~~Table of Content~~s

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


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

For the quarterly period ended ~~September~~June 30, ~~2020~~2021


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

Commission File Number ~~333-239251~~001-39610

___________________________

Eastern Bankshares, Inc.

(Exact name of the registrant as specified in its charter)

___________________________


Massachusetts						84-4199750
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification Number)

265 Franklin Street, Boston, Massachusetts						02110
(Address of principal executive offices)						(Zip Code)

(800) 327-8376

(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 exchange on which registered
Common Stock	EBC	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 and (2) has been subject to such filing requirements for the past 90 days. ☐ Yes ☒ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). ☒ Yes ☐ No

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

(Do not check if a 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. ☐ Yes ☒ No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

186,758,154 shares of the Registrant’s common stock, par value $0.01 per share, were issued and outstanding as of ~~November 13, 2020.~~August 12, 2021.

Table of Contents

Index


		PAGE
PART I.	FINANCIAL INFORMATION

~~ITEM~~I tem 1.	Financial Statements

	Unaudited Consolidated Balance Sheets	24
	Unaudited Consolidated Statements of Income	25
	Unaudited Consolidated Statements of Comprehensive Income	36
	Unaudited Consolidated Statements of Changes in Shareholders’ Equity	47
	Unaudited Consolidated Statements of Cash Flows	69
	Notes to Unaudited Consolidated Financial Statements	811

Item~~ITEM~~ 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	53

Item~~ITEM~~ 3.	Quantitative and Qualitative Disclosures about Market Risk	8690

Item~~ITEM~~ 4.	Controls and Procedures	8691

PART II.	OTHER INFORMATION

Item ~~ITEM~~ 1.	Legal Proceedings	8791

Item~~ITEM~~ 1A.	Risk Factors	8791

Item~~ITEM~~ 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9091

Item~~ITEM~~ 3.	Defaults Upon Senior Securities	9091

Item~~ITEM~~ 4.	Mine Safety Disclosures	91

Item~~ITEM~~ 5.	Other Information	91

Item~~ITEM~~ 6.	Exhibits	9192

EXHIBIT INDEX		9192

SIGNATURES		9293

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements

EASTERN BANKSHARES, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS


		As of September 30,		As of December 31,
		2020		2019			June 30, 2021		December 31, 2020
		(In Thousands)					(In thousands, except share data)
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	69,051	$	135,503	Cash and due from banks	$	58,490	$	116,591
Short-term investments	Short-term investments	2,259,033		227,099		Short-term investments	1,505,757		1,937,479
Cash and cash equivalents	Cash and cash equivalents	2,328,084		362,602		Cash and cash equivalents	1,564,247		2,054,070
Securities:
Trading		0		961
Available for sale		2,207,672		1,508,236
Total securities		2,207,672		1,509,197
Available for sale securities						Available for sale securities	4,848,781		3,183,861
Loans held for sale	Loans held for sale	4,649		26		Loans held for sale	2,734		1,140
Loans:	Loans:					Loans:
Commercial and industrial	Commercial and industrial	2,177,216		1,642,184		Commercial and industrial	1,740,679		1,995,016
Commercial real estate	Commercial real estate	3,652,312		3,535,441		Commercial real estate	3,775,771		3,573,630
Commercial construction	Commercial construction	297,508		273,774		Commercial construction	237,927		305,708
Business banking	Business banking	1,251,573		771,498		Business banking	1,339,852		1,339,164
Residential real estate	Residential real estate	1,373,237		1,428,630		Residential real estate	1,457,498		1,370,957
Consumer home equity	Consumer home equity	890,771		933,088		Consumer home equity	834,938		868,270
Other consumer	Other consumer	301,624		402,431		Other consumer	234,410		277,780
Total loans	Total loans	9,944,241		8,987,046		Total loans	9,621,075		9,730,525
Less: allowance for loan losses	Less: allowance for loan losses	(115,432)		(82,297)		Less: allowance for loan losses	(105,637)		(113,031)
Less: unamortized premiums, net of unearned discounts and deferred fees	Less: unamortized premiums, net of unearned discounts and deferred fees	(32,747)		(5,565)		Less: unamortized premiums, net of unearned discounts and deferred fees	(29,739)		(23,536)
Net loans	Net loans	9,796,062		8,899,184		Net loans	9,485,699		9,593,958
Federal Home Loan Bank stock, at cost	Federal Home Loan Bank stock, at cost	8,805		9,027		Federal Home Loan Bank stock, at cost	10,601		8,805
Premises and equipment	Premises and equipment	50,539		57,453		Premises and equipment	44,733		49,398
Bank-owned life insurance	Bank-owned life insurance	78,058		77,546		Bank-owned life insurance	79,634		78,561
Goodwill and other intangibles, net	Goodwill and other intangibles, net	375,632		377,734		Goodwill and other intangibles, net	380,402		376,534
Deferred income taxes, net	Deferred income taxes, net	19,925		28,207		Deferred income taxes, net	26,161		13,229
Prepaid expenses	Prepaid expenses	92,473		61,336		Prepaid expenses	145,941		148,680
Other assets	Other assets	498,695		246,463		Other assets	458,520		455,954
Total assets	Total assets	$	15,460,594	$	11,628,775	Total assets	$	17,047,453	$	15,964,190
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Deposits:	Deposits:					Deposits:
Demand	Demand	$	6,312,479	$	3,517,447	Demand	$	5,399,297	$	4,910,794
Interest checking accounts	Interest checking accounts	2,207,266		1,814,327		Interest checking accounts	2,656,610		2,380,497
Savings accounts	Savings accounts	1,217,898		971,119		Savings accounts	1,403,472		1,256,736
Money market investment	Money market investment	3,315,198		2,919,360		Money market investment	3,544,897		3,348,898
Certificates of deposit	Certificates of deposit	279,744		329,139		Certificates of deposit	246,157		258,859
Total deposits	Total deposits	13,332,585		9,551,392		Total deposits	13,250,433		12,155,784
Borrowed funds:	Borrowed funds:					Borrowed funds:
Federal funds purchased		0		201,082
Federal Home Loan Bank advances	Federal Home Loan Bank advances	14,773		18,964		Federal Home Loan Bank advances	14,323		14,624
Escrow deposits of borrowers	Escrow deposits of borrowers	14,664		15,349		Escrow deposits of borrowers	14,119		13,425
Total borrowed funds	Total borrowed funds	29,437		235,395		Total borrowed funds	28,442		28,049
Other liabilities	Other liabilities	385,200		241,835		Other liabilities	337,956		352,305
Total liabilities	Total liabilities	13,747,222		10,028,622		Total liabilities	13,616,831		12,536,138
Commitments and contingencies		0		0
Commitments and contingencies (see footnote 10)						Commitments and contingencies (see footnote 10)	0		0
Shareholders’ equity						Shareholders’ equity
Common shares, $0.01 par value, 1,000,000,000 shares authorized, 186,758,154 shares issued and outstanding at both June 30, 2021 and December 31, 2020						Common shares, $0.01 par value, 1,000,000,000 shares authorized, 186,758,154 shares issued and outstanding at both June 30, 2021 and December 31, 2020	1,868		1,868
Additional paid in capital						Additional paid in capital	1,856,241		1,854,068
Unallocated common shares held by the Employee Stock Ownership Plan						Unallocated common shares held by the Employee Stock Ownership Plan	(145,219)		(147,725)
Retained earnings	Retained earnings	1,709,669		1,644,000		Retained earnings	1,723,979		1,665,607
Accumulated other comprehensive income, net of tax	Accumulated other comprehensive income, net of tax	3,703		(43,847)		Accumulated other comprehensive income, net of tax	(6,247)		54,234
Total equity		1,713,372		1,600,153
Total liabilities and equity		$	15,460,594	$	11,628,775
Total shareholders’ equity						Total shareholders’ equity	3,430,622		3,428,052
Total liabilities and shareholders’ equity						Total liabilities and shareholders’ equity	$	17,047,453	$	15,964,190

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

Table of Contents

EASTERN BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
		(In Thousands)									(In thousands, except per share data)
Interest and dividend income:	Interest and dividend income:									Interest and dividend income:
Interest and fees on loans	Interest and fees on loans	$	90,704	$	101,956	$	278,385	$	304,728	Interest and fees on loans	$	90,936	$	92,143	$	179,575	$	187,681
Taxable interest and dividends on available for sale securities	Taxable interest and dividends on available for sale securities	7,554		7,515		23,332		23,468		Taxable interest and dividends on available for sale securities	12,457		7,600		22,663		15,778
Non-taxable interest and dividends on available for sale securities	Non-taxable interest and dividends on available for sale securities	1,883		1,952		5,709		6,355		Non-taxable interest and dividends on available for sale securities	1,857		1,905		3,713		3,826
Interest on federal funds sold and other short-term investments	Interest on federal funds sold and other short-term investments	372		1,292		1,173		2,257		Interest on federal funds sold and other short-term investments	431		284		863		801
Interest and dividends on trading securities	Interest and dividends on trading securities	0		8		6		236		Interest and dividends on trading securities	0		1		0		6
Total interest and dividend income	Total interest and dividend income	100,513		112,723		308,605		337,044		Total interest and dividend income	105,681		101,933		206,814		208,092
Interest expense:	Interest expense:									Interest expense:
Interest on deposits	Interest on deposits	1,727		7,354		10,245		21,186		Interest on deposits	1,031		3,104		2,033		8,518
Interest on borrowings	Interest on borrowings	44		1,221		717		5,515		Interest on borrowings	42		74		82		673
Total interest expense	Total interest expense	1,771		8,575		10,962		26,701		Total interest expense	1,073		3,178		2,115		9,191
Net interest income	Net interest income	98,742		104,148		297,643		310,343		Net interest income	104,608		98,755		204,699		198,901
Provision for allowance for credit losses		700		0		37,900		4,500
Net interest income after provision for credit losses		98,042		104,148		259,743		305,843
(Release of) provision for allowance for loan losses										(Release of) provision for allowance for loan losses	(3,300)		8,600		(3,880)		37,200
Net interest income after provision for loan losses										Net interest income after provision for loan losses	107,908		90,155		208,579		161,701
Noninterest income:	Noninterest income:									Noninterest income:
Insurance commissions	Insurance commissions	21,884		21,522		72,058		70,419		Insurance commissions	23,664		22,697		51,811		50,174
Service charges on deposit accounts	Service charges on deposit accounts	5,052		7,015		15,514		20,190		Service charges on deposit accounts	5,708		4,364		11,075		10,462
Trust and investment advisory fees	Trust and investment advisory fees	5,311		4,987		15,600		14,595		Trust and investment advisory fees	6,074		5,194		11,737		10,289
Debit card processing fees	Debit card processing fees	2,721		2,738		7,528		7,786		Debit card processing fees	3,170		2,337		5,919		4,807
Interest rate swap income (losses)		1,319		141		(3,919)		(329)
Interest rate swap (losses) income										Interest rate swap (losses) income	(1,164)		771		4,241		(5,238)
Income from investments held in rabbi trusts	Income from investments held in rabbi trusts	3,800		733		4,802		6,702		Income from investments held in rabbi trusts	4,216		7,745		6,062		1,002
(Losses) gains on trading securities, net		0		3		(3)		1,297
Losses on trading securities, net										Losses on trading securities, net	0		(1)		0		(3)
Gains on sales of mortgage loans held for sale, net	Gains on sales of mortgage loans held for sale, net	2,219		244		3,732		453		Gains on sales of mortgage loans held for sale, net	848		1,420		2,327		1,513
Gains on sales of securities available for sale, net	Gains on sales of securities available for sale, net	0		0		285		2,016		Gains on sales of securities available for sale, net	1		163		1,165		285
Other	Other	5,403		4,207		13,138		11,893		Other	3,216		2,967		6,608		7,735
Total noninterest income	Total noninterest income	47,709		41,590		128,735		135,022		Total noninterest income	45,733		47,657		100,945		81,026
Noninterest expense:	Noninterest expense:									Noninterest expense:
Salaries and employee benefits	Salaries and employee benefits	66,593		61,251		191,517		190,921		Salaries and employee benefits	69,276		63,335		133,316		124,924
Office occupancy and equipment	Office occupancy and equipment	8,294		8,684		25,598		25,866		Office occupancy and equipment	8,094		8,615		16,311		17,304
Data processing	Data processing	11,721		11,545		33,905		33,133		Data processing	13,572		12,180		25,701		22,184
Professional services	Professional services	5,510		4,104		13,595		11,208		Professional services	6,439		4,396		10,587		8,085
Charitable contributions	Charitable contributions	0		2,534		3,984		9,865		Charitable contributions	0		2,797		0		3,984
Marketing	Marketing	1,943		1,947		6,056		6,353		Marketing	3,497		1,645		5,188		4,113
Loan expenses	Loan expenses	1,554		1,606		4,702		3,157		Loan expenses	1,854		2,036		3,701		3,148
FDIC insurance	FDIC insurance	938		0		2,788		1,800		FDIC insurance	985		944		1,933		1,850
Amortization of intangible assets	Amortization of intangible assets	699		884		2,102		2,657		Amortization of intangible assets	625		701		1,157		1,403

Other	Other	12,565		8,111		21,507		22,105		Other	2,993		4,116		3,490		8,942
Total noninterest expense	Total noninterest expense	109,817		100,666		305,754		307,065		Total noninterest expense	107,335		100,765		201,384		195,937
Income before income tax expense	Income before income tax expense	35,934		45,072		82,724		133,800		Income before income tax expense	46,306		37,047		108,140		46,790
Income tax expense	Income tax expense	7,429		9,230		15,924		29,940		Income tax expense	11,497		7,197		25,668		8,495
Net Income		$	28,505	$	35,842	$	66,800	$	103,860
Net income										Net income	$	34,809	$	29,850	$	82,472	$	38,295
Basic earnings per share										Basic earnings per share	$	0.20	$	0	$	0.48	$	0
Diluted earnings per share										Diluted earnings per share	$	0.20	$	0	$	0.48	$	0

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

Table of Contents

EASTERN BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
		(In Thousands)									(In thousands)
Net income	Net income	$	28,505	$	35,842	$	66,800	$	103,860	Net income	$	34,809	$	29,850	$	82,472	$	38,295
Other comprehensive income, 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	(4,321)		8,056		22,158		43,180		Net change in fair value of securities available for sale	25,428		287		(49,476)		26,479
Net change in fair value of cash flow hedges	Net change in fair value of cash flow hedges	(6,144)		2,516		20,286		17,893		Net change in fair value of cash flow hedges	(5,909)		(2,645)		(11,857)		26,430
Net change in other comprehensive income for defined benefit postretirement plans	Net change in other comprehensive income for defined benefit postretirement plans	1,702		0		5,106		0		Net change in other comprehensive income for defined benefit postretirement plans	426		3,404		852		3,404
Total other comprehensive income		(8,763)		10,572		47,550		61,073
Total other comprehensive income (loss)										Total other comprehensive income (loss)	19,945		1,046		(60,481)		56,313
Total comprehensive income	Total comprehensive income	$	19,742	$	46,414	$	114,350	$	164,933	Total comprehensive income	$	54,754	$	30,896	$	21,991	$	94,608

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

Table of Contents

EASTERN BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Three Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~

Retained
Earnings Accumulated
Other
Comprehensive
Income Total
(In Thousands)
Balance at June 30, 2020 $ 1,681,164 $ 12,466 $ 1,693,630
Net income 28,505 — 28,505
Other comprehensive income, net of tax — (8,763) (8,763)
Balance at September 30, 2020 $ 1,709,669 $ 3,703 $ 1,713,372
2020


Balance at June 30, 2019		$	1,576,920	$	(25,260)	$	1,551,660
									Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Unallocated Common Stock Held by ESOP		Total
									(In thousands, except share data)
Balance at March 31, 2020								Balance at March 31, 2020	0	$	0	$	0	$	1,651,314	$	11,420	$	0	$	1,662,734
Net income	Net income	35,842		—		35,842		Net income	—	—		—		29,850		—		—		29,850
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		10,572		10,572		Other comprehensive income, net of tax	—	—		—		—		1,046		—		1,046
Balance at September 30, 2019		$	1,612,762	$	(14,688)	$	1,598,074
Balance at June 30, 2020								Balance at June 30, 2020	0	$	0	$	0	$	1,681,164	$	12,466	$	0	$	1,693,630

Balance at March 31, 2021								Balance at March 31, 2021	186,758,154	$	1,868	$	1,854,895	$	1,702,946	$	(26,192)	$	(146,472)	$	3,387,045
Dividends to common shareholders (1)								Dividends to common shareholders (1)	—	—		—		(13,776)		—		—		(13,776)
Net income								Net income	—	—		—		34,809		—		—		34,809
Other comprehensive income, net of tax								Other comprehensive income, net of tax	—	—		—		—		19,945		—		19,945
ESOP shares committed to be released								ESOP shares committed to be released	—	—		1,346		—		—		1,253		2,599
Balance at June 30, 2021								Balance at June 30, 2021	186,758,154	$	1,868	$	1,856,241	$	1,723,979	$	(6,247)	$	(145,219)	$	3,430,622

(1)The Company declared and paid a quarterly cash dividend of $0.08 per share of common stock during the three months ended June 30, 2021.

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

EASTERN BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~

Retained
Earnings Accumulated
Other
Comprehensive
Income Total
(In Thousands)
Balance at December 31, 2019 $ 1,644,000 $ (43,847) $ 1,600,153
Cumulative effect accounting adjustment (1)
(1,131) (1,131)
Net income 66,800 — 66,800
Other comprehensive income, net of tax — 47,550 47,550
Balance at September 30, 2020 $ 1,709,669 $ 3,703 $ 1,713,372
2020


Balance at December 31, 2018		$	1,508,902	$	(75,761)	$	1,433,141
									Shares of Common Stock Outstanding	Common Stock		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Unallocated Common Stock Held by ESOP		Total
									(In thousands, except share data)
Balance at December 31, 2019								Balance at December 31, 2019	0	$	0	$	0	$	1,644,000	$	(43,847)	$	0	$	1,600,153
Cumulative effect accounting adjustment (1)								Cumulative effect accounting adjustment (1)	—	—		—		(1,131)		—		—		(1,131)
Net income	Net income	103,860		—		103,860		Net income	—	—		—		38,295		—		—		38,295
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—		61,073		61,073		Other comprehensive income, net of tax	—	—		—		—		56,313		—		56,313
Balance at September 30, 2019		$	1,612,762	$	(14,688)	$	1,598,074
Balance at June 30, 2020								Balance at June 30, 2020	0	$	0	$	0	$	1,681,164	$	12,466	$	0	$	1,693,630

Balance at December 31, 2020								Balance at December 31, 2020	186,758,154	$	1,868	$	1,854,068	$	1,665,607	$	54,234	$	(147,725)	$	3,428,052
Dividends to common shareholders (2)								Dividends to common shareholders (2)	—	—		—		(24,100)		—		—		(24,100)
Net income								Net income	—	—		—		82,472		—		—		82,472
Other comprehensive loss, net of tax								Other comprehensive loss, net of tax	—	—		—		—		(60,481)		—		(60,481)
ESOP shares committed to be released								ESOP shares committed to be released	—	—		2,173		—		—		2,506		4,679
Balance at June 30, 2021								Balance at June 30, 2021	186,758,154	$	1,868	$	1,856,241	$	1,723,979	$	(6,247)	$	(145,219)	$	3,430,622

(1)Represents cumulative impact on retained earnings pursuant to the Company’s (as defined herein) adoption of Accounting Standards Update 2016-02 ~~Leases.~~ Leases. The transition adjustment to the opening balance of retained earnings on January 1, 2020 amounted to $1.1 million, net of tax, related to an incremental accrued rent adjustment calculated as a result of electing the hindsight practical expedient.

(2)The Company declared and paid quarterly cash dividends of $0.06 and $0.08 per share of common stock during the three months ended March 31, 2021 and June 30, 2021, respectively.

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

Table of Contents

EASTERN BANKSHARES, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS


		Nine Months Ended September 30,					For the Six Months Ended June 30,
		2020		2019
(In thousands)						(In thousands)	2021		2020

Operating activities	Operating activities					Operating activities
Net income	Net income	$	66,800	$	103,860	Net income	$	82,472	$	38,295
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
Provision for loan losses		37,900		4,500
(Release of) provision for loan losses						(Release of) provision for loan losses	(3,880)		37,200
Depreciation and amortization	Depreciation and amortization	12,246		14,757		Depreciation and amortization	6,636		8,471
Change in unamortized net loan costs and premiums		(5,582)		2,853
Deferred income tax expense (benefit)		(7,511)		4,728
Accretion of deferred loan fees and premiums, net						Accretion of deferred loan fees and premiums, net	(14,767)		(3,155)
Deferred income tax expense						Deferred income tax expense	5,407		1,773
Amortization of investment security premiums and discounts	Amortization of investment security premiums and discounts	3,057		2,249		Amortization of investment security premiums and discounts	6,397		1,656
Right-of-use asset amortization	Right-of-use asset amortization	9,086		0		Right-of-use asset amortization	6,130		6,042
Increase in cash surrender value of bank-owned life insurance	Increase in cash surrender value of bank-owned life insurance	(1,685)		(1,638)		Increase in cash surrender value of bank-owned life insurance	(1,073)		(1,155)
Gain on life insurance benefits		(147)		0
Net gain on sale of securities available for sale		(285)		(2,016)
Mark to market on loans held for sale		21		0
Gain on sale of securities available for sale, net						Gain on sale of securities available for sale, net	(1,165)		(285)
Amortization of gains from terminated interest rate swaps	Amortization of gains from terminated interest rate swaps	(7,409)		0		Amortization of gains from terminated interest rate swaps	(16,493)		(373)
Impairment loss on premises and equipment		0		131
Net gain on other real estate owned		(546)		0
Employee Stock Ownership Plan expense						Employee Stock Ownership Plan expense	4,679		0
Other						Other	248		(128)
Change in:	Change in:					Change in:
Trading securities	Trading securities	961		51,819		Trading securities	0		961
Loans held for sale	Loans held for sale	(4,644)		(3,408)		Loans held for sale	(1,583)		(2,965)
Prepaid pension expense	Prepaid pension expense	(26,391)		(13,273)		Prepaid pension expense	1,676		(28,432)
Other assets	Other assets	(122,883)		(41,785)		Other assets	9,746		(133,413)
Other liabilities	Other liabilities	61,326		21,831		Other liabilities	(24,794)		77,509
Net cash provided by operating activities	Net cash provided by operating activities	14,314		144,608		Net cash provided by operating activities	59,636		2,001
Investing activities	Investing activities					Investing activities
Proceeds from sales of securities available for sale	Proceeds from sales of securities available for sale	9,097		47,986		Proceeds from sales of securities available for sale	23,237		9,098
Proceeds from maturities and principal paydowns of securities available for sale	Proceeds from maturities and principal paydowns of securities available for sale	289,151		142,594		Proceeds from maturities and principal paydowns of securities available for sale	381,123		153,542
Purchases of securities available for sale	Purchases of securities available for sale	(971,990)		(51,140)		Purchases of securities available for sale	(2,138,024)		(171,226)
Proceeds from sale of Federal Home Loan Bank stock	Proceeds from sale of Federal Home Loan Bank stock	749		37,378		Proceeds from sale of Federal Home Loan Bank stock	0		749
Purchases of Federal Home Loan Bank stock	Purchases of Federal Home Loan Bank stock	(527)		(28,610)		Purchases of Federal Home Loan Bank stock	(1,796)		(527)
Contributions to low income housing tax credit investments	Contributions to low income housing tax credit investments	(9,614)		(4,645)		Contributions to low income housing tax credit investments	(4,553)		(7,435)
Contributions to other equity investments	Contributions to other equity investments	(1,631)		0		Contributions to other equity investments	(1,920)		(1,092)
Distributions from equity investments		54		15
Net increase in outstanding loans		(929,237)		(129,967)
Distributions from other equity investments						Distributions from other equity investments	170		54
Net decrease (increase) in outstanding loans						Net decrease (increase) in outstanding loans	126,868		(997,881)
Acquisitions, net of cash and cash equivalents acquired						Acquisitions, net of cash and cash equivalents acquired	(4,354)		0
Purchased banking premises and equipment, net	Purchased banking premises and equipment, net	(3,386)		(5,226)		Purchased banking premises and equipment, net	(1,809)		(2,146)
Proceeds from sale of other real estate owned		546		0
Proceeds from sale of premises held for sale						Proceeds from sale of premises held for sale	736		0
Net cash used in investing activities	Net cash used in investing activities	(1,616,788)		8,385		Net cash used in investing activities	(1,620,322)		(1,016,864)
Financing activities	Financing activities					Financing activities
Net increase in demand, savings, interest checking, and money market investment deposit accounts	Net increase in demand, savings, interest checking, and money market investment deposit accounts	3,830,588		151,276		Net increase in demand, savings, interest checking, and money market investment deposit accounts	1,107,351		2,315,592
Net decrease in time deposits	Net decrease in time deposits	(49,395)		(139,042)		Net decrease in time deposits	(12,702)		(20,219)
Net decrease in borrowed funds		(205,958)		(70,673)
Net increase (decrease) in borrowed funds						Net increase (decrease) in borrowed funds	393		(206,240)
Contingent consideration paid	Contingent consideration paid	(165)		(637)		Contingent consideration paid	(79)		(158)
Payment of initial public offering costs		(7,114)		0
Payment of deferred offering costs						Payment of deferred offering costs	0		(4,153)
Dividends declared and paid to common shareholders						Dividends declared and paid to common shareholders	(24,100)		0
Net cash provided by financing activities	Net cash provided by financing activities	3,567,956		(59,076)		Net cash provided by financing activities	1,070,863		2,084,822
Net increase in cash, cash equivalents, and restricted cash		1,965,482		93,917
Net (decrease) increase in cash, cash equivalents, and restricted cash						Net (decrease) increase in cash, cash equivalents, and restricted cash	(489,823)		1,069,959
Cash, cash equivalents, and restricted cash at beginning of period	Cash, cash equivalents, and restricted cash at beginning of period	362,602		259,708		Cash, cash equivalents, and restricted cash at beginning of period	2,054,070		362,602
Cash, cash equivalents, and restricted cash at end of period	Cash, cash equivalents, and restricted cash at end of period	$	2,328,084	$	353,625	Cash, cash equivalents, and restricted cash at end of period	$	1,564,247	$	1,432,561
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest paid		$	12,546	$	26,881
Income taxes		35,126		29,555
Non-cash activities
Net increase in capital commitments relating to low income housing tax credit projects		$	25,816	$	10,000


Supplemental disclosure of cash flow information				Supplemental disclosure of cash flow information
Cash paid during the period for:				Cash paid during the period for:
Interest paid				Interest paid	$	2,127	$	10,533
Income taxes				Income taxes	$	35,122	14,976
Non-cash activities				Non-cash activities
Net increase in capital commitments relating to low income housing tax credit projects				Net increase in capital commitments relating to low income housing tax credit projects	$	14,446	$	13,214
Initial recognition of operating lease right-of-use assets upon adoption of Accounting Standards Update 2016-02	Initial recognition of operating lease right-of-use assets upon adoption of Accounting Standards Update 2016-02	92,948	0	Initial recognition of operating lease right-of-use assets upon adoption of Accounting Standards Update 2016-02	$	0	$	92,948
Initial recognition of operating lease liabilities upon adoption of Accounting Standards Update 2016-02	Initial recognition of operating lease liabilities upon adoption of Accounting Standards Update 2016-02	96,426	0	Initial recognition of operating lease liabilities upon adoption of Accounting Standards Update 2016-02	$	0	$	96,426

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

710

Table of Contents

EASTERN BANKSHARES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Structure and Nature of Operations; ~~Plan of Reorganization and Conversion;~~ Basis of Presentation

Corporate Structure and Nature of Operations

Eastern Bankshares, Inc., a Massachusetts corporation (the “Company”), is a bank holding company. Through its wholly-owned subsidiaries, Eastern Bank (the “Bank”) and Eastern Insurance Group LLC (“Eastern Insurance Group”), the Company provides a variety of banking, trust and investment, ~~services,~~ and insurance services, through its full-service bank branches and insurance offices, located primarily in Eastern Massachusetts, southern and coastal New Hampshire and Rhode Island. Eastern Insurance Group LLC is a wholly-owned subsidiary of the Bank.

The activities of the Company are subject to the regulatory supervision of the ~~board~~Board of ~~governors~~Governors of the Federal Reserve ~~system ("~~System (“Federal ~~Reserve"~~Reserve”). The activities of the ~~Company's subsidiary, Eastern~~ Bank ~~("Bank")~~ are subject to the regulatory supervision of the Massachusetts Commissioner of Banks, the Federal Deposit Insurance Corporation (“FDIC”) and the Consumer Financial Protection ~~Bureau (“CFPB”).~~Bureau. The Company and the activities of the Bank and Eastern Insurance Group are also subject to various Massachusetts, ~~and~~ New Hampshire and Rhode Island business and banking regulations.

~~Plan~~Basis of ~~Conversion; Stock Offering~~Presentation

~~Pursuant to a Plan of Conversion (the “Plan”), Eastern Bank Corporation,~~The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the ~~predecessor~~United States (“GAAP”) as set forth by the Financial Accounting Standards Board (“FASB”) and its Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) as well as the rules and interpretive releases of the Company, reorganized from a mutual holding company into a publicly traded stock form of organization on October 14, 2020. In connection with the reorganization, Eastern Bank Corporation transferred to the Company 100% of Eastern Bank’s common stock,Securities and ~~immediately thereafter merged into the Company.~~

Pursuant to the Plan, the Company sold 179,287,828 shares of common stock in a public offering at $10.00 per share, including 14,940,652 shares of common stock purchased by the Bank’s employee stock ownership plan (the “ESOP”Exchange Commission (“SEC”), for gross offering proceeds of approximately $1,792,878,000. The Company completed the offering on October 14, 2020. Effective as of October 15, 2020, the Company donated 7,470,326 shares of common stock to the Eastern Bank Charitable Foundation (the “Foundation”). A total of 186,758,154 shares of common stock of the Company were issued and outstanding immediately after the donation to the Foundation.

~~The purchase of common stock by the ESOP was financed by a loan from the Company.~~

At September 30, 2020, approximately $12.1 million of stock offering costs had been incurred and deferred. These stock offering costs were deducted from the proceeds of the shares sold in the offering.

Pursuant to the Plan, eligible account holders have received an interest in a “liquidation account” maintained by the Company, and a parallel liquidation account maintained at the Bank has been established to support the Company’s liquidation account in the event the Company does not have sufficient assets to fund its obligations under the ~~Company’s liquidation account. See Note 17 for additional information regarding the liquidation account.~~

~~Basis~~authority of ~~Presentation~~federal securities laws.

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and entities in which it holds a controlling financial interest through being the primary beneficiary or through holding a majority of the voting interest. All intercompany accounts and transactions have been eliminated in consolidation.

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

The accompanying consolidated balance sheet as of ~~September~~June 30, ~~2020,~~2021, the consolidated statements of income and comprehensive income and of changes in equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 and statement of cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 are unaudited. The consolidated balance sheet as of December 31, ~~2019~~2020 was derived from the audited consolidated financial statements as of that date. The interim consolidated financial statements and the accompanying notes should be read in conjunction with the annual consolidated financial statements and the accompanying notes contained within the Company’s ~~prospectus,~~Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (“2020 Form 10-K”), as filed with the ~~Securities and Exchange Commission pursuant to Rule 424(b)(3) on August 18, 2020.~~SEC. In the opinion of management, the Company’s consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 are not necessarily indicative of results to be expected for the year ending December 31, ~~2020,~~2021, any other interim periods, or any future year or period.

2. Summary of Significant Accounting Policies

~~Table~~The following describes the Company’s use of ~~Contents~~

estimates as well as relevant accounting pronouncements that were recently issued but not yet adopted as of June 30, 2021 and those that were adopted during the six months ended June 30, 2021. For a full discussion of significant accounting policies, refer to the notes included within the Company’s 2020 Form 10-K.

Use of Estimates

In preparing the ~~consolidated financial statements,~~Consolidated Financial Statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheets and income and expenses for the periods reported. Actual results could differ from those estimates based on changing conditions, including economic conditions and future events. Material estimates that are particularly susceptible to change relate to the determination of the allowance for loan losses, valuation and fair value measurements, other-than-temporary impairment on investment securities, the liabilities for benefit obligations (particularly pensions), the provision for income taxes and impairment of goodwill and other intangibles.

~~Leases~~

Table of Contents

On January 1, 2020, the Company adopted Accounting Standards Update ("ASU”) 2016-2, “Leases” (“Topic 842”), using the modified retrospective method. The new guidance was applied to leases that existed or were entered into on or after January 1, 2020. The Company’s results for the reporting period beginning on January 1, 2020 have been presented under Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with previous guidance. See “Note 5 – Leases” for further discussion of the adoption and the impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements

The Company qualifies as an emerging growth company under the Jumpstart Our Business Act of 2012 (“JOBS Act”) and has elected to defer the adoption of new or revised accounting standards until the nonpublic company effective dates.

Relevant standards that were recently issued but not yet adopted as of ~~September~~June 30, ~~2020:~~2021:

In March 2020, the FASB issued ASU 2020-4, Reference Rate Reform (Topic 848).: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). This update addresses 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 new guidance applies only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. For public and nonpublic entities, the guidance is effective as of March 12, 2020 through December 31, 2022 and dodoes not apply to contract modifications made after December 31, 2022. The Company qualifies as an emerging growth company (“EGC”) under the Jumpstart Our Business Act of 2012 ("JOBS Act") and has elected to defer the adoption of new or revised accounting standards until the nonpublic company effective dates. As such, the Company will adopt this standard on the nonpublic company effective date and is currently in the process of reviewing its contracts and existing processes in order to assess the risks and potential impact of the transition away from LIBOR.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses on Financial Instruments and relevant amendments (Topic 326) (“ASU 2016-13”). This update was created to replace the current GAAP method of calculating credit ~~losses~~losses. Specifically, the standard replaces the existing incurred loss impairment guidance by requiring immediate recognition of expected credit losses. For financial assets carried at amortized cost that are held at the reporting date (including trade and other receivables, loans and commitments, held-to-maturity debt securities and other financial assets), credit losses are measured based on historical experience, current conditions and reasonable supportable forecasts. The standard also amends existing impairment guidance for available for sale securities, in which credit losses will be recorded as an allowance versus a write-down of the amortized cost basis of the security. It will also allow for a reversal of impairment loss when the credit of the issuer improves. The guidance requires a cumulative effect of the initial application to be recognized in retained earnings at the date of initial application.

In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses (“ASU 2018-19”). The amendments in ~~Update No.~~ASU 2018-19 were intended to clarify that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, ~~Leases.~~Leases. In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. This update requires entities to include expected recoveries of the amortized cost basis previously written off or expected to be written off in the valuation account for purchased financial assets with credit deterioration. In addition, the amendments in this update clarify and improve various aspects of the guidance for ASU 2016-13.

For public entities that meet the definition of an SEC filer (excluding smaller reporting entities) the guidance is effective for annual reporting periods beginning after December 15, 2019. Early adoption is permitted for all entities as of the fiscal years beginning after December 15, 2018. For all other entities, the guidance is effective for annual reporting periods beginning after December 15, 2022, including interim periods within those fiscal years.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic in the United States. to provide economic relief measures including the option to defer adoption of ASU 2016-13 to the earlier of the ending of the national emergency declaration related to the COVID-19 crisis or December 31, 2020. On December 27, 2020, the Consolidated Appropriations Act (the “Appropriations Act”) was enacted to fund the federal government through their fiscal year, extend certain expiring tax provisions and provide additional emergency relief to individuals and businesses related to the COVID-19 pandemic in the United States. Included within the provisions of the Appropriations Act is an extension of the adoption date for ASU 2016-13 from December 31, 2020 to the earlier of January 1, 2022 or 60 days after the date on which the COVID-19 national emergency terminates. The Company anticipates deferring adoption of this standard to January 1, 2022.

To address the impact of ASU 2016-13, the Company has formed a committee, which members include the Chief Credit Officer, the Chief Financial Officer, and Chief Information Officer, to assist in identifying, implementing, and evaluating the impact of the required changes to loan loss estimation models and processes. The Company is evaluating portfolio segmentation, methodologies and other assumptions and has initiated model validation efforts. Third parties have been engaged to assist the Company in project management, documentation, model governance, model validation and related internal controls implementation. The Company is currently assessing the impact of the new standard on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20) Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”). This update modifies the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. The guidance eliminates requirements for certain disclosures that are no longer considered cost

912

Table of Contents

beneficial and requires new ones that the FASB considers pertinent. For public companies, ASU 2018-14 is effective for fiscal years ending after December 15, 2020. For nonpublic companies, ASU 2018-14 is effective for fiscal years ending after December 15, 2021. Early adoption is permitted. The Company ~~which currently qualifies as an EGC, anticipates to early~~will adopt this standard ~~during~~on the ~~year ending on December 31, 2021 and is currently assessing the impact of~~nonpublic company effective date. The Company expects the adoption of this standard will not have a material impact on its consolidated financial statements. To date, the Company has been assessing the key differences and gaps between its current allowance methodology and model and those it is considering using upon adoption. The Company has contracted with a vendor and is currently assessing the adequacy of existing loss data and developing models for default and loss estimates. While currently unable to reasonably estimate the impact of adopting this ASU, it is expected that the impact of adoption will be influenced by the composition, characteristics and quality of the loan and securities portfolios as well as the prevailing economic conditions and forecasts as of the adoption date.

Relevant standards that were adopted during the ~~nine~~six months ended ~~September~~June 30, 2021:

In August 2018, the FASB issued ASU 2018-15, Intangibles–Goodwill and Other–Internal-use software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (“ASU 2018-15”). This update addresses accounting for fees paid by a customer for implementation, set-up and other upfront costs incurred in a cloud computing arrangement that is hosted by the vendor (i.e., a service contract). The new guidance aligns treatment for capitalization of implementation costs with guidance on internal-use software. For public entities, the guidance is effective for annual reporting periods beginning after December 15, 2019. For nonpublic entities, the guidance is effective for annual reporting periods beginning after December 15, 2020, and ~~the year ended~~for all interim periods beginning after December ~~31, 2019:~~

In accordance with the nonpublic company requirements, the Company adopted ASC 606 on January 1, 2019. In completing its assessment of the Company’s revenue streams within the scope of ASC 606, the Company did not identify any revenue sources for which the timing of recognition needed to change under the new standard.15, 2021. The adoption of this standard on January 1, ~~2019~~2021 did not have a material impact on the Company’s consolidated financial statements, its current accounting policies and practices, or the timing or amount of revenue recognized. As a result, no adjustment has been made to retained earnings. Additionally, the Company evaluated and made necessary changes, where appropriate, to business processes, systems, and internal controls in order to support the recognition, measurement, and disclosure requirements of the new standard. The Company also considered the impact of ASC 606 subtopic ASC 340-40. Under ASC 340-40, the Company is required to capitalize and amortize incremental costs of obtaining a contract, such as sales commissions, over the period of benefit. The Company does not pay sales commissions and has not identified any other incremental costs to obtain a contract, therefore ASC 340-40 had no impact to its consolidated financial statements.

In ~~February 2016,~~January 2021, the FASB issued ASU ~~2016-2,~~2021-01, ~~Leases~~Reference Rate Reform (Topic ~~842)~~848) (“ASU ~~2016-2”~~2021-01”)~~. Topic 842 was subsequently amended~~ which expands the scope of guidance in ASC 848 so that companies can apply the optional expedients to derivative instruments affected by the clearing house changes. ASU ~~2018-1,~~ ~~Land Easement Practical Expedient for Transition to Topic 842~~ (“2021-01 also clarifies and updates several items in ASU ~~2018-1”);~~2020-04 as part of the Board’s monitoring of global reference rate reform activities. ASU ~~2018-10,~~ ~~Codification Improvements to Topic 842, Leases~~ ~~(“ASU 2018-10”); ASU 2018-11,~~ ~~Targeted Improvements~~ ~~(“ASU 2018-11”); and ASU 2018-20~~ ~~Leases (Topic 842): Narrow-Scope Improvements for Lessors~~ ~~(“ASU 2018-20”). ASU 2018-1~~2021-01 permits ~~an entity~~entities to elect ancertain optional ~~transition practical expedient~~expedients and exceptions to ~~not evaluate under Topic 842 land easements~~modifications of interest rate indexes used for computing when accounting derivative contracts and certain hedging relationships impacted by changes in interest rates used for discounting, margining, or contract price alignment. ASU 2021-01 clarifies other aspects of the guidance in ASC 848 and provides new guidance on how to address the effects of the cash compensation adjustment that ~~exist or expired before~~is provided as part of the ~~entity’s adoption~~above change on certain aspects of Topic 842 and that were not previously accounted for as leases under Topic 840. ASU 2018-10 was issued to clarify the Accounting Standards Codification ("Codification") or to correct unintended application of guidance within ASU 2016-2. ASU 2018-11 allows for an optional transition method in which the provisions of Topic 842 would be applied upon the adoption date and would not have to be retroactively applied to the earliest reporting period presented in the consolidated financial statements. Lastly, ASU 2018-20 provided narrow-scope improvements for lessors, which was issued to increase transparency and comparability among organizations. ASU 2016-2 and the several additional amendments thereto are collectively referred to herein as ASC 842.

~~ASC 842 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors).~~hedge accounting. The standard represents a wholesale change to lease accounting and requires all leases with a term longer than 12 months to be reported on the balance sheet through recognition of a right-of-use asset and a corresponding liability for future lease obligations. Leases will be classified as financing or operating, with classification affecting the pattern and grouping of expenses in the income statement. The standard also requires extensive disclosures for assets, expenses, and cash flows associated with leases, as well as a maturity analysis of lease liabilities. In November 2019, the FASB issued guidance delaying the effective date for all entities except for public business entities that are SEC filers. For public business entities the guidance was effective upon issuance and allows for ~~fiscal year beginning after December 15, 2018, for all other entities the guidance is effective for fiscal years beginning after December 15, 2020, early adoption is permitted for all entities.~~

retrospective or prospective application with certain conditions. The Company ~~early adopted this standard on January 1, 2020. In accordance with ASU 2018-11, the Company used the effective date as the date of application and, therefore, periods prior to January 1, 2020, were~~did not restated. The new standard provides a number of optional practical expedients in transition. The Company elected the “package of practical expedients”, which permits the Company to not reassess prior conclusions about lease identification, lease classification, and initial direct costs under ASC 842. The Company also elected the hindsight practical expedient and, therefore, used the hindsight knowledge as of the effective date when determining lease terms and impairment. In addition, the Company elected the practical expedient to not separate lease and non-lease components and, therefore, accounts for each separate lease component of a contract and its associated non-lease components as a single lease component. The new standard also provides a practical expedient for an entity’s ongoing accounting relating to leases of 12 months or less (“short-term leases”). The Company has elected the short-term lease recognition exemption for all leases that qualify and will not recognize right-of-use assets and lease liabilities for those leases. The adoption of this standard resulted in the recognition of right-of-use assets and lease liabilities on the Company’s balance sheet for its real estate and equipment operating leases of $92.9 million and $96.4 million, respectively. The Company recorded an adjustment to remove the Company’s existing deferred rent liability of

~~Table of Contents~~

approximately $3.5 million. The Company also recognized a transition adjustment to the opening balance of retained earnings on January 1, 2020 amounting to $1.1 million, net of tax, related to an incremental accrued rent adjustment calculated as a result of electing the hindsight practical expedient. The amount of right-of-use assets were determined based upon the present value of the remaining minimum rental payments under current leasing standards for existing operating leases, adjusted for options that the Company is reasonably certain to exercise, less accrued rent as of December 31, 2019 and the incremental accrued rent as a result of electing the hindsight practical expedient. Lastly, the amount of lease liabilities was determined based upon the present value of the remaining minimum rental payments under current leasing standards for existing operating leases, adjusted for options that the Company is reasonably certain to exercise.

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820) Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement~~ ~~(“ASU 2018-13”)~~. This update modifies the disclosure requirements related to the fair value measurements in Topic 820. Specifically, this update amends disclosure around changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used in Level 3 fair value measurements and the description of measurement uncertainty. The Company adopted ASU 2018-13 on January 1, 2020.elect retrospective application. The adoption of this update did not have a material impact on ~~its~~the Company’s consolidated financial statements.

~~In October 2018, the FASB issued ASU 2018-16,~~ ~~Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes~~ (“ASU 2018-16”). This update permits the use of the Overnight Index Swap (“OIS”) rate based on the Secured Overnight Financing Rate (“SOFR”) as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815. The amendments should be adopted on a prospective basis for qualifying new or re-structured hedging relationships entered into on or after the date of adoption. The Company adopted this standard on January 1, 2020. The adoption of this update did not have a material impact on its consolidated financial statements

3. Securities

Available for Sale Securities

The amortized cost, gross unrealized gains and losses, and fair value of available for sale securities ~~for the periods below~~as of June 30, 2021 and December 31, 2020 were as follows:
As of and for the nine months ended September 30, 2020
Amortized
Cost Unrealized
Gains Unrealized
Losses Fair
Value
(In Thousands)
Debt securities:
Government-sponsored residential mortgage-backed securities $ 1,500,348 $ 38,862 $ (216) $ 1,538,994
Government-sponsored commercial mortgage-backed securities 17,089 7 0 17,096
U.S. Agency bonds 293,713 58 (598) 293,173
U.S. Treasury securities 70,147 527 (1) 70,673
State and municipal bonds and obligations 263,635 17,834 0 281,469
Qualified zone academy bond 6,236 31 0 6,267
$ 2,151,168 $ 57,319 $ (815) $ 2,207,672


		As of and for the year ended December 31, 2019									As of June 30, 2021
		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value			Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
		(In Thousands)									(In thousands)
Debt securities:	Debt securities:									Debt securities:
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	$	1,151,305	$	17,208	$	(545)	$	1,167,968	Government-sponsored residential mortgage-backed securities	$	3,480,643	$	22,240	$	(24,354)	$	3,478,529
Government-sponsored commercial mortgage-backed securities										Government-sponsored commercial mortgage-backed securities	183,062		66		(1,333)		181,795
U.S. Agency bonds										U.S. Agency bonds	860,575		0		(19,570)		841,005
U.S. Treasury securities	U.S. Treasury securities	50,155		265		0		50,420		U.S. Treasury securities	69,401		23		(93)		69,331
State and municipal bonds and obligations	State and municipal bonds and obligations	272,582		10,959		(3)		283,538		State and municipal bonds and obligations	259,935		18,186		0		278,121
Qualified zone academy bond		6,155		155		0		6,310
		$	1,480,197	$	28,587	$	(548)	$	1,508,236		$	4,853,616	$	40,515	$	(45,350)	$	4,848,781

1113

Table of Contents


	As of December 31, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
	(In thousands)
Debt securities:
Government-sponsored residential mortgage-backed securities	$	2,106,658	$	42,142	$	0	$	2,148,800
Government-sponsored commercial mortgage-backed securities	17,054		27		0		17,081
U.S. Agency bonds	670,468		113		(3,872)		666,709
U.S. Treasury securities	70,106		263		0		70,369
State and municipal bonds and obligations	260,898		20,004		0		280,902
	$	3,125,184	$	62,549	$	(3,872)	$	3,183,861

The amortized cost and estimated fair value of available for sale securities by contractual maturities as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without prepayment penalties.

The scheduled contractual maturities of available for sale securities as of the dates indicated were as follows:


		As of September 30, 2020																					As of June 30, 2021
		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
		(In Thousands)																					(In thousands)
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	$	0	$	0	$	30,748	$	32,462	$	127,727	$	133,194	$	1,341,873	$	1,373,338	$	1,500,348	$	1,538,994	Government-sponsored residential mortgage-backed securities	$	0	$	0	$	18,156	$	19,323	$	593,853	$	597,546	$	2,868,634	$	2,861,660	$	3,480,643	$	3,478,529
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	0		0		0		0		17,089		17,096		0		0		17,089		17,096		Government-sponsored commercial mortgage-backed securities	0		0		24,038		23,781		159,024		158,014		0		0		183,062		181,795
U.S. Agency bonds	U.S. Agency bonds	0		0		0		0		293,713		293,173		0		0		293,713		293,173		U.S. Agency bonds	0		0		199,796		196,383		660,779		644,622		0		0		860,575		841,005
U.S. Treasury securities	U.S. Treasury securities	50,046		50,533		20,101		20,140		0		0		0		0		70,147		70,673		U.S. Treasury securities	10,048		10,071		59,353		59,260		0		0		0		0		69,401		69,331
State and municipal bonds and obligations	State and municipal bonds and obligations	406		409		19,832		20,719		74,440		78,727		168,957		181,614		263,635		281,469		State and municipal bonds and obligations	485		486		28,682		29,781		72,515		76,046		158,253		171,808		259,935		278,121
Qualified zone academy bond		6,236		6,267		0		0		0		0		0		0		6,236		6,267
Total	Total	$	56,688	$	57,209	$	70,681	$	73,321	$	512,969	$	522,190	$	1,510,830	$	1,554,952	$	2,151,168	$	2,207,672	Total	$	10,533	$	10,557	$	330,025	$	328,528	$	1,486,171	$	1,476,228	$	3,026,887	$	3,033,468	$	4,853,616	$	4,848,781

As of December 31, 2019
Due in one year or less Due after one year to five years Due after five to ten years Due after ten years Total
Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value
(In Thousands)
Government-sponsored residential mortgage-backed securities $ 0 $ 0 $ 8,139 $ 8,464 $ 199,428 $ 203,706 $ 943,738 $ 955,798 $ 1,151,305 $ 1,167,968
U.S. Treasury securities 40 40 50,115 50,380 0 0 0 0 50,155 50,420
State and municipal bonds and obligations 381 381 8,889 9,109 77,227 79,504 186,085 194,544 272,582 283,538
Qualified zone academy bond 6,155 6,310 0 0 0 0 0 0 6,155 6,310
Total $ 6,576 $ 6,731 $ 67,143 $ 67,953 $ 276,655 $ 283,210 $ 1,129,823 $ 1,150,342 $ 1,480,197 $ 1,508,236

Table of Contents

~~There were 0 gross~~


	As of December 31, 2020
	Due in one year or less				Due after one year to five years				Due after five to ten years				Due after ten years				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Government-sponsored residential mortgage-backed securities	$	0	$	0	$	46,293	$	48,925	$	96,338	$	100,278	$	1,964,027	$	1,999,597	$	2,106,658	$	2,148,800
Government-sponsored commercial mortgage-backed securities	0		0		0		0		17,054		17,081		0		0		17,054		17,081
U.S. Agency bonds	0		0		99,772		99,834		570,696		566,875		0		0		670,468		666,709
U.S. Treasury securities	50,023		50,251		20,083		20,118		0		0		0		0		70,106		70,369
State and municipal bonds and obligations	406		408		20,511		21,431		74,980		79,635		165,001		179,428		260,898		280,902
Total	$	50,429	$	50,659	$	186,659	$	190,308	$	759,068	$	763,869	$	2,129,028	$	2,179,025	$	3,125,184	$	3,183,861

Gross realized gains from sales of available for sale securities during ~~both~~ the three months ended ~~September~~June 30, 2021 and 2020 were less than $0.1 million and ~~2019,~~$0.2 million, respectively, and $1.2 million and $0.3 million ~~and $2.1 million was recognized~~ during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The Company had 0 significant gross realized losses from sales of securities available for sale during both the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019. NaN~~2020. There was 0 other-than-temporary impairment ~~("OTTI"~~(“OTTI”) ~~was~~ recorded during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020.

Management prepares an estimate of the expected cash flows for investment securities available for sale that potentially may be deemed to have been an OTTI. This estimate begins with the contractual cash flows of the security. This amount is then reduced by an estimate of probable credit losses associated with the security. When estimating the extent of probable losses on the securities, management considers the credit quality and the ability to pay of the underlying issuers. Indicators of diminished credit quality of the issuers include defaults, interest deferrals, or “payments in kind.” Management also considers those factors listed in the ~~Investments~~“Investments – Debt and Equity ~~Securities~~Securities” topic of the FASB ASC when estimating the ultimate realizability of the cash flows for each individual security.

~~Table of Contents~~

The resulting estimate of cash flows after considering credit is then subject to a present value computation using a discount rate equal to the current yield used to accrete the beneficial interest or the effective interest rate implicit in the security at the date of acquisition. If the present value of the estimated cash flows is less than the current amortized cost basis, an OTTI is considered to have occurred and the security is written down to the fair value indicated by the cash flow analysis. As part of the analysis, management considers whether it intends to sell the security or whether it is more than likely that it would be required to sell the security before the expected recovery of its amortized cost basis.

Information pertaining to available for sale securities with gross unrealized losses as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, which the Company has not deemed to be OTTI, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:

September 30, 2020
Less than 12 Months 12 Months or Longer Total
# of
Holdings Gross
Unrealized
Losses Fair
Value Gross
Unrealized
Losses Fair
Value Gross
Unrealized
Losses Fair
Value
(Dollars In Thousands)
Government-sponsored residential mortgage-backed securities 1 $ 216 $ 103,012 $ 0 $ 0 $ 216 $ 103,012
U.S. Agency bonds 3 598 249,001 0 0 598 249,001
U.S. Treasury securities 1 1 10,000 0 0 1 10,000
5 $ 815 $ 362,013 $ 0 $ 0 $ 815 $ 362,013

Table of Contents

December 31, 2019
Less than 12 Months 12 Months or Longer Total
# of
Holdings Gross
Unrealized
Losses Fair
Value Gross
Unrealized
Losses Fair
Value Gross
Unrealized
Losses Fair
Value
(Dollars In Thousands)
Government-sponsored residential mortgage-backed securities 1 $ 545 $ 74,550 $ 0 $ 0 $ 545 $ 74,550
State and municipal bonds and obligations 2 3 850 0 0 3 850
3 $ 548 $ 75,400 $ 0 $ 0 $ 548 $ 75,400


	As of June 30, 2021
		Less than 12 Months				12 Months or Longer				Total
	# of Holdings	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
	(Dollars in thousands)
Government-sponsored residential mortgage-backed securities	20	$	24,354	$	2,178,499	$	0	$	0	$	24,354	$	2,178,499
Government-sponsored commercial mortgage-backed securities	8	1,333		161,684		0		0		1,333		161,684
U.S. Agency bonds	13	19,570		841,005		0		0		19,570		841,005
U.S. Treasury securities	2	93		59,262		0		0		93		59,262
	43	$	45,350	$	3,240,450	$	0	$	0	$	45,350	$	3,240,450


	As of December 31, 2020
		Less than 12 Months				12 Months or Longer				Total
	# of Holdings	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
	(Dollars in thousands)
U.S. Agency bonds	6	$	3,872	$	416,824	$	0	$	0	$	3,872	$	416,824
	6	$	3,872	$	416,824	$	0	$	0	$	3,872	$	416,824

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 expected recovery of its amortized cost basis. As a result, the Company does not consider these investments with gross unrealized losses to be OTTI. 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, and volatility of earnings.

As a result of the Company’s review of these qualitative and quantitative factors, the causes of the impairments listed in the tables above by category are as follows as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:

•Government-sponsored residential mortgage-backed securities -– The securities with unrealized losses in this portfolio have contractual terms that generally do not permit the issuer to settle the security at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality. Additionally, these securities are implicitly guaranteed by the U.S. government or one of its agencies.

•Government-sponsored commercial mortgage-backed securities – The securities with unrealized losses in this portfolio have contractual terms that generally do not permit the issuer to settle the security at a ~~loss position as~~price less than the current par value of ~~December 31, 2019 was subsequently~~the investment. The decline in ~~a gain position as~~market value of ~~September 30, 2020.~~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.

•U.S. Agency bonds -– The securities with unrealized losses in this portfolio have contractual terms that generally do not permit the issuer to settle the security at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality. Additionally, these securities are implicitly guaranteed by the U.S. government or one of its agencies.

•U.S. Treasury securities – The securities with unrealized losses in this portfolio have contractual terms that generally do not permit the issuer to settle the security at a price less than the current par value of the investment. The decline in market value of these securities is attributable to changes in interest rates and not credit quality. Additionally, these securities are implicitly guaranteed by the U.S. government or one of its agencies.

1316

Table of Contents

•~~U.S. Treasury securities~~ - The security with an unrealized loss in this portfolio has contractual terms that generally do not permit the issuer to settle the security at a price less than the current par value of the investment. The decline in market value of this security is attributable to changes in interest rates and not credit quality. Additionally, this security is implicitly guaranteed by the U.S. government or one of its agencies.

•~~State and municipal bonds and obligations~~ - The securities with unrealized losses in this portfolio as of December 31, 2019 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 as of December 31, 2019 is attributable to changes in interest rates and not credit quality. These securities were subsequently in a gain position as of September 30, 2020. These bonds are investment grade and are rated AA by Standard and Poor’s.

4. Loans and Allowance for Loan Losses

Loans

The following table provides a summary of the Company’s loan portfolio as of the dates indicated:


		At September 30,		At December 31,			At June 30,		At December 31,
		2020		2019			2021		2020
		(In thousands)					(In thousands)
Commercial and industrial	Commercial and industrial	$	2,177,216	$	1,642,184	Commercial and industrial	$	1,740,679	$	1,995,016
Commercial real estate	Commercial real estate	3,652,312		3,535,441		Commercial real estate	3,775,771		3,573,630
Commercial construction	Commercial construction	297,508		273,774		Commercial construction	237,927		305,708
Business banking	Business banking	1,251,573		771,498		Business banking	1,339,852		1,339,164
Residential real estate	Residential real estate	1,373,237		1,428,630		Residential real estate	1,457,498		1,370,957
Consumer home equity	Consumer home equity	890,771		933,088		Consumer home equity	834,938		868,270
Other consumer(1)	Other consumer(1)	301,624		402,431		Other consumer(1)	234,410		277,780
Gross loans before unamortized premiums, unearned discounts and deferred fees	Gross loans before unamortized premiums, unearned discounts and deferred fees	9,944,241		8,987,046		Gross loans before unamortized premiums, unearned discounts and deferred fees	9,621,075		9,730,525
Allowance for credit losses		(115,432)		(82,297)
Allowance for loan losses						Allowance for loan losses	(105,637)		(113,031)
Unamortized premiums, net of unearned discounts and deferred fees	Unamortized premiums, net of unearned discounts and deferred fees	(32,747)		(5,565)		Unamortized premiums, net of unearned discounts and deferred fees	(29,739)		(23,536)
Loans after the allowance for credit losses, unamortized premiums, unearned discounts and deferred fees	Loans after the allowance for credit losses, unamortized premiums, unearned discounts and deferred fees	$	9,796,062	$	8,899,184	Loans after the allowance for credit losses, unamortized premiums, unearned discounts and deferred fees	$	9,485,699	$	9,593,958

(1) Automobile loans are included in the other consumer portfolio above and amounted to $83.7 million and $126.7 million at June 30, 2021 and December 31, 2020, respectively.

There are no other loan categories that exceed 10% of total loans not already reflected in the preceding table.

The Company’s lending activities are conducted principally in the New England area with the exception of its Shared National Credit Program (“SNC Program”) portfolio. The Company participates in the SNC Program in an effort to improve its industry and geographical diversification. The SNC Program portfolio is included in the Company’s commercial and industrial, commercial real estate and commercial construction portfolios. The SNC Program portfolio is defined as loan syndications with exposure over $100 million and with three or more lenders participating.

Most loans originated by the Company are either collateralized by real estate or other assets or guaranteed by federal and local governmental authorities. The ability and willingness of the single-family residential and consumer borrowers to honor their repayment commitments is generally dependent on the level of overall economic activity within the borrowers’ geographic areas and real estate values. The ability and willingness of commercial real estate, commercial and industrial, and construction loan borrowers to honor their repayment commitments is generally dependent on the health of the real estate economy in the borrowers’ geographic areas and the general economy.

Loans Pledged as Collateral

The carrying value of loans pledged to secure advances from the Federal Home Loan Bank ~~("FHLB"~~(“FHLB”) of Boston ~~("FHLBB"~~(“FHLBB”) were $2.3 billion and $2.4 billion ~~and $1.5 billion~~ at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The balance of funds borrowed from the ~~FHLB~~FHLBB were ~~$14.8~~$14.3 million and ~~$19.0~~$14.6 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

~~Table of Contents~~

The carrying value of loans pledged to secure advances from the Federal Reserve Bank ~~("FRB"~~(“FRB”) were ~~$0.9 billion~~$812.6 million and ~~$1.0 billion~~$884.1 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. There were 0 funds borrowed from the FRB outstanding at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

Serviced Loans

At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, mortgage loans partially or wholly-owned by others and serviced by the Company amounted to approximately ~~$14.4~~$12.1 million and ~~$15.6~~$13.5 million, respectively.

Allowance for Loan Losses

Table of Contents

The allowance for loan losses is established to provide for probable losses incurred in the Company’s loan portfolio at the balance sheet date and is established through a provision for loan losses charged to net income. Charge-offs, net of recoveries, are charged directly to the allowance. Commercial and residential loans are charged-off in the period in which they are deemed uncollectible. Delinquent loans in these product types are subject to ongoing review and analysis to determine if a charge-off in the current period is appropriate. For consumer loans, policies and procedures exist that require charge-off consideration upon a certain triggering event depending on the product type.

The following ~~table summarizes the changes in the allowance for loan losses for the periods indicated:~~

For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2020 2019 2020 2019
(In thousands)
Balance at the beginning of period $ 116,636 $ 82,662 $ 82,297 $ 80,655
Loans charged off (2,418) (2,241) (6,025) (6,559)
Recoveries 514 2,601 1,260 4,426
Provision charged to expense 700 0 37,900 4,500
Balance at end of period $ 115,432 $ 83,022 $ 115,432 $ 83,022

~~The following~~ tables summarize the changes in the allowance for loan losses by loan category ~~and bifurcates~~for the ~~amount of allowance allocated to each loan category based on collective impairment analysis and loans evaluated individually for impairment:~~periods indicated:


		For the Three Months Ended September 30, 2020																			For the Three Months Ended June 30, 2021
		Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Residential Real Estate		Consumer Home Equity		Other Consumer		Other		Total			Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Residential Real Estate		Consumer Home Equity		Other Consumer		Other		Total
		(In Thousands)																			(In thousands)
Allowance for Loan Losses:
Allowance for loan losses:																				Allowance for loan losses:
Beginning balance	Beginning balance	$	33,229	$	54,228	$	4,816	$	9,805	$	6,569	$	3,875	$	3,762	$	352	$	116,636	Beginning balance	$	25,406	$	55,138	$	3,350	$	13,504	$	6,235	$	3,576	$	3,498	$	373	$	111,080
Charge-offs	Charge-offs	(140)		0		0		(1,179)		0		(22)		(1,077)		0		(2,418)		Charge-offs	(550)		0		0		(1,838)		0		0		(275)		0		(2,663)
Recoveries	Recoveries	306		4		0		91		43		31		39		0		514		Recoveries	13		4		0		291		17		3		192		0		520
Provision (benefit)		(3,281)		1,350		(540)		2,711		(261)		(76)		834		(37)		700
(Release of) provision																				(Release of) provision	(2,273)		(2,383)		96		748		226		9		211		66		(3,300)
Ending balance	Ending balance	$	30,114	$	55,582	$	4,276	$	11,428	$	6,351	$	3,808	$	3,558	$	315	$	115,432	Ending balance	$	22,596	$	52,759	$	3,446	$	12,705	$	6,478	$	3,588	$	3,626	$	439	$	105,637


	For the Three Months Ended June 30, 2020
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Residential Real Estate		Consumer Home Equity		Other Consumer		Other		Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	30,531	$	49,227	$	4,712	$	10,181	$	6,228	$	3,913	$	4,019	$	327	$	109,138
Charge-offs	(27)		(24)		0		(1,198)		0		0		(15)		0		(1,264)
Recoveries	58		5		0		27		13		8		51		0		162
Provision (release of)	2,667		5,020		104		795		328		(46)		(293)		25		8,600
Ending balance	$	33,229	$	54,228	$	4,816	$	9,805	$	6,569	$	3,875	$	3,762	$	352	$	116,636


	For the Six Months Ended June 30, 2021
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Residential Real Estate		Consumer Home Equity		Other Consumer		Other		Total
	(In thousands)
Allowance for loan losses:
Beginning balance	$	26,617	$	54,569	$	4,553	$	13,152	$	6,435	$	3,744	$	3,467	$	494	$	113,031
Charge-offs	(550)		(234)		0		(3,222)		0		0		(639)		0		(4,645)
Recoveries	22		4		0		656		27		74		348		0		1,131
(Release of) provision	(3,493)		(1,580)		(1,107)		2,119		16		(230)		450		(55)		(3,880)
Ending balance	$	22,596	$	52,759	$	3,446	$	12,705	$	6,478	$	3,588	$	3,626	$	439	$	105,637

1518

Table of Contents


		For the Three Months Ended September 30, 2019																			For the Six Months Ended June 30, 2020
		Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Residential Real Estate		Consumer Home Equity		Other Consumer		Other		Total			Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Residential Real Estate		Consumer Home Equity		Other Consumer		Other		Total
		(In Thousands)																			(In thousands)
Allowance for Loan Losses:
Allowance for loan losses:																				Allowance for loan losses:
Beginning balance	Beginning balance	$	20,829	$	33,586	$	4,762	$	8,054	$	6,800	$	4,097	$	4,324	$	210	$	82,662	Beginning balance	$	20,919	$	34,730	$	3,424	$	8,260	$	6,380	$	4,027	$	4,173	$	384	$	82,297
Charge-offs	Charge-offs	0		0		0		(1,630)		(3)		(67)		(541)		0		(2,241)		Charge-offs	(27)		(24)		0		(2,535)		0		(473)		(548)		0		(3,607)
Recoveries	Recoveries	2,170		175		0		172		17		16		51		0		2,601		Recoveries	380		6		0		154		73		22		111		0		746
Provision (benefit)		(2,730)		1,698		(1,526)		1,725		(164)		18		438		541		0
Provision (release of)																				Provision (release of)	11,957		19,516		1,392		3,926		116		299		26		(32)		37,200
Ending balance	Ending balance	$	20,269	$	35,459	$	3,236	$	8,321	$	6,650	$	4,064	$	4,272	$	751	$	83,022	Ending balance	$	33,229	$	54,228	$	4,816	$	9,805	$	6,569	$	3,875	$	3,762	$	352	$	116,636

For the Nine Months Ended September 30, 2020
Commercial
and
Industrial Commercial
Real Estate Commercial
Construction Business
Banking Residential
Real Estate Consumer
Home Equity Other
Consumer Other Total
(In thousands)
Allowance for loan losses:
Beginning balance $ 20,919 $ 34,730 $ 3,424 $ 8,260 $ 6,380 $ 4,027 $ 4,173 $ 384 $ 82,297
Charge-offs (167) (24) 0 (3,714) 0 (495) (1,625) 0 (6,025)
Recoveries 686 10 0 245 116 53 150 0 1,260
Provision (benefit) 8,676 20,866 852 6,637 (145) 223 860 (69) 37,900
Ending balance $ 30,114 $ 55,582 $ 4,276 $ 11,428 $ 6,351 $ 3,808 $ 3,558 $ 315 $ 115,432
Ending balance: individually evaluated for impairment $ 3,687 $ 397 $ 0 $ 1,018 $ 1,507 $ 263 $ 0 $ 0 $ 6,872
Ending balance: acquired with deteriorated credit quality $ 1,732 $ 1,066 $ 0 $ 0 $ 293 $ 0 $ 0 $ 0 $ 3,091
Ending balance: collectively evaluated for impairment $ 24,695 $ 54,119 $ 4,276 $ 10,410 $ 4,551 $ 3,545 $ 3,558 $ 315 $ 105,469
Loans ending balance:
Individually evaluated for impairment $ 16,390 $ 6,456 $ 280 $ 19,123 $ 26,958 $ 4,552 $ 54 $ 0 $ 73,813
Acquired with deteriorated credit quality 3,569 4,420 0 0 3,432 0 0 0 11,421
Collectively evaluated for impairment 2,157,257 3,641,436 297,228 1,232,450 1,342,847 886,219 301,570 0 9,859,007
Total loans by group $ 2,177,216 $ 3,652,312 $ 297,508 $ 1,251,573 $ 1,373,237 $ 890,771 $ 301,624 $ 0 $ 9,944,241

The following tables bifurcate the amount of loans and the allowance allocated to each loan category based on the type of impairment analysis as of the periods indicated:


	As of June 30, 2021
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Residential Real Estate		Consumer Home Equity		Other Consumer		Other		Total
	(In thousands)
Allowance for loan losses ending balance:
Individually evaluated for impairment	$	4,544	$	0	$	0	$	937	$	1,624	$	263	$	0	$	0	$	7,368
Acquired with deteriorated credit quality	0		249		0		0		293		0		0		0		542
Collectively evaluated for impairment	18,052		52,510		3,446		11,768		4,561		3,325		3,626		439		97,727
Total allowance for loan losses by group	$	22,596	$	52,759	$	3,446	$	12,705	$	6,478	$	3,588	$	3,626	$	439	$	105,637
Loans ending balance:
Individually evaluated for impairment	$	20,266	$	4,051	$	0	$	18,179	$	25,091	$	3,954	$	24	$	0	$	71,565
Acquired with deteriorated credit quality	1,397		249		0		0		2,880		0		0		0		4,526
Collectively evaluated for impairment	1,719,016		3,771,471		237,927		1,321,673		1,429,527		830,984		234,386		0		9,544,984
Total loans by group	$	1,740,679	$	3,775,771	$	237,927	$	1,339,852	$	1,457,498	$	834,938	$	234,410	$	0	$	9,621,075

1619

Table of Contents

For the Nine Months Ended September 30, 2019
Commercial
and
Industrial Commercial
Real Estate Commercial
Construction Business
Banking Residential
Real Estate Consumer
Home Equity Other
Consumer Other Total
(In thousands)
Allowance for loan losses:
Beginning balance $ 19,321 $ 32,400 $ 4,606 $ 8,167 $ 7,059 $ 4,113 $ 4,600 $ 389 $ 80,655
Charge-offs (272) 0 0 (4,440) (66) (191) (1,590) 0 (6,559)
Recoveries 3,538 10 0 492 88 44 254 0 4,426
Provision (benefit) (2,318) 3,049 (1,370) 4,102 (431) 98 1,008 362 4,500
Ending balance $ 20,269 $ 35,459 $ 3,236 $ 8,321 $ 6,650 $ 4,064 $ 4,272 $ 751 $ 83,022
Ending balance: individually evaluated for impairment $ 2,827 $ 40 $ 0 $ 630 $ 1,532 $ 266 $ 0 $ 0 $ 5,295
Ending balance: acquired with deteriorated credit quality $ 227 $ 85 $ 0 $ 0 $ 213 $ 0 $ 0 $ 0 $ 525
Ending balance: collectively evaluated for impairment $ 17,215 $ 35,334 $ 3,236 $ 7,691 $ 4,905 $ 3,798 $ 4,272 $ 751 $ 77,202
Loans ending balance:
Individually evaluated for impairment $ 33,827 $ 9,095 $ 0 $ 11,836 $ 26,891 $ 4,458 $ 0 $ 0 $ 86,107
Acquired with deteriorated credit quality 3,596 7,298 0 0 3,397 0 0 0 14,291
Collectively evaluated for impairment 1,621,701 3,471,390 256,053 739,771 1,408,372 949,971 436,217 0 8,883,475
Total loans by group $ 1,659,124 $ 3,487,783 $ 256,053 $ 751,607 $ 1,438,660 $ 954,429 $ 436,217 $ 0 $ 8,983,873


	As of December 31, 2020
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Residential Real Estate		Consumer Home Equity		Other Consumer		Other		Total
	(In thousands)
Allowance for loan losses ending balance:
Individually evaluated for impairment	$	4,555	$	210	$	0	$	1,435	$	1,565	$	289	$	0	$	0	$	8,054
Acquired with deteriorated credit quality	1,283		822		0		0		327		0		0		0		2,432
Collectively evaluated for impairment	20,779		53,537		4,553		11,717		4,543		3,455		3,467		494		102,545
Total allowance for loan losses by group	$	26,617	$	54,569	$	4,553	$	13,152	$	6,435	$	3,744	$	3,467	$	494	$	113,031
Loans ending balance:
Individually evaluated for impairment	$	17,343	$	4,435	$	0	$	21,901	$	27,056	$	4,845	$	29	$	0	$	75,609
Acquired with deteriorated credit quality	3,432		2,749		0		0		3,116		0		0		0		9,297
Collectively evaluated for impairment	1,974,241		3,566,446		305,708		1,317,263		1,340,785		863,425		277,751		0		9,645,619
Total loans by group	$	1,995,016	$	3,573,630	$	305,708	$	1,339,164	$	1,370,957	$	868,270	$	277,780	$	0	$	9,730,525

Management uses a methodology to systematically estimate the amount of loss incurred in the portfolio. Commercial real estate, commercial and industrial, commercial construction and business banking loans are evaluated using a loan rating system, historical losses and other factors which form the basis for estimating incurred losses. Portfolios of more homogeneous populations of loans, including residential mortgages and consumer loans, are analyzed as groups taking into account delinquency ratios, historical loss experience and charge-offs. For the purpose of estimating the allowance for loan losses, management segregates the loan portfolio into the categories noted in the above tables. Each of these loan categories possesses unique risk characteristics such as the purpose of the loan, repayment source, and collateral. These characteristics are considered when determining the appropriate level of the allowance for each category. Some examples of these risk characteristics unique to each loan category include:

Commercial Lending

Commercial and industrial: The primary risk associated with commercial and industrial loans is the ability of borrowers to achieve business results consistent with those projected at origination. Collateral frequently consists of a first lien position on business assets including, but not limited to accounts receivable, inventory, airplanes and equipment. The primary repayment source is operating cash flow and, secondarily, the liquidation of assets. The Company often obtains personal guarantees from individuals holding material ownership in the borrowing entity.

Commercial real estate: Collateral values are established by independent third-party appraisals and evaluations. Primary repayment sources include operating income generated by the real estate, permanent debt refinancing, sale of the real estate and, secondarily, by liquidation of the collateral. The Company often obtains personal guarantees from individuals holding material ownership in the borrowing entity.

Commercial construction: These loans are generally considered to present a higher degree of risk than other real estate loans and may be affected by a variety of factors, such as adverse changes in interest rates and the borrower’s ability to control costs and adhere to time schedules. Construction loans are underwritten utilizing feasibility studies, independent appraisal reviews,

~~Table of Contents~~

sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the completed project. Construction loan repayment is substantially dependent on the ability of the borrower to complete the project and obtain permanent financing.

Table of Contents

Business banking: These loans are typically secured by all business assets or commercial real estate. Business banking originations include traditionally underwritten loans as well as partially automated scored loans. Business banking scored loans are determined by utilizing the Company’s proprietary decision matrix that has a number of quantitative factors including, but not limited to, a guarantor’s credit score, industry risk, and time in business. The Company also engages in Small Business Association (“SBA”) lending, both in the business banking and commercial banking divisions. The SBA guarantees reduce the Company’s loss due to default and are considered a credit enhancement to the loan structure.

Residential Lending

Residential real estate: These loans are made to borrowers who demonstrate the ability to repay principal and interest on a monthly basis. Underwriting considerations include, among others, income sources and their reliability, willingness to repay as evidenced by credit repayment history, financial resources (including cash reserves) and the value of the collateral. The Company maintains policy standards for minimum credit score and cash reserves and maximum loan to value consistent with a “prime” portfolio. Collateral consists of mortgage liens on 1-4 family residential dwellings. The Company does not originate or purchase sub-prime or other high-risk loans. Residential loans are originated either for sale to investors or retained in the Company’s loan portfolio. Decisions about whether to sell or retain residential loans are made based on the interest rate characteristics, pricing for loans in the secondary mortgage market, competitive factors and the Company’s capital needs.

Consumer Lending

Consumer home equity: Home equity lines of credit are granted for ten years with monthly interest-only repayment requirements. Full principal repayment is required at the end of the ten-year draw period. Home equity loans are term loans that require the monthly payment of principal and interest such that the loan will be fully amortized at maturity. Underwriting considerations are materially consistent with those utilized in residential real estate. Collateral consists of a senior or subordinate lien on owner-occupied residential property.

Other consumer: The Company’s policy and underwriting in this category, which is comprised primarily of ~~airplane~~home improvement and automobile loans, include the following factors, among others: income sources and reliability, credit histories, term of repayment, and collateral value, as applicable. These are typically granted on an unsecured basis, with the exception of airplane and automobile loans.

Credit Quality

Commercial Lending Credit Quality

The Company monitors credit quality indicators and utilizes portfolio scorecards to assess the risk of its commercial portfolio. Specifically, the Company utilizes a 15-point credit risk-rating system to manage risk and identify potential problem loans.

Prior to December 31, 2020, the Company utilized a 12-point credit risk-rating system to manage risk and identify potential problem loans. ~~Risk-rating~~In the fourth quarter of 2020, the Company realigned its credit risk-rating system, transitioning to a 15-point credit risk-rating system. The Company believes that the expansion from the prior 12-point scale provides more refinement in the pass grade categories; new pass grades are 0-10. There are no changes to non-pass categories, which continue to align with regulatory guidelines and are found in ratings: special mention (11), substandard (12), doubtful (13) and loss (14). The Company believes that increasing granularity of the risk rating system allows for more robust portfolio management and increased precision and effectiveness of credit risk identification.

Under both point systems, risk-rating assignments are based upon a number of quantitative and qualitative factors that are under continual review. Factors include cash flow, collateral coverage, liquidity, leverage, position within the industry, internal controls and management, financial reporting, and other considerations. The risk-rating categories under the new 15-point credit risk-rating system are defined as follows:

0 Risk Rating - Unrated

Certain segments of the portfolios are not rated. These segments include airplane loans, business banking scored loan products, and other commercial loans managed by exception. Loans within this unrated loan segment are monitored by delinquency status; and for lines of credit greater than $100,000 in exposure, an annual review is conducted. The Company supplements performance data with current business credit scores for the business banking portfolio on a quarterly basis. Unrated ~~loans managed outside of airplane loans~~commercial and business banking loans are generally restricted to commercial exposure of less than $1 million. Loans

Table of Contents

included in this category have qualification requirements that include a risk rating of 6W10 or better at the time of recommendation for unrated status, acceptable management of deposit accounts, and no known negative changes in management, operations or financial performance. ~~Restricted from this category are lines of credit managed with borrowing base requirements.~~

For purposes of estimating the allowance for loan losses, unrated loans are considered in the same manner as pass rated loans.

~~Table of Contents~~

~~1-6W~~1-10 Risk Rating – Pass

Loans with a ~~risk-rating~~risk rating of ~~1-6W~~1-10 are classified as “Pass” and are comprised of loans that range from “substantially risk free” which indicates borrowers of unquestioned credit standing, well-established national companies with a very strong financial condition, and loans fully secured by policy conforming cash levels, through ~~“acceptable risk”~~“low pass” which indicates acceptable rated loans that may be experiencing weak cash flow, impending lease rollover or minor liquidity concerns. The top end of the risk-rating category (6W) includes loans that, although containing the same risk-rating as those with a rating of 6, are being more closely monitored to determine if a downgrade is necessary.

711 Risk Rating – Special Mention (Potential Weakness)

Loans to borrowers in this category exhibit potential weaknesses or downward trends deserving management’s close attention. While potentially weak, no loss of principal or interest is envisioned. Included in this category are borrowers who are performing as agreed, are weak when compared to industry standards, may be experiencing an interim loss and may be in declining industries. An element of asset quality, financial flexibility or management is below average. ~~Management and owners may have limited depth, particularly when operating under strained circumstances.~~ The Company does not consider borrowers within this category as new business prospects. Borrowers rated special mention may find it difficult to obtain alternative financing from traditional bank sources.

812 Risk Rating – Substandard (Well-Defined Weakness)

Loans with a risk-rating of 812 exhibit well-defined weaknesses that, if not corrected, may jeopardize the ~~repayment~~orderly liquidation of the debt. A loan is classified as substandard if it is inadequately protected by the repayment capacity of the obligor or by the collateral pledged. Specifically, repayment under market rates and terms, or by the requirements under the existing loan documents, is in jeopardy, but no loss of principal or interest is envisioned. There is a possibility that a partial loss of principal and/or interest will occur in the future if the deficiencies are not corrected. Loss potential, while existing in the aggregate portfolio of substandard assets, does not have to exist in individual assets classified as substandard. Credits in this category often may have reported a loss in the most recent fiscal year end and are likely to continue to report losses in the interim period, or interim losses are expected to result in a fiscal year-end loss. NonaccrualNon-accrual is possible, but not mandatory, in this class.

913 Risk Rating – Doubtful (Loss Probable)

Loans classified as doubtful have comparable weaknesses as found in the loans classified as substandard, with the added provision that such weaknesses make collection of the debt in full (based on currently existing facts, conditions and values) highly questionable and improbable. Serious problems exist such that a partial loss of principal is likely. The probability of loss ~~exceeds 50%,~~exists, however, because of ~~reasonably~~reasonable specific pending factors that may work to strengthen the credit, estimated losses are deferred until a more exact status can be determined. ~~Pending factors may include the sale of the company, a merger, capital injection, new profitable purchase orders, and refinancing plans.~~ Specific reserves will be the amount identified after specific review. ~~Nonaccrual~~Non-accrual is mandatory in this class.

1014 Risk Rating – Loss

Loans to borrowers in this category are deemed incapable of repayment. Loans to such borrowers are considered ~~uncollectable~~uncollectible and of such little value that continuance as active assets of the Company is not warranted. This classification does not mean that the loans have no recovery or salvage value, but rather, it is not practical or desirable to defer writing off these assets even though partial recovery may occur in the future. Loans in this category have a recorded investment of $0 at the time of the downgrade.

The credit quality of the commercial loan portfolio is actively monitored and supported by a comprehensive credit approval process; and all large dollar transactions are sent for approval to a committee of seasoned business line and credit professionals. Risk ratings are periodically reviewed and the Company maintains an independent credit risk review function that reports directly to the Risk Management Committee of the Board of Directors. Credits that demonstrate significant deterioration in credit quality are transferred to a specialized group of ~~seasoned workout~~experienced officers for individual attention.

1922

Table of Contents

The following tables detail the internal risk-rating categories for the Company’s commercial and industrial, commercial real estate, commercial construction and business banking portfolios:


			As of September 30, 2020											As of June 30, 2021
Category	Category	Risk Rating	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Total		Category	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Total
		(In thousands)												(In thousands)
Unrated	Unrated	—	$	751,703	$	43,126	$	332	$	904,292	$	1,699,453	Unrated	$	434,766	$	5,105	$	61	$	913,151	$	1,353,083
Pass	Pass	1-6W	1,233,803		3,279,252		275,172		280,997		5,069,224		Pass	1,201,952		3,492,582		218,073		346,198		5,258,805
Special mention	Special mention	7	115,579		294,176		18,114		49,348		477,217		Special mention	48,853		127,856		13,703		53,920		244,332
Substandard	Substandard	8	62,382		32,928		3,890		16,126		115,326		Substandard	39,751		150,177		6,090		25,299		221,317
Doubtful	Doubtful	9	13,749		2,830		0		810		17,389		Doubtful	15,357		51		0		1,284		16,692
Loss	Loss	10	0		0		0		0		0		Loss	0		0		0		0		0
Total	Total		$	2,177,216	$	3,652,312	$	297,508	$	1,251,573	$	7,378,609	Total	$	1,740,679	$	3,775,771	$	237,927	$	1,339,852	$	7,094,229


			As of December 31, 2019											As of December 31, 2020
Category	Category	Risk Rating	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Total		Category	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Business Banking		Total
		(In thousands)												(In thousands)
Unrated	Unrated	—	$	150,226	$	48,266	$	331	$	445,201	$	644,024	Unrated	$	655,346	$	6,585	$	0	$	918,921	$	1,580,852
Pass	Pass	1-6W	1,405,902		3,436,267		260,615		315,194		5,417,978		Pass	1,199,522		3,256,697		280,792		336,657		5,073,668
Special mention	Special mention	7	24,171		28,606		9,438		2,006		64,221		Special mention	78,117		134,562		10,330		57,092		280,101
Substandard	Substandard	8	42,894		21,635		3,390		8,207		76,126		Substandard	47,525		173,308		14,586		24,788		260,207
Doubtful	Doubtful	9	18,991		667		0		890		20,548		Doubtful	14,506		2,478		0		1,706		18,690
Loss	Loss	10	0		0		0		0		0		Loss	0		0		0		0		0
Total	Total		$	1,642,184	$	3,535,441	$	273,774	$	771,498	$	6,222,897	Total	$	1,995,016	$	3,573,630	$	305,708	$	1,339,164	$	7,213,518

Paycheck Protection Program (“PPP”) loans are included within the unrated category of the commercial and industrial and business banking portfolios in the ~~table~~tables above. Commercial and industrial PPP loans and business banking PPP loans amounted to ~~$637.6~~$366.1 million and ~~$485.9~~$459.7 million, respectively, at ~~September~~June 30, 2021 and $568.8 million and $457.4 million respectively, at December 31, 2020. The Company does not have an allowance for loan losses for PPP loans as they are 100% guaranteed by the SBA.

Residential and Consumer Lending Credit Quality

For the Company’s residential and consumer portfolios, the quality of the loan is best indicated by the repayment performance of an individual borrower. Updated appraisals, broker opinions of value and other collateral valuation methods are employed in the residential and consumer portfolios, typically for credits that are deteriorating. Delinquency status is determined using payment performance, while accrual status may be determined using a combination of payment performance, expected borrower viability and collateral value. Delinquent consumer loans are handled by a team of seasoned collection specialists.

Asset Quality

In response to the novel coronavirus (“COVID-19”) pandemic, the Company has granted loan modifications to allow deferral of payments for borrowers negatively impacted by the COVID-19 pandemic. Modifications granted to customers allowed for full payment deferrals (principal and interest) or deferral of only principal payments. The balance of loans which underwent a modification and have not yet resumed payment as of June 30, 2021 and December 31, 2020 was $149.8 million and $332.7 million, respectively. The Company defines a modified loan to have resumed payment if it is one month past the modification end date and not more than 30 days past due. These modifications with active deferrals met the criteria of either Section 4013 of the CARES Act or the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) and therefore are not deemed TDRs (as defined herein). Additionally, loans that are performing in accordance with the contractual terms of the modification are not reflected as being

Table of Contents

past due and therefore are not impacting non-accrual or delinquency totals as of June 30, 2021 and December 31, 2020. The Company continued to accrue interest on these COVID-19 modified loans and evaluated the deferred interest for collectability as of June 30, 2021 and December 31, 2020.

The Company manages its loan portfolio with careful monitoring. As a general rule, loans more than 90 days past due with respect to principal and interest are classified as ~~nonaccrual~~non-accrual loans. Exceptions may be made if management believes that collateral held by the Company is clearly sufficient and in full satisfaction of both principal and interest, or the loan is accounted for as a ~~PCI~~purchased credit impaired (“PCI”) loan. Therefore, as permitted by banking regulations, certain consumer loans past due 90 days or more may continue to accrue interest. The Company may also use discretion regarding other loans over 90 days delinquent if the loan is well secured and in the process of collection. ~~Nonaccrual~~Non-accrual loans and loans that are more than 90 days past due but still accruing interest are considered ~~nonperforming~~non-performing loans.

~~Nonaccrual~~Non-accrual loans may be returned to an accrual status when principal and interest payments are no longer delinquent, and the risk characteristics of the loan have improved to the extent that there no longer exists a concern as to the collectability of principal and interest. Loans are considered past due based upon the number of days delinquent according to

~~Table of Contents~~

their contractual terms. ~~Specifically, nonaccrual residential loans that have been restructured must perform for a period of six months before being considered for accrual status.~~

A loan is expected to remain on ~~nonaccrual~~non-accrual status until it becomes current with respect to principal and interest, the loan is liquidated, or the loan is determined to be uncollectible and is charged-off against the allowance for loan losses.

The following is a summary pertaining to the breakdown of the Company’s ~~nonaccrual~~non-accrual loans:


		As of September 30,		As of December 31,			As of June 30,		As of December 31,
		2020		2019			2021		2020
		(In Thousands)					(In thousands)
Commercial and industrial	Commercial and industrial	$	10,719	$	21,471	Commercial and industrial	$	14,591	$	11,714
Commercial real estate	Commercial real estate	2,936		4,120		Commercial real estate	531		915
Commercial construction		280		0
Business banking	Business banking	15,033		8,502		Business banking	14,234		17,430
Residential real estate	Residential real estate	7,419		5,598		Residential real estate	6,445		6,815
Consumer home equity	Consumer home equity	3,693		2,137		Consumer home equity	3,592		3,602
Other consumer	Other consumer	1,034		623		Other consumer	514		529
Total non-accrual loans	Total non-accrual loans	$	41,114	$	42,451	Total non-accrual loans	$	39,907	$	41,005

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

As of September 30, 2020
30-59
Days Past
Due 60-89
Days Past
Due 90 or More
Days Past
Due Total Past
Due Current Total
Loans Recorded
Investment
> 90 Days
and Accruing
(In thousands)
Commercial and industrial $ 129 $ 0 $ 1,990 $ 2,119 $ 2,175,097 $ 2,177,216 $ 1,048
Commercial real estate 199 0 4,443 4,642 3,647,670 3,652,312 2,336
Commercial construction 0 0 280 280 297,228 297,508 0
Business banking 3,583 1,646 9,480 14,709 1,236,864 1,251,573 0
Residential real estate 9,223 1,822 5,484 16,529 1,356,708 1,373,237 326
Consumer home equity 1,273 910 3,170 5,353 885,418 890,771 9
Other consumer 1,980 467 1,034 3,481 298,143 301,624 0
Total $ 16,387 $ 4,845 $ 25,881 $ 47,113 $ 9,897,128 $ 9,944,241 $ 3,719


		As of December 31, 2019															As of June 30, 2021
		30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total Loans		Recorded Investment >90 Days and Accruing			30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
		(In thousands)															(In thousands)
Commercial and industrial	Commercial and industrial	$	1,407	$	0	$	963	$	2,370	$	1,639,814	$	1,642,184	$	0	Commercial and industrial	$	0	$	267	$	647	$	914	$	1,739,765	$	1,740,679	$	275
Commercial real estate	Commercial real estate	1,290		100		1,856		3,246		3,532,195		3,535,441		1,315		Commercial real estate	1,896		0		1,414		3,310		3,772,461		3,775,771		1,164
Commercial Construction		0		0		0		0		273,774		273,774		0
Commercial construction																Commercial construction	0		0		0		0		237,927		237,927		0
Business banking	Business banking	3,031		763		6,095		9,889		761,609		771,498		0		Business banking	4,004		1,902		6,609		12,515		1,327,337		1,339,852		0
Residential real estate	Residential real estate	14,030		2,563		3,030		19,623		1,409,007		1,428,630		0		Residential real estate	11,706		1,330		4,631		17,667		1,439,831		1,457,498		277
Consumer home equity	Consumer home equity	2,497		430		1,636		4,563		928,525		933,088		9		Consumer home equity	610		403		3,408		4,421		830,517		834,938		9
Other consumer	Other consumer	3,451		514		579		4,544		397,887		402,431		0		Other consumer	1,074		438		513		2,025		232,385		234,410		0
Total	Total	$	25,706	$	4,370	$	14,159	$	44,235	$	8,942,811	$	8,987,046	$	1,324	Total	$	19,290	$	4,340	$	17,222	$	40,852	$	9,580,223	$	9,621,075	$	1,725

2124

Table of Contents


	As of December 31, 2020
	30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total Loans		Recorded Investment >90 Days and Accruing
	(In thousands)
Commercial and industrial	$	4	$	268	$	1,924	$	2,196	$	1,992,820	$	1,995,016	$	848
Commercial real estate	0		556		1,545		2,101		3,571,529		3,573,630		1,111
Commercial construction	0		0		0		0		305,708		305,708		0
Business banking	5,279		3,311		10,196		18,786		1,320,378		1,339,164		0
Residential real estate	9,184		2,517		4,904		16,605		1,354,352		1,370,957		279
Consumer home equity	1,806		364		3,035		5,205		863,065		868,270		9
Other consumer	1,978		234		517		2,729		275,051		277,780		0
Total	$	18,251	$	7,250	$	22,121	$	47,622	$	9,682,903	$	9,730,525	$	2,247

In the normal course of business, the Company may become aware of possible credit problems in which borrowers exhibit potential for the inability to comply with the contractual terms of their loans, but which currently do not yet meet the criteria for classification as ~~nonperforming~~non-performing loans. However, based upon the Company’s past experiences, some of these loans with potential weaknesses will ultimately be restructured or placed in non-accrual status.

Troubled Debt Restructurings (“TDR”)

In cases where a borrower experiences financial difficulty and the Company makes certain concessionary modifications to contractual terms, the loan is classified as a troubled debt restructured loan. The objective is to aid in the resolution of ~~nonperforming~~non-performing loans by modifying the contractual obligation to avoid the possibility of foreclosure.

All TDR loans are considered impaired and therefore are subject to a specific review for impairment loss. The amount of impairment loss, if any, is recorded as a specific loss allocation to each individual loan in the allowance for loan losses. Commercial loans and residential loans that have been classified as TDRs and which subsequently default are reviewed to determine if the loan should be deemed collateral dependent. In such an instance, any shortfall between the value of the collateral and the book value of the loan is determined by measuring the recorded investment in the loan against the fair value of the collateral less costs to sell.

The Company’s policy is to have any TDR loans which are on ~~nonaccrual~~non-accrual status prior to being modified remain on ~~nonaccrual~~non-accrual status for approximately six months subsequent to being modified before management considers its return to accrual status. If the TDR loan is on accrual status prior to being modified, it is reviewed to determine if the modified loan should remain on accrual status.

The following ~~table shows~~tables show the TDR loans on accrual and ~~nonaccrual~~non-accrual status as of the dates indicated:


		As of September 30, 2020										As of June 30, 2021
		TDRs on Accrual Status			TDRs on Nonaccrual Status			Total TDRs				TDRs on Accrual Status			TDRs on Non-Accrual Status			Total TDRs
		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans			Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans
		(Dollars in thousands)										(Dollars in thousands)
Commercial and industrial	Commercial and industrial	2	$	5,671	8	$	6,986	10	$	12,657	Commercial and industrial	1	$	5,675	6	$	9,607	7	$	15,282
Commercial real estate	Commercial real estate	1	3,520		2	696		3	4,216		Commercial real estate	1	3,520		0	0		1	3,520
Business banking	Business banking	5	4,090		2	223		7	4,313		Business banking	5	3,945		7	1,507		12	5,452
Residential real estate	Residential real estate	146	22,803		26	3,765		172	26,568		Residential real estate	135	21,677		26	3,129		161	24,806
Consumer home equity	Consumer home equity	85	3,766		12	786		97	4,552		Consumer home equity	77	3,494		12	460		89	3,954
Other consumer	Other consumer	3	31		1	23		4	54		Other consumer	2	5		1	19		3	24
Total	Total	242	$	39,881	51	$	12,479	293	$	52,360	Total	221	$	38,316	52	$	14,722	273	$	53,038

As of December 31, 2019
TDRs on Accrual Status TDRs on Nonaccrual Status Total TDRs
Number of Loans Balance of
Loans Number of Loans Balance of
Loans Loans Balance of
Loans
(Dollars in thousands)
Commercial and industrial 4 $ 10,899 14 $ 19,781 18 $ 30,680
Commercial real estate 1 3,520 3 3,338 4 6,858
Business banking 2 3,156 1 204 3 3,360
Residential real estate 152 25,093 27 3,977 179 29,070
Consumer home equity 89 5,955 5 600 94 6,555
Total 248 $ 48,623 50 $ 27,900 298 $ 76,523

Table of Contents


	As of December 31, 2020
	TDRs on Accrual Status			TDRs on Non-Accrual Status			Total TDRs
	Number of Loans	Balance of Loans		Number of Loans	Balance of Loans		Number of Loans	Balance of Loans
	(Dollars in thousands)
Commercial and industrial	1	$	5,628	7	$	6,819	8	$	12,447
Commercial real estate	1	3,521		1	480		2	4,001
Business banking	6	4,471		6	722		12	5,193
Residential real estate	146	23,416		27	3,273		173	26,689
Consumer home equity	91	4,030		12	815		103	4,845
Other consumer	3	29		0	0		3	29
Total	248	$	41,095	53	$	12,109	301	$	53,204

The amount of specific reserve associated with the TDRs was ~~$3.8~~$4.0 million and ~~$3.2~~$3.5 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. ~~During the nine months ended September 30, 2020 and the year ended December 31, 2019, $2.2 million and $0.3 million, respectively, in TDRs moved from nonaccrual to accrual. The amount of~~There were 0 additional commitments to lend to borrowers who have been a party to a TDR ~~was $0 and $2.5 million at September~~as of both June 30, ~~2020~~2021 and December 31, ~~2019, respectively.~~

~~Table of Contents~~

2020.

The following tables show the modifications which occurred during the periods and the change in the recorded investment subsequent to the modifications occurring:

For the Three Months Ended September 30, 2020 For the Nine Months Ended September 30, 2020
Number
of
Contracts Pre-
Modification
Outstanding
Recorded
Investment Post-
Modification
Modification
Outstanding
Recorded
Investment (1) Number
of
Contracts Pre-Modification
Modification
Outstanding
Recorded
Investment Post-
Modification
Modification
Outstanding
Recorded
Investment (1)
(Dollars in thousands)
Commercial and industrial 0 $ 0 $ 0 1 $ 140 $ 140
Commercial real estate 0 0 0 2 632 632
Business banking 0 0 0 3 1,040 1,040
Residential real estate 0 0 0 3 399 399
Consumer home equity 0 0 0 12 527 531
Other consumer 3 35 35 4 58 58
Total 3 $ 35 $ 35 25 $ 2,796 $ 2,800


	For the Three Months Ended June 30, 2021					For the Six Months Ended June 30, 2021
	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)
	(Dollars in thousands)
Business banking	1	$	462	$	462	1	$	462	$	462
Residential real estate	0	0		0		1	295		295
Total	1	$	462	$	462	2	$	757	$	757

For the Three Months Ended September 30, 2019 For the Nine Months Ended September 30, 2019
Number
of
Contracts Pre-
Modification
Outstanding
Recorded
Investment Post-
Modification
Modification
Outstanding
Recorded
Investment (1) Number
of
Contracts Pre-Modification
Modification
Outstanding
Recorded
Investment Post-
Modification
Modification
Outstanding
Recorded
Investment (1)
(Dollars in thousands)
Commercial and industrial 7 $ 11,032 $ 11,032 14 $ 18,494 $ 18,794
Commercial real estate 0 0 0 2 3,277 3,277
Business banking 2 3,184 3,184 2 3,184 3,184
Residential real estate 2 741 756 5 1,174 1,201
Consumer home equity 1 47 47 4 201 204
Total 12 $ 15,004 $ 15,019 27 $ 26,330 $ 26,660
(1)The post-modification balances represent the balance of the loan on the date of modification. These amounts may show an increase when modification includes capitalization of interest.


	For the Three Months Ended June 30, 2020					For the Six Months Ended June 30, 2020
	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment (1)
	(Dollars in thousands)
Commercial and industrial	1	$	141	$	141	1	$	141	$	141
Commercial real estate	1	506		506		1	506		506
Business banking	4	1,165		1,165		4	1,165		1,165
Residential real estate	2	155		155		3	399		399
Consumer home equity	4	113		113		12	527		531
Other consumer	0	0		0		1	24		24
Total	12	$	2,080	$	2,080	22	$	2,762	$	2,766

(1)The post-modification balances represent the balance of the loan on the date of modification. These amounts may show an increase when modification includes capitalization of interest.

At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the outstanding recorded investment of loans that were new to TDR loans during the ~~period~~six months ended June 30, 2021 and the year ended December 31, 2020 was ~~$2.5~~$0.8 million and ~~$36.2~~$3.9 million, respectively.

Table of Contents

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

~~Table of Contents~~

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2020 2019 2020 2019
(In Thousands)
Adjusted interest rate and extended maturity $ 0 $ 138 $ 0 $ 806
Adjusted interest rate and principal deferred 0 0 0 40
Adjusted interest rate 0 3,184 0 3,184
Interest only/principal deferred 0 0 1,305 40
Extended maturity 0 0 35 0
Extended maturity and interest only/principal deferred 0 47 427 47
Additional underwriting - increased exposure 0 0 0 10,572
Court-ordered concession 35 0 1,033 321
Subordination 0 11,032 0 11,032
Other 0 618 0 618
Total $ 35 $ 15,019 $ 2,800 $ 26,660


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
	(In thousands)
Interest only/principal deferred	$	0	$	1,305	$	0	$	1,305
Extended maturity	0		35		0		35
Extended maturity and interest only/principal deferred	0		381		0		427
Court-ordered concession	0		359		295		999
Principal and interest deferred	462		0		462		0
Total	$	462	$	2,080	$	757	$	2,766

The following table shows the number of loans and the recorded investment amount of those loans, as of the respective date, that have been modified during the prior 12 months which have subsequently defaulted during the periods indicated. The Company considers a loan to have defaulted when it reaches 90 days past due or is transferred to ~~nonaccrual:~~non-accrual:

For the Three Months Ended September 30, For the Nine Months Ended September 30,
2020 2019 2020 2019
Number of
Contracts Recorded
Investment Number of
Contracts Recorded
Investment Number of
Contracts Recorded
Investment Number of
Contracts Recorded
Investment
(Dollars in thousands)
Troubled debt restructurings that subsequently defaulted (1):
Commercial and industrial 0 $ 0 7 $ 16,741 0 $ 0 11 $ 22,283
Commercial real estate 0 0 0 0 0 0 1 330
Residential real estate 0 0 2 478 0 0 3 584
Consumer Home Equity 1 40 1 81 1 40 1 81
Total 1 $ 40 10 $ 17,300 1 $ 40 16 $ 23,278


	For the Six Months Ended June 30,
	2021			2020
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	(Dollars in thousands)
Troubled debt restructurings that subsequently defaulted (1):
Business banking	1	$	411	0	$	0
Consumer home equity	1	57		1	1,317
Total	2	$	468	1	$	1,317

(1)This table does not reflect any TDRs which were fully charged off, paid off, or otherwise settled during the period. In addition, there were 0 TDRs modified during the prior 12 months which subsequently defaulted during the three months ended June 30, 2021 and June 30, 2020.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2020 the~~2021, 0 amounts were charged-off on TDRs modified in the prior 12 ~~months were $0.2 million and $0.6 million, respectively.~~months. During ~~both~~ the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020, there were 0$0 and $0.4 million in charge-offs on ~~TDR loans~~TDRs modified in the prior 12 months.

Impaired Loans

Impaired loans consist of all loans for which management has determined it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreements. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due.

The Company measures impairment of loans using a discounted cash flow method, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. The Company has defined the population of impaired loans to include certain ~~nonaccrual~~non-accrual loans, TDR loans, and residential and home equity loans that have been partially charged off.

2427

Table of Contents

The following table summarizes the Company’s impaired loans by loan portfolio as of the dates indicated:


		As of September 30, 2020						As of December 31, 2019							As of June 30, 2021						As of December 31, 2020
		Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance			Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
		(In thousands)													(In thousands)
With no related allowance recorded:	With no related allowance recorded:													With no related allowance recorded:
Commercial and industrial	Commercial and industrial	$	9,261	$	10,478	$	—	$	22,074	$	22,819	$	—	Commercial and industrial	$	12,433	$	13,752	$	—	$	9,182	$	11,212	$	—
Commercial real estate	Commercial real estate	4,397		4,491		—		7,553		7,808		—		Commercial real estate	4,051		4,101		—		3,955		3,974		—
Commercial construction		280		280		—		0		0		—
Business banking	Business banking	3,783		5,214		—		2,738		4,062		—		Business banking	4,725		6,079		—		5,250		7,659		—
Residential real estate	Residential real estate	13,166		14,894		—		16,517		17,858		—		Residential real estate	13,676		15,186		—		14,730		17,010		—
Consumer home equity	Consumer home equity	2,148		2,148		—		3,666		3,697		—		Consumer home equity	2,105		2,105		—		2,571		2,571		—
Other consumer	Other consumer	54		54		—		0		0		—		Other consumer	24		24		—		29		29		—
Sub-total	Sub-total	33,089		37,559		—		52,548		56,244		—		Sub-total	37,014		41,247		—		35,717		42,455		—
With an allowance recorded:	With an allowance recorded:													With an allowance recorded:
Commercial and industrial	Commercial and industrial	7,129		7,431		3,687		10,296		10,503		2,337		Commercial and industrial	7,833		8,209		4,544		8,161		8,432		4,555
Commercial real estate	Commercial real estate	2,059		2,199		397		88		90		40		Commercial real estate	0		0		0		480		497		210
Commercial construction		0		0		0		0		0		0
Business banking	Business banking	15,340		19,697		1,018		8,920		13,176		571		Business banking	13,454		19,172		937		16,651		21,146		1,435
Residential real estate	Residential real estate	13,792		13,792		1,507		13,015		14,072		1,399		Residential real estate	11,415		11,415		1,624		12,326		12,326		1,565
Consumer home equity	Consumer home equity	2,404		2,404		263		2,889		2,913		322		Consumer home equity	1,849		1,849		263		2,274		2,274		289
Sub-total	Sub-total	40,724		45,523		6,872		35,208		40,754		4,669		Sub-total	34,551		40,645		7,368		39,892		44,675		8,054
Total	Total	$	73,813	$	83,082	$	6,872	$	87,756	$	96,998	$	4,669	Total	$	71,565	$	81,892	$	7,368	$	75,609	$	87,130	$	8,054

The following tables display information regarding interest income recognized on impaired loans, by portfolio, for the periods indicated:


	For the Three Months Ended				For the Six Months Ended
	June 30, 2021				June 30, 2021
	Average Recorded Investment		Total Interest Recognized		Average Recorded Investment		Total Interest Recognized
	(In thousands)
With no related allowance recorded:
Commercial and industrial	$	11,800	$	47	$	10,849	$	92
Commercial real estate	4,057		44		4,116		89
Business banking	4,748		25		4,886		51
Residential real estate	13,942		138		14,311		277
Consumer home equity	2,176		16		2,309		35
Other consumer	24		0		26		0
Sub-total	36,747		270		36,497		544
With an allowance recorded:
Commercial and industrial	7,774		0		7,870		0
Commercial real estate	155		0		405		0
Business banking	14,714		14		15,519		29
Residential real estate	11,638		121		11,927		243
Consumer home equity	1,910		14		2,028		31
Sub-total	36,191		149		37,749		303
Total	$	72,938	$	419	$	74,246	$	847

2528

Table of Contents

For the Three Months Ended For the Nine Months Ended
September 30, 2020 September 30, 2020
Average
Recorded
Investment Total
Interest
Recognized Average
Recorded
Investment Total
Interest
Recognized
(In Thousands)
With no related allowance recorded:
Commercial and industrial $ 9,273 $ 48 $ 14,152 $ 167
Commercial real estate 4,408 45 5,433 134
Commercial construction 280 0 125 0
Business banking 3,298 30 2,659 66
Residential real estate 13,513 129 13,141 399
Consumer home equity 3,034 21 3,287 61
Other consumer 53 1 33 1
Sub-total 33,859 274 38,830 828
With an allowance recorded:
Commercial and industrial 6,229 0 8,168 0
Commercial real estate 1,017 0 625 0
Commercial construction 0 0 0 0
Business banking 17,452 15 13,063 44
Residential real estate 14,165 144 13,708 446
Consumer home equity 2,417 23 2,692 69
Sub-total 41,280 182 38,256 559
Total $ 75,139 $ 456 $ 77,086 $ 1,387

For the Three Months Ended For the Nine Months Ended
September 30, 2019 September 30, 2019
Average
Recorded
Investment Total
Interest
Recognized Average
Recorded
Investment Total
Interest
Recognized
(In Thousands)
With no related allowance recorded:
Commercial and industrial $ 26,351 $ 116 $ 16,346 $ 339
Commercial real estate 9,106 74 10,486 222
Business banking 2,872 11 1,845 11
Residential real estate 11,500 15 11,537 352
Consumer home equity 1,837 1 1,915 71
Sub-total 51,666 217 42,129 995
With an allowance recorded:
Commercial and industrial 6,289 0 4,516 0
Commercial real estate 88 0 452 0
Business banking 8,104 10 7,326 10
Residential real estate 12,978 19 13,024 442
Consumer home equity 2,306 1 2,403 89
Sub-total 29,765 30 27,721 541
Total $ 81,431 $ 247 $ 69,850 $ 1,536

~~Table of Contents~~


	For the Three Months Ended				For the Six Months Ended
	June 30, 2020				June 30, 2020
	Average Recorded Investment		Total Interest Recognized		Average Recorded Investment		Total Interest Recognized
	(In thousands)
With no related allowance recorded:
Commercial and industrial	$	12,304	$	49	$	16,592	$	119
Commercial real estate	4,401		44		5,946		89
Business banking	2,392		17		2,339		36
Residential real estate	11,678		125		11,728		252
Consumer home equity	3,315		16		3,155		37
Other Consumer	22		0		23		1
Sub-total	34,112		251		39,783		534
With an allowance recorded:
Commercial and industrial	6,545		0		9,138		0
Commercial real estate	510		0		429		0
Commercial construction	93		0		47		0
Business banking	12,955		15		10,869		30
Residential real estate	14,664		169		14,707		343
Consumer home equity	2,706		22		3,087		51
Sub-total	37,473		206		38,277		424
Total	$	71,585	$	457	$	78,060	$	958

Purchased Credit Impaired Loans

The following table displays the outstanding and carrying amounts of PCI loans as of the dates indicated:


		September 30,		December 31,			June 30,		December 31,
		2020		2019			2021		2020
		(In Thousands)					(In thousands)
Outstanding balance	Outstanding balance	$	12,341	$	15,149	Outstanding balance	$	5,000	$	9,982
Carrying amount	Carrying amount	11,421		13,451		Carrying amount	4,526		9,297

The excess of cash flows expected to be collected over the carrying amount of the loans, referred to as the “accretable yield,” is accreted into interest income over the life of the loans using the effective yield method. The following table summarizes activity in the accretable yield for the PCI loan portfolio:


		For the Three Months Ended September 30,				For the Nine Months Ended September 30,					For the Three Months Ended June 30,				For the Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
		(In Thousands)									(In thousands)
Balance at beginning of period	Balance at beginning of period	$	2,994	$	5,474	$	3,923	$	6,161	Balance at beginning of period	$	2,031	$	3,346	$	2,495	$	3,923
Acquisition		0		0		0		0
Accretion	Accretion	(298)		(526)		(1,058)		(1,668)		Accretion	(416)		(338)		(632)		(760)
Other change in expected cash flows	Other change in expected cash flows	(44)		(248)		(209)		(648)		Other change in expected cash flows	39		(10)		(209)		(165)
Reclassification (to) from non-accretable difference for loans with (deteriorated) improved cash flows		0		0		(4)		855
Reclassification from (to) non-accretable difference for loans with improved (deteriorated) cash flows										Reclassification from (to) non-accretable difference for loans with improved (deteriorated) cash flows	1,327		(4)		1,327		(4)
Balance at end of period	Balance at end of period	$	2,652	$	4,700	$	2,652	$	4,700	Balance at end of period	$	2,981	$	2,994	$	2,981	$	2,994

Table of Contents

The estimate of cash flows expected to be collected is regularly re-assessed subsequent to acquisition. A decrease in expected cash flows in subsequent periods may indicate that the loan is impaired which would require the establishment of an allowance for loan losses by a charge to the provision for loan losses. An increase in expected cash flows in subsequent periods serves, first, to reduce any previously established allowance for loan losses by the increase in the present value of cash flows expected to be collected, and results in a recalculation of the amount of accretable yield for the loan. The adjustment of accretable yield due to an increase in expected cash flows is accounted for as a change in estimate. The additional cash flows expected to be collected are reclassified from the ~~nonaccretable~~non-accretable difference to the accretable yield, and the amount of periodic accretion is adjusted accordingly over the remaining life of the loans.

Loan Participations

The Company occasionally purchases commercial loan participations, or participates in syndications through the SNC Program. These participations meet the same underwriting, credit and portfolio management standards as the Company’s other loans and are applied against the same criteria to determine the allowance for loan losses as other loans. As of ~~September~~both June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company held commercial loan participation interests totaling ~~$1.1 billion and $965.1 million, respectively.~~

$1.0 billion.

The following table summarizes the Company’s loan participations:


		As of and for the nine months ended September 30, 2020								As of and for the year ended December 31, 2019									As of and for the six months ended June 30, 2021								As of and for the year ended December 31, 2020
		Balance		Nonperforming Loan Rate (%)		Impaired (%)		Gross Charge-offs		Balance		Nonperforming Loan Rate (%)		Impaired (%)		Gross Charge-offs			Balance		Non-performing Loan Rate (%)		Impaired (%)		Gross Charge-offs		Balance		Non-performing Loan Rate (%)		Impaired (%)		Gross Charge-offs
		(Dollars in thousands)																	(Dollars in thousands)
Commercial and industrial	Commercial and industrial	$	640,288	1.05	%	1.05	%	$	0	$	586,346	2.76	%	2.76	%	$	0	Commercial and industrial	$	584,540	1.64	%	1.64	%	$	0	$	598,873	1.11	%	1.11	%	$	0
Commercial real estate	Commercial real estate	310,332		0.00	%	0.00	%	0		314,487		0.00	%	0.00	%	0		Commercial real estate	358,558		0.00	%	0.00	%	0		306,202		0.00	%	0.00	%	0
Commercial construction	Commercial construction	100,839		0.00	%	0.00	%	0		64,259		0.00	%	0.00	%	0		Commercial construction	85,790		0.00	%	0.00	%	0		119,600		0.00	%	0.00	%	0
Business banking	Business banking	37		0.00	%	0.00	%	15		57		0.00	%	0.00	%	0		Business banking	28		0.00	%	0.00	%	0		34		0.00	%	0.00	%	15
Total loan participations	Total loan participations	$	1,051,496	0.64	%	0.64	%	$	15	$	965,149	1.68	%	1.68	%	$	0	Total loan participations	$	1,028,916	0.93	%	0.93	%	$	0	$	1,024,709	0.65	%	0.65	%	$	15

~~Table of Contents~~

5. Leases

The Company leases certain office space and equipment under various non-cancelable operating leases. These leases have original terms ranging from 1 year to 25 years. Operating lease liabilities and right-of-use ~~("ROU"~~(“ROU”) assets are recognized at the lease commencement date based upon the present value of the future minimum lease payments over the lease term. Operating lease liabilities are recorded within other liabilities and ROU assets are recorded within other assets in the Company’s consolidated balance sheet.

As of ~~September 30, 2020,~~the dates indicated, the Company had the following related to operating leases:


	~~As of September 30, 2020~~
	~~(In thousands)~~
~~Right-of-use assets~~	$	~~84,848~~
~~Lease liabilities~~	$	~~88,537~~

~~The following table is a summary of the Company’s components of net lease cost for the three and nine months ended September 30, 2020:~~

Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020
(In thousands)
Operating lease cost $ 3,596 $ 10,810
Finance lease cost 24 43
Variable lease cost 509 1,479
Total lease cost $ 4,129 $ 12,332

The rent expense under real estate operating leases for the three and nine months ended September 30, 2019 amounted to $3.6 million and $10.8 million, respectively. The rent expense under equipment operating leases for the three and nine months ended September 30, 2019 amounted to $0.1 million and $0.5 million, respectively.

~~During the three and nine months ended September 30, 2020, the Company made $3.6 million and $10.6 million, respectively, in cash payments for operating and finance lease payments.~~


	As of June 30, 2021		As of December 31, 2020
	(In thousands)
Right-of-use assets	$	76,678	$	81,596
Lease liabilities	$	80,653	$	85,330

Finance leases are not material. Finance lease liabilities are recorded within other liabilities and finance ROU assets are recorded within other assets in the Company’s consolidated balance sheet.

~~Supplemental balance sheet information related to operating leases as of September 30, 2020 is as follows:~~


	~~As of September 30, 2020~~
~~Weighted-average remaining lease term (in years)~~	~~8.67~~
~~Weighted-average discount rate~~	~~2.64~~	%

The following ~~table sets forth the undiscounted cash flows~~tables are a summary of base rent related to operating leases outstanding at September 30, 2020 with payments scheduled over the next five years and thereafter, including a reconciliation to the operating lease liability recognized in the Company’s ~~consolidated balance sheet in other liabilities.~~components of net lease cost for the periods indicated:


	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
	(In thousands)
Operating lease cost	$	3,521	$	7,082
Finance lease cost	35		66
Variable lease cost	457		947
Total lease cost	$	4,013	$	8,095

2830

Table of Contents

(In thousands)
Remainder of 2020 $ 3,554
2021 13,777
2022 12,808
2023 12,268
2024 11,465
Thereafter 45,628
Total minimum lease payments $ 99,500
Less: amount representing interest 10,963
Present value of future minimum lease payments $ 88,537


	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
	(In thousands)
Operating lease cost	$	3,601	$	7,215
Finance lease cost	17		20
Variable lease cost	448		970
Total lease cost	$	4,066	$	8,205

During the three and six months ended June 30, 2021 the Company made $3.5 million and $7.1 million respectively, in cash payments for operating and finance lease payments. During the three and six months ended June 30, 2020 the Company made $3.5 million and $7.1 million, respectively, in cash payments for operating and finance lease payments.

Supplemental balance sheet information related to operating leases are as follows:


	As of June 30, 2021		As of December 31, 2020
Weighted-average remaining lease term (in years)	8.15		8.50
Weighted-average discount rate	2.63	%	2.65	%

6. Goodwill and Other Intangibles

The following tables set forth the carrying amount of goodwill and other intangible assets, net of accumulated amortization by reporting unit at the dates indicated below:


		As of September 30, 2020							As of June 30, 2021
		Banking Business		Insurance Agency Business		Net Carrying Amount			Banking Business		Insurance Agency Business		Net Carrying Amount
		(In Thousands)							(In thousands)
Balances not subject to amortization	Balances not subject to amortization							Balances not subject to amortization
Goodwill	Goodwill	$	298,611	$	70,420	$	369,031	Goodwill	$	298,611	$	73,861	$	372,472
Balances subject to amortization	Balances subject to amortization							Balances subject to amortization
Insurance agency	Insurance agency	0		6,294		6,294		Insurance agency	0		7,833		7,833
Core deposits	Core deposits	307		0		307		Core deposits	97		0		97
Total other intangible assets	Total other intangible assets	307		6,294		6,601		Total other intangible assets	97		7,833		7,930
Total goodwill and other intangible assets	Total goodwill and other intangible assets	$	298,918	$	76,714	$	375,632	Total goodwill and other intangible assets	$	298,708	$	81,694	$	380,402


		As of December 31, 2019							As of December 31, 2020
		Banking Business		Insurance Agency Business		Net Carrying Amount			Banking Business		Insurance Agency Business		Net Carrying Amount
		(In Thousands)							(In thousands)
Balances not subject to amortization	Balances not subject to amortization							Balances not subject to amortization
Goodwill	Goodwill	$	298,611	$	70,420	$	369,031	Goodwill	$	298,611	$	70,866	$	369,477
Balances subject to amortization	Balances subject to amortization							Balances subject to amortization
Insurance agency	Insurance agency	0		7,949		7,949		Insurance agency	0		6,899		6,899
Core deposits	Core deposits	754		0		754		Core deposits	158		0		158
Total other intangible assets	Total other intangible assets	754		7,949		8,703		Total other intangible assets	158		6,899		7,057
Total goodwill and other intangible assets	Total goodwill and other intangible assets	$	299,365	$	78,369	$	377,734	Total goodwill and other intangible assets	$	298,769	$	77,765	$	376,534

The Company acquired 2 insurance agencies during the three months ended June 30, 2021. The aggregate purchase price and goodwill recorded as a result of the acquisitions were not material.

Table of Contents

The Company quantitatively assesses goodwill for impairment at the reporting unit level on an annual basis or sooner if an event occurs or circumstances change which might indicate that the fair value of a reporting unit is below its carrying amount. The quantitative assessment was most recently performed as of September 30, 2020. During the three months ended December 31, 2020 and the three and six months ended June 30, 2021 there were no events or changes in circumstances not already considered in the Company's annual assessment. The Company considered the economic conditions for the period including the potential impact of the ~~novel coronavirus ("COVID-19")~~COVID-19 pandemic inas it pertains to the goodwill ~~impairment test~~above and determined that there was no indication of impairment related to ~~goodwill. Additionally, the Company did not record any impairment charges during the year ended~~goodwill as of June 30, 2021 or December 31, ~~2019.~~2020.

Other intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company also considered the impact of the COVID-19 pandemic as it pertains to these

~~Table of Contents~~

intangible assets and determined that there was no indication of impairment related to other intangible ~~assets. Additionally,~~assets as of June 30, 2021 or December 31, 2020.

7. Earnings Per Share (“EPS”)

Basic EPS represents income available to common shareholders divided by the ~~Company did not record any impairment charges~~weighted-average number of common shares outstanding during the ~~year ended December 31, 2019.~~

~~Table~~period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares (such as stock options) were exercised or converted into additional common shares that would then share in the earnings of ~~Contents~~

~~7. Income Taxes~~

~~The following table sets forth information regarding~~ the ~~Company’s tax provision and applicable tax rates~~entity. Diluted EPS is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding for the ~~periods indicated:~~
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
(Dollars in thousands)
Combined federal and state income tax provisions $ 7,429 $ 9,230 $ 15,924 $ 29,940
Effective income tax rates 20.7 % 20.5 % 19.2 % 22.4 %

~~The Company’s provision for income taxes was $7.4 million and $9.2 million for~~period, plus the ~~three months ended September 30, 2020 and 2019, respectively, and $15.9 million and $29.9 million for~~effect of potential dilutive common share equivalents computed using the ~~nine months ended September 30, 2020 and 2019, respectively. The decrease in income tax expense was due primarily to lower pre-tax income~~treasury stock method. There were no securities that had a dilutive effect during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020 compared~~2021, and therefore the weighted-average common shares outstanding used to calculate both basic and diluted EPS are the same. Shares held by the Employee Stock Ownership Plan (“ESOP”) that have not been allocated to employees in accordance with the terms of the ESOP, referred to as “unallocated ESOP shares,” are not deemed outstanding for earnings per share calculations. Earnings per share data is not applicable for the three and ~~nine~~six months ended September 30, 2019, increasing the impact on the effective rate related to favorable permanent differences, including investment tax credits and tax exempt income. Additionally, the tax expense decreased as a result of discrete items associated with professional fees and impairment charges related to tax equity investments.

~~The Company believes that it is more likely than not that its deferred tax assets as of September~~June 30, 2020 ~~and December 31, 2019 will be realized. As such, there was 0 deferred tax asset valuation allowance~~ as ~~of September 30, 2020 and December 31, 2019.~~

~~The Company files tax returns in the U.S. federal jurisdiction and various states. As of September 30, 2020,~~ the Company ishad no ~~longer subject to exam for tax years before 2016 by the Internal Revenue Service ("IRS") and state tax authorities. The Company believes that its income tax returns~~shares outstanding.


	For the Three Months Ended June 30, 2021		For the Six Months Ended June 30, 2021
	(Dollars in thousands, except per share data)
Net income applicable to common shares	$	34,809	$	82,472

Average number of common shares outstanding	186,758,154		186,758,154
Less: Average unallocated ESOP shares	(14,584,447)		(14,646,782)
Average number of common shares outstanding used to calculate basic earnings per common share	172,173,707		172,111,372
Common stock equivalents	0		0
Average number of common shares outstanding used to calculate diluted earnings per common share	172,173,707		172,111,372
Earnings per common share
Basic and diluted	$	0.20	$	0.48

All unallocated ESOP shares have been ~~filed based upon applicable statutes, regulations~~excluded from the calculation of basic and ~~case law in effect at the time of filing, however the IRS and/or state jurisdiction, upon examination, could disagree with the Company's interpretation.~~diluted EPS.

~~Management has performed an evaluation of the Company’s tax positions and determined that a reserve for unrecognized tax benefits at September 30, 2020 and December 31, 2019 was not needed.~~

8. Low Income Housing Tax Credits and Other Tax Credit Investments

The Community Reinvestment Act (“CRA”) encourages banks to meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate income. The Company has primarily invested in ~~several~~ separate Low Income Housing Tax Credits (“LIHTC”) projects, also referred to as qualified affordable housing projects, which provide the Company with tax credits and operating loss tax benefits over a period of approximately 15 years. ~~Typically, none of the original investment is expected to be repaid.~~ The return on these investments is generally generated through tax credits and tax losses. ~~The~~In addition to LIHTC projects, the Company invests in new markets tax credit projects that qualify for CRA credits and eligible projects that qualify for renewable energy and historic tax credits.

As of June 30, 2021 and December 31, 2020, the Company had $74.4 million and $59.8 million, respectively, in tax credit investments that were included in other assets in the consolidated balance sheets.

Table of Contents

When permissible, the Company accounts for its investments in LIHTC projects using the proportional amortization method, under which it amortizes the initial cost of the investment in proportion to the amount of the tax credits and other tax benefits received and recognizes ~~the net investment performance in the income statement~~that amortization as a component of income tax ~~expense (benefit).~~expense. The ~~Company’s maximum exposure to loss~~net investment in ~~its investments in qualified affordable~~the housing projects is ~~limited to its carrying value~~ included in other assets. The Company will continue to use the proportional amortization method on any new ~~investments going forward.~~qualifying LIHTC investments.

The following table presents the Company’s investments in low income housing projects accounted for using the proportional amortization method for the periods indicated:


		Nine Months Ended September 30, 2020		Year Ended December 31, 2019			As of June 30, 2021		As of December 31, 2020
		(In Thousands)					(In thousands)
Current recorded investment included in other assets	Current recorded investment included in other assets	$	59,767	$	37,665	Current recorded investment included in other assets	$	70,184	$	58,504
Commitments to fund qualified affordable housing projects included in recorded investment noted above	Commitments to fund qualified affordable housing projects included in recorded investment noted above	34,245		18,042		Commitments to fund qualified affordable housing projects included in recorded investment noted above	41,380		31,487
Tax credits and benefits (1)		4,597		5,962
Amortization of investments included in current tax expense (2)		3,715		4,782

~~(1)Amount reflects tax credits and tax benefits recognized~~The following table presents additional information related to the Company's investments in ~~the consolidated statement of income for the nine months ended September 30, 2020 and the year ended December 31, 2019.~~

~~(2)Amount reflects amortization of qualified affordable housing~~LIHTC projects for the ~~nine months ended September~~period indicated:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
	(In thousands)
Tax credits and benefits recognized	$	1,523	$	1,539	$	2,987	$	3,058
Amortization expense included in income tax expense	1,495		1,261		2,759		2,452

The Company accounts for certain other investments in renewable energy projects using the equity method of accounting. These investments in renewable energy projects are included in other assets on the consolidated balance sheet and totaled $4.2 million and $1.2 million as of June 30, ~~2020~~2021 and ~~the year ended~~ December 31, ~~2019.~~

~~Table of Contents~~

~~In reviewing its tax credit equity investments for impairment, the Company identified an immaterial correction to the investment balances primarily~~2020, respectively. There were 0 outstanding commitments related to ~~prior periods. In the quarter-ended September~~these investments as of June 30, ~~2020, the Company wrote off $7.6~~2021. There was $1.7 million in outstanding commitments related to these investments as of the tax credit equity investment balances as a component of noninterest expense and other assets to reflect the remaining benefits from these investments. Management evaluated the correction in relation to the current period, which is when the correction was recorded, as well as the preceding periods in which it originated. Management believes this correction is immaterial to both the consolidated quarterly and previous annual financial statements.December 31, 2020.

~~Table of Contents~~

9. Employee Benefits

Conversion of Defined Benefit Pension Plan and Benefit Equalization Plan to Cash Balance Plan Design

Effective November 1, 2020, the Qualified Defined Benefit Pension Plan (“Defined Benefit Plan”) and the Non-Qualified Benefit Equalization Plan (“BEP”) sponsored by the Company were amended to convert the plans from a traditional final average earnings plan design to a cash balance plan design. Benefits earned under the final average earnings plan design were frozen at October 31, 2020. Starting November 1, 2020, future benefits are earned under the cash balance plan design. Under the cash balance plan design, hypothetical account balances are established for each participant and pension benefits are generally stated as the lump sum amount in that hypothetical account. Contribution credits equal to a percentage of a participant’s annual compensation (if the participant works at least 1,000 hours during the year) and interest credits equal to the greater of the 30-Year Treasury rate for September preceding the current plan year or 3.5% are added to a participant’s account each year. For employees hired prior to November 1, 2020, annual contribution credits generally increase as the participant remains employed with the Company. Employees hired on and after November 1, 2020 receive annual contribution credits equal to 5% of annual compensation, with no future increases. Notwithstanding the preceding sentence, since a cash balance plan is a defined benefit plan, the annual retirement benefit payable at normal retirement (age 65) is an annuity, which is the actuarial equivalent of the participant’s account balance under the cash balance plan design, plus their frozen benefit under the final average earnings plan design. However, under the Defined Benefit Plan, participants may elect, with the consent of their spouses if they are married, to have the benefits distributed as a lump sum rather than an annuity. The lump sum is equal to the sum of the actuarial equivalent of their frozen benefit under the final average earnings plan design, plus their cash balance account. Under the BEP, benefits are generally only payable as a lump sum, which is equal to the sum of the actuarial equivalent of their frozen benefit under the final average earnings plan design, plus their cash balance account.

Pension Plans

The Company provides pension benefits for its employees through membership in the Savings Banks Employees’ Retirement Association. The plan through which benefits are provided is a noncontributory, qualified defined benefit plan. The Company’s annual contribution to the Defined Benefit Plan is based upon standards established by the Pension Protection Act.

Table of Contents

The contribution is based on an actuarial method intended to provide not only for benefits attributable to service to date, but also for those expected to be earned in the future. The Defined Benefit Plan has a plan year end of October 31.

The Company has an unfunded Defined Benefit Supplemental Executive Retirement Plan ("(“DB ~~SERP"~~SERP”) that provides certain retired and currently employed officers with defined pension benefits in excess of qualified plan limits imposed by U.S. federal tax law. The DB SERP has a plan year end of December 31.

In addition, the Company has an unfunded Benefit Equalization Plan, ~~("BEP")~~the aforementioned BEP, to provide retirement benefits to certain employees whose retirement benefits under the qualified pension plan are limited per the Internal Revenue Code. The BEP has a plan year end of October 31.

The Company also has an unfunded Outside Directors’ Retainer Continuance Plan (“ODRCP”) that provides pension benefits to outside directors who retire from service. The ~~Outside Directors’ Retainer Continuance Plan~~ODRCP has a plan year end of December 31. Effective December 31, 2020, the Company closed the ODRCP to new participants and froze benefit accruals for active participants.

Components of Net Periodic Benefit Cost

The components of net pension expense for the plans for the periods indicated are as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
		(In Thousands)									(In thousands)
Components of net periodic benefit cost:	Components of net periodic benefit cost:									Components of net periodic benefit cost:
Service cost	Service cost	$	6,231	$	4,733	$	18,694	$	14,196	Service cost	$	7,898	$	6,231	$	15,794	$	12,463
Interest cost	Interest cost	2,617		2,747		7,849		8,247		Interest cost	1,267		2,615		2,536		5,232
Expected return on plan assets	Expected return on plan assets	(7,427)		(5,901)		(22,277)		(17,713)		Expected return on plan assets	(8,141)		(7,425)		(16,283)		(14,850)
Past service cost	Past service cost	7		11		19		33		Past service cost	(2,945)		6		(5,890)		12
Recognized net actuarial loss	Recognized net actuarial loss	2,361		1,809		7,082		5,432		Recognized net actuarial loss	3,538		2,361		7,075		4,721
Net periodic benefit cost	Net periodic benefit cost	$	3,789	$	3,399	$	11,367	$	10,195	Net periodic benefit cost	$	1,617	$	3,788	$	3,232	$	7,578

Service costs for the Defined Benefit Plan, the BEP, and the DB SERP are recognized within salaries and employee benefits in the statement of income. Service costs for the ~~Outside Directors’ Retainer Continuance Plan~~ODRCP are recognized within professional services in the statement of income. The remaining components of net periodic benefit cost are recognized in other noninterest expense in the statement of income. The Company’s non-service cost expenses for the Defined Benefit Plan and the BEP decreased by $3.8 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020 and decreased by $7.7 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. This was primarily due to the conversion of the Company's Defined Benefit Plan and BEP from a traditional final average earnings plan design to a cash balance plan design.

In accordance with the Pension Protection Act, the Company was not required to make any contributions to the Defined Benefit Plan for the plan year beginning November 1, 2020, and did not make any contributions to the Defined Benefit Plan during the six months ended June 30, 2021. During the ~~nine~~six months ended ~~September~~June 30, 2020, the Company made contributions ~~for~~to the Defined Benefit Plan of $32.5 million.

Rabbi Trust Variable Interest Entity

The Company established a rabbi trust to meet its obligations under certain executive non-qualified retirement benefits and deferred compensation plans and to mitigate the expense volatility of the aforementioned retirement plans. The rabbi trust is considered a variable interest entity ~~("VIE"~~(“VIE”) as the equity investment at risk is insufficient to permit the trust to finance its activities without additional subordinated financial support from the Company. The Company is considered the primary beneficiary of the rabbi trust as it has the power to direct the activities of the rabbi trust that significantly affect the rabbi trust’s economic performance and it has the obligation to absorb losses of the rabbi trust that could potentially be significant to the rabbi trust by virtue of its contingent call options on the rabbi trust’s assets in the event of the Company’s bankruptcy. As the primary beneficiary of this VIE, the Company consolidates the rabbi trust investments. In general, the rabbi trust investments and any earnings received thereon are accumulated, reinvested and used exclusively for trust purposes. These rabbi trust investments consist primarily of cash and cash equivalents, U.S. government agency obligations, equity securities, mutual funds and other exchange-traded funds, and are recorded at fair value in other assets onin the Company's consolidated balance sheet. Changes in fair value are recorded in noninterest income. At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 the amount of rabbi trust investments at fair value were ~~$83.7~~$98.9 million and ~~$78.0~~$91.7 million, respectively.

3334

Table of Contents

Investments in rabbi trust accounts are recorded at fair value within the Company's consolidated balance sheet with changes in fair value recorded through noninterest income. The following table presents the book value, mark-to-market, and fair value of assets held in rabbi trust accounts by asset type:


	As of June 30, 2021						As of December 31, 2020
	Book Value		Mark-to-Market		Fair Value		Book Value		Mark-to-Market		Fair Value
Asset Type	(In thousands)
Cash and cash equivalents	$	5,462	$	—	$	5,462	$	5,157	$	—	$	5,157
Equities	64,878		20,847		85,725		59,235		19,492		78,727
Fixed income	7,499		214		7,713		7,441		358		7,799
Total assets	$	77,839	$	21,061	$	98,900	$	71,833	$	19,850	$	91,683

10. Commitments and Contingencies

Financial Instruments with Off-Balance Sheet Risk

In order to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates, the Company is party to financial instruments with off-balance sheet risk in the normal course of business. These financial instruments include commitments to extend credit, standby letters of credit, and forward commitments to sell loans, all of which involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in each particular class of financial instruments.

Substantially all of the Company’s commitments to extend credit, which normally have fixed expiration dates or termination clauses, are contingent upon customers maintaining specific credit standards at the time of loan funding. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. In the event the customer does not perform in accordance with the terms of agreement with the third party, the Company would be required to fund the commitment. The maximum potential amount of future payments the Company could be required to make is represented by the contractual amount of the commitment. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. For forward loan sale commitments, the contract or notional amount does not represent exposure to credit loss. The Company does not sell loans with recourse.

The following table summarizes the above financial instruments as of the dates indicated:


		As of September 30, 2020		As of December 31, 2019			As of June 30, 2021		As of December 31, 2020
		(In Thousands)					(In thousands)
Commitments to extend credit	Commitments to extend credit	$	3,798,722	$	3,606,182	Commitments to extend credit	$	4,129,771	$	3,818,952
Standby letters of credit	Standby letters of credit	62,361		60,124		Standby letters of credit	61,762		60,221
Forward commitments to sell loans	Forward commitments to sell loans	154,114		21,357		Forward commitments to sell loans	45,339		41,160

Other Contingencies

The Company has been named a defendant in various legal proceedings arising in the normal course of business. Set out below are descriptions of significant legal matters involving the Company and its subsidiaries. In the opinion of management, based on the advice of legal counsel, the ultimate resolution of these proceedings will not have a material effect on the Company’s consolidated financial statements.

In the second quarter of 2021, the Company entered into a preliminary settlement of 2 purported class action matters concerning overdraft and nonsufficient funds fees. The matters were filed in the Massachusetts Superior Court in November 2019 and April 2021, respectively, and are expected to be consolidated into one matter for final settlement purposes. As of June 30, 2021, the Company estimated the settlement expense, including related costs, to be $3.3 million.

As a member of the Federal Reserve System, the Bank is required to maintain certain reserves of vault cash and/or deposits with the Federal Reserve Bank of ~~Boston.~~Boston (the “FRBB”). However, in response to the COVID-19 pandemic, the

Table of Contents

Federal Reserve temporarily eliminated reserve requirements and therefore there was 0 minimum reserve requirement as of ~~September~~either June 30, ~~2020. The amount of the Bank's reserve requirement included in cash and cash equivalents was approximately $3.7 million on~~2021 or December 31, ~~2019.~~2020.

11. Derivative Financial Instruments

The Company uses derivative financial instruments to manage ~~the Company’s~~its interest rate risk resulting from the differences in the amount, timing, and duration of known or expected cash receipts and known or expected cash payments. Additionally, the Company enters into interest rate derivatives and foreign exchange contracts to accommodate the business requirements of its customers (“customer-related positions”) and risk participation agreements entered into as financial guarantees of performance on customer-related interest rate swap derivatives. 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 the instrument qualifies as a hedge for accounting purposes, and further, by the type of hedging relationship.

By using derivatives, the Company is exposed to credit risk to the extent that counterparties to the derivative contracts do not perform as required. Should a counterparty fail to perform under the terms of a derivative contract, the Company’s credit exposure on interest rate swaps is limited to the net positive fair value and accrued interest of all swaps with each counterparty plus any initial margin collateral posted. The Company seeks to minimize counterparty credit risk through credit approvals, limits, monitoring procedures, and obtaining collateral, where appropriate. As such, management believes the risk of incurring credit losses on derivative contracts with those counterparties is remote.

Interest Rate Positions

~~Table of Contents~~

An interest rate swap is an agreement whereby one party agrees to pay a floating rate of interest on a notional principal amount in exchange for receiving a fixed rate of interest on the same notional amount, for a predetermined period of time, from a second party. The amounts relating to the notional principal amount are not actually exchanged. The Company may enter into interest rate swaps in which ~~they pay~~it pays floating and ~~receive~~receives fixed interest in order to manage its interest rate risk exposure to the variability in interest cash flows on certain floating-rate commercial loans. For interest rate swaps that are accounted for as cash flow hedges, changes in fair value are included in other comprehensive income and reclassified into net income in the same period or periods during which the hedged forecasted transaction affects net income. As of ~~September~~June 30, 2021 and December 31, 2020, the Company does not have any active interest rate swaps which qualify as cash flow hedges for accounting purposes.

Due to the phase-out, and eventual discontinuation, of the LIBOR, central clearinghouses have begun to transition to alternative rates for valuation purposes. As of October 16, 2020, the Company changed its valuation methodology to reflect changes made by the Chicago Mercantile Exchange (“CME”), through which the Company clears derivative financial instruments that are eligible for clearing. The changes from the CME changed the discounting methodology and interest calculation of cash margin from overnight index swap to secured overnight financing rate (also known as SOFR) for U.S. dollar cleared interest rate swaps. The Company believes that its improvements to its valuation methodology will result in valuations for cleared interest rate swaps that better reflect prices obtainable in the markets in which the Company transacts. The changes in valuation methodology were applied prospectively as a change in accounting estimate and are immaterial to the Company’s financial statements.

The following table ~~reflects~~presents the ~~Company’s derivative positions as~~pre-tax impact of ~~December 31, 2019 for interest rate swaps which qualify as~~terminated cash flow hedges ~~for accounting purposes.~~

December 31, 2019
Weighted Average Rate
Notional
Amount Weighted Average
Maturity Current
Rate Paid Receive Fixed
Swap Rate
Fair Value (1)
(In Thousands) (In Years) (In Thousands)
Interest rate swaps on loans 2,120,000 2.16 1.74 % 2.11 % (321)
Total $ 2,120,000 $ (321)

~~(1)Fair value included net accrued interest receivable of $0.4 million at December 31, 2019.~~

Central banks around the world, including the Federal Reserve, have commissioned working groups of market participants and official sector representatives with the goal of finding suitable replacementson accumulated other comprehensive income (“AOCI”) for the ~~London Interbank Offered Rate (“LIBOR”) based on observable market transactions because~~three and six months ended June 30, 2021 and June 30, 2020:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2021		2020		2021		2020
	(In thousands)
Unrealized gains on terminated hedges included in AOCI – beginning of respective period	$	33,199	$	0	$	41,473	$	0
Unrealized gains on terminated hedges arising during the period	0		30,952		0		30,952
Reclassification adjustments for amortization of unrealized (gains) into net income	(8,219)		(373)		(16,493)		(373)
Unrealized gains on terminated hedges included in AOCI – June 30	$	24,980	$	30,579	$	24,980	$	30,579

Table of ~~the probable phase-out~~Contents

The balance of ~~LIBOR. It is expected that a transition away from the widespread use of LIBOR to alternative rates~~terminated cash flow hedges in AOCI will occur over the course of the next few years. Although the full impact of a transition, including the potential or actual discontinuance of LIBOR publication, remains unclear, this change may have an adverse impact on the value of, return on and trading markets for a broad array of financial products, including any LIBOR-based securities, loans and derivatives that are included in the Company’s financial assets and liabilities. A transition away from LIBOR may also require extensive changes to the contracts that govern these LIBOR-based products, as well as the Company’s systems and processes.

be amortized into earnings through January 2023. The Company expects approximately ~~$32.8~~$23.1 million to be reclassified into interest income from other comprehensive income related to the Company’s terminated cash flow hedges in the next 12 months as of ~~September~~June 30, 2020. This reclassification is due to the amortization of realized but unrecognized gains from the termination of interest rate swaps. At September 30, 2020, the remaining unamortized gain on terminated cash flow hedges is $50.0 million.

As of September 30, 2020 and December 31, 2019, the Company’s exposure to the Chicago Mercantile Exchange ("CME") and the fair value of interest rate swap derivatives which qualify as cash flow hedges that contain credit-risk related contingent features that are in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, was $0 and $0.3 million, respectively. In addition, at September 30, 2020 and December 31, 2019, the Company had posted initial-margin collateral in the form of cash and a U.S. Treasury note to CME for these derivatives amounting to $0 and $22.8 million, respectively. The cash and U.S. Treasury note were considered restricted assets and were included in cash and due from banks and in available for sale securities, respectively.2021.

Customer-Related Positions

Interest rate swaps offered to commercial customers do not qualify as hedges for accounting purposes. These swaps allow the Company to retain variable rate commercial loans while allowing the commercial customer to synthetically fix the loan rate by entering into a variable-to-fixed rate interest rate swap. The Company believes that its exposure to commercial customer derivatives is limited to nonperformance by either the customer or the dealer because these contracts are simultaneously matched at inception with an offsetting dealer transaction.

Risk participation agreements are entered into as financial guarantees of performance on interest rate swap derivatives. The purchased (asset) or sold (liability) guarantee allow the Company to participate-out (fee paid) or participate-in (fee received) the risk associated with certain derivative positions executed with the borrower by the lead bank in a customer-related interest rate swap derivative.

~~Table of Contents~~

Foreign exchange contracts consist of those offered to commercial customers and those entered into to hedge the Company’s foreign currency risk associated with a foreign-currency loan. Neither qualifies as a hedge for accounting purposes. These commercial customer derivatives are offset with matching derivatives with correspondent-bank counterparties in order to minimize foreign exchange rate risk to the Company. Exposure with respect to these derivatives is largely limited to nonperformance by either the customer or the other counterparty. Neither the Company nor the correspondent-bank counterparty are required to post collateral but each has established foreign-currency transaction limits to manage the exposure risk. The Company requires its customers to post collateral to minimize risk exposure.

The following tables present the Company’s customer-related derivative positions as of the dates indicated below orfor those derivatives not designated as hedging.


		September 30, 2020				June 30, 2021
		Number of Positions	Total Notional			Number of Positions	Total Notional
		(Dollars in Thousands)				(Dollars in thousands)
Interest rate swaps	Interest rate swaps	603	$	3,778,946	Interest rate swaps	536	$	3,406,954
Risk participation agreements	Risk participation agreements	78	293,271		Risk participation agreements	68	277,452
Foreign exchange contracts:	Foreign exchange contracts:				Foreign exchange contracts:
Matched commercial customer book	Matched commercial customer book	58	7,798		Matched commercial customer book	72	9,467
Foreign currency loan	Foreign currency loan	28	8,883		Foreign currency loan	5	6,886


		December 31, 2019				December 31, 2020
		Number of Positions	Total Notional			Number of Positions	Total Notional
		(Dollars in Thousands)				(Dollars in thousands)
Interest rate swaps	Interest rate swaps	603	$	3,749,474	Interest rate swaps	576	$	3,652,385
Risk participation agreements	Risk participation agreements	67	299,576		Risk participation agreements	70	287,732
Foreign exchange contracts:	Foreign exchange contracts:				Foreign exchange contracts:
Matched commercial customer book	Matched commercial customer book	62	29,990		Matched commercial customer book	40	4,242
Foreign currency loan	Foreign currency loan	23	7,310		Foreign currency loan	3	10,798

The level of interest rate swaps, risk participation agreements and foreign currency exchange contracts at the end of each period noted above was commensurate with the activity throughout those periods.

3637

Table of Contents

The table below presents the fair value of the Company’s derivative financial instruments, as well as their classification on the balance sheet for the periods indicated. There were no derivatives designated as hedging instruments at June 30, 2021 or December 31, 2020.


		Asset Derivatives					Liability Derivatives						Asset Derivatives					Liability Derivatives
		Balance Sheet Location	Fair Value at September 30, 2020		Fair Value at December 31, 2019		Balance Sheet Location	Fair Value at September 30, 2020		Fair Value at December 31, 2019			Balance Sheet Location	Fair Value at June 30, 2021		Fair Value at December 31, 2020		Balance Sheet Location	Fair Value at June 30, 2021		Fair Value at December 31, 2020
		(Dollars in Thousands)											(In thousands)
Derivatives designated as hedging instruments
Interest rate swaps		Other assets	$	0	$	0	Other liabilities	$	0	$	321
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments											Derivatives not designated as hedging instruments
Customer-related positions:	Customer-related positions:											Customer-related positions:
Interest rate swaps	Interest rate swaps	Other assets	$	161,841	$	64,463	Other liabilities	$	48,174	$	18,057	Interest rate swaps	Other assets	$	92,980	$	141,822	Other liabilities	$	28,498	$	42,600
Risk participation agreements	Risk participation agreements	Other assets	888		482		Other liabilities	1,382		606		Risk participation agreements	Other assets	432		722		Other liabilities	675		1,230
Foreign currency exchange contracts - matched customer book	Foreign currency exchange contracts - matched customer book	Other assets	183		469		Other liabilities	159		428		Foreign currency exchange contracts - matched customer book	Other assets	94		90		Other liabilities	89		77
Foreign currency exchange contracts - foreign currency loan	Foreign currency exchange contracts - foreign currency loan	Other assets	35		0		Other liabilities	59		203		Foreign currency exchange contracts - foreign currency loan	Other assets	48		9		Other liabilities	0		69
			$	162,947	$	65,414		$	49,774	$	19,294
Total	Total		$	162,947	$	65,414		$	49,774	$	19,615	Total		$	93,554	$	142,643		$	29,262	$	43,976

The table below presents the net effect of the Company’s derivative financial instruments on the consolidated income statements as well as the effect of the Company’s derivative financial instruments included in other comprehensive income ~~("OCI"~~(“OCI”) as follows:

~~Table of Contents~~


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
		(Dollars in Thousands)									(In thousands)
Derivatives designated as hedges:	Derivatives designated as hedges:									Derivatives designated as hedges:
Gain in OCI on derivatives	Gain in OCI on derivatives	$	(142)	$	3,928	$	46,869	$	25,842	Gain in OCI on derivatives	$	0	$	3,455	$	0	$	47,011
Gain reclassified from OCI into interest income (effective portion)	Gain reclassified from OCI into interest income (effective portion)	$	8,405	$	429	$	18,651	$	953	Gain reclassified from OCI into interest income (effective portion)	$	8,219	$	7,134	$	16,493	$	10,246
Gain recognized in income on derivatives (ineffective portion and amount excluded from effectiveness test)	Gain recognized in income on derivatives (ineffective portion and amount excluded from effectiveness test)									Gain recognized in income on derivatives (ineffective portion and amount excluded from effectiveness test)
Interest income	Interest income	0		0		0		0		Interest income	0		0		0		0
Other income	Other income	0		0		0		0		Other income	0		0		0		0
Total	Total	$	0	$	0	$	0	$	0	Total	$	0	$	0	$	0	$	0
Derivatives not designated as hedges:	Derivatives not designated as hedges:									Derivatives not designated as hedges:
Customer-related positions:	Customer-related positions:									Customer-related positions:
Gain (loss) recognized in interest rate swap income		$	904	$	(1,712)	$	(6,063)	$	(5,068)
Gain (loss) recognized in interest rate swap income for risk participation agreements		11		(68)		(370)		(166)
Gain (loss) recognized in other income for foreign currency exchange contracts:
(Loss) gain recognized in interest rate swap income										(Loss) gain recognized in interest rate swap income	$	(1,087)	$	(687)	$	3,764	$	(6,967)
(Loss) gain recognized in interest rate swap income for risk participation agreements										(Loss) gain recognized in interest rate swap income for risk participation agreements	(105)		(80)		264		(381)
(Loss) gain recognized in other income for foreign currency exchange contracts:										(Loss) gain recognized in other income for foreign currency exchange contracts:
Matched commercial customer book	Matched commercial customer book	(86)		22		(17)		(18)		Matched commercial customer book	(14)		96		(8)		69
Foreign currency loan	Foreign currency loan	149		38		179		14		Foreign currency loan	36		(367)		109		30
Total (loss) for derivatives not designated as hedges		$	978	$	(1,720)	$	(6,271)	$	(5,238)
Total gain (loss) for derivatives not designated as hedges										Total gain (loss) for derivatives not designated as hedges	$	(1,170)	$	(1,038)	$	4,129	$	(7,249)

The Company has agreements with its customer-related interest rate swap derivative counterparties that contain a provision whereby if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

Table of Contents

The Company also has agreements with certain of its customer-related interest rate swap derivative correspondent-bank counterparties that contain a provision whereby if the Company fails to maintain its status as a well-capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

The Company’s exposure related to its customer-related interest rate swap derivative consists of exposure on cleared derivative transactions and exposure on non-cleared derivative transactions.

Cleared derivative transactions are with CME and exposure is settled to market daily, with additional credit exposure related to initial-margin collateral pledged to CME at trade execution. At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company’s exposure to CME for settled variation margin in excess of the customer-related interest rate swap termination values was $0.5 million, and less than $0.1 ~~million, and $1.5~~ million, respectively. In addition, at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had posted initial-margin collateral in the form of a U.S. Treasury note amounting to ~~$60.7~~$49.5 million and ~~$27.6~~$60.4 million, respectively, to CME for these derivatives. The ~~cash and~~ U.S. Treasury note ~~were~~was considered a restricted ~~assets~~asset and ~~were~~was included ~~in cash and due from banks and~~ in available for sale securities ~~respectively.~~within the Company's consolidated balance sheets.

At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 the fair value of ~~non-cleared~~all customer-related interest rate swap derivatives ~~that contain~~with credit-risk related contingent features that ~~are~~were in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, ~~related to these agreements was $48.2~~totaled $26.1 million and ~~$14.6~~$42.6 million, respectively. The Company has minimum collateral posting thresholds with its ~~non-cleared~~ customer-related interest rate swap derivative correspondent-bank counterparties to the extent that the Company has a liability position with the correspondent-bank counterparties. At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had posted collateral in the form of cash amounting to ~~$52.5~~$35.0 million and ~~$22.2~~$49.2 million, respectively, which was considered to be a restricted asset and was included in other short-term ~~investments.~~investments within the Company's consolidated balance sheets. If the Company had breached any of these provisions at ~~September~~June 30, ~~2020~~2021 or December 31, ~~2019,~~2020, it would have been required to settle its obligations under the agreements at the termination value. In addition, the

~~Table of Contents~~

Company had cross-default provisions with its commercial customer loan agreements which provide cross-collateralization with the customer loan collateral.

12. Balance Sheet Offsetting

Certain financial instruments, including derivatives, may be eligible for offset in the consolidated balance sheets and/or subject to master netting arrangements or similar agreements. The Company’s derivative transactions with upstream financial institution counterparties are generally executed under International Swaps and Derivative Association master agreements which include “right of set-off” provisions. In such cases there is generally a legally enforceable right to offset recognized amounts. However, the Company does not offset fair value amounts recognized for derivative instruments. The Company nets the amount recognized for the right to reclaim cash collateral against the obligation to return cash collateral arising from derivative instruments executed with the same counterparty under a master netting arrangement. Collateral legally required to be maintained at dealer banks by the Company is monitored and adjusted as necessary. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, it was determined that no additional collateral would have to be posted to immediately settle these instruments.

Table of Contents

The following tables present the Company’s asset and liability positions that were eligible for offset and the potential effect of netting arrangements on its financial position, as of the dates indicated:


																							As of June 30, 2021
		Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position				Net Amounts Presented in the Statement of Financial Position				Gross Amounts Not Offset in the Statement of Financial Position								Net Amount			Gross Amounts Recognized					Gross Amounts Offset in the Statement of Financial Position		Net Amounts Presented in the Statement of Financial Position			Gross Amounts Not Offset in the Statement of Financial Position				Net Amount
Description	Description									Financial Instruments				Collateral Pledged (Received)				Description								Financial Instruments						Collateral Pledged (Received)
		(In Thousands)
		As of September 30, 2020																								(In thousands)
Derivative Assets	Derivative Assets																					Derivative Assets
Interest rate swaps	Interest rate swaps	$	0			$	0			$	0			$	0			$	0					$	0		Interest rate swaps	$	0	$	0		$	0	$	0	$	0	$	0
Customer-related positions:	Customer-related positions:																					Customer-related positions:
Interest rate swaps	Interest rate swaps	161,841		0				161,841				14				0				161,827		Interest rate swaps	92,980					0		92,980			1,057		0		91,923
Risk participation agreements	Risk participation agreements	888		0				888				0				0				888		Risk participation agreements	432					0		432			0		0		432
Foreign currency exchange contracts - matched customer book		183		0				183				0				(20)				163
Foreign currency exchange contracts - foreign currency loan		35		0				35				0				0				35
Foreign currency exchange contracts – matched customer book																						Foreign currency exchange contracts – matched customer book	94					0		94			0		0		94
Foreign currency exchange contracts – foreign currency loan																						Foreign currency exchange contracts – foreign currency loan	48					0		48			0		0		48
		$	162,947	$	0			$	162,947			$	14			$	(20)			$	162,913		$	93,554				$	0	$	93,554		$	1,057	$	0	$	92,497
Derivative Liabilities	Derivative Liabilities																					Derivative Liabilities
Interest rate swaps	Interest rate swaps	$	0	$	0			$	0			$	0			$	0			$	0	Interest rate swaps	$	0				$	0	$	0		$	0	$	0	$	0
Customer-related positions:	Customer-related positions:																					Customer-related positions:
Interest rate swaps	Interest rate swaps	48,174		0				48,174				14				48,160				0		Interest rate swaps	28,498					0		28,498			1,057		27,441		0
Risk participation agreements	Risk participation agreements	1,382		0				1,382				0				0				1,382		Risk participation agreements	675					0		675			0		0		675
Foreign currency exchange contracts - matched customer book		159		0				159				0				(10)				169
Foreign currency exchange contracts - foreign currency loan		59		0				59				0				0				59
Foreign currency exchange contracts – matched customer book																						Foreign currency exchange contracts – matched customer book	89					0		89			0		0		89
Foreign currency exchange contracts – foreign currency loan																						Foreign currency exchange contracts – foreign currency loan	0					0		0			0		0		0
		$	49,774	$	0			$	49,774			$	14			$	48,150			$	1,610		$	29,262				$	0	$	29,262		$	1,057	$	27,441	$	764

3940

Table of Contents


																		As of December 31, 2020
		Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position		Net Amounts Presented in the Statement of Financial Position			Gross Amounts Not Offset in the Statement of Financial Position						Net Amount			Gross Amounts Recognized				Gross Amounts Offset in the Statement of Financial Position		Net Amounts Presented in the Statement of Financial Position			Gross Amounts Not Offset in the Statement of Financial Position				Net Amount
Description	Description							Financial Instruments			Collateral Pledged (Received)			Description						Financial Instruments						Collateral Pledged (Received)
		(In Thousands)
		As of December 31, 2019																		(In thousands)
Derivative Assets	Derivative Assets																				Derivative Assets
Interest rate swaps	Interest rate swaps	$	0	$	0	$	0		$	0		$	0		$	0	Interest rate swaps	$	0			$	0	$	0		$	0	$	0	$	0
Customer-related positions:	Customer-related positions:																Customer-related positions:
Interest rate swaps	Interest rate swaps	64,463		0		64,463			1,434			0			63,029		Interest rate swaps	141,822				0		141,822			48		0		141,774
Risk participation agreements	Risk participation agreements	482		0		482			0			0			482		Risk participation agreements	722				0		722			0		0		722
Foreign currency exchange contracts - matched customer book		469		0		469			7			(462)			0
Foreign currency exchange contracts – matched customer book																	Foreign currency exchange contracts – matched customer book	90				0		90			0		(1)		89
Foreign currency exchange contracts – foreign currency loan																	Foreign currency exchange contracts – foreign currency loan	9				0		9			0		0		9
		$	65,414	$	0	$	65,414		$	1,441		$	(462)		$	63,511		$	142,643			$	0	$	142,643		$	48	$	(1)	$	142,594
Derivative Liabilities	Derivative Liabilities																Derivative Liabilities
Interest rate swaps	Interest rate swaps	$	321	$	0	$	321		$	321		$	0		$	0	Interest rate swaps	$	—			$	0	$	0		$	0	$	0	$	0
Customer-related positions:	Customer-related positions:																Customer-related positions:
Interest rate swaps	Interest rate swaps	18,057		0		18,057			1,434			16,623			0		Interest rate swaps	42,600				0		42,600			48		42,552		0
Risk participation agreements	Risk participation agreements	606		0		606			0			0			606		Risk participation agreements	1,230				0		1,230			0		0		1,230
Foreign currency exchange contracts - matched customer book		428		0		428			7			0			421
Foreign currency exchange contracts - foreign currency loan		203		0		203			0			0			203
Foreign currency exchange contracts – matched customer book																	Foreign currency exchange contracts – matched customer book	77				0		77			0		0		77
Foreign currency exchange contracts – foreign currency loan																	Foreign currency exchange contracts – foreign currency loan	69				0		69			0		0		69
		$	19,615	$	0	$	19,615		$	1,762		$	16,623		$	1,230		$	43,976			$	0	$	43,976		$	48	$	42,552	$	1,376

13. Fair Value of Assets and Liabilities

The Company uses fair value measurements to record adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that the Company believes market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2 or from Level 2 to Level 3.

Table of Contents

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no active market exists for a portion of the Company’s financial instruments, fair value estimates are based on judgements regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgement, and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

~~Table of Contents~~

The following methods and assumptions were used by the Company in estimating fair value disclosures:

Cash and Cash Equivalents

For these financial instruments, which have original maturities of 90 days or less, their carrying amounts reported in the consolidated balance sheets approximate fair value.

~~Trading Securities~~

Trading securities consisted of fixed income municipal securities and were recorded at fair value. All fixed income securities were categorized as Level 2 as the valuations were estimated by a third-party pricing vendor using a valuation matrix with inputs including observable bond interest rate tables, recent transactions, and yield relationships.

Available for Sale Securities

Available for sale securities recorded at fair value consisted of U.S. Treasury securities, U.S. government-sponsored residential and commercial mortgage-backed securities, U.S. Agency bonds, and state and municipal ~~bonds, and a qualified zone academy bond.~~bonds.

The Company’s U.S. Treasury securities are traded on active markets and therefore these securities were classified as Level 1.

The fair value of U.S. Agency bonds are evaluated using relevant trade data, benchmark quotes and spreads obtained from publicly available trade data, and generated on a price, yield or spread basis as determined by the observed market data. Therefore, these securities were categorized as Level 2 given the use of observable inputs.

The fair value of U.S. government-sponsored residential and commercial mortgage-backed securities ~~and U.S. Agency bonds,~~ were estimated using either a matrix or benchmarks. The inputs used include benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. ~~These~~Therefore, these securities were categorized as Level 2.2 given the use of observable inputs.

~~State~~The fair value of state and municipal bonds were ~~classified~~estimated by a third-party pricing vendor using a valuation matrix with inputs including observable bond interest rate tables, recent transactions, and yield relationships. Therefore, these securities were categorized as Level 2 ~~for~~given the ~~same reasons described for the trading municipal securities.~~

The valuation technique for the qualified zone academy bond was a discounted cash flow methodology using market discount rates. The assumptions used included at least one significant model assumption or input that was unobservable, and therefore, this security was classified as Level 3.use of observable inputs.

Fair value was based on the value of one unit without regard to any premium or discount that may result from concentrations of ownership of a financial instrument, possible tax ramifications, or estimated transaction costs. The estimated fair value of the Company’s securities available for sale, by type, is disclosed in ~~Note 3.~~the Securities footnote.

Loans Held for Sale

~~Fair~~The fair value of loans held for sale, whose carrying amounts approximate fair value, was estimated using the anticipated market price based upon pricing indications provided by investor banks. These assets were classified as Level 2 given the use of observable inputs.

Loans

The fair value of commercial construction, commercial and industrial lines of credit, and certain other consumer loans was estimated by discounting the contractual cash flows using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

For commercial, commercial real estate, residential real estate, automobile, and consumer home equity loans, fair value was estimated by discounting contractual cash flows adjusted for prepayment estimates using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

The fair value of PPP loans, which are fully guaranteed by the SBA, approximates the carrying amount.

Loans that are deemed to be impaired were recorded at the fair value of the underlying collateral, if the loan is collateral-dependent, or at a carrying value based upon expected cash flows discounted using the loan’s effective interest rate.

4142

Table of Contents

Loans are classified as Level 3 since the valuation methodology utilizes significant unobservable inputs.

FHLB Stock

The fair value of FHLB stock approximates the carrying amount based on the redemption provisions of the FHLB. These assets were classified as Level 2.

Rabbi Trust Investments

Rabbi trust investments consisted primarily of cash and cash equivalents, U.S. government agency obligations, equity securities, mutual funds and other exchange-traded funds, and were recorded at fair value and included in other assets. The purpose of these rabbi trust investments is to fund certain executive non-qualified retirement benefits and deferred compensation.

The fair value of other U.S. government agency obligations was estimated using either a matrix or benchmarks. The inputs used include benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. These securities were categorized as Level 2.2 given the use of observable inputs. The equity securities, mutual funds and other exchange-traded funds were valued based on quoted prices from the market. The equities, mutual funds and exchange-traded funds traded in an active market were categorized as Level 1.1 as they were valued based upon quoted prices from the market. Mutual funds at net asset value amounted to ~~$48.8~~$54.5 million at ~~September~~June 30, ~~2020~~2021 and ~~$16.2~~$53.9 million at December 31, ~~2019.~~2020. There were 0 redemption restrictions on these mutual funds at the end of any period presented.

Bank-Owned Life Insurance

The fair value of bank-owned life insurance was based upon quotations received from bank-owned life insurance dealers. These assets were classified as Level 2 given the use of observable inputs.

Deposits

The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings and interest checking accounts, and money market accounts, was equal to their carrying amount. The fair value of time deposits was based on the discounted value of contractual cash flows using current market interest rates. Deposits were classified as Level 2 given the use of observable market inputs.

The fair value estimates of deposits do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the wholesale market (core deposit intangibles).

~~Other Borrowed Funds~~

For other borrowed funds that mature in 90 days or less, the carrying amount reported in the consolidated balance sheets approximates fair value. For borrowed funds that mature in more than 90 days, the fair value was based on the discounted value of the contractual cash flows applying interest rates currently being offered in the market.

FHLB Advances

The fair value of FHLB advances was based on the discounted value of contractual cash flows. The discount rates used are representative of approximate rates currently offered on instruments with similar remaining maturities. FHLB advances were classified as Level 2.

Escrow Deposits of Borrowers

The fair value of escrow deposits of borrowers, which have no stated maturity, approximates the carrying amount. Escrow deposits of borrowers were classified as Level 2.

Interest Rate Swaps

The fair value of interest rate swaps was determined using discounted cash flow analysis on the expected cash flows of the interest rate swaps. This analysis reflects the contractual terms of the interest rate swaps, including the period of maturity, and uses observable market-based inputs, including interest rate curves and implied ~~volatilities.~~volatility. In addition, for customer-related interest rate swaps, the analysis reflects a credit valuation adjustment to reflect the Company’s own ~~nonperformance~~non-performance risk and the respective counterparty’s ~~nonperformance~~non-performance risk in the fair value measurements. The majority of inputs used to value its interest rate swaps fall within Level 2 of the fair value hierarchy, but the credit valuation adjustments associated with the interest rate swaps utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the impact of

Table of Contents

the Level 3 inputs on the overall valuation of the interest rate swaps was deemed insignificant to the overall valuation. As a result, the interest rate swaps were categorized as Level 2 within the fair value hierarchy.

~~Table of Contents~~

Risk Participations

The fair value of risk participations was determined based upon the total expected exposure of the derivative which considers the present value of cash flows discounted using market-based inputs and ~~was~~were therefore categorized as Level 2 within the fair value hierarchy. The fair value also included a credit valuation adjustment which evaluates the credit risk of its counterparties by considering factors such as the likelihood of default by the counterparties, its net exposures, the remaining contractual life, as well as the amount of collateral securing the position. The change in value of derivative assets and liabilities attributable to credit risk was not significant during the reported periods.

Foreign Currency Forward Contracts

The fair values of foreign currency forward contracts were based upon the remaining expiration period of the contracts and bid quotations received from foreign exchange contract dealers and were categorized as Level 2 within the fair value hierarchy.

~~The carrying amounts and estimated fair values of the Company’s financial instruments as of September 30, 2020 and December 31, 2019 were as follows:~~

As of September 30, 2020 As of December 31, 2019
Carrying
Amount Fair
Value Carrying
Amount Fair
Value
(In Thousands)
Assets
Cash and cash equivalents $ 2,328,084 $ 2,328,084 $ 362,602 $ 362,602
Trading securities 0 0 961 961
Securities available for sale 2,207,672 2,207,672 1,508,236 1,508,236
Loans held for sale 4,649 4,649 26 26
Loans, net of allowance for loan losses 9,796,062 10,113,381 8,889,184 9,116,018
Accrued interest receivable 34,525 34,525 26,835 26,835
FHLB stock 8,805 8,805 9,027 9,027
Rabbi trust investments 83,663 83,663 78,012 78,012
Bank-owned life insurance 78,058 78,058 77,546 77,546
Interest rate swap contracts
Customer-related positions 161,841 161,841 64,463 64,463
Risk participation agreements 888 888 482 482
Foreign currency forward contracts
Matched customer book 183 183 469 469
Foreign currency loan 35 35 0 0
Liabilities
Deposits $ 13,332,585 $ 13,332,754 $ 9,551,392 $ 9,548,889
Other borrowed funds 0 0 201,082 201,082
FHLB advances 14,773 14,633 18,964 18,188
Escrow deposits of borrowers 14,664 14,664 15,349 15,349
Accrued interest payable 128 128 1,712 1,712
Interest rate swap contracts
Cash flow hedges - interest rate positions 0 0 321 321
Customer-related positions 48,174 48,174 18,057 18,057
Risk participation agreements 1,382 1,382 606 606
Foreign currency forward contracts
Matched customer book 159 159 428 428
Foreign currency loan 59 59 203 203

4344

Table of Contents

Fair Value of Assets and Liabilities Measured on a Recurring Basis

The following tables present the balances of assets and liabilities measured at fair value on a recurring basis as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019:~~2020:


																				Fair Value Measurements at Reporting Date Using
					Fair Value Measurements at Reporting Date Using										Balance as of June 30, 2021					Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Description	Description	Balance as of September 30, 2020			Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Description

				(Dollars in thousands)													(In thousands)
Assets	Assets												Assets
Securities available for sale	Securities available for sale												Securities available for sale
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	$	1,538,994				$	0					$	1,538,994				$	0			Government-sponsored residential mortgage-backed securities	$	3,478,529	$	0	$	3,478,529	$	0
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	17,096			0				17,096		0		Government-sponsored commercial mortgage-backed securities		181,795					0			181,795		0
U.S. Agency bonds	U.S. Agency bonds	293,173			0				293,173		0		U.S. Agency bonds		841,005					0			841,005		0
U.S. Treasury securities	U.S. Treasury securities	70,673			70,673				0		0		U.S. Treasury securities		69,331					69,331			0		0
State and municipal bonds and obligations	State and municipal bonds and obligations	281,469			0				281,469		0		State and municipal bonds and obligations		278,121					0			278,121		0
Qualified zone academy bond		6,267			0				0		6,267
Rabbi trust investments	Rabbi trust investments	83,663			75,716				7,947		0		Rabbi trust investments		98,900					91,187			7,713		0
Loans held for sale													Loans held for sale		2,734					0			2,734		0
Interest rate swap contracts	Interest rate swap contracts												Interest rate swap contracts
Customer-related positions	Customer-related positions	161,841			0				161,841		0		Customer-related positions		92,980					0			92,980		0
Risk participation agreements	Risk participation agreements	888			0				888		0		Risk participation agreements		432					0			432		0
Foreign currency forward contracts	Foreign currency forward contracts												Foreign currency forward contracts
Matched customer book	Matched customer book	183			0				183		0		Matched customer book		94					0			94		0
Foreign currency loan	Foreign currency loan	35			0				35		0		Foreign currency loan		48					0			48		0
Total	Total	$	2,454,282		$	146,389			$	2,301,626	$	6,267	Total		$	5,043,969				$	160,518		$	4,883,451	$	0
Liabilities	Liabilities												Liabilities
Interest rate swap contracts	Interest rate swap contracts												Interest rate swap contracts
Cash flow hedges - interest rate positions		$	0		0				$	0	0
Customer-related positions	Customer-related positions	48,174			0				48,174		0		Customer-related positions		$	28,498				$	0		$	28,498	$	0
Risk participation agreements	Risk participation agreements	1,382			0				1,382		0		Risk participation agreements		675					0			675		0
Foreign currency forward contracts	Foreign currency forward contracts												Foreign currency forward contracts
Matched customer book	Matched customer book	159			0				159		0		Matched customer book		89					0			89		0
Foreign currency loan	Foreign currency loan	59			0				59		0		Foreign currency loan		0					0			0		0
Total	Total	$	49,774		$	0			$	49,774	$	0	Total		$	29,262				$	0		$	29,262	$	0

4445

Table of Contents


				Fair Value Measurements at Reporting Date Using									Fair Value Measurements at Reporting Date Using
Description	Description	Balance as of December 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Description	Balance as of December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
		(In thousands)									(In thousands)
Assets	Assets									Assets
Trading securities
Municipal bonds		$	961	$	0	$	961	$	0
Securities available for sale	Securities available for sale									Securities available for sale
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	1,167,968		0		1,167,968		0		Government-sponsored residential mortgage-backed securities	$	2,148,800	$	0	$	2,148,800	$	0
Government-sponsored commercial mortgage-backed securities										Government-sponsored commercial mortgage-backed securities	17,081		0		17,081		0
U.S. Agency bonds										U.S. Agency bonds	666,709		0		666,709		0
U.S. Treasury securities	U.S. Treasury securities	50,420		50,420		0				U.S. Treasury securities	70,369		70,369		0		0
State and municipal bonds and obligations	State and municipal bonds and obligations	283,538		0		283,538		0		State and municipal bonds and obligations	280,902		0		280,902		0
Qualified zone academy bond		6,310		0		0		6,310
Rabbi trust investments	Rabbi trust investments	78,012		63,945		14,067		0		Rabbi trust investments	91,683		83,884		7,799		0
Loans held for sale										Loans held for sale	1,140		0		1,140		0
Interest rate swap contracts	Interest rate swap contracts									Interest rate swap contracts
Customer-related positions		64,463		0		64,463		0
Risk participation agreements		482		0		482		0
Foreign currency forward contracts
Matched customer book		469		0		469		0
Total		$	1,652,623	$	114,365	$	1,531,948	$	6,310
Liabilities
Interest rate swap contracts
Cash flow hedges - interest rate positions		$	321	$	0	$	321	$	0
Customer-related positions	Customer-related positions	18,057		0		18,057		0		Customer-related positions	141,822		0		141,822		0
Risk participation agreements	Risk participation agreements	606		0		606		0		Risk participation agreements	722		0		722		0
Foreign currency forward contracts	Foreign currency forward contracts									Foreign currency forward contracts
Matched customer book	Matched customer book	428		0		428		0		Matched customer book	90		0		90		0
Foreign currency loan	Foreign currency loan	203		0		203		0		Foreign currency loan	9		0		9		0
Total	Total	$	19,615	$	0	$	19,615	$	0	Total	$	3,419,327	$	154,253	$	3,265,074	$	0
Liabilities										Liabilities
Interest rate swap contracts										Interest rate swap contracts
Customer-related positions										Customer-related positions	$	42,600	$	0	$	42,600	$	0
Risk participation agreements										Risk participation agreements	1,230		0		1,230		0
Foreign currency forward contracts										Foreign currency forward contracts
Matched customer book										Matched customer book	77		0		77		0
Foreign currency loan										Foreign currency loan	69		0		69		0
Total										Total	$	43,976	$	0	$	43,976	$	0

There were 0 transfers to or from Level 1, 2 and 3 during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and year ended December 31, ~~2019.~~

For the fair value measurements which are classified as Level 3 within the fair value hierarchy, the Company’s Treasury and Finance groups determine the valuation policies and procedures. For the valuation of the qualified zone academy bond, the Company uses third-party valuation information. Management determined that no changes to the quantitative unobservable inputs were necessary. Management employs various techniques to analyze the valuation it receives from third parties, such as analyzing changes in market yields. Management reviews changes in fair value from period to period to ensure that values received from the third parties are consistent with their expectation of the market.

~~Table of Contents~~

2020.

The ~~table below presents a reconciliation for all~~Company held no assets ~~and~~or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) ~~during the three~~as of June 30, 2021 or December 31, 2020.

Fair Value of Assets and ~~nine months ended September 30, 2020 and 2019:~~


	Securities Available for Sale
	~~(Dollars In Thousands)~~
~~Balance at January 1, 2019~~	$	~~6,045~~
~~Gains and losses (realized/unrealized):~~
~~Included in net income~~	82
~~Balance at September 30, 2019~~	$	~~6,127~~

~~Balance at January 1, 2020~~	$	~~6,310~~
~~Gains and losses (realized/unrealized):~~
~~Included in net income~~	82
~~Included in other comprehensive income~~	~~(125)~~
~~Balance at September 30, 2020~~	$	~~6,267~~

~~Balance at July 1, 2019~~	$	~~6,100~~
~~Gains and losses (realized/unrealized):~~
~~Included in net income~~	27
~~Balance at September 30, 2019~~	$	~~6,127~~

~~Balance at July 1, 2020~~	$	~~6,279~~
~~Gains and losses (realized/unrealized):~~
~~Included in net income~~	27
~~Included in other comprehensive income~~	~~(39)~~
~~Balance at September 30, 2020~~	$	~~6,267~~

Liabilities Measured on a Nonrecurring Basis

The Company may also be required, from time to time, to measure certain other assets on a nonrecurring basis in accordance with generally accepted accounting principles. The following tables summarize the fair value of assets and liabilities measured at fair value on a nonrecurring basis, as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~

Fair Value Measurements at Reporting Date Using
Description Balance as of September 30, 2020 Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) Significant
Other
Observable
Inputs (Level 2) Significant
Unobservable
Inputs (Level 3)
(Dollars in thousands)
Assets
Other real estate owned $ 40 $ 0 $ 0 $ 40
Collateral-dependent impaired loans whose fair value is based upon appraisals 9,953 0 0 9,953
Total $ 9,993 $ 0 $ 0 $ 9,993
2020.

Table of Contents


				Fair Value Measurements at Reporting Date Using								Fair Value Measurements at Reporting Date Using
Description	Description	Balance as of December 31, 2019		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)	Description	Balance as of June 30, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
		(Dollars in thousands)								(In thousands)
Assets	Assets								Assets
Collateral-dependent impaired loans whose fair value is based upon appraisals	Collateral-dependent impaired loans whose fair value is based upon appraisals	$	4,261	$	0	$	0	4,261	Collateral-dependent impaired loans whose fair value is based upon appraisals	$	13,109	$	0	$	0	$	13,109


			Fair Value Measurements at Reporting Date Using
Description	Balance as of December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Assets
Collateral-dependent impaired loans whose fair value is based upon appraisals	$	11,036	$	0	$	0	11,036

For the valuation of the ~~other real estate owned and~~ collateral-dependent impaired loans, the Company relies primarily on third-party valuation information from certified appraisers and values are generally based upon recent appraisals of the underlying collateral, brokers’ opinions based upon recent sales of comparable properties, estimated equipment auction or liquidation values, income capitalization, or a combination of income capitalization and comparable sales. Depending on the type of underlying collateral, valuations may be adjusted by management for qualitative factors such as economic factors and estimated liquidation expenses. The range of these possible adjustments may vary.

Impaired loans in which a reserve was established based upon expected cash flows discounted at the loan’s effective interest rate are not deemed to be measured at fair value.

Disclosures about Fair Value of Financial Instruments

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


					Fair Value Measurements at Reporting Date Using
Description	Carrying Value as of June 30, 2021		Fair Value as of June 30, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Assets
Loans, net of allowance for loan losses	$	9,485,699	$	9,632,348	$	0	$	0	$	9,632,348
FHLB stock	10,601		10,601		0		10,601		0
Bank-owned life insurance	79,634		79,634		0		79,634		0
Liabilities
Deposits	$	13,250,433	$	13,250,334	$	0	$	13,250,334	$	0
FHLB advances	14,323		14,072		0		14,072		0
Escrow deposits from borrowers	14,119		14,119		0		14,119		0

Table of Contents


					Fair Value Measurements at Reporting Date Using
Description	Carrying Value as of December 31, 2020		Fair Value as of December 31, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In thousands)
Assets
Loans, net of allowance for loan losses	$	9,593,958	$	9,779,195	$	0	$	0	$	9,779,195
FHLB stock	8,805		8,805		0		8,805		0
Bank-owned life insurance	78,561		78,561		0		78,561		0
Liabilities
Deposits	$	12,155,784	$	12,155,843	$	0	$	12,155,843	$	0
FHLB advances	14,624		14,434		0		14,434		0
Escrow deposits from borrowers	13,425		13,425		0		13,425		0

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.

14. Revenue from Contracts with Customers

~~The Company adopted the new revenue recognition standard under ASC 606 on January 1, 2019 using the modified retrospective approach.~~ Revenue recognition remained substantially unchanged following adoption of ASC 606 and, therefore, there were no material changes to the Company’s consolidated financial statements at or for the year ended December 31, 2019, as a result of adopting the new guidance.

~~The Company derives a portion of its noninterest income~~ from contracts with customers ~~as such, revenue~~within the scope of ASC, Revenue from ~~such arrangements~~Contracts with Customers (Topic 606) (“ASC 606”) is recognized when control of goods or services is transferred to the customer, in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company considers the terms of the contract and all relevant facts and circumstances when applying this guidance. The Company measures revenue and timing of recognition by applying the following five steps:

1.Identify the contract(s) with the customers

2.Identify the performance obligations

3.Determine the transaction price

4.Allocate the transaction price to the performance obligations

5.Recognize revenue when (or as) the entity satisfies a performance obligation

The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

Performance obligations

The Company’s performance obligations are generally satisfied either at a point in time or over time, as services are rendered. Unsatisfied performance obligations at the report date are not material to the Company’s consolidated financial statements.

~~The Company has disaggregated its revenue~~

Table of Contents

A portion of the Company's noninterest income is derived from contracts with customers within the scope of ASC ~~606~~606. The Company has disaggregated such revenues by type of service, as presented in the table below. These categories reflect how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

~~Table of Contents~~


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
		(Dollars In Thousands)									(In thousands)
Insurance commissions	Insurance commissions	$	21,884	$	21,522	$	72,058	$	70,419	Insurance commissions	$	23,664	$	22,697	$	51,811	$	50,174
Service charges on deposit accounts	Service charges on deposit accounts	5,052		7,015		15,514		20,190		Service charges on deposit accounts	5,708		4,364		11,075		10,462
Trust and investment advisory fees	Trust and investment advisory fees	5,311		4,987		15,600		14,595		Trust and investment advisory fees	6,074		5,194		11,737		10,289
Debit card processing fees	Debit card processing fees	2,721		2,738		7,528		7,786		Debit card processing fees	3,170		2,337		5,919		4,807
Other non-interest income	Other non-interest income	1,689		2,265		5,226		6,185		Other non-interest income	2,123		1,485		3,915		3,537
Total noninterest income in-scope of ASC 606	Total noninterest income in-scope of ASC 606	36,657		38,527		115,926		119,175		Total noninterest income in-scope of ASC 606	40,739		36,077		84,457		79,269
Total noninterest income out-of-scope of ASC 606	Total noninterest income out-of-scope of ASC 606	11,052		3,063		12,809		15,847		Total noninterest income out-of-scope of ASC 606	4,994		11,580		16,488		1,757
Total noninterest income	Total noninterest income	$	47,709	$	41,590	$	128,735	$	135,022	Total noninterest income	$	45,733	$	47,657	$	100,945	$	81,026

Additional information related to each of the revenue streams is further noted below.

Insurance Commissions

The Company acts as an agent in offering property, casualty, and life and health insurance to both commercial and consumer customers though Eastern Insurance ~~Group LLC.~~Group. The Company earns a fixed commission on the sales of these products and services. The Company may also earn bonus commissions based upon meeting certain volume thresholds. In general, the Company recognizes commission revenues when earned based upon the effective date of the policy. For certain insurance products, the Company may also earn and recognize annual residual commissions commensurate with annual premiums being paid.

The Company also earns profit-sharing, or contingency revenues, from the insurers with whom the Company places business. These profit-sharing revenues are performance bonuses from the insurers based upon certain performance metrics such as floors on written premiums, loss rates, and growth rates. Because the Company’s expectation of the ultimate profit-sharing revenue amounts to be earned can vary from period to period, the Company does not recognize this revenue until it has concluded that, based on all the facts and information available, it is probable that a significant revenue reversal will not occur in future periods.

Insurance commissions earned but not yet received amounted to ~~$11.7~~$14.4 million as of ~~September~~June 30, ~~2020,~~2021, and ~~$3.9~~$15.8 million as of December 31, ~~2019,~~2020, and were included in other assets.

Deposit Service Charges

The Company offers various deposit account products to its customers governed by specific deposit agreements applicable to either personal customers or business customers. These agreements identify the general conditions and obligations of both parties and include standard information regarding deposit account-related fees.

Deposit account services include providing access to deposit accounts as well as access to the various deposit transactional services of the Company. These transactional services are primarily those that are identified in the standard fee schedule, and include, but are not limited to, services such as overdraft protection, wire transfer, and check collection. The Company charges monthly fixed service fees associated with the customer having access to the deposit account as well as separate fixed fees associated with and at the time specific transactions are entered into by the customer. As such, the Company considers that its performance obligations are fulfilled when customers are provided deposit account access or when the requested deposit transaction is completed.

~~Cash Management~~

Table of Contents

Cash management services are a subset of the deposit service charges revenue stream. These services include automated clearing house, or ACH, transaction processing, positive pay, lockbox, and remote deposit services. These services are also governed by separate agreements entered into by the customer. The fee arrangement for these services is structured as a fixed fee per transaction which may be offset by earnings credits. An earnings credit is a discount that a customer receives based upon the investable balance in the applicable covered deposit account(s) for a given month. Earnings credits are only good for the given month. That is, if cash management fees for a given month are less than the month’s earnings credit, the remainder of the credit does not carry over to the following month. Cash management fees are recognized as revenue in the month that the services are

~~Table of Contents~~

provided. Cash ~~Management~~management fees earned but not yet received amounted to ~~$0.8~~$0.9 million and $1.0 million as of ~~both September~~June 30, ~~2020~~2021 and December 31, ~~2019 and were included in other assets.~~

~~Debit Card Processing Fees~~

The Company provides debit cards to its customers which are authorized and settled through various card payment networks, and in exchange, the Company earns revenue as determined by each payment network’s interchange program. Regardless of the network that is utilized to authorize and settle the payment, the merchant that provides the product or service to the debit card holder is ultimately responsible for the interchange payment to the Company. Debit card processing fees are recognized as card transactions are settled within each network. Debit card processing fees earned but not yet received amounted to $0.3 million as of both September 30, 2020 ~~and December 31, 2019~~ and were included in other assets.

Trust and Investment Advisory Fees

The Company offers investment management and trust services to individuals, institutions, small businesses and charitable institutions. Each investment management product is governed by its own contract along with a separate identifiable fee schedule unique to that product. The Company also offers additional services, such as estate settlement, financial planning, tax services, and other special services quoted at the customer’s request.

The asset management and/or custody fees are primarily based upon a percentage of the monthly valuation of the principal assets in the customer’s account. Customers are also charged a base fee which is prorated over a ~~twelve-month~~12-month period. Fees for additional or special services are generally fixed in nature and are charged as services are rendered. All revenue is recognized in correlation to the monthly management fee determinations or as transactional services are provided.

Debit Card Processing Fees

The Company provides debit cards to its customers which are authorized and settled through various card payment networks, and in exchange, the Company earns revenue as determined by each payment network’s interchange program. Regardless of the network that is utilized to authorize and settle the payment, the merchant that provides the product or service to the debit card holder is ultimately responsible for the interchange payment to the Company. Debit card processing fees are recognized as card transactions are settled within each network. Debit card processing fees earned but not yet received amounted to $0.3 million as of both June 30, 2021 and December 31, 2020 and were included in other assets.

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. Noninterest income includes, but is not limited to, the following types of revenue with customers: safe deposit rent, ATM surcharge fees and customer checkbook ~~fees and insured cash sweep fee income.~~fees. Individually, these sources of noninterest income are immaterial.

4950

Table of Contents

15. Other Comprehensive Income

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

Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020
Pre Tax
Amount Tax
(Expense)
Benefit After Tax
Amount Pre Tax
Amount Tax
(Expense)
Benefit After Tax
Amount
(Dollars In Thousands)
Unrealized gains (losses) on securities available for sale:
Change in fair value of securities available for sale $ (5,563) $ 1,242 $ (4,321) $ 28,750 $ (6,370) $ 22,380
Less: reclassification adjustment for gains included in net income 0 0 0 285 (63) 222
Net change in fair value of securities available for sale (5,563) 1,242 (4,321) 28,465 (6,307) 22,158
Unrealized gains (losses) on cash flow hedges:
Change in fair value of cash flow hedges (142) 40 (102) 46,869 (13,175) 33,694
Less: net cash flow hedge losses reclassified into interest income(1)
8,405 (2,363) 6,042 18,651 (5,243) 13,408
Net change in fair value of cash flow hedges (8,547) 2,403 (6,144) 28,218 (7,932) 20,286
Defined benefit pension plans:
Amortization of actuarial net loss 2,361 (664) 1,697 7,082 (1,990) 5,092
Amortization of prior service cost 7 (2) 5 19 (5) 14
Net change in other comprehensive income for defined benefit postretirement plans 2,368 (666) 1,702 7,101 (1,995) 5,106
Total other comprehensive income $ (11,742) $ 2,979 $ (8,763) $ 63,784 $ (16,234) $ 47,550


		Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019							Three Months Ended June 30, 2021						Six Months Ended June 30, 2021
		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		Pre Tax Amount		Tax (Expense) Benefit		After Tax Amount
		(Dollars In Thousands)													(In thousands)
Unrealized gains (losses) on securities available for sale:	Unrealized gains (losses) on securities available for sale:													Unrealized gains (losses) on securities available for sale:
Change in fair value of securities available for sale	Change in fair value of securities available for sale	$	10,326	$	(2,270)	$	8,056	$	57,461	$	(12,724)	$	44,737	Change in fair value of securities available for sale	$	32,632	$	(7,203)	$	25,429	$	(62,347)	$	13,779	$	(48,568)
Less: reclassification adjustment for gains included in net income	Less: reclassification adjustment for gains included in net income	0		0		0		2,016		(459)		1,557		Less: reclassification adjustment for gains included in net income	1		0		1		1,165		(257)		908
Net change in fair value of securities available for sale	Net change in fair value of securities available for sale	10,326		(2,270)		8,056		55,445		(12,265)		43,180		Net change in fair value of securities available for sale	32,631		(7,203)		25,428		(63,512)		14,036		(49,476)
Unrealized gains (losses) on cash flow hedges:	Unrealized gains (losses) on cash flow hedges:													Unrealized gains (losses) on cash flow hedges:
Change in fair value of cash flow hedges	Change in fair value of cash flow hedges	3,928		(1,104)		2,824		25,842		(7,264)		18,578		Change in fair value of cash flow hedges	0		0		0		0		0		0
Less: net cash flow hedge losses reclassified into interest income		429		(121)		308		953		(268)		685
Less: net cash flow hedge gains reclassified into interest income(1)														Less: net cash flow hedge gains reclassified into interest income(1)	8,219		(2,310)		5,909		16,493		(4,636)		11,857
Net change in fair value of cash flow hedges	Net change in fair value of cash flow hedges	3,499		(983)		2,516		24,889		(6,996)		17,893		Net change in fair value of cash flow hedges	(8,219)		2,310		(5,909)		(16,493)		4,636		(11,857)
Total other comprehensive income		$	13,825	$	(3,253)	$	10,572	$	80,334	$	(19,261)	$	61,073
Defined benefit pension plans:														Defined benefit pension plans:
Change in actuarial net loss														Change in actuarial net loss	0		0		0		0		0		0
Less: amortization of actuarial net loss														Less: amortization of actuarial net loss	(3,538)		995		(2,543)		(7,075)		1,989		(5,086)
Less: amortization of prior service cost														Less: amortization of prior service cost	2,945		(828)		2,117		5,890		(1,656)		4,234
Net change in other comprehensive income for defined benefit postretirement plans														Net change in other comprehensive income for defined benefit postretirement plans	593		(167)		426		1,185		(333)		852
Total other comprehensive income (loss)														Total other comprehensive income (loss)	$	25,005	$	(5,060)	$	19,945	$	(78,820)	$	18,339	$	(60,481)

(1)~~Includes~~Represents amortization of ~~$5.1 million and $5.3 million~~realized gains on terminated cash flow hedges for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, respectively, of the remaining balance of realized but unrecognized gains, net of tax, from the termination of interest rate~~

~~Table of Contents~~

~~swaps.~~2021. The total realized gain of $41.2 million, net of tax, will be recognized in earnings through January 2023. The balance of this gain had amortized to ~~$35.9~~$18.0 million, net of tax, at ~~September~~June 30, 2021.

Table of Contents


	Three Months Ended June 30, 2020						Six Months Ended June 30, 2020
	Pre Tax Amount		Tax (Expense) Benefit		After Tax Amount		Pre Tax Amount		Tax (Expense) Benefit		After Tax Amount
	(In thousands)
Unrealized gains (losses) on securities available for sale:
Change in fair value of securities available for sale	$	511	$	(97)	$	414	$	34,313	$	(7,612)	$	26,701
Less: reclassification adjustment for gains included in net income	163		(36)		127		285		(63)		222
Net change in fair value of securities available for sale	348		(61)		287		34,028		(7,549)		26,479
Unrealized gains (losses) on cash flow hedges:
Change in fair value of cash flow hedges	3,455		(971)		2,484		47,011		(13,215)		33,796
Less: net cash flow hedge gains reclassified into interest income(1)	7,134		(2,005)		5,129		10,246		(2,880)		7,366
Net change in fair value of cash flow hedges	(3,679)		1,034		(2,645)		36,765		(10,335)		26,430
Defined benefit pension plans:
Change in actuarial net loss	0		0		0		0		0		0
Less: amortization of actuarial net loss	(4,721)		1,326		(3,395)		(4,721)		1,326		(3,395)
Less: amortization of prior service cost	(12)		3		(9)		(12)		3		(9)
Net change in other comprehensive income for defined benefit postretirement plans	4,733		(1,329)		3,404		4,733		(1,329)		3,404
Total other comprehensive income	$	1,402	$	(356)	$	1,046	$	75,526	$	(19,213)	$	56,313

(1)Includes amortization of $0.3 million of the remaining balance of realized but unrecognized gains, net of tax, on terminated cash flow hedges for the three and six months ended June 30, 2020. The original realized gain of $22.3 million, net of tax, will be recognized in earnings through January 2023. The balance of this gain had amortized to $22.0 million, net of tax, at June 30, 2020.

The following table illustrates the changes in the balances of each component of accumulated other comprehensive income (loss), net of tax:


		Unrealized Gains and (Losses) on Available for Sale Securities		Unrealized Gains and (Losses) on Cash Flow Hedges		Defined Benefit Pension Plans		Total			Unrealized Gains and (Losses) on Available for Sale Securities		Unrealized Gains and (Losses) on Cash Flow Hedges		Defined Benefit Pension Plans		Total
		(In Thousands)									(In thousands)
Beginning Balance: January 1, 2021										Beginning Balance: January 1, 2021	$	45,672	$	29,815	$	(21,253)	$	54,234
Other comprehensive loss before reclassifications										Other comprehensive loss before reclassifications	(48,568)		0		0		(48,568)
Less: Amounts reclassified from accumulated other comprehensive income										Less: Amounts reclassified from accumulated other comprehensive income	908		11,857		(852)		11,913
Net current-period other comprehensive (loss) income										Net current-period other comprehensive (loss) income	(49,476)		(11,857)		852		(60,481)
Ending Balance: June 30, 2021										Ending Balance: June 30, 2021	$	(3,804)	$	17,958	$	(20,401)	$	(6,247)
Beginning Balance: January 1, 2020	Beginning Balance: January 1, 2020	$	21,798	$	15,624	$	81,269	$	(43,847)	Beginning Balance: January 1, 2020	$	21,798	$	15,624	$	(81,269)	$	(43,847)
Other comprehensive income (loss) before reclassifications		22,380		33,694		0		56,074
Less: Amounts reclassified from accumulated other comprehensive income		222		13,408		5,106		8,524
Other comprehensive income before reclassifications										Other comprehensive income before reclassifications	26,701		33,796		0		60,497
Less: Amounts reclassified from accumulated other comprehensive income (loss)										Less: Amounts reclassified from accumulated other comprehensive income (loss)	222		7,366		(3,404)		4,184
Net current-period other comprehensive income	Net current-period other comprehensive income	22,158		20,286		(5,106)		47,550		Net current-period other comprehensive income	26,479		26,430		3,404		56,313
Ending Balance: September 30, 2020		$	43,956	$	35,910	$	76,163	$	3,703
Beginning Balance: January 1, 2019		$	(19,360)	$	2,988	$	59,389	$	(75,761)
Other comprehensive income (loss) before reclassifications		44,737		18,578		0		63,315
Less: Amounts reclassified from accumulated other comprehensive income		1,557		685		0		2,242
Net current-period other comprehensive income		43,180		17,893		0		61,073
Ending Balance: September 30, 2019		$	23,820	$	20,881	$	59,389	$	(14,688)
Ending Balance: June 30, 2020										Ending Balance: June 30, 2020	$	48,277	$	42,054	$	(77,865)	$	12,466

Table of Contents

16. Segment Reporting

The Company’s primary reportable segment is its banking business, which offers a range of commercial, retail, wealth management and banking services, and consists primarily of attracting deposits from the general public and investing those deposits, together with borrowings and funds generated from operations, to originate loans in a variety of sectors and to invest in securities. Revenue from the banking business consists primarily of interest earned on loans and investment securities. In addition to its banking business reportable segment, the Company has an insurance agency business reportable segment, which consists of insurance-related activities, acting as an independent agent in offering commercial, personal and employee benefits insurance products to individual and commercial clients. Revenue from the insurance agency business consists primarily of commissions on sales of insurance products and services.

Results of operations and selected financial information by segment and reconciliation to the consolidated financial statements as of and for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, and for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, was as follows:

~~Table of Contents~~


	As of and for the three months ended June 30,
	2021								2020
	Banking Business		Insurance Agency Business		Other / Eliminations		Total		Banking Business		Insurance Agency Business		Other / Eliminations		Total
	(In thousands)
Net interest income	$	104,608	$	0	$	0	$	104,608	$	98,755	$	0	$	0	$	98,755
(Release of) provision for loan losses	(3,300)		0		0		(3,300)		8,600		0		0		8,600
Net interest income after provision for loan losses	107,908		0		0		107,908		90,155		0		0		90,155
Noninterest income	21,567		24,166		0		45,733		23,779		23,886		(8)		47,657
Noninterest expense	87,799		20,496		(960)		107,335		81,713		20,084		(1,032)		100,765
Income before provision for income taxes	41,676		3,670		960		46,306		32,221		3,802		1,024		37,047
Income tax provision	10,464		1,033		0		11,497		6,121		1,076		0		7,197
Net income	$	31,212	$	2,637	$	960	$	34,809	$	26,100	$	2,726	$	1,024	$	29,850
Total assets	$	16,905,267	$	209,416	$	(67,230)	$	17,047,453	$	13,867,746	$	193,320	$	(64,543)	$	13,996,523
Total liabilities	$	13,628,092	$	55,969	$	(67,230)	$	13,616,831	$	12,314,286	$	53,150	$	(64,543)	$	12,302,893

For the nine months ended September 30,
2020 2019
Banking
Business Insurance
Agency
Business Other /
Eliminations Total Banking
Business Insurance
Agency
Business Other /
Eliminations Total
(Dollars in thousands)
Net interest income $ 297,643 $ 0 $ 0 $ 297,643 $ 310,343 $ 0 $ 0 $ 310,343
Provision for loan losses 37,900 0 0 37,900 4,500 0 0 4,500
Net interest income after provision for loan losses 259,743 0 0 259,743 305,843 0 0 305,843
Noninterest income 55,935 72,979 (179) 128,735 63,309 71,881 (168) 135,022
Noninterest expense 251,688 57,231 (3,165) 305,754 251,156 58,657 (2,748) 307,065
Income before provision for income taxes 63,990 15,748 2,986 82,724 117,996 13,224 2,580 133,800
Income tax provision 11,468 4,456 0 15,924 26,150 3,790 0 29,940
Net income $ 52,522 $ 11,292 $ 2,986 $ 66,800 $ 91,846 $ 9,434 $ 2,580 $ 103,860

~~17. Subsequent Events~~

~~Plan of Conversion; Stock Offering~~

Pursuant to a Plan of Conversion (the “Plan”), Eastern Bank Corporation, the predecessor of the Company, reorganized from a mutual holding company into a publicly traded stock form of organization on October 14, 2020. In connection with the reorganization, Eastern Bank Corporation transferred to the Company 100% of Eastern Bank’s common stock, and immediately thereafter merged into the Company. The Plan was adopted by the Board of Trustees of Eastern Bank Corporation on June 12, 2020, and approved by the corporators of Eastern Bank Corporation on August 6, 2020.

Pursuant to the Plan, the Company sold 179,287,828 shares of common stock in a public offering at $10.00 per share, including 14,940,652 shares of common stock purchased by the Bank’s employee stock ownership plan (the “ESOP”), for gross offering proceeds of approximately $1,792,878,000. The Company completed the offering on October 14, 2020. Also pursuant to the Plan, the Company donated 7,470,326 shares of common stock with an estimated fair value of $91.3 million as of the date of this filing to the Eastern Bank Charitable Foundation (the “Foundation”), effective October 15, 2020. A total of 186,758,154 shares of common stock of the Company were issued and outstanding immediately after the donation to the Foundation.

~~The purchase of common stock by the ESOP was financed by a loan from the Company.~~

~~Table of Contents~~

As of September 30, 2020 and October 14, 2020, approximately $12.1 million and $28.9 million, respectively, of stock offering costs had been incurred and deferred. These stock offering costs were deducted from the proceeds of the shares sold in the offering.

Pursuant to the Plan, eligible account holders have received an interest in a liquidation account maintained by the Company in an amount equal to (i) Eastern Bank Corporation’s ownership interest in the Bank’s total shareholders’ equity as of March 31, 2020, the date of the latest statement of financial position included in the latest prospectus filed with the U.S. Securities and Exchange Commission for the offering, plus (ii) the value of the net assets of Eastern Bank Corporation as of March 31, 2020 (excluding its ownership of Eastern Bank). Also pursuant to the Plan, a parallel liquidation account maintained at the Bank has been established to support the Company’s liquidation account in the event the Company does not have sufficient assets to fund its obligations under its liquidation account. The Company and the Bank will hold the liquidation accounts for the benefit of eligible account holders who continue to maintain deposits in the Bank. The Company is not permitted to pay dividends on its capital stock if the shareholders’ equity of the Company would be reduced below the amount of the liquidation account. The liquidation account will be reduced annually to the extent that eligible account holders have reduced their qualifying deposits. Subsequent increases will not restore an eligible account holder’s interest in the liquidation accounts. In the event of a complete liquidation of the Bank, and only in such event, each account holder will be entitled to receive a distribution from the liquidation account in an amount proportionate to the adjusted qualifying account balances then held.

~~Conversion of Defined Benefit Pension Plan and Benefit Equalization Plan to Cash Balance Plans~~

Effective November 1, 2020, the Qualified Defined Benefit Pension Plan ("the DB Plan") and the Non-Qualified Benefit Equalization Plan ("the BEP") sponsored by the Company were amended to convert the Plans from a traditional final average earnings plan design to a cash balance plan design. Benefits earned under the final average earnings plan design were frozen at October 31, 2020. Starting November 1, 2020, future benefits are earned under the cash balance plan design. Under the cash balance plan design, hypothetical account balances are established for each participant and pension benefits are generally stated as the lump sum amount in that hypothetical account. Contribution credits equal to a percentage of a participant’s annual compensation (if the participant works at least 1,000 hours during the year) and interest credits equal to the greater of the 30-Year Treasury rate for September or 3.50% are added to a participant’s account each year. For employees hired prior to November 1, 2020, annual contribution credits will generally increase as the participant remains employed with the Company. Employees hired on and after November 1, 2020 will receive annual contribution credits equal to 5% of annual compensation, with no future increases. Notwithstanding the preceding sentence, since a cash balance plan is a defined benefit plan, the annual retirement benefit payable at normal retirement (age 65) is an annuity, which is the actuarial equivalent of the participant’s account balance under the cash balance plan design, plus their frozen benefit under the final average earnings plan design. However, under the DB Plan, participants may elect, with the consent of their spouses if they are married, to have the benefits distributed as a lump sum rather than an annuity. The lump sum is equal to the sum of the actuarial equivalent of their frozen benefit under the final average earnings plan design, plus their cash balance account. Under the BEP, benefits are generally only payable as a lump sum, which is equal to the sum of the actuarial equivalent of their frozen benefit under the final average earnings plan design, plus their cash balance account. As of November 1, 2020, the estimated impact to the projected benefit obligations for the DB plan and the BEP are a decrease of $102.1 million and $27.9 million, respectively.


	For the six months ended June 30,
	2021								2020
	Banking Business		Insurance Agency Business		Other / Eliminations		Total		Banking Business		Insurance Agency Business		Other / Eliminations		Total
	(In thousands)
Net interest income	$	204,699	$	0	$	0	$	204,699	$	198,901	$	0	$	0	$	198,901
(Release of) provision for loan losses	(3,880)		0		0		(3,880)		37,200		0		0		37,200
Net interest income after provision for loan losses	208,579		0		0		208,579		161,701		0		0		161,701
Noninterest income	48,527		52,450		(32)		100,945		30,647		50,408		(29)		81,026
Noninterest expense	163,074		40,307		(1,997)		201,384		160,178		37,725		(1,966)		195,937
Income before provision for income taxes	94,032		12,143		1,965		108,140		32,170		12,683		1,937		46,790
Income tax provision	22,257		3,411		0		25,668		4,906		3,589		0		8,495
Net income	$	71,775	$	8,732	$	1,965	$	82,472	$	27,264	$	9,094	$	1,937	$	38,295

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section is intended to assist in the understanding of the financial performance of the Company and its subsidiaries through a discussion of our financial condition at ~~September~~June 30, ~~2020,~~2021, and our results of operations for the ~~three-~~three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020. This section should be read in conjunction with the unaudited interim condensed consolidated financial statements and notes thereto of the Company appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q and the Company’s ~~prospectus, filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on August 18, 2020.~~2020 Form 10-K.

Table of Contents

Forward-Looking Statements

When we use the terms ~~"we", "us", "our,"~~“we,” “us,” “our,” and the ~~"Company,"~~“Company,” we mean Eastern Bankshares, Inc., a Massachusetts corporation, and its consolidated subsidiaries, taken as a whole, unless the context otherwise indicates.

Certain statements contained in this Quarterly Report on Form 10-Q that are not historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are intended to be covered by the safe harbor

~~Table of Contents~~

provisions of the Private Securities Litigation Reform Act of 1995. These statements, which are based on certain current assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions.

Forward-looking statements are based on the current assumptions and beliefs of management and are only expectations of future results. The Company’s actual results could differ materially from those projected in the forward-looking statements as a result of, among others, factors:

•the negative impacts and disruptions of the COVID-19 pandemic and measures taken to contain its spread on our employees, customers, business operations, credit quality, financial position, liquidity and results of operations;

•the length and extent of the economic contraction as a result of the COVID-19 pandemic; continued deterioration in employment levels and other general business and economic conditions on a national basis and in the local markets in which the Company operates;

•changes in customer behavior;

•the possibility that future credit losses, loan defaults and charge-off rates are higher than expected due to changes in economic assumptions or adverse economic developments;

•turbulence in the capital and debt markets;

•changes in the rate of inflation of prices of goods and services in our market and nationally and changes in expectations regarding future inflation rates;

•changes in interest rates;

•decreases in the value of securities and other assets;

•decreases in deposit levels necessitating increased borrowing to fund loans and investments;

•competitive pressures from other financial institutions;

•operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics;

•changes in regulation;

•reputational risks relating to the Company’s participation in the ~~Paycheck Protection Program~~PPP and other pandemic-related legislative and regulatory initiatives and programs;

•changes in accounting standards and practices;

•the risk that goodwill and intangibles recorded in our financial statements will become impaired;

•risks related to the implementation of acquisitions, dispositions, and restructurings, including the risk that acquisitions may not produce results at levels or within time frames originally anticipated;

•the risk that we may not be successful in the implementation of our business strategy;

•changes in assumptions used in making such forward-looking statements; and

•other risks and uncertainties detailed in Part I, Item 1A of our 2020 Form 10-K, as updated by Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q for the ~~other risks.~~ three months ended March 31, 2021 (“Q1 Form 10-Q”), and as may be further updated in our filings with the SEC from time to time.

Forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with ~~U.S.~~ GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities

Table of Contents

and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results could differ from these estimates. Our significant accounting policies are discussed in detail in ~~the Company’s prospectus, filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on August 18, 2020.~~our 2020 Form 10-K. There have been no material changes ~~to our~~in critical accounting policies ~~as compared to~~during the ~~critical accounting policies described in the Company’s prospectus.~~three and six months ended June 30, 2021.

Selected Financial Data

The selected consolidated financial and other data of the Company set forth below should be read in conjunction with more detailed information, including the Consolidated Financial Statements and related notes, appearing elsewhere in this Quarterly Report on Form 10-Q.

~~Table of Contents~~


		As of September 30, 2020		As of December 31, 2019			As of June 30, 2021		As of December 31, 2020
		(In thousands)					(In thousands, except per share data)
Selected Financial Position Data:	Selected Financial Position Data:					Selected Financial Position Data:
Total assets	Total assets	$	15,460,594	$	11,628,775	Total assets	$	17,047,453	$	15,964,190
Cash and cash equivalents ~~(1)~~	Cash and cash equivalents ~~(1)~~	2,328,084		362,602		Cash and cash equivalents ~~(1)~~	1,564,247		2,054,070
Trading securities		—		961
Securities available for sale	Securities available for sale	2,207,672		1,508,236		Securities available for sale	4,848,781		3,183,861
Loans, net of allowance for loan losses and unamortized premiums, net of unearned discounts and deferred fees	Loans, net of allowance for loan losses and unamortized premiums, net of unearned discounts and deferred fees	9,796,062		8,899,184		Loans, net of allowance for loan losses and unamortized premiums, net of unearned discounts and deferred fees	9,485,699		9,593,958
Federal Home Loan Bank stock, at cost		8,805		9,027
FHLB stock, at cost						FHLB stock, at cost	10,601		8,805
Goodwill and other intangibles, net	Goodwill and other intangibles, net	375,632		377,734		Goodwill and other intangibles, net	380,402		376,534
Total liabilities	Total liabilities	13,747,222		10,028,622		Total liabilities	13,616,831		12,536,138
Total deposits (1)		13,332,585		9,551,392
Total deposits						Total deposits	13,250,433		12,155,784
Total borrowings	Total borrowings	29,437		235,395		Total borrowings	28,442		28,049
Total equity		1,713,372		1,600,153
Total shareholders’ equity						Total shareholders’ equity	3,430,622		3,428,052
Nonperforming loans	Nonperforming loans	44,833		43,775		Nonperforming loans	41,632		43,252
Nonperforming assets	Nonperforming assets	44,873		43,775		Nonperforming assets	41,670		43,252
Per Share Data:						Per Share Data:
Book value						Book value	$	18.37	$	18.36
Tangible book value (1)						Tangible book value (1)	$	16.33	$	16.34

(1)~~Increase is partially due to proceeds received from prospective investors~~Represents a non-GAAP financial measure. See “Non-GAAP Financial Measures” in ~~our initial public offering prior to the closing of the offering.~~this Part I, Item 2.


		Nine Months Ended September 30,					Six Months Ended June 30,
		2020		2019			2021		2020
		(Dollars in thousands)					(In thousands, except per share data)
Selected Operating Data:	Selected Operating Data:					Selected Operating Data:
Interest and dividend income	Interest and dividend income	$	308,605	$	337,044	Interest and dividend income	$	206,814	$	208,092
Interest expense	Interest expense	10,962		26,701		Interest expense	2,115		9,191
Net interest income	Net interest income	297,643		310,343		Net interest income	204,699		198,901
Provision for loan losses		37,900		4,500
(Release of) provision for loan losses						(Release of) provision for loan losses	(3,880)		37,200
Net interest income after provision for loan losses	Net interest income after provision for loan losses	259,743		305,843		Net interest income after provision for loan losses	208,579		161,701
Noninterest income	Noninterest income	128,735		135,022		Noninterest income	100,945		81,026
Noninterest expense	Noninterest expense	305,754		307,065		Noninterest expense	201,384		195,937
Income before income taxes	Income before income taxes	82,724		133,800		Income before income taxes	108,140		46,790
Provision for income taxes	Provision for income taxes	15,924		29,940		Provision for income taxes	25,668		8,495
Net income	Net income	$	66,800	$	103,860	Net income	$	82,472	$	38,295
Per Share Data:						Per Share Data:
Basic earnings per share						Basic earnings per share	$	0.48	$	—
Diluted earnings per share						Diluted earnings per share	$	0.48	$	—

Table of Contents


		As of and for the nine months ended September 30,					As of and for the Six Months Ended June 30,
		2020		2019			2021		2020
Performance Ratios:	Performance Ratios:					Performance Ratios:
Return on average assets (1) (6)	Return on average assets (1) (6)	0.68	%	1.22	%	Return on average assets (1) (6)	1.00	%	0.61	%
Return on average equity (2) (6)	Return on average equity (2) (6)	5.34	%	9.10	%	Return on average equity (2) (6)	4.87	%	4.64	%
Interest rate spread (FTE) (3) (6)	Interest rate spread (FTE) (3) (6)	3.24	%	3.78	%	Interest rate spread (FTE) (3) (6)	2.67	%	3.38	%
Net interest margin (FTE) (4) (6)	Net interest margin (FTE) (4) (6)	3.33	%	4.00	%	Net interest margin (FTE) (4) (6)	2.70	%	3.49	%
Noninterest expenses to average assets (6)	Noninterest expenses to average assets (6)	3.10	%	3.60	%	Noninterest expenses to average assets (6)	2.45	%	3.11	%
Efficiency ratio (5)	Efficiency ratio (5)	71.71	%	68.95	%	Efficiency ratio (5)	65.89	%	70.00	%
Average interest-earning assets to average interest-bearing liabilities	Average interest-earning assets to average interest-bearing liabilities	176.64	%	166.19	%	Average interest-earning assets to average interest-bearing liabilities	204.53	%	172.86	%
Capital Ratios:	Capital Ratios:					Capital Ratios:
Average equity to average assets	Average equity to average assets	12.69	%	13.37	%	Average equity to average assets	20.60	%	13.09	%
Total capital to risk weighted assets	Total capital to risk weighted assets	14.11	%	13.27	%	Total capital to risk weighted assets	29.13	%	14.00	%
Tier 1 capital to risk weighted assets	Tier 1 capital to risk weighted assets	12.91	%	12.36	%	Tier 1 capital to risk weighted assets	28.08	%	12.77	%
Common equity tier 1 capital to risk weighted assets	Common equity tier 1 capital to risk weighted assets	12.91	%	12.36	%	Common equity tier 1 capital to risk weighted assets	28.08	%	12.77	%
Tier 1 capital to average assets	Tier 1 capital to average assets	9.74	%	11.22	%	Tier 1 capital to average assets	18.66	%	9.99	%
Asset Quality Ratios:	Asset Quality Ratios:					Asset Quality Ratios:
Allowance for loan losses as a percentage of total loans	Allowance for loan losses as a percentage of total loans	1.16	%	0.92	%	Allowance for loan losses as a percentage of total loans	1.10	%	1.17	%
Allowance for loan losses as a percentage of nonperforming loans	Allowance for loan losses as a percentage of nonperforming loans	257.47	%	178.55	%	Allowance for loan losses as a percentage of nonperforming loans	253.74	%	210.55	%
Net charge-offs (recoveries) to average outstanding loans during the period (6)		0.07	%	0.03	%
Net charge-offs to average outstanding loans during the period (6)						Net charge-offs to average outstanding loans during the period (6)	0.07	%	0.06	%
Nonperforming loans as a percentage of total loans	Nonperforming loans as a percentage of total loans	0.45	%	0.52	%	Nonperforming loans as a percentage of total loans	0.43	%	0.56	%
Nonperforming loans as a percentage of total assets	Nonperforming loans as a percentage of total assets	0.29	%	0.40	%	Nonperforming loans as a percentage of total assets	0.24	%	0.40	%
Total nonperforming assets as a percentage of total assets	Total nonperforming assets as a percentage of total assets	0.29	%	0.40	%	Total nonperforming assets as a percentage of total assets	0.24	%	0.40	%

(1)Represents net income divided by average total assets.

(2)Represents net income divided by average equity.

(3)Represents the difference between average yield on average interest-earning assets and the average cost of interest-bearing liabilities for the periods on a fully tax-equivalent ~~(FTE)~~(“FTE”) basis.

(4)Represents net interest income as a percentage of average interest-earning assets adjusted on a FTE basis.

(5)Represents noninterest expenses divided by the sum of net interest income and noninterest income.

(6)Ratios have been annualized.

Overview

We are a bank holding company, and our principal subsidiary, Eastern Bank, is a Massachusetts-chartered bank that has served the banking needs of our customers since 1818. Our business philosophy is to operate as a diversified financial services enterprise providing a broad array of banking and other financial services primarily to retail, commercial and small business customers. We had total assets of ~~$15.5~~$17.0 billion and ~~$11.6~~$16.0 billion at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. We are subject to comprehensive regulation and examination by the Massachusetts Commissioner of Banks, the ~~Federal Deposit Insurance Corporation (“FDIC”),~~FDIC, the Federal Reserve Board and the Consumer Financial Protection Bureau.

We manage our business under two business segments: our banking business, which contributed ~~$125.8~~$126.2 million, or ~~84.9%~~83.9%, of our total income ~~(interest~~(pre-provision net interest and dividend income and noninterest income) for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~contributed $364.5~~$253.2 million, ~~which is 83.4%~~or 82.8%, of our total income for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, and our insurance agency business, which contributed ~~$22.6~~$24.2 million, or ~~15.2%~~16.1%, of our total income for the three months ended ~~September~~June 30, ~~2020~~2021 and ~~$73.0~~$52.5 million, ~~which is 16.7%~~or 17.2%, of our total income for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. Our banking business consists of a full range of banking, lending (commercial, residential and consumer), savings and small business offerings, including our wealth management and trust operations that we conduct through our Eastern Wealth Management division. Our insurance agency business consists of insurance-related activities, acting as an independent agent in offering commercial, personal and employee benefits insurance products to individual and commercial clients.

Net income for the three and six months ended June 30, 2021 computed in accordance with GAAP was $34.8 million and $82.5 million, respectively, as compared to $29.9 million and $38.3 million for the three and six months ended

Table of Contents

June 30, 2020, respectively, representing an increase of 16.6% and 115.4%, respectively. This increase was largely driven by a decrease in the provision for the allowance for loan losses of $11.9 million and $41.1 million for the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020, respectively, which is attributable to greater prior period provisions that resulted from the impact of the COVID-19 pandemic on the Bank’s borrowers during such periods, and current period releases of provisions for loans losses of $3.3 million and $3.9 million for the three and six months ended June 30, 2021, respectively. These items are discussed further in the “Results of Operations” section below. Net income for the three and six months ended June 30, 2021 and 2020 included items that our management considers non-core, which management excludes for purposes of assessing our operating net income, a non-GAAP financial measure. Operating net income for the three and six months ended June 30, 2021 was $37.1 million and $83.6 million compared to operating net income for the three and six months ended June 30, 2020 of $27.3 million and $38.2 million, respectively, representing a respective increase of 35.9% and increase of 119.2%. These increases were largely driven by the aforementioned change in the provision for the allowance for loan losses. See “Non-GAAP Financial Measures” below for a reconciliation of operating net income to GAAP net income.

Banking Business

Our banking business offers a range of commercial, retail, wealth management and banking services, and consists primarily of attracting deposits from the general public, including municipalities, and investing those deposits, together with borrowings and funds generated from operations, to originate loans in a variety of sectors and to invest in securities. The financial condition and results of operations of our banking business depend primarily on (i) attracting and retaining low cost, stable deposits, (ii) using those deposits to originate and acquire loans and earn net interest income and (iii) operating expenses incurred.

Lending Activities

We use funds obtained from deposits, as well as funds obtained from the ~~Federal Home Loan Bank (“FHLB”) of Boston (“FHLBB”)~~FHLBB advances and ~~Federal~~federal funds, primarily to originate loans and to invest in securities. Our lending focuses on the following categories of loans:

Commercial Lending

•Commercial and industrial: Loans in this category consist of revolving and term loans extended to businesses and corporate enterprises for the purpose of financing working capital, facilitating equipment purchases and facilitating acquisitions. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had total commercial and industrial loans of ~~$2.2~~$1.7 billion and ~~$1.6~~$2.0 billion, representing ~~21.9%~~18.1% and ~~18.3%~~20.6%, respectively, of our total loans. The primary risk associated with commercial and industrial loans is the ability of borrowers to achieve business results consistent with those projected at origination. Our primary focus for commercial and industrial loans is middle-market companies located in the markets we serve. In addition, we participate in the syndicated loan market and the ~~Shared National Credit Program (“~~SNC ~~Program”).~~Program. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, our SNC Program portfolio totaled ~~$461.3~~$374.4 million and ~~$419.0~~$425.1 million, or ~~21.2%~~21.5% and ~~25.5%~~21.3%, respectively, of our commercial and industrial portfolio, and ~~42.5%~~42.6% and ~~47.0%~~46.4%, respectively, of our SNC Program portfolio were loans to borrowers headquartered in our primary lending market. Our commercial and industrial portfolio also includes our Asset Based Lending Portfolio (“ABL Portfolio”). As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, our ABL Portfolio totaled ~~$157.0~~$141.6 million and ~~$163.0~~$134.5 million, or ~~7.2%~~8.1% and ~~9.9%~~6.7%, respectively, of our commercial and industrial portfolio. Our commercial and industrial portfolio also includes a portion of our PPP loans. As of June 30, 2021 and December 31, 2020, the amount of PPP loans included in our commercial and industrial portfolio was $366.1 million and $568.8 million, respectively.

•Commercial real estate: Loans in this category include mortgage loans on commercial real estate, both investment and owner occupied. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had total commercial real estate loans of ~~$3.7~~$3.8 billion and ~~$3.5~~$3.6 billion, representing ~~36.7%~~39.4% and ~~39.3%~~36.8%, respectively, of our total loans. As of ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, owner occupied loans totaled ~~$731.2~~$713.5 million and ~~$760.0~~$694.6 million, representing ~~20.0%~~18.9% and ~~21.5%~~19.4%, respectively, of our commercial real estate loans. Collateral values are established by independent third-party appraisals and evaluations. The primary repayment sources include operating income generated by the real estate, permanent debt refinancing and/or the sale of the real estate.

Table of Contents

•Commercial construction: Loans in this category include construction project financing and are comprised of commercial real estate, business banking and residential loans for the purpose of constructing and developing real estate. ~~Substantially all of our commercial construction portfolio is in commercial real estate.~~ As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had total commercial construction loans of ~~$297.5~~$237.9 million and ~~$273.8~~$305.7 million, representing ~~3.0%~~2.5% and ~~3.0%~~3.1%, respectively, of our total loans.

•Business banking: Loans in this category are comprised of loans to small businesses with exposures of under $1 million and small investment real estate projects with exposures of under $3 million. These loans are separate and distinct from our commercial and industrial and commercial real estate portfolios described above due to the size of the loans. As of ~~September~~both June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had total business banking loans of $1.3 billion representing 14.0% and ~~$771.5 million, respectively, representing 12.6% and 8.6%~~13.8% of our total loans for each period end, respectively. In this category, commercial and industrial loans and commercial real estate loans totaled ~~$684.6~~$649.3 million and ~~$566.9~~$690.6 million, respectively, as of ~~September~~June 30, ~~2020,~~2021, and ~~$229.0~~$675.1 million and ~~$542.2~~$664.1 million, respectively, as of December 31, ~~2019.~~2020. Business banking originations include traditionally underwritten loans as well as partially automated scored loans. Our proprietary decision matrix, which includes a number of quantitative factors including, but not limited to, a guarantor’s credit score, industry risk, and time in business, is used to determine whether to make business banking loans. We also

~~Table of Contents~~

engage in ~~Small Business Association (“SBA”)~~SBA lending. SBA guarantees reduce our risk of loss when default occurs and are considered a credit enhancement to the loan structure. Our business banking portfolio also includes a portion of our PPP loans which are included in the aforementioned commercial and industrial total. As of June 30, 2021 and December 31, 2020, the amount of PPP loans included in our business banking portfolio was $459.7 million and $457.4 million, respectively.

Residential Lending

•Residential real estate: Loans in this category consist of mortgage loans on residential real estate. As of ~~both September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had total residential loans of $1.5 billion and $1.4 billion, respectively, representing ~~13.8%~~15.2% and ~~15.9%~~14.1%, respectively, of our total loans. Underwriting considerations include, among others, income sources and their reliability, willingness to repay as evidenced by credit repayment history, financial resources including cash reserves and the value of the collateral. We maintain policy standards for minimum credit ~~score~~scores and cash reserves and maximum loan to value consistent with a “prime” portfolio. Collateral consists of mortgage liens on residential dwellings. We do not originate or purchase sub-prime or other high-risk loans. Residential loans are originated either for sale to investors or to retain in our loan portfolio. Decisions about whether to sell or retain residential loans are made based on the interest rate characteristics, pricing for loans in the secondary mortgage market, competitive factors and our capital needs. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2020 and the year ended December 31, 2019,~~2021, residential real estate mortgage originations were ~~$198.9 million, $582.8~~$236.5 million and ~~$443.0~~$496.6 million, respectively, of which ~~$102.5 million, $307.0~~$46.1 million and ~~$209.0~~$103.3 million, respectively, were sold on the secondary markets. Comparatively, during the three and six months ended June 30, 2020, residential real estate mortgage originations were $256.9 million and $380.3 million, respectively, of which $130.9 million and $201.4 million, respectively, were sold on the secondary markets. We generally do not continue to service residential loans that we sell in the secondary market.

Consumer Lending

•Consumer home equity: Loans in this category consist of home equity lines of credit and home equity loans. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had total consumer home equity loans of ~~$890.8~~$834.9 million and ~~$933.1~~$868.3 million, representing ~~9.0%~~8.7% and ~~10.4%~~8.9%, respectively, of our total loans. Home equity lines of credit are granted for ten years with monthly interest-only repayment requirements. Home equity lines of credit can be converted to term loans that are fully amortized. Underwriting considerations are materially consistent with those utilized in the residential real estate category. Collateral consists of a senior or subordinate lien on owner-occupied residential property.

•Other consumer: Loans in this category consist of unsecured personal lines of credit, overdraft protection, automobile and aircraft loans, and other personal loans. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had total other consumer loans of ~~$301.6~~$234.4 million and ~~$402.4~~$277.8 million, representing ~~3.0%~~2.4% and ~~4.5%~~2.9%, respectively, of our total loans. Our policy and underwriting in this category include the following factors, among ~~others,~~others: income sources and reliability, credit histories, term of repayment and collateral value, as applicable. Included in this category are ~~$152.7~~$83.7 million and ~~$243.9~~$126.7 million of automobile loans, respectively, at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

Table of Contents

Other Banking Products and Services

In addition to our lending activities, which are the core part of our banking business, we offer other banking products and services primarily related to (i) other commercial banking products, (ii) other consumer deposit products and (iii) wealth management services.

Other Commercial Banking Products

•We offer a variety of deposit, treasury management, electronic banking, interest rate protection and foreign exchange products to our customers. Deposit products include checking products, both interest-bearing and noninterest-bearing, as well as money market deposits, savings deposits and certificates of deposits. Our treasury management products include a variety of cash management and payment products. Our interest rate protection and foreign exchange products include interest rate swaps and currency related transactions. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, our total commercial deposits were $5.0 billion and $4.4 billion, respectively. During the three and ~~$3.2 billion, respectively, and~~six months ended June 30, 2021 our commercial noninterest income ~~during~~was $4.1 million and $8.3 million, respectively, compared to $5.0 million and $8.4 million for the three and ~~nine~~six months ended ~~September~~June 30, 2020, ~~and the year ended December 31, 2019 were $5.4 million, $31.5 million and $29.8 million,~~ respectively. As of September 30, 2020, there were no federal funds provided to us by financial institution customers. During the month of March 2020, federal funds provided to us by our financial institution customers were transferred to interest-bearing deposits and totaled $106.1 million as of September 30, 2020. As of December 31, 2019, Federal funds provided to us by our financial institution customers were $201.1 million.

~~Table of Contents~~

Other Consumer Deposit Products

•We offer a wide variety of deposit products and services to our consumer customers. We service these customers through our 8986 branches located in eastern Massachusetts and New Hampshire, through our call center in our facility in Lynn, MA and through our online and mobile banking applications.

Wealth Management Services

•Through our Eastern Wealth Management division, we provide a wide range of trust services, including (i) managing customer investments, (ii) serving as custodian for customer assets and (iii) providing other fiduciary services, including serving as the trustee and personal representative of estates. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we held ~~$2.7~~$3.0 billion and ~~$2.6~~$2.9 billion, respectively, of assets in a fiduciary, custodial or agency capacity for customers, which are not our assets and therefore not included on the consolidated balance sheets included in this Quarterly ~~Report.~~Report on Form 10-Q. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020 and the year ended December 31, 2019,~~2021, we had noninterest income of ~~$5.3 million, $15.6~~$6.1 million and ~~$19.7~~$11.7 million, respectively, from providing these ~~services.~~services compared to $5.2 million and $10.3 million, respectively, for the three and six months ended June 30, 2020.

Insurance Agency Business

Our insurance agency business consists of insurance-related activities such as acting as an independent agent in offering commercial, personal and employee benefits insurance products to individual and commercial clients through our wholly owned agency, Eastern Insurance ~~Group LLC.~~Group. Our insurance products include commercial property and liability, workers compensation, life, accident and health and automobile insurance. We also offer a wide range of employee benefits products and services, including professional advice related to health care cost management, employee engagement and retirement and executive services. As an agency business, we do not assume any underwriting or insurance risk. The commissions we earn on the sale of these insurance products and services is the most significant portion of our noninterest income, representing ~~$21.9 million, $72.1~~$23.7 million and ~~$90.6~~$51.8 million, respectively, or ~~45.9%, 56.0%~~51.7% and ~~49.7%~~51.3%, respectively of our noninterest income during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021. Comparatively, such income represented $22.7 million and $50.2 million, or 47.6% and 61.9%, respectively, of our noninterest income during the ~~year~~three and six months ended ~~December 31, 2019.~~June 30, 2020. Our insurance business operates through 25 non-branch offices located primarily in eastern Massachusetts and had ~~409~~396 full-time equivalent employees as of ~~September~~June 30, ~~2020.~~2021.

Acquisitions

~~COVID-19 Pandemic~~Proposed Acquisition

~~The COVID-19 pandemic has had and continues to have an adverse effect on our business and the markets in~~On April 7, 2021, we entered into a definitive merger agreement with Century Bancorp, Inc. ("Century") under which we ~~operate. We expect~~will acquire Century for $641.9 million in cash (the “Merger Agreement”). Century is the ~~short-term~~stock holding company of Century Bank and ~~long-term economic consequences~~Trust Company, a Massachusetts-chartered stock bank headquartered in Medford, Massachusetts with $6.4 billion in assets, $5.4 billion in deposits and 27 full-service branches in Massachusetts as of the COVID-19 pandemic to our customers will continue to be significant, and that the continuing health and safety concerns relating to the ongoing pandemic will change the way we conduct our business and interact with our customers. Consistent with our philosophy of seeking to be a source of economic strength to our communities, we have taken a broad range of steps intended to help our colleagues, our borrowers and our communities during the COVID-19 pandemic.

~~Our Borrowers.~~ In light of the COVID-19 pandemic, we temporarily modified our practices with respect to the collection of delinquent loans to assist our customers during this difficult economic time, and during the nine months ended September 30, 2020 we originated $1.1 billion of Paycheck Protection Program ("PPP") loans.

•For our retail customers, we temporarily suspended all collection of overdue payments beginning March 16, 2020, including residential property foreclosure and related property sales. We resumed collection activities with respect to delinquent consumer loans beginning in late July 2020.

•Through September 30, 2020, the balance of loans that had received a COVID-19 modification was $974.0 million, of which approximately 51% were for full payment deferrals (both interest and principal) and 49% were for deferral of only principal payments, and included $588.1 million of commercial real estate loans, including construction loans, $142.3 million of commercial and industrial loans, $112.8 million of business banking loans, $101.6 million of residential real estate loans and $29.3 million of consumer loans, including home equity loans. Most of these deferrals ended in the third quarter or will end in the fourth quarter of the year ending December 31, 2020. ~~As of September 30, 2020, $272.8 million of these loans had resumed payments and were not 30 days or more past due. The loans remaining in a modified status as of September 30, 2020 compared~~Pursuant to ~~total modifications executed through June 30, 2020 are presented by portfolio below. These modifications met~~ the ~~criteria of either Section 4013 of the CARES Act or the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the~~

Table of Contents

~~Coronavirus (Revised) and therefore are not deemed TDRs.~~

Total COVID-19 Modifications as of June 30, 2020
Remaining COVID-19 Modifications as of September 30, 2020 (1)
Total Modifications % of Total Loan Balance Remaining Modifications % of Total Loan Balance
(Dollars in thousands)
Portfolio
Commercial and industrial 157,384 6.9 % 99,630 4.6 %
Commercial real estate 546,002 15.2 % 414,233 11.3 %
Commercial construction 12,890 4.6 % 13,330 4.5 %
Business banking 106,886 8.7 % 64,369 5.1 %
Residential real estate 92,775 6.6 % 95,260 6.9 %
Consumer home equity 18,603 2.1 % 10,093 1.1 %
Other consumer 11,455 3.4 % 4,312 1.4 %
Total 945,995 9.5 % 701,227 7.1 %

~~(1)~~Remaining COVID-19 modifications reflect those loans which underwent a modification and have not yet resumed payment. We define a modified loan to have resumed payment if it is one month past the modification end date and not more than 30 days past due.

•Asterms of the ~~date~~Merger Agreement, Century Bank and Trust Company will merge with and into Eastern Bank, our wholly-owned subsidiary, upon completion of ~~this Quarterly~~the transaction. The transaction is subject to customary closing conditions, including the receipt of regulatory approval and Century shareholder approval. On July 7, 2021, Century held its special meeting of shareholders at which Century's shareholders approved the Merger Agreement. We currently expect the merger to be completed during the fourth quarter of 2021. For additional information about the Merger Agreement and the proposed transaction, please see our Current Report on Form 8-K filed with the SEC on April 8, 2021. See also “Risk Factors” included in Part II, Item 1A of Q1 Form 10-Q.

Other Acquisitions

During the three and six months ended June 30, 2021, Eastern Insurance Group completed two insurance agency acquisitions. The aggregate purchase price and goodwill recorded as a result of the acquisitions were not material.

Outlook and Trends

Century Acquisition

During the three and six months ended June 30, 2021, we ~~are unable~~incurred and recorded merger and acquisition costs related to ~~reasonably estimate~~ the ~~aggregate amount~~proposed Century acquisition of ~~loans that will likely become delinquent after the respective deferral period.~~$3.5 million and $4.1 million, respectively. The following table ~~shows certain data, as~~depicts Century-related merger and acquisition costs broken down by the line item on the consolidated statements of ~~September 30, 2020,~~income for the periods indicated in which the costs are included:


	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021

	(In thousands)
Salaries and employee benefits	$	2	$	2
Data processing	1,084		1,084
Professional services	2,393		2,978
Total	$	3,479	$	4,064

In addition to the Century-related costs, total merger and acquisition expenses disclosed in our non-GAAP financial measures include costs associated with the aforementioned insurance agency acquisitions completed during the year.

We anticipate incurring additional expenses related to ~~loans to our borrowers~~the Century acquisition during the remainder of the year ended December 31, 2021.

Paycheck Protection Program Loans

We are a participating lender in the industry categories that we believe will likely experience the most adverse effects of the COVID-19 pandemic. Loans included in the table that had been modified as of September 30, 2020 represented approximately 7.1% of our aggregate outstandingSBA’s Paycheck Protection Program. We concluded PPP loan ~~balances to all borrowers in those categories as of September 30, 2020.~~

Loan Balance Balance (%)
COVID-19
Modification % (1)
(Dollars in thousands)
High Risk Industries
Retail (2)
$ 481,432 4.8 % 20.6 %
Restaurants 205,345 2.1 % 41.9 %
Hotels 179,718 1.8 % 30.5 %
Construction contractors financing 101,510 1.0 % 2.4 %
Auto dealerships 82,350 0.8 % 2.3 %
Other high risk 82,240 0.8 % 12.6 %
All impacted industries total 1,132,596 11.3 % 22.5 %
Remaining commercial and business banking 6,246,013 62.8 % 5.4 %
Total Commercial and business banking 7,378,609 74.1 % 8.0 %
All Other Loans 2,565,632 25.9 % 4.3 %
Total $ 9,944,241 100.0 % 7.1 %

~~(1)~~The percentage of loans in each category, calculated as a percentage of aggregate outstanding loan balances for each such category as of September 30, 2020, that we modified primarily due to the effects on borrowers of the COVID-19 pandemic and related economic slowdown beginning in late March 2020.

~~(2)The retail segment includes all retail commercial real estate loans and non-essential commercial and industrial retail loans.~~

•~~During the quarter ended September 30, 2020, we concluded~~ originations ~~of PPP loans under the CARES Act. We disbursed $1.1 billion of loans to approximately 8,800 borrowers under the PPP of the CARES Act~~ during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021 as the SBA announced that PPP funds were exhausted. The vast majority of our PPP borrowers are existing commercial and small business borrowers, non-profit customers, retail banking customers and clients of our Eastern Wealth Management division and Eastern Insurance Group.

•During the six months ended June 30, 2021, we originated approximately 6,600 PPP loans totaling $543.2 million. These loans have a maturity of five years. Fees received from the SBA and direct loan origination costs are being deferred over the five-year loan term. Through June 30, 2021, we had received $28.7 million in fees from the SBA and had deferred $4.0 million in direct loan origination costs related to 2021 originations.

•During the year ended December 31, 2020, we originated approximately 8,900 PPP loans totaling $1.2 billion. The majority of these loans have a maturity of two years. Fees received from the SBA and direct loan origination costs are being deferred over the loan term, which is generally two years. During the year ended December 31, 2020, we received $37.1 million in fees from the SBA and deferred $4.6 million in direct loan origination costs. During the six months ended June 30, 2021, certain 2020 originations were modified and we received a nominal amount of additional fees from the SBA. We anticipate that the vast majority of the remaining 2020 originations will be forgiven during the year ending December 31, 2021.

Table of Contents

commercial and small business borrowers, non-profit customers, retail banking customers and clients of Eastern Wealth Management and Eastern Insurance Group LLC. We anticipate that the vast majority of our•Net PPP ~~exposure will be forgiven in the fourth quarter of 2020 or in the year ending December 31, 2021. Only $28.7 million of our PPP exposure at September 30, 2020 had a maturity of five years;~~fee accretion (fee accretion less cost amortization) for all ~~of our other~~ PPP loans ~~outstanding at September~~for the six months ended June 30, ~~2020 have a maturity of two years.~~2021 was $17.6 million.

•~~As of September 30, 2020, we received approximately $36.9 million of PPP loan origination fees from the SBA. We also deferred~~The following table shows certain ~~origination costs, totaling $4.1 million,~~data related to PPP ~~loans.~~originations by period:


	PPP Loans Originated During the				Total
	Six Months Ended June 30, 2021		Year ended December 31, 2020
	(Dollars in thousands)
Number of loans originated	6,628		8,902		15,530
Original balance of loans originated	$	543,212	$	1,167,137	$	1,710,349
Current balance of loans originated in respective periods	540,173		285,611		825,784
Total SBA fees received(1)	28,677		37,224		65,901
SBA fees recognized in interest income related to loans originated in respective periods(2)	2,249		33,650		35,899
Unaccreted SBA fees related to loans originated in respective periods	26,427		3,574		30,001

(1)Total SBA fees received on 2020 originations includes additional fees received from the SBA in 2021 for originations that were modified in 2021.

(2)Reflects life-to-date accretion.

The following table shows certain data related to our remaining PPP loans as of ~~September~~June 30, ~~2020:~~2021:


Loan Size	Loan Size	Loan Balance		Number of Loans	Fees Collected		Loan Size	Loan Balance		Number of Loans
		(Dollars in thousands)						(Dollars in thousands)
$0 to $50 thousand	$0 to $50 thousand	$	103,541	5,620	$	5,170	$0 to $50 thousand	$	110,281	6,454
$50 thousand to $150 thousand	$50 thousand to $150 thousand	153,314		1,786	7,666		$50 thousand to $150 thousand	125,647		1,452
$150 thousand to $1 million	$150 thousand to $1 million	415,882		1,190	15,750		$150 thousand to $1 million	338,263		1,020
$1 million to $2 million	$1 million to $2 million	191,842		138	5,755		$1 million to $2 million	112,351		79
$2 million to $5 million	$2 million to $5 million	180,658		60	1,784		$2 million to $5 million	118,961		45
Over $5 million	Over $5 million	78,256		13	785		Over $5 million	20,281		3
Total	Total	$	1,123,493	8,807	$	36,910	Total	$	825,784	9,053

~~Our Operating Results.~~The ~~COVID-19 pandemic has had a significant impact on our operating results for~~following table shows the nine months ended September 30, 2020, and we believe it will continue to have a significant impact for at least the remainder of the year ending December 31, 2020 and continuing into the year ending December 31, 2021.

•During March 2020, the Federal Reserve took multiple steps to lower interest rates and reduced the target range for the federal funds rate to between 0.0% and 0.25%, compared to the previous target of between 1.00% and 1.25%. These interest rate reductions, combined with the decline in longer term rates, have lowered and will continue to lower our net interest income over time from the levels we experienced in the year ended December 31, 2019.

•Our loan loss provision for the nine months ended September 30, 2020 was $37.9 million compared to $4.5 million for the nine months ended September 30, 2019. We expect our loan loss provision to continue to be elevated until the economy has recovered from the COVID-19 pandemic. The economic uncertainties caused by the COVID-19 pandemic are significant, and the timing and pace of the economic recovery both locally and nationally will determine the severity and timingbalance of our ~~future loan losses.~~PPP loans by industry as of June 30, 2021:


Industry	Loan Balance		Number of Loans
	(Dollars in thousands)
Accommodation & food services	$	129,421	880
Construction	114,574		1,205
Health care & social assistance	97,958		783
Professional, scientific & technical services	92,711		1,324
Other services	76,691		1,320
Manufacturing	61,301		338
Administrative & support	56,378		481
Wholesale trade	44,260		234
Retail trade	38,314		814
Transportation & warehousing	28,954		560
Real estate, rental & leasing	27,483		366
All other	57,739		748
Total	$	825,784	9,053

Non-GAAP Financial Measures

Table of Contents

We present certain non-GAAP financial measures, which management uses to evaluate our performance and which exclude the effects of certain transactions, non-cash items and GAAP adjustments that we believe are unrelated to our core business and are therefore not necessarily indicative of our current performance or financial position. Management believes excluding these items facilitates greater visibility for investors into our core businesses as well as underlying trends that may, to some extent, be obscured by inclusion of such items in the corresponding GAAP financial measures.

There are items in our financial statements that impact our results but which we believe are unrelated to our core business. Accordingly, we present operating net ~~operating earnings,~~income, noninterest income on an operating basis, noninterest expense on an operating basis, total operating ~~income~~revenue, operating earnings per share, and the operating efficiency ratio, ~~on an operating basis,~~ each of which excludes the impact of such items because we believe such exclusion can provide greater visibility into our core business and underlying trends. Such items that we do not consider to be core to our business include (i) income and expenses from investments held in rabbi trusts, (ii) gains and losses on sales of securities available for sale, net, (iii) gains and losses on the sale of other assets, (iv) rabbi trust employee benefits, (v) impairment charges on tax credit investments and associated tax credit benefits, (vi) expenses indirectly associated with our initial public offering (“IPO”), (vii) other real estate owned (“OREO”) gains, ~~and~~ (viii) merger and acquisition expenses, (ix) the stock donation to the Eastern Bank Charitable Foundation (now known as the Eastern Bank Foundation, or the “Foundation”) in connection with our mutual-to-stock conversion and IPO, and (x) settlement of putative consumer class action litigation matters related to overdraft and non-sufficient funds fees, and associated settlement expenses. There were no ~~merger and acquisition expenses~~OREO gains or stock donations to the Foundation during the periods presented in this Quarterly Report on Form 10-Q.

We also present tangible shareholders’ equity, tangible assets, the ratio of tangible shareholders’ equity to tangible assets, and tangible ~~equity to tangible assets ratios,~~book value per share, each of which excludes the impact of goodwill and other intangible assets, as we believe these financial measures provide investors with the

~~Table of Contents~~

ability to further assess our performance, identify trends in our core business and provide a comparison of our capital adequacy to other companies. We have included the 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.

Our non-GAAP financial measures should not be considered as an alternative or substitute to GAAP net income, or as an indication of our cash flows from operating activities, a measure of our liquidity or an indication of funds available for our cash needs. An item which we consider to be ~~noncore~~non-core and exclude when computing these non-GAAP financial measures can be of substantial importance to our results for any particular period. In addition, our methodology for calculating non-GAAP financial measures may differ from the methodologies employed by other companies to calculate the same or similar performance measures and, accordingly, our reported non-GAAP financial measures may not be comparable to the same or similar performance measures reported by other companies.

The following table summarizes the impact of ~~noncore~~non-core items recorded for the time periods indicated below and reconciles them to the most directly comparable GAAP financial ~~measure.~~measure:

Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
(In thousands)
Net income (GAAP) $ 28,505 $ 35,842 $ 66,800 $ 103,860
Non-GAAP adjustments:
Noninterest income components:
(Income) from investments held in rabbi trusts (3,800) (733) (4,802) (6,702)
(Gain) on sales of securities available for sale, net — — (285) (2,016)
Losses (gains) on sale of other assets 71 (29) 69 44
Noninterest expense components:
Rabbi trust employee benefit 1,445 296 1,951 3,050
Impairment charge on tax credit investments 7,590 — 7,590 —
Indirect initial public offering costs (1) 549 — 1,199 —
(Gain) on sale of other real estate owned (546) — (546) —
Total impact of Non-GAAP adjustments 5,309 (466) 5,176 (5,624)
Less net tax (expense) benefit associated with Non-GAAP adjustment (2)
(1,492) 131 (1,455) 1,581
Non-GAAP adjustments, net of tax $ 3,817 $ (335) $ 3,721 $ (4,043)
Net operating earnings (Non-GAAP) $ 32,322 $ 35,507 $ 70,521 $ 99,817

Table of Contents


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(Dollars in thousands, except per share data)
Net income (GAAP)	$	34,809	$	29,850	$	82,472	$	38,295
Non-GAAP adjustments:
Add:
Noninterest income components:
Income from investments held in rabbi trusts	(4,216)		(7,745)		(6,062)		(1,002)
Gains on sales of securities available for sale, net	(1)		(163)		(1,165)		(285)
(Gains) losses on sale of other assets	(29)		27		(47)		(2)
Noninterest expense components:
Rabbi trust employee benefit expenses	2,063		3,985		3,049		506
Impairment reversal on tax credit investments	(1,419)		—		(1,419)		—
Indirect IPO costs (1)	—		380		—		650
Merger and acquisition expenses	3,479		—		4,068		—
Settlement and expenses for putative consumer class action matters	3,325		—		3,325		—
Total impact of non-GAAP adjustments	3,202		(3,516)		1,749		(133)
Less net tax benefit (expense) associated with non-GAAP adjustment (2)	914		(967)		587		3
Non-GAAP adjustments, net of tax	$	2,288	$	(2,549)	$	1,162	$	(136)
Operating net income (non-GAAP)	$	37,097	$	27,301	$	83,634	$	38,159

Weighted average common shares outstanding during the period:
Basic	172,173,707		n.a		172,111,372		n.a
Diluted	172,173,707		n.a		172,111,372		n.a

Earnings per share, basic	$	0.20	n.a		$	0.48	n.a
Earnings per share, diluted	$	0.20	n.a		$	0.48	n.a

Operating earnings per share, basic (non-GAAP)	$	0.22	n.a		$	0.49	n.a
Operating earnings per share, diluted (non-GAAP)	$	0.22	n.a		$	0.49	n.a

(1)Reflects costs associated with the ~~initial public offering~~IPO that are indirectly related to the ~~offering~~IPO and were not recorded as a reduction of capital.

(2)The net tax (expense) benefit associated with these items is determined by assessing whether each item is included or excluded from net taxable income and applying our combined statutory tax rate only to those items included in net taxable income.

The following table summarizes the impact of ~~noncore~~non-core items with respect to our total ~~income,~~revenue, noninterest income, noninterest expense, and the efficiency ratio, which reconciles to the most directly comparable respective GAAP financial measure, for the periods indicated:

6263

Table of Contents


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
		2020			2019			2020			2019				2021			2020			2021			2020
		(Dollars in thousands)													(Dollars in thousands)
Net interest income (GAAP)	Net interest income (GAAP)	$	98,742		$	104,148		$	297,643		$	310,343		Net interest income (GAAP)	$	104,608		$	98,755		$	204,699		$	198,901
Add:	Add:													Add:
Tax-equivalent adjustment (non-GAAP)	Tax-equivalent adjustment (non-GAAP)	1,352			1,239			4,118			3,885			Tax-equivalent adjustment (non-GAAP)	1,269			1,378			2,566			2,746
Net interest income (non-GAAP)		100,094			105,387			301,761			314,228
Fully-taxable equivalent net interest income (non-GAAP)														Fully-taxable equivalent net interest income (non-GAAP)	105,877			100,133			207,265			201,647
Noninterest income (GAAP)	Noninterest income (GAAP)	47,709			41,590			128,735			135,022			Noninterest income (GAAP)	45,733			47,657			100,945			81,026
Less:	Less:													Less:
Income from investments held in rabbi trusts	Income from investments held in rabbi trusts	3,800			733			4,802			6,702			Income from investments held in rabbi trusts	4,216			7,745			6,062			1,002
Gains on sales of securities available for sale, net	Gains on sales of securities available for sale, net	—			—			285			2,016			Gains on sales of securities available for sale, net	1			163			1,165			285
Gains (losses) on sale of other assets		(71)			29			(69)			(44)
Gains (losses) on sales of other assets														Gains (losses) on sales of other assets	29			(27)			47			2
Noninterest income on an operating basis (non-GAAP)	Noninterest income on an operating basis (non-GAAP)	43,980			40,828			123,717			126,348			Noninterest income on an operating basis (non-GAAP)	41,487			39,776			93,671			79,737
Noninterest expense (GAAP)	Noninterest expense (GAAP)	$	109,817		$	100,666		$	305,754		$	307,065		Noninterest expense (GAAP)	$	107,335		$	100,765		$	201,384		$	195,937
Less:	Less:													Less:
Rabbi trust benefit expense (income)		1,445			296			1,951			3,050
Impairment charge on tax credit investments		7,590			—			7,590			—
Indirect initial public offering costs (1)		549			—			1,199			—
Plus:
Gain on sale of other real estate owned		546			—			546			—
Rabbi trust benefit expense														Rabbi trust benefit expense	2,063			3,985			3,049			506
Impairment reversal on tax credit investments														Impairment reversal on tax credit investments	(1,419)			—			(1,419)			—
Indirect IPO costs (1)														Indirect IPO costs (1)	—			380			—			650
Merger and acquisition expenses														Merger and acquisition expenses	3,479			—			4,068			—
Settlement and expenses for putative consumer class action matters														Settlement and expenses for putative consumer class action matters	3,325			—			3,325			—
Noninterest expense on an operating basis (non- GAAP)	Noninterest expense on an operating basis (non- GAAP)	$	100,779		$	100,370		$	295,560		$	304,015		Noninterest expense on an operating basis (non- GAAP)	$	99,887		$	96,400		$	192,361		$	194,781
Total income (GAAP)		$	148,222		$	154,313		$	437,340		$	472,066
Total operating income (non-GAAP)		$	144,074		$	146,215		$	425,478		$	440,576
Ratios
Total revenue (GAAP)														Total revenue (GAAP)	$	150,341		$	146,412		$	305,644		$	279,927
Total operating revenue (non-GAAP)														Total operating revenue (non-GAAP)	$	147,364		$	139,909		$	300,936		$	281,384
Ratios:														Ratios:
Efficiency ratio (GAAP)	Efficiency ratio (GAAP)	74.09		%	65.23		%	69.91		%	65.05		%	Efficiency ratio (GAAP)	71.39		%	68.82		%	65.89		%	70.00		%
Efficiency ratio on an operating basis (non-GAAP)		69.95		%	68.65		%	69.47		%	69.00		%
Operating efficiency ratio (non-GAAP)														Operating efficiency ratio (non-GAAP)	67.78		%	68.90		%	63.92		%	69.22		%

(1)Reflects costs associated with the ~~initial public offering~~IPO that are indirectly related to the ~~offering~~IPO and were not recorded as a reduction of capital.

Table of Contents

The following table summarizes the calculation of our tangible shareholders’ equity, tangible assets, the ratio of tangible shareholders’ equity to tangible assets, and tangible ~~equity to tangible assets ratio,~~book value per share, which reconciles to the most directly comparable respective GAAP measure, as of the dates indicated:


		As of September 30,			As of December 31,				As of June 30,			As of December 31,
		2020			2019				2021			2020
		(Dollars in Thousands)							(Dollars in thousands, except per share data)
Tangible equity:
Total equity		$	1,713,372		$	1,600,153
Tangible shareholders’ equity:								Tangible shareholders’ equity:
Total shareholders’ equity (GAAP)								Total shareholders’ equity (GAAP)	$	3,430,622		$	3,428,052
Less: Goodwill and other intangibles	Less: Goodwill and other intangibles	375,632			377,734			Less: Goodwill and other intangibles	380,402			376,534
Tangible equity (Non-GAAP)		1,337,740			1,222,419
Tangible shareholders’ equity (non-GAAP)								Tangible shareholders’ equity (non-GAAP)	3,050,220			3,051,518
Tangible assets:	Tangible assets:							Tangible assets:
Total assets (GAAP)	Total assets (GAAP)	15,460,594			11,628,775			Total assets (GAAP)	17,047,453			15,964,190
Less: Goodwill and other intangibles	Less: Goodwill and other intangibles	375,632			377,734			Less: Goodwill and other intangibles	380,402			376,534
Tangible assets (Non-GAAP)	Tangible assets (Non-GAAP)	$	15,084,962		$	11,251,041		Tangible assets (Non-GAAP)	$	16,667,051		$	15,587,656
Equity to assets ratio (GAAP)		11.1		%	13.8		%
Tangible equity to tangible assets ratio (Non-GAAP)		8.9		%	10.9		%
Shareholders’ equity to assets ratio (GAAP)								Shareholders’ equity to assets ratio (GAAP)	20.1		%	21.5		%
Tangible shareholders’ equity to tangible assets ratio (Non-GAAP)								Tangible shareholders’ equity to tangible assets ratio (Non-GAAP)	18.3		%	19.6		%
Book value per share:								Book value per share:
Common shares issued and outstanding								Common shares issued and outstanding	186,758,154			186,758,154
Book value per share (GAAP)								Book value per share (GAAP)	$	18.37		$	18.36
Tangible book value per share (non-GAAP)								Tangible book value per share (non-GAAP)	$	16.33		$	16.34

~~Table of Contents~~

Financial Position

Summary of Financial Position


		As of September 30, 2020		As of December 31, 2019		Change					As of June 30, 2021		As of December 31, 2020		Change
						Amount ($)		Percentage (%)							Amount ($)		Percentage (%)
				(Dollars in thousands)							(Dollars in thousands)
Cash and cash equivalents	Cash and cash equivalents	$	2,328,084	$	362,602	$	1,965,482	542.0	%	Cash and cash equivalents	$	1,564,247	$	2,054,070	$	(489,823)	(23.8)	%
Securities available for sale	Securities available for sale	2,207,672		1,508,236		699,436		46.4	%	Securities available for sale	4,848,781		3,183,861		1,664,920		52.3	%
Loans, net of allowance for credit losses		9,796,062		8,899,184		896,878		10.1	%
Loans, net of allowance for loan losses										Loans, net of allowance for loan losses	9,485,699		9,593,958		(108,259)		(1.1)	%
Federal Home Loan Bank Stock	Federal Home Loan Bank Stock	8,805		9,027		(222)		(2.5)	%	Federal Home Loan Bank Stock	10,601		8,805		1,796		20.4	%
Goodwill and other intangible assets	Goodwill and other intangible assets	375,632		377,734		(2,102)		(0.6)	%	Goodwill and other intangible assets	380,402		376,534		3,868		1.0	%
Deposits	Deposits	13,332,585		9,551,392		3,781,193		39.6	%	Deposits	13,250,433		12,155,784		1,094,649		9.0	%
Borrowed funds	Borrowed funds	29,437		235,395		(205,958)		(87.5)	%	Borrowed funds	28,442		28,049		393		1.4	%

Cash and cash equivalents

Total cash and cash equivalents ~~increased~~decreased by ~~$2.0~~$0.5 billion, or ~~542.0%~~23.8%, to ~~$2.3~~$1.6 billion at ~~September~~June 30, ~~2020~~2021 from ~~$362.6 million~~$2.1 billion at December 31, ~~2019.~~2020. This ~~increase resulted~~decrease was primarily due to ~~proceeds received from prospective investors~~available for sale security purchases partially offset by an increase in ~~our initial public offering prior to the closing of the offering as well as~~total customer ~~deposit growth, which exceeded our funding needs for new lending activities.~~deposits.

Securities

Our current investment policy authorizes us to invest in various types of investment securities and liquid assets, including U.S. Treasury obligations, securities of government-sponsored enterprises, mortgage-backed securities, collateralized mortgage obligations, corporate notes, asset-backed securities and municipal securities. We do not engage in any investment hedging activities or trading activities, nor do we purchase any high-risk investment products. We typically invest in the following types of securities:

U.S. government securities: At June 30, 2021 and December 31, 2020, our U.S. government securities consisted of U.S. Agency bonds and U.S. Treasury securities. We maintain these investments, to the extent appropriate, for liquidity

Table of Contents

purposes, at zero risk weighting for capital purposes, and as collateral for interest rate derivative positions. ~~At September 30, 2020 our U.S. government securities consisted of~~ U.S. Agency bonds include securities issued by Fannie Mae, Freddie Mac, the FHLB, and ~~U.S. Treasury securities. At December 31, 2019, our U.S. government securities consisted solely of U.S. Treasury securities.~~the Federal Farm Credit Bureau.

Mortgage-backed securities: We invest in residential and commercial mortgage-backed securities insured or guaranteed by Freddie Mac or Fannie Mae. We have not purchased any privately-issued mortgage-backed securities. We invest in mortgage-backed securities to achieve a positive interest rate spread with minimal administrative expense, and to lower our credit risk as a result of the guarantees provided by Freddie Mac or Fannie Mae.

Investments in residential mortgage-backed securities involve a risk that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or acceleration of any discount relating to such interests, thereby affecting the net yield on our securities. We periodically review current prepayment speeds to determine whether prepayment estimates require modification that could cause amortization or accretion adjustments. There is also reinvestment risk associated with the cash flows from such securities. In addition, the market value of such securities may be adversely affected by changes in interest rates.

State and municipal securities: We invest in fixed rate investment grade bonds issued primarily by municipalities in our local communities within Massachusetts and by the Commonwealth of Massachusetts. The market value of these securities may be affected by call options, long dated maturities, general market liquidity and credit factors.

~~Table~~The Risk Management Committee of ~~Contents~~

our Board of Directors is responsible for approving and overseeing our investment policy, which it reviews at least annually. This policy dictates that investment decisions be made based on the safety of the investment, liquidity requirements, potential returns and market risk considerations.

The following table shows the fair value of our securities by investment category as of the dates indicated:

Securities Portfolio Composition


		As of September 30, 2020		As of December 31, 2019			As of June 30, 2021		As of December 31, 2020
		(In thousands)					(In thousands)
Available for sale securities:	Available for sale securities:					Available for sale securities:
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	$	1,538,994	$	1,167,968	Government-sponsored residential mortgage-backed securities	$	3,478,529	$	2,148,800
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	17,096		—		Government-sponsored commercial mortgage-backed securities	181,795		17,081
U.S. Agency bonds	U.S. Agency bonds	293,173		—		U.S. Agency bonds	841,005		666,709
U.S. Treasury securities	U.S. Treasury securities	70,673		50,420		U.S. Treasury securities	69,331		70,369
State and municipal bonds and obligations	State and municipal bonds and obligations	281,469		283,538		State and municipal bonds and obligations	278,121		280,902
Qualified zone academy bond		6,267		6,310
Trading Securities:
Municipal bonds and obligations		—		961
Total	Total	$	2,207,672	$	1,509,197	Total	$	4,848,781	$	3,183,861

Our securities portfolio has increased year-to-date. Available for sale securities increased ~~$699.4 million,~~$1.7 billion, or ~~46.4%~~52.3%, to ~~$2.2~~$4.8 billion at ~~September~~June 30, ~~2020~~2021 from ~~$1.5~~$3.2 billion at December 31, ~~2019.~~2020. This increase is due to investment purchases ~~as well as an~~during the six months ended June 30, 2021. Partially offsetting the increase in the securities portfolio from December 31, 2020 to June 30, 2021 was the reduction in the unrealized ~~gains during~~gain on the ~~nine months ended September~~securities. At June 30, ~~2020. Trading securities totaled $1.0~~2021 the unrealized loss was $4.8 million compared to an unrealized gain of $58.7 million at December 31, ~~2019, and all securities have matured as of September 30, 2020.~~2020, representing a $63.5 million decrease.

We did not have trading or held-to-maturity investments at ~~September~~June 30, ~~2020~~2021 or December 31, ~~2019.~~2020.

A portion of our securities portfolio continues to be tax-exempt. Investments in federally tax-exempt securities totaled ~~$281.5~~$278.1 million at ~~September~~June 30, ~~2020~~2021 compared to ~~$283.5~~$280.9 million at December 31, ~~2019. Investments in state tax-exempt securities totaled $44.1 million at September 30, 2020 compared to $0 at December 31, 2019.~~2020.

Our available for sale securities are carried at fair value and are categorized within the fair value hierarchy based on the observability of model inputs. Securities which require inputs that are both significant to the fair value measurement and unobservable are classified as ~~level~~Level 3 within the fair value hierarchy. As of both ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had ~~$6.3 million of~~no securities categorized as ~~level~~Level 3 within the fair value hierarchy.

Maturities of our securities portfolio are based on the final contractual payment dates, and do not reflect the effect of scheduled principal repayments, prepayments, or early redemptions that may occur.

6566

Table of Contents

The following tables show contractual maturities of our available for sale securities and weighted average yields at and for the periods ended ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. Weighted average yields in the table below have been calculated based on the amortized cost of the security:

Securities Portfolio, Amounts Maturing


		Securities Maturing as of September 30, 2020																Securities Maturing as of June 30, 2021
		Within One Year			After One Year But Within Five Years			After Five Years But Within Ten Years			After Ten Years			Total				Within One Year			After One Year But Within Five Years			After Five Years But Within Ten Years			After Ten Years			Total
		(Dollars in thousands)																(In thousands)
Available for sale securities:	Available for sale securities:																Available for sale securities:
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	$	—		$	32,462		$	133,194		$	1,373,338		$	1,538,994		Government-sponsored residential mortgage-backed securities	$	—		$	19,323		$	597,546		$	2,861,660		$	3,478,529
Government-sponsored commercial mortgage-backed securities	Government-sponsored commercial mortgage-backed securities	—			—			17,096			—			17,096			Government-sponsored commercial mortgage-backed securities	—			23,781			158,014			—			181,795
U.S. Agency bonds	U.S. Agency bonds	—			—			293,173			—			293,173			U.S. Agency bonds	—			196,383			644,622			—			841,005
U.S. Treasury securities	U.S. Treasury securities	50,533			20,140			—			—			70,673			U.S. Treasury securities	10,071			59,260			—			—			69,331
State and municipal bonds and obligations	State and municipal bonds and obligations	409			20,719			78,727			181,614			281,469			State and municipal bonds and obligations	486			29,781			76,046			171,808			278,121
Qualified zone academy bond		6,267			—			—			—			6,267
Total	Total	$	57,209		$	73,321		$	522,190		$	1,554,952		$	2,207,672		Total	$	10,557		$	328,528		$	1,476,228		$	3,033,468		$	4,848,781
Weighted-average yield	Weighted-average yield	2.51		%	2.29		%	1.58		%	1.86		%	1.83		%	Weighted-average yield	0.50		%	0.87		%	1.01		%	1.54		%	1.33		%


		Securities Maturing as of December 31, 2019																Securities Maturing as of December 31, 2020
		Within One Year			After One Year But Within FiveYears			After Five Years But Within TenYears			After Ten Years			Total				Within One Year			After One Year But Within Five Years			After Five Years But Within Ten Years			After Ten Years			Total
		(Dollars in thousands)																(In thousands)
Available for sale securities:	Available for sale securities:																Available for sale securities:
Government-sponsored residential mortgage-backed securities	Government-sponsored residential mortgage-backed securities	$	—		$	8,464		$	203,706		$	955,798		$	1,167,968		Government-sponsored residential mortgage-backed securities	$	—		$	48,925		$	100,278		$	1,999,597		$	2,148,800
Government-sponsored commercial mortgage-backed securities																	Government-sponsored commercial mortgage-backed securities	—			—			17,081			—			17,081
U.S. Agency bonds																	U.S. Agency bonds	—			99,834			566,875			—			666,709
U.S. Treasury securities	U.S. Treasury securities	40			50,380			—			—			50,420			U.S. Treasury securities	50,251			20,118			—			—			70,369
State and municipal bonds and obligations	State and municipal bonds and obligations	381			9,109			79,504			194,544			283,538			State and municipal bonds and obligations	408			21,431			79,635			179,428			280,902
Qualified zone academy bond		6,310			—			—			—			6,310
Trading securities:
Municipal bonds and obligations		961			—			—			—			961
Total	Total	$	7,692		$	67,953		$	283,210		$	1,150,342		$	1,509,197		Total	$	50,659		$	190,308		$	763,869		$	2,179,025		$	3,183,861
Weighted-average yield	Weighted-average yield	5.44		%	2.38		%	2.95		%	2.92		%	2.90		%	Weighted-average yield	2.05		%	1.34		%	1.15		%	1.50		%	1.41		%

The yield on tax-exempt obligations of states and political subdivisions has been adjusted to a ~~fully taxable equivalent~~FTE basis ~~(“FTE”)~~ by adjusting tax-exempt income upward by an amount equivalent to the prevailing federal income taxes that would have been paid if the income had been fully taxable.

Net unrealized (losses) gains on available for sale securities as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 totaled ~~$56.5~~$(4.8) million and ~~$28.0~~$58.7 million, respectively. The change from December 31, 2020 to June 30, 2021 is primarily driven by a steepening yield curve.

Loans

We consider our loan portfolio to be relatively diversified by borrower and industry. Our loans ~~increased $957.2~~decreased $109.5 million, or ~~10.7%~~1.1%, to ~~$9.9~~$9.6 billion at ~~September~~June 30, ~~2020~~2021 from ~~$9.0~~$9.7 billion at December 31, ~~2019.~~2020. The ~~increase~~decrease as of ~~September~~June 30, ~~2020~~2021 was primarily due to ~~$1.1 billion in PPP loan originations and a $117 million increase in commercial real estate loans, partially offset by~~ a decrease in ~~retail portfolios of $198.5 million.~~our PPP loan balances within the C&I portfolio, as further noted below.

•The ~~increase~~$254.3 million decrease in our commercial and industrial ~~loans from December 31, 2019 to September 30, 2020~~portfolio was primarily a result of ~~$637.6~~a decrease of $202.7 million in PPP loan ~~originations~~balances during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021.

•The $202.1 million increase in our commercial real estate loans from December 31, 2020 to June 30, 2021 was primarily a result of an increase of $176.2 million of commercial real estate investment loan balances,

6667

Table of Contents

which represents loans secured by commercial real estate that are non-owner-occupied, during the six months ended June 30, 2021.

•The $9.8 million increase in our ~~business banking loans from December 31, 2019 to September 30, 2020~~retail portfolio was primarily a result of ~~$485.9~~an increase of $86.5 million in ~~PPP loan originations during the nine months ended September 30, 2020.~~

•~~The $116.9 million increase in our commercial~~residential real estate loans during the six months ended June 30, 2021 which was ~~primarily in the investment commercial real estate category.~~

•~~The~~partially offset by a decrease in our ~~retail portfolio was due to the following:~~

◦~~The residential portfolio declined $55.4 million due to an increase in secondary market sales;~~

◦~~The~~other consumer and consumer home equity ~~portfolio declined $42.3~~portfolios of $43.4 million ~~due to a high level of prepayments driven by a strong residential refinance market;~~

◦~~Other consumer loans declined $100.8~~and $33.3 million, ~~primarily a result of a decrease of $91.2 million in our automobile portfolio due to our exit from the indirect automobile lending business.~~respectively.

The following table shows the composition of our loan portfolio, by category, as of the dates indicated:

Loan Portfolio Composition


		As of September 30, 2020		As of December 31, 2019			As of June 30, 2021		As of December 31, 2020
		(In thousands)					(In thousands)
Commercial and industrial	Commercial and industrial	$	2,177,216	$	1,642,184	Commercial and industrial	$	1,740,679	$	1,995,016
Commercial real estate	Commercial real estate	3,652,312		3,535,441		Commercial real estate	3,775,771		3,573,630
Commercial construction	Commercial construction	297,508		273,774		Commercial construction	237,927		305,708
Business banking	Business banking	1,251,573		771,498		Business banking	1,339,852		1,339,164
Residential real estate	Residential real estate	1,373,237		1,428,630		Residential real estate	1,457,498		1,370,957
Consumer home equity	Consumer home equity	890,771		933,088		Consumer home equity	834,938		868,270
Other consumer	Other consumer	301,624		402,431		Other consumer	234,410		277,780
Total loans	Total loans	9,944,241		8,987,046		Total loans	9,621,075		9,730,525
Less:	Less:					Less:
Allowance for loan losses	Allowance for loan losses	(115,432)		(82,297)		Allowance for loan losses	(105,637)		(113,031)
Unamortized premiums, net of unearned discounts and deferred fees	Unamortized premiums, net of unearned discounts and deferred fees	(32,747)		(5,565)		Unamortized premiums, net of unearned discounts and deferred fees	(29,739)		(23,536)
Total loans receivable, net	Total loans receivable, net	$	9,796,062	$	8,899,184	Total loans receivable, net	$	9,485,699	$	9,593,958

We believe that our commercial loan portfolio composition is relatively diversified in terms of industry sectors, property types and various lending specialties, and is concentrated in the New England geographical area, with ~~89.9%~~90.7% of our loans in Massachusetts and New Hampshire as of ~~September~~June 30, ~~2020.~~2021.

Asset quality. We continually monitor the asset quality of our loan portfolio utilizing portfolio scorecards and various credit quality indicators. Based on this process, loans meeting certain criteria are categorized as delinquent, impaired, or ~~nonperforming~~non-performing and further assessed to determine if ~~nonaccrual~~non-accrual status is appropriate.

For the commercial portfolio, which includes our commercial and industrial, commercial real estate, ~~and~~ commercial construction and business banking loans, we monitor credit quality using a ~~12-point commercial risk-rating system is utilized,~~risk rating scale, which assigns a risk-grade to each borrower based on a number of quantitative and qualitative factors associated with a commercial loan transaction. Effective December 2020, management implemented an enhanced loan risk rating methodology based on a 15-point scale and adopted new risk rating scorecard tools. The rating scale expanded from the prior 12-point scale to provide more refinement in the pass grade categories; new pass grades are 0-10. There are no changes to non-pass categories, which continue to align with regulatory guidelines and are found in ratings: special mention (11), substandard (12), doubtful (13) and loss (14).

Risk rating assignment is determined using one of 14 separate scorecards developed for distinctive portfolio segments based on common attributes. Key factors ~~include~~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 new risk rating ~~categories are as follows: unrated (0), pass (1-6W), special mention (7), substandard (8), doubtful (9)~~methodology, inclusive of the expanded grade levels and ~~loss (10).~~the scorecard tools, has increased, and is expected to continue to increase, the granularity and distribution of risk rating assignment with more precision and effectiveness; provide customized and enhanced templates to incorporate more risk factors and attributes applicable to loan and collateral types; increase precision and effectiveness of credit risk identification; and provide a foundation for enhanced reporting, including migration of risk rating analysis.

Special mention, substandard and doubtful loans totaled ~~8.3%~~6.8% and ~~2.6%~~7.7% of total commercial loans outstanding at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. This ~~increase~~decrease was driven by ~~an increase~~risk rating upgrades in the ~~special mention category, due to the downgrading of our hotel~~construction and ~~restaurant loan portfolios as a result of the COVID-19 pandemic.~~commercial and industrial portfolios.

6768

Table of Contents

Our philosophy toward managing our loan portfolios is predicated upon careful monitoring, which stresses early detection and response to delinquent and default situations. We seek to make arrangements to resolve any delinquent or default situation over the shortest possible time frame.

The delinquency rate of our total loan portfolio decreased to ~~0.47%~~0.42% at ~~September~~June 30, ~~2020~~2021 from 0.49% at December 31, 2019, primarily due to a decrease in delinquencies in our (i) residential real estate portfolio (ii) business banking portfolio and (iii) commercial and industrial portfolio, partially offset by an increase in delinquencies in our (i) consumer home equity portfolio, (ii) commercial construction portfolio (iii) commercial real estate portfolio and (iv) other consumer portfolio,.2020.

The following table provides details regarding our delinquency rates as of the dates indicated:

Loan Delinquency Rates


		Delinquency Rate as of (1)					Delinquency Rate as of (1)
		September 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
Portfolio	Portfolio					Portfolio
Commercial and industrial	Commercial and industrial	0.10	%	0.14	%	Commercial and industrial	0.05	%	0.11	%
Commercial real estate	Commercial real estate	0.13	%	0.09	%	Commercial real estate	0.09	%	0.06	%
Commercial construction	Commercial construction	0.09	%	—	%	Commercial construction	—	%	—	%
Business banking	Business banking	1.18	%	1.28	%	Business banking	0.93	%	1.40	%
Residential real estate	Residential real estate	1.20	%	1.37	%	Residential real estate	1.21	%	1.21	%
Consumer home equity	Consumer home equity	0.60	%	0.49	%	Consumer home equity	0.53	%	0.60	%
Other consumer	Other consumer	1.15	%	1.13	%	Other consumer	0.86	%	0.98	%
Total	Total	0.47	%	0.49	%	Total	0.42	%	0.49	%

(1)In the calculation of the delinquency rate as of ~~September~~June 30, 2021 and December 31, 2020, the total amount of loans outstanding includes ~~$1.1~~$0.8 billion and $1.0 billion, respectively, of PPP loans.

The following table provides details regarding the age analysis of past due loans as of the dates indicated:

Age Analysis of Past Due Loans


		As of September 30, 2020						As of December 31, 2019							As of June 30, 2021						As of December 31, 2020
		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due			30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due
		(In thousands)													(In thousands)
Commercial and industrial	Commercial and industrial	$	129	$	—	$	1,990	$	1,407	$	—	$	963	Commercial and industrial	$	—	$	267	$	647	$	4	$	268	$	1,924
Commercial real estate	Commercial real estate	199		—		4,443		1,290		100		1,856		Commercial real estate	1,896		—		1,414		—		556		1,545
Commercial construction	Commercial construction	—		—		280		—		—		—		Commercial construction	—		—		—		—		—		—
Business banking	Business banking	3,583		1,646		9,480		3,031		763		6,095		Business banking	4,004		1,902		6,609		5,279		3,311		10,196
Residential real estate	Residential real estate	9,223		1,822		5,484		14,030		2,563		3,030		Residential real estate	11,706		1,330		4,631		9,184		2,517		4,904
Consumer home equity	Consumer home equity	1,273		910		3,170		2,497		430		1,636		Consumer home equity	610		403		3,408		1,806		364		3,035
Other Consumer	Other Consumer	1,980		467		1,034		3,451		514		579		Other Consumer	1,074		438		513		1,978		234		517
Total	Total	$	16,387	$	4,845	$	25,881	$	25,706	$	4,370	$	14,159	Total	$	19,290	$	4,340	$	17,222	$	18,251	$	7,250	$	22,121

As a general rule, loans more than 90 days past due with respect to principal or interest are classified as non-accrual loans. However, based on our assessment of collateral and/or payment prospects, certain loans that are more than 90 days past due may be kept on an accruing status. Income accruals are suspended on all non-accrual loans and all previously accrued and uncollected interest is reversed against current income. A loan is expected to remain on non-accrual status until it becomes current with respect to principal and interest, the loan is liquidated, or the loan is determined to be uncollectible and is charged-off against the allowance for loan losses.

Nonperforming assets (“NPAs”) are comprised of nonperforming loans (“NPLs”), ~~other real estate owned (“OREO”)~~OREO and nonperforming securities. NPLs consist of ~~nonaccrual~~non-accrual loans and loans that are more than 90 days past due but still accruing interest. OREO consists of real estate properties, which primarily serve as collateral to secure our loans, that we control due to ~~foreclosure. These properties are recorded at the lower~~foreclosure or acceptance of ~~cost or fair value less estimated costs to sell on the date we obtain control.~~a deed in lieu of foreclosure.

6869

Table of Contents

The following table sets forth information regarding NPAs held as of the dates indicated:

Nonperforming Assets


		As of September 30, 2020			As of December 31, 2019				As of June 30, 2021			As of December 31, 2020
		(In thousands)							(In thousands)
Non-accrual loans:	Non-accrual loans:							Non-accrual loans:
Commercial	Commercial	$	28,968		$	34,093		Commercial	$	29,356		$	30,059
Residential	Residential	7,419			5,598			Residential	6,445			6,815
Consumer	Consumer	4,727			2,760			Consumer	4,106			4,131
Total non-accrual loans	Total non-accrual loans	41,114			42,451			Total non-accrual loans	39,907			41,005
Accruing loans past due 90 days or more:	Accruing loans past due 90 days or more:							Accruing loans past due 90 days or more:
Commercial	Commercial	3,384			1,315			Commercial	1,439			1,959
Residential	Residential	326			—			Residential	277			279
Consumer	Consumer	9			9			Consumer	9			9
Total accruing loans past due 90 days or more	Total accruing loans past due 90 days or more	3,719			1,324			Total accruing loans past due 90 days or more	1,725			2,247
Total non-performing loans		44,833			43,775
Total nonperforming loans								Total nonperforming loans	41,632			43,252
Total real estate owned	Total real estate owned	40			—			Total real estate owned	38			—
Other non-performing assets:		—			—
Total non-performing assets		$	44,873		$	43,775
Other nonperforming assets:								Other nonperforming assets:	—			—
Total nonperforming assets								Total nonperforming assets	$	41,670		$	43,252
Total accruing troubled debt restructured loans	Total accruing troubled debt restructured loans	$	39,881		$	48,623		Total accruing troubled debt restructured loans	$	38,316		$	41,095
Total non-performing loans to total loans		0.45		%	0.49		%
Total non-performing assets to total assets		0.29		%	0.38		%
Total nonperforming loans to total loans								Total nonperforming loans to total loans	0.43		%	0.45		%
Total nonperforming assets to total assets								Total nonperforming assets to total assets	0.24		%	0.27		%

NPLs ~~increased $1.1~~decreased $1.6 million, or ~~2.4%~~3.7%, to ~~$44.8~~$41.6 million at ~~September~~June 30, ~~2020~~2021 from ~~$43.8~~$43.3 million at December 31, ~~2019.~~2020. NPLs as a percentage of total loans decreased to ~~0.45%~~0.43% at ~~September~~June 30, ~~2020~~2021 from ~~0.49%~~0.45% at December 31, ~~2019 as~~2020 primarily due to a ~~result of an increase~~decrease in business banking, commercial real estate, and residential real estate non-accrual loans.

Non-accrual loans decreased $1.1 million, or 2.7%, to $39.9 million at June 30, 2021 from $41.0 million at December 31, 2020, primarily due to a decrease in non-accrual loans in our business banking ~~and residential real estate portfolios,~~portfolio, partially offset by ~~a decrease~~an increase in non-accrual loans in our commercial and industrial ~~portfolio due to a single, larger loan payoff and a reduction in the outstanding balance of a single, larger Asset Based Lending (“ABL”) credit.~~

Non-accrual loans decreased $1.3 million, or 3.1%, to $41.1 million at September 30, 2020 from $42.5 million at December 31, 2019, primarily due to a $10.8 million decrease in our C&I portfolio and partially offset by a $6.5 million increase in our business banking portfolio.

The total amount of interest recorded on NPLs was ~~$0.5~~$0.2 million for the ~~nine~~six months ended ~~September~~June 30, 2021. The gross interest income that would have been recorded under the original terms of those loans if they had been performing amounted to $1.5 million for the six months ended June 30, 2021. The total amount of interest recorded on NPLs was $0.3 million for the six months ended June 30, 2020. The gross interest income that would have been recorded under the original terms of those loans if they had been performing amounted to ~~$2.4~~$2.0 million for the ~~nine~~six months ended ~~September~~June 30, 2020.

~~Troubled debt restructuring (“TDR”)~~In the course of resolving NPLs, we may choose to restructure the contractual terms of certain loans. We attempt to work-out alternative payment schedules with the borrowers in order to avoid foreclosure actions. We review each loan that is modified to identify whether a TDR has occurred. TDRs involve situations in which, for economic or legal reasons related to the borrower’s financial difficulties, we grant a concession to the borrower that we would not otherwise consider. As noted previously, loan modifications made in response to the COVID-19 pandemic met the criteria of either Section 4013 of the CARES Act or the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) and therefore are not deemed TDRs.

All TDR loans are considered impaired and therefore are subject to a specific review for impairment loss. The impairment analysis discounts the present value of the anticipated cash flows by the loan’s contractual rate of interest in effect prior to the loan’s modification or the fair value of collateral if the loan is collateral dependent. The amount of impairment loss, if any, is recorded as a specific reserve to each individual loan in the allowance for loan losses. Commercial loans (commercial and industrial, commercial real estate, commercial construction, and business banking) and residential loans that have been classified as TDRs and which subsequently default are reviewed to determine if the loan should be deemed collateral dependent.

TDR loans modified during the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020 were ~~$2.8~~$0.8 million (post modification balance)~~. One~~ and $2.8 million, respectively. The overall decrease in TDR loans modified during the aforementioned periods consisted of a decrease of $1.4 million in commercial loan TDR modifications and a decrease of $0.7 million in consumer loan

Table of Contents

TDR modifications. Two loans totaling ~~$40,000 was~~$0.5 million were modified during the preceding 12 months, which subsequently defaulted during the ~~nine~~six months ended ~~September~~June 30, 2021. One loan totaling $1.3 million was modified during the 12 months ended June 30, 2020, which subsequently defaulted during six months ended June 30, 2020. ~~The decrease in TDR~~

It is our policy to have any restructured loans, ~~was driven by $1.8 million in commercial loans and $1.0 million in consumer loans.~~which are on non-accrual status prior to being modified, remain on non-accrual status for approximately six months subsequent to being modified before we consider its return to accrual status. If the restructured loan is on accrual status prior to being modified, we review it to determine if the modified loan should remain on accrual status.

~~Purchase credit impaired (“PCI”)~~PCI loans are loans we acquired that have shown evidence of deterioration of credit quality since origination and, therefore, it was deemed unlikely that all contractually required payments would be collected upon the acquisition date. We consider factors such as payment history, collateral values and accrual status when determining whether there was evidence of deterioration at the acquisition date. The carrying value and prospective income recognition of PCI loans are predicated on future cash flows expected to be collected. As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 the carrying amount of PCI loans was ~~$11.4~~$4.5 million and ~~$13.5~~$9.3 million, respectively.

~~Table of Contents~~

The following table provides additional details related to our loan portfolio and the distribution of NPLs as of the dates indicated:

Distribution of Nonperforming Loans


		As of September 30, 2020													As of June 30, 2021
		Outstanding		90+ Days Due Still Accruing		Non-accruing Loans		Troubled Debt Restructured Loans, but Accruing		NPLs		NPLs as a % of Outstanding			Gross Loans Outstanding (1)		90+ Days Past Due Still Accruing		Non-accruing Loans		NPLs		NPLs as a % of Outstanding		Accruing Troubled Debt Restructured Loans
						(Dollars in thousands)									(In thousands)
Loans:	Loans:													Loans:
Commercial	Commercial	$	7,378,609	$	3,384	$	28,968	$	13,281	$	32,352	0.44	%	Commercial	$	7,094,229	$	1,439	$	29,356	$	30,795	0.43	%	$	13,140
Residential	Residential	1,373,237		326		7,419		22,803		7,745		0.56	%	Residential	1,457,498		277		6,445		6,722		0.46	%	21,677
Consumer	Consumer	1,192,395		9		4,727		3,797		4,736		0.40	%	Consumer	1,069,348		9		4,106		4,115		0.38	%	3,499
Total	Total	$	9,944,241	$	3,719	$	41,114	$	39,881	$	44,833	0.45	%	Total	$	9,621,075	$	1,725	$	39,907	$	41,632	0.43	%	$	38,316

As of December 31, 2019
Outstanding 90+ Days Due
Still Accruing Non-accruing
Loans Troubled Debt
Restructured
Loans, but
Accruing NPLs NPLs as a %
of Outstanding
(Dollars in thousands)
Loans:
Commercial $ 6,222,897 $ 1,315 $ 34,093 $ 17,575 $ 35,408 0.57 %
Residential 1,428,630 — 5,598 25,093 5,598 0.39 %
Consumer 1,335,519 9 2,760 5,955 2,769 0.21 %
Total $ 8,987,046 $ 1,324 $ 42,451 $ 48,623 $ 43,775 0.49 %
(1) Total gross loans outstanding includes $0.8 billion of PPP loans.


	As of December 31, 2020
	Gross Loans Outstanding (1)		90+ Days Past Due Still Accruing		Non-accruing Loans		NPLs		NPLs as a % of Outstanding		Accruing Troubled Debt Restructured Loans
	(In thousands)
Loans:
Commercial	$	7,213,518	$	1,959	$	30,059	$	32,018	0.44	%	$	13,620
Residential	1,370,957		279		6,815		7,094		0.52	%	23,416
Consumer	1,146,050		9		4,131		4,140		0.36	%	4,059
Total	$	9,730,525	$	2,247	$	41,005	$	43,252	0.45	%	$	41,095

(1) Total gross loans outstanding includes $1.0 billion of PPP loans.

Table of Contents

In the normal course of business, we become aware of possible credit problems in which borrowers exhibit potential for the inability to comply with the contractual terms of their loans, but which currently do not yet meet the criteria for classification as NPLs. In response to the COVID-19 pandemic, we reviewed all of our credit exposures in industries that were expected to experience significant problems due to the pandemic and resulting economic contraction. As part of that review, we downgraded our hotel loans, restaurant loans and other loans that we expected to have associated challenges inas a result of the ~~current~~ economic ~~environment.~~impact of the COVID-19 pandemic. These loans were neither delinquent nor on non-accrual status. At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, our potential problem loans (including these COVID-19-related loans), or loans with potential weaknesses that were not included in the non-accrual loans or in the loans 90 days or more past due categories, totaled ~~$615.4~~$492.1 million and ~~$157.3~~$563.3 million, respectively.

COVID-19 Modifications. In light of the COVID-19 pandemic, we implemented loan modification programs for our borrowers that allowed for either full payment deferrals (both interest and principal) or deferral of principal only. These modifications met the criteria of either Section 4013 of the CARES Act or the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised) and therefore are not deemed TDRs. We have deemed these modified loans “COVID-19 modifications.”

The Appropriations Act, which was enacted on December 27, 2020, extends certain expiring tax provisions related to the COVID-19 pandemic in the United States and provides additional emergency relief to individuals and businesses. Included within the provisions of the Appropriations Act is the extension of Section 4013 of the CARES Act to January 1, 2022. As such, we intend to apply CARES Act TDR relief to any qualifying loan modifications executed during the allowable time period.

The following table presents the balance of loans that received a COVID-19 modification and have not yet resumed repayment as of June 30, 2021 and December 31, 2020:


	Remaining COVID-19 Modifications as of June 30, 2021 (1)				Remaining COVID-19 Modifications as of December 31, 2020 (1)
	Balance		% of Total Portfolio		Balance		% of Total Portfolio
	(Dollars in thousands)
Portfolio
Commercial and industrial	$	18,850	1.1	%	$	34,076	1.7	%
Commercial real estate	113,301		3.0	%	231,794		6.5	%
Commercial construction	—		—	%	10,987		3.6	%
Business banking	2,102		0.2	%	23,434		1.7	%
Residential real estate	13,428		0.9	%	26,772		2.0	%
Consumer home equity	1,124		0.1	%	3,432		0.4	%
Other consumer	999		0.4	%	2,187		0.8	%
Total	$	149,805	1.6	%	$	332,682	3.4	%

(1)Remaining COVID-19 modifications reflect only those loans which underwent a modification and have not yet resumed repayment. We define a modified loan to have resumed payment if it is one month past the modification end date and not more than 30 days past due.

High Risk Industries.As of the date of this Quarterly Report on Form 10-Q, we are unable to reasonably estimate the aggregate amount of loans that will likely become delinquent after the respective deferral period. As of June 30, 2021, we believe loans to our borrowers in retail, restaurant, and hotel industry categories represent those which have experienced and will likely continue to experience the most adverse effects of the COVID-19 pandemic. As of June 30, 2021, the aggregate outstanding loan balance of loans to our borrowers in retail, restaurant, and hotel industry categories was $477.5 million, $191.2 million and $169.6 million, respectively, representing 5.0%, 2.0% and 1.8% of total loans, respectively. As of June 30, 2021, the percentage of loans to our borrowers in retail, restaurant, and hotel industry categories that we modified primarily due to the effects on borrowers of the COVID-19 pandemic and related economic slowdown beginning in late March 2020 were 0.9%, 9.9% and 52.6%, respectively.

Allowance for loan losses. Due to our emerging growth company status under the JOBS Act, we still follow the incurred loss allowance GAAP accounting model. For additional information, see “Risk Factors—We may be required to

Table of Contents

increase our allowance for loan losses as a result of our adoption as of January 1, 2022 of the new accounting standard for determining the amount of the allowance for loan losses” in Part I, Item 1A of our 2020 Form 10-K.

For the purpose of estimating our allowance for loan losses, we segregate the loan portfolio into ~~the~~ homogenous loan pools that possess unique risk characteristics such as loan purpose, repayment source, and collateral that are considered when determining the appropriate level of the allowance for loan losses for each category.

While we use available information to recognize losses on loans, future additions or subtractions to/from the allowance for loan losses may be necessary based on changes in NPLs, changes in economic conditions, or other reasons. Additionally, various regulatory agencies, as an integral part of our examination process, periodically assess the adequacy of the allowance for loan losses to assess whether the allowance for loan losses was determined in accordance with GAAP and applicable guidance.

We perform an evaluation of our allowance for loan losses on a regular basis (at least quarterly), and establish the allowance for loan losses based upon an evaluation of our loan categories, as each possess unique risk characteristics that are considered when determining the appropriate level of allowance for loan losses, including:

•estimated probable loss in all impaired loans in each category;

•known increases in concentrations within each category;

•certain higher risk classes of loans, or pledged collateral;

•historical loan loss experience within each category;

•results of any independent review and evaluation of the category’s credit quality;

•trends in volume, maturity and composition of each category;

•volume and trends in delinquencies and non-accruals;

•national and local economic conditions and downturns in specific local industries;

•corporate goals and objectives;

•expertise of our lending staff;

•lending policy and practices; and

•current and forecasted banking industry conditions, as well as the regulatory environment.

Loans are periodically evaluated using changes in asset quality, historical losses, and other loss allocation factors, which form our basis for estimating incurred losses. For risk rated loans, our risk-rating system takes into consideration a number of quantitative and qualitative factors, such as the borrower’s financial capacity, cash flow, liquidity, leverage, adequacy of collateral, tangible net worth, management team, industry, sales and supplier concentration, credit history, additional support and the impact of outside factors on repayment ability. Homogenous populations of loans that are not risk rated loans, are analyzed by loan category, taking into account delinquency ratios and historical loss experience.

The allowance for loan losses is allocated to loan categories using both a formula-based approach and an analysis of certain individual loans for impairment. We use a methodology to systematically estimate the amount of credit loss incurred in the loan portfolio. Under our current methodology, the allowance for loan losses contains specific, general and other components.

The specific component consists of reserves for impaired loans (defined as those where we determine it is probable we will not collect all payments when due, typically classified as either doubtful or substandard). All commercial, residential and consumer loan portfolios are periodically reviewed to identify the loans with deteriorating performance. The reports used to identify those loans include, but are not limited to, delinquency reports, risk rating migration (for risk rated loans), asset quality reports, watch loan list and other credit risk management reports. When a loan is determined to be impaired, the measurement will be based on the present value of expected future cash flows, except for collateral-dependent loans, where the impairment is based on the fair value of the collateral.

The general loss reserves methodology, which is applied to categories of loans with similar characteristics, covers all non-impaired loans and is based on our portfolio’s segment historical loss experience adjusted for qualitative factors. The general loss reserve methodology considers multiple qualitative factors that may impact the loss experience during the incurred loss horizon period, including internal infrastructure factors, external macroeconomic factors, internal credit quality factors and external industry data, tailored to the specific loan category.

For additional discussion of our risk rating methodology, see Note 4, “Loans and Allowance for Loan Losses” within the Notes to the Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q.

The allowance for loan losses ~~increased~~decreased by ~~$33.1~~$7.4 million, or ~~40.3%~~6.5%, to ~~$115.4~~$105.6 million, or 1.10% of total loans, at June 30, 2021 from $113.0 million, or 1.16% of total loans at ~~September 30, 2020 from $82.3 million, or 0.92% of total loans at~~ December 31, ~~2019.~~2020. The ~~increase~~decrease in the allowance for loan losses was primarily a result of our response to the COVID-19-related economic impact. During the nine months ended September 30, 2020, we downgraded our risk ratings for all loans secured by hotels, certain restaurant segments, and any of our other commercial loans for which our customers are expecting to face financial difficulties due to the current economic environment, and the lower risk ratings resulted in higher levels of reserves for the allowance for loan losses. This, along with other factors, resulted in a provision for loan loss of $0.7 million and $37.9 million for the three and nine months ended September 30, 2020.

7073

Table of Contents

was primarily a result of improved macroeconomic conditions and risk rating upgrades in the commercial portfolios during the period. The economic environment during the three and six months ended June 30, 2021 was assisted by government stimulus, the impacts of loan deferral programs, reductions in unemployment and reductions in COVID-19 related restrictions. These, along with other factors, resulted in a release of provisions for loan losses of $3.3 million and $3.9 million for the three and six months ended June 30, 2021 in comparison to provisions for loan losses of $8.6 million and $37.2 million for the three and six months ended June 30, 2020.

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

Summary of Changes in the Allowance for Loan Losses


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
		2020			2019			2020			2019				2021			2020			2021			2020
		(Dollars in thousands)													(Dollars in thousands)
Average total loans	Average total loans	$	9,914,731		$	8,983,022		$	9,603,207		$	8,938,781		Average total loans	$	9,796,701		$	9,875,110		$	9,806,688		$	9,445,666
Allowance for loan losses, beginning of the period	Allowance for loan losses, beginning of the period	$	116,636		$	82,662		$	82,297		$	80,655		Allowance for loan losses, beginning of the period	$	111,080		$	109,138		$	113,031		$	82,297
Charged-off loans:	Charged-off loans:													Charged-off loans:
Commercial and industrial	Commercial and industrial	140			—			167			272			Commercial and industrial	550			27			550			27
Commercial real estate	Commercial real estate	—			—			24			—			Commercial real estate	—			24			234			24
Commercial construction	Commercial construction	—			—			—			—			Commercial construction	—			—			—			—
Business banking	Business banking	1,179			1,630			3,714			4,440			Business banking	1,838			1,198			3,222			2,535
Residential real estate	Residential real estate	—			3			—			66			Residential real estate	—			—			—			—
Consumer home equity	Consumer home equity	22			67			495			191			Consumer home equity	—			—			—			473
Other consumer	Other consumer	1,077			541			1,625			1,590			Other consumer	275			15			639			548
Total charged-off loans	Total charged-off loans	2,418			2,241			6,025			6,559			Total charged-off loans	2,663			1,264			4,645			3,607
Recoveries on loans previously charged-off:	Recoveries on loans previously charged-off:													Recoveries on loans previously charged-off:
Commercial and industrial	Commercial and industrial	306			2,170			686			3,538			Commercial and industrial	13			58			22			380
Commercial real estate	Commercial real estate	4			175			10			10			Commercial real estate	4			5			4			6
Commercial construction	Commercial construction	—			—			—			—			Commercial construction	—			—			—			—
Business banking	Business banking	91			172			245			492			Business banking	291			27			656			154
Residential real estate	Residential real estate	43			17			116			88			Residential real estate	17			13			27			73
Consumer home equity	Consumer home equity	31			16			53			44			Consumer home equity	3			8			74			22
Other consumer	Other consumer	39			51			150			254			Other consumer	192			51			348			111
Total recoveries	Total recoveries	514			2,601			1,260			4,426			Total recoveries	520			162			1,131			746
Net loans charged-off (recoveries):	Net loans charged-off (recoveries):													Net loans charged-off (recoveries):
Commercial and industrial	Commercial and industrial	(166)			(2,170)			(519)			(3,266)			Commercial and industrial	537			(31)			528			(353)
Commercial real estate	Commercial real estate	(4)			(175)			14			(10)			Commercial real estate	(4)			19			230			18
Commercial construction	Commercial construction	—			—			—			—			Commercial construction	—			—			—			—
Business banking	Business banking	1,088			1,458			3,469			3,948			Business banking	1,547			1,171			2,566			2,381
Residential real estate	Residential real estate	(43)			(14)			(116)			(22)			Residential real estate	(17)			(13)			(27)			(73)
Consumer home equity	Consumer home equity	(9)			51			442			147			Consumer home equity	(3)			(8)			(74)			451
Other consumer	Other consumer	1,038			490			1,475			1,336			Other consumer	83			(36)			291			437
Total net loans charged-off	Total net loans charged-off	1,904			(360)			4,765			2,133			Total net loans charged-off	2,143			1,102			3,514			2,861
Provision for loan losses		700			—			37,900			4,500
(Release of) provision for loan losses														(Release of) provision for loan losses	(3,300)			8,600			(3,880)			37,200
Total allowance for loan losses, end of period	Total allowance for loan losses, end of period	$	115,432		$	83,022		$	115,432		$	83,022		Total allowance for loan losses, end of period	$	105,637		$	116,636		$	105,637		$	116,636
Net charge-offs to average total loans outstanding during this period	Net charge-offs to average total loans outstanding during this period	0.02		%	—		%	0.05		%	0.02		%	Net charge-offs to average total loans outstanding during this period	0.02		%	0.01		%	0.04		%	0.03		%
Allowance for loan losses as a percent of total loans	Allowance for loan losses as a percent of total loans	1.16		%	0.92		%	1.16		%	0.92		%	Allowance for loan losses as a percent of total loans	1.10		%	1.20		%	1.10		%	1.20		%
Allowance for loan losses as a percent of nonperforming loans	Allowance for loan losses as a percent of nonperforming loans	257.47		%	178.55		%	257.47		%	178.55		%	Allowance for loan losses as a percent of nonperforming loans	253.74		%	210.55		%	253.74		%	210.55		%

7174

Table of Contents

The following table sets forth the allocation of the allowance for loan losses by loan categories listed in loan portfolio composition as of the dates indicated:

Summary of Allocation of Allowance for Loan Losses


		As of September 30, 2020						As of December 31, 2019							As of June 30, 2021						As of December 31, 2020
		Allowance for Loan Losses		Percent of Allowance in Category to Total Allocated Allowance		Percent of Loans in Category toTotal Loans		Allowance for Loan Losses		Percent of Allowance in Category to Total Allocated Allowance		Percent of Loans in Category to Total Loans			Allowance for Loan Losses		Percent of Allowance in Category to Total Allocated Allowance		Percent of Loans in Category to Total Loans		Allowance for Loan Losses		Percent of Allowance in Category to Total Allocated Allowance		Percent of Loans in Category to Total Loans
		(Dollars in thousands)													(Dollars in thousands)
Commercial and industrial (1)	Commercial and industrial (1)	$	30,114	26.09	%	21.89	%	$	20,919	25.42	%	18.27	%	Commercial and industrial (1)	$	22,596	21.39	%	18.09	%	$	26,617	23.54	%	20.51	%
Commercial real estate	Commercial real estate	55,582		48.16	%	36.73	%	34,730		42.20	%	39.34	%	Commercial real estate	52,759		49.95	%	39.24	%	54,569		48.28	%	36.73	%
Commercial construction	Commercial construction	4,276		3.70	%	2.99	%	3,424		4.16	%	3.05	%	Commercial construction	3,446		3.26	%	2.47	%	4,553		4.03	%	3.14	%
Business banking (1)	Business banking (1)	11,428		9.90	%	12.59	%	8,260		10.04	%	8.58	%	Business banking (1)	12,705		12.03	%	13.93	%	13,152		11.64	%	13.76	%
Residential real estate	Residential real estate	6,351		5.50	%	13.81	%	6,380		7.75	%	15.90	%	Residential real estate	6,478		6.13	%	15.15	%	6,435		5.69	%	14.09	%
Consumer home equity	Consumer home equity	3,808		3.30	%	8.96	%	4,027		4.89	%	10.38	%	Consumer home equity	3,588		3.40	%	8.68	%	3,744		3.31	%	8.92	%
Other consumer	Other consumer	3,558		3.08	%	3.03	%	4,173		5.07	%	4.48	%	Other consumer	3,626		3.43	%	2.44	%	3,467		3.07	%	2.85	%
Unallocated		315		0.27	%	—	%	384		0.47	%	—	%
Other														Other	439		0.41	%	—	%	494		0.44	%	—	%
Total	Total	$	115,432	100.00	%	100.00	%	$	82,297	100.00	%	100.00	%	Total	$	105,637	100.00	%	100.00	%	$	113,031	100.00	%	100.00	%

(1)PPP loans are included within these ~~portfolios;~~portfolios as of June 30, 2021 and December 31, 2020; however, as of June 30, 2021 and December 31, 2020 no allowance for loan losses ~~have been~~was recorded on these loans due to the SBA guarantee of 100% of the loans

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, liquidation of the 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 loan losses and any recoveries of such previously charged-off amounts are credited to the allowance for loan losses.

Regardless of whether a loan is unsecured or collateralized, we charge 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 our allowance for loan losses, see Note 4, “Loans and Allowance for Loan Losses” within the Notes to the Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q.

Federal Home Loan Bank stock

The FHLBB is a cooperative that provides services to its member banking institutions. The primary reason for our membership in the FHLBB is to gain access to a reliable source of wholesale funding and as a tool to manage interest rate risk. The purchase of stock in the FHLB is a requirement for a member to gain access to funding. We purchase and/or are subject to redemption of FHLBB stock proportional to the volume of funding received and view the holdings as a necessary long-term investment for the purpose of balance sheet liquidity and not for investment return.

We held an investment in the FHLBB of $10.6 million and $8.8 million ~~and $9.0 million~~ at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Goodwill and other intangible assets

Goodwill and other intangible assets were ~~$375.6~~$380.4 million and ~~$377.7~~$376.5 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The ~~decrease~~increase in goodwill and other intangibles assets was due to the ~~amortization~~purchase of ~~definite- lived intangibles~~two insurance agencies during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. We did not record any impairment to our goodwill or other intangible assets during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. We will continue to assess our goodwill and other intangible assets to determine if impairments are necessary ~~during the remainder of the year ending December 31, 2020 and beyond~~ as it relates to the COVID-19 pandemic.

Table of Contents

Deposits and other interest-bearing liabilities

Deposits originating within the markets we serve continue to be our primary source of funding our earning assets. We have been able to compete effectively for deposits in our primary market areas. The distribution and market share of deposits by type of deposit and by type of depositor are important considerations in our assessment of the stability of our fund sources and our access to additional funds. Furthermore, we shift the mix and maturity of the deposits depending on economic conditions and loan and investment policies in an attempt, within set policies, to minimize cost and maximize net interest margin. We do not rely upon, and in recent years have not obtained, deposit funding through brokered deposits.

The following table presents our deposits as of the dates presented:

Components of Deposits

As of September 30, 2020 As of December 31, 2019 Change
Amount ($) Percentage (%)
(Dollars in thousands)
Demand $ 6,312,479 $ 3,517,447 $ 2,795,032 79.5 %
Interest checking 2,207,266 1,814,327 392,939 21.7 %
Savings 1,217,898 971,119 246,779 25.4 %
Money market investments 3,315,198 2,919,360 395,838 13.6 %
Certificate of deposits 279,744 329,139 (49,395) (15.0) %
Total deposits $ 13,332,585 $ 9,551,392 $ 3,781,193 39.6 %

~~Table of Contents~~


	As of June 30, 2021		As of December 31, 2020		Change
					Amount ($)		Percentage (%)
	(Dollars in thousands)
Demand	$	5,399,297	$	4,910,794	$	488,503	9.9	%
Interest checking	2,656,610		2,380,497		276,113		11.6	%
Savings	1,403,472		1,256,736		146,736		11.7	%
Money market investments	3,544,897		3,348,898		195,999		5.9	%
Certificate of deposits	246,157		258,859		(12,702)		(4.9)	%
Total deposits	$	13,250,433	$	12,155,784	$	1,094,649	9.0	%

Deposits increased by ~~$3.8~~$1.1 billion, or ~~39.6%~~9.0%, to $13.3 billion at ~~September~~June 30, ~~2020~~2021 from ~~$9.6~~$12.2 billion at December 31, ~~2019.~~2020. This increase was primarily the result of an increase in demand deposits of ~~$2.8~~$488.5 billion, ~~including $1.5 billion~~an increase in interest checking deposits of ~~proceeds from prospective investors in our initial public offering prior to the closing of the offering,~~$276.1 million and an increase in money market deposits of ~~$395.8 million and an increase~~$196.0 million. These increases reflect strong deposit flows, in ~~interest checking deposits of $392.9 million. During the nine months ended September 30, 2020, we transferred a product for our Financial Institutions customers from borrowings~~part due to ~~deposits totaling $106.1 million at September 30, 2020.~~government stimulus.

The following table presents the classification of deposits on an average basis for the ~~years below.~~periods below:

Classification of ~~deposits~~Deposits on an Average Basis


		As of September 30, 2020				As of December 31, 2019					For the Six Months Ended June 30, 2021				For the Year Ended December 31, 2020
		Average Amount		Average Rate		Average Amount		Average Rate			Average Amount		Average Rate		Average Amount		Average Rate
		(Dollars in thousands)									(Dollars in thousands)
Demand	Demand	$	4,322,809	0.00	%	$	3,369,375	0.00	%	Demand	$	5,241,134	—	%	$	4,535,066	—	%
Interest checking	Interest checking	2,208,517		0.11	%	1,842,993		0.21	%	Interest checking	2,466,860		0.04	%	2,227,185		0.09	%
Savings	Savings	1,086,957		0.02	%	991,244		0.02	%	Savings	1,343,133		0.02	%	1,123,584		0.02	%
Money market investments	Money market investments	3,162,528		0.29	%	2,769,934		0.69	%	Money market investments	3,482,002		0.07	%	3,212,752		0.23	%
Certificate of deposits	Certificate of deposits	311,462		0.59	%	392,035		1.02	%	Certificate of deposits	248,946		0.18	%	300,381		0.52	%
Total deposits	Total deposits	$	11,092,273	0.12	%	$	9,365,581	0.29	%	Total deposits	$	12,782,075	0.03	%	$	11,398,968	0.10	%

Other time deposits of $100,000 and greater, including certificates of deposits of $100,000 and greater, as of the dates indicated had maturities as follows:


		As of September 30, 2020		As of	As of December 31, 2019			As of June 30, 2021		As of December 31, 2020
Maturing in	Maturing in	(In thousands)					Maturing in	(In thousands)
Three months or less	Three months or less	$	65,386		$	58,958	Three months or less	$	58,098	$	49,740
Over three months through six months	Over three months through six months	24,979			43,008		Over three months through six months	26,877		24,608
Over six months through 12 months	Over six months through 12 months	20,922			44,643		Over six months through 12 months	16,083		31,009
Over 12 months	Over 12 months	11,926			11,029		Over 12 months	9,626		9,956
Total	Total	$	123,213		$	157,638	Total	$	110,684	$	115,313

Table of Contents

Borrowings

Our borrowings consist of both short-term and long-term borrowings and provide us with sources of funding. Maintaining available borrowing capacity provides us with a contingent source of liquidity.

Our total borrowings ~~decreased~~increased by ~~$206.0~~$0.4 million, or ~~87.5%~~1.4%, to ~~$29.4~~$28.4 million at ~~September~~June 30, ~~2020~~2021 compared to ~~$235.4~~$28.0 million at December 31, ~~2019.~~2020. The ~~decrease~~increase was primarily due to ~~a reduction~~an increase in escrow deposits of ~~$201.1 million of federal funds purchased. The reduction in~~ our ~~federal funds purchased was a result of the transfer of a product for our Financial Institution customers from borrowings to deposits as described above.~~

~~Table of Contents~~

borrowers.

The following table sets forth information concerning balances on our borrowings as of the dates and for the periods indicated:

Borrowings by Category

% Change from
As of September 30, As of December 31, December 31, 2019 September 30, 2019
2020 2019 2019 to September 30, 2020 to September 30, 2020
(Dollars in thousands)
Federal funds purchased $ — $ 222,370 $ 201,082 (100.0) % (100.0) %
Federal Home Loan Bank advances 14,773 24,797 18,964 (22.1) % (40.4) %
Escrow deposits of borrowers 14,664 16,447 15,349 (4.5) % (10.8) %
Total $ 29,437 $ 263,614 $ 235,395 (87.5) % (88.8) %


					Change
	As of June 30, 2021		As of December 31, 2020		Amount ($)		Percentage (%)
	(In thousands)
FHLB advances	$	14,323	$	14,624	$	(301)	(2.1)	%
Escrow deposits of borrowers	14,119		13,425		694		5.2	%
Total	$	28,442	$	28,049	$	393	1.4	%

Results of Operations

Summary of Results of Operations


		Three Months Ended September 30,							Nine Months Ended September 30,								Three Months Ended June 30,							Six Months Ended June 30,
						Change						Change									Change						Change
		2020		2019		Amount ($)	Percentage		2020		2019	Amount ($)		Percentage			2021		2020		Amount ($)	Percentage		2021		2020	Amount ($)		Percentage
		(Dollars in thousands)															(Dollars in thousands)
Interest and dividend income	Interest and dividend income	$	100,513	$	112,723	(12,210)	(10.8)	%	$	308,605	337,044	$	(28,439)	(8.4)	%	Interest and dividend income	$	105,681	$	101,933	3,748	3.7	%	$	206,814	208,092	$	(1,278)	(0.6)	%
Interest expense	Interest expense	1,771		8,575		(6,804)	(79.3)	%	10,962		26,701	(15,739)		(58.9)	%	Interest expense	1,073		3,178		(2,105)	(66.2)	%	2,115		9,191	(7,076)		(77.0)	%
Net interest income	Net interest income	98,742		104,148		(5,406)	(5.2)	%	297,643		310,343	(12,700)		(4.1)	%	Net interest income	104,608		98,755		5,853	5.9	%	204,699		198,901	5,798		2.9	%
Provision for loan losses	Provision for loan losses	700		—		700	100.0	%	37,900		4,500	33,400		742.2	%	Provision for loan losses	(3,300)		8,600		(11,900)	(138.4)	%	(3,880)		37,200	(41,080)		(110.4)	%
Noninterest income	Noninterest income	47,709		41,590		6,119	14.7	%	128,735		135,022	(6,287)		(4.7)	%	Noninterest income	45,733		47,657		(1,924)	(4.0)	%	100,945		81,026	19,919		24.6	%
Noninterest expense	Noninterest expense	109,817		100,666		9,151	9.1	%	305,754		307,065	(1,311)		(0.4)	%	Noninterest expense	107,335		100,765		6,570	6.5	%	201,384		195,937	5,447		2.8	%
Income taxes		7,429		9,230		(1,801)	(19.5)	%	15,924		29,940	(14,016)		(46.8)	%
Income tax expense																Income tax expense	11,497		7,197		4,300	59.7	%	25,668		8,495	17,173		202.2	%
Net income	Net income	28,505		35,842		(7,337)	(20.5)	%	66,800		103,860	(37,060)		(35.7)	%	Net income	34,809		29,850		4,959	16.6	%	82,472		38,295	44,177		115.4	%

Comparison of the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020

Interest and Dividend Income

Interest and dividend income ~~decreased~~increased by ~~$12.2~~$3.7 million, or ~~10.8%~~3.7%, to ~~$100.5~~$105.7 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$112.7~~$101.9 million during the three months ended ~~September~~June 30, ~~2019.~~2020. The ~~decrease~~increase was primarily a result of an increase in the ~~negative impact~~average balance of securities partially offset by a ~~lower~~decrease in the yield on such securities.

•Interest income on securities and federal funds sold and other short-term investments increased $5.0 million, or 50.6%, to $14.7 million during the three months ended June 30, 2021 from $9.8 million during the three months ended June 30, 2020. The increase in interest ~~rate environment.~~income on our securities was primarily due to an increase in the average balance of such securities of $3.4 billion, or 129.0%, to $6.0 billion for the three months ended June 30, 2021 from $2.6 billion for the three months ended June 30, 2020 which was partially offset by a decrease in the yield on such securities.

•Interest income on loans decreased ~~by $11.3~~$1.2 million, or ~~11.0%~~1.3%, to ~~$90.7~~$90.9 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$102.0~~$92.1 million during the three months ended ~~September~~June 30, ~~2019.~~2020. The decrease in interest income on our loans was primarily due to the decrease in yield on average loans which was driven by the downward adjustment of the interest rates on our existing adjustable-rate loans as a result of lower interest rates. The decrease in loan yields was partially offset by an increase in net accretion of PPP loan deferred fees

Table of Contents

•
~~Interest income on securities decreased $1.0~~

and costs of $5.2 million, or ~~8.9%~~126.8%, to ~~$9.8~~$9.3 million ~~for~~during the three months ended ~~September~~June 30, ~~2020 compared to $10.8~~2021 from $4.1 million ~~for the~~during three months ended ~~September~~June 30, ~~2019.~~2020.

Interest and dividend income decreased by ~~$28.4~~$1.3 million, or ~~8.4%~~0.6%, to ~~$308.6~~$206.8 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 from ~~$337.0~~$208.1 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. This decrease was a result of lower interest income on our loans as the yield on average interest-earning assets on an FTE basis decreased 8992 basis points to ~~3.45%~~2.7% during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, partially offset by ~~our recording~~accretion of deferred fees related to our PPP loans. Our average interest-earning assets increased by ~~$1.6~~$3.9 billion, or ~~15.3%~~33.2%, to ~~$12.1~~$15.5 billion as of ~~September~~June 30, ~~2020~~2021 compared to ~~$10.5~~$11.6 billion as of ~~September~~June 30, ~~2019.~~2020, primarily reflecting the investment of the proceeds from our October 2020 IPO. Our yields on loans and securities are generally presented on an FTE basis where the embedded tax

~~Table of Contents~~

benefit on loans or securities are calculated and added to the yield. This presentation allows for better comparability between institutions with different tax structures.

•Interest income on loans decreased by ~~$26.3~~$8.1 million, or ~~8.6%~~4.3%, to ~~$278.4~~$179.6 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 from ~~$304.7~~$187.7 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. The decrease in interest income on our loans was primarily due to the decrease in the yield on average ~~loans. The decrease in the average yield on our~~ loans which was ~~primarily due to~~driven by the downward adjustment of the interest rates on our existing adjustable-rate loans as a result of ~~the lowering~~lower interest ~~rate environment, whereas the~~rates. The average balance of loans increased primarily due to ~~continued efforts to expand our~~PPP loan ~~portfolio.~~originations, partially offsetting the decline in interest rates. The FTE yield on average loans decreased 6830 basis points to ~~3.9%~~3.7% during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The average balance of our loans increased by ~~$664.4~~$361.0 million, or ~~7.4%~~3.8%, to ~~$9.6~~$9.8 billion as of ~~September~~June 30, ~~2020~~2021 compared to ~~$8.9~~$9.4 billion as of ~~September~~June 30, ~~2019.~~2020.

•Partially offsetting the negative impact of the downward adjustment of the interest rates on our existing adjustable-rate loans was the recognition of net PPP loan fee accretion. During the six months ended June 30, 2021, we recognized $17.6 million in net PPP loan fee accretion. We began originating PPP loans in the second quarter of 2020 and recognized $4.1 million in net PPP loan fee accretion during the six months ended June 30, 2020.

•Interest income on securities ~~decreased $2.1~~and federal funds sold and other short-term investments increased $6.8 million, or ~~6.5%~~33.5%, to ~~$30.2~~$27.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to ~~$32.3~~$20.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. The ~~decrease~~increase in interest income on securities was due to a larger average security balance driven by security purchases between June 30, 2021 and June 30, 2020, partially offset by lower overall market rates. The FTE yield on average securities and other interest-earning assets decreased ~~123~~99 basis points to ~~1.7%~~1.0% during the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The average balance of securities and other ~~interest earning~~interest-earning assets increased by ~~$945.0 million,~~$3.5 billion, or ~~60.4%~~160.9%, to ~~$2.5~~$5.7 billion as of ~~September~~June 30, ~~2020~~2021 compared to ~~$1.6~~$2.2 billion as of ~~September~~June 30, ~~2019.~~

•~~We received approximately $36.9 million of PPP loan origination fees from~~2020. The increase was primarily due to the ~~SBA. We also deferred certain origination costs, totaling $4.1 million, related to our PPP loans. The loan fees and the deferred costs will be amortized through interest income over the life~~investment of the ~~PPP loans, which is expected to be 24 months, but the amortization period will be adjusted as PPP loans are forgiven or repaid. During the nine months ended September 30,~~proceeds of our October 2020 ~~we recorded $8.2 million in PPP loan fees, net in interest income.~~IPO.

Interest Expense

Interest expense decreased ~~$6.8~~$2.1 million, or ~~79.3%~~66.2%, to ~~$1.8~~$1.1 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$8.6~~$3.2 million during the three months ended ~~September~~June 30, ~~2019.~~2020. The decrease was a result of lower funding costs associated with the decline in market interest rates.

•Interest expense on our interest-bearing deposits decreased by ~~$5.6~~$2.1 million, or ~~76.5%~~66.8%, to ~~$1.7~~$1.0 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$7.4~~$3.1 million during the three months ended ~~September~~June 30, ~~2019.~~2020.

•Interest expense on borrowed funds decreased by ~~$1.2 million,~~$32.0 thousand, or ~~96.4%~~43.2%, to ~~less than $0.1 million~~$42.0 thousand during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$1.2 million~~$74.0 thousand during the three months ended ~~September~~June 30, ~~2019.~~2020.

Interest expense decreased ~~$15.7~~$7.1 million, or ~~58.9%~~77.0%, to ~~$11.0~~$2.1 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 from ~~$26.7~~$9.2 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. The decrease was a result of ~~decreased rates paid on deposits. The overall rates paid on average interest-bearing liabilities decreased 35 basis points to 0.21% during~~lower funding costs associated with the nine months ended September 30, 2020. Average interest-bearing liabilities increased $537.5 million, or 8.5%, to $6.9 billion as of September 30, 2020 compared to $6.3 billion as of September 30, 2019.decline in market interest rates.

•Interest expense on our interest-bearing deposits decreased by ~~$10.9~~$6.5 million, or ~~51.6%~~76.1%, to ~~$10.2~~$2.0 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 from ~~$21.2~~$8.5 million during the ~~nine~~six months ended ~~September~~June 30, 2019. The decrease in our interest expense on interest-bearing deposits was due to a decrease in the cost of deposits that more than offset the increase in the average balance of deposits during the period. The average balance of interest-bearing deposits increased due to our increasing core deposits to help fund loan growth, whereas the average cost of deposits decreased due to the interest rate decreases occurring in the nine months ended September 30, 2020. The average cost of our interest-bearing deposits decreased 27 basis points to 0.20% in the nine months ended September 30, 2020. The average balance of our interest-bearing deposits increased by $761.4 million, or 12.7%, to $6.8 billion as of September 30, 2020 compared to $6.0 billion as of September 30, 2019.

•Interest expense on borrowed funds decreased by ~~$4.8 million,~~$591.0 thousand, or ~~87.0%~~87.8%, to ~~$0.7 million~~$82.0 thousand during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 from ~~$5.5 million~~$673.0 thousand during the ~~nine~~six months ended ~~September~~June 30, ~~2019. The decrease in interest expense on borrowed funds was primarily due to the average balance of the FHLB~~2020.

7578

Table of Contents

~~advances decreasing~~Average interest-bearing deposits increased $0.9 billion, or 14.2%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The increase in deposit costs associated with the increase in average deposits was more than offset by ~~$101.7 million to $15.8 million~~the reduction in rates paid on deposits during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to ~~$117.5 million during~~ the ~~nine~~six months ended ~~September~~June 30, 2019. The reduction in FHLB borrowings was driven by an increase in deposits that reduced the Company's need to borrow. The average balance of borrowed funds decreased by $223.8 million, or 71.8%, to $87.7 million as of September 30, 2020 compared to $311.5 million as of September 30, 2019.2020.

Net Interest Income

Net interest income ~~decreased by $5.4~~was $104.6 million ~~or 5.2%, to $98.7 million during~~for the three months ended ~~September~~June 30, ~~2020 from $104.1~~2021 compared to $98.8 million ~~during~~for the three months ended ~~September~~June 30, ~~2019. The decrease~~2020, representing an increase of $5.9 million, or 5.9%. Net interest income was ~~a result~~$204.7 million during the six months ended June 30, 2021 compared to $198.9 million for the six months ended June 30, 2020, representing an increase of $5.8 million, or 2.9%. Net interest income increased slightly between the ~~Bank’s asset sensitivity combined~~two periods as the reduction in interest income associated with athe lower interest rate ~~environment. The decline in interest income~~environment was ~~only partially~~more than offset by a ~~decline in interest expense.~~

Net interest income decreased by $12.7 million, or 4.1%, to $297.6 million during the nine months ended September 30, 2020, from $310.3 million during the nine months ended September 30, 2019. The decrease was primarily a result of the decrease in interest and dividend income partially offset by the decreaserelated reduction in interest expense ~~which are each attributable~~coupled with a substantial increase in average balances of interest-earning assets during the three and six months ended June 30, 2021 compared to the ~~decrease in interest rates during the nine~~three and six months ended ~~September~~June 30, ~~2020.~~2020, primarily reflecting the investment of the proceeds from our October 2020 IPO.

Net interest margin is determined by dividing FTE net interest income by average-earning assets. For purposes of the following discussion, income from tax-exempt loans and investment securities has been adjusted to an FTE basis, using a marginal tax rate of ~~21.8%~~20.9% for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019.~~2020. Net interest margin decreased 6779 basis points to ~~3.3%~~2.70% during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, from ~~4.0%~~3.49% during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

Table of Contents

The following tables set forth average balance sheet items, annualized average yields and costs, and certain other information for the periods indicated. ~~Interest income on tax-exempt loans and investment securities has been adjusted to an FTE basis using a marginal tax rate of 21.8% for the nine months ended September 30, 2020 and 2019.~~ All average balances in the table reflect daily average balances. Non-accrual loans were included in the computation of average balances but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.

~~Table of Contents~~

Average Balances, Interest Earned/Paid, & Average Yields


		As of and for the three months ended September 30,															As of and for the three months ended June 30,
		2020							2019								2021							2020
		Average Outstanding Balance			Interest		Average Yield/Cost (5)		Average Outstanding Balance			Interest		Average Yield /Cost (5)			Average Outstanding Balance			Interest		Average Yield/Cost (5)		Average Outstanding Balance			Interest		Average Yield /Cost (5)
		(Dollars in thousands)															(Dollars in thousands)
Interest-earning assets:	Interest-earning assets:															Interest-earning assets:
Loans (1)	Loans (1)															Loans (1)
Residential	Residential	$	1,390,719		$	12,269	3.51	%	$	1,449,446		$	13,506	3.70	%	Residential	$	1,433,056		$	11,397	3.19	%	$	1,416,326		$	12,555	3.57	%
Commercial	Commercial	7,314,805			69,127		3.76	%	6,127,217			73,815		4.78	%	Commercial	7,301,745			71,747		3.94	%	7,195,093			69,779		3.90	%
Consumer	Consumer	1,209,340			10,091		3.32	%	1,406,498			15,282		4.31	%	Consumer	1,061,900			8,597		3.25	%	1,263,691			10,610		3.38	%
Total loans	Total loans	9,914,864			91,487		3.67	%	8,983,161			102,603		4.53	%	Total loans	9,796,701			91,741		3.76	%	9,875,110			92,944		3.79	%
Investment securities	Investment securities	1,712,928			10,007		2.32	%	1,367,765			10,066		2.92	%	Investment securities	4,344,690			14,778		1.36	%	1,455,901			10,083		2.79	%
Federal funds sold and other short-term investments	Federal funds sold and other short-term investments	1,462,047			372		0.10	%	235,446			1,292		2.18	%	Federal funds sold and other short-term investments	1,617,741			431		0.11	%	1,148,332			284		0.10	%
Total interest-earning assets	Total interest-earning assets	13,089,839			101,866		3.10	%	10,586,372			113,961		4.27	%	Total interest-earning assets	15,759,132			106,950		2.72	%	12,479,343			103,311		3.33	%
Non-interest-earning assets	Non-interest-earning assets	1,139,440							880,480							Non-interest-earning assets	1,061,121							1,106,217
Total assets	Total assets	$	14,229,279						$	11,466,852						Total assets	$	16,820,253						$	13,585,560
Interest-bearing liabilities:	Interest-bearing liabilities:															Interest-bearing liabilities:
Deposits:	Deposits:															Deposits:
Savings account	Savings account	$	1,187,083		$	62	0.02	%	$	978,052		$	52	0.02	%	Savings account	$	1,385,735		$	69	0.02	%	$	1,095,806		$	64	0.02	%
Interest checking account	Interest checking account	2,307,972			334		0.06	%	1,895,377			1,247		0.26	%	Interest checking account	2,541,862			253		0.04	%	2,414,356			649		0.11	%
Money market investment	Money market investment	3,311,847			1,051		0.13	%	2,863,745			5,207		0.72	%	Money market investment	3,523,330			605		0.07	%	3,192,669			1,929		0.24	%
Time account	Time account	294,025			280		0.38	%	356,922			848		0.94	%	Time account	246,801			104		0.17	%	313,410			462		0.59	%
Total interest-bearing deposits	Total interest-bearing deposits	7,100,927			1,727		0.10	%	6,094,096			7,354		0.48	%	Total interest-bearing deposits	7,697,728			1,031		0.05	%	7,016,241			3,104		0.18	%
Borrowings	Borrowings	25,478			44		0.69	%	231,067			1,221		2.10	%	Borrowings	25,042			42		0.67	%	74,960			74		0.40	%
Total interest-bearing liabilities	Total interest-bearing liabilities	7,126,405			1,771		0.10	%	6,325,163			8,575		0.54	%	Total interest-bearing liabilities	7,722,770			1,073		0.06	%	7,091,201			3,178		0.18	%
Demand accounts	Demand accounts	5,034,474							3,359,253							Demand accounts	5,355,170							4,448,756
Other noninterest-bearing liabilities	Other noninterest-bearing liabilities	362,073							203,382							Other noninterest-bearing liabilities	335,816							356,700
Total liabilities	Total liabilities	12,522,952							9,887,798							Total liabilities	13,413,756							11,896,657
Total net worth		1,706,327							1,579,054
Total liabilities and retained earnings		$	14,229,279						$	11,466,852
Net interest income - FTE					$	100,095						$	105,386
Shareholders’ equity																Shareholders’ equity	3,406,497							1,688,903
Total liabilities and shareholders’ equity																Total liabilities and shareholders’ equity	$	16,820,253						$	13,585,560
Net interest income – FTE																Net interest income – FTE				$	105,877						$	100,133
Net interest rate spread (2)	Net interest rate spread (2)						3.00	%						3.73	%	Net interest rate spread (2)						2.66	%						3.15	%
Net interest-earning assets (3)	Net interest-earning assets (3)	$	5,963,434						$	4,261,209						Net interest-earning assets (3)	$	8,036,362						$	5,388,142
Net interest margin - FTE (4)							3.04	%						3.95	%
Net interest margin – FTE (4)																Net interest margin – FTE (4)						2.69	%						3.23	%
Average interest-earning assets to interest-bearing liabilities	Average interest-earning assets to interest-bearing liabilities	183.68		%					167.37		%					Average interest-earning assets to interest-bearing liabilities	204.06		%					175.98		%

(1)Non-accrual loans are included in ~~Loans.~~loans.

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

(3)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(4)Net interest margin represents net interest income divided by average total interest-earning assets.

(5)Presented on an annualized basis.

7780

Table of Contents


		As of and for the nine months ended September 30,															As of and for the six months ended June 30,
		2020							2019								2021							2020
		Average Outstanding Balance			Interest		Average Yield /Cost (5)		Average Outstanding Balance			Interest		Average Yield/Cost (5)			Average Outstanding Balance			Interest		Average Yield /Cost (5)		Average Outstanding Balance			Interest		Average Yield/Cost (5)
		(Dollars in thousands)															(Dollars in thousands)
Interest-earning assets:	Interest-earning assets:															Interest-earning assets:
Loans (1)	Loans (1)															Loans (1)
Residential	Residential	$	1,412,268		$	38,127	3.61	%	$	1,440,239		$	40,367	3.75	%	Residential	$	1,413,208		$	22,671	3.24	%	$	1,423,161		$	25,858	3.65	%
Commercial	Commercial	6,929,729			208,534		4.02	%	6,058,961			220,297		4.86	%	Commercial	7,309,803			140,952		3.89	%	6,735,075			139,394		4.16	%
Consumer	Consumer	1,261,211			34,108		3.61	%	1,439,579			45,988		4.27	%	Consumer	1,083,677			17,534		3.26	%	1,287,430			24,017		3.75	%
Total loans	Total loans	9,603,208			280,769		3.91	%	8,938,779			306,652		4.59	%	Total loans	9,806,688			181,157		3.73	%	9,445,666			189,269		4.03	%
Investment securities	Investment securities	1,556,985			30,782		2.64	%	1,429,091			32,019		3.00	%	Investment securities	3,990,080			27,360		1.38	%	1,478,156			20,768		2.83	%
Federal funds sold and other short-term investments	Federal funds sold and other short-term investments	952,141			1,173		0.16	%	135,066			2,257		2.23	%	Federal funds sold and other short-term investments	1,678,812			863		0.10	%	694,386			801		0.23	%
Total interest-earning assets	Total interest-earning assets	12,112,334			312,724		3.45	%	10,502,936			340,928		4.34	%	Total interest-earning assets	15,475,580			209,380		2.73	%	11,618,208			210,838		3.65	%
Non-interest-earning assets	Non-interest-earning assets	1,089,473							866,856							Non-interest-earning assets	1,089,585							1,064,218
Total assets	Total assets	$	13,201,807						$	11,369,792						Total assets	$	16,565,165						$	12,682,426
Interest-bearing liabilities:	Interest-bearing liabilities:															Interest-bearing liabilities:
Deposits:	Deposits:															Deposits:
Savings account	Savings account	$	1,086,957		$	181	0.02	%	$	998,396		$	158	0.02	%	Savings account	$	1,343,133		$	133	0.02	%	$	1,036,344		$	118	0.02	%
Interest checking account	Interest checking account	2,208,517			1,801		0.11	%	1,883,708			3,220		0.23	%	Interest checking account	2,466,860			487		0.04	%	2,158,242			1,467		0.14	%
Money market investment	Money market investment	3,162,528			6,883		0.29	%	2,711,967			14,494		0.71	%	Money market investment	3,482,002			1,193		0.07	%	3,087,048			5,833		0.38	%
Time account	Time account	311,462			1,380		0.59	%	414,039			3,314		1.07	%	Time account	248,946			220		0.18	%	320,277			1,100		0.69	%
Total interest-bearing deposits	Total interest-bearing deposits	6,769,464			10,245		0.20	%	6,008,110			21,186		0.47	%	Total interest-bearing deposits	7,540,941			2,033		0.05	%	6,601,911			8,518		0.26	%
Borrowings	Borrowings	87,738			717		1.09	%	311,547			5,515		2.37	%	Borrowings	25,332			82		0.65	%	119,211			673		1.14	%
Total interest-bearing liabilities	Total interest-bearing liabilities	6,857,202			10,962		0.21	%	6,319,657			26,701		0.56	%	Total interest-bearing liabilities	7,566,273			2,115		0.06	%	6,721,122			9,191		0.27	%
Demand accounts	Demand accounts	4,322,809							3,333,807							Demand accounts	5,241,134							3,963,066
Other noninterest-bearing liabilties		345,869							196,180
Other noninterest-bearing liabilities																Other noninterest-bearing liabilities	345,776							337,679
Total liabilities	Total liabilities	11,525,880							9,849,644							Total liabilities	13,153,183							11,021,867
Total net worth		1,675,927							1,520,148
Total liabilities and retained earnings		$	13,201,807						$	11,369,792
Net interest income - FTE					$	301,762						$	314,227
Shareholders’ equity																Shareholders’ equity	3,411,982							1,660,559
Total liabilities and shareholders’ equity																Total liabilities and shareholders’ equity	$	16,565,165						$	12,682,426
Net interest income – FTE																Net interest income – FTE				$	207,265						$	201,647
Net interest rate spread (2)	Net interest rate spread (2)						3.24	%						3.78	%	Net interest rate spread (2)						2.67	%						3.38	%
Net interest-earning assets (3)	Net interest-earning assets (3)	$	5,255,132						$	4,183,279						Net interest-earning assets (3)	$	7,909,307						$	4,897,086
Net interest margin - FTE (4)							3.33	%						4.00	%
Net interest margin – FTE (4)																Net interest margin – FTE (4)						2.70	%						3.49	%
Average interest-earning assets to interest-bearing liabilities	Average interest-earning assets to interest-bearing liabilities	176.64		%					166.19		%					Average interest-earning assets to interest-bearing liabilities	204.53		%					172.86		%

(1)Non-accrual loans are included in ~~Loans.~~loans.

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

(3)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(4)Net interest margin represents net interest income divided by average total interest-earning assets.

(5)Presented on an annualized basis.

Provision for Loan Losses

The provision for loan losses represents the charge to expense that is required to maintain an appropriate level of allowance for loan losses. ~~The~~We currently follow the incurred loss model for determining the provision for loan losses ~~increased~~and anticipate adopting what is commonly referred to ~~$0.7~~as the “CECL model” on January 1, 2022.

We recorded a release of provision for loan losses of $3.3 million for the three months ended ~~September~~June 30, ~~2020,~~2021, compared to $0a provision of $8.6 million for the three months ended ~~September~~June 30, ~~2019. This increase~~2020. Given continued improved economic and credit conditions during the three months ended June 30, 2021, we determined that a release of the provision was ~~primarily due to~~necessary. We had made a similar determination in connection with the ~~Company not booking a quarter-to-date~~release of provision for loan losses of $0.6 million recorded for the three months ended ~~September 30, 2019 as~~March 31, 2021. Overall, we recorded a ~~result~~total release of ~~net recoveries during the period.~~

~~The~~ provision for loan losses ~~increased by $33.4 million, or 742.2%, to $37.9~~of $3.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021 compared to ~~$4.5~~a provision of $37.2 million for the ~~nine~~six months ended ~~September~~June 30, 2019. The increase was primarily due to the change in loan risk ratings to reflect the impact of the increased concerns about customers that are expected to face financial difficulties due to the current economic environment resulting from the COVID-19 pandemic, primarily related to the2020. In March 2020,

7881

Table of Contents

~~downgrading of~~in response to the COVID-19 pandemic, we downgraded the risk ratings for all commercial loans we expected to be significantly impacted by the pandemic, including our hotel and restaurant loan portfolios. The increase in the provision also reflects the increased concern about the performance of the loan portfolio given the increase in the non-performing loans and delinquent loans during the nine months ended September 30, 2020.

Our periodic evaluation of the appropriate allowance for loan losses considers the risk characteristics of the loan portfolio, current economic conditions, and trends in loan delinquencies and charge-offs.

Noninterest Income

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

Noninterest Income


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended June 30,								Six Months Ended June 30,
						Change								Change									Change								Change
		2020		2019		Amount		%		2020		2019		Amount		%			2021		2020		Amount		%		2021		2020		Amount		%
		(Dollars in thousands)																	(Dollars in thousands)
Insurance commissions	Insurance commissions	$	21,884	$	21,522	$	362	1.7	%	$	72,058	$	70,419	$	1,639	2.3	%	Insurance commissions	$	23,664	$	22,697	$	967	4.3	%	$	51,811	$	50,174	$	1,637	3.3	%
Service charges on deposit accounts	Service charges on deposit accounts	5,052		7,015		(1,963)		(28.0)	%	15,514		20,190		(4,676)		(23.2)	%	Service charges on deposit accounts	5,708		4,364		1,344		30.8	%	11,075		10,462		613		5.9	%
Trust and investment advisory fees	Trust and investment advisory fees	5,311		4,987		324		6.5	%	15,600		14,595		1,005		6.9	%	Trust and investment advisory fees	6,074		5,194		880		16.9	%	11,737		10,289		1,448		14.1	%
Debit card processing fees	Debit card processing fees	2,721		2,738		(17)		(0.6)	%	7,528		7,786		(258)		(3.3)	%	Debit card processing fees	3,170		2,337		833		35.6	%	5,919		4,807		1,112		23.1	%
Interest swap income		1,319		141		1,178		835.5	%	(3,919)		(329)		(3,590)		1,091.2	%
Income from investments held in rabbi trusts		3,800		733		3,067		418.4	%	4,802		6,702		(1,900)		(28.3)	%
Trading securities gains, net		—		3		(3)		(100.0)	%	(3)		1,297		(1,300)		(100.2)	%
Net gain on sales of mortgage loans held for sale		2,219		244		1,975		809.4	%	3,732		453		3,279		723.8	%
Interest swap (losses) income																		Interest swap (losses) income	(1,164)		771		(1,935)		(251.0)	%	4,241		(5,238)		9,479		(181.0)	%
Income (losses) from investments held in rabbi trusts																		Income (losses) from investments held in rabbi trusts	4,216		7,745		(3,529)		(45.6)	%	6,062		1,002		5,060		505.0	%
Losses on trading securities, net																		Losses on trading securities, net	—		(1)		1		(100.0)	%	—		(3)		3		(100.0)	%
Gain on sales of mortgage loans held for sale, net																		Gain on sales of mortgage loans held for sale, net	848		1,420		(572)		(40.3)	%	2,327		1,513		814		53.8	%
Gains on sales of securities available for sale, net	Gains on sales of securities available for sale, net	—		—		—		—	%	285		2,016		(1,731)		(85.9)	%	Gains on sales of securities available for sale, net	1		163		(162)		(99.4)	%	1,165		285		880		308.8	%
Other	Other	5,403		4,207		1,196		28.4	%	13,138		11,893		1,245		10.5	%	Other	3,216		2,967		249		8.4	%	6,608		7,735		(1,127)		(14.6)	%
Total noninterest income	Total noninterest income	$	47,709	$	41,590	$	6,119	14.7	%	$	128,735	$	135,022	$	(6,287)	(4.7)	%	Total noninterest income	$	45,733	$	47,657	$	(1,924)	(4.0)	%	$	100,945	$	81,026	$	19,919	24.6	%

Noninterest income ~~increased~~decreased by ~~$6.1~~$1.9 million, or ~~14.7%~~4.0%, to $45.7 million for the three months ended June 30, 2021 from $47.7 million for the three months ended ~~September~~June 30, ~~2020 from $41.6 million for the three months ended September 30, 2019.~~2020. This increase was primarily due to a $3.1 million increase in income from investments held in rabbi trusts, a $2.0 million increase in net gains on sales of mortgage loans held for sale, and a $1.2 million increase in interest rate swap income, which were partially offset by a $2.0 million decrease in service charges on deposit accounts.

~~Noninterest income decreased by $6.3 million, or 4.7%, to $128.7 million for the nine months ended September 30, 2020 from $135.0 million for the nine months ended September 30, 2019. The~~ decrease was primarily due to a ~~$4.7 million decrease in service charges on deposit accounts, a $3.6 million decrease in interest rate swap income, a $1.9~~$3.5 million decrease in income from investments held in rabbi trusts and a ~~$1.7~~$1.9 million decrease in ~~gains on sales of securities available for sale, net,~~interest rate swap income, which were partially offset by a ~~$3.3~~$1.3 million increase in ~~net gains on sales of mortgage loans held for sale and a $1.6 million increase in insurance commissions.~~

•~~Deposit~~ service charges ~~decreased primarily as a result of reduced overdraft charges as a result of the COVID-19 pandemic.~~

•~~Swap income decreased primarily as a result of an unfavorable mark-to-market adjustment due to the current interest rate and economic environment.~~on deposit accounts.

•Income (loss) from investments held in rabbi trust decreased primarily as a result of a less favorable mark-to-market adjustment during the ~~nine~~three months ended ~~September~~June 30, ~~2020,~~2021 compared to the ~~nine~~three months ended ~~September~~June 30, ~~2019.~~2020.

•~~Gains on securities available for sale decreased~~The Company experienced swap losses during the three months ended June 30, 2021 as compared to income during the three months ended June 30, 2020 primarily as a result of an unfavorable mark-to-market adjustment due to ~~fewer sales~~the current interest rate and economic environment.

•Service charges on deposit accounts increased primarily as a result of increased corporate account analysis charges as a result of greater commercial deposit customer activity.

Noninterest income increased by $19.9 million, or 24.6%, to $100.9 million for the six months ended June 30, 2021 from $81.0 million for the six months ended June 30, 2020. The increase was primarily due to a $9.5 million increase in interest rate swap income, a $5.1 million increase in income from investments held in rabbi trusts, a $1.6 million increase in insurance commissions, a $1.4 million increase in trust and investment advisory fees, and a $1.1 million increase in debit card processing fees.

•Swap income increased primarily as a result of a favorable mark-to-market adjustment due to the current interest rate and economic environment.

•Income (loss) from investments held in rabbi trusts increased primarily as a result of a more favorable mark-to-market adjustment during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020.

•~~Net gains on sales of mortgage loans held for sale increased primarily due to the low interest rate environment.~~

~~Table of Contents~~

•Insurance commissions increased primarily as a result of an increase in our profit-sharing revenues and commissions.

Table of Contents

•Trust and investment advisory fees increased primarily as a result of higher asset values associated with the principal assets in customers’ accounts.

•Debit card processing fees increased as a result of greater customer spending volume.

Noninterest Expense

The following table sets forth information regarding noninterest expense for the periods shown:

Noninterest Expense


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended June 30,								Six Months Ended June 30,
						Change								Change									Change								Change
		2020		2019		Amount		%		2020		2019		Amount		%			2021		2020		Amount		%		2021		2020		Amount		%
								(Dollars in thousands)																	(Dollars in thousands)
Salaries and employee benefits	Salaries and employee benefits	$	66,593	$	61,251	$	5,342	8.7	%	$	191,517	$	190,921	$	596	0.3	%	Salaries and employee benefits	$	69,276	$	63,335	$	5,941	9.4	%	$	133,316	$	124,924	$	8,392	6.7	%
Office occupancy and equipment	Office occupancy and equipment	8,294		8,684		(390)		(4.5)	%	25,598		25,866		(268)		(1.0)	%	Office occupancy and equipment	8,094		8,615		(521)		(6.0)	%	16,311		17,304		(993)		(5.7)	%
Data processing	Data processing	11,721		11,545		176		1.5	%	33,905		33,133		772		2.3	%	Data processing	13,572		12,180		1,392		11.4	%	25,701		22,184		3,517		15.9	%
Professional services	Professional services	5,510		4,104		1,406		34.3	%	13,595		11,208		2,387		21.3	%	Professional services	6,439		4,396		2,043		46.5	%	10,587		8,085		2,502		30.9	%
Charitable contributions	Charitable contributions	—		2,534		(2,534)		(100.0)	%	3,984		9,865		(5,881)		(59.6)	%	Charitable contributions	—		2,797		(2,797)		(100.0)	%	—		3,984		(3,984)		(100.0)	%
Marketing	Marketing	1,943		1,947		(4)		(0.2)	%	6,056		6,353		(297)		(4.7)	%	Marketing	3,497		1,645		1,852		112.6	%	5,188		4,113		1,075		26.1	%
Loan expenses	Loan expenses	1,554		1,606		(52)		(3.2)	%	4,702		3,157		1,545		48.9	%	Loan expenses	1,854		2,036		(182)		(8.9)	%	3,701		3,148		553		17.6	%
FDIC insurance	FDIC insurance	938		—		938		100.0	%	2,788		1,800		988		54.9	%	FDIC insurance	985		944		41		4.3	%	1,933		1,850		83		4.5	%
Amortization of intangible assets	Amortization of intangible assets	699		884		(185)		(20.9)	%	2,102		2,657		(555)		(20.9)	%	Amortization of intangible assets	625		701		(76)		(10.8)	%	1,157		1,403		(246)		(17.5)	%
Other	Other	12,565		8,111		4,454		54.9	%	21,507		22,105		(598)		(2.7)	%	Other	2,993		4,116		(1,123)		(27.3)	%	3,490		8,942		(5,452)		(61.0)	%
Total noninterest expense	Total noninterest expense	$	109,817	$	100,666	$	9,151	9.1	%	$	305,754	$	307,065	$	(1,311)	(0.4)	%	Total noninterest expense	$	107,335	$	100,765	$	6,570	6.5	%	$	201,384	$	195,937	$	5,447	2.8	%

Noninterest expense increased by ~~$9.2~~$6.6 million, or ~~9.1%~~6.5%, to ~~$109.8~~$107.3 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$100.7~~$100.8 million during the three months ended ~~September~~June 30, ~~2019.~~2020. This increase was primarily due to a ~~$5.3~~$5.9 million increase in salaries and employee benefits and an increase in other noninterest expense of $4.5 million. The increase in other noninterest expense was driven by an impairment charge taken on certain tax credit investments accounted for under the equity method of accounting of $7.6 million and partially offset by a decrease in ~~net periodic benefit cost, less service cost, of $1.1 million. Partially offsetting these unfavorable items was a decrease in~~ charitable contributions of ~~$2.5~~$2.8 million.

Noninterest expense decreased by $1.3 million, or 0.4%, to $305.8 million during the nine months ended September 30, 2020 from $307.1 million during the nine months ended September 30, 2019. The decrease was primarily due to a $5.9 million decrease in charitable contributions partially offset by a $2.4 million increase in professional services expense and $1.5 million increase in loan expenses.

•Charitable contributions decreased primarily as a result of lower contributions to the Eastern Bank Charitable Foundation, as a result of lower taxable income for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019. In addition, the Company did not make a contribution to the Eastern Bank Charitable Foundation during the three months ended September 30, 2020 in anticipation of the stock donation to the Eastern Bank Charitable Foundation subsequent to the closing of the offering.

•~~Professional services~~Salaries and employee benefits increased primarily as a result of ~~higher legal~~ESOP expense, for which no expenses were incurred during the three months ended June 30, 2020 as the ESOP was established in October 2020, and lower deferrals of nonrefundable costs ~~related to (i) corporate-related matters, (ii) loan- related matters and (iii) our commercial banking strategy and development services.~~associated with originating or acquiring loans.

•~~Loan~~Professional services expenses increased primarily as a result of costs incurred associated with the Company’s acquisition of Century Bancorp, Inc and an accrual for legal expenses associated with the anticipated settlement of the putative consumer class action litigation matters related to overdraft and non-sufficient funds fees.

•Charitable contributions decreased as no contributions were made during the six months ended June 30, 2021 following the Company’s stock donation to the Foundation that occurred in 2020 in connection with the Company’s IPO.

Noninterest expense increased ~~mortgage loan originations.~~by $5.4 million, or 2.8%, to $201.4 million during the six months ended June 30, 2021 from $195.9 million during the six months ended June 30, 2020. The increase was primarily due to an $8.4 million increase in salaries and employee benefits, a $3.5 million increase in data processing expenses and a $2.5 million increase in professional services. Partially offsetting these increases was a $4.0 million decrease in charitable contributions and a $5.5 million decrease in other noninterest expenses.

•Salaries and employee benefits increased primarily as a result of ESOP expense, for which no expenses were incurred during the six months ended June 30, 2020 as the ESOP was established in October 2020, and higher pension service costs.

•Data processing expenses increased due to an increase in software service and support expenses (including depreciation expense) of $2.8 million and an increase in core data processing expenses of $1.5 million. Core data processing expenses increased primarily as a results of increased costs due to costs incurred associated with the Company’s acquisition of Century Bancorp, Inc.

8083

Table of Contents

•Professional services expenses increased primarily as a result of costs incurred associated with the Company’s acquisition of Century Bancorp, Inc and an accrual for legal expenses associated with the anticipated settlement of the putative consumer class action litigation matters related to overdraft and non-sufficient funds fees.

•Other noninterest expenses decreased primarily due to the conversion of our Defined Benefit Plan and BEP from a traditional final average earnings plan design to a cash balance plan design. Non-service cost expenses for the Defined Benefit Plan and the BEP decreased by $6.4 million and $1.2 million, respectively, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Income Taxes

We recognize the tax effect of all income and expense transactions 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 our tax provision and applicable tax rates for the periods indicated:

Tax Provision and Applicable Tax Rates


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended June 30,						Six Months Ended June 30,
		2020			2019			2020			2019				2021			2020			2021			2020
		(Dollars in thousands)													(Dollars in thousands)
Combined federal and state income tax provisions	Combined federal and state income tax provisions	$	7,429		$	9,230		$	15,924		$	29,940		Combined federal and state income tax provisions	$	11,497		$	7,197		$	25,668		$	8,495
Effective income tax rates	Effective income tax rates	20.7		%	20.5		%	19.2		%	22.4		%	Effective income tax rates	24.8		%	19.4		%	23.7		%	18.2		%
Blended statutory tax rate	Blended statutory tax rate	28.1		%	28.1		%	28.1		%	28.1		%	Blended statutory tax rate	28.1		%	28.1		%	28.1		%	28.1		%

Income tax expense ~~decreased~~increased by ~~$1.8~~$4.3 million, or ~~19.5%~~59.7%, to ~~$7.4~~$11.5 million in the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$9.2~~$7.2 million in the three months ended ~~September~~June 30, ~~2019.~~2020. Income tax expense ~~decreased~~increased by ~~$14.0~~$17.2 million, or ~~46.8%~~202.2%, to ~~$15.9~~$25.7 million in the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 from ~~$29.9~~$8.5 million in the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. The ~~decrease~~increase in income tax expense was due primarily to ~~lower~~higher pre-tax income during the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to the three and ~~nine~~six months ended ~~September~~June 30, ~~2019, increasing~~2020, decreasing the impact on the effective rate related to favorable permanent differences, including investment tax credits and tax exempt income. ~~Additionally, the tax expense decreased as a result of discrete items associated with professional fees and impairment charges~~For additional information related to ~~tax equity investments.~~the Company’s income taxes see Note 12, “Income Taxes” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in the Company’s 2020 10-K.

Table of Contents

Financial Position and Results of Operations of our Business Segments

Comparison of the three and ~~nine~~six months ended ~~September~~June 30, 2021 and 2020


	As of and for the three months ended June 30,
	2021								2020
	Banking Business		Insurance Agency Business		Other/ Eliminations		Total		Banking Business		Insurance Agency Business		Other/ Eliminations		Total
	(In thousands)
Net interest income	$	104,608	$	—	$	—	$	104,608	$	98,755	$	—	$	—	$	98,755
(Release of) provision for loan losses	(3,300)		—		—		(3,300)		8,600		—		—		8,600
Net interest income after provision for loan losses	107,908		—		—		107,908		90,155		—		—		90,155
Noninterest income	21,567		24,166		—		45,733		23,779		23,886		(8)		47,657
Noninterest expense	87,799		20,496		(960)		107,335		81,713		20,084		(1,032)		100,765
Income before provision for income taxes	41,676		3,670		960		46,306		32,221		3,802		1,024		37,047
Income tax provision	10,464		1,033		—		11,497		6,121		1,076		—		7,197
Net income	$	31,212	$	2,637	$	960	$	34,809	$	26,100	$	2,726	$	1,024	$	29,850
Total assets	$	16,905,267	$	209,416	$	(67,230)	$	17,047,453	$	13,867,746	$	193,320	$	(64,543)	$	13,996,523
Total liabilities	$	13,628,092	$	55,969	$	(67,230)	$	13,616,831	$	12,314,286	$	53,150	$	(64,543)	$	12,302,893

	For the six months ended June 30,
	2021								2020
	Banking Business		Insurance Agency Business		Other/ Eliminations		Total		Banking Business		Insurance Agency Business		Other/ Eliminations		Total
	(In thousands)
Net interest income	$	204,699	$	—	$	—	$	204,699	$	198,901	$	—	$	—	$	198,901
(Release of ) provision for loan losses	(3,880)		—		—		(3,880)		37,200		—		—		37,200
Net interest income after provision for loan losses	208,579		—		—		208,579		161,701		—		—		161,701
Noninterest income	48,527		52,450		(32)		100,945		30,647		50,408		(29)		81,026
Noninterest expense	163,074		40,307		(1,997)		201,384		160,178		37,725		(1,966)		195,937
Income before provision for income taxes	94,032		12,143		1,965		108,140		32,170		12,683		1,937		46,790
Income tax provision	22,257		3,411		—		25,668		4,906		3,589		—		8,495
Net income	$	71,775	$	8,732	$	1,965	$	82,472	$	27,264	$	9,094	$	1,937	$	38,295

Banking Segment

•Average interest-earning assets grew $3.3 billion, or 26.3%, to $15.8 billion for the three months ended June 30, 2021 from $12.5 billion for the three months ended June 30, 2020. The increase is primarily due to an increase in average investment securities and federal funds sold and other short-term investments which increased $3.4 billion, or 129.0%, to $6.0 billion for the three months ended June 30, 2021 compared to $2.6 billion for the three months ended June 30, 2020. The increase in average interest-earning assets resulted in an increase in interest income and was partially offset by a decline in market rates of interest. For additional discussion, refer to the earlier “Interest and Dividends” section.

•Average interest-bearing liabilities grew $0.6 billion, or 8.9%, to $7.7 billion for the three months ended June 30, 2021 from $7.1 billion for the three months ended June 30, 2020, with average total interest-bearing deposits, our largest category of average interest-bearing liabilities, growing $0.7 billion, or 9.7%, to $7.7 billion for the three months ended June 30, 2021 compared to $7.0 billion for the three months ended June 30, 2020. The increase in average interest-bearing liabilities was more than offset by a decline in market rates of interest resulting in an overall decrease in interest expense. For additional discussion, refer to the earlier “Interest and ~~2019~~Dividends” section.

•Average interest-earning assets grew $3.9 billion, or 33.2%, to $15.5 billion for the six months ended June 30, 2021 from $11.6 billion for the six months ended June 30, 2020, with average total loans, our largest

8185

Table of Contents

As of and for the three months ended September 30,
2020 2019
Banking
Business Insurance
Agency
Business Other/
Eliminations Total Banking
Business Insurance
Agency
Business Other/
Eliminations Total
(Dollars In Thousands)
Net interest income $ 98,742 $ — $ — $ 98,742 $ 104,148 $ — $ — $ 104,148
Provision for loan losses 700 — — 700 — — — —
Net interest income after provision for loan losses 98,042 — — 98,042 104,148 — — 104,148
Noninterest income 25,288 22,571 (150) 47,709 19,904 21,833 (147) 41,590
Noninterest expense 91,509 19,506 (1,198) 109,817 82,059 19,590 (983) 100,666
Income before provision for income taxes 31,821 3,065 1,048 35,934 41,993 2,243 836 45,072
Income tax provision (benefit) 6,561 868 — 7,429 8,574 656 — 9,230
Net income $ 25,260 $ 2,197 $ 1,048 $ 28,505 $ 33,419 $ 1,587 $ 836 $ 35,842
Total assets $ 15,332,420 $ 202,319 $ (74,145) $ 15,460,594 $ 11,395,765 $ 160,339 $ (49,554) $ 11,506,550
Total liabilities $ 13,761,414 $ 59,953 $ (74,145) $ 13,747,222 $ 9,928,628 $ 29,403 $ (49,554) $ 9,908,477
For the nine months ended September 30,
2020 2019
Banking
Business Insurance
Agency
Business Other/
Eliminations Total Banking
Business Insurance
Agency
Business Other/
Eliminations Total
(Dollars in Thousands)
Net interest income $ 297,643 $ — $ — $ 297,643 $ 310,343 $ — $ — $ 310,343
Provision for loan losses 37,900 — — 37,900 4,500 — — 4,500
Net interest income after provision for loan losses 259,743 — — 259,743 305,843 — — 305,843
Noninterest income 55,935 72,979 (179) 128,735 63,309 71,881 (168) 135,022
Noninterest expense 251,688 57,231 (3,165) 305,754 251,156 58,657 (2,748) 307,065
Income before provision for income taxes 63,990 15,748 2,986 82,724 117,996 13,224 2,580 133,800
Income tax provision 11,468 4,456 — 15,924 26,150 3,790 — 29,940
Net income $ 52,522 $ 11,292 $ 2,986 $ 66,800 $ 91,846 $ 9,434 $ 2,580 $ 103,860

~~Banking Segment~~

•~~Average interest-earning assets grew $1.6 billion, or 15.3%, to $12.1 billion as of September 30, 2020 from $10.5 billion as of September 30, 2019, with average total loans, our largest~~ category of average interest-earning assets, growing ~~$664.4 million,~~$0.4 billion, or ~~7.4%~~3.8%, to ~~$9.6~~$9.8 billion ~~as of September~~for the six months ended June 30, ~~2020~~2021 compared to ~~$8.9~~$9.4 billion asfor the six months ended June 30, 2020. The increase in average interest-earning assets resulted in an increase in interest income and was partially offset by a decline in market rates of ~~September 30, 2019.~~interest. For additional discussion, refer to the earlier “Interest and Dividends” section.

•Average interest-bearing liabilities grew ~~$537.5 million,~~$0.8 billion, or ~~8.5%~~12.6%, to ~~$6.9~~$7.6 billion ~~as of September~~for the six months ended June 30, ~~2020~~2021 from ~~$6.3~~$6.7 billion ~~as of September~~for the six months ended June 30, ~~2019,~~2020, with average total interest-bearing deposits, our largest category of average interest-bearing liabilities, growing ~~$761.4 million,~~$0.9 billion, or ~~12.7%~~14.2%, to ~~$6.8~~$7.5 billion ~~as of September~~for the six months ended June 30, ~~2020~~2021 compared to ~~$6.0~~$6.6 billion asfor the six months ended June 30, 2020. The increase in average interest-bearing liabilities was more than offset by a decline in market rates of ~~September 30, 2019.~~interest resulting in an overall decrease in interest expense. For additional discussion, refer to the earlier “Interest and Dividends” section.

•~~Gains on sales~~We recorded a release of ~~mortgage loans held~~provision for ~~sale, net, increased by $2.0 million, or 809.43%, to $2.2~~loan losses of $3.3 million for the three months ended ~~September~~June 30, ~~2020~~2021, compared to ~~$0.2~~a provision of $8.6 million for the three months ended ~~September~~June 30, ~~2019. The increase~~2020 and a total release of provision for loan losses of $3.9 million for the six months ended June 30, 2021 compared to a provision of $37.2 million for the six months ended June 30, 2020. Given continued improved economic and credit conditions during the three and six months ended June 30, 2021, we determined that a release of the provision was ~~due to increased volume due~~necessary. Refer to the ~~low interest rate environment.~~earlier discussion within this section for additional information.

•~~Gains on sales of mortgage loans~~Income from investments held ~~for sale, net, increased by $3.3~~in rabbi trust accounts decreased $2.8 million, or ~~723.84%, to $3.7 million~~43.0% for the ~~nine~~three months ended ~~September~~June 30, 2021 primarily as a result of a less favorable mark-to-market adjustment on equity securities held in these accounts.

•Income from investments held in rabbi trust accounts increased $4.7 million, or 512.1% for the six months ended June 30, 2021 primarily as a result of a favorable mark-to-market adjustment on equity securities held in these accounts.

•Non-interest expense increased during the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020 ~~compared to $0.4 million for the nine months ended September 30, 2019. The increase was~~primarily due to ~~increased volume due~~costs associated with our proposed acquisition of Century and an aforementioned accrual for legal expenses associated with the anticipated settlement of the putative consumer class action litigation matters related to ~~the low interest rate environment.~~overdraft and non-sufficient funds fees.

Insurance Agency Segment

•Noninterest income related to our insurance agency business increased by ~~$0.7~~$0.3 million, or ~~3.4%~~1.17%, to ~~$22.6~~$24.2 million during the three months ended ~~September~~June 30, ~~2020~~2021 from ~~$21.8~~$23.9 million during the three months ended ~~September~~June 30, ~~2019.~~2020. The slight increase was driven ~~primarily~~ by ~~an increase in~~ recurring commissions and profit

~~Table of Contents~~

sharing revenues ~~of $0.2~~which increased by $0.6 million and ~~$0.2~~$0.4 million, ~~respectively, and an increase~~respectively. These increases were partially offset by a decrease in income from investments held in rabbi trusts of ~~$0.3 million.~~$0.7 million which was primarily attributable to a less favorable mark-to-market adjustment on equity securities held in these accounts during the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

•Noninterest income related to our insurance agency business increased by ~~$1.1~~$2.0 million, or ~~1.5 %,~~4.05%, to ~~$73.0~~$52.5 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 from ~~$71.9~~$50.4 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. The increase was driven primarily by ~~an increase in our combined negotiated commission~~recurring commissions and profit sharing ~~income of $0.9 million, in~~revenues which both increased by $0.8 million. In addition, ~~to an increase in our recurring commissions of $0.8 million due to organic growth, partially offset by a $0.5 million decrease in~~ income from investments held in rabbi ~~trusts.~~trusts increased by $0.4 million which was primarily attributable to a favorable mark-to-market adjustment on equity securities held in these accounts.

Off-Balance Sheet Arrangements

We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. The financial instruments include commitments to originate loans, unused lines of credit, unadvanced portions of construction loans and standby letters of credit, all of which involve elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. Our exposure to credit loss is represented by the contractual amount of the instruments. We use the same credit policies in making commitments as we do for on-balance sheet instruments.

Table of Contents

At ~~September~~June 30, ~~2020,~~2021, we had ~~$3.8~~$4.1 billion of commitments to originate loans, comprised of ~~$2.3~~$2.4 billion of commitments under commercial loans and lines of credit (including ~~$245.4~~$356.9 million of unadvanced portions of construction loans), ~~$1.2~~$1.4 billion of commitments under home equity loans and lines of credit, ~~$214.6~~$182.1 million in standard overdraft coverage commitments, ~~$40.0~~$85.6 million of unfunded commitments related to residential real estate loans and ~~$21.2~~$60.1 million in other consumer loans and lines of credit. In addition, at ~~September~~June 30, ~~2020,~~2021, we had ~~$62.4~~$61.8 million in standby letters of credit outstanding. We also had ~~$154.1~~$45.3 million in forward commitments to sell loans.

Management of Market Risk

General. Market risk is the sensitivity of income to changes in interest rates, foreign exchange rates, commodity prices and other market-driven rates or prices. Interest rate sensitivity is the most significant market risk to which we are exposed. Interest rate risk is the sensitivity of income to changes in interest rates. Changes in interest rates, as well as fluctuations in the level and duration of assets and liabilities, affect net interest income, our primary source of income. Interest rate risk arises directly from our core banking activities. In addition to directly impacting net interest income, changes in the level of interest rates can also affect the amount of loans originated, the timing of cash flows on loans and securities, and the fair value of securities and derivatives, as well as other effects. The primary goal of interest rate risk management is to control this risk within limits approved by the Risk Management Committee of our Board of Directors.

These limits reflect our tolerance for interest rate risk over both short-term and long-term horizons. We attempt to manage interest rate risk by identifying, quantifying, and where appropriate, hedging its exposure. If assets and liabilities do not re-price simultaneously and in equal volume, the potential for interest rate exposure exists. Our objective is to maintain stability in the growth of net interest income through the maintenance of an appropriate mix of interest-earning assets and interest-bearing liabilities and, when necessary and within limits that management determines to be prudent, through the use of off-balance sheet hedging instruments such as interest rate swaps, floors and caps.

Net Interest Income. We analyze our sensitivity to changes in interest rates through a net interest income model. We estimate what our net interest income would be for a 12-month period assuming no changes in interest rates. We then calculate what the net interest income would be for the same period under the assumption that the U.S. Treasury yield curve increases or decreases instantaneously by +200, +300, +400 and -100 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the “Changes in Interest Rates” column below. The model requires that interest rates remain positive for all points along the yield curve for each rate scenario which may preclude the modeling of certain falling rate scenarios during periods of lower market interest rates. The relatively low level of interest rates prevalent at ~~September~~June 30, 2021 and December 31, 2020 precluded the modeling of certain falling rate ~~scenarios, including~~scenarios. We do not model negative interest ~~rates.~~rate scenarios.

The tables below set forth, as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the calculation of the estimated changes in our net interest income on an FTE basis that would result from the designated immediate changes in the ~~United States~~U.S. Treasury yield ~~curve.~~curve:

8387

Table of Contents

Interest Rate Sensitivity


		As of September 30, 2020			As of June 30, 2021
Change in Interest Rates (basis points) (1)	Change in Interest Rates (basis points) (1)	Net Interest Income Year 1 Forecast	Year 1 Change from Level	Change in Interest Rates (basis points) (1)	Net Interest Income Year 1 Forecast		Year 1 Change from Level
		(Dollars in thousands)			(Dollars in thousands)
400	400	$582,082	48.3%	400	$	557,547	40.4	%
300	300	534,490	36.1%	300	518,005		30.4	%
200	200	486,853	24.0%	200	478,885		20.6	%
Flat	Flat	392,584	—%	Flat	397,106		—	%
(100)	(100)	380,522	(3.1)%	(100)	369,259		(7.0)	%

		As of December 31, 2019			As of December 31, 2020
Change in Interest Rates (basis points) (1)	Change in Interest Rates (basis points) (1)	Net Interest Income Year 1 Forecast	Year 1 Change from Level	Change in Interest Rates (basis points) (1)	Net Interest Income Year 1 Forecast		Year 1 Change from Level
		(Dollars in thousands)			(Dollars in thousands)
400	400	$433,300	5.2%	400	$	571,842	50.0	%
300	300	428,186	4.0%	300	524,847		37.7	%
200	200	422,881	2.7%	200	478,307		25.5	%
Flat	Flat	411,704	—%	Flat	381,259		—	%
(100)	(100)	395,697	(3.9)%	(100)	362,186		(5.0)	%

(1)Assumes an immediate uniform change in interest rates at all maturities, except in the down 100 basis points scenario, where rates are floored at zero at all maturities.

The tables above indicate that at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, in the event of an instantaneous parallel 200 basis points increase in rates, we would have experienced a ~~24.0%~~20.6% and ~~2.7%~~25.5% increase, respectively, in net interest income on an FTE basis, and in the event of an instantaneous 100 basis points decrease in interest rates, we would have experienced a ~~3.1%~~7.0% and a ~~3.9%~~5.0% decrease at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, in net interest income, on an FTE basis. Management may use interest rate derivative financial instruments, within internal policy guidelines, to manage interest rate risk as part of our asset/liability strategy. These derivatives provide significant protection against falling interest rates.

Economic Value of Equity Analysis. We also analyze the sensitivity of our financial condition in interest rates through our economic value of equity (“EVE”) model. This analysis calculates the difference between the present value of expected cash flows from assets and liabilities assuming various changes in current interest rates.

The table below represents an analysis of our interest rate risk (excluding the effect of our pension plans) as measured by the estimated changes in our EVE, resulting from an instantaneous and sustained parallel shift in the yield curve (+200, +300, +400 basis points and -100 basis points) at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. The model requires that interest rates remain positive for all points along the yield curve for each rate scenario which may preclude the modeling of certain falling rate scenarios during periods of lower market interest rates. The relatively low level of interest rates prevalent at ~~September~~June 30, 2021 and December 31, 2020 precluded the modeling of certain falling rate scenarios, including negative interest rates.

Our earnings are not directly or materially impacted by movements in foreign currency rates or commodity prices. Movements in equity prices may have a modest impact on earnings by affecting the volume of activity or the amount of fees from investment-related business lines.

Table of Contents

EVE Interest Rate Sensitivity


Change in Interest Rate (basis points) (1)			As of June 30, 2021
	Estimated EVE (2)		Estimated Increase (Decrease) in EVE from Level				EVE as a Percentage of Total Assets (3)
			Amount		Percent
	(Dollars in thousands)
400	$	4,483,593	$	319,567	7.7	%	28.18	%
300	4,426,492		262,466		6.3	%	27.31	%
200	4,361,352		197,326		4.7	%	26.40	%
Flat	4,164,026		—		—		24.23	%
(100)	3,895,942		(268,084)		(6.4)	%	22.43	%

~~Table of Contents~~

Change in Interest
Rate (basis points) (1) As of September 30, 2020
Estimated EVE (2) Estimated Increase (Decrease) in EVE from
Level EVE as a
Percentage of
Total Assets (3)
Amount Percent
(Dollars in thousands)
400 $ 4,416,336 $ 544,218 14.1 % 29.66 %
300 4,307,416 435,298 11.2 % 28.52 %
200 4,190,048 317,930 8.2 % 27.33 %
Flat 3,872,118 — — 24.51 %
(100) 3,684,240 (187,878) (4.9) % 23.23 %


Change in Interest Rate (basis points) (1)	Change in Interest Rate (basis points) (1)			As of December 31, 2019						Change in Interest Rate (basis points) (1)				As of December 31, 2020
		Estimated EVE (2)		Estimated Increase (Decrease) in EVE from Level				EVE as a Percentage of Total Assets (3)			Estimated EVE (2)			Estimated Increase (Decrease) in EVE from Level							EVE as a Percentage of Total Assets (3)
				Amount		Percent
Change in Interest Rate (basis points) (1)										Change in Interest Rate (basis points) (1)			Estimated EVE (2)		Amount				Percent				EVE as a Percentage of Total Assets (3)
		(Dollars in thousands)									(Dollars in thousands)
	400	$	2,446,754	$	14,005	0.6	%	22.51	%		$	4,385,795			$	452,022			11.5	%			29.09	%
300	300	2,453,287		20,538		0.8	%	22.11	%	300	4,297,682			363,909			9.3	%			28.06	%
200	200	2,457,642		24,893		1.0	%	21.67	%	200	4,205,867			272,094			6.9	%			27.00	%
Flat	Flat	2,432,749		—		—		20.52	%	Flat	3,933,773			—			—				24.38	%
(100)	(100)	2,364,175		(68,574)		(2.8)	%	19.54	%	(100)	3,663,432			(270,341)			(6.9)	%			22.65	%

(1)Assumes an immediate uniform change in interest rates at all maturities, except in the down 100 basis points scenario, where rates are floored at zero at all maturities.

(2)EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts. Subscription funds stemming from the mutual to stock conversion held in a demand deposit account were excluded from the analysis. The total demand deposit balance excluded at September 30, 2020 was $1.5 billion, resulting in estimated economic values of equity that would be indicative of the Company post-conversion.

(3)Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

Liquidity and Capital Resources

Liquidity. Liquidity describes our ability to meet the financial obligations that arise in the normal course of business. Liquidity is primarily needed to meet deposit withdrawals and anticipated loan fundings, as well as current and planned expenditures. We seek to maintain sources of liquidity that are deep and diversified and that may be used during the normal course of business as well as on a contingency basis.

The net proceeds from our IPO significantly increased our liquidity and capital resources at both Eastern Bankshares, Inc. and Eastern Bank. Over time, the initial level of liquidity will be reduced as net proceeds from the IPO are used for general corporate purposes, including the funding of loans. Our financial condition and results of operations have been enhanced by the net proceeds from the IPO, resulting in increased net interest-earning assets and net interest and dividend income. In April 2021, we announced that we had executed the Merger Agreement with Century, under which we expect to acquire Century for $641.9 million in cash. The transaction, which we expect to close in the middle of the fourth quarter of 2021, will reduce the net proceeds from the IPO. However, we continue to expect that due to the increase in equity resulting from the net proceeds raised in our IPO, our return on equity has been and will continue to be adversely affected until we can effectively employ the proceeds of the IPO.

Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from calls, maturities and sales of securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and due from banks and securities classified as available for sale. In the future, our liquidity position will be affected by the level of customer deposits and payments, as well as acquisitions, dividends, and stock repurchases in which we may engage. We believe that our existing resources will be sufficient to meet the liquidity and capital requirements of our operations for the foreseeable future.

We participate in the ~~Promontory Interfinancial~~IntraFi Network ~~("Promontory"~~(formerly “Promontory”), which allows us to provide access to multi-million dollar FDIC deposit insurance protection on customer deposits for consumers, businesses and public entities. We can elect to sell or repurchase this funding as reciprocal deposits from other ~~Promontory network~~IntraFi Network banks depending on our funding needs. At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had a total of ~~$421.5~~$464.7 million and ~~$176.3~~$364.8 million of ~~Promontory~~IntraFi Network one-way sell

Table of Contents

deposits, respectively. These deposits could have been repurchased as reciprocal deposits and should be considered a source of liquidity.

Although customer deposits remain our preferred source of funds, maintaining additional back up sources of liquidity is part of our prudent liquidity risk management practices. We have the ability to borrow from the FHLBB. At ~~September~~June 30, ~~2020,~~2021, we had ~~$14.8~~$14.3 million in outstanding advances and the ability to borrow up to an additional $1.6 billion. We also have the ability to borrow from the ~~Federal Reserve Bank of Boston~~FRBB as well as the Federal Reserve Paycheck Protection Program Liquidity Facility. At ~~September~~June 30, ~~2020,~~2021, we had a ~~$509.1~~$482.1 million collateralized line of credit from the ~~Federal Reserve Bank of Boston~~FRBB with no outstanding balance. Additionally, we had ~~$1.1 billion~~$825.8 million in PPP loans that could have been pledged to the Federal Reserve Paycheck Protection Program Liquidity Facility. We had a total of ~~$590.0~~$770.0 million of discretionary lines of credit at ~~September~~June 30, ~~2020.~~

~~Table of Contents~~

2021.

Sources of Liquidity


		As of September 30, 2020				As of December 31, 2019					As of June 30, 2021				As of December 31, 2020
		Outstanding		Additional Capacity		Outstanding		Additional Capacity			Outstanding		Additional Capacity		Outstanding		Additional Capacity
				(Dollars in thousands)									(In thousands)
Promontory deposits		$	—	$	421,517	$	93,539	$	176,346
IntraFi Network deposits										IntraFi Network deposits	$	—	$	464,671	$	—	$	364,794
Federal Home Loan Bank (1)	Federal Home Loan Bank (1)	14,773		1,593,850		18,964		1,822,955		Federal Home Loan Bank (1)	14,323		1,627,016		14,624		1,581,016
Federal Reserve Bank of Boston (2)	Federal Reserve Bank of Boston (2)	—		509,078		—		636,960		Federal Reserve Bank of Boston (2)	—		482,107		—		503,512
Federal Reserve Paycheck Protection Program Liquidity Facility	Federal Reserve Paycheck Protection Program Liquidity Facility	—		1,123,493		—		—		Federal Reserve Paycheck Protection Program Liquidity Facility	—		825,784		—		1,026,117
Unsecured lines of credit	Unsecured lines of credit	—		590,000		—		555,000		Unsecured lines of credit	—		770,000		—		620,000
Total deposits	Total deposits	$	14,773	$	4,237,938	$	112,503	$	3,191,261	Total deposits	$	14,323	$	4,169,578	$	14,624	$	4,095,439

(1)As of ~~September~~June 30, 2021 and December 31, 2020, loans have been pledged to the FHLBB with a carrying value of ~~$2.4 billion to secure additional borrowing capacity. As of December 31, 2019, loans and securities were pledged to the FHLBB with a carrying value of $1.5~~$2.3 billion and ~~$0.9~~$2.4 billion, respectively, to secure additional borrowing ~~capacity~~capacity.

(2)Loans with a carrying value of ~~$0.9 billion~~$812.6 million and ~~$1.0 billion~~$884.1 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, have been pledged to the ~~Federal Reserve Bank of Boston~~FRBB resulting in this additional unused borrowing ~~capacity~~capacity.

We believe that advanced preparation, early detection, and prompt responses can avoid, minimize, or shorten potential liquidity crises. Our Board of Directors and our management's Asset Liability Committee have put a Liquidity Contingency Plan in place to establish methods for assessing and monitoring risk levels, as well as potential responses during unanticipated stress events. As part of its risk management framework, we perform periodic liquidity stress testing to assess its need for liquid assets as well as backup sources of liquidity.

Capital Resources. We are subject to various regulatory capital requirements administered by the Massachusetts Commissioner of Banks, the FDIC and the Federal Reserve (with respect to our consolidated capital requirements). At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we exceeded all applicable regulatory capital requirements, and were considered “well capitalized” under regulatory guidelines.

Contractual Obligations, Commitments and Contingencies

In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities. At ~~September~~June 30, ~~2020~~2021 there were no material changes in our contractual obligations, other commitments and contingencies from those disclosed in our ~~prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on August 18, 2020.~~2020 Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES

The information required by this Item is included in Part I, Item 2 of this Quarterly Report on Form 10-Q under the heading “Management of Market Risk.”

Table of Contents

ITEM 4. CONTROLS AND PROCEDURES

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)~~15d-15(c) promulgated under the ~~Securities~~ Exchange Act of ~~1934, as amended.~~1934. 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 ~~September~~June 30, ~~2020,~~2021, the end of the period covered by this Quarterly ~~Report.~~

~~Table of Contents~~

Report on Form 10-Q.

Internal Controls over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting that occurred during the quarter ended ~~September~~June 30, ~~2020~~2021 that have materially affected or are reasonably likely to materially affect the Company’s internal controls over financial reporting. The Company has not experienced any material impact to the Company’s internal controls over financial reporting due to the fact that most of the Company’s employees responsible for financial reporting are working remotely during the ~~Covid-19~~COVID-19 pandemic. The Company is continually monitoring and assessing the impact of the ~~Covid-19~~COVID-19 pandemic on the Company’s internal controls to minimize the impact to their design and operating effectiveness.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We operate in a legal and regulatory environment that exposes us to potentially significant risks. For more information regarding the Company’s exposure generally to legal and regulatory risks, see “Business—Legal and Regulatory Proceedings” in Part I, Item 1 of the ~~Company’s prospectus, filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on August 18, 2020.~~2020 Form 10-K.

As of the date of this Quarterly Report on Form 10-Q, we are not involved in any pending legal proceeding as a plaintiff or a defendant ~~other than routine legal proceedings occurring in the ordinary course of business, and we are not involved in any legal proceeding~~ the outcome of which we believe would be material to our financial condition or results of operations. For additional information related to the Company’s ongoing legal proceedings see Note 10, “Commitments and Contingencies” within the Notes to the Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

For information regarding the Company’s risk factors, see Part I, Item 1A “Risk Factors” in ~~the Company’s prospectus, filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on August 18,~~our 2020 ~~(“Prospectus”). Other than the risk factors below,~~Form 10-K, as updated by Part II, Item 1A “Risk Factors” of Q1 Form 10-Q. As of the date of this Quarterly Report on Form 10-Q, the risk factors of the Company have not changed materially from those disclosed in our 2020 Form 10-K, as updated by the Prospectus, except that the risk factor regarding “You may not revoke your decision to purchase shares of Eastern Bankshares, Inc. common stock in the subscription or community offerings after you send us your order” is removed.Q1 Form 10-Q. The COVID-19 pandemic has led to general uncertainty and adverse changes in economic conditions and has heightened, and in some cases manifested, certain of the risks we normally face in operating our business, including those disclosed in our 2020 Form 10-K and updated in the ~~Prospectus.~~Q1 Form 10-Q. The risk factors disclosure in ~~the Prospectus~~our 2020 Form 10-K and our Q1 Form 10-Q is therefore qualified by the information relating to COVID-19 that is described in this Quarterly Report on Form 10-Q.

~~Risks Related to Covid-19 Pandemic and Associated Economic Slowdown~~

On March 11, 2020, the World Health Organization declared the outbreak of a strain of novel coronavirus disease, Covid-19, a global pandemic. The duration and severity of the pandemic, including recent resurgences in our market and elsewhere and the potential for subsequent seasonal or other resurgences, as well as the efficacy and timing of any vaccine that may be approved for use, continue to be impossible to predict. There is also substantial uncertainty regarding the pace of economic recovery and the return of business and consumer confidence if and when the impact of the pandemic lessens. This subsection summarizes a number of risks to our business, financial condition, results of operations and cash flows relating to the ongoing economic recession caused primarily by governmental and private sector actions to reduce the spread of Covid-19. We sometimes refer to the ongoing recession as the “Covid-19 recession” herein. The Covid-19 recession, including associated governmental and private sector responses, has had, and we expect will continue to have, a material adverse effect on our business, financial condition, results of operations and cash flows, as discussed below.

Many of the risks related to the Covid-19 recession may have implications for Eastern Bank that are similar to those presented by risks described in further detail in the Company’s prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) on August 18, 2020, including “Our business may be adversely affected by conditions in the financial markets and by economic conditions generally,” “The geographic concentration of our loan portfolio and lending activities makes us vulnerable to a downturn in the local economy,” “Commercial loans, including those secured by commercial real estate, are generally riskier than other types of loans and constitute a significant portion of our loan and lease portfolio,” “Changes in management’s estimates and assumptions may have a material impact on our consolidated financial statements and our financial condition or operating results,” “Climate change, natural disasters, public health crises, geopolitical developments, acts of terrorism and other external events could harm our business,” “The financial weakness of other financial institutions could adversely affect us,” and “Our business strategy includes projected growth in our core businesses, and our

~~Table of Contents~~

~~financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.”~~

The Covid-19 pandemic and governmental and private sector action in response to the Covid-19 pandemic are having a material adverse effect on the global, national and local economies, and on our business, financial condition, results of operations and cash flows, and it is premature to predict if or when economic activity will revert to the level that existed before the spread of Covid-19 in our region.

Governmental and private sector action in response to the Covid-19 pandemic have generally had the effect in our market of curtailing household and business activity, although such action has not always been coordinated or consistent across jurisdictions and has fluctuated during the pandemic.

Our market consists primarily of eastern Massachusetts and southern and coastal New Hampshire. Massachusetts issued an emergency order in March 2020 requiring all businesses and organizations that did not provide certain essential services to close their workplaces and facilities to workers, customers and the public. New Hampshire did not impose similar restrictions. Massachusetts progressively relaxed its restrictions from May through August, but beginning in September, Massachusetts tightened certain restrictions, including limits on the size of indoor and outdoor gatherings in public and private venues. We are unable to predict how the governmental and private sector action will evolve in late 2020 and early 2021 in response to the Covid-19 pandemic in our market.

Our commercial and small business borrowers that operate businesses such as hotels, inns, restaurants and retail stores that depend primarily upon customers patronizing their businesses in person have experienced the most significant adverse effects of the Covid-19 pandemic, and we expect these effects to continue.

Many individuals, households and businesses have changed their behavior in response to governmental mandates and advisories to sharply restrain commercial and social interactions and discretionary spending.Our commercial and small business borrowers that operate businesses such as hotels, inns, restaurants and retail stores that depend primarily upon customers patronizing their businesses in person have experienced the most significant adverse effects as a consequence of reduced commercial and social interactions and discretionary spending, and we expect these effects to continue. If a vaccine for Covid-19 becomes widely available in the near future, customers may revert to their prior habits of patronizing their businesses in person. However, such changed customer behavior may endure, especially if a vaccine takes longer to develop or offers only limited protection. If such changed customer behavior is prolonged, our commercial and small business borrowers will continue to experience adverse effects to their businesses. We are unable to predict if or when economic activity for those borrowers will revert to the level that existed before the spread of Covid-19 in our region. In addition, our commercial real estate borrowers with properties whose value is tied to customer patronage may experience significant decreases in their property values. See tabular disclosure of “High Risk Industries” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Outlook and Trends.”

The Covid-19 recession has significantly increased the level of unemployment in our market, and if elevated levels of unemployment continue, the Company may experience greater levels of delinquent loans especially among our consumer and small business loans.

The closure in Massachusetts of many workplaces and facilities to workers, customers and the public due to the Covid-19 recession has significantly increased the level of unemployment in Massachusetts. For example, the unemployment rate reported by the Department of Labor’s Bureau of Labor Statistics for Massachusetts for May 2020 was 17.4%. Although the level of unemployment in Massachusetts declined to 9.6% in September, unemployment in Massachusetts continues to far exceed the pre-pandemic level of 2.8% reported from August 2019 through March 2020.

Customary means to collect nonperforming assets may be prohibited or impractical during the Covid-19 pandemic, and there is a risk that collateral securing a nonperforming asset may deteriorate if we choose not to, or are unable to, foreclose on collateral on a timely basis.

Governments have adopted or may adopt in the future regulations or promulgate executive orders that restrict or limit our ability to take certain actions with respect to delinquent borrowers that we would otherwise take in the ordinary course, such as customary collection and foreclosure procedures. Massachusetts, for example, enacted a law effective April 20, 2020 that temporarily imposed a moratorium on evictions and foreclosures. The law prohibited landlords and lenders from initiating or completing evictions and foreclosures. The law also required lenders to provide forbearance to mortgage borrowers who submit a request affirming that they have experienced a financial impact from Covid-19. The Massachusetts moratorium

~~Table of Contents~~

on evictions and foreclosures expired on October 17, 2020. We are unable to predict whether Massachusetts would reinstate the same or similar moratorium in the future because of a resurgence of the pandemic in Massachusetts. There is a risk that the collateral securing a nonaccrual loan may deteriorate if we choose not to, or are unable to, foreclose on the collateral on a timely basis during the Covid-19 recession. If a large percentage of the collateral securing our nonperforming assets deteriorates, our financial results may be negatively impacted.

As a result of the dramatic decline in cash flow that many of our commercial and commercial real estate borrowers have experienced and may continue to experience as a result of the Covid-19 recession, many of those borrowers have been and will likely continue to seek payment deferments on their indebtedness.

The effects of the Covid-19 recession in our market area have significantly reduced the cash flow for many of our commercial and commercial real estate borrowers. As a consequence, many of those borrowers have been seeking and may continue to seek payment deferments on their indebtedness.

Consistent with the public encouragement provided generally by federal and state financial institution regulators after the spread of Covid-19 in the United States, Eastern Bank has attempted to work constructively with borrowers to negotiate loan modifications or forbearance arrangements that reduce or defer the monthly payments due to Eastern Bank. Generally, these modifications are for three to six months and allow customers to temporarily cease making either principal payments or both interest and principal payments. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Outlook and Trends” for additional information regarding loan modifications as of September 30, 2020.

We have experienced a significant increase in credit costs in 2020 due to the Covid-19 recession, and we may experience additional credit costs in the future if the effect of the pandemic in our market continues.

Our provision for loan losses increased to $37.9 million for the nine months ended September 30, 2020, compared to $4.5 million for the nine months ended September 30, 2019. The increase in our provision for loan loss, which occurred primarily in the quarter ended June 30, 2020, was driven primarily by our perception of the economic distress being experienced by many of our borrowers due to the Covid-19 recession.

Beginning in late March, when we realized the pandemic and economic shut down would have an immediate adverse impact on certain segments of our customers, we identified the various categories of borrowers likely to experience the most adverse effects of the Covid-19 recession. Since December 31, 2019 we have downgraded the risk ratings on loans across various industries and sectors. Downgrades to the special mention category include the entire hotel portfolio and most of the restaurant portfolio, as well as some commercial loans in other industries including retail and construction contractors.

Our loan loss allowance may be difficult to evaluate in comparison to our peers. As we are permitted to do as an emerging growth company, we have elected to postpone the adoption of Financial Accounting Standards Board Accounting Standards Update No. 2016–13 (“Measurement of Credit Losses on Financial Instruments”), commonly referred to as the “CECL model.” The new standard will be effective for us for reporting beginning as of December 31, 2021. We are adopting this standard later than our peers, and therefore, our loan loss allowance may be difficult to evaluate in comparison to many of our peers that are publicly traded.

The Federal Open Market Committee’s decision to maintain the target range for the federal funds rate between 0.0% and 0.25% to help mitigate the effects of the Covid-19 recession will likely have an adverse effect on our operating results.

Anticipating the Covid-19 recession, the Federal Open Market Committee of the Federal Reserve in March 2020 reduced the target range for the federal funds rate to between 0.0% and 0.25%, compared to the previous target of between 1.00% and 1.25%. The Federal Open Market Committee announced on November 5, 2020 that it had decided to keep the target range for the federal funds rate at 0% to 0.25% and that over upcoming months the Federal Reserve will continue to increase its holdings of Treasury securities and agency mortgage-backed securities in an effort to support the flow of credit to households and businesses.

Changes in interest rates can have a material effect on many areas of our business, including our net interest and net interest margin. When interest rates on our interest-earning assets decline at a faster pace than interest rates on our interest-bearing liabilities, our net interest income is adversely affected. Our planning for 2020 assumes that the current interest rate environment will remain in effect through December 31, 2020; interest rates on our interest-earning assets will continue to

~~Table of Contents~~

decline in 2020 at a faster pace than interest rates on our interest-bearing liabilities; and our net interest income for December 31, 2020 will likely be materially less than our net interest income for December 31, 2019.

~~We anticipate the Covid-19 recession will have other adverse effects on our operating results for the year ending December 31, 2020 and possibly beyond.~~

~~Other factors likely to have an adverse effect on our operating results include:~~

•~~reduced fees as we waive certain fees for our customers impacted by the Covid-19 pandemic,~~

•~~possible constraints on liquidity and capital, due to supporting client activities or regulatory actions,~~

•~~potential losses in our investment securities portfolio due to volatility in the financial markets, and~~

•higher operating costs, increased cybersecurity risks and a potential loss of productivity while we work remotely and must address a higher level of loan modifications, distressed credit management and PPP loan originations.

In addition, because both the Covid-19 pandemic and the associated recession are unprecedented, it may be challenging for management to make certain judgments and estimates that are material to our consolidated financial statements while the Covid-19 pandemic continues, given the inherently uncertain operating environment.

We may experience additional expense and reputational risk arising out of our origination of PPP loans if one or more companies, individuals or public officials allege that we acted unfairly in connection with PPP lending, including by choosing not to process certain PPP applications or in favoring our customers over other eligible PPP borrowers.

Through September 30, 2020, we originated approximately 8,800 loans to PPP borrowers, representing in the aggregate $1.1 billion of PPP loans. The vast majority of our PPP borrowers are existing commercial and small business borrowers, non-profit customers, retail banking customers and clients of Eastern Wealth Management and Eastern Insurance Group LLC. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations–Outlook and Trends” for additional information regarding our PPP loans as of September 30, 2020.

As of the date hereof, federal and state officials are investigating how participating PPP lenders process applications and whether certain PPP lenders may have inappropriately or unfairly prioritized certain customers to the detriment of other eligible borrowers. Similarly, there are pending lawsuits against other banks brought by eligible PPP borrowers alleging that various PPP lenders improperly prioritized existing customers when those lenders approved PPP loans. In addition, there are pending lawsuits against other banks alleging that various PPP lenders failed to pay required agency fees to third parties who allegedly assisted businesses with PPP loan applications. We are proud of our efforts to provide PPP funding to small businesses and non-profits in our community, but there can be no assurance that we will not be the target of government scrutiny or that private parties will not bring claims similar to those brought against other banks.

An important element of our business strategy is to pursue growth in our core businesses, and it may be challenging for us to grow our core business while the Covid-19 pandemic and associated recession continue or if the recovery from the Covid-19 recession is slow or unpredictable.

The Covid-19 pandemic and the associated recession are unprecedented. We are unable to predict if or when economic activity will revert to the level that existed before the spread of Covid-19 in our region. We also are unable to predict whether our existing and prospective customers will have confidence in assessing when the Covid-19 pandemic will likely abate and the likely pace of any economic recovery. It may be challenging for us to grow our core business while the Covid-19 pandemic continues or if the recovery from the Covid-19 recession is slow or unpredictable. If the continuing effects of the Covid-19 recession impede our ability to grow our core business, our return on equity may be less than our peer companies, and the market price of our stock may be adversely affected.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES

None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

~~Table of Contents~~

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

Table of Contents

ITEM 6.EXHIBITS

The exhibits listed in the Exhibit Index (following the signatures section of this report) are included in, or incorporated by reference into, this Quarterly Report on Form 10-Q.

EXHIBIT INDEX

The following exhibits are included in this Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2020~~2021 (and are numbered in accordance with Item 601 of Regulation S-K):


Exhibit No.						Description

3.1*2.1						~~Amended~~Agreement and ~~Restated Articles~~Plan of ~~Organization of~~Merger by and among Eastern Bankshares, Inc., Clarion Acquisition Corp., Century Bancorp, Inc. and Century Bank and Trust Company, dated as of April 7, 2021 (incorporated by reference to exhibit 2.1 to Form 8-K filed with the ~~Secretary of the Commonwealth of Massachusetts~~Securities and Exchange Commission on ~~October~~April 8, ~~2020~~2021)


10.1*						Eastern Bankshares, Inc. Management Incentive Plan adopted as of May 3, 2021 for Eastern Bank Participants

10.2*						Eastern Bankshares, Inc. Management Incentive Plan adopted as of May 3, 2021 for Eastern Insurance Group LLC Participants

31.1*						Certification of Chief Executive Officer Required by Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act

31.2*						Certification of Chief Financial Officer Required by Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act

32.1+						Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2+						Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101*						Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Unaudited Consolidated Balance Sheets as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, (ii) the Unaudited Consolidated Statements of Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 (iii) the Unaudited Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, (iv) the Unaudited Consolidated Statements of Changes in Equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020, (v) the Unaudited Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, 2021 and ~~2019,~~2020, and (vi) the Notes to the Unaudited Consolidated Financial Statements.

104						Cover page interactive data file (formatted as inline XBRL with applicable taxonomy extension information) contained in Exhibit 101 to this report+

*Filed herewith

+ Furnished herewith

9192

Table of Contents

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.


	EASTERN BANKSHARES, INC.

Date : ~~November 16, 2020~~August 13, 2021	/s/ Robert F. Rivers
	By:	Robert F. Rivers
		Chief Executive Officer and Chair of the Board
		(Principal Executive Officer)

Date : ~~November 16, 2020~~August 13, 2021	/s/ James B. Fitzgerald
	By:	James B. Fitzgerald
		Chief Financial Officer
		(Principal Financial Officer)

9293


			Page
Part I Financial Information

Item 1.I. Unaudited Consolidated Financial Statements

Unaudited Consolidated Balance Sheets as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020			24
Unaudited Consolidated Statements of Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020			25
Unaudited Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020			36
Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020			47
Unaudited Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020			69
Notes to the Unaudited Consolidated Financial Statements			811


	Retained Earnings		Accumulated Other Comprehensive Income		Total
	(In Thousands)
Balance at June 30, 2020	$	1,681,164	$	12,466	$	1,693,630
Net income	28,505		—		28,505
Other comprehensive income, net of tax	—		(8,763)		(8,763)
Balance at September 30, 2020	$	1,709,669	$	3,703	$	1,713,372


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
	(In thousands)
Balance at the beginning of period	$	116,636	$	82,662	$	82,297	$	80,655
Loans charged off	(2,418)		(2,241)		(6,025)		(6,559)
Recoveries	514		2,601		1,260		4,426
Provision charged to expense	700		0		37,900		4,500
Balance at end of period	$	115,432	$	83,022	$	115,432	$	83,022


	For the Three Months Ended				For the Nine Months Ended
	September 30, 2020				September 30, 2020
	Average Recorded Investment		Total Interest Recognized		Average Recorded Investment		Total Interest Recognized
	(In Thousands)
With no related allowance recorded:
Commercial and industrial	$	9,273	$	48	$	14,152	$	167
Commercial real estate	4,408		45		5,433		134
Commercial construction	280		0		125		0
Business banking	3,298		30		2,659		66
Residential real estate	13,513		129		13,141		399
Consumer home equity	3,034		21		3,287		61
Other consumer	53		1		33		1
Sub-total	33,859		274		38,830		828
With an allowance recorded:
Commercial and industrial	6,229		0		8,168		0
Commercial real estate	1,017		0		625		0
Commercial construction	0		0		0		0
Business banking	17,452		15		13,063		44
Residential real estate	14,165		144		13,708		446
Consumer home equity	2,417		23		2,692		69
Sub-total	41,280		182		38,256		559
Total	$	75,139	$	456	$	77,086	$	1,387


	For the Three Months Ended				For the Nine Months Ended
	September 30, 2019				September 30, 2019
	Average Recorded Investment		Total Interest Recognized		Average Recorded Investment		Total Interest Recognized
	(In Thousands)
With no related allowance recorded:
Commercial and industrial	$	26,351	$	116	$	16,346	$	339
Commercial real estate	9,106		74		10,486		222
Business banking	2,872		11		1,845		11
Residential real estate	11,500		15		11,537		352
Consumer home equity	1,837		1		1,915		71
Sub-total	51,666		217		42,129		995
With an allowance recorded:
Commercial and industrial	6,289		0		4,516		0
Commercial real estate	88		0		452		0
Business banking	8,104		10		7,326		10
Residential real estate	12,978		19		13,024		442
Consumer home equity	2,306		1		2,403		89
Sub-total	29,765		30		27,721		541
Total	$	81,431	$	247	$	69,850	$	1,536


	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
	(In thousands)
Operating lease cost	$	3,596	$	10,810
Finance lease cost	24		43
Variable lease cost	509		1,479
Total lease cost	$	4,129	$	12,332



	(In thousands)
Remainder of 2020	$	3,554
2021	13,777
2022	12,808
2023	12,268
2024	11,465
Thereafter	45,628
Total minimum lease payments	$	99,500
Less: amount representing interest	10,963
Present value of future minimum lease payments	$	88,537


December 31, 2019
				Weighted Average Rate
	Notional Amount		Weighted Average Maturity	Current Rate Paid		Receive Fixed Swap Rate		Fair Value (1)
	(In Thousands)		(In Years)					(In Thousands)
Interest rate swaps on loans	2,120,000		2.16	1.74	%	2.11	%	(321)
Total	$	2,120,000						$	(321)


	As of September 30, 2020				As of December 31, 2019
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(In Thousands)
Assets
Cash and cash equivalents	$	2,328,084	$	2,328,084	$	362,602	$	362,602
Trading securities	0		0		961		961
Securities available for sale	2,207,672		2,207,672		1,508,236		1,508,236
Loans held for sale	4,649		4,649		26		26
Loans, net of allowance for loan losses	9,796,062		10,113,381		8,889,184		9,116,018
Accrued interest receivable	34,525		34,525		26,835		26,835
FHLB stock	8,805		8,805		9,027		9,027
Rabbi trust investments	83,663		83,663		78,012		78,012
Bank-owned life insurance	78,058		78,058		77,546		77,546
Interest rate swap contracts
Customer-related positions	161,841		161,841		64,463		64,463
Risk participation agreements	888		888		482		482
Foreign currency forward contracts
Matched customer book	183		183		469		469
Foreign currency loan	35		35		0		0
Liabilities
Deposits	$	13,332,585	$	13,332,754	$	9,551,392	$	9,548,889
Other borrowed funds	0		0		201,082		201,082
FHLB advances	14,773		14,633		18,964		18,188
Escrow deposits of borrowers	14,664		14,664		15,349		15,349
Accrued interest payable	128		128		1,712		1,712
Interest rate swap contracts
Cash flow hedges - interest rate positions	0		0		321		321
Customer-related positions	48,174		48,174		18,057		18,057
Risk participation agreements	1,382		1,382		606		606
Foreign currency forward contracts
Matched customer book	159		159		428		428
Foreign currency loan	59		59		203		203


	Total COVID-19 Modifications as of June 30, 2020			Remaining COVID-19 Modifications as of September 30, 2020 (1)
	Total Modifications	% of Total Loan Balance		Remaining Modifications	% of Total Loan Balance
	(Dollars in thousands)
Portfolio
Commercial and industrial	157,384	6.9	%	99,630	4.6	%
Commercial real estate	546,002	15.2	%	414,233	11.3	%
Commercial construction	12,890	4.6	%	13,330	4.5	%
Business banking	106,886	8.7	%	64,369	5.1	%
Residential real estate	92,775	6.6	%	95,260	6.9	%
Consumer home equity	18,603	2.1	%	10,093	1.1	%
Other consumer	11,455	3.4	%	4,312	1.4	%
Total	945,995	9.5	%	701,227	7.1	%


	Loan Balance		Balance (%)		COVID-19 Modification % (1)
	(Dollars in thousands)
High Risk Industries
Retail (2)	$	481,432	4.8	%	20.6	%
Restaurants	205,345		2.1	%	41.9	%
Hotels	179,718		1.8	%	30.5	%
Construction contractors financing	101,510		1.0	%	2.4	%
Auto dealerships	82,350		0.8	%	2.3	%
Other high risk	82,240		0.8	%	12.6	%
All impacted industries total	1,132,596		11.3	%	22.5	%
Remaining commercial and business banking	6,246,013		62.8	%	5.4	%
Total Commercial and business banking	7,378,609		74.1	%	8.0	%
All Other Loans	2,565,632		25.9	%	4.3	%
Total	$	9,944,241	100.0	%	7.1	%


							% Change from
	As of September 30,				As of December 31,		December 31, 2019		September 30, 2019
	2020		2019		2019		to September 30, 2020		to September 30, 2020
	(Dollars in thousands)
Federal funds purchased	$	—	$	222,370	$	201,082	(100.0)	%	(100.0)	%
Federal Home Loan Bank advances	14,773		24,797		18,964		(22.1)	%	(40.4)	%
Escrow deposits of borrowers	14,664		16,447		15,349		(4.5)	%	(10.8)	%
Total	$	29,437	$	263,614	$	235,395	(87.5)	%	(88.8)	%