UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

___________________________________________________

FORM 10-Q



☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2020~~2021



☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to



Commission File Number:			1-9047

Independent Bank Corp.

(Exact name of registrant as specified in its charter)

___________________________________________________



~~Massachusetts~~	~~04-2870273~~
~~(State or other jurisdiction of~~ ~~incorporation or organization)~~	~~(I.R.S. Employer~~ ~~Identification No.)~~



MA			04-2870273
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

Office Address:

2036 Washington Street,

Hanover,

~~Massachusetts~~MA

02339

Mailing Address:

288 Union Street,

Rockland,

~~Massachusetts~~MA

02370

(Address of principal executive offices, including zip code)

(781) 878-6100

(Registrant’s telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:
Title of each Class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value per share	INDB	~~NASDAQ~~The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer		x			Accelerated Filer		☐

~~Large Accelerated Filer~~		x	~~Accelerated Filer~~	☐

Non-accelerated Filer	☐		Smaller Reporting Company			☐

					Emerging Growth Company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes

☐

☒

As of May ~~6, 2020,~~4, 2021, there were ~~32,934,656~~33,030,954 shares of the issuer’s common stock outstanding, par value $0.01 per share.

Table of Contents

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	PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets - March 31, ~~2020~~2021 and December 31, ~~2019~~2020		5
Consolidated Statements of Income - Three months ended March 31, ~~2020~~2021 and ~~2019~~2020		7
Consolidated Statements of Comprehensive Income -Three months ended March 31, ~~2020~~2021 and ~~2019~~2020		8
Consolidated Statements of Stockholders’ Equity - Three months ended March 31, ~~2020~~2021 and ~~2019~~2020		9
Consolidated Statements of Cash Flows - Three months ended March 31, ~~2020~~2021 and ~~2019~~2020		10

Condensed Notes to Consolidated Financial Statements - March 31, ~~2019~~2021
Note 1 - Basis of Presentation		12
Note 2 - Recent Accounting Standards Updates		12
Note 3 - Securities		1312
Note 4 - Loans, Allowance for Credit Losses, and Credit Quality		1817
Note 5 ~~- Loans and Allowance for Loan Losses~~		28
~~Note 6 - Goodwill and Other Intangible Assets~~	31
~~Note 7 - Earnings Per Share~~	32
~~Note 8~~ - Stock Based Compensation	3227
Note 96 - Derivative and Hedging Activities		3328
Note ~~10 - Income Taxes~~		39
~~Note 11~~7 - Fair Value Measurements	3934
Note 128 - Revenue Recognition		4741
Note 139 - Comprehensive Income (Loss)		5044
Note 1410 - Commitments and Contingencies		5145
Note 1511 - Low Income Housing Project Investments		5347
Note 1612 - Subsequent ~~Events~~Event		5347
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		5447
Table 1 - Closed Residential Real Estate Loans		6659
Table 2 - Residential Mortgage Loan Sales		6760
Table 3 - Mortgage Servicing Asset		6761
Table 4 - Nonperforming Assets		7266
Table 5 - Activity in Nonperforming Assets		7266
Table 6 - Troubled Debt Restructurings		7367
Table 7 - Activity in Troubled Debt Restructurings		7367
Table 8 - Interest Income - Nonaccrual Loans and Troubled Debt Restructurings		7368
Table 9 - ~~Potentially Impacted COVID-19 Industries~~Deferral by Modification Type		7468
Table 10 - Industries Highly Impacted By COVID-19 - Details		69
Table 11 - Summary of Changes in the Allowance for Credit Losses		7772
Table 1112 - Summary of Allocation of the Allowance for Credit Losses		7873
Table 1213 - Borrowings		7974
Table 1314 - Company and Bank’s Capital Amounts and Ratios		8075
Table 1415 - Summary of Results of Operations		8277
Table 1516 - Average Balance, Interest Earned/Paid & Average Yields Quarter-to-Date		8378

Table 1617 - Volume Rate Analysis		8580
Table 1718 - Noninterest Income - Three Months Ended		8781

~~Table of Contents~~

Table 1819 - Noninterest Expense - Three Months Ended 20 - Noninterest Expense - Three Months Ended			8882
Table 1920 - Tax Provision and Applicable Tax Rates			8982
Table 2021 - Interest Rate Sensitivity			9185
Table 212 2 - Sources of Liquidity			9287

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Item 3. Quantitative and Qualitative Disclosures About Market Risk			9387
Item 4. Controls and Procedures			9388

PART II. OTHER INFORMATION			9388
Item 1. Legal Proceedings			9388
Item 1A. Risk Factors			9388
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			9689
Item 3. Defaults Upon Senior Securities			9689
Item 4. Mine Safety Disclosures			9690
Item 5. Other Information			9690
Item 6. Exhibits			9790
Signatures			9891

Exhibit 31.1 – Certification 302
Exhibit 31.2 – Certification 302
Exhibit 32.1 – Certification 906
Exhibit 32.2 – Certification 906

Table of Contents

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

INDEPENDENT BANK CORP.

CONSOLIDATED BALANCE SHEETS

(Unaudited—Dollars in thousands)


	March 31 2021		December 31 2020
Assets
Cash and due from banks	$	126,651	$	169,460
Interest-earning deposits with banks	1,642,688		1,127,176
Securities
Trading	3,269		2,838
Equity	22,419		22,107
Available for sale (amortized cost $593,167 and $395,453)	600,213		412,860
Held to maturity (fair value $820,430 and $752,177)	805,529		724,512
Total securities	1,431,430		1,162,317
Loans held for sale (at fair value)	41,632		58,104
Loans
Commercial and industrial	2,086,671		2,103,152
Commercial real estate	4,177,617		4,173,927
Commercial construction	516,362		553,929
Small business	174,211		175,023
Residential real estate	1,241,789		1,296,183
Home equity - first position	610,907		633,142
Home equity - subordinate positions	417,588		435,648
Other consumer	21,546		21,862
Total loans	9,246,691		9,392,866
Less: allowance for credit losses	(107,549)		(113,392)
Net loans	9,139,142		9,279,474
Federal Home Loan Bank stock	10,250		10,250
Bank premises and equipment, net	115,945		116,393
Goodwill	506,206		506,206
Other intangible assets	21,689		23,107
Cash surrender value of life insurance policies	241,365		200,525

Other assets	496,916		551,289
Total assets	$	13,773,914	$	13,204,301
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing demand deposits	$	4,136,259	$	3,762,306
Savings and interest checking accounts	4,242,235		4,047,332
Money market	2,346,985		2,232,903
Time certificates of deposit of $100,000 and over	465,182		525,424
Other time certificates of deposits	402,863		425,205
Total deposits	11,593,524		10,993,170
Borrowings
Federal Home Loan Bank borrowings	35,717		35,740



Long-term borrowings (less unamortized debt issuance costs of $26 and $40)	28,099		32,773

Table of Contents

March 31
2020 December 31
2019
Assets
Cash and due from banks $ 125,638
$ 114,686
Interest-earning deposits with banks 345,739
36,288
Securities
Trading 2,247
2,179
Equity 19,439
21,261
Available for sale (amortized cost $419,452 and $420,703) 437,296
426,424
Held to maturity (fair value $809,355 and $753,263) 777,798
740,806
Total securities 1,236,780
1,190,670
Loans held for sale (at fair value) 43,756
33,307
Loans
Commercial and industrial 1,448,224
1,395,036
Commercial real estate 4,061,347
4,002,359
Commercial construction 527,138
547,293
Small business 177,820
174,497
Residential real estate 1,528,416
1,590,569
Home equity - first position 656,994
649,255
Home equity - subordinate positions 489,276
484,543
Other consumer 27,215
30,087
Total loans 8,916,430
8,873,639
Less: allowance for credit losses (92,376 ) (67,740 )
Net loans 8,824,054
8,805,899
Federal Home Loan Bank stock 23,274
14,424
Bank premises and equipment, net 121,873
123,674
Goodwill 506,206
506,206
Other intangible assets 27,466
29,286
Cash surrender value of life insurance policies 197,772
197,372
Other assets 527,682
343,353
Total assets $ 11,980,240
$ 11,395,165
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing demand deposits $ 2,820,312
$ 2,662,591
Savings and interest checking accounts 3,428,546
3,232,909
Money market 1,897,632
1,856,552
Time certificates of deposit of $100,000 and over 629,528
663,645
Other time certificates of deposits 640,180
731,670
Total deposits 9,416,198
9,147,367
Borrowings
Federal Home Loan Bank borrowings 358,591
115,748


Long-term borrowings (less unamortized debt issuance costs of $80 and $94)	74,920			74,906
Junior subordinated debentures (less unamortized debt issuance costs of $39 and $40)	62,849			62,848
Subordinated debentures (less unamortized debt issuance costs of $375 and $399)	49,625			49,601
Junior subordinated debentures (less unamortized debt issuance costs of $37 and $37)							Junior subordinated debentures (less unamortized debt issuance costs of $37 and $37)	62,851		62,851
Subordinated debentures (less unamortized debt issuance costs of $280 and $304)							Subordinated debentures (less unamortized debt issuance costs of $280 and $304)	49,720		49,696
Total borrowings	545,985			303,103			Total borrowings	176,387		181,060
Other liabilities	338,401			236,552			Other liabilities	288,632		327,386
Total liabilities	10,300,584			9,687,022			Total liabilities	12,058,543		11,501,616
Commitments and contingencies	—			—			Commitments and contingencies	0		0
Stockholders' equity							Stockholders' equity
Preferred stock, $.01 par value, authorized: 1,000,000 shares, outstanding: none	—			—
Common stock, $.01 par value, authorized: 75,000,000 shares, issued and outstanding: 33,260,005 shares at March 31, 2020 and 34,377,388 shares at December 31, 2019 (includes 147,892 and 147,184 shares of unvested participating restricted stock awards, respectively)	331			342
Value of shares held in rabbi trust at cost: 133,857 shares at March 31, 2020 and 143,820 shares at December 31, 2019	(4,604		)	(4,735		)
Preferred stock, $0.01 par value, authorized: 1,000,000 shares, outstanding: NaN							Preferred stock, $0.01 par value, authorized: 1,000,000 shares, outstanding: NaN	0		0
Common stock, $0.01 par value, authorized: 75,000,000 shares, issued and outstanding: 33,024,882 shares at March 31, 2021 and 32,965,692 shares at December 31, 2020 (includes 144,790 and 135,205 shares of unvested participating restricted stock awards, respectively)							Common stock, $0.01 par value, authorized: 75,000,000 shares, issued and outstanding: 33,024,882 shares at March 31, 2021 and 32,965,692 shares at December 31, 2020 (includes 144,790 and 135,205 shares of unvested participating restricted stock awards, respectively)	329		328
Value of shares held in rabbi trust at cost: 83,629 shares at March 31, 2021 and 84,126 shares at December 31, 2020							Value of shares held in rabbi trust at cost: 83,629 shares at March 31, 2021 and 84,126 shares at December 31, 2020	(3,080)		(3,066)
Deferred compensation and other retirement benefit obligations	4,604			4,735			Deferred compensation and other retirement benefit obligations	3,080		3,066
Additional paid in capital	962,513			1,035,450			Additional paid in capital	946,002		945,638
Retained earnings	667,084			654,182			Retained earnings	741,883		716,024
Accumulated other comprehensive income, net of tax	49,728			18,169			Accumulated other comprehensive income, net of tax	27,157		40,695
Total stockholders’ equity	1,679,656			1,708,143			Total stockholders’ equity	1,715,371		1,702,685
Total liabilities and stockholders' equity	$	11,980,240		$	11,395,165		Total liabilities and stockholders' equity	$	13,773,914	$	13,204,301

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited—Dollars in thousands, except per share data)


	Three Months Ended					Three Months Ended
	March 31					March 31
	2020		2019				2021		2020
Interest income					Interest income
Interest and fees on loans	$	99,022	$	83,608	Interest and fees on loans		$	92,383	$	99,022
Taxable interest and dividends on securities	7,957		7,465		Taxable interest and dividends on securities		6,627		7,957
Nontaxable interest and dividends on securities	9		13		Nontaxable interest and dividends on securities		5		9
Interest on loans held for sale	232		31		Interest on loans held for sale		296		232
Interest on federal funds sold and short-term investments	160		426		Interest on federal funds sold and short-term investments		326		160
Total interest and dividend income	107,380		91,543		Total interest and dividend income		99,637		107,380
Interest expense					Interest expense
Interest on deposits	10,892		7,028		Interest on deposits		2,711		10,892
Interest on borrowings	2,184		1,990		Interest on borrowings		1,342		2,184
Total interest expense	13,076		9,018		Total interest expense		4,053		13,076
Net interest income	94,304		82,525		Net interest income		95,584		94,304
Provision for credit losses	25,000		1,000		Provision for credit losses		(2,500)		25,000
Net interest income after provision for credit losses	69,304		81,525		Net interest income after provision for credit losses		98,084		69,304
Noninterest income					Noninterest income
Deposit account fees	4,970		4,406		Deposit account fees		3,584		4,970
Interchange and ATM fees	4,896		4,516		Interchange and ATM fees		2,720		4,896
Investment management	6,829		6,748		Investment management		8,304		6,829
Mortgage banking income	861		806		Mortgage banking income		5,740		861
Increase in cash surrender value of life insurance policies					Increase in cash surrender value of life insurance policies		1,323		1,276
Gain on life insurance benefits	357		—		Gain on life insurance benefits		258		357
Increase in cash surrender value of life insurance policies	1,276		972
Loan level derivative income	3,597		641		Loan level derivative income		173		3,597

Other noninterest income	3,649		3,444		Other noninterest income		3,144		3,649
Total noninterest income	26,435		21,533		Total noninterest income		25,246		26,435
Noninterest expenses					Noninterest expenses
Salaries and employee benefits	37,349		33,117		Salaries and employee benefits		39,889		37,349
Occupancy and equipment expenses	9,317		7,130		Occupancy and equipment expenses		9,273		9,317
Data processing and facilities management	1,658		1,326		Data processing and facilities management		1,665		1,658
FDIC assessment	—		616		FDIC assessment		1,050		—
Advertising expense	1,105		1,213

Consulting expense	1,336		764		Consulting expense		2,391		1,336
Core deposit amortization	1,531		857		Core deposit amortization		1,392		1,531
Merger and acquisition expense	—		1,032

Software maintenance	1,685		1,165		Software maintenance		1,970		1,685
Unrealized loss on equity securities	1,799		—		Unrealized loss on equity securities		0		1,799
Other noninterest expenses	11,060		9,091		Other noninterest expenses		12,052		12,165
Total noninterest expenses	66,840		56,311		Total noninterest expenses		69,682		66,840
Income before income taxes	28,899		46,747		Income before income taxes		53,648		28,899
Provision for income taxes	2,148		11,522		Provision for income taxes		11,937		2,148
Net income	$	26,751	$	35,225	Net income		$	41,711	$	26,751
Basic earnings per share	$	0.78	$	1.25	Basic earnings per share		$	1.26	$	0.78
Diluted earnings per share	$	0.78	$	1.25	Diluted earnings per share		$	1.26	$	0.78
Weighted average common shares (basic)	34,184,431		28,106,184		Weighted average common shares (basic)		32,995,332		34,184,431
Common share equivalents	36,827		54,466		Common share equivalents		30,098		36,827
Weighted average common shares (diluted)	34,221,258		28,160,650		Weighted average common shares (diluted)		33,025,430		34,221,258
Cash dividends declared per common share	$	0.46	$	0.44	Cash dividends declared per common share		$	0.48	$	0.46

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited—Dollars in thousands)


	Three Months Ended						Three Months Ended
	March 31						March 31
	2020			2019				2021		2020
Net income	$	26,751		$	35,225	Net income		$	41,711	$	26,751
Other comprehensive income, net of tax						Other comprehensive income, net of tax
Net change in fair value of securities available for sale	9,347			4,729		Net change in fair value of securities available for sale		(7,774)		9,347
Net change in fair value of cash flow hedges	22,984			3,285		Net change in fair value of cash flow hedges		(6,583)		22,984
Net change in other comprehensive income for defined benefit postretirement plans	(772		)	40		Net change in other comprehensive income for defined benefit postretirement plans		819		(772)
Total other comprehensive income	31,559			8,054
Total other comprehensive income (loss)						Total other comprehensive income (loss)		(13,538)		31,559
Total comprehensive income	$	58,310		$	43,279	Total comprehensive income		$	28,173	$	58,310

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

Table of Contents

INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three Months Ended March 31, ~~2020~~2021 and ~~2019~~2020

(Unaudited—Dollars in thousands, except per share data)


	Common Stock Outstanding	Common Stock		Value of Shares Held in Rabbi Trust at Cost		Deferred Compensation Obligation		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance December 31, 2020	32,965,692	$	328	$	(3,066)	$	3,066	$	945,638	$	716,024	$	40,695	$	1,702,685

Net income	—	—		—		—		—		41,711		—		41,711
Other comprehensive loss	—	—		—		—		—		—		(13,538)		(13,538)
Common dividend declared ($0.48 per share)	—	—		—		—		—		(15,852)		—		(15,852)

Proceeds from exercise of stock options, net of cash paid	4,744	—		—		—		(57)		—		—		(57)
Stock based compensation	—	—		—		—		1,150		—		—		1,150
Restricted stock awards issued, net of awards surrendered	48,106	1		—		—		(1,221)		—		—		(1,220)
Shares issued under direct stock purchase plan	6,340	—		—		—		492		—		—		492

Deferred compensation and other retirement benefit obligations	—	—		(14)		14		—		—		—		0
Balance March 31, 2021	33,024,882	$	329	$	(3,080)	$	3,080	$	946,002	$	741,883	$	27,157	$	1,715,371

Balance December 31, 2019	34,377,388	$	342	$	(4,735)	$	4,735	$	1,035,450	$	654,182	$	18,169	$	1,708,143
Cumulative effect accounting adjustment (1)	—	—		—		—		—		1,553		—		1,553

Net income	—	—		—		—		—		26,751		—		26,751
Other comprehensive income	—	—		—		—		—		—		31,559		31,559
Common dividend declared ($0.46 per share)	—	—		—		—		—		(15,402)		—		(15,402)


Stock based compensation	—	—		—		—		850		—		—		850
Restricted stock awards issued, net of awards surrendered	42,531	1		—		—		(1,133)		—		—		(1,132)
Shares issued under direct stock purchase plan	7,009	0		—		—		560		—		—		560
Shares repurchased under share repurchase program	(1,166,923)	(12)		—		—		(73,214)		—		—		(73,226)
Deferred compensation and other retirement benefit obligations	—	—		131		(131)		—		—		—		0
Balance March 31, 2020	33,260,005	$	331	$	(4,604)	$	4,604	$	962,513	$	667,084	$	49,728	$	1,679,656

Common Stock Outstanding Common Stock Value of Shares Held in Rabbi Trust at Cost Deferred Compensation Obligation Additional Paid in Capital Retained Earnings Accumulated Other
Comprehensive Income/(Loss) Total
Balance December 31, 2019 34,377,388
$ 342
$ (4,735 ) $ 4,735
$ 1,035,450
$ 654,182
$ 18,169
$ 1,708,143
Cumulative effect accounting adjustment (1) —
—
—
—
—
1,553
—
1,553
Net income —
—
—
—
—
26,751
—
26,751
Other comprehensive income —
—
—
—
—
—
31,559
31,559
Common dividend declared ($0.46 per share) —
—
—
—
—
(15,402 ) —
(15,402 )
Stock based compensation —
—
—
—
850
—
—
850
Restricted stock awards issued, net of awards surrendered 42,531
1
—
—
(1,133 ) —
—
(1,132 )
Shares issued under direct stock purchase plan 7,009
—
—
—
560
—
—
560
Shares repurchased under share repurchase program (1,166,923 ) (12 ) —
—
(73,214 ) —
—
(73,226 )
Deferred compensation and other retirement benefit obligations —
—
131
(131 ) —
—
—
—
Balance March 31, 2020 33,260,005
$ 331

$ (4,604 )
$ 4,604

$ 962,513

$ 667,084

$ 49,728

$ 1,679,656

Balance December 31, 2018 28,080,408
$ 279
$ (4,718 ) $ 4,718
$ 527,648
$ 546,736
$ (1,173 ) $ 1,073,490
Net income —
—
—
—
—
35,225
—
35,225
Other comprehensive loss —
—
—
—
—
—
8,054
8,054
Common dividend declared ($0.44 per share) —
—
—
—
—
(12,379 ) —
(12,379 )
Proceeds from exercise of stock options, net of cash paid 6,000
—
—
—
165
—
—
165
Stock based compensation —
—
—
—
915
—
—
915
Restricted stock awards issued, net of awards surrendered 44,407
1
—
—
(1,420 ) —
—
(1,419 )
Shares issued under direct stock purchase plan 6,689
—
—
—
487
—
—
487
Deferred compensation and other retirement benefit obligations —
—
119
(119 ) —
—
—
—
Balance March 31, 2019 28,137,504
$ 280
$ (4,599 ) $ 4,599
$ 527,795
$ 569,582
$ 6,881
$ 1,104,538
(1) Represents adjustment needed to reflect the cumulative impact on retained earnings pursuant to the Company's adoption of Accounting Standards Update 2016-13. The adjustment presented includes $1.1 million ($817,000, net of tax) attributable to the change in accounting methodology for estimating the allowance for credit losses and $1.0 million ($736,000, net of tax) related to the reserve for unfunded commitments resulting from the Company's adoption of the standard. Amount shown in the table above is presented net of tax.

~~(1)~~

Represents adjustment needed to reflect the cumulative impact on retained earnings pursuant to the Company's adoption of Accounting Standards Update 2016-13. The adjustment presented includes $1.1 million ($817,000, net of tax) attributable to the change in accounting methodology for estimating the allowance for credit losses and $1.0 million ($736,000, net of tax) related to the reserve for unfunded commitments resulting from the Company's adoption of the standard. Amount shown in the table above is presented net of tax.

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

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INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited—Dollars in thousands)

Three Months Ended
March 31
2020 2019
Cash flow from operating activities
Net income $ 26,751
$ 35,225
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization 6,992
4,101
Change in unamortized net loan costs and premiums (735 ) (453 )
Provision for loan losses 25,000
1,000
Deferred income tax expense 3,108
539
Net (gain) loss on equity securities 1,801
(907 )
Net loss on bank premises and equipment 420
25
Realized gain on sale leaseback transaction (145 ) (145 )
Stock based compensation 850
915
Increase in cash surrender value of life insurance policies (1,276 ) (972 )
Gain on life insurance benefits (357 ) —
Operating lease payments (2,926 ) (2,165 )
Change in fair value on loans held for sale 914
(1 )
Net change in:
Trading assets (68 ) (333 )
Loans held for sale (11,363 ) 846
Other assets (151,830 ) 1,721
Other liabilities 92,461
(5,228 )
Total adjustments (37,154 ) (1,057 )
Net cash provided by (used in) operating activities (10,403 ) 34,168
Cash flows provided by (used in) investing activities
Purchases of equity securities (108 ) (105 )
Proceeds from maturities and principal repayments of securities available for sale 31,280
11,318
Purchases of securities available for sale (30,095 ) —
Proceeds from maturities and principal repayments of securities held to maturity 48,183
19,003
Purchases of securities held to maturity (84,824 ) (30,502 )
Net redemption (purchases) of Federal Home Loan Bank stock (8,850 ) 8,016
Investments in low income housing projects (5,934 ) (292 )
Purchases of life insurance policies (93 ) (93 )
Proceeds from life insurance policies 1,326
—
Net increase in loans (41,283 ) (70,378 )
Purchases of bank premises and equipment (1,749 ) (3,713 )
Proceeds from the sale of bank premises and equipment 9
13
Net cash used in investing activities (92,138 ) (66,733 )
Cash flows provided by (used in) financing activities
Net increase (decrease) in time deposits (125,396 ) 12,464
Net increase in other deposits 394,438
24,034
Net advances (repayments) of short-term Federal Home Loan Bank borrowings 257,826
(122,046 )


	Three Months Ended
	March 31
	2021		2020
Cash flow from operating activities
Net income	$	41,711	$	26,751
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization	8,228		6,992
Change in unamortized net loan costs and premiums	(10,318)		(735)

Provision for credit losses	(2,500)		25,000
Deferred income tax expense	567		3,108
Net (gain) loss on equity securities	(316)		1,801


Net loss on bank premises and equipment	4		420




Realized gain on sale leaseback transaction	(145)		(145)
Stock based compensation	1,150		850

Increase in cash surrender value of life insurance policies	(1,323)		(1,276)
Gain on life insurance benefits	(258)		(357)
Operating lease payments	(3,077)		(2,926)
Change in fair value on loans held for sale	1,764		(255)
Net change in:
Trading assets	(431)		(68)

Loans held for sale	14,708		(10,194)
Other assets	70,901		(151,830)
Other liabilities	(53,201)		92,461
Total adjustments	25,753		(37,154)
Net cash provided by (used in) operating activities	67,464		(10,403)
Cash flows used in investing activities


Purchases of equity securities	(124)		(108)

Proceeds from maturities and principal repayments of securities available for sale	26,092		31,280
Purchases of securities available for sale	(223,986)		(30,095)
Proceeds from maturities and principal repayments of securities held to maturity	68,497		48,183
Purchases of securities held to maturity	(149,453)		(84,824)
Net purchases of Federal Home Loan Bank stock	0		(8,850)
Investments in low income housing projects	(6,632)		(5,934)
Purchases of life insurance policies	(40,093)		(93)
Proceeds from life insurance policies	576		1,326
Net (increase) decrease in loans	153,150		(41,283)

Purchases of bank premises and equipment	(2,524)		(1,749)
Proceeds from the sale of bank premises and equipment	4		9



Net cash used in investing activities	(174,493)		(92,138)
Cash flows provided by financing activities
Net decrease in time deposits	(82,569)		(125,396)
Net increase in other deposits	682,938		394,438

Net advances of short-term Federal Home Loan Bank borrowings	0		257,826

Repayments of long-term Federal Home Loan Bank borrowings	0		(15,000)

Repayments of long-term Federal Home Loan Bank borrowings (15,000 ) —
Proceeds from line of credit, net of issuance costs —
49,993
Proceeds from long-term debt, net of issuance costs —
74,914
Repayments of junior subordinated debentures, net of issuance costs —
(3,093 )
Proceeds from subordinated debentures, net of issuance costs —
49,556
Net proceeds from exercise of stock options —
165
Restricted stock awards issued, net of awards surrendered (1,132 ) (1,419 )
Proceeds from shares issued under direct stock purchase plan 560
487
Payments for shares repurchased under share repurchase program (73,226 ) —
Common dividends paid (15,126 ) (10,671 )
Net cash provided by financing activities 422,944
74,384
Net increase in cash and cash equivalents 320,403
41,819
Cash and cash equivalents at beginning of year 150,974
250,455
Cash and cash equivalents at end of period $ 471,377
$ 292,274
Supplemental schedule of noncash activities
Net increase in capital commitments relating to low income housing project investments $ 14,394
$ —
Initial recognition of operating leases upon adoption of Accounting Standards Update 2016-02 (1) $ —
$ 32,777
Recognition of operating lease at commencement $ 2,223
$ 2,926

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~~(1)~~

Represents adjustment needed to reflect the opening balance of the Company's Right of Use ("ROU") assets and lease liabilities pursuant to the adoption of Accounting Standards Update 2016-02 effective January 1, 2019. Upon adoption, the Company recognized on its balance sheet ROU assets of approximately $32.8 million, with a corresponding operating lease liability of approximately $34.1 million, with an adjustment to remove the Company's existing deferred rent liability of approximately $1.3 million.


Repayments of long-term debt, net of issuance costs	(4,688)		0


Net proceeds from exercise of stock options	(57)		0
Restricted stock awards issued, net of awards surrendered	(1,220)		(1,132)
Proceeds from shares issued under direct stock purchase plan	492		560
Payments for shares repurchased under share repurchase program	0		(73,226)
Common dividends paid	(15,164)		(15,126)
Net cash provided by financing activities	579,732		422,944
Net increase in cash and cash equivalents	472,703		320,403
Cash and cash equivalents at beginning of year	1,296,636		150,974
Cash and cash equivalents at end of period	$	1,769,339	$	471,377
Supplemental schedule of noncash activities


Net increase in capital commitments relating to low income housing project investments	$	24,014	$	14,394

Right-of-use assets obtained in exchange for new lease obligations	$	0	$	2,223

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

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CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

Independent Bank Corp. (the “Company”) is a state chartered, federally registered bank holding company, incorporated in 1985. The Company is the sole stockholder of Rockland Trust Company (“Rockland Trust” or the “Bank”), a Massachusetts trust company chartered in 1907.

All material intercompany balances and transactions have been eliminated in consolidation. Certain previously reported amounts have been reclassified to conform to the current year’s presentation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements, primarily consisting of normal recurring adjustments, have been included. Results for the ~~quarter~~three months ended March 31, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020~~2021 or any other interim period.

For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, filed with the Securities and Exchange ~~Commission.~~Commission (the "2020 Form 10-K").

NOTE 2 - RECENT ACCOUNTING STANDARDS UPDATES

~~Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 326 "Financial Instruments - Credit Losses" Update No. 2016-13.~~The standard was issued in June 2016 and has been amended three times by the FASB (collectively, the "updates"). The purpose of the updates is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, these updates replace the incurred loss impairment methodology in current GAAP with a methodology, referred to as the current expected credit losses ("CECL") methodology, that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The updates affect loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The Company adopted the CECL standard effective January 1, 2020.

The Company adopted the standard using the modified retrospective method for all financial assets measured at amortized cost, net investment in leases and off-balance sheet credit exposures. Results for reporting periods beginning after January 1, 2020 are presented under the CECL standard, while prior period results are presented under standards previously applicable under GAAP. The cumulative effect of the Company's adoption resulted in an immaterial increase to retained earnings as of the January 1, 2020 adoption date. This transition adjustment was a result of the change in allowance methodology, including the impact to the reserve on unfunded commitments resulting from the application of new guidance under CECL, as well as the day one gross-up of purchased credit deteriorated ("PCD") assets. The standard was adopted using the prospective transition approach for PCD assets that were previously classified as purchased credit impaired ("PCI") assets. As prescribed by the standard, management did not reassess whether PCI assets met the criteria of PCD assets at the date of adoption. On January 1, 2020, the amortized cost basis of the PCD assets were adjusted to reflect estimated credit losses, with the remaining non-credit related discount, calculated based on the adjusted amortized cost, and will be accreted into interest income on a straight line basis over the remaining contractual term of the asset. See ~~Note 3 Securities~~ ~~and~~ ~~Note 4 Loans, Allowance for Credit Losses and Credit Quality~~ ~~for further details surrounding the Company's adoption of CECL, related accounting policy updates and full disclosures required under the standard.~~

FASB ASC Topic 848 "Reference Rate Reform" Update No. 2020-04. Update No. 2020-04 was issued in March 2020 to provide optional expedients and exceptions for applying ~~generally accepted accounting principles (GAAP)~~GAAP to certain contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. The ~~expedients and exceptions provided by the~~ amendments dowill not apply to contract modifications made and hedging relationship entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022 ~~that~~for which an entity has elected certain optional expedients ~~for and~~ that are retained through the end of the hedging relationship. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022 and do not apply to contract modifications made after December 31, 2022. FASB ASC Topic 848 "Reference Rate Reform" Update No. 2021-01 was subsequently issued in January 2021 and expanded application of the optional expedients to derivative transactions affected by the discounting transition. The Company has not yet adopted the amendments in ~~this update~~these updates and is

currently in the process of reviewing its contracts and existing processes in order to assess the risks and potential impact of the transition away from LIBOR.

NOTE 3 - SECURITIES

Investment securities are classified at the time of purchase as available for sale, held to maturity, trading, or equity. Classification is constantly re-evaluated for consistency with corporate goals and objectives. Trading and equity securities are recorded at fair value with subsequent changes in fair value recorded in earnings. Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amortized cost. Securities not classified as held to maturity or trading are classified as available for sale and recorded at fair value, with changes in fair value excluded from earnings and reported in other comprehensive income, net of related tax. Purchase premiums and discounts are recognized in interest income, using the interest method, to arrive at periodic interest income at a constant effective yield, thereby reflecting the securities market yield. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Accrued interest receivable balances are excluded from the amortized cost of held to maturity securities and the fair value of available for sale securities and are included within Other Assets on the consolidated balance sheet. Management has elected not to measure an allowance for credit losses on these balances as the Company employs a timely write-off policy. It is the Company's policy that a security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent, and interest earned but not collected for a security placed on non-accrual is reversed against interest income.

~~Allowance for Credit Losses - Available for Sale Securities~~

The Company's available for sale securities are carried at fair value. For available for sale securities in an unrealized loss position, management will first evaluate whether there is intent to sell, 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 available for sale 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, the security will be written down to fair value, 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 uncollectibility of a security is confirmed, or when either of the aforementioned criteria surrounding intent or requirement to sell have been met.

~~Allowance for Credit Losses - Held to Maturity Securities~~

The Company measures expected credit losses on held to maturity securities on a collective basis by major security type. Management classifies the held-to maturity portfolio into the following major security types: U.S. Government Agency, U.S. Treasury, Agency Mortgage-Backed Securities, Agency Collateralized Mortgage Obligations, Small Business Administration Pooled Securities, and Single Issuer Trust Preferred Securities. Securities in the Company's held to maturity portfolio are primarily 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 these securities to have a zero loss expectation and therefore does not estimate an allowance for credit losses on these securities.

Trading Securities

The Company had trading securities of ~~$2.2~~$3.3 million and $2.8 million as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020, respectively. These securities are held in a rabbi trust and will be used for future payments associated with the Company’s ~~nonqualified~~non-qualified 401(k) Restoration Plan and ~~Nonqualified~~Non-qualified Deferred Compensation Plan.

Equity Securities

The Company had equity securities of ~~$19.4~~$22.4 million and ~~$21.3~~$22.1 million as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. These securities consist primarily of mutual funds held in a rabbi trust and will be used for future payments associated with the Company’s supplemental executive retirement plans.

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The following table represents a summary of the gains and losses recognized within non-interest income and non-interest expense within the consolidated statements of income that relate to equity securities for the periods indicated:

Three Months Ended
March 31
2020 2019
Net gains (losses) recognized during the period on equity securities $ (1,801 ) $ 907
Less: net gains recognized during the period on equity securities sold during the period 6
3
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date $ (1,807 ) $ 904


	Three Months Ended
	March 31
	2021		2020
	Dollars in thousands
Net gains (losses) recognized during the period on equity securities	$	316	$	(1,801)
Less: net gains recognized during the period on equity securities sold during the period	29		6
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date	$	287	$	(1,807)

Available for Sale Securities

The following table summarizes the amortized cost, allowance for credit losses, and fair value of available for sale securities and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive ~~income(loss)~~income (loss) as of the dates indicated:


	March 31, 2021										December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for credit losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for credit losses		Fair Value
	(Dollars in thousands)

U.S. government agency securities	$	169,091	$	1,209	$	(2,244)	$	0	$	168,056	$	22,476	$	1,640	$	0	$	0	$	24,116
Agency mortgage-backed securities	286,512		7,561		(3,898)		0		290,175		224,293		9,337		(1)		0		233,629
Agency collateralized mortgage obligations	78,952		2,688		(11)		0		81,629		88,687		3,083		(87)		0		91,683

State, county, and municipal securities	540		15		0		0		555		790		17		0		0		807
Single issuer trust preferred securities issued by banks	489		0		(1)		0		488		489		0		(1)		0		488
Pooled trust preferred securities issued by banks and insurers	1,412		0		(348)		0		1,064		1,429		0		(373)		0		1,056
Small business administration pooled securities	56,171		2,075		0		0		58,246		57,289		3,792		0		0		61,081
Total available for sale securities	$	593,167	$	13,548	$	(6,502)	$	0	$	600,213	$	395,453	$	17,869	$	(462)	$	0	$	412,860

March 31, 2020 December 31, 2019
Amortized
Cost Gross
Unrealized
Gains Gross Unrealized
Losses Allowance for credit losses Fair
Value Amortized
Cost Gross
Unrealized
Gains Gross Unrealized
Losses Fair
Value
(Dollars in thousands)
U.S. government agency securities $ 22,474
$ 1,818
$ —
$ —
$ 24,292
$ 32,473
$ 642
$ —
$ 33,115
Agency mortgage-backed securities 247,675
11,110
(1 ) —
258,784
243,548
3,456
(4 ) 247,000
Agency collateralized mortgage obligations 83,183
4,027
—
—
87,210
87,305
1,225
(19 ) 88,511
State, county, and municipal securities 1,126
18
—
—
1,144
1,377
19
—
1,396
Single issuer trust preferred securities issued by banks 489
—
(53 ) —
436
488
5
—
493
Pooled trust preferred securities issued by banks and insurers 1,443
—
(434 ) —
1,009
1,488
—
(374 ) 1,114
Small business administration pooled securities 63,062
1,359
—
—
64,421
54,024
771
—
54,795
Total available for sale securities $ 419,452
$ 18,332
$ (488 ) $ —
$ 437,296
$ 420,703
$ 6,118
$ (397 ) $ 426,424

~~As noted in the table above, the~~The Company did not record ~~an allowance~~a provision for estimated credit losses on any available for sale securities during the three months ended March 31, 2021 and 2020. Excluded from the table above is accrued interest on available for sale securities of ~~$1.6~~$2.0 million and $1.2 million as of March 31, 2021 and December 31, 2020, respectively, which is included within ~~Other Assets~~other assets on the consolidated balance ~~sheet.~~sheets. Additionally, the Company did not record any write-offs of accrued interest income on available for sale securities during the three months ended March 31, 2021 and 2020. NoFurthermore, 0 securities held by the Company were delinquent on contractual payments ~~as of March 31, 2020,~~ nor were any securities placed on non-accrual status ~~during the three months then ended.~~as of March 31, 2021 and December 31, 2020.

When securities are sold, the adjusted cost of the specific security sold is used to compute the gain or loss on the sale. The Company had no sales of securities available for sale during the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, and therefore no gains or losses were realized during the periods presented.

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The following ~~table shows~~tables show the gross unrealized losses and fair value of the Company’s available for sale securities ~~which are~~ in an unrealized loss position, and for which the Company has not recorded ~~an allowance~~a provision for credit ~~losses as of March 31, 2020.~~losses. These available for sale securities are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position:

March 31, 2020
Less than 12 months 12 months or longer Total

# of
holdings

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
(Dollars in thousands)
Agency mortgage-backed securities 1
86
(1 ) —
—
86
(1 )
Single issuer trust preferred securities issued by banks and insurers 1
436
(53 ) —
—
436
(53 )
Pooled trust preferred securities issued by banks and insurers 1
—
—
1,009
(434 ) 1,009
(434 )
Total temporarily impaired available for sale securities 3
$ 522
$ (54 ) $ 1,009
$ (434 ) $ 1,531
$ (488 )


	March 31, 2021
		Less than 12 months				12 months or longer				Total
	# of holdings	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S. government agency securities	4	$	113,171	$	(2,244)	$	0	$	0	$	113,171	$	(2,244)
Agency mortgage-backed securities	8	98,873		(3,898)		0		0		98,873		(3,898)
Agency collateralized mortgage obligations	1	9,519		(11)		0		0		9,519		(11)

Single issuer trust preferred securities issued by banks and insurers	1	0		0		488		(1)		488		(1)
Pooled trust preferred securities issued by banks and insurers	1	0		0		1,064		(348)		1,064		(348)

Total impaired available for sale securities	15	$	221,563	$	(6,153)	$	1,552	$	(349)	$	223,115	$	(6,502)

	December 31, 2020
		Less than 12 months				12 months or longer				Total
	# of holdings	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)

Agency mortgage-backed securities	3	437		(1)		0		0		437		(1)
Agency collateralized mortgage obligations	2	23,323		(87)		0		0		23,323		(87)

Single issuer trust preferred securities issued by banks and insurers	1	488		(1)		0		0		488		(1)
Pooled trust preferred securities issued by banks and insurers	1	0		0		1,056		(373)		1,056		(373)

Total impaired available for sale securities	7	$	24,248	$	(89)	$	1,056	$	(373)	$	25,304	$	(462)

The Company does not intend to sell these investments and has determined, based upon available evidence, that it is more likely than not that the Company will not be required to sell each security before the recovery of its amortized cost basis. In addition, management does not believe that any of the securities are impaired due to reasons of credit quality. As a result, the Company did not recognize ~~an allowance~~a provision for credit losses on these investments ~~during~~for the three months ended March 31, 2021 and 2020. The Company made this determination by reviewing various qualitative and quantitative factors regarding each investment category, such as current market conditions, extent and nature of changes in fair value, issuer rating changes and trends, volatility of earnings, and current analysts’ evaluations.

As a result of the Company’s review of these qualitative and quantitative factors, the causes of the impairments listed in the table above by category ~~are~~were as follows at March 31, ~~2020:~~

•

~~Agency Mortgage-Backed Securities:~~ These portfolios have contractual terms that generally do not permit the issuer to settle the securities at a price less than the current par value of the investment. The decline in market value of these securities 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.


•	~~Single Issuer Trust Preferred Securities:~~ This portfolio consists of one security, which is investment grade. The unrealized loss on this security is attributable to the illiquid nature of the trust preferred market in the current economic environment. Management evaluates various financial metrics for the issuers, including regulatory capital ratios of the issuers.

•

~~Pooled Trust Preferred Securities:~~ This portfolio consists of one below investment grade security which is performing. The unrealized loss on this security is attributable to the illiquid nature of the trust preferred market in the current economic and regulatory environment. Management evaluates collateral credit and instrument structure, including current and expected deferral and default rates and timing. In addition, discount rates are determined by evaluating comparable spreads observed currently in the market for similar instruments.

2021:

•U.S. Government Agency Securities, Agency Mortgage-Backed Securities and Agency Collateralized Mortgage Obligations: These portfolios have contractual terms that generally do not permit the issuer to settle the securities at a price less than the current par value of the investment. The decline in market value of these securities 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.

•Single Issuer Trust Preferred Securities: This portfolio consists of one security, which is investment grade. The unrealized loss on this security is attributable to the illiquid nature of the trust preferred market in the current economic environment. Management evaluates various financial metrics for the issuer, including regulatory capital ratios of the issuer.

•Pooled Trust Preferred Securities: This portfolio consists of one below investment grade security which is performing. The unrealized loss on this security is attributable to the illiquid nature of the trust preferred market in the current economic and regulatory environment. Management evaluates collateral credit and instrument

Table of Contents

structure, including current and expected deferral and default rates and timing. In addition, discount rates are determined by evaluating comparable spreads observed currently in the market for similar instruments.

Held to Maturity Securities

The following table summarizes the amortized cost, fair value and allowance for credit losses of held to maturity securities and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive ~~income(loss)~~income (loss) as of the dates indicated:

March 31, 2020 December 31, 2019
Amortized
Cost Gross
Unrealized
Gains Gross Unrealized
Losses Allowance for credit losses Fair
Value Amortized
Cost Gross
Unrealized
Gains Gross Unrealized
Losses Fair
Value
(Dollars in thousands)
U.S. government agency securities $ —
$ —
$ —
$ —
$ —
$ 12,874
$ 123
$ —
$ 12,997
U.S. Treasury securities 4,029
110
—
—
4,139
4,032
21
—
4,053
Agency mortgage-backed securities 463,632
18,864
(133 ) —
482,363
397,414
8,445
(57 ) 405,802
Agency collateralized mortgage obligations 277,921
11,981
—
—
289,902
293,662
4,501
(849 ) 297,314
Single issuer trust preferred securities issued by banks 1,500
—
(10 ) —
1,490
1,500
—
(10 ) 1,490
Small business administration pooled securities 30,716
745
—
—
31,461
31,324
338
(55 ) 31,607
Total held to maturity securities $ 777,798
$ 31,700
$ (143 ) $ —
$ 809,355
$ 740,806
$ 13,428
$ (971 ) $ 753,263


	March 31, 2021										December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for credit losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for credit losses		Fair Value
	(Dollars in thousands)

U.S. Treasury securities	$	4,014	$	43	$	0	$	0	$	4,057	$	4,017	$	60	$	0	$	0	$	4,077
Agency mortgage-backed securities	417,811		13,069		(4,252)		0		426,628		356,085		18,036		0		0		374,121
Agency collateralized mortgage obligations	355,686		7,474		(2,158)		0		361,002		335,993		8,466		(340)		0		344,119

Single issuer trust preferred securities issued by banks	1,500		8		0		0		1,508		1,500		0		(2)		0		1,498
Small business administration pooled securities	26,518		717		0		0		27,235		26,917		1,445		0		0		28,362

Total held to maturity securities	$	805,529	$	21,311	$	(6,410)	$	0	$	820,430	$	724,512	$	28,007	$	(342)	$	0	$	752,177

~~As noted in the table above, the~~The Company did not record ~~an allowance~~a provision for estimated credit losses on any held to maturity securities during the three months ended March 31, 2021 and 2020. Excluded from the table above is accrued interest on held to maturity securities of ~~$2.0~~$1.6 million and $1.5 million as of March 31, 2021 and December 31, 2020, respectively, which is included within ~~Other Assets~~other assets on the consolidated balance ~~sheet.~~sheets. Additionally, the Company did not record any write-offs of accrued interest income on held to maturity securities during the three months ended March 31, 2021 and 2020. NoFurthermore, 0 securities held by the Company were delinquent on contractual payments ~~as of March 31, 2020,~~ nor were any securities placed on non-accrual status ~~during the three months then ended.~~as of March 31, 2021 and December 31, 2020.

When securities are sold, the adjusted cost of the specific security sold is used to compute the gain or loss on the sale. The Company had no sales of held to maturity securities during the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, and therefore no gains or losses were realized during the periods presented.

The Company monitors the credit quality of held to maturity securities through the use of credit ratings. Credit ratings are monitored by the Company on at least a quarterly basis. As of March 31, ~~2020,~~2021, all held to maturity securities held by the Company were rated investment grade or higher.

Table of Contents

The actual maturities of certain available for sale or held to maturity securities may differ from the contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. A schedule of the contractual maturities of available for sale and held to maturity securities as of March 31, ~~2020~~2021 is presented below:


	Due in one year or less				Due after one year to five years				Due after five to ten years				Due after ten years				Total					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			Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)																					(Dollars in thousands)
Available for sale securities																					Available for sale securities
U.S. government agency securities	$	—	$	—	$	10,002	$	10,351	$	12,472	$	13,941	$	—	$	—	$	22,474	$	24,292	U.S. government agency securities	$	10,001	$	10,180	$	0	$	0	$	159,090	$	157,876	$	0	$	0	$	169,091	$	168,056
Agency mortgage-backed securities	—		—		72,092		75,268		41,885		44,607		133,698		138,909		247,675		258,784		Agency mortgage-backed securities	0		0		80,169		82,809		98,747		96,914		107,596		110,452		286,512		290,175
Agency collateralized mortgage obligations	—		—		—		—		—		—		83,183		87,210		83,183		87,210		Agency collateralized mortgage obligations	0		0		0		0		0		0		78,952		81,629		78,952		81,629

State, county, and municipal securities	250		250		687		691		189		203		—		—		1,126		1,144		State, county, and municipal securities	350		351		0		0		190		204		0		0		540		555
Single issuer trust preferred securities issued by banks	—		—		—		—		—		—		489		436		489		436		Single issuer trust preferred securities issued by banks	0		0		0		0		0		0		489		488		489		488
Pooled trust preferred securities issued by banks and insurers	—		—		—		—		—		—		1,443		1,009		1,443		1,009		Pooled trust preferred securities issued by banks and insurers	0		0		0		0		0		0		1,412		1,064		1,412		1,064
Small business administration pooled securities	—		—		—		—		—		—		63,062		64,421		63,062		64,421		Small business administration pooled securities	0		0		0		0		0		0		56,171		58,246		56,171		58,246
Total available for sale securities	$	250	$	250	$	82,781	$	86,310	$	54,546	$	58,751	$	281,875	$	291,985	$	419,452	$	437,296	Total available for sale securities	$	10,351	$	10,531	$	80,169	$	82,809	$	258,027	$	254,994	$	244,620	$	251,879	$	593,167	$	600,213
Held to maturity securities																					Held to maturity securities

U.S. Treasury securities	$	—	$	—	$	4,029	$	4,139	$	—	$	—	$	—	$	—	$	4,029	$	4,139	U.S. Treasury securities	$	4,014	$	4,057	$	0	$	0	$	0	$	0	$	0	$	0	$	4,014	$	4,057
Agency mortgage-backed securities	8,619		8,715		1,902		1,951		48,123		50,345		404,988		421,352		463,632		482,363		Agency mortgage-backed securities	0		0		4,614		4,869		128,958		127,901		284,239		293,858		417,811		426,628
Agency collateralized mortgage obligations	—		—		—		—		—		—		277,921		289,902		277,921		289,902		Agency collateralized mortgage obligations	0		0		0		0		0		0		355,686		361,002		355,686		361,002

Single issuer trust preferred securities issued by banks	—		—		—		—		1,500		1,490		—		—		1,500		1,490		Single issuer trust preferred securities issued by banks	0		0		0		0		1,500		1,508		0		0		1,500		1,508
Small business administration pooled securities	—		—		—		—		—		—		30,716		31,461		30,716		31,461		Small business administration pooled securities	0		0		0		0		0		0		26,518		27,235		26,518		27,235

Total held to maturity securities	$	8,619	$	8,715	$	5,931	$	6,090	$	49,623	$	51,835	$	713,625	$	742,715	$	777,798	$	809,355	Total held to maturity securities	$	4,014	$	4,057	$	4,614	$	4,869	$	130,458	$	129,409	$	666,443	$	682,095	$	805,529	$	820,430
Total	$	8,869	$	8,965	$	88,712	$	92,400	$	104,169	$	110,586	$	995,500	$	1,034,700	$	1,197,250	$	1,246,651	Total	$	14,365	$	14,588	$	84,783	$	87,678	$	388,485	$	384,403	$	911,063	$	933,974	$	1,398,696	$	1,420,643

Included in the table above are ~~$4.1~~$3.3 million of callable securities at March 31, ~~2020.~~2021.

The carrying value of securities pledged to secure public funds, trust deposits, and for other purposes, as required or permitted by law, was ~~$459.5~~$420.2 million and ~~$375.5~~$419.6 million at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

At March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had 0 investments in obligations of individual states, counties, or municipalities which exceeded 10% of consolidated stockholders’ equity.

Under previous accounting guidance, the Company reviewed both available for sale and held to maturity securities for other-than-temporary-impairment ("OTTI"). However, in accordance with the newly adopted CECL standard, the Company now utilizes separate impairment models for held to maturity and available for sale securities for purposes of estimating credit losses. The following table shows the gross unrealized losses and fair value of the Company’s investments in an unrealized loss position, which the Company had not deemed to be OTTI, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2019:

December 31, 2019
Less than 12 months 12 months or longer Total

# of
holdings

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

Fair
Value

Unrealized
Losses
(Dollars in thousands)
Agency mortgage-backed securities 12
34,009
(59 ) 243
(2 ) 34,252
(61 )
Agency collateralized mortgage obligations 17
48,476
(215 ) 37,382
(653 ) 85,858
(868 )
Single issuer trust preferred securities issued by banks and insurers 1
—
—
1,490
(10 ) 1,490
(10 )
Pooled trust preferred securities issued by banks and insurers 1
—
—
1,114
(374 ) 1,114
(374 )
Small business administration pooled securities 1
7,349
(55 ) —
—
7,349
(55 )
Total temporarily impaired securities 32
$ 89,834
$ (329 ) $ 40,229
$ (1,039 ) $ 130,063
$ (1,368 )

The Company did not intend to sell these investments and therefore determined, based upon available evidence, that it was more likely than not that the Company would not be required to sell each security before the recovery

Table of its amortized cost basis. As a result, the Company did not consider these investments to be OTTI and accordingly, there was no OTTI recorded and no cumulative credit related component of OTTI for the year ended December 31, 2019.Contents

NOTE 4 - LOANS, ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

~~Loans Held for Sale~~

The Bank primarily classifies new residential real estate mortgage loans as held for sale based on intent, which is determined when loans are underwritten. Residential real estate mortgage loans not designated as held for sale are retained based upon available liquidity, for interest rate risk management and other business purposes.

The Company has elected the fair value option to account for originated closed loans intended for sale. Accordingly, changes in fair value relating to loans intended for sale are recorded in earnings and are offset by changes in fair value relating to interest rate lock commitments and forward sales commitments. Gains and losses on residential loan sales (sales proceeds minus carrying amount) are recorded in mortgage banking income. Upfront costs and fees related to items for which the fair value option is elected are recognized in earnings as incurred and are not deferred.

~~Loans~~

Loans that the Company has the intent and ability to hold until maturity or payoff are carried at amortized cost (net of the allowance for credit losses). Amortized cost is the principal amount outstanding, adjusted by partial charge-offs and net of deferred loan costs or fees. For originated loans, loan fees and certain direct origination costs are deferred and amortized into interest income over the expected term of the loan using the level-yield method. When a loan is paid off, the unamortized portion is recognized in interest income. Interest income on loans is accrued based upon the daily principal amount outstanding except for loans on nonaccrual status.

As a general rule, loans more than 90 days past due with respect to principal or interest are classified as nonaccrual loans, or sooner if management considers such action to be prudent. However, loans that are more than ~~90 days~~ past due may be kept on an accruing status if the loan is well secured and in the process of collection. The Company may also put a junior lien mortgage on nonaccrual status as a result of delinquency with respect to the first position, which is held by the Bank or by another financial institution, while the junior lien is currently performing. Income accruals are suspended on all nonaccrual loans in a timely manner and all previously accrued and uncollected interest is reversed against current income. A loan remains on nonaccrual status until it becomes current with respect to principal and interest (and in certain instances remains current for up to six months), the loan is liquidated, or when the loan is determined to be uncollectible and is charged-off against the allowance for credit losses. When doubt exists as to the collectability of a loan, any payments received are applied to reduce the amortized cost of the loan to the

extent necessary to eliminate such doubt. For all loan portfolios, a charge-off occurs when the Company determines that a specific loan, or portion thereof, is uncollectible. This determination is made based on management's review of specific facts and circumstances of the individual loan, including assessing the viability of the customer’s business or project as a going concern, the expected cash flows to repay the loan, the value of the collateral and the ability and willingness of any guarantors to perform.

~~Allowance for Credit Losses - Loans Held for Investment~~

The allowance for credit losses is established based upon the Company's current estimate of expected lifetime credit losses on loans measured at amortized cost. Loan losses are charged against the allowance when Management's assessments confirm that the Company will not collect the full amortized cost basis of a loan. Subsequent recoveries, if any, are credited to the allowance.

Under the CECL methodology, the Company estimates credit losses for financial assets on a collective basis for loans sharing similar risk characteristics 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. The quantitative model utilizes a factor based approach to estimate expected credit losses using Probability of Default ("PD"), Loss Given Default ("LGD") and Exposure at Default ("EAD"), which are derived from internal historical default and loss experience. The 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 historical long-run average. Management has determined a reasonable and supportable period of 12 months, and a straight line reversion period of 6 months, to be appropriate for purposes of estimating expected credit losses. The qualitative risk factors impacting the expected risk of loss within the portfolio include the following:

~~Lending policies and procedures~~

~~Economic and business conditions~~

~~Nature and volume of loans~~

~~Changes in management~~

~~Changes in credit quality~~

~~Changes in loan review system~~

~~Changes to underlying collateral values~~

~~Concentrations of credit risk~~

~~Other external factors~~

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 will use either a discounted cash flow (“DCF”) approach or a fair value of collateral approach. The latter approach will be used for loans deemed to be collateral dependent or when foreclosure is probable.

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 nonaccrual loans, accrued interest receivable is typically written off when loans reach 90 days past due and are placed on nonaccrual status.

In the ordinary course of business, the Company enters into commitments to extend credit, commercial letters of 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 allowance for credit losses. The reserve for unfunded lending commitments is included in other liabilities on the consolidated balance sheet.

~~Acquired Loans~~

Prior to its adoption of CECL, and under legacy GAAP, the Company maintained a portfolio of acquired loans, which, at acquisition, were recorded at fair value with no carryover of the allowance for loan losses. Acquired loans were also reviewed to determine if the loan had evidence of deterioration in credit quality and also if it was probable, at acquisition, that all contractually required payments would not be collected. Loans meeting such criteria were deemed to be purchased credit impaired ("PCI") loans. Under the accounting model for PCI loans, the excess of cash flows expected to be collected over the carrying amount of the loans, referred to as the "accretable yield", was accreted into interest income over the life of the loans using the effective yield method. Accordingly, PCI loans were not subject to classification as nonaccrual in the same manner as originated loans. Rather, acquired PCI loans were generally considered to be accruing loans because their interest income related to the accretable yield recognized and not to contractual interest payments at the loan level. The difference between contractually required principal and interest payments and the cash flows expected to be collected, referred to as the "nonaccretable difference", included estimates of both the impact of prepayments and future credit losses expected to be incurred over the life of the loans.

Under the CECL standard, the concept of PCI assets was effectively replaced with purchased credit deteriorated ("PCD") assets, the balances of which should be treated in a manner consistent with loans held for investment for purposes of estimating an allowance for credit losses. As a result, upon the Company's adoption of CECL on January 1, 2020, loan balances previously classified as PCI assets were re-classified as PCD assets and will be prospectively accounted for in accordance with the standard. See ~~Note 2 -Recent Accounting Standards Updates~~ ~~for further discussion surrounding the day one impact associated with adoption of CECL as it relates to PCI assets.~~

Loans Held for Investment and Allowance for Credit Losses

The following table summarizes the change in allowance for credit losses by loan category, and bifurcates the amount of loans allocated to each loan category for the period indicated:


	Three Months Ended March 31, 2021
	(Dollars in thousands)
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Residential Real Estate		Home Equity		Other Consumer		Total
Allowance for credit losses
Beginning balance	$	21,086	$	45,009	$	5,397	$	5,095	$	14,275	$	22,060	$	470	$	113,392


Charge-offs	(3,331)		0		0		(66)		0		0		(289)		(3,686)
Recoveries	64		57		0		11		1		13		197		343
Provision for credit loss expense	2,388		(718)		(129)		(1,419)		(1,320)		(1,357)		55		(2,500)
Ending balance (1)	$	20,207	$	44,348	$	5,268	$	3,621	$	12,956	$	20,716	$	433	$	107,549

	Three Months Ended March 31, 2020
	(Dollars in thousands)
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Residential Real Estate		Home Equity		Other Consumer		Total
Allowance for credit losses
Beginning balance, pre adoption of ASU 2016-13	$	17,594	$	32,935	$	6,053	$	1,746	$	3,440	$	5,576	$	396	$	67,740
Cumulative effect accounting adjustment (2)	(1,984)		(13,048)		(3,652)		495		9,828		7,012		212		(1,137)
Cumulative effect accounting adjustment (3)	49		337		0		0		423		319		29		1,157
Charge-offs	0		0		0		(109)		0		(138)		(487)		(734)
Recoveries	42		0		0		3		1		58		246		350
Provision for credit loss expense	5,948		9,274		1,346		1,694		1,155		5,083		500		25,000
Ending balance (1)	$	21,649	$	29,498	$	3,747	$	3,829	$	14,847	$	17,910	$	896	$	92,376

Three Months Ended March 31, 2020
(Dollars in thousands)
Commercial and
Industrial Commercial
Real Estate Commercial
Construction Small
Business Residential
Real Estate
Home Equity Other Consumer Total
Allowance for credit losses
Beginning balance, pre adoption of Topic 326 $ 17,594
$ 32,935
$ 6,053
$ 1,746
$ 3,440
$ 5,576
$ 396
$ 67,740
Cumulative effect accounting adjustment (1) (1,984 ) (13,048 ) (3,652 ) 495
9,828
7,012
212
(1,137 )
Cumulative effect accounting adjustment (2) 49
337
—
—
423
319
29
1,157
Charge-offs —
—
—
109
—
138
487
734
Recoveries 42
—
—
3
1
58
246
350
Provision for credit loss expense 5,948
9,274
1,346
1,694
1,155
5,083
500
25,000
Ending balance (3) $ 21,649
$ 29,498
$ 3,747
$ 3,829
$ 14,847
$ 17,910
$ 896
$ 92,376

(1)Balances of accrued interest receivable excluded from amortized cost and the calculation of allowance for credit losses amounted to $33.4 million and $25.9 million as of March 31, 2021 and March 31, 2020, respectively.


~~(1)~~	Represents adjustment needed to reflect the cumulative day one impact pursuant to the Company's adoption of Accounting Standards Update 2016-13. The adjustment represents a $1.1 million decrease to the allowance attributable to the change in accounting methodology for estimating the allowance for credit losses resulting from the Company's adoption of the standard.


~~(2)~~	Represents adjustment needed to reflect the day one re-class of the Company's PCI loan balances to PCD and the associated gross-up, pursuant to the Company's adoption of Accounting Standards Update 2016-13. The adjustment represents a $1.2 million increase to the allowance resulting from the day one re-class.


~~(3)~~	~~Balances of accrued interest receivable excluded from amortized cost and the calculation of allowance for credit losses amounted to $25.9 million as of March 31, 2020.~~

(2)Represents adjustment needed to reflect the cumulative day one impact pursuant to the Company's adoption of Accounting Standards Update 2016-13. The adjustment represents a $1.1 million decrease to the allowance attributable to the change in accounting methodology for estimating the allowance for credit losses resulting from the Company's adoption of the standard.

(3)Represents adjustment needed to reflect the day one reclassification of the Company's PCI loan balances to PCD and the associated gross-up, pursuant to the Company's adoption of Accounting Standards Update 2016-13. The adjustment represents a $1.2 million increase to the allowance resulting from the day one reclassification.

The balance of allowance for credit losses of ~~$92.4~~$107.5 million as of March 31, ~~2020,~~2021 represents ~~an increase~~a decrease of ~~$24.6~~$5.8 million, or ~~36.3%, in comparison~~5.2% compared to ~~the implementation balances at January 1,~~December 31, 2020. ~~This increase~~The decrease in the allowance ~~during~~was driven primarily by $3.3 million of charge-offs and $2.5 million of negative provision. The negative provision reflects improvements in asset quality metrics and overall macro-economic assumptions, as well as an overall reduction in loan balances for the first quarter was primarily driven by forecasted credit deterioration due to the ongoing COVID-19 pandemic. The model applies a reasonable and supportable forecast period of one year, with a reversion period of six months. This forecast was adjusted to use a more severe outlook at March 31, 2020 as compared to the baseline forecast that was used to calculate opening balances on January 1, 2020.

~~In addition, social distancing restrictions have led to a decline in consumer spending and a steep rise in unemployment, especially within certain industries.~~ quarter. While management is unable to know with certainty the direct, indirect, and future impacts of the COVID-19 pandemic, it is expected itthat the pandemic will have a material adverse impact on ~~many~~future losses across a broad range of ~~the Company's~~ loan ~~customers.~~segments. As such, the ~~provision amounts were also qualitatively adjusted~~allowance for credit losses as of March 31, 2021 reflects increased reserve allocations to ~~factor~~loan segments that are considered to have elevated loss exposure associated with the COVID-19 pandemic in comparison to March 31, 2020. These loan segments primarily include commercial relationships within industries that are subject to mandated closures and capacity limits that will potentially impede the borrowers’ ability to make loan payments, including loans in the ~~anticipated impact of the COVID-19 pandemic. Management reviewed relationships which may be deemed "at risk" within industries expected to be impacted such as Education &~~following industry sections: Accommodations, Food Services, Retail Trade, Recreation and Entertainment, and Other Services ~~Hospital & Health Care, Hospitality & Food Service, Motor Vehicles & Parts Dealers, Recreation & Entertainment, Retail- Good~~ (excluding ~~food) and Transportation sectors. The provision~~Public Administration). In addition to these industry exposures, additional risk of loss was ~~qualitatively adjusted upward~~attributable to ~~ensure coverage for~~non-owner occupied real estate borrowers with significant retail

Table of Contents

tenant exposure, as well as home equity loans within a junior lien position. Leveraging actual historical loss given default (LGD) rates combined with stressing of assumptions over probability of default rates over these ~~"at risk" relationships as a result of this review.~~higher risk segments, qualitative adjustments were made to the initially model-driven calculated loss reserves.

For the purpose of estimating the allowance for credit losses, management segregated the loan portfolio into the portfolio segments detailed in the above tables. Each of these loan categories possesses unique risk characteristics that are considered when determining the appropriate level of allowance for each segment. Some of the ~~risk~~ characteristics unique to each loan category include:

Commercial Portfolio

•

•Commercial and Industrial: Loans in this category consist of revolving and term loan obligations extended to business and corporate enterprises for the purpose of financing working capital and/or capital investment. Collateral generally consists of pledges of business assets including, but not limited to: accounts receivable, inventory, plant and equipment, or real estate, if applicable. Repayment sources consist of primarily, operating cash flow, and secondarily, liquidation of assets.

•Commercial Real Estate: Loans in this category consist of mortgage loans to finance investment in real property such as multi-family residential, commercial/retail, office, industrial, hotels, educational and healthcare facilities and other specific use properties. Loans are typically written with amortizing payment structures. Collateral values are determined based upon third party appraisals and evaluations. Loan to value ratios at origination are governed by established policy and regulatory guidelines. Repayment sources consist of, primarily, cash flow from operating leases and rents and, secondarily, liquidation of assets.

•Commercial Construction: Loans in this category consist of short-term construction loans, revolving and nonrevolving credit lines and construction/permanent loans to finance the acquisition, development and construction or rehabilitation of real property. Project types include residential land development, 1-4 family, condominium, and multi-family home construction, commercial/retail, office, industrial, hotels, educational and healthcare facilities and other specific use properties. Loans may be written with nonamortizing or hybrid payment structures depending upon the type of project. Collateral values are determined based upon third party appraisals and evaluations. Loan to value ratios at origination are governed by established policy and regulatory guidelines. Repayment sources vary depending upon the type of project and may consist of sale or lease of units, operating cash flows or liquidation of other assets.

•: Loans in this category consist of revolving and term loan obligations extended to business and corporate enterprises for the purpose of financing working capital and/or capital investment. Collateral generally consists of pledges of business assets including, but not limited to: accounts receivable, inventory, plant and equipment, or real estate, if applicable. Repayment sources consist of primarily, operating cash flow, and secondarily, liquidation of assets.

•

~~Commercial Real Estate~~: Loans in this category consist of mortgage loans to finance investment in real property such as multi-family residential, commercial/retail, office, industrial, hotels, educational and healthcare facilities and other specific use properties. Loans are typically written with amortizing payment structures. Collateral values are determined based upon third party appraisals and evaluations. Loan to value ratios at origination are governed by established policy and regulatory guidelines. Repayment sources consist of, primarily, cash flow from operating leases and rents and, secondarily, liquidation of assets.

•

~~Commercial Construction~~: Loans in this category consist of short-term construction loans, revolving and nonrevolving credit lines and construction/permanent loans to finance the acquisition, development and construction or rehabilitation of real property. Project types include residential land development, 1-4 family, condominium, and multi-family home construction, commercial/retail, office, industrial, hotels, educational and healthcare facilities and other specific use properties. Loans may be written with nonamortizing or hybrid payment structures depending upon the type of project. Collateral values are determined based upon third party appraisals and evaluations. Loan to value ratios at origination are governed by established policy and regulatory guidelines. Repayment sources vary depending upon the type of project and may consist of sale or lease of units, operating cash flows or liquidation of other assets.

•

Small Business: Loans in this category consist of revolving, term loan and mortgage obligations extended to sole proprietors and small businesses for purposes of financing working capital and/or capital investment. Collateral generally consists of pledges of business assets including, but not limited to, accounts receivable, inventory, plant and equipment, or real estate if applicable. Repayment sources consist primarily of operating cash flows and, secondarily, liquidation of assets.

For the commercial portfolio it is the Company’s policy to obtain personal guarantees for payment from individuals holding material ownership interests in the borrowing entities.

Consumer Portfolio

•

•Residential Real Estate: Residential mortgage loans held in the Company’s portfolio are made to borrowers who demonstrate the ability to make scheduled payments with full consideration to underwriting factors such as current and expected income, employment status, current assets, other financial resources, credit history and the value of the collateral. Collateral consists of mortgage liens on 1-4 family residential properties. Residential mortgage loans also include loans to construct owner-occupied 1-4 family residential properties.

•: Residential mortgage loans held in the Company’s portfolio are made to borrowers who demonstrate the ability to make scheduled payments with full consideration to underwriting factors such as current and expected income, employment status, current assets, other financial resources, credit history and the value of the collateral. Collateral consists of mortgage liens on 1-4 family residential properties. Residential mortgage loans also include loans to construct owner-occupied 1-4 family residential properties.

•

Home Equity: Home equity loans and credit lines are made to qualified individuals and are primarily secured by senior or junior mortgage liens on owner-occupied 1-4 family homes, condominiums or vacation homes. Each home equity loan has a fixed rate and is billed in equal payments comprised of principal and interest. The majority of home equity lines of credit have a variable rate and are billed in interest-only payments during the draw period. At the end of the draw period, the home equity line of credit is billed as a percentage of the then outstanding principal balance plus all accrued interest over a predetermined repayment period, as set forth in the note. Additionally, the Company has the option of renewing each line of credit for additional draw periods. Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan to value ratios within established policy guidelines.

•Other Consumer: Other consumer loan products include personal lines of credit and amortizing loans made to qualified individuals for various purposes such as education, debt consolidation, personal expenses or overdraft protection. Borrower ~~qualifications include favorable credit history combined with supportive income requirements and combined loan to value ratios within established policy guidelines.~~


•	~~Other Consumer:~~ Other consumer loan products include personal lines of credit and amortizing loans made to qualified individuals for various purposes such as education, debt consolidation, personal expenses or overdraft protection. Borrower

qualifications include favorable credit history combined with supportive income and collateral requirements within established policy guidelines. These loans may be secured or unsecured.

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Credit Quality

The Company continually monitors the asset quality of the loan portfolio using all available information. Based on this information, loans demonstrating certain payment issues or other weaknesses may be categorized as adversely risk-rated, delinquent, nonperforming and/or put on nonaccrual status. Additionally, in the course of resolving such loans, the Company may choose to restructure the contractual terms of certain loans to match the borrower’s ability to repay the loan based on their current financial condition.

The Company reviews numerous credit quality indicators when assessing the risk in its loan portfolio. For the commercial portfolio, the Company utilizes a 10-point credit risk-rating system, which assigns a risk-grade to each loan obligation based on a number of quantitative and qualitative factors associated with a commercial or small business loan transaction. Factors considered include industry and market conditions, position within the industry, earnings trends, operating cash flow, asset/liability values, debt capacity, guarantor strength, management and controls, financial reporting, collateral, and other considerations. The ~~risk-ratings~~risk-rating categories for the commercial portfolio are defined as follows:

•

•Pass: Risk-rating “1” through “6” comprises of loans ranging from ‘Substantially Risk Free’ which indicates borrowers are of unquestioned credit standing and the pinnacle of credit quality, well established companies with a very strong financial condition, and loans fully secured by cash collateral, through ‘Acceptable Risk’, which indicates borrowers may exhibit declining earnings, strained cash flow, increasing or above average leverage and/or weakening market fundamentals that indicate below average asset quality, margins and market share. Collateral coverage is protective.

•Potential Weakness: Borrowers exhibit potential credit weaknesses or downward trends deserving management’s close attention. If not checked or corrected, these trends will weaken the Company’s asset and position. While potentially weak, currently these borrowers are marginally acceptable; no loss of principal or interest is envisioned.

•Definite Weakness Loss Unlikely: Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt. Loans may be inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned. However, there is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Collateral coverage may be inadequate to cover the principal obligation.

•Partial Loss Probable: Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt with the added provision that the weaknesses make collection of the debt in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Serious problems exist to the point where partial loss of principal is likely.

•Risk-rating grades “1” through “6” comprise those loans ranging from ‘Substantially Risk Free’ which indicates borrowers are of unquestioned credit standing and the pinnacle of credit quality, well established companies with a very strong financial condition, and loans fully secured by cash collateral, through ‘Acceptable Risk’, which indicates borrowers may exhibit declining earnings, strained cash flow, increasing or above average leverage and/or weakening market fundamentals that indicate below average asset quality, margins and market share. Collateral coverage is protective.


•	~~Potential Weakness:~~ Borrowers exhibit potential credit weaknesses or downward trends deserving management’s close attention. If not checked or corrected, these trends will weaken the Company’s asset and position. While potentially weak, currently these borrowers are marginally acceptable; no loss of principal or interest is envisioned.

•

~~Definite Weakness Loss Unlikely:~~ Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt. Loans may be inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned. However, there is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Collateral coverage may be inadequate to cover the principal obligation.


•	~~Partial Loss Probable:~~ Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt with the added provision that the weaknesses make collection of the debt in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Serious problems exist to the point where partial loss of principal is likely.


•	Definite Loss: Borrowers deemed incapable of repayment. Loans to such borrowers are considered uncollectible and of such little value that continuation as active assets of the Company is not warranted.

The credit quality of the commercial loan portfolio is actively monitored and any changes in credit quality are reflected in risk-rating changes. Risk-ratings are assigned or reviewed for all new loans, when advancing significant additions to existing relationships (over $50,000), at least quarterly for all actively managed loans, and any time a significant event occurs, including at renewal of the loan.

The Company utilizes a comprehensive, continuous strategy for evaluating and monitoring commercial credit quality. Initially, credit quality is determined at loan origination and is re-evaluated when subsequent actions, such as renewals, modifications or reviews, occur. Actively managed commercial borrowers are required to provide updated financial information at least annually which is carefully evaluated for any changes in credit quality. Larger loan relationships are subject to a full annual credit review by an experienced credit ~~analysis group,~~professionals, while continuous portfolio monitoring techniques are employed to evaluate changes in credit quality for smaller loan relationships. Any changes in credit quality are reflected in risk-rating changes. Additionally, the Company retains an independent loan review firm to evaluate the credit quality of the commercial loan portfolio. The independent loan review process achieves significant penetration into the commercial loan portfolio and reports the results of these reviews to the Audit Committee of the Board of Directors on a quarterly basis. Commercial loan modifications granted by the Company allowing payment deferrals for qualifying borrowers in accordance with the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") have been assessed for potential downgrades of risk ratings.

For the Company’s consumer portfolio, the quality of the loan is best indicated by the repayment performance of an individual borrower. As a result, for this portfolio the Company utilizes a pass/default risk-rating system, based on an age analysis (i.e., days past due) associated with each consumer loan. Under this structure, consumer loans less than 90 days past due are assigned a "pass" rating, while any consumer loans ~~greater than~~ 90 days or more past due are assigned a "default" rating. Consumer loan modifications granted by the Company allowing payment deferrals for qualifying borrowers in accordance with the CARES Act have not been categorized as delinquent loans.

Table of Contents

The following table details the amortized cost balances of the Company's loan portfolios, presented by credit quality indicator and origination year as of the dates indicated below:


	March 31, 2021
	2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving converted to Term		Total
	(Dollars in thousands)
Commercial and industrial
Pass (1)	$	420,682	$	724,577	$	127,454	$	88,970	$	25,737	$	27,123	$	589,448	$	—	$	2,003,991
Potential weakness	3,424		14,991		2,636		2,148		4,288		3,205		12,252		—		42,944
Definite weakness - loss unlikely	17,912		663		1,116		1,327		2,768		482		6,927		0		31,195
Partial loss probable	0		0		0		0		0		143		8,398		0		8,541
Definite loss	0		0		0		0		0		0		0		0		—
Total commercial and industrial	$	442,018	$	740,231	$	131,206	$	92,445	$	32,793	$	30,953	$	617,025	$	—	$	2,086,671




Commercial real estate
Pass	$	214,573	$	1,043,424	$	687,959	$	432,728	$	524,194	$	966,331	$	16,196	$	—	$	3,885,405
Potential weakness	390		29,218		53,849		31,274		18,981		86,160		13,612		0		233,484
Definite weakness - loss unlikely	3,590		22,536		3,754		3,474		9,892		15,482		0		0		58,728
Partial loss probable	0		0		0		0		0		0		0		0		0
Definite loss	0		0		0		0		0		0		0		0		0
Total commercial real estate	$	218,553	$	1,095,178	$	745,562	$	467,476	$	553,067	$	1,067,973	$	29,808	$	0	$	4,177,617




Commercial construction
Pass	$	28,323	$	239,954	$	142,076	$	28,189	$	23,313	$	6,628	$	19,934	$	—	$	488,417
Potential weakness	0		17,544		9,691		—		0		0		190		0		27,425
Definite weakness - loss unlikely	0		0		—		520		0		0		—		0		520
Partial loss probable	0		0		0		0		0		0		0		0		0
Definite loss	0		0		0		0		0		0		0		0		0
Total commercial construction	$	28,323	$	257,498	$	151,767	$	28,709	$	23,313	$	6,628	$	20,124	$	—	$	516,362




Small business
Pass	$	10,307	$	41,418	$	25,817	$	17,750	$	12,624	$	29,309	$	33,658	$	0	$	170,883
Potential weakness	0		—		389		204		10		202		634		0		1,439
Definite weakness - loss unlikely	0		677		51		59		17		301		758		0		1,863
Partial loss probable	0		0		0		0		0		0		26		0		26
Definite loss	0		0		0		0		0		0		0		0		0
Total small business	$	10,307	$	42,095	$	26,257	$	18,013	$	12,651	$	29,812	$	35,076	$	0	$	174,211




Residential real estate
Pass	$	80,657	$	212,891	$	126,359	$	133,150	$	130,580	$	554,848	$	0	$	0	$	1,238,485
Default	0		0		—		427		0		2,877		0		0		3,304

Total residential real estate	$	80,657	$	212,891	$	126,359	$	133,577	$	130,580	$	557,725	$	0	$	0	$	1,241,789




Home equity
Pass	$	23,583	$	77,497	$	51,398	$	46,648	$	48,132	$	140,376	$	636,881	$	1,762	$	1,026,277
Default	0		0		0		—		0		210		2,008		—		2,218

Total home equity	$	23,583	$	77,497	$	51,398	$	46,648	$	48,132	$	140,586	$	638,889	$	1,762	$	1,028,495




Other consumer
Pass	$	46	$	540	$	326	$	146	$	620	$	6,800	$	12,939	$	0	$	21,417

Table of Contents


Default	0		0		0		0		15		111		3		0		129

Total other consumer	$	46	$	540	$	326	$	146	$	635	$	6,911	$	12,942	$	0	$	21,546

Total	$	803,487	$	2,425,930	$	1,232,875	$	787,014	$	801,171	$	1,840,588	$	1,353,864	$	1,762	$	9,246,691


	March 31, 2020
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving converted to Term		Total
	(Dollars in thousands)
Commercial and industrial
Pass (1)	$	119,886	$	213,925	$	138,376	$	50,323	$	36,685	$	33,576	$	736,304	$	327	$	1,329,402
Potential weakness	362		5,432		1,489		4,909		725		697		21,780		50		35,444
Definite weakness - loss unlikely	495		2,128		26,006		5,589		2,604		1,575		44,932		0		83,329
Partial loss probable	0		0		0		0		0		49		0		0		49
Definite loss	0		0		0		0		0		0		0		0		—
Total commercial and industrial	$	120,743	$	221,485	$	165,871	$	60,821	$	40,014	$	35,897	$	803,016	$	377	$	1,448,224

Commercial real estate
Pass	$	260,217	$	943,205	$	586,125	$	651,335	$	468,824	$	945,248	$	48,056	$	2,987	$	3,905,997
Potential weakness	1,809		8,303		33,755		8,506		9,851		42,382		0		0		104,606
Definite weakness - loss unlikely	0		3,612		7,432		20,395		6,993		12,312		0		0		50,744
Partial loss probable	0		0		0		0		0		0		0		0		0
Definite loss	0		0		0		0		0		0		0		0		0
Total commercial real estate	$	262,026	$	955,120	$	627,312	$	680,236	$	485,668	$	999,942	$	48,056	$	2,987	$	4,061,347

Commercial construction
Pass	$	43,369	$	221,773	$	114,561	$	73,493	$	0	$	6,867	$	44,225	$	325	$	504,613
Potential weakness	0		554		347		19,044		0		0		347		0		20,292
Definite weakness - loss unlikely	0		0		1,887		0		0		0		346		0		2,233
Partial loss probable	0		0		0		0		0		0		0		0		0
Definite loss	0		0		0		0		0		0		0		0		0
Total commercial construction	$	43,369	$	222,327	$	116,795	$	92,537	$	0	$	6,867	$	44,918	$	325	$	527,138

Small business
Pass	$	8,414	$	31,651	$	25,184	$	17,848	$	17,594	$	26,734	$	47,109	$	0	$	174,534
Potential weakness	0		12		18		13		753		259		597		0		1,652
Definite weakness - loss unlikely	0		47		133		51		169		598		636		0		1,634
Partial loss probable	0		0		0		0		0		0		0		0		0
Definite loss	0		0		0		0		0		0		0		0		0
Total small business	$	8,414	$	31,710	$	25,335	$	17,912	$	18,516	$	27,591	$	48,342	$	0	$	177,820

Residential real estate
Pass	$	39,122	$	204,524	$	260,899	$	210,662	$	283,255	$	523,742	$	0	$	0	$	1,522,204
Default	0		0		427		435		0		5,350		0		0		6,212

Total residential real estate	$	39,122	$	204,524	$	261,326	$	211,097	$	283,255	$	529,092	$	0	$	0	$	1,528,416

Home equity
Pass	$	23,397	$	75,161	$	70,081	$	67,740	$	51,106	$	138,733	$	715,169	$	1,853	$	1,143,240
Default	0		0		0		18		0		579		2,372		61		3,030

Total home equity	$	23,397	$	75,161	$	70,081	$	67,758	$	51,106	$	139,312	$	717,541	$	1,914	$	1,146,270

Table of Contents



Other consumer
Pass	$	414	$	705	$	356	$	1,049	$	1,000	$	10,850	$	12,767	$	0	$	27,141
Default	0		0		0		19		0		39		16		0		74

Total other consumer	$	414	$	705	$	356	$	1,068	$	1,000	$	10,889	$	12,783	$	0	$	27,215

Total	$	497,485	$	1,711,032	$	1,267,076	$	1,131,429	$	879,559	$	1,749,590	$	1,674,656	$	5,603	$	8,916,430

(1)Loans originated as part of the Paycheck Protection Program ("PPP") established by the CARES Act are included within commercial and industrial under the 2021 and 2020 vintage year and "pass" category as these loans are 100% guaranteed by the U.S. Government. Outstanding PPP loans totaled $846.3 million as of March 31, ~~2020:~~

March 31, 2020
2020 2019 2018 2017 2016 Prior Revolving Loans Revolving converted to Term Total
(Dollars in thousands)
Commercial and
industrial

Pass $ 119,886
$ 213,925
$ 138,376
$ 50,323
$ 36,685
$ 33,576
$ 736,304
$ 327
$ 1,329,402
Potential weakness 362
5,432
1,489
4,909
725
697
21,780
50
35,444
Definite weakness - loss unlikely 495
2,128
26,006
5,589
2,604
1,575
44,932
—
83,329
Partial loss probable —
—
—
—
—
49
—
—
49
Definite loss —
—
—
—
—
—
—
—
—
Total commercial and industrial $ 120,743
$ 221,485
$ 165,871
$ 60,821
$ 40,014
$ 35,897
$ 803,016
$ 377
$ 1,448,224

Commercial real estate
Pass $ 260,217
$ 943,205
$ 586,125
$ 651,335
$ 468,824
$ 945,248
$ 48,056
$ 2,987
$ 3,905,997
Potential weakness 1,809
8,303
33,755
8,506
9,851
42,382
—
—
104,606
Definite weakness - loss unlikely —
3,612
7,432
20,395
6,993
12,312
—
—
50,744
Partial loss probable —
—
—
—
—
—
—
—
—
Definite loss —
—
—
—
—
—
—
—
—
Total commercial real estate $ 262,026
$ 955,120
$ 627,312
$ 680,236
$ 485,668
$ 999,942
$ 48,056
$ 2,987
$ 4,061,347

Commercial construction
Pass $ 43,369
$ 221,773
$ 114,561
$ 73,493
$ —
$ 6,867
$ 44,225
$ 325
$ 504,613
Potential weakness —
554
347
19,044
—
—
347
—
20,292
Definite weakness - loss unlikely —
—
1,887
—
—
—
346
—
2,233
Partial loss probable —
—
—
—
—
—
—
—
—
Definite loss —
—
—
—
—
—
—
—
—
Total commercial construction $ 43,369
$ 222,327
$ 116,795
$ 92,537
$ —
$ 6,867
$ 44,918
$ 325
$ 527,138

Small business
Pass $ 8,414
$ 31,651
$ 25,184
$ 17,848
$ 17,594
$ 26,734
$ 47,109
$ —
$ 174,534
Potential weakness —
12
18
13
753
259
597
—
1,652
Definite weakness - loss unlikely —
47
133
51
169
598
636
—
1,634
Partial loss probable —
—
—
—
—
—
—
—
—
Definite loss —
—
—
—
—
—
—
—
—
Total small business $ 8,414
$ 31,710
$ 25,335
$ 17,912
$ 18,516
$ 27,591
$ 48,342
$ —
$ 177,820

Residential real estate
Pass $ 39,122
$ 204,524
$ 260,899
$ 210,662
$ 283,255
$ 523,742
$ —
$ —
$ 1,522,204
Default —
—
427
435
—
5,350
—
—
6,212
Total residential real estate $ 39,122
$ 204,524
$ 261,326
$ 211,097
$ 283,255
$ 529,092
$ —
$ —
$ 1,528,416

Home equity
Pass $ 23,397
$ 75,161
$ 70,081
$ 67,740
$ 51,106
$ 138,733
$ 715,169
$ 1,853
$ 1,143,240
Default —
—
—
18
—
579
2,372
61
3,030
Total home equity $ 23,397
$ 75,161
$ 70,081
$ 67,758
$ 51,106
$ 139,312
$ 717,541
$ 1,914
$ 1,146,270

2021, including $506.3 million and $340.0 million originated in 2020 and 2021, respectively.

Other consumer
Pass $ 414
$ 705
$ 356
$ 1,049
$ 1,000
$ 10,850
$ 12,767
$ —
$ 27,141
Default —
—
—
19
—
39
16
—
74
Total other consumer $ 414
$ 705
$ 356
$ 1,068
$ 1,000
$ 10,889
$ 12,783
$ —
$ 27,215

Total $ 497,485
$ 1,711,032
$ 1,267,076
$ 1,131,429
$ 879,559
$ 1,749,590
$ 1,674,656
$ 5,603
$ 8,916,430

For the Company’s consumer portfolio, the quality of the loan is best indicated by the repayment performance of an individual borrower. However, the Company does supplement performance data with current Fair Isaac Corporation (“FICO”) scores and Loan to Value (“LTV”) estimates. Current FICO data is purchased and appended to all consumer loans on a regular basis. In addition, automated valuation services and broker opinions of value are used to supplement original value data for the residential and home equity portfolios, periodically. The following table shows the weighted average FICO scores and the weighted average combined LTV ratios ~~as of~~at the ~~periods~~dates indicated below:


	March 31 2021		December 31 2020
Residential portfolio
FICO score (re-scored)(1)	749		749
LTV (re-valued)(2)	56.5	%	57.4	%
Home equity portfolio
FICO score (re-scored)(1)	772		771
LTV (re-valued)(2)(3)	45.9	%	46.0	%

March 31
2020 December 31
2019
Residential portfolio
FICO score (re-scored)(1) 749
749
LTV (re-valued)(2) 58.1 % 59.0 %
Home equity portfolio
FICO score (re-scored)(1) 768
767
LTV (re-valued)(2)(3) 46.9 % 46.6 %

(1)The average FICO scores at March 31, 2021 are based upon rescores from March 2021, as available for previously originated loans, or origination score data for loans booked in March 2021. The average FICO scores at December 31, 2020 were based upon rescores available from December 2020, as available for previously originated loans, or origination score data for loans booked in December 2020.


~~(1)~~	The average FICO scores at March 31, 2020 are based upon rescores available from February 2020 and origination score data for loans booked in March 2020. The average FICO scores at December 31, 2019 were based upon rescores available from November 2019 and origination score data for loans booked in December 2019.

~~(2)~~

The combined LTV ratios for March 31, 2020 are based upon updated automated valuations as of March 2020, when available, and/or the most current valuation data available. The combined LTV ratios for December 31, 2019 were based upon updated automated valuations as of November 2019, when available, and/or the most current valuation data available. The updated automated valuations provide new information on loans that may be available since the previous valuation was obtained. If no new information is available, the valuation will default to the previously obtained data or most recent appraisal.


~~(3)~~	~~For home equity loans and lines in a subordinate lien, the LTV data represents a combined LTV, taking into account the senior lien data for loans and lines.~~

(2)The combined LTV ratios for March 31, 2021 are based upon updated automated valuations as of February 2021, when available, and/or the most current valuation data available. The combined LTV ratios for December 31, 2020 were based upon updated automated valuations as of November 2020, when available, and/or the most current valuation data available as of such date. The updated automated valuations provide new information on loans that may be available since the previous valuation was obtained. If no new information is available, the valuation will default to the previously obtained data or most recent appraisal.

(3)For home equity loans and lines in a subordinate lien, the LTV data represents a combined LTV, taking into account the senior lien data for loans and lines.

Unfunded Commitments

Management evaluates the need for a reserve on unfunded lending commitments in a manner consistent with loans held for investment. ~~As of January 1, 2020, the Company's reserve for unfunded commitments was $1.1 million, as adjusted for adoption of CECL.~~ At March 31, 2021, and December 31, 2020 the Company's estimated reserve for unfunded commitments amounted to ~~$650,000.~~$1.0 million and $1.2 million, respectively.

Asset Quality

The Company’s philosophy toward managing its loan portfolios is predicated upon careful monitoring, which stresses early detection and response to delinquent and default situations. Delinquent loans are managed by a team of collection specialists and the Company seeks to make arrangements to resolve any delinquent or default situation over the shortest possible time frame. As a general rule, loans ~~more than~~ 90 days or more past due with respect to principal or interest are classified as nonaccrual loans. The Company also may use discretion regarding other loans ~~over~~ 90 days or more delinquent if the loan is well secured and/or in process of collection.

Table of Contents

In response to the COVID-19 pandemic, the Company has granted loan modifications to allow deferral of payments for borrowers negatively impacted by the pandemic. The balance of loans with active deferrals as of March 31, 2021 and December 31, 2020 was $220.6 million and $173.6 million, respectively. The majority of these loans with active deferrals continue to be characterized as current loans. In accordance with regulatory guidance, these modifications are not considered to be troubled debt restructures ("TDRs") if they were performing prior to December 31, 2019. Additionally, a majority of these are characterized as current and therefore are not impacting nonaccrual or delinquency totals as of March 31, 2021 and December 31, 2020. The Company does, however, consider all active deferrals when estimating loss reserves. As loans reach their deferral maturity date, consideration of TDR and delinquency status will resume in accordance with the Company's accounting policy.

The following table shows information regarding nonaccrual loans as of the dates indicated:


	Nonaccrual Balances											Nonaccrual Balances
	March 31, 2020							December 31, 2019				March 31, 2021						December 31, 2020
	With Allowance for Credit Losses		Without Allowance for Credit Losses		Total			Total				With Allowance for Credit Losses		Without Allowance for Credit Losses		Total		With Allowance for Credit Losses		Without Allowance for Credit Losses		Total
	(Dollars in thousands)											(Dollars in thousands)
Commercial and industrial	$	1,078	$	20,357	$	21,435		$	22,574		Commercial and industrial	$	3,606	$	26,179	$	29,785	$	3,804	$	30,925	$	34,729
Commercial real estate	1,305		3,644		4,949			3,016			Commercial real estate	9,635		—		9,635		10,195		—		10,195
Commercial construction	—		—		—			—

Small business	450		—		450			311			Small business	660		—		660		815		10		825
Residential real estate	11,001		3,501		14,502			13,360			Residential real estate	8,870		4,522		13,392		10,935		4,593		15,528
Home equity	6,463		108		6,571			6,570			Home equity	5,592		—		5,592		5,427		—		5,427
Other consumer	108		—		108			61			Other consumer	136		—		136		156		—		156
Total nonaccrual loans	$	20,405	$	27,610	$	48,015	(1)	$	45,892	(1)
Total nonaccrual loans (1)											Total nonaccrual loans (1)	$	28,499	$	30,701	$	59,200	$	31,332	$	35,528	$	66,860

(1)Included in these amounts were ~~$23.8~~$21.2 million and ~~$24.8~~$22.2 million of nonaccruing TDRs at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

It is the Company's policy to reverse any accrued interest when a loan is put on nonaccrual status, and, as such, the Company did not record any interest income on nonaccrual loans during the three months ended March 31, 2021 and March 31, 2020.

In accordance with government moratorium orders established in response to the COVID-19 pandemic, new foreclosures pursued by the Company were on hold as of March 31, 2021, and in turn, all loan foreclosures in process as of March 31, 2021 had begun prior to the commencement of the moratorium orders. The following table shows information regarding foreclosed residential real estate property at the dates indicated:

March 31, 2020 December 31, 2019
(Dollars in thousands)
Foreclosed residential real estate property held by the creditor $ —
$ —
Recorded investment in mortgage loans collateralized by residential real estate property that are in the process of foreclosure $ 4,580
$ 3,294


	March 31, 2021		December 31, 2020
	(Dollars in thousands)
Foreclosed residential real estate property held by the creditor	$	0	$	0
Recorded investment in mortgage loans collateralized by residential real estate property that are in the process of foreclosure	$	1,628	$	1,750

The following tables show the age analysis of past due financing receivables as of the dates indicated:

Table of Contents


	March 31, 2020																				March 31, 2021
	30-59 days			60-89 days			90 days or more			Total Past Due					Total Financing Receivables		Amortized Cost >90 Days and Accruing				30-59 days					60-89 days					90 days or more					Total Past Due							Total Financing Receivables		Amortized Cost >90 Days and Accruing
	Number of Loans	Principal Balance		Number of Loans	Principal Balance		Number of Loans	Principal Balance		Number of Loans	Principal Balance		Current							Number of Loans		Principal Balance			Number of Loans		Principal Balance			Number of Loans		Principal Balance			Number of Loans		Principal Balance			Current
	(Dollars in thousands)																				(Dollars in thousands)
Loan Portfolio																				Loan Portfolio
Commercial and industrial	13	$	1,930	—	$	—	6	$	1,078	19	$	3,008	$	1,445,216	$	1,448,224	$	—	Commercial and industrial		6		$	510		0		$	0		10		$	141		16		$	651		$	2,086,020	$	2,086,671	$	0
Commercial real estate	18	6,989		2	383		7	1,499		27	8,871		4,052,476		4,061,347		—		Commercial real estate		3		888			0		0			4		511			7		1,399			4,176,218		4,177,617		0
Commercial construction	1	331		—	—		—	—		1	331		526,807		527,138		—		Commercial construction		0		0			0		0			0		0			0		0			516,362		516,362		0
Small business	12	1,030		8	185		5	176		25	1,391		176,429		177,820		—		Small business		5		56			1		2			3		36			9		94			174,117		174,211		0
Residential real estate	19	2,614		5	994		39	6,258		63	9,866		1,518,550		1,528,416		—		Residential real estate		9		1,252			3		764			28		3,837			40		5,853			1,235,936		1,241,789		0
Home equity	22	1,507		7	801		36	3,030		65	5,338		1,140,932		1,146,270		—		Home equity		7		425			2		87			27		2,217			36		2,729			1,025,766		1,028,495		0
Other consumer (1)	335	386		11	67		16	99		362	552		26,663		27,215		25		Other consumer (1)		196		167			1		1			7		130			204		298			21,248		21,546		1
Total	420	$	14,787	33	$	2,430	109	$	12,140	562	$	29,357	$	8,887,073	$	8,916,430	$	25	Total		226		$	3,298		7		$	854		79		$	6,872		312		$	11,024		$	9,235,667	$	9,246,691	$	1


	December 31, 2020
	30-59 days			60-89 days			90 days or more			Total Past Due					Total Financing Receivables		Recorded Investment >90 Days and Accruing
	Number of Loans	Principal Balance		Number of Loans	Principal Balance		Number of Loans	Principal Balance		Number of Loans	Principal Balance		Current
	(Dollars in thousands)
Loan Portfolio
Commercial and industrial	2	$	318	1	$	672	8	$	785	11	$	1,775	$	2,101,377	$	2,103,152	$	0
Commercial real estate	3	409		0	0		4	515		7	924		4,173,003		4,173,927		0
Commercial construction	0	0		2	2,794		0	0		2	2,794		551,135		553,929		0
Small business	14	421		6	273		4	59		24	753		174,270		175,023		0
Residential real estate	12	2,150		8	5,507		27	3,648		47	11,305		1,284,878		1,296,183		0
Home equity	10	733		5	203		33	2,633		48	3,569		1,065,221		1,068,790		0
Other consumer (1)	260	137		3	1		6	138		269	276		21,586		21,862		1
Total	301	$	4,168	25	$	9,450	82	$	7,778	408	$	21,396	$	9,371,470	$	9,392,866	$	1

(1)Other consumer portfolio is inclusive of deposit account overdrafts recorded as loan balances.

December 31, 2019
30-59 days 60-89 days 90 days or more Total Past Due
Total
Financing
Receivables

Recorded
Investment
>90 Days
and Accruing

Number
of Loans

Principal
Balance

Number
of Loans

Principal
Balance

Number
of Loans

Principal
Balance

Number
of Loans

Principal
Balance
Current
(Dollars in thousands)
Loan Portfolio
Commercial and industrial 1
$ 253
2
$ 323
5
$ 760
8
$ 1,336
$ 1,393,700
$ 1,395,036
$ —

Commercial real estate 7
1,690
1
194
8
2,038
16
3,922
3,998,437
4,002,359
218
(2 )
Commercial construction 1
560
—
—
—
—
1
560
546,733
547,293
—

Small business 11
837
3
15
6
115
20
967
173,530
174,497
—

Residential real estate 17
2,237
17
3,055
38
7,020
72
12,312
1,578,257
1,590,569
1,652
(2 )
Home equity 23
1,689
8
524
40
3,854
71
6,067
1,127,731
1,133,798
265
(2 )
Other consumer (1) 387
245
12
44
16
32
415
321
29,766
30,087
22

Total 447
$ 7,511
43
$ 4,155
113
$ 13,819
603
$ 25,485
$ 8,848,154
$ 8,873,639
$ 2,157


~~(1)~~	~~Other consumer portfolio is inclusive of deposit account overdrafts recorded as loan balances.~~


~~(2)~~	~~Represents purchased credit impaired loans that were accruing interest due to expectations of future cash collections.~~

Troubled Debt Restructurings

In the course of resolving nonperforming loans, the Bank may choose to restructure the contractual terms of certain loans. The Bank attempts to work out an alternative payment schedule with the borrower in order to avoid foreclosure actions. Any loans that are modified are reviewed by the Bank to identify if a TDR has occurred, which is when, for economic or legal reasons related to a borrower’s financial difficulties, the Bank grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two.

Table of Contents

The following table shows the Company’s total TDRs and other pertinent information as of the dates indicated:

March 31, 2020 December 31, 2019
(Dollars in thousands)
TDRs on accrual status $ 18,129
$ 19,599
TDRs on nonaccrual 23,842
24,766
Total TDRs $ 41,971
$ 44,365
Amount of specific reserves included in the allowance for loan loss associated with TDRs n/a
$ 855
Additional commitments to lend to a borrower who has been a party to a TDR $ 163
$ 63


		March 31, 2021		December 31, 2020
	(Dollars in thousands)
TDRs on accrual status		$	20,262	$	16,983
TDRs on nonaccrual		21,167		22,209
Total TDRs		$	41,429	$	39,192
Additional commitments to lend to a borrower who has been a party to a TDR		$	466	$	263

The Company’s policy is to have any restructured loan which is on nonaccrual status prior to being modified remain on nonaccrual status for six months subsequent to being modified before management considers its return to accrual status. If the restructured loan is on accrual status prior to being modified, it is reviewed to determine if the modified loan should remain on accrual status. Additionally, loans classified as TDRs are adjusted to reflect the changes in value of the recorded investment in the loan, if any, resulting from the granting of a concession. For all residential loan modifications, the borrower must perform during a 90 day trial period before the modification is finalized.

Table of Contents

The following table shows the ~~modifications~~troubled debt restructurings which occurred during the ~~period~~periods indicated and the change in the recorded investment subsequent to the modifications occurring:


	Three Months Ended
	March 31, 2021
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(Dollars in thousands)
Troubled debt restructurings
Commercial and industrial (1)	1	$	14,148	$	14,148
Commercial real estate (1)	5	3,964		3,964
Small business	1	100		100



Total	7	$	18,212	$	18,212


	Three Months Ended						Three Months Ended
	March 31, 2020						March 31, 2020
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment				Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(Dollars in thousands)							(Dollars in thousands)
Troubled debt restructurings						Troubled debt restructurings
Commercial and industrial	2	$	268	$	268
Commercial real estate	1	604		604
Commercial and industrial (1)						Commercial and industrial (1)		2	$	268	$	268
Commercial real estate (1)						Commercial real estate (1)		1	604		604
Small business	1	49		25		Small business		1	49		25
Residential real estate	1	177		209		Residential real estate		1	177		209

Total	5	$	1,098	$	1,106	Total		5	$	1,098	$	1,106

Three Months Ended
March 31, 2019

Number of
Contracts

Pre-Modification
Outstanding
Recorded
Investment

Post-Modification
Outstanding
Recorded
Investment
(Dollars in thousands)
Troubled debt restructurings
Commercial real estate 1
150
150
Home equity 1
75
75
Total 2
$ 225
$ 225

(1)The pre-modification and post-modification balances represent the legal principal balance of the loan. During the first quarter of 2021 and 2020 there were two relationships amounting to $14.3 million and $872,000 that related to additional modifications on previously existing TDRs.

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

Three Months Ended
March 31
2020 2019
(Dollars in thousands)
Adjusted interest rate $ 604
$ 150
Court ordered concession 25
75
Extended maturity 477
—
Total $ 1,106
$ 225


	Three Months Ended
	March 31
		2021		2020
		(Dollars in thousands)
Adjusted interest rate		$	0	$	604
Combination rate and maturity		14,148		0
Court ordered concession		0		25
Extended maturity		4,064		477
Total		$	18,212	$	1,106

The Company considers a loan to have defaulted when it reaches 90 days past due. During the three months ended March 31, ~~2020~~2021 and March 31, ~~2019,~~2020 there were 0 loans modified during the ~~past~~prior twelve months that subsequently ~~defaulted.~~defaulted during the respective periods.

~~NOTE 5 - LOANS AND ALLOWANCE FOR LOAN LOSSES~~

~~As disclosed in~~ ~~Note 4 -~~ ~~Loans, Allowance for Credit Losses and Credit Quality~~, the Company adopted the CECL standard, effective January 1, 2020. As required by disclosure guidance, the Company has included relevant disclosures from the prior year and prior to the adoption of CECL within this footnote, as it relates to loans and allowance for loan losses.

~~The following table bifurcates the amount of loans and the allowance allocated to each loan category based on the type of impairment analysis as of December 31, 2019:~~

December 31, 2019
Commercial
and
Industrial Commercial
Real Estate Commercial
Construction Small
Business Residential
Real
Estate Home
Equity Other Consumer Total
(Dollars in thousands)
Financing receivables ending balance:
Collectively evaluated for impairment $ 1,370,580
$ 3,987,848
$ 547,293
$ 173,960
$ 1,571,848
$ 1,127,963
$ 29,663
$ 8,809,155

Individually evaluated for impairment 24,456
8,337
—
537
11,228
4,948
122
49,628

Purchased credit impaired loans —
6,174
—
—
7,493
887
302
14,856

Total loans by group $ 1,395,036
$ 4,002,359
$ 547,293
$ 174,497
$ 1,590,569
$ 1,133,798
$ 30,087
$ 8,873,639
(1)


~~(1)~~	The amount of net deferred costs on originated loans included in the ending balance was $7.1 million at December 31, 2019. Net unamortized discounts on acquired loans not deemed to be purchased credit impaired ("PCI") included in the ending balance was $21.6 million at December 31, 2019.

~~At December 31, 2019, the reserve for unfunded loan commitments was $2.1 million.~~

~~The following table summarizes changes in allowance for loan losses by loan category for the period indicated:~~

Three Months Ended March 31, 2019
(Dollars in thousands)

Commercial and
Industrial

Commercial
Real Estate

Commercial
Construction

Small
Business

Residential
Real Estate

Home Equity
Other Consumer Total
Allowance for loan losses
Beginning balance $ 15,760
$ 32,370
$ 5,158
$ 1,756
$ 3,219
$ 5,608
$ 422
$ 64,293
Charge-offs —
—
—
(145 ) —
(113 ) (301 ) (559 )
Recoveries 124
33
—
27
1
66
155
406
Provision (benefit) 988
(354 ) 197
146
14
(54 ) 63
1,000
Ending balance $ 16,872
$ 32,049
$ 5,355
$ 1,784
$ 3,234
$ 5,507
$ 339
$ 65,140
Ending balance: collectively evaluated for impairment $ 16,814
$ 31,974
$ 5,355
$ 1,783
$ 2,432
$ 5,346
$ 332
$ 64,036
Ending balance: individually evaluated for impairment $ 58
$ 75
$ —
$ 1
$ 802
$ 161
$ 7
$ 1,104

~~The Company's historical approach to loan portfolio segmentation by risk characteristics and monitoring~~Table of ~~credit quality for commercial loans under previous accounting guidance was consistent with that applied under the newly adopted CECL standard. See~~ ~~Note 4 - Loans, Allowance for Credit Losses and Credit Quality~~ ~~further discussion surrounding the Company's policies for loan segmentation and credit quality monitoring.~~Contents

~~The following tables detail the amount of outstanding principal balances relative to each of the risk-rating categories for the Company’s loan portfolio as of December 31, 2019:~~

December 31, 2019
Category
Risk
Rating

Commercial and
Industrial

Commercial
Real Estate

Commercial
Construction
Small Business Total
(Dollars in thousands)
Pass 1 - 6 $ 1,274,155
$ 3,860,555
$ 542,608
$ 171,213
$ 5,848,531
Potential weakness 7 63,485
97,268
2,247
1,416
164,416
Definite weakness-loss unlikely 8 57,396
44,536
2,438
1,868
106,238
Partial loss probable 9 —
—
—
—
—
Definite loss 10 —
—
—
—
—
Total $ 1,395,036
$ 4,002,359
$ 547,293
$ 174,497
$ 6,119,185

~~Impaired Loans~~

Under previous accounting guidance, a loan was considered impaired when, based on current information and events, it was probable that the Company would be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment included payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experienced insignificant payment delays and payment shortfalls generally were not classified as impaired. Management determined the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

~~The table below sets forth information regarding the Company’s impaired loans by loan portfolio at the date indicated:~~

December 31, 2019

Recorded
Investment

Unpaid
Principal
Balance

Related
Allowance
(Dollars in thousands)
With no related allowance recorded
Commercial and industrial $ 23,786
$ 34,970
$ —
Commercial real estate 6,213
12,101
—
Small business 469
484
—
Residential real estate 4,976
5,123
—
Home equity 3,764
3,893
—
Other consumer 34
34
—
Subtotal 39,242
56,605
—
With an allowance recorded
Commercial and industrial $ 670
$ 670
$ 126
Commercial real estate 2,124
2,124
48
Small business 68
105
8
Residential real estate 6,252
7,163
637
Home equity 1,184
1,382
156
Other consumer 88
91
5
Subtotal 10,386
11,535
980
Total $ 49,628
$ 68,140
$ 980

~~The following table sets forth information regarding interest income recognized on impaired loans, by portfolio, for the period indicated:~~

Three Months Ended
March 31, 2019

Average
Recorded
Investment

Interest
Income
Recognized
(Dollars in thousands)
With no related allowance recorded
Commercial and industrial $ 30,198
$ 35
Commercial real estate 8,873
104
Commercial construction 311
—
Small business 323
2
Residential real estate 4,421
54
Home equity 4,952
55
Other consumer 53
1
Subtotal 49,131
251
With an allowance recorded
Commercial and industrial $ 498
$ 3
Commercial real estate 1,682
24
Small business 181
2
Residential real estate 7,665
64
Home equity 985
12
Other consumer 138
1
Subtotal 11,149
106
Total $ 60,280
$ 357

~~Purchased Credit Impaired Loans~~

Under previous accounting guidance, certain loans acquired by the Company which may have shown evidence of deterioration of credit quality since origination at purchase date and was therefore deemed unlikely that the Company would be able to collect all contractually required payments. As such, these loans were deemed to be PCI loans and the carrying value and prospective income recognition are predicated upon future cash flows expected to be collected. The following table displays certain information pertaining to PCI loans at the date indicated:

December 31, 2019
(Dollars in thousands)
Outstanding balance $ 18,358
Carrying amount $ 14,856

~~The following table summarizes activity in the accretable yield for the PCI loan portfolio for the period indicated:~~

Three Months Ended March 31
2019
(Dollars in thousands)
Beginning balance $ 1,191
Accretion (141 )
Other change in expected cash flows (1) 114
Reclassification from nonaccretable difference for loans which have paid off —
Ending balance $ 1,164

~~(1) Represents changes in cash flows expected to be collected and resulting in increased interest income as a prospective yield adjustment over the remaining life of the loan(s).~~

~~NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS~~

~~The following table sets forth the carrying value of goodwill and other intangible assets, net of accumulated amortization, at the periods indicated below:~~

March 31, 2020 December 31, 2019
(Dollars in thousands)
Balances not subject to amortization
Goodwill $ 506,206
$ 506,206
Balances subject to amortization
Core deposit intangibles 26,485
28,016
Other intangible assets 981
1,270
Total other intangible assets 27,466
29,286
Total goodwill and other intangible assets $ 533,672
$ 535,492

The Company typically performs its goodwill impairment test during the third quarter of the year, unless certain indicators suggest earlier testing to be warranted. The Company determined that an interim impairment test was warranted due to the operational disruption and uncertainty associated with the COVID-19 pandemic which commenced during the first quarter of 2020. Accordingly, the Company performed an impairment test as of March 31, 2020 and determined that there was no impairment of its goodwill, as the fair value of the Company's single reporting unit was in excess of its carrying value. Other intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company also considered the impact of COVID-19 as it pertains to these intangible assets, and determined that there was no indication of impairment related to other intangible assets as of March 31, 2020.

~~NOTE 7 -EARNINGS PER SHARE~~

~~Earnings per share consisted of the following components for the periods indicated:~~

Three Months Ended
March 31
2020 2019
(Dollars in thousands, except per share data)
Net income $ 26,751
$ 35,225

Weighted Average Shares
Basic shares 34,184,431
28,106,184
Effect of dilutive securities 36,827
54,466
Diluted shares 34,221,258
28,160,650

Net income per share
Basic EPS $ 0.78
$ 1.25
Effect of dilutive securities —
—
Diluted EPS $ 0.78
$ 1.25

During the three months ended March 31, 2020 and 2019 there were 0 options to purchase common stock and 5,431 and 6,890 shares of performance-based restricted stock, respectively, that were excluded from the calculation of diluted earnings per share because they were anti-dilutive.

NOTE 85 - STOCK BASED COMPENSATION

~~Time Vested Restricted Stock Awards~~

During the three months ended March 31, ~~2020,~~2021, the Company had the following activity related to stock based compensation:

Time Vested Restricted Stock Awards

The Company made the following awards of time vested restricted stock:

Date Shares Granted Plan Grant Date Fair Value Per Share Vesting Period
2/27/2020 46,550
2005 Employee Stock Plan $ 70.24
Ratably over 5 years from grant date

Date

Shares Granted

Plan

Grant Date Fair Value Per Share

Vesting Period

2/18/2021

49,550

2005 Employee Stock Plan

81.84

Ratably over 5 years from grant date

The fair value of the restricted stock awards is based upon the average of the high and low price at which the Company’s common stock traded on the date of grant. The holders of restricted stock awards are entitled to receive dividends and to vote from and as of the date of grant.

Performance-Based Restricted Stock Awards

On February ~~27, 2020,~~18, 2021, the Company granted ~~17,100~~18,900 performance-based restricted stock awards to certain executive level employees. These performance-based restricted stock awards were issued from the 2005 Employee Stock Plan and were determined to have a grant date fair value per share of ~~$70.24,~~$81.84, determined by the average of the high and low price at which the Company's common stock traded on the date of grant. The number of shares to be vested is contingent upon the Company's attainment of certain performance measures outlined in the award agreement and will be measured as of the end of the three year performance period, January 1, ~~2020~~2021 through December 31, ~~2022.~~2023. The awards will vest upon the earlier of the date on which it is determined if the performance goal is achieved subsequent to the performance period or March 31, ~~2023.~~2024. These awards are accounted for as equity awards due to the nature of these awards and the fact that these shares will not be settled in cash.

The holders of these awards are not entitled to receive dividends or vote until the shares are vested.

On March ~~3, 2020,~~12, 2021, the performance-based restricted stock awards that were awarded on February ~~16, 2017~~15, 2018 vested at ~~100%~~85% of the maximum target shares awarded, or ~~14,400~~13,005 shares.

~~Stock Options~~

~~The Company did not grant any awards~~

Table of ~~options to purchase shares of common stock during the three months ended March 31, 2020.~~Contents

NOTE 96 - DERIVATIVE AND HEDGING ACTIVITIES

The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally to manage the Company’s interest rate risk. Additionally, the Company enters into interest rate derivatives, ~~and~~ foreign exchange contracts and risk participation agreements to accommodate the business requirements of its customers (“customer related positions”). The Company minimizes the market and liquidity risks of customer related positions by entering into similar offsetting positions with broker-dealers. Derivative instruments are carried at fair value in the Company's financial statements. The accounting for changes in the fair value of a derivative instrument is dependent upon whether or not it qualifies as a hedge for accounting purposes, and further, by the type of hedging relationship.

The Company does not enter into proprietary trading positions for any derivatives.

The Company is subject to over-the-counter derivative clearing requirements which require certain derivatives to be cleared through central clearing houses. Accordingly, the Company clears certain derivative transactions through the Chicago Mercantile Exchange Clearing House ("CME"). This clearing house requires the Company to post initial and variation margin to mitigate the risk of non-payment, the latter of which is received or paid daily based on the net asset or liability position of the contracts.

Interest Rate Positions

The Company may utilize various interest rate derivatives as hedging instruments against interest rate risk associated with the Company’s borrowings and loan portfolios. An interest rate derivative 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.

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The following tables reflect the Company's derivative positions ~~for~~as of the ~~periods~~dates indicated below for interest rate derivatives which qualify as cash flow hedges for accounting purposes:


March 31, 2021
				Weighted Average Rate
	Notional Amount		Average Maturity	Current Rate Received		Pay Fixed Swap Rate		Fair Value
	(in thousands)		(in years)					(in thousands)
Interest rate swaps on borrowings	$	75,000	0.93	0.19	%	1.53	%	$	(1,075)

				Current Rate Paid		Receive Fixed Swap Rate
Interest rate swaps on loans	550,000		3.33	0.10	%	2.16	%	21,467

				Current Rate Paid		Receive Fixed Swap Rate Cap - Floor
Interest rate collars on loans	400,000		2.41	0.11	%	2.73% - 2.20%		17,942

Total	$	1,025,000						$	38,334


December 31, 2020
				Weighted Average Rate
	Notional Amount		Average Maturity	Current Rate Received		Pay Fixed Swap Rate		Fair Value
	(in thousands)		(in years)					(in thousands)
Interest rate swaps on borrowings	$	75,000	1.18	0.22	%	1.53	%	$	(1,341)

				Current Rate Paid		Receive Fixed Swap Rate
Interest rate swaps on loans	450,000		2.66	0.15	%	2.37	%	27,021

				Current Rate Paid		Receive Fixed Swap Rate Cap - Floor
Interest rate collars on loans	400,000		2.66	0.15	%	2.73% - 2.20%		21,764

Total	$	925,000						$	47,444

March 31, 2020
Weighted Average Rate
Notional Amount Average Maturity Current
Rate
Received Pay Fixed
Swap Rate Fair Value (1)
(in thousands) (in years) (in thousands)
Interest rate swaps on borrowings $ 175,000
2.20 1.28 % 0.94 % $ (1,790 )

Current Rate Paid
Receive Fixed
Swap Rate

Interest rate swaps on loans 450,000
3.41 0.86 % 2.37 % 31,701

Current Rate Paid
Receive Fixed Swap Rate
Cap - Floor

Interest rate collars on loans 400,000
3.41 0.81 % 2.73% - 2.20%
25,573

Total $ 1,025,000
$ 55,484

December 31, 2019
Weighted Average Rate
Notional Amount Average Maturity Current
Rate
Received Pay Fixed
Swap Rate Fair Value (1)
(in thousands) (in years) (in thousands)
Interest rate swaps on borrowings $ 75,000
2.18 1.90 % 1.53 % $ 140

Current Rate Paid
Receive Fixed
Swap Rate

Interest rate swaps on loans 450,000
3.66 1.76 % 2.37 % 12,907

Current Rate Paid
Receive Fixed Swap Rate
Cap - Floor

Interest rate collars on loans 400,000
3.66 1.76 % 2.73% - 2.20%
9,896

Total $ 925,000
$ 22,943


~~(1)~~	~~Beginning in 2020, the Company made an election to include accrued interest within fair value balances.~~

The maximum length of time over which the Company is currently hedging its exposure to the variability in future cash flows for forecasted transactions related to the payment of variable interest on existing financial instruments is ~~4.6~~8.0 years.

For derivative instruments that are designated and qualify as cash flow hedging instruments, the effective portion of the gains or losses is reported as a component of other comprehensive income ("OCI"), and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The Company expects approximately ~~$16.8~~$19.4 million (pre-tax) to be reclassified as an increase to interest income and ~~$587,000~~$844,000 (pre-tax) to be reclassified as an increase to interest expense, from OCI related to the

Company’s cash flow hedges in the next twelve months. This reclassification is due to anticipated payments that will be made and/or received on the swaps based upon the forward curve as of March 31, ~~2020.~~2021.

The Company had 0 fair value hedges as of March 31, ~~2020~~2021 or December 31, ~~2019.~~2020.

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Customer Related Positions

Loan level derivatives, primarily interest rate swaps, offered to commercial borrowers through the Company’s loan level derivative program do not qualify as hedges for accounting purposes. The Company believes that its exposure to commercial customer derivatives is limited because these contracts are simultaneously matched at inception with an offsetting dealer transaction. Derivatives with dealer counterparties are then either cleared through a clearinghouse or settled directly with a single counterparty. The commercial customer derivative program allows the Company to retain variable-rate commercial loans while allowing the customer to synthetically fix the loan rate by entering into a variable-to-fixed interest rate swap. The amounts relating to the notional principal amount are not actually exchanged.

Foreign exchange contracts offered to commercial borrowers through the Company’s derivative program do not qualify as hedges for accounting purposes. The Company acts as a seller and buyer of foreign exchange contracts to accommodate its customers. To mitigate the market and liquidity risk associated with these derivatives, the Company enters into similar offsetting positions. The amounts relating to the notional principal amount are exchanged.

The Company has entered into risk participation agreements with other dealer banks in commercial loan agreements. Participating banks guarantee the performance on borrower-related interest rate swap contracts. These derivatives are not designated as hedges and, therefore, changes in fair value are recognized in earnings. Under a risk participation-out agreement, a derivative asset, the Company participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower for a fee paid to the participating bank. Under a risk participation-in agreement, a derivative liability, the Company assumes, or participates in, a portion of the credit risk associated with the interest rate swap position with the commercial borrower for a fee received from the other bank.

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The following table reflects the ~~Company��s~~Company’s customer related derivative positions as of the dates indicated below for those derivatives not designated as hedging:


		Notional Amount Maturing
	Number of Positions (1)	Less than 1 year		Less than 2 years		Less than 3 years		Less than 4 years		Thereafter		Total		Fair Value
	March 31, 2021
	(Dollars in thousands)
Loan level swaps
Receive fixed, pay variable	302	$	72,391	$	105,368	$	137,041	$	177,153	$	1,149,151	$	1,641,104	$	66,621
Pay fixed, receive variable	302	72,391		105,368		137,041		177,153		1,149,151		1,641,104		(66,615)
Foreign exchange contracts
Buys foreign currency, sells U.S. currency	30	94,917		6,538		0		0		0		101,455		2,502
Buys U.S. currency, sells foreign currency	30	94,917		6,538		0		0		0		101,455		(2,493)
Risk participation agreements
Participation out	12	6,642		0		2,665		31,804		68,040		109,151		195
Participation in	7	0		30,483		28,866		—		8,436		67,785		(73)

		Notional Amount Maturing
	Number of Positions (1)	Less than 1 year		Less than 2 years		Less than 3 years		Less than 4 years		Thereafter		Total		Fair Value
	December 31, 2020
	(Dollars in thousands)
Loan level swaps
Receive fixed, pay variable	322	$	102,999	$	76,487	$	149,265	$	147,422	$	1,222,557	$	1,698,730	$	127,226
Pay fixed, receive variable	313	102,999		76,487		149,265		147,422		1,222,557		1,698,730		(127,216)
Foreign exchange contracts
Buys foreign currency, sells U.S. currency	33	87,557		5,300		0		0		0		92,857		(4,214)
Buys U.S. currency, sells foreign currency	33	87,557		5,300		0		0		0		92,857		4,224
Risk participation agreements
Participation out	12	6,721		0		2,675		7,307		93,378		110,081		512
Participation in	8	0		30,649		29,072		0		15,844		75,565		(118)

Notional Amount Maturing

Number of Positions
(1)
Less than 1 year Less than 2 years Less than 3 years Less than 4 years Thereafter Total Fair Value (2)
March 31, 2020
(Dollars in thousands)
Loan level swaps
Receive fixed, pay variable 313
$ 155,318
$ 76,735
$ 126,910
$ 139,600
$ 1,178,142
$ 1,676,705
$ 143,707
Pay fixed, receive variable 305
$ 158,692
$ 76,735
$ 126,910
$ 139,600
$ 1,178,142
$ 1,680,079
$ (143,726 )
Foreign exchange contracts
Buys foreign currency, sells U.S. currency 47
$ 118,711
$ —
$ —
$ —
$ —
$ 118,711
$ (1,439 )
Buys U.S. currency, sells foreign currency 47
$ 118,711
$ —
$ —
$ —
$ —
$ 118,711
$ 1,499
Notional Amount Maturing

Number of Positions
(1)
Less than 1 year Less than 2 years Less than 3 years Less than 4 years Thereafter Total Fair Value (2)
December 31, 2019
(Dollars in thousands)
Loan level swaps
Receive fixed, pay variable 299
$ 156,690
$ 125,203
$ 85,603
$ 165,599
$ 1,044,315
$ 1,577,410
$ 48,596
Pay fixed, receive variable 290
$ 156,690
$ 125,203
$ 85,603
$ 165,599
$ 1,044,315
$ 1,577,410
$ (48,591 )
Foreign exchange contracts
Buys foreign currency, sells U.S. currency 40
$ 91,434
$ —
$ —
$ —
$ —
$ 91,434
$ (81 )
Buys U.S. currency, sells foreign currency 40
$ 91,434
$ —
$ —
$ —
$ —
$ 91,434
$ 123

(1)The Company may enter into one dealer swap agreement which offsets multiple commercial borrower swap agreements.


~~(1)~~	~~The Company may enter into one dealer swap agreement which offsets multiple commercial borrower swap agreements.~~


~~(2)~~	~~Beginning in 2020, the Company made an election to include accrued interest within fair value balances.~~

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Mortgage Derivatives

The Company enters into commitments to fund residential mortgage loans at specified rates and times in the future, with the intention that loans will likely be sold subsequently in the secondary market. Mortgage loan commitments are referred to as derivative loan commitments if the loan that will result from exercise of the commitment will be held for sale upon funding. These commitments are recognized at fair value on the consolidated balance sheet in other assets and other liabilities with changes in their fair values recorded within mortgage banking income. In addition, the Company has elected the fair value option to carry loans held for sale at fair value. The change in fair value of loans held for sale is recorded in current period earnings as a component of mortgage banking income in accordance with the Company's fair value election. The fair value of loans held for sale decreased by ~~$914,000~~$1.8 million and increased by ~~$1,000~~$255,000 for the three month periods ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. These amounts were offset in earnings by the change in the fair value of mortgage derivatives.

Outstanding loan commitments expose the Company to the risk that the price of the loans arising from exercise of the loan commitment might change from inception of the rate lock to funding of the loan due to changes in mortgage interest rates. If interest rates increase, the value of these loan commitments decreases. Conversely, if interest rates decrease, the value of these loan commitments increases. To protect against the price risk inherent in derivative loan commitments, the Company utilizes both "mandatory delivery" and "best efforts" forward loan sale commitments to mitigate the risk of potential decreases in the values of loans that would result from the exercise of the derivative loan commitments. Mandatory delivery contracts are accounted for as derivative instruments. Included in the mandatory delivery forward commitments are To Be Announced securities ("TBAs"). Certain assumptions, including pull through rates and rate lock periods, are used in managing the existing and future hedges. The accuracy of underlying assumptions will impact the ultimate effectiveness of any hedging strategies.

With mandatory delivery contracts, the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. If the Company fails to deliver the amount of mortgages necessary to fulfill the commitment by the specified date, it is obligated to pay a "pair-off" fee, based on then-current market prices, to the investor/counterparty to compensate the investor for the shortfall. Generally the Company makes this type of commitment once mortgage loans have been funded and are held for sale, in order to minimize the risk of failure to deliver the requisite volume of loans to the investor and paying pair-off fees as a result. The Company also sells TBA securities to offset potential changes in the fair value of derivative loan commitments. Generally the Company sells TBA securities by entering into derivative loan commitments for settlement in 30 to 90 days. The Company expects that mandatory delivery contracts, including TBA securities, will experience changes in fair value opposite to the changes in the fair value of derivative loan commitments.

With best effort contracts, the Company commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. Generally best efforts cash contracts have no pair off risk regardless of market movement. The price the investor will pay the seller for an individual loan is specified prior to the loan being funded (e.g., on the same day the lender commits to lend funds to a potential borrower). The Company expects that these best efforts forward loan sale commitments will experience a net neutral shift in fair value with related derivative loan commitments.

The aggregate amount of net realized gains or losses on sales of such loans included within mortgage banking income was ~~$4.5~~$8.1 million and ~~$705,000~~$4.5 million for the three ~~month periods~~months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

Balance Sheet Offsetting

The Company does not offset fair value amounts recognized for derivative instruments. The Company does net 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.

A daily settlement occurs through the CME for changes in the fair value of centrally cleared derivatives. Not all of the derivatives are required to be cleared through the daily clearing agent. As a result, the total fair values of loan level derivative assets and liabilities recognized on the Company's financial statements are not equal and offsetting.

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The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the balance sheet and the potential effect of netting arrangements on its financial position, at the dates indicated:


	Asset Derivatives (1)						Liability Derivatives (2)
	Fair Value at			Fair Value at			Fair Value at			Fair Value at
	March 31 2021			December 31 2020			March 31 2021			December 31 2020
	(Dollars in thousands)
Derivatives designated as hedges
Interest rate derivatives	$	40,776	(3)	$	48,786	(3)	$	2,442	(4)	$	1,342	(4)
Derivatives not designated as hedges
Customer Related Positions
Loan level derivatives	86,890		(3)	127,228		(3)	86,884		(4)	127,218		(4)
Foreign exchange contracts	2,691			4,359			2,682			4,349
Risk participation agreements	195			513			73			119
Mortgage Derivatives
Interest rate lock commitments	1,652			6,513			0			0
Forward sale loan commitments	370			0			0			1
Forward sale hedge commitments	1,131			0			0			1,035
Total derivatives not designated as hedges	92,929			138,613			89,639			132,722
Total	133,705			187,399			92,081			134,064

Netting Adjustments (5)	(8,027)			23			7,107			16,105
Net Derivatives on the Balance Sheet	125,678			187,422			84,974			117,959

Financial instruments (6)	50,189			48,786			50,189			48,786
Cash collateral pledged (received)	0			0			28,799			62,460
Net Derivative Amounts	$	75,489		$	138,636		$	5,986		$	6,713

Asset Derivatives (1) Liability Derivatives (2)
Fair Value at Fair Value at Fair Value at Fair Value at
March 31
2020 December 31
2019 March 31
2020 December 31
2019
(Dollars in thousands)
Derivatives designated as hedges
Interest rate derivatives $ 57,274
(3) $ 23,140
(3) $ 1,790
(4) $ 197
(4)
Derivatives not designated as hedges
Customer Related Positions
Loan level derivatives 143,763
(3) 52,374
(3) 143,782
(4) 52,369
(4)
Foreign exchange contracts 2,047
1,191
1,987
1,149

Mortgage Derivatives
Interest rate lock commitments 2,332
1,680
—
—

Forward sale loan commitments 399
—
—
12

Forward sale hedge commitments —
—
1,980
196

Total derivatives not designated as hedges 148,541
55,245
147,749
53,726

Total 205,815
78,385
149,539
53,923

Netting Adjustments (5) —
—
13,024
—

Net Derivatives on the Balance Sheet 205,815
78,385
136,515
53,923

Financial instruments (6) 57,276
24,882
57,276
24,882

Cash collateral pledged (received) —
—
73,771
25,493

Net Derivative Amounts $ 148,539
$ 53,503
$ 5,468
$ 3,548

(1)All asset derivatives are located in other assets on the balance sheet.

(2)All liability derivatives are located in other liabilities on the balance sheet.

(3)Approximately $1.2 million and $1.7 million of accrued interest receivable is included in the fair value of the interest rate and loan level asset derivatives, respectively, as of March 31, 2021. Accrued interest receivable of approximately and $1.2 million and $2.0 million is included in the fair value of the interest rate and loan level asset derivatives, respectively, as of December 31, 2020.

(4)Approximately $56,000 and $1.7 million of accrued interest payable is included in the fair value of the interest rate and loan level liability derivatives, respectively, as of March 31, 2021. Accrued interest payable of approximately $81,000 and $2.0 million is included in the fair value of the interest rate and loan level derivative liabilities, respectively, as of December 31, 2020.

(5)Netting adjustments represent the amounts recorded to convert derivative assets and liabilities cleared through CME from a gross basis to a net basis, inclusive of the variation margin payments, in accordance with applicable accounting guidance. As displayed in the table above, derivatives that cleared through the CME were either in a net asset position or a net liability position as of March 31, 2021.

(6)Reflects offsetting derivative positions with the same counterparty that are not netted on the balance sheet.


~~(1)~~	~~All asset derivatives are located in other assets on the balance sheet.~~


~~(2)~~	~~All liability derivatives are located in other liabilities on the balance sheet.~~

~~(3)~~

~~Approximately $574,000and~~$1.1 million of accrued interest receivable is included in the fair value of the interest rate and loan level asset derivatives, respectively, as of March 31, 2020. Accrued interest receivable of approximately and $350,000 and~~$569,000 was excluded from the fair value of the interest rate and loan level asset derivatives, respectively, as of December 31, 2019.~~

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~~(4)~~	Approximately $14,000 and $1.1 million of accrued interest payable is included in the fair value of the interest rate and loan level derivative liabilities, respectively, as of March 31, 2020. Accrued interest payable of approximately $4,000 and $569,000 was excluded from the fair value of the interest rate and loan level derivative liabilities, respectively, as of December 31, 2019.


~~(5)~~	Netting adjustments represent the amounts recorded to convert derivative assets and liabilities cleared through CME from a gross basis to a net basis, inclusive of the variation margin payments, in accordance with applicable accounting guidance. All derivatives that cleared through the CME were in a net liability position as of March 31, 2020.


~~(6)~~	~~Reflects offsetting derivative positions with the same counterparty that are not netted on the balance sheet.~~

The table below presents the effect of the Company’s derivative financial instruments included in OCI and current earnings for the periods indicated:


	Three Months Ended
	March 31
		2021		2020
		(Dollars in thousands)
Derivatives designated as hedges
Gain (loss) in OCI on derivatives (effective portion), net of tax		$	(6,583)	$	22,984
Gain reclassified from OCI into interest income or interest expense (effective portion)		$	4,380	$	1,586
Loss reclassified from OCI into noninterest expense (loss on termination)		$	0	$	0
Interest expense		$	—	$	—
Other expense		—		—
Total		$	—	$	—
Derivatives not designated as hedges
Changes in fair value of customer related positions
Other income		$	6	$	22
Other expense		(283)		(24)
Changes in fair value of mortgage derivatives
Mortgage banking income		(2,324)		(721)
Total		$	(2,601)	$	(723)

Three Months Ended
March 31
2020 2019
(Dollars in thousands)
Derivatives designated as hedges
Gain in OCI on derivatives (effective portion), net of tax $ 22,984
$ 3,285
Gain reclassified from OCI into interest income or interest expense (effective portion) $ 1,586
$ 424
Loss reclassified from OCI into noninterest expense (loss on termination) $ —
$ —
Interest expense $ —
$ —
Other expense —
—
Total $ —
$ —
Derivatives not designated as hedges
Changes in fair value of customer related positions
Other income $ 22
$ 13
Other expense (24 ) (1 )
Changes in fair value of mortgage derivatives
Mortgage banking income (expense) (721 ) 59
Total $ (723 ) $ 71

The Company's derivative agreements with institutional counterparties contain various credit-risk related contingent provisions, such as requiring the Company to maintain a well-capitalized capital position. If the Company fails to meet these conditions, the counterparties could request the Company make immediate payment or demand that the Company provide immediate and ongoing full collateralization on derivative positions in net liability positions. The aggregate fair value of all derivative instruments with credit-risk related contingent features that were in a net liability position was ~~$88.3~~$28.5 million and ~~$26.0~~$79.8 million at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Although none of the contingency provisions have applied as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company has posted collateral to offset the net liability exposure with institutional counterparties.

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. The Company seeks to minimize counterparty credit risk through credit approvals, limits, monitoring procedures, and obtaining collateral, where appropriate. Institutional counterparties must have an investment grade credit rating and be approved by the Company's Board of Directors. As such, management believes the risk of incurring credit losses on derivative contracts with institutional counterparties is remote. The Company's exposure relating to institutional counterparties was ~~$57.3~~$50.9 million and ~~$25.4~~$48.8 million at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The Company’s exposure relating to customer counterparties was approximately ~~$143.7~~$76.8 million and ~~$51.0~~$127.2 million at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Credit exposure may be reduced by the value of collateral pledged by the counterparty.

~~NOTE 10 - INCOME TAXES~~

~~The following table sets forth information regarding the Company’s tax provision and applicable tax rates for the periods indicated:~~

Three Months Ended
March 31
2020 2019
(Dollars in thousands)
Combined federal and state income tax provision $ 2,148
$ 11,522
Effective income tax rate 7.43 % 24.65 %

The Company's provision for income taxes was $2.1 million and $11.5 million for the three months ended March 31, 2020 and 2019, respectively. The lower tax provision in 2020 was due to a lower effective tax rate, which included a $4.7 million discrete tax benefit recognized in the quarter. This discrete benefit was associated with revised net operating loss (NOL) carryback provisions included in the federal Coronavirus, Aid, Relief and Economic Security Act ("CARES Act"), signed into law on March 27, 2020. The effect of any change in enacted tax rates on deferred assets and liabilities is recognized in income in the period that includes the enactment date, and accordingly, the discrete benefit was fully recognized during the first quarter of 2020.

NOTE 117 - FAIR VALUE MEASUREMENTS

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 assumptions applied by the Company when determining fair value reflect those that the Company determines market participants would use to price the asset or liability at the measurement date. If there has been a significant decrease in the volume and level of activity for the asset or liability, regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received if the asset were to be sold or that would be or paid if the liability were to be transferred in an orderly market transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. When determining fair value, the Company considers pricing information and other inputs that are current as of the measurement date. In periods of market dislocation, the observability of prices and other inputs may be reduced for certain instruments, or not available at all. The unavailability or reduced availability of pricing or other input information could cause an instrument to be reclassified from one level to another.

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The Fair Value Measurements and Disclosures Topic of the FASB ASC defines fair value and 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 under the Fair Value Measurements and Disclosures Topic of the FASB ASC 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.

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

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.

Valuation Techniques

There have been no changes in the valuation techniques used during the ~~current period.~~three months ended March 31, 2021.

Securities

Trading and Equity Securities

These equity securities are valued based on market quoted prices. These securities are categorized in Level 1 as they are actively traded and no valuation adjustments have been applied.

U.S. Government Agency Securities

Fair value is estimated using either multi-dimensional spread tables or benchmarks. The inputs used include benchmark yields, reported trades, and broker/dealer quotes. These securities are classified as Level 2.

Agency Mortgage-Backed Securities

Fair value is estimated using either a matrix or benchmarks. The inputs used include benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. These securities are categorized as Level 2.

Agency Collateralized Mortgage Obligations and Small Business Administration Pooled Securities

The valuation model for these securities is volatility-driven and ratings based, and uses multi-dimensional spread tables. The inputs used include benchmark yields, reported trades, new issue data, broker dealer quotes, and collateral performance. If there is at least one significant model assumption or input that is not observable, these securities are categorized as Level 3 within the fair value hierarchy; otherwise, they are classified as Level 2.

State, County, and Municipal Securities

The fair value is estimated using a valuation matrix with inputs including bond interest rate tables, recent transactions, and yield relationships. These securities are categorized as Level 2.

Single and Pooled Issuer Trust Preferred Securities

The fair value of trust preferred securities, including pooled and single issuer preferred securities, is estimated using external pricing models, discounted cash flow methodologies or similar techniques. The inputs used in these valuations include benchmark yields, reported trades, new issue data, broker dealer quotes, and collateral performance. If there is at least one significant model assumption or input that is not observable, these securities are classified as Level 3 within the fair value hierarchy; otherwise, they are classified as Level 2.

Loans Held for Sale

The Company has elected the fair value option to account for originated closed loans intended for sale. The fair value is measured on an individual loan basis using quoted market prices and when not available, comparable market value or discounted cash flow analysis may be utilized. These assets are typically classified as Level 2.

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Derivative Instruments

Derivatives

The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied ~~volatilities.~~volatilizes. The Company incorporates credit valuation adjustments to appropriately reflect nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings. Additionally, in conjunction with fair value measurement guidance, the Company has made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. Although the Company has determined that the majority of the inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its interest rate derivatives and risk participation agreements may also utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are properly classified as Level 2.

Mortgage Derivatives

The fair value of mortgage derivatives is determined based on current market prices for similar assets in the secondary market and, therefore, classified as Level 2 within the fair value hierarchy.

Individually Assessed Collateral Dependent Loans

In accordance with the CECL standard, expected credit losses on individually assessed loans deemed to be collateral dependent are valued based upon the lower of amortized cost or fair value of the underlying collateral less costs to sell. The inputs used in the appraisals of the collateral are not always observable, and in such cases the loans may be classified as Level 3 within the fair value hierarchy; otherwise, they are classified as Level 2.

Other Real Estate Owned and Other Foreclosed Assets

Other Real Estate Owned ("OREO") and Other Foreclosed Assets are valued at the lower of cost or fair value of the property, less estimated costs to sell. The fair values are generally estimated based upon recent appraisal values of the property less costs to sell the property. Certain inputs used in appraisals are not always observable, and therefore OREO and Other Foreclosed Assets may be classified as Level 3 within the fair value hierarchy.

Goodwill and Other Intangible Assets

Goodwill and other intangible assets are subject to impairment testing. The Company conducts an annual impairment test of goodwill in the third quarter of each year, or more frequently if necessary. Other intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. To estimate the fair value of goodwill and, if necessary, other intangible assets, the Company utilizes both a comparable analysis of relevant price multiples in recent market transactions and a discounted cash flow analysis. Both valuation models require a significant degree of management judgment. In the event the fair value as determined by the valuation model is less than the carrying value, the intangibles may be impaired. If the impairment testing resulted in impairment, the Company would classify the impaired goodwill and other intangible assets subjected to nonrecurring fair value adjustments as Level 3.

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Assets and liabilities measured at fair value on a recurring and nonrecurring basis were as follows as of the dates indicated:


			Fair Value Measurements at Reporting Date Using
	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	March 31, 2021
	(Dollars in thousands)
Recurring fair value measurements
Assets
Trading securities	$	3,269	$	3,269	$	—	$	—
Equity securities	22,419		22,419		0		0
Securities available for sale
U.S. government agency securities	168,056		—		168,056		—
Agency mortgage-backed securities	290,175		—		290,175		—
Agency collateralized mortgage obligations	81,629		—		81,629		—

State, county, and municipal securities	555		—		555		—
Single issuer trust preferred securities issued by banks and insurers	488		—		488		—
Pooled trust preferred securities issued by banks and insurers	1,064		—		1,064		—
Small business administration pooled securities	58,246		0		58,246		0
Loans held for sale	41,632		—		41,632		—
Derivative instruments	133,705		—		133,705		—
Liabilities
Derivative instruments	92,081		—		92,081		—
Total recurring fair value measurements	$	709,157	$	25,688	$	683,469	$	0

Nonrecurring fair value measurements
Assets
Individually assessed collateral dependent loans (1)	$	31,213	$	—	$	—	$	31,213

Total nonrecurring fair value measurements	$	31,213	$	0	$	0	$	31,213

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			Fair Value Measurements at Reporting Date Using												Fair Value Measurements at Reporting Date Using
	Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)				Balance				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
	March 31, 2020										December 31, 2020
	(Dollars in thousands)										(Dollars in thousands)
Recurring fair value measurements									Recurring fair value measurements
Assets									Assets
Trading securities	$	2,247	$	2,247	$	—	$	—	Trading securities		$	2,838			$	2,838			$	—			$	—
Equity securities	19,439		19,439		—		—		Equity securities		22,107				22,107				0				0
Securities available for sale									Securities available for sale
U.S. government agency securities	24,292		—		24,292		—		U.S. government agency securities		24,116				—				24,116				—
Agency mortgage-backed securities	258,784		—		258,784		—		Agency mortgage-backed securities		233,629				—				233,629				—
Agency collateralized mortgage obligations	87,210		—		87,210		—		Agency collateralized mortgage obligations		91,683				—				91,683				—

State, county, and municipal securities	1,144		—		1,144		—		State, county, and municipal securities		807				0				807				0
Single issuer trust preferred securities issued by banks and insurers	436		—		436		—		Single issuer trust preferred securities issued by banks and insurers		488				—				488				—
Pooled trust preferred securities issued by banks and insurers	1,009		—		—		1,009		Pooled trust preferred securities issued by banks and insurers		1,056				—				1,056				—
Small business administration pooled securities	64,421		—		64,421		—		Small business administration pooled securities		61,081				0				61,081				0
Loans held for sale	43,756		—		43,756		—		Loans held for sale		58,104				—				58,104				—
Derivative instruments	205,815		—		205,815		—		Derivative instruments		187,399				—				187,399				—
Liabilities									Liabilities
Derivative instruments	149,539		—		149,539		—		Derivative instruments		134,064				—				134,064				—
Total recurring fair value measurements	$	559,014	$	21,686	$	536,319	$	1,009	Total recurring fair value measurements		$	549,244			$	24,945			$	524,299			$	0

Nonrecurring fair value measurements
Nonrecurring fair value measurements:									Nonrecurring fair value measurements:
Assets									Assets
Individually assessed collateral dependent loans(1)	$	39,444	$	—	$	—	$	39,444	$	31,510			$	—			$	—			$	31,510

Total nonrecurring fair value measurements	$	39,444	$	—	$	—	$	39,444	Total nonrecurring fair value measurements		$	31,510			$	0			$	0			$	31,510

Fair Value Measurements at Reporting Date Using
Balance
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
December 31, 2019
(Dollars in thousands)
Recurring fair value measurements
Assets
Trading securities $ 2,179
$ 2,179
$ —
$ —
Equity securities 21,261
21,261
—
—
Securities available for sale
U.S. government agency securities 33,115
—
33,115
—
Agency mortgage-backed securities 247,000
—
247,000
—
Agency collateralized mortgage obligations 88,511
—
88,511
—
State, county, and municipal securities 1,396
—
1,396
—
Single issuer trust preferred securities issued by banks and insurers 493
—
493
—
Pooled trust preferred securities issued by banks and insurers 1,114
—
—
1,114
Small business administration pooled securities 54,795
—
54,795
—
Loans held for sale 33,307
—
33,307
—
Derivative instruments 78,385
—
78,385
—
Liabilities
Derivative instruments 53,923
—
53,923
—
Total recurring fair value measurements $ 507,633
$ 23,440
$ 483,079
$ 1,114

Nonrecurring fair value measurements:
Assets
Collateral dependent impaired loans $ 25,515
$ —
$ —
$ 25,515
Total nonrecurring fair value measurements $ 25,515
$ —
$ —
$ 25,515

(1) The ~~table below presents a reconciliation for all assets and liabilities measured at~~ fair value ~~on a recurring basis using significant unobservable inputs (Level 3), which were valued using pricing models and discounted cash flow methodologies, as~~of individually assessed collateral dependent loans is generally determined through independent appraisals of the ~~dates indicated:~~underlying collateral, which generally include various Level 3 inputs which are not identifiable. Appraisals may be adjusted by management for qualitative factors such as economic factors and estimated liquidation expenses. The range of these possible adjustments may vary.

Three Months Ended
March 31
2020 2019
(Dollars in thousands)
Pooled Trust Preferred Securities
Beginning balance $ 1,114
$ 1,329
Gains and (losses) (realized/unrealized)
Included in earnings —
—
Included in other comprehensive income (60 ) 3
Settlements (45 ) (18 )
Ending balance $ 1,009
$ 1,314

~~The following table sets forth certain unobservable inputs regarding the Company’s financial instruments that are classified as Level 3 for the periods indicated:~~

March 31
2020 December 31
2019 March 31
2020 December 31
2019 March 31
2020 December 31
2019
Valuation Technique Fair Value Unobservable Inputs Range Weighted Average
(Dollars in thousands)
Discounted cash flow methodology
Pooled trust preferred securities $ 1,009
$ 1,114
Cumulative prepayment 0% - 57% 0% - 57% 2.4% 2.6%
Cumulative default 4% - 100% 2% - 100% 13.5% 13.5%
Loss given default 85% - 100% 85% - 100% 93.6% 93.6%
Cure given default 0% - 75% 0% - 75% 60.9% 60.9%
Appraisals of collateral(1)
Individually assessed collateral dependent loans $ 39,444
n/a

Collateral dependent impaired loans n/a
$ 25,515

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~~(1)~~	Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various Level 3 inputs which are not identifiable. Appraisals may be adjusted by management for qualitative factors such as economic factors and estimated liquidation expenses. The range of these possible adjustments may vary.

The significant unobservable inputs used in the fair value measurement of the Company’s pooled trust preferred securities are cumulative prepayment rates, cumulative default rates, loss given default rates and cure given default rates. Significant increases (decreases) in deferrals or defaults, in isolation, would result in a significantly lower (higher) fair value measurement. Alternatively, significant increases (decreases) in cure rates, in isolation, would result in a significantly higher (lower) fair value measurement.

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 ~~periods~~dates indicated:


					Fair Value Measurements at Reporting Date Using
	Carrying Value		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	March 31, 2021
	(Dollars in thousands)
Financial assets
Securities held to maturity (a)

U.S. Treasury securities	$	4,014	$	4,057	$	—	$	4,057	$	—
Agency mortgage-backed securities	417,811		426,628		—		426,628		—
Agency collateralized mortgage obligations	355,686		361,002		—		361,002		—

Single issuer trust preferred securities issued by banks	1,500		1,508		—		1,508		—
Small business administration pooled securities	26,518		27,235		0		27,235		0

Loans, net of allowance for credit losses (b)	9,107,929		9,072,683		—		—		9,072,683
Federal Home Loan Bank stock (c)	10,250		10,250		0		10,250		0
Cash surrender value of life insurance policies (d)	241,365		241,365		0		241,365		0
Financial liabilities
Deposit liabilities, other than time deposits (e)	$	10,725,479	$	10,725,479	$	—	$	10,725,479	$	—
Time certificates of deposits (f)	868,045		871,056		—		871,056		—
Federal Home Loan Bank borrowings (f)	35,717		35,799		—		35,799		—



Long-term borrowings (f)	28,099		27,572		0		27,572		0
Junior subordinated debentures (g)	62,851		68,052		—		68,052		—
Subordinated debentures (f)	49,720		47,027		—		—		47,027

Fair Value Measurements at Reporting Date Using

Carrying
Value

Fair
Value

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

March 31, 2020
(Dollars in thousands)
Financial assets
Securities held to maturity(a)
U.S. Treasury securities $ 4,029
$ 4,139
$ —
$ 4,139
$ —
Agency mortgage-backed securities 463,632
482,363
—
482,363
—
Agency collateralized mortgage obligations 277,921
289,902
—
289,902
—
Single issuer trust preferred securities issued by banks 1,500
1,490
—
1,490
—
Small business administration pooled securities 30,716
31,461
—
31,461
—
Loans, net of allowance for credit losses(b) 8,784,610
8,626,697
—
—
8,626,697
Federal Home Loan Bank stock(c) 23,274
23,274
—
23,274
—
Cash surrender value of life insurance policies(d) 197,772
197,772
—
197,772
—
Financial liabilities
Deposit liabilities, other than time deposits(e) $ 8,146,490
$ 8,146,490
$ —
$ 8,146,490
$ —
Time certificates of deposits(f) 1,269,708
1,279,983
—
1,279,983
—
Federal Home Loan Bank borrowings(f) 358,591
359,249
—
359,249
—
Long-term borrowings(f) 74,920
73,572
—
73,572
—
Junior subordinated debentures(g) 62,849
61,528
—
61,528
—
Subordinated debentures(f) 49,625
51,896
—
—
51,896

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					Fair Value Measurements at Reporting Date Using
	Carrying Value		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	December 31, 2020
	(Dollars in thousands)
Financial assets
Securities held to maturity (a)

U.S. Treasury securities	$	4,017	$	4,077	$	—	$	4,077	$	—
Agency mortgage-backed securities	356,085		374,121		—		374,121		—
Agency collateralized mortgage obligations	335,993		344,119		—		344,119		—

Single issuer trust preferred securities issued by banks	1,500		1,498		—		1,498		—
Small business administration pooled securities	26,917		28,362		0		28,362		0

Loans, net of allowance for credit losses (b)	9,247,964		9,253,381		—		—		9,253,381
Federal Home Loan Bank stock (c)	10,250		10,250		0		10,250		0
Cash surrender value of life insurance policies (d)	200,525		200,525		0		200,525		0
Financial liabilities
Deposit liabilities, other than time deposits (e)	$	10,042,541	$	10,042,541	$	—	$	10,042,541	$	—
Time certificates of deposits (f)	950,629		955,598		—		955,598		—
Federal Home Loan Bank borrowings (f)	35,740		35,885		—		35,885		—
Long-term borrowings (f)	32,773		32,033		0		32,033		0


Junior subordinated debentures (g)	62,851		70,238		—		70,238		—
Subordinated debentures (f)	49,696		46,486		—		—		46,486

(a)The fair values presented are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments and/or discounted cash flow analysis.

(b)Fair value of loans is measured using the exit price valuation method, determined primarily by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities or cash flows, while incorporating liquidity and credit assumptions. Additionally, this amount excludes individually assessed collateral dependent loans, which are deemed to be marked to fair value on a nonrecurring basis.

Fair Value Measurements at Reporting Date Using

Carrying
Value

Fair
Value

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

December 31, 2019
(Dollars in thousands)
Financial assets
Securities held to maturity(a)
U.S. government agency securities $ 12,874
$ 12,997
$ —
$ 12,997
$ —
U.S. Treasury securities 4,032
4,053
$ —
4,053
$ —
Agency mortgage-backed securities 397,414
405,802
—
405,802
—
Agency collateralized mortgage obligations 293,662
297,314
—
297,314
—
Single issuer trust preferred securities issued by banks 1,500
1,490
—
1,490
—
Small business administration pooled securities 31,324
31,607
—
31,607
—
Loans, net of allowance for credit losses(b) 8,780,384
8,613,635
—
—
8,613,635
Federal Home Loan Bank stock(c) 14,424
14,424
—
14,424
—
Cash surrender value of life insurance policies(d) 197,372
197,372
—
197,372
—
Financial liabilities
Deposit liabilities, other than time deposits(e) $ 7,752,052
$ 7,752,052
$ —
$ 7,752,052
$ —
Time certificates of deposits(f) 1,395,315
1,396,760
—
1,396,760
—
Federal Home Loan Bank borrowings(f) 115,748
115,881
—
115,881
—
Long-term borrowings (f) 74,906
72,219
—
72,219
—
Junior subordinated debentures(g) 62,848
65,603
—
65,603
—
Subordinated debentures(f) 49,601
52,870
—
—
52,870

(c)Federal Home Loan Bank stock has no quoted market value and is carried at cost; therefore the carrying amount approximates fair value.


~~(a)~~	The fair values presented are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments and/or discounted cash flow analysis.

~~(b)~~

Fair value of loans is measured using the exit price valuation method, determined primarily by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities or cash flows, while incorporating liquidity and credit assumptions. Additionally, this amount excludes collateral dependent impaired loans, which are deemed to be marked to fair value on a nonrecurring basis.


~~(c)~~	~~FHLB stock has no quoted market value and is carried at cost, therefore the carrying amount approximates fair value.~~


~~(d)~~	~~Cash surrender value of life insurance is recorded at its cash surrender value (or the amount that can be realized upon surrender of the policy), therefore carrying amount approximates fair value.~~


~~(e)~~	~~Fair value of demand deposits, savings and interest checking accounts and money market deposits is the amount payable on demand at the reporting date.~~


~~(f)~~	~~Fair value was determined by discounting anticipated future cash payments using rates currently available for instruments with similar remaining maturities.~~


~~(g)~~	~~Fair value was determined based upon market prices of securities with similar terms and maturities.~~

(d)Cash surrender value of life insurance policies is recorded at its cash surrender value (or the amount that can be realized upon surrender of the policy), therefore, carrying amount approximates fair value.

(e)Fair value of demand deposits, savings and interest checking accounts and money market deposits is the amount payable on demand at the reporting date.

(f)Fair value was determined by discounting anticipated future cash payments using rates currently available for instruments with similar remaining maturities.

(g)Fair value was determined based upon market prices of securities with similar terms and maturities.

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.

The Company considers its current use of financial instruments to be the highest and best use of the instruments.

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NOTE 128 - REVENUE RECOGNITION

A portion of the Company's noninterest income is derived from contracts with customers, and as such, the revenue recognized depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company considers the terms of the contract and all relevant facts and circumstances when applying this guidance. To ensure its alignment with this core principle, the Company measures revenue and the timing of recognition by applying the following five steps:


1.	~~Identify the contract(s) with 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~~

1.Identify the contract(s) with 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 has disaggregated its revenue from contracts with customers into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. The following table presents the revenue streams that the Company has disaggregated as of the periods indicated:


	Three Months Ended
		March 31 2021		March 31 2020
		(Dollars in thousands)
Deposit account fees (inclusive of cash management fees)		$	3,584	$	4,970
Interchange fees		1,903		4,104
ATM fees		625		639
Investment management - wealth management and advisory services		7,402		6,289
Investment management - retail investments and insurance revenue		902		540
Merchant processing income		320		393
Credit card income		236		183
Other noninterest income		1,125		1,212
Total noninterest income in-scope of ASC 606		16,097		18,330
Total noninterest income out-of-scope of ASC 606		9,149		8,105
Total noninterest income		$	25,246	$	26,435

Three Months Ended
March 31
2020 March 31
2019
(Dollars in thousands)
Deposit account fees (inclusive of cash management fees) $ 4,970
$ 4,406
Interchange fees 4,104
3,735
ATM fees 639
666
Investment management - wealth management and advisory services 6,289
6,069
Investment management - retail investments and insurance revenue 540
679
Merchant processing income 393
280
Credit card income 183
—
Other noninterest income 1,212
939
Total noninterest income in-scope of ASC 606 18,330
16,774
Total noninterest income out-of-scope of ASC 606 8,105
4,759
Total noninterest income $ 26,435
$ 21,533

In each of the revenue streams identified above, there were no significant judgments made in determining or allocating the transaction price, as the consideration and service requirements are generally explicitly identified in the associated contracts. Additional information related to each of the revenue streams is further noted below.

Deposit Account Fees

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. Revenue is recognized in conjunction with the various services being provided. For example, the Company may assess monthly fixed service fees associated with the customer having access to a deposit account, which can vary depending on the account type and daily account balance. In addition, the Company may also assess separate fixed fees associated with and at the time specific transactions are entered into by the customer. As such, the Company considers its performance obligations to be met concurrently with providing the account access or completing the requested deposit transaction.

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Cash Management

Cash management services are a subset of the deposit account fees revenue stream. These services primarily include ACH transaction processing, positive pay and remote deposit services. These services are also governed by separate agreements entered into with the customer. The fee arrangement for these services is structured to assess fees under one of two scenarios, either a per transaction fee arrangement or an earnings credit analysis arrangement. Under the per transaction fee arrangement, fixed fees are assessed concurrently with customers executing the transactions, and as such, the Company considers its performance obligations to be met concurrently with completing the requested transaction. Under the earnings credit analysis arrangement, the Company provides a monthly earnings credit to the customer that is negotiated and determined based on various factors. The credit is then available to absorb the per transaction fees that are assessed on the customer's deposit account activity for the month. Any amount of the transactional fees in excess of the earnings credit is recognized as revenue in that month.

Interchange Fees

The Company earns interchange revenue from its issuance of credit and debit cards granted through its membership in various card payment networks. The Company provides credit cards and debit cards to its customers which are authorized and settled through these payment networks, and in exchange, the Company earns revenue as determined by each payment network's interchange program. The revenue is recognized concurrently with the settlement of card transactions within each network.

ATM Fees

The Company deploys automated teller machines (ATMs) as part of its overall branch network. Certain transactions performed at the ATMs require customers to acknowledge and pay a fee for the requested service. Certain ATM fees are disclosed in the deposit account agreement fee schedules, whereas those assessed to non-Rockland Trust deposit holders are solely determined during the transaction at the machine.

The ATM fee is a fixed dollar per transaction amount, and as such, is recognized concurrently with the overall daily processing and settlement of the ATM activity.

Investment Management - Wealth Management and Advisory Services

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 client's request.

The asset management and/or custody fees are based upon a percentage of the monthly valuation of the principal assets in the customer's account, whereas fees for additional or special services are fixed in nature and are charged as services are rendered. As the fees are dependent on assets under management, which are susceptible to market factors outside of the Company's control, this variable consideration is constrained and therefore no revenue is estimated at contract initiation. As such, all revenue is recognized in correlation to the monthly management fee determinations or as transactional services are provided. Due to the fact that payments are primarily made subsequent to the valuation period, the Company records a receivable for revenue earned but not received. The following table provides the amount of investment management revenue earned but not received as of the ~~periods~~dates indicated:


	March 31, 2021		December 31, 2020
	(Dollars in thousands)
Receivables, included in other assets	$	4,826	$	4,636

March 31, 2020 December 31, 2019
(Dollars in thousands)
Receivables, included in other assets $ 1,912
$ 2,341

Investment Management - Retail Investments and Insurance Revenue

The Company offers the sale of mutual fund shares, unit investment trust shares, general securities, fixed and variable annuities and life insurance products through registered representatives who are both employed by the Company and licensed and contracted with various broker general agents to offer these products to the Company’s customer base. As such, the Company performs these services as an agent and earns a fixed commission on the sales of these products and services. To a lesser degree, production bonus commissions can also be earned based upon the Company meeting certain volume thresholds.

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In general, the Company recognizes commission revenue at the point of sale, and for certain insurance products, may also earn and recognize annual residual commissions commensurate with annual premiums being paid.

Merchant Processing Income

The Company refers customers to third party merchant processing partners in exchange for commission and fee income. The income earned is comprised of multiple components, including a fixed referral fee per each referred customer, a rebate amount determined primarily as a percentage of net revenue earned by the third party from services provided to each referred customer, and overall production bonus commissions if certain new account production thresholds are met. Merchant processing income is recognized in conjunction with either completing the referral to earn the fixed fee amount or as the merchant activity is processed to derive the Company's rebate and/or production bonus amounts.

Credit Card Income

The Company provides consumer and business credit card solutions to its customers by soliciting new accounts on behalf of a third party credit card provider in exchange for a fee. The income earned is comprised of new account incentive payments as well as a percentage of interchange income earned by the third party provider offering the consumer and business purpose revolving credit accounts. The credit card income is recognized in conjunction with the establishment of each new credit card member or as the interchange is earned by the third party in connection with net purchase transactions made by the credit card member.

Other Noninterest Income

The Company earns various types of other noninterest income that fall within the scope of the new revenue recognition rules, and have been aggregated into one general revenue stream in the table noted above. This amount includes, but is not limited to, the following types of revenue with customers:

Safe Deposit Rent

The Company rents out the use of safe deposit boxes to its customers, which can be accessed when the bank is open for business. The safe deposit box rental fee is paid upfront and is recognized as revenue ratably over the annual term of the contract.

1031 Exchange Fee Revenue

The Company provides like-kind exchange services pursuant to Section 1031 of the Internal Revenue Code. Fee income is recognized in conjunction with completing the exchange transactions.

Foreign Currency

The Company earns fee income associated with various transactions related to foreign currency product offerings, including foreign currency bank notes and drafts and foreign currency wires. The majority of this income is derived from commissions earned related to customers executing the above mentioned foreign currency transactions through arrangements with third party correspondents.

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NOTE 139 - OTHER COMPREHENSIVE INCOME (LOSS)

The following tables present a reconciliation of the changes in the components of other comprehensive income (loss) for the ~~dates~~periods indicated, including the amount of income tax (expense) benefit allocated to each component of other comprehensive income (loss):

Three Months Ended
March 31, 2020
Pre Tax
Amount Tax (Expense)
Benefit After Tax
Amount
(Dollars in thousands)
Change in fair value of securities available for sale $ 12,123
$ (2,776 ) $ 9,347
Less: net security losses reclassified into other noninterest expense —
—
—
Net change in fair value of securities available for sale 12,123
(2,776 ) 9,347

Change in fair value of cash flow hedges 33,567
(9,443 ) 24,124
Less: net cash flow hedge gains reclassified into interest income or interest expense 1,586
(446 ) 1,140
Net change in fair value of cash flow hedges 31,981
(8,997 ) 22,984

Net unamortized loss related to defined benefit pension and other postretirement adjustments arising during the period (1,389 ) 391
(998 )
Amortization of net actuarial losses 245
(69 ) 176
Amortization of net prior service costs 69
(19 ) 50
Net change in other comprehensive income for defined benefit postretirement plans (1) (1,075 ) 303
(772 )
Total other comprehensive income $ 43,029
$ (11,470 ) $ 31,559


	Three Months Ended March 31, 2021
		Pre Tax Amount		Tax (Expense) Benefit		After Tax Amount
		(Dollars in thousands)
Change in fair value of securities available for sale		$	(10,361)	$	2,587	$	(7,774)
Less: net security losses reclassified into other noninterest expense		0		0		0
Net change in fair value of securities available for sale		(10,361)		2,587		(7,774)

Change in fair value of cash flow hedges		(4,779)		1,344		(3,435)
Less: net cash flow hedge gains reclassified into interest income or interest expense		4,380		(1,232)		3,148

Net change in fair value of cash flow hedges		(9,159)		2,576		(6,583)

Net unamortized gain related to defined benefit pension and other postretirement adjustments arising during the period		653		(184)		469

Amortization of net actuarial losses		442		(124)		318
Amortization of net prior service costs		44		(12)		32

Net change in other comprehensive income for defined benefit postretirement plans (1)		1,139		(320)		819
Total other comprehensive loss		$	(18,381)	$	4,843	$	(13,538)


	Three Months Ended March 31, 2019										Three Months Ended March 31, 2020
	Pre Tax Amount			Tax (Expense) Benefit			After Tax Amount					Pre Tax Amount		Tax (Expense) Benefit		After Tax Amount
	(Dollars in thousands)											(Dollars in thousands)
Change in fair value of securities available for sale	$	6,178		$	(1,449	)	$	4,729		Change in fair value of securities available for sale		$	12,123	$	(2,776)	$	9,347
Less: net security gains reclassified into other noninterest income (expense)	—			—			—
Less: net security losses reclassified into other noninterest expense										Less: net security losses reclassified into other noninterest expense		0		0		0
Net change in fair value of securities available for sale	6,178			(1,449		)	4,729			Net change in fair value of securities available for sale		12,123		(2,776)		9,347

Change in fair value of cash flow hedges	4,996			(1,406		)	3,590			Change in fair value of cash flow hedges		33,567		(9,443)		24,124
Less: net cash flow hedge gains reclassified into interest income or interest expense	424			(119		)	305			Less: net cash flow hedge gains reclassified into interest income or interest expense		1,586		(446)		1,140

Net change in fair value of cash flow hedges	4,572			(1,287		)	3,285			Net change in fair value of cash flow hedges		31,981		(8,997)		22,984

Net unamortized loss related to defined benefit pension and other postretirement adjustments arising during the period	(11		)	3			(8		)	Net unamortized loss related to defined benefit pension and other postretirement adjustments arising during the period		(1,389)		391		(998)
Amortization of net actuarial gains	(2		)	1			(1		)

Amortization of net actuarial losses										Amortization of net actuarial losses		245		(69)		176
Amortization of net prior service costs	69			(20		)	49			Amortization of net prior service costs		69		(19)		50

Net change in other comprehensive income for defined benefit postretirement plans (1)	56			(16		)	40			Net change in other comprehensive income for defined benefit postretirement plans (1)		(1,075)		303		(772)
Total other comprehensive income	$	10,806		$	(2,752	)	$	8,054		Total other comprehensive income		$	43,029	$	(11,470)	$	31,559

(1)The amortization of prior service costs is included in the computation of net periodic pension cost as disclosed in Note 15 "Employee Benefit Plans" within the ~~Employee Benefit Plans footnote~~Notes to the Consolidated Financial Statements included in Item 8 of the Company's ~~Annual Report on~~2020 Form ~~10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission.~~10-K.

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Information on the Company’s accumulated other comprehensive income (loss), net of tax, is comprised of the following components as of the ~~periods~~dates indicated:


	Unrealized Gain (Loss) on Securities		Unrealized Gain on Cash Flow Hedge		Defined Benefit Postretirement Plans		Accumulated Other Comprehensive Income (Loss)
	(Dollars in thousands)
	2021
Beginning balance: January 1, 2021	$	13,255	$	33,276	$	(5,836)	$	40,695
Net change in other comprehensive income (loss)	(7,774)		(6,583)		819		(13,538)
Ending balance: March 31, 2021	$	5,481	$	26,693	$	(5,017)	$	27,157
	2020
Beginning balance: January 1, 2020	$	4,398	$	16,479	$	(2,708)	$	18,169


Net change in other comprehensive income (loss)	9,347		22,984		(772)		31,559
Ending balance: March 31, 2020	$	13,745	$	39,463	$	(3,480)	$	49,728

Unrealized Gain (Loss)
on Securities
Unrealized Gain on Cash Flow Hedge Defined Benefit Postretirement Plans Accumulated Other Comprehensive Income (Loss)
(Dollars in thousands)
2020
Beginning balance: January 1, 2020 $ 4,398
$ 16,479
$ (2,708 ) $ 18,169
Net change in other comprehensive income (loss) 9,347
22,984
(772 ) 31,559
Ending balance: March 31, 2020 $ 13,745
$ 39,463
$ (3,480 ) $ 49,728
2019
Beginning balance: January 1, 2019 $ (5,947 ) $ 6,148
$ (1,374 ) $ (1,173 )
Net change in other comprehensive income (loss) 4,729
3,285
40
8,054
Ending balance: March 31, 2019 $ (1,218 ) $ 9,433
$ (1,334 ) $ 6,881

NOTE 1410 - COMMITMENTS AND CONTINGENCIES

Financial Instruments with Off-Balance Sheet Risk

In the normal course of business, the Company enters into various transactions to meet the financing needs of its customers, which, in accordance with GAAP, are not included in its consolidated balance sheets. These transactions include commitments to extend credit and standby letters of credit, and ~~loans sold~~loan exposures with recourse, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. The Company minimizes its exposure to loss under these commitments by subjecting them to credit approval and monitoring procedures.

The Company enters into contractual commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Substantially all of these commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of loan funding.

The Company has certain loan exposures for which there is recourse. These loan relationships could require the Company to repurchase or cover certain losses per agreements for certain loans that are either sold or referred to third parties.

Standby letters of credit are written conditional commitments issued 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 the 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. If the commitment were funded, the Company would be entitled to seek recovery from the customer. The Company’s policies generally require that standby letter of credit arrangements contain security and debt covenants similar to those contained in loan agreements.

The fees collected in connection with the issuance of standby letters of credit are representative of the fair value of the Company's obligation undertaken in issuing the guarantee. In accordance with applicable accounting standards related to guarantees, fees collected in connection with the issuance of standby letters of credit are deferred. The fees are then recognized in income proportionately over the life of the standby letter of credit agreement. The deferred standby letter of credit fees represent the fair value of the Company's potential obligations under the standby letter of credit guarantees.

The following table summarizes the above financial instruments at the dates indicated:


	March 31, 2021		December 31, 2020
	(Dollars in thousands)
Commitments to extend credit	$	3,561,078	$	3,301,692
Standby letters of credit	20,385		20,686
Deferred standby letter of credit fees	169		164
Loan exposures with recourse	261,713		303,265

March 31, 2020 December 31, 2019
(Dollars in thousands)
Commitments to extend credit $ 3,296,926
$ 3,337,930
Standby letters of credit 20,100
21,565
Deferred standby letter of credit fees 166
158
Loans sold with recourse 426,342
404,532

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Lease Commitments

The Company leases office space, space for ATM locations, and certain branch locations under ~~noncancelable~~noncancellable operating leases. ~~Several~~Several of these leases contain renewal options to extend lease terms for a period of 1 to 10 years. During the fourth quarter of 2020, the Company committed to pay lease termination fees of $4.8 million, incurred in connection with two branch closure decisions. It is anticipated that these payments will be made in the second quarter of 2021.

There has been no significant change in the future minimum lease payments payable by the Company since December 31, ~~2019.~~2020. See the Company's ~~Annual Report on~~2020 Form 10-K ~~for the fiscal year ended December 31, 2019~~ for information regarding leases and other commitments.

Other Contingencies

At March 31, ~~2020, Rockland Trust~~2021, the Bank was involved in pending lawsuits that arose in the ordinary course of business. Management has reviewed these pending lawsuits with legal counsel and has taken into consideration the view of counsel as to their outcome. In the opinion of management, the final disposition of pending lawsuits is not expected to have a material adverse effect on the Company’s financial position or results of operations.

~~The~~Historically, the Bank iswas required to maintain certain reserve requirements of vault cash and/or deposits with the Federal Reserve Bank of ~~Boston. There~~Boston, however the reserve requirement was reduced to zero by the Federal Reserve during the first quarter of 2020 in response to the COVID-19 pandemic, and as such, there was 0 reserve requirement at March 31, ~~2020 and~~2021. There was also 0 reserve requirement balance necessary at December 31, ~~2019, respectively.~~2020 due to cash balances held at the Federal Reserve that were in excess of reserve requirements.

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NOTE 1511 - LOW INCOME HOUSING PROJECT INVESTMENTS

The Company has invested in low income housing projects that generate Low Income Housing Tax Credits (“LIHTC”) which provide the Company with tax credits and operating loss tax benefits over a period of approximately 15 years. None of the original investment is expected to be repaid.

The following table presents certain information related to the Company's investments in low income housing projects as of the dates indicated:


	March 31 2020			December 31 2019			March 31 2021			December 31 2020
	(Dollars in thousands)						(Dollars in thousands)
Original investment value	$	110,669		$	96,275	Original investment value	$	152,766		$	128,752
Current recorded investment	84,679			72,510		Current recorded investment	117,915			97,435
Unfunded liability obligation	43,427			34,967		Unfunded liability obligation	66,968			49,586
Tax credits and benefits	11,194		(1)	7,342		Tax credits and benefits	14,202		(1)	9,404
Amortization of investments	9,211		(2)	5,645		Amortization of investments	12,298		(1)	7,552
Net income tax benefit	1,983		(3)	1,696		Net income tax benefit	1,904		(1)	1,851

(1) ~~This amount reflects anticipated tax credits and tax benefits~~Amounts shown represent the full year impact for the ~~full~~ year ended December 31, ~~2020.~~2021.

~~(2) The amortization amount reduces the tax credits and benefits anticipated for the full year ended December 31, 2020.~~

~~(3) This amount represents the net tax benefit expected to be realized for the full year ended December 31, 2020 in determining the Company's effective tax rate.~~

NOTE 1612 - SUBSEQUENT EVENTS

~~Subsequent to March 31, 2020~~On April 22, 2021, the Company ~~participated in~~announced the ~~government-sponsored Payroll Protection Program ("PPP"), helping to deploy stimulus funds to small businesses within the community. As~~signing of ~~the filing date, the Company has processed loans, with an aggregate dollar value of $818.9 million. The average and median loan sizes of the PPP loans for~~a definitive agreement under which the Company ~~has obtained an SBA guarantee are approximately $160,000~~will

acquire Meridian Bancorp, Inc. ("Meridian") and ~~$41,000, respectively. Additionally,~~Rockland Trust Company will merge with East Boston Savings Bank (the "Merger Agreement").

Under the Merger Agreement each share of Meridian common stock will be exchanged for 0.2750 shares of the Company's common stock. The transaction is intended to qualify as a tax-free reorganization for federal income tax purposes and to provide Meridian stockholders with a tax-free exchange for the Company common stock consideration they will receive in the merger.

The Company anticipates ~~receiving $25.9~~issuing approximately 14.2 million shares of its common stock in ~~process fee income for~~ the ~~loans that have been issued under~~merger. Based upon the ~~PPP, which will be deferred through net interest income over the life~~closing price of $79.57 per share of the ~~loans.~~

~~Additionally,~~Company's common stock on April 21, 2021, the transaction is valued at approximately $1.15 billion. The Boards of Directors of each company unanimously approved the transaction, which is subject to certain conditions, including the receipt of required regulatory approvals, approval of both the stockholders of Meridian and the shareholders of the Company, ~~has been offering needs based payment relief options for commercial~~ and small business loans, residential mortgages, and home equity loans and lines of credit and monitors loan modification requests daily. These modifications will not be accounted as TDRs if the borrower was in compliance with the terms of their loans as of December 31, 2019. The following table summarizes the loan modification requests through the date of this filing which are anticipated to be approved:other customary conditions.

Loan Modification Requests by Loan Category:
# of Loans % of Total Loans (#) Balance as of March 31, 2020 % of Total Loans ($)
(Dollars in thousands)
Commercial and industrial 308
0.69 % $ 163,889
1.84 %
Commercial real estate 557
1.27 % 967,643
10.86 %
Construction 19
0.04 % 37,811
0.42 %
Small Business 289
0.65 % 21,781
0.24 %
Residential real estate 438
0.99 % 185,530
2.08 %
Home equity 308
0.69 % 44,695
0.50 %
Other consumer 22
0.05 % 559
0.01 %
Total 1,941
4.38 % $ 1,421,908
15.95 %

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements, notes and tables included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020, filed with the Securities and Exchange ~~Commission.~~Commission (the "2020 Form 10-K").

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this "Report"), in ~~the~~ Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not historical facts and include expressions about management’s confidence and strategies and management’s expectations about new and existing programs and products, acquisitions, relationships, opportunities, taxation, technology, market conditions and economic expectations. These statements may be identified by forward-looking terminology such as “should,” “expect,” “believe,” “view,” “opportunity,” “allow,” “continues,” “reflects,” “typically,” “usually,” “anticipate,” or similar statements or variations of such terms. Such forward-looking statements involve certain risks and uncertainties and our actual results may differ materially from such forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking

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statements, in addition to those risk factors listed under the “Risk Factors” section of the ~~Company's Annual Report on~~2020 Form 10-K ~~for the fiscal year ended December 31, 2019,~~ include, but are not limited to:

•further weakening in the United States economy in general and the regional and local economies within the New England region and the Company’s market area, including future weakening caused by the COVID-19 pandemic;

•the length and extent of economic contraction as a result of the COVID-19 pandemic;

•unanticipated loan delinquencies, loss of collateral, decreased service revenues, and other potential negative effects on our business caused by severe weather, pandemics or other external events;

•adverse changes or volatility in the local real estate market;

•adverse changes in asset quality ~~including an~~and any unanticipated credit deterioration in our loan portfolio including those related to one or more large commercial relationships;

•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;

•additional regulatory oversight and related compliance costs, including the additional costs associated with the Company's increase in assets to over $10 billion;

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

•higher than expected tax expense, resulting from failure to comply with general tax laws or changes in tax ~~laws, or failure to comply with requirements of the federal New Markets Tax Credit program;~~laws;

•changes in market interest rates for interest earning assets and/or interest bearing liabilities and changes related to the phase-out of LIBOR;

•increased competition in the Company’s market ~~area;~~areas;

•adverse weather, changes in climate, natural disasters, the emergence of widespread health emergencies or pandemics, including the magnitude and duration of the COVID-19 pandemic, other public health crises or man-made events could negatively affect our local economies or disrupt our operations, which would have an adverse effect on our business or results of operations;

•a deterioration in the conditions of the securities markets;

•a deterioration of the credit rating for U.S. long-term sovereign debt;

•inability to adapt to changes in information technology, including changes to industry accepted delivery models driven by a migration to the internet as a means of service delivery;

•electronic fraudulent activity within the financial services industry, especially in the commercial banking sector;

•adverse changes in consumer spending and savings habits;

•failure to consummate or a delay in consummating the acquisition of Meridian Bancorp, Inc., which is subject to certain standard conditions, including the receipt of required regulatory approvals, approval by the stockholders of Meridian Bancorp, Inc. and the shareholders of the Company, and other customary conditions;

•the inability to realize expected revenue synergies from merger transactions in the amounts or in the timeframe anticipated;

•inability to retain customers and employees, including those of previous mergers;

•the effect of laws and regulations regarding the financial services industry;

•changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) generally applicable to the Company’s business;

•the Company's potential judgments, claims, damages, penalties, fines and reputational damage resulting from pending or future litigation and regulatory and government actions, including as a result of our participation in and execution of government programs related to the COVID-19 pandemic;

•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 including, but not limited to, , changes to how the Company accounts for credit losses;

•cyber security attacks or intrusions that could adversely impact our businesses; and

•other unexpected material adverse changes in our operations or earnings.

Further, the foregoing factors may be exacerbated by the ultimate impact of the COVID-19 pandemic, which is unknown at this time. Statements about the COVID-19 pandemic and its potential impact on the Company's business, financial condition, liquidity and results of operations may constitute forward-looking statements and are subject to the risk that actual results may differ, possibly materially, from what is reflected in such statements due to factors and future developments that are uncertain, unpredictable and, in many cases, beyond the Company's control, including the scope, duration and extent of the pandemic and any resurgences, actions taken by governmental authorities in response to the pandemic and the direct and indirect impact on the Company’s employees, customers, business and third-parties with which the Company conducts business.

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Except as required by law, the Company disclaims any intent or obligation to update publicly any such forward-looking statements, whether in response to new information, future events or otherwise. Any public statements or disclosures by the Company following this ~~Quarterly~~ Report ~~on Form 10-Q~~ which modify or impact any of the forward-looking statements contained in this ~~Quarterly~~ Report ~~on Form 10-Q~~ will be deemed to modify or supersede such statements in this ~~Quarterly Report on Form 10-Q.~~Report.

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Selected Quarterly Financial Data

The selected consolidated financial and other data of the Company set forth below does not purport to be complete and should be read in conjunction with, and is qualified in its entirety by, the more detailed information, including the Consolidated Financial Statements and related notes, appearing elsewhere in this ~~Quarterly Report on Form 10-Q.~~Report.


				Three Months Ended
	March 31 2021			December 31 2020			September 30 2020			June 30 2020			March 31 2020
	(Dollars in thousands, except per share data)
Financial condition data
Securities	$	1,431,430		$	1,162,317		$	1,106,782		$	1,174,894		$	1,236,780
Loans	9,246,691			9,392,866			9,405,193			9,359,648			8,916,430
Allowance for credit losses	(107,549)			(113,392)			(115,625)			(112,176)			(92,376)
Goodwill and other intangible assets	527,894			529,313			530,749			532,202			533,672
Total assets	13,773,914			13,204,301			13,173,665			13,022,500			11,980,240
Total deposits	11,593,524			10,993,170			10,851,308			10,716,821			9,416,198
Total borrowings	176,387			181,060			295,734			295,701			545,985
Stockholders’ equity	1,715,371			1,702,685			1,689,724			1,671,692			1,679,656
Nonperforming loans	59,201			66,861			98,025			48,814			48,040
Nonperforming assets	59,201			66,861			98,025			48,814			48,040
Income statement
Interest income	$	99,637		$	96,805		$	97,919		$	99,965		$	107,380
Interest expense	4,053			5,362			7,036			8,867			13,076
Net interest income	95,584			91,443			90,883			91,098			94,304
Provision for credit losses	(2,500)			—			7,500			20,000			25,000
Noninterest income	25,246			27,468			29,347			28,190			26,435
Noninterest expenses	69,682			73,727			66,658			66,607			66,840
Net income	41,711			34,641			34,873			24,902			26,751
Per share data
Net income—basic	$	1.26		$	1.05		$	1.06		$	0.76		$	0.78
Net income—diluted	1.26			1.05			1.06			0.76			0.78
Cash dividends declared	0.48			0.46			0.46			0.46			0.46
Book value per share	51.94			51.65			51.27			50.75			50.50
Tangible book value per share (1)	35.96			35.59			35.17			34.59			34.46
Performance ratios
Return on average assets	1.26		%	1.04		%	1.07		%	0.79		%	0.94		%
Return on average common equity	9.87		%	8.10		%	8.21		%	5.97		%	6.22		%
Net interest margin (on a fully tax equivalent basis)	3.25		%	3.10		%	3.13		%	3.25		%	3.74		%
Equity to assets	12.45		%	12.89		%	12.83		%	12.84		%	14.02		%
Dividend payout ratio	36.35		%	43.76		%	43.45		%	61.85		%	56.54		%
Asset Quality Ratios
Nonperforming loans as a percent of gross loans	0.64		%	0.71		%	1.04		%	0.52		%	0.54		%
Nonperforming assets as a percent of total assets	0.43		%	0.51		%	0.74		%	0.37		%	0.40		%
Allowance for credit losses as a percent of total loans	1.16		%	1.21		%	1.23		%	1.20		%	1.04		%
Allowance for credit losses as a percent of nonperforming loans	181.67		%	169.59		%	117.95		%	229.80		%	192.29		%

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Three Months Ended
March 31
2020 December 31
2019 September 30
2019 June 30
2019 March 31
2019
(Dollars in thousands, except per share data)
Financial condition data
Securities $ 1,236,780
$ 1,190,670
$ 1,192,229
$ 1,213,253
$ 1,083,126
Loans 8,916,430
8,873,639
8,913,501
8,950,787
6,976,872
Allowance for credit losses (92,376 ) (67,740 ) (66,942 ) (65,960 ) (65,140 )
Goodwill and other intangible assets 533,672
535,492
535,869
537,896
270,444
Total assets 11,980,240
11,395,165
11,538,639
11,603,199
8,997,457
Total deposits 9,416,198
9,147,367
9,326,091
9,307,915
7,463,602
Total borrowings 545,985
303,103
292,791
499,702
308,040
Stockholders’ equity 1,679,656
1,708,143
1,682,324
1,636,003
1,104,538
Nonperforming loans 48,040
48,049
45,702
45,294
43,331
Nonperforming assets 48,040
48,049
48,202
48,183
43,331
Income statement
Interest income $ 107,380
$ 113,703
$ 119,624
$ 122,144
$ 91,543
Interest expense 13,076
13,710
15,026
16,125
9,018
Net interest income 94,304
99,993
104,598
106,019
82,525
Provision for loan losses 25,000
4,000
—
1,000
1,000
Noninterest income 26,435
33,297
31,816
28,648
21,533
Noninterest expenses 66,840
67,445
67,533
93,032
56,311
Net income 26,751
47,477
51,845
30,628
35,225
Per share data
Net income—basic $ 0.78
$ 1.38
$ 1.51
$ 0.89
$ 1.25
Net income—diluted 0.78
1.38
1.51
0.89
1.25
Cash dividends declared 0.46
0.44
0.44
0.44
0.44
Book value per share 50.50
49.69
48.95
47.67
39.26
Tangible book value per share (1) 34.46
34.11
33.36
32.00
29.64
Performance ratios
Return on average assets 0.94 % 1.64 % 1.78 % 1.06 % 1.62 %
Return on average common equity 6.22 % 11.06 % 12.33 % 7.59 % 13.10 %
Net interest margin (on a fully tax equivalent basis) 3.74 % 3.90 % 4.03 % 4.09 % 4.14 %
Equity to assets 14.02 % 14.99 % 14.58 % 14.10 % 12.28 %
Dividend payout ratio 56.54 % 31.85 % 29.13 % 40.42 % 30.29 %
Asset Quality Ratios


Capital ratios
Equity to assets	12.45	%	12.89	%	12.83	%	12.84	%	14.02	%
Tangible equity to tangible assets (1)	8.96	%	9.26	%	9.17	%	9.12	%	10.01	%
Tier 1 leverage capital ratio	9.63	%	9.56	%	9.52	%	9.57	%	10.74	%
Common equity tier 1 capital ratio	13.16	%	12.67	%	12.41	%	12.26	%	11.95	%
Tier 1 risk-based capital ratio	13.85	%	13.34	%	13.08	%	12.94	%	12.60	%
Total risk-based capital ratio	15.61	%	15.13	%	14.87	%	14.73	%	14.13	%

(1) Represents a non-GAAP measure. For reconciliation to GAAP book value per share, see Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations - Executive Level Overview - Non-GAAP Measures" below.

Nonperforming loans as a percent of gross loans 0.54 % 0.54 % 0.51 % 0.51 % 0.62 %
Nonperforming assets as a percent of total assets 0.40 % 0.42 % 0.42 % 0.42 % 0.48 %
Allowance for credit losses as a percent of total loans 1.04 % 0.76 % 0.75 % 0.74 % 0.93 %
Allowance for credit losses as a percent of nonperforming loans 192.29 % 140.98 % 146.47 % 145.63 % 150.33 %
Capital ratios
Tier 1 leverage capital ratio 10.74 % 11.28 % 10.83 % 10.45 % 10.64 %
Common equity tier 1 capital ratio 11.95 % 12.86 % 12.52 % 12.08 % 12.09 %
Tier 1 risk-based capital ratio 12.60 % 13.53 % 13.19 % 12.75 % 13.11 %
Total risk-based capital ratio 14.13 % 14.83 % 14.88 % 14.42 % 15.28 %

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~~(1)~~	~~Represents a non-GAAP measure. For reconciliation to GAAP book value per share, see Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations - Executive Level Overview - Non-GAAP Measures" below.~~

Executive Level Overview

Management evaluates the Company's operating results and financial condition using measures that include net income, earnings per share, return on assets and equity, return on tangible common equity, net interest margin, tangible book value per share, asset quality indicators, and many others. These metrics are used by management to make key decisions regarding the Company's balance sheet, liquidity, interest rate sensitivity, and capital resources and assist with identifying opportunities for improving the Company's financial position or operating results. The ~~results for~~Company is focused on organic growth, but will also consider acquisition opportunities that can provide a satisfactory financial return.

On April 22, 2021 the ~~first~~Company announced the signing of a definitive merger agreement with Meridian Bancorp, Inc. ("Meridian"), which is expected to close in the fourth quarter of ~~2020 were significantly impacted by $25.0 million of loan provision expense. Assumptions regarding the impact~~2021. The closing of the ~~novel coronavirus ("COVID-19") pandemic were the primary driver~~Meridian acquisition is subject to certain conditions including approval of the ~~size~~transaction by Meridian and the Company's shareholders, receipt of required regulatory approvals, and other standard conditions.

During the ~~credit loss allowance. The full macroeconomic impacts of~~ongoing COVID-19 pandemic, the pandemic remain unknown and are continuing to unfold, however the social distancing restrictions that have been put in place for public safety have led to a decline in consumer spending, and historically high levels of unemployment, as workplaces have been forced to shut down or severely limit operations. The duration of these restrictions is unknown, therefore the Company is not able to provide any assurances that the Company’s earnings, asset quality, regulatory capital ratios and economic condition will not be materially adversely impacted on a short term or long term basis.

~~The~~ Company has been and ~~continues to remain~~remains committed to supporting and working with its customers as they navigate these unprecedented times. The Company has ~~instituted~~abided by government mandates requiring a temporary moratorium on foreclosures and has offered a variety of relief measures to its customers consistent with prudent banking principles and regulatory guidance. These relief measures ~~may include:~~have included: temporary deferrals of loan payments, waiving certain fees and permitting customers easier access to their deposits. ~~Additionally, the Company is participating in the government-sponsored Paycheck Protection Program ("PPP") loan program designed to help deploy stimulus funds to businesses within the community.~~ The Company’s charitable foundations have engaged and will continue to engage in outreach to local communities during this difficult time and have committed funds to be made available to key nonprofits with urgent needs, such as local food banks.

~~From a capital standpoint,~~ The Company remains an active participant in the ~~Company has deployed stress-testing scenarios incorporating adverse assumptions specific~~government-sponsored Paycheck Protection Program ("PPP") designed to help deploy stimulus funds in the ~~current environment. Management will continue~~form of loans to ~~use~~businesses within the ~~results~~community, funding an additional $340.0 million as part of ~~these scenarios to guide~~ the ~~ongoing management~~second round program during the first quarter of ~~capital. Additionally, while the aforementioned modifications and~~2021, bringing total outstanding PPP loans ~~will put a temporary strain on~~to $846.3 million at March 31, 2021.

While the Company's liquidity, management believes that there is sufficient sources of available liquidity through various existing channels primarily through the Federal Home Loan Bank and the Federal Reserve. While management is unable to know with certainty the direct, indirect, and futurefull macroeconomic impacts of the COVID-19 pandemic orhave yet to be fully determined, overall conditions have begun to improve as a result of vaccine availability, leading to the ~~extent~~re-opening of ~~those impacts, management will continue to monitor~~businesses and loosening of certain travel restrictions and social distancing measures. Despite the ~~impacts~~observed improvements, the future outlook of the COVID-19 pandemic remains highly dependent on the speed of vaccine administration, the efficacy of the vaccines and the possibility for resurgences of COVID-19 ~~diligently.~~or other variants of the virus. As a result, the Company is not able to provide any assurances that the Company’s earnings, asset quality, regulatory capital ratios and economic condition will not be materially adversely impacted on a short term or long term basis.

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Interest-Earning Assets

~~Management’s asset strategy typically emphasizes loan growth, primarily in the commercial and home equity portfolios.~~ The results depicted in the following table reflect the trend of the Company's interest-earning assets over the past five quarters. ~~For~~Management’s asset strategy typically emphasizes loan growth, primarily in the commercial and home equity portfolios however, during the first quarter of ~~2020,~~2021, the increase in interest-earning assets was primarily driven ~~primarily~~ by ~~an increase~~growth in cash balances ~~reflecting~~attributable to elevated deposits from PPP fundings and government stimulus payments, as well as purchases of investment securities made during the ~~Company's proactive approach~~quarter to ~~increasing on-balance sheet liquidity.~~effectively deploy the excess cash. Loan growth decreased slightly during the quarter as strong originations continued to be constrained by paydowns and refinancing activity.

Management strives to be disciplined about loan pricing and considers interest rate sensitivity when generating loan assets. In addition, management takes a disciplined approach to credit underwriting, seeking to avoid undue credit risk and loan losses.

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Funding and Net Interest Margin

The Company's overall sources of funding reflect strong business and retail deposit growth with a management emphasis ~~over~~on core deposit growth to fund loans. ~~However, during~~During the first quarter of ~~2020,~~2021, the Company realized growth in deposits, which increased ~~its borrowings~~$600.4 million, or 5.5%, from December 31, 2020 to $11.6 billion at March 31, 2021, primarily attributable to a combination of government stimulus payments and loan fundings under the second round of the PPP. Core deposits rose to 90.87% of total deposits at March 31, 2021, as ~~part of its overall liquidity management within this uncertain environment.~~the higher-cost time deposits continued to run-off. The following chart shows the sources of funding and the percentage of core deposits to total deposits for the trailing five quarters:

As of March 31, 2020, core deposits comprised 82.62% of total deposits, which is lower than the year ago period due to the acquisition of the time deposit base of Blue Hills Bancorp, Inc., parent of Blue Hills Bank (collectively "BHB"). The cost of deposits for the first quarter remained at 0.48%, when compared to the fourth quarter of 2019. The Company's net interest margin was ~~3.74%~~3.25% for the first quarter ~~ended March 31, 2020,~~of 2021, reflecting a ~~sixteen~~15 basis point ~~decrease~~increase from the fourth quarter of ~~2019,~~2020. The increase was primarily driven by increased PPP fee recognition of $5.8 million during the quarter. Also benefiting the margin was the reduced cost of deposits, which ~~was driven primarily by reduced purchase accounting loan accretion~~decreased 4 basis points during the first quarter of 2021 to 0.10%. The table below illustrates the factors that contributed to this increase in the net interest margin for the first quarter 2021:


Net interest margin for the three months ended December 31, 2020	3.10	%
Excess liquidity (cash) Levels	(0.03)	%
Securities	(0.05)	%
Loan yields	(0.02)	%
Nonaccrual interest impact, net	(0.03)	%
PPP loan impact	0.20	%
Loan purchase accounting (fair value mark amortization/accretion)	0.03	%
Decreased cost of funds	0.05	%
Net interest margin for the three months ended March 31, 2021	3.25	%

Table of Contents

The following table shows the net interest margin and ~~lower asset yields linked to Federal Reserve Rate cuts.~~cost of deposits trends for the trailing five quarters:

Noninterest Income

~~Management continues to focus on noninterest~~ Noninterest income ~~which~~ is primarily comprised of deposit account fees, interchange and ATM fees, investment management fees and mortgage banking income. The following chart shows the components of noninterest income over the past five quarters:

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Expense Control

Management seeks to take a balanced approach to noninterest expense control by monitoring ongoing operating expenses while making needed capital expenditures and prudently investing in growth initiatives. The Company’s primary expenses arise from Rockland Trust’s employee salaries and benefits, as well as expenses associated with buildings and equipment. The following chart depicts the Company's efficiency ratio on a GAAP basis (calculated by dividing noninterest expense by the sum of noninterest income and net interest income), as well as the Company's efficiency ratio on a non-GAAP operating basis, if applicable (calculated by dividing noninterest expense, excluding certain noncore items, by the sum of noninterest income, excluding certain noncore items, and net interest income), over the past five quarters:

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

~~Tax Effectiveness~~

~~The Company participates~~Noninterest expense for the fourth quarter of 2020 included approximately $5.2 million in ~~federal~~pre-tax expenses primarily attributable to branch closing decisions and ~~state tax credit programs designed to promote economic development, affordable housing, and job creation. The Company continues to make low-income housing tax credit~~loss on the sale of investments. The Company has also established security corporation subsidiaries and, through its subsidiaries, purchased tax-exempt bonds. Federal and state tax credit program participation and other tax strategies help the Company operate in a more tax effective manner and sometimes also create a competitive advantage for Rockland Trust and its community development subsidiaries. DuringNoninterest expenses decreased during the first quarter of ~~2020, the Company’s effective tax rate was 7.43%,~~2021, as compared to ~~23.23% at December 31, 2019. The tax rate for~~ the fourth quarter ~~includes a $4.7 million discrete tax benefit recognized~~of 2020, but remained elevated primarily due to increases in ~~the quarter associated with revised net operating loss (NOL) carryback provisions included in the Coronavirus, Aid, Relief~~salaries and ~~Economic Security Act ("CARES Act").~~employee benefits and consultant fees.

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Capital

The Company's approach with respect to revenue ~~expense,~~ and ~~tax effectiveness~~expense is designed to promote long-term earnings growth, which in turn contributes to capital growth. ~~During the first quarter of 2020, the Company executed~~Strong earnings retention has contributed to capital growth, both on its previously announced stock repurchase plan for 1.5 million shares, repurchasing 1.2 million shares of common stock, at a $73.2 million cost. The Company repurchased the remaining 300,000 shares in early April, completing the repurchase of all 1.5 million shares under the plan at an ~~average~~absolute level and per share ~~price of $63.39.~~basis. The following chart shows the Company's book value and tangible book value per share over the past five quarters (see "Non-GAAP Measures" below for a reconciliation of non-GAAP measures):

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

~~The Company's growth in capital enables the payment of cash dividends.~~ The Company declared quarterly cash dividends of ~~$0.46~~$0.48 per share for the first quarter of ~~2020,~~2021, representing an increase of ~~4.5%~~4.3% from the ~~2019~~2020 quarterly dividend rate of ~~$0.44~~$0.46 per share.

First Quarter ~~2020~~2021 Results

Net income for the first quarter of ~~2020~~2021 was ~~$26.8~~$41.7 million, or ~~$0.78~~$1.26 on a diluted earnings per share basis, and ~~decreased 24.1%~~increased 55.9% and ~~37.6%~~61.5%, respectively, as compared to ~~$35.2~~$26.8 million, or ~~$1.25~~$0.78 on a diluted earnings per share basis, for the prior year first quarter. ~~The first~~First quarter 2021 results were positively impacted by a release of ~~2019~~provision for credit loss of $2.5 million as well as increased interest income from fee amortization related to forgiven PPP loans, whereas the prior year ago period included ~~gain on~~provision for credit loss of $25 million as a result of the sale of loans and merger and acquisition costs which the Company deems to be noncore. Excluding the gain on the sale of loans and merger and acquisition expenses, first quarter 2019 operating net income $36.7 million. There were no such operating items for the first quarter of 2020. See "Non-GAAP Measures" below for a reconciliation of non-GAAP measures.COVID-19 pandemic.

~~2020~~2021 Outlook

During the ~~Company’s~~Company's first quarter ~~2020~~2021 earnings call, the Company's Chief Financial Officer ~~stated that given~~provided the ~~profound uncertainty~~following key expectations regarding business activity to serve as near term guidance for the remainder of 2021:

•net loan growth is expected to ~~the economic outlook and customer impacts, the Company can not confidently provide comprehensive forward looking guidance, however some near-term insights into a few key areas are as follows:~~

~~The Company estimates~~remain challenged in the near ~~term~~future as attrition continues to mitigate strong closing activity;

•excess liquidity and timing of PPP fee recognition will continue to create some level of volatility in net reported interest margin. Excluding those factors, core ~~net interest~~ margin is expected to compress modestly as asset repricing slightly outpaces the Company's ability to further ~~assuming~~reduce funding costs;

•provisions for credit losses will continue to reflect a combination of charge-off activity, net loan growth and general economic assumptions. As such, a relatively stable economic environment should continue to provide a framework for very modest provision levels following the ~~following:~~significant reserve build in 2020;

~~Full impact of~~•fee income from the ~~March 2020 Federal Reserve interest rate cuts~~wealth management business is expected to ~~be partially offset by deposit rate adjustments, consistent with previous guidance;~~

~~No further adjustment~~remain strong, while mortgage gain on sales margins is expected to ~~the Federal Reserve target interest rate range;~~

~~Further compression of the one-month London Interbank Offered Rate ("LIBOR") index throughout the quarter;~~

~~Loan accretion income to be fairly consistent with Q1 level but below last quarter guidance of $2.0 - $2.5 million per quarter;~~

~~The Company's balance sheet cash position consistent with~~normalize down from first quarter ~~levels, and;~~

~~Omission of the impact from the Paycheck Protection Program ("PPP") loan program given the uncertainty over how much volume will qualify for debt forgiveness and trigger acceleration of the processing~~2021 levels. Continued challenges to swap fee income ~~versus how much will be retained on the balance sheet~~are expected as fixed rate alternatives continue to ~~be repaid over the two year term.~~provide a compelling offer;

~~Overall expenses~~•non-interest expense is expected to remain relatively consistent with first quarter ~~results.~~2021 levels; and,

~~Tax~~•the tax rate is expected to ~~normalize back to approximately~~approximate 25%.

~~Loan provision levels~~ for the ~~first quarter addressed the harsh impact~~remainder of ~~the COVID-19 pandemic. The provision for loan losses in the coming quarters will be highly correlated with any further deterioration~~2021.

Table of ~~economic factors in excess of those used in the March 2020 assumptions as well as any increase in perceived loss exposure inherent in the Company's portfolio.~~Contents

Due to the impacts of the COVID-19 pandemic, the Company's prior outlook and expectations for 2020 included in the Company's 2019 year-end earnings release and in its 2019 Annual Report on Form 10-K for the year ended December 31, 2019 has been withdrawn and should not be relied upon.

Non-GAAP Measures

When management assesses the Company’s financial performance for purposes of making day-to-day and strategic decisions, it does so based upon the performance of its core banking business, which is primarily derived from the combination of net interest income and noninterest or fee income, reduced by operating expenses, the provision for ~~loan~~credit losses, and the impact of income taxes and other noncore items shown in the tables that follow. There are items that impact the Company's results that management believes are unrelated to its core banking business such as merger and acquisition expenses and other items. Management, therefore, computes certain non-GAAP measures including net operating earnings and operating EPS, noninterest income on an operating basis and efficiency ratio on an operating basis, which exclude items management considers to be noncore. Management believes excluding these items facilitates greater visibility into the Company’s core banking business and underlying trends that may, to some extent, be obscured by inclusion of such items.

Management also supplements its evaluation of financial performance with analyses of tangible book value per share (which is computed by dividing stockholders' equity less goodwill and identifiable intangible assets, or "tangible common equity", by common shares outstanding) and the tangible common equity ratio (which is computed by dividing tangible common equity by "tangible assets", defined as total assets less goodwill and other intangibles). The Company has included information on tangible book value per share and the tangible common equity ratio because management believes that investors may find it useful to have access to the same analytical tools used by management. As a result of merger and acquisition activity, the Company has recognized goodwill and other intangible assets in conjunction with business combination accounting principles. Excluding the impact of goodwill and other intangibles in measuring asset and capital values for the ratios provided, along with other bank standard capital ratios, provides a framework to compare the capital adequacy of the Company to other companies in the financial services industry.

These non-GAAP measures should not be viewed as a substitute for operating results and other financial measures determined in accordance with GAAP. 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 quarter or year. The Company’s non-GAAP performance measures, including operating earnings, operating EPS, operating return on average assets, operating return on average equity, tangible book value per share and the tangible common equity ratio, are not necessarily comparable to non-GAAP performance measures which may be presented by other companies.


	Three Months Ended
	March 31 2021			December 31 2020			September 30 2020			June 30 2020			March 31 2020
	(Dollars in thousands)
Net interest income (GAAP)	$	95,584		$	91,443		$	90,883		$	91,098		$	94,304		(a)

Noninterest income (GAAP)	$	25,246		$	27,468		$	29,347		$	28,190		$	26,435		(b)






Noninterest expense (GAAP)	$	69,682		$	73,727		$	66,658		$	66,607		$	66,840		(d)
Less:




Loss on termination of derivative	—			—			684			—			—
Noninterest expense on an operating basis (Non-GAAP)	$	69,682		$	73,727		$	65,974		$	66,607		$	66,840		(e)

Total revenue (GAAP)	$	120,830		$	118,911		$	120,230		$	119,288		$	120,739		(a+b)


Ratios


Efficiency ratio (GAAP based)	57.67		%	62.00		%	55.44		%	55.84		%	55.36		%	(d/(a+b))
Efficiency ratio on an operating basis (Non-GAAP)	57.67		%	62.00		%	54.87		%	55.84		%	55.36		%	(e/(a+b))

~~The following tables summarize adjustments for noncore items for the time periods indicated below and reconcile non-GAAP measures:~~

Table of Contents

Three Months Ended March 31
Net Income
Diluted
Earnings Per Share
2020 2019 2020 2019
(Dollars in thousands, except per share data)
Net income available to common shareholders (GAAP) $ 26,751
$ 35,225
$ 0.78
$ 1.25
Non-GAAP adjustments
Noninterest expense components
Merger and acquisition expenses —
1,032
—
0.04
Noncore increases to income before taxes —
1,032
—
0.04
Net tax benefit associated with noncore items (1) —
(198 ) —
(0.01 )
Add - adjustment for tax effect of previously incurred merger and acquisition expenses $ —
$ 650
$ —
$ 0.02
Total tax impact $ —
$ 452
$ —
$ 0.01
Noncore increases to net income $ —
$ 1,484
$ —
$ 0.05
Operating net income (Non-GAAP) $ 26,751
$ 36,709
$ 0.78
$ 1.30


~~(1)~~	The net tax benefit associated with noncore items is determined by assessing whether each noncore item is included or excluded from net taxable income and applying the Company's combined marginal tax rate to only those items included in net taxable income.

Three Months Ended
March 31
2020 December 31
2019 September 30
2019 June 30
2019 March 31
2019
(Dollars in thousands)
Net interest income (GAAP) $ 94,304
$ 99,993
$ 104,598
$ 106,019
$ 82,525
(a)

Noninterest income (GAAP) $ 26,435
$ 33,297
$ 31,816
$ 28,648
$ 21,533
(b)
Less:
Gain on sale of loans —
—
951
—
—

Noninterest income on an operating basis (Non-GAAP) $ 26,435
$ 33,297
$ 30,865
$ 28,648
$ 21,533
(c)

Noninterest expense (GAAP) $ 66,840
$ 67,445
$ 67,533
$ 93,032
$ 56,311
(d)
Less:
Merger and acquisition expense —
—
705
24,696
1,032

Noninterest expense on an operating basis (Non-GAAP) $ 66,840
$ 67,445
$ 66,828
$ 68,336
$ 55,279
(e)

Total revenue (GAAP) $ 120,739
$ 133,290
$ 136,414
$ 134,667
$ 104,058
(a+b)
Total operating revenue (Non-GAAP)* $ 120,739
$ 133,290
$ 135,463
$ 134,667
$ 104,058
(a+c)

Ratios
Noninterest income as a % of revenue (GAAP based) 21.89 % 24.98 % 23.32 % 21.27 % 20.69 % (b/(a+b))
Noninterest income as a % of revenue on an operating basis (Non-GAAP)* 21.89 % 24.98 % 22.78 % 21.27 % 20.69 % (c/(a+c))
Efficiency ratio (GAAP based) 55.36 % 50.60 % 49.51 % 69.08 % 54.12 % (d/(a+b))
Efficiency ratio on an operating basis (Non-GAAP) 55.36 % 50.60 % 49.33 % 50.74 % 53.12 % (e/(a+c))

The following table summarizes the calculation of the Company's tangible common equity ratio and tangible book value per share ~~for~~as of the ~~periods~~dates indicated:


	March 31 2021			December 31 2020			September 30 2020			June 30 2020			March 31 2020
	(Dollars in thousands, except per share data)
Tangible common equity
Stockholders' equity (GAAP)	$	1,715,371		$	1,702,685		$	1,689,724		$	1,671,692		$	1,679,656		(a)
Less: Goodwill and other intangibles	527,895			529,313			530,749			532,202			533,672
Tangible common equity (Non-GAAP)	1,187,476			1,173,372			1,158,975			1,139,490			1,145,984			(b)
Tangible assets
Assets (GAAP)	13,773,914			13,204,301			13,173,665			13,022,500			11,980,240			(c)
Less: Goodwill and other intangibles	527,895			529,313			530,749			532,202			533,672
Tangible assets (Non-GAAP)	$	13,246,019		$	12,674,988		$	12,642,916		$	12,490,298		$	11,446,568		(d)
Common shares	33,024,882			32,965,692			32,955,547			32,942,110			33,260,005			(e)

Common equity to assets ratio (GAAP)	12.45		%	12.89		%	12.83		%	12.84		%	14.02		%	(a/c)
Tangible common equity to tangible assets ratio (Non-GAAP)	8.96		%	9.26		%	9.17		%	9.12		%	10.01		%	(b/d)
Book value per share (GAAP)	$	51.94		$	51.65		$	51.27		$	50.75		$	50.50		(a/e)
Tangible book value per share (Non-GAAP)	$	35.96		$	35.59		$	35.17		$	34.59		$	34.46		(b/e)

March 31
2020 December 31
2019 September 30
2019 June 30
2019 March 31
2019
(Dollars in thousands, except per share data)
Tangible common equity
Stockholders' equity (GAAP) $ 1,679,656
$ 1,708,143
$ 1,682,324
$ 1,636,003
$ 1,104,538
(a)
Less: Goodwill and other intangibles 533,672
535,492
535,869
537,896
270,444

Tangible common equity (Non-GAAP) 1,145,984
1,172,651
1,146,455
1,098,107
834,094
(b)
Tangible assets

Assets (GAAP) 11,980,240
11,395,165
11,538,639
11,603,199
8,997,457
(c)
Less: Goodwill and other intangibles 533,672
535,492
535,869
537,896
270,444

Tangible assets (Non-GAAP) $ 11,446,568
$ 10,859,673
$ 11,002,770
$ 11,065,303
$ 8,727,013
(d)
Common shares 33,260,005

34,377,388

34,366,781
34,321,061
28,137,504
(e)

Common equity to assets ratio (GAAP) 14.02 % 14.99 % 14.58 % 14.10 % 12.28 % (a/c)
Tangible common equity to tangible assets ratio (Non-GAAP) 10.01 % 10.80 % 10.42 % 9.92 % 9.56 % (b/d)
Book value per share (GAAP) $ 50.50
$ 49.69
$ 48.95
$ 47.67
$ 39.26
(a/e)
Tangible book value per share (Non-GAAP) $ 34.46
$ 34.11
$ 33.36
$ 32.00
$ 29.64
(b/e)

Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. The Company believes that the most critical accounting policies are those which the Company’s financial condition depends upon, and which involve the most complex or subjective decisions or assessments.

There have been no material changes in critical accounting policies during the first three months of ~~2020 aside from the adoption of the CECL accounting standard effective January 1, 2020. The Company's critical accounting policy for the Allowance for Credit Losses is as follows:~~

~~Allowance for Credit Losses~~ The Company’s allowance for credit losses provides for probable losses based upon current expected credit losses within the loan and securities portfolios. Arriving at an appropriate amount of allowance for credit losses involves a high degree of judgment.

For loans, the company estimates credit losses on a collective basis for loans sharing similar risk characteristics 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. The quantitative model utilizes a factor based approach to estimate expected credit losses using a Probability of Default ("PD"), Loss Given Default ("LGD") and Exposure at Default ("EAD"), which are derived from internal historical default and loss experience. Management’s judgment is based upon its assessment of PD, LGD, and EAD. Changes in these estimates could be due to a number of circumstances which may have a direct impact on the provision for credit losses and may result in changes to the amount of allowance. The allowance is determined based upon the application of the Company’s methodology for assessing the adequacy of the allowance for credit losses, which considers historical and expected loss factors, loan portfolio composition and other relevant indicators. Economic forecasts are incorporated into the estimate over a reasonable and supportable forecast period, beyond which is a reversion2021. Refer to the Company's historical long-run average. This methodology involves management’s judgment regarding the application and use of such factors, including the effects of changes to the prevailing economic environment in its estimate of the required amounts of allowance. Additionally, the model estimates expected credit losses using loan level data over the contractual life of the exposure, considering the effect of prepayments, which is subject to management's judgment based on analysis to determine the appropriate level of assumed prepayments.

Loans that no longer 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 will use either a discounted cash flow (“DCF”) approach or a fair value of collateral approach. The latter approach will

be used for loans deemed to be collateral dependent or when foreclosure is probable. The allowance is increased by provisions for credit losses and by recoveries of loans previously charged-off and is reduced by loans charged-off. For additional discussion of the Company’s methodology of assessing the adequacy of the allowance for credit losses, see ~~Note 4, "Loans, Allowance for Credit Losses and Credit Quality"~~ ~~within Condensed Notes to Consolidated Financial Statements included in Item 1 hereof.~~

For held-to-maturity securities, the Company measures expected credit losses on a collective basis by major security type. Management classifies the held-to maturity portfolio into the following major security types: U.S. Government Agency, U.S. Treasury, Agency Mortgage-Backed Securities, Agency Collateralized Mortgage Obligations, Small Business Administration Pooled Securities, and Single Issuer Trust Preferred Securities. Securities in the Company's held to maturity 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 these securities to have a zero loss expectation and therefore does not estimate an allowance for credit losses on these securities.

For available-for-sale securities, the Company reviews any holdings in an unrealized loss position, management will first evaluate whether there is intent to sell, 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 available for sale 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, the security will be written down to fair value, 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.

~~For additional discussion of the Company’s methodology of assessing the adequacy of the allowance for credit losses for its security portfolios, see~~ ~~Note 3, "Securities"~~ ~~within Condensed Notes to Consolidated Financial Statements included in Item 1 hereof.~~

~~Please refer to the Company's Annual Report on~~2020 Form 10-K ~~for the fiscal year ended December 31, 2019~~ for a complete listing of critical accounting policies.

FINANCIAL POSITION

Securities Portfolio The Company’s securities portfolio consists of trading securities, equity securities, securities available for sale, and securities which management intends to hold until maturity. Securities increased by ~~$46.1~~$269.1 million, or ~~3.9%~~23.2%, at March 31, ~~2020~~2021 as compared to December 31, ~~2019,~~2020, reflecting ~~$113.8~~$373.4 millionofpurchases offset by paydowns, called securities, and maturities. The ratio of securities to total assets was ~~10.32%~~10.4% and ~~10.45%~~8.8% at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. 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. Further details regarding the Company's ~~analysis~~measurement of expected credit losses on securities can be found in Note 3 “Securities” ~~within Condensed Notes~~ to the Consolidated Financial Statements included in Part I. Item 1 ~~hereof.~~of this Report.

Residential Mortgage Loan Sales The Company’s primary loan sale activity arises from the sale of government sponsored enterprise eligible residential mortgage loans. ~~During the three months ended March 31, 2020 and 2019, the~~The Company ~~originated~~originates residential loans with the intention of selling them in the secondary market or to hold in the Company's residential portfolio. When a loan is sold, the Company enters into agreements that contain representations and warranties about the characteristics of the loans sold and their origination. The Company may be required to either repurchase mortgage loans or to indemnify the purchaser from losses if representations and warranties are breached. The Company incurred ~~minimal~~no material losses related to mortgage repurchases during the three ~~month periods~~months ended March 31, 2021 and 2020, ~~and no losses during the three month period ended March 31, 2019 related to mortgage repurchases.~~ ~~Additionally, the Company sold residential loans with recourse totaling $35.3 million during the period ended March 31, 2020 and sold no such loans during the period ended March 31, 2019.~~respectively.

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The following table shows the total residential loans that were closed and whether the amounts were held in the portfolio or sold/held for sale in the secondary market during the periods indicated:

Table 1 - Closed Residential Real Estate Loans


	Three Months Ended March 31
		2021		2020
		(Dollars in thousands)
Held in portfolio		$	81,921	$	37,337
Sold or held for sale in the secondary market		270,161		169,253
Total closed loans		$	352,082	$	206,590

Three Months Ended March 31
2020 2019
(Dollars in thousands)
Held in portfolio $ 37,337
$ 31,200
Sold or held for sale in the secondary market 169,253
38,858
Total closed loans $ 206,590
$ 70,058

The table below reflects additional information related to the loans which were sold during the periods indicated:

Table 2 - Residential Mortgage Loan Sales


	Three Months Ended March 31					Three Months Ended March 31
	2020		2019				2021		2020
	(Dollars in thousands)						(Dollars in thousands)
Sold with servicing rights released	$	121,784	$	39,708	Sold with servicing rights released		$	281,139	$	121,784
Sold with servicing rights retained	35,331		—
Sold with servicing rights retained (1)					Sold with servicing rights retained (1)		1,430		35,331
Total loans sold	$	157,115	$	39,708	Total loans sold		$	282,569	$	157,115

(1) All loans sold with servicing rights retained were sold with recourse during the three months ended March 31, 2021 and 2020, respectively.

When a loan is sold, the Company may decide to also sell the servicing of sold loans for a servicing release premium, ~~simultaneous~~simultaneously with the sale of the loan, or the Company may opt to sell the loan and retain the servicing. 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. Servicing rights are recorded in other assets in the consolidated balance sheets, are amortized in proportion to and over the period of estimated net servicing income, and are assessed for impairment based on fair value at each reporting date. Impairment is determined by stratifying the rights based on predominant characteristics, such as interest rate, loan type and investor type. 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 ~~$610.4~~$401.2 million, ~~$656.4~~$453.7 million and ~~$234.1~~$610.4 million at March 31, ~~2020,~~2021, December 31, ~~2019,~~2020, and March 31, ~~2019,~~2020, respectively.

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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 March 31
	2020			2019					2021		2020
	(Dollars in thousands)								(Dollars in thousands)
Balance at beginning of period	$	5,116		$	1,445		Balance at beginning of period		$	2,365	$	5,116
Additions	333			—			Additions		13		333

Amortization	(284		)	(71		)	Amortization		(243)		(284)
Change in valuation allowance	(661		)	—			Change in valuation allowance		406		(661)
Balance at end of period	$	4,504		$	1,374		Balance at end of period		$	2,541	$	4,504

See Note 9,6, “Derivative and Hedging Activities” within ~~Condensed~~the Notes to Consolidated Financial Statements included in Part I. Item 1 ~~hereof~~of this Report for more information on mortgage activity and mortgage related derivatives.

Loan Portfolio ~~The Company’s~~Total loans at March 31, 2021 decreased by $146.2 million, or 1.6%, when compared to the prior quarter. Despite strong origination volumes and loan pipelines across all products, overall portfolio ~~increased~~growth continued to be constrained by ~~$42.8 million~~ongoing paydowns and re-financing activity. Exclusive of PPP activity, total commercial loans decreased 1.70% during the first ~~three months of 2020. The overall increase was~~quarter, primarily reflecting a slowdown in new construction financing and notably lower line utilization levels within the ~~result of strong closings in the~~commercial and industrial ("C&I") portfolio, while commercial real estate ~~and commercial and industrial portfolios, partially offset by~~balances remained relatively stable. Within C&I, PPP loan originations from the new 2021 program of $340.0 million outpaced PPP loan payoffs of $285.6 million on the prior year balances, resulting in a ~~decline in~~net PPP loan balance increase of $54.4 million for the ~~construction portfolio. The consumer portfolio decreased~~first quarter of 2021 as compared to the ~~linked~~fourth quarter asof 2020. Within the ~~Company continues to sell a~~consumer portfolios, the majority of ~~its residential~~mortgage production ~~into~~continued to be sold in the secondary market, while the low interest-rate environment and excess consumer liquidity position continued to drive elevated payoff activity along with low home equity ~~lending increased slightly.~~line utilization, resulting in reductions of 4.2% and 3.8% within the mortgage and home equity portfolios, respectively.

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The Company's commercial loan portfolio is comprised primarily of commercial and industrial loans as well as commercial real estate loans. Management considers the Company’s commercial and industrial portfolio to be well-diversified with loans to various types of industries. The Company's participation in the PPP resulted in significant loan fundings within the commercial and industrial portfolio throughout 2020 and the first quarter of 2021, with outstanding balances totaling $846.3 million at March 31, 2021, comprising 40.6% of the total portfolio. Accordingly, the composition of the portfolio by sector is skewed as compared to periods prior to commencement of the PPP, as the PPP loans are reflected within the various sectors below. In connection with PPP loan originations during the current quarter, the Company received fee revenue of $13.1 million, which is deferred and amortized over the life of the loan. During the three months ended March 31, 2021, the Company amortized into income $9.5 million in PPP fee revenue related to forgiven loans. Balances of unamortized PPP loan fees will be amortized into income over the remaining loan maturities. The following pie chart shows the diversification of the commercial and industrial portfolio as of March 31, ~~2020:~~2021:

(Dollars in thousands)
Average loan size (excluding floor plan tranches) $ 329
Largest individual commercial and industrial loan outstanding $ 24,829
Commercial and industrial nonperforming loans/commercial and industrial loans 1.48 %


	(Dollars in thousands)
Average loan size (excluding floor plan tranches)	$	126
Largest individual commercial and industrial loan outstanding	$	20,213
Commercial and industrial nonperforming loans/commercial and industrial loans	1.43		%

The Company’s commercial real estate loan portfolio, inclusive of commercial construction, is the Company’s largest loan type concentration. The Company believes that this portfolio is also well-diversified with loans secured by a variety of property types, such as owner-occupied and nonowner-occupied commercial, retail, office, industrial, warehouse, and other special purpose properties, such as hotels, motels, nursing homes, restaurants, churches, recreational facilities, marinas, and golf courses. 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, ~~2020:~~

2021:

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(Dollars in thousands)
Average loan size $ 1,067
Largest individual commercial real estate mortgage outstanding $ 32,000
Commercial real estate nonperforming loans/commercial real estate loans 0.11 %
Owner occupied commercial real estate loans/commercial real estate loans 14.6 %


	(Dollars in thousands)
Average loan size	$	1,107
Largest individual commercial real estate mortgage outstanding	$	32,000
Commercial real estate nonperforming loans/commercial real estate loans	0.21		%
Owner occupied commercial real estate loans/commercial real estate loans	14.4		%

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The Company's consumer portfolio consists of both fixed-rate and adjustable-rate residential real estate loans as well as residential construction lending related to single-home residential development within the Company's market area. The Company also provides home equity loans and lines that may be made as a ~~fixed rate~~fixed-rate term loan or under a variable rate revolving line of credit secured by a first or junior mortgage on the borrower's residence or second home. Additionally, the Company makes loans for a wide variety of other personal needs. Other consumer loans primarily consist of installment loans and overdraft protections. The residential, home equity and other consumer portfolios totaled ~~$2.7~~$2.3 billion at March 31, ~~2020,~~2021, as noted below:

Asset Quality The Company continually monitors the asset quality of the loan portfolio using all available information. Based on this assessment, loans demonstrating certain payment issues or other weaknesses may be categorized as delinquent, nonperforming and/or put on nonaccrual status. ~~Additionally, in~~In the course of resolving such loans, the Company may choose to restructure the contractual terms of certain loans to match the borrower’s ability to repay the loan based on their current financial condition. If a restructured loan meets certain criteria, it may be categorized as a troubled debt restructuring ("TDR"). In addition, the Company has been offering need-based payment relief options for commercial and small business loans, residential mortgages, and home equity loans and lines of credit in response to the COVID-19 pandemic. In accordance with the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), these modifications are not accounted for as TDRs or reflected as delinquent or non-accrual loans if the borrower was in compliance with the loan terms as of December 31, 2019.

Delinquency The Company’s philosophy toward managing its loan portfolios is predicated upon careful monitoring, which stresses early detection and response to delinquent and default situations. The Company seeks to make arrangements to resolve any delinquent or default situation over the shortest possible time frame. Generally, the Company requires that a delinquency notice be mailed to a borrower upon expiration of a grace period (typically no longer than 15 days beyond the due date). Reminder notices may be sent and telephone calls may be made prior to the expiration of the grace period. If the delinquent status is not resolved within a reasonable time frame following the mailing of a delinquency notice, the Bank’s personnel charged with managing its loan portfolios contacts the borrower to ascertain the reasons for delinquency and the prospects for payment. Any subsequent actions taken to resolve the delinquency will depend upon the nature of the loan and the length of time that the loan has been delinquent. The borrower’s needs are considered as much as reasonably possible without jeopardizing the Bank’s position. A late charge is usually assessed on loans upon expiration of the grace period.

Nonaccrual Loans As a general rule, loans ~~more than~~ 90 days or more past due with respect to principal or interest are classified as nonaccrual loans. However, certain loans that are ~~more than~~ 90 days or more past due may be kept on an accruing status if the loans are well secured ~~and/or~~and in the process of collection. The Company may also put a junior lien mortgage on nonaccrual status as a result of delinquency with respect to the first position, which is held by another financial institution, while the junior lien is currently

performing. Income accruals are suspended on all nonaccrual loans and all previously accrued and uncollected interest is reversed against current income. A loan remains on nonaccrual status until it becomes current with respect to principal and interest (and in certain instances remains current for up to six months), the loan is liquidated, or when the loan is determined to be uncollectible and is charged-off against the allowance for credit losses.

Troubled Debt Restructurings In the course of resolving problem loans, the Company may choose to restructure the contractual terms of certain loans. The Company attempts to work out an alternative payment schedule with the borrower in order to avoid or cure a default. Loans that are modified are reviewed by the Company to identify if a TDR has occurred, which is when, for economic or legal reasons related to a borrower’s financial difficulties, the Bank grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status and the restructuring of the loan may include adjustments to interest rates, extensions of maturity, consumer loans where the borrower's obligations have been effectively discharged through Chapter 7 Bankruptcy and the borrower has not reaffirmed the debt to the Bank, and other actions intended to minimize economic loss and avoid foreclosure or repossession of collateral. If such efforts by the Bank do not result in satisfactory performance, the loan is referred to legal counsel, at which time foreclosure proceedings are initiated. At any time prior to a sale of the property at foreclosure, the Bank may terminate foreclosure proceedings if the borrower is able to work out a satisfactory payment plan.

It is the Company’s policy to have any restructured loans which are on nonaccrual status prior to being modified remain on nonaccrual status for six months, subsequent to being modified, before management considers their return to accrual status. If the restructured loan is on accrual status prior to being modified, it is reviewed to determine if the modified loan should remain on accrual status. Loans that are considered TDRs are classified as performing, unless they are on nonaccrual status or ~~greater than~~are delinquent for 90 days ~~delinquent.~~or more. Loans classified as TDRs remain classified as such for the life of the loan, except in limited circumstances, when it may be determined that the borrower is performing under modified terms and the restructuring agreement specified an interest rate greater than or equal to an acceptable market rate for a comparable new loan at the time of the restructuring.

Purchased Credit Deteriorated Loans Purchased Credit Deteriorated ("PCD") loans are acquired loans which have shown a more-than-insignificant deterioration in credit quality since origination. PCD loans are recorded at amortized cost with an allowance for credit losses recorded upon purchase, as appropriate. ~~PCD loans are not subject to the same classification as nonaccrual as originated loans.~~

Nonperforming Assets Nonperforming assets are typically comprised of nonperforming loans and other real estate owned. Nonperforming loans consist of nonaccrual loans and loans that are ~~more than~~ 90 days or more past due but still accruing interest.

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The following table sets forth information regarding nonperforming assets held by the Company at the dates indicated:

Table 4 - Nonperforming Assets


	March 31 2021			December 31 2020			March 31 2020
	(Dollars in thousands)
Loans accounted for on a nonaccrual basis
Commercial and industrial	$	29,785		$	34,729		$	21,435
Commercial real estate	9,635			10,195			4,949
Small business	660			825			450
Residential real estate	13,392			15,528			14,502
Home equity	5,592			5,427			6,571
Other consumer	136			156			108
Total (1)	$	59,200		$	66,860		$	48,015
Loans past due 90 days or more but still accruing



Other consumer	1			1			25
Total	$	1		$	1		$	25
Total nonperforming loans	$	59,201		$	66,861		$	48,040

Other real estate owned	—			—			—

Total nonperforming assets	$	59,201		$	66,861		$	48,040
Nonperforming loans as a percent of gross loans	0.64		%	0.71		%	0.54		%
Nonperforming assets as a percent of total assets	0.43		%	0.51		%	0.40		%

March 31
2020 December 31
2019 March 31
2019
(Dollars in thousands)
Loans accounted for on a nonaccrual basis
Commercial and industrial $ 21,435
$ 22,574
$ 25,879
Commercial real estate 4,949
3,016
1,539
Small business 450
311
180
Residential real estate 14,502
13,360
8,517
Home equity 6,571
6,570
7,202
Other consumer 108
61
9
Total (1) $ 48,015
$ 45,892
$ 43,326
Loans past due 90 days or more but still accruing
Commercial real estate (2) —
218
—
Residential real estate (2) —
1,652
—
Home equity (2) —
265
—
Other consumer 25
22
5
Total $ 25
$ 2,157
$ 5
Total nonperforming loans $ 48,040
$ 48,049
$ 43,331
Other real estate owned —
—
—
Total nonperforming assets $ 48,040
$ 48,049
$ 43,331
Nonperforming loans as a percent of gross loans 0.54 % 0.54 % 0.62 %
Nonperforming assets as a percent of total assets 0.40 % 0.42 % 0.48 %


~~(1)~~	~~Inclusive of TDRs on nonaccrual status of $23.8 million, $24.8 million, and $28.9 million at March 31, 2020, December 31, 2019, and March 31, 2019, respectively.~~


~~(2)~~	~~Represents purchased credit impaired loans that were accruing interest due to expectation of future cash collections.~~

(1)Inclusive of TDRs on nonaccrual status of $21.2 million, $22.2 million, and $23.8 million at March 31, 2021, December 31, 2020, and March 31, 2020, respectively.

The following table summarizes the changes in nonperforming assets for the periods indicated:

Table 5 - Activity in Nonperforming Assets


	Three Months Ended
	March 31
	2021
	Three Months Ended
	March 31 2021		March 31 2020
	(Dollars in thousands)
Nonperforming assets beginning balance	$	66,861	$	48,049
New to nonperforming	2,359		6,515

Loans charged-off	(3,686)		(734)
Loans paid-off	(4,025)		(5,079)

Loans restored to performing status	(2,559)		(561)






Other	251		(150)
Nonperforming assets ending balance	$	59,201	$	48,040

Three Months Ended
March 31
2020 March 31
2019
(Dollars in thousands)
Nonperforming assets beginning balance $ 48,049
$ 45,418
New to nonperforming 6,515
1,857
Loans charged-off (734 ) (559 )
Loans paid-off (5,079 ) (3,171 )
Loans restored to performing status (561 ) (232 )
Other (150 ) 18
Nonperforming assets ending balance $ 48,040
$ 43,331

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The following table sets forth information regarding troubled debt restructured loans as of the dates indicated:

Table 6 - Troubled Debt Restructurings


	March 31 2021			December 31 2020			March 31 2020
	(Dollars in thousands)
Performing troubled debt restructurings	$	20,262		$	16,983		$	18,129
Nonaccrual troubled debt restructurings	21,167			22,209			23,842
Total	$	41,429		$	39,192		$	41,971
Performing troubled debt restructurings as a % of total loans	0.22		%	0.18		%	0.20		%
Nonaccrual troubled debt restructurings as a % of total loans	0.23		%	0.24		%	0.27		%
Total troubled debt restructurings as a % of total loans	0.45		%	0.42		%	0.47		%

March 31
2020 December 31
2019 March 31
2019
(Dollars in thousands)
Performing troubled debt restructurings $ 18,129
$ 19,599
$ 23,053
Nonaccrual troubled debt restructurings 23,842
24,766
28,908
Total $ 41,971
$ 44,365
$ 51,961
Performing troubled debt restructurings as a % of total loans 0.20 % 0.22 % 0.33 %
Nonaccrual troubled debt restructurings as a % of total loans 0.27 % 0.28 % 0.41 %
Total troubled debt restructurings as a % of total loans 0.47 % 0.50 % 0.74 %

In addition, the Company has been offering needs based payment relief options for commercial and small business loans, residential mortgages, and home equity loans and lines of credit in response to the COVID-19 pandemic. These modifications will not be accounted as TDRs if the borrower was in compliance with the terms of their loans as of December 31, 2020. For further information regarding these modifications see
~~Note 16, "Subsequent Events~~" ~~within Condensed Notes to Consolidated Financial Statements included in Item 1 hereof .~~

The following table summarizes changes in TDRs for the periods indicated:

Table 7 - Activity in Troubled Debt Restructurings


	Three Months Ended
		March 31 2021		March 31 2020
		(Dollars in thousands)
TDRs beginning balance		$	39,192	$	44,365
New to TDR status		3,836		185

Paydowns		(1,599)		(2,557)
Charge-offs		—		(22)
TDRs ending balance		$	41,429	$	41,971

Three Months Ended
March 31
2020 March 31
2019
(Dollars in thousands)
TDRs beginning balance $ 44,365
$ 53,197
New to TDR status 185
225
Paydowns (2,601 ) (1,461 )
Charge-offs 22
—
TDRs ending balance $ 41,971
$ 51,961

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Income accruals are suspended on all nonaccrual loans and all previously accrued and uncollected interest is reversed against current income. The table below shows interest income that was recognized or collected on all nonaccrual loans and TDRs ~~as of~~for the ~~dates~~periods indicated:

Table 8 - Interest Income - Nonaccrual Loans and Troubled Debt Restructurings


	Three Months Ended					Three Months Ended
	March 31 2020		March 31 2019				March 31 2021		March 31 2020
	(Dollars in thousands)						(Dollars in thousands)
The amount of incremental gross interest income that would have been recorded if nonaccrual loans had been current in accordance with their original terms	$	709	$	565	The amount of incremental gross interest income that would have been recorded if nonaccrual loans had been current in accordance with their original terms		$	917	$	709
The amount of interest income on nonaccrual loans and performing TDRs that was included in net income	$	1,041	$	1,271	The amount of interest income on nonaccrual loans and performing TDRs that was included in net income		$	264	$	326

Potential problem loans are any loans which are not included in nonaccrual or nonperforming loans, where known information about possible credit problems of the borrowers causes management to have concerns as to the ability of such borrowers to comply with present loan repayment terms. At March 31, ~~2020,~~2021, there were ~~110~~87 relationships, with an aggregate balance of ~~$186.0~~$141.2 million, deemed to be potential problem loans. These potential problem loans continued to perform with respect to payments. Management actively monitors these loans and strives to minimize any possible adverse impact to the Company. A portion of the potential problem loans identified by management were granted a deferral during 2020 in accordance with the relief options offered in response to the COVID-19 pandemic. If applicable, these potential problem loans with an active deferral as of March 31, 2021 have been included in the table below.

~~In addition and~~

As previously noted, the Company has been offering need-based payment relief options to its customers in response to the COVID-19 pandemic, primarily in the form of payment deferrals. Loans that were modified are not accounted for as TDRs or reflected as delinquent or nonaccrual loans if the borrower was in compliance with their loan terms as of December 31, 2019. The following table summarizes active deferrals by modification type as of March 31, 2021:

Table 9 - Deferrals by Modification Type


	Deferral of Principal and Interest		Deferral of Principal Only		Deferral of Interest Only		Total Deferrals		Total Portfolio		% Deferral
	(Dollars in thousands)
Commercial and industrial	$	2,300	$	1,636	$	1,765	$	5,701	$	2,086,671	0.3	%
Commercial real estate (1)	10,425		203,319		—		213,744		4,693,979		4.6	%
Business Banking	294		645		—		939		174,211		0.5	%
Residential real estate	87		—		—		87		1,241,789		—	%
Home equity	153		—		—		153		1,028,495		—	%
Consumer	—		—		—		—		21,546		—	%
Total active deferrals as of March 31, 2021	$	13,259	$	205,600	$	1,765	$	220,624	$	9,246,691	2.4	%

(1) Balances include commercial construction deferrals.

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Additionally, as a result of the COVID-19 pandemic, management has also enhanced monitoring of loan portfolios in certain industries ~~considered to~~that have been or could be ~~at an elevated "at risk".~~potentially highly impacted. While management is unable to predict the full impact of all industries affected by the COVID-19 pandemic, there are assumptions as to which industries will be more impacted due to social distancing and other measures put in place, as well as the duration of these restrictions. Management has identified approximately ~~$1.7~~$1.3 billion of loans within ~~potentially~~ highly impacted industries, such as Accommodations, Food Services, Retail Trade, ~~Health Care & Social Assistance,~~ Other Services (except Public Administration), and Arts, ~~Entertainments~~Entertainment & ~~Recreation, Transportation & Warehousing, as well as Educational Services.~~Recreation. Loss exposure within these industries is mitigated by a number of factors such as collateral values, loan-to-value ratios, and other key indicators, however, some degree of credit loss is expected and has been incorporated into the ~~first quarter~~ allowance for ~~loan~~credit loss recognition under the CECL model.

The table below provides total outstanding balances of commercial loans as of ~~March 31, 2020~~the dates indicated within industries that ~~could potentially~~management has deemed to be ~~more~~highly impacted by the COVID-19 pandemic:

Table 10 - Industries Highly Impacted By COVID-19 - Details


	March 31, 2021
	(Dollars in thousands)
Accommodations
Balance	$	402,259
Average borrower loan size	$	4,193
% secured by real estate	99.8		%
Weighted average loan to value	54.3		%
Other information:
–The accommodation portfolio consists of 68 properties representing a combination of flagged (59%) and non-flagged (41%) hotels, motels and inns.
–Loans secured by hotel properties deemed to be located in areas of leisure comprise $167.5 million, or 42% of the hotel portfolio.
–Approximately 89% of the balances outstanding are secured by properties located within the six New England states with the largest concentration in Massachusetts (58%).

Food Services
Balance	$	135,480
Average borrower loan size	$	363
% secured by real estate	69.4		%
Weighted average loan to value	50.4		%
Other information:
–The food services portfolio includes full-service restaurants (60%), limited service restaurants and fast food (38%), and other types of food service (caterers, bars, mobile food service 2%).

Retail Trade
Balance	$	530,544
Average borrower loan size	$	492
% secured by real estate	42.7		%
Weighted average loan to value	56.6		%
Other information:
–The retail trade portfolio consists broadly of food and beverage stores (43%), motor vehicle and parts dealers (28%), and gasoline stations (14%). All other retailers account for 15% of the current outstanding balance.
–Collateral for these loans varies and may consist of real estate, motor vehicles inventories, other types of inventories and general business assets.

Other Services (except Public Administration)
Balance	$	147,968

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Average borrower loan size	$	259
% secured by real estate	51.0		%
Weighted average loan to value	50.4		%
Other information:
–The other services portfolio consists of various for-profit and not-for-profit services diversified across religious, civic and social service organizations (41%), repair and maintenance business (31%) and personal services, including car washes, beauty salons, laundry services, funeral homes, pet care and other types of services (28%).



Arts, Entertainment, and Recreation
Balance	$	99,919
Average borrower loan size	$	805
% secured by real estate	83.9		%
Weighted average loan to value	52.9		%
Other information:
–Amusement, gambling and recreational industries make up a majority of this category (94%) and include amusement/theme parks, bowling centers, fitness centers, golf courses, marinas, and other recreational industries. Other industries including museums, performing arts, and spectator sports account for the remaining outstanding balances (6%).

~~Table 9 - Potentially Impacted COVID-19 Industries~~

Balance % of total Loans % Secured by Real Estate Additional commentary:
(Dollars in thousands)
Accommodation $ 411,384
4.6 % 98.0 % The accommodation portfolio consists of 70 properties representing a combination of flagged (60%) and non-flagged hotels, motels and inns (40%). Approximately 90% of the balances outstanding are secured by properties located within New England states with the largest concentration in Massachusetts (61%). The average borrower loan size is $4.1 million and the portfolio balance weighted average loan-to-value is 54.8%.
Food Services 155,415
1.7 % 61.3 % The food services portfolio includes full-service restaurants (67%), limited service restaurants including fast food (30%) and other types of food service (caterers, bars, mobile food service, 3%). The average borrower loan size is approximately $388 thousand and approximately 61% of the loan balances outstanding are secured by real estate assets with a portfolio balance weighted average loan-to-value of 46.7%.
Retail Trade 526,711
5.9 % 43.1 % The Retail Trade portfolio consists broadly of food and beverage stores (39%), motor vehicle and parts dealers (29%), gasoline stations (13%), non-store retail fuel dealers (7%), furniture and home furnishing stores (6%) and other types of retailers (7%). Collateral for these loans varies and may consist of real estate, motor vehicles inventories, other types of inventories and general business assets. Approximately 43% of the Retail Trade portfolio is secured by real estate with a portfolio balance weighted average loan-to-value of 54.0%. The average borrower loan size is $466 thousand.

Health Care and Social Assistance 206,484
2.3 % 69.7 % The healthcare portfolio consists of nursing and residential care facilities (38%), ambulatory care (29%), social assistance (19%) and Hospitals (14%). Approximately 70% of this portfolio is secured by real estate with a portfolio balance weighted average loan-to-value of 46.9%. The average borrower loan size in the healthcare portfolio is $652 thousand.
Other Services (except Public Administration) 160,159
1.8 % 49.1 % The other services portfolio consists of various for-profit and not-for-profit services diversified across religious, civic and social service organizations (45%), repair and maintenance businesses (29%) and personal services, including car washes, beauty salons, laundry services, funeral homes, pet care and other types of services (26%). Approximately 49% of the ‘other services’ portfolio is secured by real estate with a portfolio balance weighted average loan-to-value ratio of 46.5%. The average borrower loan size is $272 thousand.
Arts, Entertainment, and Recreation 88,202
1.0 % 82.8 % The Arts Entertainment and Recreation portfolio segment includes fitness and recreational sports centers (30%), amusement and theme parks (18%), Bowling centers (12%), Golf Courses (11%), marinas (9%) and other types of recreation (20%). Real estate secures approximately 83% of balances outstanding at a portfolio balance weighted average loan-to-value of 44.0%. The average borrower loan size is $737 thousand.
Transportation and Warehousing 84,805
1.0 % 56.0 % The transportation and Warehousing portfolio consists of warehousing and storage (52%), transit, ground passenger transportation and truck transportation (35%) and other transportation related activities (13%). The average borrower loan size is $611 thousand. Approximately 56% of the portfolio is secured by real estate with a portfolio balance weighted average loan-to-value of 52.2%. The average borrower loan size is $611 thousand.
Educational Services 44,922
0.5 % 89.5 % The Educational Services portfolio consists of elementary and secondary schools (48%), colleges and universities (35%) and other types of for profit and not-for-profit educational and training schools (17%). Real estate collateral secures 89% of the outstanding balances in this portfolio segment with a portfolio balance weighted average loan-to-value of 31.8%. The average borrower loan size is $598 thousand.
Total $ 1,678,082
18.8 % 66.1 %

Allowance for Credit Losses The allowance for credit losses is maintained at a level that management considers appropriate to provide for the Company's current estimate of expected lifetime credit losses on loans measured at amortized cost. The allowance is increased by providing for credit losses through a charge to expense and by credits for recoveries of loans previously charged-off and is reduced by loans being charged-off.

In accordance with the CECL methodology, ~~adopted January 1, 2020,~~ the Company estimates credit losses for financial assets on a collective basis for loans sharing similar risk characteristics 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. The model estimates expected credit losses using loan level data over the contractual life of the exposure, considering the effect of prepayments. Economic forecasts are incorporated into the estimate over a reasonable and supportable forecast period of one year, beyond which is a reversion to the Company's historical long-run average for a period of 6 months. The Company's qualitative assessment is structured based upon nine environmental factors impacting the expected risk of loss within the loan portfolio. Loans that no 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. The latter approach is used for loans deemed to be collateral dependent or when foreclosure is probable.

The ~~Company's adoption~~allowance for credit losses of ~~CECL had~~$107.5 million at March 31, 2021 represents a ~~minimal impact to the allowance as~~decrease of $5.8 million, or 5.2% compared to December 31, 2020. The Company recorded a release of provision for credit losses of $2.5 million during the ~~previous incurred loss methodology.~~first quarter of 2021, reflecting improvements in asset quality metrics and overall macro-economic assumptions, along with lower loan levels.

While management is unable to know with certainty the direct, indirect, and future impacts of the COVID-19 pandemic, it is expected that the pandemic will have a material adverse impact on future losses across a broad range of loan segments. As ~~of March 31, 2020,~~such, the allowance for credit losses ~~totaled $92.4 million,~~at March 31, 2021 reflects increased reserve allocations to loan segments that are considered to have elevated loss exposure associated with the COVID-19 pandemic. In addition, management continues to reflect conservative assumptions, such as that the federal funds rates will remain near 0% through mid-2025 and that recent stimulus will be ineffective as consumers are reluctant to spend the funds, and some concerns about the speed of wide spread vaccine administration, the efficacy of the vaccines and the possibility for resurgences of COVID-19 or ~~1.04%~~other variants of ~~total loans, as compared to $67.7 million, or 0.76% of total loans, at December 31, 2019.~~ the virus.

The ~~balance of~~ allowance for credit losses ~~as of March, 31, 2020, represents an increase of $24.6 million, or 36.3%, in comparison~~continued to ~~the implementation balances at January 1, 2020. This increase in the allowance~~be qualitatively adjusted upward during the first quarter ~~was primarily driven by forecasted credit deterioration due to the ongoing COVID-19 pandemic, which resulted~~of 2021, in ~~the Company recording a $25.0 million provision for credit losses in~~ order to reserve for current expected credit losses in the Company's loan portfolio. This forecast was adjusted to use a more severe outlook at March 31, 2020 as compared to the baseline forecast that was used to calculate opening balances on January 1, 2020. In determining the Company's allowance for credit losses as of March 31, 2020, the economic outlook included the following assumptions related to the COVID-19 pandemic:

~~Assumes the COVID-19 crisis will persist and continue to meaningfully impact the economy~~

~~Unemployment rate peaks at 16.9% in Q2 2020 and remains elevated throughout the remainder of the year~~

~~50% of industries will be on lock down throughout Q2 2020 creating additional downward pressure on spending~~

~~No sustained economic recovery expected until Q4 2021~~

~~Federal funds rates will remain at or near 0% for the foreseeable future.~~

~~In addition, the provision was qualitatively adjusted upward~~ to ensure coverage for ~~these "at risk"~~highly impacted relationships as ~~a result~~management performed detailed analysis consisting of ~~this~~a review of maximum levels of historic loss given default ("LGD") and stressed probability of default ("PD") scenarios for loans that ~~are withing~~were deemed to be more at risk within the industries that are ~~potentially~~highly impacted by the COVID-19 pandemic. In addition to these industry exposures, qualitative adjustments were also made in order to provide coverage over the additional risk of loss

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attributable to collateral values associated with non-owner occupied real estate with significant retail tenant exposure, as well as home equity loans within a junior lien position.

~~Refer to~~

~~Note 4, "Loans, Allowance for Credit Losses and Credit Quality"~~

~~within Condensed Notes to Consolidated Financial Statements included in Item 1 hereof, for further details surrounding the Company's adoption~~Table of ~~CECL, related accounting policy updates and full disclosures under the new standard.~~Contents

The following table summarizes changes in the allowance for credit losses and other selected statistics for the periods presented:

Table 1011 - Summary of Changes in the Allowance for Credit Losses


	Three Months Ended
	March 31 2021			December 31 2020			September 30 2020			June 30 2020			March 31 2020
	(Dollars in thousands)
Average total loans	$	9,343,769		$	9,396,192		$	9,375,522		$	9,311,877		$	8,871,346
Allowance for credit losses, beginning of period	$	113,392		$	115,625		$	112,176		$	92,376		$	67,740
Cumulative effect accounting adjustment (1)	—			—			—			—			(1,137)
Cumulative effect accounting adjustment (2)	—			—			—			—			1,157
Charged-off loans
Commercial and industrial	3,331			2,124			185			—			—
Commercial real estate	—			—			3,885			—			—
Commercial construction	—			—			—			—			—
Small business	66			186			49			36			109
Residential real estate	—			105			—			—			—
Home equity	—			—			—			4			138
Other consumer	289			283			185			670			487
Total charged-off loans	3,686			2,698			4,304			710			734
Recoveries on loans previously charged-off
Commercial and industrial	64			242			1			4			42
Commercial real estate	57			—			9			—			—
Commercial construction	—			—			—			—			—
Small business	11			25			2			3			3
Residential real estate	1			—			1			—			1
Home equity	13			36			21			95			58
Other consumer	197			162			219			408			246
Total recoveries	343			465			253			510			350
Net loans charged-off (recovered)
Commercial and industrial	3,267			1,882			184			(4)			(42)
Commercial real estate	(57)			—			3,876			—			—
Commercial construction	—			—			—			—			—
Small business	55			161			47			33			106
Residential real estate	(1)			105			(1)			—			(1)
Home equity	(13)			(36)			(21)			(91)			80
Other consumer	92			121			(34)			262			241
Total net loans charged-off	3,343			2,233			4,051			200			384
Provision for credit losses	(2,500)			—			7,500			20,000			25,000
Total allowance for credit losses, end of period	$	107,549		$	113,392		$	115,625		$	112,176		$	92,376
Net loans charged-off as a percent of average total loans (annualized)	0.15		%	0.09		%	0.17		%	0.01		%	0.02		%
Allowance for credit losses as a percent of total loans	1.16		%	1.21		%	1.23		%	1.20		%	1.04		%
Allowance for credit losses as a percent of nonperforming loans	181.67		%	169.59		%	117.95		%	229.80		%	192.29		%

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Three Months Ended
March 31
2020 December 31
2019 September 30
2019 June 30
2019 March 31
2019
(Dollars in thousands)
Average total loans $ 8,871,346
$ 8,877,072
$ 8,897,794
$ 9,046,591
$ 6,935,927
Allowance for credit losses, beginning of period $ 67,740
$ 66,942
$ 65,960
$ 65,140
$ 64,293
Cumulative effect accounting adjustment (1) (1,137 )
—

—

—

—
Cumulative effect accounting adjustment (2) 1,157

—

—

—

—
Charged-off loans
Commercial and industrial —
244
—
—
—
Commercial real estate —
2,532
82
—
—
Small business 109
190
125
49
145
Home equity 138
28
28
71
113
Other consumer 487
473
472
352
301
Total charged-off loans 734
3,467
707
472
559
Recoveries on loans previously charged-off
Commercial and industrial 42
4
1,003
—
124
Commercial real estate —
—
106
13
33
Small business 3
14
61
20
27
Residential real estate 1
1
140
—
1
Home equity 58
40
194
18
66
Other consumer 246
206
185
241
155
Total recoveries 350
265
1,689
292
406
Net loans charged-off (recovered)
Commercial and industrial (42 ) 240
(1,003 ) —
(124 )
Commercial real estate —
2,532
(24 ) (13 ) (33 )
Small business 106
176
64
29
118
Residential real estate (1 ) (1 ) (140 ) —
(1 )
Home equity 80
(12 ) (166 ) 53
47
Other consumer 241
267
287
111
146
Total net loans (recovered) charged-off 384
3,202
(982 ) 180
153
Provision for credit losses 25,000
4,000
—
1,000
1,000
Total allowance for credit losses, end of period $ 92,376
$ 67,740
$ 66,942
$ 65,960
$ 65,140
Net loans (recovered)/charged-off as a percent of average total loans (annualized) 0.02 % 0.14 % (0.04 )% 0.01 % 0.01 %
Allowance for credit losses as a percent of total loans 1.04 % 0.76 % 0.75 % 0.74 % 0.93 %
Allowance for credit losses as a percent of nonperforming loans 192.29 % 140.98 % 146.47 % 145.63 % 150.33 %
(1)Represents adjustment needed to reflect the cumulative day one impact pursuant to the Company's adoption of Accounting Standards Update 2016-13. The adjustment represents a $1.1 million decrease to the allowance attributable to the change in accounting methodology for estimating the allowance for credit losses resulting from the Company's adoption of the standard.


~~(1)~~	Represents adjustment needed to reflect the cumulative day one impact pursuant to the Company's adoption of Accounting Standards Update 2016-13. The adjustment represents a $1.1 million decrease to the allowance attributable to the the change in accounting methodology for estimating the allowance for credit losses resulting from the Company's adoption of the standard.

(2)Represents adjustment needed to reflect the day one reclassification of the Company's PCI loan balances to PCD and the associated gross-up, pursuant to the adoption of Accounting Standards Update 2016-13. The adjustment represents a $1.2 million increase to the allowance resulting from the day one reclassification.


~~(2)~~	Represents adjustment needed to reflect the day one re-class of the Company's PCI loan balances to PCD and the associated gross-up, pursuant to the adoption of Accounting Standards Update 2016-13. The adjustment represents a $1.2 million increase to the allowance resulting from the day one re-class.

For purposes of the allowance for credit losses, management segregates the loan portfolio into the portfolio segments detailed in the table below. The allocation of the allowance for credit losses is made to each loan category using the analytical techniques and estimation methods described ~~herein.~~in this Report. While these amounts represent management’s best estimate of credit losses at the evaluation dates, they are not necessarily indicative of either the categories in which actual losses may occur or the extent of such actual losses that may be recognized within each category. Each of these loan categories ~~possesses~~possess unique risk characteristics that are considered when determining the appropriate level of allowance for each segment. The Company began estimating its allowance for credit losses in accordance with the CECL methodology as of January 1, 2020, while prior period amounts were estimated using the incurred loss methodology prescribed by previously applicable accounting guidance. The total allowance is available to absorb losses from any segment of the loan portfolio.

The following table sets forth the allocation of the allowance for credit losses by loan category at the dates indicated:

Table 1112 - Summary of Allocation of Allowance for Credit Losses


	March 31 2021				December 31 2020
	Allowance Amount		Percent of Loans In Category To Total Loans		Allowance Amount		Percent of Loans In Category To Total Loans
	(Dollars in thousands)
Commercial and industrial (1)	$	20,207	22.6	%	$	21,086	22.4	%
Commercial real estate	44,348		45.2	%	45,009		44.4	%
Commercial construction	5,268		5.6	%	5,397		5.9	%
Small business	3,621		1.9	%	5,095		1.9	%
Residential real estate	12,956		13.4	%	14,275		13.8	%
Home equity	20,716		11.1	%	22,060		11.4	%
Other consumer	433		0.2	%	470		0.2	%
Total allowance for credit losses	$	107,549	100.0	%	$	113,392	100.0	%

March 31
2020 January 1
2020 December 31
2019

Allowance
Amount

Percent of
Loans
In Category
To Total Loans
Allowance
Amount Percent of
Loans
In Category
To Total Loans
Allowance
Amount

Percent of
Loans
In Category
To Total Loans
(Dollars in thousands)
Commercial and industrial $ 21,649
16.2 % $ 15,659
15.7 % $ 17,594
15.7 %
Commercial real estate 29,498
45.6 % 20,224
45.1 % 32,935
45.1 %
Commercial construction 3,747
5.9 % 2,401
6.2 % 6,053
6.2 %
Small business 3,829
2.0 % 2,241
2.0 % 1,746
2.0 %
Residential real estate 14,847
17.1 % 13,691
17.9 % 3,440
17.9 %
Home equity 17,910
12.9 % 12,907
12.8 % 5,576
12.8 %
Other consumer 896
0.3 % 637
0.3 % 396
0.3 %
Total allowance for credit losses $ 92,376
100.0 % $ 67,760
100.0 % $ 67,740
100.0 %

~~As a result~~(1)Includes loans originated as part of the initial adoption of CECL on January 1, 2020, the total allowance amount did not change materially, although allocation of these amounts by category did change. These changes are due to the new model that incorporates estimates of loss for the life of the loan, and therefore requiring higher reserves for loans with longer anticipated lives. The increase from adoption to March 31, 2020 is largely drivenPPP established by the ~~downturn of~~CARES Act, which have been excluded from the ~~economy in response to~~credit loss calculations because these loans are 100% guaranteed by the impact of the COVID-19 pandemic and the resulting changes to the model inputs, as well as additional qualitative adjustments required for relationships in industries that are highly impacted by social distancing business closures and other mandated government requirements in response to the COVID-19 pandemic.U.S. Government.

To determine if a loan should be charged-off, all possible sources of repayment are analyzed. Possible sources of repayment include the potential for future cash flows, the value of the Bank’s collateral, and the strength of co-makers or guarantors. When available information confirms that specific loans or portions thereof are uncollectible, these amounts are promptly charged-off against the allowance for credit losses and any recoveries of such previously charged-off amounts are credited to the allowance.

Regardless of whether a loan is unsecured or collateralized, the Company charges off the amount of any confirmed loan loss in the period when the loans, or portions of loans, are deemed uncollectible. For troubled, collateral-dependent loans, loss-confirming events may include an appraisal or other valuation that reflects a shortfall between the value of the collateral and the carrying value of the loan or receivable, or a deficiency balance following the sale of the collateral.

For additional information regarding the Company’s allowance for credit losses, see Note 4 ~~Loans,~~"Loans, Allowance for Credit Losses and Credit Quality ~~and~~ ~~Note 5, “Loans and Allowance for Loan Losses”~~" within ~~Condensed~~the Notes to Consolidated Financial Statements included in ~~Item~~Part I.Item 1 ~~hereof.~~of this Report.

Federal Home Loan Bank Stock The Bank held ~~an investment~~investments in FHLB of Boston stock of ~~$23.3 million and $14.4~~$10.3 million at each of March 31, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020. The 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. The purchase of stock in the FHLB is a requirement for a member to gain access to funding. The Company either purchases additional FHLB stock or is subject to redemption of FHLB stock proportional to the

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

Goodwill and Other Intangible Assets Goodwill and other intangible assets were ~~$533.7~~$527.9 million and ~~$535.5~~$529.3 million ~~as of~~at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The decrease was primarily due to amortization of definite-lived intangibles.

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. The Company determined that an interim impairment test was warranted due to the operational disruption and uncertainty associated with the COVID-19 pandemic which commenced during the first quarter of 2020. Accordingly, the Company last performed anits annual goodwill impairment ~~test as~~testing during the third quarter of ~~March 31,~~ 2020 and determined that ~~there~~the Company's goodwill was ~~no impairment~~not impaired as of ~~its goodwill.~~September 30, 2020. 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. ~~The Company also considered~~There were no events or changes during the ~~impact~~first quarter of ~~COVID-19 as it pertains to these intangible assets, and determined~~2021 that ~~there was no indication~~indicated impairment of ~~impairment related to~~ other intangible ~~assets as of March 31, 2020.~~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 ~~$197.8~~$241.4 million and ~~$197.4~~$200.5 million at March 31, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020, respectively, reflecting new policy purchases totaling $40.0 million during the first quarter of 2021. The Company recorded tax exempt income from life insurance policies of $1.3 million for each of the three month periods ended March 31, 2021 and ~~$972,000~~2020. The Company also recorded gains on life insurance benefits of $258,000, and $357,000 for the three months ended March 31, 2021 and 2020, ~~and 2019,~~ respectively. ~~Also during the first quarter of 2020 the Company recorded gains on life insurance benefits of $357,000.~~

Deposits As of March 31, ~~2020,~~2021, total deposits were ~~$9.4~~$11.6 billion, representing a ~~$268.8~~$600.4 million, or ~~2.9%~~5.5%, increase from December 31, ~~2019, driven primarily by increases from existing customers across all core deposit categories.~~2020, as a combination of government stimulus payments and loan fundings under the second round of the PPP fueled significant growth during the first quarter of 2021. The total cost of deposits was ~~0.48%~~0.10% and ~~0.39%~~0.48% for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Core deposits ~~represented 82.62%~~increased to 90.9% of total deposits as of March 31, ~~2020.~~2021, as noncore time deposits continued to runoff.

The Company also participates in the ~~Promontory Interfinancial~~IntraFi Network, allowing the Bank to provide easy access to multi-million dollar Federal Deposit Insurance Corporation ("FDIC") deposit insurance protection on certificate of deposit and money market investments for consumers, businesses and public entities. This channel allows the Company to seek additional funding in potentially large quantities by attracting deposits from outside the Bank’s core market, and amounted to ~~$219.0~~$233.2 million and ~~$211.2~~$237.9 million at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. In addition, the Company may occasionally raise funds through the use of brokered deposits outside of the ~~Promontory Interfinancial~~IntraFi Network, which amounted to ~~$197.4~~$7.8 million and ~~$281.6~~$8.5 million at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Borrowings The Company’s borrowings consist of both short-term and long-term borrowings and provide the Bank with one of its primary sources of funding. Maintaining available borrowing capacity provides the Bank with a contingent source of liquidity. Borrowings increased by $242.9 million, or 80.1%, at March 31, 2020, as compared to December 31, 2019, as the Company entered into an additional $300.0 million FHLB borrowing during the first quarter of 2020.

The following table presents the components of borrowings as of the ~~periods~~dates indicated:

Table 1213 - Borrowings


	March 31 2020		December 31 2019			March 31 2021		December 31 2020
						(Dollars in thousands)
Federal Home Loan Bank borrowings	$	358,591	$	115,748	Federal Home Loan Bank borrowings	$	35,717	$	35,740

Long-term borrowings	74,920		74,906		Long-term borrowings	28,099		32,773
Junior subordinated debentures	62,849		62,848		Junior subordinated debentures	62,851		62,851
Subordinated debentures	49,625		49,601		Subordinated debentures	49,720		49,696
Total borrowings	$	545,985	$	303,103	Total borrowings	$	176,387	$	181,060

Additionally, the Bank had ~~$3.5~~$4.0 billion and ~~$4.0~~$4.1 billion of assets pledged as collateral against borrowings at March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. These assets are primarily pledged to the FHLB of Boston and the Federal Reserve Bank of Boston.

Table of Contents

Capital Resources On March ~~19, 2020,~~18, 2021, the Company’s Board of Directors declared a cash dividend of ~~$0.46~~$0.48 per share to ~~stockholders~~shareholders of record as of the close of business on March ~~30, 2020.~~29, 2021. This dividend was paid on April 9, ~~2020.~~2021.

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. 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 financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company’s and the Bank’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

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, ~~2020~~2021 and December 31, ~~2019,~~2020, 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 ~~for~~as of each ~~period~~date indicated:

Table 1314 - Company and Bank's Capital Amounts and Ratios


	Actual				For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount			Ratio		Amount			Ratio
	March 31, 2021
	(Dollars in thousands)
Company (consolidated)
Total capital (to risk weighted assets)	$	1,395,973	15.61	%	$	715,596	≥	8.0	%	N/A			N/A
Common equity tier 1 capital (to risk weighted assets)	1,177,483		13.16	%	402,522		≥	4.5	%	N/A			N/A
Tier 1 capital (to risk weighted assets)	1,238,483		13.85	%	536,697		≥	6.0	%	N/A			N/A
Tier 1 capital (to average assets)	1,238,483		9.63	%	514,262		≥	4.0	%	N/A			N/A
Bank
Total capital (to risk weighted assets)	$	1,359,395	15.20	%	$	715,318	≥	8.0	%	$	894,147	≥	10.0	%
Common equity tier 1 capital (to risk weighted assets)	1,251,598		14.00	%	402,366		≥	4.5	%	581,196		≥	6.5	%
Tier 1 capital (to risk weighted assets)	1,251,598		14.00	%	536,488		≥	6.0	%	715,318		≥	8.0	%
Tier 1 capital (to average assets)	1,251,598		9.73	%	514,356		≥	4.0	%	642,945		≥	5.0	%
	December 31, 2020
	(Dollars in thousands)
Company (consolidated)
Total capital (to risk weighted assets)	$	1,374,349	15.13	%	$	726,482	≥	8.0	%	N/A			N/A
Common equity tier 1 capital (to risk weighted assets)	1,150,177		12.67	%	408,646		≥	4.5	%	N/A			N/A
Tier 1 capital (to risk weighted assets)	1,211,177		13.34	%	544,861		≥	6.0	%	N/A			N/A
Tier 1 capital (to average assets)	1,211,177		9.56	%	506,805		≥	4.0	%	N/A			N/A
Bank
Total capital (to risk weighted assets)	$	1,320,056	14.54	%	$	726,313	≥	8.0	%	$	907,892	≥	10.0	%
Common equity tier 1 capital (to risk weighted assets)	1,206,566		13.29	%	408,551		≥	4.5	%	590,130		≥	6.5	%
Tier 1 capital (to risk weighted assets)	1,206,566		13.29	%	544,735		≥	6.0	%	726,313		≥	8.0	%
Tier 1 capital (to average assets)	1,206,566		9.54	%	505,747		≥	4.0	%	632,184		≥	5.0	%

Table of Contents

Actual For Capital Adequacy Purposes To Be Well Capitalized Under Prompt
Corrective Action Provisions
Amount Ratio Amount Ratio Amount Ratio
March 31, 2020
(Dollars in thousands)
Company (consolidated)
Total capital (to risk weighted assets) $ 1,318,370
14.13 % $ 745,793
≥ 8.0 % N/A N/A
Common equity tier 1 capital
(to risk weighted assets)
1,114,799
11.95 % 419,509
≥ 4.5 % N/A N/A
Tier 1 capital (to risk weighted assets) 1,175,799
12.60 % 559,345
≥ 6.0 % N/A N/A
Tier 1 capital (to average assets) 1,175,799
10.74 % 458,249
≥ 4.0 % N/A N/A
Bank
Total capital (to risk weighted assets) $ 1,303,125
13.96 % $ 746,962
≥ 8.0 % $ 933,702
≥ 10.0 %
Common equity tier 1 capital
(to risk weighted assets)
1,210,099
12.96 % 420,166
≥ 4.5 % 606,906
≥ 6.5 %
Tier 1 capital (to risk weighted assets) 1,210,099
12.96 % 560,221
≥ 6.0 % 746,962
≥ 8.0 %
Tier 1 capital (to average assets) 1,210,099
11.06 % 458,246
≥ 4.0 % 572,808
≥ 5.0 %
December 31, 2019
(Dollars in thousands)
Company (consolidated)
Total capital (to risk weighted assets) $ 1,352,341
14.83 % $ 729,291
≥ 8.0 % N/A N/A
Common equity tier 1 capital
(to risk weighted assets)
1,171,963
12.86 % 410,226
≥ 4.5 % N/A N/A
Tier 1 capital (to risk weighted assets) 1,232,963
13.53 % 546,969
≥ 6.0 % N/A N/A
Tier 1 capital (to average assets) 1,232,963
11.28 % 437,271
≥ 4.0 % N/A N/A
Bank
Total capital (to risk weighted assets) $ 1,275,611
14.00 % $ 728,868
≥ 8.0 % $ 911,085
≥ 10.0 %
Common equity tier 1 capital
(to risk weighted assets)
1,205,740
13.23 % 409,988
≥ 4.5 % 592,205
≥ 6.5 %
Tier 1 capital (to risk weighted assets) 1,205,740
13.23 % 546,651
≥ 6.0 % 728,868
≥ 8.0 %
Tier 1 capital (to average assets) 1,205,740
11.06 % 435,886
≥ 4.0 % 544,857
≥ 5.0 %

In addition to the minimum risk-based capital requirements outlined in the table above, the Company is required to maintain a minimum capital conservation buffer, in the form of common equity, in order to avoid restrictions on capital distributions and discretionary bonuses. The required amount of the capital conservation buffer is 2.5%. At March 31, ~~2020,~~2021, the Company's capital levels exceeded the buffer.

Dividend Restrictions InThe 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. The Company is, in the ordinary course of business, ~~the Company is~~ dependent upon the receipt of cash dividends from the Bank to ~~provide funds for the payment of~~pay cash dividends to shareholders and ~~to provide for~~satisfy the Company’s other cash ~~requirements. Banking regulations~~needs. Federal and state law impose limits on capital distributions by the Bank. Massachusetts-chartered banks, such as the Bank, may ~~limit the amount of~~declare from net profits cash dividends ~~that~~not more frequently than quarterly and non-cash dividends at any time. No dividends may be ~~paid. Approval by regulatory authorities~~declared, credited, or paid if the Bank’s capital stock would be impaired. Massachusetts Bank Commissioner approval is required if the ~~effect~~total of all dividends declared ~~would cause the regulatory capital of~~by the Bank ~~to fall below specified minimum levels. Approval is also required if dividends declared~~in any calendar year would exceed the total of its net profits for that year combined with ~~the~~its retained net profits ~~for~~of the preceding two ~~years. Under~~years, less any required transfer to surplus or a fund for the ~~foregoing dividend restrictions and while maintaining its "well capitalized" status,~~retirement of any preferred stock. There were no dividends paid by the Bank to the Company ~~totaled $28.4 million and $30.0 million~~ for the three months ended March 31, ~~2020~~2021 and ~~2019, respectively .~~$28.4 million in dividends were paid by the Bank to the Company for the three months ended March 31, 2020.

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~~each of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 there ~~was~~were $61.0 million ~~respectively,~~ in trust preferred securities ~~which have been~~ included in the Tier 1 capital of the Company for regulatory reporting purposes pursuant to the Federal Reserve's capital adequacy guidelines.

~~Common Stock Repurchase Program~~ On October 17, 2019, the Company put into place a share repurchase program with the ability to repurchase up to 1.5 million shares of the Company's common stock. The program allowed for repurchases to be made from time to time on the open market and in privately negotiated transactions, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act. During the first quarter of 2020, the Company repurchased 1.2 million shares of common stock, at a cost of $73.2 million. Subsequently, in early April the Company repurchased the remaining shares available under the plan, thereby completing the repurchase of all 1.5 million shared authorized by the program at an average share price of $63.39.

Investment Management As of March 31, ~~2020,~~2021, the Rockland Trust Investment Management Group had assets under administration of ~~$4.0~~$5.2 billion, representing ~~6,171~~6,216 trust, fiduciary, and agency accounts. At December 31, ~~2019,~~2020, assets under administration were ~~$4.6~~$4.9 billion, representing approximately ~~6,108~~6,175 trust, fiduciary, and agency accounts. ~~The decline in value reflects the overall market decline driven primarily by investor response to the COVID-19 pandemic, including a sharp decline in the U.S. stock market. Also, included~~Included in these amounts as of March 31, ~~2020~~2021 and December 31, ~~2019 are~~2020 were assets under administration of ~~$278.4~~$395.8 million and ~~$342.2~~$369.6 million, respectively, relating to the Company’s registered investment advisor, Bright Rock Capital Management, LLC, which provides institutional quality investment management services to institutional and high net worth clients. Revenue from the Investment Management Group was ~~$6.3~~$7.4 million and ~~$6.1~~$6.3 million for the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

Retail investments and insurance revenue ~~was~~were $902,000 and $540,000 ~~and $679,000~~ for the three months ended March 31, 2021 and 2020, ~~and 2019,~~ respectively. This increase was primarily due to a strong sales volume.

Retail investments and insurance revenue ~~includes~~include commission revenue from LPL Financial (“LPL”) and its affiliates and their insurance subsidiary, LPL Insurance Associates, Inc., which offers 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. These same agents are also approved and appointed with various other broker general agents for the purpose of processing insurance solutions for clients.

Table of Contents

RESULTS OF OPERATIONS

The following table provides a summary of results of operations for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:

Table 1415 - Summary of Results of Operations


	Three Months Ended March 31							Three Months Ended March 31
	2020			2019					2021			2020
	(Dollars in thousands, except per share data)								(Dollars in thousands, except per share data)
Net income	$	26,751		$	35,225		Net income		$	41,711		$	26,751
Diluted earnings per share	$	0.78		$	1.25		Diluted earnings per share		$	1.26		$	0.78
Return on average assets	0.94		%	1.62		%	Return on average assets		1.26		%	0.94		%
Return on average equity	6.22		%	13.10		%	Return on average equity		9.87		%	6.22		%
Net interest margin	3.74		%	4.14		%	Net interest margin		3.25		%	3.74		%

The Company's results of operations ~~were impacted primarily by the additional provision~~ for ~~loan losses recognized during~~ the first quarter of ~~2020. The~~2021 were positively impacted by a release of provision for credit losses in the amount of $2.5 million as well as elevated interest income from forgiven PPP loans. In comparison, results from the first quarter of 2020 reflected an increased provision for credit loss of $25.0 million, ~~was~~ driven by anticipated credit losses related to the COVID-19 pandemic.

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 ~~2020~~2021 was ~~$94.6~~$95.8 million, representing an increase of ~~$11.8~~$1.3 million, or ~~14.3%~~1.3%, when compared to the first quarter of 2019. The increase in net interest income from the year ago period is primarily due to increased interest earning assets, including those obtained in the BHB acquisition. Despite the increase in interest-earning assets, the yields on assets have decreased significantly due to the Federal Reserve rate cuts that have occurred in the second half2020.

Table of ~~2019 and the first quarter 2020.~~Contents

The following tables present the Company’s average balances, net interest income, interest rate spread, and net interest margin for the three months ~~ending~~ended March 31, ~~2020~~2021 and ~~2019, respectively.~~2020. 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 ~~taxes~~tax rate that would have been paid if the income had been fully taxable.

Table 1516 - Average Balance, Interest Earned/Paid & Average Yields Quarter-to-Date




	Three Months Ended March 31
	2021						2020
	Average Balance		Interest Earned/ Paid		Yield/Rate		Average Balance		Interest Earned/ Paid		Yield/Rate
	(Dollars in thousands)
Interest-earning assets
Interest-earning deposits with banks, federal funds sold, and short term investments	$	1,321,430	$	326	0.10	%	$	72,552	$	160	0.89	%
Securities
Securities - trading	2,939		—		—	%	2,263		—		—	%
Securities - taxable investments	1,250,451		6,627		2.15	%	1,189,965		7,957		2.69	%
Securities - nontaxable investments (1)	642		6		3.79	%	1,237		12		3.90	%
Total securities	$	1,254,032	$	6,633	2.15	%	$	1,193,465	$	7,969	2.69	%
Loans held for sale	49,652		296		2.42	%	28,045		232		3.33	%
Loans (2)
Commercial and industrial (1)	2,115,069		23,046		4.42	%	1,403,199		16,940		4.86	%
Commercial real estate (1)	4,156,012		40,376		3.94	%	4,012,125		45,851		4.60	%
Commercial construction	555,153		5,283		3.86	%	555,741		6,901		4.99	%
Small business	174,320		2,281		5.31	%	174,668		2,562		5.90	%
Total commercial	7,000,554		70,986		4.11	%	6,145,733		72,254		4.73	%
Residential real estate	1,271,283		12,436		3.97	%	1,560,839		14,619		3.77	%
Home equity	1,050,234		8,757		3.38	%	1,136,931		11,827		4.18	%
Total consumer real estate	2,321,517		21,193		3.70	%	2,697,770		26,446		3.94	%
Other consumer	21,698		432		8.07	%	27,843		572		8.26	%
Total loans	$	9,343,769	$	92,611	4.02	%	$	8,871,346	$	99,272	4.50	%
Total interest-earning assets	$	11,968,883	$	99,866	3.38	%	$	10,165,408	$	107,633	4.26	%
Cash and due from banks	154,870						122,707
Federal Home Loan Bank stock	10,250						14,699
Other assets	1,241,651						1,166,775
Total assets	$	13,375,654					$	11,469,589
Interest-bearing liabilities
Deposits
Savings and interest checking accounts	$	4,109,747	$	423	0.04	%	$	3,270,719	$	1,934	0.24	%
Money market	2,288,030		521		0.09	%	1,872,003		3,173		0.68	%
Time deposits	906,613		1,767		0.79	%	1,346,890		5,785		1.73	%
Total interest-bearing deposits	$	7,304,390	$	2,711	0.15	%	$	6,489,612	$	10,892	0.68	%
Borrowings
Federal Home Loan Bank borrowings	$	35,785	$	188	2.13	%	$	131,225	$	528	1.62	%



Long-term borrowings	28,247		111		1.59	%	74,912		561		3.01	%
Junior subordinated debentures	62,851		426		2.75	%	62,849		478		3.06	%
Subordinated debentures	49,705		617		5.03	%	49,612		617		5.00	%
Total borrowings	$	176,588	$	1,342	3.08	%	$	318,598	$	2,184	2.76	%

Table of Contents

Three Months Ended March 31
2020 2019

Average
Balance

Interest
Earned/
Paid
Yield/Rate
Average
Balance

Interest
Earned/
Paid
Yield/Rate
(Dollars in thousands)
Interest-earning assets
Interest-earning deposits with banks, federal funds sold, and short term investments $ 72,552
$ 160
0.89 % $ 68,994
$ 426
2.50 %
Securities
Securities - trading 2,263
—
— % 1,616
—
— %
Securities - taxable investments 1,189,965
7,957
2.69 % 1,084,747
7,465
2.79 %
Securities - nontaxable investments (1) 1,237
12
3.90 % 1,738
17
3.97 %
Total securities $ 1,193,465
$ 7,969
2.69 % $ 1,088,101
$ 7,482
2.79 %
Loans held for sale 28,045
232
3.33 % 3,445
31
3.65 %
Loans (2)
Commercial and industrial (1) 1,403,199
16,940
4.86 % 1,113,819
14,440
5.26 %
Commercial real estate (1) 4,012,125
45,851
4.60 % 3,240,346
39,230
4.91 %
Commercial construction 555,741
6,901
4.99 % 386,736
5,617
5.89 %
Small business 174,668
2,562
5.90 % 165,374
2,484
6.09 %
Total commercial 6,145,733
72,254
4.73 % 4,906,275
61,771
5.11 %
Residential real estate 1,560,839
14,619
3.77 % 926,945
9,547
4.18 %
Home equity 1,136,931
11,827
4.18 % 1,086,620
12,175
4.54 %
Total consumer real estate 2,697,770
26,446
3.94 % 2,013,565
21,722
4.38 %
Other consumer 27,843
572
8.26 % 16,087
313
7.89 %
Total loans $ 8,871,346
$ 99,272
4.50 % $ 6,935,927
$ 83,806
4.90 %
Total interest-earning assets $ 10,165,408
$ 107,633
4.26 % $ 8,096,467
$ 91,745
4.60 %
Cash and due from banks 122,707
105,194

Federal Home Loan Bank stock 14,699
11,697

Other assets 1,166,775
617,259

Total assets $ 11,469,589
$ 8,830,617

Interest-bearing liabilities
Deposits
Savings and interest checking accounts $ 3,270,719
$ 1,934
0.24 % $ 2,891,613
$ 1,954
0.27 %
Money market 1,872,003
3,173
0.68 % 1,464,151
2,719
0.75 %
Time deposits 1,346,890
5,785
1.73 % 717,081
2,355
1.33 %
Total interest-bearing deposits $ 6,489,612
$ 10,892
0.68 % $ 5,072,845
$ 7,028
0.56 %
Borrowings
Federal Home Loan Bank borrowings $ 131,225
$ 528
1.62 % $ 112,898
$ 710
2.55 %
Line of credit —
—
— % 2,221
21
3.83 %
Long-term borrowings 74,912
561
3.01 % 3,331
32
3.90 %
Junior subordinated debentures 62,849
478
3.06 % 73,287
684
3.79 %
Subordinated debentures 49,612
617
5.00 % 44,678
543
4.93 %


Total interest-bearing liabilities	$	7,480,978	$	4,053	0.22	%	$	6,808,210	$	13,076	0.77	%
Noninterest bearing demand deposits	3,895,447						2,680,718
Other liabilities	285,857						251,469
Total liabilities	$	11,662,282					$	9,740,397
Stockholders' equity	1,713,372						1,729,192
Total liabilities and stockholders' equity	$	13,375,654					$	11,469,589
Net interest income (1)			$	95,813					$	94,557
Interest rate spread (3)					3.16	%					3.49	%
Net interest margin (4)					3.25	%					3.74	%
Supplemental information
Total deposits, including demand deposits	$	11,199,837	$	2,711			$	9,170,330	$	10,892
Cost of total deposits					0.10	%					0.48	%
Total funding liabilities, including demand deposits	$	11,376,425	$	4,053			$	9,488,928	$	13,076
Cost of total funding liabilities					0.14	%					0.55	%

(1)The total amount of adjustment to interest income and yield on a FTE basis was $229,000 and $253,000 for the three months ended March 31, 2021 and 2020, respectively. The FTE adjustment relates to tax exempt income relating to securities with average balances of $642,000 and $1.2 million and tax exempt income relating to loans with average balances of $70.2 million and $85.5 million, for the three months ended March 31, 2021 and 2020, 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.

Total borrowings $ 318,598
$ 2,184
2.76 % $ 236,415
$ 1,990
3.41 %
Total interest-bearing liabilities $ 6,808,210
$ 13,076
0.77 % $ 5,309,260
$ 9,018
0.69 %
Noninterest bearing demand deposits 2,680,718
2,317,209

Other liabilities 251,469
113,688

Total liabilities $ 9,740,397
$ 7,740,157

Stockholders' equity 1,729,192
1,090,460

Total liabilities and stockholders' equity $ 11,469,589
$ 8,830,617

Net interest income (1) $ 94,557
$ 82,727

Interest rate spread (3) 3.49 % 3.91 %
Net interest margin (4) 3.74 % 4.14 %
Supplemental information
Total deposits, including demand deposits $ 9,170,330
$ 10,892
$ 7,390,054
$ 7,028

Cost of total deposits 0.48 % 0.39 %
Total funding liabilities, including demand deposits $ 9,488,928
$ 13,076
$ 7,626,469
$ 9,018

Cost of total funding liabilities 0.55 % 0.48 %

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~~(1)~~

The total amount of adjustment to present interest income and yield on a FTE basis is $253,000 and $202,000 for the three months ended March 31, 2020 and 2019, respectively. The FTE adjustment relates to tax exempt income relating to securities with average balances of $1.2 million and $1.7 million and tax exempt income relating to loans with average balances of $85.5 million and $65.0 million, for the three months ended March 31, 2020 and 2019, respectively.


~~(2)~~	~~Average nonaccruing loans are included in 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. For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to: (1) changes in rate (change in rate multiplied by prior period volume), (2) changes in volume (change in volume multiplied by old rate), and (3) changes in volume/rate (change in volume multiplied by change in rate) which is allocated to the change due to rate column:

Table 1617 - Volume Rate Analysis


	Three Months Ended March 31
	2021 Compared To 2020
	Change Due to Rate		Change Due to Volume		Total Change
	(Dollars in thousands)
Income on interest-earning assets
Interest earning deposits, federal funds sold and short term investments	$	(2,588)	$	2,754	$	166
Securities

Securities - taxable investments	(1,734)		404		(1,330)
Securities - nontaxable investments (1)	—		(6)		(6)
Total securities					(1,336)
Loans held for sale	(115)		179		64
Loans
Commercial and industrial (1)	(2,488)		8,594		6,106
Commercial real estate (1)	(7,119)		1,644		(5,475)
Commercial construction	(1,611)		(7)		(1,618)
Small business	(276)		(5)		(281)
Total commercial					(1,268)
Residential real estate	529		(2,712)		(2,183)
Home equity	(2,168)		(902)		(3,070)
Total consumer real estate					(5,253)
Other consumer	(14)		(126)		(140)
Total loans (1)(2)					(6,661)
Total income of interest-earning assets					$	(7,767)
Expense of interest-bearing liabilities
Deposits
Savings and interest checking accounts	$	(2,007)	$	496	$	(1,511)
Money market	(3,357)		705		(2,652)
Time certificates of deposits	(2,127)		(1,891)		(4,018)
Total interest bearing deposits					(8,181)
Borrowings
Federal Home Loan Bank borrowings	44		(384)		(340)


Line of Credit	—		—		—
Long-term borrowings	(101)		(349)		(450)
Junior subordinated debentures	(52)		—		(52)
Subordinated debentures	(1)		1		—
Total borrowings					(842)
Total expense of interest-bearing liabilities					(9,023)
Change in net interest income					$	1,256

Three Months Ended March 31
2020 Compared To 2019
Change
Due to
Rate
Change
Due to
Volume
Total Change
(Dollars in thousands)
Income on interest-earning assets
Interest earning deposits, federal funds sold and short term investments $ (288 ) $ 22
$ (266 )
Securities
Securities - taxable investments (232 ) 724
492
Securities - nontaxable investments (1) —
(5 ) (5 )
Total securities 487
Loans held for sale (20 ) 221
201
Loans
Commercial and industrial (1) (1,252 ) 3,752
2,500
Commercial real estate (1) (2,723 ) 9,344
6,621
Commercial construction (1,171 ) 2,455
1,284
Small business (62 ) 140
78
Total commercial 10,483
Residential real estate (1,457 ) 6,529
5,072
Home equity (912 ) 564
(348 )
Total consumer real estate 4,724
Other consumer 30
229
259
Total loans (1)(2) 15,466
Total income of interest-earning assets $ 15,888
Expense of interest-bearing liabilities
Deposits
Savings and interest checking accounts $ (276 ) $ 256
$ (20 )
Money market (303 ) 757
454
Time certificates of deposits 1,362
2,068
3,430
Total interest bearing deposits 3,864
Borrowings
Federal Home Loan Bank borrowings (297 ) 115
(182 )
Customer repurchase agreements and other short-term borrowings —
—
—
Line of Credit —
(21 ) (21 )
Long-term borrowings (159 ) 688
529
Junior subordinated debentures (109 ) (97 ) (206 )
Subordinated debentures 14
60
74
Total borrowings 194
Total expense of interest-bearing liabilities 4,058
Change in net interest income $ 11,830

(1)Reflects income determined on a FTE basis. See footnote (1) to tables 16 for the related adjustments.


~~(1)~~	~~The table above reflects income determined on a FTE basis. See footnote (1) to tables 15 for the related adjustments.~~


~~(2)~~	~~Loans include portfolio loans and nonaccrual loans; however, unpaid interest on nonaccrual loans has not been included for purposes of determining interest income.~~

(2)Loans include portfolio loans and nonaccrual loans; however, unpaid interest on nonaccrual loans has not been included for purposes of determining interest income.

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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. ~~Provision was $25.0 million~~The Company recorded a release of provision for credit losses ~~during~~of $2.5 million for the three months ended March 31, 2021, primarily due to an improved economic outlook coupled with lower loan balances. The Company recorded a provision expense of $25.0 million for the three months ended March 31, 2020, ~~as compared to $1.0 million for the comparable year-ago periods. The elevated provision for credit losses during the first quarter of 2020~~which was ~~calculated under the newly adopted CECL methodology, which became effective January 1, 2020, and was~~primarily driven ~~primarily~~ by anticipated loan losses related to the COVID-19 pandemic. The Company’s allowance for credit losses, as a percentage of total loans, was 1.16% at March 31, 2021, 1.21% at December 31, 2020, and 1.04% at March 31, ~~2020, 0.76% at December 31, 2019, and 0.93% at March 31, 2019.~~2020. The Company recorded net charge-offs of $3.3 million and $384,000 for the three months ended March 31, ~~2020, as compared to net charge-offs of $153,000 for the three months ended~~2021 and March 31, ~~2019. Please refer~~2020, respectively. Refer to Note 4 ~~Loans,~~"Loans, Allowance for Credit Losses and Credit Quality" within ~~Condensed~~the Notes to Consolidated Financial Statements included in Part I. Item 1 ~~hereof,~~of this Report, for further details surrounding the ~~Company's accounting policies under the CECL standard and~~ primary drivers of the provision for credit losses ~~during~~for the period.

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

Table 1718 - Noninterest Income


	Three Months Ended									Three Months Ended
	March 31				Change					March 31				Change
	2020		2019		Amount		%			2021		2020		Amount		%
	(Dollars in thousands)									(Dollars in thousands)
Deposit account fees	$	4,970	$	4,406	$	564	12.80	%	Deposit account fees	$	3,584	$	4,970	$	(1,386)	(27.89)	%
Interchange and ATM fees	4,896		4,516		380		8.41	%	Interchange and ATM fees	2,720		4,896		(2,176)		(44.44)	%
Investment management	6,829		6,748		81		1.20	%	Investment management	8,304		6,829		1,475		21.60	%
Mortgage banking income	861		806		55		6.82	%	Mortgage banking income	5,740		861		4,879		566.67	%
Gain on life insurance benefits	357		—		357		100.00%		Gain on life insurance benefits	258		357		(99)		(27.73)	%
Increase in cash surrender value of life insurance policies	1,276		972		304		31.28	%	Increase in cash surrender value of life insurance policies	1,323		1,276		47		3.68	%

Loan level derivative income	3,597		641		2,956		461.15	%	Loan level derivative income	173		3,597		(3,424)		(95.19)	%
Other noninterest income	3,649		3,444		205		5.95	%	Other noninterest income	3,144		3,649		(505)		(13.84)	%
Total	$	26,435	$	21,533	$	4,902	22.77	%	Total	$	25,246	$	26,435	$	(1,189)	(4.50)	%

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

•Deposit account fees ~~increased due~~decreased for the three months ended March 31, 2021 in comparison to ~~overall increased household accounts, including~~ the ~~impact~~year ago period, driven primarily by reductions in overdraft fees as customers benefited from government stimulus payments during the first quarter of ~~the BHB acquisition.~~2021.

•Interchange and ATM fees ~~have increased, driven mainly by increased account activity and a larger customer base from~~decreased for the ~~BHB acquisition.~~

~~Investment management income was consistent with~~three months ended March 31, 2021 in comparison to the year ago ~~period. Assets under administration were approximately $4.0~~period, which decrease primarily reflects the negative impact of the Durbin Amendment, which the Company became subject to effective July 1, 2020 as a result of crossing the $10 billion asset threshold, and an overall decrease in consumer spending as customers focused on retaining liquidity following the onset of ~~March 31, 2020 and 2019, respectively, with the current quarter asset values negatively impacted by general stock market declines associated with~~ COVID-19 ~~concerns.~~

~~Mortgage banking income increased modestly despite significantly stronger closing volumes~~pandemic late in the first quarter of ~~2020 as compared~~2020.

•Investment management income increased for the three months ended March 31, 2021 in comparison to the year ago ~~period. Sharp reductions in rates~~period primarily driven by more favorable market conditions during the first quarter of ~~2020 caused severe secondary market disruption and uncertainty over pipeline closing assumptions throughout~~2021, along with overall growth in assets under administration which increased 29.91% to $5.2 billion at March 31, 2021, from $4.0 billion at Mach 31, 2020.

•Mortgage banking income increased for the ~~mortgage market, leading to significant declines~~three months ended March 31, 2021 in ~~value over various hedging positions. In addition~~comparison to the ~~reduced hedge values, the Company also recorded a $661,000 loss related to the valuation of mortgage servicing assets.~~

~~The Company received proceeds on life insurance policies during the first quarter of 2020 resulting in gains of $357,000. There were no such gains during the first quarter of 2019.~~

~~The increase in cash surrender value of life insurance policies increased~~year ago period primarily due to ~~policies obtained from~~increased loan volume and continued strong demand largely driven by the ~~BHB acquisition.~~low interest rate environment.

•Loan level derivative income ~~increased~~decreased for the three months ended March 31, 2021 primarily as a result of ~~higher~~lower customer ~~demand.~~demand in comparison to the year ago period.

•Other noninterest income ~~increased due~~decreased for the three months ended March 31, 2021, primarily attributable to ~~higher credit card fee~~decreases in equipment rental income, income on called securities, ~~merchant processing~~1031 exchange fee income and ~~checkbook fees;~~FHLB dividend income, partially offset by ~~decreases~~increases in unrealized gains on equity securities and ~~reduced business credit card interchange fees.~~loan workout costs.

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

Table 1819 - Noninterest Expense


	Three Months Ended
	March 31				Change
	2021		2020		Amount		%
	(Dollars in thousands)
Salaries and employee benefits	$	39,889	$	37,349	$	2,540	6.80	%
Occupancy and equipment expenses	9,273		9,317		(44)		(0.47)	%
Data processing & facilities management	1,665		1,658		7		0.42	%
FDIC assessment	1,050		—		1,050		100.00%

Consulting expense	2,391		1,336		1,055		78.97	%
Core deposit amortization	1,392		1,531		(139)		(9.08)	%








Software maintenance	1,970		1,685		285		16.91	%
Unrealized loss on equity securities	—		1,799		(1,799)		(100.00)	%
Other noninterest expenses	12,052		12,165		(113)		(0.93)	%
Total	$	69,682	$	66,840	$	2,842	4.25	%

Three Months Ended
March 31 Change
2020 2019 Amount %
(Dollars in thousands)
Salaries and employee benefits $ 37,349
$ 33,117
$ 4,232
12.78 %
Occupancy and equipment expenses 9,317
7,130
2,187
30.67 %
Data processing & facilities management 1,658
1,326
332
25.04 %
FDIC assessment —
616
(616 ) (100.00 )%
Advertising expense 1,105
1,213
(108 ) (8.90 )%
Consulting expense 1,336
764
572
74.87 %
Core deposit amortization 1,531
857
674
78.65 %
Merger and acquisition expenses —
1,032
(1,032 ) (100.00 )%
Software maintenance 1,685
1,165
520
44.64 %
Unrealized loss on equity securities 1,799
—
1,799
100.00%
Other noninterest expenses 11,060
9,091
1,969
21.66 %
Total $ 66,840
$ 56,311
$ 10,529
18.70 %

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

•The increase in salaries and employee benefits ~~reflects overall~~for the three months ended March 31, 2021 is due primarily to increases in incentive compensation expenses, commissions, retirement costs and payroll taxes.

•FDIC assessment increased for the ~~employee base, including the BHB acquisition, along with increases~~three months ended March 31, 2021, in ~~expenses associated with medical insurance and retirement benefit costs offset somewhat by a decrease in incentive compensation.~~

~~Occupancy and equipment expenses increased mainly due~~comparison to ~~the acquired BHB branch network offset by a decrease in snow removal costs.~~

~~Data processing increases reflect overall increased levels of transactional activity in conjunction with the Company's growth.~~

year ago period. The Company ~~incurred~~previously benefited from a small bank assessment credit, which resulted in no ~~FDIC assessment~~ expense during the first quarter of ~~2020, reflecting small bank~~2020. In addition, the Company's assessment ~~credits allocated~~base increased due to the Company crossing the $10 billion asset threshold, resulting in ~~conjunction with the Deposit Insurance Fund's attainment of a 1.38 percent reserve ratio.~~an increase to fees incurred.

•Consulting expense increased ~~in conjunction~~for the three months ended March 31, 2021 associated with the Company's overall growth, ~~and~~ implementation of strategic ~~initiatives.~~

~~The core deposit amortization increased due to additional core deposit intangibles associated with the BHB acquisition.~~

~~The merger~~initiatives, and ~~acquisition expenses~~projects and measures implemented in ~~2019 is primarily attributable~~response to the BHB acquisition, with a small remainder associated with the MNB Bancorp acquisition. The majority of these costs include legal, professional fees, and integration costs. There mere no merger and acquisition costs during the first quarter of 2020.COVID-19 pandemic.

•Software maintenance increased ~~during 2020~~for the three months ended March 31, 2021 primarily due to the Company's continued investment in its technology infrastructure.

~~Unrealized loss on equity securities increased primarily due~~•Other noninterest expense remained relatively consistent when comparing the three months ended March 31, 2021 to the ~~overall decline~~year ago period, with decreases in ~~general market conditions, driven primarily by COVID-19 pandemic uncertainty.~~

~~The increase in other noninterest expenses is primarily due to increases in losses on fixed asset disposals,~~ recruitment ~~expense,~~costs, amortization of other intangibles and ~~appraisal fees, partially~~sponsorships, offset by ~~decreases~~increases in in the provision for unfunded ~~commitments.~~commitments, contactless card issuance costs and contract labor.

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. The following table sets forth information regarding the Company’s tax provision and applicable tax rates for the periods indicated:

Table 1920 - Tax Provision and Applicable Tax Rates


	Three Months Ended
	March 31
		2021			2020
		(Dollars in thousands)
Combined federal and state income tax provision		$	11,937		$	2,148
Effective income tax rate		22.25		%	7.43		%
Blended statutory tax rate		27.92		%	27.88		%

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Three Months Ended
March 31
2020 2019
(Dollars in thousands)
Combined federal and state income tax provision $ 2,148
$ 11,522
Effective income tax rate 7.43 % 24.65 %
Blended statutory tax rate 27.88 % 28.23 %

The Company’s effective tax rate in ~~2020~~2021 thus far is ~~lower~~higher as compared to the year ago period primarily due to higher net income, as well as the impact of discrete items, ~~which are subject~~including tax benefits related to ~~fluctuation year over year.~~low income housing tax credits and equity compensation. The ~~current quarter~~ discrete tax amounts for the three months ended March 31, 2020 include a ~~significant~~ benefit of $4.7 million associated with the net operating loss (NOL) carryback provision of the CARES Act. The NOL was generated in relation to the ~~BHB acquisition. Additionally, the Company fully realized tax credit benefits from the New Market Tax Credit program as~~acquisition of ~~December 31, 2019 and therefore, the current year effective tax rate reflects no benefit from these particular credits.~~Blue Hills Bancorp, Inc. in 2019. The effective tax rates in the table above are lower than the blended statutory tax rates due to the aforementioned discrete items as well as certain tax preference assets such as life insurance policies, tax exempt bonds, and federal tax credits. The Company’s blended statutory tax rate for the ~~current quarter~~three months ended March 31, 2021 is comparable to the year ago period.

The Company invests in various low income housing projects, which are real estate limited partnerships that acquire, develop, own and operate low and moderate-income housing developments. As a limited partner in these operating partnerships, the Company will receive tax credits and tax deductions for losses incurred by the underlying properties. The investments are accounted for using the proportional amortization method and will be amortized over various periods through ~~2037,~~2039, which represents the period that the tax credits and other tax benefits will be utilized. The total committed investment in these partnerships is ~~$110.7~~$152.8 million, of which ~~$67.2~~$85.8 million ~~has~~had been funded as of March 31, ~~2020.~~2021. It is expected that the limited partnership investments will generate a net tax benefit of approximately ~~$2.0~~$1.9 million for the ~~full calendar~~fiscal year ~~of 2020~~2021 and a total of ~~$13.2~~$20.6 million over the remaining life of the investments from the combination of the tax credits and operating losses.

Risk Management

The Board of Directors and ~~Management~~management have identified significant risks which affect the Company, including credit risk, market risk, liquidity risk, price risk, operations risk, cybersecurity risk, consumer compliance risk, reputation risk, and strategic risk. The Board of Directors has approved an Enterprise Risk Management Policy, and ~~Management~~management has adopted a Risk Appetite Statement that addresses each risk category. Management reviews key risks and their mitigation on an ongoing basis and provides regular enterprise risk management reports to the Board of Directors. The Board of Directors, with the assistance of the Board’s Risk Committee, oversees ~~Management’s~~management’s enterprise risk assessment and management.

Credit Risk Credit risk is the possibility that customers or other counterparties may not repay loans or other contractual obligations according to their terms. While the collateral securing loans may be sufficient in some cases to recover the amount due, in other cases the Company may experience significant credit losses which could have an adverse effect on its operating results. The Company makes assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of its borrowers and counterparties and the value of collateral for the repayment of loans. For further discussion regarding the credit risk and the credit quality of the Company’s loan portfolio, see Note 4, “Loans, Allowance for Credit Losses and Credit Quality” within ~~Condensed~~the Notes to Consolidated Financial Statements included in Part I. Item 1 of this Report.

~~Operations~~Operational Risk ~~Operations~~Operational risk is the risk of loss from the Company’s operations due to ~~human behavior,~~ inadequate or failed internal process, people, systems and controls, and external influences such as market conditions, fraudulent activities, natural disasters, and security risks. Potential operational risk exposure exists throughout the Company. The continued effectiveness of colleagues, technical systems, operational infrastructure, and relationships with key third party service providers are integral to mitigating

~~operations~~ operational risk, and any shortcomings subject the Company to risks that vary in size, scale and scope. ~~Operations~~Operational risks include, but are not limited to, operational or technical failures, unlawful tampering with technical systems, cyber security, terrorist activities, ineffectiveness or exposure due to interruption in third party support, as well as the loss of key individuals or failure on the part of the key individuals to perform properly. Management maintains an ~~Operations~~Operational Risk Committee to assess and mitigate ~~operations~~operational risk which contributes to periodic enterprise risk management reporting to the ~~Board.~~Board of Directors.

Compliance Risk Compliance risk is the risk of regulatory sanctions or financial loss resulting from the failure to comply with rules and regulations issued by the various banking agencies, the U.S. Securities and Exchange Commission, the NASDAQ Stock Market, and good banking practices. Activities which may expose the Company to compliance risk include money laundering, privacy and data protection, adherence to laws and regulations, community reinvestment initiatives, and employment and tax matters. Compliance risk is mitigated through the use of written policies and procedures, staff training, and continuous monitoring of activities for adherence to policies and procedures. Management maintains a Consumer Compliance ~~Committee~~Advisory Team to assess and mitigate compliance risk that contributes to periodic enterprise risk management reporting to Executive Management and the ~~Board.~~Board of Directors.

Strategic and Reputation Risk Strategic and reputation risk is the risk of loss due to impairment of reputation, failure to fully develop and execute business plans, and failure to assess current and new opportunities and threats in business, markets, and products. Management seeks to mitigate strategic and reputational risk through annual strategic planning, frequent

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executive review of strategic plan progress, ongoing competitive and technological observation, assessment processes of new ~~product,~~products, new branches, and new business initiatives, adherence to ethical standards, a philosophy of customer advocacy, a structured process of customer complaint resolution, and ongoing reputational monitoring, crisis management planning, and management tools.

Market Risk Market risk is the sensitivity of income to changes in interest rates, equity prices, foreign exchange rates, commodity prices, and other market-driven rates or prices. The Company’s most significant market risk exposure is interest rate risk.

Interest rate risk is the sensitivity of income due to changes in interest rates. Interest rate changes, as well as fluctuations in the level and duration of assets and liabilities, affect net interest income, the Company’s primary source of revenue. Interest rate risk arises directly from the Company’s core banking activities. In addition to directly impacting net interest income, changes in the level of interest rates can also affect the amount of loans originated, the timing of cash flows on loans and securities, and the fair value of securities and derivatives, and have other effects.

Management maintains an Asset Liability Committee to manage interest rate risk, which strives to control interest rate risk within limits approved by the Board of Directors that reflect the Company’s tolerance for interest rate risk over short-term and long-term horizons. The Company attempts to manage interest rate risk by identifying, quantifying, and, where appropriate, hedging exposure. 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~~management determines to be prudent, through the use of off-balance sheet 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. Key assumptions in these simulation analyses relate to behavior of interest rates and behavior of the Company’s deposit and loan customers. The most material assumptions relate to the prepayment of mortgage assets (including mortgage loans and mortgage-backed securities) and the life and sensitivity of non-maturity deposits (e.g., demand deposit, negotiable order of withdrawal, savings, and money market accounts). In the case of prepayment of mortgage assets, assumptions are derived from published dealer median prepayment estimates for comparable mortgage loans. The risk of prepayment tends to increase when interest rates fall. Since future prepayment behavior of loan customers is uncertain, interest rate sensitivity of loans cannot be determined exactly and actual behavior may differ from ~~assumptions.~~assumption.

Based upon the net interest income simulation models, the Company currently forecasts that the Bank’s assets re-price faster than the liabilities. As a result, the net interest income of the Bank will benefit as market rates increase, and contract if market rates decrease. The Company runs several scenarios to quantify and effectively assist in managing this position. These scenarios include 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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The results of all scenarios and the impact to net interest income are outlined in the table below:

Table 2021 - Interest Rate Sensitivity


	March 31
	2021				2020
	Year 1		Year 2		Year 1		Year 2
Parallel rate shocks (basis points)

-100	(2.8)	%	(14.0)	%	(1.1)	%	(3.5)	%
+100	6.8	%	2.0	%	3.7	%	4.6	%
+200	14.5	%	12.6	%	8.1	%	11.2	%
+300	22.7	%	23.6	%	12.7	%	17.6	%
+400	30.5	%	34.0	%	17.0	%	23.8	%

Gradual rate shifts (basis points)

-100 over 12 months	(1.1)	%	12.4	%	(0.1)	%	(3.0)	%
+200 over 12 months	6.6	%	10.2	%	3.5	%	9.2	%
+400 over 24 months	6.7	%	18.7	%	3.5	%	13.5	%

Alternative scenarios
Yield Curve Twist (1)	n/a		n/a		1.1	%	5.6	%
Flat up 200 basis points scenario	6.8		9.7		n/a		n/a

(1)In the yield curve twist scenario, rates increase 200 basis points over a two year horizon. The parallel shift occurs faster on the long end of the curve than it does on the short end, creating a temporary increase in the steepness of the curve during the interim period of the twist.

March 31
2020 2019
Year 1 Year 2 Year 1 Year 2
Parallel rate shocks (basis points)
-100 (1.1 )% (3.5 )% (4.5 )% (7.4 )%
+100 3.7 % 4.6 % 3.5 % 6.4 %
+200 8.1 % 11.2 % 6.4 % 11.4 %
+300 12.7 % 17.6 % 9.3 % 16.4 %
+400 17.0 % 23.8 % 12.2 % 21.3 %

Gradual rate shifts (basis points)
-100 over 12 months (0.1 )% (3.0 )% (2.0 )% (6.1 )%
+200 over 12 months 3.5 % 9.2 % 3.0 % 9.8 %
+400 over 24 months 3.5 % 13.5 % 3.0 % 12.7 %

Alternative scenarios
Yield Curve Twist 1.1 % 5.6 % 0.9 % 6.8 %

The results depicted in the table above are dependent on material assumptions. For instance, asymmetrical rate behavior can have a material impact on the simulation results. If competition for deposits prompts the Company to raise rates on those liabilities more quickly than is assumed in the simulation analysis without a corresponding increase in asset yields, net interest income would be negatively impacted. Alternatively, if the Company is able to lag increases in deposit rates as loans re-price upward, net interest income would be positively impacted.

The most significant factors affecting market risk exposure of the Company’s net interest income during the three months ended March 31, ~~2020~~2021 were the shape of the U.S. Government securities and interest rate swap yield curve, the U.S. prime interest rate and LIBOR rates, and the interest rates being offered on long-term fixed rate loans. Additionally, the full economic impact of the COVID-19 pandemic on these factors remains uncertain.

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. 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 the other party. Interest rate caps and floors are agreements where one party agrees to pay a floating rate of interest on a notional principal amount for a predetermined period of time to a second party if certain market interest rate thresholds are realized. The amounts relating to the notional principal amount are not actually exchanged. Additionally, the Company may manage the interest rate risk inherent in its mortgage banking operations by entering into forward sales contracts. In an effort to mitigate that risk, forward delivery sales commitments are executed, under which the Company agrees to deliver whole mortgage loans to various investors. See Note 9,6, “Derivative and Hedging Activities” within ~~Condensed~~the Notes to Consolidated Financial Statements included in Part I. Item 1 ~~hereof~~of this Report for additional information regarding the Company’s Derivative Financial Instruments.

The Company’s earnings are not directly or materially impacted by movements in foreign currency rates or commodity prices. Movements in equity prices may have a modest impact on earnings by affecting the volume of activity or the amount of fees from investment-related business lines. See Note 3, “Securities” within ~~Condensed~~the Notes to Consolidated Financial Statements included in Part I. Item 1.

Liquidity Risk Liquidity risk is the risk that the Company will not have the ability to generate adequate amounts of cash in the most economical way to meet its ongoing obligations to pay deposit withdrawals, repay borrowings, and fund loans. The Company’s primary sources of funds are deposits, borrowings, and the amortization, prepayment, and maturities of loans

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and securities. The Bank utilizes its extensive branch network to access retail customers who provide a base of in-market core deposits.

These funds are principally comprised of demand deposits, interest checking accounts, savings accounts, and money market accounts. Deposit levels are greatly influenced by interest rates, economic conditions, and competitive factors.

Management maintains an Asset Liability Committee to manage liquidity risk. 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 funding at the FHLB, less short-term liabilities relative to total assets, was within policy limits at March 31, ~~2020.~~2021. The Total Basic Surplus/Deficit measure is affected primarily by changes in deposits, securities and short-term investments, loans, and borrowings. An increase in deposits, without a corresponding increase in nonliquid assets, will improve the Total Basic Surplus/Deficit measure, whereas, an increase in loans, with no increase in deposits, will decrease the measure. Other factors affecting the Total Basic Surplus/Deficit measure include collateral requirements at the FHLB, changes in the securities portfolio, and the mix of deposits.

The Bank seeks to increase deposits without adversely impacting the weighted average cost of those funds. As part of a prudent liquidity risk management practice, the Company maintains various liquidity sources, some of which are only accessed on a contingency basis. Accordingly, Management has implemented funding strategies that include FHLB advances, Federal Reserve Bank borrowing capacity, and repurchase agreement lines. These funding sources are a contingent source of liquidity and, when profitable lending and investment opportunities exist, access to them provides a means to grow the balance sheet.

Borrowing capacity at the FHLB and the Federal Reserve is impacted by the amount and type of assets available to be pledged. For example, a prime, one-to-four family, residential loan, may provide 75 cents of borrowing capacity for every $1.00 pledged, whereas, a commercial loan may provide a lower amount. As a result, the Company’s lending decisions can also affect its liquidity position.

The Company can raise additional funds through the issuance of equity or unsecured debt privately or publicly and has done so in the past. Additionally, the Company is able to enter into repurchase agreements or acquire brokered deposits at its discretion. The availability and cost of equity or debt on an unsecured basis is dependent on many factors. Some factors that will impact this source of liquidity are the Company’s financial position, the market environment, and the Company’s credit rating. The Company monitors the factors that could impact its ability to raise liquidity through these channels.

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As a result of PPP loan funding, government stimulus programs and a customer focus on retaining liquidity, the Company continued to experience significant growth in deposits and a buildup of liquidity through these sources during the first quarter of 2021. In addition to this excess liquidity as of March 31, 2021, the Company also maintains sufficient alternative sources of funding from which it may draw, if necessary. The table below shows current and unused liquidity capacity from various sources as of the dates indicated:

Table 2122 - Sources of Liquidity


	March 31, 2021				December 31, 2020
	Outstanding		Additional Borrowing Capacity		Outstanding		Additional Borrowing Capacity
	(Dollars in thousands)
Federal Home Loan Bank of Boston (1)	$	35,717	$	1,261,506	$	35,740	$	1,372,671
Federal Reserve Bank of Boston (2)	—		1,382,439		—		1,355,809
Unpledged Securities	—		985,024		—		716,961
Line of Credit	—		50,000		—		50,000
Long-term borrowing (3)	28,099		—		32,773		—

Junior subordinated debentures (3)	62,851		—		62,851		—
Subordinated debt (3)	49,720		—		49,696		—
Reciprocal deposits (3)	233,179		—		237,902		—
Brokered deposits (3)	7,792		—		8,538		—
	$	417,358	$	3,678,969	$	427,500	$	3,495,441

March 31, 2020 December 31, 2019
Outstanding
Additional
Borrowing
Capacity
Outstanding
Additional
Borrowing Capacity
(Dollars in thousands)
Federal Home Loan Bank of Boston (1) $ 358,591
$ 1,179,248
$ 115,748
$ 1,557,559
Federal Reserve Bank of Boston (2) —
692,179
—
954,748
Unpledged Securities —
754,494
—
790,304
Line of Credit —
50,000
—
50,000
Long-term borrowing (3) 74,920
—
74,906
—
Junior subordinated debentures (3) 62,849
—
62,848
—
Subordinated debt (3) 49,625
—
49,601
—
Reciprocal deposits (3) 218,971
—
211,213
—
Brokered deposits (3) 197,436
—
281,773
—
$ 962,392
$ 2,675,921
$ 796,089
$ 3,352,611

(1)Loans with a carrying value of $2.1 billion at each of March 31, 2021 and December 31, 2020 were pledged to the Federal Home Loan Bank of Boston resulting in this additional unused borrowing capacity.

(2)Loans with a carrying value of $1.9 billion at each of March 31, 2021 and December 31, 2020 were pledged to the Federal Reserve Bank of Boston resulting in this additional unused borrowing capacity.


~~(1)~~	Loans with a carrying value of $2.3 billion and $2.5 billion at March 31, 2020 and December 31, 2019, respectively, have been pledged to the Federal Home Loan Bank of Boston resulting in this additional unused borrowing capacity.


~~(2)~~	Loans with a carrying value of $1.2 billion and $1.5 billion at March 31, 2020 and December 31, 2019, respectively, have been pledged to the Federal Reserve Bank of Boston resulting in this additional unused borrowing capacity.


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

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

In addition to policies used for managing operational liquidity, the Board of Directors and ~~Management~~management recognize the need to establish reasonable guidelines for managing through an environment of heightened liquidity risk. Catalysts for elevated liquidity risk can be Bank-specific issues and/or systemic industry-wide ~~events, such as the COVID-19 pandemic.~~events. It is therefore the responsibility of ~~Management~~management to institute systems and controls to provide advanced detection of potentially significant funding shortages, establish methods for assessing and monitoring risk levels, and institute prompt responses that may ~~alleviate/~~alleviate or circumvent

a potential liquidity crisis. Management has established a Liquidity Contingency Plan to provide a framework for the Bank to help detect liquidity problems promptly and appropriately address potential liquidity problems in a timely manner. In a period of perceived heightened liquidity risk, the Liquidity Contingency Plan provides for the establishment of a Liquidity Crisis Task Force. The Liquidity Crisis Task Force is responsible for monitoring the potential for a liquidity crisis and for establishing and executing an appropriate response.

Off-Balance Sheet Arrangements There were no material changes in off-balance sheet financial instruments during the three months ended March 31, ~~2020.~~2021.

See Note 9,6, "Derivative and Hedging Activities" and Note ~~14,~~10, "Commitments and Contingencies" within~~within Condensed~~ the Notes to Consolidated Financial Statements included in Part I. Item 1 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, ~~2020.~~2021.

~~Please refer~~Refer to the ~~Company's Annual Report on~~2020 Form 10-K ~~for the fiscal year ended December 31, 2019~~ for a complete table of contractual obligations, commitments and contingencies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Information required by this Item 3 is included in the "Risk Management" section of Part I, Item 2 ~~of Part I of this Form 10-Q, “Management’s~~Management's Discussion and Analysis of Financial Condition and Results of ~~Operations.”~~Operations of this Report and is incorporated herein by reference.

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Item 4. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures. The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures ~~are~~were effective as of the end of the period covered by this quarterly report.

Changes in Internal ~~Controls~~Control over Financial Reporting. There were no changes in the Company's internal ~~controls~~control over financial reporting that occurred during the first quarter of ~~2020~~2021 that have materially affected or are reasonably likely to materially affect the Company’s internal ~~controls~~control over financial reporting. The Company has not experienced any material impact to the Company’s internal ~~controls~~control over financial reporting due to the fact that most of the Company’s employees responsible for financial reporting are working remotely during the COVID-19 pandemic. The Company is continually monitoring and assessing the impact of the COVID-19 pandemic on the Company’s internal ~~controls~~control over financial reporting to minimize ~~the~~any impact ~~to their~~on the design and operating effectiveness.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

At March 31, ~~2020,~~2021, the Bank was involved in pending lawsuits that arose in the ordinary course of business. Management has reviewed these pending lawsuits with legal counsel and has taken into consideration the view of counsel as to their outcome. In the opinion of management, the final disposition of pending lawsuits is not expected to have a material adverse effect on the Company’s financial position or results of operations.

Item 1A. Risk Factors

The section titled Risk Factors in Part I, Item 1A of the ~~Company's 2019 Annual Report on~~2020 Form 10-K includes a discussion of the ~~many~~material risks and uncertainties the Company faces, any one or more of which could have a material adverse effect on the Company's business, results of operations, or financial condition (including capital and liquidity). The information presented below provides an update to, and should be read in conjunction with, the risk factors and other information contained in the ~~Company's 2019 Annual Report~~2020 Form 10-K as well as any updated to our risk factors included in subsequent Quarterly Reports on Form ~~10-K.~~10-Q.

Except as presented below, there have been no material changes to the risk factors described in the ~~Company's 2019 Annual Report~~2020 Form 10-K.

Failure to complete the acquisition of Meridian Bancorp, Inc. for any reason could negatively impact future business and financial results of the Company.

On April 22, 2021, the Company announced the entry into a definitive agreement (the “Merger Agreement”) under which the Company will acquire Meridian Bancorp, Inc. (“Meridian”) and Rockland Trust Company will acquire East Boston Savings Bank (the “Merger”). Completion of the Merger is subject to customary closing conditions, including, among others, (i) approval of the issuance of shares of the Company’s common stock pursuant to the Merger Agreement (the “Company share issuance”) and adoption and approval by Meridian’s stockholders of the Merger Agreement, (ii) authorization for listing on the Nasdaq Stock Market of the shares of the Company’s common stock to be issued in the Merger, subject to official notice of issuance, (iii) the receipt of all required regulatory approvals, including the approval of the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Massachusetts Commissioner of Banks, the Massachusetts Housing Partnership Fund and the Depositors Insurance Fund, without the imposition of a burdensome condition, (iv) the effectiveness of the registration statement on Form ~~10-K.~~S-4 to be filed with the Securities and Exchange Commission by the Company in connection with the transactions contemplated by the Merger Agreement and (v) the absence of any order, injunction, decree or other legal restraint preventing the completion of the transactions contemplated by the Merger Agreement or making them illegal. Each party’s obligation to complete the Merger is also subject to additional customary conditions, including, subject to certain exceptions, the accuracy of the representations and warranties of the other party and the performance in all material respects by each party of its obligations under the Merger Agreement.

The ~~COVID-19 pandemic is adversely affecting~~Merger Agreement provides certain termination rights for both the Company and ~~its customers, counterparties, employees, and third-party service providers, and~~Meridian, including that a termination fee of $44.2 million will be payable by either the ~~full extent~~Company or Meridian, as applicable, in connection with the termination of the ~~adverse impacts on~~Merger Agreement under certain circumstances.

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If the ~~Company's~~Merger is not completed for any reason, the business ~~financial position, results~~ of ~~operations,~~the Company may be adversely affected and, ~~prospects~~without realizing any of the benefits of having completed the Merger, the Company could be ~~significant.~~

The spread of COVID-19 has created a global public-health crisis that has resulted in widespread volatility and deteriorations in business, economic, and market conditions and household incomes, including in the Commonwealth of Massachusetts where the Company conducts nearly all of its business. The extent of the impact of the COVID-19 pandemic on the Company's capital and liquidity, and on its business, results of operations, financial position and prospects generally will depend onsubject to a number of ~~evolving factors,~~risks. In this regard, the Company faces risks and uncertainties due both to the pendency of the Merger and the potential failure to consummate the merger, including:

•~~The duration, extent, and severity~~the occurrence of any event, change or other circumstances that could give rise to the termination of the ~~pandemic.~~ Merger Agreement;

•~~COVID-19 has~~the risk that Meridian’s stockholders may not ~~yet been contained~~adopt and ~~could affect significantly more households and businesses. The duration and severity~~approve the Merger Agreement;

•the risk that the Company’s shareholders may not approve the Company share issuance;

•the risk that the necessary regulatory approvals may not be obtained or may be obtained subject to conditions that are not anticipated;

•delays in closing the Merger or other risks that any of the ~~pandemic, including~~closing conditions to the Merger may not be satisfied in a timely manner;

•the diversion of management’s time and resources from ongoing business operations due to issues relating to the Merger;

•material adverse changes in the Company’s or Meridian’s operations or earnings; and

•potential ~~for a seasonal~~litigation in connection with the Merger.

In addition, the Company has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the Merger Agreement. If the Merger is not consummated, the Company could have to recognize these and other expenses without realized the expected benefits of the Merger.

The acquisition of Meridian may be more difficult, costly or ~~other resurgence after the initial containment, continue to be impossible to predict. Following any containment, there is also substantial uncertainty surrounding the pace of economic recovery~~time consuming than expected, and the ~~return~~expected benefits of ~~business~~the merger may not be realized.

Cost or difficulties relating to integration matters might be greater than expected and ~~consumer confidence.~~

~~The response of governmental~~the Company may be unable to realize expected cost savings and ~~nongovernmental authorities.~~ ~~Many of their actions have been directed toward curtailing household~~synergies from the Merger in the amounts and ~~business activity to contain COVID-19 while simultaneously deploying fiscal- and monetary-policy measures to partially mitigate~~in the adverse effects on individual households and businesses. These actions are not always coordinated or consistent across jurisdictions but, in general, have rapidly expanded in scope and intensity, contributing to substantial market volatility.

~~The effect on~~timeframe anticipated. For example, it is possible that the ~~Company's customers, counterparties, employees, and third-party service providers.~~ COVID-19 and its associated consequences and uncertainties, including increased unemployment rates, are affecting individuals, households, and businesses differently and unevenly. Many, however, have already changed their behavior in response to governmental mandates and advisories to sharply restrain commercial and social interactions and discretionary spending. As aintegration process could result in the ~~near term,~~loss of key employees, the ~~Company's credit, operational,~~disruption of the Company’s ongoing business or inconsistencies in standards, controls, procedures and ~~other risks have generally increased~~policies that adversely affect the combined bank’s ability to maintain relationships with customers and ~~for~~employees or to achieve the ~~foreseeable future, are expected to remain elevated or increase further.~~

anticipated benefits and cost savings of the Merger. The ~~effect on economies and markets.~~ ~~Whether the actions~~loss of governmental and nongovernmental authorities will be successful in mitigating the adverse effects of COVID-19 is unclear. National, regional, and local economies (including the local economies in the markets areas which the Company serves) and markets could suffer disruptions that are lasting. Governmental actions are meaningfully influencing the interest-rate environment and financial-market activity, whichkey employees could adversely affect the ~~Company's results of operations and financial condition.~~

~~During the first quarter of 2020, the most notable impact~~Company’s ability to the Company's results of operations was a higher provision expense for credit losses. The Company's provision expense was $25 million for the first quarter of 2020, compared to $1 million for the first quarter of 2019, and $4 million for the fourth quarter of 2019. With the spread of COVID-19successfully conduct its business in the ~~United States having only begun to accelerate~~markets in ~~March 2020,~~which Meridian now operates, which could have an adverse effect on the ~~Company's forecast~~Company’s financial results and the value of ~~macroeconomic conditions~~its common stock. The Company’s belief that cost savings and revenue enhancements are achievable is a forward-looking statement that is inherently uncertain. The combined company’s actual cost savings and revenue enhancements, if any, cannot be quantified at this time. Any actual cost savings or revenue enhancements will depend on future expense levels and operating results, ~~including expected lifetime credit losses on~~ the ~~Company's loan portfolio is subject to meaningful uncertainty.~~

~~Governments have taken unprecedented steps to partially mitigate the adverse effects~~timing of ~~their containment measures. For example, on March 27, 2020, the CARES Act was enacted to inject more than $2 trillion~~certain events and general industry, regulatory and business conditions. Many of ~~financial assistance into the U.S. economy. The FRB has taken decisive and sweeping actions as well. Since March 15, 2020,~~ these have included a reduction in the target range for the federal funds rate to 0 to 1/4 percent, a program to purchase an indeterminate amount of Treasury securities and agency mortgage-backed securities, and numerous facilities to support the flow of credit to households and businesses.

The degree to which the Company's actions and those of governments and others will directly or indirectly assist the Company's customers, counterparties, and third-party service providers and advance the Company's business and the economy generally is not yet clear. For example, while the Company's loan-deferral programs may better position customers to resume their regular payments to the Company in the future and enhance the Company's brand and customer loyalty, these programs may negatively impact the Company's revenue and other results of operations at least in the near term, may produce a higher degree of enrollment and other requests for extensions and rewrites than the Company anticipated, and the Company may not be as successful as expected in managing credit risk. In addition, while the FRB’s accommodative monetary policy may benefit the Company to some degree by supporting economic activity among its customers, this policy and sudden shifts in it may inhibit the Company's ability to grow or sustain net interest income and effectively manage interest-rate risk.

The Company is unable to estimate the near-term and ultimate impacts of COVID-19 on the Company's business and operations at this time. The pandemic could cause the Company to experience higher credit losses in its lending portfolio, additional increases in the allowance for credit losses, impairment of goodwill and other financial assets, diminished access to capital markets and other funding sources, further reduced demand for the Company's products and services, and other negative impacts on the Company's financial position, results of operations, and prospects. In addition, while the Company continues to anticipate that its

~~capital and liquidity positions~~events will be ~~sufficient, sustained adverse effects may impair these positions, prevent~~beyond the ~~Company from satisfying its minimum regulatory capital ratios and other supervisory requirements, and result in downgrades in its credit ratings.~~

The COVID-19 pandemic and related governmental mandates and advisories also have necessitated changes in the way the Company and its third party service providers continue operations, and the length of time that it may be required to operate under these circumstances, as well as the potential for conditions to worsen or for significant disruptions to occur, remains unpredictable. All of these risks and uncertainties can be expected to persist at least until the pandemic is demonstrably and sustainably contained, authorities cease curbing household and business activity, and consumer and business confidence recover. COVID-19 and the volatile economic conditions stemming from it or future resurgences could also precipitate or contribute to the other risk factors identified in the Company's 2019 Annual Report on Form 10-K, ~~which in turn could materially adversely affect the Company's~~ ~~business, financial position, results of operations, prospects~~, and its stock price, and may also affect the Company's business in a manner that is not presently known to it or that the Company currently does not consider to present significant risks to its business, financial position, results of operations or prospects.

As a participating lender in the SBA Paycheck Protection Program (“PPP”), the Company is subject to additional risks of litigation from its customers or other parties regarding the processing of loans for the PPP and risks that the U.S. Small Business Administration (“SBA”) may not fund some or all PPP loan guaranties, which could have a significant adverse impact on the Company's business, financial position, results of operations, and prospects .

The CARES Act included a $349 billion loan program administered through the SBA referred to as the PPP. Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. The Company is participating as a lender in the PPP. The PPP opened on April 3, 2020; however, becausecontrol of the short timeframe between the passing of the CARES Act and the opening of the PPP, there is some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes the Company to risks relating to noncompliance with the PPP. On or about April 16, 2020, the SBA notified lenders that the $349 billion earmarked for the PPP was exhausted. Congress has approved additional funding for the PPP and President Trump signed the new legislation on April 24, 2020. Since the opening of the PPP, several other larger banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP. The Company may be exposed to the risk of litigation, from both clients and non-clients that approached us regarding PPP loans, regarding its process and procedures used in processing applications for the PPP. If any such litigation is filed against the Company and is not resolved in a manner favorable to the Company, it may result in significant financial liability or adversely affect the Company's reputation. In addition, litigation can be costly, regardless of outcome. Any financial liability, litigation costs or reputational damage caused by PPP-related litigation could have a material adverse impact on the Company's business, financial position, results of operations and prospects.combined company.

The Company may have a credit risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by the Company, such as an issue with the eligibility of a borrower to receive a PPP loan, which may or may not be related to the ambiguity in the laws, rules and guidance regarding the operation of the PPP. In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded, or serviced by the Company, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Company, which could adversely impact the Company's business, financial position, results of operations and prospects.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable.

(b) Not applicable.

(c) The following table sets forth information regarding the Company’s repurchases of its common stock during the three months ended March 31, ~~2020:~~2021:


	Issuer Purchases of Equity Securities
	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan or Program	Maximum Number of Shares That May Yet Be Purchased Under the Plan or Program
Period
January 1 to January 31, 2021	2,316	$	76.97	—	—
February 1 to February 28, 2021	10,010	$	81.88	—	—
March 1 to March 31, 2021	4,079	$	98.36	—	—
Total	16,405	$	85.28	—

Issuer Purchases of Equity Securities
Total Number of Shares Purchased (1) Average Price Paid Per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plan or
Program (2)
Maximum Number of Shares That May Yet Be Purchased Under the Plan or Program (2)
Period
January 1 to January 31, 2020 13,389
$ 72.00
13,389
1,486,611
February 1 to February 29, 2020 133,107
$ 71.06
122,800
1,363,811
March 1 to March 31, 2020 1,035,656
$ 61.74
1,030,734
333,077
Total 1,182,152
$ 62.90
1,166,923

(1)Reflects shares withheld in connection with the exercise and/or vesting of equity compensation grants to satisfy related tax withholding obligations.


~~(1)~~	The number of shares purchased related to the surrendering of shares in connection with the exercise and/or vesting of equity compensation grants to satisfy related tax withholding obligations was 10,307 shares in February 2020 and 4,922 shares in March 2020.


~~(2)~~	On October 17, 2019, the Company announced that its Board of Directors authorized a share repurchase program of up to 1.5 million shares of the Company's common stock. The remaining 333,077 shares as of March 31, 2020 were repurchased in April 2020. Accordingly, the share repurchase program was terminated.

Item 3. Defaults Upon Senior Securities - ~~None~~None.

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Item 4. Mine Safety Disclosures - Not ~~Applicable~~Applicable.

Item 5. Other Information - ~~None~~None.

Item 6. Exhibits

Exhibit Index



No.			Exhibit



~~31.1~~2.1		Agreement and Plan of Merger dated April 22, 2021 by and among Independent Bank Corp., Bradford Merger Sub Inc., Rockland Trust Company, Meridian Bancorp, Inc. and East Boston Savings, is incorporated by reference to Exhibit 2.1 to Form 8-K filed on April 26, 2021.
31.1		Section 302 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.*
31.2		Section 302 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.*
32.1		Section 906 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.+
32.2		Section 906 Certification of Sarbanes-Oxley Act of 2002 is attached hereto.+
~~32.2~~101		~~Section 906 Certification of Sarbanes-Oxley Act of 2002 is attached hereto~~.+
~~101~~	The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
104		Cover page interactive data file (formatted as inline XBRL and contained in Exhibit 101).



*			Filed herewith



+		Furnished herewith

#	~~Management contract or compensatory plan or arrangement~~

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

INDEPENDENT BANK CORP.

(registrant)



May ~~7, 2020~~6, 2021						/s/ Christopher Oddleifson
						Christopher Oddleifson President and Chief Executive Officer (Principal Executive Officer)



May ~~7, 2020~~6, 2021						/s/ Mark J. Ruggiero
						Mark J. Ruggiero Chief Financial Officer (Principal Financial Officer)



Repayments of long-term Federal Home Loan Bank borrowings	(15,000		)	—
Proceeds from line of credit, net of issuance costs	—			49,993
Proceeds from long-term debt, net of issuance costs	—			74,914
Repayments of junior subordinated debentures, net of issuance costs	—			(3,093		)
Proceeds from subordinated debentures, net of issuance costs	—			49,556
Net proceeds from exercise of stock options	—			165
Restricted stock awards issued, net of awards surrendered	(1,132		)	(1,419		)
Proceeds from shares issued under direct stock purchase plan	560			487
Payments for shares repurchased under share repurchase program	(73,226		)	—
Common dividends paid	(15,126		)	(10,671		)
Net cash provided by financing activities	422,944			74,384
Net increase in cash and cash equivalents	320,403			41,819
Cash and cash equivalents at beginning of year	150,974			250,455
Cash and cash equivalents at end of period	$	471,377		$	292,274
Supplemental schedule of noncash activities
Net increase in capital commitments relating to low income housing project investments	$	14,394		$	—
Initial recognition of operating leases upon adoption of Accounting Standards Update 2016-02 (1)	$	—		$	32,777
Recognition of operating lease at commencement	$	2,223		$	2,926



	Three Months Ended
	March 31, 2019
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(Dollars in thousands)
Troubled debt restructurings
Commercial real estate	1	150		150
Home equity	1	75		75
Total	2	$	225	$	225



	December 31, 2019
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Residential Real Estate		Home Equity		Other Consumer		Total
	(Dollars in thousands)
Financing receivables ending balance:
Collectively evaluated for impairment	$	1,370,580	$	3,987,848	$	547,293	$	173,960	$	1,571,848	$	1,127,963	$	29,663	$	8,809,155
Individually evaluated for impairment	24,456		8,337		—		537		11,228		4,948		122		49,628
Purchased credit impaired loans	—		6,174		—		—		7,493		887		302		14,856
Total loans by group	$	1,395,036	$	4,002,359	$	547,293	$	174,497	$	1,590,569	$	1,133,798	$	30,087	$	8,873,639	(1)



	Three Months Ended March 31, 2019
	(Dollars in thousands)
	Commercial and Industrial		Commercial Real Estate			Commercial Construction		Small Business			Residential Real Estate		Home Equity			Other Consumer			Total
Allowance for loan losses
Beginning balance	$	15,760	$	32,370		$	5,158	$	1,756		$	3,219	$	5,608		$	422		$	64,293
Charge-offs	—		—			—		(145		)	—		(113		)	(301		)	(559		)
Recoveries	124		33			—		27			1		66			155			406
Provision (benefit)	988		(354		)	197		146			14		(54		)	63			1,000
Ending balance	$	16,872	$	32,049		$	5,355	$	1,784		$	3,234	$	5,507		$	339		$	65,140
Ending balance: collectively evaluated for impairment	$	16,814	$	31,974		$	5,355	$	1,783		$	2,432	$	5,346		$	332		$	64,036
Ending balance: individually evaluated for impairment	$	58	$	75		$	—	$	1		$	802	$	161		$	7		$	1,104



		December 31, 2019
Category	Risk Rating	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Total
		(Dollars in thousands)
Pass	1 - 6	$	1,274,155	$	3,860,555	$	542,608	$	171,213	$	5,848,531
Potential weakness	7	63,485		97,268		2,247		1,416		164,416
Definite weakness-loss unlikely	8	57,396		44,536		2,438		1,868		106,238
Partial loss probable	9	—		—		—		—		—
Definite loss	10	—		—		—		—		—
Total		$	1,395,036	$	4,002,359	$	547,293	$	174,497	$	6,119,185



	December 31, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(Dollars in thousands)
With no related allowance recorded
Commercial and industrial	$	23,786	$	34,970	$	—
Commercial real estate	6,213		12,101		—
Small business	469		484		—
Residential real estate	4,976		5,123		—
Home equity	3,764		3,893		—
Other consumer	34		34		—
Subtotal	39,242		56,605		—
With an allowance recorded
Commercial and industrial	$	670	$	670	$	126
Commercial real estate	2,124		2,124		48
Small business	68		105		8
Residential real estate	6,252		7,163		637
Home equity	1,184		1,382		156
Other consumer	88		91		5
Subtotal	10,386		11,535		980
Total	$	49,628	$	68,140	$	980



	Three Months Ended
	March 31, 2019
	Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)
With no related allowance recorded
Commercial and industrial	$	30,198	$	35
Commercial real estate	8,873		104
Commercial construction	311		—
Small business	323		2
Residential real estate	4,421		54
Home equity	4,952		55
Other consumer	53		1
Subtotal	49,131		251
With an allowance recorded
Commercial and industrial	$	498	$	3
Commercial real estate	1,682		24
Small business	181		2
Residential real estate	7,665		64
Home equity	985		12
Other consumer	138		1
Subtotal	11,149		106
Total	$	60,280	$	357



	December 31, 2019
	(Dollars in thousands)
Outstanding balance	$	18,358
Carrying amount	$	14,856



Loan Modification Requests by Loan Category:
	# of Loans	% of Total Loans (#)		Balance as of March 31, 2020		% of Total Loans ($)
				(Dollars in thousands)
Commercial and industrial	308	0.69	%	$	163,889	1.84	%
Commercial real estate	557	1.27	%	967,643		10.86	%
Construction	19	0.04	%	37,811		0.42	%
Small Business	289	0.65	%	21,781		0.24	%
Residential real estate	438	0.99	%	185,530		2.08	%
Home equity	308	0.69	%	44,695		0.50	%
Other consumer	22	0.05	%	559		0.01	%
Total	1,941	4.38	%	$	1,421,908	15.95	%



	Three Months Ended March 31
	Net Income					Diluted Earnings Per Share
	2020		2019			2020		2019
	(Dollars in thousands, except per share data)
Net income available to common shareholders (GAAP)	$	26,751	$	35,225		$	0.78	$	1.25
Non-GAAP adjustments
Noninterest expense components
Merger and acquisition expenses	—		1,032			—		0.04
Noncore increases to income before taxes	—		1,032			—		0.04
Net tax benefit associated with noncore items (1)	—		(198		)	—		(0.01		)
Add - adjustment for tax effect of previously incurred merger and acquisition expenses	$	—	$	650		$	—	$	0.02
Total tax impact	$	—	$	452		$	—	$	0.01
Noncore increases to net income	$	—	$	1,484		$	—	$	0.05
Operating net income (Non-GAAP)	$	26,751	$	36,709		$	0.78	$	1.30



	March 31 2020			December 31 2019			September 30 2019			June 30 2019			March 31 2019
	(Dollars in thousands, except per share data)
Tangible common equity
Stockholders' equity (GAAP)	$	1,679,656		$	1,708,143		$	1,682,324		$	1,636,003		$	1,104,538		(a)
Less: Goodwill and other intangibles	533,672			535,492			535,869			537,896			270,444
Tangible common equity (Non-GAAP)	1,145,984			1,172,651			1,146,455			1,098,107			834,094			(b)
Tangible assets
Assets (GAAP)	11,980,240			11,395,165			11,538,639			11,603,199			8,997,457			(c)
Less: Goodwill and other intangibles	533,672			535,492			535,869			537,896			270,444
Tangible assets (Non-GAAP)	$	11,446,568		$	10,859,673		$	11,002,770		$	11,065,303		$	8,727,013		(d)
Common shares	33,260,005			34,377,388			34,366,781			34,321,061			28,137,504			(e)

Common equity to assets ratio (GAAP)	14.02		%	14.99		%	14.58		%	14.10		%	12.28		%	(a/c)
Tangible common equity to tangible assets ratio (Non-GAAP)	10.01		%	10.80		%	10.42		%	9.92		%	9.56		%	(b/d)
Book value per share (GAAP)	$	50.50		$	49.69		$	48.95		$	47.67		$	39.26		(a/e)
Tangible book value per share (Non-GAAP)	$	34.46		$	34.11		$	33.36		$	32.00		$	29.64		(b/e)



	(Dollars in thousands)
Average loan size	$	1,067
Largest individual commercial real estate mortgage outstanding	$	32,000
Commercial real estate nonperforming loans/commercial real estate loans	0.11		%
Owner occupied commercial real estate loans/commercial real estate loans	14.6		%



	Balance		% of total Loans		% Secured by Real Estate		Additional commentary:
(Dollars in thousands)
Accommodation	$	411,384	4.6	%	98.0	%	The accommodation portfolio consists of 70 properties representing a combination of flagged (60%) and non-flagged hotels, motels and inns (40%). Approximately 90% of the balances outstanding are secured by properties located within New England states with the largest concentration in Massachusetts (61%). The average borrower loan size is $4.1 million and the portfolio balance weighted average loan-to-value is 54.8%.
Food Services	155,415		1.7	%	61.3	%	The food services portfolio includes full-service restaurants (67%), limited service restaurants including fast food (30%) and other types of food service (caterers, bars, mobile food service, 3%). The average borrower loan size is approximately $388 thousand and approximately 61% of the loan balances outstanding are secured by real estate assets with a portfolio balance weighted average loan-to-value of 46.7%.
Retail Trade	526,711		5.9	%	43.1	%	The Retail Trade portfolio consists broadly of food and beverage stores (39%), motor vehicle and parts dealers (29%), gasoline stations (13%), non-store retail fuel dealers (7%), furniture and home furnishing stores (6%) and other types of retailers (7%). Collateral for these loans varies and may consist of real estate, motor vehicles inventories, other types of inventories and general business assets. Approximately 43% of the Retail Trade portfolio is secured by real estate with a portfolio balance weighted average loan-to-value of 54.0%. The average borrower loan size is $466 thousand.



Health Care and Social Assistance	206,484		2.3	%	69.7	%	The healthcare portfolio consists of nursing and residential care facilities (38%), ambulatory care (29%), social assistance (19%) and Hospitals (14%). Approximately 70% of this portfolio is secured by real estate with a portfolio balance weighted average loan-to-value of 46.9%. The average borrower loan size in the healthcare portfolio is $652 thousand.
Other Services (except Public Administration)	160,159		1.8	%	49.1	%	The other services portfolio consists of various for-profit and not-for-profit services diversified across religious, civic and social service organizations (45%), repair and maintenance businesses (29%) and personal services, including car washes, beauty salons, laundry services, funeral homes, pet care and other types of services (26%). Approximately 49% of the ‘other services’ portfolio is secured by real estate with a portfolio balance weighted average loan-to-value ratio of 46.5%. The average borrower loan size is $272 thousand.
Arts, Entertainment, and Recreation	88,202		1.0	%	82.8	%	The Arts Entertainment and Recreation portfolio segment includes fitness and recreational sports centers (30%), amusement and theme parks (18%), Bowling centers (12%), Golf Courses (11%), marinas (9%) and other types of recreation (20%). Real estate secures approximately 83% of balances outstanding at a portfolio balance weighted average loan-to-value of 44.0%. The average borrower loan size is $737 thousand.
Transportation and Warehousing	84,805		1.0	%	56.0	%	The transportation and Warehousing portfolio consists of warehousing and storage (52%), transit, ground passenger transportation and truck transportation (35%) and other transportation related activities (13%). The average borrower loan size is $611 thousand. Approximately 56% of the portfolio is secured by real estate with a portfolio balance weighted average loan-to-value of 52.2%. The average borrower loan size is $611 thousand.
Educational Services	44,922		0.5	%	89.5	%	The Educational Services portfolio consists of elementary and secondary schools (48%), colleges and universities (35%) and other types of for profit and not-for-profit educational and training schools (17%). Real estate collateral secures 89% of the outstanding balances in this portfolio segment with a portfolio balance weighted average loan-to-value of 31.8%. The average borrower loan size is $598 thousand.
Total	$	1,678,082	18.8	%	66.1	%



	March 31 2020				January 1 2020				December 31 2019
	Allowance Amount		Percent of Loans In Category To Total Loans		Allowance Amount		Percent of Loans In Category To Total Loans		Allowance Amount		Percent of Loans In Category To Total Loans
	(Dollars in thousands)
Commercial and industrial	$	21,649	16.2	%	$	15,659	15.7	%	$	17,594	15.7	%
Commercial real estate	29,498		45.6	%	20,224		45.1	%	32,935		45.1	%
Commercial construction	3,747		5.9	%	2,401		6.2	%	6,053		6.2	%
Small business	3,829		2.0	%	2,241		2.0	%	1,746		2.0	%
Residential real estate	14,847		17.1	%	13,691		17.9	%	3,440		17.9	%
Home equity	17,910		12.9	%	12,907		12.8	%	5,576		12.8	%
Other consumer	896		0.3	%	637		0.3	%	396		0.3	%
Total allowance for credit losses	$	92,376	100.0	%	$	67,760	100.0	%	$	67,740	100.0	%



	Three Months Ended March 31
	2020 Compared To 2019
	Change Due to Rate			Change Due to Volume			Total Change
	(Dollars in thousands)
Income on interest-earning assets
Interest earning deposits, federal funds sold and short term investments	$	(288	)	$	22		$	(266	)
Securities
Securities - taxable investments	(232		)	724			492
Securities - nontaxable investments (1)	—			(5		)	(5		)
Total securities							487
Loans held for sale	(20		)	221			201
Loans
Commercial and industrial (1)	(1,252		)	3,752			2,500
Commercial real estate (1)	(2,723		)	9,344			6,621
Commercial construction	(1,171		)	2,455			1,284
Small business	(62		)	140			78
Total commercial							10,483
Residential real estate	(1,457		)	6,529			5,072
Home equity	(912		)	564			(348		)
Total consumer real estate							4,724
Other consumer	30			229			259
Total loans (1)(2)							15,466
Total income of interest-earning assets							$	15,888
Expense of interest-bearing liabilities
Deposits
Savings and interest checking accounts	$	(276	)	$	256		$	(20	)
Money market	(303		)	757			454
Time certificates of deposits	1,362			2,068			3,430
Total interest bearing deposits							3,864
Borrowings
Federal Home Loan Bank borrowings	(297		)	115			(182		)
Customer repurchase agreements and other short-term borrowings	—			—			—
Line of Credit	—			(21		)	(21		)
Long-term borrowings	(159		)	688			529
Junior subordinated debentures	(109		)	(97		)	(206		)
Subordinated debentures	14			60			74
Total borrowings							194
Total expense of interest-bearing liabilities							4,058
Change in net interest income							$	11,830