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 ~~September 30, 2022~~March 31, 2023


☐			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)

___________________________________________________


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

Office Address:

2036 Washington Street,

Hanover,

02339

Mailing Address:

288 Union Street,

Rockland,

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	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

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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	☐

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 ~~November 2, 2022,~~May 1, 2023, there were ~~45,642,245~~44,125,003 shares of the issuer’s common stock outstanding, par value $0.01 per share.

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			PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets - ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022			5
Consolidated Statements of Income - Three ~~and Nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~			7
Consolidated Statements of Comprehensive Income -Three ~~and Nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~			8
Consolidated Statements of Stockholders’ Equity - Three ~~and Nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~			9
Consolidated Statements of Cash Flows - ~~Nine~~Three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~			1110

Notes to Consolidated Financial Statements - ~~September 30, 2022~~March 31, 2023
Note 1 - Basis of Presentation			1312
Note 2 - Recent Accounting Standards Updates			1312
Note 3 - Securities			1513
Note 4 - Loans, Allowance for Credit Losses, and Credit Quality			1917
Note 5 - Borrowings			26
Note 6 - Stock Based Compensation			2826
Note 67 - Derivative and Hedging Activities			2927
Note 78 - Fair Value Measurements			35
~~Note 8 - Revenue Recognition~~			4233
Note 9 - ~~Comprehensive Income (Loss)~~Revenue Recognition			4540
Note 10 - ~~Commitments and Contingencies~~Other Comprehensive Income (Loss)			4643
Note 11 - ~~Low Income Housing Project Investments~~Commitments and Contingencies			4844
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			4845
Table 1 - Closed Residential Real Estate Loans			6157
Table 2 - Residential Mortgage Loan Sales			6157
Table 3 - Mortgage Servicing Asset			6258
Table 4 - Nonperforming Assets			6763
Table 5 - Activity in Nonperforming Assets			6763
Table 6 ~~- Troubled Debt Restructurings~~			68
~~Table 7 - Activity in Troubled Debt Restructurings~~			68
~~Table 8 - Interest Income - Nonaccrual Loans and Troubled Debt Restructurings~~			68
~~Table 9~~ - Summary of Net Charge-Offs to Average Loans Outstanding			7065
Table 107 - Summary of Allocation of Allowance for Credit Losses			7166
Table 118 - Company and Bank’s Capital Amounts and Ratios			7368
Table 12 9 - Assets Under Administration			7469
Table 1310 - Summary of Results of Operations			7571
Table 1411 - Average Balance, Interest Earned/Paid & Average Yields Quarter-to-Date			7672

Table ~~15 - Average Balance, Interest Earned/Paid & Average Yields Year-to-Date~~			78
~~Table 16~~12 - Volume Rate Analysis			8074
Table 1713 - Noninterest Income			8175
Table 1814 - Noninterest Expense			8376
Table 1915 - Tax Provision and Applicable Tax Rates			8477
Table 2016 - Liquidity Sources ~~of Liquidity~~			8679
Table 2117 - Interest Rate Sensitivity			8780

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PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

INDEPENDENT BANK CORP.

CONSOLIDATED BALANCE SHEETS

(Unaudited—Dollars in thousands)


		September 30 2022		December 31 2021			March 31 2023		December 31 2022
Assets	Assets					Assets
Cash and due from banks	Cash and due from banks	$	172,615	$	141,581	Cash and due from banks	$	179,923	$	175,843
Interest-earning deposits with banks	Interest-earning deposits with banks	763,681		2,099,103		Interest-earning deposits with banks	322,621		177,090
Securities	Securities					Securities
Trading	Trading	3,538		3,720		Trading	4,469		3,888
Equity	Equity	20,439		23,173		Equity	21,503		21,119
Available for sale (amortized cost $1,605,913 and $1,583,736)		1,425,511		1,571,148
Held to maturity (fair value $1,509,985 and $1,064,133)		1,697,635		1,066,818
Available for sale (amortized cost $1,551,042 and $1,566,779)						Available for sale (amortized cost $1,551,042 and $1,566,779)	1,405,602		1,399,154
Held to maturity (fair value $1,519,504 and $1,524,710)						Held to maturity (fair value $1,519,504 and $1,524,710)	1,678,376		1,705,120
Total securities	Total securities	3,147,123		2,664,859		Total securities	3,109,950		3,129,281
Loans held for sale (at fair value)	Loans held for sale (at fair value)	5,100		24,679		Loans held for sale (at fair value)	1,130		2,803
Loans	Loans					Loans
Commercial and industrial	Commercial and industrial	1,548,349		1,563,279		Commercial and industrial	1,649,882		1,635,103
Commercial real estate	Commercial real estate	7,677,917		7,992,344		Commercial real estate	7,820,094		7,760,230
Commercial construction	Commercial construction	1,185,157		1,165,457		Commercial construction	1,046,310		1,154,413
Small business	Small business	209,567		193,189		Small business	225,866		219,102
Residential real estate	Residential real estate	1,959,254		1,604,686		Residential real estate	2,095,644		2,035,524
Home equity - first position	Home equity - first position	578,405		589,550		Home equity - first position	556,534		566,166
Home equity - subordinate positions	Home equity - subordinate positions	508,765		450,061		Home equity - subordinate positions	534,221		522,584
Other consumer	Other consumer	32,936		28,720		Other consumer	19,401		35,553
Total loans	Total loans	13,700,350		13,587,286		Total loans	13,947,952		13,928,675
Less: allowance for credit losses	Less: allowance for credit losses	(147,313)		(146,922)		Less: allowance for credit losses	(159,131)		(152,419)
Net loans	Net loans	13,553,037		13,440,364		Net loans	13,788,821		13,776,256
Federal Home Loan Bank stock	Federal Home Loan Bank stock	5,218		11,407		Federal Home Loan Bank stock	40,303		5,218
Bank premises and equipment, net	Bank premises and equipment, net	198,408		195,590		Bank premises and equipment, net	195,921		196,504
Goodwill	Goodwill	985,072		985,072		Goodwill	985,072		985,072
Other intangible assets	Other intangible assets	26,934		32,772		Other intangible assets	23,253		25,068
Cash surrender value of life insurance policies	Cash surrender value of life insurance policies	293,126		289,304		Cash surrender value of life insurance policies	295,268		293,323

Other assets	Other assets	552,955		538,674		Other assets	500,140		527,716
Total assets	Total assets	$	19,703,269	$	20,423,405	Total assets	$	19,442,402	$	19,294,174
Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Deposits	Deposits					Deposits
Noninterest-bearing demand deposits	Noninterest-bearing demand deposits	$	5,622,260	$	5,479,503	Noninterest-bearing demand deposits	$	5,083,678	$	5,441,584
Savings and interest checking accounts	Savings and interest checking accounts	6,094,493		6,350,016		Savings and interest checking accounts	5,638,781		5,898,009
Money market	Money market	3,443,622		3,556,375		Money market	3,094,362		3,343,673
Time certificates of deposit	Time certificates of deposit	1,178,619		1,531,150		Time certificates of deposit	1,455,351		1,195,741
Total deposits	Total deposits	16,338,994		16,917,044		Total deposits	15,272,172		15,879,007
Borrowings	Borrowings					Borrowings
Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	643		25,667		Federal Home Loan Bank borrowings	879,628		637

Long-term borrowings		—		14,063
Junior subordinated debentures (less unamortized debt issuance costs of $33 and $35)		62,855		62,853

Junior subordinated debentures (less unamortized debt issuance costs of $32 and $33)						Junior subordinated debentures (less unamortized debt issuance costs of $32 and $33)	62,856		62,855

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Subordinated debentures (less unamortized debt issuance costs of $138 and $209)		49,862		49,791
Subordinated debentures (less unamortized debt issuance costs of $91 and $115)						Subordinated debentures (less unamortized debt issuance costs of $91 and $115)	49,909		49,885
Total borrowings	Total borrowings	113,360		152,374		Total borrowings	992,393		113,377
Other liabilities	Other liabilities	433,714		335,538		Other liabilities	346,928		415,089
Total liabilities	Total liabilities	16,886,068		17,404,956		Total liabilities	16,611,493		16,407,473
Commitments and contingencies	Commitments and contingencies	—		—		Commitments and contingencies	—		—
Stockholders' equity	Stockholders' equity					Stockholders' equity
Preferred stock, $0.01 par value, authorized: 1,000,000 shares, outstanding: none	Preferred stock, $0.01 par value, authorized: 1,000,000 shares, outstanding: none	—		—		Preferred stock, $0.01 par value, authorized: 1,000,000 shares, outstanding: none	—		—
Common stock, $0.01 par value, authorized: 75,000,000 shares, issued and outstanding: 45,634,626 shares at September 30, 2022 and 47,349,778 shares at December 31, 2021 (includes 136,904 and 135,273 shares of unvested participating restricted stock awards, respectively)		454		472
Value of shares held in rabbi trust at cost: 82,617 shares at September 30, 2022 and 82,565 shares at December 31, 2021		(3,239)		(3,146)
Common stock, $0.01 par value, authorized: 75,000,000 shares, issued and outstanding: 44,114,827 shares at March 31, 2023 and 45,641,238 shares at December 31, 2022 (includes 176,316 and 135,712 shares of unvested participating restricted stock awards, respectively)						Common stock, $0.01 par value, authorized: 75,000,000 shares, issued and outstanding: 44,114,827 shares at March 31, 2023 and 45,641,238 shares at December 31, 2022 (includes 176,316 and 135,712 shares of unvested participating restricted stock awards, respectively)	439		455
Value of shares held in rabbi trust at cost: 80,964 shares at March 31, 2023 and 80,965 shares at December 31, 2022						Value of shares held in rabbi trust at cost: 80,964 shares at March 31, 2023 and 80,965 shares at December 31, 2022	(3,286)		(3,227)
Deferred compensation and other retirement benefit obligations	Deferred compensation and other retirement benefit obligations	3,239		3,146		Deferred compensation and other retirement benefit obligations	3,286		3,227
Additional paid in capital	Additional paid in capital	2,113,313		2,249,078		Additional paid in capital	1,995,077		2,114,888
Retained earnings	Retained earnings	882,503		766,716		Retained earnings	971,338		934,442
Accumulated other comprehensive income (loss), net of tax		(179,069)		2,183
Accumulated other comprehensive loss, net of tax						Accumulated other comprehensive loss, net of tax	(135,945)		(163,084)
Total stockholders’ equity	Total stockholders’ equity	2,817,201		3,018,449		Total stockholders’ equity	2,830,909		2,886,701
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	19,703,269	$	20,423,405	Total liabilities and stockholders' equity	$	19,442,402	$	19,294,174

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

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INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF INCOME

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


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30				September 30					March 31
		2022		2021		2022		2021			2023		2022
Interest income	Interest income									Interest income
Interest and fees on loans	Interest and fees on loans	$	150,157	$	84,212	$	413,770	$	265,409	Interest and fees on loans	$	170,926	$	129,625
Taxable interest and dividends on securities	Taxable interest and dividends on securities	13,243		7,792		34,567		21,603		Taxable interest and dividends on securities	15,309		10,043
Nontaxable interest and dividends on securities	Nontaxable interest and dividends on securities	1		4		4		14		Nontaxable interest and dividends on securities	1		1
Interest on loans held for sale	Interest on loans held for sale	51		193		150		675		Interest on loans held for sale	34		64
Interest on federal funds sold and short-term investments	Interest on federal funds sold and short-term investments	6,519		815		10,222		1,654		Interest on federal funds sold and short-term investments	665		886
Total interest and dividend income	Total interest and dividend income	169,971		93,016		458,713		289,355		Total interest and dividend income	186,935		140,619
Interest expense	Interest expense									Interest expense
Interest on deposits	Interest on deposits	6,109		1,633		10,327		6,361		Interest on deposits	22,675		2,107
Interest on borrowings	Interest on borrowings	1,261		1,292		3,492		3,965		Interest on borrowings	5,262		1,080
Total interest expense	Total interest expense	7,370		2,925		13,819		10,326		Total interest expense	27,937		3,187
Net interest income	Net interest income	162,601		90,091		444,894		279,029		Net interest income	158,998		137,432
Provision for (release of) credit losses	Provision for (release of) credit losses	3,000		(10,000)		1,000		(17,500)		Provision for (release of) credit losses	7,250		(2,000)
Net interest income after provision for credit losses	Net interest income after provision for credit losses	159,601		100,091		443,894		296,529		Net interest income after provision for credit losses	151,748		139,432
Noninterest income	Noninterest income									Noninterest income
Deposit account fees	Deposit account fees	6,261		4,298		17,582		11,704		Deposit account fees	5,916		5,493
Interchange and ATM fees	Interchange and ATM fees	4,331		3,441		11,967		9,229		Interchange and ATM fees	4,184		3,609
Investment management	Investment management	8,436		9,174		26,438		26,350		Investment management	9,779		8,673
Mortgage banking income	Mortgage banking income	585		2,825		2,989		11,270		Mortgage banking income	308		1,362
Increase in cash surrender value of life insurance policies	Increase in cash surrender value of life insurance policies	1,883		1,596		5,549		4,508		Increase in cash surrender value of life insurance policies	1,854		1,795
Gain on life insurance benefits	Gain on life insurance benefits	477		—		600		258		Gain on life insurance benefits	11		—
Loan level derivative income	Loan level derivative income	471		586		1,511		875		Loan level derivative income	408		604

Other noninterest income	Other noninterest income	5,751		4,537		15,729		12,476		Other noninterest income	5,782		4,736
Total noninterest income	Total noninterest income	28,195		26,457		82,365		76,670		Total noninterest income	28,242		26,272
Noninterest expenses	Noninterest expenses									Noninterest expenses
Salaries and employee benefits	Salaries and employee benefits	52,708		42,235		150,957		124,759		Salaries and employee benefits	56,975		48,711
Occupancy and equipment expenses	Occupancy and equipment expenses	12,316		8,564		37,255		26,543		Occupancy and equipment expenses	12,822		13,302
Data processing and facilities management	Data processing and facilities management	2,259		1,673		6,878		5,024		Data processing and facilities management	2,527		2,372
Consulting expense	Consulting expense	2,547		1,560		7,057		5,443		Consulting expense	2,077		1,750
Software maintenance	Software maintenance	2,497		2,018		7,706		5,903		Software maintenance	2,949		2,564
Debit card expense	Debit card expense	1,936		1,347		5,562		3,693		Debit card expense	2,171		1,765
Amortization of intangible assets	Amortization of intangible assets	1,898		1,310		5,801		4,037		Amortization of intangible assets	1,815		2,001
FDIC assessment	FDIC assessment	1,677		980		5,225		2,805		FDIC assessment	2,610		1,805

Merger and acquisition expense	Merger and acquisition expense	—		1,943		7,100		3,674		Merger and acquisition expense	—		7,100

Other noninterest expenses	Other noninterest expenses	14,890		10,789		45,249		33,522		Other noninterest expenses	14,715		14,130
Total noninterest expenses	Total noninterest expenses	92,728		72,419		278,790		215,403		Total noninterest expenses	98,661		95,500
Income before income taxes	Income before income taxes	95,068		54,129		247,469		157,796		Income before income taxes	81,329		70,204
Provision for income taxes	Provision for income taxes	23,171		14,122		60,699		38,506		Provision for income taxes	20,082		17,107
Net income	Net income	$	71,897	$	40,007	$	186,770	$	119,290	Net income	$	61,247	$	53,097
Basic earnings per share	Basic earnings per share	$	1.57	$	1.21	$	4.01	$	3.61	Basic earnings per share	$	1.36	$	1.12
Diluted earnings per share	Diluted earnings per share	$	1.57	$	1.21	$	4.00	$	3.61	Diluted earnings per share	$	1.36	$	1.12
Weighted average common shares (basic)	Weighted average common shares (basic)	45,839,555		33,043,716		46,618,209		33,024,386		Weighted average common shares (basic)	45,004,100		47,366,753
Common share equivalents	Common share equivalents	16,856		15,554		17,221		18,238		Common share equivalents	19,564		20,711
Weighted average common shares (diluted)	Weighted average common shares (diluted)	45,856,411		33,059,270		46,635,430		33,042,624		Weighted average common shares (diluted)	45,023,664		47,387,464
Cash dividends declared per common share	Cash dividends declared per common share	$	0.51	$	0.48	$	1.53	$	1.44	Cash dividends declared per common share	$	0.55	$	0.51

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

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INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited—Dollars in thousands)


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30				September 30					March 31
		2022		2021		2022		2021			2023		2022
Net income	Net income	$	71,897	$	40,007	$	186,770	$	119,290	Net income	$	61,247	$	53,097
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax									Other comprehensive income (loss), net of tax
Net change in fair value of securities available for sale	Net change in fair value of securities available for sale	(42,582)		(7,897)		(128,872)		(11,878)		Net change in fair value of securities available for sale	17,068		(62,556)
Net change in fair value of cash flow hedges	Net change in fair value of cash flow hedges	(27,144)		(3,383)		(52,743)		(11,559)		Net change in fair value of cash flow hedges	10,163		(17,950)
Net change in other comprehensive income for defined benefit postretirement plans	Net change in other comprehensive income for defined benefit postretirement plans	121		280		363		1,309		Net change in other comprehensive income for defined benefit postretirement plans	(92)		121
Total other comprehensive loss		(69,605)		(11,000)		(181,252)		(22,128)
Total comprehensive income		$	2,292	$	29,007	$	5,518	$	97,162
Total other comprehensive income (loss)										Total other comprehensive income (loss)	27,139		(80,385)
Total comprehensive income (loss)										Total comprehensive income (loss)	$	88,386	$	(27,288)

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

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INDEPENDENT BANK CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~

~~(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 June 30, 2022 46,069,761 $ 459 $ (3,196) $ 3,196 $ 2,146,333 $ 833,857 $ (109,464) $ 2,871,185
Net income — — — — — 71,897 — 71,897
Other comprehensive loss — — — — — — (69,605) (69,605)
Common dividend declared ($0.51 per share) — — — — — (23,251) — (23,251)
Stock based compensation — — — — 1,017 — — 1,017
Restricted stock awards issued, net of awards surrendered 296 — — — — — — —
Shares issued under direct stock purchase plan 7,541 — — — 606 — — 606
Shares repurchased under share repurchase program (442,972) (5) — — (34,643) — — (34,648)
Deferred compensation and other retirement benefit obligations — — (43) 43 — — — —
Balance September 30, 2022 45,634,626 $ 454 $ (3,239) $ 3,239 $ 2,113,313 $ 882,503 $ (179,069) $ 2,817,201
Balance June 30, 2021 33,037,859 $ 329 $ (3,116) $ 3,116 $ 948,130 $ 763,596 $ 29,567 $ 1,741,622
Net income — — — — — 40,007 — 40,007
Other comprehensive loss — — — — — — (11,000) (11,000)
Common dividend declared ($0.48 per share) — — — — — (15,861) — (15,861)
Stock based compensation — — — — 707 — — 707
Restricted stock awards issued, net of awards surrendered (763) — — — (3) — — (3)
Shares issued under direct stock purchase plan 6,716 — — — 482 — — 482
Deferred compensation and other retirement benefit obligations — — (41) 41 — — — —
Balance September 30, 2021 33,043,812 $ 329 $ (3,157) $ 3,157 $ 949,316 $ 787,742 $ 18,567 $ 1,755,954

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~~INDEPENDENT BANK CORP.~~

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~

~~Nine Months Ended September 30, 2022 and 2021~~

(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, 2022																	Balance December 31, 2022	45,641,238	$	455	$	(3,227)	$	3,227	$	2,114,888	$	934,442	$	(163,084)	$	2,886,701

Net income																	Net income	—	—		—		—		—		61,247		—		61,247
Other comprehensive income																	Other comprehensive income	—	—		—		—		—		—		27,139		27,139
Common dividend declared ($0.55 per share)																	Common dividend declared ($0.55 per share)	—	—		—		—		—		(24,351)		—		(24,351)

Proceeds from exercise of stock options, net of cash paid																	Proceeds from exercise of stock options, net of cash paid	1,666	—		—		—		80		—		—		80
Stock based compensation																	Stock based compensation	—	—		—		—		1,672		—		—		1,672
Restricted stock awards issued, net of awards surrendered																	Restricted stock awards issued, net of awards surrendered	81,075	—		—		—		(1,110)		—		—		(1,110)
Shares issued under direct stock purchase plan																	Shares issued under direct stock purchase plan	7,881	—		—		—		642		—		—		642
Shares repurchased under share repurchase program(1)																	Shares repurchased under share repurchase program(1)	(1,617,033)	(16)		—		—		(121,095)		—		—		(121,111)
Deferred compensation and other retirement benefit obligations																	Deferred compensation and other retirement benefit obligations	—	—		(59)		59		—		—		—		—
Balance March 31, 2023																	Balance March 31, 2023	44,114,827	$	439	$	(3,286)	$	3,286	$	1,995,077	$	971,338	$	(135,945)	$	2,830,909
		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, 2021	Balance December 31, 2021	47,349,778	$	472	$	(3,146)	$	3,146	$	2,249,078	$	766,716	$	2,183	$	3,018,449	Balance December 31, 2021	47,349,778	$	472	$	(3,146)	$	3,146	$	2,249,078	$	766,716	$	2,183	$	3,018,449

Net income	Net income	—	—		—		—		—		186,770		—		186,770		Net income	—	—		—		—		—		53,097		—		53,097
Other comprehensive loss	Other comprehensive loss	—	—		—		—		—		—		(181,252)		(181,252)		Other comprehensive loss	—	—		—		—		—		—		(80,385)		(80,385)
Common dividend declared ($1.53 per share)		—	—		—		—		—		(70,983)		—		(70,983)
Common dividend declared ($0.51 per share)																	Common dividend declared ($0.51 per share)	—	—		—		—		—		(24,162)		—		(24,162)

Stock based compensation	Stock based compensation	—	—		—		—		3,483		—		—		3,483		Stock based compensation	—	—		—		—		834		—		—		834
Restricted stock awards issued, net of awards surrendered	Restricted stock awards issued, net of awards surrendered	50,096	—		—		—		(1,085)		—		—		(1,085)		Restricted stock awards issued, net of awards surrendered	44,569	—		—		—		(1,063)		—		—		(1,063)
Shares issued under direct stock purchase plan	Shares issued under direct stock purchase plan	21,717	—		—		—		1,765		—		—		1,765		Shares issued under direct stock purchase plan	6,602	—		—		—		571		—		—		571
Shares repurchased under share repurchase program(1)		(1,786,965)	(18)		—		—		(139,928)		—		—		(139,946)
Shares repurchased under share repurchase program																	Shares repurchased under share repurchase program	(23,824)	—		—		—		(1,902)		—		—		(1,902)
Deferred compensation and other retirement benefit obligations	Deferred compensation and other retirement benefit obligations	—	—		(93)		93		—		—		—		—		Deferred compensation and other retirement benefit obligations	—	—		(33)		33		—		—		—		—
Balance September 30, 2022		45,634,626	$	454	$	(3,239)	$	3,239	$	2,113,313	$	882,503	$	(179,069)	$	2,817,201

Balance December 31, 2020		32,965,692	$	328	$	(3,066)	$	3,066	$	945,638	$	716,024	$	40,695	$	1,702,685

Net income		—	—		—		—		—		119,290		—		119,290
Other comprehensive loss		—	—		—		—		—		—		(22,128)		(22,128)
Common dividend declared ($1.44 per share)		—	—		—		—		—		(47,572)		—		(47,572)

Proceeds from exercise of stock options, net of cash paid		4,744	—		—		—		(57)		—		—		(57)
Stock based compensation		—	—		—		—		3,467		—		—		3,467
Restricted stock awards issued, net of awards surrendered		53,795	1		—		—		(1,247)		—		—		(1,246)
Shares issued under direct stock purchase plan		19,581	—		—		—		1,515		—		—		1,515

Deferred compensation and other retirement benefit obligations		—	—		(91)		91		—		—		—		—
Balance September 30, 2021		33,043,812	$	329	$	(3,157)	$	3,157	$	949,316	$	787,742	$	18,567	$	1,755,954
Balance March 31, 2022																	Balance March 31, 2022	47,377,125	$	472	$	(3,179)	$	3,179	$	2,247,518	$	795,651	$	(78,202)	$	2,965,439

(1) Inclusive of $1.2 million impact of excise tax attributable to share repurchases made during the three months ended March 31, 2023.

The accompanying 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)


		Nine Months Ended					Three Months Ended
		September 30					March 31
		2022		2021			2023		2022
Cash flow from operating activities	Cash flow from operating activities					Cash flow from operating activities
Net income	Net income	$	186,770	$	119,290	Net income	$	61,247	$	53,097
Adjustments to reconcile net income to net cash provided by operating activities	Adjustments to reconcile net income to net cash provided by operating activities					Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	Depreciation and amortization	29,528		24,586		Depreciation and amortization	9,633		10,119
Change in unamortized net loan costs and premiums		(6,397)		(17,217)
Accretion of fair value mark of acquired loans		(65)		(5,349)
Change in unamortized net loan costs and fees						Change in unamortized net loan costs and fees	(529)		(3,666)
Accretion of acquired loans						Accretion of acquired loans	(305)		(84)
Provision for (release of) credit losses	Provision for (release of) credit losses	1,000		(17,500)		Provision for (release of) credit losses	7,250		(2,000)
Deferred income tax expense	Deferred income tax expense	271		271		Deferred income tax expense	644		643
Net loss (gain) on equity securities		2,819		(695)
Net (gain) loss on equity securities						Net (gain) loss on equity securities	(368)		627

Net loss on bank premises and equipment	Net loss on bank premises and equipment	217		32		Net loss on bank premises and equipment	79		406

Realized gain on sale leaseback transaction	Realized gain on sale leaseback transaction	(433)		(433)		Realized gain on sale leaseback transaction	(145)		(145)
Stock based compensation	Stock based compensation	3,483		3,467		Stock based compensation	1,672		834

Increase in cash surrender value of life insurance policies	Increase in cash surrender value of life insurance policies	(5,549)		(4,508)		Increase in cash surrender value of life insurance policies	(1,854)		(1,795)
Gain on life insurance benefits		(600)		(258)

Operating lease payments	Operating lease payments	(15,867)		(8,993)		Operating lease payments	(3,432)		(9,030)
Operating lease termination payments		—		(4,750)

Change in fair value on loans held for sale	Change in fair value on loans held for sale	620		1,534		Change in fair value on loans held for sale	17		548
Net change in:	Net change in:					Net change in:
Trading assets	Trading assets	182		(666)		Trading assets	(581)		(236)

Loans held for sale	Loans held for sale	18,959		23,017		Loans held for sale	1,656		17,987
Other assets	Other assets	32,252		16,700		Other assets	17,326		46,805
Other liabilities	Other liabilities	58,669		28,267		Other liabilities	(40,844)		(38,582)
Total adjustments	Total adjustments	119,089		37,505		Total adjustments	(9,781)		22,431
Net cash provided by operating activities	Net cash provided by operating activities	305,859		156,795		Net cash provided by operating activities	51,466		75,528
Cash flows used in investing activities	Cash flows used in investing activities					Cash flows used in investing activities
Proceeds from sales of equity securities		30		1,164

Purchases of equity securities	Purchases of equity securities	(471)		(1,522)		Purchases of equity securities	(136)		(184)

Proceeds from maturities and principal repayments of securities available for sale	Proceeds from maturities and principal repayments of securities available for sale	100,790		75,442		Proceeds from maturities and principal repayments of securities available for sale	15,694		34,927
Purchases of securities available for sale	Purchases of securities available for sale	(123,289)		(1,106,079)		Purchases of securities available for sale	—		(98,246)
Proceeds from maturities and principal repayments of securities held to maturity	Proceeds from maturities and principal repayments of securities held to maturity	132,997		199,304		Proceeds from maturities and principal repayments of securities held to maturity	27,877		51,072
Purchases of securities held to maturity	Purchases of securities held to maturity	(763,987)		(340,713)		Purchases of securities held to maturity	—		(266,972)
Net redemption of Federal Home Loan Bank stock		6,189		1,584
Net purchase of Federal Home Loan Bank stock						Net purchase of Federal Home Loan Bank stock	(35,085)		—
Investments in low income housing projects	Investments in low income housing projects	(14,896)		(19,236)		Investments in low income housing projects	(13,669)		(6,405)
Purchases of life insurance policies	Purchases of life insurance policies	(115)		(40,116)		Purchases of life insurance policies	(91)		(93)
Proceeds from life insurance policies		2,273		576

Net (increase) decrease in loans	Net (increase) decrease in loans	(107,211)		603,773		Net (increase) decrease in loans	(18,981)		10,605

Purchases of bank premises and equipment	Purchases of bank premises and equipment	(18,019)		(16,114)		Purchases of bank premises and equipment	(4,219)		(8,335)
Proceeds from the sale of bank premises and equipment	Proceeds from the sale of bank premises and equipment	1,228		78		Proceeds from the sale of bank premises and equipment	52		—

Net cash used in investing activities	Net cash used in investing activities	(784,481)		(641,859)		Net cash used in investing activities	(28,558)		(283,631)
Cash flows (used in) provided by financing activities
Net decrease in time deposits		(351,458)		(165,052)
Cash flows provided by (used in) financing activities						Cash flows provided by (used in) financing activities
Net increase (decrease) in time deposits						Net increase (decrease) in time deposits	259,590		(131,925)
Net decrease in other deposits						Net decrease in other deposits	(866,445)		(21,112)

Proceeds from short-term Federal Home Loan Bank borrowings						Proceeds from short-term Federal Home Loan Bank borrowings	879,000		—

Repayments of long-term debt, net of issuance costs						Repayments of long-term debt, net of issuance costs	—		(14,063)

Net proceeds from exercise of stock options						Net proceeds from exercise of stock options	80		—

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Net (decrease) increase in other deposits (225,519) 1,432,037
Repayments of short-term Federal Home Loan Bank borrowings (25,000) —
Repayments of long-term Federal Home Loan Bank borrowings — (10,000)
Repayments of long-term debt, net of issuance costs (14,063) (14,063)
Net payments for exercise of stock options — (57)
Restricted stock awards issued, net of awards surrendered (1,085) (1,246)
Proceeds from shares issued under direct stock purchase plan 1,765 1,515
Payments for shares repurchased under share repurchase program (139,946) —
Common dividends paid (70,460) (46,875)
Net cash (used in) provided by financing activities (825,766) 1,196,259
Net (decrease) increase in cash and cash equivalents (1,304,388) 711,195
Cash and cash equivalents at beginning of year 2,240,684 1,296,636
Cash and cash equivalents at end of period $ 936,296 $ 2,007,831
Supplemental schedule of noncash activities
Net increase in capital commitments relating to low income housing project investments $ 4,408 $ 34,127
Right-of-use assets obtained in exchange for new lease obligations $ 14,124 $ 5,888


Restricted stock awards issued, net of awards surrendered	(1,110)		(1,063)
Proceeds from shares issued under direct stock purchase plan	642		571
Payments for shares repurchased under share repurchase program	(119,951)		(1,902)
Common dividends paid	(25,103)		(22,728)
Net cash provided by (used in) financing activities	126,703		(192,222)
Net increase (decrease) in cash and cash equivalents	149,611		(400,325)
Cash and cash equivalents at beginning of year	352,933		2,240,684
Cash and cash equivalents at end of period	$	502,544	$	1,840,359
Supplemental schedule of noncash investing and financing activities


Net increase (decrease) in capital commitments relating to low income housing project investments	$	564	$	(718)

Recognition of operating lease at commencement and/or at extension	$	2,642	$	1,549

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

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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 ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022~~2023 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, ~~2021,~~2022, filed with the Securities and Exchange Commission (the ~~"2021~~"2022 Form 10-K").

NOTE 2 - RECENT ACCOUNTING STANDARDS UPDATES

Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("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 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 amendments will not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022 for which an entity has elected certain optional expedients 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 these updates, but has established a working group to guide the Company’s transition from LIBOR and has begun efforts to transition off the LIBOR index consistent with industry timelines. The working group has identified its products that utilize LIBOR and has implemented fallback language to facilitate the transition to alternative rates. The Company is also evaluating existing platforms and systems as well as alternative indices in its preparation to offer new products tied to the alternative indices. The Company does not anticipate that the adoption of these updates will have a material impact on the Company's financial statements.

~~FASB ASC Topic 260 "Earnings Per Share" Update No. 2020-06.~~ InAugust 2020, the FASB issued update No. 2020-06 ("ASU 2020-06"). ASU 2020-06 included amendments to ASC 260 related to the earnings per share calculation, which were designed to simplify and improve consistency of the diluted earnings per share calculation. ASU 2020-06 is effective for public entities for annual periods beginning after December 15, 2021 and interim periods therein. Accordingly, the Company adopted ASU 2020-06 effective January 1, 2022 and the adoption did not have a material impact on the Company's financial statements.

~~FASB ASC Topic 815 "Derivatives and Hedging" Update No. 2022-01.~~ Update No. 2022-01 was issued in March 2022 and its amendments allow for nonprepayable financial assets to also be included in a closed portfolio hedged using the portfolio layer method. The expanded scope permits an entity to apply the same portfolio hedging method to both prepayable and nonprepayable financial assets resulting in more consistent accounting for similar hedges. All amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on the Company's financial statements.

~~FASB ASC Topic 326 "Financial Instruments - Credit Losses" Update No. 2022-02.~~ Update No. 2022-02 was issued in March 2022 and applies to public entities that have adopted ASU Topic 326. The amendments in this update eliminate the existing accounting guidance for troubled debt restructures ("TDRs") by creditors in Subtopic 310-40, Receivables - Troubled Debt Restructurings by Creditors and instead requires that an entity evaluate whether a modification

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represents a new loan or a continuation of an existing loan. The amendments also enhance disclosure requirements for certain loan refinancing and restructuring by creditors when a borrower is experiencing financial difficulty. ASU 2022-02 also requires additional disclosure of current period gross write-offs by year of origination for financing receivables to be included in the entity's vintage disclosure, as currently required under Topic 326. All amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this standard on the Company's financial statements.

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NOTE 3 - SECURITIES

Trading Securities

The Company had trading securities of ~~$3.5~~$4.5 million and ~~$3.7~~$3.9 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. These securities are held in a rabbi trust and will be used for future payments associated with the Company’s non-qualified 401(k) Restoration Plan and Non-qualified Deferred Compensation Plan.

Equity Securities

The Company had equity securities of ~~$20.4~~$21.5 million and ~~$23.2~~$21.1 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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.

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				Nine Months Ended					Three Months Ended
		September 30				September 30					March 31
		2022		2021		2022		2021			2023		2022
		Dollars in thousands									Dollars in thousands
Net gains (losses) recognized during the period on equity securities	Net gains (losses) recognized during the period on equity securities	$	(742)	$	(169)	(2,819)		695		Net gains (losses) recognized during the period on equity securities	$	368	$	(627)
Less: net gains recognized during the period on equity securities sold during the period	Less: net gains recognized during the period on equity securities sold during the period	—		50		8		191		Less: net gains recognized during the period on equity securities sold during the period	1		4
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date	Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date	$	(742)	$	(219)	$	(2,827)	$	504	Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date	$	367	$	(631)

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) as of the dates indicated:


		September 30, 2022										December 31, 2021											March 31, 2023										December 31, 2022
		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			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)																					(Dollars in thousands)
Available for sale securities

U.S. government agency securities	U.S. government agency securities	$	231,122	$	—	$	(31,180)	$	—	$	199,942	$	217,393	$	990	$	(2,901)	$	—	$	215,482	U.S. government agency securities	$	230,753	$	—	$	(25,739)	$	—	$	205,014	$	230,936	$	—	$	(28,636)	$	—	$	202,300
U.S. treasury securities	U.S. treasury securities	873,891		—		(89,433)		—		784,458		873,467		172		(12,191)		—		861,448		U.S. treasury securities	874,177		—		(69,490)		—		804,687		874,035		—		(82,694)		—		791,341
Agency mortgage-backed securities	Agency mortgage-backed securities	393,296		50		(49,193)		—		344,153		364,955		4,512		(5,534)		—		363,933		Agency mortgage-backed securities	346,584		63		(40,625)		—		306,022		359,068		54		(45,434)		—		313,688
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	43,672		5		(2,890)		—		40,787		78,966		1,282		(571)		—		79,677		Agency collateralized mortgage obligations	40,483		—		(2,594)		—		37,889		41,874		—		(3,031)		—		38,843

State, county, and municipal securities	State, county, and municipal securities	193		—		(6)		—		187		192		11		—		—		203		State, county, and municipal securities	194		1		—		—		195		193		—		(2)		—		191
Single issuer trust preferred securities issued by banks		489		—		—		—		489		489		2		—		—		491

Pooled trust preferred securities issued by banks and insurers	Pooled trust preferred securities issued by banks and insurers	1,202		—		(203)		—		999		1,199		—		(199)		—		1,000		Pooled trust preferred securities issued by banks and insurers	1,203		—		(161)		—		1,042		1,203		—		(169)		—		1,034
Small business administration pooled securities	Small business administration pooled securities	62,048		—		(7,552)		—		54,496		47,075		1,839		—		—		48,914		Small business administration pooled securities	57,648		—		(6,895)		—		50,753		59,470		—		(7,713)		—		51,757
Total available for sale securities	Total available for sale securities	$	1,605,913	$	55	$	(180,457)	$	—	$	1,425,511	$	1,583,736	$	8,808	$	(21,396)	$	—	$	1,571,148	Total available for sale securities	$	1,551,042	$	64	$	(145,504)	$	—	$	1,405,602	$	1,566,779	$	54	$	(167,679)	$	—	$	1,399,154

Excluded from the table above is accrued interest on available for sale securities of ~~$3.3~~$3.2 million and ~~$3.0~~$3.6 million ~~as of September 30, 2022~~at March 31, 2023 and December 31, ~~2021,~~2022, respectively, which is included within other assets on the consolidated balance sheets. Additionally, the Company did not record any write-offs of accrued interest income on available for sale securities during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. Furthermore, no securities held by the Company were

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delinquent on contractual payments nor were any securities placed on non-accrual status ~~as of September 30, 2022~~at March 31, 2023 and December 31, ~~2021.~~2022.

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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 ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ and therefore no gains or losses were realized during the periods presented.

The following tables show the gross unrealized losses and fair value of the Company’s available for sale securities in an unrealized loss position, and for which the Company has not recorded a provision for credit losses, as of the dates indicated. 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, 2023
																	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															U.S. government agency securities	9	$	11,869	$	(616)	$	193,145	$	(25,123)	$	205,014	$	(25,739)
U.S. treasury securities															U.S. treasury securities	18	—		—		804,687		(69,490)		804,687		(69,490)
Agency mortgage-backed securities															Agency mortgage-backed securities	119	43,406		(2,007)		259,616		(38,618)		303,022		(40,625)
Agency collateralized mortgage obligations															Agency collateralized mortgage obligations	13	3,039		(32)		34,851		(2,562)		37,890		(2,594)

Pooled trust preferred securities issued by banks and insurers															Pooled trust preferred securities issued by banks and insurers	1	—		—		1,042		(161)		1,042		(161)
Small business administration pooled securities															Small business administration pooled securities	8	3,933		(201)		46,820		(6,694)		50,753		(6,895)
Total impaired available for sale securities															Total impaired available for sale securities	168	$	62,247	$	(2,856)	$	1,340,161	$	(142,648)	$	1,402,408	$	(145,504)

		September 30, 2022														December 31, 2022
			Less than 12 months				12 months or longer				Total						Less than 12 months				12 months or longer				Total
		# of holdings	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			# of holdings	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
		(Dollars in thousands)														(Dollars in thousands)
U.S. government agency securities	U.S. government agency securities	9	$	80,353	$	(11,483)	$	119,589	$	(19,697)	$	199,942	$	(31,180)	U.S. government agency securities	9	$	60,575	$	(7,292)	$	141,725	$	(21,344)	$	202,300	$	(28,636)
U.S. treasury securities	U.S. treasury securities	18	86,592		(12,426)		697,866		(77,007)		784,458		(89,433)		U.S. treasury securities	18	43,035		(6,350)		748,306		(76,344)		791,341		(82,694)
Agency mortgage-backed securities	Agency mortgage-backed securities	142	263,358		(29,512)		79,167		(19,681)		342,525		(49,193)		Agency mortgage-backed securities	123	155,944		(15,186)		154,653		(30,248)		310,597		(45,434)
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	11	39,291		(2,890)		—		—		39,291		(2,890)		Agency collateralized mortgage obligations	13	38,843		(3,031)		—		—		38,843		(3,031)
State, county, and municipal securities	State, county, and municipal securities	1	187		(6)		—		—		187		(6)		State, county, and municipal securities	1	191		(2)		—		—		191		(2)

Pooled trust preferred securities issued by banks and insurers	Pooled trust preferred securities issued by banks and insurers	1	—		—		999		(203)		999		(203)		Pooled trust preferred securities issued by banks and insurers	1	—		—		1,034		(169)		1,034		(169)
Small business administration pooled securities	Small business administration pooled securities	8	36,885		(3,768)		17,611		(3,784)		54,496		(7,552)		Small business administration pooled securities	8	34,511		(3,550)		17,246		(4,163)		51,757		(7,713)
Total impaired available for sale securities	Total impaired available for sale securities	190	$	506,666	$	(60,085)	$	915,232	$	(120,372)	$	1,421,898	$	(180,457)	Total impaired available for sale securities	173	$	333,099	$	(35,411)	$	1,062,964	$	(132,268)	$	1,396,063	$	(167,679)

		December 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		6	$	160,913	$	(2,901)	$	—	$	—	$	160,913	$	(2,901)
U.S. treasury securities		17	811,993		(12,191)		—		—		811,993		(12,191)
Agency mortgage-backed securities		12	214,678		(5,534)		—		—		214,678		(5,534)
Agency collateralized mortgage obligations		1	22,960		(571)		—		—		22,960		(571)

Pooled trust preferred securities issued by banks and insurers		1	—		—		1,000		(199)		1,000		(199)

Total impaired available for sale securities		37	$	1,210,544	$	(21,197)	$	1,000	$	(199)	$	1,211,544	$	(21,396)

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 a provision for credit losses on these investments during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021, respectively.~~2022. 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.

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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 were as follows at ~~September 30, 2022:~~March 31, 2023:

•U.S. Government Agency Securities, U.S. Treasury Securities, Agency Mortgage-Backed Securities, Agency Collateralized Mortgage Obligations and Small Business Administration Pooled 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.

•~~State, County and Municipal Securities:~~ This portfolio has 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.

•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.

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) as of~~at the dates indicated:


		September 30, 2022										December 31, 2021											March 31, 2023										December 31, 2022
		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			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)																					(Dollars in thousands)
U.S. government agency securities	U.S. government agency securities	$	31,696	$	—	$	(2,393)	$	—	$	29,303	$	32,987	$	—	$	(441)	$	—	$	32,546	U.S. government agency securities	$	30,824	$	—	$	(1,866)	$	—	$	28,958	$	31,258	$	—	$	(2,222)	$	—	$	29,036
U.S. treasury securities	U.S. treasury securities	100,615		—		(12,623)		—		87,992		102,560		6		(324)		—		102,242		U.S. treasury securities	100,654		—		(9,936)		—		90,718		100,634		—		(11,755)		—		88,879
Agency mortgage-backed securities	Agency mortgage-backed securities	892,102		149		(90,158)		—		802,093		493,012		8,495		(4,271)		—		497,236		Agency mortgage-backed securities	887,994		896		(73,336)		—		815,554		898,927		408		(83,383)		—		815,952
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	553,995		—		(77,025)		—		476,970		415,736		3,232		(10,123)		—		408,845		Agency collateralized mortgage obligations	521,621		—		(71,197)		—		450,424		535,971		—		(77,554)		—		458,417

Single issuer trust preferred securities issued by banks	Single issuer trust preferred securities issued by banks	1,500		8		—		—		1,508		1,500		8		—		—		1,508		Single issuer trust preferred securities issued by banks	1,500		8		—		—		1,508		1,500		8		—		—		1,508
Small business administration pooled securities	Small business administration pooled securities	117,727		12		(5,620)		—		112,119		21,023		733		—		—		21,756		Small business administration pooled securities	135,783		895		(4,336)		—		132,342		136,830		313		(6,225)		—		130,918

Total held to maturity securities	Total held to maturity securities	$	1,697,635	$	169	$	(187,819)	$	—	$	1,509,985	$	1,066,818	$	12,474	$	(15,159)	$	—	$	1,064,133	Total held to maturity securities	$	1,678,376	$	1,799	$	(160,671)	$	—	$	1,519,504	$	1,705,120	$	729	$	(181,139)	$	—	$	1,524,710

Substantially all held to maturity securities held by the Company are guaranteed by the U.S. federal government or other government sponsored agencies and have a long history of no credit losses. As a result, management has determined these securities to have a zero loss expectation and therefore the Company did not record a provision for estimated credit losses on any held to maturity securities during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021, respectively.~~2022. Excluded from the table above is accrued interest on held to maturity securities of ~~$4.3~~$4.5 million and ~~$2.0~~$4.4 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, which is included within other assets on the consolidated balance sheets. Additionally, the Company did not record any write-offs of accrued interest income on held to maturity securities during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. Furthermore, no securities held by the Company were delinquent on contractual payments nor were any securities placed on non-accrual status ~~as of September 30, 2022~~at March 31, 2023 and December 31, ~~2021.~~2022.

~~When~~While management has the positive intent and ability to hold the Company's held to maturity securities ~~are sold,~~until maturity, if a decision were made to sell a security within this portfolio, the adjusted cost of the specific security sold iswould be used to compute the gain or loss on the sale. The Company had no sales of held to maturity securities during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively,~~ 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 ~~September 30, 2022,~~March 31, 2023, all held to maturity securities held by the Company were rated investment grade or higher.

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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 ~~September 30, 2022~~March 31, 2023 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																					Available for sale securities
U.S. government agency securities	U.S. government agency securities	$	—	$	—	$	68,007	$	60,786	$	163,115	$	139,156	$	—	$	—	$	231,122	$	199,942	U.S. government agency securities	$	—	$	—	$	117,578	$	106,039	$	113,175	$	98,975	$	—	$	—	$	230,753	$	205,014
U.S. treasury securities	U.S. treasury securities	—		—		691,691		627,786		182,200		156,672		—		—		873,891		784,458		U.S. treasury securities	99,915		97,018		689,740		632,502		84,522		75,167		—		—		874,177		804,687
Agency mortgage-backed securities	Agency mortgage-backed securities	19,658		19,617		70,984		66,817		148,475		126,625		154,179		131,094		393,296		344,153		Agency mortgage-backed securities	7,201		7,051		97,586		89,002		98,048		84,449		143,749		125,520		346,584		306,022
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	—		—		—		—		—		—		43,672		40,787		43,672		40,787		Agency collateralized mortgage obligations	—		—		—		—		—		—		40,483		37,889		40,483		37,889

State, county, and municipal securities	State, county, and municipal securities	—		—		193		187		—		—		—		—		193		187		State, county, and municipal securities	—		—		194		195		—		—		—		—		194		195
Single issuer trust preferred securities issued by banks		—		—		—		—		—		—		489		489		489		489

Pooled trust preferred securities issued by banks and insurers	Pooled trust preferred securities issued by banks and insurers	—		—		—		—		—		—		1,202		999		1,202		999		Pooled trust preferred securities issued by banks and insurers	—		—		—		—		—		—		1,203		1,042		1,203		1,042
Small business administration pooled securities	Small business administration pooled securities	—		—		—		—		—		—		62,048		54,496		62,048		54,496		Small business administration pooled securities	—		—		—		—		—		—		57,648		50,753		57,648		50,753
Total available for sale securities	Total available for sale securities	$	19,658	$	19,617	$	830,875	$	755,576	$	493,790	$	422,453	$	261,590	$	227,865	$	1,605,913	$	1,425,511	Total available for sale securities	$	107,116	$	104,069	$	905,098	$	827,738	$	295,745	$	258,591	$	243,083	$	215,204	$	1,551,042	$	1,405,602
Held to maturity securities	Held to maturity securities																					Held to maturity securities
U.S. government agency securities	U.S. government agency securities	$	—	$	—	$	31,696	$	29,303	$	—	$	—	$	—	$	—	$	31,696	$	29,303	U.S. government agency securities	$	—	$	—	$	30,824	$	28,958	$	—	$	—	$	—	$	—	$	30,824	$	28,958
U.S. treasury securities	U.S. treasury securities	—		—		49,766		44,047		50,849		43,945		—		—		100,615		87,992		U.S. treasury securities	—		—		99,663		89,875		991		843		—		—		100,654		90,718
Agency mortgage-backed securities	Agency mortgage-backed securities	228		226		190,333		182,141		478,115		415,833		223,426		203,893		892,102		802,093		Agency mortgage-backed securities	81		80		215,084		204,705		446,707		398,228		226,122		212,541		887,994		815,554
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	—		—		29,998		28,550		36,791		31,784		487,206		416,636		553,995		476,970		Agency collateralized mortgage obligations	—		—		29,669		28,418		38,862		34,561		453,090		387,445		521,621		450,424

Single issuer trust preferred securities issued by banks	Single issuer trust preferred securities issued by banks	—		—		—		—		1,500		1,508		—		—		1,500		1,508		Single issuer trust preferred securities issued by banks	—		—		—		—		1,500		1,508		—		—		1,500		1,508
Small business administration pooled securities	Small business administration pooled securities	—		—		—		—		—		—		117,727		112,119		117,727		112,119		Small business administration pooled securities	—		—		—		—		3,389		3,132		132,394		129,210		135,783		132,342

Total held to maturity securities	Total held to maturity securities	$	228	$	226	$	301,793	$	284,041	$	567,255	$	493,070	$	828,359	$	732,648	$	1,697,635	$	1,509,985	Total held to maturity securities	$	81	$	80	$	375,240	$	351,956	$	491,449	$	438,272	$	811,606	$	729,196	$	1,678,376	$	1,519,504
Total	Total	$	19,886	$	19,843	$	1,132,668	$	1,039,617	$	1,061,045	$	915,523	$	1,089,949	$	960,513	$	3,303,548	$	2,935,496	Total	$	107,197	$	104,149	$	1,280,338	$	1,179,694	$	787,194	$	696,863	$	1,054,689	$	944,400	$	3,229,418	$	2,925,106

Included in the table above are ~~$24.8~~$25.0 million of callable securities at ~~September 30, 2022.~~March 31, 2023.

The carrying value of securities pledged to secure public funds, trust deposits, and for other purposes, as required or permitted by law, was ~~$963.9~~$946.7 million and ~~$740.6~~$959.8 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had no investments in obligations of individual states, counties, or municipalities which exceeded 10% of consolidated stockholders’ equity.

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

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 September 30, 2022
		(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		$	14,107	$	83,456	$	11,710	$	2,784	$	19,750	$	11,740	$	772	$	144,319

Charge-offs		—		(62)		—		—		—		—		(679)		(741)
Recoveries		2		330		—		88		—		65		251		735
Provision for (release of) credit losses		6,060		(3,688)		(291)		(248)		852		(154)		469		3,000
Ending balance (1)		$	20,169	$	80,036	$	11,419	$	2,624	$	20,602	$	11,651	$	812	$	147,313

		Three Months Ended September 30, 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		$	17,032	$	44,325	$	4,865	$	3,612	$	12,014	$	20,087	$	422	$	102,357
Charge-offs		(1)		—		—		(83)		—		—		(248)		(332)
Recoveries		1		—		—		50		—		49		121		221
Provision for (release of) credit losses		(1,018)		(6,527)		(397)		88		(967)		(1,268)		89		(10,000)
Ending balance (1)		$	16,014	$	37,798	$	4,468	$	3,667	$	11,047	$	18,868	$	384	$	92,246

		Nine Months Ended September 30, 2022																	Three Months Ended March 31, 2023
		(Dollars in thousands)																	(Dollars in thousands)
		Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Residential Real Estate		Home Equity		Other Consumer		Total			Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Residential Real Estate		Home Equity		Other Consumer		Total
Allowance for credit losses	Allowance for credit losses																	Allowance for credit losses
Beginning balance	Beginning balance	$	14,402	$	83,486	$	12,316	$	3,508	$	14,484	$	17,986	$	740	$	146,922	Beginning balance	$	27,559	$	77,799	$	10,762	$	2,834	$	20,973	$	11,504	$	988	$	152,419
Charge-offs	Charge-offs	—		(62)		—		(59)		—		(122)		(1,749)		(1,992)		Charge-offs	(281)		—		—		(28)		—		—		(506)		(815)
Recoveries	Recoveries	44		333		—		147		—		105		754		1,383		Recoveries	5		—		—		31		—		16		225		277
Provision for (release of) credit losses	Provision for (release of) credit losses	5,723		(3,721)		(897)		(972)		6,118		(6,318)		1,067		1,000		Provision for (release of) credit losses	9,649		(1,601)		(1,514)		501		(519)		908		(174)		7,250
Ending balance (1)	Ending balance (1)	$	20,169	$	80,036	$	11,419	$	2,624	$	20,602	$	11,651	$	812	$	147,313	Ending balance (1)	$	36,932	$	76,198	$	9,248	$	3,338	$	20,454	$	12,428	$	533	$	159,131

		Nine Months Ended September 30, 2021																	Three Months Ended March 31, 2022
		(Dollars in thousands)																	(Dollars in thousands)
		Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Residential Real Estate		Home Equity		Other Consumer		Total			Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Residential Real Estate		Home Equity		Other Consumer		Total
Allowance for credit losses	Allowance for credit losses																	Allowance for credit losses
Beginning balance	Beginning balance	$	21,086	$	45,009	$	5,397	$	5,095	$	14,275	$	22,060	$	470	$	113,392	Beginning balance	$	14,402	$	83,486	$	12,316	$	3,508	$	14,484	$	17,986	$	740	$	146,922

Charge-offs	Charge-offs	(3,474)		—		—		(184)		—		(69)		(772)		(4,499)		Charge-offs	—		—		—		(48)		—		(24)		(634)		(706)
Recoveries	Recoveries	100		57		—		65		1		107		523		853		Recoveries	13		3		—		26		—		26		234		302
Provision for (release of) credit losses	Provision for (release of) credit losses	(1,698)		(7,268)		(929)		(1,309)		(3,229)		(3,230)		163		(17,500)		Provision for (release of) credit losses	(246)		947		(449)		(327)		3,904		(6,238)		409		(2,000)
Ending balance (1)	Ending balance (1)	$	16,014	$	37,798	$	4,468	$	3,667	$	11,047	$	18,868	$	384	$	92,246	Ending balance (1)	$	14,169	$	84,436	$	11,867	$	3,159	$	18,388	$	11,750	$	749	$	144,518

(1)Balances of accrued interest receivable excluded from amortized cost and the calculation of allowance for credit losses amounted to ~~$42.7~~$52.7 million and ~~$36.7~~$39.4 million as of ~~September 30,~~March 31, 2023 and March 31, 2022, ~~and September 30, 2021,~~ respectively.

~~Table of Contents~~

The balance of allowance for credit losses ~~of $147.3~~increased to $159.1 million as of ~~September 30, 2022 remained relatively flat~~March 31, 2023 compared to ~~$146.9~~$152.4 million at December 31, ~~2021. The nominal change~~2022, due primarily to an additional reserve allocation associated with further credit deterioration of a large commercial and industrial credit that migrated to nonperforming status during 2022, resulting in a full specific reserve allocation on the Company's allowance for credit losses for the nine months ended September 30, 2022 primarily reflects increased reserves attributable to category shifts on nonperforming loans and net loan growth, offset by a stabilized credit environment and continued strong asset quality metrics.

loan.

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 characteristics unique to each loan category include:

Commercial Portfolio

•Commercial and Industrial: ~~Loans in this category consist~~Consists 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~~or other business assets. The primary source of ~~primarily,~~repayment is operating cash flow and, secondarily, liquidation of assets.

•Commercial Real Estate: ~~Loans in this category consist~~Consists 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 and is inclusive of owner-occupied commercial properties. Loans are typically written with amortizing payment structures. Collateral values are determined based upon third party appraisals and evaluations. ~~Loan~~Permissible loan to value ratios at origination are governed by ~~established~~Company policy and regulatory guidelines. ~~Repayment sources consist~~The primary source of ~~primarily,~~repayment is cash flow from operating leases and rents and, secondarily, liquidation of assets.

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•Commercial Construction: ~~Loans in this category consist~~Consists 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, one-to-four 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~~Permissible loan to value ratios at origination are governed by ~~established~~Company policy and regulatory guidelines. Repayment sources vary depending upon the type of project and may consist of proceeds from the sale or lease of units, operating cash flows or liquidation of other assets.

•Small Business: ~~Loans in this category consist~~Consists 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~~The primary source of repayment is 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 one-to-four family residential properties. Residential mortgage loans also include loans to construct owner-occupied one-to-four 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 one-to-four 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 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.

~~Table of Contents~~

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-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.

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•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 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 experienced credit 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 A~~

~~ct ("CARES Act") were 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 90 days or more past due are assigned a "default" rating.

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, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving converted to Term		Total (1)
	(Dollars in thousands)
Commercial and industrial
Pass (2)	$	153,554	$	262,933	$	122,770	$	94,702	$	54,925	$	85,391	$	811,795	$	—	$	1,586,070
Potential weakness	—		4,712		705		868		1,608		1,342		24,114		—		33,349
Definite weakness - loss unlikely	—		2,295		1,516		164		377		1		2,936		—		7,289
Partial loss probable	—		—		—		—		—		—		23,174		—		23,174
Definite loss	—		—		—		—		—		—		—		—		—
Total commercial and industrial	$	153,554	$	269,940	$	124,991	$	95,734	$	56,910	$	86,734	$	862,019	$	—	$	1,649,882
Current-period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	34	$	247	$	—	$	281



Commercial real estate
Pass	$	204,462	$	1,199,328	$	1,459,526	$	1,259,511	$	720,208	$	2,439,424	$	59,810	$	—	$	7,342,269
Potential weakness	154		52,961		67,200		29,611		13,139		225,673		—		—		388,738
Definite weakness - loss unlikely	3,481		39,208		13,205		5,334		4,038		23,821		—		—		89,087
Partial loss probable	—		—		—		—		—		—		—		—		—

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		September 30, 2022
		2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving converted to Term		Total (1)
		(Dollars in thousands)
Commercial and industrial
Pass (2)		$	292,601	$	149,588	$	122,752	$	67,591	$	82,911	$	22,943	$	759,390	$	3,362	$	1,501,138
Potential weakness		1,540		973		1,038		1,844		3,955		715		6,557		—		16,622
Definite weakness - loss unlikely		2,485		935		—		39		—		111		27,019		—		30,589
Partial loss probable		—		—		—		—		—		—		—		—		—
Definite loss		—		—		—		—		—		—		—		—		—
Total commercial and industrial		$	296,626	$	151,496	$	123,790	$	69,474	$	86,866	$	23,769	$	792,966	$	3,362	$	1,548,349

Commercial real estate
Pass		$	922,772	$	1,467,370	$	1,265,711	$	773,102	$	733,621	$	1,976,282	$	47,317	$	1,070	$	7,187,245
Potential weakness		32,579		53,096		41,164		14,147		68,298		205,234		—		—		414,518
Definite weakness - loss unlikely		26,684		2,224		4,722		2,585		17,928		21,836		—		—		75,979
Partial loss probable		—		—		—		—		—		175		—		—		175
Definite loss	Definite loss	—		—		—		—		—		—		—		—		—		Definite loss	—		—		—		—		—		—		—		—		—
Total commercial real estate	Total commercial real estate	$	982,035	$	1,522,690	$	1,311,597	$	789,834	$	819,847	$	2,203,527	$	47,317	$	1,070	$	7,677,917	Total commercial real estate	$	208,097	$	1,291,497	$	1,539,931	$	1,294,456	$	737,385	$	2,688,918	$	59,810	$	—	$	7,820,094

Current-period gross write-offs																				Current-period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial construction	Commercial construction																			Commercial construction
Pass	Pass	$	388,627	$	392,229	$	231,336	$	57,768	$	26,263	$	7,844	$	21,457	$	632	$	1,126,156	Pass	$	90,362	$	461,824	$	266,758	$	89,919	$	62,033	$	4,755	$	21,237	$	—	$	996,888
Potential weakness	Potential weakness	40,631		—		3,387		—		—		—		—		—		44,018		Potential weakness	18,431		—		5,889		3,919		—		—		—		—		28,239
Definite weakness - loss unlikely	Definite weakness - loss unlikely	2,138		12,845		—		—		—		—		—		—		14,983		Definite weakness - loss unlikely	7,619		11,434		2,130		—		—		—		—		—		21,183
Partial loss probable	Partial loss probable	—		—		—		—		—		—		—		—		—		Partial loss probable	—		—		—		—		—		—		—		—		—
Definite loss	Definite loss	—		—		—		—		—		—		—		—		—		Definite loss	—		—		—		—		—		—		—		—		—
Total commercial construction	Total commercial construction	$	431,396	$	405,074	$	234,723	$	57,768	$	26,263	$	7,844	$	21,457	$	632	$	1,185,157	Total commercial construction	$	116,412	$	473,258	$	274,777	$	93,838	$	62,033	$	4,755	$	21,237	$	—	$	1,046,310

Current-period gross write-offs																				Current-period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Small business	Small business																			Small business
Pass	Pass	$	41,923	$	46,581	$	31,968	$	17,536	$	10,454	$	20,227	$	37,455	$	—	$	206,144	Pass	$	9,770	$	54,258	$	43,458	$	29,810	$	16,173	$	26,536	$	42,746	$	—	$	222,751
Potential weakness	Potential weakness	—		163		394		369		193		129		697		—		1,945		Potential weakness	—		—		—		158		—		228		527		—		913
Definite weakness - loss unlikely	Definite weakness - loss unlikely	194		—		442		7		20		224		591		—		1,478		Definite weakness - loss unlikely	105		126		113		304		3		686		865		—		2,202
Partial loss probable	Partial loss probable	—		—		—		—		—		—		—		—		—		Partial loss probable	—		—		—		—		—		—		—		—		—
Definite loss	Definite loss	—		—		—		—		—		—		—		—		—		Definite loss	—		—		—		—		—		—		—		—		—
Total small business	Total small business	$	42,117	$	46,744	$	32,804	$	17,912	$	10,667	$	20,580	$	38,743	$	—	$	209,567	Total small business	$	9,875	$	54,384	$	43,571	$	30,272	$	16,176	$	27,450	$	44,138	$	—	$	225,866

Current-period gross write-offs																				Current-period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	28	$	—	$	28

Residential real estate	Residential real estate																			Residential real estate
Pass	Pass	$	557,643	$	426,721	$	196,538	$	95,689	$	96,828	$	582,830	$	—	$	—	$	1,956,249	Pass	$	91,404	$	658,273	$	416,067	$	190,313	$	92,927	$	644,659	$	—	$	—	$	2,093,643
Default	Default	—		—		676		466		376		1,487		—		—		3,005		Default	—		—		—		472		157		1,372		—		—		2,001

Total residential real estate	Total residential real estate	$	557,643	$	426,721	$	197,214	$	96,155	$	97,204	$	584,317	$	—	$	—	$	1,959,254	Total residential real estate	$	91,404	$	658,273	$	416,067	$	190,785	$	93,084	$	646,031	$	—	$	—	$	2,095,644

Current-period gross write-offs																				Current-period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Home equity	Home equity																			Home equity
Pass	Pass	$	37,298	$	61,898	$	56,262	$	32,761	$	27,906	$	124,325	$	741,952	$	3,190	$	1,085,592	Pass	$	6,812	$	42,352	$	58,830	$	53,565	$	31,341	$	139,472	$	756,103	$	937	$	1,089,412
Default	Default	—		—		—		122		—		285		1,171		—		1,578		Default	—		—		—		—		122		82		1,139		—		1,343

Total home equity	Total home equity	$	37,298	$	61,898	$	56,262	$	32,883	$	27,906	$	124,610	$	743,123	$	3,190	$	1,087,170	Total home equity	$	6,812	$	42,352	$	58,830	$	53,565	$	31,463	$	139,554	$	757,242	$	937	$	1,090,755
Current-period gross write-offs																				Current-period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Other consumer
Other consumer (3)																				Other consumer (3)
Pass	Pass	$	383	$	2,498	$	1,969	$	1,370	$	380	$	3,630	$	22,680	$	—	$	32,910	Pass	$	60	$	386	$	1,168	$	926	$	514	$	1,852	$	14,450	$	—	$	19,356
Default	Default	—		14		—		—		—		11		1		—		26		Default	—		—		—		—		6		37		2		—		45

Total other consumer	Total other consumer	$	383	$	2,512	$	1,969	$	1,370	$	380	$	3,641	$	22,681	$	—	$	32,936	Total other consumer	$	60	$	386	$	1,168	$	926	$	520	$	1,889	$	14,452	$	—	$	19,401
Current-period gross write-offs																				Current-period gross write-offs	$	498	$	—	$	—	$	—	$	—	$	—	$	8	$	—	$	506

Total	Total	$	2,347,498	$	2,617,135	$	1,958,359	$	1,065,396	$	1,069,133	$	2,968,288	$	1,666,287	$	8,254	$	13,700,350	Total	$	586,214	$	2,790,090	$	2,459,335	$	1,759,576	$	997,571	$	3,595,331	$	1,758,898	$	937	$	13,947,952
Total current-period gross write-offs																				Total current-period gross write-offs	$	498	$	—	$	—	$	—	$	—	$	34	$	283	$	—	$	815

2220

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		September 30, 2021																			March 31, 2022
		2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving converted to Term		Total (1)			2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving converted to Term		Total (1)
		(Dollars in thousands)																			(Dollars in thousands)
Commercial and industrial	Commercial and industrial																			Commercial and industrial
Pass (2)	Pass (2)	$	590,532	$	185,706	$	97,095	$	74,381	$	15,175	$	16,731	$	605,718	$	66	$	1,585,404	Pass (2)	$	138,642	$	288,516	$	159,051	$	85,497	$	105,651	$	30,082	$	741,200	$	—	$	1,548,639
Potential weakness	Potential weakness	1,338		9,035		3,286		1,672		980		1,632		10,262		—		28,205		Potential weakness	629		746		1,402		1,423		88		1,113		4,097		—		9,498
Definite weakness - loss unlikely	Definite weakness - loss unlikely	16,597		332		793		1,034		2,678		214		5,452		—		27,100		Definite weakness - loss unlikely	403		1,253		—		57		420		2,684		3,238		—		8,055
Partial loss probable	Partial loss probable	—		—		—		—		—		—		—		—		—		Partial loss probable	—		—		—		—		—		—		—		—		—
Definite loss	Definite loss	—		—		—		—		—		—		—		—		—		Definite loss	—		—		—		—		—		—		—		—		—
Total commercial and industrial	Total commercial and industrial	$	608,467	$	195,073	$	101,174	$	77,087	$	18,833	$	18,577	$	621,432	$	66	$	1,640,709	Total commercial and industrial	$	139,674	$	290,515	$	160,453	$	86,977	$	106,159	$	33,879	$	748,535	$	—	$	1,566,192

Commercial real estate	Commercial real estate																			Commercial real estate
Pass	Pass	$	699,565	$	1,019,453	$	606,645	$	347,874	$	442,306	$	794,263	$	17,068	$	—	$	3,927,174	Pass	$	226,907	$	1,548,212	$	1,254,460	$	867,980	$	830,148	$	2,431,434	$	135,980	$	522	$	7,295,643
Potential weakness	Potential weakness	22,106		29,091		51,976		14,628		21,350		82,655		13,615		—		235,421		Potential weakness	10,059		51,223		92,984		43,560		83,195		210,418		13,619		—		505,058
Definite weakness - loss unlikely	Definite weakness - loss unlikely	9,331		16,336		3,399		13,657		9,762		6,179		—		—		58,664		Definite weakness - loss unlikely	145		20,031		4,081		3,237		412		69,009		—		—		96,915
Partial loss probable	Partial loss probable	—		—		—		—		—		—		—		—		—		Partial loss probable	—		—		—		—		—		—		—		—		—
Definite loss	Definite loss	—		—		—		—		—		—		—		—		—		Definite loss	—		—		—		—		—		—		—		—		—
Total commercial real estate	Total commercial real estate	$	731,002	$	1,064,880	$	662,020	$	376,159	$	473,418	$	883,097	$	30,683	$	—	$	4,221,259	Total commercial real estate	$	237,111	$	1,619,466	$	1,351,525	$	914,777	$	913,755	$	2,710,861	$	149,599	$	522	$	7,897,616

Commercial construction	Commercial construction																			Commercial construction
Pass	Pass	$	127,945	$	216,573	$	82,559	$	22,851	$	22,873	$	6,505	$	16,424	$	2,134	$	497,864	Pass	$	82,805	$	400,932	$	440,129	$	100,066	$	30,145	$	34,952	$	34,416	$	—	$	1,123,445
Potential weakness	Potential weakness	—		12,991		—		—		—		—		—		—		12,991		Potential weakness	—		—		3,005		—		—		12,935		—		—		15,940
Definite weakness - loss unlikely	Definite weakness - loss unlikely	—		4,560		—		—		—		—		—		—		4,560		Definite weakness - loss unlikely	—		14,560		—		—		—		—		—		—		14,560
Partial loss probable	Partial loss probable	—		—		—		—		—		—		—		—		—		Partial loss probable	—		—		—		—		—		—		—		—		—
Definite loss	Definite loss	—		—		—		—		—		—		—		—		—		Definite loss	—		—		—		—		—		—		—		—		—
Total commercial construction	Total commercial construction	$	127,945	$	234,124	$	82,559	$	22,851	$	22,873	$	6,505	$	16,424	$	2,134	$	515,415	Total commercial construction	$	82,805	$	415,492	$	443,134	$	100,066	$	30,145	$	47,887	$	34,416	$	—	$	1,153,945

Small business	Small business																			Small business
Pass	Pass	$	40,736	$	38,804	$	22,075	$	14,241	$	10,675	$	21,809	$	32,679	$	—	$	181,019	Pass	$	14,959	$	52,037	$	35,973	$	19,540	$	12,136	$	24,449	$	37,719	$	—	$	196,813
Potential weakness	Potential weakness	14		—		383		200		5		174		627		—		1,403		Potential weakness	—		183		435		376		196		277		761		—		2,228
Definite weakness - loss unlikely	Definite weakness - loss unlikely	138		637		41		26		10		284		580		—		1,716		Definite weakness - loss unlikely	—		—		601		20		7		283		453		—		1,364
Partial loss probable	Partial loss probable	—		—		—		—		—		—		—		—		—		Partial loss probable	—		—		—		—		—		—		—		—		—
Definite loss	Definite loss	—		—		—		—		—		—		—		—		—		Definite loss	—		—		—		—		—		—		—		—		—
Total small business	Total small business	$	40,888	$	39,441	$	22,499	$	14,467	$	10,690	$	22,267	$	33,886	$	—	$	184,138	Total small business	$	14,959	$	52,220	$	37,009	$	19,936	$	12,339	$	25,009	$	38,933	$	—	$	200,405

Residential real estate	Residential real estate																			Residential real estate
Pass	Pass	$	277,949	$	184,974	$	92,723	$	97,915	$	102,581	$	463,397	$	—	$	—	$	1,219,539	Pass	$	177,524	$	446,985	$	209,293	$	106,746	$	111,601	$	650,555	$	—	$	—	$	1,702,704
Default	Default	—		123		—		1,024		—		2,163		—		—		3,310		Default	—		—		392		—		999		1,950		—		—		3,341

Total residential real estate	Total residential real estate	$	277,949	$	185,097	$	92,723	$	98,939	$	102,581	$	465,560	$	—	$	—	$	1,222,849	Total residential real estate	$	177,524	$	446,985	$	209,685	$	106,746	$	112,600	$	652,505	$	—	$	—	$	1,706,045

Home equity	Home equity																			Home equity
Pass	Pass	$	58,897	$	68,629	$	42,083	$	37,644	$	41,792	$	117,488	$	628,575	$	3,575	$	998,683	Pass	$	13,376	$	64,981	$	61,198	$	35,075	$	31,458	$	137,315	$	678,867	$	1,519	$	1,023,789
Default	Default	—		—		—		—		—		33		1,717		35		1,785		Default	—		—		—		122		—		64		1,840		—		2,026

Total home equity	Total home equity	$	58,897	$	68,629	$	42,083	$	37,644	$	41,792	$	117,521	$	630,292	$	3,610	$	1,000,468	Total home equity	$	13,376	$	64,981	$	61,198	$	35,197	$	31,458	$	137,379	$	680,707	$	1,519	$	1,025,815

Other consumer(3)	Other consumer(3)																			Other consumer(3)
Pass	Pass	$	307	$	347	$	244	$	78	$	500	$	5,338	$	16,359	$	—	$	23,173	Pass	$	142	$	2,964	$	2,469	$	1,978	$	695	$	4,669	$	17,074	$	—	$	29,991
Default	Default	—		—		—		—		—		—		2		—		2		Default	—		9		4		—		—		3		2		—		18

Total other consumer	Total other consumer	$	307	$	347	$	244	$	78	$	500	$	5,338	$	16,361	$	—	$	23,175	Total other consumer	$	142	$	2,973	$	2,473	$	1,978	$	695	$	4,672	$	17,076	$	—	$	30,009

Total	Total	$	1,845,455	$	1,787,591	$	1,003,302	$	627,225	$	670,687	$	1,518,865	$	1,349,078	$	5,810	$	8,808,013	Total	$	665,591	$	2,892,632	$	2,265,477	$	1,265,677	$	1,207,151	$	3,612,192	$	1,669,266	$	2,041	$	13,580,027

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(1)Loan origination dates in the tables above reflect the original origination date, or the date of a material modification of a previously originated loan.

(2)Loans originated as part of the Paycheck Protection Program ("PPP") established by the ~~CARES~~Coronavirus Aid, Relief and Economic Security Act (the "CARES Act")t 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 ~~$11.1~~$6.6 million and ~~$383.6~~$99.6 million as of ~~September 30,~~March 31, 2023 and 2022, respectively.

(3)Other consumer portfolio is inclusive of deposit account overdrafts recorded as loan balances and ~~2021, respectively.~~the associated gross write-offs.

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 real estate and home equity portfolios, periodically. The following table shows the weighted average FICO scores and the weighted average combined LTV ratios at the dates indicated below:


		September 30 2022		December 31 2021			March 31 2023		December 31 2022
Residential real estate portfolio	Residential real estate portfolio					Residential real estate portfolio
FICO score (re-scored)(1)	FICO score (re-scored)(1)	753		749		FICO score (re-scored)(1)	752		753
LTV (re-valued)(2)	LTV (re-valued)(2)	54.8	%	54.4	%	LTV (re-valued)(2)	58.7	%	57.0	%
Home equity portfolio	Home equity portfolio					Home equity portfolio
FICO score (re-scored)(1)	FICO score (re-scored)(1)	771		772		FICO score (re-scored)(1)	771		771
LTV (re-valued)(2)(3)	LTV (re-valued)(2)(3)	40.9	%	42.4	%	LTV (re-valued)(2)(3)	43.8	%	41.3	%

(1)The average FICO scores at ~~September 30, 2022~~March 31, 2023 are based upon rescores from ~~June 2022,~~March 2023, as available for previously originated loans, or origination score data for loans booked ~~since June 2022.~~in March 2023. The average FICO scores at December 31, ~~2021~~2022 were based upon rescores available from December ~~2021,~~2022, as available for previously originated loans, or origination score data for loans booked in December ~~2021.~~2022.

(2)The combined LTV ratios for ~~September 30, 2022~~March 31, 2023 are based upon updated automated valuations as of ~~August 2022,~~February 2023, when available, and/or the most current valuation data available. The combined LTV ratios for December 31, ~~2021~~2022 were based upon updated automated valuations as of November ~~2021,~~2022, 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. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company's estimated reserve for unfunded commitments amounted to ~~$1.3~~$1.6 million and ~~$1.5~~$1.3 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 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 90 days or more delinquent if the loan is well secured and/or in process of collection.

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 September 30, 2022 and December 31, 2021 was $193.3 million and $383.1 million, respectively. The majority of these loans with active deferrals as of September 30, 2022 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 as of December 31, 2019. Additionally, a majority of these modified loans are characterized as current and therefore are not impacting nonaccrual or delinquency totals as of September 30, 2022 and December 31, 2021. 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.

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


		Nonaccrual Balances													Nonaccrual Balances
		September 30, 2022						December 31, 2021							March 31, 2023						December 31, 2022
		With Allowance for Credit Losses		Without Allowance for Credit Losses		Total		With Allowance for Credit Losses		Without Allowance for Credit Losses		Total			With Allowance for Credit Losses		Without Allowance for Credit Losses		Total		With Allowance for Credit Losses		Without Allowance for Credit Losses		Total (1)
		(Dollars in thousands)													(Dollars in thousands)
Commercial and industrial	Commercial and industrial	$	27,374	$	19	$	27,393	$	3,420	$	19	$	3,439	Commercial and industrial	$	26,045	$	298	$	26,343	$	26,395	$	298	$	26,693
Commercial real estate	Commercial real estate	15,982		—		15,982		10,870		—		10,870		Commercial real estate	15,324		2,714		18,038		12,961		2,769		15,730

Small business	Small business	50		—		50		44		—		44		Small business	238		4		242		99		5		104
Residential real estate	Residential real estate	8,891		—		8,891		8,580		602		9,182		Residential real estate	8,178		—		8,178		8,479		—		8,479
Home equity	Home equity	3,485		—		3,485		3,781		—		3,781		Home equity	3,282		—		3,282		3,400		—		3,400
Other consumer	Other consumer	216		—		216		504		—		504		Other consumer	129		—		129		475		—		475
Total nonaccrual loans ~~(1)~~	Total nonaccrual loans ~~(1)~~	$	55,998	$	19	$	56,017	$	27,199	$	621	$	27,820	Total nonaccrual loans ~~(1)~~	$	53,196	$	3,016	$	56,212	$	51,809	$	3,072	$	54,881

(1)~~Included in these amounts were $1.5 million and $2.0~~Nonaccrual balances at December 31, 2022 included $11.5 million of nonaccruing ~~TDRs at September 30, 2022 and December 31, 2021, respectively.~~troubled debt restructures ("TDRs").

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 ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021.~~except for instances where nonaccrual loans were paid off in excess of the recorded book balance.

The following table shows information regarding foreclosed residential real estate property at the dates indicated:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(Dollars in thousands)					(Dollars in thousands)
Foreclosed residential real estate property held by the creditor	Foreclosed residential real estate property held by the creditor	$	—	$	—	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	Recorded investment in mortgage loans collateralized by residential real estate property that are in the process of foreclosure	$	1,871	$	1,426	Recorded investment in mortgage loans collateralized by residential real estate property that are in the process of foreclosure	$	1,380	$	1,615

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


		September 30, 2022																			March 31, 2023
		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																			Loan Portfolio
Commercial and industrial	Commercial and industrial	10	$	322	1	$	182	3	$	558	14	$	1,062	$	1,547,287	$	1,548,349	$	—	Commercial and industrial	5	$	339	1	$	69	2	$	23,472	8	$	23,880	$	1,626,002	$	1,649,882	$	—
Commercial real estate	Commercial real estate	9	5,419		5	4,491		2	208		16	10,118		7,667,799		7,677,917		—		Commercial real estate	4	785		—	—		3	4,846		7	5,631		7,814,463		7,820,094		—
Commercial construction	Commercial construction	—	—		1	1,661		—	—		1	1,661		1,183,496		1,185,157		—		Commercial construction	—	—		—	—		—	—		—	—		1,046,310		1,046,310		—
Small business	Small business	7	233		3	15		6	29		16	277		209,290		209,567		—		Small business	9	114		4	116		6	140		19	370		225,496		225,866		—
Residential real estate	Residential real estate	15	3,146		6	1,202		19	1,804		40	6,152		1,953,102		1,959,254		—		Residential real estate	11	2,202		5	579		15	2,002		31	4,783		2,090,861		2,095,644		—
Home equity	Home equity	14	534		8	775		19	1,577		41	2,886		1,084,284		1,087,170		—		Home equity	18	1,440		3	81		18	1,343		39	2,864		1,087,891		1,090,755		23
Other consumer (1)	Other consumer (1)	504	510		36	245		8	26		548	781		32,155		32,936		—		Other consumer (1)	374	353		20	76		6	45		400	474		18,927		19,401		—
Total	Total	559	$	10,164	60	$	8,571	57	$	4,202	676	$	22,937	$	13,677,413	$	13,700,350	$	—	Total	421	$	5,233	33	$	921	50	$	31,848	504	$	38,002	$	13,909,950	$	13,947,952	$	23

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Table of Contents


		December 31, 2021																			December 31, 2022
		30-59 days			60-89 days			90 days or more			Total Past Due					Total Financing Receivables		Recorded Investment >90 Days and Accruing			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							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																			Loan Portfolio
Commercial and industrial	Commercial and industrial	7	$	143	2	$	252	2	$	24	11	$	419	$	1,562,860	$	1,563,279	$	—	Commercial and industrial	3	$	49	1	$	175	3	$	23,726	7	$	23,950	$	1,611,153	$	1,635,103	$	—
Commercial real estate	Commercial real estate	15	32,845		—	—		4	1,339		19	34,184		7,958,160		7,992,344		—		Commercial real estate	7	2,052		5	4,971		3	2,977		15	10,000		7,750,230		7,760,230		—
Commercial construction	Commercial construction	—	—		—	—		—	—		—	—		1,165,457		1,165,457		—		Commercial construction	—	—		—	—		—	—		—	—		1,154,413		1,154,413		—
Small business	Small business	11	136		6	53		4	24		21	213		192,976		193,189		—		Small business	12	111		3	25		3	5		18	141		218,961		219,102		—
Residential real estate	Residential real estate	12	2,709		5	714		76	3,922		93	7,345		1,597,341		1,604,686		—		Residential real estate	8	1,654		8	1,105		16	1,725		32	4,484		2,031,040		2,035,524		—
Home equity	Home equity	15	1,375		6	381		21	1,671		42	3,427		1,036,184		1,039,611		—		Home equity	19	1,647		3	201		17	965		39	2,813		1,085,937		1,088,750		—
Other consumer (1)	Other consumer (1)	458	719		41	277		16	112		515	1,108		27,612		28,720		—		Other consumer (1)	432	421		15	83		4	28		451	532		35,021		35,553		—
Total	Total	518	$	37,927	60	$	1,677	123	$	7,092	701	$	46,696	$	13,540,590	$	13,587,286	$	—	Total	481	$	5,934	35	$	6,560	46	$	29,426	562	$	41,920	$	13,886,755	$	13,928,675	$	—

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

(2)The amount of net deferred costs on originated loans included in the ending balance was $5.5 million and $5.0 million at March 31, 2023 and December 31, 2022, respectively.

~~Troubled Debt Restructurings~~

Loan Modifications

In the course of resolving nonperforming loans, the ~~Bank~~Company may choose to restructure the contractual terms of certain loans. The ~~Bank~~Company attempts to work out an alternative payment schedule with the borrower in order to avoid foreclosure actions. Exclusive of loans modified under provisions of the CARES Act, 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 principal forgiveness, interest rate reductions, term extensions, other-than-insignificant payment delays, and/or any combinations thereof. Any loans that are modified are reviewed by the ~~transfer~~Company to determine whether the modification is the direct result of ~~assets from~~a borrower experiencing financial difficulty, as the ~~borrower~~Company adopted the accounting and disclosure requirements for loan modifications made to ~~satisfy~~borrowers experiencing financial difficulty and ceased to recognize TDRs effective January 1, 2023.

Loan modifications made to borrowers experiencing financial difficulty are evaluated on a collective basis with loans sharing similar risk characteristics in accordance with the ~~debt,~~current expected credit loss ("CECL") methodology. Under previously applicable accounting guidance, the Company determined the amount of allowance for credit losses on TDRs using a ~~modification of loan terms,~~discounted cash flow analysis or a ~~combination~~fair value of collateral approach if the loan was determined to be individually evaluated. This change in methodology did not have a material impact on the Company's allowance for credit loss estimate.

Table of Contents

The following table presents the amortized cost basis at March 31, 2023 of loans modified to borrowers experiencing financial difficulty during the three month period then ended, disaggregated by class of financing receivable and type of modification granted:















	Term Extension
	Amortized Cost Basis		% of Total Class of Financing Receivable
Loan Category	(Dollars in thousands)

Commercial real estate	$	2,540	0.03%

Small business	105		0.05%



Total	$	2,645













	Other-Than-Insignificant Payment Delay
	Amortized Cost Basis		% of Total Class of Financing Receivable
Loan Category	(Dollars in thousands)
Commercial and industrial	$	2,805	0.17%
Commercial real estate	7,013		0.09%





Total	$	9,818

	Combination - Interest Rate Reduction and Term Extension
	Amortized Cost Basis		% of Total Class of Financing Receivable
Loan Category	(Dollars in thousands)



Small business	$	44	0.02%



Total	$	44

The following table describes the financial effect of the ~~two.~~modifications made to borrowers experiencing financial difficulty for the period ending March 31, 2023:


Term Extension
Loan Category						Financial Effect

Commercial real estate						Added a weighted-average contractual term of 2 months to the life of the loan, which reduced monthly payment amounts for the borrowers.

Small business						Added a weighted-average contractual term of 4.3 years to the life of loans, which reduced monthly payment amounts for the borrowers.




Interest Rate Reduction
Loan Category						Financial Effect



Small business						Reduced weighted-average contractual interest rate from 10.00% to 6.50%

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

September 30, 2022 December 31, 2021
(Dollars in thousands)
TDRs on accrual status $ 11,549 $ 14,635
TDRs on nonaccrual 1,538 1,993
Total TDRs $ 13,087 $ 16,628
Additional commitments to lend to a borrower who has been a party to a TDR $ 137 $ 190

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.


		December 31, 2022
	(Dollars in thousands)
TDRs on accrual status		$	11,278
TDRs on nonaccrual		11,520
Total TDRs		$	22,798

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There were no new TDRs during the three months ended March 31, 2022.

At March 31, 2023, the Company did not have any additional commitments to lend to borrowers experiencing financial difficulty who were party to a loan modification. At December 31, 2022, the Company had additional commitments to lend to borrowers who had been a party to a TDR of $64,000.

The ~~following table shows~~Company closely monitors the ~~TDRs which occurred during~~performance of loans modified to borrowers experiencing financial difficulty to understand the ~~periods indicated and the change in the recorded investment subsequent to the modifications occurring:~~

Three Months Ended Nine Months Ended
September 30, 2022 September 30, 2022
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
Commercial and industrial 1 $ 68 $ 67 1 68 67
Total (1) 1 $ 68 $ 67 1 68 67
Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2021
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)
Troubled debt restructurings
Commercial and industrial — $ — $ — 1 $ 14,148 $ 14,148
Commercial real estate — — — 5 3,964 3,964
Small business — — — 2 189 189
Total (1) — $ — $ — 8 $ 18,301 $ 18,301

~~(1)The pre-modification and post-modification balances represent the legal principal balance~~effectiveness of ~~the loan. Activity presented in the table above includes $14.3 million of modifications on existing TDRs occurring during the nine months ended September 30, 2021.~~

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

Three Months Ended Nine Months Ended
September 30 September 30
2022 2021 2022 2021
(Dollars in thousands)
Combination rate and maturity — — — 14,148
Extended maturity 67 — 67 4,153
Total 67 — $ 67 $ 18,301

efforts. The Company considers a loan to have defaulted when it reaches 90 days past due. During the ~~nine~~three months ended ~~September 30, 2022 and September 30, 2021,~~March 31, 2023 there were no loans modified to borrowers experiencing financial difficulty that subsequently defaulted, and during the three months ended March 31, 2022, there were no TDRs that were modified during the prior twelve months that subsequently ~~defaulted~~defaulted. Accordingly, all loans modified to borrowers experiencing financial difficulty during the ~~respective periods. The Company determines the amount of allowance on TDRs~~period remained current and were performing in accordance with ~~CECL methodology using a discounted cash flow approach, or a fair value~~the modified terms as of ~~collateral approach if the loan is determined to be individually evaluated.~~

~~Table of Contents~~

March 31, 2023.

NOTE 5 - BORROWINGS

During the three months ended March 31, 2023, the Company entered into advances with the Federal Home Loan Bank ("FHLB") of $879.0 million, due primarily to deposit balance reductions, share repurchase activity, and a proactive strategy to bolster on-balance sheet liquidity during the quarter. These borrowings were comprised of comprised of $379.0 million in overnight FHLB borrowings carrying a rate of 4.95% at March 31, 2023, as well as $500.0 million in one-month term FHLB advances carrying a weighted average interest rate of 5.03% at March 31, 2023. In conjunction with the one-month term FHLB advances, the Company entered into hedges to convert the cost of these borrowings to a total weighted average cost of 4.47% at March 31, 2023.

NOTE 56 - STOCK BASED COMPENSATION

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, 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
2/17/2022 52,100 2005 Employee Stock Plan $ 84.70 Ratably over 5 years from grant date
5/24/2022 8,099 2018 Non-Employee Director Stock Plan $ 80.39 Shares vested immediately
9/15/2022 646 2005 Employee Stock Plan $ 77.44 Ratably over 5 years from grant date

Date

Shares Granted

Plan

Grant Date Fair Value Per Share

Vesting Period

2/16/2023

77,525

2005 Employee Stock Plan

80.65

Ratably over 3 years from grant date

2/16/2023

12,309

2005 Employee Stock Plan

80.65

Ratably over 5 years, on each anniversary of February 6, 2023 start date

Performance-Based Restricted Stock Awards

On February ~~17, 2022,~~16, 2023, the Company granted ~~20,700~~32,200 performance-based restricted stock awards, representing the maximum number of shares that may be earned under the 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 ~~$84.70.~~$80.65. The number of shares to be vested ~~are~~is contingent upon the Company's attainment of certain performance criteria to be measured at the end of a three year performance period ending December 31, ~~2024.~~2025. 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, ~~2025.~~2026.

On March ~~10, 2022,~~13, 2023, the performance-based restricted stock awards that were awarded on February ~~21, 2019~~27, 2020 vested at ~~50%~~80% of the maximum target shares awarded, or ~~7,450 shares.~~12,880 shares, net of forfeitures.

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NOTE 67 - 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, 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 ~~as of~~at the dates indicated below for interest rate ~~derivatives~~swaps which qualify as cash flow hedges for accounting purposes:


September 30, 2022
March 31, 2023											March 31, 2023
															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											Interest rate swaps on borrowings	$	300,000	3.48	4.87	%	3.57	%	$	(202)

															Current Rate Paid		Receive Fixed Swap Rate
Interest rate swaps on loans											Interest rate swaps on loans	$	1,050,000	2.73	4.68	%	2.66	%	$	(30,615)

															Current Rate Paid		Receive Fixed Swap Rate Cap - Floor
Interest rate collars on loans											Interest rate collars on loans	400,000		2.03	4.67	%	3.09% - 2.19%		(7,619)

Total											Total	$	1,750,000						$	(38,436)

December 31, 2022											December 31, 2022
					Weighted Average Rate										Weighted Average Rate

		Notional Amount		Average Maturity	Current Rate Paid		Receive Fixed Swap Rate		Fair Value			Notional Amount		Average Maturity	Current Rate Paid		Receive Fixed Swap Rate		Fair Value
		(in thousands)		(in years)					(in thousands)			(in thousands)		(in years)					(in thousands)
Interest rate swaps on loans	Interest rate swaps on loans	$	1,050,000	3.23	2.72	%	2.66	%	$	(43,365)	Interest rate swaps on loans	1,050,000		2.97	4.24	%	2.66	%	(42,005)

					Current Rate Paid		Receive Fixed Swap Rate Cap - Floor								Current Rate Paid		Receive Fixed Swap Rate Cap - Floor
Interest rate collars on loans	Interest rate collars on loans	400,000		2.52	2.69	%	3.09% - 2.19%		(10,375)		Interest rate collars on loans	400,000		2.27	4.22	%	3.09% - 2.19%		(10,239)

Total	Total	$	1,450,000						$	(53,740)	Total	$	1,450,000						$	(52,244)

December 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		$	25,000	0.62	0.16	%	1.88	%	$	(294)

					Current Rate Paid		Receive Fixed Swap Rate
Interest rate swaps on loans		550,000		2.58	0.11	%	2.16	%	11,830

					Current Rate Paid		Receive Fixed Swap Rate Cap - Floor
Interest rate collars on loans		400,000		1.66	0.11	%	2.73% - 2.20%		9,383

Total		$	975,000						$	20,919

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 ~~6.5~~6.0 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 ~~$22.5~~$3.1 million (pre-tax) to be reclassified as an increase to interest income and $25.0 million (pre-tax) to be reclassified as an increase to interest expense, from OCI related to the Company’s cash flow hedges in the twelve months following ~~September 30, 2022.~~March 31, 2023. This reclassification is due to anticipated payments that will be made and/or received on the swaps based upon the forward curve ~~as of September 30, 2022.~~at March 31, 2023.

The Company had no fair value hedges as of ~~September 30, 2022~~March 31, 2023 or December 31, ~~2021.~~2022.

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.

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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 customer related derivative positions ~~as of~~at 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
September 30, 2022
(Dollars in thousands)
Loan level swaps
Receive fixed, pay variable 285 $ 82,932 $ 98,409 $ 259,419 $ 173,197 $ 953,915 $ 1,567,872 $ (127,611)
Pay fixed, receive variable 285 82,932 98,409 259,419 173,197 953,915 1,567,872 127,609
Foreign exchange contracts
Buys foreign currency, sells U.S. currency 62 162,094 13,013 — — — 175,107 (15,992)
Buys U.S. currency, sells foreign currency 62 162,094 13,013 — — — 175,107 16,079
Risk participation agreements
Participation out 11 2,605 — 24,538 — 72,045 99,188 64
Participation in 7 22,802 16,329 — — 25,944 65,075 (15)
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, 2021
(Dollars in thousands)
Loan level swaps
Receive fixed, pay variable 296 $ 37,589 $ 139,844 $ 123,507 $ 260,953 $ 1,060,276 $ 1,622,169 $ 55,984
Pay fixed, receive variable 296 37,589 139,844 123,507 260,953 1,060,276 1,622,169 (55,982)
Foreign exchange contracts
Buys foreign currency, sells U.S. currency 52 149,588 8,784 — — — 158,372 5,734
Buys U.S. currency, sells foreign currency 52 149,588 8,784 — — — 158,372 (5,734)
Risk participation agreements
Participation out 11 — 2,635 7,138 24,539 68,408 102,720 279
Participation in 7 29,972 28,235 — — 8,339 66,546 (55)


		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, 2023
	(Dollars in thousands)
Loan level swaps
Receive fixed, pay variable	276	$	58,387	$	143,725	$	229,318	$	210,340	$	1,009,526	$	1,651,296	$	(88,936)
Pay fixed, receive variable	276	58,387		143,725		229,318		210,340		1,009,526		1,651,296		88,935
Foreign exchange contracts
Buys foreign currency, sells U.S. currency	40	105,637		8,830		—		—		—		114,467		1,558
Buys U.S. currency, sells foreign currency	40	105,637		8,830		—		—		—		114,467		(1,489)
Risk participation agreements
Participation out	18	2,585		24,538		—		—		128,132		155,255		365
Participation in	6	27,142		—		—		17,558		8,168		52,868		(20)

		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, 2022
	(Dollars in thousands)
Loan level swaps
Receive fixed, pay variable	283	$	80,531	$	96,613	$	256,924	$	193,096	$	1,016,312	$	1,643,476	$	(118,930)
Pay fixed, receive variable	283	80,531		96,613		256,924		193,096		1,016,312		1,643,476		118,928
Foreign exchange contracts
Buys foreign currency, sells U.S. currency	49	124,982		13,363		—		—		—		138,345		306
Buys U.S. currency, sells foreign currency	49	124,982		13,363		—		—		—		138,345		(232)
Risk participation agreements
Participation out	13	2,595		—		24,538		—		95,514		122,647		161
Participation in	6	27,365		—		—		—		25,849		53,214		(15)

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

~~Table of Contents~~

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 may 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 change in fair value ofassociated with loans held for sale ~~decreased by $194,000~~was a decrease of $17,000 and ~~$75,000~~$548,000 for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. The fair value of loans held for sale decreased by $620,000 and $1.5 million for the nine months ended September 30, 2022 and 2021,~~ respectively. These amounts were offset in earnings by the change in the fair value of mortgage derivatives.

Table of Contents

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 on sales of such loans included within mortgage banking income was ~~$229,000~~$174,000 and ~~$4.9 million~~$599,000 for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $550,000 and $17.2 million for the nine months ended September 30, 2022 and 2021,~~ 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)								Asset Derivatives (1)						Liability Derivatives (2)
		Fair Value at			Fair Value at			Fair Value at			Fair Value at					Fair Value at			Fair Value at			Fair Value at			Fair Value at
		September 30 2022			December 31 2021			September 30 2022			December 31 2021					March 31 2023			December 31 2022			March 31 2023			December 31 2022
		(Dollars in thousands)													(Dollars in thousands)
Derivatives designated as hedges	Derivatives designated as hedges													Derivatives designated as hedges
Interest rate derivatives	Interest rate derivatives	$	—		$	21,951	(3)	$	53,740	(4)	$	1,032	(4)	Interest rate derivatives		$	416	(3)	$	—		$	38,852	(4)	$	52,244	(4)
Derivatives not designated as hedges	Derivatives not designated as hedges													Derivatives not designated as hedges
Customer Related Positions	Customer Related Positions													Customer Related Positions
Loan level derivatives	Loan level derivatives	127,625		(3)	68,726		(3)	127,627		(4)	68,724		(4)	Loan level derivatives		100,821		(3)	123,372		(3)	100,822		(4)	123,374		(4)
Foreign exchange contracts	Foreign exchange contracts	16,520			6,147			16,433			6,147			Foreign exchange contracts		3,259			4,352			3,190			4,278
Risk participation agreements	Risk participation agreements	64			279			15			55			Risk participation agreements		365			161			20			15
Mortgage Derivatives	Mortgage Derivatives													Mortgage Derivatives
Interest rate lock commitments	Interest rate lock commitments	6			753			16			—			Interest rate lock commitments		32			43			—			—
Forward sale loan commitments	Forward sale loan commitments	86			56			—			—			Forward sale loan commitments		—			30			5			—
Forward sale hedge commitments		73			—			—			57

Total derivatives not designated as hedges	Total derivatives not designated as hedges	144,374			75,961			144,091			74,983			Total derivatives not designated as hedges		104,477			127,958			104,037			127,667
Total	Total	144,374			97,912			197,831			76,015			Total		104,893			127,958			142,889			179,911

Netting Adjustments (5)	Netting Adjustments (5)	(62,614)			(5,727)			35,293			6,769			Netting Adjustments (5)		(48,117)			(57,784)			24,686			33,245
Net Derivatives on the Balance Sheet	Net Derivatives on the Balance Sheet	81,760			92,185			162,538			69,246			Net Derivatives on the Balance Sheet		56,776			70,174			118,203			146,666

Financial instruments (6)	Financial instruments (6)	17,744			22,378			17,744			22,378			Financial instruments (6)		19,358			20,019			19,358			20,019
Cash collateral pledged (received)	Cash collateral pledged (received)	—			—			—			33,838			Cash collateral pledged (received)		—			—			—			—
Net Derivative Amounts	Net Derivative Amounts	$	64,016		$	69,807		$	144,794		$	13,030		Net Derivative Amounts		$	37,418		$	50,155		$	98,845		$	126,647

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

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

(3)~~Approximately $660,000~~As of March 31, 2023, approximately $30,000 of accrued interest payable is included in the fair value of interest rate derivative assets and approximately $2.5 million of accrued interest receivable is included in the fair value of ~~the~~ loan level derivative ~~assets at September 30, 2022, in comparison to accrued~~assets. Accrued interest receivable of approximately ~~$1.2~~$2.2 million ~~and $1.5 million in~~is included in the fair value of ~~interest rate and~~ loan level derivative assets ~~respectively,~~ at December 31, ~~2021.~~2022.

(4)Approximately ~~$36,000~~$1.6 million and ~~$660,000~~$2.5 million of accrued interest payable is included in the fair value of interest rate and loan level derivative liabilities, respectively, at ~~September 30, 2022. Accrued~~March 31, 2023, in comparison to accrued interest payable of approximately ~~$5,000~~$1.3 million and ~~$1.5~~$2.2 million, ~~is included in the fair value of the interest rate and loan level derivative liabilities,~~ respectively, at December 31, ~~2021.~~2022.

(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 at September 30, 2022.~~

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

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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				Nine Months Ended					Three Months Ended
		September 30				September 30					March 31
		2022		2021		2022		2021			2023		2022
		(Dollars in thousands)									(Dollars in thousands)
Derivatives designated as hedges	Derivatives designated as hedges									Derivatives designated as hedges
Loss in OCI on derivatives (effective portion), net of tax		$	(27,144)	$	(3,383)	$	(52,743)	$	(11,559)
Gain reclassified from OCI into interest income or interest expense (effective portion)		$	407	$	4,791	$	8,427	$	13,869
Gain (loss) in OCI on derivatives (effective portion), net of tax										Gain (loss) in OCI on derivatives (effective portion), net of tax	$	10,163	$	(17,950)
(Loss) gain reclassified from OCI into interest income or interest expense (effective portion)										(Loss) gain reclassified from OCI into interest income or interest expense (effective portion)	$	(6,239)	$	4,505

Derivatives not designated as hedges	Derivatives not designated as hedges									Derivatives not designated as hedges
Changes in fair value of customer related positions	Changes in fair value of customer related positions									Changes in fair value of customer related positions
Other income	Other income	$	26	$	54	$	147	$	137	Other income	$	272	$	89
Other expense	Other expense	(67)		(80)		(239)		(374)		Other expense	(77)		(83)
Changes in fair value of mortgage derivatives	Changes in fair value of mortgage derivatives									Changes in fair value of mortgage derivatives
Mortgage banking income	Mortgage banking income	41		(213)		(603)		(3,840)		Mortgage banking income	(46)		(419)
Total	Total	$	—	$	(239)	$	(695)	$	(4,077)	Total	$	149	$	(413)

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. All derivative instruments with credit-risk contingent features were in a net asset position at ~~September 30, 2022. At December~~March 31, 2021, the aggregate fair value of all derivative instruments with credit-risk related contingent features that were in a net liability position was $34.8 million. Although none of the contingency provisions have applied as of September 30, 20222023 and December 31, ~~2021, the Company posted collateral to offset the net liability exposure with institutional counterparties at December 31, 2021.~~2022.

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. In addition, certain derivative contracts executed bilaterally with a dealer counterparty in the over-the-counter market are cleared through a clearinghouse, whereby the clearinghouse becomes the counterparty to the transaction. As such, management believes the risk of incurring credit losses on derivative contracts with ~~institutional~~those counterparties is remote. The Company's exposure relating to institutional counterparties was ~~$127.6~~$95.3 million and ~~$28.3~~$121.2 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. The Company’s exposure relating to customer counterparties was approximately ~~$8,000~~$5.9 million and ~~$62.4~~$2.2 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Credit exposure may be reduced by the value of collateral pledged by the counterparty.

NOTE 78 - 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.

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

~~Table of Contents~~

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:

Table of Contents

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~~were no changes in the valuation techniques used during the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

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 and U.S. Treasury 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 ~~volatilizes.~~volatilities. 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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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, when applicable, 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 at the dates indicated:


				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)
		September 30, 2022									March 31, 2023
		(Dollars in thousands)									(Dollars in thousands)
Recurring fair value measurements	Recurring fair value measurements									Recurring fair value measurements
Assets	Assets									Assets
Trading securities	Trading securities	$	3,538	$	3,538	$	—	$	—	Trading securities	$	4,469	$	4,469	$	—	$	—
Equity securities	Equity securities	20,439		20,439		—		—		Equity securities	21,503		21,503		—		—
Securities available for sale	Securities available for sale									Securities available for sale
U.S. government agency securities	U.S. government agency securities	199,942		—		199,942		—		U.S. government agency securities	205,014		—		205,014		—
U.S. treasury securities	U.S. treasury securities	784,458		—		784,458		—		U.S. treasury securities	804,687		—		804,687		—
Agency mortgage-backed securities	Agency mortgage-backed securities	344,153		—		344,153		—		Agency mortgage-backed securities	306,022		—		306,022		—
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	40,787		—		40,787		—		Agency collateralized mortgage obligations	37,889		—		37,889		—

State, county, and municipal securities	State, county, and municipal securities	187		—		187		—		State, county, and municipal securities	195		—		195		—
Single issuer trust preferred securities issued by banks and insurers		489		—		489		—

Pooled trust preferred securities issued by banks and insurers	Pooled trust preferred securities issued by banks and insurers	999		—		999		—		Pooled trust preferred securities issued by banks and insurers	1,042		—		1,042		—
Small business administration pooled securities	Small business administration pooled securities	54,496		—		54,496		—		Small business administration pooled securities	50,753		—		50,753		—
Loans held for sale	Loans held for sale	5,100		—		5,100		—		Loans held for sale	1,130		—		1,130		—
Derivative instruments	Derivative instruments	144,374		—		144,374		—		Derivative instruments	104,893		—		104,893		—
Liabilities	Liabilities									Liabilities
Derivative instruments	Derivative instruments	197,831		—		197,831		—		Derivative instruments	142,889		—		142,889		—
Total recurring fair value measurements	Total recurring fair value measurements	$	1,401,131	$	23,977	$	1,377,154	$	—	Total recurring fair value measurements	$	1,394,708	$	25,972	$	1,368,736	$	—

Nonrecurring fair value measurements	Nonrecurring fair value measurements									Nonrecurring fair value measurements
Assets	Assets									Assets
Individually assessed collateral dependent loans (1)	Individually assessed collateral dependent loans (1)	$	13,020	$	—	$	—	$	13,020	Individually assessed collateral dependent loans (1)	$	16,036	$	—	$	—	$	16,036

Total nonrecurring fair value measurements	Total nonrecurring fair value measurements	$	13,020	$	—	$	—	$	13,020	Total nonrecurring fair value measurements	$	16,036	$	—	$	—	$	16,036

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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)
		December 31, 2021									December 31, 2022
		(Dollars in thousands)									(Dollars in thousands)
Recurring fair value measurements	Recurring fair value measurements									Recurring fair value measurements
Assets	Assets									Assets
Trading securities	Trading securities	$	3,720	$	3,720	$	—	$	—	Trading securities	$	3,888	$	3,888	$	—	$	—
Equity securities	Equity securities	23,173		23,173		—		—		Equity securities	21,119		21,119		—		—
Securities available for sale	Securities available for sale									Securities available for sale
U.S. government agency securities	U.S. government agency securities	215,482		—		215,482		—		U.S. government agency securities	202,300		—		202,300		—
U.S. treasury securities	U.S. treasury securities	861,448		—		861,448		—		U.S. treasury securities	791,341		—		791,341		—
Agency mortgage-backed securities	Agency mortgage-backed securities	363,933		—		363,933		—		Agency mortgage-backed securities	313,688		—		313,688		—
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	79,677		—		79,677		—		Agency collateralized mortgage obligations	38,843		—		38,843		—

State, county, and municipal securities	State, county, and municipal securities	203		—		203		—		State, county, and municipal securities	191		—		191		—
Single issuer trust preferred securities issued by banks and insurers		491		—		491		—

Pooled trust preferred securities issued by banks and insurers	Pooled trust preferred securities issued by banks and insurers	1,000		—		1,000		—		Pooled trust preferred securities issued by banks and insurers	1,034		—		1,034		—
Small business administration pooled securities	Small business administration pooled securities	48,914		—		48,914		—		Small business administration pooled securities	51,757		—		51,757		—
Loans held for sale	Loans held for sale	24,679		—		24,679		—		Loans held for sale	2,803		—		2,803		—
Derivative instruments	Derivative instruments	97,912		—		97,912		—		Derivative instruments	127,958		—		127,958		—
Liabilities	Liabilities									Liabilities
Derivative instruments	Derivative instruments	76,015		—		76,015		—		Derivative instruments	179,911		—		179,911		—
Total recurring fair value measurements		$	1,644,617	$	26,893	$	1,617,724	$	—
Total recurring fair value measurements, net										Total recurring fair value measurements, net	$	1,375,011	$	25,007	$	1,350,004	$	—

Nonrecurring fair value measurements	Nonrecurring fair value measurements									Nonrecurring fair value measurements
Assets	Assets									Assets
Individually assessed collateral dependent loans (1)	Individually assessed collateral dependent loans (1)	$	1,174	$	—	$	—	$	1,174	Individually assessed collateral dependent loans (1)	$	16,092	$	—	$	—	$	16,092

Total nonrecurring fair value measurements	Total nonrecurring fair value measurements	$	1,174	$	—	$	—	$	1,174	Total nonrecurring fair value measurements	$	16,092	$	—	$	—	$	16,092

(1) The carrying value of individually assessed collateral dependent loans is based on the lower of amortized cost or fair value of the underlying collateral less costs to sell. The fair value of the underlying collateral is generally determined through independent appraisals, 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.

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The estimated fair values and related carrying amounts for assets and liabilities for which fair value is only disclosed are shown below at the dates indicated:


						Fair Value Measurements at Reporting Date Using											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)			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)
		September 30, 2022											March 31, 2023
		(Dollars in thousands)											(Dollars in thousands)
Financial assets	Financial assets											Financial assets
Securities held to maturity (a)	Securities held to maturity (a)											Securities held to maturity (a)
U.S. government agency securities	U.S. government agency securities	$	31,696	$	29,303	$	—	$	29,303	$	—	U.S. government agency securities	$	30,824	$	28,958	$	—	$	28,958	$	—
U.S. treasury securities	U.S. treasury securities	100,615		87,992		—		87,992		—		U.S. treasury securities	100,654		90,718		—		90,718		—
Agency mortgage-backed securities	Agency mortgage-backed securities	892,102		802,093		—		802,093		—		Agency mortgage-backed securities	887,994		815,554		—		815,554		—
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	553,995		476,970		—		476,970		—		Agency collateralized mortgage obligations	521,621		450,424		—		450,424		—

Single issuer trust preferred securities issued by banks	Single issuer trust preferred securities issued by banks	1,500		1,508		—		1,508		—		Single issuer trust preferred securities issued by banks	1,500		1,508		—		1,508		—
Small business administration pooled securities	Small business administration pooled securities	117,727		112,119		—		112,119		—		Small business administration pooled securities	135,783		132,342		—		132,342		—

Loans, net of allowance for credit losses (b)	Loans, net of allowance for credit losses (b)	13,540,017		13,208,966		—		—		13,208,966		Loans, net of allowance for credit losses (b)	13,772,785		13,144,699		—		—		13,144,699
Federal Home Loan Bank stock (c)	Federal Home Loan Bank stock (c)	5,218		5,218		—		5,218		—		Federal Home Loan Bank stock (c)	40,303		40,303		—		40,303		—
Cash surrender value of life insurance policies (d)	Cash surrender value of life insurance policies (d)	293,126		293,126		—		293,126		—		Cash surrender value of life insurance policies (d)	295,268		295,268		—		295,268		—
Financial liabilities	Financial liabilities											Financial liabilities
Deposit liabilities, other than time deposits (e)	Deposit liabilities, other than time deposits (e)	$	15,160,375	$	15,160,375	$	—	$	15,160,375	$	—	Deposit liabilities, other than time deposits (e)	$	13,816,821	$	13,816,821	$	—	$	13,816,821	$	—
Time certificates of deposits (f)	Time certificates of deposits (f)	1,178,619		1,147,506		—		1,147,506		—		Time certificates of deposits (f)	1,455,351		1,428,877		—		1,428,877		—
Federal Home Loan Bank borrowings (f)	Federal Home Loan Bank borrowings (f)	643		571		—		571		—		Federal Home Loan Bank borrowings (f)	879,628		878,777		—		878,777		—

Junior subordinated debentures (g)	Junior subordinated debentures (g)	62,855		59,770		—		59,770		—		Junior subordinated debentures (g)	62,856		56,387		—		56,387		—
Subordinated debentures (f)	Subordinated debentures (f)	49,862		44,066		—		—		44,066		Subordinated debentures (f)	49,909		47,527		—		—		47,527

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						Fair Value Measurements at Reporting Date Using											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)			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, 2021											December 31, 2022
		(Dollars in thousands)											(Dollars in thousands)
Financial assets	Financial assets											Financial assets
Securities held to maturity (a)	Securities held to maturity (a)											Securities held to maturity (a)
U.S. government agency securities	U.S. government agency securities	$	32,987	$	32,546	$	—	$	32,546	$	—	U.S. government agency securities	$	31,258	$	29,036	$	—	$	29,036	$	—
U.S. treasury securities	U.S. treasury securities	102,560		102,242		—		102,242		—		U.S. treasury securities	100,634		88,879		—		88,879		—
Agency mortgage-backed securities	Agency mortgage-backed securities	493,012		497,236		—		497,236		—		Agency mortgage-backed securities	898,927		815,952		—		815,952		—
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	415,736		408,845		—		408,845		—		Agency collateralized mortgage obligations	535,971		458,417		—		458,417		—

Single issuer trust preferred securities issued by banks	Single issuer trust preferred securities issued by banks	1,500		1,508		—		1,508		—		Single issuer trust preferred securities issued by banks	1,500		1,508		—		1,508		—
Small business administration pooled securities	Small business administration pooled securities	21,023		21,756		—		21,756		—		Small business administration pooled securities	136,830		130,918		—		130,918		—

Loans, net of allowance for credit losses (b)	Loans, net of allowance for credit losses (b)	13,439,190		13,389,515		—		—		13,389,515		Loans, net of allowance for credit losses (b)	13,760,164		13,260,873		—		—		13,260,873
Federal Home Loan Bank stock (c)	Federal Home Loan Bank stock (c)	11,407		11,407		—		11,407		—		Federal Home Loan Bank stock (c)	5,218		5,218		—		5,218		—
Cash surrender value of life insurance policies (d)	Cash surrender value of life insurance policies (d)	289,304		289,304		—		289,304		—		Cash surrender value of life insurance policies (d)	293,323		293,323		—		293,323		—
Financial liabilities	Financial liabilities											Financial liabilities
Deposit liabilities, other than time deposits (e)	Deposit liabilities, other than time deposits (e)	$	15,385,894	$	15,385,894	$	—	$	15,385,894	$	—	Deposit liabilities, other than time deposits (e)	$	14,683,266	$	14,683,266	$	—	$	14,683,266	$	—
Time certificates of deposits (f)	Time certificates of deposits (f)	1,531,150		1,529,857		—		1,529,857		—		Time certificates of deposits (f)	1,195,741		1,164,892		—		1,164,892		—
Federal Home Loan Bank borrowings (f)	Federal Home Loan Bank borrowings (f)	25,667		25,663		—		25,663		—		Federal Home Loan Bank borrowings (f)	637		563		—		563		—
Long-term borrowings (f)		14,063		13,989		—		13,989		—

Junior subordinated debentures (g)	Junior subordinated debentures (g)	62,853		67,019		—		67,019		—		Junior subordinated debentures (g)	62,855		60,002		—		60,002		—
Subordinated debentures (f)	Subordinated debentures (f)	49,791		45,532		—		—		45,532		Subordinated debentures (f)	49,885		45,891		—		—		45,891

(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.

(c)~~Federal Home Loan Bank~~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 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 89 - 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 accounts for such revenues in accordance with ASC 606 - Revenue from Contracts with Customersconsiders 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

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				Nine Months Ended					Three Months Ended
		September 30 2022		September 30 2021		September 30 2022		September 30 2021			March 31 2023		March 31 2022
		(Dollars in thousands)									(Dollars in thousands)
Deposit account fees (inclusive of cash management fees)	Deposit account fees (inclusive of cash management fees)	$	6,261	$	4,298	$	17,582	$	11,704	Deposit account fees (inclusive of cash management fees)	$	5,916	$	5,493
Interchange fees	Interchange fees	2,833		2,223		8,043		6,267		Interchange fees	2,788		2,472
ATM fees	ATM fees	1,066		817		2,900		2,177		ATM fees	938		841
Investment management - wealth management and advisory services	Investment management - wealth management and advisory services	7,834		8,147		23,563		23,576		Investment management - wealth management and advisory services	8,185		7,904
Investment management - retail investments and insurance revenue	Investment management - retail investments and insurance revenue	602		1,027		2,875		2,774		Investment management - retail investments and insurance revenue	1,594		769
Merchant processing income	Merchant processing income	412		365		1,140		1,024		Merchant processing income	470		378
Credit card income	Credit card income	495		334		1,341		883		Credit card income	493		372
Other noninterest income	Other noninterest income	1,782		1,362		4,650		3,732		Other noninterest income	1,198		1,396
Total noninterest income in-scope of ASC 606	Total noninterest income in-scope of ASC 606	21,285		18,573		62,094		52,137		Total noninterest income in-scope of ASC 606	21,582		19,625
Total noninterest income out-of-scope of ASC 606	Total noninterest income out-of-scope of ASC 606	6,910		7,884		20,271		24,533		Total noninterest income out-of-scope of ASC 606	6,660		6,647
Total noninterest income	Total noninterest income	$	28,195	$	26,457	$	82,365	$	76,670	Total noninterest income	$	28,242	$	26,272

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~~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~~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 dates indicated:

September 30, 2022 December 31, 2021
(Dollars in thousands)
Receivables, included in other assets $ 4,401 $ 5,385


	March 31, 2023		December 31, 2022
	(Dollars in thousands)
Receivables, included in other assets	$	5,205	$	5,261

Investment Management - Retail Investments and Insurance Revenue

The Company offers the sale of mutual fund shares, unit investment trust shares, third party model portfolios, 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~~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

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products and services. To a lesser degree, production bonus commissions can also be earned based upon the Company meeting certain volume thresholds.

~~Table of Contents~~

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 910 - OTHER COMPREHENSIVE INCOME (LOSS)

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


		Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022							Three Months Ended March 31, 2023
		Pre-Tax Amount		Tax (Expense) Benefit		After Tax Amount		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	Change in fair value of securities available for sale	$	(55,461)	$	12,879	$	(42,582)	$	(167,814)	$	38,942	$	(128,872)	Change in fair value of securities available for sale		$	22,185	$	(5,117)	$	17,068
Less: net security losses reclassified into other noninterest expense	Less: net security losses reclassified into other noninterest expense	—		—		—		—		—		—		Less: net security losses reclassified into other noninterest expense		—		—		—
Net change in fair value of securities available for sale	Net change in fair value of securities available for sale	(55,461)		12,879		(42,582)		(167,814)		38,942		(128,872)		Net change in fair value of securities available for sale		22,185		(5,117)		17,068

Change in fair value of cash flow hedges	Change in fair value of cash flow hedges	(37,357)		10,505		(26,852)		(64,963)		18,277		(46,686)		Change in fair value of cash flow hedges		7,899		(2,221)		5,678
Less: net cash flow hedge gains reclassified into interest income or interest expense		407		(115)		292		8,427		(2,370)		6,057
Less: net cash flow hedge losses reclassified into interest income or interest expense														Less: net cash flow hedge losses reclassified into interest income or interest expense		(6,239)		1,754		(4,485)

Net change in fair value of cash flow hedges	Net change in fair value of cash flow hedges	(37,764)		10,620		(27,144)		(73,390)		20,647		(52,743)		Net change in fair value of cash flow hedges		14,138		(3,975)		10,163

Amortization of net actuarial losses		159		(45)		114		476		(134)		342
Amortization of net actuarial gains														Amortization of net actuarial gains		(137)		38		(99)
Amortization of net prior service costs	Amortization of net prior service costs	10		(3)		7		29		(8)		21		Amortization of net prior service costs		10		(3)		7

Net change in other comprehensive income for defined benefit postretirement plans (1)	Net change in other comprehensive income for defined benefit postretirement plans (1)	169		(48)		121		505		(142)		363		Net change in other comprehensive income for defined benefit postretirement plans (1)		(127)		35		(92)
Total other comprehensive loss		$	(93,056)	$	23,451	$	(69,605)	$	(240,699)	$	59,447	$	(181,252)
Total other comprehensive income														Total other comprehensive income		$	36,196	$	(9,057)	$	27,139


		Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021							Three Months Ended March 31, 2022
		Pre-Tax Amount		Tax (Expense) Benefit		After Tax Amount		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	Change in fair value of securities available for sale	$	(10,337)	$	2,440	$	(7,897)	$	(15,589)	$	3,711	$	(11,878)	Change in fair value of securities available for sale		$	(81,619)	$	19,063	$	(62,556)
Less: net security losses reclassified into other noninterest expense	Less: net security losses reclassified into other noninterest expense	—		—		—		—		—		—		Less: net security losses reclassified into other noninterest expense		—		—		—
Net change in fair value of securities available for sale	Net change in fair value of securities available for sale	(10,337)		2,440		(7,897)		(15,589)		3,711		(11,878)		Net change in fair value of securities available for sale		(81,619)		19,063		(62,556)

Change in fair value of cash flow hedges	Change in fair value of cash flow hedges	84		(23)		61		(2,214)		624		(1,590)		Change in fair value of cash flow hedges		(20,480)		5,768		(14,712)
Less: net cash flow hedge gains reclassified into interest income or interest expense	Less: net cash flow hedge gains reclassified into interest income or interest expense	4,791		(1,347)		3,444		13,869		(3,900)		9,969		Less: net cash flow hedge gains reclassified into interest income or interest expense		4,505		(1,267)		3,238

Net change in fair value of cash flow hedges	Net change in fair value of cash flow hedges	(4,707)		1,324		(3,383)		(16,083)		4,524		(11,559)		Net change in fair value of cash flow hedges		(24,985)		7,035		(17,950)

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

Amortization of net actuarial losses	Amortization of net actuarial losses	346		(97)		249		1,037		(291)		746		Amortization of net actuarial losses		159		(45)		114
Amortization of net prior service costs	Amortization of net prior service costs	44		(13)		31		131		(37)		94		Amortization of net prior service costs		10		(3)		7

Net change in other comprehensive income for defined benefit postretirement plans (1)	Net change in other comprehensive income for defined benefit postretirement plans (1)	390		(110)		280		1,821		(512)		1,309		Net change in other comprehensive income for defined benefit postretirement plans (1)		169		(48)		121
Total other comprehensive loss	Total other comprehensive loss	$	(14,654)	$	3,654	$	(11,000)	$	(29,851)	$	7,723	$	(22,128)	Total other comprehensive loss		$	(106,435)	$	26,050	$	(80,385)

(1)The amortization of prior service costs is included in the computation of net periodic pension cost as disclosed in Note ~~14 "Employee~~13 - Employee Benefit ~~Plans"~~ Plans within the Notes to the Consolidated Financial Statements included in Item 8 of the Company's ~~2021~~2022 Form 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 dates indicated:


		Unrealized Gain (Loss) on Securities		Unrealized Gain (Loss) on Cash Flow Hedge		Defined Benefit Postretirement Plans			Accumulated Other Comprehensive Income (Loss)			Unrealized Gain (Loss) on Securities		Unrealized Gain (Loss) on Cash Flow Hedge		Defined Benefit Postretirement Plans		Accumulated Other Comprehensive Income (Loss)
		(Dollars in thousands)						(Dollars in thousands)
		2022						2023
Beginning balance: January 1, 2023											Beginning balance: January 1, 2023	$	(128,657)	$	(36,630)	$	2,203	$	(163,084)
Net change in other comprehensive income (loss)											Net change in other comprehensive income (loss)	17,068		10,163		(92)		27,139
Ending balance: March 31, 2023											Ending balance: March 31, 2023	$	(111,589)	$	(26,467)	$	2,111	$	(135,945)
												2022
Beginning balance: January 1, 2022	Beginning balance: January 1, 2022	$	(9,667)	$	14,137	$	(2,287)		$	2,183	Beginning balance: January 1, 2022	$	(9,667)	$	14,137	$	(2,287)	$	2,183
Net change in other comprehensive income (loss)		(128,872)		(52,743)		363			(181,252)
Ending balance: September 30, 2022		$	(138,539)	$	(38,606)	$	(1,924)		$	(179,069)
		2021
Beginning balance: January 1, 2021		$	13,255	$	33,276	$	(5,836)		$	40,695

Net change in other comprehensive income (loss)	Net change in other comprehensive income (loss)	(11,878)		(11,559)		1,309			(22,128)		Net change in other comprehensive income (loss)	(62,556)		(17,950)		121		(80,385)
Ending balance: September 30, 2021		$	1,377	$	21,717	$	(4,527)		$	18,567
Ending balance: March 31, 2022											Ending balance: March 31, 2022	$	(72,223)	$	(3,813)	$	(2,166)	$	(78,202)

NOTE 1011 - 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 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:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(Dollars in thousands)					(Dollars in thousands)
Commitments to extend credit	Commitments to extend credit	$	4,552,576	$	4,535,895	Commitments to extend credit	$	4,594,573	$	4,566,041
Loan exposures sold with recourse						Loan exposures sold with recourse	164,438		167,274
Standby letters of credit	Standby letters of credit	25,565		24,412		Standby letters of credit	22,850		24,941
Deferred standby letter of credit fees	Deferred standby letter of credit fees	187		124		Deferred standby letter of credit fees	190		168
Loan exposures sold with recourse		171,437		202,717

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Lease Commitments

The Company leases office and parking space, space for ATM locations, and certain branch locations under noncancellable operating leases. Several of these leases contain renewal options to extend lease terms for a period of 1 to 20 years. During the first quarter of 2022, the Company recognized approximately $4.4 million in costs associated with several terminated leased locations acquired from Meridian that were subsequently exited. These costs are reflected within merger and acquisition expense in the Consolidated Statement of Income.

There has been no significant change in the future minimum lease payments payable by the Company since December 31, ~~2021.~~2022. See the Company's ~~2021~~2022 Form 10-K for information regarding leases and other commitments.

Other Contingencies

At ~~September 30, 2022,~~March 31, 2023, 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.

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~~NOTE 11 - LOW INCOME HOUSING PROJECT INVESTMENTS~~

The Company has invested in low income housing projects that generate Low Income Housing Tax Credits 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:~~

September 30
2022 December 31
2021
(Dollars in thousands)
Original investment value $ 183,889 $ 179,481
Current recorded investment 129,875 135,497
Unfunded liability obligation 63,014 73,336
Tax credits and benefits 16,679 (1) 14,198
Amortization of investments 13,375 (1) 11,892
Net income tax benefit 3,304 (1) 2,306

~~(1)Amounts shown represent the estimated full year impact for the year ended December 31, 2022.~~

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, ~~2021,~~2022, filed with the Securities and Exchange Commission (the ~~"2021~~"2022 Form 10-K").

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this "Report"), in 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,” “could,” “will,” “may,” “expect,” “believe,” “forecast,” “view,” “opportunity,” “allow,” “continues,” “reflects,” “typically,” “usually,” “anticipate,” “estimate,” “intend,” 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 statements, in addition to those risk factors listed under the “Risk Factors” section of the ~~2021~~2022 Form 10-K, 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 any future weakening caused by the COVID-19 pandemic and any uncertainty regarding the length and extent of economic contraction as a result of the pandemic;~~area;

•the ~~potential~~ effects of inflationary pressures, labor market shortages and supply chain issues;

•the instability or volatility in financial markets and unfavorable general economic or business conditions, globally, nationally or regionally, caused by geopolitical concerns, including as a result of the conflict between Russia and ~~Ukraine;~~Ukraine, and as a result of recent disruptions in the banking industry;

•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 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;

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

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•higher than expected tax expense, resulting from failure to comply with general tax laws and changes in tax laws;

•changes in market interest rates for interest earning assets and/or interest bearing liabilities and changes related to the phase-out of ~~LIBOR;~~the London Interbank Offered Rate ("LIBOR");

•increased competition in the Company’s market areas;

•adverse weather, changes in climate, natural disasters, geopolitical concerns, including those arising from the conflict between Russia and Ukraine;

•the emergence of widespread health emergencies or pandemics, ~~including the magnitude and duration of the COVID-19 pandemic,~~ any further resurgences or variants of the COVID-19 virus, ~~the efficacy and availability of vaccines, boosters or other treatments,~~ actions taken by governmental authorities in response thereto, other public health crises or man-made events, and their impact on the Company's local economies or the Company's operations;

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•a deterioration in the conditions of the securities markets;

•a deterioration of the credit rating for U.S. long-term sovereign ~~debt;~~debt, actions that the U.S. government may take to avoid exceeding the debt ceiling, or uncertainties surrounding the debt ceiling and the federal budget;

•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;

•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;~~business, including any such changes in laws and regulations as a result of recent disruptions in the banking industry, and the associated costs of such changes;

•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;~~actions;

•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;~~setters;

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

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

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 Report which modify or impact any of the forward-looking statements contained in this Report will be deemed to modify or supersede such statements in this 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 Report.


					Three Months Ended																Three Months Ended
		September 30 2022			June 30 2022			March 31 2022			December 31 2021			September 30 2021				March 31 2023			December 31 2022			September 30 2022			June 30 2022			March 31 2022
		(Dollars in thousands, except per share data)																(Dollars in thousands, except per share data)
Financial condition data	Financial condition data																Financial condition data
Securities	Securities	$	3,147,123		$	2,934,956		$	2,861,739		$	2,664,859		$	2,318,757		Securities	$	3,109,950		$	3,129,281		$	3,147,123		$	2,934,956		$	2,861,739
Loans	Loans	13,700,350			13,675,764			13,580,027			13,587,286			8,808,013			Loans	13,947,952			13,928,675			13,700,350			13,675,764			13,580,027
Allowance for credit losses	Allowance for credit losses	(147,313)			(144,319)			(144,518)			(146,922)			(92,246)			Allowance for credit losses	(159,131)			(152,419)			(147,313)			(144,319)			(144,518)
Goodwill and other intangible assets	Goodwill and other intangible assets	1,012,006			1,013,917			1,015,831			1,017,844			525,261			Goodwill and other intangible assets	1,008,325			1,010,140			1,012,006			1,013,917			1,015,831
Total assets	Total assets	19,703,269			19,982,450			20,159,178			20,423,405			14,533,311			Total assets	19,442,402			19,294,174			19,703,269			19,982,450			20,159,178
Total deposits	Total deposits	16,338,994			16,639,548			16,763,392			16,917,044			12,260,140			Total deposits	15,272,172			15,879,007			16,338,994			16,639,548			16,763,392
Total borrowings	Total borrowings	113,360			138,344			138,328			152,374			157,045			Total borrowings	992,393			113,377			113,360			138,344			138,328
Stockholders’ equity	Stockholders’ equity	2,817,201			2,871,185			2,965,439			3,018,449			1,755,954			Stockholders’ equity	2,830,909			2,886,701			2,817,201			2,871,185			2,965,439
Nonperforming loans	Nonperforming loans	56,017			55,915			56,618			27,820			45,810			Nonperforming loans	56,235			54,881			56,017			55,915			56,618
Nonperforming assets	Nonperforming assets	56,017			55,915			56,618			27,820			45,810			Nonperforming assets	56,235			54,881			56,017			55,915			56,618
Income statement	Income statement																Income statement
Interest income	Interest income	$	169,971		$	148,123		$	140,619		$	125,921		$	93,016		Interest income	$	186,935		$	184,127		$	169,971		$	148,123		$	140,619
Interest expense	Interest expense	7,370			3,262			3,187			3,391			2,925			Interest expense	27,937			15,772			7,370			3,262			3,187
Net interest income	Net interest income	162,601			144,861			137,432			122,530			90,091			Net interest income	158,998			168,355			162,601			144,861			137,432
Provision for (release of) credit losses	Provision for (release of) credit losses	3,000			—			(2,000)			35,705			(10,000)			Provision for (release of) credit losses	7,250			5,500			3,000			—			(2,000)
Noninterest income	Noninterest income	28,195			27,898			26,272			29,180			26,457			Noninterest income	28,242			32,302			28,195			27,898			26,272
Noninterest expenses	Noninterest expenses	92,728			90,562			95,500			117,126			72,419			Noninterest expenses	98,661			94,872			92,728			90,562			95,500
Net income	Net income	71,897			61,776			53,097			1,702			40,007			Net income	61,247			77,043			71,897			61,776			53,097
Per share data	Per share data																Per share data
Net income—basic	Net income—basic	$	1.57		$	1.32		$	1.12		$	0.04		$	1.21		Net income—basic	$	1.36		$	1.69		$	1.57		$	1.32		$	1.12
Net income—diluted	Net income—diluted	1.57			1.32			1.12			0.04			1.21			Net income—diluted	1.36			1.69			1.57			1.32			1.12
Cash dividends declared	Cash dividends declared	0.51			0.51			0.51			0.48			0.48			Cash dividends declared	0.55			0.55			0.51			0.51			0.51
Book value per share	Book value per share	61.73			62.32			62.59			63.75			53.14			Book value per share	64.17			63.25			61.73			62.32			62.59
Tangible book value per share (1)	Tangible book value per share (1)	39.56			40.31			41.15			42.25			37.24			Tangible book value per share (1)	41.31			41.12			39.56			40.31			41.15
Performance ratios	Performance ratios																Performance ratios
Return on average assets	Return on average assets	1.43		%	1.24		%	1.06		%	0.04		%	1.11		%	Return on average assets	1.30		%	1.56		%	1.43		%	1.24		%	1.06		%
Return on average common equity	Return on average common equity	9.90		%	8.49		%	7.16		%	0.28		%	9.04		%	Return on average common equity	8.63		%	10.70		%	9.90		%	8.49		%	7.16		%
Net interest margin (on a fully tax equivalent basis)	Net interest margin (on a fully tax equivalent basis)	3.64		%	3.27		%	3.09		%	3.05		%	2.78		%	Net interest margin (on a fully tax equivalent basis)	3.79		%	3.85		%	3.64		%	3.27		%	3.09		%
Dividend payout ratio	Dividend payout ratio	32.78		%	39.11		%	42.80		%	931.90		%	39.64		%	Dividend payout ratio	40.99		%	30.21		%	32.78		%	39.11		%	42.80		%
Asset Quality Ratios	Asset Quality Ratios																Asset Quality Ratios
Nonperforming loans as a percent of gross loans	Nonperforming loans as a percent of gross loans	0.41		%	0.41		%	0.42		%	0.20		%	0.52		%	Nonperforming loans as a percent of gross loans	0.40		%	0.39		%	0.41		%	0.41		%	0.42		%
Nonperforming assets as a percent of total assets	Nonperforming assets as a percent of total assets	0.28		%	0.28		%	0.28		%	0.14		%	0.32		%	Nonperforming assets as a percent of total assets	0.29		%	0.28		%	0.28		%	0.28		%	0.28		%
Allowance for credit losses as a percent of total loans	Allowance for credit losses as a percent of total loans	1.08		%	1.06		%	1.06		%	1.08		%	1.05		%	Allowance for credit losses as a percent of total loans	1.14		%	1.09		%	1.08		%	1.06		%	1.06		%
Allowance for credit losses as a percent of nonperforming loans	Allowance for credit losses as a percent of nonperforming loans	262.98		%	258.10		%	255.25		%	528.12		%	201.37		%	Allowance for credit losses as a percent of nonperforming loans	282.98		%	277.73		%	262.98		%	258.10		%	255.25		%
Capital ratios	Capital ratios																Capital ratios

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Equity to assets	Equity to assets	14.30	%	14.37	%	14.71	%	14.78	%	12.08	%	Equity to assets	14.56	%	14.96	%	14.30	%	14.37	%	14.71	%
Tangible equity to tangible assets (1)	Tangible equity to tangible assets (1)	9.66	%	9.79	%	10.18	%	10.31	%	8.79	%	Tangible equity to tangible assets (1)	9.89	%	10.26	%	9.66	%	9.79	%	10.18	%
Tier 1 leverage capital ratio	Tier 1 leverage capital ratio	10.51	%	10.42	%	10.62	%	12.03	%	9.36	%	Tier 1 leverage capital ratio	10.78	%	10.99	%	10.51	%	10.42	%	10.62	%
Common equity tier 1 capital ratio	Common equity tier 1 capital ratio	13.98	%	13.90	%	14.45	%	14.30	%	13.53	%	Common equity tier 1 capital ratio	13.83	%	14.33	%	13.98	%	13.90	%	14.45	%
Tier 1 risk-based capital ratio	Tier 1 risk-based capital ratio	13.98	%	13.90	%	14.45	%	14.30	%	14.21	%	Tier 1 risk-based capital ratio	13.83	%	14.33	%	13.98	%	13.90	%	14.45	%
Total risk-based capital ratio	Total risk-based capital ratio	15.71	%	15.62	%	16.18	%	16.04	%	15.78	%	Total risk-based capital ratio	15.66	%	16.11	%	15.71	%	15.62	%	16.18	%

(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.

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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 Company maintains an asset-sensitive profile and, accordingly, has benefited from recent interest rate increases. While asset quality remains very strong, management is closely monitoring the economic environment, including elevated inflationary pressures, supply chain issues, and labor shortages being experienced in the current operating environment across various industries. The Company focuses on organic growth, but will also consider growth through acquisition. Any potential acquisition opportunities are evaluated for the potential to provide a satisfactory financial return as well as other criteria (ease of integration, synergies, geographical location). ~~Recent acquisitions include~~

First Quarter 2023 Results

Net income for the three months ended March 31, 2023 was $61.2 million, or $1.36 on a diluted earnings per share basis, as compared to $53.1 million, or $1.12 on a diluted earnings per share basis, for the three months ended March 31, 2022, representing increases of 15.3% and 21.4%, respectively. Results for three months ended March 31, 2022 reflect merger and acquisition-related costs of $7.1 million, pre-tax, associated with the Meridian Bancorp, Inc. ("Meridian") acquisition and its subsidiary, East Boston Savings Bank ("EBSB"), which closed in the fourth quarter of ~~2021.~~2021

~~Third Quarter 2022 Results~~

Net income for the three months ended September 30, 2022 was $71.9 million, or $1.57 on a diluted earnings per share basis, as compared to $40.0 million, or $1.21 on a diluted earnings per share basis, for the three months ended September 30, 2021, or an increase of 79.7% and 29.8%, respectively. Net income for the nine months ended September 30, 2022 was $186.8 million, or $4.00 on a diluted earnings per share basis, as compared to $119.3 million, or $3.61 on a diluted earnings per share basis, for the nine months ended September 30, 2021, or an increase of 56.6% and 10.8%, respectively. The nine months ended September 30, 2022 results reflect merger and acquisition-related costs of $7.1 million, pre-tax, associated with the Meridian acquisition, as compared to $3.7 million of merger-related costs during the same prior year period.. Excluding these merger and acquisition costs, operating net income was ~~$191.9~~$58.2 million, or ~~$4.11~~$1.23 on a diluted per share basis for ~~the nine~~three months ended ~~September 30, 2022, as compared to $121.9 million, or $3.69 on a diluted per share basis~~March 31, 2022. There were no such costs for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2023. See "Non-GAAP Measures" below for a reconciliation of non-GAAP measures.

~~Third~~First quarter ~~2022~~2023 results reflected the following key drivers:

•~~Improved net interest margin for the quarter;~~Flat overall loan balances, reflecting decreased demand and a cautious posture over new commitments;

•~~1.3% annualized net loan growth, excluding Paycheck Protection Program ("PPP") runoff;~~

•~~Continued modest cash deployment into the securities portfolio;~~

•~~Strong core deposit account openings and low cost of~~3.8% decrease in deposits;

•~~Modest provision for credit loss; nonperforming assets remained flat;~~Increases in both on and off balance sheet liquidity;

•~~Strong fee income;~~Number of households increased by 0.5% ;

•~~49% efficiency ratio for the quarter;~~Increased provision due to specific reserve allocation; asset quality metrics strong;

•~~443,000 shares repurchased, completing the Company's~~Wealth Management assets under administration increased to $6.1 billion;

•52.7% efficiency ratio;

•Completion of full $120.0 million stock buyback program; and

•Modest tangible book value per share ~~repurchase program announced in January 2022.~~growth

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Interest-Earning Assets

The results depicted in the following table reflect the trend of the Company's interest-earning assets over the past five ~~quarters, inclusive of~~quarters. While the Company's acquisition of Meridian during the fourth quarter of 2021. Changes over the five quarter period reflect measured deployment of excess cash balances into the securities portfolio, combined withCompany employs a longer term ~~overall~~ strategy that typically emphasizes loan growth commensurate with overall economic ~~growth.~~growth, changes over the five quarter period reflect a decline in interest-earning cash balances, largely attributable to a competitive rate environment, redeployment of excess customer liquidity, and the completion of two stock repurchase programs over the course of 2022 and through the first quarter of 2023. The following table summarizes the Company's interest-earning assets as of the periods indicated:

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 credit 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 strategy of relying upon core deposit growth to substantially fund loans. Total borrowings increased by $879.0 million during the first quarter of 2023, in response to deposit balance reductions and share repurchase activity, along with preemptive measures to bolster on-balance sheet liquidity in response to the high deposit risk environment experienced across the banking industry during the month of March 2023. The following chart shows sources of funding and percentage of core deposits to total deposits for the trailing five quarters:

The following table shows the net interest margin and cost of deposits trends for the trailing five quarters:

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Noninterest Income

Noninterest income is primarily comprised of deposit account fees, interchange and ATM fees, investment management fees and mortgage banking income. The following chart shows trends in 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:

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

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Capital

The Company's approach with respect to revenue and expense is designed to promote long-term earnings growth, which in turn contributes to capital growth. ~~Strong~~Capital is primarily impacted by earnings retention, ~~has contributed to capital growth, both on an absolute level~~dividends and ~~per~~opportunistic share ~~basis, which has been offset in the last two quarters by share repurchases and other comprehensive losses.~~repurchases. 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 to GAAP financial measures.

The Company declared a quarterly cash dividend of ~~$0.51~~$0.55 per share for ~~each of~~ the first ~~three quarters~~quarter of ~~2022,~~2023, representing an increase of ~~6.3%~~7.8% from the ~~2021 quarterly~~2022 first quarter dividend rate of ~~$0.48 per share. During~~$0.51. Additionally, during the ~~third~~first quarter of ~~2022,~~2023 the Company repurchased ~~approximately 443,000 shares of common stock under the Company's stock repurchase program announced in January 2022. In total, the Company repurchased 1.8~~1.6 million shares of its common stock ~~during the nine months ended September 30, 2022~~for $120.0 million at an average price of ~~$78.32 under~~$74.18, marking the ~~January 2022 program which ended in the third quarter. In consideration~~full completion of ~~the Company's strong current capital position, on October 20, 2022 the Company announced a new~~its stock repurchase ~~plan, which authorizes repurchases by the Company of up to $120 million~~program announced in ~~common stock. The new plan will be in effect through~~ October ~~19, 2023.~~

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2022.

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 credit losses, and the impact of income taxes and other noncore ~~items.~~items shown in the table that follows. There are items that impact the Company's results that management believes are unrelated to its core banking business such as gains or losses on the sales of securities, merger and acquisition expenses, provision for credit losses on acquired portfolios, loss on extinguishment of debt, impairment, and other items, such as one-time adjustments as a result of changes in laws and regulations. Management, therefore, excludes items management considers to be noncore when computing the Company’s non-GAAP operating earnings and operating EPS, noninterest income on an operating basis and efficiency ratio on an operating basis. Management believes excluding these items facilitates greater visibility into the Company’s core banking business and underlying ~~trends.~~trends that may, to some extent, be obscured by inclusion of such items.

Management also supplements its evaluation of financial performance with an analysis of tangible book value per share (which is computed by dividing stockholders' equity less goodwill and identifiable intangible assets, ~~which is referred to as~~or tangible common equity, by common shares outstanding) and with the Company's tangible common equity ratio (which is computed by dividing tangible common equity by tangible assets)~~, both of~~ which are non-GAAP measures. The Company ~~reports~~has included information on these tangible ratios because management believes that investors may find it useful to have access to the same analytical tools used by management to assess performance and identify trends. The Company has recognized goodwill and other intangible assets in conjunction with merger and acquisition activities. ~~Management believes providing information excluding~~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, facilitates comparison of 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 financial results determined in accordance with GAAP. An item which management deems to be noncore and excludes when computing these non-GAAP measures can be of

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substantial importance to the Company’s results for any particular period. The Company’s non-GAAP performance measures are not necessarily comparable to similarly named non-GAAP performance measures which may be presented by other companies.

The following tables summarize adjustments for noncore items for the periods indicated below and shows the reconciliation of non-GAAP measures:

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		Three Months Ended September 30									Three Months Ended March 31
		Net Income				Diluted Earnings Per Share					Net Income				Diluted Earnings Per Share
		2022		2021		2022		2021			2023		2022		2023		2022
		(Dollars in thousands, except per share data)									(Dollars in thousands, except per share data)
Net income available to common shareholders (GAAP)	Net income available to common shareholders (GAAP)	$	71,897	$	40,007	$	1.57	$	1.21	Net income available to common shareholders (GAAP)	$	61,247	$	53,097	$	1.36	$	1.12
Non-GAAP adjustments	Non-GAAP adjustments									Non-GAAP adjustments

Noninterest expense components	Noninterest expense components									Noninterest expense components

Add: merger and acquisition expenses	Add: merger and acquisition expenses	—		1,943		—		0.06		Add: merger and acquisition expenses	—		7,100		—		0.15

Noncore increases to income before taxes	Noncore increases to income before taxes	—		1,943		—		0.06		Noncore increases to income before taxes	—		7,100		—		0.15
Net tax benefit associated with noncore items (1)	Net tax benefit associated with noncore items (1)	—		(546)		—		(0.02)		Net tax benefit associated with noncore items (1)	—		(1,995)		—		(0.04)

Noncore increases to net income	Noncore increases to net income	—		1,397		—		0.04		Noncore increases to net income	—		5,105		—		0.11
Operating net income (Non-GAAP)	Operating net income (Non-GAAP)	$	71,897	$	41,404	$	1.57	$	1.25	Operating net income (Non-GAAP)	$	61,247	$	58,202	$	1.36	$	1.23

		Nine Months Ended September 30
		Net Income				Diluted Earnings Per Share
		2022		2021		2022		2021
		(Dollars in thousands, except per share data)
Net income available to common shareholders (GAAP)		$	186,770	$	119,290	$	4.00	$	3.61
Non-GAAP adjustments

Noninterest expense components

Add: merger and acquisition expenses		7,100		3,674		0.15		0.11
Noncore increases to income before taxes		7,100		3,674		0.15		0.11
Net tax benefit associated with noncore items (1)		(1,995)		(1,033)		(0.04)		(0.03)

Noncore increases to net income		5,105		2,641		0.11		0.08
Operating net income (Non-GAAP)		$	191,875	$	121,931	$	4.11	$	3.69

(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 2023			December 31 2022			September 30 2022			June 30 2022			March 31 2022
	(Dollars in thousands)
Net interest income (GAAP)	$	158,998		$	168,355		$	162,601		$	144,861		$	137,432		(a)

Noninterest income (GAAP)	$	28,242		$	32,302		$	28,195		$	27,898		$	26,272		(b)






Noninterest expense (GAAP)	$	98,661		$	94,872		$	92,728		$	90,562		$	95,500		(c)
Less:

Merger and acquisition expense	—			—			—			—			7,100



Noninterest expense on an operating basis (Non-GAAP)	$	98,661		$	94,872		$	92,728		$	90,562		$	88,400		(d)

Total revenue (GAAP)	$	187,240		$	200,657		$	190,796		$	172,759		$	163,704		(a+b)


Ratios
Noninterest income as a % of revenue (GAAP based)	15.08		%	16.10		%	14.78		%	16.15		%	16.05		%	(b/(a+b))

Efficiency ratio (GAAP based)	52.69		%	47.28		%	48.60		%	52.42		%	58.34		%	(c/(a+b))
Efficiency ratio on an operating basis (Non-GAAP)	52.69		%	47.28		%	48.60		%	52.42		%	54.00		%	(d/(a+b))

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Three Months Ended
September 30
2022 June 30
2022 March 31
2022 December 31
2021 September 30
2021
(Dollars in thousands)
Net interest income (GAAP) $ 162,601 $ 144,861 $ 137,432 $ 122,530 $ 90,091 (a)
Noninterest income (GAAP) $ 28,195 $ 27,898 $ 26,272 $ 29,180 $ 26,457 (b)
Noninterest expense (GAAP) $ 92,728 $ 90,562 $ 95,500 $ 117,126 $ 72,419 (c)
Less:
Merger and acquisition expense — — 7,100 37,166 1,943
Noninterest expense on an operating basis (Non-GAAP) $ 92,728 $ 90,562 $ 88,400 $ 79,960 $ 70,476 (d)
Total revenue (GAAP) $ 190,796 $ 172,759 $ 163,704 $ 151,710 $ 116,548 (a+b)
Ratios
Noninterest income as a % of revenue (GAAP based) 14.78 % 16.15 % 16.05 % 19.23 % 22.70 % (b/(a+b))
Efficiency ratio (GAAP based) 48.60 % 52.42 % 58.34 % 77.20 % 62.14 % (c/(a+b))
Efficiency ratio on an operating basis (Non-GAAP) 48.60 % 52.42 % 54.00 % 52.71 % 60.47 % (d/(a+b))

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


		September 30 2022			June 30 2022			March 31 2022			December 31 2021			September 30 2021					March 31 2023			December 31 2022			September 30 2022			June 30 2022			March 31 2022
		(Dollars in thousands, except per share data)																	(Dollars in thousands, except per share data)
Tangible common equity	Tangible common equity																	Tangible common equity
Stockholders' equity (GAAP)	Stockholders' equity (GAAP)	$	2,817,201		$	2,871,185		$	2,965,439		$	3,018,449		$	1,755,954		(a)	Stockholders' equity (GAAP)	$	2,830,909		$	2,886,701		$	2,817,201		$	2,871,185		$	2,965,439		(a)
Less: Goodwill and other intangibles	Less: Goodwill and other intangibles	1,012,006			1,013,917			1,015,831			1,017,844			525,261				Less: Goodwill and other intangibles	1,008,325			1,010,140			1,012,006			1,013,917			1,015,831
Tangible common equity (Non-GAAP)	Tangible common equity (Non-GAAP)	1,805,195			1,857,268			1,949,608			2,000,605			1,230,693			(b)	Tangible common equity (Non-GAAP)	1,822,584			1,876,561			1,805,195			1,857,268			1,949,608			(b)
Tangible assets	Tangible assets																	Tangible assets
Assets (GAAP)	Assets (GAAP)	19,703,269			19,982,450			20,159,178			20,423,405			14,533,311			(c)	Assets (GAAP)	19,442,402			19,294,174			19,703,269			19,982,450			20,159,178			(c)
Less: Goodwill and other intangibles	Less: Goodwill and other intangibles	1,012,006			1,013,917			1,015,831			1,017,844			525,261				Less: Goodwill and other intangibles	1,008,325			1,010,140			1,012,006			1,013,917			1,015,831
Tangible assets (Non-GAAP)	Tangible assets (Non-GAAP)	$	18,691,263		$	18,968,533		$	19,143,347		$	19,405,561		$	14,008,050		(d)	Tangible assets (Non-GAAP)	$	18,434,077		$	18,284,034		$	18,691,263		$	18,968,533		$	19,143,347		(d)
Common shares	Common shares	45,634,626			46,069,761			47,377,125			47,349,778			33,043,812			(e)	Common shares	44,114,827			45,641,238			45,634,626			46,069,761			47,377,125			(e)

Common equity to assets ratio (GAAP)	Common equity to assets ratio (GAAP)	14.30		%	14.37		%	14.71		%	14.78		%	12.08		%	(a/c)	Common equity to assets ratio (GAAP)	14.56		%	14.96		%	14.30		%	14.37		%	14.71		%	(a/c)
Tangible common equity to tangible assets ratio (Non-GAAP)	Tangible common equity to tangible assets ratio (Non-GAAP)	9.66		%	9.79		%	10.18		%	10.31		%	8.79		%	(b/d)	Tangible common equity to tangible assets ratio (Non-GAAP)	9.89		%	10.26		%	9.66		%	9.79		%	10.18		%	(b/d)
Book value per share (GAAP)	Book value per share (GAAP)	$	61.73		$	62.32		$	62.59		$	63.75		$	53.14		(a/e)	Book value per share (GAAP)	$	64.17		$	63.25		$	61.73		$	62.32		$	62.59		(a/e)
Tangible book value per share (Non-GAAP)	Tangible book value per share (Non-GAAP)	$	39.56		$	40.31		$	41.15		$	42.25		$	37.24		(b/e)	Tangible book value per share (Non-GAAP)	$	41.31		$	41.12		$	39.56		$	40.31		$	41.15		(b/e)

Critical Accounting ~~Policies~~Estimates

Critical accounting policies are defined as those that are reflective of significant management judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. ~~The Company believes~~Certain estimates associated with these policies inherently have a greater reliance on the use of assumptions and judgments and, as such, have a greater possibility of producing results that ~~the most~~could be materially different than originally reported. These critical accounting ~~policies~~estimates are ~~those~~defined as estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had, or are ~~both most important~~reasonably likely to ~~the portrayal of the Company’s~~have, a material impact on financial condition ~~and~~or results ~~and require management's most difficult, subjective, or complex judgments, often as a result~~ of ~~the need to make estimates about the effects of matters that are inherently uncertain.~~operations.

There have been no material changes in critical accounting ~~policies~~estimates during the first ~~nine~~three months of ~~2022.~~2023. Refer to "Critical Accounting ~~Policies and~~ Estimates" in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's ~~2021~~2022 Form 10-K 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~~decreased by ~~$482.3~~$19.3 million, or ~~18.1%~~0.6%, at ~~September 30, 2022~~March 31, 2023 as compared to December 31, ~~2021,~~2022, driven primarily r~~eflecting $887.3 million~~of~~purchases,~~by paydowns, calls, and maturities, partially offset by unrealized ~~losses~~gains of ~~$167.8~~$22.2 million ~~related to~~in the available for sale ~~portfolio, as well as paydowns, calls, and maturities. The~~portfolio. As a result, the Company's ratio of securities to total assets ~~increased~~decreased to 16.0% at ~~September 30, 2022~~March 31, 2023 compared to ~~13.0%~~16.2% at December 31, ~~2021, which reflects the ongoing strategy to deploy excess liquidity into increased investment security purchases.~~2022. 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 measurement of expected credit losses on securities can be found in Note 3 “Securities” within the Notes to Consolidated Financial Statements included in Part I. Item 1 of this Report.

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Residential Mortgage Loan Sales The Company’s primary loan sale activity arises from the sale of government sponsored enterprise eligible residential mortgage loans. The Company originates residential loans with the intention of either selling them in the secondary market or holding them in the Company's residential real estate 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 found to be not accurate in all material respects. The Company incurred no material losses related to residential mortgage repurchases during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

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

Table 1 - Closed Residential Real Estate Loans

Three Months Ended September 30 Nine Months Ended September 30
2022 2021 2022 2021
(Dollars in thousands)
Held in portfolio $ 165,065 $ 65,832 $ 571,115 $ 279,176
Sold or held for sale in the secondary market 21,325 183,794 77,309 611,795
Total closed loans $ 186,390 $ 249,626 $ 648,424 $ 890,971


	Three Months Ended March 31
		2023		2022
		(Dollars in thousands)
Held in portfolio		$	91,526	$	180,525
Sold or held for sale in the secondary market		9,934		37,245
Total closed loans		$	101,460	$	217,770

The Company experienced a lower volume of residential real estate loans sales for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to the same prior year periods, driven primarily by reduced customer demand in the rising interest rate environment. ~~In addition, the volume of closed residential real estate loans held in portfolio increased during the three and nine months ended September 30, 2022.~~

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

Table 2 - Residential Mortgage Loan Sales


		Three Months Ended September 30				Nine Months Ended September 30					Three Months Ended March 31
		2022		2021		2022		2021				2023		2022
		(Dollars in thousands)										(Dollars in thousands)
Sold with servicing rights released	Sold with servicing rights released	$	18,206	$	171,256	$	94,006	$	618,171	Sold with servicing rights released		$	11,589	$	53,864
Sold with servicing rights retained (1)	Sold with servicing rights retained (1)	182		3,029		863		11,116		Sold with servicing rights retained (1)		—		420
Total loans sold	Total loans sold	$	18,388	$	174,285	$	94,869	$	629,287	Total loans sold		$	11,589	$	54,284

(1)All loans sold with servicing rights retained during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 ~~and 2021, respectively,~~ were sold without recourse.

When a loan is sold, the Company may decide to also sell the servicing of sold loans for a servicing release premium, 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 ~~$336.2~~$320.9 million, ~~$382.6~~$327.5 million and ~~$342.3~~$361.7 million at ~~September 30, 2022,~~March 31, 2023, December 31, ~~2021,~~2022, and ~~September 30, 2021,~~March 31, 2022, 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 September 30				Nine Months Ended September 30					Three Months Ended March 31
		2022		2021		2022		2021				2023		2022
		(Dollars in thousands)										(Dollars in thousands)
Balance at beginning of period	Balance at beginning of period	$	2,993	$	2,295	$	2,627	$	2,365	Balance at beginning of period		$	2,947	$	2,627
Additions	Additions	2		30		8		95		Additions		—		4

Amortization	Amortization	(153)		(244)		(510)		(769)		Amortization		(136)		(194)
Change in valuation allowance	Change in valuation allowance	103		122		820		512		Change in valuation allowance		(1)		368
Balance at end of period	Balance at end of period	$	2,945	$	2,203	$	2,945	$	2,203	Balance at end of period		$	2,810	$	2,805

See Note 6,7, “Derivative and Hedging Activities” within the Notes to Consolidated Financial Statements included in Part I. Item 1 of this Report for more information on mortgage activity and mortgage related derivatives.

Loan Portfolio Total loans at ~~September 30, 2022~~March 31, 2023 increased by ~~$113.1~~$19.3 million, or ~~0.8%~~0.1%, (0.6% on an annualized basis) when compared to December 31, ~~2021. Excluding $205.1~~2022. The commercial portfolio decreased by $26.7 million, ~~of net paydowns associated with PPP loans~~or 0.2% during the ~~nine months ended September 30, 2022,~~ t~~he loan portfolio increased by $318.1 million, or 2.4% (3.2% on~~quarter, reflecting decreased demand and an ~~annualized basis), compared to December 31, 2021. Organic loan growth was driven primarily by strong consumer loan activity, as~~overall cautious posture over new commitments. Small business loans rose modestly in the first quarter. As in prior quarters, the vast majority of residential real estate ~~loan closings~~originations were retained on the balance sheet, ~~while increased demand and line utilization fueled~~resulting in growth inof $60.1 million, or 3.0% for the quarter while home equity balances. Excluding the net reduction in PPP loans, the commercial portfolio decreased 0.82% at September 30, 2022 in comparison to December 31, 2021, primarily driven by continued elevated levels of attrition within the commercial real estate portfolio, which were partially offset by increased line utilization and higher closing volumes within the commercial and industrial category, which grew by $190.1 million, or 14.1% (18.9% on an annualized basis), as compared to December 31, 2021.balances remained relatively flat.

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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 following pie chart shows the diversification of the commercial and industrial portfolio as of September 30, 2022:


	~~(Dollars in thousands)~~
~~Average loan size (excluding floor plan tranches)~~	$	~~388~~
~~Largest individual commercial and industrial loan outstanding~~	$	~~37,650~~
~~Commercial and industrial nonperforming loans/commercial and industrial loans~~	~~1.77~~		%

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 ~~September 30, 2022:~~March 31, 2023:

(1)Included in the total commercial real estate balance are $1.0 billion, or 11.8%, of owner occupied commercial real estate loans.

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	(Dollars in thousands)
Average loan size	$	~~1,573~~1,604
Largest individual commercial real estate mortgage outstanding	$	~~63,435~~62,791
Commercial real estate nonperforming loans/commercial real estate loans	~~0.18~~0.20		%

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Management considers the Company’s commercial and industrial portfolio to be well-diversified with loans to various types of industries. The following pie chart shows the diversification of the commercial and industrial portfolio as of March 31, 2023:


	(Dollars in thousands)
~~Owner occupied~~Average loan size (excluding floor plan tranches)	$	419
Largest individual commercial ~~real estate~~and industrial loan outstanding	$	37,650
Commercial and industrial nonperforming loans/commercial ~~real estate~~and industrial loans	~~12.0~~1.60		%

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The Company's consumer portfolio primarily 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 of credit that may be made as a 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 real estate, home equity and other consumer portfolios totaled ~~$3.1~~$3.2 billion at ~~September 30, 2022,~~March 31, 2023, as noted below:


	(Dollars in thousands)
Average loan size	$	~~165~~100
Largest individual consumer loan outstanding	$	~~5,181~~5,132
Consumer nonperforming loans/consumer loans	~~0.41~~0.36		%

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. 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 offered 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 90 days or more past due with respect to principal or interest are classified as nonaccrual loans. However, certain loans that are 90 days or more past due may be kept on an accruing status if the loans are well secured and in the process of collection. 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~~

Loan Modifications 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 term extensions, 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 than insignificant payment delays and/or a combination thereof. These actions are 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. All loan restructurings are reviewed by the Company to identify if a borrower is deemed to be experiencing financial difficulty at time of the restructuring.

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 are delinquent for 90 days 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.

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 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


		September 30 2022			December 31 2021			September 30 2021				March 31 2023			December 31 2022			March 31 2022
		(Dollars in thousands)										(Dollars in thousands)
Loans accounted for on a nonaccrual basis	Loans accounted for on a nonaccrual basis										Loans accounted for on a nonaccrual basis
Commercial and industrial	Commercial and industrial	$	27,393		$	3,439		$	19,275		Commercial and industrial	$	26,343		$	26,693		$	3,517
Commercial real estate	Commercial real estate	15,982			10,870			11,788			Commercial real estate	18,038			15,730			40,470
Small business	Small business	50			44			46			Small business	242			104			20
Residential real estate	Residential real estate	8,891			9,182			10,872			Residential real estate	8,178			8,479			8,457
Home equity	Home equity	3,485			3,781			3,746			Home equity	3,282			3,400			3,761
Other consumer	Other consumer	216			504			83			Other consumer	129			475			393
Total (1)											Total (1)	$	56,212		$	54,881		$	56,618
Loans past due 90 days or more but still accruing											Loans past due 90 days or more but still accruing

Home equity											Home equity	23			—			—

Total											Total	$	23		$	—		$	—
Total nonperforming loans											Total nonperforming loans	$	56,235		$	54,881		$	56,618

Total nonperforming assets (1)	Total nonperforming assets (1)	$	56,017		$	27,820		$	45,810		Total nonperforming assets (1)	$	56,235		$	54,881		$	56,618
Nonperforming loans as a percent of gross loans	Nonperforming loans as a percent of gross loans	0.41		%	0.20		%	0.52		%	Nonperforming loans as a percent of gross loans	0.40		%	0.39		%	0.42		%
Nonperforming assets as a percent of total assets	Nonperforming assets as a percent of total assets	0.28		%	0.14		%	0.32		%	Nonperforming assets as a percent of total assets	0.29		%	0.28		%	0.28		%

(1)Inclusive of ~~TDRs~~troubled debt restructurings ("TDRs") on nonaccrual status of ~~$1.5 million at September 30, 2022, $2.0~~$11.5 million at December 31, ~~2021,~~2022, and ~~$21.1~~$2.0 million at ~~September 30, 2021.~~March 31, 2022, in accordance with previously applicable accounting guidance.

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

Table 5 - Activity in Nonperforming Assets


		2022				2021					2023
		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30 2022		September 30 2021		September 30 2022		September 30 2021			March 31 2023		March 31 2022
		(Dollars in thousands)									(Dollars in thousands)
Nonperforming assets beginning balance	Nonperforming assets beginning balance	$	55,915	$	47,818	$	27,820	$	66,861	Nonperforming assets beginning balance	$	54,881	$	27,820
New to nonperforming	New to nonperforming	30,650		4,613		67,226		9,205		New to nonperforming	5,416		33,754

Loans charged-off	Loans charged-off	(741)		(332)		(1,992)		(4,499)		Loans charged-off	(815)		(706)
Loans paid-off	Loans paid-off	(29,450)		(3,488)		(33,174)		(17,877)		Loans paid-off	(1,915)		(1,485)

Loans restored to performing status	Loans restored to performing status	(366)		(2,813)		(3,806)		(8,143)		Loans restored to performing status	(1,352)		(2,702)

Other	Other	9		12		(57)		263		Other	20		(63)
Nonperforming assets ending balance	Nonperforming assets ending balance	$	56,017	$	45,810	$	56,017	$	45,810	Nonperforming assets ending balance	$	56,235	$	56,618

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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~~

September 30
2022 December 31
2021 September 30
2021
(Dollars in thousands)
Performing troubled debt restructurings $ 11,549 $ 14,635 $ 15,950
Nonaccrual troubled debt restructurings 1,538 1,993 21,104
Total $ 13,087 $ 16,628 $ 37,054
Performing troubled debt restructurings as a % of total loans 0.09 % 0.11 % 0.18 %
Nonaccrual troubled debt restructurings as a % of total loans 0.01 % 0.01 % 0.24 %
Total troubled debt restructurings as a % of total loans 0.10 % 0.12 % 0.42 %

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

~~Table 7 - Activity in Troubled Debt Restructurings~~

Three Months Ended Nine Months Ended
September 30
2022 September 30
2021 September 30
2022 September 30
2021
(Dollars in thousands)
TDRs beginning balance $ 13,411 $ 39,707 $ 16,628 $ 39,192
New to TDR status 62 — 62 3,918
Paydowns (386) (2,637) (3,603) (6,040)
Charge-offs — (16) — (16)
TDRs ending balance $ 13,087 $ 37,054 $ 13,087 $ 37,054

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 for the periods indicated:

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

Three Months Ended Nine Months Ended
September 30
2022 September 30
2021 September 30
2022 September 30
2021
(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 $ 1,802 $ 678 $ 4,666 $ 2,289
The amount of interest income on nonaccrual loans and performing TDRs that was included in net income $ 1,817 $ 257 $ 2,443 $ 673

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 September 30, 2022, there were 51 relationships, with an aggregate balance of $173.5 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.

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As previously noted, the Company has offered need-based payment relief options to its customers in response to the COVID-19 pandemic, primarily in the form of payment deferrals, all of which were granted prior to December 31, 2020. 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 Company held $193.3 million of loans with active deferrals at September 30, 2022, of which $137.7 million is scheduled to mature during the fourth quarter of 2022.

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, 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

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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 six 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 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 balance of allowance for credit losses increased to $159.1 million as of ~~$147.3 million at September 30, 2022 remained relatively flat~~March 31, 2023 compared to ~~$146.9~~$152.4 million at December 31, ~~2021. The net change in the Company's allowance for credit losses for the nine months ended September 30,~~ 2022, due primarily reflects elevated balances of nonperforming loans at September 30, 2022 compared to December 31, 2021, offset by attrition of existing loans and continued strong asset quality metrics. Despite the increase in nonperforming loans, net charge-offs recorded for the three and nine months ended September 30, 2022 were minimal.

~~The aforementioned increase in nonperforming loans contributed~~ to an ~~overall higher quantitative allowance at September 30,~~additional reserve allocation associated with further credit deterioration of a large commercial and industrial credit that migrated to nonperforming status during 2022, ~~compared to December 31, 2021.~~ resulting in a full specific reserve allocation on the loan.

Management's forecast anticipates that the federal funds rates will continue to rise in the near term and that ~~supply chain issues will persist, inflation will remain elevated, and~~ the ~~military conflict between Russia and Ukraine will persist for~~recent U.S. bank failures are not symptomatic of a serious broader problem in the ~~foreseeable future, potentially impacting global oil supplies and the supply chain more generally.~~financial system. The forecast used by management also anticipates that a full-employment economy is expected to continue, that lawmakers will suspend or increase limits on the U.S. ~~economy will fall into a recession during~~debt ceiling prior to the ~~fourth quarter of 2022~~default date, and that prices for office properties and houses are expected to decline over the ~~recession will persist for the short term.~~course of 2023. Additionally, the allowance for credit losses is qualitatively adjusted on a quarterly basis in order to ensure coverage for relationships that are deemed to be more at risk within certain industries, specific collateral types, or other specific characteristics that may be highly impacted by the current economic environment.

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

Table 96 - Summary Net Charge-Offs to Average Loans Outstanding


		Net Charge-Offs (Recoveries)		Average Loans Outstanding		Ratio of Annualized Net Charge-Offs/(Recoveries) to Average Loans		Net Charge-Offs (Recoveries)		Average Loans Outstanding		Ratio of Annualized Net Charge-Offs/(Recoveries) to Average Loans			Net Charge-Offs/(Recoveries)		Average Loans Outstanding		Ratio of Annualized Net Charge-Offs/(Recoveries) to Average Loans
		(Dollars in thousands)													(Dollars in thousands)
		Three Months Ended September 30, 2022						Nine Months Ended September 30, 2022							Three Months Ended March 31, 2023
Commercial and industrial	Commercial and industrial	$	(2)	$	1,520,924	—	%	$	(44)	$	1,531,421	—	%	Commercial and industrial	$	276	$	1,618,330	0.07	%
Commercial real estate	Commercial real estate	(268)		7,760,470		(0.01)	%	(271)		7,832,534		—	%	Commercial real estate	—		7,773,007		—	%
Commercial construction	Commercial construction	—		1,157,876		—	%	—		1,180,509		—	%	Commercial construction	—		1,134,469		—	%
Small business	Small business	(88)		207,546		(0.17)	%	(88)		202,151		(0.06)	%	Small business	(3)		222,543		(0.01)	%
Residential real estate	Residential real estate	—		1,909,066		—	%	—		1,774,355		—	%	Residential real estate	—		2,056,524		—	%
Home equity	Home equity	(65)		1,076,040		(0.02)	%	17		1,051,921		—	%	Home equity	(16)		1,089,056		(0.01)	%
Other consumer	Other consumer	429		31,883		5.34	%	995		31,092		4.28	%	Other consumer	281		32,767		3.48	%
Total	Total	$	6	$	13,663,805	—	%	$	609	$	13,603,983	0.01	%	Total	$	538	$	13,926,696	0.02	%

		Net Charge-Offs (Recoveries)		Average Loans Outstanding		Ratio of Annualized Net Charge-Offs/(Recoveries) to Average Loans		Net Charge-Offs (Recoveries)		Average Loans Outstanding		Ratio of Annualized Net Charge-Offs/(Recoveries) to Average Loans			Net Charge-Offs/ (Recoveries)		Average Loans Outstanding		Ratio of Annualized Net Charge-Offs/(Recoveries) to Average Loans
		(Dollars in thousands)													(Dollars in thousands)
		Three Months Ended September 30, 2021						Nine Months Ended September 30, 2021							Three Months Ended March 31, 2022
Commercial and industrial	Commercial and industrial	$	—	$	1,640,422	—	%	$	3,374	$	1,898,100	0.24	%	Commercial and industrial	$	(13)	$	1,535,619	—	%
Commercial real estate	Commercial real estate	—		4,232,575		—	%	(57)		4,195,200		—	%	Commercial real estate	(3)		7,911,349		—	%
Commercial construction	Commercial construction	—		507,393		—	%	—		525,652		—	%	Commercial construction	—		1,190,659		—	%
Small business	Small business	33		181,953		0.07	%	119		178,294		0.09	%	Small business	22		194,819		0.05	%
Residential real estate	Residential real estate	—		1,231,606		—	%	(1)		1,242,991		—	%	Residential real estate	—		1,649,157		—	%
Home equity	Home equity	(49)		1,007,371		(0.02)	%	(38)		1,027,311		—	%	Home equity	(2)		1,032,308		—	%
Other consumer	Other consumer	127		25,929		1.94	%	249		23,382		1.42	%	Other consumer	400		29,814		5.44	%
Total	Total	$	111	$	8,827,249	—	%	$	3,646	$	9,090,930	0.05	%	Total	$	404	$	13,543,725	0.01	%

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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 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 possess unique risk characteristics that are considered when determining the appropriate level of allowance for each segment. 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 107 - Summary of Allocation of Allowance for Credit Losses


		September 30 2022				December 31 2021					March 31 2023				December 31 2022
		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		Allowance Amount		Percent of Loans In Category To Total Loans
		(Dollars in thousands)									(Dollars in thousands)
Commercial and industrial (1)	Commercial and industrial (1)	$	20,169	11.3	%	$	14,402	11.5	%	Commercial and industrial (1)	$	36,932	11.8	%	$	27,559	11.7	%
Commercial real estate	Commercial real estate	80,036		56.1	%	83,486		58.8	%	Commercial real estate	76,198		56.2	%	77,799		55.7	%
Commercial construction	Commercial construction	11,419		8.7	%	12,316		8.6	%	Commercial construction	9,248		7.5	%	10,762		8.3	%
Small business	Small business	2,624		1.5	%	3,508		1.4	%	Small business	3,338		1.6	%	2,834		1.6	%
Residential real estate	Residential real estate	20,602		14.3	%	14,484		11.8	%	Residential real estate	20,454		15.0	%	20,973		14.6	%
Home equity	Home equity	11,651		7.9	%	17,986		7.7	%	Home equity	12,428		7.8	%	11,504		7.8	%
Other consumer	Other consumer	812		0.2	%	740		0.2	%	Other consumer	533		0.1	%	988		0.3	%
Total allowance for credit losses	Total allowance for credit losses	$	147,313	100.0	%	$	146,922	100.0	%	Total allowance for credit losses	$	159,131	100.0	%	$	152,419	100.0	%

(1)Total loans in this category are inclusive of ~~$11.1~~$6.6 million and ~~$216.2~~$9.1 million in loans at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, which were originated as part of the ~~PPP~~Paycheck Protection Program ("PPP") established by the ~~CARES Act.~~Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"). These loans have been excluded from the credit loss calculations as these loans are 100% guaranteed by the 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, Allowance for Credit Losses and Credit Quality" within the Notes to Consolidated Financial Statements included in Part I. Item 1 of this Report.

Federal Home Loan Bank Stock 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 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. The ~~Bank held~~Company's investments in FHLB of Boston stock ofincreased to $40.3 million at March 31, 2023 compared to $5.2 million ~~and $11.4 million~~ at ~~September 30, 2022 and~~ December 31, ~~2021, respectively, reflecting redemption activity occurring~~2022, driven by an increase in FHLB borrowings during ~~2022.~~the quarter of $879.0 million.

Goodwill and Other Intangible Assets Goodwill and other intangible assets were $1.0 billion at both ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

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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. ~~Accordingly,~~In light of the turmoil experienced in the U.S. banking industry during the first quarter of 2023, and the related industry wide impact on bank stock valuations, the Company performed ~~its annual~~an interim goodwill impairment testing during the ~~third~~ quarter ~~of 2022~~ and determined that the Company's goodwill was not impaired as of ~~September 30, 2022.~~March 31, 2023. Other intangible assets are also reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. There were no other events or changes during the ~~third~~first quarter of ~~2022~~2023 that indicated impairment of goodwill and other intangible assets.

Cash Surrender Value of Life Insurance Policies The Bank holds life insurance policies for the purpose of offsetting its future obligations to its employees under its retirement and benefits plans. The cash surrender value of life insurance policies was ~~$293.1~~$295.3 million at ~~September 30, 2022~~March 31, 2023 compared to ~~$289.3~~$293.3 million at December 31, ~~2021,~~2022, representing an increase of ~~$3.8~~$1.9 million, or ~~1.3%~~0.7%, primarily due to income earned on the policies.

The Company recorded tax exempt income from life insurance policies of $1.9 million and ~~$1.6~~$1.8 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, and 2021, respectively, and $5.5 million and $4.5 million for the nine months ended September 30, 2022 and 2021, respectively. The Company recorded gains on life insurance benefits of $477,000 for three months ended September 30, 2022 and no such gains for the three months ended September 30, 2021, respectively, and $600,000 and $258,000 for the nine months ended September 30, 2022 and September 30, 2021, respectively.

Deposits As of ~~September 30, 2022,~~March 31, 2023, total deposits were ~~$16.3~~$15.3 billion, representing a ~~$578.1~~$606.8 million, or ~~3.4%~~3.8%, decrease from December 31, ~~2021,~~2022, primarily ~~attributable~~reflective of industry wide dislocations in the first quarter along with seasonality, a competitive rate environment, and redeployment of customer excess liquidity due to ~~continued runoff in higher-cost time deposits~~inflationary and ~~certain rate sensitive deposits.~~other factors. The total cost of deposits ~~was 0.15% and 0.05%~~increased 54 basis points to 0.59% for the three months ended ~~September 30, 2022 and 2021, respectively, and 0.08% and 0.07%~~March 31, 2023 as compared to 0.05% for the ~~nine months ended September 30, 2022~~same prior year period. The increase in the cost of deposits was driven by the higher rate environment driven by the Federal Reserve's rate hikes over the past year.

The Company's deposits are comprised primarily of core deposits (demand, savings, and ~~2021, respectively.~~money market), as well as time deposits. Core deposits ~~increased to 87.8%~~represented 85.6% and 87.9% of total deposits as of ~~September 30, 2022 from 84.5% at~~March 31, 2023 and December 31, ~~2021.~~2022, respectively, with the first quarter 2023 decrease driven primarily by core deposit outflows in conjunction with growth in higher yielding time deposits. In addition, the Company may also utilize brokered deposit sources, as needed, with balances of $95.4 million and $102.6 million outstanding at March 31, 2023 and December 31, 2022, respectively.

The Company's deposits accounts are insured to the maximum extent permitted by law the Deposit Insurance Fund which is administered by the Federal Deposit Insurance Corporation ("FDIC"). The FDIC offers insurance coverage on deposits up to the federally insured limit of $250,000. The Company ~~also~~ participates in the IntraFi Network, allowing ~~the Bank~~it to provide easy access to multi-million dollar ~~Federal Deposit Insurance Corporation ("FDIC")~~FDIC deposit insurance protection on certificate of deposit and money market investments for consumers, businesses and public entities. This channel, which is not included in the Company's core deposits, allows the Company to seek additional funding in potentially large quantities by attracting deposits from outside the Bank’s core market, and amounted to ~~$751.1~~$698.3 million and ~~$998.1~~$653.6 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. ~~In addition,~~The estimated balance of uninsured deposits at the ~~Company may occasionally raise funds through the use~~Bank are $4.7 billion and $5.3 billion as of ~~brokered deposits outside of the IntraFi Network, which amounted to $102.6 million and $141.6 million at September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. Included in these amounts are $659.0 million and $605.0 million of collateralized deposits, which offer additional protection.

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 were ~~$113.4~~$992.4 million at ~~September 30, 2022, a decrease~~March 31, 2023, representing an increase of ~~$39.0~~$879.0 million ~~or 25.6%,~~ as compared to December 31, ~~2021, due~~2022, driven primarily ~~to the re-payment of a revolving loan credit facility~~by deposit balance reductions and share repurchase activity during the ~~first~~ quarter, as well as preemptive measures to bolster on-balance sheet liquidity. The additional borrowings were comprised primarily of ~~2022 and the maturity of a~~ short term ~~Federal Home Loan Bank borrowing during~~borrowings from the ~~third quarter~~FHLB. In conjunction with these borrowings, the Company entered into $300.0 million of ~~2022.~~hedges resulting in a weighted average cost of 3.7% over an average term of 3.5 years.

Additionally, the Bank had ~~$4.3~~$7.3 billion and ~~$4.2~~$4.4 billion of assets pledged as collateral against borrowings at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. These assets are primarily pledged to the FHLB of Boston and the Federal Reserve Bank of ~~Boston.~~Boston and pledged amounts were proactively increased by management during the first quarter of 2023 as part of the Company's strategy to bolster off-balance sheet liquidity in response to recent industry events.

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Capital Resources On ~~September 15, 2022~~March 16, 2023 the Company’s Board of Directors declared a cash dividend of ~~$0.51~~$0.55 per share to shareholders of record as of the close of business on ~~September 26, 2022.~~March 27, 2023. This dividend was paid on ~~October 7, 2022.~~April 6, 2023.

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company and the Bank exceeded the minimum requirements for all applicable ratios that were in effect during the respective periods. The Company’s and the Bank’s capital amounts and ratios are presented in the following table, along with the applicable minimum requirements as of each date indicated:

Table 118 - Company and Bank's Capital Amounts and Ratios


		Actual				For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions						Actual				For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
		Amount		Ratio		Amount			Ratio		Amount			Ratio			Amount		Ratio		Amount			Ratio		Amount			Ratio
		September 30, 2022															March 31, 2023
		(Dollars in thousands)															(Dollars in thousands)
Company (consolidated)	Company (consolidated)															Company (consolidated)
Total capital (to risk weighted assets)	Total capital (to risk weighted assets)	$	2,250,741	15.71	%	$	1,146,074	≥	8.0	%	N/A			N/A		Total capital (to risk weighted assets)	$	2,237,464	15.66	%	$	1,142,667	≥	8.0	%	N/A			N/A
Common equity tier 1 capital (to risk weighted assets)	Common equity tier 1 capital (to risk weighted assets)	2,002,105		13.98	%	644,666		≥	4.5	%	N/A			N/A		Common equity tier 1 capital (to risk weighted assets)	1,975,606		13.83	%	642,750		≥	4.5	%	N/A			N/A
Tier 1 capital (to risk weighted assets)	Tier 1 capital (to risk weighted assets)	2,002,105		13.98	%	859,555		≥	6.0	%	N/A			N/A		Tier 1 capital (to risk weighted assets)	1,975,606		13.83	%	857,000		≥	6.0	%	N/A			N/A
Tier 1 capital (to average assets)	Tier 1 capital (to average assets)	2,002,105		10.51	%	761,820		≥	4.0	%	N/A			N/A		Tier 1 capital (to average assets)	1,975,606		10.78	%	733,161		≥	4.0	%	N/A			N/A
Bank	Bank															Bank
Total capital (to risk weighted assets)	Total capital (to risk weighted assets)	$	2,142,284	14.95	%	$	1,146,046	≥	8.0	%	$	1,432,558	≥	10.0	%	Total capital (to risk weighted assets)	$	2,169,306	15.19	%	$	1,142,720	≥	8.0	%	$	1,428,400	≥	10.0	%
Common equity tier 1 capital (to risk weighted assets)	Common equity tier 1 capital (to risk weighted assets)	2,004,510		13.99	%	644,651		≥	4.5	%	931,163		≥	6.5	%	Common equity tier 1 capital (to risk weighted assets)	2,018,357		14.13	%	642,780		≥	4.5	%	928,460		≥	6.5	%
Tier 1 capital (to risk weighted assets)	Tier 1 capital (to risk weighted assets)	2,004,510		13.99	%	859,535		≥	6.0	%	1,146,046		≥	8.0	%	Tier 1 capital (to risk weighted assets)	2,018,357		14.13	%	857,040		≥	6.0	%	1,142,720		≥	8.0	%
Tier 1 capital (to average assets)	Tier 1 capital (to average assets)	2,004,510		10.52	%	801,528		≥	4.0	%	1,001,911		≥	5.0	%	Tier 1 capital (to average assets)	2,018,357		11.01	%	733,201		≥	4.0	%	916,501		≥	5.0	%
		December 31, 2021															December 31, 2022
		(Dollars in thousands)															(Dollars in thousands)
Company (consolidated)	Company (consolidated)															Company (consolidated)
Total capital (to risk weighted assets)	Total capital (to risk weighted assets)	$	2,262,740	16.04	%	$	1,128,900	≥	8.0	%	N/A			N/A		Total capital (to risk weighted assets)	$	2,311,824	16.11	%	$	1,148,328	≥	8.0	%	N/A			N/A
Common equity tier 1 capital (to risk weighted assets)	Common equity tier 1 capital (to risk weighted assets)	2,017,497		14.30	%	635,006		≥	4.5	%	N/A			N/A		Common equity tier 1 capital (to risk weighted assets)	2,057,099		14.33	%	645,935		≥	4.5	%	N/A			N/A
Tier 1 capital (to risk weighted assets)	Tier 1 capital (to risk weighted assets)	2,017,497		14.30	%	846,675		≥	6.0	%	N/A			N/A		Tier 1 capital (to risk weighted assets)	2,057,099		14.33	%	861,246		≥	6.0	%	N/A			N/A
Tier 1 capital (to average assets)	Tier 1 capital (to average assets)	2,017,497		12.03	%	670,659		≥	4.0	%	N/A			N/A		Tier 1 capital (to average assets)	2,057,099		10.99	%	748,775		≥	4.0	%	N/A			N/A
Bank	Bank															Bank
Total capital (to risk weighted assets)	Total capital (to risk weighted assets)	$	2,083,689	14.77	%	$	1,128,536	≥	8.0	%	$	1,410,670	≥	10.0	%	Total capital (to risk weighted assets)	$	2,162,752	15.07	%	$	1,148,329	≥	8.0	%	$	1,435,411	≥	10.0	%
Common equity tier 1 capital (to risk weighted assets)	Common equity tier 1 capital (to risk weighted assets)	1,949,237		13.82	%	634,801		≥	4.5	%	916,935		≥	6.5	%	Common equity tier 1 capital (to risk weighted assets)	2,018,912		14.07	%	645,935		≥	4.5	%	933,017		≥	6.5	%
Tier 1 capital (to risk weighted assets)	Tier 1 capital (to risk weighted assets)	1,949,237		13.82	%	846,402		≥	6.0	%	1,128,536		≥	8.0	%	Tier 1 capital (to risk weighted assets)	2,018,912		14.07	%	861,247		≥	6.0	%	1,148,329		≥	8.0	%
Tier 1 capital (to average assets)	Tier 1 capital (to average assets)	1,949,237		11.62	%	670,827		≥	4.0	%	838,534		≥	5.0	%	Tier 1 capital (to average assets)	2,018,912		10.78	%	748,828		≥	4.0	%	936,036		≥	5.0	%

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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 ~~September 30, 2022,~~March 31, 2023, the Company's capital levels exceeded the buffer.

Dividend Restrictions The Company is subject to capital and dividend requirements administered by federal and state bank regulators, and the Company will not declare a cash dividend that would cause the Company to violate regulatory requirements. The Company is, in the ordinary course of business, dependent upon the receipt of cash dividends from the Bank to pay cash dividends to shareholders and satisfy the Company’s other cash needs. Federal and state law impose limits on capital distributions by the Bank. Massachusetts-chartered banks, such as the Bank, may declare from net profits cash dividends not more frequently than quarterly and non-cash dividends at any time. No dividends may be declared, credited, or paid if the Bank’s capital stock would be impaired. Massachusetts Bank Commissioner approval is required if the total of all dividends declared by the Bank in any calendar year would exceed the total of its net profits for that year combined with its retained net profits of the preceding two years, less any required transfer to surplus or a fund for the retirement of any preferred stock. Dividends paid by the Bank to the Company totaled ~~$64.5~~$66.4 million and ~~$33.9~~$25.0 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively and totaled $142.7 million and $38.9 million for the nine months ended September 30, 2022 and 2021,~~ respectively.

Trust Preferred Securities In accordance with the applicable accounting standard related to variable interest entities, the common stock of trusts which have issued trust preferred securities has not been included in the consolidated financial statements of the Company. At each of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 there were $61.0 million in trust preferred securities included in the Tier 2 capital of the Company for regulatory reporting purposes pursuant to the Federal Reserve's capital adequacy guidelines.

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

Table 129 - Assets Under Administration


		September 30 2022		December 31 2021		September 30 2021			March 31 2023		December 31 2022		March 31 2022
		(Dollars in thousands)							(Dollars in thousands)
Assets under administration	Assets under administration	$	5,091,592	$	5,726,368	$	5,434,971	Assets under administration	$	6,145,134	$	5,792,857	$	5,724,542
Number of trust, fiduciary and agency accounts	Number of trust, fiduciary and agency accounts	6,487		6,379		6,368		Number of trust, fiduciary and agency accounts	6,527		6,459		6,667

~~Despite strong new asset inflows,~~The Company's Investment Management Group provides investment management and trust services to individuals, institutions, small businesses, and charitable institutions.

Accounts maintained by the Investment Management Group consist of managed and nonmanaged accounts. Managed accounts are those for which the Bank is responsible for administration and investment management and/or investment advice, while nonmanaged accounts are those for which the Bank acts solely as a custodian or directed trustee. The Bank receives fees dependent upon the level and type of service(s) provided. The Investment Management Group generated gross fee revenues of $8.2 million and $7.9 million for the three months ended March 31, 2023 and 2022, respectively. Total assets under administration at ~~September 30, 2022 decreased~~March 31, 2023 were $6.1 billion, including $627.9 million of investment solutions designed by Rockland Trust that are administered and executed through its agreement with LPL Financial ("LPL"), compared to $5.8 billion and $603.7 million, respectively, at December 31, ~~2021, driven primarily by depressed market valuations experienced during the first nine months of~~ 2022. ~~Included in these amounts as of September 30, 2022 and December 31, 2021 are assets under administration of $361.0 million and $447.4 million, respectively, relating to the Company’s~~The Company also has a subsidiary that is a registered investment advisor, Bright Rock Capital Management, LLC ("Bright Rock"), which provides institutional quality investment management services to both institutional and high net worth clients. ~~Revenue from the Investment Management Group was $7.8~~Included in these same amounts as of March 31, 2023 and December 31, 2022 are assets under administration of $411.6 million and ~~$8.1~~$390.1 million, ~~for the three months ended September 30, 2022 and 2021,~~ respectively, ~~and $23.6 million for the nine months ended September 30, 2022 and 2021.~~related to Bright Rock.

The administration of trust and fiduciary accounts is monitored by the Trust Committee of the Bank’s Board of Directors. The Trust Committee has delegated administrative responsibilities to three committees, one for investments, one for administration, and one for operations, all of which are comprised of Investment Management Group officers who meet no less than quarterly.

The Bank has an agreement with LPL ~~Financial ("LPL")~~ and its affiliates and their insurance subsidiary, LPL Insurance Associates, Inc., to offer the sale of mutual fund shares, unit investment trust shares, general securities, fixed and variable annuities and life insurance. Registered representatives who are both employed by the Bank and licensed and contracted with LPL are onsite to

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offer these products to the Bank’s customer base. These same agents are also approved and appointed with various other Broker General Agents for the purposes of processing insurance solutions for clients. Retail investments and insurance revenue was ~~$601,000~~$1.6 million and ~~$1.0 million~~$769,000 for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $2.9 million and $2.8 million for the nine months ended September 30, 2022 and 2021,~~ respectively.

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RESULTS OF OPERATIONS

The following table provides a summary of results of operations for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

Table 1310 - Summary of Results of Operations


		Three Months Ended September 30						Nine Months Ended September 30							Three Months Ended March 31
		2022			2021			2022			2021					2023			2022
		(Dollars in thousands, except per share data)														(Dollars in thousands, except per share data)
Net income	Net income	$	71,897		$	40,007		$	186,770		$	119,290		Net income		$	61,247		$	53,097
Diluted earnings per share	Diluted earnings per share	$	1.57		$	1.21		$	4.00		$	3.61		Diluted earnings per share		$	1.36		$	1.12
Return on average assets	Return on average assets	1.43		%	1.11		%	1.25		%	1.15		%	Return on average assets		1.30		%	1.06		%
Return on average equity	Return on average equity	9.90		%	9.04		%	8.51		%	9.20		%	Return on average equity		8.63		%	7.16		%
Net interest margin	Net interest margin	3.64		%	2.78		%	3.33		%	3.00		%	Net interest margin		3.79		%	3.09		%

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 ~~third~~first quarter of ~~2022~~2023 was ~~$163.6~~$160.1 million, representing an increase of ~~$73.3~~$21.7 million, or ~~81.2%~~15.7%, when compared to the ~~third~~first quarter of 2021. For the nine months ended September 30, 2022, the net interest income on a FTE basis was $447.9 million, representing an increase of $168.2 million, or 60.1%, when compared to the year ago period.2022. The year-over-year ~~increases~~increase in net interest income ~~are~~was primarily attributable to ~~the Meridian acquisition which closed during the fourth quarter of 2021, as well as~~ the positive impact of asset repricing in the rising rate environment, ~~and relatively stable funding costs experienced through September 30, 2022,~~ partially offset by ~~reduced PPP fee income.~~higher funding costs from elevated deposit pricing in comparison to the same prior year quarter, as well as increased borrowings assumed by the Company during the quarter ended March 31, 2023.

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The following tables present the Company’s average balances, net interest income, interest rate spread, and net interest margin for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. Nontaxable income from loans and securities is presented on a FTE basis by adjusting tax-exempt income upward by an amount equivalent to the prevailing income tax rate that would have been paid if the income had been fully taxable.

Table 1411 - Average Balance, Interest Earned/Paid & Average Yields Quarter-to-Date


		Three Months Ended September 30													Three Months Ended March 31
		2022						2021							2023						2022
		Average Balance		Interest Earned/ Paid		Yield/Rate		Average Balance		Interest Earned/ Paid		Yield/Rate			Average Balance		Interest Earned/ Paid		Yield/Rate		Average Balance		Interest Earned/ Paid		Yield/Rate
		(Dollars in thousands)													(Dollars in thousands)
Interest-earning assets	Interest-earning assets													Interest-earning assets
Interest-earning deposits with banks, federal funds sold, and short term investments	Interest-earning deposits with banks, federal funds sold, and short term investments	$	1,156,143	$	6,519	2.24	%	$	2,135,031	$	815	0.15	%	Interest-earning deposits with banks, federal funds sold, and short term investments	$	73,608	$	665	3.66	%	$	1,906,164	$	886	0.19	%
Securities	Securities													Securities
Securities - trading	Securities - trading	3,730		—		—	%	3,498		—		—	%	Securities - trading	4,095		—		—	%	3,732		—		—	%
Securities - taxable investments	Securities - taxable investments	3,024,802		13,243		1.74	%	1,880,863		7,792		1.64	%	Securities - taxable investments	3,117,024		15,309		1.99	%	2,726,281		10,043		1.49	%
Securities - nontaxable investments (1)	Securities - nontaxable investments (1)	196		1		2.02	%	468		5		4.24	%	Securities - nontaxable investments (1)	193		2		4.20	%	201		1		2.02	%
Total securities	Total securities	$	3,028,728	$	13,244	1.73	%	$	1,884,829	$	7,797	1.64	%	Total securities	$	3,121,312	$	15,311	1.99	%	$	2,730,214	$	10,044	1.49	%
Loans held for sale	Loans held for sale	4,263		51		4.75	%	30,143		193		2.54	%	Loans held for sale	2,474		34		5.57	%	9,475		64		2.74	%
Loans (2)	Loans (2)													Loans (2)
Commercial and industrial (1)	Commercial and industrial (1)	1,520,924		19,289		5.03	%	1,640,422		15,309		3.70	%	Commercial and industrial (1)	1,618,330		26,572		6.66	%	1,535,619		17,031		4.50	%
Commercial real estate (1)	Commercial real estate (1)	7,760,470		85,284		4.36	%	4,232,575		41,469		3.89	%	Commercial real estate (1)	7,773,007		89,581		4.67	%	7,911,349		76,030		3.90	%
Commercial construction	Commercial construction	1,157,876		14,875		5.10	%	507,393		4,916		3.84	%	Commercial construction	1,134,469		16,467		5.89	%	1,190,659		12,268		4.18	%
Small business	Small business	207,546		2,819		5.39	%	181,953		2,341		5.10	%	Small business	222,543		3,219		5.87	%	194,819		2,416		5.03	%
Total commercial	Total commercial	10,646,816		122,267		4.56	%	6,562,343		64,035		3.87	%	Total commercial	10,748,349		135,839		5.13	%	10,832,446		107,745		4.03	%
Residential real estate	Residential real estate	1,909,066		16,533		3.44	%	1,231,606		10,955		3.53	%	Residential real estate	2,056,524		19,358		3.82	%	1,649,157		13,697		3.37	%
Home equity	Home equity	1,076,040		11,869		4.38	%	1,007,371		9,043		3.56	%	Home equity	1,089,056		16,244		6.05	%	1,032,308		8,662		3.40	%
Total consumer real estate	Total consumer real estate	2,985,106		28,402		3.77	%	2,238,977		19,998		3.54	%	Total consumer real estate	3,145,580		35,602		4.59	%	2,681,465		22,359		3.38	%
Other consumer	Other consumer	31,883		523		6.51	%	25,929		398		6.09	%	Other consumer	32,767		577		7.14	%	29,814		489		6.65	%
Total loans	Total loans	$	13,663,805	$	151,192	4.39	%	$	8,827,249	$	84,431	3.79	%	Total loans	$	13,926,696	$	172,018	5.01	%	$	13,543,725	$	130,593	3.91	%
Total interest-earning assets	Total interest-earning assets	$	17,852,939	$	171,006	3.80	%	$	12,877,252	$	93,236	2.87	%	Total interest-earning assets	$	17,124,090	$	188,028	4.45	%	$	18,189,578	$	141,587	3.16	%
Cash and due from banks	Cash and due from banks	192,003						144,556						Cash and due from banks	181,402						171,533
Federal Home Loan Bank stock	Federal Home Loan Bank stock	5,745						8,904						Federal Home Loan Bank stock	14,714						11,407
Other assets	Other assets	1,854,870						1,268,199						Other assets	1,844,556						1,851,196
Total assets	Total assets	$	19,905,557					$	14,298,911					Total assets	$	19,164,762					$	20,223,714
Interest-bearing liabilities	Interest-bearing liabilities													Interest-bearing liabilities
Deposits	Deposits													Deposits
Savings and interest checking accounts	Savings and interest checking accounts	$	6,224,690	$	2,110	0.13	%	$	4,426,106	$	338	0.03	%	Savings and interest checking accounts	$	5,745,357	$	7,473	0.53	%	$	6,255,843	$	598	0.04	%
Money market	Money market	3,459,212		3,025		0.35	%	2,375,492		443		0.07	%	Money market	3,243,322		10,393		1.30	%	3,608,793		559		0.06	%
Time deposits	Time deposits	1,246,841		974		0.31	%	795,943		852		0.42	%	Time deposits	1,293,987		4,809		1.51	%	1,466,651		950		0.26	%
Total interest-bearing deposits	Total interest-bearing deposits	$	10,930,743	$	6,109	0.22	%	$	7,597,541	$	1,633	0.09	%	Total interest-bearing deposits	$	10,282,666	$	22,675	0.89	%	$	11,331,287	$	2,107	0.08	%
Borrowings	Borrowings													Borrowings
Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	$	12,876	$	55	1.69	%	$	31,118	$	165	2.10	%	Federal Home Loan Bank borrowings	$	298,413	$	3,644	4.95	%	$	25,696	$	133	2.10	%

Long-term borrowings	Long-term borrowings	—		—		—	%	18,742		77		1.63	%	Long-term borrowings	—		—		—	%	9,063		31		1.39	%
Junior subordinated debentures	Junior subordinated debentures	62,854		589		3.72	%	62,852		432		2.73	%	Junior subordinated debentures	62,856		1,001		6.46	%	62,853		299		1.93	%
Subordinated debentures	Subordinated debentures	49,847		617		4.91	%	49,753		617		4.92	%	Subordinated debentures	49,897		617		5.01	%	49,800		617		5.02	%

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Total borrowings	Total borrowings	$	125,577	$	1,261	3.98	%	$	162,465	$	1,291	3.15	%	Total borrowings	$	411,166	$	5,262	5.19	%	$	147,412	$	1,080	2.97	%
Total interest-bearing liabilities	Total interest-bearing liabilities	$	11,056,320	$	7,370	0.26	%	$	7,760,006	$	2,924	0.15	%	Total interest-bearing liabilities	$	10,693,832	$	27,937	1.06	%	$	11,478,699	$	3,187	0.11	%
Noninterest bearing demand deposits	Noninterest bearing demand deposits	5,641,742						4,502,045						Noninterest bearing demand deposits	5,219,531						5,443,465
Other liabilities	Other liabilities	325,507						280,754						Other liabilities	374,195						293,597
Total liabilities	Total liabilities	$	17,023,569					$	12,542,805					Total liabilities	$	16,287,558					$	17,215,761
Stockholders' equity	Stockholders' equity	2,881,988						1,756,106						Stockholders' equity	2,877,204						3,007,953
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	19,905,557					$	14,298,911					Total liabilities and stockholders' equity	$	19,164,762					$	20,223,714
Net interest income (1)	Net interest income (1)			$	163,636					$	90,312			Net interest income (1)			$	160,091					$	138,400
Interest rate spread (3)	Interest rate spread (3)					3.54	%					2.72	%	Interest rate spread (3)					3.39	%					3.05	%
Net interest margin (4)	Net interest margin (4)					3.64	%					2.78	%	Net interest margin (4)					3.79	%					3.09	%
Supplemental information	Supplemental information													Supplemental information
Total deposits, including demand deposits	Total deposits, including demand deposits	$	16,572,485	$	6,109			$	12,099,586	$	1,633			Total deposits, including demand deposits	$	15,502,197	$	22,675			$	16,774,752	$	2,107
Cost of total deposits	Cost of total deposits					0.15	%					0.05	%	Cost of total deposits					0.59	%					0.05	%
Total funding liabilities, including demand deposits	Total funding liabilities, including demand deposits	$	16,698,062	$	7,370			$	12,262,051	$	2,924			Total funding liabilities, including demand deposits	$	15,913,363	$	27,937			$	16,922,164	$	3,187
Cost of total funding liabilities	Cost of total funding liabilities					0.18	%					0.09	%	Cost of total funding liabilities					0.71	%					0.08	%

(1)The total amount of adjustment to interest income and yield on a FTE basis was ~~$1.0~~$1.1 million and ~~$220,000~~$968,000 for the three months ended ~~September 30,~~March 31, 2023 and 2022, and 2021, respectively. The FTE adjustment relates to tax exempt income relating to securities with average balances of $196,000 and $468,000 and tax exempt income relating to loans with average balances of $414.4 million and $61.2 million, for the three months ended September 30, 2022 and 2021, 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.

~~Table of Contents~~

~~Table 15 - Average Balance, Interest Earned/Paid & Average Yields Year-to-Date~~

Nine Months Ended September 30
2022 2021
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 $ 1,477,117 $ 10,222 0.93 % $ 1,782,463 $ 1,654 0.12 %
Securities
Securities - trading 3,775 — — % 3,267 — — %
Securities - taxable investments 2,881,203 34,567 1.60 % 1,550,859 21,603 1.86 %
Securities - nontaxable investments (1) 198 5 3.38 % 555 17 4.10 %
Total securities $ 2,885,176 $ 34,572 1.60 % $ 1,554,681 $ 21,620 1.86 %
Loans held for sale 5,841 150 3.43 % 35,953 675 2.51 %
Loans (2)
Commercial and industrial (1) 1,531,421 53,816 4.70 % 1,898,100 58,706 4.14 %
Commercial real estate (1) 7,832,534 238,085 4.06 % 4,195,200 123,377 3.93 %
Commercial construction 1,180,509 40,599 4.60 % 525,652 14,976 3.81 %
Small business 202,151 7,891 5.22 % 178,294 6,924 5.19 %
Total commercial 10,746,615 340,391 4.23 % 6,797,246 203,983 4.01 %
Residential real estate 1,774,355 45,109 3.40 % 1,242,991 34,449 3.71 %
Home equity 1,051,921 29,709 3.78 % 1,027,311 26,391 3.43 %
Total consumer real estate 2,826,276 74,818 3.54 % 2,270,302 60,840 3.58 %
Other consumer 31,092 1,519 6.53 % 23,382 1,241 7.10 %
Total loans $ 13,603,983 $ 416,728 4.10 % $ 9,090,930 $ 266,064 3.91 %
Total interest-earning assets $ 17,972,117 $ 461,672 3.43 % $ 12,464,027 $ 290,013 3.11 %
Cash and due from banks 184,754 147,269
Federal Home Loan Bank stock 7,780 9,516
Other assets 1,853,818 1,256,066
Total assets $ 20,018,469 $ 13,876,878
Interest-bearing liabilities
Deposits
Savings and interest checking accounts $ 6,224,317 $ 3,418 0.07 % $ 4,292,992 $ 1,145 0.04 %
Money market 3,517,459 4,191 0.16 % 2,337,445 1,393 0.08 %
Time deposits 1,355,861 2,718 0.27 % 848,143 3,823 0.60 %
Total interest-bearing deposits $ 11,097,637 $ 10,327 0.12 % $ 7,478,580 $ 6,361 0.11 %
Borrowings
Federal Home Loan Bank borrowings $ 21,361 $ 311 1.95 % $ 34,185 $ 544 2.13 %
Long-term borrowings 2,988 31 1.39 % 23,434 282 1.61 %
Junior subordinated debentures 62,854 1,298 2.76 % 62,852 1,287 2.74 %
Subordinated debentures 49,824 1,852 4.97 % 49,729 1,852 4.98 %
Total borrowings $ 137,027 $ 3,492 3.41 % $ 170,200 $ 3,965 3.11 %
Total interest-bearing liabilities $ 11,234,664 $ 13,819 0.16 % $ 7,648,780 $ 10,326 0.18 %
Noninterest bearing demand deposits 5,544,476 4,213,764
Other liabilities 303,308 280,002

~~Table of Contents~~

Total liabilities $ 17,082,448 $ 12,142,546
Stockholders' equity 2,936,021 1,734,332
Total liabilities and stockholders' equity $ 20,018,469 $ 13,876,878
Net interest income (1) $ 447,853 $ 279,687
Interest rate spread (3) 3.27 % 2.93 %
Net interest margin (4) 3.33 % 3.00 %
Supplemental information
Total deposit, including demand deposits $ 16,642,113 $ 10,327 $ 11,692,344 $ 6,361
Cost of total deposits 0.08 % 0.07 %
Total funding liabilities, including demand deposits $ 16,779,140 $ 13,819 $ 11,862,544 $ 10,326
Cost of total funding liabilities 0.11 % 0.12 %

~~(1)~~The total amount of adjustment to present interest income and yield on a FTE basis was $3.0 million and $658,000 for the nine months ended September 30, 2022 and 2021, respectively. The FTE adjustment relates to nontaxable investment securities with average balances of $198,000 and $555,000 and tax exempt income relating to loans with average balances of $411.9 million and $63.9 million for the nine months ended September 30, 2022 and 2021, 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.~~

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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 1612 - Volume Rate Analysis


		Three Months Ended September 30						Nine Months Ended September 30							Three Months Ended March 31
		2022 Compared To 2021						2022 Compared To 2021							2023 Compared To 2022
		Change Due to Rate		Change Due to Volume		Total Change		Change Due to Rate		Change Due to Volume		Total Change			Change Due to Rate		Change Due to Volume		Total Change
		(Dollars in thousands)													(Dollars in thousands)
Income on interest-earning assets	Income on interest-earning assets													Income on interest-earning assets
Interest earning deposits, federal funds sold and short term investments	Interest earning deposits, federal funds sold and short term investments	$	6,078	$	(374)	$	5,704	$	8,851	$	(283)	$	8,568	Interest earning deposits, federal funds sold and short term investments	$	631	$	(852)	$	(221)
Securities	Securities													Securities

Securities - taxable investments	Securities - taxable investments	712		4,739		5,451		(5,567)		18,531		12,964		Securities - taxable investments	3,827		1,439		5,266
Securities - nontaxable investments (1)	Securities - nontaxable investments (1)	(1)		(3)		(4)		(1)		(11)		(12)		Securities - nontaxable investments (1)	1		—		1
Total securities	Total securities					5,447						12,952		Total securities					5,267
Loans held for sale	Loans held for sale	24		(166)		(142)		40		(565)		(525)		Loans held for sale	17		(47)		(30)
Loans	Loans													Loans
Commercial and industrial (1)	Commercial and industrial (1)	5,095		(1,115)		3,980		6,451		(11,341)		(4,890)		Commercial and industrial (1)	8,624		917		9,541
Commercial real estate (1)	Commercial real estate (1)	9,250		34,565		43,815		7,737		106,971		114,708		Commercial real estate (1)	14,881		(1,330)		13,551
Commercial construction	Commercial construction	3,657		6,302		9,959		6,966		18,657		25,623		Commercial construction	4,778		(579)		4,199
Small business	Small business	149		329		478		41		926		967		Small business	459		344		803
Total commercial	Total commercial					58,232						136,408		Total commercial					28,094
Residential real estate	Residential real estate	(448)		6,026		5,578		(4,067)		14,727		10,660		Residential real estate	2,278		3,383		5,661
Home equity	Home equity	2,210		616		2,826		2,686		632		3,318		Home equity	7,106		476		7,582
Total consumer real estate	Total consumer real estate					8,404						13,978		Total consumer real estate					13,243
Other consumer	Other consumer	34		91		125		(131)		409		278		Other consumer	40		48		88
Total loans (1)(2)	Total loans (1)(2)					66,761						150,664		Total loans (1)(2)					41,425
Total income of interest-earning assets	Total income of interest-earning assets					$	77,770					$	171,659	Total income of interest-earning assets					$	46,441
Expense of interest-bearing liabilities	Expense of interest-bearing liabilities													Expense of interest-bearing liabilities
Deposits	Deposits													Deposits
Savings and interest checking accounts	Savings and interest checking accounts	$	1,635	$	137	$	1,772	$	1,758	$	515	$	2,273	Savings and interest checking accounts	$	6,924	$	(49)	$	6,875
Money market	Money market	2,380		202		2,582		2,095		703		2,798		Money market	9,891		(57)		9,834
Time certificates of deposits	Time certificates of deposits	(361)		483		122		(3,394)		2,289		(1,105)		Time certificates of deposits	3,971		(112)		3,859
Total interest bearing deposits	Total interest bearing deposits					4,476						3,966		Total interest bearing deposits					20,568
Borrowings	Borrowings													Borrowings
Federal Home Loan Bank borrowings	Federal Home Loan Bank borrowings	(13)		(97)		(110)		(29)		(204)		(233)		Federal Home Loan Bank borrowings	2,099		1,412		3,511

Line of Credit	Line of Credit	—		—		—						—		Line of Credit	—		—		—
Long-term borrowings	Long-term borrowings	—		(77)		(77)		(5)		(246)		(251)		Long-term borrowings	—		(31)		(31)
Junior subordinated debentures	Junior subordinated debentures	157		—		157		11		—		11		Junior subordinated debentures	702		—		702
Subordinated debentures	Subordinated debentures	(1)		1		—		(4)		4		—		Subordinated debentures	(1)		1		—
Total borrowings	Total borrowings					(30)						(473)		Total borrowings					4,182
Total expense of interest-bearing liabilities	Total expense of interest-bearing liabilities					4,446						3,493		Total expense of interest-bearing liabilities					24,750
Change in net interest income	Change in net interest income					$	73,324					$	168,166	Change in net interest income					$	21,691

(1)Reflects income determined on a FTE basis. See footnote (1) to Table ~~14 and 15~~11 in this Report 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.

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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. The Company recorded a ~~$3.0~~$7.3 million and a ~~$1.0~~$2.0 million provision for credit losses for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and March 31, 2022, ~~respectively, as compared to releases of~~respectively. The provision for credit losses ~~of $10.0 million and $17.5 million~~ for the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2023 primarily reflects an additional reserve allocation associated with further credit deterioration of a large commercial and industrial credit that migrated to nonperforming status during 2022, resulting in a full specific reserve allocation on the loan. The Company’s allowance for credit losses as a percentage of total loans, was ~~1.08%~~1.14%, 1.09%, and 1.06% at ~~both September 30,~~March 31, 2023, December 31, 2022, and ~~December~~March 31, ~~2021, and 1.05% at September 30, 2021.~~2022, respectively. The Company recorded net charge-offs of ~~$6,000 and $609,000~~$538,000 for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023, as compared to net charge-offs of ~~$111,000 and $3.6 million~~$404,000 for the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2022. Refer to Note 4 "Loans, Allowance for Credit Losses and Credit Quality" within the ~~Note~~Notes to Consolidated Financial Statements included in Part I. Item 1 of this Report, for further details surrounding the primary drivers of the provision for credit losses for the period.

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

Table 1713 - Noninterest Income


		Three Months Ended									Three Months Ended
		September 30				Change					March 31				Change
		2022		2021		Amount		%			2023		2022		Amount		%
		(Dollars in thousands)									(Dollars in thousands)
Deposit account fees	Deposit account fees	$	6,261	$	4,298	$	1,963	45.67	%	Deposit account fees	$	5,916	$	5,493	$	423	7.70	%
Interchange and ATM fees	Interchange and ATM fees	4,331		3,441		890		25.86	%	Interchange and ATM fees	4,184		3,609		575		15.93	%
Investment management	Investment management	8,436		9,174		(738)		(8.04)	%	Investment management	9,779		8,673		1,106		12.75	%
Mortgage banking income	Mortgage banking income	585		2,825		(2,240)		(79.29)	%	Mortgage banking income	308		1,362		(1,054)		(77.39)	%
Gain on life insurance benefits	Gain on life insurance benefits	477		—		477		100.00%		Gain on life insurance benefits	11		—		11		100.00%
Increase in cash surrender value of life insurance policies	Increase in cash surrender value of life insurance policies	1,883		1,596		287		17.98	%	Increase in cash surrender value of life insurance policies	1,854		1,795		59		3.29	%

Loan level derivative income	Loan level derivative income	471		586		(115)		(19.62)	%	Loan level derivative income	408		604		(196)		(32.45)	%

Other noninterest income	Other noninterest income	5,751		4,537		1,214		26.76	%	Other noninterest income	5,782		4,736		1,046		22.09	%
Total	Total	$	28,195	$	26,457	$	1,738	6.57	%	Total	$	28,242	$	26,272	$	1,970	7.50	%

		Nine Months Ended
		September 30				Change
		2022		2021		Amount		%
		(Dollars in thousands)
Deposit account fees		$	17,582	$	11,704	$	5,878	50.22	%
Interchange and ATM fees		11,967		9,229		2,738		29.67	%
Investment management		26,438		26,350		88		0.33	%
Mortgage banking income		2,989		11,270		(8,281)		(73.48)	%
Gain on life insurance benefits		600		258		342		132.56	%
Increase in cash surrender value of life insurance policies		5,549		4,508		1,041		23.09	%

Loan level derivative income		1,511		875		636		72.69	%

Other noninterest income		15,729		12,476		3,253		26.07	%
Total		$	82,365	$	76,670	$	5,695	7.43	%

The primary reasons for the variances in the noninterest income categories ~~for the three and nine months ended September 30, 2022 as compared to the respective prior year periods~~ shown in the preceding table include:

•Deposit account fees ~~and interchange~~increased driven primarily by increased overdraft fees.

•Interchange and ATM fees increased ~~for the three and nine months ended September 30, 2022 in comparison~~due to ~~the same prior year periods driven primarily by increased transaction volume attributable to the larger customer base as a result of the Meridian acquisition.~~higher debit card service charges.

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•Investment management income ~~decreased for the three months ended September 30, 2022,~~increased driven primarily by ~~a decline in overall asset valuations and was consistent for the nine months ended September 30, 2022,~~higher levels of assets under administration, which increased by $420.6 million, or 7.3%, to $6.1 billion at March 31, 2023 as compared to $5.7 billion at March 31, 2022, as well as higher retail and insurance commission income during the ~~prior year period, primarily due to a higher volume~~first quarter of ~~new asset inflows, which were offset by depressed market valuations.~~2023.

•Mortgage banking income decreased for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 in comparison to the prior year ~~periods, due~~period, primarily toreflecting overall reduced ~~activity resulting~~volumes from ~~increased~~rising interest ~~rates and a greater portion of new originations being retained in the Company's portfolio versus being sold in the secondary market during 2022.~~rates.

•~~The cash surrender value of life insurance policies increased~~Loan level derivative income decreased primarily due to ~~the impact of policies acquired from Meridian.~~

•~~The changes in loan level derivative income primarily reflect~~lower customer ~~demand during the respective periods.~~demand.

•Other noninterest income increased for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, primarily attributable to increases in rental income from equipment leases, ~~foreign currency exchange fees,~~unrealized gains on equity securities and credit card fee income, discounted purchases of Massachusetts historical tax credits, and a gain on the sale of a vacated office space recently acquired during the Meridian acquisition, partially offset by decreases in loan fees and income from like-kind exchanges.income.

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

Table 1814 - Noninterest Expense


		Three Months Ended									Three Months Ended
		September 30				Change					March 31				Change
		2022		2021		Amount		%			2023		2022		Amount		%
		(Dollars in thousands)									(Dollars in thousands)
Salaries and employee benefits	Salaries and employee benefits	$	52,708	$	42,235	$	10,473	24.80	%	Salaries and employee benefits	$	56,975	$	48,711	$	8,264	16.97	%
Occupancy and equipment expenses	Occupancy and equipment expenses	12,316		8,564		3,752		43.81	%	Occupancy and equipment expenses	12,822		13,302		(480)		(3.61)	%
Data processing & facilities management	Data processing & facilities management	2,259		1,673		586		35.03	%	Data processing & facilities management	2,527		2,372		155		6.53	%
Consulting expense	Consulting expense	2,547		1,560		987		63.27	%	Consulting expense	2,077		1,750		327		18.69	%
Software maintenance	Software maintenance	2,497		2,018		479		23.74	%	Software maintenance	2,949		2,564		385		15.02	%
Amortization of intangible assets	Amortization of intangible assets	1,898		1,310		588		44.89	%	Amortization of intangible assets	1,815		2,001		(186)		(9.30)	%
Debit card expense	Debit card expense	1,936		1,347		589		43.73	%	Debit card expense	2,171		1,765		406		23.00	%
FDIC assessment	FDIC assessment	1,677		980		697		71.12	%	FDIC assessment	2,610		1,805		805		44.60	%

Merger and acquisition expenses	Merger and acquisition expenses	—		1,943		(1,943)		(100.00)	%	Merger and acquisition expenses	—		7,100		(7,100)		(100.00)	%
Other noninterest expenses	Other noninterest expenses	14,890		10,789		4,101		38.01	%	Other noninterest expenses	14,715		14,130		585		4.14	%
Total	Total	$	92,728	$	72,419	$	20,309	28.04	%	Total	$	98,661	$	95,500	$	3,161	3.31	%

		Nine Months Ended
		September 30				Change
		2022		2021		Amount		%
		(Dollars in thousands)
Salaries and employee benefits		$	150,957	$	124,759	$	26,198	21.00	%
Occupancy and equipment expenses		37,255		26,543		10,712		40.36	%
Data processing & facilities management		6,878		5,024		1,854		36.90	%
Merger and acquisition expenses		7,100		3,674		3,426		93.25	%
Software maintenance		7,706		5,903		1,803		30.54	%

Consulting expense		7,057		5,443		1,614		29.65	%
Amortization of intangible assets		5,801		4,037		1,764		43.70	%
Debit card expense		5,562		3,693		1,869		50.61	%

FDIC assessment		5,225		2,805		2,420		86.27	%
Other noninterest expenses		45,249		33,522		11,727		34.98	%
Total		$	278,790	$	215,403	$	63,387	29.43	%

The primary reasons for the variances in the noninterest expense categories ~~for the three and nine months ended September 30, 2022 as compared to the respective prior year periods~~ shown in the preceding table include:

•The increase in salaries and employee benefits was primarily attributable to ~~the Company's increased workforce base following the Meridian acquisition.~~CEO transition related expenses, general salary increases and payroll taxes.

•Occupancy and equipment expenses decreased, driven primarily by reduced snow removal costs costs and equipment maintenance and repairs, partially offset by increased year-over-year, primarily driven by costs associated with the Company's expanded branch network, real estate and other fixed assets resulting from the Meridian acquisition, as well as increased depreciation expense on leased equipment.utilities expenses.

•~~Data processing~~Consulting expense increased for the three months ended March 31, 2023, due primarily to the Company's overall growth and ~~facilities management expenses~~implementation of strategic initiatives.

•Software maintenance increased primarily due to the ~~timing of certain initiatives and general increases associated with~~Company's continued investment in its technology infrastructure.

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

•FDIC assessment increased primarily due to increased assessment rates.

•The Company incurred merger and acquisition costs related to the Meridian acquisition of $7.1 million during the first quarter of 2022, primarily related to lease terminations associated with exited branch locations, along with

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additional integration costs and professional fees. ~~Meridian related merger and acquisition~~No such costs were ~~also~~ incurred ~~to a lesser extent,~~ during the ~~nine months ended September 30, 2021, leading up to deal close during the fourth~~first quarter of ~~2021.~~

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

•~~FDIC assessment increased primarily due to an increased assessment base resulting from the Meridian acquisition.~~

•~~Consulting expense increased for the three and nine months ended September 30, 2022, primarily due to rollout of strategic initiatives during such periods.~~2023.

•Other noninterest expense increased for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, primarily due to ~~three full quarters~~increases in legal fees and timing of ~~general increases associated with the Meridian acquisition, elevated~~expenses such as trainings, subscriptions and recruitment, which are tied to various strategic initiatives, offset partially by decreases in unrealized losses on equity ~~securities, and increased marketing and public relations costs.~~securities.

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:

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Table 1915 - Tax Provision and Applicable Tax Rates


		Three Months Ended						Nine Months Ended							Three Months Ended
		September 30						September 30							March 31
		2022			2021			2022			2021				2023			2022
		(Dollars in thousands)													(Dollars in thousands)
Combined federal and state income tax provision	Combined federal and state income tax provision	$	23,171		$	14,122		$	60,699		$	38,506		Combined federal and state income tax provision	$	20,082		$	17,107
Effective income tax rate	Effective income tax rate	24.37		%	26.09		%	24.53		%	24.40		%	Effective income tax rate	24.69		%	24.37		%
Blended statutory tax rate	Blended statutory tax rate	27.11		%	27.92		%	27.11		%	27.92		%	Blended statutory tax rate	27.85		%	27.11		%

The Company’s effective tax rate in ~~2022~~2023 thus far is higher as compared to the year ago period primarily due to higher pre-tax ~~income, as well as the impact of discrete items, including tax benefits related to low income housing tax credits and equity compensation.~~income. The effective tax rates in the table above are lower than the blended statutory tax rates due to the ~~aforementioned~~impact of discrete items, including tax benefits related to low income housing tax credits and equity compensation, as well as certain tax preference assets such as life insurance policies, tax exempt bonds, and federal tax credits.

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 2039, which represents the period that the tax credits and other tax benefits will be utilized. The total committed investment in these partnerships is ~~$183.9~~$197.7 million, of which ~~$120.9~~$152.9 million had been funded as of ~~September 30, 2022.~~March 31, 2023. It is expected that the limited partnership investments will generate a net tax benefit of approximately ~~$3.3~~$3.6 million for the fiscal year ~~2022~~2023 and a total of ~~$23.7~~$22.1 million over the remaining life of the investments from the combination of the tax credits and operating losses.

Risk Management

The Board of Directors has approved an Enterprise Risk Management Policy ~~and Risk Appetite Statement~~ to state the Company’s goals and objectives in identifying, measuring, and managing the risks associated with the Company’s current and near future anticipated size and complexity. Management is responsible for comprehensive enterprise risk management, and continually strives to adopt and implement practices that strike an appropriate balance between risk and reward and permit the achievement of strategic goals in a controlled environment.

The Company has implemented the “three lines of defense” enterprise risk management model. The first line of defense are the executives in charge of business units, operational areas, and corporate functions who, sometimes assisted by management committees, teams, and working groups, own and manage risks. The second line of defense monitors and provides risk management advice across all risk domains, and is comprised of the enterprise risk department, with oversight from the Chief Risk ~~Officer and the risk department, who monitor and provide advice with respect to first line risk management.~~Officer. The third line of

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defense is independent assurance performed by the Chief Internal Auditor, who reports to the Audit Committee of the Company's Board of Directors, and by the Company's internal audit department.

The Board of Directors, with the assistance of its Risk Committee, oversees management’s enterprise risk management practices. As risks must be taken to create value, the Board of Directors has ~~defined~~approved a Risk Appetite Statement that defines the acceptable residual risk tolerances for the Company and the ~~eight~~nine major risk types identified as having the potential to create significant adverse impacts on the Company, such as financial losses, reputational damage, legal or regulatory actions, ~~nonachievement of~~failure to achieve strategic objectives, diminished customer experience, and/or cultural erosion. The ~~eight~~nine major risk types identified by the Company and addressed in the Risk Appetite Statement are strategic and emerging risk, culture risk, credit risk, liquidity risk, interest rate risk, operational risk, ~~technology~~reputation risk, compliance risk, and ~~reputation~~technology risk, each of which is discussed below.

Strategic and Emerging Risk Strategic and emerging risk is the risk arising from adverse strategic or business decisions, misalignment of strategic direction with the Company’s mission and values, failure to execute strategies or tactics, or an inadequate adaptation or lack of responsiveness to industry and/or operating environment changes. Management seeks to mitigate strategic risk through strategic planning, frequent executive review of strategic plan progress, monitoring of competitors and technology, assessment of new products, new branches, and new business initiatives, customer advocacy, and crisis management planning.

Culture Risk Culture risk is the risk arising from failed leadership and/or ineffective colleague engagement and workplace management that causes the Company to lose sight of core values and, through acts or omissions, damage the relationship-based culture ~~which~~that has been one of the foundations of the Company’s consistent success. Management ~~mitigates~~seeks to mitigate culture risk through effective employee relations, leadership that encourages continuous improvement, cultural

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development and reinforcement of core values, communication of clear ethical and behavioral standards, consistent enforcement of policies and programs, discipline of misbehavior, alignment of incentives and compensation, and by promoting diversity, equity, and inclusion.

Credit Risk Credit risk is the risk arising from the failure of a borrower or a counterparty to a contract to make payments as agreed, and includes the risks arising from inadequate collateral and mismanagement of loan concentrations. 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~~that 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 the Notes to Consolidated Financial Statements included in Part I. Item 1 of this Report.

Liquidity Risk Liquidity risk is the risk arising from the Company being unable to meet obligations when due. Liquidity risk includes the inability to access funding sources or manage fluctuations in available funding levels. Liquidity risk also results from a failure to recognize or address market condition changes that affect the ability to liquidate assets quickly with minimal value loss.

The Company’s primary sources of funds are deposits, borrowings, and the amortization, prepayment, and maturities of loans 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~~Interest rates, economic conditions, and competitive ~~factors.~~factors greatly influence deposit levels.

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 ~~Federal Home Loan Bank~~FHLB funding, less short-term liabilities relative to total assets, was within policy limits at ~~September 30, 2022.~~March 31, 2023. 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 include ~~Federal Home Loan Bank~~FHLB collateral requirements, securities portfolio changes, and the mix of deposits.

The Company ~~seeks to increase~~prioritizes core deposits ~~without adversely impacting its weighted average~~as a primary funding ~~cost.~~source. The Company ~~also maintains~~experienced a decline in its deposit balances during the first quarter of 2023, attributable to various factors, including seasonality, customer balance diversification due to FDIC insurance limits, and a competitive rate environment. As a result of the deposit outflows, the Company’s Borrowings increased during the quarter. The Company continues to maintain a variety of available liquidity sources, including ~~Federal Home Loan Bank~~FHLB advances, Federal Reserve borrowing capacity, and repurchase agreement lines. These funding sources serve as a contingent source of liquidity and, when profitable lending and investment opportunities exist, the Company may access them to provide the liquidity needed to grow the balance sheet. The amount and type of assets that the Company has available to pledge ~~impacts~~affects the Company's ~~Federal Home Loan Bank~~FHLB and Federal Reserve borrowing capacity. For example, a prime one-to-four family residential loan may provide 75 cents of borrowing capacity for every $1.00 pledged, whereas a pledged commercial loan may increase borrowing capacity in a lower amount. The Company’s lending decisions, therefore, can also affect its liquidity position.

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The Company ~~can~~may also have the ability to 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, including the Company’s financial position, the market environment, and the Company’s credit rating. The Company monitors the factors that could ~~impact~~affect its ability to raise liquidity through these channels.

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The following table depicts current and unused liquidity capacity from various sources as of the dates indicated:

Table 2016 - Liquidity Sources


		September 30, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		Outstanding		Additional Borrowing Capacity		Outstanding		Additional Borrowing Capacity			Outstanding		Additional Borrowing Capacity		Outstanding		Additional Borrowing Capacity
		(Dollars in thousands)									(Dollars in thousands)
Federal Home Loan Bank of Boston (1)	Federal Home Loan Bank of Boston (1)	$	643	$	1,739,262	$	25,667	$	1,622,494	Federal Home Loan Bank of Boston (1)	$	879,628	$	914,019	$	637	$	1,808,729
Federal Reserve Bank of Boston (2)	Federal Reserve Bank of Boston (2)	—		1,206,651		—		1,176,486		Federal Reserve Bank of Boston (2)	—		3,037,834		—		1,210,451
Unpledged Securities	Unpledged Securities	—		2,159,018		—		1,897,148		Unpledged Securities	—		2,137,098		—		2,144,235
Line of Credit	Line of Credit	—		85,000		—		85,000		Line of Credit	—		85,000		—		85,000
Long-term borrowing (3)		—		—		14,063		—

Junior subordinated debentures (3)	Junior subordinated debentures (3)	62,855		—		62,853		—		Junior subordinated debentures (3)	62,856		—		62,855		—
Subordinated debt (3)	Subordinated debt (3)	49,862		—		49,791		—		Subordinated debt (3)	49,909		—		49,885		—
Reciprocal deposits (3)	Reciprocal deposits (3)	751,133		—		998,121		—		Reciprocal deposits (3)	698,304		—		653,638		—
Brokered deposits (3)	Brokered deposits (3)	102,610		—		141,572		—		Brokered deposits (3)	95,434		—		102,643		—
		$	967,103	$	5,189,931	$	1,292,067	$	4,781,128		$	1,786,131	$	6,173,951	$	869,658	$	5,248,415

(1)Loans with a carrying value of ~~$2.6 billion and $2.3~~$2.7 billion at ~~September 30, 2022~~both March 31, 2023 and December 31, ~~2021, respectively,~~2022, were pledged to the ~~Federal Home Loan Bank~~FHLB of Boston resulting in this additional unused borrowing capacity.

(2)Loans with a carrying value of $4.6 billion and $1.7 billion ~~and $1.8 billion~~ at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, were 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.

In addition to customary operational liquidity practices, the Board of Directors and management recognize the need to establish reasonable guidelines to manage a heightened liquidity risk environment. Catalysts for elevated liquidity risk can be Company-specific issues and/or systemic industry-wide events. ItManagement is therefore ~~the responsibility of management to institute~~responsible for instituting systems and controls designed to provide advanced detection of potentially significant funding shortages, ~~establish~~establishing methods for assessing and monitoring risk levels, and ~~institute~~instituting responses that may alleviate or circumvent a potential liquidity crisis. Management has established a Liquidity Contingency Plan to provide a framework to detect potential liquidity problems and appropriately address them 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 to monitor the potential for a liquidity crisis and ~~establish and~~ execute an appropriate response.

In response to the recent turmoil within the banking industry, the Company has continued to operate under its Liquidity Contingency Plan, resulting in various immediate action items. From a liquidity management perspective, the company proactively borrowed under its existing FHLB capacity to increase current cash on hand to improve direct on balance sheet liquidity, while also pledging additional assets to increase overall borrowing capacity. In addition, the Company has created customer communications, increased internal discussion frequency, and continues to review both on and off balance sheet liquidity sources to understand vulnerabilities through application of various stress testing scenarios and other analyses.

Interest Rate Risk Interest rate risk is the risk arising from changes in interest rates and the value of investments due to market conditions or other external factors or events. Interest rate risk includes market ~~risk. The Company’s primary market risk exposure is interest rate~~ risk.

Interest rate risk is the sensitivity of income 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~~affecting 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 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

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interest-bearing liabilities and, when necessary within limits management deems prudent, ~~through the use of~~with 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 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.~~(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 with precision and actual behavior may differ from assumptions to a significant degree. Non-maturity deposits, assumptions over customer behavior, shifts in deposits categories, and magnitude of impact to the cost of deposits all may differ from what is currently anticipated by the models or analyses.

Based upon the net interest income simulation models, the Company ~~currently forecasts~~anticipates that assets ~~are anticipated to~~will generally re-price faster than ~~liabilities.~~liabilities over the long term, though short term volatility may exist depending on the current state of the overall rate cycle, as well as the pace and magnitude of interest rate changes. As a result, net interest income will be positively impacted as market rates increase and negatively impacted if market rates decrease. The Company runs several scenarios to quantify and effectively assist in managing interest rate risk, including instantaneous parallel shifts in market rates as well as gradual (12-24 months) shifts in market rates, and may also include other alternative scenarios as management deems necessary given the interest rate environment. The ~~Company measures~~results of those scenarios are summarized in the ~~annual income from each scenario and then compares it against the current year base case scenario.~~following table:

The relative results of all scenarios and the impact to net interest income as they compare to the year 1 base scenario are outlined in the table below:

Table 2117 - Interest Rate Sensitivity


		September 30									March 31
		2022				2021					2023		2022
		Year 1		Year 2		Year 1		Year 2			Year 1			Year 1
Parallel rate shocks (basis points)	Parallel rate shocks (basis points)									Parallel rate shocks (basis points)
-300	-300	(15.2)	%	(21.8)	%	n/a		n/a		-300	(11.2)	%		n/a
-200	-200	(9.8)	%	(11.3)	%	n/a		n/a		-200	(5.0)	%		n/a
-100	-100	(3.4)	%	0.5	%	(3.4)	%	(9.8)	%	-100	(1.5)	%		(4.8)	%
+100	+100	2.4	%	14.0	%	8.4	%	9.6	%	+100	(0.1)	%		5.1	%
+200	+200	4.0	%	18.1	%	18.0	%	22.8	%	+200	(1.6)	%		10.0	%
+300	+300	6.4	%	24.0	%	27.9	%	36.4	%	+300	(2.4)	%		15.5	%
+400	+400	8.7	%	29.9	%	37.5	%	49.5	%	+400	(3.4)	%		20.9	%

Gradual rate shifts (basis points)	Gradual rate shifts (basis points)									Gradual rate shifts (basis points)
-200 over 12 months	-200 over 12 months	(3.9)	%	(8.2)	%	n/a		n/a		-200 over 12 months	(1.5)	%		n/a
-100 over 12 months	-100 over 12 months	(1.5)	%	1.6	%	(1.4)	%	(8.0)	%	-100 over 12 months	(0.7)	%		(2.1)	%
+200 over 12 months	+200 over 12 months	2.3	%	17.5	%	8.6	%	20.3	%	+200 over 12 months	0.7	%		5.0	%
+400 over 24 months	+400 over 24 months	2.3	%	20.8	%	8.6	%	31.6	%	+400 over 24 months	0.7	%		5.0	%

Alternative scenarios

Flat up 200 basis points scenario		n/a		n/a		8.0	%	17.8	%

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.~~affected. Alternatively, if the Company iswere able to lag increases in deposit rates as loans re-price upward, net interest income would be positively impacted.

The most significant market factors affecting the Company’s net interest income during the ~~nine months~~year ended ~~September 30, 2022~~March 31, 2023 were the shape of the U.S. Government securities and interest rate swap yield curve, the U.S. prime interest

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

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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 in which 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. While interest is paid or received in swap, cap, and floors agreements, the notional principal amount is not ~~actually~~ exchanged. The Company may also manage the interest rate risk inherent in its mortgage banking operations by entering into forward sales contracts under which the Company agrees to deliver whole mortgage loans to various investors. See Note 6,7, “Derivative and Hedging Activities” within the Notes to Consolidated Financial Statements included in Part I. Item 1 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~~Movements in foreign currency rates or commodity ~~prices.~~prices do not directly or materially affect the Company's earnings. 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 the Notes to Consolidated Financial Statements included in Part I. Item 1 of this Report.

Operational Risk Operational risk is the risk arising from human error or misconduct, transaction errors or delays, inadequate or failed internal systems or processes, data unavailability, loss, or poor quality, or adverse external events. Operational risk includes ~~business resiliency risk, consumer compliance risk, data governance risk,~~ fraud risk ~~legal risk,~~and model ~~risk, regulatory compliance risk, and third party vendor~~ risk. Potential operational risk exposure exists throughout the Company. The continued effectiveness of colleagues ~~technical systems,~~and operational infrastructure ~~and relationships with key third party service providers~~ are integral to mitigating operational risk, and any shortcomings subject the Company to risks that vary in size, scale and scope. ~~Operational risks~~

Reputation Risk Reputation risk is the risk arising from negative public opinion of the Company and the Bank. Management seeks to mitigate reputational risk through actions that include ~~operational failures, unlawful tampering, terrorist activities, ineffectiveness~~a structured process of customer complaint resolution and ongoing reputational monitoring.

Compliance RiskCompliance risk is the risk arising from violations of laws or ~~exposure due~~regulations, non-conformance with prescribed practices, internal bank policies and procedures, or ethical standards. Compliance risk includes consumer compliance risk, legal risk, and regulatory compliance risk. Management seeks to ~~interruption in third party support, as well as the loss of key individuals or a failure of key individuals to perform properly.~~mitigate compliance risk through compliance training and regulatory change management processes.

Technology Risk Technology risk is the risk of losses or other impacts arising from the failure of technology systems to function in accordance with expectations and business requirements. Technology risk includes information technology risk, information security risk, and cyber security.

~~Reputation Risk~~ ~~Reputational risk is the risk arising from negative public opinion of the Company and the Bank.~~ Technology risks include technical failures, unlawful tampering with technical systems, cyber security, terrorist activities, ineffectiveness or exposure due to interruption in third party support. Management seeks to mitigate ~~reputation~~technology risk through ~~actions that include a structured process of customer complaint resolution~~appropriate security and ~~ongoing reputational monitoring.~~controls over data and its technological environment.

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

Off-Balance Sheet Arrangements There were no material changes in off-balance sheet ~~financial instruments~~arrangements during the three months ended ~~September 30, 2022.~~March 31, 2023.

See Note 6,7, "Derivative and Hedging Activities" and Note ~~10,~~11, "Commitments and Contingencies" within the Notes to Consolidated Financial Statements included in Part I. Item 1 of this Report for more information relating to the Company's other off-balance sheet financial instruments.

Contractual Obligations, Commitments, and Contingencies There were no material changes in contractual obligations, commitments, or contingencies during the three months ended ~~September 30, 2022.~~March 31, 2023.

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 "Management's Discussion and Analysis of Financial Condition and Results of 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 were effective as of the end of the period covered by this quarterly report.

Changes in Internal Control over Financial Reporting. There were no changes in the Company's internal control over financial reporting that occurred during the ~~third~~first quarter of ~~2022~~2023 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

The section titled Risk Factors in Part I, Item 1A of the ~~2021~~2022 Form 10-K includes a discussion of the 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). ~~As of~~The information presented below provides an update to, and should be read in conjunction with, the ~~date of this Report,~~risk factors and other information contained in the 2022 Form 10-K.

Except as presented below, there have been no material changes ~~with regard~~ to the ~~Risk Factors disclosed~~risk factors described in ~~Item 1A~~the 2022 Form 10-K.

Risks Related to Recent Events Impacting the Financial Services Industry

Recent events impacting the financial services industry, including several high profile bank failures, have resulted in decreased confidence in banks among depositors, investors and other counterparties, as well as significant disruption, volatility and depressed valuations of equity and other securities of banks in the capital markets.These events occurred during a period of rapidly rising interest rates which, among other things, has resulted in increased unrealized losses on certain investment securities, increased competition for bank deposits and may increase the risk of a potential recession. These recent events have, and could continue to adversely impact the market price and volatility of the ~~2021 Form 10-K~~Company’s common stock.These recent events may also result in potentially adverse changes to laws or regulations applicable to the Company, which ~~are incorporated herein by reference.~~could have a material impact on the Company’s business and result in increased costs necessary to comply with any such changes.Additionally, the cost of resolving recent bank failures may prompt the FDIC to increase its premiums above the current levels or result in additional special assessments.

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 ~~September 30, 2022:~~March 31, 2023:

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 (or Approximate Dollar Value) That May Yet Be Purchased Under the Plan or Program (2)
Period
July 1 to July 31, 2022 177,327 $ 79.25 177,327 $ 20,648,057
August 1 to August 31, 2022 111,433 $ 78.98 111,433 $ 11,847,362
September 1 to September 30, 2022 154,212 $ 76.48 154,212 $ —
Total 442,972 $ 78.22 442,972

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	Issuer Purchases of Equity Securities
	Total Number of Shares Purchased (1)	Average Price Paid Per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plan or Program (3)	Maximum Number of Shares (or Approximate Dollar Value) That May Yet Be Purchased Under the Plan or Program (3)
Period
January 1 to January 31, 2023	604,395	$	78.31	604,395	$	72,669,467
February 1 to February 28, 2023	77,925	$	80.01	67,701	$	67,260,944
March 1 to March 31, 2023	949,152	$	71.11	944,937	$	—
Total	1,631,472	$	74.20	1,617,033

(1)Of these shares, ~~none~~10,224 shares and 4,215 shares were surrendered in February 2023 and March 2023, respectively, in connection with the exercise and/or vesting of equity compensation grants to satisfy related tax withholding obligations.

(2)~~On January 20, 2022,~~During the ~~Company announced that its Board~~three months ended March 31, 2023, the average price per share of ~~Directors authorized a~~repurchased shares was $74.18 and the average price per share ~~repurchase program~~ of upsurrendered shares related to $140 million in shares of the Company's common stock. The 154,212 shares repurchased under the program in September 2022 represented the balance of the $140 million in shares repurchased, completing the program.tax withholding obligations was $76.87.

(3)

On October 20, 2022, the Company announced the commencement of a new stock repurchase plan which ~~authorizes~~authorized repurchases by the Company of up to $120 million in common stock. ~~Repurchases~~The 1.6 million shares repurchased under the ~~new plan may be made from time to time on~~program during the ~~open market and in privately negotiated transactions, including through~~three months ended March 31, 2023 represented full completion of the use of trading plans intended to qualify under Rule 10b5-1 under the Exchange Act. The extent to which the Company repurchases shares and the size and timing of these repurchases will depend on a variety of factors, including pricing, market and economic conditions, the Company’s capital position and amount of retained earnings and legal and contractual requirements. The

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~~repurchase plan is scheduled to expire~~

~~October 19,~~ ~~2023 and may be modified, suspended or discontinued without prior notice at any time.~~

Item 3. Defaults Upon Senior Securities - None.

Item 4. Mine Safety Disclosures - Not Applicable.

Item 5. Other Information - None.

Item 6. Exhibits

Exhibit Index


No.			Exhibit


10.1			Employment Agreement, dated as of January 6, 2023, by and among Jeffrey J. Tengel, Independent and Rockland Trust, incorporated herein by reference to Exhibit 10.1 to Form 8-K filed on January 11, 2023.
10.2			Letter Agreement Regarding Succession and Consulting Services, dated as of January 10, 2023, by and between Christopher Oddleifson and Independent, incorporated herein by reference to Exhibit 10.2 to Form 8-K filed on January 11, 2023.
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.+
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

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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)


~~November 3, 2022~~May 4, 2023						/s/ ~~Christopher Oddleifson~~Jeffrey J. Tengel
						~~Christopher Oddleifson~~Jeffrey J. Tengel President and Chief Executive Officer (Principal Executive Officer)


~~November 3, 2022~~May 4, 2023						/s/ Mark J. Ruggiero
						Mark J. Ruggiero Chief Financial Officer (Principal Financial Officer)

9184


Net (decrease) increase in other deposits	(225,519)		1,432,037

Repayments of short-term Federal Home Loan Bank borrowings	(25,000)		—

Repayments of long-term Federal Home Loan Bank borrowings	—		(10,000)





Repayments of long-term debt, net of issuance costs	(14,063)		(14,063)


Net payments for exercise of stock options	—		(57)
Restricted stock awards issued, net of awards surrendered	(1,085)		(1,246)
Proceeds from shares issued under direct stock purchase plan	1,765		1,515
Payments for shares repurchased under share repurchase program	(139,946)		—
Common dividends paid	(70,460)		(46,875)
Net cash (used in) provided by financing activities	(825,766)		1,196,259
Net (decrease) increase in cash and cash equivalents	(1,304,388)		711,195
Cash and cash equivalents at beginning of year	2,240,684		1,296,636
Cash and cash equivalents at end of period	$	936,296	$	2,007,831
Supplemental schedule of noncash activities


Net increase in capital commitments relating to low income housing project investments	$	4,408	$	34,127

Right-of-use assets obtained in exchange for new lease obligations	$	14,124	$	5,888


Total liabilities	$	17,082,448					$	12,142,546
Stockholders' equity	2,936,021						1,734,332
Total liabilities and stockholders' equity	$	20,018,469					$	13,876,878
Net interest income (1)			$	447,853					$	279,687
Interest rate spread (3)					3.27	%					2.93	%
Net interest margin (4)					3.33	%					3.00	%
Supplemental information
Total deposit, including demand deposits	$	16,642,113	$	10,327			$	11,692,344	$	6,361
Cost of total deposits					0.08	%					0.07	%
Total funding liabilities, including demand deposits	$	16,779,140	$	13,819			$	11,862,544	$	10,326
Cost of total funding liabilities					0.11	%					0.12	%


	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 (or Approximate Dollar Value) That May Yet Be Purchased Under the Plan or Program (2)
Period
July 1 to July 31, 2022	177,327	$	79.25	177,327	$	20,648,057
August 1 to August 31, 2022	111,433	$	78.98	111,433	$	11,847,362
September 1 to September 30, 2022	154,212	$	76.48	154,212	$	—
Total	442,972	$	78.22	442,972