Eastern Bankshares Inc.
05/08/2026 | Press release | Distributed by Public on 05/08/2026 12:45
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section is intended to assist in the understanding of the financial performance of the Company and its subsidiaries through a discussion of our financial condition at March 31, 2026, and our results of operations for the three months ended March 31, 2026 and 2025. This section should be read in conjunction with the unaudited interim condensed consolidated financial statements and notes thereto of the Company appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q and the Company's 2025 Form 10-K.
Forward-Looking Statements
When we use the terms "we," "us," "our," and the "Company," we mean Eastern Bankshares, Inc., a Massachusetts corporation, and its consolidated subsidiaries, taken as a whole, unless the context otherwise indicates.
Certain statements contained in this Quarterly Report on Form 10-Q that are not historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements, which are based on certain current assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of the words "may," "will," "should," "could," "would," "plan," "potential," "estimate," "project," "believe," "intend," "anticipate," "expect," "target" and similar expressions.
Forward-looking statements are based on the current assumptions and beliefs of management and are only expectations of future results. The Company's actual results could differ materially from those projected in the forward-looking statements as a result of, among others, the following factors:
•changes in regional, national or international macroeconomic conditions, including tariffs, governmental shutdowns or changes in inflation, recessionary pressures or interest rates in the United States;
•the possibility that future credit losses, loan defaults and charge-off rates are higher than expected due to changes in economic assumptions or adverse economic developments;
•general business and economic conditions on a national basis and in the local markets in which we operate, including those impacting credit quality;
•turbulence in the capital and debt markets and within the banking industry;
•decreases in the value of securities and other assets;
•decreases in deposit levels necessitating increased borrowing to fund loans, investments and other needs;
•competitive pressures from other financial institutions;
•operational risks including, but not limited to, cybersecurity incidents, fraud, new technological integration including AI, natural disasters and future pandemics, including COVID-19;
•a regulatory reform agenda that is significantly different from that of the prior administration, impacting the rulemaking, supervision, examination and enforcement priorities of the federal banking agencies, including risks related to the administration's increased focus on widespread implementation of stablecoins and other digital assets;
•changes in regulation, regulatory policy, legislation, accounting standards and practices, and fiscal monetary policy, particularly in light of the shift in presidential administrations and the potential for related shifts in agency policy and leadership;
•the risk that goodwill and intangibles recorded in our financial statements will become impaired;
•risks related to the implementation of acquisitions, dispositions, and restructurings, including our 2025 merger with HarborOne Bancorp and HarborOne Bank, which is further described in Part I, Item 1 of our 2025 Annual Report on Form 10-K under "Recent Acquisitions - Bank Acquisitions", including that revenue and expense synergies or other expected benefits may not materialize or in the time frame originally anticipated or may be more costly to achieve than anticipated and that the combined businesses may not perform as expected;
•potential risks related to the integration of our completed or pending acquisitions may not materialize or may be more costly to achieve than anticipated and that the combined businesses may not perform as expected;
•the risk that we may not be successful in the implementation of our business strategy;
•changes in assumptions used in making such forward-looking statements; and
•other risks and uncertainties detailed in Part I, Item 1A of our 2025 Form 10-K and as may be further updated in our filings with the SEC from time to time.
Forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results could differ from these estimates. Our significant accounting policies are discussed in detail in our 2025 Form 10-K, as updated by the notes to our Unaudited Interim Condensed Consolidated Financial Statements accompanying this Quarterly Report on Form 10-Q.
There have been no other material changes in critical accounting policies during the three months ended March 31, 2026.
Overview
We are a bank holding company, and our principal subsidiary, Eastern Bank, is a Massachusetts-chartered bank that has served the banking needs of our customers since 1818. Our business philosophy is to operate as a diversified financial services enterprise providing a broad array of banking and other financial services primarily to retail, commercial and small business customers. We had total assets of $30.6 billion at both March 31, 2026 and December 31, 2025. We are subject to comprehensive regulation and examination by the Massachusetts Commissioner of Banks, the New Hampshire Banking Department, the FDIC, the Federal Reserve Board and the Consumer Financial Protection Bureau. Our 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 under our "Cambridge Trust Wealth Management, a division of Eastern Bank" brand name ("Cambridge Trust Wealth Management division").
Net income for the three months ended March 31, 2026 computed in accordance with GAAP was $65.3 million, as compared to a net loss of $217.7 million for the three months ended March 31, 2025. The increase in net income for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to losses on sales of available for sale securities during the three months ended March 31, 2025, which did not recur during the three months ended March 31, 2026. Refer to the later sections titled "Results of Operations" within this Item 2 for additional discussion.
Net income for the three months ended March 31, 2026, and net loss for the three months ended March 31, 2025 included items that our management considers non-core, which management excludes for purposes of assessing our operating net income, a non-GAAP financial measure. Operating net income for the three months ended March 31, 2026 was $88.6 million, compared to $67.5 million for the three months ended March 31, 2025, representing an increase of $21.1 million, or 31.3%. This increase was primarily due to higher net interest income for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, partially offset by higher noninterest expense on an operating basis for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. See "Non-GAAP Financial Measures" and "Results of Operations" within this Item 2 for a reconciliation of operating net income to net income/(loss) on a GAAP basis and further discussion of noninterest income/(loss) and noninterest expense.
Banking Business
Our banking business offers a range of commercial, retail, wealth management and banking service, and consists primarily of attracting deposits from the general public, including municipalities, and investing those deposits, together with borrowings and funds generated from operations, to originate loans in a variety of sectors and to invest in securities. Our financial condition and results of operations depend primarily on (i) attracting and retaining relatively low cost, stable deposits, (ii) using those deposits to originate and acquire loans and earn net interest income and (iii) operating expenses incurred.
Lending Activities
We use funds obtained from deposits, as well as funds obtained from the FHLBB advances, primarily to originate loans and to invest in securities. Our lending focuses on the following categories of loans:
Commercial Lending
•Commercial and industrial: Loans in this category consist of revolving and term loans extended to businesses and corporate enterprises for the purpose of financing working capital, facilitating equipment purchases and facilitating acquisitions. As of both March 31, 2026 and December 31, 2025, we had total commercial and industrial loans of $4.3 billion, representing 19.0% and 18.6%, respectively, of our total loans as of each period end. The primary risk associated with commercial and industrial loans is the ability of borrowers to achieve business results consistent with those projected at origination. Our primary focus for commercial and industrial loans is middle-market companies located in the markets we serve. In addition, we participate in the syndicated loan market and the SNC Program. Our commercial and industrial portfolio also includes our Asset Based Lending Portfolio ("ABL Portfolio") and industrial revenue bonds ("IRBs") which are municipal bonds issued to finance major capital projects. The majority of our IRB portfolio is in educational and other non-profit sectors.
•Commercial real estate: Loans in this category include mortgage loans and lines of credit on commercial real estate, both investment and owner occupied. Property types financed include office, industrial, multi-family, affordable housing, retail, hotel, and other type properties. As of both March 31, 2026 and December 31, 2025, we had total commercial real estate loans of $9.4 billion, representing 40.9% and 40.8%, respectively, of our total loans as of each period end. As of both March 31, 2026 and December 31, 2025, owner occupied loans totaled $1.2 billion, representing 12.8% and 12.9%, respectively, of our commercial real estate loans as of each period end. Collateral values are established by independent third-party appraisals and evaluations. The primary repayment sources include operating income generated by the real estate, permanent debt refinancing and/or the sale of the real estate. Our commercial real estate loan portfolio also includes loans included in our SNC Program portfolio described above and IRB loans.
•Commercial construction: Loans in this category include construction project financing and are comprised of commercial real estate, business banking and residential loans for the purpose of constructing and developing real estate. As of March 31, 2026 and December 31, 2025, we had total commercial construction loans of $502.0 million and $563.5 million, respectively, representing 2.2% and 2.4%, respectively, of our total loans. Our commercial construction loan portfolio also includes loans included in our SNC Program portfolio described above and IRB loans.
•Business banking: Loans in this category are comprised of loans to small businesses with exposures of under $1.0 million and small investment real estate projects with exposures of under $3.0 million. These loans are separate and distinct from our commercial and industrial and commercial real estate portfolios described above due to the size of the loans. As of March 31, 2026 and December 31, 2025, we had total business banking loans of $1.5 billion and $1.6 billion, respectively, representing 6.7% and 6.9%, respectively, of our total loans for each period end. In this category, commercial and industrial loans and commercial real estate loans totaled $316.9 million and $1.2 billion, respectively, as of March 31, 2026, and $307.6 million and $1.3 billion, respectively, as of December 31, 2025.
Business banking originations include traditionally underwritten loans as well as partially automated scored loans. Our proprietary decision matrix, which includes a number of quantitative factors including, but not limited to, a guarantor's credit score, industry risk, and time in business, is used to determine whether to make business banking loans. We also engage in SBA lending. SBA guarantees reduce our risk of loss when default occurs and are considered a credit enhancement to the loan structure
Residential Lending
•Residential real estate: Loans in this category consist of mortgage loans on residential real estate. As of both March 31, 2026 and December 31, 2025, we had total residential real estate loans of $5.2 billion, representing 22.6% and 22.7%, respectively, of our total loans as of each period end. Underwriting considerations include, among others, income sources and their reliability, willingness to repay as evidenced by credit repayment history, financial resources including cash reserves and the value of the collateral. We maintain policy standards for minimum credit scores and cash reserves and maximum loan-to-value consistent with a "prime" portfolio. Collateral consists of mortgage liens on residential dwellings. We do not originate or purchase sub-prime or other high-risk loans. Residential real estate loans are originated either for sale to investors or to retain in our loan portfolio. Decisions about whether to sell or retain residential real estate loans are made based on the interest rate characteristics, pricing for loans in the secondary mortgage market, competitive factors and our capital needs. Following our merger with HarborOne, which included the acquisition of HarborOne's mortgage company, a portion of our loans sold on the secondary markets are sold with servicing retained. During the three months ended March 31, 2026, residential real estate mortgage loan originations for secondary market sale and sales on secondary market were $101.6 million and $98.8 million, respectively. Comparatively, during the three months ended March 31, 2025, residential real estate mortgage loan originations for secondary market sale and sales on secondary market were $13.2 million and $12.8 million, respectively.
Consumer Lending
•Consumer home equity: Loans in this category consist of home equity lines of credit and home equity loans. As of both March 31, 2026 and December 31, 2025, we had total consumer home equity loans of $1.8 billion, representing 7.7% and 7.6%, respectively, of our total loans as of each period end. Home equity lines of credit are granted for ten years with monthly interest-only repayment requirements. Full principal repayment is required at the end of the ten-year draw period. Home equity lines of credit can be converted to term loans that are fully amortized. Underwriting considerations are materially consistent with those utilized in the residential real estate category. Collateral consists of a senior or subordinate lien on owner-occupied residential property.
•Other consumer: Loans in this category consist of unsecured personal lines of credit, overdraft protection, automobile and aircraft loans, home improvement loans and other personal loans. As of March 31, 2026 and December 31, 2025, we had total other consumer loans of $215.5 million and $232.0 million, respectively, representing 0.9% and 1.0%, respectively, of our total loans. Our policy and underwriting in this category include the following factors, among others: income sources and reliability, credit histories, term of repayment and collateral value, as applicable.
Other Products and Services
In addition to our lending activities, which are the core part of our banking business, we offer other banking products and services primarily related to (i) other commercial banking products, (ii) other consumer deposit products and (iii) wealth management services.
Other Commercial Banking Products
•We offer a variety of deposit, treasury management, electronic banking, interest rate protection and foreign exchange products to our customers. In addition, we offer cash management services to our corporate and municipal clients. Deposit products include checking products, both interest-bearing and noninterest-bearing, as well as money market deposits, savings deposits and certificates of deposit. Our treasury management products include a variety of cash management and payment products. Our interest rate protection and foreign exchange products include interest rate swaps and currency related transactions.
Other Consumer Deposit Products
•We offer a wide variety of deposit products and services to our consumer customers. We service these customers through our 128 branches located in eastern Massachusetts, New Hampshire, and Rhode Island, through our call center and through our online and mobile banking applications.
Wealth Management Services
•Through our Cambridge Trust Wealth Management division, we provide a wide range of trust services, including (i) managing customer investments, (ii) serving as custodian for customer assets, and (iii) providing other fiduciary services, including serving as the trustee and personal representative of estates. As of March 31, 2026 and December 31, 2025, we held $10.3 billion and $10.1 billion, respectively, of assets in a fiduciary, custodial or agency capacity for customers, which are not our assets and therefore not included on the Consolidated Balance Sheets included in this Quarterly Report on Form 10-Q. For the three months ended March 31, 2026, we had noninterest income of $18.3 million from providing these services compared to $16.4 million for the three months ended March 31, 2025.
Outlook and Trends
Interest Rates
Beginning in March 2022, the Federal Open Market Committee ("FOMC") voted to increase the federal funds rate multiple times from a range of 0.00% to 0.25% to a range of 5.25% to 5.50% on July 26, 2023, when the FOMC stated that it will continue to assess additional information and its implications for monetary policy. At its meeting on September 18, 2024, the FOMC decided to lower the target range for the federal funds rate by 50 basis points from the range set at its July 26, 2023 meeting to a range of 4.75% to 5.00%. The FOMC further decided to lower the target range for the federal funds rate at each of its meetings held on November 7, 2024, December 18, 2024, September 17, 2025, October 29, 2025, December 10, 2025, and January 28, 2026 with the most recent change reducing the target range for the federal funds rate to a range of 3.50% to 3.75%. At its most recent meeting on April 29, 2026, the FOMC decided to maintain the target range for the federal funds rate at the range set at its January 28, 2026 meeting and indicated, in considering additional adjustments to the target range for the federal funds rate, it will carefully assess incoming data, the evolving outlook, and the balance of risks. The FOMC further indicated it is strongly committed to supporting maximum employment and reducing the annual inflation rate to its 2 percent objective.
Inevitably, not all of our interest rate-sensitive assets and liabilities will re-price simultaneously and in equal volume in response to changes in the federal funds rate, and therefore the potential for interest rate exposure exists. Management believes that several factors will affect the actual impact of interest rate changes on our balance sheet and operating results, including, but not limited to, actual changes in interest rates or expectations of future changes, the degree of volatility in the securities markets, inflation rates or expectations of inflation, and the slope of the interest rate yield curve. We attempt to manage interest rate risk by identifying, quantifying, and, where appropriate, hedging our exposure. Approximately 35% of the outstanding principal balance of our loans, gross of outstanding interest rate swaps as described further below, as of March 31, 2026 was indexed to a market rate that is expected to re-price with similar magnitude and direction as the federal funds rate. A portion of these loans have been hedged using interest rate swaps to convert the floating rate interest receipts to a fixed rate. The notional amount of floating rate loans swapped totaled $1.6 billion on March 31, 2026, representing approximately 7.0% of the outstanding principal balance of our loans at that date. For more detail regarding such hedging financial instruments, refer to Note 11, "Derivative Financial Instruments" within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q. Refer to the section titled "Management of Market Risk" within this Item 2 for additional discussion including the estimated change to our net interest income under interest rate risk measurement methodologies that use a variety of hypothetical scenarios assuming immediate and parallel changes in interest rates that may not reflect the manner in which actual yields and costs respond to changes in market interest rates.
Non-GAAP Financial Measures
We present certain non-GAAP financial measures, which management uses to evaluate our performance, and which exclude the effects of certain transactions, non-cash items and GAAP adjustments that we believe are unrelated to our core business and are therefore not necessarily indicative of our current performance or financial position. Management believes excluding these items facilitates greater visibility for investors into our core business as well as underlying trends that may, to some extent, be obscured by inclusion of such items in the corresponding GAAP financial measures.
There are items in our financial statements that impact our results but which we believe are unrelated to our core business. Accordingly, we present operating net income, noninterest income on an operating basis, noninterest expense on an operating basis, total operating revenue, operating earnings per share, tangible net income to average tangible shareholders' equity, tangible operating net income to average tangible shareholders' equity, tangible book value per share, and the operating efficiency ratio, each of which excludes the impact of such items because we believe such exclusion can provide greater visibility into our core business and underlying trends. Such items that we do not consider to be core to our business include (i) gains and losses on sales of securities available for sale, net, (ii) gains and losses on the sale of other equity investments, (iii) gains and losses on the sale of other assets, (iv) impairment charges on tax credit investments and associated tax credit benefits, (v) OREO gains and losses, (vi) merger and acquisition expenses, (vii) non-recurring expenses associated with a staffing reorganization, and (viii) certain discrete tax items. There were no expenses indirectly associated with gains and losses on the sale of other equity investments, OREO gains or losses, or impairment charges on tax credit investments and associated tax credit benefits during the periods presented in this Quarterly Report on Form 10-Q.
We also present tangible shareholders' equity, tangible assets, the ratio of tangible shareholders' equity to tangible assets, average tangible shareholders' equity, the ratios of tangible net income (loss) and tangible operating net income to average tangible shareholders' equity and tangible book value per share, each of which excludes the impact of goodwill and other intangible assets, as we believe these financial measures provide investors with the ability to further assess our performance, identify trends in our core business and provide a comparison of our capital adequacy to other companies. We
have included the tangible ratios because management believes that investors may find it useful to have access to the same analytical tools used by management to assess performance and identify trends.
Our non-GAAP financial measures should not be considered as an alternative or substitute to GAAP net income (loss), or as an indication of our cash flows from operating activities, a measure of our liquidity or an indication of funds available for our cash needs. An item which we consider to be non-core and exclude when computing these non-GAAP financial measures can be of substantial importance to our results for any particular period. In addition, our methodology for calculating non-GAAP financial measures may differ from the methodologies employed by other companies to calculate the same or similar performance measures and, accordingly, our reported non-GAAP financial measures may not be comparable to the same or similar performance measures reported by other companies.
The following table summarizes the impact of non-core items recorded for the time periods indicated below and reconciles them to the most directly comparable GAAP financial measure:
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (Dollars in thousands, except per share data) | |||||||||||
| Net income (loss) (GAAP) | $ | 65,262 | $ | (217,666) | |||||||
| Non-GAAP adjustments: | |||||||||||
| Add: | |||||||||||
| Noninterest income components: | |||||||||||
| Losses on sales of securities available for sale, net | - | 269,638 | |||||||||
| Losses on sales of other assets | 1,504 | 630 | |||||||||
| Noninterest expense components: | |||||||||||
| Expenses associated with staffing reorganization | 2,706 | - | |||||||||
| Merger and acquisition expenses | 28,061 | - | |||||||||
| Total impact of non-GAAP adjustments | 32,271 | 270,268 | |||||||||
|
Less net tax benefit (expense) associated with non-GAAP adjustment (1)
|
8,907 | (14,882) | |||||||||
| Non-GAAP adjustments, net of tax | $ | 23,364 | $ | 285,150 | |||||||
| Operating net income (non-GAAP) | $ | 88,626 | $ | 67,484 | |||||||
| Weighted average common shares outstanding during the period: | |||||||||||
| Basic | 222,142,991 | 200,020,707 | |||||||||
| Diluted | 223,384,587 | 201,415,845 | |||||||||
| Earnings (losses) per share, basic | $ | 0.29 | $ | (1.09) | |||||||
| Earnings (losses) per share, diluted | $ | 0.29 | $ | (1.08) | |||||||
| Operating earnings per share, basic (non-GAAP) | $ | 0.40 | $ | 0.34 | |||||||
| Operating earnings per share, diluted (non-GAAP) | $ | 0.40 | $ | 0.34 | |||||||
(1)The net tax benefit associated with these items is generally determined by assessing whether each item is included or excluded from net taxable income and applying our combined statutory tax rate only to those items included in net taxable income.
The following table summarizes the impact of non-core items with respect to our total revenue, noninterest income (loss), noninterest expense, and the efficiency ratio, which reconciles to the most directly comparable respective GAAP financial measure, for the periods indicated:
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Net interest income (GAAP) | $ | 244,656 | $ | 188,899 | |||||||
| Add: | |||||||||||
| Tax-equivalent adjustment (non-GAAP) | 6,169 | 4,607 | |||||||||
| Fully-taxable equivalent net interest income on an operating basis (non-GAAP) | 250,825 | 193,506 | |||||||||
| Noninterest income (loss) (GAAP) | 43,557 | (236,118) | |||||||||
| Less: | |||||||||||
| Losses on sales of securities available for sale, net | - | (269,638) | |||||||||
| Losses on sales of other assets | (1,504) | (630) | |||||||||
| Noninterest income on an operating basis (non-GAAP) | 45,061 | 34,150 | |||||||||
| Noninterest expense (GAAP) | $ | 198,630 | $ | 130,120 | |||||||
| Less: | |||||||||||
| Expenses associated with staffing reorganization | 2,706 | - | |||||||||
| Merger and acquisition expenses | 28,061 | - | |||||||||
| Noninterest expense on an operating basis (non-GAAP) | 167,863 | 130,120 | |||||||||
| Amortization of intangible assets | 11,644 | 7,808 | |||||||||
| Noninterest expense for calculation of operating efficiency ratio (non-GAAP) | $ | 156,219 | $ | 122,312 | |||||||
| Total revenue (loss) (GAAP) | $ | 288,213 | $ | (47,219) | |||||||
| Total operating revenue (non-GAAP) | $ | 295,886 | $ | 227,656 | |||||||
| Ratios: | |||||||||||
| Efficiency ratio (GAAP) | 68.92 | % | (275.57) | % | |||||||
| Operating efficiency ratio (non-GAAP) | 52.80 | % | 53.73 | % | |||||||
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 March 31, | As of December 31, | ||||||||||
| 2026 | 2025 | ||||||||||
| (Dollars in thousands, except per share data) | |||||||||||
| Tangible shareholders' equity: | |||||||||||
| Total shareholders' equity (GAAP) | $ | 4,285,980 | $ | 4,340,553 | |||||||
| Less: Goodwill and other intangibles | 1,289,286 | 1,300,930 | |||||||||
| Tangible shareholders' equity (non-GAAP) | 2,996,694 | 3,039,623 | |||||||||
| Tangible assets: | |||||||||||
| Total assets (GAAP) | 30,632,569 | 30,586,856 | |||||||||
| Less: Goodwill and other intangibles | 1,289,286 | 1,300,930 | |||||||||
| Tangible assets (non-GAAP) | $ | 29,343,283 | $ | 29,285,926 | |||||||
| Shareholders' equity to assets ratio (GAAP) | 14.0 | % | 14.2 | % | |||||||
| Tangible shareholders' equity to tangible assets ratio (non-GAAP) | 10.2 | % | 10.4 | % | |||||||
| Book value per share: | |||||||||||
| Common shares issued and outstanding | 232,292,219 | 235,646,558 | |||||||||
| Book value per share (GAAP) | $ | 18.45 | $ | 18.42 | |||||||
| Tangible book value per share (non-GAAP) | $ | 12.90 | $ | 12.90 | |||||||
The following table summarizes the calculation of our average tangible shareholders' equity and ratio of net income (loss) 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:
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Tangible net income (loss): | |||||||||||
| Net income (loss) (GAAP) | $ | 65,262 | $ | (217,666) | |||||||
| Add: Amortization of intangible assets | 11,644 | 7,808 | |||||||||
|
Less: Tax effect of amortization of intangible assets (3)
|
3,214 | 2,163 | |||||||||
| Tangible net income (loss) (non-GAAP) | $ | 73,692 | $ | (212,021) | |||||||
|
Operating net income (non-GAAP) (1)
|
$ | 88,626 | $ | 67,484 | |||||||
| Add: Amortization of intangible assets | 11,644 | 7,808 | |||||||||
|
Less: Tax effect of amortization of intangible assets (3)
|
3,214 | 2,163 | |||||||||
| Tangible operating net income (non-GAAP) | $ | 97,056 | $ | 73,129 | |||||||
| Average tangible shareholders' equity: | |||||||||||
| Average total shareholders' equity (GAAP) | $ | 4,361,528 | $ | 3,583,292 | |||||||
| Less: Average goodwill and other intangibles | 1,296,833 | 1,047,469 | |||||||||
| Average tangible shareholders' equity (non-GAAP) | $ | 3,064,695 | $ | 2,535,823 | |||||||
| Ratios: | |||||||||||
|
Return (loss) on average total shareholders' equity (GAAP) (2)
|
6.07 | % | (24.64) | % | |||||||
|
Return (loss) on average tangible shareholders' equity (non-GAAP) (2)
|
9.75 | % | (33.91) | % | |||||||
|
Operating return on average tangible shareholders' equity (non-GAAP) (2)
|
12.84 | % | 11.70 | % | |||||||
(1)Refer to the table above within this "Non-GAAP Financial Measures" section for a reconciliation of operating net income to net income (loss).
(2)Presented on an annualized basis.
(3)The tax effect of amortization of intangible assets was calculated for the three months ended March 31, 2026 and 2025 using our combined statutory tax rate of 27.6% and 27.7%, respectively.
Financial Position
Summary of Financial Position
| As of March 31, 2026 | As of December 31, 2025 | Change | |||||||||||||||||||||
| Amount ($) | Percentage (%) | ||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 331,563 | $ | 316,869 | $ | 14,694 | 4.6 | % | |||||||||||||||
| Securities available for sale | 3,860,264 | 3,825,569 | 34,695 | 0.9 | % | ||||||||||||||||||
| Securities held to maturity | 712,555 | 599,557 | 112,998 | 18.8 | % | ||||||||||||||||||
| Loans, net of allowance for loan losses | 22,596,152 | 22,753,224 | (157,072) | (0.7) | % | ||||||||||||||||||
| Federal Home Loan Bank stock | 38,801 | 13,838 | 24,963 | 180.4 | % | ||||||||||||||||||
| Goodwill and other intangible assets | 1,289,286 | 1,300,930 | (11,644) | (0.9) | % | ||||||||||||||||||
| Deposits | 25,105,249 | 25,470,751 | (365,502) | (1.4) | % | ||||||||||||||||||
| Borrowed funds | 717,208 | 214,938 | 502,270 | 233.7 | % | ||||||||||||||||||
Cash and cash equivalents
Total cash and cash equivalents increased by $14.7 million, or 4.6%, to $331.6 million at March 31, 2026 from $316.9 million at December 31, 2025. This increase was primarily due to an increase in FHLB advances of $502.3 million and AFS and HTM maturities and principal paydowns of $118.6 million, partially offset by a decrease in total deposits of $365.5 million and a decrease in gross loans of $186.5 million. For further discussion of the change in deposits and loans, refer to the later "Loans" and "Deposits" sections in this Item 2.
Securities
Our current investment policy authorizes us to invest in various types of investment securities and liquid assets, including U.S. Treasury obligations, securities of government-sponsored enterprises, mortgage-backed securities, collateralized mortgage obligations, corporate debt obligations, asset-backed securities and municipal securities. The Risk Management Committee of our Board of Directors is responsible for approving and overseeing our investment policy, which it reviews at least annually. This policy dictates that investment decisions be made based on the safety of the investment, liquidity requirements, potential returns and market risk considerations. We do not engage in any investment hedging activities or trading activities, nor do we purchase any high-risk investment products. We typically invest in the following types of securities:
U.S. government securities: As of both March 31, 2026 and December 31, 2025, our U.S. government securities consisted of U.S. Treasury securities. We maintain these investments, to the extent appropriate, for liquidity purposes, at zero risk weighting for capital purposes, and as collateral for interest rate derivative positions.
Mortgage-backed securities: We invest in residential and commercial mortgage-backed securities insured or guaranteed by Freddie Mac, Ginnie Mae or Fannie Mae, including collateralized mortgage obligations. We have not purchased any privately-issued mortgage-backed securities. We invest in mortgage-backed securities to achieve a positive interest rate spread with minimal administrative expense, and to lower our credit risk as a result of the guarantees provided by Freddie Mac, Ginnie Mae or Fannie Mae.
Investments in mortgage-backed securities involve a risk that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or accretion of any discount relating to such interests, thereby affecting the net yield on our securities. We periodically review current prepayment speeds to determine whether prepayment estimates require modification that could cause amortization or accretion adjustments. There is also reinvestment risk associated with the cash flows from such securities. In addition, the market value of such securities may be adversely affected by changes in interest rates.
State and municipal securities: We invest in fixed rate investment grade bonds issued primarily by municipalities in our local communities within Massachusetts and by the Commonwealth of Massachusetts. The market value of these securities may be affected by call options, long dated maturities, general market liquidity and credit factors.
The following table shows the fair value of our securities by investment category as of the dates indicated:
Securities Portfolio Composition
| As of March 31, 2026 | As of December 31, 2025 | ||||||||||
| (In thousands) | |||||||||||
| Available for sale securities, at fair value: | |||||||||||
| Government-sponsored residential mortgage-backed securities | $ | 2,594,507 | $ | 2,533,309 | |||||||
| Government-sponsored commercial mortgage-backed securities | 1,039,854 | 1,060,331 | |||||||||
| U.S. Treasury securities | 50,175 | 50,350 | |||||||||
| State and municipal bonds and obligations | 175,728 | 181,579 | |||||||||
| Total available for sale securities, at fair value | 3,860,264 | 3,825,569 | |||||||||
| Held to maturity securities, at amortized cost: | |||||||||||
| Government-sponsored residential mortgage-backed securities | 205,168 | 210,142 | |||||||||
| Government-sponsored commercial mortgage-backed securities | 183,047 | 185,185 | |||||||||
| State and municipal bonds and obligations | 282,454 | 167,346 | |||||||||
| Corporate bonds | 41,886 | 36,884 | |||||||||
| Total held to maturity securities, at amortized cost | 712,555 | 599,557 | |||||||||
| Total | $ | 4,572,819 | $ | 4,425,126 | |||||||
Our securities portfolio increased $147.7 million, or 3.3%, to $4.6 billion at March 31, 2026 from $4.4 billion at December 31, 2025. This increase was primarily due to purchases of AFS and HTM securities of $288.0 million partially offset by AFS and HTM maturities and principal paydowns of $118.6 million.
We did not have trading investments at March 31, 2026 or December 31, 2025.
A portion of our securities portfolio continues to be tax-exempt. Investments in federally tax-exempt securities totaled $454.9 million at March 31, 2026 compared to $348.8 million at December 31, 2025.
Our AFS securities are carried at fair value and are categorized within the fair value hierarchy based on the observability of model inputs. Securities which require inputs that are both significant to the fair value measurement and unobservable are classified as Level 3 within the fair value hierarchy. As of both March 31, 2026 and December 31, 2025, we had no securities categorized as Level 3 within the fair value hierarchy.
The following tables show contractual maturities of our AFS and HTM securities and weighted average yields at and for the periods ended March 31, 2026 and December 31, 2025. Maturities of our securities portfolio are based on the final contractual payment dates, and do not reflect the effect of scheduled principal repayments, prepayments, or early redemptions that may occur. 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 March 31, 2026 (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 | 2.45 | % | 2.44 | % | 2.22 | % | 2.95 | % | 2.94 | % | |||||||||||||||||||
| Government-sponsored commercial mortgage-backed securities | 2.09 | 3.98 | 1.97 | 2.02 | 3.02 | ||||||||||||||||||||||||
| U.S. Treasury securities | 4.19 | - | - | - | 4.19 | ||||||||||||||||||||||||
| State and municipal bonds and obligations | 2.62 | 3.03 | 3.76 | 4.16 | 3.78 | ||||||||||||||||||||||||
| Total available for sale securities | 3.22 | % | 3.90 | % | 2.86 | % | 2.85 | % | 3.02 | % | |||||||||||||||||||
| Held to maturity securities: | |||||||||||||||||||||||||||||
| Government-sponsored residential mortgage-backed securities | - | % | - | % | - | % | 2.86 | % | 2.86 | % | |||||||||||||||||||
| Government-sponsored commercial mortgage-backed securities | - | 2.16 | 2.35 | - | 2.21 | ||||||||||||||||||||||||
| State and municipal bonds and obligations | - | - | - | 5.57 | 5.57 | ||||||||||||||||||||||||
| Corporate bonds | 7.35 | - | 6.95 | - | 6.96 | ||||||||||||||||||||||||
| Total held to maturity securities | 7.35 | % | 2.16 | % | 4.34 | % | 4.43 | % | 4.01 | % | |||||||||||||||||||
| Total | 3.27 | % | 3.60 | % | 3.54 | % | 3.05 | % | 3.16 | % | |||||||||||||||||||
|
Securities Maturing as of December 31, 2025 (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 | 2.54 | % | 2.43 | % | 2.21 | % | 2.92 | % | 2.91 | % | |||||||||||||||||||
| Government-sponsored commercial mortgage-backed securities | 2.10 | 3.94 | 1.98 | 2.02 | 3.02 | ||||||||||||||||||||||||
| U.S. Treasury securities | 4.19 | - | - | - | 4.19 | ||||||||||||||||||||||||
| State and municipal bonds and obligations | 2.52 | 2.93 | 3.74 | 4.15 | 3.75 | ||||||||||||||||||||||||
| Total available for sale securities | 3.68 | % | 3.86 | % | 2.78 | % | 2.83 | % | 3.00 | % | |||||||||||||||||||
| Held to maturity securities: | |||||||||||||||||||||||||||||
| Government-sponsored residential mortgage-backed securities | - | % | - | % | - | % | 2.87 | % | 2.87 | % | |||||||||||||||||||
| Government-sponsored commercial mortgage-backed securities | - | 2.16 | 2.35 | - | 2.21 | ||||||||||||||||||||||||
| State and municipal bonds and obligations | - | - | - | 5.54 | 5.54 | ||||||||||||||||||||||||
| Corporate bonds | - | 7.35 | 7.10 | - | 7.11 | ||||||||||||||||||||||||
| Total held to maturity securities | - | % | 2.20 | % | 4.23 | % | 4.05 | % | 3.67 | % | |||||||||||||||||||
| Total | 3.68 | % | 3.58 | % | 3.39 | % | 2.95 | % | 3.08 | % | |||||||||||||||||||
(1)Investment security weighted-average yields were calculated on a level-yield basis by weighting the tax equivalent yield for each security type by the book value of each maturity category.
The yield on tax-exempt obligations of states and political subdivisions has been adjusted to a fully-taxable equivalent ("FTE") basis by adjusting tax-exempt income upward by an amount equivalent to the prevailing federal income taxes that would have been paid if the income had been fully taxable.
Loans
The following table shows the composition of our loan portfolio, by category, as of the dates indicated:
Loan Portfolio Composition
| Change | |||||||||||||||||||||||
| As of March 31, 2026 | As of December 31, 2025 | Amount ($) | Percentage (%) | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Commercial and industrial | $ | 4,373,727 | $ | 4,324,615 | $ | 49,112 | 1.1 | % | |||||||||||||||
| Commercial real estate | 9,475,352 | 9,529,071 | (53,719) | (0.6) | % | ||||||||||||||||||
| Commercial construction | 503,192 | 567,597 | (64,405) | (11.3) | % | ||||||||||||||||||
| Business banking | 1,545,197 | 1,603,489 | (58,292) | (3.6) | % | ||||||||||||||||||
| Residential real estate | 5,466,975 | 5,516,114 | (49,139) | (0.9) | % | ||||||||||||||||||
| Consumer home equity | 1,765,450 | 1,758,099 | 7,351 | 0.4 | % | ||||||||||||||||||
| Other consumer | 258,101 | 275,511 | (17,410) | (6.3) | % | ||||||||||||||||||
| Total gross loans | $ | 23,387,994 | $ | 23,574,496 | $ | (186,502) | (0.8) | % | |||||||||||||||
We consider our loan portfolio to be relatively diversified by borrower and industry. Our gross loans decreased $186.5 million, or 0.8%, to $23.4 billion at March 31, 2026 from $23.6 billion at December 31, 2025. The decrease was primarily due to paydowns of non-performing loans and net loan payoffs in the commercial real estate, commercial construction and business banking portfolios, partially offset by net originations of commercial and industrial loans.
We believe that our commercial loan portfolio composition is relatively diversified in terms of industry sectors, property types and various lending specialties, and it is concentrated in the New England geographical area, with 79.3% of our commercial loans in Massachusetts, New Hampshire, or Rhode Island as of March 31, 2026.
Asset quality. We continually monitor the asset quality of our loan portfolio utilizing portfolio scorecards and various credit quality indicators. Based on this process, loans meeting certain criteria are categorized as delinquent or non-performing and further assessed to determine if non-accrual status is appropriate.
For the commercial portfolio, which includes our commercial and industrial, commercial real estate, commercial construction and business banking loans, we monitor credit quality using a risk rating scale, which assigns a risk-grade to each borrower based on a number of quantitative and qualitative factors associated with a commercial loan transaction. Management utilizes a loan risk rating methodology based on a 15-point scale with the assistance of risk rating scorecard tools. Pass grades are 0-10 and non-pass categories, which align with regulatory guidelines, are: special mention (11), substandard (12), doubtful (13) and loss (14).
Risk rating assignment is determined using one of 15 separate scorecards developed for distinctive portfolio segments based on common attributes. Key factors include: industry and market conditions, position within the industry, earnings trends, operating cash flow, asset/liability values, debt capacity, guarantor strength, management and controls, financial reporting, collateral and other considerations.
Special mention, substandard and doubtful loans totaled 5.1% and 5.0% of total commercial loans outstanding at March 31, 2026 and December 31, 2025, respectively.
Our philosophy toward managing our loan portfolios is predicated upon careful monitoring, which stresses early detection and response to delinquent and default situations. We seek to make arrangements to resolve any delinquent or default situation over the shortest possible time frame.
The delinquency rate of our total loan portfolio increased to 0.60% at March 31, 2026, compared to 0.56% at December 31, 2025.
The following table provides details regarding our delinquency rates as of the dates indicated:
Loan Delinquency Rates
| Delinquency Rate as of | |||||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||
| Portfolio | |||||||||||
| Commercial and industrial | 0.15 | % | 0.17 | % | |||||||
| Commercial real estate | 0.23 | % | 0.22 | % | |||||||
| Commercial construction | - | % | 0.18 | % | |||||||
| Business banking | 1.68 | % | 1.83 | % | |||||||
| Residential real estate | 1.31 | % | 1.02 | % | |||||||
| Consumer home equity | 0.91 | % | 0.99 | % | |||||||
| Other consumer | 0.36 | % | 0.35 | % | |||||||
| Total | 0.60 | % | 0.56 | % | |||||||
As a general rule, loans more than 90 days past due with respect to principal or interest are classified as non-accrual loans. However, based on our assessment of collateral and/or payment prospects, certain loans that are more than 90 days past due may be kept on an accruing status. Income accruals are suspended on all non-accrual loans and all previously accrued and uncollected interest is reversed against current income. A loan is expected to remain on non-accrual status until it becomes current with respect to principal and interest, the loan is liquidated, or the loan is determined to be uncollectible and is charged-off against the allowance for loan losses.
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. These properties are recorded at the fair value less estimated costs to sell on the date we obtain control. Any write-downs to the cost of the related asset upon transfer to OREO to reflect the asset at fair value less estimated costs to sell is recorded through the allowance for loan losses.
NPLs decreased $34.7 million, or 20.1%, to $137.7 million at March 31, 2026 from $172.3 million at December 31, 2025. NPLs as a percentage of total loans decreased to 0.60% at March 31, 2026 from 0.75% at December 31, 2025. The decrease was primarily due to commercial loan payoffs during the three months ended March 31, 2026. Also driving this decline is continued efforts to work with borrowers to either exit certain relationships through sale of the loan or to otherwise alleviate non-performance through regular payoffs.
The total amount of interest recorded on NPLs during both the three months ended March 31, 2026 and 2025 was not significant. The gross interest income that would have been recorded under the original terms of those loans if they had been performing amounted to $2.1 million and $2.3 million for the three months ended March 31, 2026 and 2025, respectively.
In the course of resolving NPLs, we may choose to restructure the contractual terms of certain loans. We attempt to work-out alternative payment schedules with the borrowers in order to avoid foreclosure actions. The aggregate amortized cost balance as of March 31, 2026 of loans modified during the three months ended March 31, 2026 which were determined to be modifications to borrowers experiencing financial difficulty was $34.0 million. The aggregate amortized cost balance as of March 31, 2025 of loans modified during the three months ended March 31, 2025 which were determined to be modifications to borrowers experiencing financial difficulty was $4.4 million.
As of March 31, 2026 and 2025, there were no loans that had been modified to a borrower experiencing financial difficulty during the twelve-month period then ended and which had subsequently defaulted during the three months ended March 31, 2026 and 2025, respectively.
Our policy is that any restructured loan, which is on non-accrual status prior to being modified, remain on non-accrual status for approximately six months subsequent to being modified before we consider its return to accrual status. If the restructured loan is on accrual status prior to being modified, we review it to determine if the modified loan should remain on accrual status.
Purchased credit deteriorated ("PCD") loans are loans that we acquired that have shown evidence of deterioration of credit quality since origination and, therefore, it was deemed unlikely that all contractually required payments would be collected upon the merger date. We consider factors such as payment history, collateral values and accrual status when determining whether there was evidence of deterioration at the merger date. As of March 31, 2026 and December 31, 2025, the carrying amount of PCD loans was $619.8 million and $659.7 million, respectively.
Potential Problem Loans. In the normal course of business, we become aware of possible credit problems in which borrowers exhibit the potential to be unable to comply in the future 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. Our potential problem loans, or loans with potential weaknesses that were not included in the non-accrual loans or in the loans 90 or more past due categories, increased by $88.9 million, or 21.5%, to $502.6 million at March 31, 2026 from $413.7 million at December 31, 2025. These loans as a percentage of total loans increased to 2.2% at March 31, 2026 from 1.8% at December 31, 2025.
Commercial Real Estate Office Exposure. As of March 31, 2026 and December 31, 2025 our total office-related commercial real estate ("CRE") loans (which is comprised of loans within our commercial real estate and construction portfolios that are secured by office space, medical office space, mixed-use, and laboratory/life sciences office properties where rental income is primarily from office space) totaled $1.0 billion and $1.3 billion, respectively. As of March 31, 2026, our office-related CRE loans are primarily concentrated in Massachusetts, where approximately 86.4% of the total recorded investment balance of office-related CRE loans are located, and approximately 14.3% of the total recorded investment balance of office-related CRE loans are located in the City of Boston.
Given prevailing market conditions such as reduced occupancy as a result of the increase in hybrid and fully remote work arrangements post-COVID and lower commercial real estate valuations, we are carefully monitoring these loans for signs of deterioration in credit quality. Such monitoring includes incremental risk management strategies undertaken by management including monthly internal CRE office exposure portfolio reporting, more frequent portfolio reviews, ongoing monitoring of market conditions, and additional portfolio analysis such as maturity risk analysis and rent rollover risk analysis. As of March 31, 2026, eight of these loans, which had an aggregate recorded investment balance of $10.8 million, were on non-accrual status. As of December 31, 2025, four of these loans were on non-accrual status and had an aggregate recorded investment balance of $36.7 million.
The following table sets forth the unpaid principal balance of office-related CRE loans by loan segment and credit quality indicator as of the dates indicated:
| March 31, 2026 | December 31, 2025 | ||||||||||
| (In thousands) | |||||||||||
| Commercial real estate | |||||||||||
| Pass | $ | 852,131 | $ | 1,065,028 | |||||||
| Special mention | 41,956 | 38,503 | |||||||||
| Substandard | 111,109 | 105,824 | |||||||||
| Doubtful | 10,825 | 36,772 | |||||||||
| Total commercial real estate | $ | 1,016,021 | $ | 1,246,127 | |||||||
| Commercial construction | |||||||||||
| Pass | $ | 6,022 | $ | 25,021 | |||||||
| Special mention | - | - | |||||||||
| Substandard | - | - | |||||||||
| Doubtful | - | - | |||||||||
| Total commercial construction | $ | 6,022 | $ | 25,021 | |||||||
| Total | $ | 1,022,043 | $ | 1,271,148 | |||||||
The following table sets forth the unpaid principal balance of office-related CRE loans by loan segment and collateral use type as of the dates indicated:
| March 31, 2026 | December 31, 2025 | ||||||||||
| (In thousands) | |||||||||||
| Commercial real estate | |||||||||||
| Office | $ | 447,135 | $ | 562,157 | |||||||
| Medical office | 92,023 | 135,003 | |||||||||
| Mixed-use | 378,341 | 425,529 | |||||||||
| Laboratory/life science | 98,522 | 123,438 | |||||||||
| Total commercial real estate | $ | 1,016,021 | $ | 1,246,127 | |||||||
| Commercial construction | |||||||||||
| Office | $ | 489 | $ | 489 | |||||||
| Medical office | 5,533 | 5,324 | |||||||||
| Mixed-use | - | 19,208 | |||||||||
| Laboratory/life science | - | - | |||||||||
| Total commercial construction | $ | 6,022 | $ | 25,021 | |||||||
| Total | $ | 1,022,043 | $ | 1,271,148 | |||||||
Allowance for credit losses. For the purpose of estimating our allowance for loan losses, we segregate the loan portfolio into loan categories, for loans that share similar risk characteristics, that possess unique risk characteristics such as loan purpose, repayment source, and collateral that are considered when determining the appropriate level of the allowance for loan losses for each category. Loans that do not share similar risk characteristics with other loans are evaluated individually.
While we use available information to recognize losses on loans, future additions or subtractions to/from the allowance for loan losses may be necessary based on changes in NPLs, changes in economic conditions, or other reasons. Additionally, various regulatory agencies, as an integral part of our examination process, periodically assess the adequacy of the allowance for loan losses to assess whether the allowance for loan losses was determined in accordance with GAAP and applicable guidance.
We perform an evaluation of our allowance for loan losses on a regular basis (at least quarterly), and establish the allowance for loan losses based upon an evaluation of our loan categories, as each 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.
Loans are evaluated on a regular basis by management. 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. 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
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. Under our current methodology, the allowance for loan losses contains reserves related to loans for which the related allowance for loan losses is determined on an individual loan basis and on a collective basis, and other qualitative components.
The allowance for loan losses decreased by $3.9 million, or 1.2%, to $327.9 million, or 1.43% of total loans, at March 31, 2026 from $331.8 million, or 1.44% of total loans at December 31, 2025. The decrease in the allowance for loan losses for the three months ended March 31, 2026, was primarily due to charge-offs of loans that were previously reserved for on a specific reserve basis.
In the ordinary course of business, we enter into commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable. The credit risk associated with these commitments is evaluated in a manner similar to the reserving method for loans receivable previously described. The reserve for unfunded lending commitments is included in other liabilities in the Consolidated Balance Sheets. Our reserve for unfunded lending commitments remained consistent at $16.2 million at March 31, 2026 compared to $16.4 million at December 31, 2025.
The following table summarizes credit ratios for the periods presented:
Credit Ratios
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Net loan charge-offs (recoveries): | |||||||||||
| Commercial and industrial | $ | 5,706 | $ | (11) | |||||||
| Commercial real estate | 3,588 | 10,893 | |||||||||
| Commercial construction | - | - | |||||||||
| Business banking | 84 | 20 | |||||||||
| Residential real estate | (32) | (39) | |||||||||
| Consumer home equity | (59) | - | |||||||||
| Other consumer | 418 | 379 | |||||||||
| Total net loan charge-offs | $ | 9,705 | $ | 11,242 | |||||||
| Average loans: | |||||||||||
| Commercial and industrial | $ | 4,322,016 | $ | 3,340,051 | |||||||
| Commercial real estate | 9,483,357 | 7,224,155 | |||||||||
| Commercial construction | 507,405 | 452,187 | |||||||||
| Business banking | 1,533,396 | 1,288,556 | |||||||||
| Residential real estate | 5,204,071 | 3,912,382 | |||||||||
| Consumer home equity | 1,756,250 | 1,394,282 | |||||||||
| Other consumer | 224,391 | 222,095 | |||||||||
|
Average total loans (1)
|
$ | 23,030,886 | $ | 17,833,708 | |||||||
| Net charge-offs (recoveries) to average loans outstanding during the period: | |||||||||||
| Commercial and industrial | 0.13 | % | (0.00) | % | |||||||
| Commercial real estate | 0.04 | 0.15 | |||||||||
| Commercial construction | - | - | |||||||||
| Business banking | 0.01 | 0.00 | |||||||||
| Residential real estate | (0.00) | (0.00) | |||||||||
| Consumer home equity | (0.00) | 0.00 | |||||||||
| Other consumer | 0.19 | 0.17 | |||||||||
| Total net charge-offs to average loans outstanding during the period: | 0.04 | % | 0.06 | % | |||||||
| Total loans | $ | 22,924,044 | $ | 17,915,695 | |||||||
| Total non-accrual loans | $ | 137,668 | $ | 91,626 | |||||||
| Allowance for loan losses | $ | 327,892 | $ | 224,310 | |||||||
| Allowance for loan losses as a percent of total loans | 1.43 | % | 1.25 | % | |||||||
| Non-accrual loans as a percent of total loans | 0.60 | % | 0.51 | % | |||||||
| Allowance for loan losses as a percent of non-accrual loans | 238.18 | % | 244.81 | % | |||||||
(1)Average loan balances exclude loans held for sale
Non-accrual loans increased $46.0 million, or 50.2%, to $137.7 million at March 31, 2026 from $91.6 million at March 31, 2025, primarily due to loans acquired from HarborOne in the fourth quarter of 2025, and which were already on non-accrual or were transferred to non-accrual following the completion of the merger. For additional information regarding the credit quality of our loans, see Note 4, "Loans and Allowance for Credit Losses" within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q.
The following table sets forth the allocation of the allowance for loan losses by loan categories listed in loan portfolio composition as of the dates indicated:
Summary of Allocation of Allowance for Loan Losses
| As of March 31, 2026 | As of December 31, 2025 | ||||||||||||||||||||||||||||||||||
| 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 | $ | 59,508 | 18.15 | % | 18.96 | % | $ | 65,768 | 19.82 | % | 18.34 | % | |||||||||||||||||||||||
| Commercial real estate | 178,826 | 54.54 | % | 40.89 | % | 164,376 | 49.53 | % | 40.42 | % | |||||||||||||||||||||||||
| Commercial construction | 11,123 | 3.39 | % | 2.19 | % | 21,058 | 6.35 | % | 2.41 | % | |||||||||||||||||||||||||
| Business banking | 22,159 | 6.76 | % | 6.70 | % | 22,921 | 6.91 | % | 6.80 | % | |||||||||||||||||||||||||
| Residential real estate | 42,641 | 13.00 | % | 22.63 | % | 44,177 | 13.31 | % | 23.40 | % | |||||||||||||||||||||||||
| Consumer home equity | 9,627 | 2.94 | % | 7.68 | % | 9,171 | 2.76 | % | 7.46 | % | |||||||||||||||||||||||||
| Other consumer | 4,008 | 1.22 | % | 0.94 | % | 4,370 | 1.32 | % | 1.17 | % | |||||||||||||||||||||||||
| Total | $ | 327,892 | 100.00 | % | 100.00 | % | $ | 331,841 | 100.00 | % | 100.00 | % | |||||||||||||||||||||||
To determine if a loan should be charged-off, all possible sources of repayment are analyzed. Possible sources of repayment include the potential for future cash flows, liquidation of the collateral and the strength of co-makers or guarantors. When available information confirms that specific loans or portions thereof are uncollectible, these amounts are promptly charged-off against the allowance for loan losses and any recoveries of such previously charged-off amounts are credited to the allowance for loan losses.
Regardless of whether a loan is unsecured or collateralized, we charge off the amount of any confirmed loan loss in the period when the loans, or portions of loans, are deemed uncollectible. For troubled, collateral-dependent loans, loss confirming events may include an appraisal or other valuation that reflects a shortfall between the value of the collateral and the carrying value of the loan or receivable, or a deficiency balance following the sale of the collateral.
For additional information regarding our allowance for loan losses, see Note 4, "Loans and Allowance for Credit Losses" within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q.
Federal Home Loan Bank stock
The FHLBB is a cooperative that provides services to its member banking institutions. The primary reason for our membership in the FHLBB is to gain access to a reliable source of wholesale funding and as a tool to manage interest rate risk. The purchase of stock in the FHLB is a requirement for a member to gain access to funding. We purchase and/or are subject to redemption of FHLBB stock proportional to the volume of funding received and view the holdings as a necessary long-term investment for the purpose of balance sheet liquidity and not for investment return.
We held an investment in the FHLBB of $38.8 million and $13.8 million at March 31, 2026 and December 31, 2025, respectively. The amount of stock we are required to purchase is proportional to our FHLB advances and level of total assets. Accordingly, our FHLB borrowings increased primarily from an increase in our FHLB advances during the three months ended March 31, 2026.
Goodwill and other intangible assets
The table below sets forth the carrying amount of goodwill and other intangible assets, net of accumulated amortization, as of the dates indicated below:
| March 31, 2026 | December 31, 2025 | ||||||||||
| (In thousands) | |||||||||||
| Balances not subject to amortization | |||||||||||
| Goodwill | $ | 1,117,148 | $ | 1,117,148 | |||||||
| Balances subject to amortization | |||||||||||
| Core deposit intangibles | 153,571 | 164,280 | |||||||||
| Customer list intangible | 17,838 | 18,711 | |||||||||
| Trade name intangible | 729 | 791 | |||||||||
| Total balances subject to amortization | 172,138 | 183,782 | |||||||||
| Total goodwill and other intangible assets | $ | 1,289,286 | $ | 1,300,930 | |||||||
The balance of our goodwill and core deposit intangible asset was $1.3 billion at both March 31, 2026 and December 31, 2025. We did not record any impairment to our goodwill or other intangible assets during the three months ended March 31, 2026.
Deposits
Deposits originating within the markets we serve continue to be our primary source of funding our earning assets. Historically, we have been able to compete effectively for deposits in our primary market areas. The distribution and market share of deposits by type of deposit and type of depositor are important considerations in our assessment of the stability of our funding sources and our access to additional funds. Furthermore, we shift the mix and maturity of the deposits depending on economic conditions and loan and investment policies in an attempt, within set policies, to minimize cost and maximize net interest margin.
The following table presents our deposits as of the dates presented:
Components of Deposits
| Change | |||||||||||||||||||||||
| As of March 31, 2026 | As of December 31, 2025 | Amount ($) | Percentage (%) | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Demand | $ | 6,596,577 | $ | 6,341,205 | $ | 255,372 | 4.0 | % | |||||||||||||||
| Interest checking | 4,508,811 | 4,727,219 | (218,408) | (4.6) | % | ||||||||||||||||||
| Savings | 2,140,074 | 2,010,028 | 130,046 | 6.5 | % | ||||||||||||||||||
| Money market investments | 7,715,516 | 7,885,707 | (170,191) | (2.2) | % | ||||||||||||||||||
| Certificates of deposit | 4,144,271 | 4,506,592 | (362,321) | (8.0) | % | ||||||||||||||||||
| Total deposits | $ | 25,105,249 | $ | 25,470,751 | $ | (365,502) | (1.4) | % | |||||||||||||||
Deposits decreased by $0.4 billion, or 1.4%, to $25.1 billion at March 31, 2026 from $25.5 billion at December 31, 2025. This decrease was primarily driven by regular deposit outflows during the three months ended March 31, 2026. Also contributing to this decrease was the scheduled run-off of brokered certificates of deposit during the three months ended March 31, 2026 that were acquired in our merger with HarborOne.
The Bank's estimate of total uninsured deposits was $10.1 billion and $10.2 billion at March 31, 2026 and December 31, 2025, respectively. In accordance with the FDIC's Call Report instructions, these estimates include accounts of wholly-owned subsidiaries, the holding company, and internal operating deposit accounts (together referred to as "internal deposit accounts"). In addition, these estimates include municipal deposit accounts for which securities were pledged by us to secure such deposits ("collateralized deposits"). For liquidity monitoring purposes, we exclude internal deposit accounts and collateralized deposits from our estimate of uninsured deposits. Our estimate of uninsured deposits, excluding internal deposit accounts and collateralized deposits, was $7.6 billion and $8.1 billion at March 31, 2026 and December 31, 2025, respectively.
The following table presents the classification of deposits on an average basis for the periods below:
Classification of Deposits on an Average Basis
| For the Three Months Ended March 31, 2026 | For the Year Ended December 31, 2025 | ||||||||||||||||||||||
|
Average Amount |
Average Rate |
Average Amount |
Average Rate |
||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Demand | $ | 6,330,200 | - | % | $ | 5,803,876 | - | % | |||||||||||||||
| Interest checking | 4,669,195 | 0.84 | % | 4,482,914 | 0.94 | % | |||||||||||||||||
| Savings | 2,056,455 | 0.35 | % | 1,683,451 | 0.30 | % | |||||||||||||||||
| Money market investments | 7,860,869 | 2.15 | % | 6,309,936 | 2.35 | % | |||||||||||||||||
| Certificates of deposit | 4,277,889 | 3.53 | % | 3,487,640 | 3.93 | % | |||||||||||||||||
| Total deposits | $ | 25,194,608 | 1.45 | % | $ | 21,767,817 | 1.53 | % | |||||||||||||||
Other time deposits in excess of the FDIC insurance limit of $250,000, including certificates of deposit as of the dates indicated, had maturities as follows:
| As of March 31, 2026 | As of December 31, 2025 | |||||||||||||
| Maturing in | (In thousands) | |||||||||||||
| Three months or less | $ | 655,595 | $ | 734,723 | ||||||||||
| Over three months through six months | 516,859 | 467,873 | ||||||||||||
| Over six months through 12 months | 131,188 | 202,541 | ||||||||||||
| Over 12 months | 3,932 | 8,465 | ||||||||||||
| Total | $ | 1,307,574 | $ | 1,413,602 | ||||||||||
Borrowings
Our borrowings consist of both short-term and long-term borrowings and provide us with sources of funding. Maintaining available borrowing capacity provides us with a contingent source of liquidity. The following table sets forth the balances on our borrowings as of the dates and for the periods indicated:
Borrowings by Category
| Change | |||||||||||||||||||||||
| As of March 31, 2026 | As of December 31, 2025 | Amount ($) | Percentage (%) | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Interest rate swap collateral funds | $ | 27,991 | $ | 15,321 | $ | 12,670 | 82.7 | % | |||||||||||||||
| FHLB advances | 689,217 | 199,617 | 489,600 | 245.3 | % | ||||||||||||||||||
| Total | $ | 717,208 | $ | 214,938 | $ | 502,270 | 233.7 | % | |||||||||||||||
Our total borrowings increased by $502.3 million to $717.2 million at March 31, 2026 compared to $214.9 million at December 31, 2025. The increase was primarily due to increased balances of FHLB advances. Refer to the later "Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies" section in this Item 2 for additional discussion of our liquidity position.
Results of Operations
Summary of Results of Operations
| Three Months Ended March 31, | |||||||||||||||||||||||
| Change | |||||||||||||||||||||||
| 2026 | 2025 |
Amount ($) |
Percentage | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Interest and dividend income | $ | 339,546 | $ | 265,705 | $ | 73,841 | 27.8 | % | |||||||||||||||
| Interest expense | 94,890 | 76,806 | 18,084 | 23.5 | % | ||||||||||||||||||
| Net interest income | 244,656 | 188,899 | 55,757 | 29.5 | % | ||||||||||||||||||
| Provision for allowance for loan losses | 5,756 | 6,600 | (844) | (12.8) | % | ||||||||||||||||||
| Noninterest income (loss) | 43,557 | (236,118) | 279,675 | 118.4 | % | ||||||||||||||||||
| Noninterest expense | 198,630 | 130,120 | 68,510 | 52.7 | % | ||||||||||||||||||
| Income tax expense | 18,565 | 33,727 | (15,162) | (45.0) | % | ||||||||||||||||||
| Net income (loss) | 65,262 | (217,666) | 282,928 | 130.0 | % | ||||||||||||||||||
Comparison of the three months ended March 31, 2026 and 2025
Interest and Dividend Income
Interest and dividend income increased by $73.8 million, or 27.8%, to $339.5 million during the three months ended March 31, 2026 from $265.7 million during the three months ended March 31, 2025. The increase was primarily due to an increase in both the average balance of our loan portfolio and yields of our loan and securities portfolios. Our yields on loans and securities are generally presented on an FTE basis where the embedded tax benefit on loans and securities are calculated and added to the yield. Management believes that this presentation allows for better comparability between institutions with different tax structures.
•Interest income on loans increased $73.3 million, or 32.1%, to $301.8 million during the three months ended March 31, 2026 from $228.5 million during the three months ended March 31, 2025. The increase in interest income on our loans was due to an increase in the average balance and an increase in the yield on our loans. The average balance of our loan portfolio increased $5.2 billion, or 29.3%, to $23.1 billion during the three months ended March 31, 2026 from $17.8 billion during the three months ended March 31, 2025. This increase was primarily due to loans acquired in connection with our merger with HarborOne, which was completed in November 2025. The overall yield on our loans increased 11 basis points during the three months ended March 31, 2026 in comparison to the three months ended March 31, 2025, which was primarily due to the accretion of the discounts recorded related to loans acquired in our merger with HarborOne.
•Interest income on securities and other short-term investments increased by $0.6 million, or 1.5%, to $37.8 million during the three months ended March 31, 2026 from $37.2 million during the three months ended March 31, 2025. The increase was primarily due to an increase in our combined yield on our securities and other short-term investments, which increased 35 basis points during the three months ended March 31, 2026 in comparison to the three months ended March 31, 2025 due to the purchase of new securities with higher yields. Partially offsetting this increase was a decrease in the average balance of our securities and other short-term investments during the three months ended March 31, 2026, which primarily resulted from maturities and principal paydowns of AFS and HTM securities.
Interest Expense
During the three months ended March 31, 2026, interest expense increased by $18.1 million to $94.9 million from $76.8 million during the three months ended March 31, 2025. This increase was primarily due to both an increase in deposit interest expense and an increase in borrowings interest expense.
During the three months ended March 31, 2026, interest expense on our interest-bearing deposits increased by $14.4 million to $90.4 million from $76.0 million during the three months ended March 31, 2025. This increase was due to an increase in the average balance of our interest-bearing deposits. During the three months ended March 31, 2026, average interest-bearing deposits increased by $3.8 billion, or 25.0%, to $18.9 billion from $15.1 billion during the three months ended March 31, 2025, which was primarily due to our merger with HarborOne, which added approximately $3.5 billion in interest-bearing deposits.
Interest expense related to our borrowings increased by $3.7 million to $4.5 million during the three months ended March 31, 2026 from $0.8 million during the three months ended March 31, 2025. The increase in borrowings interest expense
during the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to an increase in our total borrowings due to FHLB advances assumed in connection with our merger with HarborOne.
Net Interest Income
Net interest income increased by $55.8 million, or 29.5%, to $244.7 million during the three months ended March 31, 2026 from $188.9 million for the three months ended March 31, 2025. Net interest income increased due to an increase in our net interest margin of 26 basis points, to 3.63% during the three months ended March 31, 2026 from 3.38% during the three months ended March 31, 2025.
The following chart shows our net interest margin over the past five quarters:
Net interest margin is determined by dividing FTE net interest income by average total interest-earning assets. For purposes of the following discussion, income from tax-exempt loans and investment securities has been adjusted to an FTE basis, using marginal tax rates of 22.0% for the three months ended March 31, 2026 compared to 21.8% for the three months ended March 31, 2025.
Net interest margin increased 26 basis points during the three months ended March 31, 2026 to 3.63% from 3.38% during the three months ended March 31, 2025. The increase in net interest margin for the three months ended March 31, 2026 from the three months ended March 31, 2025 was primarily due to an increase in our average balance on interest-earning assets which exceeded the increase in our average balance of interest-bearing liabilities.
The following tables set forth average balance sheet items, annualized average yields and costs, and certain other information for the periods indicated. All average balances in the table reflect daily average balances. Non-accrual loans were included in the computation of average balances but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees and costs, discounts and premiums that are accreted or amortized to interest income or expense.
Average Balances, Interest Earned/Paid, & Average Yields
| As of and for the three months ended March 31, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
|
Average Outstanding Balance |
Interest |
Average Yield/Cost (5) |
Average Outstanding Balance |
Interest |
Average Yield /Cost (5) |
||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||||||||||
|
Loans (1)
|
|||||||||||||||||||||||||||||||||||
| Commercial | $ | 15,846,175 | $ | 214,209 | 5.48 | % | $ | 12,304,951 | $ | 163,837 | 5.40 | % | |||||||||||||||||||||||
| Residential | 5,227,871 | 60,702 | 4.71 | % | 3,913,793 | 42,669 | 4.42 | % | |||||||||||||||||||||||||||
| Consumer | 1,980,641 | 31,994 | 6.55 | % | 1,616,376 | 26,174 | 6.57 | % | |||||||||||||||||||||||||||
| Total loans | 23,054,687 | 306,905 | 5.40 | % | 17,835,120 | 232,680 | 5.29 | % | |||||||||||||||||||||||||||
| Non-taxable investment securities | 393,163 | 4,597 | 4.74 | % | 196,073 | 1,836 | 3.80 | % | |||||||||||||||||||||||||||
| Taxable investment securities | 4,433,668 | 33,203 | 3.04 | % | 4,770,949 | 31,160 | 2.65 | % | |||||||||||||||||||||||||||
| Other short-term investments | 126,009 | 1,010 | 3.25 | % | 438,430 | 4,636 | 4.29 | % | |||||||||||||||||||||||||||
| Total interest-earning assets | $ | 28,007,527 | $ | 345,715 | 5.01 | % | $ | 23,240,572 | $ | 270,312 | 4.72 | % | |||||||||||||||||||||||
| Non-interest-earning assets | 2,605,533 | 1,829,737 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 30,613,060 | $ | 25,070,309 | |||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||||||||||||||
| Savings account | $ | 2,056,455 | $ | 1,787 | 0.35 | % | $ | 1,648,234 | $ | 1,191 | 0.29 | % | |||||||||||||||||||||||
| Interest checking account | 4,669,195 | 9,653 | 0.84 | % | 4,492,879 | 10,049 | 0.91 | % | |||||||||||||||||||||||||||
| Money market investment | 7,860,869 | 41,719 | 2.15 | % | 5,733,572 | 31,707 | 2.24 | % | |||||||||||||||||||||||||||
| Time account | 4,277,889 | 37,276 | 3.53 | % | 3,211,280 | 33,051 | 4.17 | % | |||||||||||||||||||||||||||
| Total interest-bearing deposits | 18,864,408 | 90,435 | 1.94 | % | 15,085,965 | 75,998 | 2.04 | % | |||||||||||||||||||||||||||
| Borrowings | 487,512 | 4,455 | 3.71 | % | 85,779 | 808 | 3.82 | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | $ | 19,351,920 | $ | 94,890 | 1.99 | % | $ | 15,171,744 | $ | 76,806 | 2.05 | % | |||||||||||||||||||||||
| Demand accounts | 6,330,200 | 5,742,132 | |||||||||||||||||||||||||||||||||
| Other noninterest-bearing liabilities | 569,412 | 573,141 | |||||||||||||||||||||||||||||||||
| Total liabilities | 26,251,532 | 21,487,017 | |||||||||||||||||||||||||||||||||
| Shareholders' equity | 4,361,528 | 3,583,292 | |||||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 30,613,060 | $ | 25,070,309 | |||||||||||||||||||||||||||||||
|
Net interest income - FTE
|
$ | 250,825 | $ | 193,506 | |||||||||||||||||||||||||||||||
|
Net interest rate spread (2)
|
3.02 | % | 2.67 | % | |||||||||||||||||||||||||||||||
|
Net interest-earning assets (3)
|
$ | 8,655,607 | $ | 8,068,828 | |||||||||||||||||||||||||||||||
|
Net interest margin - FTE (4)
|
3.63 | % | 3.38 | % | |||||||||||||||||||||||||||||||
| Average interest-earning assets to interest-bearing liabilities | 144.73 | % | 153.18 | % | |||||||||||||||||||||||||||||||
|
Return (loss) on average assets (5)(6)
|
0.86 | % | (3.52) | % | |||||||||||||||||||||||||||||||
|
Return (loss) on average equity (5)(7)
|
6.07 | % | (24.64) | % | |||||||||||||||||||||||||||||||
| Noninterest expense to average assets | 2.63 | % | 2.10 | % | |||||||||||||||||||||||||||||||
(1)Non-accrual loans are included in loans.
(2)Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(3)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(4)Net interest margin - FTE represents fully-taxable equivalent net interest income divided by average total interest-earning assets. Refer to the earlier "Non-GAAP Financial Measures" section within this Item 2 for additional information.
(5)Presented on an annualized basis.
(6)Represents net income (loss) divided by average total assets.
(7)Represents net income (loss) divided by average equity.
The following chart shows the composition of our quarterly average interest-earning assets for the past five quarters:
Provision for Loan Losses
The provision for loan losses represents the charge to expense that is required to maintain an appropriate level of allowance for loan losses.
We recorded provisions for allowance for loan losses of $5.8 million and $6.6 million for the three months ended March 31, 2026 and 2025, respectively.
Our periodic evaluation of the appropriate allowance for loan losses considers the risk characteristics of the loan portfolio, current economic conditions, and trends in loan delinquencies and charge-offs.
Management's estimate of our allowance for loan losses as of March 31, 2026 and the provision for allowance for loan losses for the three months ended March 31, 2026, was supported, in part, by Oxford Economics' March 2026 Baseline forecast ("the forecast") which was used to develop management's estimate of the effect of expected future economic conditions on the allowance for loan losses. The forecast assumed the U.S. economy will grow slightly in 2026, however there is concern regarding higher energy prices due to the conflict in Iran, thus leading to less consumer spending. The forecast also assumed and increase to the U.S. unemployment rate in 2026, which could also affect consumer spending, thus leading to large amounts of layoffs. Further, the forecast assumed that the FOMC will decrease the federal funds rate twice in 2026, with those cuts projected to come in June and September in order to guide against a rise in estimated unemployment rates. Refer to the section titled "Outlook and Trends" within this Item 2 for additional discussion. For additional discussion of our allowance for credit losses measurement methodology, see Note 4, "Loans and Allowance for Credit Losses" within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q.
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 GDP growth on an annual basis in 2026 of 0.7%. Use of the downside scenario would have resulted in an incremental increase in the allowance for loan losses of approximately $20.4 million as of March 31, 2026. The upside scenario assumed GDP growth on an annual basis of 2.8%. Use of the upside scenario would have resulted in an incremental decrease in the allowance for loan losses of approximately $8.0 million as of March 31, 2026.
Noninterest Income (Loss)
The following table sets forth information regarding noninterest income for the periods shown:
Noninterest Income (Loss)
| Three Months Ended March 31, | |||||||||||||||||||||||
| Change | |||||||||||||||||||||||
| 2026 | 2025 | Amount | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Investment advisory fees | $ | 18,314 | $ | 16,437 | $ | 1,877 | 11.4 | % | |||||||||||||||
| Service charges on deposit accounts | 9,927 | 8,315 | 1,612 | 19.4 | % | ||||||||||||||||||
| Card income | 5,797 | 3,920 | 1,877 | 47.9 | % | ||||||||||||||||||
| Interest rate swap income | 983 | 488 | 495 | 101.4 | % | ||||||||||||||||||
| Losses from investments for employee retirement benefits | (1,860) | (1,257) | (603) | 48.0 | % | ||||||||||||||||||
| Mortgage banking income (loss) | 2,865 | (92) | 2,957 | (3,214.1) | % | ||||||||||||||||||
| Losses on sales of securities available for sale, net | - | (269,638) | 269,638 | (100.0) | % | ||||||||||||||||||
| Miscellaneous income and fees | 9,035 | 6,339 | 2,696 | 42.5 | % | ||||||||||||||||||
| Other non-operating loss | (1,504) | (630) | (874) | 138.7 | % | ||||||||||||||||||
| Total noninterest income (loss) | $ | 43,557 | $ | (236,118) | $ | 279,675 | (118.4) | % | |||||||||||||||
Noninterest income increased by $279.7 million, or 118.4%, to $43.6 million during the three months ended March 31, 2026 from a loss of $236.1 million during the three months ended March 31, 2025. This increase was primarily due to a $269.6 million decrease in losses on sales of securities available for sale and a $3.0 million increase in mortgage banking income.
•There were no sales of available for sale securities during the three months ended March 31, 2026. Losses on sales of securities available for sale were $269.6 million for the three months ended March 31, 2025, due to an investment portfolio repositioning, which included the decision by management to sell certain available for sale securities.
•Mortgage banking income increased primarily due to the merger with HarborOne, which included a mortgage company subsidiary that was liquidated into the Bank during the three months ended March 31, 2026. The activities of the subsidiary, in which the Bank is now engaged, included originating residential real estate mortgage loans principally for sale on the secondary market. As a result, the merger lead to a greater volume of secondary market sales during the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
Noninterest Expense
The following table sets forth information regarding noninterest expense for the periods shown:
Noninterest Expense
| Three Months Ended March 31, | |||||||||||||||||||||||
| Change | |||||||||||||||||||||||
| 2026 | 2025 | Amount | % | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| Salaries and employee benefits | $ | 102,151 | $ | 79,859 | $ | 22,292 | 27.9 | % | |||||||||||||||
| Occupancy and equipment | 14,111 | 10,617 | 3,494 | 32.9 | % | ||||||||||||||||||
| Technology and data processing | 23,843 | 18,015 | 5,828 | 32.4 | % | ||||||||||||||||||
| Professional services | 3,414 | 2,924 | 490 | 16.8 | % | ||||||||||||||||||
| Marketing expenses | 2,696 | 1,732 | 964 | 55.7 | % | ||||||||||||||||||
| FDIC insurance | 3,368 | 3,288 | 80 | 2.4 | % | ||||||||||||||||||
| Amortization of intangible assets | 11,644 | 7,808 | 3,836 | 49.1 | % | ||||||||||||||||||
| Other operating expenses | 6,636 | 5,877 | 759 | 12.9 | % | ||||||||||||||||||
| Non-operating expenses | 30,767 | - | 30,767 | 100.0 | % | ||||||||||||||||||
| Total noninterest expense | $ | 198,630 | $ | 130,120 | $ | 68,510 | 52.7 | % | |||||||||||||||
Noninterest expense increased by $68.5 million, or 52.7%, to $198.6 million during the three months ended March 31, 2026 from $130.1 million during the three months ended March 31, 2025. This increase was primarily due to a $30.8 million increase in non-operating expenses, a $22.3 million increase in salaries and employee benefits expense, a $5.8 million increase in technology and data processing expense, a $3.8 million increase in amortization of intangible assets, and a $3.5 million increase in occupancy and equipment expense.
•Non-operating expenses increased primarily as a result of merger and acquisition expenses in association with our merger with HarborOne. There were no merger and acquisition expenses incurred during the three months ended March 31, 2025.
•Salaries and employee benefits increased primarily due to increases in salary and wages expenses and health insurance expenses, which were primarily due to an increase in the number of employees as a result of our merger with HarborOne in addition to regular employee wage increases.
•Technology and data processing expenses increased primarily due to an increase in software expenses, which were primarily driven by an increase in cybersecurity software expenses. The increase in these expenses was driven by an increase in the number of our employees and efforts to improve our cybersecurity technology to better protect against potential cybersecurity threats. Also contributing to this increase, was an increase in core data processing expenses, which was primarily driven by an increase in the number of accounts due to our merger with HarborOne.
•Amortization of intangible assets increased due to an increase in intangible assets in connection with our merger with HarborOne, resulting in an increase in amortization expense.
•Occupancy and equipment expense increased primarily due to the addition of properties resulting from our merger with HarborOne which lead to an increase in depreciation expense.
Income Taxes
We recognize the tax effect of all income and expense transactions in each year's Consolidated Statements of Income, regardless of the year in which the transactions are reported for income tax purposes. The following table sets forth information regarding our tax provision and applicable tax rates for the periods indicated:
Tax Provision and Applicable Tax Rates
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (Dollars in thousands) | |||||||||||
| Combined federal and state income tax provision | $ | 18,565 | $ | 33,727 | |||||||
| Effective income tax rate | 22.1 | % | (18.3) | % | |||||||
| Blended statutory tax rate | 27.6 | % | 27.7 | % | |||||||
We recognized income tax expenses of $18.6 million and $33.7 million for the three months ended March 31, 2026 and 2025, respectively. The decrease in income tax expense for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was due to the treatment of the tax benefit associated with the loss of sale of securities incurred in the first quarter of 2025. We recorded net income tax expense during the three months ended March 31, 2025 despite a net pre-tax loss recognized during that same period. The loss on sale of securities recognized during the three months ended March 31, 2025 was not considered to be a discrete item for tax purposes and, therefore, the associated tax benefit was realizable ratably over the full year. We did not sell any securities during the three months ended March 31, 2026.
Management of Market Risk
General. 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 risk is the sensitivity of the net present value of assets and liabilities and income to changes in interest rates. Changes in interest rates, as well as fluctuations in the level and duration of assets and liabilities, affect net interest income, our primary source of income. Interest rate risk arises directly from our core banking activities. In addition to directly impacting net interest income, changes in the level of interest rates can also affect the amount of loans originated, the timing of cash flows on loans and securities, and the fair value of assets and liabilities, as well as other aspects of our business.
Governance. The primary goal of interest rate risk management is to attempt to control this risk within policy limits approved by the Risk Management Committee of our Board of Directors ("RMC"), and within the Risk Appetite Statement formally adopted by the Board of Directors and described further below.
These limits reflect our tolerance for interest rate risk over both short-term and long-term horizons, are designed to encompass market rate shocks that would take place with both gradual and immediate effect and cover a range of scenarios from mild to extreme market shocks. More specifically, and as further described below, our policy limits govern:
•The maximum amount of acceptable earnings loss due to market risk in year one of a two-year earnings simulation, determined by net interest income analysis;
•The maximum amount of acceptable earnings loss due to market risk in year two of a two-year earnings simulation, determined by net interest income analysis;
•The maximum amount of acceptable decline in the present value of equity due to market risk, determined by economic value of equity analysis;
•The maximum acceptable size of the investment portfolio relative to total assets;
•Concentration limits on investment asset types to ensure appropriate portfolio diversification;
•Maximum maturity and weighted average life per security at time of purchase in both a base case and a shocked rate scenario to measure extension risk;
•The maximum acceptable duration of the investment and hedging derivatives portfolio; and
•Guidelines on accounting classification of securities including held for trading, available for sale and held to maturity.
Policy limits are tested quarterly, and the results are reported to the Asset Liability Committee ("ALCO"), which is a subcommittee of management's Enterprise Risk Management Committee ("ERMC"), and to RMC. RMC advises the Board of Directors with respect to the adequacy of capital allocated based on the level of risk as well as risk issues that could impact liquidity and/or capital adequacy. From time to time, we expect we will exceed policy limits, in which case we may seek corrective action after considering, among other things, market conditions, customer reaction, and the estimated impact on profitability. A remediation plan will be presented to ALCO, ERMC and RMC that carefully outlines the proposed corrective action.
We attempt to manage interest rate risk by identifying, quantifying, and where appropriate, hedging our exposure to market risk. If assets and liabilities do not re-price simultaneously and in equal volume, the potential for interest rate exposure exists. Our objective is to maintain stability in the growth of net interest income through the maintenance of an appropriate mix of interest-earning assets and interest-bearing liabilities and, when necessary and within limits that management determines to be prudent, through the use of off-balance sheet hedging instruments including, but not limited to, interest rate swaps, floors and caps.
Our asset-liability management strategy is devised and monitored by our ALCO in accordance with policies approved by RMC. ALCO operates under a charter developed and approved by ERMC. ALCO meets monthly, or more frequently as needed, to review, among other things, our sensitivity to interest rate changes, loan pricing and activity, investment activity and strategy, hedging strategies, deposit pricing and funding strategies with respect to overall balance sheet composition, as well as earnings simulations over multiple years. ALCO may meet more frequently if there are changes in the economic environment, such as rapid increases or decreases in interest rates due to or as a result of exogenous or unknown factors so that ALCO can make any necessary strategic adjustments to better manage interest rate risk. ALCO's membership is comprised of executive management of the Company, and representatives from various lines of business are in regular attendance, including representation from Enterprise Risk Management ("ERM"). ALCO reports regularly to RMC on these risks and objectives with independent oversight and reporting from our Financial and Model Risk Management group within ERM.
As a company offering banking and other financial services, certain elements of risk are inherent in our transactions and operations and are present in the business decisions we make. We, therefore, encounter risk as part of the normal course of our business, and we design risk management processes to help manage these risks. In its oversight of our risk management framework, the Board of Directors has adopted a formal Risk Appetite Statement ("RAS") which defines the aggregate level of risk and the types of risk the Company is willing to assume to achieve its corporate strategy and objectives. The Board of Directors regularly assesses whether the approved policy limits, as described further above, conform to stated risk appetite. The Board of Directors monitors, on at least a quarterly basis, a set of key risk metrics, including those, but not limited to those, pertaining to market risk. Monitoring these metrics can help to identify trends in risk profile or emerging risks over time, and where applicable, determine where adjustments may be required to business strategy or tactics. Within our risk
management framework, the functional responsibilities of risk management are divided into a tiered model, involving three lines of defense:
1.The Finance Department to which primary market risk ownership belongs including monitoring and tracking of risk, model development and maintenance, and execution of strategy and tactics to mitigate market risk;
2.The ERM Department which conducts independent risk and controls assessments to ensure appropriate risk identification, management, and reporting. The Model Risk Management group ("MRM") within ERM is responsible for independent oversight of models used to measure market risk, including model and assumption implementation, development, and conceptual soundness; and
3.The Internal Audit Department which independently assesses the operating effectiveness of the first- and second-line processes and controls.
Comments on Recent Developments. During the past several years, the U.S. economy has experienced both sharp increases and decreases in interest rates. Refer to the earlier section titled "Outlook and Trends" within this Item 7, for a description of recent actions by the Federal Open Market Committee ("FOMC") regarding changes to the range of the federal funds rate. Our market risk management framework is designed for the potential for such rapid changes in interest rates, by establishing policy limits on such rapid shocks and periodically back-testing modeled to actual results. Back-testing of top-line results as well as key assumptions is performed against established thresholds as part of our ongoing monitoring governance of our models, and results are reported to ALCO and MRM. Should back-testing results exceed established performance thresholds, the model and underlying assumptions will be reviewed for recalibration.
Net Interest Income Analysis. We analyze our sensitivity to changes in interest rates through a net interest income ("NII") model. We model our NII over a 12-month and 24-month period assuming no changes in interest rates and a static balance sheet, where cash flows from financial assets and liabilities are replaced with new business of similar terms at current rates. The impact of our interest rate derivatives designated as hedging instruments are included in the model results. We then model NII for the same period under the assumption that market rates increase and decrease instantaneously by certain basis point increments, which vary by period depending upon market conditions, with changes in interest rates representing immediate, permanent, and parallel shifts in the yield curve. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the "Changes in Interest Rates" column in the table below.
Many assumptions are made in the modeling process for both NII and economic value of equity ("EVE", discussed further below), including but not limited to the repricing and maturity characteristics of existing and new business, loan and security prepayments, administered deposit rate betas, duration of deposits without stated maturity dates, and other option risks. Management believes these assumptions to be reasonable for the various interest rate environments modeled. However, differences in actual results from these assumptions could change our exposure to interest rate risk. 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. 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.
Because of the limitations inherent in any modeling approach used to measure market risk, including NII and EVE sensitivity analysis, and because, in the event of changes in interest rates, management would take active steps to manage interest rate risk exposure among its financial assets and liabilities, modeling results, including those discussed in "Interest Rate Sensitivity" and "EVE Interest Rate Sensitivity" below, should not be relied upon as a forecast of actual NII or EVE, nor should they be interpreted as management's expectations of actual results in the event of such interest rate fluctuations. The tables provide an indication of our interest rate risk exposure at a particular point in time, and actual results may differ.
The tables below set forth, as of March 31, 2026 and December 31, 2025, the modeled changes in our net interest income on an FTE basis that would result from the designated immediate changes in market interest rates:
Interest Rate Sensitivity
| As of March 31, 2026 | ||||||||||||||
|
Change in
Interest Rates
(basis points) (1)
|
Year 1 Change from Level |
Policy Limit | ||||||||||||
| 400 | 2.3 | % | (20.0) | % | ||||||||||
| 200 | 1.3 | % | (12.0) | % | ||||||||||
| 100 | 0.7 | % | (10.0) | % | ||||||||||
| Flat | - | % | - | % | ||||||||||
| (100) | (0.8) | % | (10.0) | % | ||||||||||
| (200) | (1.1) | % | (12.0) | % | ||||||||||
| (400) | 1.6 | % | (20.0) | % | ||||||||||
| As of December 31, 2025 | ||||||||||||||
|
Change in
Interest Rates
(basis points) (1)
|
Year 1 Change from Level |
Policy Limit | ||||||||||||
| 400 | (1.7) | % | (20.0) | % | ||||||||||
| 200 | (0.6) | % | (12.0) | % | ||||||||||
| 100 | (0.2) | % | (10.0) | % | ||||||||||
| Flat | - | % | - | % | ||||||||||
| (100) | (0.1) | % | (10.0) | % | ||||||||||
| (200) | 0.0 | % | (12.0) | % | ||||||||||
| (400) | 1.4 | % | (20.0) | % | ||||||||||
(1)Assumes an immediate uniform change in market interest rates at all maturities.
As of March 31, 2026, our model, as indicated above, shows modest changes in net interest income in rising and falling rate scenarios. In the rising rate scenarios modeled interest income is expected to outpace the growth in funding costs. In the falling rate scenarios, except for the shock down 400 basis point scenario, interest income is modeled to fall faster than funding costs. This represents a modest increase in asset sensitivity from December 31, 2025, driven by a modest decrease in asset duration, due in part to the reduced impact of the cash flow hedge portfolio. The simulation results are within policy limits and management therefore does not expect a material change to our current strategy over the near term. The rate scenarios that we model at each period end are dependent upon market conditions, which is why the rate scenarios that we model may differ from period-to-period.
Management may use techniques such as investment strategy, loan and deposit pricing, non-core funding strategies, and interest rate derivative financial instruments, within internal policy guidelines, to manage interest rate risk as part of our asset/liability strategy. Hedging strategies such as, for example, receive-fixed and pay-fixed swaps, interest rate caps, floors, or collars, may be used to protect against benchmark interest rates either rising or falling. The type of derivatives we primarily use to hedge market risk are interest rate swap agreements designated as cash flow hedging instruments. When the Federal Reserve began raising interest rates in March of 2022 from very low levels, management began evaluating a derivative strategy designed to limit our exposure to downward rate scenarios. In 2022, management executed receive-fixed interest rate swap agreements on floating-rate loans which have a total notional value of $1.6 billion as of March 31, 2026. These swaps are designated as cash flow hedges and management believes these derivatives provide significant protection against falling interest rates, as they have the effect of converting floating rate loan exposure to fixed rates. These receive-fixed swaps constitute the entirety of our current hedge portfolio. Management may, from time to time, due to actual or projected changes in market rates or our risk exposure, evaluate other hedging strategies, although we believe our current Net Interest Income and Economic Value of Equity simulation analyses support maintaining the current derivatives strategy. For additional information related to our interest rate derivative financial instruments, see Note 11, "Derivative Financial Instruments" within the Notes to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Quarterly Report on Form 10-Q.
Economic Value of Equity Analysis. We also analyze the sensitivity of our financial condition to changes in interest rates through our EVE model. This analysis calculates the difference between the present value of expected cash flows from assets and liabilities assuming various changes in current interest rates.
The 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 both March 31, 2026 and December 31, 2025. 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.
Our earnings are not directly or materially impacted by movements in foreign currency rates or commodity prices. Movements in equity prices may have a material impact on earnings by affecting the volume of activity or the amount of wealth management revenue and by affecting the amount of unrealized gains and losses from investments for employee retirement benefits, which are partially offset by corresponding and opposite changes in employee benefit expense driven by fluctuations in plan asset values.
EVE Interest Rate Sensitivity
|
Change in Interest Rates (basis points) (1) |
As of March 31, 2026 | ||||||||||||||||
| Estimated Increase (Decrease) in EVE from Level (2) |
EVE as a Percentage of Total Assets (3) |
||||||||||||||||
| Percent | Policy Limit | ||||||||||||||||
| 400 | (3.8) | % | (40.0) | % | 22.69 | % | |||||||||||
| 200 | (1.4) | % | (20.0) | % | 22.31 | % | |||||||||||
| 100 | (0.5) | % | N/A | 22.03 | % | ||||||||||||
| Flat | - | - | % | 21.66 | % | ||||||||||||
| (100) | (0.4) | % | N/A | 21.09 | % | ||||||||||||
| (200) | (2.5) | % | (20.0) | % | 20.22 | % | |||||||||||
| (400) | (14.3) | % | (40.0) | % | 17.07 | % | |||||||||||
|
Change in Interest Rates (basis points) (1) |
As of December 31, 2025 | ||||||||||||||||
| Estimated Increase (Decrease) in EVE from Level (2) |
EVE as a Percentage of Total Assets (3) |
||||||||||||||||
| Percent | Policy Limit | ||||||||||||||||
| 400 | (3.0) | % | (30.0) | % | 22.17 | % | |||||||||||
| 200 | (0.6) | % | (20.0) | % | 21.81 | % | |||||||||||
| 100 | (0.3) | % | N/A | 21.43 | % | ||||||||||||
| Flat | - | - | % | 21.02 | % | ||||||||||||
| (100) | (0.9) | % | N/A | 20.38 | % | ||||||||||||
| (200) | (3.4) | % | (20.0) | % | 19.46 | % | |||||||||||
| (400) | (15.1) | % | (30.0) | % | 16.45 | % | |||||||||||
(1)Assumes an immediate uniform change in market interest rates at all maturities.
(2)EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.
(3)Total assets is the net present value of expected cash flows.
Liquidity, Capital Resources, Contractual Obligations, Commitments and Contingencies
Liquidity. Liquidity describes our ability to meet the financial obligations that arise in the normal course of business. Liquidity is primarily needed to meet deposit withdrawals and anticipated loan fundings, as well as current and planned expenditures. We seek to maintain sources of liquidity that are reliable and diversified and that may be used during the normal course of business as well as on a contingency basis.
Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from calls, maturities and sales of securities, subject to market conditions. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan and securities prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are unencumbered cash and cash equivalents and securities classified as available for sale, which could be liquidated, subject to market conditions. In the future,
our liquidity position will continue to be affected by the level of customer deposits and payments, loan originations and repayments, as well as any acquisitions, dividends, and share repurchases in which we may engage. For the next twelve months, we believe that our existing resources, including our capacity to use brokered deposits and wholesale borrowings, will be sufficient to meet the liquidity and capital requirements of our operations. 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.
We participate in a reciprocal deposit 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 banks in the same network depending on our funding needs. At both March 31, 2026 and December 31, 2025, we had no one-way sell deposits. At March 31, 2026 and December 31, 2025, we had repurchased $2.2 billion and $2.3 billion, respectively, of reciprocal deposits.
Although customer deposits remain our preferred source of funds, maintaining additional sources of liquidity is part of our prudent liquidity risk management practices. We have the ability to borrow from the FHLBB. At March 31, 2026, we had $0.7 billion in outstanding advances and the ability to borrow up to an additional $4.0 billion. We also have the ability to borrow from the Federal Reserve Bank of Boston. At March 31, 2026, we had the ability to borrow up to $4.0 billion from the Federal Reserve Bank of Boston Discount Window. At March 31, 2026, cash and cash equivalents were $0.3 billion and secured borrowing capacity at the Federal Reserve Bank and Federal Home Loan Bank totaled $8.1 billion, providing total liquidity sources of $8.4 billion. These liquidity sources provided 110% coverage of all customer uninsured and uncollateralized deposits, which totaled $7.6 billion, or 30% of total deposits, as of March 31, 2026. For further discussion of uninsured deposits, refer to the "Deposits" discussion within the "Financial Position" section within this Item 2.
Sources of Liquidity
| As of March 31, 2026 | As of December 31, 2025 | ||||||||||||||||||||||
| Outstanding |
Additional Capacity |
Outstanding |
Additional Capacity |
||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
|
Brokered deposits (1)
|
$ | 3,525 | $ | - | $ | 84,703 | $ | - | |||||||||||||||
| Reciprocal deposits | 2,224,093 | - | 2,267,539 | - | |||||||||||||||||||
|
Federal Home Loan Bank (2)
|
687,917 | 4,042,789 | 198,058 | 3,049,296 | |||||||||||||||||||
|
Federal Reserve Bank of Boston- Discount Window (3)
|
- | 4,035,987 | - | 3,902,128 | |||||||||||||||||||
| Total | $ | 2,915,535 | $ | 8,078,776 | $ | 2,550,300 | $ | 6,951,424 | |||||||||||||||
(1)Additional borrowing capacity has not been assessed in this category.
(2)As of both March 31, 2026 and December 31, 2025, loans with a carrying value of $5.0 billion, and securities with carrying values of $1.5 billion and $0.2 billion, respectively, were pledged to the FHLBB resulting in this additional unused borrowing capacity. The outstanding balance of FHLB borrowings as of March 31, 2026 and December 31, 2025 shown above excludes the remaining premium related to borrowings assumed in connection with our merger with HarborOne of $1.3 million and $1.6 million, respectively.
(3)As of March 31, 2026 and December 31, 2025, loans with a carrying value of $5.2 billion and $5.0 billion, respectively, and securities with a carrying value of $397.1 million and $414.2 million, respectively, were pledged to the Discount Window, resulting in this additional borrowing capacity.
We believe that advanced preparation, early detection, and prompt responses can avoid, minimize, or shorten potential liquidity constraints. Our Board of Directors and management's ALCO oversee the assessment and monitoring of risk levels, as well as potential responses during unanticipated stress events. As part of our risk management framework, we perform periodic liquidity stress testing to assess our need for liquid assets as well as backup sources of liquidity.
Capital Resources. We are subject to various regulatory capital requirements administered by the Massachusetts Commissioner of Banks, the FDIC and the Federal Reserve (with respect to our consolidated capital requirements). At March 31, 2026 and December 31, 2025, we exceeded all applicable regulatory capital requirements, and were considered "well capitalized" under regulatory guidelines. To be categorized as well-capitalized, the Company must maintain (1) a minimum of total risk-based capital ratio of 10.0%; (2) a minimum of common equity Tier 1 capital ratio of 6.5%; (3) a minimum of Tier 1 capital ratio of 8.0%; and (4) a minimum of Tier 1 leverage ratio of 5.0%. Management believes that the Company met all capital adequacy requirements to which it is subject as of March 31, 2026 and December 31, 2025. There have been no conditions or events that management believes would cause a change in the Company's categorization.
The Company's actual capital ratios are presented in the following table:
| As of March 31, 2026 | As of December 31, 2025 | ||||||||||
| Capital Ratios: | |||||||||||
|
Average equity to average assets (1)
|
14.25 | % | 14.43 | % | |||||||
| Total regulatory capital (to risk-weighted assets) | 14.15 | % | 14.32 | % | |||||||
| Common equity Tier 1 capital (to risk-weighted assets) | 13.15 | % | 13.19 | % | |||||||
| Tier 1 capital (to risk-weighted assets) | 13.15 | % | 13.19 | % | |||||||
| Tier 1 capital (to average assets) leverage | 10.98 | % | 11.65 | % | |||||||
(1)The ratio presented as of March 31, 2026 represents quarter-to-date average equity as a percentage of quarter-to-date average total assets.
Contractual Obligations, Commitments and Contingencies. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities. At March 31, 2026, there were no material changes in our contractual obligations, other commitments and contingencies from those disclosed in our 2025 Form 10-K.
We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. The financial instruments include commitments to originate loans, unused lines of credit, unadvanced portions of construction loans and standby letters of credit, all of which involve elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Balance Sheets. Our exposure to credit loss is represented by the contractual amount of the instruments. We use the same credit policies in making commitments as we do for on-balance sheet instruments.
At March 31, 2026, we had $7.3 billion of commitments to originate loans, comprised of $4.1 billion of commitments under commercial loans and lines of credit (including $677.1 million of unadvanced portions of construction loans), $2.7 billion of commitments under home equity loans and lines of credit, $271.9 million in standard overdraft coverage commitments, $65.8 million of unfunded commitments related to residential real estate loans and $166.3 million in other consumer loans and lines of credit. In addition, at March 31, 2026, we had $93.0 million in standby letters of credit outstanding. We also had $29.9 million in forward commitments to sell loans.
Commitments to originate loans are agreements to lend to a customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments are expected to expire without being drawn upon, the total commitments do not necessarily represent future cash requirements.
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