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What changed in Eastern Bankshares, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Eastern Bankshares, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+815 added−785 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-24)

Top changes in Eastern Bankshares, Inc.'s 2023 10-K

815 paragraphs added · 785 removed · 508 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

141 edited+53 added−53 removed177 unchanged
Biggest changeDemographics The tables below depict our demographics as of December 31, 2022 for our Board of Directors, our Management Committee (which consists of our most senior executive leaders), our total workforce, and new hires in 2022: 2022 Board of Directors Gender Race & Ethnicity Female Male Not Disclosed Total Asian Black Latinx Not Disclosed Other POC White Total Count 3 8 — 11 1 1 1 — — 8 11 Percentage 27.3% 72.7% —% 100.0% 9.1% 9.1% 9.1% —% —% 72.7% 100.0% 2022 Management Committee Gender Race & Ethnicity Female Male Not Disclosed Total Asian Black Latinx Not Disclosed Other POC White Total Count 5 9 — 14 1 1 — — — 12 14 Percentage 35.7% 64.3% —% 100.0% 7.1% 7.1% —% —% —% 85.8% 100.0% 2022 Total Workforce Gender Race & Ethnicity Female Male Non-binary Total Asian Black Latinx Not Disclosed Other POC White Total Count 1,421 722 3 2,146 182 142 256 44 38 1,484 2,146 Percentage 66.3% 33.6% 0.1% 100.0% 8.5% 6.6% 11.9% 2.1% 1.8% 69.1% 100.0% 24 2022 New Hires (2022 new hires employed as of 12/31/22) Gender Race & Ethnicity Female Male Not Disclosed Total Asian Black Latinx Not Disclosed Other POC White Total Count 225 149 — 374 42 43 44 10 38 197 374 Percentage 60.2% 39.8% —% 100.0% 11.2% 11.5% 11.8% 2.7% 10.2% 52.6% 100.0% Pay & Benefits Our compensation and benefits programs are designed to attract, motivate and retain talent to achieve short-term and long-term goals through the implementation of sound compensation principles and policies.
Biggest changeDemographics The tables below depict our demographics as of December 31, 2023 for our Board of Directors, our Management Committee (which consists of our most senior executive leaders), our total workforce, and new hires in 2023: 2023 Board of Directors Gender Race & Ethnicity Female Male Not Disclosed Total Asian Black Latinx Not Disclosed Other POC White Total Count 5 8 — 13 1 2 1 — — 9 13 Percentage 38.5% 61.5% —% 100.0% 7.7% 15.4% 7.7% —% —% 69.2% 100.0% 2023 Management Committee Gender Race & Ethnicity Female Male Not Disclosed Total Asian Black Latinx Not Disclosed Other POC White Total Count 5 7 — 12 1 1 — — — 10 12 Percentage 41.7% 58.3% —% 100.0% 8.3% 8.3% —% —% —% 83.4% 100.0% 24 2023 Total Workforce Gender Race & Ethnicity Female Male Non-binary Total Asian Black Latinx Not Disclosed Other POC White Total Count 1,138 600 6 1,744 166 136 266 35 30 1,111 1,744 Percentage 65.3% 34.4% 0.3% 100.0% 9.5% 7.8% 15.3% 2.0% 1.7% 63.7% 100.0% 2023 New Hires (2023 new hires employed as of 12/31/23) Gender Race & Ethnicity Female Male Non-Binary Total Asian Black Latinx Not Disclosed Other POC White Total Count 119 80 2 201 17 21 54 2 3 104 201 Percentage 59.2% 39.8% 1.0% 100.0% 8.5% 10.4% 26.9% 1.0% 1.5% 51.7% 100.0% Pay & Benefits Our compensation and benefits programs are designed to attract, motivate and retain talent to achieve short-term and long-term goals through the implementation of sound compensation principles and policies.
We are subject to comprehensive regulation and examination by the Massachusetts Commissioner of Banks, the Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve Board and the Consumer Financial Protection Bureau. Our diversified products and services include lending, deposit, wealth management and insurance products.
We are subject to comprehensive regulation and examination by the Massachusetts Commissioner of Banks, the Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve Board and the Consumer Financial Protection Bureau. Our diversified products and services include lending, deposit, and wealth management.
Loan operations are also subject to state and federal laws applicable to credit transactions, such as the: • Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; • Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; • Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; • Massachusetts Debt Collection Regulations, establishing standards, by defining unfair or deceptive acts or practices, for the collection of debts from persons within the Commonwealth of Massachusetts and the General Laws of Massachusetts, Chapter 167E, which governs Eastern Bank’s lending powers; and • Rules and regulations of the various federal and state agencies charged with the responsibility of implementing such federal and state laws.
Loan operations are also subject to state and federal laws applicable to credit transactions, such as the: • Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; • Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; • Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; 18 • Massachusetts Debt Collection Regulations, establishing standards, by defining unfair or deceptive acts or practices, for the collection of debts from persons within the Commonwealth of Massachusetts and the General Laws of Massachusetts, Chapter 167E, which governs Eastern Bank’s lending powers; and • Rules and regulations of the various federal and state agencies charged with the responsibility of implementing such federal and state laws.
Some of the principal activities that the Federal Reserve Board has determined by regulation to be so closely related to banking are: (i) making or servicing loans; (ii) performing certain data processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment or financial advisor; (v) leasing personal or real property; (vi) making investments in corporations or projects designed primarily to promote community welfare; and (vii) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.
Some of the principal activities that the Federal Reserve Board has determined by regulation to be so closely related to banking are: (i) making or servicing loans; (ii) performing certain data processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment or financial advisor; (v) leasing personal or real property; (vi) making investments in corporations or projects designed primarily to 19 promote community welfare; and (vii) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.
As a result of the conversion of Eastern Bank Corporation, the predecessor holding company of Eastern Bank, from a mutual into a stock holding company in connection with our IPO (the “Conversion”), Eastern Bankshares, Inc. may not declare or pay a cash dividend on, or repurchase any of its capital shares if the effect thereof would cause its net worth to be reduced below (i) the amount required for the liquidation account established by Eastern Bankshares, Inc. in connection with the IPO (“Liquidation Account”) or (ii) the regulatory capital requirements of Eastern Bankshares, Inc.
As a result of the conversion of Eastern Bank Corporation, the predecessor holding company of Eastern Bank, from a mutual into a stock holding company in connection with our IPO (the “Conversion”), Eastern Bankshares, Inc. may not declare or pay a cash dividend on, or repurchase any of its capital shares if 12 the effect thereof would cause its net worth to be reduced below (i) the amount required for the liquidation account established by Eastern Bankshares, Inc. in connection with the IPO (“Liquidation Account”) or (ii) the regulatory capital requirements of Eastern Bankshares, Inc.
Massachusetts law requires the Massachusetts Commissioner of Banks to consider, but not be limited to, a bank’s record of performance under Massachusetts law in considering any application by the bank to establish a branch or other deposit-taking facility, to relocate 17 an office or to merge or consolidate with or acquire the assets and assume the liabilities of any other banking institution.
Massachusetts law requires the Massachusetts Commissioner of Banks to consider, but not be limited to, a bank’s record of performance under Massachusetts law in considering any application by the bank to establish a branch or other deposit-taking facility, to relocate an office or to merge or consolidate with or acquire the assets and assume the liabilities of any other banking institution.
Under Section 22(h) of the Federal Reserve Act, loans to a director, an executive officer and to a greater than 10.0% shareholder of a financial institution, and certain affiliated interests of these, together with 16 all other outstanding loans to such person and affiliated interests, may not exceed specified limits.
Under Section 22(h) of the Federal Reserve Act, loans to a director, an executive officer and to a greater than 10.0% shareholder of a financial institution, and certain affiliated interests of these, together with all other outstanding loans to such person and affiliated interests, may not exceed specified limits.
Under the Community Reinvestment Act, or CRA, as implemented by FDIC regulations, Eastern Bank as a non-member bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods.
Under the Community Reinvestment Act, or CRA, as implemented by FDIC regulations, Eastern Bank as a non-member bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community, including low- and moderate-income (“LMI”) neighborhoods.
The SBA 7(a) loan program supports, through a United States Government guarantee, 8 some portion of the traditional commercial loan underwriting that might not be fully covered absent the guarantee. Eastern Bank is a preferred lender under the SBA’s Preferred Lender Program, which allows expedited underwriting and approval of SBA 7(a) Loans.
The SBA 7(a) loan program supports, through a United States Government guarantee, some portion of the traditional commercial loan underwriting that might not be fully covered absent the guarantee. Eastern Bank is a preferred lender under the SBA’s Preferred Lender Program, which allows expedited underwriting and approval of SBA 7(a) loans.
We believe we have been able to attract and maintain satisfactory levels of deposits based on the level of service we provide to our customers, the convenience of our banking locations, our electronic banking options, and our interest rates, all of which are generally competitive with those of competing financial institutions.
We believe we have been able to attract and maintain satisfactory levels of deposits based on the level of service 10 we provide to our customers, the convenience of our banking locations, our electronic banking options, and our interest rates, all of which are generally competitive with those of competing financial institutions.
In addition, a nonmember bank may control a subsidiary that engages in activities as principal that would only be permitted for a national bank to conduct in a “financial subsidiary” if a bank meets specified conditions and deducts its investment in the subsidiary for regulatory capital purposes. 15 Interstate Banking and Branching.
In addition, a nonmember bank may control a subsidiary that engages in activities as principal that would only be permitted for a national bank to conduct in a “financial subsidiary” if a bank meets specified conditions and deducts its investment in the subsidiary for regulatory capital purposes. Interstate Banking and Branching.
A Massachusetts-chartered bank may make a wide variety of mortgage loans including fixed-rate loans, adjustable-rate loans, variable-rate loans, participation loans, graduated payment loans, construction and development loans, condominium and co-operative loans, second mortgage loans and other types of loans that may be made in 12 accordance with applicable regulations.
A Massachusetts-chartered bank may make a wide variety of mortgage loans including fixed-rate loans, adjustable-rate loans, variable-rate loans, participation loans, graduated payment loans, construction and development loans, condominium and co-operative loans, second mortgage loans and other types of loans that may be made in accordance with applicable regulations.
The status of Eastern Bankshares, Inc. as a registered bank holding company under the Bank Holding Company Act will not exempt it from certain federal and state laws and regulations applicable to corporations generally, including, without limitation, certain provisions of the federal securities laws. 20 Massachusetts Holding Company Regulation.
The status of Eastern Bankshares, Inc. as a registered bank holding company under the Bank Holding Company Act will not exempt it from certain federal and state laws and regulations applicable to corporations generally, including, without limitation, certain provisions of the federal securities laws. Massachusetts Holding Company Regulation.
As of December 31, 2022, our internal limits on loans-to-one borrower (and related entities), all of which are subject to industry-specific sub-limits, were: • $50.0 million for commercial real estate loans; • $125.0 million for commercial real estate relationships; • $50.0 million for commercial and industrial relationships, including loans to non-profit entities; • $75.0 million for loans to education entities with a risk rating between 1 and 7; • $50.0 million for loans to education entities with a risk rating of 8 and above; • $75.0 million for loans to healthcare entities with a risk rating between 1 and 4; and • $50.0 million for loans the healthcare entities with a risk rating of 5 and above; Aggregate exposure limits can be increased up to 10% on an exception basis with the approval of the Credit Committee, including the approval of the Chief Credit Officer and the Chief Commercial Banking Officer.
As of December 31, 2023, our internal limits on loans-to-one borrower (and related entities), all of which are subject to industry-specific sub-limits, were: • $50.0 million for commercial real estate loans; • $125.0 million for commercial real estate relationships; • $50.0 million for commercial and industrial relationships, including loans to non-profit entities; • $75.0 million for loans to education entities with a risk rating between 1 and 7; • $50.0 million for loans to education entities with a risk rating of 8 and above; • $75.0 million for loans to healthcare entities with a risk rating between 1 and 4; and • $50.0 million for loans the healthcare entities with a risk rating of 5 and above; Aggregate exposure limits can be increased up to 10% on an exception basis with the approval of the Credit Committee, including the approval of the Chief Credit Officer and the Chief Commercial Banking Officer.
In addition, upon finding that a bank has engaged in an unfair or deceptive act or practice, the Massachusetts Commissioner of Banks may issue an order to cease and desist and impose a fine on the bank concerned.
In addition, upon finding that a bank has engaged in an unfair or 13 deceptive act or practice, the Massachusetts Commissioner of Banks may issue an order to cease and desist and impose a fine on the bank concerned.
Eastern Bankshares, Inc. is also subject to examination by the Massachusetts Commissioner of Banks. In addition, Eastern Bankshares, Inc. is subject to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) under the federal securities laws.
Eastern Bankshares, Inc. is also subject to examination 11 by the Massachusetts Commissioner of Banks. In addition, Eastern Bankshares, Inc. is subject to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) under the federal securities laws.
If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. Investment Activities.
If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. 14 Investment Activities.
Federal Reserve System Historically, the Federal Reserve Board regulations required depository institutions to maintain interest-earning reserves against their transaction accounts. However, in March of 2020, the Federal Reserve Board eliminated reserve requirements and therefore there was no minimum reserve requirement as of December 31, 2022. The Federal Reserve Board has stated that it has no plans to re-impose reserve requirements.
Federal Reserve System Historically, the Federal Reserve Board regulations required depository institutions to maintain interest-earning reserves against their transaction accounts. However, in March of 2020, the Federal Reserve Board eliminated reserve requirements and therefore there was no minimum reserve requirement as of December 31, 2023. The Federal Reserve Board has stated that it has no plans to re-impose reserve requirements.
Based on data from the FDIC as of June 30, 2022 (the latest date for which information is available), we had a weighted average deposit market share of 5.4% for the seven separate banking markets tracked by the Federal Reserve Board in which we have at least one branch.
Based on data from the FDIC as of June 30, 2023 (the latest date for which information is available), we had a weighted average deposit market share of 5.4% for the seven separate banking markets tracked by the Federal Reserve Board in which we have at least one branch.
Pursue opportunistic acquisitions. We have pursued and intend to continue to prudently pursue opportunities to acquire banks in our existing and contiguous markets that we believe will create attractive financial returns. Our focus is primarily on franchises that enhance our funding profile, product capabilities or geographic density, while maintaining an acceptable risk profile.
We have pursued and intend to continue to prudently pursue opportunities to acquire banks in our existing and contiguous markets that we believe will create attractive financial returns. Our focus is primarily on franchises that enhance our funding profile, product capabilities or geographic density, while maintaining an acceptable risk profile.
We originate a variety of fixed- and adjustable-rate commercial real estate loans with terms and amortization periods generally up to 30 years, which may include balloon loans. Interest rates and payments on most of our adjustable-rate loans are set based upon the 30-day LIBOR or SOFR index plus a margin.
We originate a variety of fixed- and adjustable-rate commercial real estate loans with terms and amortization periods generally up to 30 years, which may include balloon loans. Interest rates and payments on most of our adjustable-rate loans are set based upon the 30-day SOFR index plus a margin.
An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%. As of December 31, 2022, Eastern Bank was a “well capitalized” institution under FDIC regulations.
An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%. As of December 31, 2023, Eastern Bank was a “well capitalized” institution under FDIC regulations.
An affiliate of a bank is any company or entity that controls, is controlled by or is under common control with the bank.
An affiliate of a bank is any company or entity that controls, is 15 controlled by or is under common control with the bank.
In 2022, we continued to implement our “Road to Equity” action plan that was launched in 2021, which reflects efforts to increase DEI across the Company, including talent acquisition, retention and development, supplier diversity, products and services, and philanthropic support from the Eastern Bank Foundation.
In 2023, we continued to implement our “Road to Equity” action plan that was launched in 2021, which reflects efforts to increase DEI across the Company, including talent acquisition, retention and development, supplier diversity, products and services, and philanthropic support from the Eastern Bank Foundation.
Among other benefits, in 2022, we offered our employees three separate retirement benefits: a defined pension benefit plan, a 401(k) contribution, and an employee stock ownership plan (“ESOP”) through which Company stock is allocated to all eligible employees (based on age and hours worked).
Among other benefits, in 2023, we offered our employees three separate retirement benefits: a defined pension benefit plan, a 401(k) contribution, and an employee stock ownership plan (“ESOP”) through which Company stock is allocated to all eligible employees (based on age and hours worked).
Based on redemption provisions of the FHLBB, the shares have no quoted market value and are carried at cost. Eastern Bank reviews for impairment based on the ultimate recoverability of the cost basis of the FHLBB shares. As of December 31, 2022, no impairment had been recognized. At its discretion, the FHLBB may declare dividends on the shares.
Based on redemption provisions of the FHLBB, the shares have no quoted market value and are carried at cost. Eastern Bank reviews for impairment based on the ultimate recoverability of the cost basis of the FHLBB shares. As of December 31, 2023, no impairment had been recognized. At its discretion, the FHLBB may declare dividends on the shares.
The FHLB provides a central credit facility primarily for member institutions. Members of the FHLB are required to acquire and hold shares of capital shares in the FHLB bank of which they are a member. Eastern Bank acquired capital shares in the FHLBB and was in compliance with this requirement at December 31, 2022.
The FHLB provides a central credit facility primarily for member institutions. Members of the FHLB are required to acquire and hold shares of capital shares in the FHLB bank of which they are a member. Eastern Bank acquired capital shares in the FHLBB and was in compliance with this requirement at December 31, 2023.
Investment Activities Our securities portfolio consists primarily of government-sponsored residential mortgage-backed securities (which includes collateralized mortgage obligations), government-sponsored commercial mortgage-backed securities (which includes collateralized mortgage obligations), U.S. Agency bonds, U.S. Treasury securities, state and municipal bonds and obligations, and other debt securities. We view our securities portfolio as a source of income and liquidity.
Investment Activities Our securities portfolio consists primarily of government-sponsored residential mortgage-backed securities (which includes collateralized mortgage obligations), government-sponsored commercial mortgage-backed securities (which includes collateralized mortgage obligations), U.S. Agency bonds, U.S. Treasury securities, and state and municipal bonds and obligations. We view our securities portfolio as a source of income and liquidity.
On at least a quarterly basis, we assess our securities portfolio for expected credit losses in accordance with the current expected credit losses (“CECL”) methodology, with separate approaches depending on whether a security is classified as available for sale or held to maturity. 10 Sources of Funds Deposits and other interest-bearing liabilities.
On at least a quarterly basis, we assess our securities portfolio for expected credit losses in accordance with the current expected credit losses (“CECL”) methodology, with separate approaches depending on whether a security is classified as available for sale (“AFS”) or held to maturity (“HTM”). Sources of Funds Deposits and other interest-bearing liabilities.
Our first customer was a woman, and for over 200 years women have played a key role in our Company’s success. Women comprise 66% of our total workforce. • Our record of being and recognition as a DEI leader.
Our first customer was a woman, and for over 200 years women have played a key role in our Company’s success. Women comprise 65% of our total workforce. • Our record of being and recognition as a DEI leader.
With an estimated population of 8.4 million, the Boston–Worcester–Providence CSA is the sixth largest CSA in the United States based upon 2021 population data. We believe the Boston–Worcester–Providence CSA provides a well-diversified and resilient economic base. There are approximately 3.3 million households in the Boston–Worcester–Providence CSA with an average of 2.5 persons per household.
With an estimated population of 8.4 million, the Boston–Worcester–Providence CSA is the sixth largest CSA in the United States based upon 2022 population data. We believe the Boston–Worcester–Providence CSA provides a well-diversified and resilient economic base. There are approximately 3.4 million households in the Boston–Worcester–Providence CSA with an average of 2.4 persons per household.
In the Boston market, which accounted for 94.9% of our deposits as of June 30, 2022, our market share was 3.5%, representing the fifth largest deposit share in that market. We also face competition for deposits from other financial services companies such as securities brokerage firms, credit unions, insurance companies and money market funds.
In the Boston market, which accounted for 94.5% of our deposits as of June 30, 2023, our market share was 3.5%, representing the fifth largest deposit share in that market. We also face competition for deposits from other financial services companies such as securities brokerage firms, credit unions, insurance companies and money market funds.
We expect competition to continue to increase, especially as a result of regulatory and technological changes, the continuing trend of consolidation in the financial services industry, and the Federal Open Market Committee’s (the “FOMC’s”) monetary policy, including increases to the federal funds rate, which have recently lead to increased competition for customer deposits.
We expect competition to continue to increase, especially as a result of regulatory and technological changes, the continuing trend of consolidation in the financial services industry, and the Federal Open Market Committee’s (the “FOMC’s”) monetary policy, including increases to the federal funds rate, which have led to increased competition for customer deposits.
We believe this will result in disciplined growth of low-cost deposits, loans with attractive risk-adjusted returns and a steady stream of fee income. Our relationship-based approach has enabled us to achieve disciplined organic growth over time, and we expect this trend to continue.
We believe this will result in disciplined growth of low-cost deposits, loans with attractive risk-adjusted returns and a steady stream of fee income. Our relationship-based approach has enabled us to achieve disciplined organic growth over time, and we expect this trend to continue. Pursue opportunistic acquisitions.
We believe that as a result of our initial public offering (“IPO”), which was completed in October 2020, we are well-positioned as a consolidator in the banking market because of our financial strength, reputation and culture as evidenced by our recent acquisition of Century in November 2021.
We believe that as a result of our initial public offering (“IPO”), which was completed in October 2020, we are well-positioned as a consolidator in the banking market because of our financial strength, reputation and culture as evidenced by our acquisition of Century in November 2021 and our proposed acquisition of Cambridge.
Bureau of Labor Statistics. 4 Home to over 100 colleges and universities, including nationally and internationally recognized institutions such as Boston College, Boston University, Brown University, Harvard University, Massachusetts Institute of Technology, Northeastern University, Wellesley College and Worcester Polytechnic Institute, the Boston–Worcester–Providence CSA includes many employers in what often is referred to as the “knowledge-based economy” that relies on highly-educated employees, professionals and entrepreneurs.
Home to over 100 colleges and universities, including nationally and internationally recognized institutions such as Boston College, Boston University, Brown University, Harvard University, Massachusetts Institute of Technology, Northeastern University, Wellesley College and Worcester Polytechnic Institute, the Boston–Worcester–Providence CSA includes many employers in what often is referred to as the “knowledge-based economy” that relies on highly-educated employees, professionals and entrepreneurs.
In managing the commercial and industrial loan portfolio, we focus on the size of the customer’s lending relationship, which we view as the aggregate amount of all loans and loan commitments outstanding to a commercial borrower and any related borrowers or guarantors. The average commercial and industrial lending relationship by balance at December 31, 2022 was $2.3 million.
In managing the commercial and industrial loan portfolio, we focus on the size of the customer’s lending relationship, which we view as the aggregate amount of all loans and loan commitments outstanding to a commercial borrower and any related borrowers or guarantors. The average commercial and industrial lending relationship by balance at December 31, 2023 was $3.7 million.
Dividend income from the FHLB during the year ended December 31, 2022 was $0.3 million. There can be no assurance that such dividends will continue in the future. 19 Holding Company Regulation Eastern Bankshares, Inc. is subject to examination, regulation, and periodic reporting under the Bank Holding Company Act of 1956, as amended, as administered by the Federal Reserve Board.
Dividend income from the FHLB during the year ended December 31, 2023 was $2.0 million. There can be no assurance that such dividends will continue in the future. Holding Company Regulation Eastern Bankshares, Inc. is subject to examination, regulation, and periodic reporting under the Bank Holding Company Act of 1956, as amended, as administered by the Federal Reserve Board.
However, they may adjust reserve requirement ratios in the future if conditions warrant. The annual interest rate on reserve balances was 4.40% as of December 31, 2022. Federal Home Loan Bank System Eastern Bank is a member of the Federal Home Loan Bank System, which consists of 11 regional Federal Home Loan Banks.
However, they may adjust reserve requirement ratios in the future if conditions warrant. The annual interest rate on reserve balances was 5.4% as of December 31, 2023. Federal Home Loan Bank System Eastern Bank is a member of the Federal Home Loan Bank System, which consists of 11 regional Federal Home Loan Banks.
We also have a DEI Executive Committee led by the CEO, as well as a DEI Steering Committee comprised of executives, leaders of our employee resource groups and outside professionals. • Our diverse leadership team.
We also have a DEI Executive Committee led by the Chief Executive Officer, as well as a DEI Steering Committee comprised of executives, leaders of our employee resource groups and outside professionals. • Our diverse leadership team.
Employee Engagement 25 We are dedicated to engaging our workforce to better understand how we can improve our culture and workplace. In 2022, we virtually hosted eight Town Hall meetings, led by the CEO. At each meeting, employees were able to ask questions anonymously and engage directly with the CEO and Management Committee members.
Employee Engagement We are dedicated to engaging our workforce to better understand how we can improve our culture and workplace. In 2023, we virtually hosted six Town Hall meetings, led by the CEO. At each meeting, employees were able to ask questions anonymously and engage directly with the CEO and Management Committee members.
This has included mandatory training on our DEI strategy for all employees; a live facilitated discussion called Understanding Racism offered to all employees; and a pilot focused on understanding and preventing microaggressions.
This has included training on our DEI strategy for all employees; a live facilitated discussion called Understanding Racism offered to all employees; and a workshop focused on understanding and preventing microaggressions.
Approximately 45.3% of the population in the Boston–Worcester–Providence CSA age 25 or older has at least a bachelor’s degree, compared to 35.0% for the United States as a whole as of December 31, 2022. Major employment sectors range from education, services, manufacturing and wholesale and retail trade, to finance, technology and health care.
Approximately 45.8% of the population in the Boston–Worcester–Providence CSA age 25 or older has at least a bachelor’s degree, compared to 35.7% for the United States as a whole as of December 31, 2023. Major employment sectors range from education, services, manufacturing and wholesale and retail trade, to finance, technology and health care.
Loans are extended on both a secured and unsecured basis, according to the credit profile of the customer, at both fixed interest rates and variable interest rates at varying spreads over the London Interbank Offered Rate (“LIBOR”), Secured Overnight Financing Rate (“SOFR”), and Prime rate.
Loans are extended on both a secured and unsecured basis, according to the credit profile of the customer, at both fixed interest rates and variable interest rates at varying spreads over the Secured Overnight Financing Rate (“SOFR”) and Prime rate.
At December 31, 2022, total deposits were $19.0 billion. Deposits originating through our branch banking network have traditionally been the principal source of our funds for use in lending and for other general business purposes. We offer a range of demand deposits, interest checking, money market accounts, savings accounts and time certificates of deposit.
At December 31, 2023, total deposits were $17.6 billion. Deposits originating through our branch banking network have traditionally been the principal source of our funds for use in lending and for other general business purposes. We offer a range of demand deposits, interest checking, money market accounts, savings accounts and time certificates of deposit.
At December 31, 2022, Eastern Bank held $2.9 billion of assets in a fiduciary, custodial or agency capacity for customers. These assets are not assets of Eastern Bank and therefore are not included in the Consolidated Balance Sheets included in this Annual Report on Form 10-K.
At December 31, 2023, Eastern Bank held $3.3 billion of assets in a fiduciary, custodial or agency capacity for customers. These assets are not assets of Eastern Bank and therefore are not included in the Consolidated Balance Sheets included in this Annual Report on Form 10-K.
Increased competition for deposits and the origination of loans could limit our growth in the future. Recent Acquisitions Bank Acquisitions During the past two decades, we have been able to expand our banking business through a combination of internal or “organic” growth complemented by opportunistic strategic transactions. Since 1997, we have completed eight mergers or acquisitions of banking businesses.
Increased competition for deposits and the origination of loans could limit our growth in the future. Recent Acquisitions Bank Acquisitions During the past two decades, we have been able to expand our banking business through a combination of internal or “organic” growth complemented by opportunistic strategic transactions.
Approximately 66.6% of our commercial and industrial loan exposure at December 31, 2022 was to customers headquartered within our primary lending market, which consists of eastern and central Massachusetts, southern New Hampshire, including the seacoast region, and northern Rhode Island, although we participate in the syndicated loan market and the SNC Program.
Approximately 65.2% of our commercial and industrial loan exposure at December 31, 2023 was to customers headquartered within our primary lending market, which consists of eastern and central Massachusetts, southern New Hampshire, including the seacoast region, and northern Rhode Island, although we participate in the syndicated loan market and the SNC Program.
At December 31, 2022, Eastern Bank exceeded the regulatory requirement for the capital conservation buffer.
At December 31, 2023, Eastern Bank exceeded the regulatory requirement for the capital conservation buffer.
Manage risk to navigate a range of economic environments. We believe that our conservative credit culture, strong capital and sources of liquidity, and our deep client relationships are key to our long-term financial success. We believe that stable long-term growth and profitability are the result of building strong customer relationships one at a time while maintaining rigorous credit discipline.
We believe that our conservative credit culture, strong capital and sources of liquidity, and our deep client relationships are key to our long-term financial success. We believe that stable long-term growth and profitability are the result of building strong customer relationships one at a time while maintaining rigorous credit discipline.
At December 31, 2022, our ten largest commercial and industrial lending relationships, including relationships with combined commercial and industrial and owner-occupied commercial real estate exposure (e.g., combination of outstanding principal balance and undrawn commitment amount), had an average exposure of $68.9 million and ranged in exposure size from $62.2 million to $80.4 million.
At December 31, 2023, our ten largest commercial and industrial lending relationships, including relationships with combined commercial and industrial and owner-occupied commercial real estate exposure (e.g., combination of outstanding principal balance and undrawn commitment amount), had an average exposure of $68.6 million and ranged in exposure size from $60.6 million to $80.4 million.
We generally do not continue to service residential loans that we sell in the secondary market. At December 31, 2022, our ten largest one- to four-family residential real estate loans had an average balance of $2.4 million, ranging from $2.2 million to $2.7 million.
We generally do not continue to service residential loans that we sell in the secondary market. At December 31, 2023, our ten largest one- to four-family residential real estate loans had an average balance of $2.8 million, ranging from $2.2 million to $5.2 million.
Consumer Protection and Fair Lending Regulations. Massachusetts-chartered banks are subject to a variety of federal and Massachusetts statutes and regulations that are intended to protect consumers and prohibit discrimination in the granting of credit.
Massachusetts-chartered banks are subject to a variety of federal and Massachusetts statutes and regulations that are intended to protect consumers and prohibit discrimination in the granting of credit.
Loans in this category consist of lines of credit and term loans extended to businesses and corporate enterprises for the purpose of financing working capital, facilitating equipment purchases and facilitating acquisitions. As of December 31, 2022, we had total commercial and industrial loans of $3.2 billion, representing 23.2% of our total loans.
Loans in this category consist of lines of credit and term loans extended to businesses and corporate enterprises for the purpose of financing working capital, facilitating equipment purchases and facilitating acquisitions. As of December 31, 2023, we had total commercial and industrial loans of $3.0 billion, representing 21.8% of our total loans.
In addition, the Massachusetts Commissioner of Banks has the authority to appoint the FDIC as a receiver or conservator if the Massachusetts Commissioner of Banks or the FDIC determine that we are conducting our business in an unsafe or unauthorized manner, and under certain other circumstances.
In addition, the Massachusetts Commissioner of Banks has the authority to appoint the FDIC as a receiver or conservator if the Massachusetts Commissioner of Banks or the FDIC determine that a Massachusetts-chartered bank is conducting business in an unsafe or unauthorized manner, and under certain other circumstances.
Since 2016, we have outsourced to an independent party the processing, underwriting (using our criteria) and closing of residential loans originated by our mortgage loan officers. During the year ended December 31, 2022, residential real estate mortgage originations were $524.6 million, of which $60.3 million were sold on the secondary markets.
Since 2016, we have outsourced to an independent party the processing, underwriting (using our criteria) and closing of residential loans originated by our mortgage loan officers. During the year ended December 31, 2023, residential real estate mortgage originations were $341.7 million, of which $51.6 million were sold on the secondary markets.
Human Capital Management Diversity, Equity & Inclusion (DE&I) The Company, which employed 2,146 employees as of December 31, 2022, including 1,950 full-time employees, is deeply committed to having a diverse workforce reflective of the communities we serve, where all feel included and 22 supported.
Human Capital Management Diversity, Equity & Inclusion (DE&I) The Company, which employed 1,744 employees as of December 31, 2023, including 1,562 full-time employees, is deeply committed to having a diverse workforce reflective of the communities we serve, where all feel included and supported.
We also participate in the IntraFi Network, which allows us to provide access to multi-million dollar FDIC deposit insurance protection on deposits for consumers, businesses and public entities. We can elect to sell or repurchase this funding as reciprocal deposits from other IntraFi Network banks depending on funding needs.
We also participate in the IntraFi Network, which allows us to provide access to FDIC deposit insurance protection on deposits for consumers, businesses and public entities that exceed same-bank FDIC insurance thresholds. We can elect to sell or repurchase this funding as reciprocal deposits from other IntraFi Network banks depending on our funding needs.
As of December 31, 2022, we held loan participation interests, including SNCs, totaling $1.5 billion in loans originated by other lenders, consisting of $1.0 billion of commercial and industrial loan participations, $422.0 million of commercial real estate loan participations, $96.1 million of commercial construction loan participations, and less than $0.1 million of business banking loan participations.
As of December 31, 2023, we held loan participation interests, including SNCs, totaling $1.6 billion in loans originated by other lenders, consisting of $1.0 billion of commercial and industrial loan participations, $447.6 million of commercial real estate loan participations, $146.0 million of commercial construction loan participations, and less than $0.1 million of business banking loan participations.
Commercial loans may be made to corporations and other commercial enterprises with or without security. Consumer and personal loans may also be made with or without security. Insurance Sales.
Commercial loans may be made to corporations and other commercial enterprises with or without security. Consumer and personal loans may also be made with or without security. Investment Activities.
For larger loans, we also will generally require an inspection of the property by an Eastern Bank-appointed construction engineer before disbursement of funds during the term of the construction loan. Land development loans and IRB loans within the construction portfolio totaled $24.3 million and $36.9 million as of December 31, 2022, respectively. Small Business Loans.
For larger loans, we also will generally require an inspection of the property by an Eastern Bank-appointed construction engineer before disbursement of funds during the term of the construction loan. Land development loans and IRB loans within the construction portfolio totaled $2.6 million and $63.8 million, respectively, as of December 31, 2023. Small Business Loans.
As of December 31, 2022, we had total commercial construction loans of $336.3 million, representing 2.5% of our total loans. The majority of the loans in this category, measured by the outstanding loan balance as of December 31, 2022, are secured by properties located in our primary lending area.
As of December 31, 2023, we had total commercial construction loans of $387.0 million, representing 2.8% of our total loans. The majority of the loans in this category, measured by the outstanding loan balance as of December 31, 2023, are secured by properties located in our primary lending area.
For the eleven counties in eastern Massachusetts and southern New Hampshire in which our branches are located and from which we gather most of our deposits, the average unemployment rate as of December 2022 was 3.0%, as compared to 3.3% for the United States as a whole.
For the fourteen counties in eastern Massachusetts, southern Maine, and southern New Hampshire in which our branches are located and from which we gather 4 most of our deposits, the average unemployment rate as of December 2023 was 3.2%, as compared to 3.5% for the United States as a whole.
For the statistical area consisting of Boston and Cambridge, Massachusetts, and Nashua, New Hampshire, which is a subset of the Boston–Worcester–Providence CSA, the unemployment rate as of November 2022, the most recent date for which data was available, was 2.7%, according to the U.S.
For the statistical area consisting of Boston and Cambridge, Massachusetts, and Nashua, New Hampshire, which is a subset of the Boston–Worcester–Providence CSA, the unemployment rate as of December 2023, the most recent date for which data was available, was 3.2%, according to the U.S. Bureau of Labor Statistics.
This policy dictates that investment decisions be made based on the safety of the investment, liquidity requirements, potential returns and market risk considerations. At December 31, 2022, our securities totaled $7.2 billion, and generated interest and dividends of 20.8% of total interest income for the year ended December 31, 2022.
This policy dictates that investment decisions be made based on the safety of the investment, liquidity requirements, potential returns and market risk considerations. At December 31, 2023, our securities portfolio totaled $4.9 billion, and generated interest and dividends of 13.4% of total interest income for the year ended December 31, 2023.
We primarily target companies and institutions with annual revenues of $10 million to $500 million and strive to serve as the lead bank for customers with multi-product, long-term, profitable relationships with an emphasis on building long-term relationships.
We offer a broad range of products, including lines of credit and term loans. We primarily target companies and institutions with annual revenues of $10 million to $500 million and strive to serve as the lead bank for customers with multi-product, long-term, profitable relationships with an emphasis on building long-term relationships.
In part as a result of the extensive regulation, supervision and examination of our business described elsewhere in this Annual Report on Form 10-K, we are also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding our business, certain of which may result in adverse judgments, settlements, fines, penalties, public or private censure, increased costs, required remediation, restriction on business activities or other impacts on us.
For additional information, see Note 17, “Commitments and Contingencies” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K. 21 In part as a result of the extensive regulation, supervision and examination of our business described elsewhere in this Annual Report on Form 10-K, we are also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental and self-regulatory agencies regarding our business, certain of which may result in adverse judgments, settlements, fines, penalties, public or private censure, increased costs, required remediation, restriction on business activities or other impacts on us.
Our Management Committee, which runs the Company, is comprised of 14 executives, about 43% of whom are women or people of color, including our President, Quincy Miller, and Sujata Yadav, Executive Vice President and Chief Marketing Officer and the first woman of color to serve on this leadership team. • Our history.
Our Management Committee, which plays a key role in managing the Company, is comprised of 12 executives, about 50% of whom are women and/or people of color, including our President, Quincy Miller, and Sujata Yadav, Executive Vice President and Chief Marketing Officer and the first woman of color to serve on this leadership team. • Our history.
As of December 31, 2022, we had total business banking loans of $1.1 billion, representing 8.0% of our total loans. In this category, commercial and industrial loans and commercial real estate loans totaled $208.4 million and $882.1 million, respectively, as of December 31, 2022. Business banking originations include traditionally underwritten loans as well as partially automated scored loans.
As of December 31, 2023, we had total business banking loans of $1.1 billion, representing 7.8% of our total loans. In this category, commercial and industrial loans and commercial real estate loans totaled $186.9 million and $898.9 million, respectively, as of December 31, 2023. Business banking originations include traditionally underwritten loans as well as partially automated scored loans.
Certain of these statutes authorize private individual and class action lawsuits and the award of actual, statutory and punitive damages and attorneys’ fees for certain types of violations. Consumer Financial Protection Bureau Supervision.
Certain of these statutes authorize private individual and class action lawsuits and the award of actual, statutory and punitive damages and attorneys’ fees for certain types of violations. The U.S.
For offboarding, we survey colleagues to better understand why they left the Company. We believe these efforts will provide data that can help us improve the overall employee experience at our Company and deepen engagement and retention. In 2022, we continued supporting our employees’ commitment to engage with the communities by offering paid time off to volunteer.
We believe these efforts provide data that can help us improve the overall employee experience at our Company and deepen engagement and retention. In 2023, we continued supporting our employees’ commitment to engage with the communities by offering paid time off to volunteer.
Market Street Securities Corporation, a wholly owned subsidiary engaged in buying, selling, dealing in and holding securities; 3. Real/Property Services, Inc., a wholly owned subsidiary that provides real estate services to Eastern Bank; 4. Millennium Corporation, a wholly owned subsidiary engaged in holding IRBs; and 5.
Broadway Securities Corporation, a wholly owned subsidiary engaged in buying, selling, dealing in and holding securities and in holding industrial revenue bonds (“IRBs”); 2. Real/Property Services, Inc., a wholly owned subsidiary that provides real estate services to Eastern Bank; 3. Millennium Corporation, a wholly owned subsidiary engaged in holding IRBs; 4.
Property types financed include office, industrial, multi-family, affordable housing, retail, hotel and other type properties. As of December 31, 2022, we had total commercial real estate loans of $5.2 billion, representing 38.0% of our total loans. As of December 31, 2022, owner occupied loans totaled $917.2 million, representing 17.8%, of our commercial real estate loans.
Property types financed include office, industrial, multi-family, affordable housing, retail, hotel and other type properties. As of December 31, 2023, we had total commercial real estate loans of $5.5 billion, representing 39.1% of our total loans. As of December 31, 2023, owner occupied loans totaled $990.4 million, representing 18.2%, of our commercial real estate loans.
Federal Securities Laws The class of common stock of Eastern Bankshares, Inc. is registered with the Securities and Exchange Commission under the Exchange Act, and therefore Eastern Bankshares Inc. and our shareholders are subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act.
Our pending acquisition of Cambridge Bancorp and Cambridge Trust Company remains subject to the receipt of regulatory approvals and the approvals of the shareholders of Eastern Bankshares, Inc. and Cambridge Bancorp. 20 Federal Securities Laws The class of common stock of Eastern Bankshares, Inc. is registered with the Securities and Exchange Commission under the Exchange Act, and therefore Eastern Bankshares Inc. and our shareholders are subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Exchange Act.
Acquisition of more than 10% of any class of a bank holding company’s voting securities constitutes a rebuttable presumption of control under certain circumstances, including where, as will be the case with Eastern Bankshares, Inc., the issuer has registered securities under Section 12 of the Exchange Act. 21 Substantially similar requirements are imposed under Massachusetts law with respect to the acquisition of control, directly or indirectly, of Eastern Bank.
Acquisition of more than 10% of any class of a bank holding company’s voting securities constitutes a rebuttable presumption of control under certain circumstances, including where, as will be the case with Eastern Bankshares, Inc., the issuer has registered securities under Section 12 of the Exchange Act.
At December 31, 2022, total borrowings were $740.8 million. Borrowings consist of both short-term and long-term borrowings and primarily consist of FHLB advances. Borrowings provide us with one source of funding. Maintaining available borrowing capacity with the FHLB provides us with a contingent source of liquidity. Eastern Bank is a member of the FHLB of Boston.
At December 31, 2023, total borrowings were $48.2 million. Borrowings consist of both short-term and long-term borrowings and primarily consist of FHLB advances. Borrowings provide us with one source of funding. Maintaining available borrowing capacity with the FHLB provides us with a contingent source of liquidity.
Overall, 45% of our Board of Directors is comprised of women and people of color. • Our DEI Governance. Each committee of the Board, including the Compensation and Human Capital Management, Nominating and Governance, Audit and Risk Management Committees, has oversight of aspects of the Company’s DEI strategic priorities.
Each committee of the Board, including the Compensation and Human Capital Management, Nominating and Governance, Audit and Risk Management Committees, has oversight of aspects of the Company’s DEI strategic priorities.
The average tenor of our commercial and industrial portfolio varies according to market conditions but at December 31, 2022 it was 5.7 years.
The average tenure of our commercial and industrial portfolio varies according to market conditions but at December 31, 2023 it was approximately 6 years.
As previously indicated, we began purchasing mortgage loans, specifically one- to four-family residential mortgages, during the year ended December 31, 2022. Loans purchased were subject to the same underwriting criteria as those loans originated directly by us. Home Equity Loans and Lines of Credit. Loans in this category consist of home equity lines of credit and home equity loans.
As previously indicated, we began purchasing mortgage loans, specifically one- to four-family residential mortgages, in the third quarter of 2022 and we stopped purchasing these loans in the first quarter of 2023. Loans purchased were subject to the same underwriting criteria as those loans originated directly by us. Home Equity Loans and Lines of Credit.
During the year ended December 31, 2022, we purchased mortgage loans, specifically one- to four-family residential real estate loans, a portion of which are outside of our traditional lending area. Loans purchased were subject to the same underwriting criteria as those loans originated directly by us.
Beginning in the third quarter of 2022 and ending in the first quarter of 2023, we purchased mortgage loans, specifically one- to four-family residential real estate loans, a portion of which were outside of our traditional lending area. Loans purchased were subject to the same underwriting criteria as those loans originated directly by us.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeVarious risks, including risks associated with changes in interest rates, loan losses, cybersecurity and regulatory compliance, are inherent in our business and our industry generally. • Recent and anticipated future increases in interest rates have had and will likely continue to have a material effect on many areas of our business, including on our net interest income, deposit costs, and loan volume and delinquency, and they may have an adverse effect on our operating results. • The fair value of our investments, including our securities portfolio, has declined due to the recent increases in interest rates and may continue to decline, adversely impacting shareholders’ equity. • Interest rate increases, competition from other banks, and other factors adversely affect our liquidity, and our operating results may be impacted by these factors and by measures we undertake to manage our liquidity position. • The geographic concentration of our loan portfolio and lending activities in eastern Massachusetts and southern and coastal New Hampshire makes us vulnerable to a downturn in our 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. • If our allowance for loan losses is insufficient to cover actual loan losses, our earnings and capital could decrease. • Replacement of the LIBOR benchmark interest rate with a substitute index may adversely affect our results of operations, including by causing us to incur significant expenses in effecting the transition, changes to loan balances, and disputes or litigation with customers. • Technology has lowered barriers to entry in the financial services sector, making it possible for non-banks to offer products and services, such as loans and payment services, that traditionally were banking products, and also making it possible for technology companies to compete with financial institutions in providing electronic, internet-based, and mobile phone-based financial solutions. • We face progressively increasing security risks to our information databases, including information we maintain relating to our customers, as precautions taken by us and our vendors may not be completely effective to prevent unauthorized access, human error, phishing attacks or other forms of social engineering and other events that could impact the security, reliability, confidentiality, integrity and availability of our systems or those of our vendors. • We face significant legal risks, both from regulatory investigations and proceedings and from private actions brought against us. • Operational risk and losses can result from internal and external fraud; errors by employees or third parties; failure to document transactions properly or to obtain proper authorization; failure to comply with applicable regulatory requirements and conduct of business rules; equipment failures, including those caused by natural disasters or by electrical, telecommunications or other essential utility outages; business continuity and data security system failures, including those caused by computer viruses, cyber-attacks or unforeseen problems encountered while implementing major new computer systems or upgrades to existing systems; or the inadequacy or failure of systems and controls, including those of our suppliers or counterparties. • Our business is subject to extensive state and federal regulations, which often limit or restrict our activities and may impose material financial requirements or limitations on the conduct of our business. • We are subject to capital and liquidity standards that require banks and bank holding companies to maintain more and higher quality capital and greater liquidity than has historically been the case. • We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions. • We may incur fines, penalties and other negative consequences from regulatory violations, possibly even inadvertent or unintentional violations. • We may be unable to disclose some restrictions or limitations on our operations imposed by our regulators. 28 • Eastern Insurance Group’s business model, in which it acts as an agent in offering insurance solutions for clients with insurance needs, could become outdated as insurance carriers increasingly offer products directly to consumers. • To the extent that we acquire other companies, our business may be negatively impacted by certain risks inherent with such acquisitions. • Our stock-based benefit plan, which we adopted in 2021, has increased and is expected to continue to increase our annual compensation and benefit expenses related to awards granted to participants under such plan.
Biggest changeVarious risks, including risks associated with changes in interest rates, loan losses, cybersecurity and regulatory compliance, are inherent in our business and our industry generally. • Increases in interest rates have had and in the future may have a material adverse effect on many areas of our business, including net interest income, the earnings and volume of interest-earning assets and interest-bearing liabilities, and loan delinquency, and increases in interest rates may have a material adverse effect on our operating results. • If our allowance for loan losses is insufficient to cover actual loan losses, our earnings and capital could decrease. • The geographic concentration of our loan portfolio and lending activities in eastern Massachusetts and southern and coastal New Hampshire makes us vulnerable to a downturn in our local economy. • We face security risks to our information databases, including information we maintain relating to our customers, as precautions taken by us and our vendors may not be completely effective to prevent unauthorized access, human error, phishing attacks or other events that could impact the security, reliability, confidentiality, integrity and availability of our systems or those of our vendors. 27 • We operate in a highly competitive industry, and technological advances have lowered barriers to entry and made it possible for non-banks to offer products and services, such as loans and payment services, that traditionally were banking products. • We may be unable to successfully execute on our strategic plan or performance targets, including through a failure to attract or retain the necessary highly skilled and qualified personnel. • The fair value of our investments, including our securities portfolio, has declined due to increases in interest rates and may continue to decline, adversely impacting shareholders’ equity. • 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. • We face significant legal and regulatory risks, both from regulatory investigations and proceedings and from private actions brought against us. • Operational risk and losses can result from factors such as internal and external fraud; errors by employees or third parties; failure to document transactions properly or to obtain proper authorization; failure to comply with applicable regulatory requirements and conduct of business rules; equipment failures, including those caused by natural disasters or utility outages; business continuity and data security system failures, including those encountered while implementing major new computer systems or upgrades to existing systems; or the inadequacy or failure of systems and controls, including those of our suppliers or counterparties. • We may be adversely affected by weaknesses in financial institutions, the financial markets and economic conditions in the United States, market changes, or changes in equity markets. • We are subject to capital and liquidity standards that may change from time to time, and we may be unable to raise additional capital if needed on terms that are acceptable to us, or at all. • Our business is subject to extensive state and federal regulations, which often limit or restrict our activities and may impose material financial requirements or limitations on the conduct of our business. • We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions, or could impede or materially delay our receipt of regulatory approval to acquire other companies. • We may incur fines, penalties and other negative consequences from regulatory violations, which could include inadvertent or unintentional violations. • We may be unable to disclose some restrictions or limitations on our operations imposed by our regulators. • Our stock-based benefit plan, which we adopted in 2021, has increased and is expected to continue to increase our annual compensation and benefit expenses.
The following risks are not the only risks we face. Additional risks that are not presently known or that we presently deem to be immaterial also could have a material adverse effect on our financial condition, results of operations and business.
The following risks are not the only risks we face. Additional risks that are not presently known or that we presently deem to be immaterial also could have a material adverse effect on our financial condition, results of operations and business.
The marketplace for skilled personnel is competitive, which means hiring, training and retaining skilled personnel is costly and challenging and we may not be able to increase the number of our loan professionals sufficiently to achieve our loan origination targets successfully; • that we will be able to fund asset growth by growing deposits with our overall cost of funds at a rate consistent with our expectations; • that we will be able to successfully identify and purchase high-quality interest-earning assets that perform over time in accordance with our expectations; and • that there will be no material change in competitive dynamics, including as a result of our seeking to increase market share.
The marketplace for skilled personnel is competitive, which means hiring, training and retaining skilled personnel is costly and challenging, and we may not be able to increase the number of our loan professionals sufficiently to successfully achieve our loan origination targets; • that we will be able to fund asset growth by growing deposits with our overall cost of funds at a rate consistent with our expectations; • that we will be able to successfully identify and purchase high-quality interest-earning assets that perform over time in accordance with our expectations; and • that there will be no material change in competitive dynamics, including as a result of our seeking to increase market share.
In October 2022, the FDIC increased the initial base deposit insurance assessment rate schedules for all FDIC insured depository institutions by 2 basis points, beginning with the quarterly assessment period ending March 31, 2023. The new assessment rate schedules will remain in effect unless and until the DIF reserve ratio meets or exceeds 2%, absent further FDIC action.
In October 2022, the FDIC increased the initial base deposit insurance assessment rate schedules for all FDIC insured depository institutions by 2 basis points, beginning with the quarterly assessment period ending March 31, 2023. The new base assessment rate schedules will remain in effect unless and until the DIF reserve ratio meets or exceeds 2%, absent further FDIC action.
The articles of organization of Eastern Bankshares, Inc. provide that state and federal courts located in Massachusetts will be the exclusive forum for substantially all disputes between us and our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
The articles of organization of Eastern Bankshares, Inc. provide that state and federal courts located in Massachusetts will be the exclusive forum for substantially all disputes between us and our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
A worsening of business and economic conditions generally or specifically in the principal markets in which we conduct business could have adverse effects on our business, including the following: • A decrease in the demand for, or the availability of, loans and other products and services offered by us; • A decrease in the value of our loans held for sale or other assets secured by residential or commercial real estate; • An impairment of certain intangible assets, such as goodwill; • A decrease in interest income from variable rate loans due to declines in interest rates; and • An increase in the number of clients and counterparties who become delinquent, file for protection under bankruptcy laws or default on their loans or other obligations to us, which could result in a higher level of non-performing assets, net charge-offs, provisions for loan losses, and valuation adjustments on loans held for sale.
A worsening of business and economic conditions generally or specifically in the principal markets in which we conduct business could have adverse effects on our business, including the following: • A decrease in the demand for, or the availability of, loans and other products and services offered by us; • A decrease in the value of our loans held for sale or other assets secured by residential or commercial real estate; • An impairment of certain intangible assets, such as goodwill; • A decrease in interest income from variable rate loans due to declines in interest rates; and 32 • An increase in the number of clients and counterparties who become delinquent, file for protection under bankruptcy laws or default on their loans or other obligations to us, which could result in a higher level of non-performing assets, net charge-offs, provisions for loan losses, and valuation adjustments on loans held for sale.
The articles of organization of Eastern Bankshares, Inc. provide that, unless we consent in writing to the selection of an alternative forum, the Business Litigation Session of the Suffolk County Superior Court (the “BLS”) (1) is the sole and exclusive forum for any derivative action or proceeding brought on behalf of Eastern Bankshares, Inc., any action asserting a claim of breach of a fiduciary duty, any action asserting a claim arising pursuant to any provision of Massachusetts corporate law, or any action asserting a claim governed by the internal affairs doctrine, and (2) is a concurrent jurisdiction for any claim arising under the Securities Act of 1933 or the rules and regulations thereunder.
The articles of organization further provide that, unless we consent in writing to the selection of an alternative forum, the Business Litigation Session of the Suffolk County Superior Court (the “BLS”) (1) is the sole and exclusive forum for any derivative action or proceeding brought on behalf of Eastern Bankshares, Inc., any action asserting a claim of breach of a fiduciary duty, any action asserting a claim arising pursuant to any provision of Massachusetts corporate law, or any action asserting a claim governed by the internal affairs doctrine, and (2) is a concurrent jurisdiction for any claim arising under the Securities Act of 1933 or the rules and regulations thereunder.
Any problems caused by these third-parties, including an interruption in service, or as a result of their not providing us their services 41 for any reason or their performing their services poorly, and our inability to make alternative arrangements in a timely manner, could cause a disruption to our business and could adversely affect our ability to deliver products and services to our customers or otherwise conduct our business efficiently and effectively.
Any problems caused by these third-parties, including an interruption in service, or as a result of their not providing us their services for any reason or their performing their services poorly, and our inability to make alternative arrangements in a timely manner, could cause a disruption to our business and could adversely affect our ability to deliver products and services to our customers or otherwise conduct our business efficiently and effectively.
Moreover, a significant decline in general economic conditions, caused by inflation, recession, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, unemployment, public health crises or other factors beyond our control could further impact these local economic conditions and could further negatively affect the financial results 33 of our banking operations.
Moreover, a significant decline in general economic conditions, caused by inflation, recession, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, unemployment, public health crises or other factors beyond our control could further impact these local economic conditions and could further negatively affect the financial results of our banking operations.
A significant amount of our commercial and industrial and commercial real estate, including multi-family residential real estate loans, are adjustable-rate loans and an increase in the 32 general level of interest rates may adversely affect the ability of borrowers, especially those with adjustable rate loans, to pay their loan obligations.
A significant amount of our commercial and industrial and commercial real estate, including multi-family residential real estate loans, are adjustable-rate loans and an increase in the general level of interest rates may adversely affect the ability of borrowers, especially those with adjustable rate loans, to pay their loan obligations.
Any breach of our system security could result in disruption of our operations, unauthorized access to confidential customer information, significant regulatory costs, such as enforcement actions and/or the imposition of civil money penalties, litigation exposure and other possible damages, loss or liability.
Any breach of our 33 system security could result in disruption of our operations, unauthorized access to confidential customer information, significant regulatory costs, such as enforcement actions and/or the imposition of civil money penalties, litigation exposure and other possible damages, loss or liability.
We may not be able to acquire other institutions on acceptable terms. The ability to grow may be limited if we are unable to successfully make acquisitions in the future. To the extent that we acquire other companies, our business may be negatively impacted by certain risks inherent with such acquisitions.
We may not be able to acquire other institutions on acceptable terms. The ability to grow may be limited if we are unable to successfully make acquisitions in the future. 30 To the extent that we acquire other companies, our business may be negatively impacted by certain risks inherent with such acquisitions.
In our market areas, we face competition from other commercial banks, savings and loan associations, tax-exempt credit unions, financial technology companies (“fintechs”), internet banks, finance companies, mutual funds, insurance companies, brokerage and investment banking firms, mortgage companies and other financial intermediaries that offer similar services.
In our market areas, we face competition from other commercial banks, savings and loan associations, tax-exempt credit unions, financial technology companies (“fintechs”), internet banks, finance companies, mutual funds, brokerage and investment banking firms, mortgage companies and other financial intermediaries that offer similar services.
Failure to comply with these and other regulations, and supervisory expectations related thereto, may result in fines, penalties, lawsuits, regulatory sanctions, reputation damage or restrictions on our business. 47 Non-compliance with the USA PATRIOT Act, Bank Secrecy Act or other laws and regulations could result in fines or sanctions.
Failure to comply with these and other regulations, and supervisory expectations related thereto, may result in fines, penalties, lawsuits, regulatory sanctions, reputation damage or restrictions on our business. Non-compliance with the USA PATRIOT Act, Bank Secrecy Act or other laws and regulations could result in fines or sanctions.
Commercial loans generally carry larger balances and involve a higher risk of nonpayment or late payment than residential mortgage loans. Most of the commercial loans are secured by borrower business assets such as accounts receivable, inventory, equipment and other fixed assets.
Commercial loans generally carry larger balances and involve a higher risk of nonpayment or late payment than residential mortgage loans. Most of the commercial and industrial loans are secured by borrower business assets such as accounts receivable, inventory, equipment and other fixed assets.
Failure to comply with laws, regulations, or policies could result in sanctions by regulatory agencies, civil money penalties, and/or reputation damage, which could have a material 46 adverse effect on our business, financial condition, and results of operations.
Failure to comply with laws, regulations, or policies could result in sanctions by regulatory agencies, civil money penalties, and/or reputation damage, which could have a material adverse effect on our business, financial condition, and results of operations.
In addition to these specific effects, widespread adverse economic conditions that could affect us include: • Reduced consumer spending; • Increased unemployment; • Lower wage income levels; • Declines in the market value of residential and commercial real estate; • Inflation or deflation; • Fluctuations in the value of the U.S. dollar; 43 • Volatility in short-term and long-term interest rates (for more information regarding the potential effect of fluctuating interest rates, see “Changes in interest rates may have an adverse effect on our profitability.”); and • Higher bankruptcy filings.
In addition to these specific effects, widespread adverse economic conditions that could affect us include: • Reduced consumer spending; • Increased unemployment; 41 • Lower wage income levels; • Declines in the market value of residential and commercial real estate; • Inflation or deflation; • Fluctuations in the value of the U.S. dollar; • Volatility in short-term and long-term interest rates (For more information regarding the potential effect of fluctuating interest rates, see “Changes in interest rates may have an adverse effect on our profitability.”); and • Higher bankruptcy filings.
Additionally, our Board of Directors is currently classified, with directors serving three-year staggered terms. However, the classified structure is being phased out, and by our 2027 annual meeting of stockholders, directors will be elected for annual terms.
Additionally, our Board of Directors is currently classified, with directors serving three-year staggered terms. 47 However, the classified structure is being phased out, and by our 2027 annual meeting of stockholders, directors will be elected for annual terms.
For these reasons, we may experience higher rates of delinquencies, default and losses on our home equity loans, which could have a material adverse effect on our financial condition and results of operations.
For these reasons, we may 36 experience higher rates of delinquencies, default and losses on our home equity loans, which could have a material adverse effect on our financial condition and results of operations.
Taken as a whole, these 50 statutory provisions and provisions in our articles of organization could result in our being less attractive to a potential acquirer and thus could adversely affect the market price of our common stock.
Taken as a whole, these statutory provisions and provisions in our articles of organization could result in our being less attractive to a potential acquirer and thus could adversely affect the market price of our common stock.
Our need to review and evaluate the impact of ongoing rule proposals, final rules and implementation guidance from regulators further complicates the development and implementation of new information systems for our business.
Our need to review and evaluate the impact of ongoing rule proposals, final rules 44 and implementation guidance from regulators further complicates the development and implementation of new information systems for our business.
As a participant in the financial services industry, it is likely that we could continue to experience a high level of litigation related to our businesses and operations.
As a participant in the financial services industry, it is likely that we could experience a high level of litigation related to our businesses and operations.
Operational risk and losses can result from internal and external fraud; errors by employees or third parties; failure to document transactions properly or to obtain proper authorization; failure to comply with applicable regulatory requirements and conduct of business rules; equipment failures, including those caused by natural disasters or by electrical, telecommunications or other essential utility outages; business continuity and data security system failures, including those caused by computer viruses, cyber-attacks or unforeseen problems encountered while implementing major new computer systems or upgrades to existing systems; or the inadequacy or failure of systems and controls, including those of our suppliers or counterparties.
Operational risk and losses can result from factors such as internal and external fraud; errors by employees or third parties; failure to document transactions properly or to obtain proper authorization; failure to comply with applicable regulatory requirements and conduct of business rules; equipment failures, including those caused by natural disasters or by electrical, telecommunications or other essential utility outages; business continuity and data security system failures, including those caused by computer viruses, cyber-attacks or unforeseen problems encountered while implementing major new computer systems or upgrades to existing systems; or the inadequacy or failure of systems and controls, including those of our suppliers or counterparties.
If we are unable to compete effectively, our business, financial condition and results of operations could be adversely affected, perhaps materially. 36 The fair value of Eastern Bank’s investments has declined and could decline further due to a variety of factors. Most of Eastern Bank’s investment securities portfolio is designated as available-for-sale.
If we are unable to compete effectively, our business, financial condition and results of operations could be adversely affected, perhaps materially. 35 The fair value of Eastern Bank’s investments has declined and could decline further due to a variety of factors. Most of Eastern Bank’s investment securities portfolio is designated as available-for-sale.
Please see the section of this Annual Report on Form 10-K titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” for more information and Note 2, “Summary of Significant Accounting Policies” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.
Please see the section of this Annual Report on Form 10-K titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” with Item 7 for more information and Note 2, “Summary of Significant Accounting Policies” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.
There also are provisions in our articles of organization that may be used to delay or block a takeover attempt, including, among others, a provision that prohibits any person from casting a full vote for any shares of common stock exceeding the 10% threshold, as described above; the prohibition on removal of directors without cause; and the required approval of at least 80% of the voting power of the shares then-outstanding entitled to vote for business combination transactions with interested shareholders.
Provisions in our articles of organization may be used to delay or block a takeover attempt, including, among others, a provision that prohibits any person from casting a full vote for any shares of common stock exceeding the 10% threshold, as described above; the prohibition on removal of directors without cause; and the required approval of at least 80% of the voting power of the shares then-outstanding entitled to vote for business combination transactions with interested shareholders.
Our ability to successfully grow will depend on a variety of factors, including our customers’ ability to meet their obligations to us, our ability to attract and retain experienced bankers and insurance agents, the continued availability of desirable business opportunities, the competitive responses from other financial institutions in our market areas and our ability to manage our growth.
Our ability to successfully grow will depend on a variety of factors, including our customers’ ability to meet their obligations to us, our ability to attract and retain experienced bankers, the continued availability of desirable business opportunities, the competitive responses from other financial institutions in our market areas and our ability to manage our growth.
Our repurchase of shares of common stock is also subject to Federal Reserve Board policy related to repurchases of shares by depository institution holding companies.
Our repurchase of shares of common stock is subject to Federal Reserve Board policy related to repurchases of shares by depository institution holding companies.
Moreover, our decision regarding the classification of a loan participation and loan loss provisions associated with a loan participation is made in part based upon information provided by the lead lender. A lead lender also may not monitor a participation loan in the same manner as we would for loans that we originate.
Moreover, our decision regarding the classification of a loan participation and loan loss provisions associated with a loan participation is made in part based upon information provided by the lead lender and/or our regulators. A lead lender also may not monitor a participation loan in the same manner as we would for loans that we originate.
Our funding costs have increased materially beginning in 2022 and may continue to increase if our deposits decline and we are forced to replace them with more expensive sources of funding, if clients shift their deposits into higher cost products, or if we need to raise interest rates to avoid losing deposits.
Our funding costs increased materially beginning in 2022 and may continue to increase if our deposits decline and we are forced to replace them with more expensive sources of funding, if clients shift their deposits into higher cost products, or if we raise interest rates to avoid losing deposits.
Although we have been successful with this strategy in the past, we may not be able to grow our business in the future through acquisitions for a number of reasons, including: • Competition with other prospective buyers resulting in our inability to complete an acquisition or in our paying a substantial premium over the fair value of the net assets of the acquired business; • Inability to obtain regulatory approvals; • Potential difficulties and/or unexpected expenses relating to the integration of the operations, technologies, products and the key employees of the acquired business, resulting in the diversion of resources from the operation of our existing business; • Acquisitions of new lines of business may present risks that are different in kind or degree compared to those that we are accustomed to managing, requiring us to implement new or enhance existing procedures and controls and diverting resources from the operation of our existing business; • Inability to maintain existing customers of the acquired business or to sell the products and services of the acquired business to our existing customers; • Inability to retain key management of the acquired business; • Assumption of or potential exposure to significant liabilities of the acquired business, some of which may be unknown or contingent at the time of acquisition, including, without limitation, liabilities for regulatory and compliance issues; • Exposure to potential asset quality issues of the acquired business; • Failure to mitigate deposit erosion or loan quality deterioration at the acquired business; • Potential changes in banking or tax laws or regulations that may affect the acquired business; • Inability to improve the revenues and profitability or realize the cost savings and synergies expected of the acquired business; • Potential future impairment of the value of goodwill and intangible assets acquired; and • Identification of internal control deficiencies of the acquired business.
Although we have been successful with this strategy in the past, we may not be able to grow our business in the future through acquisitions for a number of reasons, including: • Competition with other prospective buyers resulting in our inability to complete an acquisition or in our paying a substantial premium over the fair value of the net assets of the acquired business; • Inability to obtain regulatory or shareholder approvals, delays in obtaining regulatory approvals; or the imposition of costly or burdensome conditions to regulatory approvals; • Potential difficulties and/or unexpected expenses relating to the integration of the operations, technologies, products and the key employees of the acquired business, resulting in the diversion of resources from the operation of our existing business; • Acquisitions of new lines of business may present risks that are different in kind or degree compared to those that we are accustomed to managing, requiring us to implement new or enhance existing procedures and controls and diverting resources from the operation of our existing business; • Inability to maintain existing customers of the acquired business or to sell the products and services of the acquired business to our existing customers; • Inability to retain key management of the acquired business; • Assumption of or potential exposure to significant liabilities of the acquired business, some of which may be unknown or contingent at the time of acquisition, including, without limitation, liabilities for regulatory and compliance issues; • Exposure to potential asset quality issues of the acquired business; • Failure to mitigate deposit erosion or loan quality deterioration at the acquired business; • Potential changes in banking or tax laws or regulations that may affect the acquired business; • Inability to improve the revenues and profitability or realize the cost savings and synergies expected of the acquired business; • Potential future impairment of the value of goodwill and intangible assets acquired; and • Identification of internal control deficiencies of the acquired business.
The actual amount of these new stock-related compensation and benefit expenses will depend on the number of awards actually granted under the Equity Plan, the fair market value of the awards on the date of grant, the vesting period, and other factors which we cannot predict at this time.
The actual amount of the stock-related compensation and benefit expenses will depend on the number of awards actually granted under the Equity Plan, the fair market value of the awards on the date of grant, the vesting period, and other factors which we cannot predict at this time.
We intend to utilize all tax credits, as of December 31, 2022, to offset income tax liability. Substantially all of these tax credits are related to development projects that are subject to ongoing compliance requirements over certain periods of time to fully realize their value.
We intend to utilize all tax credits, as of December 31, 2023, to offset income tax liability. Substantially all of these tax credits are related to development projects that are subject to ongoing compliance requirements over certain periods of time to fully realize their value.
The significant increases in market interest rates beginning in 2022 have contributed and may continue to contribute to a decline in our core deposits as customers seek higher interest rates from sources such as non-bank money market funds and bank competitors.
The significant increases in market interest rates beginning in 2022 initially contributed and may continue to contribute to a decline in our core deposits as customers seek higher interest rates from sources such as non-bank money market funds and bank competitors.
Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts. Consumers and businesses also may change their behavior on their own as a result of these concerns.
Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts, and consumers and businesses also may change their behavior as a result of these concerns.
Risks Related to Stock-Based Benefit Plans 49 Our stock-based benefit plans have increased and will continue to increase our expenses and reduce our income. In 2021, we adopted the Equity Plan, which will increase our annual compensation and benefit expenses related to awards granted to participants under such plan.
Risks Related to Stock-Based Benefit Plans Our stock-based benefit plans have increased and will continue to increase our expenses and reduce our income. In 2021, we adopted the Equity Plan, which impacts our annual compensation and benefit expenses related to awards granted to participants under such plan.
Changes in interest rates have influenced and could continue to influence the interest we receive on loans and securities and the amount of interest we pay on deposits and borrowings, our ability to originate loans and obtain deposits, and the fair value of our financial assets and liabilities.
Changes in interest rates have influenced and will continue to influence the interest we receive on loans and securities and the amount of interest we pay on deposits and borrowings, our ability to originate loans and obtain deposits, and the fair value of our financial assets and liabilities.
In addition, our credit risk may be exacerbated when the collateral held by us cannot be liquidated or is liquidated at prices not sufficient to recover the full amount of the financial instrument exposure due to us. There is no assurance that any such losses would not materially and adversely affect our results of operations.
In addition, our credit risk may be exacerbated when the collateral held by us cannot be liquidated or is liquidated at prices not sufficient to recover the full amount of our exposure. There is no assurance that any such losses would not materially and adversely affect our results of operations.
Our business is highly regulated, which could limit or restrict our activities and impose financial requirements or limitations on the conduct of our business. Eastern Bank and Eastern Bankshares, Inc. are subject to extensive regulation, supervision and examination by the Massachusetts Commissioner of Banks, the FDIC, the Federal Reserve Board and the Consumer Financial Protection Bureau.
Our business is highly regulated, which could limit or restrict our activities and impose financial requirements or limitations on the conduct of our business. Eastern Bank and Eastern Bankshares, Inc. are subject to extensive regulation, supervision and examination by regulatory authorities, including the Massachusetts Commissioner of Banks, the FDIC, the Federal Reserve Board and the Consumer Financial Protection Bureau.
As a community bank, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates.
We strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates.
The increase in the relative sea level in Boston and other coastal regions of Massachusetts and New Hampshire in our market is expected to result in higher coastal surges during storm events and, when considered with projected increases in precipitation intensities, an increase in stormwater flooding.
The increase in the relative sea level in Boston, as a coastal city, and other coastal regions of Massachusetts and New Hampshire in our market is expected to result in higher coastal surges during storm events and, when considered with projected increases in precipitation intensities, an increase in stormwater flooding.
These shifts in investing priorities may result in adverse effects on the trading price of our common stock if investors determine that we do not sufficiently address ESG matters in accordance with their standards or other third-party standards for evaluating ESG matters.
These shifts in investing priorities may result in adverse effects on the trading price of our common stock if investors believe that we do not sufficiently address ESG matters in accordance with their or third-party standards for evaluating ESG matters.
We primarily serve individuals, businesses and municipalities located in eastern and central Massachusetts, including the greater Boston metropolitan area, southern New Hampshire, including its coastal region, and northern Rhode Island. At December 31, 2022, approximately $9.1 billion, or 91.2% of our total loans secured by real estate were secured by real estate located in this market area.
We primarily serve individuals, businesses and municipalities located in eastern and central Massachusetts, including the greater Boston metropolitan area, southern New Hampshire, including its coastal region, and northern Rhode Island. At December 31, 2023, approximately $9.6 billion, or 91.2% of our total loans secured by real estate were secured by real estate located in this market area.
Our electronic communications and information systems infrastructure, as well as the systems infrastructures of the vendors we use to meet our data processing and communication needs, are inherently vulnerable to unauthorized access, human error, computer viruses, denial-of-service attacks, malicious code, spam attacks, phishing, ransomware or other forms of social engineering and other events that could impact the security, reliability, confidentiality, integrity and availability of our systems or those of our vendors.
Our electronic communications and information systems infrastructure, as well as the systems infrastructures of the vendors we use, are inherently vulnerable to unauthorized access, human error, computer viruses, denial-of-service attacks, malicious code, spam attacks, phishing, ransomware or other forms of social engineering and other events that could impact the security, reliability, confidentiality, integrity and availability of our systems or those of our vendors.
Additionally, interest rate hedging could fail to protect us or adversely affect us because, among other things: • available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought, including, for example, an interest rated based upon adjusted SOFR, as discussed above; • the duration of the hedge may not match the duration of the related liability; • the party owing money in the hedging transaction may default on its obligation to pay; • the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; • the value of derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value; and/or • downward adjustments, or “mark-to-market” losses, would reduce our shareholders’ equity.
Additionally, interest rate hedging could fail to protect us or adversely affect us because, among other things: • available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought; • the duration of the hedge may not match the duration of the related liability; • the party owing money in the hedging transaction may default on its obligation to pay; • the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; • the value of derivatives used for hedging may be adjusted from time to time in accordance with accounting rules to reflect changes in fair value; and/or • downward adjustments, or “mark-to-market” losses, would reduce our shareholders’ equity.
We could be required to act as a “source of strength” to our banking subsidiaries, which would have a material adverse effect on our business, financial condition and results of operations. Federal Reserve Board policy historically required bank holding companies such as Eastern Bankshares, Inc. to act as a source of financial and managerial strength to their subsidiary banks.
We could be required to act as a “source of strength” to our banking subsidiaries, which would have a material adverse effect on our business, financial condition and results of operations. Federal law and policy require bank holding companies such as Eastern Bankshares, Inc. to act as a source of financial and managerial strength to their subsidiary banks.
If our assumptions are incorrect, or if delinquencies or non-performing loans increase, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, which would require additions to our allowance, which could materially decrease our net income.
If our assumptions in determining the amount of allowance for loan losses are incorrect, or if delinquencies or non-performing loans increase, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, which would require additions to our allowance, which could materially decrease our net income.
The choice of forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that the shareholder finds favorable for disputes with us or our directors and officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.
The choice of forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that the shareholder finds favorable for disputes, could discourage such lawsuits against us and our directors, officers and other employees.
These risks include, but are not limited to, credit risk, market risks, liquidity risks, interest rate risks, operational risks, model risks, technology, regulatory and legal risks, and strategic and reputational risks.
These risks include, but are not limited to, credit risk, capital risk, market risks, liquidity risks, cyber risk, interest rate risks, operational risks, model risks, technology, compliance, regulatory and legal risks, and strategic and reputational risks.
Further, our regulators, including the Securities and Exchange Commission, may adopt regulations related to ESG matters that could require the collection, assessment, and reporting of extensive data, including emissions-related data, in categories and formats that are novel to us.
Further, our regulators, including the SEC, may adopt regulations related to ESG matters that could require the collection, assessment, and reporting of extensive data, including emissions-related data, in categories and formats that are novel to us.
We expect that in most if not all cases a publicly traded company that we might acquire in the future will be a “predecessor company.” Accordingly, we expect that the number of our covered employees will increase if Eastern acquires one or more publicly held corporations in the future.
We expect that in most if not all cases a publicly traded company that we might acquire in the future will be a “predecessor company.” Accordingly, we expect that the number of our covered employees will increase if Eastern acquires one or more publicly held corporations, including through the prospective acquisition of Cambridge.
Significant components of Eastern Bank’s liquidity needs are met through its access to funding pursuant to its membership in the Federal Home Loan Bank of Boston. The Federal Home Loan Bank of Boston is a cooperative that provides services to its member banking institutions. The primary reason for joining the Federal Home Loan Bank of Boston is to obtain funding.
Significant components of Eastern Bank’s liquidity needs are met through its access to funding pursuant to its membership in the Federal Home Loan Bank of Boston. The Federal Home Loan Bank of Boston is a cooperative that provides services to its member banking institutions.
We discuss our principal risk management processes and, in appropriate places, related historical performance in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Annual Report on Form 10-K.
We discuss our principal risk management processes and, in appropriate places, related historical performance in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section included in Part II, Item 7 in this Annual Report on Form 10-K.
The potential costs of compliance with or imposed by new or existing laws and regulations and policies that are applicable to us may affect the use of our products and services and could have a material adverse impact on our results of operations.
The potential costs of compliance with or imposed by new or existing laws and regulations and policies may affect the use of our products and services and could have a material adverse impact on our results of operations.
A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties. At December 31, 2022, $10.0 billion, or 74.0% of our total loans, comprised loans secured by real estate.
A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties. At December 31, 2023, $10.5 billion, or 75.5% of our total loans, comprised loans secured by real estate.
As a financial institution with a diverse base of customers, vendors and suppliers, we may face potential negative publicity based on the identity of those we choose to do business with and the public’s (or certain segments of the public’s) view of those customers, vendors and suppliers.
As a financial institution with a diverse base of customers, vendors and suppliers, we may face potential negative publicity based on the identity of those we choose to do business with.
This makes us vulnerable to a downturn in the local economy and real estate markets. Decreases in local real estate values caused by economic conditions or other events could adversely affect the value of the property used as collateral for our loans, which could cause us to realize a loss in the event of a foreclosure.
Decreases in local real estate values caused by economic conditions or other events could adversely affect the value of the property used as collateral for our loans, which could cause us to realize a loss in the event of a foreclosure.
At 42 December 31, 2022, we maintained investments of approximately $131.3 million in entities for which we receive allocations of tax credits, excluding investments of approximately $3.9 million in qualified zone academy bond investments, which we utilize to offset our income tax liability. We recorded the benefit of $7.3 million in credits for the year ended December 31, 2022.
At December 31, 2023, we maintained investments of approximately $223.4 million in entities for which we receive allocations of tax credits, excluding investments of approximately $3.9 million in qualified zone academy bond investments, which we utilize to offset our income tax liability. We recorded the benefit of $9.4 million in credits for the year ended December 31, 2023.
We continuously look for acquisition opportunities of banks, financial institutions and insurance agencies that meet our criteria, some of which may be material to our business and financial performance and could involve significant cash expenditures or result in a material increase in the number of shares of our common stock that are outstanding.
We may be unsuccessful identifying and competing for acquisitions. We regularly look for acquisition opportunities of banks and financial institutions that meet our criteria, some of which may be material to our business and financial performance and could involve significant cash expenditures or result in a material increase in the number of shares of our common stock that are outstanding.
As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, could lead to market-wide liquidity problems and losses or defaults by us or by other institutions and organizations. Many of these transactions expose us to credit risk in the event of default of our counterparty or client.
As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, could lead to market-wide liquidity problems and losses or defaults by us or by other institutions and organizations. We may be exposed to credit risk in the event of default of our counterparty or client.
Public health crises, such as pandemics and epidemics, such as the global outbreak of COVID-19, domestic or geopolitical crises, such as terrorism, military conflict, the ongoing war between Russia and Ukraine, other wars or the perception that hostilities may be imminent, political instability or civil unrest, or other conflict, human error or other events outside of our control, could cause disruptions to our business or the United States economy as a whole, and our business and operating results could suffer.
Public health crises, such as pandemics and epidemics, domestic or geopolitical crises, such as terrorism, military conflict, wars or the perception that hostilities may be imminent, political instability or civil unrest, or other conflict, human error or other events outside of our control, could cause disruptions to our 42 business or the United States economy as a whole, and our business and operating results could suffer.
Eastern Bank and its customers will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. We and our customers may face cost increases, asset value reductions, operating process changes, and the like.
Eastern Bank and its customers will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns, which could involve cost increases, asset value reductions, operating process changes, and the like.
If our allowance for loan losses is insufficient to cover loan losses, our earnings and capital could decrease. At December 31, 2022, our allowance for loan losses was $142.2 million, or 1.05% of total loans, compared to $97.8 million, or 0.80% of total loans, at December 31, 2021.
If our allowance for loan losses is insufficient to cover loan losses, our earnings and capital could decrease. At December 31, 2023, our allowance for loan losses was $149.0 million, or 1.07% of total loans, compared to $142.2 million, or 1.05% of total loans, at December 31, 2022.
To date, we have received two notices of non-objection to proposed share repurchase programs, one allowing the purchase of up to 9,337,900 shares, which we completed in the third quarter of 2022; and one allowing the purchase of up to up to 8,900,000 shares through August 31, 2023.
To date, we have received two notices of non-objection to proposed share repurchase programs, one allowing the purchase of up to 9,337,900 shares, which we completed in the third quarter of 2022; and one allowing the purchase of up to up to 8,900,000 shares, which expired on August 31, 2023. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
(For a more complete discussion of our strategic plan, please see the section of this Annual Report on Form 10-K titled “Business.”) It is possible that one or more factors, including factors outside of our control, may hinder or prevent us from achieving our growth objectives.
(For a more complete discussion of our strategic plan, please see the “Business” section included in Part I, Item 1 in this Annual Report on Form 10-K.) It is possible that one or more factors, including factors outside of our control, may hinder or prevent us from achieving our growth objectives.
Technology has lowered barriers to entry and made it possible for non-banks to offer products and services, such as loans and payment services, that traditionally were banking products, and made it possible for technology companies to compete with financial institutions in providing electronic, internet-based, and mobile phone-based financial solutions.
Technology has lowered barriers to entry and made it possible for non-banks to offer products and services, that traditionally were banking products, and made it possible for technology companies to compete with financial institutions in providing electronic, internet-based, and mobile phone-based financial solutions. Competition with non-banks, including technology companies, to provide financial products and services is intensifying.
Any of these factors could require us to recognize an impairment in the value of our investment securities portfolio, which could have an adverse effect on our results of operations in future periods.
Adverse developments in the factors used to assess credit related impairment could require us to recognize an impairment in the value of our investment securities portfolio, which could have an adverse effect on our results of operations in future periods.
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. Our commercial loan and lease portfolio, including those secured by commercial real estate but excluding PPP, comprised $9.7 billion, or 71.8% of our total loans at December 31, 2022 (excluding PPP loans).
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 portfolio. Our commercial loan portfolio, including those secured by commercial real estate, comprised $9.9 billion, or 71.3% of our total loans at December 31, 2023.
Net interest income historically has been, and we anticipate that it will remain, a significant component of our total revenue. A high percentage of our assets and liabilities have been and will continue to be in the form of interest-bearing or interest-related instruments.
Net interest income historically has been, and we anticipate that it will remain, a significant component of our total revenue. A high percentage of our assets and liabilities involve interest-bearing or interest-related instruments.
If our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional financial and management resources.
If our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional financial and management resources. 40 We maintain a significant investment in projects that generate tax credits, which we may not be able to fully utilize, or, if utilized, may be subject to recapture or restructuring.
Our business strategy includes projected growth in our core businesses, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively. We expect to continue to experience growth in the amount of our assets, the level of our deposits and the scale of our operations.
Our business strategy includes projected growth in our core businesses, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively.
Any such actions or restrictions, if and in whatever manner imposed, could adversely affect our costs and revenues. Moreover, efforts to comply with any such nonpublic supervisory actions or restrictions may require material investments in additional resources and systems, as well as a significant commitment of managerial time and attention.
Moreover, efforts to comply with any such nonpublic supervisory actions or restrictions may require material investments in additional resources and systems, as well as a significant commitment of managerial time and attention.
A reduction in net income could negatively affect the price of Eastern Bankshares, Inc. stock. Regulatory developments could adversely affect our business by increasing our costs and thereby making our business less profitable. Our profitability may be adversely affected by current and future rulemaking and enforcement activity by the various federal, state and self-regulatory organizations to which we are subject.
Regulatory developments could adversely affect our business by increasing our costs and thereby making our business less profitable. Our profitability may be adversely affected by current and future rulemaking and enforcement activity by the various federal, state and self-regulatory organizations to which we are subject.
Further, if we foreclose on commercial collateral, our holding period for the collateral may be longer than for one- to four-family residential real estate loans because there are fewer potential purchasers of the collateral, which can result in substantial holding costs.
Higher rates of default could have an adverse effect on our financial condition and results of operations. Further, if we foreclose on commercial collateral, our holding period for the collateral may be longer than for one- to four-family residential real estate loans because there are fewer potential purchasers of the collateral, which can result in substantial holding costs.
For more information about our market area, please see the section of this Annual Report on Form 10-K titled “Business.” We are a community bank and our ability to manage reputational risk is critical to attracting and maintaining customers, investors and employees and to the success of our business, and the failure to do so may materially adversely affect our performance.
For more information about our market area, please see the “Business” section included in Part I, Item 1 in this Annual Report on Form 10-K. Our ability to manage reputational risk is critical to attracting and maintaining customers, investors and employees and to the success of our business, and the failure to do so may materially adversely affect our performance.
Many of these companies, including our competitors, have fewer regulatory constraints, and some have lower cost structures, in part due to lack of physical locations and regulatory compliance costs. Some of these companies also have greater resources to invest in technological improvements than we currently have.
Many of these companies, including our competitors, have fewer regulatory constraints, and some have lower cost structures, in part due to lack of physical locations and regulatory compliance costs.
Any impairment charge would have a negative effect on our shareholders’ equity and financial results and may cause a decline in our stock price. We may need to raise additional capital in the future, but that capital may not be available when it is needed, or the cost of that capital may be very high.
Any impairment charge would have a negative effect on our shareholders’ equity and financial results and may cause a decline in our stock price. 37 We are subject to stringent capital requirements and may need to raise additional capital in the future, and that capital may not be available or its cost may be high.
In addition, deflationary pressures, if present, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance.
In addition, deflationary pressures, if present, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance. If economic conditions worsen or volatility increases, our business, financial condition and results of operations could be materially adversely affected.
After that date, any holder of shares in excess of the 10% threshold will be entitled to cast only one one-hundredth (1/100th) of a vote per share for each share in excess of the 10% threshold. • Our articles of organization provide that state and federal courts located in Massachusetts will be the exclusive forum for substantially all disputes between us and our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees. • The market price of our stock value may be negatively affected by applicable regulations that restrict the level of stock that we may repurchase through October 14, 2023. * * * Risks potentially affecting our business, financial condition, results of operations and cash flows You should carefully consider the following risk factors that may affect our business, future operating results and financial condition, as well as the other information set forth in this Annual Report on Form 10-K, before making an investment decision regarding our common stock.
Certain provisions of our articles of organization, as well as state and federal banking laws, may make our stock a less attractive investment compared to the stock of peer companies. • Our articles of organization provide that state and federal courts located in Massachusetts will be the exclusive forum for substantially all disputes between us and our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes. • A beneficial holder of 10% or more of our shares is entitled to cast only one one-hundredth (1/100th) of a vote per share for each share in excess of the 10% threshold. * * * Risks potentially affecting our business, financial condition, results of operations and cash flows You should carefully consider the following risk factors that may affect our business, future operating results and financial condition, as well as the other information set forth in this Annual Report on Form 10-K, before making an investment decision regarding our common stock.
We conduct a quarterly review for indicators of impairment of goodwill and other identifiable intangible assets. Our management recently completed these reviews and concluded that no impairment charge was necessary for the year ended December 31, 2022. We cannot provide assurance whether we will be required to take an impairment charge in the future.
Our management recently completed these reviews and concluded that no impairment charge was necessary for the year ended December 31, 2023. We cannot provide assurance whether we will be required to take an impairment charge in the future.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeEastern Insurance Group LLC operates through 21 non-branch offices including offices in eastern Massachusetts, and one office in Providence, Rhode Island. At December 31, 2022, we leased 81 of our offices, and the total net book value of our land, buildings, furniture, fixtures and equipment was $62.7 million.
Biggest changeAt December 31, 2023, we leased 78 of our offices, and the total net book value of our land, buildings, furniture, fixtures and equipment was $60.1 million.
ITEM 2. PROPERTIES At December 31, 2022, we conducted our banking business through our corporate headquarters in Boston, Massachusetts and 98 branch offices located in eastern Massachusetts and southern New Hampshire. In addition, Eastern Bank occupies two administrative/operational offices, in Lynn and Brockton, Massachusetts.
ITEM 2. PROPERTIES At December 31, 2023, we conducted our banking business through our corporate headquarters in Boston, Massachusetts and 97 branch offices located in eastern Massachusetts and southern New Hampshire. In addition, Eastern Bank occupies two administrative/operational offices, in Lynn and Brockton, Massachusetts.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor 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 this Annual Report on Form 10-K. 51 As of the date of this Annual Report on Form 10-K, 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.
Biggest changeAs of the date of this Annual Report on Form 10-K, 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.
ITEM 3. LEGAL PROCEEDINGS We operate in a legal and regulatory environment that exposes us to potentially significant risks.
ITEM 3. 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 this Annual Report on Form 10-K.
Removed
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 52 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeInformation used in the graph and table was obtained from a third party provider, a source believed to be reliable, but we are not responsible for any errors or omission in such information. 53 Period Ending Index 10/15/2020 12/31/2020 03/31/2021 06/30/2021 9/30/2021 Eastern Bankshares, Inc. 100.00 134.24 159.29 170.48 168.94 Russell 2000 100.00 120.82 136.16 142.00 135.81 KBW Regional Banks 100.00 134.82 174.87 172.39 177.93 Index 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 Eastern Bankshares, Inc. 168.53 180.81 155.75 166.55 147.04 Russell 2000 138.72 128.28 106.22 103.90 110.37 KBW Regional Banks 184.23 180.21 158.61 164.85 171.46 Source: Zacks Investment Research, Inc. © 1980-2023 Dividends We intend to continue to pay regular cash dividends to holders of our common stock; however, any future determination to declare and pay cash dividends, if any, will be made at the discretion of our Board of Directors and will depend on a variety of factors, including applicable laws, our financial condition, results of operations, business prospects, general business or financial market conditions, regulatory environment and other factors our Board of Directors may deem relevant.
Biggest changeInformation used in the graph and table was obtained from a third party provider, a source believed to be reliable, but we are not responsible for any errors or omission in such information. 50 Period Ending Index 10/15/2020 12/31/2020 03/31/2021 06/30/2021 9/30/2021 12/31/2021 3/31/2022 Eastern Bankshares, Inc. 100.00 134.24 159.29 170.48 168.94 168.53 180.81 Russell 2000 100.00 120.82 136.16 142.00 135.81 138.72 128.28 KBW Regional Banks 100.00 134.82 174.87 172.39 177.93 184.23 180.21 Index 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 Eastern Bankshares, Inc. 155.75 166.55 147.04 108.26 106.19 109.33 124.94 Russell 2000 106.22 103.90 110.37 113.39 119.29 113.18 129.05 KBW Regional Banks 158.61 164.85 171.46 140.67 132.59 135.75 170.78 Source: Zacks Investment Research, Inc. © 1980-2024 Dividends We intend to continue to pay regular cash dividends to holders of our common stock; however, any future determination to declare and pay cash dividends will be made at the discretion of our Board of Directors and will depend on a variety of factors, including applicable laws, our financial condition, results of operations, business prospects, general business or financial market conditions, regulatory environment and other factors our Board of Directors may deem relevant.
Comparative Stock Performance Graph The stock performance graph below and associated table compare the cumulative total shareholder return of our common stock from October 15, 2020 to December 31, 2022 to the cumulative total return of the Russell 2000 Index and the KBW Regional Banking Index.
Comparative Stock Performance Graph The stock performance graph below and associated table compare the cumulative total shareholder return of our common stock from October 15, 2020 to December 31, 2023 to the cumulative total return of the Russell 2000 Index and the KBW Regional Banking Index.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Eastern Bankshares, Inc.’s common stock trades on the Nasdaq Global Select Market under the symbol EBC. As of February 10, 2023, there were 8,175 common shareholders of record based on information provided by our transfer agent.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Eastern Bankshares, Inc.’s common stock trades on the Nasdaq Global Select Market under the symbol EBC. As of February 22, 2024, there were 7,930 common shareholders of record based on information provided by our transfer agent.
On November 12, 2021, we announced we had received the Non-Objection Notice to the share repurchase program, which authorized the purchase of up 54 to 9,337,900 shares over a 12-month period. The program was limited to $225.0 million through November 30, 2022.
Repurchases of Common Shares On September 7, 2022, we announced receipt of a notice of non-objection from the Board of Governors of the Federal Reserve System for a new share repurchase program. The program authorized the purchase of up to 8,900,000 shares over a 12-month period and was limited to $200.0 million through August 31, 2023.
Removed
Repurchases of Common Shares As further detailed below, we have received notices of non-objection from the Board of Governors of the Federal Reserve System to two share repurchase programs, one allowing the purchase of up to 9,337,900 shares of our common stock, which we competed in the third quarter of 2022, and the other allowing the purchase of up to 8,900,000 shares through August 31, 2023.
Added
The program expired in August 2023. We made no repurchases of shares during the year ended December 31, 2023. ITEM 6. [RESERVED] 51
Removed
Repurchases are made at management’s discretion from time to time at prices management considers to be attractive and in the best interests of both the Company and its shareholders, subject to the availability of shares, general market conditions, the trading price of the shares, alternative uses for capital and liquidity, and our financial performance.
Removed
Repurchases may be suspended, terminated or modified by us at any time for any reason.
Removed
Information regarding the shares repurchased under the plans is presented in the following table: Period Total Number of Shares Repurchased Average Price Paid per Share Total Number of Shares Repurchased as Part of the Share Repurchase Programs Maximum Number of Shares That May Yet Be Purchased Under the Share Repurchase Programs (1)(2) December 1, 2021 – December 31, 2021 1,135,878 $ 20.42 1,135,878 8,202,022 January 1, 2022 – January 31, 2022 987,526 21.02 2,123,404 7,214,496 February 1, 2022 – February 28, 2022 1,109,697 21.08 3,233,101 6,104,799 March 1, 2022 – March 31, 2022 769,398 21.31 4,002,499 5,335,401 April 1, 2022 – April 30, 2022 1,194,185 20.19 5,196,684 4,141,216 May 1, 2022 – May 31, 2022 1,880,381 18.93 7,077,065 2,260,835 June 1, 2022 – June 30, 2022 1,141,903 18.78 8,218,968 1,118,932 July 1, 2022 – July 31, 2022 909,785 19.02 9,128,753 209,147 August 1, 2022 – August 31, 2022 — — 9,128,753 209,147 September 1, 2022 – September 30, 2022 571,463 20.33 9,700,216 8,537,684 October 1, 2022 – October 31, 2022 1,094,049 20.32 10,794,265 7,443,635 November 1, 2022 – November 30, 2022 453,885 18.91 11,248,150 6,989,750 December 1, 2022 – December 31, 2022 — — 11,248,150 6,989,750 Total 11,248,150 $ 19.97 (1) On October 28, 2021, we announced that our Board of Directors had approved a share repurchase program, subject to receipt of a notice of non-objection from the Board of Governors of the Federal Reserve System (“Non-Objection Notice”).
Removed
We completed the repurchase of the total number of shares authorized through this program during the third quarter of 2022. (2) On September 7, 2022, we announced receipt of a notice of non-objection from the Board of Governors of the Federal Reserve System for a new share repurchase program.
Removed
The program, which authorizes the purchase of up to 8,900,000 shares over a 12-month period, is limited to $200.0 million through August 31, 2023. ITEM 6. [RESERVED] 55

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeFinancial Statements 96 Consolidated Balance Sheets 98 Consolidated Statements of Income 99 Consolidated Statements of Comprehensive Income 100 Consolidated Statements of Changes in Shareholders' Equity 101 Consolidated Statements of Cash Flows 102 Notes to Consolidated Financial Statements 104
Biggest changeFinancial Statements 98 Consolidated Balance Sheets 101 Consolidated Statements of Income 102 Consolidated Statements of Comprehensive Income (Loss) 103 Consolidated Statements of Changes in Shareholders' Equity 104 Consolidated Statements of Cash Flows 105 Notes to Consolidated Financial Statements 107
Item 6. [Reserved] 55 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 56 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 95 Item 8.
Item 6. [Reserved] 51 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 52 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 97 Item 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

190 edited+199 added−117 removed53 unchanged
Biggest change(2) Interest income on tax-exempt loans and investment securities has been adjusted to an FTE basis using a marginal tax rate of 21.6% for the year ended December 31, 2022, 21.0% for the year ended December 31, 2021, 21.8% for the year ended December 31, 2020, 21.8% for the year ended December 31, 2019, and 21.7% for the year ended December 31, 2018. 61 The following table summarizes the calculation of our tangible shareholders’ equity, tangible assets, the ratio of tangible shareholders’ equity to tangible assets, and tangible book value per share, which reconciles to the most directly comparable respective GAAP measure, as of the dates indicated: As of December 31, 2022 2021 2020 2019 2018 (Dollars in thousands, except per share data) Tangible shareholders’ equity: Total shareholders’ equity (GAAP) $ 2,471,790 $ 3,406,352 $ 3,428,052 $ 1,600,153 $ 1,433,141 Less: Goodwill and other intangibles 661,126 649,703 376,534 377,734 381,276 Tangible shareholders’ equity (non-GAAP) 1,810,664 2,756,649 3,051,518 1,222,419 1,051,865 Tangible assets: Total assets (GAAP) 22,646,858 23,512,128 15,964,190 11,628,775 11,372,287 Less: Goodwill and other intangibles 661,126 649,703 376,534 377,734 381,276 Tangible assets (non-GAAP) $ 21,985,732 $ 22,862,425 $ 15,587,656 $ 11,251,041 $ 10,991,011 Shareholders’ equity to assets ratio (GAAP) 10.9 % 14.5 % 21.5 % 13.8 % 12.6 % Tangible shareholders’ equity to tangible assets ratio (non-GAAP) 8.2 % 12.1 % 19.6 % 10.9 % 9.6 % Book value per share: Common shares issued and outstanding 176,172,073 186,305,332 186,758,154 — — Book value per share (GAAP) $ 14.03 $ 18.28 $ 18.36 $ — $ — Tangible book value per share (non-GAAP) $ 10.28 $ 14.80 $ 16.34 $ — $ — The following table summarizes the calculation of our average tangible shareholders’ equity and ratio of net income and operating net income to average tangible shareholders’ equity (“operating return on average tangible shareholders’ equity”), which reconciles to the most directly comparable GAAP measure, for the periods indicated: As of December 31, 2022 2021 2020 2019 2018 (Dollars in thousands) Net income (GAAP) $ 199,759 $ 154,665 $ 22,738 $ 135,098 $ 122,727 Operating net income (non-GAAP) (1) 213,279 165,885 102,134 129,696 121,796 Average tangible shareholders’ equity: Average total shareholders’ equity (GAAP) $ 2,831,533 $ 3,424,570 $ 2,040,156 $ 1,543,191 $ 1,360,562 Less: Average goodwill and other intangibles 655,653 414,441 376,706 379,615 380,304 Average tangible shareholders’ equity (non-GAAP) $ 2,175,880 $ 3,010,129 $ 1,663,450 $ 1,163,576 $ 980,258 Ratios: Return on average total shareholders’ equity (GAAP) 7.05 % 4.52 % 1.11 % 8.75 % 9.02 % Return on average tangible shareholders’ equity (non-GAAP) 9.18 % 5.14 % 1.37 % 11.61 % 12.52 % Operating return on average tangible shareholders’ equity (non-GAAP) 9.80 % 5.51 % 6.14 % 11.15 % 12.42 % (1) Refer to the table above within this “Non-GAAP Financial Measures” section for a reconciliation of operating net income to net income. 62 Financial Position Summary of Financial Position As of December 31, Change 2022 2021 Amount ($) Percentage (%) (Dollars in thousands) Cash and cash equivalents $ 169,505 $ 1,231,792 $ (1,062,287) (86.2) % Securities available for sale 6,690,778 8,511,224 (1,820,446) (21.4) % Securities held to maturity 476,647 — 476,647 100.0 % Loans, net of allowance for loan losses 13,420,317 12,157,281 1,263,036 10.4 % Federal Home Loan Bank stock 41,363 10,904 30,459 279.3 % Goodwill and other intangible assets 661,126 649,703 11,423 1.8 % Deposits 18,974,359 19,628,311 (653,952) (3.3) % Borrowed funds 740,828 34,278 706,550 2,061.2 % Cash and cash equivalents Total cash and cash equivalents decreased by $1.1 billion, or 86.2%, to $169.5 million at December 31, 2022 from $1.2 billion at December 31, 2021.
Biggest changeRefer to Note 23, “Discontinued Operations” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K. 59 The following table summarizes the calculation of our tangible shareholders’ equity, tangible assets, the ratio of tangible shareholders’ equity to tangible assets, and tangible book value per share, which reconciles to the most directly comparable respective GAAP measure, as of the dates indicated: As of December 31, 2023 2022 2021 2020 2019 (Dollars in thousands, except per share data) Tangible shareholders’ equity: Total shareholders’ equity (GAAP) $ 2,974,855 $ 2,471,790 $ 3,406,352 $ 3,428,052 $ 1,600,153 Less: Goodwill and other intangibles (1) 566,205 661,126 649,703 376,534 377,734 Tangible shareholders’ equity (non-GAAP) 2,408,650 1,810,664 2,756,649 3,051,518 1,222,419 Tangible assets: Total assets (GAAP) 21,133,278 22,646,858 23,512,128 15,964,190 11,628,775 Less: Goodwill and other intangibles (1) 566,205 661,126 649,703 376,534 377,734 Tangible assets (non-GAAP) $ 20,567,073 $ 21,985,732 $ 22,862,425 $ 15,587,656 $ 11,251,041 Shareholders’ equity to assets ratio (GAAP) 14.1 % 10.9 % 14.5 % 21.5 % 13.8 % Tangible shareholders’ equity to tangible assets ratio (non-GAAP) 11.7 % 8.2 % 12.1 % 19.6 % 10.9 % Book value per share: Common shares issued and outstanding 176,426,993 176,172,073 186,305,332 186,758,154 — Book value per share (GAAP) $ 16.86 $ 14.03 $ 18.28 $ 18.36 $ — Tangible book value per share (non-GAAP) $ 13.65 $ 10.28 $ 14.80 $ 16.34 $ — (1) Includes goodwill and other intangible assets which were associated with our insurance agency business for the years ended December 31, 2022, 2021, 2020, and 2019.
The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns.
The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns.
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 including, but not limited to, interest rate swaps, floors and caps. Net Interest Income.
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 including, but not limited to, interest rate swaps, floors and caps.
Further, if an entity employs a discounted cash flow method to calculate the allowance for credit losses, it will be required to use a post-modification-derived effective interest rate as part of its calculation. The update also requires new disclosures for receivables for which there has been a modification in their contractual cash flows resulting from borrowers experiencing financial difficulties.
Further, if an entity employs a discounted cash flow method to calculate the allowance for credit losses, it will be required to use a post-modification-derived effective interest rate as part of its calculation. This update also requires new disclosures for receivables for which there has been a modification in their contractual cash flows resulting from borrowers experiencing financial difficulties.
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 and by affecting the amount of unrealized gains and losses from securities held in rabbi trusts which are partially offset by a corresponding but opposite impact to the amount of employee benefit expense associated with the change in value of plan assets.
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 and by affecting the amount of unrealized gains and losses from securities held in rabbi trusts, the latter of which are partially offset by a corresponding but opposite impact to the amount of employee benefit expense associated with the change in value of plan assets.
For residential real estate, consumer home equity and other consumer portfolios, our quantitative model uses 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 expected credit loss in the loan portfolio.
For residential real estate, consumer home equity and other consumer portfolios, our quantitative model uses 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 expected credit loss 71 in the loan portfolio.
The allowance for credit losses, or ACL, is established to provide for our current estimate of expected lifetime credit losses on loans measured at amortized cost and unfunded lending commitments at the balance sheet date and is established through a provision for credit losses charged to net income.
Allowance for Loan Losses . The allowance for credit losses, or ACL, is established to provide for our current estimate of expected lifetime credit losses on loans measured at amortized cost and unfunded lending commitments at the balance sheet date and is established through a provision for credit losses charged to net income.
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.
When available information confirms that specific loans or portions thereof are uncollectible, these amounts are promptly 74 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.
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.
Deposits and other interest-bearing liabilities Deposits originating within the markets we serve continue to be our primary source of funding our earning assets. Historically, we have been able to compete effectively for deposits in our primary market areas.
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.
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 in the table below.
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. 59 The following table summarizes the impact of non-core items recorded for the time periods indicated below and reconciles them to the most directly comparable GAAP financial measure.
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. 57 The following table summarizes the impact of non-core items recorded for the time periods indicated below and reconciles them to the most directly comparable GAAP financial measure.
For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Entities may elect to apply the updated guidance on TDR recognition and measurement by using a modified retrospective transition method. The amendments on TDR disclosures and vintage disclosures should be adopted prospectively.
For public business entities, the amendments in this update were effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Entities may elect to apply the updated guidance on TDR recognition and measurement by using a modified retrospective transition method. The amendments on TDR disclosures and vintage disclosures should be adopted prospectively.
We periodically review current prepayment speeds to determine whether prepayment estimates require modification that could cause amortization or 63 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.
We periodically review current prepayment speeds to determine whether prepayment estimates require modification that could cause amortization or 61 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.
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. These loans were neither delinquent nor on non-accrual status.
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. These loans are neither delinquent nor on non-accrual status.
While our significant accounting policies are discussed in detail in Note 2, “Summary of Significant Accounting Policies” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
While our significant accounting policies are discussed in detail in Note 2, “Summary of Significant Accounting Policies” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
The Society of Actuaries (“SOA”) most recently issued mortality improvement tables during the year ended December 31, 2021. We reviewed our recent mortality experience and we determined our current mortality assumptions were appropriate to measure our pension plan obligations as of December 31, 2022. Significant differences in actual experience or significant changes in assumptions may materially affect the pension obligations.
The Society of Actuaries (“SOA”) most recently issued mortality improvement tables during the year ended December 31, 2021. We reviewed our recent mortality experience and we determined our current mortality assumptions were appropriate to measure our pension plan obligations as of December 31, 2023. Significant differences in actual experience or significant changes in assumptions may materially affect the pension obligations.
For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2022. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023.
For public business entities, the amendments in this update were effective for fiscal years beginning after December 15, 2022. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023.
For additional discussion of our allowance for credit losses measurement methodology, see Note 2, “Summary of Significant Accounting Policies” and Note 5, “Loans and Allowance for Loan Losses” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.
For additional discussion of our allowance for credit losses measurement methodology, see Note 2, “Summary of Significant Accounting Policies” and Note 4, “Loans and Allowance for Loan Losses” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.
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.
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 banking and other financial services primarily to retail, commercial and small business customers.
For our Defined Benefit Plan and the Non-Qualified Benefit Equalization Plan, the interest rates used to convert annuities to the actuarial equivalent lump sum amounts were selected based on the applicable segment rates under Internal Revenue Code Section 417(e) for the plan year beginning on November 1, 2022.
For our Defined Benefit Plan and the Non-Qualified Benefit Equalization Plan, the interest rates used to convert annuities to the actuarial equivalent lump sum amounts were selected based on the applicable segment rates under Internal Revenue Code Section 417(e) for the plan year beginning on November 1, 2023.
For example, the models assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assume that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities.
The models assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assume that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities.
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.
If the 69 restructured loan is on accrual status prior to being modified, we review it to determine if the modified loan should remain on accrual status.
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 21.6% for the year ended December 31, 2022, 21.0% for the year ended December 31, 2021 and 21.8% for the year ended December 31, 2020.
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% for the year ended December 31, 2023, 21.6% for the year ended December 31, 2022 and 21.0% for the year ended December 31, 2021.
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.
Our non-GAAP financial measures should not be considered as an alternative or substitute to GAAP net income from continuing operations, 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.
For information regarding our pension and other postretirement benefit plans including our pension contributions, investment strategies, assumptions, the change in benefit obligation and related plan assets, pension funding requirements and future net benefit payments, refer to Note 2, “Summary of Significant Accounting Policies” and Note 17, “Employee Benefits” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.
For information regarding our pension and other postretirement benefit plans including our pension contributions, investment strategies, assumptions, the change in benefit obligation and related plan assets, pension funding requirements and future net benefit payments, refer to Note 2, “Summary of Significant Accounting Policies” and Note 15, “Employee Benefits” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.
The amendments in this update eliminate the accounting guidance 90 on troubled debt restructurings (“TDRs”) for creditors in ASC 310-40 and amends the guidance on vintage disclosures, referenced in ASC 326-20-50, to require disclosure of current-period gross write-offs by year of origination.
The amendments in this update eliminate the accounting guidance on troubled debt restructurings (“TDRs”) for creditors in ASC 310-40 and amend the guidance on vintage disclosures, referenced in ASC 326-20-50, to require disclosure of current-period gross write-offs by year of origination.
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.
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 funding sources and our access to additional funds.
For additional discussion of our allowance for credit losses measurement methodology, see Note 2, “Summary of Significant Accounting Policies” and Note 5, “Loans and Allowance for Loan Losses” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.
For additional discussion of our allowance for credit losses measurement methodology, see Note 2, “Summary of Significant Accounting Policies” and Note 4, “Loans and Allowance for Loan Losses” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.
We attempt to manage interest rate risk by identifying, quantifying, and, where appropriate, hedging our exposure. Approximately 34% of the outstanding principal balance of our loans as of December 31, 2022 was indexed to a market rate that is expected to reprice along with the federal funds rate.
We attempt to manage interest rate risk by identifying, quantifying, and, where appropriate, hedging our exposure. Approximately 33% of the outstanding principal balance of our loans as of December 31, 2023 was indexed to a market rate that is expected to reprice along with the federal funds rate.
(2) As of December 31, 2022 and December 31, 2021, loans have been pledged to the FHLBB with a carrying value of $3.9 billion and $2.6 billion, respectively, to secure our total borrowing capacity.
(2) As of December 31, 2023 and 2022, loans have been pledged to the FHLBB with a carrying value of $4.6 billion and $3.9 billion, respectively, to secure our total borrowing capacity.
For more detail regarding such hedging financial instruments, refer to Note 19, “Derivative Financial Instruments” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.
For more detail regarding such hedging financial instruments, refer to Note 18, “Derivative Financial Instruments” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.
The effects of actual results differing from assumptions and the changing of assumptions are included in unamortized net actuarial gains and losses that are subject to amortization to pension expense over future periods. The unamortized pre-tax actuarial loss on all of our pension plans was $99.0 million and $128.4 million at December 31, 2022 and December 31, 2021, respectively.
The effects of actual results differing from assumptions and the changing of assumptions are included in unamortized net actuarial gains and losses that are subject to amortization to pension expense over future periods. The unamortized pre-tax actuarial loss on all of our pension plans was $69.7 million and $99.0 million at December 31, 2023 and December 31, 2022, respectively.
We had total assets of $22.6 billion and $23.5 billion at December 31, 2022 and 2021, respectively. We are subject to comprehensive regulation and examination by the Massachusetts Commissioner of Banks, the Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve Board and the Consumer Financial Protection Bureau.
We had total assets of $21.1 billion and $22.6 billion at December 31, 2023 and 2022, respectively. We are subject to comprehensive regulation and examination by the Massachusetts Commissioner of Banks, the Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve Board and the Consumer Financial Protection Bureau.
This requires subjective projections of future taxable income resulting from interest on loans and securities, as well as noninterest income. A valuation allowance is established if it is considered more likely than not that all or a portion of the deferred tax assets will not be realized.
This requires subjective projections of future taxable income resulting from interest on loans and securities, as well as noninterest income. A valuation allowance is established if it is considered more-likely-than-not that all or a portion of the deferred tax assets will not be realized. Interest and penalties paid on the underpayment of income taxes are classified as income tax expense.
The table below represents an analysis of our interest rate risk 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, -200 basis points) at December 31, 2022 and (+200, +300, +400 basis points and -100 basis points) December 31, 2021.
The tables below represent an analysis of our interest rate risk as measured by the estimated changes in our EVE, resulting from an instantaneous and sustained parallel shift in the yield curve (+100, +200, +400 basis points and -100, -200, and -400 basis points) at December 31, 2023 and (+200, +300, +400 basis points and -100, -200 basis points) at December 31, 2022.
(2) Insufficient data available to report. The delinquency rate of our total loan portfolio decreased to 0.50% at December 31, 2022 from 0.65% at December 31, 2021.
(2) Insufficient data available to report. The delinquency rate of our total loan portfolio decreased to 0.41% at December 31, 2023 from 0.50% at December 31, 2022.
For commercial and industrial, commercial real estate, commercial construction and business banking portfolios, the quantitative model uses a loan rating system which is comprised of management’s determination of probability of default, or “PD,” loss given default, or “LGD” and exposure at default, or “EAD,” which are derived from historical loss experience and other factors.
For commercial and industrial, commercial real estate, commercial construction and business banking portfolios, the quantitative model uses a loan rating system which is comprised of management’s determination of probability of default, or PD, loss given default, or LGD, and exposure at default, or EAD, which are derived from historical loss experience and other factors.
We participate in the IntraFi Network, 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 IntraFi Network banks depending on our funding needs.
We participate in the IntraFi Network, which allows us to provide access to FDIC deposit insurance protection on customer deposits for consumers, businesses and public entities that exceed same-bank FDIC insurance thresholds. We can elect to sell or repurchase this funding as reciprocal deposits from other IntraFi Network banks depending on our funding needs.
We did not have trading investments at December 31, 2022 and 2021. A portion of our securities portfolio continues to be tax-exempt. Investments in federally tax-exempt securities totaled $182.9 million at December 31, 2022 compared to $279.8 million at December 31, 2021.
We did not have trading investments at December 31, 2023 and 2022. A portion of our securities portfolio continues to be tax-exempt. Investments in federally tax-exempt securities totaled $191.1 million at December 31, 2023 compared to $182.9 million at December 31, 2022.
The model requires that interest rates remain positive for all points along the yield curve for each rate scenario which may preclude the 92 modeling of certain falling rate scenarios during periods of lower market interest rates.
Additionally, 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. We do not model negative interest rate scenarios.
Interest rate risk is the sensitivity of the net present value of assets and liabilities and/or 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.
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.
Expected lifetime losses are estimated on a collective basis for loans sharing similar risk characteristics and are determined using a quantitative model combined with an assessment of certain qualitative factors designed to address forecast 88 risk and model risk inherent in the quantitative model output.
Management uses a methodology to systematically estimate the amount of expected lifetime losses in the portfolio. Expected lifetime losses are estimated on a collective basis for loans sharing similar risk characteristics and are determined using a quantitative model combined with an assessment of certain qualitative factors designed to address forecast risk and model risk inherent in the quantitative model output.
Market risk is the sensitivity of the net present value of assets and liabilities and/or 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 sensitivity is the most significant market risk to which we are exposed. Interest rate risk is the sensitivity of the net present value of assets and liabilities and/or income to changes in interest rates.
For additional information regarding this charge, refer to Note 17, “Employee Benefits” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.
For additional information, refer to Note 15, “Employee Benefits” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.
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. 72 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: • known increases 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; • lending policies and procedures, including underwriting standards and collection, charge-off and recovery practices; and • current and forecasted banking industry conditions, as well as the regulatory and competitive environment.
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 possesses unique risk characteristics that are considered when determining the appropriate level of allowance for loan losses, including: • 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; • lending policies and procedures, including underwriting standards and collection, charge-off and recovery practices; and • current and forecasted banking industry conditions, as well as the regulatory and competitive environment.
We may elect to raise additional capital through the sale of additional equity or debt financing to fund business activities such as strategic acquisitions, share repurchases, or other purposes beyond the next twelve months. At December 31, 2022, we had $169.5 million of cash and cash equivalents, a decrease of $1.1 billion from $1.2 billion at December 31, 2021.
We may elect to raise additional capital through the sale of additional equity or debt financing to fund business activities such as strategic acquisitions, share repurchases, or other purposes beyond the next twelve months. At December 31, 2023, we had $693.1 million of cash and cash equivalents, an increase of $523.6 million from $169.5 million at December 31, 2022.
We held an investment in the FHLBB of $41.4 million and $10.9 million at December 31, 2022 and 2021, respectively. The amount of stock we are required to purchase is in proportional to our FHLB borrowings and level of total assets. Accordingly, the increase in the FHLB stock is due to increased borrowing.
We held an investment in the FHLBB of $5.9 million and $41.4 million at December 31, 2023 and 2022, respectively. The amount of stock we are required to purchase is in proportional to our FHLB borrowings and level of total assets. Accordingly, the decrease in the FHLB stock is due to decreased borrowings.
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.
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 assets and liabilities, as well as other aspects of our business. Governance.
As a result of the study, it was determined that the weighted-average long-term rate of return on assets in effect at December 31, 2021 of 7.00%, should be increased to 7.50% at December 31, 2022. Another key assumption in determining net pension expense is the assumed discount rate used to discount plan obligations.
As a result of the study, it was determined that the weighted-average long-term rate of return on assets of 7.50% was reasonable as of December 31, 2023. Another key assumption in determining net pension expense is the assumed discount rate used to discount plan obligations.
The following table illustrates the sensitivity to a change in certain assumptions for the pension plans, holding all other assumptions constant: Effect on 2023 Pension Expense Effect on December 31, 2022 Pension Benefit Obligation (in thousands) 25 basis point decrease in discount rate $ 539 $ 7,786 25 basis point increase in discount rate (519) (7,472) 25 basis point decrease in expected rate of return on plan assets 1,005 N/A 25 basis point increase in expected rate of return on plan assets (1,005) N/A 25 basis point decrease in lump sum conversion rates 494 3,558 25 basis point increase in lump sum conversion rates (472) (3,404) Recent Accounting Pronouncements In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”).
The following table illustrates the sensitivity to a change in certain assumptions for the pension plans, holding all other assumptions constant: Effect on 2023 Pension Expense Effect on December 31, 2023 Pension Benefit Obligation (in thousands) 25 basis point decrease in discount rate $ 539 $ 9,376 25 basis point increase in discount rate (519) (8,974) 25 basis point decrease in expected rate of return on plan assets 1,005 N/A 25 basis point increase in expected rate of return on plan assets (1,005) N/A 25 basis point decrease in lump sum conversion rates 494 3,032 25 basis point increase in lump sum conversion rates (472) (2,906) Recent Accounting Pronouncements Relevant standards that we adopted during the year ended December 31, 2023: In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”).
The increase as of December 31, 2022 was primarily due to increases in our commercial real estate, residential real estate, and commercial and industrial portfolio balances, partially offset by a decrease in our business banking portfolio, as further noted below: • Our commercial real estate portfolio increased by $632.8 million from December 31, 2021 to December 31, 2022 which was primarily attributable to an increase of $622.0 million in commercial real estate investment loan balances.
The increase as of December 31, 2023 was primarily due to increases in our commercial real estate and residential real estate portfolios, partially offset by a decrease in our commercial and industrial portfolio, as further noted below: • Our commercial real estate portfolio increased by $302.0 million from December 31, 2022 to December 31, 2023 which was primarily attributable to an increase of $329.1 million in commercial real estate investment loan balances.
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. In addition, we may occasionally raise funds through the use of brokered deposits.
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.
These derivatives provide significant protection against falling interest rates. For additional information related to our interest rate derivative financial instruments, see Note 19, “Derivative Financial Instruments” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K Economic Value of Equity Analysis.
For additional information related to our interest rate derivative financial instruments, see Note 18, “Derivative Financial Instruments” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K. 93 Economic Value of Equity Analysis.
The year-over-year change was primarily due to an increase in discount rate assumptions used for determining the benefit obligation and lump sum conversion rates.
The year-over-year change was primarily due to an increase in plan assets and an increase in lump sum conversion rates, partially offset by a decrease in discount rate assumptions used for determining the benefit obligation.
For the retail portfolio, which includes residential real estate, consumer home equity, and other consumer portfolios, we monitor credit quality using the borrower’s FICO score. As of December 31, 2022, 72.3% of retail borrowers, based on loan balance, have a FICO score of 740 or greater.
For the retail portfolio, which includes residential real estate, consumer home equity, and other consumer portfolios, we monitor credit quality using the borrower’s FICO score. As of December 31, 2023, 70.9% of retail borrowers, based on amortized cost balances, have a FICO score of 740 or greater.
While the studies give appropriate consideration to recent plan performance and historical returns, the assumptions are primarily long-term, prospective rates of return. 89 An investment policy study was completed for the Defined Benefit Pension Plan as of December 31, 2022.
While the studies give appropriate consideration to recent plan performance and historical returns, the assumptions are primarily long-term, prospective rates of return. 86 In November 2023, an investment policy study was completed for the Defined Benefit Plan.
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 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. In recent years, we managed our business under two business segments: our banking business and our insurance agency business.
The overfunded status of all of our pension plans improved during the year ended December 31, 2022 to $56.8 million from $44.5 million primarily due to: (i) the favorable effect of an increase in discount rates of $97.6 million; (ii) the favorable effect of an increase in lump sum conversion rates of $39.3 million; and (iii) changes in other actuarial assumptions and demographic data updates; partially offset by (iv) the unfavorable effect of increased service and interest costs of $4.6 million; and (v) actual pension plan investment returns less than expected of $127.0 million.
The overfunded status of all of our pension plans improved during the year ended December 31, 2023 to $69.0 million from $56.8 million primarily due to: (i) actual pension plan investment returns less than expected of $33.7 million; (ii) the favorable effect of an increase in lump sum conversion rates of $5.8 million; and (iii) changes in other actuarial assumptions and demographic data updates; partially offset by (iv) the unfavorable effect of a decrease in discount rates of $7.7 million.
For additional information on our allowance for loan losses, refer to Note 5, “Loans and Allowance for Loan Losses” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K. Income Taxes .
For additional information regarding our allowance for loan losses, see Note 4, “Loans and Allowance for Credit Losses” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.
The allowance for loan losses increased by $44.4 million, or 45.4%, to $142.2 million, or 1.05% of total loans, at December 31, 2022 from $97.8 million, or 0.80% of total loans at December 31, 2021.
The allowance for loan losses increased by $6.8 million, or 4.8%, to $149.0 million, or 1.07% of total loans, at December 31, 2023 from $142.2 million, or 1.05% of total loans at December 31, 2022.
The following table presents the classification of deposits on an average basis for the years indicated: Classification of Deposits on an Average Basis For the Year Ended December 31, 2022 2021 2020 Average Amount Average Rate Average Amount Average Rate Average Amount Average Rate (Dollars in thousands) Demand $ 6,647,518 — % $ 5,547,615 — % $ 4,535,066 — % Interest checking 4,890,709 0.24 % 2,866,091 0.07 % 2,227,185 0.09 % Savings 2,015,651 0.01 % 1,483,271 0.02 % 1,123,584 0.02 % Money market investments 5,057,445 0.27 % 3,870,712 0.06 % 3,212,752 0.23 % Certificates of deposit 463,261 0.70 % 280,141 0.21 % 300,381 0.52 % Total deposits $ 19,074,584 0.15 % $ 14,047,830 0.04 % $ 11,398,968 0.10 % Other time deposits in excess of the FDIC insurance limit of $250,000, including certificates of deposits as of the dates indicated had maturities as follows: Maturities of Time Certificates of Deposit $250,000 and Over As of December 31, 2022 2021 Maturing in (In thousands) Three months or less $ 39,322 $ 113,019 Over three months through six months 45,053 53,899 Over six months through twelve months 149,107 33,295 Over twelve months 5,569 23,827 Total $ 239,051 $ 224,040 Borrowings Our borrowings may consist of both short-term and long-term borrowings and provide us with sources of funding.
The following table presents the classification of deposits on an average basis for the years indicated: Classification of Deposits on an Average Basis For the Year Ended December 31, 2023 2022 2021 Average Amount Average Rate Average Amount Average Rate Average Amount Average Rate (Dollars in thousands) Demand $ 5,404,208 — % $ 6,647,518 — % $ 5,547,615 — % Interest checking 4,070,585 0.60 % 4,890,709 0.24 % 2,866,091 0.07 % Savings 1,515,713 0.01 % 2,015,651 0.01 % 1,483,271 0.02 % Money market investments 4,918,343 2.11 % 5,057,445 0.27 % 3,870,712 0.06 % Certificates of deposit 2,303,520 4.24 % 463,261 0.70 % 280,141 0.21 % Total deposits $ 18,212,369 1.24 % $ 19,074,584 0.15 % $ 14,047,830 0.04 % Other time deposits in excess of the FDIC insurance limit of $250,000, including certificates of deposits as of the dates indicated had maturities as follows: Maturities of Time Certificates of Deposit $250,000 and Over As of December 31, 2023 2022 Maturing in (In thousands) Three months or less $ 278,281 $ 39,322 Over three months through six months 262,761 45,053 Over six months through twelve months 316,408 149,107 Over twelve months 10,146 5,569 Total $ 867,596 $ 239,051 Borrowings Our borrowings may consist of both short-term and long-term borrowings and provide us with sources of funding.
The following table shows the fair value of our securities by investment category as of the dates indicated: Securities Portfolio Composition As of December 31, 2022 2021 (In thousands) Available for sale securities, at fair value: Government-sponsored residential mortgage-backed securities $ 4,111,908 $ 5,524,708 Government-sponsored commercial mortgage-backed securities 1,348,954 1,408,868 U.S. Agency bonds 952,482 1,175,014 U.S.
The following table shows the fair value of our securities by investment category as of the dates indicated: Securities Portfolio Composition As of December 31, 2023 2022 (In thousands) Available for sale securities, at fair value: Government-sponsored residential mortgage-backed securities $ 2,780,638 $ 4,111,908 Government-sponsored commercial mortgage-backed securities 1,124,376 1,348,954 U.S. Agency bonds 216,011 952,482 U.S.
The increase was attributable to increases in both deposit interest expense and borrowings interest expense. • Interest expense on our interest-bearing deposits increased by $23.5 million, or 453.9%, to $28.6 million during the year ended December 31, 2022 from $5.2 million during the year ended December 31, 2021.
The overall increase was attributable to increases in both deposit interest expense and borrowings interest expense. • Interest expense on our interest-bearing deposits increased by $197.5 million to $226.1 million during the year ended December 31, 2023 from $28.6 million during the year ended December 31, 2022.
This decrease was driven by risk rating upgrades in the construction and commercial and industrial portfolios. 69 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.
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.
Weighted average yields in the tables below have been calculated based on the amortized cost of the security: Securities Portfolio, Weighted-Average Yield Securities Maturing as of December 31, 2022 (1) Within One Year After One Year But Within Five Years After Five Years But Within Ten Years After Ten Years Total Available for sale securities: Government-sponsored residential mortgage-backed securities — % 2.27 % 1.00 % 1.53 % 1.45 % Government-sponsored commercial mortgage-backed securities — 1.29 1.51 1.94 1.68 U.S.
Weighted average yields in the tables below have been calculated based on the amortized cost of the security: Securities Portfolio, Weighted-Average Yield Securities Maturing as of December 31, 2023 (1) Within One Year After One Year But Within Five Years After Five Years But Within Ten Years After Ten Years Total Available for sale securities: Government-sponsored residential mortgage-backed securities — % 2.35 % 1.90 % 1.59 % 1.60 % Government-sponsored commercial mortgage-backed securities — 1.92 1.40 1.95 1.79 U.S.
Commitments to extend credit was comprised of $3.4 billion of commitments under commercial loans and lines of credit (including $713.3 million of unadvanced portions of construction loans), $2.0 billion of commitments under home equity loans and lines of credit, $198.6 million in overdraft coverage commitments, $24.9 million of unfunded commitments related to residential real estate loans and $56.1 million in other consumer loans and lines of credit as of December 31, 2022.
Commitments to extend credit was comprised of $3.7 billion of commitments under commercial loans and lines of credit (including $826.2 million of unadvanced portions of construction loans), $2.1 billion of commitments under home equity loans and lines of credit, $201.3 million in overdraft coverage commitments, $5.1 million of unfunded commitments related to residential real estate loans and $60.1 million in other consumer loans and lines of credit as of December 31, 2023.
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.
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.
For discussion of our previous methodology for estimating the allowance for loan losses, refer to Note 6, “Loans and Allowance for Loan Losses” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K and Note 2, “Summary of Significant Accounting Policies” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“2021 Form 10-K”).
For discussion of our previous methodology for estimating the allowance for loan losses, refer to Note 4, “Loans and Allowance for Loan Losses” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K.
Non-accrual residential real estate and consumer home equity loans increased primarily due to several loans moving to non-accrual status which had been acquired in connection with our acquisition of Century. 74 The following tables sets forth the allocation of the allowance for loan losses by loan categories listed in loan portfolio composition and the related loan balances as a percentage of total loans as of the dates indicated: Summary of Allocation of Allowance for Loan Losses As of December 31, 2022 2021 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) Commercial and industrial (1) $ 26,859 18.89 % 23.21 % $ 18,018 18.43 % 24.10 % Commercial real estate 54,730 38.49 % 37.97 % 52,373 53.56 % 36.82 % Commercial construction 7,085 4.98 % 2.48 % 2,585 2.64 % 1.81 % Business banking (1) 16,189 11.38 % 8.03 % 10,983 11.23 % 10.87 % Residential real estate 28,129 19.78 % 18.13 % 6,556 6.70 % 15.69 % Consumer home equity 6,454 4.54 % 8.75 % 3,722 3.81 % 8.96 % Other consumer 2,765 1.94 % 1.43 % 3,308 3.38 % 1.75 % Other — — % — % 242 0.25 % — % Total $ 142,211 100.00 % 100.00 % $ 97,787 100.00 % 100.00 % As of December 31, 2020 2019 2018 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) Commercial and industrial (1) $ 26,617 23.54 % 20.51 % $ 20,919 25.42 % 18.27 % $ 19,321 23.96 % 18.73 % Commercial real estate 54,569 48.28 % 36.73 % 34,730 42.20 % 39.34 % 32,400 40.17 % 36.26 % Commercial construction 4,553 4.03 % 3.14 % 3,424 4.16 % 3.05 % 4,606 5.71 % 3.53 % Business banking (1) 13,152 11.64 % 13.76 % 8,260 10.04 % 8.58 % 8,167 10.13 % 8.37 % Residential real estate 6,435 5.69 % 14.09 % 6,380 7.75 % 15.90 % 7,059 8.75 % 16.16 % Consumer home equity 3,744 3.31 % 8.92 % 4,027 4.89 % 10.38 % 4,113 5.10 % 10.72 % Other consumer 3,467 3.07 % 2.85 % 4,173 5.07 % 4.48 % 4,600 5.70 % 6.23 % Other 494 0.44 % — % 384 0.47 % — % 389 0.48 % — % Total $ 113,031 100.00 % 100.00 % $ 82,297 100.00 % 100.00 % $ 80,655 100.00 % 100.00 % (1) PPP loans are included within these portfolios as of December 31, 2022, December 31, 2021, and December 31, 2020; however, as of each such date, no allowance for loan losses was recorded on these loans due to the SBA guarantee of 100% of the loans.
The following tables sets forth the allocation of the allowance for loan losses by loan categories listed in loan portfolio composition and the related loan balances as a percentage of total loans as of the dates indicated: Summary of Allocation of Allowance for Loan Losses As of December 31, 2023 2022 Allowance for Loan Losses Percent of Allowance in Category to Total Allowance Percent of Loans in Category to Total Loans Allowance for Loan Losses Percent of Allowance in Category to Total Allowance Percent of Loans in Category to Total Loans (Dollars in thousands) Commercial and industrial $ 26,959 18.09 % 21.71 % $ 26,859 18.89 % 23.21 % Commercial real estate 65,475 43.95 % 39.05 % 54,730 38.49 % 37.97 % Commercial construction 6,666 4.47 % 2.77 % 7,085 4.98 % 2.48 % Business banking 14,913 10.01 % 7.77 % 16,189 11.38 % 8.03 % Residential real estate 25,954 17.42 % 18.36 % 28,129 19.78 % 18.13 % Consumer home equity 5,595 3.76 % 8.65 % 6,454 4.54 % 8.75 % Other consumer 3,431 2.30 % 1.69 % 2,765 1.94 % 1.43 % Total $ 148,993 100.00 % 100.00 % $ 142,211 100.00 % 100.00 % As of December 31, 2021 2020 2019 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) Commercial and industrial $ 18,018 18.43 % 24.10 % $ 26,617 23.54 % 20.51 % $ 20,919 25.42 % 18.27 % Commercial real estate 52,373 53.56 % 36.82 % 54,569 48.28 % 36.73 % 34,730 42.20 % 39.34 % Commercial construction 2,585 2.64 % 1.81 % 4,553 4.03 % 3.14 % 3,424 4.16 % 3.05 % Business banking 10,983 11.23 % 10.87 % 13,152 11.64 % 13.76 % 8,260 10.04 % 8.58 % Residential real estate 6,556 6.70 % 15.69 % 6,435 5.69 % 14.09 % 6,380 7.75 % 15.90 % Consumer home equity 3,722 3.81 % 8.96 % 3,744 3.31 % 8.92 % 4,027 4.89 % 10.38 % Other consumer 3,308 3.38 % 1.75 % 3,467 3.07 % 2.85 % 4,173 5.07 % 4.48 % Other 242 0.25 % — % 494 0.44 % — % 384 0.47 % — % Total $ 97,787 100.00 % 100.00 % $ 113,031 100.00 % 100.00 % $ 82,297 100.00 % 100.00 % To determine if a loan should be charged-off, all possible sources of repayment are analyzed.
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.
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. Non-performing assets (“NPAs”) are comprised of non-performing loans (“NPLs”), OREO and non-performing securities.
For discussion of our previous methodology for estimating the allowance for loan losses, refer to Note 6, “Loans and Allowance for Loan Losses” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K and Note 2, “Summary of Significant Accounting Policies” included in Part II, Item 8 of the 2021 Form 10-K. 73 The following table summarizes credit ratios for the periods presented: Credit Ratios For the Year Ended December 31, 2022 2021 2020 2019 2018 (Dollars in thousands) Net loan charge-offs (recoveries): Commercial and industrial $ (1,053) $ 623 $ 992 $ (2,625) $ 893 Commercial real estate (91) 243 (206) (12) (83) Commercial construction — — — — — Business banking 223 3,567 4,855 5,370 5,970 Residential real estate (94) (87) (125) (39) (125) Consumer home equity (23) (161) 421 153 225 Other consumer 1,625 1,373 2,129 1,811 1,676 Total net loan charge-offs (recoveries) $ 587 $ 5,558 $ 8,066 $ 4,658 $ 8,556 Average loans: Commercial and industrial $ 2,944,064 $ 2,015,665 $ 2,053,093 $ 1,419,875 $ 1,185,224 Commercial real estate 4,886,951 3,960,818 3,654,887 3,667,147 3,402,560 Commercial construction 294,805 191,771 226,286 263,736 327,781 Business banking 1,021,720 1,241,770 1,079,779 738,652 738,122 Residential real estate 2,063,193 1,508,796 1,398,337 1,438,775 1,357,116 Consumer home equity 1,129,757 869,110 902,634 948,089 934,681 Other consumer 197,659 233,932 334,257 471,602 619,406 Average total loans (1) $ 12,538,149 $ 10,021,862 $ 9,649,273 $ 8,947,876 $ 8,564,890 Total net charge-offs (recoveries) to average total loans outstanding during the period Commercial and industrial (0.04) % 0.03 % 0.05 % (0.18) % 0.08 % Commercial real estate 0.00 0.01 (0.01) 0.00 0.00 Commercial construction — — — — — Business banking 0.02 0.29 0.45 0.73 0.81 Residential real estate 0.00 (0.01) (0.01) 0.00 (0.01) Consumer home equity 0.00 (0.02) 0.05 0.02 0.02 Other consumer 0.82 0.59 0.64 0.38 0.27 Total net charge-offs (recoveries) to average total loans outstanding during the period 0.00 % 0.06 % 0.08 % 0.05 % 0.10 % Total loans $ 13,575,531 $ 12,281,510 $ 9,730,525 $ 8,987,046 $ 8,856,003 Total non-accrual loans $ 38,604 $ 32,993 $ 41,005 $ 42,451 $ 26,172 Allowance for loan losses $ 142,211 $ 97,787 $ 113,031 $ 82,297 $ 80,655 Allowance for loan losses as a percent of total loans 1.05 % 0.80 % 1.16 % 0.92 % 0.91 % Non-accrual loans as a percent of total loans 0.28 % 0.27 % 0.42 % 0.47 % 0.30 % Allowance for loan losses as a percent of non-accrual loans 368.38 % 296.39 % 275.65 % 193.86 % 308.17 % (1) Average loan balances exclude loans held for sale.
For additional discussion of the change in allowance for loan losses, refer to the later “ Provision for Loan Losses ,” included in the “Results of Operations” section within this Item 7. 72 The following table summarizes credit ratios for the periods presented: Credit Ratios For the Year Ended December 31, 2023 2022 2021 2020 2019 (Dollars in thousands) Net loan charge-offs (recoveries): Commercial and industrial $ (283) $ (1,053) $ 623 $ 992 $ (2,625) Commercial real estate 7,810 (91) 243 (206) (12) Commercial construction — — — — — Business banking 2,778 223 3,567 4,855 5,370 Residential real estate (97) (94) (87) (125) (39) Consumer home equity (34) (23) (161) 421 153 Other consumer 1,953 1,625 1,373 2,129 1,811 Total net loan charge-offs $ 12,127 $ 587 $ 5,558 $ 8,066 $ 4,658 Average loans: Commercial and industrial $ 3,197,668 $ 2,944,064 $ 2,015,665 $ 2,053,093 $ 1,419,875 Commercial real estate 5,377,304 4,886,951 3,960,818 3,654,887 3,667,147 Commercial construction 357,499 294,805 191,771 226,286 263,736 Business banking 981,496 1,021,720 1,241,770 1,079,779 738,652 Residential real estate 2,536,374 2,063,193 1,508,796 1,398,337 1,438,775 Consumer home equity 1,193,270 1,129,757 869,110 902,634 948,089 Other consumer 188,476 197,659 233,932 334,257 471,602 Average total loans (1) $ 13,832,087 $ 12,538,149 $ 10,021,862 $ 9,649,273 $ 8,947,876 Total net charge-offs (recoveries) to average total loans outstanding during the period Commercial and industrial (0.01) % (0.04) % 0.03 % 0.05 % (0.18) % Commercial real estate 0.15 0.00 0.01 (0.01) 0.00 Commercial construction — — — — — Business banking 0.28 0.02 0.29 0.45 0.73 Residential real estate 0.00 0.00 (0.01) (0.01) 0.00 Consumer home equity 0.00 0.00 (0.02) 0.05 0.02 Other consumer 1.04 0.82 0.59 0.64 0.38 Total net charge-offs to average total loans outstanding during the period 0.09 % 0.00 % 0.06 % 0.08 % 0.05 % Total loans $ 13,973,428 $ 13,575,531 $ 12,281,510 $ 9,730,525 $ 8,987,046 Total non-accrual loans $ 52,557 $ 38,604 $ 32,993 $ 41,005 $ 42,451 Allowance for loan losses $ 148,993 $ 142,211 $ 97,787 $ 113,031 $ 82,297 Allowance for loan losses as a percent of total loans 1.07 % 1.05 % 0.80 % 1.16 % 0.92 % Non-accrual loans as a percent of total loans 0.38 % 0.28 % 0.27 % 0.42 % 0.47 % Allowance for loan losses as a percent of non-accrual loans 283.49 % 368.38 % 296.39 % 275.65 % 193.86 % (1) Average loan balances exclude loans held for sale. 73 Non-accrual loans increased $14.0 million, or 36%, to $52.6 million at December 31, 2023 from $38.6 million at December 31, 2022, primarily due to an increase in commercial real estate non-accrual loans of $30.1 million partially offset by a decrease in commercial and industrial non-accrual loans of $13.5 million.
Net income for the year ended December 31, 2022 and 2021 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 year ended December 31, 2022 was $213.3 million compared to $165.9 million for the year ended December 31, 2021.
Net loss from continuing operations for the year ended December 31, 2023 and net income from continuing operations for the year ended December 31, 2022 included items that our management considers non-core, which management excludes for purposes of assessing our operating net income, a non-GAAP financial measure.
We consider our loan portfolio to be relatively diversified by borrower and industry. Our loans increased $1.3 billion, or 10.5%, to $13.6 billion at December 31, 2022 from $12.3 billion at December 31, 2021.
We consider our loan portfolio to be relatively diversified by borrower and industry. Our loans increased $0.4 billion, or 2.9%, to $14.0 billion at December 31, 2023 from $13.6 billion at December 31, 2022.
To illustrate the sensitivity of the modeled result to the impact of a hypothetical change in the economic forecast, management calculated the allowance for loan losses assuming the downside economic forecast scenario and, separately, the upside economic forecast scenario were used.
To illustrate the sensitivity of the modeled result to the impact of a hypothetical change in the economic forecast, management calculated the allowance for loan losses assuming the downside economic forecast scenario and, separately, the upside economic forecast scenario. The downside scenario assumed the U.S. economy will experience a decline in GDP in 2024 of 0.7%.
The upside scenario assumed GDP growth of 1.4% in 2023, 1.9% in 2024 and sustained recovery. Use of the upside scenario would have resulted in an incremental decrease in the allowance for loan losses of approximately $3.1 million as of December 31, 2022.
Use of the downside scenario would have resulted in an incremental increase in the allowance for loan losses of approximately $12.3 million as of December 31, 2023. The upside scenario assumed GDP growth of 2.5% in 2024 along with 82 sustained recovery.
Non-performing assets (“NPAs”) are comprised of non-performing loans (“NPLs”), OREO and non-performing securities. NPLs consist of 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.
NPLs consist of 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 fair value less estimated costs to sell on the date we obtain control.
(2) Represents a non-cash settlement charge related to the Defined Benefit Plan. For additional information regarding this charge, refer to Note 17, “Employee Benefits” within the Notes to the Consolidated Financial Statements included in Item 8 in this Annual Report on Form 10-K.
Refer to Note 23, “Discontinued Operations” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K for additional discussion. (2) Represents a non-cash settlement loss for the year ended December 31, 2022 related to the Defined Benefit Plan.
Treasury securities 93,057 88,605 State and municipal bonds and obligations 183,092 280,329 Small business administration pooled securities — 32,103 Other debt securities 1,285 1,597 Total available for sale securities, at fair value 6,690,778 8,511,224 Held to maturity securities, at amortized cost: Government-sponsored residential mortgage-backed securities 276,493 — Government-sponsored commercial mortgage-backed securities 200,154 — Total held to maturity securities, at amortized cost 476,647 — Total $ 7,167,425 $ 8,511,224 Our securities portfolio has decreased $1.3 billion, or 15.8%, to $7.2 billion at December 31, 2022 from $8.5 billion at December 31, 2021.
Treasury securities 95,152 93,057 State and municipal bonds and obligations 191,344 183,092 Other debt securities — 1,285 Total available for sale securities, at fair value 4,407,521 6,690,778 Held to maturity securities, at amortized cost: Government-sponsored residential mortgage-backed securities 254,752 276,493 Government-sponsored commercial mortgage-backed securities 194,969 200,154 Total held to maturity securities, at amortized cost 449,721 476,647 Total $ 4,857,242 $ 7,167,425 Our securities portfolio has decreased $2.3 billion, or 32.2%, to $4.9 billion at December 31, 2023 from $7.2 billion at December 31, 2022.
At December 31, 2022, we had $704.1 million in outstanding advances and the ability to borrow up to an additional $2.0 billion. We also have the ability to borrow from the Federal Reserve Bank of Boston. At December 31, 2022, we had a $538.9 million collateralized line of credit from the Federal Reserve Bank of Boston with no outstanding balance.
We have the ability to borrow from the FHLBB. At December 31, 2023, we had $17.7 million in outstanding advances and the ability to borrow up to an additional $2.9 billion. We also have the ability to borrow from the Federal Reserve Bank of Boston.
The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense. 80 Average Balances, Interest Earned/Paid, & Average Yields/Costs As of and for the Year Ended December 31, 2022 2021 2020 Average Outstanding Balance Interest Average Yield /Cost Average Outstanding Balance Interest Average Yield /Cost Average Outstanding Balance Interest Average Yield /Cost (Dollars in thousands) Interest-earning assets: Loans (1): Residential $ 2,064,609 $ 63,803 3.09 % $ 1,510,703 $ 47,143 3.12 % $ 1,400,907 $ 49,767 3.55 % Commercial 9,147,540 366,097 4.00 % 7,410,024 288,557 3.89 % 7,014,044 281,816 4.02 % Consumer 1,327,417 56,965 4.29 % 1,103,042 36,019 3.27 % 1,236,893 43,729 3.54 % Total loans 12,539,566 486,865 3.88 % 10,023,769 371,719 3.71 % 9,651,844 375,312 3.89 % Non-taxable investment securities 253,651 9,091 3.58 % 260,399 9,335 3.58 % 265,511 9,899 3.73 % Taxable investment securities 8,413,217 118,690 1.41 % 4,890,737 58,312 1.19 % 1,560,610 31,831 2.04 % Other short-term investments 420,834 3,271 0.78 % 1,514,351 1,886 0.12 % 1,288,714 1,758 0.14 % Total interest-earning assets 21,627,268 617,917 2.86 % 16,689,256 441,252 2.64 % 12,766,679 418,800 3.28 % Non-interest-earning assets 986,865 1,173,830 1,097,064 Total assets $ 22,614,133 $ 17,863,086 $ 13,863,743 Interest-bearing liabilities: Deposits: Savings accounts $ 2,015,651 $ 209 0.01 % $ 1,483,271 $ 230 0.02 % $ 1,123,584 $ 242 0.02 % Interest checking accounts 4,890,709 11,675 0.24 % 2,866,091 1,997 0.07 % 2,227,185 2,033 0.09 % Money market investments 5,057,445 13,479 0.27 % 3,870,712 2,342 0.06 % 3,212,752 7,492 0.23 % Time accounts 463,261 3,258 0.70 % 280,141 598 0.21 % 300,381 1,548 0.52 % Total interest-bearing deposits 12,427,066 28,621 0.23 % 8,500,215 5,167 0.06 % 6,863,902 11,315 0.16 % Federal funds purchased (7) 964 24 2.49 % — — — % 45,204 570 1.26 % Other borrowings 255,668 8,482 3.32 % 26,495 165 0.62 % 26,897 192 0.71 % Total interest-bearing liabilities 12,683,698 37,127 0.29 % 8,526,710 5,332 0.06 % 6,936,003 12,077 0.17 % Demand accounts 6,647,518 5,547,615 4,535,066 Other noninterest-bearing liabilities 451,384 364,191 352,518 Total liabilities 19,782,600 14,438,516 11,823,587 Shareholders’ equity 2,831,533 3,424,570 2,040,156 Total liabilities and shareholders’ equity $ 22,614,133 $ 17,863,086 $ 13,863,743 Net interest income - FTE $ 580,790 $ 435,920 $ 406,723 Net interest rate spread (2) 2.57 % 2.58 % 3.11 % Net interest-earning assets (3) $ 8,943,570 $ 8,162,546 $ 5,830,676 Net interest margin - FTE (4) 2.69 % 2.61 % 3.19 % Average interest-earning assets to interest-bearing liabilities 170.51 % 195.73 % 184.06 % Return on average assets (5) 0.88 % 0.87 % 0.16 % Return on average equity (6) 7.05 % 4.52 % 1.11 % Noninterest expenses to average assets 2.08 % 2.49 % 3.64 % (1) Non-accrual loans are included in Loans.
Average asset and liability balances included in discontinued operations are included in non-interest-earnings assets and liabilities, respectively. 79 Average Balances, Interest Earned/Paid, & Average Yields/Costs As of and for the Year Ended December 31, 2023 2022 2021 Average Outstanding Balance Interest Average Yield /Cost Average Outstanding Balance Interest Average Yield /Cost Average Outstanding Balance Interest Average Yield /Cost (Dollars in thousands) Interest-earning assets: Loans (1): Residential $ 2,538,588 $ 90,139 3.55 % $ 2,064,609 $ 63,803 3.09 % $ 1,510,703 $ 47,143 3.12 % Commercial 9,913,968 491,427 4.96 % 9,147,540 366,097 4.00 % 7,410,024 288,557 3.89 % Consumer 1,381,745 86,167 6.24 % 1,327,417 56,965 4.29 % 1,103,042 36,019 3.27 % Total loans 13,834,301 667,733 4.83 % 12,539,566 486,865 3.88 % 10,023,769 371,719 3.71 % Non-taxable investment securities 197,682 7,279 3.68 % 253,651 9,091 3.58 % 260,399 9,335 3.58 % Taxable investment securities 6,050,024 101,233 1.67 % 8,413,217 118,690 1.41 % 4,890,737 58,312 1.19 % Other short-term investments 720,864 37,395 5.19 % 420,834 3,271 0.78 % 1,514,351 1,886 0.12 % Total interest-earning assets 20,802,871 813,640 3.91 % 21,627,268 617,917 2.86 % 16,689,256 441,252 2.64 % Non-interest-earning assets 921,622 986,865 1,173,830 Total assets $ 21,724,493 $ 22,614,133 $ 17,863,086 Interest-bearing liabilities: Deposits: Savings accounts $ 1,515,713 $ 217 0.01 % $ 2,015,651 $ 209 0.01 % $ 1,483,271 $ 230 0.02 % Interest checking accounts 4,070,585 24,235 0.60 % 4,890,709 11,675 0.24 % 2,866,091 1,997 0.07 % Money market investments 4,918,343 104,002 2.11 % 5,057,445 13,479 0.27 % 3,870,712 2,342 0.06 % Time accounts 2,303,520 97,621 4.24 % 463,261 3,258 0.70 % 280,141 598 0.21 % Total interest-bearing deposits 12,808,161 226,075 1.77 % 12,427,066 28,621 0.23 % 8,500,215 5,167 0.06 % Federal funds purchased 8 — — % 964 24 2.49 % — — — % Other borrowings 418,876 19,975 4.77 % 255,668 8,482 3.32 % 26,495 165 0.62 % Total interest-bearing liabilities 13,227,045 246,050 1.86 % 12,683,698 37,127 0.29 % 8,526,710 5,332 0.06 % Demand accounts 5,404,208 6,647,518 5,547,615 Other noninterest-bearing liabilities 522,239 451,384 364,191 Total liabilities 19,153,492 19,782,600 14,438,516 Shareholders’ equity 2,571,001 2,831,533 3,424,570 Total liabilities and shareholders’ equity $ 21,724,493 $ 22,614,133 $ 17,863,086 Net interest income - FTE $ 567,590 $ 580,790 $ 435,920 Net interest rate spread (2) 2.05 % 2.57 % 2.58 % Net interest-earning assets (3) $ 7,575,826 $ 8,943,570 $ 8,162,546 Net interest margin - FTE (4) 2.73 % 2.69 % 2.61 % Average interest-earning assets to interest-bearing liabilities 157.28 % 170.51 % 195.73 % Return on average assets (5) 1.07 % 0.88 % 0.87 % Return on average equity (6) 9.03 % 7.05 % 4.52 % Noninterest expenses to average assets (7) 2.35 % 2.08 % 2.49 % (1) Non-accrual loans are included in loans.

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