What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-06 compared with 2024-05-08 · 219 added, 137 removed, 678 unchanged (34% of the section changed)

10 unchanged sentences

• the effects to the Company of an increasingly competitive labor market, including the possibility that the Company will have to devote significant resources to attract and retain qualified personnel;

• the instability or volatility in financial markets and unfavorable domestic or global general economic, political or business conditions, whether caused by geopolitical concerns, including the Russia/Ukraine conflict, the conflict in Israel and surrounding areas and the possible expansion of such conflicts, changes in U.S.

presidential election, changes in U.S.

and international trade policies, or other factors, and the potential impact of such factors on the Company and its customers, including the potential for decreases in deposits and loan demand, unanticipated loan delinquencies, loss of collateral and decreased service re venues;

3 unchanged sentences

• acquisitions may not produce results at levels or within time frames originally anticipated and may result in unforeseen integration issues or impairment of goodwill and/or other intangibles;

• the effect of laws, regulations, new requirements or expectations, or additional regulatory oversight in the highly regulated financial services industry, including as a result of intensified regulatory scrutiny in the aftermath of recent bank failures and the resulting need to invest in technology to meet heightened regulatory expectations, increased costs of compliance or required adjustments to strategy;

• the effect of laws, regulations, new requirements or expectations, or additional regulatory oversight in the highly regulated financial services industry, including as a result of intensified regulatory scrutiny in the aftermath of regional bank failures and the resulting need to invest in technology to meet heightened regulatory expectations, increased costs of compliance or required adjustments to strategy;

• changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System;

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• changes in accounting policies, practices and standards, as may be adopted by the regulatory agencies as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board, and other accounting standard setters;

• operational risks related to cyber threats, attacks, intrusions, and fraud which could lead to interruptions or disruptions of the Company's operating systems, including systems that are customer facing, and adversely impact the Company's business;

• operational risks related to the Company and its customers’ reliance on information technology;

cyber threats, attacks, intrusions, and fraud;

and outages or other issues impacting the Company or its third party service providers which could lead to interruptions or disruptions of the Company’s operating systems, including systems that are customer facing, and adversely impact the Company’s business;

• any unexpected material adverse changes in the Company’s operations or earnings:

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Three Months Ended

2024 March 31

2024 December 31

2023 September 30

2023 March 31

(Dollars in thousands, except per share data)

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Any potential acquisition opportunities are evaluated for the potential to provide a satisfactory financial return as well as other criteria (ease of integration, synergies, geographical location).

First Quarter 2024 Results

Net income for the three months ended March 31, 2024 was $47.8 million, or $1.12 on a diluted earnings per share basis, as compared to $61.2 million, or $1.36 on a diluted earnings per share basis, for the three months ended March 31, 2023.

The 2024 first quarter results included the following key drivers:

• Disciplined loan growth and solid pipelines;

• Seasonal deposit growth with steady core household formation;

• Net interest margin at 3.23%, within expectations;

• Stable nonperforming asset levels;

minimal charge-offs;

• Solid core fee income;

Second Quarter 2024 Results

Net income for the three months ended June 30, 2024 was $51.3 million, or $1.21 on a diluted earnings per share basis, as compared to $62.6 million, or $1.42 on a diluted earnings per share basis, for the three months ended June 30, 2023, representing decreases of 18.1% and 14.8%, respectively, due primarily to reductions in net interest income.

However, the second quarter of 2024 reflected solid overall business activity amidst a continued challenging environment, including the following key drivers:

• Disciplined loan growth of 0.5%;

• Net interest margin of 3.25%;

• Stable nonperforming asset levels, minimal charge-offs;

• Strong fee income;

• Focused expense management;

• Tangible book value per share growth of $0.21;

• $31.0 million of stock repurchases, marking completion of the Company's $100 million buyback program.

• Tangible book value per share growth of $0.85 for the quarter

Interest-Earning Assets

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The Company's overall sources of funding reflect strong business and retail deposit growth with management's emphasis on core deposit growth to fund loans.

In conjunction with deposit growth during the first quarter of 2024, total borrowings decreased by $193.0 million at March 31, 2024 as compared to December 31, 2023, primarily driven by a reduction in Federal Home Loan Bank borrowings.

Additionally, the Company fully redeemed its outstanding subordinated debentures with an aggregate principal amount of $50.0 million.

In conjunction with deposit growth during the first half of 2024, total borrowings decreased by $525.0 million at June 30, 2024 as compared to December 31, 2023, primarily driven by a reduction in Federal Home Loan Bank borrowings, along with the full redemption of $50.0 million in subordinated debentures during the first quarter of 2024.

The following chart shows sources of funding for the trailing five quarters:

The Company's ratio of core deposits to total deposits decreased over the last five quarters, primarily attributable to core deposit outflows in conjunction with existing deposit balances shifting into higher cost time deposits.

The following chart shows the percentage of core deposits for the trialing five quarters:

The following chart shows the percentage of core deposits for the trailing five quarters:

(1) The percentage of core deposits to total deposits presented above is inclusive of reciprocal deposits collected through the Company's participation in the IntraFi Network.

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*See "Non-GAAP Measures" below for a reconciliation to GAAP financial measures.

The Company declared a quarterly cash dividend of $0.57 per share for the first quarter of 2024, representing an increase of 3.6% from the 2023 fourth quarter dividend rate of $0.55.

During the first quarter of 2024, the Company repurchased 532,266 shares of its common stock for $31.0 million at an average price per share of $58.22, marking the completion of its previously announced $100 million buyback program.

The Company declared a quarterly cash dividend of $0.57 per share for the second quarter of 2024, representing an increase of 3.6% from the 2023 second quarter dividend rate of $0.55.

Non-GAAP Measures

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An item which management deems to be noncore and excludes when computing these non-GAAP measures can be of substantial importance to the Company’s results for any particular period.

The Company’s non-GAAP performance measures

are not necessarily comparable to similarly named non-GAAP performance measures which may be presented by other companies.

The Company’s non-GAAP performance measures are not necessarily comparable to similarly named non-GAAP performance measures which may be presented by other companies.

The following table summarizes the calculation of tangible common equity to tangible assets ratio and tangible book value per share and shows the reconciliation of non-GAAP measures:

2024 March 31

2024 December 31

2023 September 30

2023 March 31

(Dollars in thousands, except per share data)

Tangible common equity

Tangible common equity (Dollars in thousands, except per share data)

Stockholders' equity (GAAP) $ 2,919,249 $ 2,884,208 $ 2,895,251 $ 2,885,408 $ 2,854,914 (a)

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These critical accounting estimates are defined as estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on financial condition or results of operations.

There have been no material changes in critical accounting estimates during the first three months of 2024.

There have been no material changes in critical accounting estimates during the first six months of 2024.

Refer to “Critical Accounting Estimates” in Item 7.

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Interest and principal payments generated from securities provide a source of liquidity to fund loans and meet short-term cash needs.

Total securities decreased by $85.1 million, or 2.9%, at March 31, 2024 as compared to December 31, 2023, driven primarily by paydowns, calls, maturities, and unrealized losses of $4.0 million in the available for sale portfolio.

As a result, the Company's ratio of securities to total assets decreased to 14.7% at March 31, 2024 compared to 15.1% at December 31, 2023.

Total securities decreased by $165.1 million, or 5.6%, at June 30, 2024 as compared to December 31, 2023, driven primarily by paydowns, calls and maturities.

As a result, the Company's ratio of securities to total assets decreased to 14.2% at June 30, 2024 compared to 15.1% at December 31, 2023.

The Company estimates expected credit losses for its available for sale and held to maturity securities in accordance with the current expected credit loss ("CECL") methodology.

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The Company may be required to either repurchase mortgage loans or to indemnify the purchaser from losses if representations and warranties are found to be not accurate in all material respects.

The Company incurred no material losses related to residential mortgage repurchases during the three months ended March 31, 2024 and 2023, respectively.

The Company experienced a lower volume of residential real estate loan sales for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, driven primarily by reduced customer demand in the current interest rate environment.

The Company incurred no material losses related to residential mortgage repurchases during the three and six months ended June 30, 2024 and 2023, respectively.

The Company experienced a lower volume of residential real estate loan sales for the three and six months ended June 30, 2024 as compared to the three and six months ended June 30, 2023, driven primarily by reduced customer demand in the current interest rate environment.

The following table shows the total residential real estate loans closed and the breakdown of amounts held in portfolio or sold (or held for sale) in the secondary market during the periods indicated:

Table 1 - Closed Residential Real Estate Loans

Three Months Ended March 31

Three Months Ended June 30 Six Months Ended June 30

2024 2023 2024 2023

(Dollars in thousands)

2 unchanged sentences

Total closed loans $ 121,355 $ 176,867 $ 198,394 $ 278,327

Total residential real estate loan closings decreased during the quarter ended March 31, 2024 compared to March 31, 2023 , and a larger portion of new originations were sold in the secondary market versus retained in the Company's portfolio as compared to the prior year period, reflecting the Company's 2024 strategy to shift the majority of its residential production to the saleable market.

During the three and six months ended June 30, 2024, a larger portion of new originations were sold in the secondary market versus retained in the Company's portfolio as compared to the same prior year periods, reflecting the Company's 2024 strategy to shift its residential production to the saleable market.

The table below reflects additional information related to the loans sold during the periods indicated and the sale or retention of the related servicing rights:

Table 2 - Residential Mortgage Loan Sales

Three Months Ended March 31

Three Months Ended June 30 Six Months Ended June 30

2024 2023 2024 2023

(Dollars in thousands)

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(1) All loans sold with servicing rights retained during the above periods were sold without recourse.

alternatively is based on a valuation model that calculates the present value of estimated future net servicing income.

In the event of a sale with servicing rights retained, a mortgage servicing asset is established, which represents the then current estimated fair value based on market prices for comparable mortgage servicing contracts, when available, or alternatively is based on a valuation model that calculates the present value of estimated future net servicing income.

The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses.

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Impairment is recognized through a valuation allowance, to the extent that fair value is less than the capitalized amount.

If the Company later determines that all or a portion of the impairment no longer exists, a reduction of the allowance may be recorded as an increase to income.

The principal balance of loans serviced by the Bank on behalf of investors was $296.0 million, $298.8 million and $320.9 million at March 31, 2024, December 31, 2023, and March 31, 2023, respectively.

If the Company later determines that all or a portion of the impairment no longer exists, a reduction of the allowance

may be recorded as an increase to income.

The principal balance of loans serviced by the Bank on behalf of investors was $291.1 million, $298.8 million and $311.5 million at June 30, 2024, December 31, 2023, and June 30, 2023, respectively.

The following table shows the adjusted cost of the servicing rights associated with these loans and the changes for the periods indicated:

Table 3 - Mortgage Servicing Asset

Three Months Ended March 31

Three Months Ended June 30 Six Months Ended June 30

2024 2023 2024 2023

(Dollars in thousands)

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Item 1 of this Report for more information on mortgage activity and mortgage related derivatives.

Loan Portfolio The Company's total loan portfolio at March 31, 2024 increased by $52.5 million, or 0.4% (1.5% on an annualized basis), when compared to December 31, 2023.

The 2024 first quarter growth was primarily within the commercial real estate loan portfolio, reflecting transfers from the construction portfolio, modest new origination activity, and reduced levels of paydowns.

The small business portfolio also continued its steady growth, rising by 3.86% during the first quarter of 2024, while the total consumer real estate portfolios remained generally in line with prior quarter.

Loan Portfolio The Company's total loan portfolio at June 30, 2024 increased by $122.9 million, or 0.9% (1.7% on an annualized basis), when compared to December 31, 2023.

The 2024 first half growth was primarily within the commercial real estate loan portfolio, reflecting transfers from the construction portfolio, modest new origination activity, and reduced levels of paydowns, along with modest growth in the commercial and industrial portfolio.

The small business portfolio also continued its steady growth, rising by 6.9% during the first half of 2024, while the total consumer real estate portfolio increased $35.3 million, or 1.0% (2.0% on an annualized basis).

The Company’s commercial real estate loan portfolio, inclusive of commercial construction, is the Company’s largest loan type concentration.

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Commercial real estate also includes loans secured by certain residential-related property types, including multi-family apartment buildings, residential development tracts and condominiums.

The following pie chart shows the diversification of the commercial real estate loan portfolio as of March 31, 2024:

The following pie chart shows the diversification of the commercial real estate loan portfolio as of June 30, 2024:

(1) Included in the total commercial real estate portfolio is $1.4 billion of owner occupied commercial real estate loans .

(Dollars in thousands)

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Management considers the Company’s commercial and industrial portfolio to be well-diversified with loans to various types of industries.

The following pie chart shows the diversification of the commercial and industrial portfolio as of March 31, 2024:

The following pie chart shows the diversification of the commercial and industrial portfolio as of June 30, 2024:

(Dollars in thousands)

6 unchanged sentences

Other consumer loans primarily consist of installment loans and overdraft protections.

The residential real estate, home equity and other consumer portfolios totaled $3.6 billion at March 31, 2024, as noted below:

The residential real estate, home equity and other consumer portfolios totaled $3.6 billion at June 30, 2024, as noted below:

(Dollars in thousands)

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2024 December 31

2023 March 31

(Dollars in thousands)

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Other consumer 23 40 86

Total $ 56,941 $ 54,383 $ 56,212

Loans past due 90 days or more but still accruing

Commercial real estate — — —

Home equity — — 23

Total $ — $ — $ 23

Total nonperforming loans $ 57,451 $ 54,383 $ 45,702

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Table 5 - Activity in Nonperforming Assets

Three Months Ended

2024 March 31

Three Months Ended Six Months Ended

(Dollars in thousands)

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Loans restored to performing status (1,429) (680) (10,284) (2,032)

Other 4 (10) 22 10

Nonperforming assets ending balance $ 57,561 $ 45,812 $ 57,561 $ 45,812

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Loans that do not share similar risk characteristics with any pools of assets are subject to individual assessment and are removed from the collectively assessed pools to avoid double counting.

For the loans that will be individually assessed, the Company uses either a discounted cash flow (“DCF”) approach or a fair value of collateral approach.

For the loans that will be individually assessed, the Company uses either a discounted cash flow approach or a fair

value of collateral approach.

The latter approach is used for loans deemed to be collateral dependent or when foreclosure is probable.

Management's allowance for credit loss estimate incorporates an economic forecast over a reasonable and supportable period of 12 months.

As of March 31, 2024, the forecast selected by management assum es t hat the Federal Reserve will begin easing rates gradually in mid-20 24, inflation will return to 2% target by the end of 2024, job growth will slow in 2024 with unemployment rising modestly , home prices will remain stable through 2024, and that prices for office real estate will generally decrease as uncertainty over occupancy and operating cash flows persists.

As of June 30, 2024, the forecast selected by management assum es t hat the Federal Reserve will begin easing rates gradually over the second half of 2024 , that inflation will stabilize and return to 2% target by early 2025, that fiscal policies will likely remain unchanged until after the U.S.

presidential election , that new home sales will remain robust given the current national housing deficit, and that the outlook for office real estate will remain bearish as uncertainty over occupancy and operating cash flows persists.

Additionally, the allowance for credit losses is qualitatively adjusted on a quarterly basis in order to ensure coverage for relationships that are deemed to be more at risk within certain industries, specific collateral types, or other specific characteristics that may be highly impacted by the current economic environment.

The following table summarizes the ratio of net charge-offs to average loans outstanding within each major loan category for the periods presented:

Table 6 - Summary Net Charge-Offs/(Recoveries) to Average Loans Outstanding

Net Charge-Offs/(Recoveries) Average Loans Outstanding Ratio of Annualized Net Charge-Offs/(Recoveries) to Average Loans

Table 6 - Summary of Net Charge-Offs/(Recoveries) to Average Loans Outstanding

Net Charge-Offs/(Recoveries) Average Loans Outstanding Ratio of Annualized Net Charge-Offs/(Recoveries) to Average Loans Net Charge-Offs/ (Recoveries) Average Loans Outstanding Ratio of Annualized Net Charge-Offs/(Recoveries) to Average Loans

(Dollars in thousands)

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024 Six Months Ended June 30, 2024

Commercial and industrial $ (2) $ 1,583,858 — % $ (87) $ 1,571,918 (0.01) %

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Total $ 339 $ 14,365,323 0.01 % $ 613 $ 14,339,879 0.01 %

Net Charge-Offs/ (Recoveries) Average Loans Outstanding Ratio of Annualized Net Charge-Offs/(Recoveries) to Average Loans

Net Charge-Offs/ (Recoveries) Average Loans Outstanding Ratio of Annualized Net Charge-Offs/(Recoveries) to Average Loans Net Charge-Offs/ (Recoveries) Average Loans Outstanding Ratio of Annualized Net Charge-Offs/(Recoveries) to Average Loans

(Dollars in thousands)

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023 Six Months Ended June 30, 2023

Commercial and industrial $ 23,174 $ 1,686,348 5.51 % $ 23,450 $ 1,652,527 2.86 %

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Item 1 of this Report.

Federal Home Loan Bank Stock The FHLB is a cooperative that provides services to its member banking institutions.

Federal Home Loan Bank Stock The Federal Home Loan Bank (“FHLB”) is a cooperative that provides services to its member banking institutions.

The primary reason for the FHLB of Boston membership is to gain access to a reliable source of wholesale funding as a tool to manage liquidity and interest rate risk.

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The Company views the holdings as a necessary long-term investment for the purpose of balance sheet liquidity and not for investment return.

The Company's investments in FHLB of Boston stock increased to $46.3 million at March 31, 2024 compared to $43.6 million at December 31, 2023.

Goodwill and Other Intangible Assets Goodwill and other intangible assets were $1.0 billion at both March 31, 2024 and December 31, 2023.

The Company's investments in FHLB of Boston stock decreased to $32.7 million at June 30, 2024 compared to $43.6 million at December 31, 2023, in conjunction with reduced levels of outstanding FHLB borrowings.

Goodwill and Other Intangible Assets Goodwill and other intangible assets were $1.0 billion at both June 30, 2024 and December 31, 2023.

The Company typically performs its annual goodwill impairment testing during the third quarter of the year, unless certain indicators suggest earlier testing to be warranted.

1 unchanged sentence

Other intangible assets are also reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

There were no other events or changes during the first quarter of 2024 that indicated impairment of goodwill and other intangible assets.

There were no other events or changes during the second quarter of 2024 that indicated impairment of goodwill and other intangible assets.

Cash Surrender Value of Life Insurance Policies The Bank holds life insurance policies for the purpose of offsetting its future obligations to its employees under its retirement and benefits plans.

The cash surrender value of life insurance policies was $298.4 million at March 31, 2024 compared to $297.4 million at December 31, 2023.

The Company recorded tax exempt income from life insurance policies of $1.9 million for each of the three months ended March 31, 2024 and 2023.

There were $263,000 in gains on life insurance benefits recorded for the three months ended March 31, 2024 and $11,000 for the three months ended March 31, 2023.

Deposits As of March 31, 2024, total deposits were $15.0 billion, representing an $177.7 million, or 1.2%, increase from December 31, 2023.

This increase was primarily driven by municipal deposit inflows and consumer demand for higher cost time deposits, partially offset by seasonal business deposit outflows.

Though some level of product remixing persists, total noninterest bearing demand deposits comprised 29.71% of total deposits at March 31, 2024.

The total cost of deposits was 1.48% and 0.59% for the three months ended March 31, 2024 and 2023, respectively.

The cash surrender value of life insurance policies was $300.1 million at June 30, 2024 compared to $297.4 million at December 31, 2023.

The Company recorded tax exempt income from life insurance policies of $2.0 million and $1.9 million for the three months ended June 30, 2024 and 2023, respectively, and $3.9 million and $3.8 million for the six months ended June 30, 2024 and 2023, respectively.

The Company recorded no gains on life insurance benefits for the three months ended June 30, 2024 as compared to gains of $176,000 for the three months ended June 30, 2023, and recorded gains of $263,000, and $187,000 for the six months ended June 30, 2024 and 2023, respectively.

Deposits As of June 30, 2024, total deposits were $15.4 billion, representing a $544.0 million, or 3.7%, increase from December 31, 2023.

This increase was primarily driven by municipal deposit inflows and continued consumer demand for higher cost time deposits.

Though some level of product remixing persists, total noninterest bearing demand deposits comprised 28.7% of total deposits at June 30, 2024.

The total cost of deposits was 1.65% and 0.85% for the three months ended June 30, 2024 and 2023, respectively, and 1.56% and 0.72% for the six months ended June 30, 2024 and 2023, respectively.

The Company's deposits are comprised primarily of core deposits (demand, savings and money market), as well as time deposits.

The Company's ratio of core deposits to total deposits represented 83.2% and 84.6% of total deposits as of March 31, 2024 and December 31, 2023, respectively, with the decrease driven primarily by core deposit outflows in conjunction with growth in higher yielding time deposits.

In addition, the Company may also utilize brokered deposit sources, as needed, with balances of $91.0 million and $100.9 million outstanding at March 31, 2024 and December 31, 2023, respectively.

The Company's ratio of core deposits to total deposits represented 81.9% and 84.6% of total deposits as of June 30, 2024 and December 31, 2023, respectively, with the decrease driven primarily by core deposit outflows in conjunction with growth in higher yielding time deposits.

In addition, the Company may also utilize brokered deposit sources, as needed, with balances of $91.0 million and $100.9 million outstanding at June 30, 2024 and December 31, 2023, respectively.

The Company's deposit accounts are insured to the maximum extent permitted by the Deposit Insurance Fund which is administered by the Federal Deposit Insurance Corporation ("FDIC").

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The Company participates in the IntraFi Network, allowing it to provide easy access to multi-million dollar FDIC deposit insurance protection on certificate of deposit and money market investments for consumers, businesses and public entities.

This channel allows the Company to access a reciprocal deposit exchange that can be used to benefit customers seeking increased FDIC insurance protection, and amounted to $933.0 million and $959.1 million at March 31, 2024 and December 31, 2023, respectively.

The estimated balance of uninsured deposits at the Bank were $4.7 billion and $4.6 billion as of March 31, 2024 and December 31, 2023, respectively.

This channel allows the Company to access a reciprocal deposit exchange that can be used to benefit customers seeking increased FDIC insurance protection, and amounted to $979.0 million and $959.1 million at June 30, 2024 and December 31, 2023, respectively.

The estimated balance of uninsured deposits at the Bank were $5.1 billion and $4.6 billion as of June 30, 2024 and December 31, 2023, respectively.

Included in these amounts are $997.0 million and $720.5 million of collateralized deposits, which offer additional protection.

1 unchanged sentence

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

Borrowings were $1.0 billion at March 31, 2024, representing a decrease of $193.0 million as compared to December 31, 2023.

This decrease was driven primarily by a reduction in Federal Home Loan Bank borrowings of $143.0 million, in conjunction with deposit balance growth during the quarter.

Additionally, the Company fully redeemed its outstanding subordinated debentures with an aggregate principal amount of $50.0 million during the quarter.

The Company had $8.5 billion of assets pledged as collateral against borrowings at both March 31, 2024 and December 31, 2023, respectively.

Borrowings were $693.4 million at June 30, 2024, representing a decrease of $525.0 million as compared to December 31, 2023.

This decrease was experienced primarily within Federal Home Loan Bank borrowings, which decreased $475.0 million in conjunction with deposit balance growth over the first half of 2024.

Additionally, the Company fully redeemed its outstanding subordinated debentures with an aggregate principal amount of $50.0 million during the first quarter of 2024.

The Company had $8.8 billion and $8.5 billion of assets pledged as collateral against borrowings at June 30, 2024 and December 31, 2023, respectively.

These assets are primarily pledged to the FHLB of Boston and the Federal Reserve Bank of Boston.

Capital Resources On March 21, 2024 the Company’s Board of Directors declared a cash dividend of $0.57 per share to shareholders of record as of the close of business on April 1, 2024.

This dividend was paid on April 5, 2024.

Capital Resources On June 20, 2024 the Company’s Board of Directors declared a cash dividend of $0.57 per share to shareholders of record as of the close of business on July 1, 2024.

This dividend was paid on July 8, 2024.

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies.

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Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the table below) of Total, Tier 1 Capital and Common Equity Tier 1 Capital (as defined for regulatory purposes) to risk weighted assets (as defined for regulatory purposes) and Tier 1 Capital to average assets (as defined for regulatory purposes).

At March 31, 2024 and December 31, 2023, the Company and the Bank exceeded the minimum requirements for all applicable ratios that were in effect during the respective periods.

At June 30, 2024 and December 31, 2023, the Company and the Bank exceeded the minimum requirements for all applicable ratios that were in effect during the respective periods.

The Company’s and the Bank’s capital amounts and ratios are presented in the following table, along with the applicable minimum requirements as of each date indicated:

3 unchanged sentences

Amount Ratio Amount Ratio Amount Ratio

March 31, 2024

June 30, 2024

(Dollars in thousands)

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The required amount of the capital conservation buffer is 2.5%.

At March 31, 2024, the Company's capital levels exceeded the buffer.

At June 30, 2024, the Company's capital levels exceeded the buffer.

Dividend Restrictions The Company is subject to capital and dividend requirements administered by federal and state bank regulators, and the Company will not declare a cash dividend that would cause the Company to violate regulatory requirements.

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Massachusetts Bank Commissioner approval is required if the total of all dividends declared by the Bank in any calendar year would exceed the total of its net profits for that year combined with its retained net profits of the preceding two years, less any required transfer to surplus or a fund for the retirement of any preferred stock.

Dividends paid by the Bank to the Company totaled $47.9 million and $66.4 million for the three months ended March 31, 2024 and 2023, respectively.

Dividends paid by the Bank to the Company totaled $45.3 million and $55.9 million for the three months ended June 30, 2024 and 2023, respectively and totaled $93.2 million and $122.2 million for the six months ended June 30, 2024 and 2023, respectively.

Trust Preferred Securities In accordance with the applicable accounting standard related to variable interest entities, the common stock of trusts which have issued trust preferred securities has not been included in the consolidated financial statements of the Company.

At both March 31, 2024 and December 31, 2023 there were $61.0 million in trust preferred securities included in the Tier 2 capital of the Company for regulatory reporting purposes pursuant to the Federal Reserve's capital adequacy guidelines.

At both June 30, 2024 and December 31, 2023 there were $61.0 million in trust preferred securities included in the Tier 2 capital of the Company for regulatory reporting purposes pursuant to the Federal Reserve's capital adequacy guidelines.

Investment Management The following table presents total assets under administration and number of accounts held by the Rockland Trust Investment Management Group at the following dates:

1 unchanged sentence

2024 December 31

2023 March 31

(Dollars in thousands)

5 unchanged sentences

The Bank receives fees dependent upon the level and type of service(s) provided.

The Investment Management Group generated gross fee revenues of $9.1 million and $8.2 million for the three months ended March 31, 2024 and 2023, respectively.

Total assets under administration at March 31, 2024 were $6.8 billion, including $396.9 million of investment solutions designed by Rockland Trust that are administered and executed through its agreement with LPL Financial ("LPL"), compared to $6.5 billion and $383.0 million, respectively, at December 31, 2023.

The Investment Management Group generated gross fee revenues of $9.6 million and $8.9 million for the three months ended June 30, 2024 and 2023, respectively and $18.7 million and $17.0 million for the six months ended June 30, 2024 and 2023, respectively.

Total assets under administration at June 30, 2024 were $6.9 billion, including $401.3 million of investment solutions designed by Rockland Trust that are administered and executed through its agreement with LPL Financial ("LPL"), compared to $6.5 billion and $383.0 million, respectively, at December 31, 2023.

The Company also has a subsidiary that is a registered investment advisor, Bright Rock Capital Management, LLC ("Bright Rock"), which provides institutional quality investment management services to both institutional and high net worth clients.

Included in these same amounts as of March 31, 2024 and December 31, 2023 are assets under administration of $484.8 million and $449.8 million, respectively, related to Bright Rock.

Included in these same amounts as of June 30, 2024 and December 31, 2023 are assets under administration of $475.1 million and $449.8 million, respectively, related to Bright Rock.

The administration of trust and fiduciary accounts is monitored by the Trust Committee of the Bank’s Board of Directors.

The Trust Committee has delegated administrative responsibilities to three committees, one for investments, one for administration, and one for operations, all of which are comprised of Investment Management Group officers who meet no less than quarterly.

The Bank has an agreement with LPL and its affiliates and their insurance subsidiary, LPL Insurance Associates, Inc., to offer the sale of mutual fund shares, unit investment trust shares, general securities, fixed and variable annuities and life insurance.

Registered representatives who are both employed by the Bank and licensed and contracted with LPL are onsite to

offer these products to the Bank’s customer base.

Registered representatives who are both employed by the Bank and licensed and contracted with LPL are onsite to offer these products to the Bank’s customer base.

These same agents are also approved and appointed with various other Broker General Agents for the purposes of processing insurance solutions for clients.

Retail investments and insurance revenue was $861,000 and $1.6 million for the three months ended March 31, 2024 and 2023, respectively.

Retail investments and insurance revenue was $1.4 million and $1.5 million for the three months ended June 30, 2024 and 2023, respectively, and $2.2 million and $3.1 million for the six months ended June 30, 2024 and 2023, respectively.

RESULTS OF OPERATIONS

The following table provides a summary of results of operations for the three months ended March 31, 2024 and 2023:

The following table provides a summary of results of operations for the three and six months ended June 30, 2024 and 2023:

Table 10 - Summary of Results of Operations

Three Months Ended March 31

Three Months Ended June 30 Six Months Ended June 30

2024 2023 2024 2023

(Dollars in thousands, except per share data)

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Net Interest Income The amount of net interest income is affected by changes in interest rates and by the volume, mix, and interest rate sensitivity of interest-earning assets and interest-bearing liabilities.

On a fully tax equivalent basis ("FTE"), net interest income for the first quarter of 2024 was $138.6 million, representing a decrease of $21.5 million, or 13.4%, when compared to the first quarter of 2023, as rising deposit costs continued to counter the benefit of repriced assets, resulting in a reduction in net interest margin of 56 basis points to 3.23% for the first quarter of 2024.

The following tables present the Company’s average balances, net interest income, interest rate spread, and net interest margin for the three months ended March 31, 2024 and 2023.

On a fully tax equivalent basis (“FTE”), net interest income for the second quarter of 2024 was $139.1 million, representing a decrease of $14.5 million, or 9.5%, when compared to the second quarter of 2023.

For the six months ended June 30, 2024, the net interest income on a FTE basis was $277.7 million, representing a decrease of $36.0 million, or 11.5%, when compared to the six months ended June 30, 2023.

The decreases in net interest income for both the three and six month 2024 periods were primarily attributable to rising deposit costs, resulting in a net interest margin decrease of 29 basis points to 3.25% for the second quarter of 2024, compared to the same prior year quarter, and a net interest margin decrease of 43 basis points to 3.24% for the first half of 2024 as compared to the same prior year period.

The following tables present the Company’s average balances, net interest income, interest rate spread, and net interest margin for the three and six months ended June 30, 2024 and 2023.

Nontaxable income from loans and securities is presented on a FTE basis by adjusting tax-exempt income upward by an amount equivalent to the prevailing income tax rate that would have been paid if the income had been fully taxable.

Table 11 - Average Balance, Interest Earned/Paid & Average Yields Quarter-to-Date

Three Months Ended March 31

Three Months Ended June 30

Balance Interest

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Cost of total funding liabilities 1.85 % 1.14 %

(1) The total amount of adjustment to interest income and yield on a FTE basis was $1.2 million and $1.1 million for the three months ended March 31, 2024 and 2023, respectively.

(1) The total amount of adjustment to interest income and yield on a FTE basis was $1.2 million and $1.1 million for the three months ended June 30, 2024 and 2023, respectively.

(2) Includes average nonaccruing loans.

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(4) Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.

Table 12 - Average Balance, Interest Earned/Paid & Average Yields Year-to-Date

Six Months Ended June 30

Balance Interest

(Dollars in thousands)

Interest-earning assets

Interest-earning deposits with banks, federal funds sold, and short-term investments $ 49,091 $ 880 3.60 % $ 172,569 $ 3,977 4.65 %

Securities - trading 4,759 — — % 4,292 — — %

Securities - taxable investments 2,830,302 28,223 2.01 % 3,094,263 30,890 2.01 %

Securities - nontaxable investments (1) 190 4 4.23 % 192 4 4.20 %

Total securities $ 2,835,251 $ 28,227 2.00 % $ 3,098,747 $ 30,894 2.01 %

Loans held for sale 9,853 303 6.18 % 2,727 73 5.40 %

Commercial and industrial (1) 1,571,918 55,911 7.15 % 1,652,527 56,023 6.84 %

Commercial real estate (1) 8,111,748 206,526 5.12 % 7,788,304 181,394 4.70 %

Commercial construction 838,678 30,872 7.40 % 1,089,311 33,679 6.23 %

Small business 261,147 8,536 6.57 % 226,479 6,720 5.98 %

Total commercial 10,783,491 301,845 5.63 % 10,756,621 277,816 5.21 %

Residential real estate 2,423,126 52,555 4.36 % 2,105,311 40,301 3.86 %

Home equity 1,102,418 37,270 6.80 % 1,091,707 33,638 6.21 %

Total consumer real estate 3,525,544 89,825 5.12 % 3,197,018 73,939 4.66 %

Other consumer 30,844 1,202 7.84 % 30,940 1,143 7.45 %

Total loans $ 14,339,879 $ 392,872 5.51 % $ 13,984,579 $ 352,898 5.09 %

Total interest-earning assets $ 17,234,074 $ 422,282 4.93 % $ 17,258,622 $ 387,842 4.53 %

Cash and due from banks 178,032 180,047

Federal Home Loan Bank stock 44,157 29,749

Other assets 1,842,859 1,835,669

Total assets $ 19,299,122 $ 19,304,087

Interest-bearing liabilities

Savings and interest checking accounts $ 5,166,103 $ 31,185 1.21 % $ 5,628,535 $ 16,898 0.61 %

Money market 2,876,759 33,400 2.33 % 3,143,355 22,724 1.46 %

Time deposits 2,438,277 51,204 4.22 % 1,462,929 14,962 2.06 %

Total interest-bearing deposits $ 10,481,139 $ 115,789 2.22 % $ 10,234,819 $ 54,584 1.08 %

Federal Home Loan Bank borrowings $ 1,071,282 $ 25,960 4.87 % $ 685,626 $ 16,220 4.77 %

Junior subordinated debentures 62,858 2,287 7.32 % 62,856 2,045 6.56 %

Subordinated debentures 20,326 508 5.03 % 49,909 1,235 4.99 %

Total borrowings $ 1,154,466 $ 28,755 5.01 % $ 798,391 $ 19,500 4.93 %

Total interest-bearing liabilities $ 11,635,605 $ 144,544 2.50 % $ 11,033,210 $ 74,084 1.35 %

Noninterest bearing demand deposits 4,400,002 5,045,694

Other liabilities 361,601 355,097

Total liabilities $ 16,397,208 $ 16,434,001

Stockholders' equity 2,901,914 2,870,086

Total liabilities and stockholders' equity $ 19,299,122 $ 19,304,087

Net interest income (1) $ 277,738 $ 313,758

Interest rate spread (3) 2.43 % 3.18 %

Net interest margin (4) 3.24 % 3.67 %

Supplemental information

Total deposit, including demand deposits $ 14,881,141 $ 115,789 $ 15,280,513 $ 54,584

Cost of total deposits 1.56 % 0.72 %

Total funding liabilities, including demand deposits $ 16,035,607 $ 144,544 $ 16,078,904 $ 74,084

Cost of total funding liabilities 1.81 % 0.93 %

(1) The total amount of adjustment to present interest income and yield on a FTE basis was $2.4 million and $2.2 million for the six months ended June 30, 2024 and 2023, respectively.

(2) Includes average nonaccruing loans.

(3) Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(4) Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.

The following table presents certain information on a FTE basis regarding changes in the Company’s interest income and interest expense for the periods indicated.

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Table 13 - Volume Rate Analysis

Three Months Ended March 31

2024 Compared To 2023

Three Months Ended June 30 Six Months Ended June 30

2024 Compared To 2023 2024 Compared To 2023

Volume Total Change Change

Volume Total Change

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however, unpaid interest on nonaccrual loans has not been included for purposes of determining interest income.

Provision For Credit Losses The provision for credit losses represents the charge to expense that is required to maintain an adequate level of allowance for credit losses.

The Company recorded a provision for credit losses of $5.0 million and $7.3 million for the three months ended March 31, 2024 and March 31, 2023, respectively.

The Company’s allowance for credit losses, as a percentage of total loans, was 1.03% at March 31, 2024, 1.00% at December 31, 2023, and 1.14% at March 31, 2023.

Provision For Credit Losses The provision for credit losses represents the charge to expense that is required to maintain an appropriate level of allowance for credit losses.

The Company recorded a provision for credit loss of $4.3 million and $9.3 million for the three and six months ended June 30, 2024, respectively, as compared to a provision for credit loss of $5.0 million for the three months ended June 30, 2023 and $12.3 million for the six months ended June 30, 2023.

The Company’s allowance for credit losses, as a percentage of total loans, was 1.05% at June 30, 2024, 1.00% at December 31, 2023, and 0.99% at June 30, 2023.

Refer to Note 3, “Loans, Allowance for Credit Losses and Credit Quality” within the Notes to Consolidated Financial Statements included in Part I.

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Three Months Ended

March 31 Change

June 30 Change

2024 2023 Amount %

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Total $ 32,330 $ 30,757 $ 1,573 5.11 %

Six Months Ended

June 30 Change

2024 2023 Amount %

(Dollars in thousands)

Deposit account fees $ 12,560 $ 11,424 $ 1,136 9.94 %

Interchange and ATM fees 9,205 8,662 543 6.27 %

Investment management 20,928 20,127 801 3.98 %

Mortgage banking income 2,116 978 1,138 116.36 %

Increase in cash surrender value of life insurance policies 3,928 3,794 134 3.53 %

Gain on life insurance benefits 263 187 76 40.64 %

Loan level derivative income 553 1,683 (1,130) (67.14) %

Other noninterest income 12,720 12,144 576 4.74 %

Total $ 62,273 $ 58,999 $ 3,274 5.55 %

The primary reasons for the variances in the noninterest income categories shown in the preceding table include:

• Deposit account fees increased during the three months ended March 31, 2024, as compared to the same prior year period driven primarily by increased cash management fees.

• Interchange and ATM fees for the three months ended March 31, 2024 increased as compared to the same prior year period due primarily to higher transaction volumes.

• Investment management and advisory income increased driven primarily by higher levels of assets under administration, which increased by $658.9 million, or 10.7%, to $6.8 billion at March 31, 2024 as compared to $6.1 billion at March 31, 2023.

This increase was partially offset by higher insurance and retail commission income recognized during the first quarter of 2023 as compared to the current quarter.

• Mortgage banking income increased for the three months ended March 31, 2024 as compared to the same prior year period due to a greater portion of new originations being sold in the secondary market versus being retained in the Company's portfolio.

• Loan level derivative income decreased for the three months ended March 31, 2024 in comparison to the same prior year periods due to lower demand.

• Other noninterest income increased for the three months ended March 31, 2024, primarily attributable to increased FHLB dividend income and realized gains on sales of equity securities, partially offset by discounted purchases of Massachusetts historical tax credits made during the first quarter of 2023 and reduced unrealized gains on equity securities during the first quarter of 2024 compared to the same prior year period.

• Deposit account fees were higher for the three and six months ended June 30, 2024 as compared to the same prior year periods driven primarily by increased overdraft and cash management fees.

• Interchange and ATM fees were higher for the three and six months ended June 30, 2024 as compared to the same prior year periods due primarily to increased transaction volumes.

• Investment management and advisory income increased, driven primarily by higher levels of assets under administration, which increased by $566.9 million, or 9.0%, to $6.9 billion at June 30, 2024 as compared to $6.3

billion at June 30, 2023.

This increase was partially offset by higher insurance and retail commission income recognized during the first half of 2023 as compared to the first half of 2024.

• Mortgage banking income increased for the three and six months ended June 30, 2024 as compared to the same prior year periods due primarily to a greater portion of new originations being sold in the secondary market versus being retained in the Company's portfolio during the first half of 2024 as compared to the first half of 2023.

• Loan level derivative income decreased for the three and six months ended June 30, 2024 in comparison to the same prior year periods due to lower demand.

• Other noninterest income for the three months ended June 30, 2024 was relatively flat compared to the same prior year period as higher FHLB dividend income and commercial loan fees recognized during the second quarter of 2024 were offset by reductions in interest income recognized from income tax return refunds as well as purchases of Massachusetts historical tax credits during the second quarter of 2023.

Other noninterest income for the six months ended June 30, 2024 was higher than the same prior year period, primarily attributable to increased FHLB dividend income, realized gains on sales of equity securities, and commercial loan fees, partially offset by discounted purchases of Massachusetts historical tax credits made during the first half of 2023 and reduced unrealized gains on equity securities during the first half of 2024 compared to the same prior year period.

Noninterest Expense The following table sets forth information regarding non-interest expense for the periods shown:

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Three Months Ended

March 31 Change

June 30 Change

2024 2023 Amount %

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FDIC assessment 2,694 2,674 20 0.75 %

Consulting expense 1,997 1,935 62 3.20 %

Advertising expense 1,826 1,641 (125) (4.94) %

Debit card expense 1,602 2,217 (615) (27.74) %

Amortization of intangible assets 1,465 1,716 (251) (14.63) %

Other noninterest expenses 13,516 13,348 168 1.26 %

Total $ 99,614 $ 95,555 $ 3,749 4.25 %

Six Months Ended

June 30 Change

2024 2023 Amount %

(Dollars in thousands)

Salaries and employee benefits $ 114,336 $ 110,950 $ 3,386 3.05 %

Occupancy and equipment expenses 25,939 25,207 732 2.90 %

Data processing & facilities management 4,888 5,057 (169) (3.34) %

Software and subscriptions 8,569 6,083 2,486 40.87 %

FDIC assessment 5,676 5,284 392 7.42 %

Consulting expense 3,425 4,012 (587) (14.63) %

Advertising expense 2,986 2,858 128 4.48 %

Debit card expense 4,080 4,388 (308) (7.02) %

Amortization of intangible assets 3,028 3,531 (503) (14.25) %

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The primary reasons for the variances in the noninterest expense categories shown in the preceding table include:

• The increase in salaries and employee benefits was primarily attributable to increases in general salaries, incentive programs, medical plan insurance, and seasonal increases in payroll taxes, partially offset by decreased commissions and equity compensation.

• Occupancy and equipment expenses increased for the three months ended March 31, 2024, driven primarily by one-time lease exit costs associated with acquired leased locations as well as increased depreciation expense, partially offset by decreased utilities costs compared to the first quarter of 2023.

• Software and subscriptions increased primarily due to the Company's continued investment in its technology infrastructure.

• FDIC assessment increased compared to the same prior year period primarily due to an increase in the estimated FDIC special assessment recognized by the Company.

• Debit card expense increased due to higher processing fees driven by increased volume.

• Consulting expense decreased for the three months ended March 31, 2024 due primarily to the timing of strategic initiatives.

• Other noninterest expense decreased for the three months ended March 31, 2024, as compared to the same prior year period, primarily due to decreases in legal costs and examination and audit fees, partially offset by increases in card issuance costs and customer fraud reimbursements.

• The increases in salaries and employee benefits was primarily attributable to increases in general salaries, incentive programs, medical plan insurance, and payroll taxes, partially offset by an outsized benefit related to the valuation of the Company’s split-dollar BOLI policies recognized during the second quarter of 2024 as well as reduced commissions expense over the first half of 2024 as compared to the first half of 2023.

• Occupancy and equipment expenses were relatively flat for the three months ended June 30, 2024 as compared to the same prior year period, and were higher for the first half of 2024 compared to the first half of 2023, driven primarily by one-time lease exit costs associated with acquired leased locations and increased depreciation expense, partially offset by decreased utilities costs.

• FDIC assessment was flat for the second quarter of 2024 as compared to the same prior year quarter, and increased for the six months ended June 30, 2024 compared to the same prior year period due primarily to an increase in the estimated FDIC special assessment recognized by the Company during the first quarter of 2024.

• Debit card expense decreased for the three and six months ended June 30, 2024, due primarily to reduced processing costs.

• Consulting expense was relatively flat for the second quarter of 2024, as compared to the same prior year quarter, and decreased for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, due primarily to the timing of strategic initiatives.

• Other noninterest expense was higher for the second quarter of 2024 compared to the same prior year quarter, driven primarily by software and subscriptions, examinations and audit fees, and communications expenses.

Other noninterest expense decreased for the six months ended June 30, 2024, as compared to the same prior year period, primarily due to decreases in recruitment expense, legal costs and contract labor, partially offset by increases in software and subscriptions, card issuance costs, internet banking, and communication fees.

Income Taxes The tax effect of all income and expense transactions is recognized by the Company in each year’s consolidated statements of income, regardless of the year in which the transactions are reported for income tax purposes.

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Table 16 - Tax Provision and Applicable Tax Rates

Three Months Ended

Three Months Ended Six Months Ended

June 30 June 30

2024 2023 2024 2023

(Dollars in thousands)

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Blended statutory tax rate 27.91 % 27.85 % 27.91 % 27.11 %

The Company’s effective tax rate for the first quarter of 2024 is lower as compared to the year ago period primarily due to lower pre-tax income as well as increased tax benefits from low income housing tax credits.

The Company’s effective tax rate for the second quarter of 2024 is lower as compared to the year ago period primarily due to lower pre-tax income as well as increased tax benefits from low income housing tax credits.

The effective tax rates in the table above are lower than the blended statutory tax rates due to the impact of discrete items, including tax benefits related to low income housing tax credits and equity compensation, as well as certain tax preference assets such as life insurance policies, tax exempt bonds, and federal tax credits.

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The investments are accounted for using the proportional amortization method and will be amortized over various periods through 2040, which represents the period that the tax credits and other tax benefits will be utilized.

The total committed investment in these partnerships is $237.3 million, of which $176.8 million had been funded as of March 31, 2024.

The total committed investment in these partnerships is $258.3 million, of which $185.7 million had been funded as of June 30, 2024.

It is expected that the limited partnership investments will generate a net tax benefit of approximately $3.8 million for the fiscal year 2024 and a total of $37.3 million over the remaining life of the investments from the combination of the tax credits and operating losses.

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As risks must be taken to create value, the Board of Directors has approved a Risk Appetite Statement that defines the acceptable residual risk tolerances for the Company and the nine major risk types identified as having the potential to create significant adverse impacts on the Company, such as financial losses, reputational damage, legal or regulatory actions, failure to achieve strategic objectives, diminished customer experience, and/or cultural erosion.

The nine major risk categories identified by the Company and addressed in the Risk Appetite Statement are strategic and emerging risk, culture risk, credit risk, liquidity risk, interest rate risk, operational risk, reputation risk, compliance risk, and technology risk, each of which is discussed below.

The nine major risk categories identified by the Company and addressed in the Risk Appetite Statement are strategic and emerging risk, culture risk, credit risk, liquidity risk, market and interest rate risk, operational risk, reputation risk, compliance risk, and technology and cyber risk, each of which is discussed below.

Strategic and Emerging Risk Strategic and emerging risk is the risk arising from adverse strategic or business decisions, misalignment of strategic direction with the Company’s mission and values, failure to execute strategies or tactics, or an inadequate adaptation or lack of responsiveness to industry and/or operating environment changes.

Management seeks to mitigate strategic risk through strategic planning, frequent executive review of strategic plan progress, monitoring of competitors and technology, assessment of new products, new branches, and new business initiatives, customer advocacy, and crisis management planning.

relationship-based culture that has been one of the foundations of the Company’s consistent success.

Culture Risk Culture risk is the risk arising from failed leadership and/or ineffective colleague engagement and workplace management that causes the Company to lose sight of core values and, through acts or omissions, damage the relationship-based culture that has been one of the foundations of the Company’s consistent success.

Management seeks to mitigate culture risk through effective employee relations, leadership that encourages continuous improvement, cultural development and reinforcement of core values, communication of clear ethical and behavioral standards, consistent enforcement of policies and programs, discipline of misbehavior, alignment of incentives and compensation, and by promoting diversity, equity, and inclusion.

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The Company’s primary measure of short-term liquidity is the Total Basic Surplus/Deficit as a percentage of assets.

This ratio, which is an analysis of the relationship between liquid assets plus available FHLB funding, less short-term liabilities relative to total assets, was within policy limits at March 31, 2024.

The Total Basic Surplus/Deficit measure is affected primarily by changes in deposits, securities and short-term investments, loans, and borrowings.

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Table 17 - Liquidity Sources

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Outstanding Additional

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$ 1,763,354 $ 6,198,526 $ 2,278,370 $ 5,928,807

(1) Loans with a carrying value of $3.9 billion at both March 31, 2024 and December 31, 2023 were pledged to the FHLB of Boston.

(2) Loans with a carrying value of $4.7 billion and $4.6 billion at March 31, 2024 and December 31, 2023, respectively, were pledged to the Federal Reserve Bank of Boston.

(1) Loans and securities with a carrying value of $3.8 billion and $3.9 billion at June 30, 2024 and December 31, 2023, respectively, were pledged to the FHLB of Boston.

(2) Loans and securities with a carrying value of $4.9 billion at June 30, 2024, and loans with a carrying value of $4.6 billion at December 31, 2023, were pledged to the Federal Reserve Bank of Boston at each respective period.

(3) The additional borrowing capacity has not been assessed for these categories.

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If assets and liabilities do not re-price simultaneously and in equal volume, the potential for interest rate exposure exists.

It is the Company's objective to maintain stability in the growth of net interest income through the maintenance of an appropriate mix of interest-earning assets and

interest-bearing liabilities and, when necessary within limits management deems prudent, with hedging instruments such as interest rate swaps, floors, and caps.

It is the Company's objective to maintain stability in the growth of net interest income through the maintenance of an appropriate mix of interest-earning assets and interest-bearing liabilities and, when necessary within limits management deems prudent, with hedging instruments such as interest rate swaps, floors, and caps.

The Company quantifies its interest rate exposures using net interest income simulation models, as well as simpler gap analysis, and an Economic Value of Equity analysis.

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Given the volatility associated with market rates, and the uncertainty surrounding future rate movements, management has been proactive in achieving a more neutral interest rate risk position as compared to the prior year.

In 2023, management continued to increase the duration of its assets by marginally increasing exposure to fixed rate loans while deposit attrition reduced the amount of rate sensitive cash on hand at the Federal Reserve Bank.

The Company runs several scenarios to quantify and effectively assist in managing interest rate risk, including instantaneous parallel shifts in market rates as well as gradual (12-24 months) shifts in market rates, and may also include other alternative scenarios as management deems necessary given the interest rate environment.

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Accordingly, although the tables provide an indication of the Company's interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates, and actual results may differ.

The most significant market factors affecting the Company’s net interest income during the three months ended March 31, 2024 were the shape of the U.S.

The most significant market factors affecting the Company’s net interest income during the three months ended June 30, 2024 were the shape of the U.S.

Government securities and interest rate swap yield curve, the U.S.

prime interest rate, the secured overnight financing rate ("SOFR"), and other interest rates offered on long-term fixed rate loans.

prime interest rate, the secured overnight financing rate, and other interest rates offered on long-term fixed rate loans.

The Company manages the interest rate risk inherent in both its loan and borrowing portfolios by using interest rate swap agreements and interest rate caps and floors.

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Contractual Obligations, Commitments, Contingencies, and Off-Balance Sheet Financial Information

Off-Balance Sheet Arrangements There were no material changes in off-balance sheet arrangements during the three months ended March 31, 2024.

Off-Balance Sheet Arrangements There were no material changes in off-balance sheet arrangements during the three months ended June 30, 2024.

See Note 5, “Derivative and Hedging Activities” and Note 9, “Commitments and Contingencies” within the Notes to Consolidated Financial Statements included in Part I.

Item 1 of this Report for more information relating to the Company's other off-balance sheet financial instruments.

Contractual Obligations, Commitments, and Contingencies There were no material changes in contractual obligations, commitments, or contingencies during the three months ended March 31, 2024.

Contractual Obligations, Commitments, and Contingencies There were no material changes in contractual obligations, commitments, or contingencies during the three months ended June 30, 2024.

Quantitative and Qualitative Disclosures About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis