA common collective trust during the years indicated: For the Year Ended December 31, 2024 2023 (In thousands) Balance at beginning of year $ 468,364 $ 419,366 Net realized and unrealized gains and (losses) 48,629 63,811 Contributions — — Benefits paid ( 27,972 ) ( 14,813 ) Acquisition 56,201 — Balance at end of year $ 545,222 $ 468,364 Components of Net Periodic Benefit Cost The components of net pension expense for the plans for the periods indicated are as follows: For the Year Ended December 31, 2024 2023 2022 (In thousands) Components of net periodic benefit cost: Service cost (1) $ 22,470 $ 24,474 $ 31,382 Interest cost 19,601 17,559 10,582 Expected return on plan assets ( 35,368 ) ( 30,127 ) ( 35,486 ) Past service credit ( 9,953 ) ( 11,560 ) ( 11,882 ) Recognized net actuarial loss 7,098 9,563 11,032 Curtailment (2) — ( 15,908 ) — Settlement ( 29 ) — 12,045 Net periodic benefit cost $ 3,819 $ ( 5,999 ) $ 17,673 (1) Includes service costs related to employees of the Company's insurance agency business for the years ended December 31, 2023 and 2022. Such service costs were included in net income from discontinued operations as such costs are no longer incurred by the Company following the sale of the insurance agency business in October 2023. All other costs included in the determination of the benefit obligation for the Defined Benefit Plan and the BEP were included in net income from continuing operations as the Bank assumed the related liability upon dissolution of its Eastern Insurance Group subsidiary. Service costs included in net income from discontinued operations and included in the above table were $ 5.1 million, and $ 7.5 million for the years ended December 31, 2023 and 2022, respectively. (2) The pension curtailment gain recognized during the year ended December 31, 2023 was included in discontinued operations. Refer to the below discussion under “Pension Curtailment and Settlement” for further discussion. Except as indicated above as it relates to service costs included in discontinued operations, service costs for the Defined Benefit Plan, the BEP, and the DB SERP are recognized within salaries and employee benefits in the Consolidated Statement of Income. In addition, as indicated above, the pension curtailment gain is also included in discontinued operations within the gain on sale of discontinued operations. The remaining components of net periodic benefit cost are recognized in other noninterest expense in the Consolidated Statements of Income. Pension Curtailment and Settlement As discussed in the earlier “Pension Plans” section, during the year ended December 31, 2023 and in connection with the sale of its insurance agency business, the Company remeasured the plan assets and obligations of the Defined Benefit 153 Plan and the obligations of the BEP to determine the resulting curtailment gain or loss. The remeasurement followed the Company’s amendments to to its Defined Benefit Plan and BEP. As a result and in accordance with ASC 715-30, “Compensation-Retirement Benefits - Defined Benefit Plans,” the Company recognized a curtailment gain upon completion of the sale of the insurance agency business associated with the prior service credits attributable to the employees of the insurance agency business, all of which transferred to Gallagher. The Company determined, with assistance from its actuaries, the amount of the resulting non-cash curtailment amount to be a gain of $ 15.9 million which was included in the gain on sale of the insurance agency business . As a practical expedient, ASC 715, “Compensation–Retirement Benefits,” permits employers to not apply pension plan settlement accounting and to treat settlement transactions as normal benefit payments if the cost of all settlements in the year is less than or equal to the sum of the service cost and interest cost components of net periodic benefit cost. The Company has elected this practical expedient. During the year ended December 31, 2022, lump sum payments from the Defined Benefit Plan exceeded the sum of the service cost and interest cost components (the “threshold”) of the Defined Benefit Plan’s net periodic pension cost. ASC 715-20, “Compensation-Retirement Benefits - Defined Benefit Plans,” requires that upon determining it is probable that such threshold will be met, an entity shall immediately recognize in earnings a pro rata portion of the aggregate unamortized gain or loss (e.g., “non-cash settlement charge”). In accordance with the applicable accounting guidance, the Company elected to apply a practical expedient to remeasure the plan assets and obligations as of the nearest month-end date upon the triggering of the previously mentioned threshold. Accordingly, the Company performed a remeasurement as of October 31, 2022 and, subsequently, as of December 31, 2022. The Company determined, with assistance from its actuaries, the amount of the resulting non-cash settlement charge to be a loss of $ 12.0 million which was recorded in other noninterest expense in the Consolidated Statement of Income . Benefits expected to be paid The following table summarizes estimated benefits to be paid from the Defined Benefit Plan and BEP for the plan years beginning on November 1, and the DB SERP, the ODRCP, and the PHCP for the plan years beginning January 1: Year (In thousands) 2025 $ 55,152 2026 39,366 2027 37,940 2028 42,128 2029 40,298 In aggregate for 2030-2034 205,277 Employee Tax Deferred Incentive Plan The Company has an employee tax deferred incentive plan, otherwise known as a 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. The amount contributed by the Company is included in salaries and employee benefits expense. The amounts contributed to the plan for the years ended December 31, 2024, 2023, and 2022, were $ 4.9 million, $ 5.2 million and $ 5.0 million, respectively. Defined Contribution Supplemental Executive Retirement Plan The Company’s DC SERP, a defined contribution supplemental executive retirement plan, allows certain senior officers to earn benefits calculated as a percentage of their compensation. The participant benefits are adjusted based upon a deemed investment performance of measurement funds selected by the participant. These measurement funds are for tracking purposes and are used only to track the performance of a mutual fund, market index, savings instrument, or other designated investment or portfolio of investments. The Company recognized no expense related to the DC SERP during the year ended December 31, 2024. The Company recorded expense related to the DC SERP of $ 0.1 million and $ 0.4 million in the years ended December 31, 2023 and 2022, respectively. The total amount due to participants under this plan was included in other liabilities on the Company’s Consolidated Balance Sheets and amounted to $ 23.7 million and $ 20.3 million at December 31, 2024 and 2023, respectively. 154 Deferred Compensation Plans 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. Portfolios with various risk profiles are available to participants with the approval of the Compensation Committee of the Board of Directors. The Company purchases and sells investments which track the deemed investment choices, so that it has available funds to meet its payment liabilities. Deferred amounts, adjusted for deemed investment performance, are paid at the time of a participant designated date or event, such as separation from service, death, or disability. The total amounts due to participants under the four plans were included in other liabilities on the Company’s Consolidated Balance Sheets and amounted to $ 33.3 million and $ 28.2 million at December 31, 2024 and 2023, respectively. Rabbi Trust Variable Interest Entity The Company established rabbi trusts to meet its obligations under certain executive non-qualified retirement benefits and deferred compensation plans and to mitigate the expense volatility of the aforementioned retirement plans. The rabbi trusts are considered VIEs as the equity investment at risk is insufficient to permit the trusts to finance their activities without additional subordinated financial support from the Company. The Company is considered the primary beneficiary of the rabbi trusts as it has the power to direct the activities of the rabbi trusts that significantly affect the rabbi trusts’ economic performance and it has the obligation to absorb losses of the rabbi trusts that could potentially be significant to the rabbi trusts by virtue of its contingent call options on the rabbi trusts’ assets in the event of the Company’s bankruptcy. As the primary beneficiary of these VIEs, the Company consolidates the rabbi trust investments. In general, the rabbi trust investments and any earnings received thereon are accumulated, reinvested and used exclusively for trust purposes. These rabbi trust investments consist primarily of cash and cash equivalents, U.S. government agency obligations, equity securities, mutual funds and other exchange-traded funds, and are recorded at fair value in other assets in the Company’s Consolidated Balance Sheets. Changes in fair value are recorded in noninterest income. Assets held in rabbi trust accounts by plan type, at fair value, were as follows: As of December 31, 2024 2023 (In thousands) DB SERP $ 14,100 $ 16,349 BEP 26,418 18,656 ODRCP 2,625 2,819 DC SERP 24,227 20,785 Deferred compensation plans 31,611 28,826 Total rabbi trust assets $ 98,981 $ 87,435 The following tables present the book value, net unrealized gain or loss, and market value of assets held in rabbi trust accounts by asset type: As of December 31, 2024 As of December 31, 2023 Book Value Unrealized Gain/(Loss) Fair Value Book Value Unrealized Gain Fair Value Asset Type (In thousands) Cash and cash equivalents $ 9,109 $ — $ 9,109 $ 12,269 $ — $ 12,269 Equities (1) 63,107 19,229 82,336 56,140 12,869 69,009 Fixed income 7,980 ( 444 ) 7,536 6,676 ( 519 ) 6,157 Total assets $ 80,196 $ 18,785 $ 98,981 $ 75,085 $ 12,350 $ 87,435 (1) Equities include mutual funds and other exchange-traded funds. The Company had equity securities held in rabbi trust accounts of $ 82.3 million and $ 69.0 million as of December 31, 2024 and 2023, respectively. Included in the equity securities presented in the tables above are exchange-traded mutual funds which had a net asset value of $ 54.1 million and $ 48.9 million as of December 31, 2024 and 2023, respectively. 155 16. Share-Based Compensation Employee Stock Ownership Plan As part of the IPO completed on October 14, 2020, the Company established a tax-qualified Employee Stock Ownership Plan to provide eligible employees the opportunity to own Company shares. The ESOP borrowed $ 149.4 million from the Company to purchase 14,940,652 common shares during the IPO and in the open market. The loan is payable in annual installments over 30 years at an interest rate equal to the Prime rate as published in the The Wall Street Journal . As the loan is repaid to the Company, shares are released and allocated proportionally to eligible participants on the basis of each participant’s proportional share of compensation relative to the compensation of all participants. The unallocated ESOP shares are pledged as collateral on the loan. The Company accounts for its ESOP in accordance with FASB ASC 718-40, " Compensation – Stock Compensation" . Under this guidance, unreleased shares are deducted from shareholders’ equity as unearned ESOP shares in the accompanying Consolidated Balance Sheets. The Company recognizes compensation expense equal to the fair value of the ESOP shares during the periods in which they are committed to be released. To the extent that the fair value of the Company’s ESOP shares differs from the cost of such shares, the difference is credited or debited to equity. As the loan is internally leveraged, the loan receivable from the ESOP to the Company is not reported as an asset nor is the debt of the ESOP shown as a liability in the Company’s Consolidated Balance Sheets. Dividends on unallocated shares are used to pay the ESOP debt. The following table presents the amount of compensation expense associated with the ESOP and the amount of the loan payments made by the ESOP, including the portions related to principal and interest, for the periods indicated: Year Ended December 31, 2024 2023 2022 (In thousands) Compensation expense $ 7,356 $ 7,129 $ 9,923 Annual loan payment: Interest 11,543 9,374 4,724 Principal 1,523 2,914 3,147 Total loan payment $ 13,066 $ 12,288 $ 7,871 The number of shares committed to be released per year is estimated to be 495,672 through 2049 and 392,404 in the year 2050. The following table presents share information held by the ESOP: As of December 31, 2024 2023 (Dollars in thousands) Allocated shares 1,889,114 1,541,971 Shares committed to be released 103,078 103,230 Unallocated shares (suspense shares) 12,784,387 13,270,932 Total shares 14,776,579 14,916,133 Fair value of unallocated shares $ 220,531 $ 188,447 Share-Based Compensation Plan On November 29, 2021, the shareholders of the Company approved the Eastern Bankshares, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for the issuance of up to 26,146,141 shares of common stock pursuant to grants of restricted stock, restricted stock units (“RSUs”), non-qualified stock options and incentive stock options, any or all of which can be granted with performance-based vesting conditions. Under the 2021 Plan, 7,470,326 shares may be issued as restricted stock or RSUs, including those issued as performance shares and performance share units (“PSUs”), and 18,675,815 shares may be issued upon the exercise of stock options. These shares may be awarded from the Company’s authorized but unissued shares. However, the 2021 Plan permits the grant of additional awards of restricted stock or RSUs above the aforementioned limit, provided that, for each additional share of restricted stock or RSU awarded in excess of such limit, the pool of shares available to be issued upon the exercise of stock options will be reduced by three shares. Pursuant to the terms of the 2021 Plan, each of the Company’s non-employee directors were automatically granted awards of restricted 156 stock on November 30, 2021. Such restricted stock awards vest pro-rata on an annual basis over a five-year period. The maximum term for stock options is ten years . In the third quarter of 2024, the Company granted a total of 146,178 RSUs to certain executives who joined the Company following the merger with Cambridge. These RSUs vest pro-rata on an annual basis over a period of three years from the date of grant, subject to continued employment. During that same period, the Company also granted a total of 67,350 PSUs, for which vesting is contingent upon the Compensation and Human Capital Management Committee of the Board of Director’s certification, after the conclusion of a period of approximately 2.3 years, that the Company has attained a threshold level of certain performance criteria over such period. On July 12, 2024, the Company completed its previously announced merger with Cambridge. In connection with the merger and as a component of the purchase consideration, the Company issued 118,693 restricted stock award shares with a fair value of $ 1.1 million, net of a $ 0.7 million post-combination fair value adjustment, and, with respect to RSUs and PSUs, credited pre-merger service for employees retained following the merger with Cambridge which amounted to $ 3.0 million. In May 2024 the Company granted a total of 56,352 shares of restricted stock to the Company’s non-employee directors which vest after approximately one year from the date of grant. In May 2023 the Company granted a total of 47,820 shares of restricted stock to the Company’s non-employee directors which vest after approximately one year from the date of grant. In March 2024, the Company granted to all of the Company’s executive officers and certain other employees a total of 416,276 RSUs, which vest pro-rata on an annual basis over a period of three years from the date of the grant, and a total of 234,091 PSUs for which vesting is contingent upon the Compensation and Human Capital Management Committee of the Board of Director’s certification, after the conclusion of a period of approximately 2.8 years from the date of the grant, that the Company has attained a threshold level of certain performance criteria over such period. In March 2023, the Company granted to all of the Company’s executive officers and certain other employees a total of 318,577 RSUs, which vest pro-rata on an annual basis over a period of three years from the date of the grant, and a total of 108,984 PSUs for which vesting is contingent upon the Compensation and Human Capital Management Committee of the Board of Director’s certification, after the conclusion of a three-year period from the date of the grant, that the Company has attained a threshold level of certain performance criteria over such period. As of December 31, 2024 and 2023, there were 3,844,157 shares and 4,872,494 shares that remained available for issuance as restricted stock or RSU awards (including those that may be issued as performance shares and PSUs), respectively, and 18,675,815 shares that remained available for issuance upon the exercise of stock options at both dates. As of both December 31, 2024 and 2023, no stock options had been awarded under the 2021 Plan. The following table summarizes the Company’s restricted stock award activity for the periods indicated: For the Years Ended December 31, 2024 2023 Restricted Stock Awards Number of Shares Weighted-Average Grant Price Per Share Number of Shares Weighted-Average Grant Price Per Share Non-vested restricted stock at beginning of year 420,400 $ 19.15 525,460 $ 20.08 Granted 56,352 13.84 47,820 11.50 Vested ( 275,474 ) 16.27 ( 152,880 ) 19.95 Forfeited ( 3,026 ) 14.87 — — Converted in connection with merger 118,693 14.87 — — Non-vested restricted stock at end of year (1) 316,945 $ 18.02 420,400 $ 19.15 (1) Includes the effect of modifications to previously awarded and unvested restricted share awards for two plan participants to accelerate vesting. The financial effect of the modifications on total unrecognized compensation expense was not significant. During the years ended December 31, 2024, 2023, and 2022, 275,474 , 152,880 , and 136,609 RSA awards vested, respectively. Such awards had a grant date fair value of $ 4.5 million, $ 3.0 million, and $ 2.7 million, respectively. During the years ended December 31, 2024, 2023, and 2022, 56,352 , 47,820 , and 31,559 RSA awards were granted, respectively. In aggregate, the amount of RSAs granted each year had a grant date fair value of $ 0.8 million, $ 0.5 million, and $ 0.6 million, respectively. 157 The following table summarizes the Company’s restricted stock unit activity for the periods indicated: For the Years Ended December 31, 2024 2023 Restricted Stock Units Number of Shares Weighted-Average Grant Price Per Share Number of Shares Weighted-Average Grant Price Per Share Non-vested restricted stock at beginning of year 952,001 $ 19.46 972,325 $ 21.08 Granted 562,454 13.83 318,577 15.63 Vested ( 372,179 ) 18.62 ( 302,908 ) 21.08 Forfeited ( 22,520 ) 13.20 ( 35,993 ) 15.73 Converted in connection with merger 236,766 14.87 — — Non-vested restricted stock at end of year (1) 1,356,522 $ 16.55 952,001 $ 19.46 (1) Includes the effect of modifications to previously awarded and unvested restricted share awards for one plan participant to accelerate vesting. The financial effect of the modifications on total unrecognized compensation expense was not significant. During the years ended December 31, 2024 and 2023, 372,179 and 302,908 RSU awards vested, respectively. Such awards had a grant date fair value of $ 6.9 million and $ 6.4 million, respectively. During the year ended December 31, 2022, no RSU awards vested. The following table summarizes the Company’s performance stock unit activity for the periods indicated: For the Years Ended December 31, 2024 2023 Performance Stock Units Number of Shares Weighted-Average Grant Price Per Share Number of Shares Weighted-Average Grant Price Per Share Non-vested restricted stock at beginning of year 633,034 $ 19.40 533,676 $ 21.12 Granted 301,441 10.82 108,984 10.16 Vested ( 76,353 ) 14.87 — — Forfeited — — ( 9,626 ) 10.16 Converted in connection with merger 111,617 14.87 — — Non-vested restricted stock at end of year 969,739 $ 16.63 633,034 $ 19.40 During the year ended December 31, 2024, 76,353 PSU awards vested which represent the accelerated vesting of awards assumed from Cambridge which were converted to awards of the Company upon completion of the merger. Such awards had a grant date value of $ 1.1 million. No PSU awards vested during the years ended December 31, 2023 and 2022, respectively. Included in vested RSU and PSU shares, as shown in the tables above, are shares withheld for employee payroll taxes. The aggregate number of RSU and PSU shares withheld for payroll taxes during the years ended December 31, 2024 and 2023 was 147,323 and 95,808 , respectively. No RSU or PSU awards vested during the year ended December 31, 2022. The following table shows share-based compensation expense under the 2021 Plan and the related tax benefit for the periods indicated: For the Years Ended December 31, 2024 2023 2022 (In millions) Share-based compensation expense $ 19.3 $ 16.5 $ 10.5 Related tax benefit (1) 5.3 4.7 3.0 (1) Estimated based upon the Company’s statutory rate for the respective period. As of December 31, 2024 and 2023, there was $ 21.4 million and $ 26.8 million, respectively, of total unrecognized compensation expense related to unvested restricted stock awards, restricted stock units and performance stock units granted and issued under the 2021 Plan, as applicable. As of December 31, 2024, this cost is expected to be recognized over a weighted average remaining period of approximately 1.4 years. As of December 31, 2023, this cost was expected to be recognized over a weighted average remaining period of approximately 2.2 years. 158 17. Commitments and Contingencies Financial Instruments with Off-Balance Sheet Risk In order to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates, the Company is party to financial instruments with off-balance sheet risk in the normal course of business. These financial instruments include commitments to extend credit, standby letters of credit, and forward commitments to sell loans, all of which involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in each particular class of financial instruments. Substantially all of the Company’s commitments to extend credit, which normally have fixed expiration dates or termination clauses, are contingent upon customers maintaining specific credit standards at the time of loan funding. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. In the event the customer does not perform in accordance with the terms of agreement with the third party, the Company would be required to fund the commitment. The maximum potential amount of future payments the Company could be required to make is represented by the contractual amount of the commitment. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. For forward loan sale commitments, the contract or notional amount does not represent exposure to credit loss. The Company generally does not sell loans with recourse. The following table summarizes the above financial instruments as of the dates indicated: As of December 31, 2024 2023 (In Thousands) Commitments to extend credit $ 6,660,149 $ 6,027,356 Standby letters of credit 83,122 58,632 Forward commitments to sell loans 6,374 9,198 Other Contingencies Legal Proceedings The Company has been named a defendant in various legal proceedings arising in the normal course of business. In the opinion of management, based on the advice of legal counsel, the ultimate resolution of these proceedings will not have a material effect on the Company’s Consolidated Financial Statements. 18. Derivative Financial Instruments The Company uses derivative financial instruments to manage its interest rate risk resulting from the differences in the amount, timing, and duration of known or expected cash receipts and known or expected cash payments. Additionally, the Company enters into interest rate derivatives and foreign exchange contracts to accommodate the business requirements of its customers (“customer-related positions”) and risk participation agreements entered into as financial guarantees of performance on customer-related interest rate swap derivatives. The Company also enters into residential mortgage loan commitments to fund mortgage loans at specified rates and times in the future and enters into forward sale commitments to sell such residential mortgage loans at specified prices and times in the future, both of which are considered derivative instruments. Derivative instruments are carried at fair value in the Company’s Consolidated Financial Statements. The accounting for changes in the fair value of a derivative instrument is dependent upon whether or not the instrument qualifies as a hedge for accounting purposes, and further, by the type of hedging relationship. By using derivatives, the Company is exposed to credit risk to the extent that counterparties to the derivative contracts do not perform as required. Should a counterparty fail to perform under the terms of a derivative contract, the Company’s credit exposure on interest rate swaps is limited to the net positive fair value and accrued interest of all swaps with each counterparty plus any initial margin collateral posted. The Company seeks to minimize counterparty credit risk through credit approvals, limits, monitoring procedures, and obtaining collateral, where appropriate. As such, management believes the risk of incurring credit losses on derivative contracts with those counterparties is remote. The Company’s discounting methodology and interest calculation of cash margin uses the Secured Overnight Financing Rate, or SOFR, for U.S. dollar cleared interest rate swaps. 159 Interest Rate Positions An interest rate swap is an agreement whereby one party agrees to pay a floating rate of interest on a notional principal amount in exchange for receiving a fixed rate of interest on the same notional amount, for a predetermined period of time, from a second party. The amounts relating to the notional principal amount are not actually exchanged. The Company has entered into interest rate swaps in which it pays floating and receives fixed interest in order to manage its interest rate risk exposure to the variability in interest cash flows on certain floating-rate loans. Such interest rate swaps include those which effectively convert the floating rate one-month SOFR or overnight indexed swap rate, or prime rate interest payments received on the loans to a fixed rate and consequently reduce the Company’s exposure to variability in short-term interest rates. For interest rate swaps that are accounted for as cash flow hedges, changes in fair value are included in other comprehensive income and reclassified into net income in the same period or periods during which the hedged forecasted transaction affects net income. The following tables reflect the Company’s derivative positions for interest rate swaps which qualify as cash flow hedges for accounting purposes as of the dates indicated: As of December 31, 2024 Weighted Average Rate Notional Amount Weighted Average Maturity Current Rate Paid Receive Fixed Swap Rate Fair Value (1) (In thousands) (In Years) (In thousands) Interest rate swaps on loans $ 2,400,000 2.57 4.51 % 3.02 % $ 220 Total $ 2,400,000 $ 220 (1) The fair value included a net accrued interest payable balance of $ 1.6 million as of December 31, 2024. In addition, the fair value includes netting adjustments which represent the amounts recorded to convert derivative assets and liabilities cleared through the CME from a gross basis to a net basis in accordance with applicable accounting guidance. As of December 31, 2023 Weighted Average Rate Notional Amount Weighted Average Maturity Current Rate Paid Receive Fixed Swap Rate Fair Value (1) (In thousands) (In Years) (In thousands) Interest rate swaps on loans $ 2,400,000 3.57 5.35 % 3.02 % $ ( 883 ) Total $ 2,400,000 $ ( 883 ) (1) The fair value included a net accrued interest payable balance of $ 2.6 million as of December 31, 2023. In addition, the fair value includes netting adjustments which represent the amounts recorded to convert derivative assets and liabilities cleared through the CME from a gross basis to a net basis in accordance with applicable accounting guidance. The maximum amount of time over which the Company is currently hedging its exposure to the variability in future cash flows of forecasted transactions related to the receipt of variable interest on existing financial instruments is 2.7 years. The Company expects approximately $ 24.7 million will be reclassified into interest income, as a reduction of such income, from other comprehensive income related to the Company’s active cash flow hedges in the next 12 months as of December 31, 2024. The reclassification is due to anticipated net payments on the swaps based upon the forward curve as of December 31, 2024. The Company discontinues cash flow hedge accounting if it is probable that the forecasted hedged transactions will not occur in the initially identified time period. At such time, the associated gains and losses deferred in accumulated other comprehensive income (“AOCI”) are reclassified immediately into earnings and any subsequent changes in the fair value of such derivatives are recognized directly in earnings. The following table presents the pre-tax impact of terminated cash flow hedges on AOCI for the periods indicated: Year Ended December 31, 2024 2023 2022 (In thousands) Unrealized gains on terminated hedges included in AOCI — January 1 $ — $ 46 $ 10,239 Unrealized gains on terminated hedges arising during the period — — — Reclassification adjustments for amortization of unrealized (gains) into net interest income — ( 46 ) ( 10,193 ) Unrealized gains on terminated hedges included in AOCI — December 31 $ — $ — $ 46 160 Customer-Related Positions Interest rate swaps offered to commercial customers do not qualify as hedges for accounting purposes. These swaps allow the Company to retain variable rate commercial loans while allowing the commercial customer to synthetically fix the loan rate by entering into a variable-to-fixed rate interest rate swap. The Company believes that its exposure to commercial customer derivatives is limited to non-performance by either the customer or the dealer because these contracts are simultaneously matched at inception with an offsetting transaction. Risk participation agreements are entered into as financial guarantees of performance on interest rate swap derivatives. The purchased (asset) or sold (liability) guarantee allow the Company to participate-out (fee paid) or participate-in (fee received) the risk associated with certain derivative positions executed with the borrower by the lead bank in a customer-related interest rate swap derivative. Foreign exchange contracts consist of those offered to commercial customers and those entered into to hedge the Company’s foreign currency risk associated with a foreign-currency loan. Neither qualifies as a hedge for accounting purposes. These commercial customer derivatives are offset with matching derivatives with correspondent-bank counterparties in order to minimize foreign exchange rate risk to the Company. Exposure with respect to these derivatives is largely limited to non-performance by either the customer or the other counterparty. Neither the Company nor the correspondent-bank counterparty are required to post collateral but each has established foreign-currency transaction limits to manage the exposure risk. The Company requires its customers to post collateral to minimize risk exposure. The following tables present the Company’s customer-related derivative positions as of the dates indicated below for those derivatives not designated as hedging: As of December 31, 2024 Number of Positions Total Notional (Dollars in thousands) Interest rate swaps 494 $ 3,308,037 Risk participation agreements 125 503,803 Foreign exchange contracts: Matched commercial customer book 226 98,429 Foreign currency loan 8 5,835 As of December 31, 2023 Number of Positions Total Notional (Dollars in thousands) Interest rate swaps 356 $ 2,405,835 Risk participation agreements 78 323,957 Foreign exchange contracts: Matched commercial customer book 98 87,601 Foreign currency loan 10 10,242 The level of interest rate swaps, risk participation agreements and foreign currency exchange contracts at the end of each period noted above was commensurate with the activity throughout those periods. 161 The table below presents the fair value of the Company’s derivative financial instruments, as well as their classification on the Consolidated Balance Sheets for the periods indicated: Asset Derivatives Liability Derivatives Balance Sheet Location Fair Value at December 31, 2024 Fair Value at December 31, 2023 Balance Sheet Location Fair Value at December 31, 2024 Fair Value at December 31, 2023 (In thousands) Derivatives designated as hedging instruments Interest rate swaps Other assets $ 225 $ 10 Other liabilities $ 5 $ 893 Derivatives not designated as hedging instruments Customer-related positions: Interest rate swaps Other assets $ 57,526 $ 19,535 Other liabilities $ 97,594 $ 61,217 Risk participation agreements Other assets 4 151 Other liabilities 4 106 Foreign currency exchange contracts — matched customer book Other assets 1,990 760 Other liabilities 1,980 672 Foreign currency exchange contracts — foreign currency loan Other assets 62 — Other liabilities — 187 $ 59,582 $ 20,446 $ 99,578 $ 62,182 Total $ 59,807 $ 20,456 $ 99,583 $ 63,075 The table below presents the net effect of the Company’s derivative financial instruments on the Consolidated Statements of Income as well as the effect of the Company’s derivative financial instruments included in other comprehensive income (“OCI”) as follows: For the Year Ended December 31, 2024 2023 2022 (In thousands) Derivatives designated as hedges: Loss in OCI on derivatives $ ( 45,096 ) $ ( 24,855 ) $ ( 69,010 ) (Loss) gain reclassified from OCI into interest income (effective portion) $ ( 52,151 ) $ ( 48,795 ) $ 9,580 Gain recognized in income on derivatives (ineffective portion and amount excluded from effectiveness test) Interest income $ — $ — $ — Other income — — — Total $ — $ — $ — Derivatives not designated as hedges: Customer-related positions: Gain (loss) recognized in interest rate swap income $ 638 $ ( 274 ) $ 4,324 (Loss) gain recognized in interest rate swap income for risk participation agreements ( 45 ) 97 213 Gain (loss) recognized in other income for foreign currency exchange contracts: Matched commercial customer book ( 78 ) 95 ( 22 ) Foreign currency loan 249 ( 96 ) ( 4 ) Total gain (loss) for derivatives not designated as hedges $ 764 $ ( 178 ) $ 4,511 The Company has agreements with its customer-related interest rate swap derivative counterparties that contain a provision whereby if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. 162 The Company also has agreements with certain of its customer-related interest rate swap derivative correspondent-bank counterparties that contain a provision whereby if the Company fails to maintain its status as a well-capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements. The Company’s exposure related to its customer-related interest rate swap derivatives consists of exposure on cleared derivative transactions and exposure on non-cleared derivative transactions. Cleared derivative transactions are with the Chicago Mercantile Exchange, or CME, and exposure is settled to market daily, with additional credit exposure related to initial-margin collateral pledged to CME at trade execution. At December 31, 2024 and December 31, 2023, the Company had exposure to CME for settled variation margin in excess of the customer-related and non-customer-related interest rate swap termination values of $ 0.1 million and $ 0.4 million, respectively. In addition, at December 31, 2024 and 2023, the Company had posted initial-margin collateral in the form of U.S. Treasury notes amounting to $ 88.0 million and $ 85.9 million, respectively, to CME for these derivatives. The U.S. Treasury notes were considered restricted assets and were included in available for sale securities within the Company’s Consolidated Balance Sheets. At December 31, 2024 there were no customer-related interest rate swap derivatives with credit-risk contingent features in a net liability position. At December 31, 2023, there were $ 1.9 million of customer-related interest rate swap derivatives with credit-risk contingent features in a net liability position. The Company has minimum collateral posting thresholds with its customer-related interest rate swap derivative correspondent-bank counterparties to the extent that the Company has a liability position with the correspondent-bank counterparties. The Company was not required to post cash collateral for interest rate swaps with correspondent-bank counterparties as of December 31, 2024. At December 31, 2023, the Company had posted collateral in the form of cash amounting to $ 3.0 million, which was considered to be a restricted asset and was included in other short-term investments within the Company’s Consolidated Balance Sheets. If the Company had breached any of these provisions at December 31, 2024 or 2023, it would have been required to settle its obligations under the agreements at the termination value. In addition, the Company had cross-default provisions with its commercial customer loan agreements which provide cross-collateralization with the customer loan collateral. Mortgage Banking Derivatives The Company enters into residential mortgage loan commitments in connection with its consumer mortgage banking activities to fund mortgage loans at specified rates and times in the future. In addition, the Company enters into forward sale commitments to sell such residential mortgage loans at specified prices and times in the future. These commitments are short-term in nature and generally expire in 30 to 60 days. The residential mortgage loan commitments that relate to the origination of mortgage loans that will be held for sale and the related forward sale commitments are considered derivative instruments under ASC Topic 815, “Derivatives and Hedging” and are reported at fair value. Changes in fair value are reported in earnings and included in other non-interest income on the Consolidated Statements of Income. As of December 31, 2024 and December 31, 2023, the Company had an outstanding notional balance of residential mortgage loan origination commitments of $ 15.7 million and $ 10.5 million, respectively, and forward sale commitments of $ 6.4 million and $ 9.2 million, respectively. During the years ended December 31, 2024, 2023 and 2022, net gains/losses recorded by the Company related to the change in fair value of commitments to originate and sell mortgage loans were not significant. In addition, the aggregate fair value of the Company’s mortgage banking derivative asset and liability as of December 31, 2024 and 2023 was not significant. Mortgage banking derivative assets and liabilities are included in other assets and other liabilities, respectively, on the Consolidated Balance Sheets. Residential mortgages sold are generally sold with servicing rights released. Mortgage banking derivatives do not qualify as hedges for accounting purposes. 19. Balance Sheet Offsetting Certain financial instruments, including derivatives, may be eligible for offset in the Consolidated Balance Sheets and/or subject to master netting arrangements or similar agreements. The Company’s derivative transactions with upstream financial institution counterparties are generally executed under International Swaps and Derivative Association master agreements which include “right of set-off” provisions. In such cases there is generally a legally enforceable right to offset recognized amounts. However, the Company does not offset fair value amounts recognized for derivative instruments. The Company nets the amount recognized for the right to reclaim cash collateral against the obligation to return cash collateral arising from derivative instruments executed with the same counterparty under a master netting arrangement. Collateral legally required to be maintained at dealer banks by the Company is monitored and adjusted as necessary. As of December 31, 2024 and 2023, it was determined that no additional collateral would have to be posted to immediately settle these instruments. 163 The following tables present the Company’s asset and liability positions that were eligible for offset and the potential effect of netting arrangements on its financial position, as of the dates indicated: As of December 31, 2024 Gross Amounts Recognized Gross Amounts Offset in the Statement of Financial Position Net Amounts Presented in the Statement of Financial Position Gross Amounts Not Offset in the Statement of Financial Position Net Amount Financial Instruments Collateral Pledged (Received) (In thousands) Derivative Assets Interest rate swaps designated as cash flow hedges $ 225 $ — $ 225 $ — $ — $ 225 Customer-related positions: Interest rate swaps 57,526 — 57,526 3,368 ( 48,590 ) 5,568 Risk participation agreements 4 — 4 — — 4 Foreign currency exchange contracts – matched customer book 1,990 — 1,990 — — 1,990 Foreign currency exchange contracts – foreign currency loan 62 — 62 — — 62 $ 59,807 $ — $ 59,807 $ 3,368 $ ( 48,590 ) $ 7,849 Derivative Liabilities Interest rate swaps designated as cash flow hedges $ 5 $ — $ 5 $ — $ 5 $ — Customer-related positions: Interest rate swaps 97,594 — 97,594 3,368 130 94,096 Risk participation agreements 4 — 4 — — 4 Foreign currency exchange contracts – matched customer book 1,980 — 1,980 — — 1,980 Foreign currency exchange contracts – foreign currency loan — — — — — — $ 99,583 $ — $ 99,583 $ 3,368 $ 135 $ 96,080 164 As of December 31, 2023 Gross Amounts Recognized Gross Amounts Offset in the Statement of Financial Position Net Amounts Presented in the Statement of Financial Position Gross Amounts Not Offset in the Statement of Financial Position Net Amount Financial Instruments Collateral Pledged (Received) (In thousands) Derivative Assets Interest rate swaps designated as cash flow hedges $ 10 $ — $ 10 $ — $ — $ 10 Customer-related positions: Interest rate swaps 19,535 — 19,535 4,871 ( 8,500 ) 6,164 Risk participation agreements 151 — 151 — — 151 Foreign currency exchange contracts – matched customer book 760 — 760 — — 760 $ 20,456 $ — $ 20,456 $ 4,871 $ ( 8,500 ) $ 7,085 Derivative Liabilities Interest rate swaps designated as cash flow hedges $ 893 $ — $ 893 $ — $ 893 $ — Customer-related positions: Interest rate swaps 61,217 — 61,217 4,871 1,860 54,486 Risk participation agreements 106 — 106 — — 106 Foreign currency exchange contracts – matched customer book 672 — 672 — — 672 Foreign currency exchange contracts – foreign currency loan 187 — 187 — — 187 $ 63,075 $ — $ 63,075 $ 4,871 $ 2,753 $ 55,451 20. Fair Value of Assets and Liabilities The Company uses fair value measurements to record adjustments to certain assets and liabilities and to determine fair value disclosures. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that the Company believes market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or from Level 2 to Level 3. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no active market exists for a portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment, and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates. 165 The following methods and assumptions were used by the Company in estimating fair value disclosures: Cash and Cash Equivalents For these financial instruments, which have original maturities of 90 days or less, their carrying amounts reported in the Consolidated Balance Sheets approximate fair value. Securities Securities consisted of U.S. Treasury securities, U.S. Agency bonds, U.S. government-sponsored residential and commercial mortgage-backed securities, and state and municipal bonds. AFS securities are recorded at fair value. The Company’s U.S. Treasury securities are traded on active markets and therefore these securities were classified as Level 1. The fair value of U.S. Agency bonds were evaluated using relevant trade data, benchmark quotes and spreads obtained from publicly available trade data, and generated on a price, yield or spread basis as determined by the observed market data. Therefore, these securities were categorized as Level 2 given the use of observable inputs. The fair value of U.S. government-sponsored residential and commercial mortgage-backed securities were estimated using either a matrix or benchmarks. The inputs used include benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Therefore, these securities were categorized as Level 2 given the use of observable inputs. The fair value of state and municipal bonds were estimated using a valuation matrix with inputs including observable bond interest rate tables, recent transactions, and yield relationships. Therefore, these securities were categorized as Level 2 given the use of observable inputs. Fair value was based on the value of one unit without regard to any premium or discount that may result from concentrations of ownership of a financial instrument, possible tax ramifications, or estimated transaction costs. Loans Held for Sale The fair value of loans held for sale, whose carrying amounts approximate fair value, was estimated using the anticipated market price based upon pricing indications provided by investor banks. These assets were classified as Level 2 given the use of observable inputs. Loans The fair value of commercial construction, commercial and industrial lines of credit, and certain other consumer loans was estimated by discounting the contractual cash flows using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. For commercial, commercial real estate, residential real estate, automobile, and consumer home equity loans, fair value was estimated by discounting contractual cash flows adjusted for prepayment estimates using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Loans are classified as Level 3 since the valuation methodology utilizes significant unobservable inputs. Loans that are deemed to be collateral-dependent, as described in Note 2, “Summary of Significant Accounting Policies” were recorded at the fair value of the underlying collateral. FHLB Stock The fair value of FHLB stock approximates the carrying amount based on the redemption provisions of the FHLB. These assets were classified as Level 2. Rabbi Trust and Deferred Compensation Plan Investments Rabbi trust and deferred compensation plan investments consisted primarily of cash and cash equivalents, U.S. government agency obligations, equity securities, mutual funds and other exchange-traded funds, and were recorded at fair value and included in other assets. The purpose of these investments is to fund certain executive non-qualified retirement benefits and deferred compensation. 166 The fair value of other U.S. government agency obligations were estimated using either a matrix or benchmarks. The inputs used include benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. These securities were categorized as Level 2 given the use of observable inputs. The equity securities, mutual funds and other exchange-traded funds were valued based on quoted prices from the market. The equities, mutual funds and exchange-traded funds traded in an active market were categorized as Level 1 as they were valued based upon quoted prices from the market. Mutual funds at net asset value amounted to $ 54.1 million and $ 48.9 million at December 31, 2024 and 2023, respectively. There were no redemption restrictions on these mutual funds at the end of any period presented. Bank-Owned Life Insurance The fair value of bank-owned life insurance was based upon quotations received from bank-owned life insurance dealers. These assets were classified as Level 2 given the use of observable inputs. Deposits The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings, interest checking accounts, and money market accounts, was equal to their carrying amount. The fair value of time deposits was based on the discounted value of contractual cash flows using current market interest rates. Deposits were classified as Level 2 given the use of observable market inputs. The fair value estimates of deposits do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the wholesale market (core deposit intangibles). FHLB Advances The fair value of FHLB advances was based on the discounted value of contractual cash flows. The discount rates used are representative of approximate rates currently offered on instruments with similar remaining maturities. FHLB advances were classified as Level 2. Escrow Deposits of Borrowers The fair value of escrow deposits of borrowers, which have no stated maturity, approximates the carrying amount. Escrow deposits of borrowers were classified as Level 2. Interest Rate Swap Collateral Funds The fair value of interest rate swap collateral funds approximates the carrying amount. Interest rate swap collateral funds were classified as Level 2. Interest Rate Swaps The fair value of interest rate swaps was determined using discounted cash flow analysis on the expected cash flows of the interest rate swaps. This analysis reflects the contractual terms of the interest rate swaps, including the period of maturity, and uses observable market-based inputs, including interest rate curves and implied volatility. In addition, for customer-related interest rate swaps, the analysis reflects a credit valuation adjustment to reflect the Company’s own non-performance risk and the respective counterparty’s non-performance risk in the fair value measurements. The majority of inputs used to value the Company’s interest rate swaps fall within Level 2 of the fair value hierarchy, but the credit valuation adjustments associated with the interest rate swaps utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, at December 31, 2024 and 2023, the impact of the Level 3 inputs on the overall valuation of the interest rate swaps was deemed insignificant to the overall valuation. As a result, the interest rate swaps were categorized as Level 2 within the fair value hierarchy. Risk Participations The fair value of risk participations was determined based upon the total expected exposure of the derivative which considers the present value of cash flows discounted using market-based inputs and were therefore categorized as Level 2 within the fair value hierarchy. The fair value also included a credit valuation adjustment which evaluates the credit risk of its counterparties by considering factors such as the likelihood of default by the counterparties, its net exposures, the remaining contractual life, as well as the amount of collateral securing the position. The change in value of derivative assets and liabilities attributable to credit risk was not significant during the reported periods. 167 Foreign Currency Forward Contracts The fair values of foreign currency forward contracts were based upon the remaining expiration period of the contracts and bid quotations received from foreign exchange contract dealers and were categorized as Level 2 within the fair value hierarchy. Mortgage Derivatives The fair value of mortgage derivatives was determined based upon current market prices for similar assets in the secondary market and therefore are classified as Level 2 within the fair value hierarchy. Fair Value of Assets and Liabilities Measured on a Recurring Basis The following tables present the balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 and 2023: Fair Value Measurements at Reporting Date Using Balance as of December 31, 2024 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Description (In thousands) Assets Securities available for sale Government-sponsored residential mortgage-backed securities $ 2,561,895 $ — $ 2,561,895 $ — Government-sponsored commercial mortgage-backed securities 1,161,111 — 1,161,111 — U.S. Agency bonds 17,672 — 17,672 — U.S. Treasury securities 97,619 97,619 — — State and municipal bonds and obligations 183,301 — 183,301 — Rabbi trust investments 98,981 91,445 7,536 — Deferred compensation plan investments 2,439 2,439 — — Loans held for sale 372 — 372 — Interest rate swap contracts Cash flow hedges - interest rate positions 225 — 225 — Customer-related positions 57,526 — 57,526 — Risk participation agreements 4 — 4 — Foreign currency forward contracts Matched customer book 1,990 — 1,990 — Foreign currency loan 62 — 62 — Mortgage derivatives 33 — 33 — Total $ 4,183,230 $ 191,503 $ 3,991,727 $ — Liabilities Interest rate swap contracts Cash flow hedges - interest rate positions $ 5 $ — $ 5 $ — Customer-related positions 97,594 — 97,594 — Risk participation agreements 4 — 4 — Foreign currency forward contracts Matched customer book 1,980 — 1,980 — Foreign currency loan — — — — Mortgage derivatives 41 — 41 — Total $ 99,624 $ — $ 99,624 $ — 168 Fair Value Measurements at Reporting Date Using Description Balance as of December 31, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Assets Securities available for sale Government-sponsored residential mortgage-backed securities $ 2,780,638 $ — $ 2,780,638 $ — Government-sponsored commercial mortgage-backed securities 1,124,376 — 1,124,376 — U.S. Agency bonds 216,011 — 216,011 — U.S. Treasury securities 95,152 95,152 — — State and municipal bonds and obligations 191,344 — 191,344 — Rabbi trust investments 87,435 81,278 6,157 — Loans held for sale 1,124 — 1,124 — Interest rate swap contracts Cash flow hedges - interest rate positions 10 — 10 — Customer-related positions 19,535 — 19,535 — Risk participation agreements 151 — 151 — Foreign currency forward contracts Matched customer book 760 — 760 — Mortgage derivatives 69 — 69 — Total $ 4,516,605 $ 176,430 $ 4,340,175 $ — Liabilities Interest rate swap contracts Cash flow hedges - interest rate positions $ 893 $ — $ 893 $ — Customer-related positions 61,217 — 61,217 — Risk participation agreements 106 — 106 — Foreign currency forward contracts Matched customer book 672 — 672 — Foreign currency loan 187 — 187 — Mortgage derivatives 36 — 36 — Total $ 63,111 $ — $ 63,111 $ — There were no transfers to or from Level 1, 2 and 3 during the years ended December 31, 2024 and 2023. The Company held no assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of December 31, 2024 nor December 31, 2023. 169 Fair Value of Assets and Liabilities Measured on a Nonrecurring Basis The Company may also be required, from time to time, to measure certain other assets on a nonrecurring basis in accordance with generally accepted accounting principles. The following tables summarize the fair value of assets and liabilities measured at fair value on a nonrecurring basis, as of December 31, 2024 and 2023. Fair Value Measurements at Reporting Date Using Description Balance as of December 31, 2024 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Assets Individually assessed collateral-dependent loans whose fair value is based upon appraisals $ 79,156 $ — $ — $ 79,156 Fair Value Measurements at Reporting Date Using Description Balance as of December 31, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Assets Individually assessed collateral-dependent loans whose fair value is based upon appraisals $ 27,874 $ — $ — $ 27,874 For the valuation of the collateral-dependent loans, the Company relies primarily on third-party valuation information from certified appraisers, and values are generally based upon recent appraisals of the underlying collateral, brokers’ opinions based upon recent sales of comparable properties, estimated equipment auction or liquidation values, income capitalization, or a combination of income capitalization and comparable sales. Depending on the type of underlying collateral, valuations may be adjusted by management for qualitative factors such as economic factors and estimated liquidation expenses. The range of these possible adjustments may vary. 170 Disclosures about Fair Value of Financial Instruments The estimated fair values and related carrying amounts for assets and liabilities for which fair value is only disclosed are shown below as of the dates indicated: Fair Value Measurements at Reporting Date Using Carrying Value as of December 31, 2024 Fair Value as of December 31, 2024 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Assets Held to maturity securities: Government-sponsored residential mortgage-backed securities $ 231,709 $ 202,271 $ — $ 202,271 $ — Government-sponsored commercial mortgage-backed securities 189,006 169,453 — 169,453 — Loans, net of allowance for loan losses 17,549,402 17,126,716 — — 17,126,716 FHLB stock 5,865 5,865 — 5,865 — Bank-owned life insurance 204,704 204,704 — 204,704 — Liabilities Deposits $ 21,291,619 $ 21,287,835 $ — $ 21,287,835 $ — FHLB advances 17,589 15,310 — 15,310 — Escrow deposits of borrowers 27,721 27,721 — 27,721 — Interest rate swap collateral funds 48,590 48,590 — 48,590 — Fair Value Measurements at Reporting Date Using Carrying Value as of December 31, 2023 Fair Value as of December 31, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (In thousands) Assets Held to maturity securities: Government-sponsored residential mortgage-backed securities $ 254,752 $ 230,319 $ — $ 230,319 $ — Government-sponsored commercial mortgage-backed securities 194,969 174,503 — 174,503 — Loans, net of allowance for loan losses 13,799,367 13,145,455 — — 13,145,455 FHLB stock 5,904 5,904 — 5,904 — Bank-owned life insurance 164,702 164,702 — 164,702 — Liabilities Deposits $ 17,596,217 $ 17,593,214 $ — $ 17,593,214 $ — FHLB advances 17,738 15,366 — 15,366 — Escrow deposits of borrowers 21,978 21,978 — 21,978 — Interest rate swap collateral funds 8,500 8,500 — 8,500 — This summary excludes certain financial assets and liabilities for which the carrying value approximates fair value. For financial assets, these may include cash and due from banks, federal funds sold and short-term investments. For financial liabilities, these may include federal funds purchased. These instruments would all be considered to be classified as Level 1 within the fair value hierarchy. Also excluded from the summary are financial instruments measured at fair value on a recurring and nonrecurring basis, as previously described. 171 21. Revenue from Contracts with Customers Revenue from contracts with customers within the scope of ASC 606, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) is recognized when control of goods or services is transferred to the customer, in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The Company considers the terms of the contract and all relevant facts and circumstances when applying this guidance. The Company measures revenue and timing of recognition by applying the following five steps: 1. Identify the contract(s) with the customers. 2. Identify the performance obligations. 3. Determine the transaction price. 4. Allocate the transaction price to the performance obligations. 5. Recognize revenue when (or as) the entity satisfies a performance obligation. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. The information presented within this Note excludes discontinued operations with respect to the years ended December 31, 2023 and 2022. Refer to Note 23, “Discontinued Operations” for further discussion regarding discontinued operations. Performance obligations The Company’s performance obligations are generally satisfied either at a point in time or over time, as services are rendered. Unsatisfied performance obligations at the report date are not material to the Company’s Consolidated Financial Statements. A portion of the Company’s noninterest income/(loss) is derived from contracts with customers within the scope of ASC 606. The Company has disaggregated such revenues by type of service, as presented in the table below. These categories reflect how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. For the Year Ended December 31, 2024 2023 2022 (In thousands) 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 Other non-interest income (1) 20,312 10,502 10,670 Total noninterest income in-scope of ASC 606 112,619 76,866 77,299 Total noninterest income (loss) out-of-scope of ASC 606 11,298 ( 314,619 ) ( 549 ) Total noninterest income (loss) $ 123,917 $ ( 237,753 ) $ 76,750 (1) Includes income of $ 7.8 million, recognized during the year ended December 31, 2024, representing a penalty for the early withdrawal of an omnibus deposit contract. No such income was recognized for the years ended December 31, 2023 or 2022. Additional information related to each of the revenue streams is further noted below. Trust and Investment Advisory Fees The Company offers investment management and trust services to individuals, institutions, small businesses and charitable institutions. Each investment management product is governed by its own contract along with a separate identifiable fee schedule unique to that product. The Company also offers additional services, such as estate settlement, financial planning, tax services, and other special services quoted at the customer’s request. The asset management and/or custody fees are primarily based upon a percentage of the monthly valuation of the principal assets in the customer’s account. Customers are also charged a base fee which is prorated over a twelve-month period. Fees for additional or special services are generally fixed in nature and are charged as services are rendered. All revenue is recognized in correlation to the monthly management fee determinations or as transactional services are provided. Trust and advisory fees earned but not yet received amounted to $ 5.7 million and $ 0.1 million as of December 31, 2024 and 2023, respectively. 172 Deposit Service Charges The Company offers various deposit account products to its customers governed by specific deposit agreements applicable to either personal customers or business customers. These agreements identify the general conditions and obligations of both parties and include standard information regarding deposit account-related fees. Deposit account services include providing access to deposit accounts as well as access to the various deposit transactional services of the Company. These transactional services are primarily those that are identified in the standard fee schedule, and include, but are not limited to, services such as overdraft protection, wire transfer, and check collection. The Company may charge monthly fixed service fees associated with the customer having access to the deposit account as well as separate fixed fees associated with and at the time specific transactions are entered into by the customer. As such, the Company considers that its performance obligations are fulfilled when customers are provided deposit account access or when the requested deposit transaction is completed. Cash management services are a subset of the deposit service charges revenue stream. These services include automated clearing house, or ACH, transaction processing, positive pay, lockbox, and remote deposit services. These services are also governed by separate agreements entered into by the customer. The fee arrangement for these services is structured as a fixed fee per transaction which may be offset by earnings credits. An earnings credit is a discount that a customer receives based upon the investable balance in the applicable covered deposit account(s) for a given month. Earnings credits are only good for the given month. That is, if cash management fees for a given month are less than the month’s earnings credit, the remainder of the credit does not carry over to the following month. Cash management fees are recognized as revenue in the month that the services are provided. Cash management fees earned but not yet received amounted to $ 1.6 million as of both December 31, 2024 and 2023, and were included in other assets on the Consolidated Balance Sheets. Debit Card Processing Fees The Company provides debit cards to its customers which are authorized and settled through various card payment networks, and in exchange, the Company earns revenue as determined by each payment network’s interchange program. Regardless of the network that is utilized to authorize and settle the payment, the merchant that provides the product or service to the debit card holder is ultimately responsible for the interchange payment to the Company. Debit card processing fees are recognized as card transactions are settled within each network. Debit card processing fees earned but not yet received amounted to $ 0.4 million as of both December 31, 2024 and 2023, and were included in other assets on the Consolidated Balance Sheets. Other Noninterest Income The Company earns various types of other noninterest income that have been aggregated into one general revenue stream in the table noted above. Noninterest income in-scope of ASC 606 includes, but is not limited to, the following types of revenue with customers: safe deposit rent, ATM surcharge fees and customer checkbook fees. Individually, these sources of noninterest income are not material. 173 22. Other Comprehensive Income The following tables present a reconciliation of the changes in the components of other comprehensive income (loss) for the dates indicated including the amount of income tax benefit (expense) allocated to each component of other comprehensive income (loss): For the Year Ended December 31, 2024 Pre Tax Amount Tax (Expense) Benefit After Tax Amount (In thousands) Unrealized losses on securities available for sale: Change in fair value of securities available for sale $ ( 19,461 ) $ 7,684 $ ( 11,777 ) Less: reclassification adjustment for losses included in net income ( 16,798 ) 4,653 ( 12,145 ) Net change in fair value of securities available for sale ( 2,663 ) 3,031 368 Unrealized losses on cash flow hedges: Change in fair value of cash flow hedges ( 45,096 ) 12,492 ( 32,604 ) Less: net cash flow hedge losses reclassified into interest income ( 52,151 ) 14,446 ( 37,705 ) Net change in fair value of cash flow hedges 7,055 ( 1,954 ) 5,101 Defined benefit pension plans: Change in actuarial net loss 28,546 ( 7,907 ) 20,639 Less: amortization of actuarial net loss ( 7,098 ) 1,966 ( 5,132 ) Less: Defined Benefit Plan settlement gain 29 ( 8 ) 21 Less: net accretion of prior service credit 9,953 ( 2,757 ) 7,196 Net change in other comprehensive income for defined benefit pension plans 25,662 ( 7,108 ) 18,554 Total other comprehensive income $ 30,054 $ ( 6,031 ) $ 24,023 For the Year Ended December 31, 2023 Pre Tax Amount Tax (Expense) Benefit After Tax Amount (In thousands) Unrealized losses on securities available for sale: Change in fair value of securities available for sale $ 47,104 $ ( 9,731 ) $ 37,373 Less: reclassification adjustment for losses included in net income ( 333,170 ) 74,630 ( 258,540 ) Net change in fair value of securities available for sale 380,274 ( 84,361 ) 295,913 Unrealized losses on cash flow hedges: Change in fair value of cash flow hedges (1) ( 24,855 ) 8,165 ( 16,690 ) Less: net cash flow hedge gains reclassified into interest income (1) ( 48,795 ) 13,517 ( 35,278 ) Net change in fair value of cash flow hedges 23,940 ( 5,352 ) 18,588 Defined benefit pension plans: Change in actuarial net loss 19,742 ( 5,547 ) 14,195 BEP and Defined Benefit Plan amendments - accelerated vesting ( 1,351 ) 381 ( 970 ) Less: amortization of actuarial net loss ( 9,563 ) 2,693 ( 6,870 ) Less: BEP and Defined Benefit Plan curtailment gain 15,908 ( 4,490 ) 11,418 Less: net accretion of prior service credit 11,560 ( 3,222 ) 8,338 Net change in other comprehensive income for defined benefit pension plans 486 ( 147 ) 339 Total other comprehensive income $ 404,700 $ ( 89,860 ) $ 314,840 174 For the Year Ended December 31, 2022 Pre Tax Amount Tax Benefit (Expense) After Tax Amount (Dollars in thousands) Unrealized losses on securities available for sale: Change in fair value of securities available for sale $ ( 1,061,859 ) $ 238,005 $ ( 823,854 ) Less: reclassification adjustment for gains included in net income ( 3,157 ) 873 ( 2,284 ) Net change in fair value of securities available for sale ( 1,058,702 ) 237,132 ( 821,570 ) Unrealized losses on cash flow hedges: Change in fair value of cash flow hedges (1) ( 69,010 ) 18,377 ( 50,633 ) Less: net cash flow hedge gains reclassified into interest income (1) 9,580 ( 2,693 ) 6,887 Net change in fair value of cash flow hedges ( 78,590 ) 21,070 ( 57,520 ) Defined benefit pension plans: Change in actuarial net gain 6,323 ( 1,777 ) 4,546 Less: amortization of actuarial net loss ( 11,032 ) 3,101 ( 7,931 ) Less: Defined Benefit Plan settlement loss ( 12,045 ) 3,386 ( 8,659 ) Less: net accretion of prior service credit 11,882 ( 3,340 ) 8,542 Net change in other comprehensive income for defined benefit pension plans 17,518 ( 4,924 ) 12,594 Total other comprehensive loss $ ( 1,119,774 ) $ 253,278 $ ( 866,496 ) (1) Includes amortization of less than $ 0.1 million and $ 7.3 million for the years ended December 31, 2023 and 2022, respectively, of realized but unrecognized gains, net of tax, from the termination of interest rate swaps. The total original gain of $ 41.2 million, net of tax, became fully accreted into income during the year ended December 31, 2023. The balance of this gain had amortized to less than $ 0.1 million, net of tax, at December 31, 2022. The following table illustrates the changes in the balances of each component of accumulated other comprehensive income (loss), net of tax: Unrealized (Losses) and Gains on Available for Sale Securities Unrealized (Losses) and Gains on Cash Flow Hedges Defined Benefit Pension Plans Total (In thousands) Beginning balance: January 1, 2022 $ ( 58,586 ) $ 7,361 $ ( 5,471 ) $ ( 56,696 ) Other comprehensive (loss) income before reclassifications ( 823,854 ) ( 50,633 ) 4,546 ( 869,941 ) Less: Amounts reclassified from accumulated other comprehensive income ( 2,284 ) 6,887 ( 8,048 ) ( 3,445 ) Net current-period other comprehensive (loss) income ( 821,570 ) ( 57,520 ) 12,594 ( 866,496 ) Ending balance: December 31, 2022 $ ( 880,156 ) $ ( 50,159 ) $ 7,123 $ ( 923,192 ) Other comprehensive income (loss) before reclassifications 37,373 ( 16,690 ) 13,225 33,908 Less: Amounts reclassified from accumulated other comprehensive (loss) income ( 258,540 ) ( 35,278 ) 12,886 ( 280,932 ) Net current-period other comprehensive income 295,913 18,588 339 314,840 Ending balance: December 31, 2023 $ ( 584,243 ) $ ( 31,571 ) $ 7,462 $ ( 608,352 ) Other comprehensive income before reclassifications ( 11,777 ) ( 32,604 ) 20,639 ( 23,742 ) Less: Amounts reclassified from accumulated other comprehensive income ( 12,145 ) ( 37,705 ) 2,085 ( 47,765 ) Net current-period other comprehensive income 368 5,101 18,554 24,023 Ending balance: December 31, 2024 $ ( 583,875 ) $ ( 26,470 ) $ 26,016 $ ( 584,329 ) 175 The following table illustrates the significant amounts reclassified out of each component of accumulated other comprehensive (loss)/income, net of tax: Year Ended December 31, Details about Accumulated Other Comprehensive (Loss)/Income Components 2024 2023 2022 Affected Line Item in the Statement Where Net Income is Presented (In thousands) Unrealized losses on available-for-sale securities $ ( 16,798 ) $ ( 333,170 ) $ ( 3,157 ) Losses on sales of securities available for sale, net ( 16,798 ) ( 333,170 ) ( 3,157 ) Total before tax 4,653 74,630 873 Tax benefit $ ( 12,145 ) $ ( 258,540 ) $ ( 2,284 ) Net of tax Unrealized (losses) gains on cash flow hedges $ ( 52,151 ) $ ( 48,795 ) $ 9,580 Interest income ( 52,151 ) ( 48,795 ) 9,580 Total before tax 14,446 13,517 ( 2,693 ) Tax benefit (expense) $ ( 37,705 ) $ ( 35,278 ) $ 6,887 Net of tax Amortization of defined benefit pension items $ ( 7,069 ) $ ( 9,563 ) $ ( 23,077 ) Net periodic pension cost - see Note 15 BEP and Defined Benefit Plan curtailment gain — 15,908 — Net income from discontinued operations Accretion of prior service credit 9,953 11,560 11,882 Net periodic pension cost - see Note 15 2,884 17,905 ( 11,195 ) Total before tax ( 799 ) ( 5,019 ) 3,147 Tax (expense) benefit $ 2,085 $ 12,886 $ ( 8,048 ) Net of tax Total reclassifications for the period $ ( 47,765 ) $ ( 280,932 ) $ ( 3,445 ) 23. Discontinued Operations On September 19, 2023, the Company announced that it had entered into an asset purchase agreement (“the agreement”) with Arthur J. Gallagher & Co. (“Gallagher”) to sell substantially all of the assets of its insurance agency business for a gross purchase price of $ 515.0 million. The agreement also provided for the assumption of certain liabilities of the insurance agency business by Gallagher. Management made the decision to sell certain assets of its insurance agency business to recognize the valuation premium of the business, while allowing the Company to focus on growth and strategic initiatives of its core banking business. In September 2023, following the approval of the sale by the Company’s board of directors, the Company reclassified substantially all of the assets and certain liabilities of its insurance agency business as held for sale in connection with a planned disposition of the business. A business is classified as held for sale when management, having the authority to approve the action, commits to a plan to sell the business, the sale is probable to occur during the next 12 months at a price that is reasonable in relation to its current fair value, and certain other criteria are met. In accordance with ASC 205, Presentation of Financial Statements , the Company classifies operations as discontinued when they meet all the criteria to be classified as held for sale and when the sale represents a strategic shift that will have a major impact on the Company’s financial condition and results of operations. On October 31, 2023, the Company completed the sale of its insurance agency business for net cash consideration at closing of $ 498.1 million, subject to customary post-closing working capital adjustments. The net cash proceeds at closing included the gross purchase price pursuant to the agreement of $ 515.0 million and an estimated working capital adjustment of $ 4.2 million, which were reduced by transaction expenses of $ 17.0 million and the settlement of certain obligations of the Company primarily related to employee post-retirement liabilities that originated prior to closing of $ 4.1 million. In addition, the Company transferred $ 7.4 million in fiduciary cash to Gallagher upon closing which is included in the determination of the gain on sale as of December 31, 2023 but was not included in the amount of net cash consideration of $ 498.1 million. In connection with the sale, the Company recognized a gain on sale of $ 408.6 million, which was subject to certain post-closing adjustments during the 120 day post-closing settlement period which ended on February 28, 2024. The amount of the post- 176 closing settlement was not material. In addition, the Company recognized indirect noninterest expenses associated with the sale of approximately $ 22.3 million. The following presents operating results of the discontinued insurance agency business for the periods indicated: For the Years Ended December 31, 2023 2022 (In thousands) Noninterest income: Insurance commissions $ 93,997 $ 99,887 Other noninterest income 67 179 Total noninterest income 94,064 100,066 Noninterest expense: Salaries and employee benefits 76,109 65,089 Office occupancy and equipment 4,420 3,319 Data processing 3,577 4,335 Professional services 1,176 1,009 Marketing expenses 179 246 Amortization of intangible assets 2,002 2,666 Other 5,304 4,944 Total noninterest expense 92,767 81,608 Income from discontinued operations before income tax expense 1,297 18,458 Gain on sale of discontinued operations before income tax expense 408,629 — Total gain on discontinued operations before income tax expense 409,926 18,458 Income tax expense 115,060 5,210 Income from discontinued operations, net of taxes (1) $ 294,866 $ 13,248 (1) Represents net income from discontinued operations that is presented in the Consolidated Statements of Income. Certain income and expense amounts were excluded from discontinued operations as they relate to assets and liabilities which were not assumed by Gallagher. The following is a summary of such items and the corresponding income tax effect for the periods indicated: Years Ended December 31, 2023 2022 (In thousands) Noninterest income: Income (loss) from investments held in rabbi trusts $ 697 $ ( 1,305 ) Other noninterest income (1) 60 54 Total noninterest income (loss) 757 ( 1,251 ) Noninterest expense: Salaries and employee benefits (2) 721 ( 1,292 ) Office occupancy and equipment (3) 433 499 Other (4) 1,608 2,396 Total noninterest expense 2,762 1,603 (Loss) income before income tax expense ( 2,005 ) ( 2,854 ) Income tax (benefit) expense ( 564 ) ( 802 ) Net (loss) income ( 1,441 ) ( 2,052 ) (1) Includes income on Company-owned life insurance policies which were not disposed of and were transferred into the Bank upon dissolution of Eastern Insurance Group. (2) Includes expenses, which were a net credit for the year ended December 31, 2022 , associated with certain employee post-retirement benefit plan expenses. (3) Includes depreciation expense associated with buildings and related improvements and ROU asset amortization related to one lease which were not disposed of and were transferred to the Bank as of January 1, 2024. 177 (4) Includes intercompany expenses and other credits associated with the Defined Benefit Plan and the BEP. Components of net periodic benefit cost associated with the Defined Benefit Plan and the BEP included in other noninterest expense above were a net credit for the periods presented. Continuing Involvement Pursuant to the agreement, the Company agreed to provide certain transitional services to Gallagher for up to six months following the closing of the sale. Such services included certain information and technology support and human resources support. The Company was compensated for such services on a monthly basis, and the total compensation over the six month period plus reimbursement of amounts paid by the Company in connection with its performance of the transitional services was not material. Leases During the year ended December 31, 2023, upon reclassification of the above assets and liabilities to assets and liabilities of discontinued operations, the Company re-assessed the ROU assets of certain leases, which were assumed by Gallagher upon closing, and made the decision to abandon certain leases which were not assumed by Gallagher and for which Eastern Insurance Group was the lessee. The Company retained one lease for which Eastern Insurance Group was lessee at the time of closing. Following the sale, the lease was partially sublet to Gallagher and Eastern Insurance Group’s obligation was transferred to the Bank upon dissolution of Eastern Insurance Group. As of December 31, 2023, the ROU asset and lease liability for such lease was $ 0.5 million and $ 0.3 million, respectively. During the year ended December 31, 2023, the Company remeasured the present value of the future lease payments related to each lease for which Eastern Insurance Group was the lessee which resulted in a net reduction of the lease liabilities and a corresponding net reduction of the lease ROU assets of $ 6.4 million. The Company recorded an impairment charge of $ 2.0 million related to leases which were terminated early following the closing of the asset sale. The impairment charge was included in net income from discontinued operations for the year ended December 31, 2023. Revenue Recognition - Insurance Commissions The Company acted as an agent in offering property, casualty, and life and health insurance to both commercial and consumer customers though Eastern Insurance Group. The Company also earned additional commissions from the insurers based upon meeting certain criteria, such as premium levels, growth rates, new business volume and loss experience. The Company recognized commission revenues when earned based upon the effective date of the policy or when services were rendered. Certain revenues were deferred to reflect delivery of services over the contract period. Upon the transfer of Eastern Insurance Group’s assets to Gallagher, which occurred on October 31, 2023, the Company ceased to offer insurance products and services and thus no longer receives insurance-related commissions and revenues. The Company earned a fixed commission rate on the sales of these products and services. Commissions were earned on the contract effective date and generally were based upon a percentage of premiums for insurance coverage. Commission rates depended upon a large number of factors, including the type of risk being placed, the particular underwriting enterprise’s demand, the expected loss experience of the particular risk coverage, and historical benchmarks surrounding the level of effort necessary for the Company to place and service the insurance contract. The vast majority of the Company’s services and revenues were associated with the placement of an insurance contract. The Company also earned profit-sharing revenues, also referred to as contingency revenue, from the insurers with whom the Company placed business. These profit-sharing revenues were performance bonuses from the insurers based upon certain performance metrics such as floors on written premiums, loss rates, and growth rates. These amounts were in excess of the commission revenues discussed above, and not all business placed with underwriting enterprises was eligible for contingent revenues. Contingent revenues were variable and generally based upon the Company’s expectation of the ultimate profit-sharing revenue amounts to be earned and varied from period to period. The Company’s contracts were generally calendar year contracts whereby revenues from underwriting enterprises were received in the calendar year following placement, generally the first and second quarters, after verification of the performance indicators outlined in the contracts. Accordingly, during each reporting period, management made its best estimate of the amounts that had been earned using historical averages and other factors to project revenues. The Company based its estimates each period on a contract-by-contract basis. As estimates could have changed significantly from period to period, the Company did not recognize this revenue until it had concluded that, based upon all the facts and information available, it was probable that a significant revenue reversal would not occur in a future period. 178 24. Parent Company Financial Statements Condensed financial information relative to Eastern Bankshares Inc.’s (“the parent company”) balance sheets at December 31, 2024 and 2023 and the related statements of income and cash flows for the years ended December 31, 2024, 2023 and 2022 are presented below. The statement of shareholders’ equity is not presented below as the parent company’s shareholders’ equity is that of the consolidated Company. BALANCE SHEETS As of December 31, 2024 2023 (In thousands) Assets Cash and cash equivalents (1) $ 186,589 $ 118,256 Goodwill and other intangibles, net 744 744 Deferred income taxes, net 2,455 6,763 Investment in subsidiaries 3,418,356 2,842,099 Other assets 5,246 8,202 Total assets $ 3,613,390 $ 2,976,064 Liabilities and shareholders’ equity Other liabilities $ 1,423 $ 1,209 Total liabilities 1,423 1,209 Shareholders’ equity 3,611,967 2,974,855 Total liabilities and shareholders’ equity $ 3,613,390 $ 2,976,064 (1) Includes $ 185.0 million and $ 116.7 that is eliminated in consolidation as of December 31, 2024 and 2023, respectively. STATEMENTS OF INCOME For the Year Ended December 31, 2024 2023 2022 (In thousands) Income Interest income $ 142 $ 130 $ 15 Other 9,291 — — Total income 9,433 130 15 Expenses Professional services 5,877 4,937 899 Other 4,170 3,706 3,070 Total expenses 10,047 8,643 3,969 Loss before income taxes and equity in undistributed income of subsidiaries ( 614 ) ( 8,513 ) ( 3,954 ) Income tax expense (benefit) 973 ( 1,773 ) 269 Loss before equity in undistributed income of subsidiaries ( 1,587 ) ( 6,740 ) ( 4,223 ) Equity in undistributed income of subsidiaries 121,148 238,917 203,982 Net income $ 119,561 $ 232,177 $ 199,759 179 STATEMENTS OF CASH FLOWS For the Year Ended December 31, 2024 2023 2022 (In thousands) Cash flows provided by operating activities Net income $ 119,561 $ 232,177 $ 199,759 Adjustments to reconcile net income to cash provided by operating activities Equity in undistributed income of subsidiaries ( 121,148 ) ( 238,917 ) ( 203,982 ) Share-based compensation 19,269 16,513 10,507 ESOP expense 7,356 7,129 9,923 Gain on sale of other equity investment ( 9,291 ) — — Change in: Deferred income taxes, net 4,308 6,419 4,792 Other, net 736 ( 4,115 ) ( 937 ) Net cash provided by operating activities 20,791 19,206 20,062 Cash flows provided by investing activities Return of investments in subsidiary 128,000 40,000 240,000 Contributions to other equity investments ( 405 ) ( 720 ) ( 788 ) Proceeds from sale of other equity investment 9,958 — — Net cash acquired in business combination 21,154 — — Net cash provided by investing activities 158,707 39,280 239,212 Cash flows used in financing activities Payments for shares repurchased under share repurchase plans ( 27,683 ) — ( 201,618 ) Dividends declared and paid to common shareholders ( 82,541 ) ( 66,671 ) ( 65,886 ) Stock issuance costs ( 941 ) — — Net cash used in financing activities ( 111,165 ) ( 66,671 ) ( 267,504 ) Net increase (decrease) in cash and cash equivalents 68,333 ( 8,185 ) ( 8,230 ) Cash and cash equivalents at beginning of year 118,256 126,441 134,671 Cash and cash equivalents at end of year $ 186,589 $ 118,256 $ 126,441 25. Related Parties The Company has, and expects to have in the future, related party transactions in the ordinary course of business. The transactions include, but are not limited to, lending activities and deposit services with directors and executive officers of the Company and their affiliates. Based on the Company’s assessment, such transactions are consistent with prudent banking practices and are within applicable banking regulations. During the years ended December 31, 2024, 2023 and 2022, no such transactions involved amounts in excess of 5% of the Company’s total shareholders’ equity. 26. Quarterly Results of Operations (Unaudited) In connection with the sale of the insurance agency business, which was completed in the fourth quarter of 2023, the Company reclassified certain assets and liabilities and the related results of operations to discontinued operations in the third quarter of 2023. Refer to Note 23, “Discontinued Operations” for further discussion regarding discontinued operations. The following unaudited supplementary information summarizes the retrospective changes to the Consolidated Statements of Income as a result of the decision to sell the insurance agency business for the year ended December 31, 2023 (quarterly information for the year ended December 31, 2024 was provided for comparative purposes): 180 First Quarter Second Quarter Third Quarter Fourth Quarter 2024 2023 2024 2023 2024 2023 2024 2023 (Dollars in thousands, except per share data) Interest and dividend income $ 202,611 $ 188,880 $ 207,376 $ 201,765 $ 266,018 $ 202,168 $ 270,761 $ 203,646 Interest expense 72,711 50,571 78,727 60,177 96,163 64,963 91,568 70,339 Net interest income 129,900 138,309 128,649 141,588 169,855 137,205 179,193 133,307 Provision for allowance for loan losses 7,451 25 6,126 7,501 46,983 7,328 6,820 5,198 Net interest income after provision for loan losses 122,449 138,284 122,523 134,087 122,872 129,877 172,373 128,109 Noninterest income (loss) 27,692 ( 309,853 ) 25,348 26,204 33,528 19,157 37,349 26,739 Noninterest expense 101,202 95,891 109,869 99,934 159,753 101,748 137,544 121,029 Income (loss) from continuing operations before income tax expense 48,939 ( 267,460 ) 38,002 60,357 ( 3,353 ) 47,286 72,178 33,819 Income tax expense (benefit) 10,292 ( 65,379 ) 11,671 15,938 2,835 ( 16,178 ) 11,407 2,310 Net income (loss) from continuing operations 38,647 ( 202,081 ) 26,331 44,419 ( 6,188 ) 63,464 60,771 31,509 Net income (loss) from discontinued operations — 7,985 — 4,238 — ( 4,351 ) — 286,994 Net income (loss) $ 38,647 $ ( 194,096 ) $ 26,331 $ 48,657 $ ( 6,188 ) $ 59,113 $ 60,771 $ 318,503 Basic earnings (loss) per share: Continuing operations $ 0.24 $ ( 1.25 ) $ 0.16 $ 0.27 $ ( 0.03 ) $ 0.39 $ 0.30 $ 0.19 Discontinued operations — 0.05 — 0.03 — ( 0.03 ) — 1.77 Basic earnings (loss) per share $ 0.24 $ ( 1.20 ) $ 0.16 $ 0.30 $ ( 0.03 ) $ 0.36 $ 0.30 $ 1.96 Diluted earnings (loss) per share: Continuing operations $ 0.24 $ ( 1.25 ) $ 0.16 $ 0.27 $ ( 0.03 ) $ 0.39 $ 0.30 $ 0.19 Discontinued operations — 0.05 — 0.03 — ( 0.03 ) — 1.76 Diluted earnings (loss) per share $ 0.24 $ ( 1.20 ) $ 0.16 $ 0.30 $ ( 0.03 ) $ 0.36 $ 0.30 $ 1.95 Average common shares outstanding: Basic 162,863,540 161,991,373 163,145,255 162,232,236 196,700,222 162,370,469 201,237,749 162,571,066 Diluted 163,188,410 162,059,431 163,499,296 162,246,675 197,706,644 162,469,887 202,638,608 162,724,398 27. Segment Reporting An operating segment is defined as a component of a business for which separate financial information is available that is evaluated regularly by the CODM in deciding how to allocate resources and evaluate performance. The Company has determined that its CODM is its Executive Chair. The Company has one reportable segment: its banking business, which consists of a full range of banking lending, savings, and small business offerings, and its wealth management and trust operations. The CODM makes operating and resource allocation decisions based upon the results of the Company’s core banking business. The core banking business, which is comprised of the commercial group, consumer group, and wealth management components, is managed by the Company’s Executive Chair and resource allocation decisions are made by the CODM as a single operating segment rather than at the individual component level. Each of these components are conducted and financed through banking activities and operations. The core banking business activities are interrelated and viewed by management as a single operating segment. The accounting policies of the banking business segment are the same as those described in the summary of significant accounting policies. The CODM assesses performance of the banking business segment and decides how to allocate resources based upon net income that is reported on the Consolidated Statements of Income as net income (loss) from continuing operations. The measure of segment assets is reported on the Consolidated Balance Sheets as total assets. The CODM uses net income to evaluate income generated from segment assets in deciding whether to reinvest profits into the banking business segment or into other parts of the Company, such as for acquisitions, to pay dividends, or to repurchase outstanding shares. Net income is used to monitor budget versus actual results. The CODM also uses net income in competitive analysis by benchmarking to the Company’s competitors. The competitive analysis along with the monitoring of budgeted versus actual results are used in assessing performance of the segment and in establishing management’s compensation. The Company does not have intra-entity sales. The CODM uses consolidated profit and loss measures which are presented on the Company’s Consolidated Statements of Income. Therefore, refer to the Consolidated Statements of Income for quantitative information regarding the 181 banking business segment operating results. The segment operating results include certain other segment items which are included in other noninterest expense within the Consolidated Statements of Income. Significant expense items included in the other noninterest expense line include operational losses, which are primarily comprised of debit card and bad check losses, liability insurance expense, and other loan expenses, which are primarily comprised of legal collection fees and certain origination and servicing-related expenses. The CODM reviews such amounts as a whole in their review of segment operating results. 28. Subsequent Event Subsequent to December 31, 2024, management made the decision to sell certain available for sale securities, which were in an unrealized loss position as of December 31, 2024, in connection with an investment portfolio repositioning. In January and February 2025, available for sale securities with a book value of $ 1.6 billion were sold for proceeds of $ 1.3 billion which resulted in the recognition of a realized loss on sale of approximately $ 270.0 million. Management reinvested the sale proceeds into available for sale securities at current market interest rates. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.