Report Item 1a:
Form 10-K
N/A
Report Item 1b:
Annual Report
Enclosed is the 2019 Consolidated Eastern Bank Corporation Annual Report.
Report Item 2a:
Organization Chart
Attached is an organization chart of Eastern Bank Corporation's direct and indirect ownership
of all its banks and nonbank subsidiaries.
Report Item 2b:
Domestic Branch Listing
Attached is the list of Eastern Bank Corporation's branches
Report Item 3:
Shareholders
Eastern Bank Corporation is a mutually owned holding company with no shareholders.
Report Item 4:
Directors and Officers
Attached is a list of the information requested for Eastern Bank Corporation's Board of Directors
and Executive Officers.
The following list is a reference for the responses submitted to each of the report items
for the 2019 Annual Report FR Y-6 for Eastern Bank Corporation.
Eastern Bank Corporation
2019 Annual Report
Management’s Letter
2019 was another outstanding year for Eastern as we generated our third consecutive year of
record results. Our net income of $135.1 million was an all-time high and exceeded our 2018
results by over 10%. Total assets grew to a record $11.6 billion; and loans, deposits and capital
levels were also new highs. Loans ended 2019 at $8.9 billion or an increase of $124 million
from 2018; deposits were $9.6 billion, up $152 million from 2018; and capital exceeded $1.6
billion, or an increase of $167 million from 2018 levels. Our loan credit quality remained stellar
with very low loan losses of 0.05% of average loans and non-performing loans of 0.49% of total
loans.
Although interest rate levels were lower in 2019 than they had been in 2018, a vibrant local
economy and our strong competitive position helped us generate this performance. The
company’s net interest income (the difference between interest earned on loans and
investments less interest paid on deposits and other funding sources) was $411 million, or 5.4%
above 2018, as higher interest rates on loans and investments exceeded higher costs of
deposits and other funding. Our net interest margin improved to 3.96% from 3.84% in 2018 as
our balance sheet, which we have been positioning to perform well for any direction in interest
rates, paid dividends.
All of our business units performed well in 2019. Our Commercial Banking Group had another
exceptional year as commercial loans increased from $5.9 billion to $6.2 billion, or 5%. Our
commitment to Small Business remained as strong as ever as we were ranked the #1 SBA
lender in New England for the 10th consecutive year. Our retail businesses, both consumer
lending and our branch-based deposit groups, had outstanding years as checking and lending
product sales to our customers were well above prior levels. Eastern Insurance Group had
another outstanding year with more than $91 million in revenues and Eastern Wealth
Management saw revenues increase 3% to just under $20 million.
We leveraged our existing platforms to generate these terrific results with noninterest expenses
of $413 million, less than a 4% increase from 2018. We continue to be very pleased with our
many investments in technology and people and believe our online and mobile platform
upgrades over the last few years have provided a better customer experience and new
opportunities for growth. We will finish the roll out of our commercial and business customers’
online banking upgrades in the first half of 2020 and plan continuous upgrades in our
commercial lending origination platform we implemented several years ago. The process to
create better digital experiences for our customers that make it easy to transact with Eastern,
and to improve our analytical capabilities to better understand our customers, made great
strides in 2019 and we look forward to more in 2020.
Our capital base is critical to our health and future success. We ended 2019 with over $1.6
billion in capital after adding $167 million through the year, primarily due to our earnings. Our
capital ratios far exceed the bank regulatory minimums and we also exceed the “well-
capitalized” standards set by our regulators. In addition, our balance sheet is extremely strong
with excellent loan quality, ample liquidity and robust capital levels.
1
We were very pleased with these record results in 2019 and would like to thank our 1,896
Eastern colleagues for making them happen. We believe we are well positioned for continued
success and look forward to another outstanding year in 2020.
ROBERT F. RIVERS DEBORAH C. JACKSON
Chair and Chief Executive Officer Lead Director
QUINCY L. MILLER JAMES B. FITZGERALD
Vice Chair and President Vice Chair, Chief Financial Officer & Chief Administrative Officer
2
Financial Highlights
December 31
3
Average Balance Sheets
The following tables present average balances, interest rates and yields (tax equivalent basis) for
the years indicated:
Average Interest Average
(Dollars in thousands) Balance Income/Expense Yield/Rate
Assets
Loans:
Residential mortgage loans $ 1,439,845 $ 53,736 3.73 %
Commercial loans
(2)
6,089,410 291,055 4.78
Consumer loans 1,419,692 60,009 4.23
Total loans 8,948,947 404,800 4.52
Investment securities
(2)
1,435,719 42,494 2.96
Federal funds sold and other short-term
investments 144,856 2,977 2.06
Total earning assets 10,529,522 450,271 4.28
Noninterest-bearing assets 874,588
Total assets $ 11,404,110
Liabilities and Retained Earnings
Deposits:
Savings accounts $ 991,244 210 0.02
Interest checking accounts
(1)
1,842,993 3,947 0.21
Money market investment
(1)
2,769,934 19,150 0.69
Time accounts 392,035 3,994 1.02
Total interest-bearing deposits 5,996,206 27,301 0.46
Borrowed funds 291,413 6,452 2.21
Total interest-bearing liabilities 6,287,619 33,753 0.54
Demand accounts
(1)
3,369,375
Other noninterest-bearing liabilities 203,925
Retained earnings 1,543,191
Total liabilities and retained earnings $ 11,404,110
Net interest income $ 416,518
Interest spread 3.74 %
Net interest income to earning assets 3.96 %
(1) Balances shown for interest checking accounts, money market investments, and demand accounts do not reflect the
impacts of certain sweep programs designed to manage reserve requirements at the Federal Reserve Bank of Boston.
(2) FTE adjustments to commercial loan and investment security income were $2.7 and $2.5 million, respectively.
2019
4
Average Interest Average
(Dollars in thousands) Balance Income/Expense Yield/Rate
Assets
Loans:
Residential mortgage loans $ 1,358,387 $ 49,840 3.67 %
Commercial loans
(2)
5,653,675 262,234 4.64
Consumer loans 1,554,087 59,669 3.84
Total loans 8,566,149 371,743 4.34
Investment securities
(2)
1,539,901 45,707 2.97
Federal funds sold and other short-term
investments 192,112 3,412 1.78
Total earning assets 10,298,162 420,862 4.09
Noninterest-bearing assets 839,208
Total assets $ 11,137,370
Liabilities and Retained Earnings
Deposits:
Savings accounts $ 1,048,289 229 0.02
Interest checking accounts
(1)
1,821,854 3,325 0.18
Money market investment
(1)
2,422,531 9,988 0.41
Time accounts 452,885 3,843 0.85
Total interest-bearing deposits 5,745,559 17,385 0.30
Borrowed funds 410,312 7,737 1.89
Total interest-bearing liabilities 6,155,871 25,122 0.41
Demand accounts
(1)
3,416,422
Other noninterest-bearing liabilities 204,515
Retained earnings 1,360,562
Total liabilities and retained earnings $ 11,137,370
Net interest income $ 395,740
Interest spread 3.68 %
Net interest income to earning assets 3.84 %
(1) Balances shown for interest checking accounts, money market investments, and demand accounts do not reflect the
impacts of certain sweep programs designed to manage reserve requirements at the Federal Reserve Bank of Boston.
(2) FTE adjustments to commercial loan and investment security income were $2.6 and $3.1 million, respectively.
2018
5
Ernst & Young LLP Tel: +1 617 266 2000
200 Clarendon Street Fax: +1 617 266 5843
Boston, MA 02116 ey.com
Report of Independent Auditors
The Board of Directors
Eastern Bank Corporation
We have audited the accompanying consolidated financial statements of Eastern Bank Corporation,
which comprise the consolidated balance sheets as of December 31, 2019 and 2018, and the related
consolidated statements of income, comprehensive income, changes in retained earnings and cash flows
for the years then ended, and the related notes to the consolidated financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
conformity with U.S. generally accepted accounting principles; this includes the design,
implementation and maintenance of internal control relevant to the preparation and fair presentation of
financial statements that are free of material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of significant accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
6
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of Eastern Bank Corporation at December 31, 2019 and 2018, and the
consolidated results of its operations and its cash flows for the years then ended in conformity with
U.S. generally accepted accounting principles.
February 28, 2020
7
Eastern Bank Corporation
Consolidated Balance Sheets
Assets
Cash and due from banks $ 135,503 $ 149,703
Other short-term investments 227,099 110,005
Cash and cash equivalents 362,602 259,708
Trading securities 961 52,899
Securities available for sale 1,508,236 1,455,898
Loans held for sale 26 22
Loans and leases, net of allowance for credit losses of
$82,297 in 2019 and $80,655 in 2018 8,899,184 8,774,913
Federal Home Loan Bank stock, at cost 9,027 17,959
Premises and equipment 57,453 66,475
Bank-owned life insurance 77,546 75,434
Goodwill and other intangibles, net 377,734 381,276
Deferred income taxes, net 28,207 37,676
Rabbi trust assets 78,012 64,819
Other assets 229,787 191,208
Total assets $ 11,628,775 $ 11,378,287
Liabilities and retained earnings
Liabilities:
Deposits:
Demand $ 386,446 $ 337,169
Savings 971,119 999,649
Interest checking 214,462 464,352
Money market investment 7,650,226 7,123,375
Time 243,941 277,740
Time - $250,000 and over 85,198 197,208
Total deposits 9,551,392 9,399,493
Borrowed funds 235,395 334,287
Other liabilities 241,835 211,366
Total liabilities 10,028,622 9,945,146
Retained earnings 1,644,000 1,508,902
Accumulated other comprehensive income, net of tax:
Unrealized appreciation (depreciation) on securities 21,798 (19,360)
available for sale
Funded status of defined benefit postretirement plans (81,269) (59,389)
Unrealized appreciation on cash flow hedges 15,624 2,988
Total retained earnings 1,600,153 1,433,141
Total liabilities and retained earnings $ 11,628,775 $ 11,378,287
See accompanying notes.
December 31
2019
2018
(In Thousands)
8
Eastern Bank Corporation
Consolidated Statements of Income
Interest and dividend income:
Loans, including fees $ 402,092 $ 369,148
Trading securities 242 1,033
Taxable securities available for sale 31,400 31,988
Tax-exempt securities available for sale 8,306 9,585
Federal funds sold and other short-term investments 2,977 3,412
Total interest and dividend income
445,017 415,166
Interest expense:
Deposits 27,301 17,384
Borrowed funds 6,452 7,738
Total interest expense
33,753 25,122
Net interest income 411,264 390,044
Provision for allowance for credit losses 6,300 15,100
Net interest income after provision for credit losses
404,964 374,944
Noninterest income:
Insurance commissions 90,587 91,885
Service charges on deposit accounts 27,043 26,897
Trust and investment advisory fees 19,653 19,128
Debit card processing fees 10,452 16,162
Interest rate swap income 4,362 5,012
Income (losses) from investments held in rabbi trusts 9,866 (1,542)
Trading securities gains, net 1,297 2,156
Net gain on sales of mortgage loans held for sale 795 397
Gains on sales of securities available for sale, net 2,016 50
(Losses) gains on sales of other assets (15) 1,989
Other 16,243 18,461
Total noninterest income
182,299 180,595
Noninterest expense:
Salaries and employee benefits 252,238 239,349
Office occupancy and equipment 36,458 35,480
Data processing 45,939 45,260
Professional services 15,958 14,812
Charitable contributions 12,905 13,251
Marketing 9,619 11,100
FDIC insurance 1,878 4,180
Amortization of intangible assets 3,542 3,891
Net periodic benefit cost, excluding service cost (5,335) (6,498)
Other 39,482 37,103
Total noninterest expense
412,684 397,928
Income before income tax expense 174,579 157,611
Income tax expense 39,481 34,884
Net income $
135,098
$
122,727
See accompanying notes.
Year Ended December 31
2019
2018
(In Thousands)
9
Eastern Bank Corporation
Consolidated Statements of Comprehensive Income
Net income $ 135,098 $ 122,727
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities available for sale:
Change in fair value of securities available for sale 42,715 (30,485)
Less: reclassification adjustment for gains
included in net income 1,557 40
Net change in fair value of securities available for sale 41,158 (30,525)
Unrealized gains(losses) on cash flow hedges:
Change in fair value of cash flow hedges 14,576 3,849
Less: reclassification adjustment for income 1,940 861
Net change in fair value of cash flow hedges 12,636 2,988
Defined benefit pension plans:
(Amortization) of actuarial net loss (5,206) (5,479)
Change in actuarial net loss 27,119 (1,926)
(Amortization) of prior service cost (33) (32)
Net change in actuarial net loss 21,880 (7,437)
Total other comprehensive income (loss) 31,914 (20,100)
Comprehensive income $ 167,012 $ 102,627
See accompanying notes.
Year Ended December 31
2019
2018
(In Thousands)
10
Eastern Bank Corporation
Consolidated Statements of Changes in Retained Earnings
Accumulated
Other
Retained Comprehensive
Earnings Income Total
Balance at December 31, 2017 $ 1,379,006 $ (48,492) $ 1,330,514
Opening balance reclassification
(1)
:
Unrealized appreciation on securities available for sale (1,953) 1,953 -
Actuarial net loss of defined benefit pension plans 9,122 (9,122) -
Net income 122,727 - 122,727
Other comprehensive (loss), net of tax - (20,100) (20,100)
Balance at December 31, 2018 1,508,902 (75,761) 1,433,141
Net income 135,098 - 135,098
Other comprehensive income, net of tax - 31,914 31,914
Balance at December 31, 2019 $ 1,644,000 $ (43,847) $ 1,600,153
(1) Opening balance reclassification adjustment, related to the adoption of Accounting Standards Update 2018-02,
to reclassify amounts stranded in other comprehensive income to retained earnings as a result of the Tax Cuts and
Jobs Act.
See accompanying notes.
(In Thousands)
11
Eastern Bank Corporation
Consolidated Statements of Cash Flows
Operating activities
Net income $
135,098
$
122,727
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for allowance for credit losses
6,300 15,100
Depreciation
15,940 16,177
Amortization of intangible assets
3,542 3,891
Deferred income tax expense (benefit)
1,376 (4,878)
Amortization of premiums, discounts, and fees, net
8,193 4,747
Increase in cash surrender value of bank-owned life insurance
(2,112) (15)
Decrease (increase) in trading securities, net
51,938 (6,108)
Gain on sale of securities available for sale, net
(2,016) (50)
Net gain on sale of mortgage loans held for sale
(795) (397)
Proceeds from sale of loans held for sale
208,658 108,788
Originations of loans held for sale
(207,867) (106,059)
(Increase) decrease in prepaid pension expense
(11,031) 11,237
Other, net
(11,347) 39,849
Net cash provided by operating activities 195,877 205,009
Investing activities
Proceeds from sales of securities available for sale
47,985 11,672
Proceeds from maturities and principal paydowns of securities
available for sale
204,065 162,425
Purchases of securities available for sale
(252,571) (167,584)
Proceeds from sale of Federal Home Loan Bank stock
42,034 18,346
Purchases of Federal Home Loan Bank stock
(33,102) (12,035)
Contributions to low income housing tax credit investments
(6,349) (3,270)
Contributions to other equity investments
(4,545) (146)
Distributions from equity investments
62 226
Proceeds from life insurance policies
- 743
Net increase in outstanding loans
(135,666) (637,518)
Acquisitions, net of cash and cash equivalents acquired
- (11,500)
Proceeds from sale of portion of reporting unit
- 571
Purchased banking premises and equipment, net
(7,187) (9,034)
Net cash used in investing activities (145,274) (647,104)
Financing activities
Net increase in demand, savings, interest checking, and money
market investment deposit accounts
297,708 485,087
Net (decrease) increase in time deposits
(145,809) 98,954
Net decrease in borrowed funds
(98,892) (192,218)
Contingent consideration paid
(716) (1,173)
Net cash provided by financing activities
52,291 390,650
Net increase (decrease) in cash, cash equivalents, and restricted cash
102,894 (51,445)
Cash, cash equivalents, and restricted cash at beginning of year
259,708 311,153
Cash, cash equivalents, and restricted cash at end of year $ 362,602 $ 259,708
See accompanying notes.
Year Ended December 31
2019
2018
(In Thousands)
12
Eastern Bank Corporation
Notes to Consolidated Financial Statements
December 31, 2019
1. Summary of Significant Accounting Policies
Nature of Operations
Eastern Bank Corporation (the Corporation) is a Massachusetts chartered mutual bank holding
company. Through its wholly-owned subsidiaries, Eastern Bank (the Bank) and Eastern Insurance
Group LLC, the Corporation provides a variety of banking, trust and investment, and insurance
services.
The activities of the Corporation are subject to the regulatory supervision of the Federal Reserve
Board. The activities of the Bank are subject to the regulatory supervision of the Federal Deposit
Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB). The
Corporation is also subject to various Massachusetts business and banking regulations, and the
Bank is also subject to various Massachusetts and New Hampshire business and banking
regulations.
Basis of Presentation
The consolidated financial statements include the accounts of the Corporation, its wholly-owned
subsidiaries and a consolidated tax credit investment company. All intercompany accounts and
transactions have been eliminated in consolidation. The Corporation consolidates: wholly-owned
subsidiaries; any variable interest entities (VIEs) where the Corporation or one of the
Corporation’s wholly-owned subsidiaries was determined to be the primary beneficiary of the VIE;
and any voting interest entities (VOEs) where either the Corporation or a wholly-owned subsidiary
is determined to have control of the VOE.
Certain previously reported amounts have been reclassified to conform to the current year
presentation.
The accounting and reporting policies of the Corporation conform to accounting principles
generally accepted in the United States (GAAP) and to the general practices of the banking
industry. In preparing the consolidated financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and liabilities as of the date
of the balance sheet and revenues and expenses for the period. Actual results could differ from
those estimates.
13
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Material estimates that are particularly susceptible to change relate to the determination of the
allowance for credit losses, valuation and fair value measurements, other-than-temporary
impairment on investment securities, the liabilities for benefit obligations (particularly pensions),
the provision for income taxes and the valuation of goodwill and other intangibles and their
respective analyses of impairment.
The Corporation has evaluated subsequent events through February 28, 2020, which is the date
that the consolidated financial statements were available to be issued.
Business Combinations
Acquisitions of businesses are accounted for using the acquisition method of accounting.
Accordingly, the net assets of the companies acquired are recorded at their fair values at the date
of acquisition. Goodwill represents the excess of purchase price over the fair value of net assets
acquired. Other intangible assets represent acquired assets that lack physical substance but can be
distinguished from goodwill because of contractual or other legal rights, or because the asset is
capable of being sold or exchanged either on its own, or in combination with a related contract,
asset, or liability.
The Corporation evaluates goodwill for impairment at least annually, or more often if warranted.
Other intangible assets are reviewed for impairment whenever there is an indication of impairment,
however, useful lives are evaluated annually. Any impairment losses are charged to earnings. The
Corporation amortizes other intangible assets over their respective estimated useful lives. The
estimated useful life of core deposit identifiable intangible assets fall within a range of seven to
ten years and the estimated useful life of customer lists from insurance agency acquisitions is ten
years. The estimated useful life of non-compete agreements resulting from insurance agency
acquisitions are dependent upon the terms of the agreement. Intangible assets are stated at cost
less accumulated amortization.
Cash and Cash Equivalents
Cash and cash equivalents include cash and due from banks, Federal funds sold, and other short-
term investments including restricted cash pledged, all of which have an original maturity of 90
days or less.
Securities
Debt and equity securities that are bought and held principally for the purpose of resale in the near
terms are classified as trading and fair value net income, respectively, and reported at fair value,
with unrealized gains and losses included in earnings.
14
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Debt securities classified as available for sale are reported at fair value, with unrealized gains and
losses reported as a separate component of other comprehensive income, net of tax.
Management evaluates impaired securities available for sale (e.g., those for which fair value is less
than cost) for other-than-temporary impairment (OTTI) at least on a quarterly basis, and more
frequently when economic or market concerns warrant such evaluation. Consideration is given to
the length of time and the extent to which the fair value has been less than cost, current market
conditions, the financial condition and near-term prospects of the issuer, performance of collateral
underlying the securities, the ratings of the individual securities, the interest rate environment, the
Corporation’s intent to sell the security or whether it is more likely than not that the Corporation
will be required to sell the debt security before its anticipated recovery, as well as other qualitative
factors.
Premiums and discounts on investments and mortgage-backed securities are amortized or accreted
to income using the effective interest rate method. If a decline in fair value below the amortized
cost basis of an investment is judged to be other than temporary, the investment is written down
to fair value. The portion of the impairment related to credit losses is included in earnings, and
the portion of the impairment related to other factors is included in other comprehensive income.
Gains and losses on sales of investments are recognized at the time of sale on the specific-
identification basis.
Loans
Loans are reported at their principal amount outstanding, net of deferred loan fees and any
unearned discount or unamortized premium for acquired loans. Unearned discount and
unamortized premium are accreted and amortized, respectively, to income on a basis that results
in level rates of return over the terms of the loans. Origination fees and related direct incremental
origination costs are offset, and the resulting net amount is deferred and amortized over the life of
the related loans using the interest method, assuming a certain level of prepayments. When loans
are sold or repaid, the unamortized fees and costs are recorded to income.
15
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Interest accruals are generally discontinued when management has determined that the borrower
may be unable to meet contractual obligations and/or when loans are 90 days or more in arrears,
unless management believes that collateral held by the Corporation is clearly sufficient and full
satisfaction of both principal and interest is highly probable or the loan is accounted for as a
purchased credit-impaired loan. When a loan is placed on nonaccrual, all interest previously
accrued but not collected is reversed against current period income and amortization of deferred
loan fees is discontinued. Interest received on nonaccrual loans is either applied against principal
or reported as income according to management’s judgment as to the collectability of principal.
Nonaccrual loans may be returned to an accrual status when principal and interest payments are
no longer delinquent, and the risk characteristics of the loan have improved to the extent that there
no longer exists a concern as to the collectability of principal and interest. Loans are considered
past due based upon the number of days delinquent according to their contractual terms.
Impaired loans consist of all loans for which management has determined it is probable the
Corporation will be unable to collect all amounts due according to the contractual terms of the loan
agreements. Factors considered by management in determining impairment include payment
status, collateral value, and the probability of collecting scheduled principal and interest payments
when due. The Corporation measures impairment of loans using a discounted cash flow method,
the loan’s observable market price, or the fair value of the collateral if the loan is collateral
dependent.
In cases where a borrower experiences financial difficulties and the Corporation makes certain
concessionary modifications to contractual terms, the loan is classified as a troubled debt
restructuring (TDR). Modifications may include adjustments to interest rates, extensions of
maturity, consumer loans where the borrower’s obligations have been effectively discharged
through Chapter 7 Bankruptcy and the borrower has not reaffirmed the debt to the Corporation,
and other actions intended to minimize economic loss and avoid foreclosure or repossession of
collateral. All TDR loans are considered impaired and therefore are subject to a specific review
for impairment loss. The impairment analysis discounts the present value of the anticipated cash
flows by the loan’s contractual rate of interest in effect prior to the loan’s modification or the fair
value of collateral if the loan is collateral dependent. The amount of impairment loss, if any, is
recorded as a specific loss allocation to each individual loan in the allowance for loan losses.
Commercial loans (commercial and industrial, commercial real estate, commercial construction,
and small business loans) and residential loans that have been classified as TDRs and which
subsequently default are reviewed to determine if the loan should be deemed collateral dependent.
In such an instance, any shortfall between the value of the collateral and the book value of the loan
is determined by measuring the recorded investment in the loan against the fair value of the
collateral less costs to sell.
16
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Acquired Loans
All acquired loans are recorded at fair value at the acquisition date with no carryover of the
allowance for loan losses. At acquisition, loans are also reviewed to determine if the loan has
evidence of deterioration in credit quality since origination and for which it is probable, at
acquisition, that all contractually required payments will not be collected. Such loans are deemed
to be purchased credit-impaired (PCI) loans. Under the accounting model for PCI loans, the excess
of cash flows expected to be collected over the carrying amount of the loans, referred to as the
“accretable yield,” is accreted into interest income over the life of the loans using the effective
yield method. Accordingly, PCI loans are not subject to classification as nonaccrual in the same
manner as originated loans. Rather, acquired loans are considered to be accruing loans because
their interest income relates to the accretable yield recognized and not to contractual interest
payments at the loan level. The difference between contractually required principal and interest
payments and the cash flows expected to be collected, referred to as the “nonaccretable difference,”
includes estimates of both the impact of prepayments and future credit losses expected to be
incurred over the life of the loans.
The estimate of cash flows expected to be collected is regularly re-assessed subsequent to
acquisition. These re-assessments involve updates, as necessary, of the key assumptions and
estimates used in the initial estimate of fair value. Generally speaking, expected cash flows are
affected by:
• Changes in the expected principal and interest payments over the estimated life – Changes
in expected cash flows may be driven by the credit outlook and actions taken with
borrowers. Changes in expected future cash flows resulting from loan modifications are
included in the assessment of expected cash flows.
• Change in prepayment assumptions – Prepayments affect the estimated life of the loans,
which may change the amount of interest income expected to be collected.
• Change in interest rate indices for variable rate loans – Expected future cash flows are
based, as applicable, on the variable rates in effect at the time of the assessment of
expected cash flows.
17
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
A decrease in expected cash flows in subsequent periods may indicate that the loan is impaired
which would require the establishment of an allowance for loan losses by a charge to the provision
for loan losses. An increase in expected cash flows in subsequent periods serves, first, to reduce
any previously established allowance for loan losses by the increase in the present value of cash
flows expected to be collected, and results in a recalculation of the amount of accretable yield for
the loan. The adjustment of accretable yield due to an increase in expected cash flows is accounted
for as a change in estimate. The additional cash flows expected to be collected are reclassified
from the nonaccretable difference to the accretable yield, and the amount of periodic accretion is
adjusted accordingly over the remaining life of the loans.
A PCI loan may be resolved either through receipt of payment (in full or in part) from the borrower,
the sale of the loan to a third party, or foreclosure of the collateral. For PCI loans accounted for
on an individual loan basis and resolved directly with the borrower, any amount received from
resolution in excess of the carrying amount of the loan is recognized and reported within interest
income.
A refinancing or modification of a PCI loan accounted for individually is assessed to determine
whether the modification represents a TDR. If the loan is considered to be a TDR, it will be
included in the total impaired loans reported by the Corporation. The loan will continue to
recognize interest income based upon the excess of cash flows expected to be collected over the
carrying amount of the loan.
18
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Allowance for Credit Losses
The allowance for credit losses is established to provide for probable losses incurred in the
Corporation’s loan portfolio at the balance sheet date and is established through a provision for
credit losses charged to earnings. The allowance is based on management’s assessment of many
factors, including the risk characteristics of the loan portfolio, current economic conditions, and
trends in loan delinquencies and charge-offs. Charge-offs, net of recoveries, are charged directly
to the allowance. Commercial and residential loans are charged-off in the period in which they
are deemed uncollectible. Delinquent loans in these product types are subject to ongoing review
and analysis to determine if a charge-off in the current period is appropriate. For consumer finance
loans, policies and procedures exist that require charge-off consideration upon a certain triggering
event depending on the product type. Charge-off triggers include: 120 days delinquent for
automobile, home equity, and other consumer loans with the exception of cash reserve loans for
which the trigger is 150 days delinquent; death of the borrower; or chapter 7 bankruptcy. In
addition to those events, the charge-off determination includes other credit quality indicators, such
as collateral position and adequacy or the presence of other repayment sources.
The allowance for credit losses is evaluated on a regular basis by management. While management
uses current information in establishing the allowance for losses, future adjustments to the
allowance may be necessary if economic conditions or conditions relative to borrowers differ
substantially from the assumptions used in making the evaluation. Management uses a
methodology to systematically estimate the amount of credit loss incurred in the portfolio.
Commercial real estate, commercial and industrial, and business banking loans are evaluated using
a loan rating system, historical losses and other factors which form the basis for estimating incurred
losses. Portfolios of more homogeneous populations of loans, including residential mortgages and
consumer loans, are analyzed as groups taking into account delinquency ratios, historical loss
experience and charge-offs.
19
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
The allowance consists of specific and general components. The specific component consists of
reserves for impaired loans (defined as those where management has determined it is probable it
will not collect all payments when due), typically classified as either doubtful or substandard. For
impaired loans, an allowance is established when the discounted cash flows (or collateral value or
observable market price) of the loan is lower than the carrying value of the loan. The general
component covers non-impaired non-classified loans and is based on historical loss experience
adjusted for qualitative factors. The qualitative factors include internal infrastructure factors,
external macroeconomic factors, and internal portfolio factors, all customized to loan pools that
include loans with similar characteristics. The general reserve rate is then determined as the greater
of the rate arrived at via the qualitative factor methodology or the floor rate. The floors are
determined by adjusting the Corporation’s average loss rates by long run industry average loss
rates for peer institutions, and then multiplying those by the industry loss emergence period.
In the ordinary course of business, the Corporation enters 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 allowance for loan losses. The reserve for unfunded lending commitments is
included in other liabilities in the balance sheet.
Additionally, various regulatory agencies, as an integral part of the Corporation’s examination
process, periodically assess the appropriateness of the allowance for loan losses and may require
the Corporation to increase its provision for loan losses or recognize further loan charge-offs, in
accordance with U.S. GAAP.
Mortgage Banking Activities
Mortgage loans held for sale to the secondary market are carried at the lower of cost or estimated
market value on an individual loan basis. The Corporation enters into commitments to fund
residential mortgage loans with an offsetting forward commitment to sell them in the secondary
markets in order to mitigate interest rate risk. Gains or losses on sales of mortgage loans are
recognized at the time of sale. Interest income is recognized on loans held for sale between the
time the loan is funded and the loan is sold. Direct loan origination costs and fees are deferred
upon origination and are recognized on the date of sale.
20
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Federal Home Loan Bank Stock
The Corporation, as a member of the Federal Home Loan Bank (FHLB) of Boston, is required to
maintain an investment in capital stock of the FHLB. Based on redemption provisions, the stock
has no quoted market value and is carried at cost.
Premises and Equipment Used in Operations
Land is carried at cost. Buildings, leasehold improvements, and equipment are stated at cost less
accumulated depreciation and amortization, computed principally on the straight-line method over
the estimated useful lives of the related assets or the terms of the leases, if shorter.
Premises and Equipment Held for Sale
Banking premises and equipment held for sale are carried at the lower of cost or estimated fair
value less costs to sell.
Retirement Plans
The Corporation provides pension benefits to its employees through various pension plans. At the
measurement date, plan assets are determined based on fair value, generally representing
observable market prices. The actuarial cost method used to compute the pension liabilities and
related expense is the projected unit credit method. The projected benefit obligation is principally
determined based on the present value of the projected benefit distributions at an assumed discount
rate. The discount rate which is utilized is determined using the spot rate approach whereby the
individual spot rates on the Financial Times and Stock Exchange (FTSE) above-median yield
curve are applied to each corresponding year’s projected cash flow used to measure the respective
plan’s service cost and interest cost. Periodic pension expense (or income) includes service costs,
interest costs based on the assumed discount rate, the expected return on plan assets, if applicable,
based on an actuarially derived market-related value and amortization of actuarial gains and losses.
The overfunded or underfunded status of the plans is recorded as an asset or liability on the
consolidated balance sheets, with changes in that status recognized through other comprehensive
income, net of related taxes.
21
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Variable Interest Entities and Voting Interest Entities
The Corporation is involved in the normal course of business with various types of special purpose
entities, some of which meet the definition for VIEs and VOEs. The Corporation is required by
GAAP to consolidate a VIE when the Corporation is deemed to be the primary beneficiary. This
determination is evaluated periodically as facts and circumstances change.
A legal entity is referred to as a VIE if any of the following conditions exist: 1) the total equity
investment at risk is insufficient to permit the legal entity to finance its activities without additional
subordinated financial support from other parties; 2) as a group, the holders of the equity
investment at risk lack any of the characteristics of a controlling financial interest; or 3) the equity
investors’ voting rights are not proportional to the economics, and substantially all of the activities
of the entity either involve or are conducted on behalf of an investor that has disproportionally few
voting rights. The Corporation consolidates entities deemed to be VIEs when either the
Corporation or a wholly-owned subsidiary is determined to be the primary beneficiary. The
primary beneficiary analysis is a qualitative analysis based on power and benefits. An enterprise
has a controlling financial interest in a VIE if it has both power and benefits – that is, it has 1) the
power to direct the activities of a VIE that most significantly impact the VIE’s economic
performance (power); and 2) the obligation to absorb losses of the VIE that potentially could be
significant to the VIE and/or the right to receive benefits from the VIE that potentially could be
significant to the VIE (benefits).
Under GAAP, investments in limited partnerships and similar entities that are not VIEs should be
evaluated for potential consolidation under the voting model. The Corporation consolidates VOEs
when either the Corporation or a wholly-owned subsidiary is determined to have control of the
VOE.
22
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Rabbi Trust VIE
The Corporation established a rabbi trust to meet its obligations under certain executive non-
qualified retirement benefits and deferred compensation plans and to mitigate the expense
volatility of the aforementioned retirement plans. The rabbi trust is considered a VIE as the equity
investment at risk is insufficient to permit the trust to finance its activities without additional
subordinated financial support from the Corporation. The Corporation is considered the primary
beneficiary of the rabbi trust as it has the power to direct the activities of the rabbi trust that
significantly affect the rabbi trust’s economic performance and it has the obligation to absorb
losses of the rabbi trust that could potentially be significant to the rabbi trust by virtue of its
contingent call options on the rabbi trust’s assets in the event of the Corporation’s bankruptcy. As
the primary beneficiary of this VIE, the Corporation consolidates the rabbi trust investments,
executive retirement benefits liabilities and deferred compensation plan liabilities. These rabbi
trust investments consist primarily of cash and cash equivalents, U.S. government agency
obligations, equity securities, mutual funds and other exchange-traded funds, and are recorded at
fair value. Changes in fair value are recorded in noninterest income.
Tax Credit Investment VIE
Through a wholly-owned subsidiary, the Corporation is the sole member of a tax credit investment
company through which it consolidates a community development entity (CDE) that is considered
a VIE. The CDE is considered a VIE because as a group, the holders of the equity investment at
risk lack any of the characteristics of a controlling financial interest. The tax credit investment
company is considered the primary beneficiary of the CDE as it has the power to direct the
activities of a VIE that most significantly impact the VIEs economic performance and the
obligation to absorb losses of and the right to receive benefits from the VIE that potentially could
be significant to the VIE.
23
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Bank Owned Life Insurance
Primarily as a result of mergers and acquisitions, the Corporation holds life insurance on the lives
of certain participating executives. The amount reported as an asset on the balance sheet is the
sum of the cash surrender values reported to the Corporation by the various insurance carriers.
Certain policies are split-dollar life insurance policies whereby the Corporation recognizes a
liability for the postretirement benefit related to the arrangement. This postretirement benefit is
included in other liabilities on the balance sheet.
Income Taxes
The Corporation accounts for income taxes under the asset and liability method. Under this
method, deferred tax assets and liabilities are established for the temporary differences between
the accounting basis and the tax basis of the Corporation’s assets and liabilities at enacted tax rates
expected to be in effect when the amounts related to such temporary differences are realized or
settled. A valuation allowance is established if it is considered more likely than not that all or a
portion of the deferred tax assets will not be realized. Interest and penalties paid on the
underpayment of income taxes are classified as income tax expense.
The Corporation periodically evaluates the potential uncertainty of its tax positions as to whether
it is more likely than not its position would be upheld upon examination by the appropriate taxing
authority. A tax position that meets the more-likely-than-not recognition threshold is measured to
determine the amount of benefit to recognize in the consolidated financial statements. The tax
position is measured at the largest amount of benefit that is greater than 50% likely of being
realized upon settlement.
Low Income Housing Tax Credits and Other Tax Credit Investments
As part of its community reinvestment initiatives, the Corporation invests in qualified affordable
housing projects and other tax credit investment projects. The Corporation receives low-income
housing tax credits, investment tax credits, rehabilitation tax credits, solar tax credits and other tax
credits as a result of its investments in these limited partnership investments.
24
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
The Corporation accounts for its investments in qualified affordable housing projects using the
proportional amortization method and amortizes the initial cost of the investment in proportion to
the tax credits and other tax benefits allocated to the Corporation. The amortization of the excess
of the carrying amount of the investment over its estimated residual value is included as a
component of income tax expense. At investment inception, the Corporation records a liability for
the committed amount of the investment. This liability is reduced as contributions are made.
The Corporation evaluates investments in tax credit investment companies for consolidation based
on the variable or voting interest entity guidance, as appropriate.
Other tax credit investment projects are accounted for using either the cost method or equity
method.
Advertising Costs
All advertising costs are expensed in the period in which they are incurred.
Insurance Commissions
Through Eastern Insurance Group LLC, the Corporation acts as an agent in offering property,
casualty and life and health insurance to both personal and commercial customers. Personal lines
insurance products include life, accident and health, automobile, and property and liability
insurance including fire, condominium, home and tenants, among others. Commercial insurance
products include group life and health, commercial property and liability, surety, and workers
compensation insurance, among others. The Corporation recognizes insurance commission
revenues as performance obligations of underlying agreements are satisfied.
Trust Operations
The Bank is a full-service trust company that provides a wide range of trust services to customers
that includes managing customer investments, safekeeping customer assets, supplying
disbursement services, and providing other fiduciary services. Trust assets held in a fiduciary or
agency capacity for customers are not included in the accompanying consolidated balance sheets
as they are not assets of the Corporation. Revenue from administrative and management activities
associated with these assets is recognized as performance obligations of underlying agreements
are satisfied.
25
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Derivative Financial Instruments
Derivative instruments are carried at fair value in the Corporation’s financial statements. The
accounting for changes in the fair value of a derivative instrument is determined by whether it has
been designated and qualifies as part of a hedging relationship, and further, by the type of hedging
relationship. At the inception of a hedge, the Corporation documents certain items, including, but
not limited to, the following: the relationship between hedging instruments and hedged items, the
Corporation’s risk management objectives, hedging strategies, and the evaluation of hedge
transaction effectiveness. Documentation includes linking all derivatives that are designated as
hedges to specific assets or liabilities on the balance sheet or to specific forecasted transactions.
The Corporation’s derivative instruments that are designated and qualify for hedge accounting are
classified as cash flow hedges (i.e., hedging the exposure to variability in expected future cash
flows associated with a recognized asset or liability, or a forecasted transaction). As such, changes
in the fair value of the designated hedging instrument that is included in the assessment of hedge
effectiveness are recorded in other comprehensive income and reclassified into earnings in the
same period or periods during which the hedged forecasted transaction affects earnings. Such
reclassifications shall be presented in the same income statement line item as the earnings effect
of the hedged item.
The Corporation’s derivative instruments not designated as hedging instruments are recorded at
fair value and changes in fair value are recognized in other noninterest income. Derivative
instruments not designated as hedging instruments include interest rate swaps, foreign exchange
contracts offered to commercial customers to assist them in meeting their financing and investing
objectives for their risk management purposes, and risk participation agreements entered into as
financial guarantees of performance on customer-related interest rate swap derivatives. The
interest rate and foreign exchange risks associated with customer interest rate swaps and foreign
exchange contracts are mitigated by entering into similar derivatives having offsetting terms with
correspondent bank counterparties.
All derivative financial instruments eligible for clearing are cleared through the Chicago
Mercantile Exchange (CME). In accordance with its amended rulebook, CME legally
characterizes variation margin payments made to and received from CME as settlement of
derivatives rather than as collateral against derivatives.
26
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Fair Value Measurements
The Fair Value Measurements and Disclosures Topic of the Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. This Topic also establishes a fair value hierarchy that
prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1 measurements), and the lowest priority to unobservable inputs (Level 3 measurements).
The three levels of the fair value hierarchy are described below:
Level 1 – Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities
that the reporting entity has the ability to access at the measurement date.
Level 2 – Valuations based on quoted prices in markets that are not active or for which all
significant inputs are observable, either directly or indirectly.
Level 3 – Prices or valuations that require inputs that are both significant to the fair value
measurement and unobservable.
To the extent that valuation is based on models or inputs that are less observable or unobservable
in the market, the determination of fair value requires more judgment. Accordingly, the degree of
judgment exercised by the Corporation in determining fair value is greatest for instruments
categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on
the lowest level of any input that is significant to the fair value measurement.
Statements of Cash Flows
Supplemental disclosures of cash flow information for the years ended December 31 follows:
Cash paid for:
Interest $ 34,217 $ 23,732
Income taxes $ 31,308 $ 29,731
2019
2018
(In Thousands)
27
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Recent Accounting Pronouncements
Relevant standards that were recently issued but not yet adopted as of December 31, 2019:
Standard Description
Date of
Adoption
Effects on the financial statements or other significant
matters
ASU 2016-02, Leases (Topic
842) and relevant amendments
The standard represents a wholesale change to lease
accounting and requires all leases, other than short-
term leases, to be reported on balance sheet through
recognition of a right-of-use asset and a corresponding
liability for future lease obligations. The standard also
requires extensive disclosures for assets, expenses, and
cashflows associated with leases, as well as a maturity
analysis of lease liabilities.
January 1, 2020
The Corporation adopted this standard on January1, 2020 and
used the effective date as the date of application and, therefore,
periods prior to January 1, 2020 will not be restated. The
Corporation elected the package of practical expedients which
permit the Corporation not to reassess prior conclusions about
lease identification, lease classification, and initial direct costs
under the new standard. The Corporation also elected the
hindsight practical expedient and, therefore, used hindsight
knowledge as of the effective date when determining lease
terms and impairment. In addition, the Corporation elected the
practical expedient to not separate lease and non-lease
components and, therefore, accounts for each separate lease
component of a contract and its associated non-lease
components as a single lease component. The new standard
also provides a practical expedient for an entity’s ongoing
accounting relating to leases of 12 months or less (short-term
leases). The Corporation has elected the short-term lease
recognition exemption for all leases that qualify, and thus will
not recognize right-of-use assets or lease liabilities for those
leases. The adoption of this standard resulted in the recognition
of right-of-use assets and lease liabilities on the Corporation’s
balance sheet for its real estate and equipment operating leases
of $93.0 million and $96.4 million, respectively. The
Corporation also recognized a transition adjustment to the
opening balance of retained earnings on 1/1/2020 amounting to
$1.1 million, net of tax, related to the incremental accrued rent
adjustment calculated as a result of electing hindsight. The
amount of right-of-use assets were determined based upon the
present value of the remaining minimum rental payments under
current leasing standards for existing operating leases, adjusted
for options that the Corporation is reasonably certain to
exercise, less accrued rent as of 12/31/2019 and the
incremental accrued rent as a result of electing hindsight. The
amount of lease liabilities were determined based upon the
present value of the remaining minimum rental payments under
current leasing standards for existing operating leases, adjusted
for options that the Corporation is reasonably certain to
exercise.
28
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Standard Description
Date of
Adoption
Effects on the financial statements or other significant
matters
ASU 2016-13, Financial
Instruments - Credit Losses
(Topic 326): Measurement of
Credit Losses on Financial
Instruments and relevant
amendments
The standard replaces the existing incurred loss
impairment guidance and requires immediate
recognition of expected credit losses for financial
assets carried at amortized cost, including trade and
other receivables, loans and commitments, held-to-
maturity debt securities and other financial assets, held
at the reporting date to be measured based on
historical experience, current conditions and
reasonable and supportable forecasts. The standard
also amends existing impairment guidance for available-
for-sale securities, and credit losses will be recorded
as an allowance versus a write-down of the amortized
cost basis of the security and will allow for a reversal
of impairment loss when the credit of the issuer
improves. The guidance requires a cumulative effect of
the initial application to be recognized in retained
earnings at the date of initial application.
January 1, 2023,
early adoption
permitted
The Corporation continues to assess the impact of the standard
on its consolidated financial statements. To date, the
Corporation has been assessing the key differences and gaps
between its current allowance methodologies and model with
those it is considering to use upon adoption. This has included
assessing the adequacy ofexisting loss data, developing models
for default and loss estimates, and finalizing vendor selection.
The Corporation expects to validate its models and execute a
parallel run beginning in 2021.
ASU 2018-15, Intangibles -
Goodwill and Other - Internal-
Use Software (Subtopic 350-
40): Customer's Accounting
for Implementation Costs
Incurred in a Cloud
Computing Arrangement That
is a Service Contract
This standard addresses accounting for fees paid by a
customer for implementation, set-up and other upfront
costs incurred in a cloud computing arrangement that is
hosted by the vendor, i.e., a service contract. The new
guidance aligns treatment for capitalization of
implementation costs with guidance on internal-use
software.
January 1, 2021,
early adoption
permitted
The Corporation is currently assessing the impact of the new
standard on the Corporation's consolidated financial statements.
29
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Relevant standards that were adopted during the year ended December 31, 2019:
The Corporation adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606),
effective January 1, 2019. The standard provides entities with a single model for recognizing
revenue from contracts with customers. The core principle requires an entity to recognize revenue
to depict the transfer of goods or services to customers in an amount that reflects the consideration
that it expects to be entitled to in exchange for those goods or services. In completing its
assessment of those revenue streams within the scope of the guidance, the Corporation did not
identify any revenue sources for which the timing of recognition needed to change under the new
standard. The adoption of this standard on January 1, 2019 did not have a material impact on the
Corporation’s consolidated financial statements, its current accounting policies and practices, or
the timing or amount of revenue recognized. As a result, no adjustment has been made to retained
earnings. However, where appropriate, the Corporation evaluated necessary changes to business
processes, systems, and internal controls in order to support the recognition, measurement, and
disclosure requirements of the new standard.
Effective January 1, 2016, The Corporation early adopted a provision of ASU 2016-01, Financial
Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and
Financial Liabilities, that eliminated the requirement for entities that are not considered public
business entities to disclose the fair value of financial instruments measured at amortized cost.
The Corporation adopted the remaining provisions of the standard effective January 1, 2019.
Under the new standard, all equity securities will be measured at fair value through earnings with
certain exceptions, including investments accounted for under the equity method of accounting or
where the fair market value of an equity security is not readily available. The adoption of this
standard did not have a material impact on the Corporation’s consolidated financial statements.
The preceding listings of relevant standards are not comprehensive listings of all standards to
which the Corporation is subject. Rather, these represent accounting standards that had or have
the potential for having a material impact on the Corporation’s consolidated financial statements.
30
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
2. Mergers and Acquisitions
In 2018, the Corporation acquired certain assets and assumed certain liabilities from the acquisition
of certain insurance agencies for total consideration of $11.5 million in cash. These acquisitions
were considered to be business combinations to be accounted for using the acquisition method
since the Corporation obtained control through the acquisition of the operating assets. As a result
of these business combinations, the Corporation increased its goodwill and insurance agency
intangible assets by $7.7 million and $5.0 million, respectively. The intangible assets recorded as
part of these acquisitions consisted of a $4.4 million customer list intangible asset and a $0.6
million non-compete intangible asset. For tax purposes, the transactions were considered asset
acquisitions and as such, the amortization of goodwill and intangible assets is deductible for tax
purposes. Included in the determination of goodwill was $1.2 million of contingent consideration
based upon a percentage of revenues retained over a period of time after the acquisition dates. The
amount of contingent consideration included in goodwill was based upon management’s best
estimate of possible outcomes. According to the purchase agreements, the contingent
consideration payouts may range from $0 to $1.4 million. Acquisition-related legal and
professional fee costs associated with these agency acquisitions of $0.2 million were charged to
expense in 2018 and were included in the professional fee line item of the consolidated statement
of income.
In 2018, $0.2 million was charged to expense to adjust the acquisition-related contingent
consideration liabilities.
31
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
3. Securities
Trading Securities:
Trading securities, at fair value, were as follows:
The reduction in the above balance is due to the Corporation’s exit of the Capital Markets business
in 2019.
For the years ended December 31, 2019 and 2018, the net unrealized gains and losses on trading
activities for trading securities still held at the reporting date were $2 thousand and $39 thousand,
respectively.
Debt securities:
Municipal bonds and obligations $ 961 $ 52,899
$ 961 $ 52,899
Year Ended December 31
2019
2018
(In Thousands)
32
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
3. Securities
Securities Available for Sale:
The amortized cost, gross unrealized gains and losses, and fair value of securities available for sale
for the periods below were as follows:
A schedule of the contractual maturities of securities available for sale as of December 31, 2019,
follows:
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Debt securities
Government-sponsored residential
mortgage-backed securities $ 1,151,305 $ 17,208 $ (545) $ 1,167,968
U.S. Treasury securities 50,155 265 - 50,420
State and municipal bonds and obligations 272,582 10,959 (3) 283,538
Qualified zone academy bond 6,155 155 - 6,310
$ 1,480,197 $ 28,587 $ (548) $ 1,508,236
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Debt securities
Government-sponsored residential
mortgage-backed securities $ 1,153,495 $ 1,919 $ (19,277) $ 1,136,137
State and municipal bonds and obligations 321,184 1,883 (9,351) 313,716
Qualified zone academy bond 6,045 - - 6,045
$ 1,480,724 $ 3,802 $ (28,628) $ 1,455,898
December 31, 2019
December 31, 2018
(In Thousands)
(In Thousands)
Amortized Fair
Cost Value
Maturing in one year or less $ 6,576 $ 6,731
Maturing after one year but within five years 67,145 67,954
Maturing after five years but within ten years 276,655 283,210
Maturing after ten years 1,129,821 1,150,341
$ 1,480,197 $ 1,508,236
(In Thousands)
33
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
3. Securities (continued)
Mortgage-backed securities and callable securities are shown at their contractual maturity dates.
However, both are expected to have shorter average lives due to expected prepayments and callable
features, respectively. Included in the securities available for sale at December 31, 2019, were
$266.4 million of callable securities at fair value.
Gross realized gains from sales of securities available for sale were $2.1 million and $0.2 million
for the years ended December 31, 2019 and 2018, respectively. The Corporation had no significant
gross realized losses from sales of securities available for sale for the years ended December 31,
2019 and 2018, respectively.
Management prepares an estimate of the expected cash flows for investment securities available
for sale that potentially may be deemed to have OTTI. This estimate begins with the contractual
cash flows of the security. This amount is then reduced by an estimate of probable credit losses
associated with the security. When estimating the extent of probable losses on the securities,
management considers the credit quality and the ability to pay of the underlying issuers. Indicators
of diminished credit quality of the issuers include defaults, interest deferrals, or “payments in
kind.” Management also considers those factors listed in the Investments – Debt and Equity
Securities topic of the FASB ASC when estimating the ultimate realizability of the cash flows for
each individual security.
The resulting estimate of cash flows after considering credit is then subject to a present value
computation using a discount rate equal to the current yield used to accrete the beneficial interest
or the effective interest rate implicit in the security at the date of acquisition. If the present value
of the estimated cash flows is less than the current amortized cost basis, an OTTI is considered to
have occurred and the security is written down to the fair value indicated by the cash flow analysis.
As part of the analysis, management considers whether it intends to sell the security or whether it
is more than likely that it would be required to sell the security before the expected recovery of its
amortized cost basis.
34
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
3. Securities (continued)
Information pertaining to securities available for sale with gross unrealized losses at December 31,
2019 and 2018, which the Corporation has not deemed to be OTTI, aggregated by investment
category and length of time that individual securities have been in a continuous loss position,
follows:
Gross Gross
# of Unrealized Fair Unrealized Fair
Holdings Losses Value Losses Value
Government-sponsored residential
mortgage-backed securities 1 $ 545 $ 74,550 $ - $ -
State and municipal bonds and obligations 2 3 850 - -
3 $ 548 $ 75,400 $ - $ -
Gross Gross
# of Unrealized Fair Unrealized Fair
Holdings Losses Value Losses Value
Government-sponsored residential
mortgage-backed securities 17 $ - $ - $ 19,277 $ 925,797
State and municipal bonds and obligations 257 978 47,324 8,373 151,562
274 $ 978 $ 47,324 $ 27,650 $ 1,077,359
(In Thousands)
December 31, 2019
December 31, 2018
Less than 12 Months
12 Months or Longer
Less than 12 Months
12 Months or Longer
(In Thousands)
35
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
3. Securities (continued)
The Corporation does not intend to sell these investments and has determined based upon available
evidence that it is more likely than not that the Corporation will not be required to sell each security
before the expected recovery of its amortized cost basis. As a result, the Corporation does not
consider these investments to be OTTI. The Corporation made this determination by reviewing
various qualitative and quantitative factors regarding each investment category, such as current
market conditions, extent and nature of changes in fair value, issuer rating changes and trends, and
volatility of earnings.
As a result of the Corporation’s review of these qualitative and quantitative factors, the causes of
the impairments listed in the table above by category are as follows at December 31, 2019:
• Government-sponsored residential mortgage-backed securities: The security with an
unrealized loss in this portfolio has contractual terms that generally do not permit the issuer
to settle the security at a price less than the current par value of the investment. The decline
in market value of this security is attributable to changes in interest rates and not credit
quality. Additionally, this security is implicitly guaranteed by the U.S. Government or one
of its agencies.
• State and municipal bonds and obligations: The securities with unrealized losses in this
portfolio have contractual terms that generally do not permit the issuer to settle the
securities at a price less than the current par value of the investment. The decline in market
value of these securities is attributable to changes in interest rates and not credit quality.
These bonds are investment grade and are rated AA Standard and Poor’s.
In 2018 the Corporation tendered illiquid common shares for one of its cost method investments
in exchange for cash and stock in the acquiring entity totaling $0.6 million. The Corporation
recorded a gain of $0.6 million for the consideration received in excess of the cost basis of the
tendered shares. The newly acquired stock in the acquiring entity had a fair value of $0.3 million
and was subsequently donated to the Eastern Bank Charitable Foundation, and the portion of the
gain related to the stock donation was a non-taxable securities gain.
36
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses
A comparative summary of loans at December 31 follows:
The Corporation’s lending activities are conducted principally in the New England area with the
exception of its Shared National Credit Portfolio. Eastern participates in Shared National Credits
in an effort to improve industry and geographical diversification. Shared National Credits are
included in the commercial and industrial and commercial real estate portfolios and are defined as
loan syndications with exposure over $100 million and with three or more lenders participating.
The Corporation originates single-family and multi-family residential loans, commercial real
estate loans, commercial loans, airplane loans for commercial and consumer use, and a variety of
other consumer loans. Commercial and consumer airplane loans are included in commercial and
industrial and other consumer loans, respectively, in the table above. In addition, the Corporation
originates loans for the construction of residential homes, multi-family properties, commercial real
estate properties, and for land development. Most loans originated by the Corporation are either
collateralized by real estate or other assets, or guaranteed by federal and local governmental
authorities. The ability and willingness of the single-family residential and consumer borrowers
to honor their repayment commitments is generally dependent on the level of overall economic
activity within the borrowers’ geographic areas and real estate values.
Commercial and industrial $
1,642,184 $ 1,658,765
Commercial real estate
3,806,311 3,520,717
Business banking
774,402 744,548
Residential real estate
1,428,630 1,430,764
Consumer home equity
933,088 949,410
Automobile
243,888 415,949
Other consumer
158,543 135,850
Gross loans before unamortized premiums, unearned
discounts and deferred fees
8,987,046 8,856,003
Allowance for credit losses
(82,297) (80,655)
Unamortized premiums, net of unearned discounts and
deferred fees
(5,565) (435)
Loans after the allowance for credit losses, unamortized
premiums, unearned discounts and deferred fees $
8,899,184
$
8,774,913
2019
2018
(In Thousands)
37
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses (continued)
The ability and willingness of commercial real estate, commercial and industrial, and construction
loan borrowers to honor their repayment commitments is generally dependent on the health of the
real estate economic sector in the borrowers’ geographic areas and the general economy. The
ability and willingness of airplane loan borrowers to repay is generally dependent on the health of
the general economy.
The following tables summarize changes in the allowance for loan losses by loan category and
bifurcate the amount of allowance allocated to each loan category based on collective impairment
analysis and loans evaluated individually for impairment.
(In Tho us ands )
Co m me rc ia l Co ns ume r
and C o m m e rc ia l B us ine s s R e s ide ntia l Ho m e Othe r
Indus tria l Re al Es tate B anking Re a l Es tate Equity A uto m o bile C o ns ume r Unallo c a te d To tal
Allo wa nc e fo r Lo an Lo s s e s :
Beginning balance $ 19,3 2 1 $ 3 6 ,876 $ 8,2 9 7 $ 7,0 5 9 $ 4,113 $ 2,2 8 8 $ 2,3 12 $ 389 $ 8 0 ,655
Charge-offs (1,12 3 ) - (5,97 4 ) (66) (205 ) (475) (1,6 56) - (9,4 99)
Recoveries 3,7 48 12 604 105 52 198 122 - 4,8 41
P rovision (1,027) 1,2 26 5,3 73 (718) 67 (670) 2,0 54 (5 ) 6,3 0 0
Ending balance $ 20 ,919 $ 38 ,114 $ 8 ,3 00 $ 6 ,380 $ 4 ,027 $ 1,3 4 1 $ 2,8 3 2 $ 384 $ 82 ,297
Ending balance: individually
evaluated for impairment $ 2,3 3 7 $ 40 $ 571 $ 1,3 9 9 $ 322 $ - $ - $ - $ 4,6 6 9
Ending balance: acquired with
deterio rated credit quality $ 936 $ - $ - $ 256 $ - $ - $ - $ - $ 1,192
Ending balance: co llectively
evaluated for impairment $ 17 ,646 $ 3 8,0 74 $ 7,7 2 9 $ 4,7 25 $ 3,7 05 $ 1,341 $ 2,8 3 2 $ 384 $ 76,436
Lo a ns :
Ending balance: individually
evaluated for impairment $ 32,3 7 0 $ 7,6 4 1 $ 11,6 5 8 $ 2 9 ,532 $ 6,5 5 5 $ - $ - $ - $ 87,7 5 6
Ending balance: acquired with
deterio rated credit quality 3,5 7 1 6,4 59 - 3,4 21 - - - - 13,4 51
Ending balance: co llectively
evaluated for impairment 1,6 06,24 3 3,79 2 ,211 762,7 4 4 1,3 9 5 ,6 77 9 2 6,53 3 24 3 ,888 158 ,543 - 8 ,885,8 3 9
Ending balance: to tal lo ans
by gro up $ 1,6 4 2,184 $ 3,8 06,3 11 $ 7 7 4 ,4 02 $ 1,4 2 8,63 0 $ 933,0 88 $ 2 4 3 ,8 88 $ 158,5 43 $ - $ 8,9 87,0 4 6
Fo r the Ye ar Ende d De c e mbe r 3 1, 2 0 19
38
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses (continued)
(In Tho us ands )
Co m me rc ia l Co ns ume r
and C o m m e rc ia l B us ine s s R e s ide ntia l Ho m e Othe r
Indus tria l Re al Es tate B anking Re a l Es tate Equity A uto m o bile C o ns ume r Una llo c ate d To ta l
Allo wa nc e fo r Lo an Lo s s e s :
Beginning balance $ 14,892 $ 36,277 $ 6,615 $ 6,954 $ 4,040 $ 2,714 $ 2,037 $ 582 $ 74,111
Charge-offs (3,646) (49) (6,345) (27) (285) (695) (1,414) - (12,461)
Recoveries 2,753 132 375 152 60 271 162 - 3,905
P rovision 5,322 516 7,652 (20) 298 (2) 1,527 (193) 15,100
Ending balance $ 19,321 $ 36,876 $ 8,297 $ 7,059 $ 4,113 $ 2,288 $ 2,312 $ 389 $ 80,655
Ending balance: individually
evaluated for impairment $ 1,361 $ 38 $ 154 $ 1,804 $ 337 $ - $ - $ - $ 3,694
Ending balance: acquired with
deterio rated credit quality $ 239 $ 181 $ - $ 393 $ - $ - $ - $ - $ 813
Ending balance: co llectively
evaluated for impairment $ 17,721 $ 36,657 $ 8,143 $ 4,862 $ 3,776 $ 2,288 $ 2,312 $ 389 $ 76,148
Lo a ns :
Ending balance: individually
evaluated for impairment $ 13,954 $ 10,579 $ 7,704 $ 27,713 $ 4,948 $ - $ - $ - $ 64,898
Ending balance: acquired with
deterio rated credit quality 4,904 7,853 - 4,134 - - - - 16,891
Ending balance: co llectively
evaluated for impairment 1,639,907 3,502,285 736,844 1,398,917 944,462 415,949 135,850 - 8,774,214
Ending balance: to tal lo ans
by gro up $ 1,658,765 $ 3,520,717 $ 744,548 $ 1,430,764 $ 949,410 $ 415,949 $ 135,850 $ - $ 8,856,003
Fo r the Ye ar Ende d De c e mbe r 3 1, 2 0 18
39
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses (continued)
For the purpose of estimating the allowance for loan losses, management segregates the loan
portfolio into the categories noted in the above tables. Each of these loan categories possess unique
risk characteristics like loan purpose, repayment source, and collateral that are considered when
determining the appropriate level of the allowance for each category. Examples of these
characteristics include:
Commercial and Industrial
Loans in this category consist of revolving and term loan obligations extended to businesses and
corporate enterprises for the purpose of financing working capital, equipment purchases and
acquisitions. Collateral frequently consists of a first lien position on business assets including, but
not limited to: accounts receivable, inventory, airplanes and equipment. The primary repayment
source is operating cash flow and, secondarily, the liquidation of assets. The Corporation often
obtains personal guarantees from individuals holding material ownership in the borrowing entity.
Commercial Real Estate
Loans in this category consist of mortgage loans on investment real estate. In addition to term
loans on cash flowing, stabilized properties, loans are also granted to construct new structures.
Property types financed include office, industrial, multi-family, retail, hotel and other single-
purpose use properties. Collateral values are established by independent third-party appraisals and
evaluations. Primary repayment sources include: operating income generated by the real estate,
permanent debt refinancing, sale of the real estate and, secondarily, by liquidation of the collateral.
The Corporation often obtains personal guarantees from individuals holding material ownership
in the borrowing entity.
Business Banking
The business banking portfolio segment consists of loans granted to commercial borrowers with
more modest loan exposures, generally commercial and industrial exposures of $1 million or less
and commercial real estate exposures of $3 million or less. Business banking loans are typically
secured by all business assets or commercial real estate. Business Banking originations include
traditionally underwritten loans as well as partially automated scored loans. Business banking
scored loans are decisioned by utilizing the Corporation’s proprietary decision matrix that includes
a number of quantitative factors including, but not limited to, a guarantor’s credit score, industry
risk, and time in business.
40
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses (continued)
The Corporation engages in Small Business Association (SBA) lending, both in business banking
and commercial banking divisions. SBA guarantees reduce the Corporation’s loss given default
and are considered a credit enhancement to the loan structure.
Residential Real Estate
Residential real estate loans originated for the Corporation’s portfolio are made to borrowers who
demonstrate the ability to repay principal and interest on a monthly basis. Underwriting
considerations include, among others: income sources and their reliability, willingness to repay
as evidenced by credit repayment history, financial resources including cash reserves and the value
of the collateral. The Corporation maintains policy standards for minimum credit score and cash
reserves and maximum loan to value consistent with a “prime” portfolio. Collateral consists of
mortgage liens on 1-4 family residential dwellings. The Corporation does not originate or purchase
sub-prime or other high-risk loans.
Consumer Home Equity
The Corporation originates home equity lines of credit and home equity loans. Home equity lines
of credit are granted for ten years with monthly interest-only repayment requirements. Full
principal repayment is required at the end of the ten-year draw period. Home equity loans are term
loans that require the monthly payment of principal and interest such that the loan will have fully
amortized at maturity. Underwriting considerations are materially consistent with those utilized
in residential real estate. Collateral consists of a senior or subordinate lien on owner-occupied
residential property.
Automobile
The Corporation originates loans secured by new and used automobiles. In 2018, the Corporation
exited the indirect automobile loan business and no longer originates loans through dealerships.
The Corporation still originates automobile loans through its branch network. The Corporation’s
policy and underwriting in this portfolio segment include the following, among others: income
sources and reliability, credit histories, term of repayment and collateral value.
Other Consumer
Other consumer loans consist of personal lines of credit, overdraft protection, airplane loans and
student loans. This portfolio segment is typically granted on an unsecured basis with the exception
of airplane loans.
41
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses (continued)
Credit Quality
For the commercial real estate, commercial and industrial and business banking portfolio, the
Corporation utilizes a risk rating system from 0 to 10 to manage risk and identify potential problem
loans. Risk rating assignment is based upon a number of quantitative and qualitative factors that
are under continual review. Factors include cash flow, collateral coverage, liquidity, leverage,
position within the industry, internal controls and management, financial reporting, and other
considerations. The risk rating categories are defined as follows:
Unrated
Certain segments of the portfolios are not rated. These segments include airplane loans, business
banking scored loan products, and other commercial loans managed by exception. Loans within
this unrated loan segment are monitored by delinquency status and for lines of credit greater than
$100,000 in exposure, an annual review is conducted. The Corporation supplements performance
data with current credit scores for the business banking portfolio on a quarterly basis. Unrated
loans managed outside of airplane loans and business banking loans are generally restricted to
commercial exposure less than $1,000,000 with a line of credit component restricted to $350,000.
Loans included in this category have qualification requirements that include: risk rating of 6 or
better at time of recommendation for unrated status, acceptable management of deposit accounts
and no known negative changes in management, operations or financial performance. Restricted
from this category are lines of credit managed with borrowing base requirements and construction
loans.
For purposes of estimating the allowance for loan losses, unrated loans are considered in the same
manner as pass rated loans.
1-6 Risk Rating – Pass
Loans risk rated 1-6 comprise those loans that range from “substantially risk free”, which indicates
borrowers of unquestioned credit standing, well-established national companies with a very strong
financial condition, and loans fully secured by cash, though acceptable rated loans may be
experiencing weak cash flow, impending lease rollover or minor liquidity concerns.
42
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses (continued)
7 Risk Rating – Special Mention (Potential Weakness)
Loans to borrowers in this category exhibit potential weaknesses or downward trends deserving
management’s close attention. While potentially weak, no loss of principal or interest is
envisioned. Included in special mention are borrowers who are performing as agreed, are weak
when compared to industry standards, may be experiencing an interim loss and may be in declining
industries. An element of asset quality, financial flexibility or management is below average.
Management and owners may have limited depth, particularly when operating under strained
circumstances. The Corporation does not consider borrowers within this category as new business
prospects. Borrowers rated special mention may find it difficult to obtain alternative financing
from traditional bank sources.
8 Risk Rating – Substandard (Well-Defined Weakness)
Loans with an 8 risk rating exhibit well-defined weaknesses that, if not corrected, may jeopardize
the orderly liquidation of the debt. A substandard loan is inadequately protected by the repayment
capacity of the obligor or by the collateral pledged. Repayment under market rates and terms, or
by the requirements under the existing loan documents, is in jeopardy, however, no loss of
principal or interest is envisioned. There is a possibility that a partial loss of principal and/or
interest will occur if the deficiencies are not corrected. Loss potential, while existing in the
aggregate portfolio of substandard assets, does not have to exist in individual assets classified
substandard. Credits in this category often may have reported a loss in the most recent fiscal year
end and are likely to continue to report losses in the interim period, or interim losses are expected
to result in a fiscal year-end loss. Nonaccrual is possible, but not mandatory, in this class.
9 Risk Rating – Doubtful (Loss Probably)
Loans classified as doubtful have the weaknesses found in the substandard borrowers with the
added provision that the weaknesses make collection of the debt in full, on the basis of currently
existing facts, conditions and values, highly questionable and improbable. Serious problems exist
such that partial loss of principal is likely. The probability of loss exceeds 50% but because of
reasonably specific pending factors that may work to strengthen the credit, estimated losses are
deferred until a more exact status can be determined. Pending factors may include the sale of the
company, a merger, capital injection, new profitable purchase orders, and refinancing plans.
Specific reserves will be the amount identified after specific review. Nonaccrual is mandatory in
this class.
43
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses (continued)
10 Risk Rating – Loss
Loans to borrowers in this category are deemed incapable of repayment. Loans to such borrowers
are considered uncollectable and of such little value that continuance as active assets of the
Corporation is not warranted. This classification does not mean that the loans have no recovery
or salvage value, but rather, it is not practical or desirable to defer writing off these assets even
though partial recovery may be affected in the future. Loans in this category will have a recorded
investment of $0 at the time of the downgrade.
The credit quality of the commercial loan portfolio is actively monitored and supported by a
comprehensive credit approval process that vests approval of all large dollar transactions to a
committee of seasoned business line and credit professionals. Risk ratings are periodically
reviewed and the Corporation maintains an independent credit risk review function that reports
directly to the Risk Management Committee of the Board of Directors. Credits that demonstrate
significant deterioration in credit quality are transferred to a specialized group of seasoned workout
officers for individual attention.
The following table details the internal risk grading categories for the Corporation’s commercial
and industrial, commercial real estate and business banking portfolios:
(Dollars in thousands)
Risk
Category Rating 2019 2018 2019 2018 2019 2018
Unrated $ 150,226 $ 185,265 $ 48,597 $ 50,785 $ 445,201 $ 441,757
Pass 1-6 1,405,902 1,415,249 3,694,332 3,391,360 317,744 290,252
Special mention 7 24,171 30,880 38,044 56,092 2,006 6,632
Substandard 8 42,894 21,042 24,671 21,925 8,561 5,907
Doubtful 9 18,991 6,329 667 555 890 -
Loss 10 - - - - - -
Total $ 1,642,184 $ 1,658,765 $ 3,806,311 $ 3,520,717 $ 774,402 $ 744,548
As of December 31
Commercial and
Industrial
Commercial Real Estate
Business Banking
44
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses (continued)
For the Corporation’s residential real estate and home equity loan portfolios, the quality of the loan
is best indicated by the repayment performance of an individual borrower. Updated appraisals,
broker opinions of value and other collateral valuation methods are employed in the residential
and home equity portfolios, typically for credits that are deteriorating. Delinquency status is
determined using payment performance, while accrual status may be determined using a
combination of payment performance, expected borrower viability and collateral value.
Nonaccrual residential loans that have been restructured must perform for a period of six months
before being considered for accrual status. Delinquent consumer loans are handled by a team of
seasoned collection specialists.
As a general rule, loans more than 90 days past due with respect to principal and interest are
classified as a nonaccrual loan unless the loan is accounted for as a PCI loan. As permitted by
banking regulations, certain consumer loans past due 90 days or more may continue to accrue
interest. The Corporation may also use discretion regarding other loans over 90 days delinquent
if the loan is well secured and in the process of collection.
45
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses (continued)
The following table shows the age analysis of past due loans as of the dates indicated:
(Dollars in thousands)
Commercial and industrial $ 1,407 $ - $ 9 63 $ 2 ,37 0 $ 1,6 3 9,8 14 $ 1,6 4 2,18 4 $ -
Commercial real estate 1,290 10 0 1,856 3 ,246 3 ,8 0 3,0 6 5 3 ,8 06 ,3 11 1,315
Business banking 3,031 763 6,095 9,889 7 64 , 5 13 7 7 4 , 4 02 -
Re sidential real estate 14,0 3 0 2,563 3,030 19 ,6 2 3 1,4 0 9,0 0 7 1,4 2 8 ,6 3 0 -
Consumer home equity 2,49 7 430 1,6 36 4 ,56 3 9 28 ,5 2 5 9 33 , 0 8 8 9
Automobile 2,929 3 61 362 3,652 2 4 0 , 2 36 24 3 ,8 8 8 -
Other consumer 522 153 2 17 89 2 157 , 6 5 1 15 8,5 43 -
Total $ 2 5,7 0 6 $ 4 ,370 $ 14 ,15 9 $ 4 4 ,2 3 5 $ 8,9 4 2 , 8 11 $ 8 , 9 8 7 ,0 4 6 $ 1,324
(Dollars in thousands)
Commercial and industrial $ 2 96 $ 526 $ 2 ,3 26 $ 3 ,148 $ 1,6 55,617 $ 1,6 58,7 65 $ -
Commercial real estate 2 ,5 47 - 2 ,0 69 4,616 3,516 ,101 3,5 20,7 17 410
Business banking 3,32 8 885 5,114 9,32 7 73 5,22 1 74 4,54 8 -
Re sidential real estate 16,003 3,493 3,109 22 ,605 1,40 8,15 9 1,4 30 ,7 64 -
Consumer home equity 3,44 9 811 2 ,3 92 6,652 94 2,75 8 94 9,410 9
Automobile 3,02 1 37 3 331 3,725 4 12 ,2 24 415,94 9 -
Other consumer 4 14 8 7 10 6 607 135 ,2 43 135 ,8 50 -
Total $ 2 9,05 8 $ 6,175 $ 15,44 7 $ 5 0,68 0 $ 8 ,805 ,323 $ 8,856,003 $ 4 19
De c e mbe r 3 1, 2 019
De c e mbe r 3 1, 2 018
3 0 - 5 9
Da ys P a st
Du e
6 0 - 8 9
Da ys P a st
Du e
9 0 Da ys
o r Mo re
To ta l P a s t
Du e
Cu rre nt
To ta l
Lo a ns
Re c o rde d
Inve s tme nt >9 0
Da ys a nd
Ac c ruing
3 0 - 5 9
Da ys P a st
Du e
6 0 - 8 9
Da ys P a st
Du e
9 0 Da ys
o r Mo re
To ta l P a s t
Du e
Cu rre nt
To ta l
Lo a ns
Re c o rde d
Inve s tme nt >9 0
Da ys a nd
Ac c ruing
46
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses (continued)
The following is a summary of information pertaining to nonaccrual loans:
The following is a summary of information pertaining to impaired loans as of the dates indicated:
Commercial and industrial $ 21,471 $ 6,551
Commercial real estate 4,120 3,344
Business banking 8,502 7,704
Residential real estate 5,598 5,535
Consumer home equity 2,137 2,461
Automobile 364 380
Other consumer 259 197
Total nonaccrual loans $ 42,451 $ 26,172
2019
2018
(In Thousands)
December 31,
(Dollars in thousands)
Unpaid Average Total Interest Interest Income
Recorded Principal Related Recorded Income Recognized
Investment Balance Allowance Investment Recognized Using Cash Basis
With no related allowance recorded:
Commercial and industrial $ 22,074 $ 22,819 $ - $ 17,695 $ 615 $ -
Commercial real estate 7,553 7,808 - 9,987 179 -
Business banking 2,738 4,062 - 2,072 70 -
Residential real estate 16,517 17,858 - 15,501 603 68
Consumer home equity 3,666 3,697 - 2,869 121 3
Sub-total
52,548 56,244 - 48,124 1,588 71
With an allowance recorded:
Commercial and industrial 10,296 10,503 2,337 6,141 - -
Commercial real estate 88 90 40 391 - -
Business banking 8,920 13,176 571 7,730 86 -
Residential real estate 13,015 14,072 1,399 12,215 475 53
Consumer home equity 2,889 2,913 322 2,261 96 3
Sub-total
35,208 40,754 4,669 28,738 657 56
Total
$ 87,756 $ 96,998 $ 4,669 $ 76,862 $ 2,245 $ 127
December 31, 2019
47
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses (continued)
In the course of resolving nonperforming loans, the Corporation may choose to restructure the
contractual terms of certain loans. The Corporation attempts to work-out an alternative payment
schedule with the borrower in order to avoid foreclosure actions. Any loans that are modified are
reviewed by the Corporation to identify whether a TDR has occurred. TDRs involve situations in
which, for economic or legal reasons related to the borrower’s financial difficulties, the
Corporation grants a concession to the borrower that it would not otherwise consider. Terms may
be modified to fit the ability of the borrower to repay consistent with their current financial
condition and the restructuring of the loans may include the transfer of assets from the borrower
to satisfy the debt, a modification of loan terms, or a combination of the two.
The Corporation’s policy is to have any restructured loans which are on nonaccrual status prior to
being modified remain on nonaccrual status for approximately six months subsequent to being
modified before management considers its return to accrual status. If the restructured loan is on
accrual status prior to being modified, it is reviewed to determine if the modified loan should
remain on accrual status.
(Dollars in thousands)
Unpaid Average Total Interest Interest Income
Recorded Principal Related Recorded Income Recognized
Investment Balance Allowance Investment Recognized Using Cash Basis
With no related allowance recorded:
Commercial and industrial $ 10,466 $ 11,035 $ - $ 10,797 $ 429 $ -
Commercial real estate 10,364 10,554 - 8,993 328 -
Business banking 1,231 2,470 - 1,298 - -
Residential real estate 11,779 12,767 - 11,880 439 31
Consumer home equity 2,102 2,115 - 1,944 81 -
Sub-total
35,942 38,941 - 34,912 1,277 31
With an allowance recorded:
Commercial and industrial 3,488 5,110 1,361 5,647 - -
Commercial real estate 215 215 38 919 - -
Business banking 6,473 10,403 154 7,015 - -
Residential real estate 15,934 17,272 1,804 16,072 594 42
Consumer home equity 2,846 2,862 337 2,629 110 1
Sub-total
28,956 35,862 3,694 32,282 704 43
Total
$ 64,898 $ 74,803 $ 3,694 $ 67,194 $ 1,981 $ 74
December 31, 2018
48
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses (continued)
The following table shows the TDR loans on accrual and nonaccrual status as of the dates
indicated:
The amount of specific reserve associated with the TDRs was $3.2 million and $2.9 million at
December 31, 2019 and 2018, respectively. In 2019, $0.3 million in TDRs moved from nonaccrual
to accrual. The amount of additional commitments to lend to borrowers who have been a party to
a TDR was $2.5 million and $0 at December 31, 2019 and 2018, respectively.
(Dollars in thousands)
Commercial and industrial 4 $ 10,899 14 $ 19,781 18 $ 30,680
Commercial real estate 1 3,520 3 3,338 4 6,858
Business banking 2 3,156 1 204 3 3,360
Residential real estate 152 25,093 27 3,977 179 29,070
Consumer home equity 89 5,955 5 600 94 6,555
Total 248 $ 48,623 50 $ 27,900 298 $ 76,523
(Dollars in thousands)
Commercial and industrial 3 $ 5,580 7 $ 4,184 10 $ 9,764
Commercial real estate 2 7,236 2 239 4 7,475
Business banking - - 1 288 1 288
Residential real estate 133 24,033 25 3,104 158 27,137
Consumer home equity 62 4,616 7 332 69 4,948
Total 200 $ 41,465 42 $ 8,147 242 $ 49,612
TDRs on Accrual Status
TDRs on Nonaccrual Status
Total TDRs
December 31, 2019
December 31, 2018
Number of
Loans
Balance of
Loans
TDRs on Accrual Status
TDRs on Nonaccrual Status
Total TDRs
Number of Loans
Loans
Balance of
Loans
Number of
Loans
Balance of
Number of
Loans
Balance of
Loans
Balance of
Loans
Balance of
Loans
Number of
Loans
Loans
Number of
Loans
49
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses (continued)
The following table shows the modifications which occurred during the periods and the change in
the recorded investment subsequent to the modifications occurring:
(1) The post-modification balances represent the balance of the loan on the date of modification.
These amounts may show an increase when modification includes capitalization of interest.
At December 31, 2019, the outstanding recorded investment of loans that were new to TDR during
the year was $36.2 million.
(Dollars in thousands)
Troubled debt
restructurings:
Commercial and
industrial
16 $ 18,912 $ 19,212 7 $ 5,926 $ 6,786
Commercial real estate
2 3,277 3,277 - - -
Business banking
2 3,184 3,184 - - -
Residential real estate
11 2,659 2,696 14 2,235 2,278
Consumer home equity
9 2,053 2,392 10 1,122 1,128
Total
40 $ 30,085 $ 30,761 31 $ 9,283 $ 10,192
Recorded
Investment
Post-Modification
Outstanding
Recorded
Investment (1)
Year Ended December 31, 2019
Year Ended December 31, 2018
Number of
Contracts
Pre-Modification
Outstanding
Recorded
Investment
Post-Modification
Outstanding
Recorded
Investment (1)
Number of
Contracts
Pre-Modification
Outstanding
50
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses (continued)
The following table shows the Corporation’s post-modification balance of TDRs listed by type of
modification during the years indicated:
The following table shows the loans have that been modified during the prior 12 months which
have subsequently defaulted during the years indicated. The Bank considers a loan to have
defaulted when it reaches 90 days past due:
In 2019 and 2018, the amount of TDRs that were modified in the prior 12 months and subsequently
charged off was $0 and $1.5 million, respectively.
2019 2018
Adjusted interest rate and extended maturity 1,513$ 1,338$
Adjusted interest rate and principal deferred - 715
Adjusted interest rate 3,352 676
Interest only/principal deferred 2,769 5,926
Extended maturity and interest only/principal
deferred - 677
Additional underwriting - increased exposure 10,822 -
Subordination 11,032 -
Other 1,273 860
Total 30,761$ 10,192$
(In Thousands)
Year Ended December 31,
(Dollars in thousands)
Number of Recorded Number of Recorded
Contracts Investment Contracts Investment
Troubled debt restructurings that subsequently defaulted (1):
Commercial and industrial 10 18,808$ - -$
Commercial real estate 2 3,125 - -
Consumer home equity - - 1 116
Residential real estate - - 1 144
Total 12 21,933$ 2 260$
(1) This table does not reflect any TDRs which were charged off during the years indicated.
Year Ended December 31,
2019
2018
51
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses (continued)
Certain loans acquired by the Corporation may have shown evidence of deterioration of credit
quality since origination and it was therefore deemed unlikely that the Corporation would be able
to collect all contractually required payments. As such, these loans were deemed to be PCI loans
and the carrying value and prospective income recognition are predicated upon future cash flows
expected to be collected. The Corporation considered factors such as payment history, collateral
values, and accrual status when determining whether there was evidence of deterioration in credit
quality at the acquisition date.
The following table displays certain information pertaining to PCI loans at the dates indicated:
The following summarizes activity in the accretable yield for the PCI loan portfolio:
Outstanding balance $ 15,149 $ 20,841
Carrying amount 13,451 16,891
December 31,
2019
2018
(In Thousands)
Balance at beginning of year $ 6,161 $ 7,618
Accretion (2,132) (2,559)
Other change in expected cash flows (898) (680)
Reclassification from nonaccretable difference for loans
with improved cash flows 792 1,782
Balance at end of year $ 3,923 $ 6,161
2019
(In Thousands)
2018
52
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
4. Loans and Allowance for Loan Losses (continued)
The following summarizes the impairment recorded through the allowance for loan losses for PCI
loans subsequent to acquisition:
(1) Reduction to a previously established allowance because it is probable that there is a
significant increase in cash flows previously expected to be collected or actual cash flows are
significantly greater than cash flows previously expected.
Loans pledged to secure advances from the Federal Home Loan Bank were $1.0 billion and $0.9
billion at December 31, 2019 and 2018, respectively.
At December 31, 3019, and 2018 mortgage loans partially or wholly-owned by others and serviced
by the Corporation amounted to approximately $15.6 million and $16.8 million, respectively.
Balance at beginning of year $ 813 $ 761
Provision for loan losses 895 497
Reduction of the allowance (1) (516) (445)
Balance at end of year $ 1,192 $ 813
2019
2018
(In Thousands)
53
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
5. Premises and Equipment
A comparative summary of premises and equipment at December 31 follows:
The Corporation occupies certain branch offices under operating lease arrangements. The net
expense under such arrangements for the years ended December 31, 2019 and 2018 amounted to
approximately $16.2 million and $14.3 million, respectively.
Premises and equipment used in operations:
Land $ 7,410 $ 7,960
Buildings 57,075 56,295
Equipment 57,720 62,775
Leasehold improvements 35,447 35,808
Premises and equipment, gross 157,652 162,838
Less accumulated depreciation and amortization (101,085) (96,363)
Premises and equipment used in operations, net 56,567 66,475
Premises and equipment held for sale 886 -
Premises and equipment, net $ 57,453 $ 66,475
2019
2018
(In Thousands)
54
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
6. Goodwill and Other Intangibles
The changes in the carrying amount of goodwill for the years ended December 31 follows:
A summary of other intangible assets for the years ended December 31 follows:
Gross Accumulated Net Gross Accumulated Net
Carrying Impairment Carrying Carrying Impairment Carrying
Amount Losses Amount Amount Losses Amount
Balance at beginning
of year
$ 369,031 $ - $ 369,031 $ 361,937 $ - $ 361,937
Goodwill acquired
during the year
- - - 7,666 - 7,666
Goodwill disposed of
during the year
(1)
- - - (572) - (572)
Balance at end
of year
$ 369,031 $ - $ 369,031 $ 369,031 $ - $ 369,031
(1) The Corporation sold a portion of its insurance agency reporting unit in 2018 and reduced goodwill by $0.6 million.
2019
2018
(In Thousands)
Gross Net Gross Net
Carrying Accumulated Carrying Carrying Accumulated Carrying
Amount Amortization Amount
Amount
(1)
Amortization
(1)
Amount
Insurance agency
$ 27,305 $ (19,356) $ 7,949 $ 27,305 $ (16,712) $ 10,593
Core deposits
6,579 (5,825) 754 6,579 (4,927) 1,652
Total
$ 33,884 $ (25,181) $ 8,703 $ 33,884 $ (21,639) $ 12,245
(1) Excludes amounts that became fully amortized during year.
2019
2018
(In Thousands)
55
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
6. Goodwill and Other Intangibles (continued)
The Corporation has estimated the useful life of its insurance agency-related intangible assets,
comprising primarily of customer lists and non-compete agreements, and its core deposit
identifiable intangible assets to be a weighted-average of ten years and eight years, respectively,
and these useful lives are reassessed annually.
The estimated amortization expense for each of the five succeeding years follows:
Years Ending December 31:
2020 $ 2,799
2021 1,900
2022 1,406
2023 1,000
2024 730
(In Thousands)
56
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
7. Deposits
Deposit balances reflect the impact of overnight programs which decrease reported demand and
interest checking balances and increase reported money market investment balances. These
programs have been established to manage reserve requirements at the Federal Reserve Bank of
Boston. At December 31, 2019 and 2018, the Corporation swept $4.7 billion and $4.5 billion,
respectively, from demand deposit and interest checking balances into money market investments.
The following table summarizes time deposits by maturity at December 31, 2019:
Deposits from related parties held by the Corporation at December 31, 2019 amounted to $6.9
million.
At December 31, 2019 and 2018, securities with a carrying value of $21.9 million and $29.0
million respectively, were pledged to secure public deposits and for other purposes required by
law.
2020 $ 286,862
2021 20,889
2022 9,902
2023 5,052
2024 6,370
Thereafter 64
$ 329,139
(In Thousands)
57
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
8. Borrowed Funds
A comparative summary of borrowed funds at December 31 follows:
At December 31, 2019, the Bank had available and unused borrowing capacity of approximately
$637.0 million at the Federal Reserve Discount Window.
A summary of FHLB of Boston advances by maturities at December 31 follows:
Advances from the FHLB of Boston are secured by stock in FHLB of Boston, residential real
estate loans, commercial real estate loans and government-sponsored residential mortgage-backed
securities. The collateral value of residential real estate and commercial real estate loans securing
these advances was $952.5 million and $150.1 million, respectively, at December 31, 2019. The
collateral value of government-sponsored residential mortgage-backed securities securing these
advances was $801.1 million at December 31, 2019. At December 31, 2019, the Bank had
available and unused borrowing capacity of approximately $1.7 billion with the FHLB of Boston.
Federal funds purchased $ 201,082 $ 168,776
Federal Home Loan Bank advances 18,964 137,286
Escrow deposits of borrowers 15,349 14,875
Interest rate swap collateral funds - 13,350
$ 235,395 $ 334,287
2019
2018
(In Thousands)
Weighted- Weighted-
Average Average
Amount Rate Amount Rate
Within one year $ 4,946 1.81% $ 130,082 2.67%
Over one year to three years 193 0.17% - -
Over three years to five years 1,587 0.35% 366 1.01%
Over five years 12,238 1.39% 6,838 1.86%
$
18,964
1.40% $ 137,286 2.63%
(In Thousands)
2019
2018
58
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
8. Borrowed Funds (continued)
As a member of the FHLB of Boston, the Corporation is required to hold FHLB of Boston stock.
At December 31, 2019 and 2018, the Corporation had investments in the FHLB of Boston of $9.0
million and $18.0 million, respectively. At its discretion the FHLB of Boston may declare
dividends on the stock. Included in other noninterest income are dividends received of $0.8 million
and $1.2 million for the years ended December 31, 2019 and 2018, respectively.
9. Income Taxes
Income tax expense (benefit) for the years ended December 31 follows:
Current tax expense:
Federal $ 26,365 $ 26,793
State 11,740 12,969
Total current tax expense 38,105 39,762
Deferred tax expense (benefit):
Federal 782 (1,360)
State 594 (3,518)
Total deferred tax expense (benefit) 1,376 (4,878)
Total income tax expense $ 39,481 $ 34,884
2019
2018
(In Thousands)
59
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
9. Income Taxes (continued)
The difference between the total expected income tax expense computed by applying the federal
income tax rate of 21% to income before income tax expense for the years ended December 31,
2019 and 2018, respectively, follows:
Income tax expense at statutory rate $ 36,662 $ 33,098
Increase (decrease) resulting from:
State income tax, net of federal tax benefit 9,744 7,466
Amortization of qualified low-income housing
investments 4,782 2,750
Tax credits (7,570) (3,154)
Tax-exempt income (3,923) (4,269)
Cash surrender value of officers' life insurance (472) (680)
Dividends received deduction (58) (51)
Nontaxable gain on donated stock - (64)
Other, net 316 (212)
Actual income tax expense $ 39,481 $ 34,884
2019
2018
(In Thousands)
60
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
9. Income Taxes (continued)
Significant components of the Corporation’s deferred tax assets and deferred tax liabilities at
December 31 are presented in the table below:
Deferred tax assets:
Allowance for credit losses $ 25,641 $ 25,001
Pension and deferred compensation plans 25,455 15,809
Unrealized appreciation on securities available for sale - 5,466
Accrued expenses 5,854 5,412
Depreciation 3,515 2,805
Loan basis difference fair value adjustments 1,949 2,483
Charitable contribution limitation carryover - 778
Other 1,516 1,097
Total deferred tax assets 63,930 58,851
Less: valuation allowance - -
Deferred tax assets, net of valuation allowance 63,930 58,851
Deferred tax liabilities:
Amortization of intangibles 13,400 13,373
Unrealized appreciation on securities available for sale 6,241 -
Partnerships 3,967 3,297
Cash flow hedges 6,109 1,168
Trading securities 3,316 891
Other 2,690 2,446
Total deferred tax liabilities 35,723 21,175
Net deferred income tax assets $ 28,207 $ 37,676
2019
2018
(In Thousands)
61
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
9. Income Taxes (continued)
There was no deferred tax asset valuation allowance at December 31, 2019 and December 31,
2018. In addition, there was no change in the valuation allowance for the years ended December
31, 2019 and 2018.
The Corporation files tax returns in the U.S. federal jurisdiction and various states. At December
31, 2019, the Corporation’s open tax years for examination by the IRS were 2016, 2017 and 2018.
The Corporation’s open tax years for examination by state tax authorities varies by state, but no
years prior to 2013 are open.
Management has performed an evaluation of the Corporation’s uncertain tax positions and
determined that a liability for unrecognized tax benefits at December 31, 2019 and 2018 was not
needed.
In 2018, the Corporation recognized approximately $1 thousand in interest expense and penalties
that were included in income tax expense. In 2019, there was no interest expense or penalties
included in income tax expense.
As a result of the Tax Reform Act of 1986, the special tax bad debt provisions were amended to
eliminate the reserve method. However, the base year reserve of approximately $20.8 million
remains subject to recapture in the event that the Bank pays dividends in excess of its earnings and
profits or redeems its stock.
62
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
10. Low Income Housing Tax Credits and Other Tax Credit Investments
The Corporation has invested in several separate Low Income Housing Tax Credits (LIHTC)
projects which provide the Corporation with tax credits and operating loss tax benefits over a
period of approximately 15 years. Typically, none of the original investment is expected to be
repaid. The return on these investments is generally generated through tax credits and tax losses.
The Corporation accounts for its investments in LIHTC projects using the proportional
amortization method, under which it amortizes the initial cost of the investment in proportion to
the amount of the tax credits and other tax benefits received and recognizes the net investment
performance in the income statement as a component of income tax expense (benefit). The
Corporation’s maximum exposure to loss in its investments in qualified affordable housing
projects is limited to its carrying value included in other assets. The effects of the Tax Cuts and
Jobs Act on this proportional amortization method and carrying value of these LIHTC projects
was considered and was deemed to be immaterial.
63
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
10. Low Income Housing Tax Credits and Other Tax Credit Investments (continued)
The following table presents the Corporation’s investments in qualified affordable housing
projects accounted for using the proportional amortization method as of the date indicated:
The Corporation is the sole member of a tax credit investment company through which it
consolidates a VIE. In 2015 the VIE made an equity investment to fund the construction of solar
energy facilities in a manner to qualify for renewable energy investment tax credits. This equity
investment is included in other assets on the consolidated balance sheet and totaled $4.2 million
and $4.4 million at December 31, 2019 and 2018, respectively. The minority interest associated
with this investment was immaterial at December 31, 2019 and 2018. The Corporation will treat
the investment tax credits received as a reduction of federal income taxes for the year in which the
credit arises using the flow-through method. The Corporation recorded $0.4 million of new
markets tax credits in both 2019 and 2018 as a result of this investment.
The Corporation accounts for its investments in other tax credit investment projects using either
the cost method or equity method. These investments are included in other assets on the
consolidated balance sheets and totaled $4.3 million and $0.4 million at December 31, 2019 and
2018, respectively. Investment tax credits received as a result of these investments amounted to
$2.3 million and $0 million in 2019 and 2018, respectively. The Corporation treats investment tax
credits received for these investments as a reduction of federal income taxes for the year in which
the credits arise using the flow-through method. There were no commitments outstanding for these
projects at either year end.
Current recorded investment included in other assets $ 37,665 $ 32,446
Commitments to fund qualified affordable housing projects
included in recorded investment noted above 18,042 14,391
Tax credits and benefits
(1)
5,962 2,891
Amortization of investments included in current tax
expense
(2)
4,782 2,750
(1) Amount reflects tax credits and tax benefits recognized
in the consolidated statement of income for the
years ended December 31, 2019 and 2018
(2) Amount reflects amortization of qualified affordable
housing projects for the years ended December 31, 2019
and 2018
2019
2018
(In Thousands)
64
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
11. Minimum Regulatory Capital Requirements
The Corporation is subject to various regulatory capital requirements administered by federal
banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory,
and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct
material effect on the Corporation’s consolidated financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Corporation must meet
specific capital guidelines that involve quantitative measures of the Corporation’s assets,
liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices.
The Corporation’s capital amounts and classification are also subject to qualitative judgements by
the regulators about components, risk weightings, and other factors.
The Corporation is subject to the requirements set forth in U.S. Basel III. Under this regulation,
the Corporation is required to maintain minimum amounts and ratios (set forth in the table on the
next page) of total, Tier I, and common equity Tier 1 capital to risk-weighted assets, and of Tier I
capital to average assets (all as defined in the regulations). Management believes, as of December
31, 2019 and 2018, that the Corporation met all capital adequacy requirements to which it is
subject.
As of December 31, 2019, the Bank was categorized as “well-capitalized” based on the regulatory
framework for prompt corrective action. To be categorized as well-capitalized, the Corporation
must maintain minimum total risk-based, Tier I risk-based, common equity Tier 1 risk-based, and
Tier 1 leverage ratios as set forth in the following table. There have been no conditions or events
that management believes would cause a change in the Corporation’s categorization.
65
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
11. Minimum Regulatory Capital Requirements (continued)
The Corporation’s actual capital amounts and ratios are presented in the following table:
The Corporation is subject to various capital requirements in connection with seller/servicer
agreements that the Corporation has entered into with secondary market investors. Failure to
maintain minimum capital requirements could result in the Corporation’s inability to originate and
service loans for the respective investor and, therefore, could have a direct material effect on the
Corporation’s financial statements. Management believes, as of December 31, 2019 and 2018,
that the Corporation met all capital requirements in connection with seller/servicer agreements.
Amount Ratio Amount Ratio Amount Ratio
As of December 31, 2019:
Total regulatory capital
(to risk-weighted assets)
$ 1,365,391 13.56 % $ 805,394 >8 % $ 1,006,742 >10 %
Tier 1 capital (to risk-
weighted assets)
1,274,174 12.66 604,045 6 805,394 8
Common Equity Tier I
capital (to risk-weighted
assets)
1,274,174 12.66 453,034 4.5 654,382 6.5
Tier I capital (to average
assets)
1,274,174 11.47 444,279 4 555,348 5
As of December 31, 2018:
Total regulatory capital
(to risk-weighted assets)
$ 1,224,693 12.41 % $ 789,488 >8 % $ 986,860 >10 %
Tier 1 capital (to risk-
weighted assets)
1,135,755 11.51 592,116 6 789,488 8
Common Equity Tier I
capital (to risk-weighted
assets)
1,135,755 11.51 444,087 4.5 641,459 6.5
Tier I capital (to average
assets)
1,135,755 10.39 437,410 4 546,763 5
(In Thousands)
To Be Well-
Capitalized Under
Prompt Corrective
Action Provisions
For Capital
Adequacy
Actual
66
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
12. Employee Benefits
Pension Plans
The Corporation provides pension benefits for its employees through membership in the Savings
Banks Employees’ Retirement Association (SBERA). The plan is a noncontributory, defined
benefit plan. Corporation employees become eligible after attaining age 21 and one year of
service. Additionally, benefits become fully vested after three years of eligible service for
individuals employed by the Corporation on or before October 31, 1989. Individuals employed
subsequent to October 31, 1989 become fully vested after five years of eligible service. The
Corporation’s annual contribution to the defined benefit plan is based upon standards established
by the Pension Protection Act. The contribution is based on an actuarial method intended to
provide not only for benefits attributable to service to date, but also for those expected to be earned
in the future.
SBERA offers a common and collective trust as the underlying investment structure for pension
plans participating in the association. The target allocation mix for the common and collective
trust portfolio calls for an equity-based investment deployment range of 43% to 57% of total
common and collective trust portfolio assets. The remainder of the common and collective trust’s
portfolio is allocated to fixed income securities with a target range of 15% to 25% and other
investments, including global asset allocation and hedge funds, from 15% to 31%. The investment
managers for the common and collective trust portfolio are selected by the trustees of SBERA
through the association’s investment committee. A professional investment advisory firm is
retained by the investment committee to provide allocation analysis, performance measurement,
and to assist with manager searches. The overall investment objective is to diversify equity
investments across a spectrum of investment types to limit risks from large market swings. The
defined benefit plan has a plan year end of October 31.
The Corporation has an unfunded defined benefit Supplemental Executive Retirement Plan (DB
SERP) that provides certain retired and currently employed officers with defined pension benefits
in excess of qualified plan limits imposed by U.S. federal tax law. The DB SERP has a plan year
end of December 31. In addition, the Corporation has an unfunded Benefit Equalization Plan
(BEP) to provide retirement benefits to certain employees whose retirement benefits under the
qualified pension plan are limited per the Internal Revenue Code. The BEP has a plan year end of
October 31. The Corporation also has an unfunded Outside Directors’ Retainer Continuance Plan
that provides pension benefits to outside directors who retire from service. The Outside Directors’
Retainer Continuance Plan has a plan year end of December 31.
67
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
12. Employee Benefits (continued)
The funded status and amounts recognized in the Corporation’s consolidated financial statements
for the defined benefit plan, the DB SERP, the BEP and the Outside Directors’ Retainer
Continuance Plan are set forth in the following table:
Change in benefit obligation:
Benefit obligation at beginning of the year $
302,317
$
328,409
Service cost
18,926 23,256
Interest cost
10,996 11,170
Actuarial (gain) loss
74,828 (46,932)
Benefits paid
(10,298) (13,586)
Benefit obligation at end of the year $
396,769
$
302,317
Change in plan assets:
Fair value of plan assets at beginning of year $
305,154
$
335,369
Actual return on plan assets
60,723 (18,918)
Employer contribution
23,300 2,289
Benefits paid
(10,298) (13,586)
Fair value of plan assets at end of year
378,879 305,154
Funded status $
(17,890)
$
2,837
Reconciliation of funding status:
Past service cost $
(25)
$
(69)
Unrecognized net loss
(113,022) (82,542)
Prepaid benefit cost
95,157 85,448
Funded status $
(17,890)
$
2,837
Accumulated benefit obligation $
290,429
$
223,865
Amounts recognized in accumulated other comprehensive income,
net of tax:
Unrecognized past service cost $
(18)
$
(50)
Unrecognized net loss
(81,251) (59,339)
Net amount $
(81,269)
$
(59,389)
Amounts in accumulated other comprehensive income expected
to be recognized in net periodic benefit cost over the next
fiscal year:
Unrecognized past service cost $
18
$
32
Unrecognized net loss
6,790 5,207
Net amount $
6,808
$
5,239
2019
2018
(In Thousands)
68
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
12. Employee Benefits (continued)
Assumptions used in determining the benefit obligation and pension cost were as follows:
In general, the Corporation has selected its assumption with respect to the expected long-term rate
of return based on prevailing yields on high quality fixed income investments increased by a
premium for equity return expectations.
In 2018, upon the hiring of a new actuarial firm, the Corporation refined its methodology for
determining the discount rate used in calculating the benefit obligation and the benefit cost for all
of its defined benefit plans. This change was effective in calculating the benefit obligations as of
December 31, 2018 and the benefit costs beginning for fiscal year 2019. The Corporation now
uses the spot rate approach whereby the individual spot rates on the FTSE above-median yield
curve are applied to each corresponding year’s projected cash flow used to measure the respective
plan’s service cost and interest cost. The Corporation believes that the new methodology more
accurately determines each plan’s service cost and interest cost for the fiscal year versus using the
single equivalent discount rate by strengthening the correlation between the projected cash flows
and the corresponding discount rate use to measure those components of net periodic pension cost.
2019 2018
Discount rate - benefit obligation defined benefit plan 3.16% 4.25%
Discount rate - benefit obligation BEP 3.15% 4.25%
Discount rate - benefit obligation DB SERP 2.72% 4.25%
Discount rate - benefit obligation directors' retainer
continuance plan 2.86% 4.25%
Discount rate - benefit cost 4.25% 3.50%
Rate of increase in compensation levels for defined
benefit plan and BEP - benefit obligation 5.25% 5.25%
Rate of increase in compensation level for directors'
retainer continuance plan - benefit obligation 3.00% 3.00%
Rate of increase in compensation levels for defined
benefit plan and BEP - benefit cost 5.25% 5.25%
Rate of increase in compensation level for directors'
retainer continuance plan - benefit cost 3.00% 3.00%
Expected return on plan assets for defined benefit
plan - benefit obligation 7.50% 7.50%
Expected return on plan assets for defined benefit
plan - benefit cost 7.50% 7.75%
69
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
12. Employee Benefits (continued)
The Corporation accounted for this change as a change in accounting estimate that is inseparable
from a change in accounting principle and, accordingly, accounted for it prospectively. A total
estimated benefit obligation of $302.3 million was calculated at December 31, 2018 under the new
methodology. Under the prior methodology, a total estimated benefit obligation of $310.3 million
would have been calculated at December 31, 2018.
The Corporation owns a percentage of the SBERA defined benefit common collective trust. Based
upon this ownership percentage, plan assets managed by SBERA on behalf of the Corporation
amounted to $378.9 million and $305.2 million at December 31, 2019 and 2018, respectively.
Investments held by the common collective trust include Level 1, 2 and 3 assets such as: collective
funds, equity securities, mutual funds, hedge funds and short-term investments. The Fair Value
Measurements and Disclosures Topic of the FASB ASC stipulates that an asset’s fair value
measurement level within the fair value hierarchy is based on the lowest level of any input that is
significant to the fair value measurement. As such, the Corporation classifies its interest in the
common collective trust as a Level 3 asset.
The table below presents a reconciliation of the Corporation’s interest in the SBERA common
collective trust during the year ended December 31, 2019:
Balance at January 1, 2019 $ 305,154
Net realized and unrealized gains and losses 60,723
Contributions 20,000
Benefits Paid (6,998)
Balance at December 31, 2019 $
378,879
(In Thousands)
70
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
12. Employee Benefits (continued)
The components of net pension expense for the plans for the years ended December 31 follows:
Service costs for the defined benefit plan, the BEP, and the DB SERP are included in salaries and
employee benefits in the statement of income. Service costs for the Directors’ Retainer
Continuance Plan are included in professional services in the statement of income.
In accordance with the Pension Protection Act, the Corporation is not required to make any
contributions for the defined benefit plan for the plan year beginning November 1, 2019.
The following table summarizes estimated benefits to be paid from the defined benefit plan, DB
SERP, BEP, and Directors’ Retainer Continuance Plan for the plan years beginning November 1
and January 1, respectively.
Components of net periodic benefit cost:
Service cost $
18,926
$ 23,258
Interest cost
10,996
11,170
Expected return on plan assets
(23,617)
(25,335)
Past service cost
44
44
Recognized net actuarial loss
7,242
7,621
Net periodic benefit cost $
13,591
$
16,758
2019
2018
(In Thousands)
2020 $ 32,024
2021 24,355
2022 24,815
2023 26,447
2024 26,891
In aggregate for 2025 - 2029 157,091
(In Thousands)
71
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
12. Employee Benefits (continued)
The Corporation consolidates a rabbi trust VIE which consists of investments that are used to fund
certain executive non-qualified retirement benefits and deferred compensation. These rabbi trust
investments consist primarily of cash and cash equivalents, U.S. government agency obligations,
equity securities, mutual funds and other exchange-traded funds, and were recorded at fair value.
Changes in fair value are recorded in noninterest income. The liabilities associated with these non-
qualified plans and deferred compensation are included in other liabilities.
Assets held in rabbi trust accounts by plan type, at fair value, were as follows:
For the years ended December 31, 2019 and 2018, the net unrealized gain on rabbi trust
investments still held at the reporting date were $13.2 million and $3.2 million, respectively.
Deferred Compensation $ 23,936 $ 21,249
DB SERP 20,003 18,183
DC SERP 24,564 18,947
Directors' Retainer Continuance Plan 3,575 3,273
Benefit Equalization Plan 5,934 3,167
$ 78,012 $ 64,819
2019
2018
(In Thousands)
At December 31,
72
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
12. Employee Benefits (continued)
Employee Tax Deferred Incentive Plan
The Corporation has an employee tax deferred incentive plan (401(k)) under which the
Corporation makes voluntary contributions within certain limitations. All employees who meet
specified age and length of service requirements are eligible to participate in the 401(k) plan. The
amount contributed by the Corporation is included in salaries and employee benefits expense. The
amounts contributed for the years ended December 31, 2019 and 2018, were $4.2 million and $3.9
million, respectively.
Defined Contribution Supplemental Executive Retirement Plan
The Corporation has a defined contribution supplemental executive retirement plan (DC SERP),
which allows certain senior officers to earn benefits calculated as a percentage of their
compensation. In addition, the participant benefits are adjusted based upon a deemed investment
performance of measurement funds selected by the participant. These measurement funds are for
tracking purposes and are used only to track the performance of a mutual fund, market index,
savings instrument, or other designated investment or portfolio of investments. The Corporation
recorded expense related to the DC SERP of $1.3 million and $1.4 million in 2019 and 2018,
respectively. The total amount due to participants under this plan was included in other liabilities
on the Corporation’s balance sheet and amounted to $24.5 million and $18.6 million at December
31, 2019 and 2018, respectively.
Deferred Compensation
The Corporation sponsors three plans which allow for elective compensation deferrals by directors,
trustees, and certain senior-level employees. Each plan allows its participants to designate deemed
investments for deferred amounts from certain options which include diversified choices, such as
exchange traded funds, mutual funds, and a deemed fund yielding the highest rate paid by the
Corporation on deposit accounts each month. Portfolios with various risk profiles are available to
participants with the approval of the Compensation Committee. The Corporation purchases and
sells investments which track the deemed investment choices, so that it has available funds to meet
its payment liabilities. Deferred amounts, adjusted for deemed investment performance, are paid
at the time of a participant designated date or event, such as separation from service, death, or
disability. The total amounts due to participants under the three plans were included in other
liabilities on the Corporation’s balance sheet and amounted to $23.8 million and $21.0 million at
December 31, 2019 and 2018, respectively.
73
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
13. Commitments and Contingencies
Financial Instruments with Off-Balance Sheet Risk
The Corporation is party to financial instruments with off-balance sheet risk in the normal course
of business to meet the financing needs of its customers and to reduce its own exposure to
fluctuations in interest rates. These financial instruments include commitments to originate loans,
standby letters of credit, and forward loan sale commitments. The instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount recognized in the
consolidated balance sheets. The contract or notional amounts of those instruments reflect the
extent of involvement the Corporation has in particular classes of financial instruments.
The Corporation enters into contractual commitments to extend credit, normally with fixed
expiration dates or termination clauses, at specified rates and for specific purposes. Substantially
all of these commitments to extend credit are contingent upon customers maintaining specific
credit standards at the time of loan funding.
Standby letters of credit are conditional commitments issued by the Corporation to guarantee the
performance by a customer to a third party. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
For forward loan sale commitments, the contract or notional amount does not represent exposure
to credit loss. The Corporation does not sell loans with recourse.
The following table summarizes the above financial instruments at December 31:
Commitments to extend credit $ 3,606,182 $ 3,283,069
Standby letters of credit 60,124 62,683
Forward commitments to sell loans 21,357 12,613
2019
2018
(In Thousands)
74
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
13. Commitments and Contingencies (continued)
Lease Commitments
As of December 31, 2019, the Corporation and its subsidiaries were obligated under non-
cancelable leases for minimum rentals in future periods as follows:
Other Contingencies
The Corporation has been named a defendant in various legal proceedings arising in the normal
course of business. In the opinion of management, based on the advice of legal counsel, the
ultimate resolution of these proceedings will not have a material effect on the Corporation’s
consolidated financial statements.
As a member of the Federal Reserve System, the Bank is required to maintain certain reserves of
vault cash and/or deposits with the Federal Reserve Bank of Boston. The amount of this reserve
requirement included in cash and cash equivalents was approximately $3.7 million on December
31, 2019.
75
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
14. Derivative Financial Instruments
The Corporation early adopted ASU 2017-12, Derivatives and Hedging: Targeted Improvements
to Accounting for Hedging Activities as of January 1, 2018. As the Corporation had no existing
designated accounting hedges as of the implementation date, this standard was adopted
prospectively.
The Corporation’s derivative financial instruments are used to manage differences in the amount,
timing, and duration of the Corporation’s known or expected cash receipts principally to manage
the Corporation’s interest rate risk. In addition, the Corporation enters into interest rate derivatives
and foreign exchange contracts to accommodate the business requirements of its customers
(“customer-related positions”) and risk participation agreements entered into as financial
guarantees of performance on customer-related interest rate swap derivatives. Derivative
instruments are carried at fair value in the Corporation’s financial statements. The accounting for
changes in the fair value of a derivative instrument is dependent upon whether or not it qualifies
as a hedge for accounting purposes, and further, by the type of hedging relationship.
By using derivatives, the Corporation is exposed to credit risk to the extent that counterparties to
the derivative contracts do not perform as required. Should a counterparty fail to perform under
the terms of a derivative contract, the Corporation’s credit exposure on interest rate swaps is
limited to the net positive fair value and accrued interest of all swaps with each counterparty plus
any initial margin collateral posted. The Corporation seeks to minimize counterparty credit risk
through credit approvals, limits, monitoring procedures, and obtaining collateral, where
appropriate. As such, management believes the risk of incurring credit losses on derivative
contracts with those counterparties is remote.
Interest Rate Positions
The Corporation has entered into pay floating/receive fixed interest rate swaps to manage its
interest rate risk exposure to the variability in interest cash flows on certain floating-rate
commercial loans. An interest rate swap is an agreement whereby one party agrees to pay a
floating rate of interest on a notional principal amount in exchange for receiving a fixed rate of
interest on the same notional amount, for a predetermined period of time, from a second party.
The amounts relating to the notional principal amount are not actually exchanged. The
Corporation’s interest rate swaps effectively convert the floating rate one-month LIBOR interest
payments received on the commercial loans to a fixed rate and consequently reduce the Bank’s
exposure to variability in short-term interest rates. These swaps are accounted for as cash flow
hedges and therefore changes in fair value are included in other comprehensive income and
reclassified into earnings in the same period or periods during which the hedged forecasted
transaction affects earnings.
76
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
14. Derivative Financial Instruments (continued)
The following table reflects the Corporation’s derivative positions as of December 31, 2019 and
2018 for interest rate swaps which qualify as cash flow hedges for accounting purposes.
$ 40,000 23-Feb-18 23-Feb-18 15-Feb-21 1 Month LIBOR 1.74% 2.45% $ (5)
40,000 23-Feb-18 23-Feb-18 15-Jan-21 1 Month LIBOR 1.74% 2.44% (4)
40,000 26-Mar-18 26-Mar-18 15-Mar-21 1 Month LIBOR 1.74% 2.50% (5)
40,000 16-Apr-18 16-Apr-18 15-Apr-21 1 Month LIBOR 1.74% 2.55% (5)
40,000 31-May-18 31-May-18 15-May-21 1 Month LIBOR 1.74% 2.56% (5)
40,000 21-Jun-18 21-Jun-18 15-Jun-21 1 Month LIBOR 1.74% 2.71% (5)
60,000 20-Jul-18 20-Jul-18 15-Jul-21 1 Month LIBOR 1.74% 2.70% (8)
60,000 27-Aug-18 27-Aug-18 15-Aug-21 1 Month LIBOR 1.74% 2.72% (8)
60,000 10-Sep-18 15-Sep-18 15-Sep-21 1 Month LIBOR 1.74% 2.78% (9)
80,000 19-Oct-18 19-Oct-18 15-Oct-21 1 Month LIBOR 1.74% 3.00% (13)
80,000 30-Nov-18 30-Nov-18 15-Nov-21 1 Month LIBOR 1.74% 2.80% (13)
80,000 20-Dec-18 20-Dec-18 15-Dec-21 1 Month LIBOR 1.74% 2.57% (14)
100,000 2-Jan-19 15-Jan-19 15-Jan-22 1 Month LIBOR 1.74% 2.44% (19)
100,000 15-Feb-19 15-Feb-19 15-Feb-22 1 Month LIBOR 1.74% 2.44% (19)
40,000 19-Feb-19 15-Jan-21 15-Jan-22 1 Month LIBOR N/A 2.34% (3)
40,000 19-Feb-19 15-Feb-21 15-Feb-22 1 Month LIBOR N/A 2.33% (3)
100,000 19-Mar-19 19-Mar-19 15-Mar-22 1 Month LIBOR 1.74% 2.35% (20)
40,000 28-Mar-19 15-Mar-21 15-Mar-22 1 Month LIBOR N/A 1.97% (3)
120,000 12-Apr-19 15-Apr-19 15-Apr-22 1 Month LIBOR 1.74% 2.27% (24)
40,000 26-Apr-19 15-Apr-21 15-Apr-22 1 Month LIBOR N/A 2.05% (3)
120,000 30-May-19 30-May-19 15-May-22 1 Month LIBOR 1.74% 1.96% (25)
40,000 30-May-19 15-May-21 15-May-22 1 Month LIBOR N/A 1.81% (3)
120,000 11-Jun-19 15-Jun-19 15-Jun-22 1 Month LIBOR 1.74% 1.79% (26)
40,000 25-Jun-19 15-Jun-21 15-Jun-22 1 Month LIBOR N/A 1.42% (4)
120,000 8-Jul-19 15-Jul-19 15-Jul-22 1 Month LIBOR 1.74% 1.69% (26)
60,000 16-Jul-19 15-Jul-21 15-Jul-22 1 Month LIBOR N/A 1.65% (5)
120,000 29-Aug-19 29-Aug-19 15-Aug-22 1 Month LIBOR 1.74% 1.27% (27)
60,000 29-Aug-19 15-Aug-21 15-Aug-22 1 Month LIBOR N/A 1.07% (5)
50,000 25-Sep-19 15-Sep-21 15-Sep-22 Federal Funds Effective Rate (1 day) N/A 1.15% (1)
50,000 11-Oct-19 15-Oct-21 15-Oct-22 Federal Funds Effective Rate (1 day) N/A 1.21% (2)
50,000 7-Nov-19 15-Nov-21 15-Nov-22 Federal Funds Effective Rate (1 day) N/A 1.45% (4)
50,000 6-Dec-19 15-Dec-21 15-Dec-22 Federal Funds Effective Rate (1 day) N/A 1.35% (5)
$ 2,120,000 $ (321)
$ 40,000 23-Feb-18 23-Feb-18 15-Feb-21 1 Month LIBOR 2.46% 2.45% $ 30
40,000 23-Feb-18 23-Feb-18 15-Jan-21 1 Month LIBOR 2.46% 2.44% 7
40,000 26-Mar-18 26-Mar-18 15-Mar-21 1 Month LIBOR 2.46% 2.50% 21
40,000 16-Apr-18 16-Apr-18 15-Apr-21 1 Month LIBOR 2.46% 2.55% 23
40,000 31-May-18 31-May-18 15-May-21 1 Month LIBOR 2.46% 2.56% 25
40,000 21-Jun-18 21-Jun-18 15-Jun-21 1 Month LIBOR 2.46% 2.71% 26
60,000 20-Jul-18 20-Jul-18 15-Jul-21 1 Month LIBOR 2.46% 2.70% 42
60,000 27-Aug-18 27-Aug-18 15-Aug-21 1 Month LIBOR 2.46% 2.72% 45
60,000 10-Sep-18 15-Sep-18 15-Sep-21 1 Month LIBOR 2.46% 2.78% 47
80,000 19-Oct-18 19-Oct-18 15-Oct-21 1 Month LIBOR 2.46% 3.00% 67
80,000 30-Nov-18 30-Nov-18 15-Nov-21 1 Month LIBOR 2.46% 2.80% 70
80,000 20-Dec-18 20-Dec-18 15-Dec-21 1 Month LIBOR 2.46% 2.57% 72
$ 660,000 $ 475
(1) Fair value included net accrued interest receivable of $404 and $69, respectively, at December 31, 2019 and 2018.
December 31, 2018
December 31, 2019
Effective
Date
Pay Variable Index
Receive
Fixed Swap
Rate
Fair
Value
(1)
($ In Thousands)
Trade Date
Maturity Date
Current
Rate Paid
Notional
Amount
77
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
14. Derivative Financial Instruments (continued)
Central banks around the world, including the Federal Reserve, have commissioned working
groups of market participants and official sector representatives with the goal of finding suitable
replacements for the London Interbank Offered Rate (“LIBOR”) based on observable market
transactions because of the probable phase-out of LIBOR. It is expected that a transition away
from the widespread use of LIBOR to alternative rates will occur over the course of the next few
years. Although the full impact of a transition, including the potential or actual discontinuance of
LIBOR publication, remains unclear, this change may have an adverse impact on the value of,
return on and trading markets for a broad array of financial products, including any LIBOR-based
securities, loans and derivatives that are included in the Corporation’s financial assets and
liabilities. A transition away from LIBOR may also require extensive changes to the contracts that
govern these LIBOR-based products, as well as the Corporation’s systems and processes.
The maximum amount of time over which the Corporation is currently hedging its exposure to the
variability in future cash flows of forecasted transactions related to the receipt of variable interest
on existing financial instruments is 3 years.
For derivative instruments that are designated and qualify as cash flow hedging instruments, the
effective portion of the gains or losses is reported as a component of other comprehensive income
and is subsequently reclassified into earnings in the period that the hedged transaction affects
earnings. The Corporation expects approximately $10.7 million to be reclassified into interest
income from other comprehensive income related to the Corporation’s cash flow hedges in the
next twelve months. This reclassification is due to anticipated payments that will be received on
the swaps based upon the forward curve as of December 31, 2019.
At December 31, 2019 and 2018, the Corporation’s exposure to CME and the fair value of interest
rate swap derivatives which qualify as cash flow hedges that contain credit-risk related contingent
features that are in a net liability position, which includes accrued interest but excludes any
adjustment for nonperformance risk, related to these agreements was $0.3 million and $0,
respectively. In addition, at December 31, 2019, the Corporation had posted initial-margin
collateral in the form of a U.S. Treasury Note amounting to $22.8 million to CME for these
derivatives. At December 31, 2018, the Corporation posted initial-margin cash collateral of $5.9
million to CME for these derivatives. The cash and U.S. Treasury Note were considered restricted
assets and were included in cash and due from banks and in available for sale securities,
respectively.
78
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
14. Derivative Financial Instruments (continued)
Customer-Related Positions
Interest rate swaps offered to commercial customers do not qualify as hedges for accounting
purposes. The Corporation believes that its exposure to commercial customer derivatives is
limited because these contracts are simultaneously matched at inception with an offsetting dealer
transaction. The program allows the Corporation to retain variable rate commercial loans while
allowing the commercial customer to synthetically fix the loan rate by entering into a variable-to-
fixed rate interest rate swap. Exposure with respect to these derivatives is largely limited to
nonperformance by either the customer or the dealer.
Risk participation agreements are entered into as financial guarantees of performance on interest
rate swap derivatives. The purchased (asset) or sold (liability) guarantee allows the Corporation
to participate-out (fee paid) or participate-in (fee received) the risk associated with certain
derivative positions executed with the borrower by the lead bank in a customer-related interest rate
swap derivative.
Foreign exchange contracts consist of those offered to commercial customers and those entered
into to hedge the Corporation’s foreign currency risk associated with a foreign-currency loan, both
of which do not qualify as hedges for accounting purposes. These commercial customer
derivatives are offset with matching derivatives with correspondent-bank counterparties in order
to minimize foreign exchange rate risk to the Corporation. Exposure with respect to these
derivatives is largely limited to nonperformance by either the customer or the other counterparty.
The Corporation does not require that the correspondent-bank counterparty, and the
correspondent-bank counterparty does not require that the Corporation, post collateral but each
has established foreign-currency transaction limits to manage the exposure risk. The Corporation
requires its customers to post collateral to minimize the risk exposure.
79
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
14. Derivative Financial Instruments (continued)
The following table presents the Corporation’s customer-related derivative positions for the
periods indicated below for those derivatives not designated as hedging.
The level of interest rate swaps, risk participation agreements and foreign currency exchange
contracts at each year-end period noted above was commensurate with the activity throughout
those years.
Number of
Positions
Total Notional
Interest rate swaps
603 $ 3,749,474
Risk participation agreements
67 299,576
Foreign exchange contracts:
Matched commercial customer book
62 29,990
Foreign currency loan
23 7,310
Interest rate swaps
544 $ 3,154,181
Risk participation agreements
34 163,903
Foreign exchange contracts:
Matched commercial customer book
72 55,110
Foreign currency loan
- -
December 31, 2018
(Dollars in Thousands)
December 31, 2019
80
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
14. Derivatives Financial Instruments (continued)
The table below presents the fair value of the Corporation’s derivative financial instruments, as
well as their classification on the balance sheet for the periods indicated.
Derivatives designated as
hedging instruments:
Interest rate swaps Other Other
assets $ - $ 475 liabilities $ 321 $ -
Derivatives not designated as
hedging instruments:
Customer-related positions:
Interest rate swaps Other Other
assets $ 64,463 $ 33,696 liabilities $ 18,057 $ 26,256
Risk participation Other Other
agreements assets 482 226 liabilities 606 267
Foreign currency
exchange contracts - Other Other
matched customer book assets 469 547 liabilities 428 459
Foreign currency
exchange contracts - Other Other
foreign currency loan assets - - liabilities 203 -
$ 65,414
$ 34,469
$ 19,294
$ 26,982
Total $ 65,414 $ 34,944 $ 19,615 $ 26,982
Asset Derivatives
Liability Derivatives
(In Thousands)
Balance
Sheet
Location
Fair Value at
December 31, 2019
Fair Value at
December 31, 2018
Balance
Sheet
Location
Fair Value at
December 31, 2019
Fair Value at
December 31, 2018
81
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
14. Derivatives Financial Instruments (continued)
The table below presents the net effect of the Corporation’s derivative financial instruments on the
consolidated income statements as well as the effect of the Corporation’s derivative financial
instruments included in OCI for the years ended December 31, 2019 and 2018.
The Corporation has agreements with its customer-related interest rate swap derivative
counterparties that contain a provision whereby if the Corporation defaults on any of its
indebtedness, including default where repayment of the indebtedness has not been accelerated by
the lender, then the Corporation could also be declared in default on its derivative obligations.
The Corporation also has agreements with certain of its customer-related interest rate swap
derivative correspondent-bank counterparties that contain a provision whereby if the Corporation
fails to maintain its status as a well-capitalized institution, then the counterparty could terminate
the derivative positions and the Corporation would be required to settle its obligations under the
agreements.
2019 2018
Derivatives designated as hedges:
Gain (loss) in OCI on derivatives $ 20,275 $ 5,354
Gain (loss) reclassified from OCI into interest income (effective portion) $ 2,698 $ 1,198
Gain (loss) recognized in income on derivatives (ineffective portion and
amount excluded from effectiveness test)
Interest income $ - $ -
Other income - -
Total $ - $ -
Derivatives not designated as hedges:
Customer-related positions:
Gain (loss) recognized in interest rate swap income $ (2,833) $ (550)
Gain (loss) recognized in interest rate swap income for risk participation
agreements (83) (35)
Gain (loss) recognized in other income for foreign currency
exchange contracts:
Matched commercial customer book (47) 36
Foreign currency loan (203) -
Total gain (loss) for derivatives not designated as hedges $ (3,166) $ (549)
(In Thousands)
For the Year Ended
82
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
14. Derivatives Financial Instruments (continued)
The Corporation’s exposure related to its customer-related interest rate swap derivative consists
of exposure on cleared derivative transactions and exposure on non-cleared derivative
transactions.
Cleared derivative transactions are with CME and exposure is settled to market daily, with
additional credit exposure related to initial-margin collateral pledged to CME at trade execution.
At December 31, 2019 and 2018, the Corporation’s exposure to CME for settled variation margin
in excess of the customer-related interest rate swap termination values was $1.5 million and $0,
respectively. In addition, at December 31, 2019, the Corporation had posted initial-margin
collateral in the form of a U.S. Treasury Note amounting to $27.6 million to CME for these
derivatives. At December 31, 2018, the Corporation posted initial-margin cash collateral of $11.6
million to CME for these derivatives. The cash and U.S. Treasury Note were considered restricted
assets and were included in cash and due from banks and in available for sale securities,
respectively.
As of December 31, 2019 and 2018, the fair value of non-cleared customer-related interest rate
swap derivatives that contain credit-risk related contingent features that are in a net liability
position, which includes accrued interest but excludes any adjustment for nonperformance risk,
related to these agreements was $14.6 million and $0, respectively. The Corporation has minimum
collateral posting thresholds with its non-cleared customer-related interest rate swap derivative
correspondent-bank counterparties to the extent that the Corporation has a liability position with
the correspondent-bank counterparties. At December 31, 2019, the Corporation had posted
collateral in the form of cash amounting to $22.2 million which was considered to be a restricted
asset and was included in other short-term investments. Since the Corporation was in an asset
position with all counterparties at December 31, 2018, it had posted collateral of $0 which would
have been included in other short-term investments and would have been considered to be a
restricted asset to the extent it had posted collateral. If the Corporation had breached any of these
provisions at December 31, 2019, it would have been required to settle its obligations under the
agreements at the termination value. In addition, the Corporation had cross-default provisions
with its commercial customer loan agreements which provide cross-collateralization with the
customer loan collateral.
83
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
15. Balance Sheet Offsetting
Certain financial instruments, including derivatives, may be eligible for offset in the consolidated
balance sheet and/or subject to master netting arrangements or similar agreements. The
Corporation’s derivative transactions with upstream financial institution counterparties are
generally executed under International Swaps and Derivative Association master agreements
which include “right of set-off” provisions. In such cases there is generally a legally enforceable
right to offset recognized amounts. However, the Corporation does not offset fair value amounts
recognized for derivative instruments. The Corporation does net the amount recognized for the
right to reclaim cash collateral against the obligation to return cash collateral arising from
derivative instruments executed with the same counterparty under a master netting arrangement.
Collateral legally required to be maintained at dealer banks by the Corporation is monitored and
adjusted as necessary. Per a review completed by management of these instruments at December
31, 2019, it was determined that no additional collateral would have to be posted to immediately
settle these instruments.
84
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
15. Balance Sheet Offsetting (continued)
The following table presents the Corporation’s asset positions that were eligible for offset and the
potential effect of netting arrangements on its financial position, as of the periods indicated:
Gross Net Amounts
Amounts of Assets
Gross Offset in the Presented in
Amounts of Statement of the Statement Cash
Recognized Financial of Financial Financial Collateral Net
Assets Position Position Instruments Received Amount
Interest rate swaps $ - $ - $ - $ - $ - $ -
Customer-related positions:
Interest rate swaps 64,463 - 64,463 1,434 - 63,029
Risk participation agreements 482 - 482 - - 482
Foreign currency
exchange contracts -
matched customer book 469 - 469 7 462 -
Foreign currency
exchange contracts -
foreign currency loan - - - - - -
$ 65,414 $ - $ 65,414 $ 1,441 $ 462 $ 63,511
Interest rate swaps $ 475 $ - $ 475 $ - $ - $ 475
Customer-related positions:
Interest rate swaps 33,696 - $ 33,696 2,849 13,350 17,497
Risk participation agreements 226 226 104 - 122
Foreign currency
exchange contracts 547 - 547 236 311 -
$ 34,944 $ - $ 34,944 $ 3,189 $ 13,661 $ 18,094
December 31, 2018
Description
Gross Amounts Not Offset
in the Statement of
Financial Position
(In Thousands)
December 31, 2019
85
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
15. Balance Sheet Offsetting (continued)
The following table presents the Corporation’s liability positions that were eligible for offset and
the potential effect of netting arrangements on its financial position, as of the periods indicated:
Gross Net Amounts
Amounts of Liabilities
Gross Offset in the Presented in
Amounts of Statement of the Statement Cash
Recognized Financial of Financial Financial Collateral Net
Liabilities Position Position Instruments Pledged Amount
Interest rate swaps $ 321 $ - $ 321 $ 321 $ - $ -
Customer-related positions:
Interest rate swaps 18,057 - 18,057 1,434 16,623 -
Risk participation agreements 606 - 606 - - 606
Foreign currency
exchange contracts -
matched customer book 428 - 428 7 - 421
Foreign currency
exchange contracts -
foreign currency loan 203 - 203 - - 203
$ 19,615 $ - $ 19,615 $ 1,762 $ 16,623 $ 1,230
Customer-related positions:
Interest rate swaps $ 26,256 $ - $ 26,256 $ 2,849 $ 1,786 $ 21,621
Risk participation agreements 267 - 267 104 - 163
Foreign currency
exchange contracts 459 - 459 236 - 223
$ 26,982 $ - $ 26,982 $ 3,189 $ 1,786 $ 22,007
December 31, 2018
Gross Amounts Not Offset
in the Statement of
Financial Position
Description
(In Thousands)
December 31, 2019
86
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
16. Fair Value of Assets and Liabilities
The Corporation uses fair value measurements to record fair value adjustments to certain assets
and liabilities and to determine fair value disclosures. The fair value of a financial instrument is
the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Fair value is best determined
based upon quoted market prices. However, in many instances, there are no quoted market prices
for the Corporation’s various financial instruments. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other valuation techniques.
Those techniques are significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in
an immediate settlement of the instrument.
Fair value is a market-based measure considered from the perspective of a market participant rather
than an entity-specific measure. Therefore, even when market assumptions are not readily
available, the Corporation’s own assumptions are set to reflect those that the Corporation believes
market participants would use in pricing the asset or liability at the measurement date. The
Corporation uses prices and inputs that are current as of the measurement date, including during
periods of market dislocation. In periods of market dislocation, the observability of prices and
inputs may be reduced for many instruments. This condition could cause an instrument to be
reclassified from Level 1 to Level 2 or from Level 2 to Level 3.
Fair value estimates are made at a specific point in time, based on relevant market information and
information about the financial instrument. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the Corporation’s entire holdings of a
particular financial instrument. Because no active market exists for a portion of the Corporation’s
financial instruments, fair value estimates are based on judgements regarding future expected loss
experience, current economic conditions, risk characteristics of various financial instruments, and
other factors. These estimates are subjective in nature and involve uncertainties and matters of
significant judgement, and therefore cannot be determined with precision. Changes in assumptions
could significantly affect these estimates.
The following methods and assumptions were used by the Corporation in estimating fair value
disclosures:
87
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
16. Fair Value of Assets and Liabilities (continued)
Cash and Cash Equivalents and Accrued Interest
For these financial instruments, which have original maturities of 90 days or less, their carrying
amounts reported in the consolidated balance sheets approximate fair value.
Trading Securities
Trading securities consisted of fixed income municipal securities and were recorded at fair value.
All of the fixed income securities were categorized in Level 2 as the valuations were estimated by
a third-party pricing vendor using a valuation matrix with inputs including bond interest rate tables,
recent transactions, and yield relationships.
Securities Available for Sale
Securities available for sale consisted of U.S. Treasury securities, U.S. government-sponsored
residential mortgage-backed securities, state and municipal bonds, and a qualified zone academy
bond and were recorded at fair value.
The fair value of U.S. Treasury securities was obtained from a third-party pricing vendor who
estimated fair value based off of quoted prices in active markets and therefore these securities were
classified as Level 1.
The fair value of other U.S. government-sponsored residential mortgage-backed securities was
estimated by a third-party pricing vendor using either a matrix or benchmarks. The inputs used
include benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. These
securities were categorized as Level 2.
The municipal bonds were classified as Level 2 for the same reasons described for the trading
municipal securities.
The valuation technique for the qualified zone academy bond was a discounted cash flow
methodology using market discount rates. The assumptions used included at least one significant
model assumption or input that was unobservable, and therefore, this security was classified as
Level 3.
88
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
16. Fair Value of Assets and Liabilities (continued)
Fair value was based on the value of one unit without regard to any premium or discount that may
result from concentrations of ownership of a financial instrument, possible tax ramifications, or
estimated transaction costs. The estimated fair value of the Corporation’s securities available for
sale, by type, is disclosed in Note 3.
Loans Held for Sale
For loans held for sale, whose carrying amounts approximate fair value, the fair value was
estimated by the anticipated market price based upon pricing indications provided by investor
banks.
Loans
The fair value of commercial, commercial real estate, construction, and certain other consumer
loans was estimated by discounting the contractual cash flows using interest rates currently being
offered for loans with similar terms to borrowers of similar credit quality.
For residential real estate loans, auto loans, and consumer home equity lines and loans, fair value
was estimated by discounting contractual cash flows adjusted for prepayment estimates using
interest rates currently being offered for loans with similar terms to borrowers of similar credit
quality.
Loans that are deemed to be impaired were recorded at the fair value of the underlying collateral,
if the loan is collateral-dependent, or at a carrying value based upon expected cash flows
discounted using the loan’s effective interest rate.
FHLB Stock
The fair value of FHLB stock approximates the carrying amount based on the redemption
provisions of the FHLB.
89
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
16. Fair Value of Assets and Liabilities (continued)
Rabbi Trust Investments
Rabbi trust investments consisted primarily of cash and cash equivalents, U.S. Government agency
obligations, equity securities, mutual funds and other exchange-traded funds, and were recorded
at fair value and included in other assets. The purpose of these rabbi trust investments is to fund
certain executive non-qualified retirement benefits and deferred compensation.
For cash and cash equivalents, which have original maturities of 90 days or less, their carrying
amounts reported in the consolidated balance sheets approximate fair value and were categorized
as Level 1. The fair value of other U.S. government agency obligations was estimated using either
a matrix or benchmarks. The inputs used include benchmark yields, reported trades, broker/dealer
quotes, and issuer spreads. These securities were categorized as Level 2. The equity securities
and other exchange-traded funds were valued based on quoted prices from the market. The
equities, mutual funds and exchange-traded funds traded in an active market were categorized as
Level 1. Mutual funds at net asset value amounted to $16.2 million and $15.6 million at December
31, 2019 and 2018, respectively. There were no redemption restrictions on these mutual funds at
either year end.
Bank-Owned Life Insurance
The fair value of bank-owned life insurance was based upon quotations received from bank-owned
life insurance dealers.
Deposits
The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits,
savings and interest checking accounts, and money market accounts, was equal to their carrying
amount. The fair value of time deposits was based on the discounted value of contractual cash
flows using current market interest rates.
The fair value estimates of deposits do not include the benefit that results from the low-cost funding
provided by the deposit liabilities compared to the cost of borrowing funds in the wholesale market
(core deposit intangibles).
90
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
16. Fair Value of Assets and Liabilities (continued)
Other Borrowed Funds
For other borrowed funds that mature in 90 days or less, the carrying amount reported in the
consolidated balance sheets approximates fair value. For borrowed funds that mature in more than
90 days, the fair value was based on the discounted value of the contractual cash flows applying
interest rates currently being offered in the market.
FHLB Advances
The fair value of FHLB advances was based on the discounted value of contractual cash flows.
The discount rates used are representative of approximate rates currently offered on instruments
with similar remaining maturities.
Escrow Deposits of Borrowers
The fair value of escrow deposits of borrowers, which have no stated maturity, approximates the
carrying amount.
Interest Rate Swaps
The fair value of interest rate swaps was determined using discounted cash flow analysis on the
expected cash flows of the interest rate swaps. This analysis reflects the contractual terms of the
interest rate swaps, including the period of maturity, and uses observable market-based inputs,
including interest rate curves and implied volatilities. In addition, for customer-related interest
rate swaps, the analysis reflects a credit valuation adjustment to reflect the Corporation’s own
nonperformance risk and the respective counterparty’s nonperformance risk in the fair value
measurements. The majority of inputs used to value its interest rate swaps fall within Level 2 of
the fair value hierarchy, but the credit valuation adjustments associated with the interest rate swaps
utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of
default by the Corporation and its counterparties. However, as of December 31, 2019, the impact
of the Level 3 inputs on the overall valuation of the interest rate swaps was deemed not significant
to the overall valuation. As a result, the interest rate swaps were categorized as Level 2 within the
fair value hierarchy.
91
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
16. Fair Value of Assets and Liabilities (continued)
Risk Participations
The fair value of risk participations was determined based upon the total expected exposure of the
derivative which considers the present value of cash flows discounted using market-based inputs
and was categorized as Level 2 within the fair value hierarchy. The fair value also included a
credit valuation adjustment which evaluates the credit risk of its counterparties by considering
factors such as the likelihood of default by the counterparties, its net exposures, the remaining
contractual life, as well as the amount of collateral securing the position. The change in value of
derivative assets and liabilities attributable to credit risk was not significant during the reported
periods.
Foreign Currency Forward Contracts
The fair values of foreign currency forward contracts were based upon the remaining expiration
period of the contracts and bid quotations received from foreign exchange contract dealers, and
were categorized as Level 2 within the fair value hierarchy.
92
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
16. Fair Value of Assets and Liabilities (continued)
The carrying amounts and estimated fair values of the Corporation’s financial instruments at
December 31 follow:
Financial Assets
Cash and cash equivalents $ 362,602 $ 362,602 $ 259,708 $ 259,708
Trading securities 961 961 52,899 52,899
Securities available for sale
1,508,236 1,508,236 1,455,898 1,455,898
Loans held for sale
26 26 22 22
Loans, net of allowance for loan losses
8,889,184 9,116,018 8,774,913 8,914,613
Accrued interest receivable
26,835 26,835 28,407 28,407
FHLB stock 9,027 9,027 17,959 17,959
Rabbi trust investments 78,012 78,012 64,819 64,819
Bank-owned life insurance 77,546 77,546 75,434 75,434
Interest rate swap contracts
Cash flow hedges - interest rate positions - - 475 475
Customer-related positions 64,463 64,463 33,696 33,696
Risk participation agreements 482 482 226 226
Foreign currency forward contracts
Matched customer book 469 469 547 547
Liabilities
Deposits $ 9,551,392 $ 9,548,889 $ 9,399,493 $ 9,394,359
Other borrowed funds 201,082 201,082 182,126 182,126
FHLB advances 18,964 18,188 137,286 136,738
Escrow deposits of borrowers 15,349 15,349 14,875 14,875
Accrued interest payable 1,712 1,712 2,176 2,176
Interest rate swap contracts
Cash flow hedges - interest rate positions 321 321 - -
Customer-related positions 18,057 18,057 26,256 26,256
Risk participation agreements 606 606 267 267
Foreign currency forward contracts
Matched customer book 428 428 459 459
Foreign currency loan 203 203 - -
Carrying
Fair
Carrying
Fair
Amount
Value
Amount
Value
(In Thousands)
2019
2018
93
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
16. Fair Value of Assets and Liabilities (continued)
Assets and liabilities measured at fair value on a recurring basis were as follows:
Description
Assets
Trading securities
Municipal bonds $
961
$
-
$
961
$
-
Securities available for sale
U.S. Treasury securities
50,420 50,420 -
Government-sponsored residential
mortgage-backed securities
1,167,968 - 1,167,968 -
State and municipal bonds and
obligations 283,538 - 283,538 -
Other bonds 6,310 - - 6,310
Rabbi trust investments 78,012 63,945 14,067 -
Interest rate swap contracts
Customer-related positions 64,463 - 64,463 -
Risk participation agreements 482 - 482 -
Foreign currency forward contracts -
Matched customer book 469 469 -
Total $ 1,652,623 $ 114,365 $ 1,531,948 $ 6,310
Liabilities
Interest rate swap contracts
Cash flow hedges - interest rate positions
$
321 $ - $ 321 $ -
Customer-related positions 18,057 - 18,057 -
Risk participation agreements 606 - 606 -
Foreign currency forward contracts
Matched customer book 428 - 428 -
Foreign currency loan 203 - 203 -
Total $ 19,615 $ - $ 19,615 $ -
Fair Value Measurements at Reporting Date Using
(In Thousands)
Balance as of
December 31,
2019
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
94
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
16. Fair Value of Assets and Liabilities (continued)
There were no transfers between Level 1 and Level 2 during 2019 or 2018.
Description
Assets
Trading securities
Municipal bonds $ 52,899 $ - $ 52,899 $ -
Securities available for sale
Government-sponsored residential
mortgage-backed securities 1,136,137 - 1,136,137 -
State and municipal bonds and
obligations
313,716 - 313,716 -
Other bonds
6,045 - - 6,045
Rabbi trust investments
64,819
54,754
10,065 -
Interest rate swap contracts
Cash flow hedges - interest rate positions
475 475
Customer-related positions
33,696 - 33,696 -
Risk participations
226 - 226 -
Foreign currency forward contracts
547 - 547 -
Total $ 1,608,560 $ 54,754 $ 1,547,761 $ 6,045
Liabilities
Interest rate swap contracts
Cash flow hedges - interest rate positions $
26,256
$
-
$
26,256
$
-
Risk participations
267 - 267 -
Foreign currency forward contracts
459 - 459 -
Total $ 26,982 $ - $ 26,982 $ -
Fair Value Measurements at Reporting Date Using
(In Thousands)
Balance as of
December 31,
2018
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Unobservable
Inputs
(Level 3)
Significant
Other
Observable
Inputs
(Level 2)
95
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
16. Fair Value of Assets and Liabilities (continued)
For the fair value measurements which are classified as Level 3 within the fair value hierarchy,
the Corporation’s Treasury and Finance groups determine the valuation policies and procedures.
For the valuation of the qualified zone academy bond, the Corporation uses third-party valuation
information. Management determined that no changes to the quantitative unobservable inputs
were necessary. Management employs various techniques to analyze the valuation it receives from
third parties, such as analyzing changes in market yields. Management reviews changes in fair
value from period to period to ensure that values received from the third parties are consistent with
their expectation of the market.
The table below presents a reconciliation for all assets and liabilities measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) during the years ended December
31, 2019 and 2018:
Balance at January 1, 2018 $ 5,936
Gains and losses (realized/unrealized):
Included in earnings 109
Balance at December 31, 2018 6,045
Gains and losses (realized/unrealized):
Included in earnings
109
Included in other comprehensive income
156
Balance at December 31, 2019 $ 6,310
Securities Available
for Sale
(In Thousands)
96
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
16. Fair Value of Assets and Liabilities (continued)
The Corporation may also be required, from time to time, to measure certain other assets on a
nonrecurring basis in accordance with generally accepted account principles. These adjustments
to fair value usually result from write-downs of individually impaired assets. The following table
summarizes the fair value hierarchy used to determine each adjustment and the carrying value of
the related individual assets of December 31, 2019 and 2018. Individual assets were measured
during the reporting periods and measurement dates may not coincide with the reporting dates.
The gain/(loss) represents the amount of write-down recorded during 2019 and 2018 on the assets
held at December 31, 2019 and 2018.
Quoted Prices
in Active Significant
Markets for
Other Significant
Balance as of
Identical Observable Unobservable
December 31, Assets Inputs Inputs Total Gains
Description
2019 (Level 1) (Level 2) (Level 3) (Losses)
Assets
Collateral-dependent impaired
loans whose fair value
is based upon appraisals
$
4,261
$
-
$
-
$
4,261
$
(1,089)
(In Thousands)
Fair Value Measurements at Reporting Date Using
97
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
16. Fair Value of Assets and Liabilities (continued)
For the valuation of the other real estate owned and collateral-dependent impaired loans, the
Corporation relies primarily on third-party valuation information from certified appraisers and
values are generally based upon recent appraisals of the underlying collateral, brokers’ opinions
based upon recent sales of comparable properties, estimated equipment auction or liquidation
values, income capitalization, or a combination of income capitalization and comparable sales.
Depending on the type of underlying collateral, valuations may be adjusted by management for
qualitative factors such as economic factors and estimated liquidation expenses. The range of
these possible adjustments may vary.
Impaired loans in which the reserve was established based upon expected cash flows discounted
at the loan’s effective interest rate are not deemed to be measured at fair value.
Quoted Prices
in Active Significant
Markets for Other Significant
Balance as of
Identical Observable Unobservable
December 31, Assets Inputs Inputs Total Gains
Description
2018 (Level 1) (Level 2) (Level 3) (Losses)
Assets
Other real estate owned $
35 $ - $ - $ 35 $ -
Collateral-dependent impaired
loans whose fair value
is based upon appraisals
12,039 - - 12,039 (1,311)
Total $
12,074
$
-
$
-
$
12,074
$
(1,311)
(In Thousands)
Fair Value Measurements at Reporting Date Using
98
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
17. Revenue from Contracts with Customers
The Corporation adopted the new revenue recognition standard under ASC 606 as of January 1,
2019 and used the modified retrospective method upon adoption. The Corporation determined
that there were no material changes to be made to revenue recognition upon adoption and that there
were no practical expedients to apply to its contracts.
A portion of the Corporation’s noninterest income is derived from contracts with customers, and
as such, the revenue recognized depicts the transfer of promised goods or services to customers in
an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. The Corporation considers the terms of the contract and all relevant facts
and circumstances when applying this guidance. To ensure its alignment with this core principle,
the Corporation measures revenue and the timing of recognition by applying the following five
steps:
1. Identify the contract(s) with the customers
2. Identify the performance obligations
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations
5. Recognize revenue when (or as) the entity satisfies a performance obligation
The Corporation has disaggregated its revenue from contracts with customers into categories that
depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by
economic factors. The following table presents the revenue streams that the Corporation has
disaggregated for the years ended December 31:
99
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
17. Revenue from Contracts with Customers (continued)
With the exception of insurance commissions, there were no significant judgments made in
determining or allocating the transaction price in the revenue streams identified above, as the
consideration and service requirements are generally explicitly identified in the associated
contracts. Additional information related to each of the revenue streams, including significant
judgments made in determining and allocating the transaction price for insurance commissions, is
further noted below.
Insurance Commissions
The Corporation acts as an agent in offering property, casualty, and life and health insurance to
both commercial and consumer customers though Eastern Insurance Group LLC. The Corporation
earns a fixed commission on the sales of these products and services and may also earn bonus
commissions based upon meeting certain volume thresholds. In general, the Corporation
recognizes commission revenues when earned based upon the effective date of the policy, and for
certain insurance products, may also earn and recognize annual residual commissions
commensurate with annual premiums being paid. For certain categories of insurance
commissions, the Corporation had to estimate standalone selling prices of promised services within
the applicable contracts in order to allocate the transaction price to the related performance
obligations. The Corporation used the cost plus margin and residual approaches to estimate these
amounts.
Insurance commissions $ 90,587 $ 91,885
Service charges on deposit accounts 27,043 26,897
Trust and investment advisory fees 19,653 19,128
Debit card processing fees 10,452 16,162
Other non-interest income 8,483 9,981
Total noninterest income in-scope of ASC 606 156,218 164,053
Total noninterest income out-of-scope of ASC 606 26,081 16,542
Total noninterest income $ 182,299 $ 180,595
2019
2018
(In Thousands)
100
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
17. Revenue from Contracts with Customers (continued)
The Corporation also earns profit sharing, or contingency, revenues from the insurers with whom
the Corporation places business. These profit sharing revenues are performance bonuses from the
insurers based upon certain performance metrics such as floors on written premiums, loss rates,
and growth rates. Because the Corporation’s expectation of the ultimate profit sharing revenue
amounts to be earned can vary from period to period, the Corporation does not recognize this
revenue until it has concluded that, based on all the facts and information available, that it is
probable that a significant revenue reversal will not occur in future periods.
Insurance commissions earned but not yet received amounted to $3.9 million, $4.6 million, and
$2.8 million at December 31, 2019, 2018, and 2017, respectively, and were included in other
assets.
Deposit Service Charges
The Corporation offers various deposit account products to its customers governed by specific
deposit agreements applicable to either personal customers or business customers. These
agreements identify the general conditions and obligations of both parties and include standard
information regarding deposit account-related fees.
Deposit account services include providing access to deposit accounts as well as access to the
various deposit transactional services of the Corporation. These transactional services are
primarily those that are identified in the standard fee schedule, and include, but are not limited to,
services such as overdraft protection, wire transfer, and check collection. Revenue is recognized
in conjunction with the various services being provided. For example, the Corporation may assess
monthly fixed service fees associated with the customer having access to the deposit account,
which can vary depending on the account type and daily account balance. In addition, the
Corporation may also assess separate fixed fees associated with and at the time specific
transactions are entered in to by the customer. As such, the Corporation considers its performance
obligations to be met concurrently with providing the account access or completing the requested
deposit transaction.
101
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
17. Revenue from Contracts with Customers (continued)
Cash Management
Cash management services are a subset of the deposit service charges revenue stream. These
services include ACH transaction processing, positive pay, lockbox, and remote deposit services.
These services are also governed by separate agreements entered in to by the customer. The fee
arrangement for these services is structured to assess fees on a per transaction fee arrangement
which may be offset by earnings credits. An earnings credit is a discount that a customer receives
based upon the investable balance in the applicable covered deposit account(s) for a given month.
Earnings credits are only good for the given month. That is, if cash management fees for a given
month are less than the month’s earnings credit, the remainder of the credit does not carry over to
the following month. Cash management fees are recognized as revenue in the month that the
services are provided. Cash Management fees earned but not yet received amounted to $0.8
million, $0.7 million, and $0.7 million at December 31, 2019, 2018, and 2017, respectively, and
were included in other assets.
Debit Card Processing Fees
The Corporation provides debit cards to its customers which are authorized and settled through
various card payment networks, and in exchange, the Corporation earns revenue as determined by
each payment network’s interchange program. Regardless of the network that is utilized to
authorize and settle the payment, the merchant that provides the product or service to the debit
card holder is ultimately responsible for the interchange payment to the Corporation. Debit card
processing fees are recognized concurrently with the settlement of card transactions within each
network. Debit card processing fees earned but not yet received amounted to $0.3 million, $0.3
million, and $0.4 million at December 31, 2019, 2018, and 2017 and were included in other assets.
Trust and Investment Advisory Fees
The Corporation offers investment management and trust services to individuals, institutions,
small businesses and charitable institutions. Each investment management product is governed by
its own contract along with a separate identifiable fee schedule unique to that product. The
Corporation also offers additional services, such as estate settlement, financial planning, tax
services, and other special services quoted at the customer’s request.
102
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
17. Revenue from Contracts with Customers (continued)
The asset management and/or custody fees are primarily based upon a percentage of the monthly
valuation of the principal assets in the customer’s account. Customers are also charged a base fee
which is prorated over a twelve-month period. Fees for additional or special services are generally
fixed in nature and are charged as services are rendered. All revenue is recognized in correlation
to the monthly management fee determinations or as transactional services are provided.
Other Noninterest Income
The Corporation earns various types of other noninterest income that fall within the scope of the
new revenue recognition rules and have been aggregated into one general revenue stream in the
table noted above. The amount includes, but is not limited to, the following types of revenue with
customers:
Safe Deposit Rent
The Corporation rents out the use of safe deposit boxes to its customers, which can be accessed
when the Bank is open for business. The safe deposit box rental fee is recognized as performance
obligations are satisfied.
ATM Surcharge Fees
The Corporation deploys automated teller machines (ATMs) as part of its overall branch network.
Certain transactions performed at the ATMs require users to acknowledge and pay a fee for the
requested service. ATM fees assessed to Eastern Bank deposit customers are disclosed in the
deposit account agreement fee schedules and are included within the deposit service charges
revenue stream. ATM fees assessed to non-Eastern Bank deposit customers are solely determined
during the transaction at the machine and are included in the ATM surcharge fees revenue stream.
The ATM fee is a fixed dollar per transaction amount, and as such, is recognized concurrently with
the overall daily processing and settlement of the ATM activity.
Customer Checkbook Fees
The Corporation places checkbook orders for its customers using a third-party checkbook provider.
The third party fulfills the checkbook order directly to the Corporation’s deposit customers and
therefore the Corporation is an agent in the transaction. As such, the Corporation records revenue
as the net amount it retains in the transaction. Checkbook fee revenue is recognized as checkbook
orders are filled by the third party.
103
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
17. Revenue from Contracts with Customers (continued)
Insured Cash Sweep Fee Income
The Corporation is a member of the Promontory Interfinancial Network, LLC (Promontory, the
Network) through which it offers the insured cash sweep (ICS) product to its commercial
customers. Through this service, customers set a target balance in their selected account(s) and
have the excess balance(s) swept to various other financial institutions within the Promontory
Network in amounts that do not exceed the current FDIC standard maximum deposit insurance
amount of $250,000. If desired, the Corporation can receive matching funds placed by other
participating institutions within the Network. When the Corporation does not elect to receive
matching funds, fee income is earned from the Network and recognized commensurate with when
deposits are placed.
104
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
18. Other Comprehensive Income
The Corporation’s comprehensive income, presented net of taxes, is set forth below for the years
ended December 31, 2019 and 2018:
Unrealized gains (losses) on securities available for sale:
Change in fair value of securities available for sale $ 54,881 $ (12,166) $ 42,715
Less: reclassification adjustment for gains included in
net income 2,016 (459) 1,557
Net change in fair value of securities available for sale 52,865 (11,707) 41,158
Unrealized gains (losses) on cash flow hedges:
Change in fair value of cash flow hedges 20,275 (5,699) 14,576
Less: net cash flow hedge losses reclassified into
interest income 2,698 (758) 1,940
Net change in fair value of cash flow hedges 17,577 (4,941) 12,636
Defined benefit pension plans:
(Amortization) of actuarial net loss (7,242) 2,036 (5,206)
Change in actuarial net loss 37,722 (10,603) 27,119
(Amortization) of prior service cost (44) 11 (33)
Net change in actuarial net loss 30,436 (8,556) 21,880
Total other comprehensive income $ 40,006 $ (8,092) $ 31,914
Unrealized gains (losses) on securities available for sale:
Change in fair value of securities available for sale $ (39,144) $ 8,659 $ (30,485)
Less: reclassification adjustment for gains included in
net income 50 (10) 40
Net change in fair value of securities available for sale (39,194) 8,669 (30,525)
Unrealized gains (losses) on cash flow hedges:
Change in fair value of cash flow hedges 5,354 (1,505) 3,849
Less: net cash flow hedge losses reclassified into
interest income 1,198 (337) 861
Net change in fair value of cash flow hedges 4,156 (1,168) 2,988
Defined benefit pension plans:
(Amortization) of actuarial net loss (7,621) 2,142 (5,479)
Change in actuarial net loss (2,680) 754 (1,926)
(Amortization) of prior service cost (44) 12 (32)
Net change in actuarial net loss (10,345) 2,908 (7,437)
Total other comprehensive income $ (24,693) $ 4,593 $ (20,100)
(In Thousands)
Year Ended December 31, 2018
Pre Tax
Tax (Expense)
After Tax
Amount
Benefit
Amount
(In Thousands)
Amount
Benefit
Year Ended December 31, 2019
Pre Tax
Tax (Expense)
After Tax
Amount
105
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
18. Other Comprehensive Income (continued)
Effective in 2018 and as a result of ASU 2018-02, Reporting Comprehensive Income, the
Corporation elected to reclassify certain tax effects from accumulated other comprehensive income
to retained earnings related to items that were stranded in comprehensive income as a result of the
Tax Cut and Jobs Act. This served to increase retained earnings and decrease accumulated other
comprehensive income by $7.2 million.
The following table illustrates the changes in the balances of each component of accumulated other
comprehensive income, net of tax:
Unrealized
Gains and
(Losses) on
Cash Flow
Hedges
Beginning balance: January 1, 2019 $ (19,360) $ 2,988 $ 59,389 $ (75,761)
Other comprehensive income (loss) before
reclassifications 42,715 14,576 27,119 30,172
Less: Amounts reclassified from accumulated other
comprehensive income 1,557 1,940 5,239 (1,742)
Net current-period other comprehensive income 41,158 12,636 21,880 31,914
Ending balance: December 31, 2019 $ 21,798 $ 15,624 $ 81,269 $ (43,847)
(In Thousands)
for-Sale
Pension
Securities
Items
Total
Benefit
Available-
(Losses) on
Gains and
Unrealized
Defined
106
Eastern Bank Corporation
Notes to Consolidated Financial Statements (continued)
18. Other Comprehensive Income (continued)
The following table illustrates the significant amounts reclassified out of each component of
accumulated other comprehensive income, net of tax, during the year ended December 31, 2019:
Unrealized gains and losses on
available-for-sale securities $ 2,016 Gain/(loss) on sale of securities
2,016 Total before tax
(459) Tax (expense) or benefit
$ 1,557 Net of tax
Unrealized gains and losses on cash flow
hedges $ 2,698 Interest income
2,698 Total before tax
(758) Tax (expense) or benefit
$ 1,940 Net of tax
Amortization of defined benefit
pension items $ 7,242 Net periodic pension cost - see
Prior service cost 44 Employee Benefits footnote
7,286 Total before tax
(2,047) Tax expense or (benefit)
$ 5,239 Net of tax
Total reclassifications for the period $ (1,742)
Details about Accumulated Other
Comprehensive Income Components
(In Thousands)
Amount Reclassified from
Accumulated Other
Affected Line Item in the Statement
Comprehensive Income
Where Net Income is Presented
107
Eastern Bank Corporation
Chair and Chief Executive Officer
Robert F. Rivers
Vice Chair
Quincy L. Miller
President
Jan A. Miller
Chief Financial Officer and Treasurer
James B. Fitzgerald
Secretary
Kathleen C. Henry
Assistant Secretaries and Assistant Clerks
Mary E. Conway
Norah A. Sullivan
Susan L. Martin
Board of Trustees – Eastern Bank Corporation
Board of Directors – Eastern Bank
Richard C. Bane
President
Bane Care Management, LLC
Richard E. Holbrook
Chair Emeritus
Eastern Bank
Luis Borgen
Senior Vice President
Chief Financial Officer
athenahealth
Deborah C. Jackson
President
Cambridge College
Joseph T. Chung
Managing Director and Co-founder
Redstar Ventures
Peter K. Markell
Executive Vice-President of Administration and
Finance, Chief Financial Officer and Treasurer
Partners HealthCare System, Inc.
Paul M. Connolly
Retired First Vice President and
Chief Operating Officer
Federal Reserve Bank of Boston
Robert F. Rivers
Chair and Chief Executive Officer
Eastern Bank
Bari A. Harlam
EVP, Chief Marketing Officer for Hudson's
Bay Corporation
Greg A. Shell
Managing Director
Bain Capital
Diane Hessan
CEO
Salient Ventures
Paul D. Spiess
Former Chair of the Board
Centrix Bank and Trust
Eastern Bank Corporation as of February 1, 2020
108
Eastern Bank Corporation
Board of Advisors
Honorary Board of Advisors
Honorary Trustees
Zamawa Arenas
Robert V. Antonucci
Noel J. Almeida
Del A. Berrada
Phyllis Barajas
Deborah H. Bornheimer
Miriam B. Blankstein
Robert L. Bradley
James C. Callahan, Jr.
Andrew T. Boyle
Alberto Calvo
William F. Collins, Jr.
Gerard H. Brandi
Diana M. Cataldo
Robert A. Glassman
K. Douglas Briggs
Leonard H. Chace, Jr.
Clark A. Griffith
Robert J. Brown
Peter K. Chan
Daryl A. Hellman
Vanessa Calderón-Rosado
David H. Cohen
Andre C. Jasse, Jr.
Elyse D. Cherry
James G. Crosby
Lawrence J. King
Mary C. Chin
William H. Darling
Wendell J. Knox
Alexander G. Clark
Michael E. Davenport
Laurence B. Leonard, Jr.
Brenda L. Cole
Everett M. Davis
Stanley J. Lukowski
William (Mo) Cowan
George P. DeAngelis
George E. Massaro
Catherine D’Amato
Charles F. Desmond
Henry L. Murphy, Jr.
Lyndia Downie
Frank D’Orio, Jr.
Thomas S. Olsen
Suzanne Fay Glynn
Donald D. Durkee
E. Joel Peterson
James B. Fitzgerald
Richard A. Hall
Nils P. Peterson
Carol N. Fulp
Norman D. Hammer
John A. Plukas
Michael W. Gallagher
Barbara P. Healey
Irakli A. Savas
Peter H. Gamage
W. Lynn Jachney
Roger D. Scoville
Edward E. Greene
Sumner W. Jones
John A. Shane
Robert E. Griffin
Norman Katz
Michael B. Sherman
Rebecca L. Haag
Leland B. McDonough
Katherine A. Hesse
Arthur W. McLean
Steven Joncas
Richard F. Moore
George N. Keches
Garfield R. Morgan
C. Henry Kezer
Francis J. Murphy, Jr.
Mitzi J. Lawlor
Therese Murray
Rebecca A. Lee
Nancy L. Pettinelli
Antonio Lopez
Roger W. Redfield
William E. Lucey
Charles L. Rowley
Thomas A. Maddigan
Douglas C. Ryder
Patricia M. Meservey
Joseph F. Ryan
Jan A. Miller
David P. Sampson
Quincy L. Miller
Wallace E. Savory
Oswald Mondejar
Wilfred M. Sheehan
J. Keith Motley
John M. Sheskey
Judith Nitsch
Donald J. Short
James F. O’Donnell, Jr.
Edwin G. Smith
Colette A.M. Phillips
David J. Solimine, Sr.
Thomas Piantedosi
William L. Thompson
Michael E. Rubin
Jerome F. Twomey
James L. Rudolph
Ralph L. Yohe
Michael H. Shanahan
Michael J. Simchik
Scott E. Squillace
Inez Stewart
Kirk A. Sykes
Clayton H.W. Turnbull
Leverett L. Wing
Sherilyn Burnett Young
Eastern Bank Corporation as of February 1, 2020
109
Eastern Bank Corporation
Corporators
The Corporation consists of the Board of Trustees, the Board of Advisors and the following Corporators:
Paul G. Alexander
Jimmy Liang
Jessica Andors
Manuel A. Lopes
Steven L. Antonakes
Patrick T. Maddigan
Lincoln D. Andrews
Josiane Martinez
Evelyn Barahona
Juliette C. Mayers
Michael J. Barry
Raul Medina
Leonard M. Bello
James Meniates, Jr.
Scott M. Blagden
Kenneth R. Michaels, Jr.
Josefina Bonilla
Salvatore Migliaccio, Jr.
Edward M. Breed
James B. Miller
Tina P. Brzezenski
Michael J. Miller
Richard R. Burns, Jr.
Eva Millona
Susan J. Byrne
Myechia Minter-Jordan, M.D.
Thomas P. Callaghan
Beth A. Monaghan
Nurys Z. Camargo
Juan Carlos Morales
Dennis R. Cataldo
Kenneth R. Newbegin
Harry Clark
Stephen Rima
Thomas A. Cole
Eneida M. Román
Magnolia Contreras
Betsy G. Rooks
Gregg Croteau
Leslie Saltzberg
Yasmin Cruz
David J. Sampson
Brian T. Dacey
Michael Shaw
Susan Lee DaSilva
Jeffrey N. Shribman
Marilyn B. Durkin
Charles W. Soucy
Herby Duverné
Nancy H. Stager
Betty Francisco
Sarah S. Stiles
Louis R. Gallo
Kasey Suffredini
Raymond J. Gosselin
Daniel J. Sullivan
William J. Guinee
Stephen C. Upton
Barbara J. Heinemann
Donald P. Uvanitte
Kathleen C. Henry
Warren V. Valente
David C. Howse
Alberto Vasallo III
Thomas P. Jaeger
Michael J. Welch
Mark Jaffe
Donald M. Westermann
Michael E. Kiernan
Stephen M. Wishoski
Richard F. LaCamera
David Zorn
Eastern Bank Corporation as of February 1, 2020
110
EASTERN BANK MANAGEMENT
Chair and Chief Executive Officer
Robert F. Rivers
Vice Chair
Chief Commercial Banking Officer
Jan A. Miller
President
Quincy L. Miller
Vice Chair
Chief Administrative Officer & Chief Financial Officer
James B. Fitzgerald
OFFICE OF THE PRESIDENT
CONSUMER BANKING
Executive Vice President
*Barbara J. Heinemann
Senior Vice Presidents
Ruth P. Bitchell
Thomas J. Mercuro
Rana H. Murphy
Elizabeth J. O’Hara
Scott D. Stephenson
Mortgage Lending
Senior Vice Presidents
*John P. Brodrick
Paul F. Coveney
Corporate Call Center
Senior Vice President
*Heather A. Allen
Consumer Product Management
Senior Vice President
Laurie A. Hannigan
Private Banking
Senior Vice President
*Carolyn E. Crowley
Consumer Lending
Senior Vice President
*Sujata Yadav
Business Banking
Senior Vice Presidents
*Kristopher Puskar
Anna Clune
Scott Frazer
Ryan Fullam
Ashley A. Irez
Aileen Sheehan
Charles M. Smith
Sarrah Stewart
Institutional Banking
Corporate, Treasury &
Institutional Services
Senior Vice Presidents
*Heather L. Tittmann
Melissa S. Skomurski
Financial Institutions
Senior Vice President
*Mary Ann Jordan
COMMERCIAL BANKING
Executive Vice Presidents
*Gregory Buscone
*Matthew A. Osborne
Senior Vice Presidents
Sean Boucher
Michael McCarthy
Commercial Real Estate
Senior Vice Presidents
*Nicholas K. Moise
Richard A. Donald
Susan A. Feig
David B. MacManus
Catherine Scherer
Alexander Schmidt
Community Development
Senior Vice Presidents
*Pamela M. Feingold
Patricia A. Capalbo
Yongmei A. Chen
John E. Marston
Christopher W. Scoville
International Banking
Senior Vice President
*Jonathan G. Marcus
New Hampshire Division
Senior Vice Presidents
*David H. Cassidy
Deborah T. Blondin
Brian A. Lavoie
Matthew J. Sylvia
Michael Toomey
Stephen H. Witt
Commercial & Industrial–North
Senior Vice Presidents
*Paul K. Kurker
Frank A. Coccoluto
Boris E. Nusinov
Brian Sheehan
Jared H. Ward
Commercial Banking–Metro South
Senior Vice Presidents
*Brendan P. O’Neill
Stephen J. DiPrete
Matthew Hunt
Commercial Banking–Boston South
Senior Vice Presidents
*Thomas J. King
Youssef Abdouh
Catherine S. Adams
Commercial &
Industrial Lending
Senior Vice Presidents
*Daniel C. Field
James Healey
James L. Murphy
David J. Nussbaum
Asset Based Lending
Senior Vice Presidents
*Donald Lewis
Daniel Bolger
Commercial & Business Banking
Risk Management
Senior Vice President
John Prendergast
*Denotes Business Leader
111
EASTERN WEALTH MANAGEMENT
Senior Vice Presidents
*William J. Walsh
Lori B. Evans
James E. Rich
David R. Sawyer
Susan K. Syversen
Maureen M. Trefry
Senior Vice President &
Chief Investment Officer
Michael A. Tyler
Senior Vice President &
Managing Director
Rose M. Brooks
EASTERN INSURANCE GROUP, LLC
President and Chief Executive Officer
*John F. Koegel
EIG–Commercial Lines
Executive Vice Presidents
*Timothy J. Lodge
Frank J. Smith
Senior Vice Presidents
Robert C. Alm
Mark D. Bailey
John M. Berksza
Mark J. Bossé
Peter K. Brockway
David H. Chase, Jr.
Ann L. DeBiasio
Mikaela DeYoung-Asebrook
Thomas E. Donovan
Timothy P. Doran
Richard E. Eagan, Jr.
John P. Fallon
Lora L. FitzGerald
Dennis P. Gilligan
Roy T. Grafton
Sharon L. Gritzuk
Mark L. Kingston
Jon E. Lien
Michelle A. Lord
Deane Morreale
Paul-Michael Quintin
Donald J. Rielly, Jr.
George R. Samoluk
Susan Seifert
Christopher S. Sheppard
James S. Smith
Donald P. Uvanitte
EIG–Personal Lines
Executive Vice President
*Marguerite L. Hartley
Senior Vice Presidents
Julie E. DiMeo
Gregory L. Grintchenko
Bruce M. Shapiro
Eastern Benefits Group
Executive Vice President
*Matthew F. Shadrick
Senior Vice Presidents
Patricia Bean
Brian F. Charon
Paul Coleman, Jr.
Charles R. Diamond
Colleen Doherty
Timothy J. Harrington, Jr.
Michael S. Kapnis
Joan A. Marasco
Anthony J. Murphy
Michael B. Uretsky
Accounting
Senior Vice President &
Chief Financial Officer
John F. Ray
*Denotes Business Leader
112
CORPORATE SERVICES
CORPORATE CREDIT
Executive Vice President &
Chief Credit Officer
*Daniel J. Sullivan
Senior Vice Presidents
Michael Avin
John P. Farmer
Edward Jennings
Pete J. Kaznoski
Thomas G. Kinchla
Diana Lamkin
Katerina Papp
Amy M. Tsokanis
Katherine C. Wheeler
ENTERPRISE RISK
MANAGEMENT
Executive Vice President
*Steven L. Antonakes
Senior Vice Presidents
Wendy L. de Villiers
Stacey A. Jackson
Caroline F. Malone
Dawn Mugford
Joshua Neffinger
Karl C. Renney
HUMAN RESOURCES
Executive Vice President &
Chief Human Resources Officer
*Nancy Huntington Stager
Senior Vice Presidents
Tyrone F. Graham
Jennifer G. Porter
Eastern Bank
Charitable Foundation
President and Chief Executive Officer
*Nancy Huntington Stager
Foundation for Business Equity
President
*Nancy Huntington Stager
Executive Director
Glynn T. Lloyd
LEGAL
Executive Vice President &
General Counsel
Kathleen C. Henry
Senior Vice President &
Deputy General Counsel
Tracy C. Plants
MARKETING &
COMMUNICATIONS
Executive Vice President &
Chief Marketing &
Communications Officer
*Paul G. Alexander
Senior Vice President
Tracy J. Stokes
TECHNOLOGY & OPERATIONS
Executive Vice President &
Chief Information Officer
*Donald M. Westermann
Senior Vice Presidents
Julie A. Colarusso
Ashley A. N. Eknaian
Carlo Guerriero
Mark T. Leonard
Operations
Senior Vice Presidents
*Martha A. Dean
Karen Carbone
Virginia Daniels
Annmarie Hewitt
Finance
Senior Vice President &
Treasurer
Jillian A. Belliveau
Senior Vice President &
Controller
David A. Ahlquist
Senior Vice President
Mark P. Coryea
Audit
Senior Vice President &
Chief Internal Auditor
Cheryle J. Leonard
General Services
Senior Vice President
Thomas E. Dunn
Eastern Bank Management as of March 2020
*Denotes Business Leader
113
Eastern Bank Offices
Andover
60 Main Street
Bedford, NH
1 Atwood Lane
Beverly
33 Enon Street
81 Bridge Street
Boston
246 Border Street
155 Dartmouth Street
63 Franklin Street
265 Franklin Street
470 West Broadway
1413 Tremont Street
Braintree
51 Commercial Street
Bridgewater
110 Main Street
Brockton
1265 Belmont Street
276 Quincy Street
Brookline
301 Harvard Street
Burlington
43 Middlesex Turnpike
Cambridge
One Brattle Square
287 Third Street
647 Massachusetts Avenue
Chelmsford
291 Chelmsford Street
Chelsea
90 Everett Avenue
Concord, NH
11 South Main Street
Cotuit
1560 Old Post Road
Danvers
4 Federal Street
Dedham
240 Providence Highway
Dorchester
1906 Dorchester Avenue
Dover, NH
538 Central Avenue
Dracut
45 Broadway Road
Duxbury
19 Depot Street
33 Enterprise Drive
East Wareham
3003 Cranberry Highway
Everett
738 Broadway
Falmouth
815 Main Street
Hingham
274 Main Street
Hyannis
375 Iyannough Road
Jamaica Plain
687 Centre Street
Kingston
108 Main Street
Lakeville
45 Main Street
Lawrence
486 Essex Street
Lexington
1833 Massachusetts Avenue
Lowell
50 Central Street
Lynn
112 Market Street
195 Market Street
156 Boston Street
Lynnfield
45 Salem Street
Malden
130 Pleasant Street
Manchester, NH
41 Hooksett Road
Marblehead
118 Washington Street
Marion
340 Front Street
Marshfield
1932 Ocean Street
Mashpee
6 Shellback Way
Mattapoisett
29 County Road
Medford
53 Locust Street
Melrose
441 Main Street
Nashua, NH
11 Trafalgar Square, Suite 105
Natick
2 South Avenue
Newburyport
17 Storey Avenue
Newton
1255 Centre Street
188 Needham Street
2060 Commonwealth Avenue
Norwell
80 Washington Street
Peabody
Essex Center Drive (Shaw’s)
100 Brooksby Village Drive
300 Brooksby Village Drive
37 Foster Street
Plymouth
36 Main Street
Portsmouth, NH
163 Deer Street
Quincy
63 Franklin Street
34 Chapman Street
Randolph
35 Memorial Parkway
Reading
123 Haven Street
Revere
339 Squire Road
114
Salem
139 Washington Street
19 Congress Street
6 Traders Way
Sandwich
65C Route 6A
Saugus
605 Broadway
466 Lincoln Avenue
Sharon
7 South Main Street
Somerville
250 Elm Street
Stoneham
163 Main Street
Stoughton
397 Washington Street
Swampscott
405 Paradise Road
Taunton
742 County Street
Wakefield
445 Main Street
Wareham
226 Main Street
Watertown
One Church Street
West Plymouth
71 Carver Road
Westford
203 Littleton Road
Westerly, RI
101 Franklin Street
Weymouth
1150 Washington Street
Wilmington
370 Main Street
Corporate Office
Corporate Headquarters
265 Franklin Street, Boston
617.897.1008
Eastern Bank Offices as of February 1, 2020
115
Eastern Insurance Group Offices
Acton
133 Great Road
Amesbury
34 Market Street
Andover
60 Main Street
Brockton
1265 Belmont Street
Danvers
21 Maple Street
Duxbury
33 Enterprise Street
Gloucester
4 Railroad Avenue
Hyannis
375 Iyannough Road
Keene, NH
372 West Street
Lakeville
45 Main Street
Leominster
285 Central Street
Marshfield
933 Webster Street
Natick
233 West Central Street
Newburyport
65 Parker Street
Newton
1149 Washington Street
Northborough
155 Otis Street
North Dartmouth
439 State Road
Norwell
77 Accord Park Drive
Providence, RI
42 Weybosset Street
Quincy
382 Quincy Avenue
Sturbridge
139 Main Street
Wakefield
100 Quannapowitt Pkwy
West Plymouth
71 Carver Road
Westwood
190 Washington Street
Wrentham
78 South Street
Corporate Office
Corporate Headquarters
233 West Central St., Natick
800.333.7234
Eastern Insurance Group Offices as of February 1, 2020
116
Eastern Bank Corporation
265 Franklin Street
Boston, MA 02110
1.800.EASTERN
www.easternbank.com
Eastern Bank Corporation
Boston, MA
Eastern Bank*
100% Ownership
Boston, MA
LEI X8V2II80XTQHRH7NCB19
Eastern Insurance Group LLC
100% Ownership
Natick, MA
No Managing Member
Broadway Securities Corporation
100% Ownership
Boston, MA
Market Street Securities Corporation
100% Ownership
Boston, MA
Real Property Services, Inc.
100% Ownership
Middleborough, MA
Shared Value Investments LLC
100% Ownership
Boston, MA
Eastern Bank/Pam Feingold –
Managing Member
BCC Solar III Investment
Fund, LLC
100% Ownership
Boston, MA
Managing Member**
BCC NMTC CDE XXII,
LLC
99.99% Ownership
Boston, MA
Investor, Non Managing
Member
All companies are incorporated in the state of Massachusetts.
LEI not applicable unless otherwise noted
Revised 10/28/19
** Manager is BCC Sea Investment Fund Manager, LLC, which
is managed by Boston Community Capital, Inc.
* Eastern Labs, LLC, 100% ownership by Eastern Bank, has no Managing Member. It has
never been funded and after conversations with the Federal Reserve Bank of Boston, we
have not included it on the organizational chart.
Results:
A list of branches for your depository institution:
EASTERN BANK (ID_RSSD: 128904).
This depository institution is held by
EASTERN BANK CORPORATION (1427239) of BOSTON, MA.
The data are as of
12/31/2019
. Data reflects information that was received and processed through
01/07/2020.
Reconciliation and Verification Steps
1. In the
Data Action
column of each branch row, enter one or more of the actions specified below
2. If required, enter the date in the
Effective Date
column
Actions
OK:
If the branch information is correct, enter
'OK'
in the
Data Action
column.
Change:
If the branch information is incorrect or incomplete, revise the data, enter
'Change'
in the
Data Action
column and the date when this information first became valid in the
Effective Date
column.
Close:
If a branch listed was sold or closed, enter
'Close'
in the
Data Action
column and the sale or closure date in the
Effective Date
column.
Delete:
If a branch listed was never owned by this depository institution, enter
'Delete'
in the
Data Action
column.
Add:
If a reportable branch is missing, insert a row, add the branch data, and enter
'Add'
in the
Data Action
column and the opening or acquisition date in the
Effective Date
column.
If printing this list, you may need to adjust your page setup in MS Excel. Try using landscape orientation, page scaling, and/or legal sized paper.
Submission Procedure
When you are finished, send a saved copy to your FRB contact. See the detailed instructions on this site for more information.
If you are e-mailing this to your FRB contact, put your institution name, city and state in the subject line of the e-mail.
Note:
To satisfy the
FR Y-10 reporting requirements
, you must also submit FR Y-10 Domestic Branch Schedules for each branch with a
Data Action
of
Change, Close, Delete,
or
Add.
The FR Y-10 report may be submitted in a hardcopy format or via the FR Y-10 Online application - https://y10online.federalreserve.gov.
* FDIC UNINUM, Office Number, and ID_RSSD columns are for reference only. Verification of these values is not required.
Data
Action
Effective
Date
Branch Service Type
Branch
ID_RSSD*
Popular Name Street Address City State Zip Code County Country FDIC UNINUM* Office Number* Head Office
Head Office
ID_RSSD*
Comments
OK
Full Service (Head Office)
128904
EASTERN BANK
265 FRANKLIN STREET
BOSTON
MA
02110
SUFFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Limited Service
4183835
ANDOVER BRANCH
60 MAIN STREET
ANDOVER
MA
01810
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3281855
COMMONWEALTH AVENUE BRANCH
2060 COMMONWEALTH AVENUE
AUBURNDALE
MA
02466
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
199708
81 BRIDGE STREET BRANCH
81 BRIDGE STREET
BEVERLY
MA
01915
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
559209
BEVERLY BRANCH
33 ENON STREET
BEVERLY
MA
01915
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
2612340
BACK BAY STATION BRANCH
155 DARTMOUTH STREET
BOSTON
MA
02116
SUFFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
689302
FRANKLIN STREET BRANCH
63 FRANKLIN STREET
BOSTON
MA
02110
SUFFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
5222076
ROXBURY BRANCH
1413 TREMONT STREET
BOSTON
MA
02120
SUFFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
27904
BRAINTREE BRANCH
51 COMMERCIAL STREET
BRAINTREE
MA
02184
NORFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
2847067
BRIDGEWATER BRANCH
110 MAIN STREET
BRIDGEWATER
MA
02324
PLYMOUTH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
1223879
BELMONT STREET MAIN BRANCH
1265 BELMONT STREET
BROCKTON
MA
02301
PLYMOUTH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
703404
QUINCY STREET BRANCH
276 QUINCY STREET
BROCKTON
MA
02302
PLYMOUTH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3386291
COOLIDGE CORNER BRANCH
301 HARVARD STREET
BROOKLINE
MA
02446
NORFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
2595612
MIDDLESEX MALL BRANCH
43 MIDDLESEX TURNPIKE, SUITE 10
BURLINGTON
MA
01803
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3697380
HARVARD SQUARE BRANCH
ONE BRATTLE STREET
CAMBRIDGE
MA
02138
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
695200
KENDALL SQUARE BRANCH
287 THIRD STREET
CAMBRIDGE
MA
02142
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3391174
MASS AVE BRANCH
647 MASSACHUSETTS AVENUE
CAMBRIDGE
MA
02139
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
1906239
CHELMSFORD BRANCH
291 CHELMSFORD STREET
CHELMSFORD
MA
01824
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3820740
CHELSEA BRANCH
90 EVERETT AVENUE
CHELSEA
MA
02150
SUFFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
2247443
DANVERS BRANCH
4 FEDERAL STREET
DANVERS
MA
01923
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3223631
DEDHAM MALL BRANCH
240 PROVIDENCE HIGHWAY
DEDHAM
MA
02026
NORFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
4398956
ASHMONT STATION BRANCH
1906 DORCHESTER AVENUE
DORCHESTER
MA
02124
SUFFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
984306
DRACUT BRANCH
45 BROADWAY RD
DRACUT
MA
01826
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
941608
DEPOT STREET BRANCH
19 DEPOT ST
DUXBURY
MA
02332
PLYMOUTH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3183360
SHAW'S SUPERMARKET BORDER STREET BRANCH
246 BORDER STREET
EAST BOSTON
MA
02128
SUFFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
2615891
EAST WAREHAM BRANCH
3003 CRANBERRY HIGHWAY
EAST WAREHAM
MA
02538
PLYMOUTH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
171478
EVERETT BRANCH
738 BROADWAY
EVERETT
MA
02149
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
5112261
FALMOUTH 815 BRANCH
815 MAIN STREET
FALMOUTH
MA
02540
BARNSTABLE
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
2320195
HINGHAM BRANCH
274 MAIN STREET
HINGHAM
MA
02043
PLYMOUTH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3956304
HYANNIS BRANCH
375 IYANNOUGH ROAD
HYANNIS
MA
02601
BARNSTABLE
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
2841711
CENTRE STREET BRANCH
687 CENTRE STREET
JAMAICA PLAIN
MA
02130
SUFFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
756905
KINGSTON BRANCH
108 MAIN STREET
KINGSTON
MA
02364
PLYMOUTH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3379257
LAKEVILLE BRANCH
45 MAIN STREET
LAKEVILLE
MA
02347
PLYMOUTH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
4352499
LAWRENCE BRANCH
486 ESSEX STREET
LAWRENCE
MA
01840
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3343173
DEPOT SQUARE BRANCH
1833 MASSACHUSETTS AVENUE
LEXINGTON
MA
02420
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
1927328
LOWELL/CENTRAL SAVINGS BRANCH
50 CENTRAL STREET
LOWELL
MA
01852
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
666602
BOSTON STREET BRANCH
156 BOSTON STREET
LYNN
MA
01904
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
933902
FIRST COLONIAL MAIN BRANCH
112 MARKET STREET
LYNN
MA
01901
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
852900
LYNNFIELD BRANCH
45 SALEM STREET
LYNNFIELD
MA
01940
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
1972485
PLEASANT STREET BRANCH
130 PLEASANT STREET
MALDEN
MA
02148
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
Data
Action
Effective
Date
Branch Service Type
Branch
ID_RSSD*
Popular Name Street Address City State Zip Code County Country FDIC UNINUM* Office Number* Head Office
Head Office
ID_RSSD*
Comments
OK
Full Service
2595621
CROSBY MARKETPLACE BRANCH
118 WASHINGTON STREET
MARBLEHEAD
MA
01945
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
940003
MARION BRANCH
340 FRONT ST
MARION
MA
02738
PLYMOUTH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
2684329
MARSHFIELD BRANCH
1932 OCEAN STREET
MARSHFIELD
MA
02050
PLYMOUTH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
474003
WINDMILL SQUARE BRANCH
1560 OLD POST ROAD
MARSTONS MILLS
MA
02648
BARNSTABLE
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
1411957
MASHPEE BRANCH
6 SHELLBACK WAY
MASHPEE
MA
02649
BARNSTABLE
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
939801
UPLAND WAY BRANCH
29 COUNTY RD
MATTAPOISETT
MA
02739
PLYMOUTH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
932008
MEDFORD BRANCH
53 LOCUST STREET
MEDFORD
MA
02155
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
558707
MELROSE BRANCH
441 MAIN STREET
MELROSE
MA
02176
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3393114
NATICK BRANCH
2 SOUTH AVENUE
NATICK
MA
01760
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
277008
STOREY AVENUE BRANCH
17 STOREY AVENUE
NEWBURYPORT
MA
01950
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
2539184
NEWTON BRANCH
188 NEEDHAM STREET
NEWTON
MA
02464
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3391165
NEWTON CENTRE BRANCH
1255 CENTRE STREET
NEWTON CENTER
MA
02459
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
708100
NORWELL OFFICE
80 WASHINGTON STREET
NORWELL
MA
02061
PLYMOUTH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
2948759
BROOKSBY VILLAGE BRANCH
100 BROOKSBY VILLAGE DRIVE
PEABODY
MA
01960
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3921003
BROOKSBY VILLAGE II BRANCH
300 BROOKSBY VILLAGE DRIVE
PEABODY
MA
01960
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
1966064
PEABODY BRANCH
37 FOSTER STREET
PEABODY
MA
01960
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
2471127
SHAW'S NORTH-SHORE SHOPPING CENTER BRANCH
114 ESSEX CENTER DRIVE
PEABODY
MA
01960
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
882000
PLYMOUTH BRANCH
36 MAIN ST
PLYMOUTH
MA
02360
PLYMOUTH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
2536389
QUINCY BRANCH
63 FRANKLIN STREET
QUINCY
MA
02169
NORFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
89005
WOLLASTON BRANCH
34 CHAPMAN STREET
QUINCY
MA
02170
NORFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
315704
RANDOLPH BRANCH
35 MEMORIAL PARKWAY
RANDOLPH
MA
02368
NORFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
685407
MASSBANK MAIN OFFICE
123 HAVEN STR
READING
MA
01867
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
5142017
REVERE BRANCH
339 SQUIRE STREET
REVERE
MA
02151
SUFFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
433804
DERBY STREET BRANCH
19 CONGRESS STREET
SALEM
MA
01970
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
665007
HAWTHORNE SHOPPING CENTER BRANCH
SIX TRADER'S WAY
SALEM
MA
01970
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
436403
SALEM MAIN BRANCH
139 WASHINGTON STREET
SALEM
MA
01970
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
757407
SANDWICH CENTER BRANCH
65C ROUTE 6A
SANDWICH
MA
02563
BARNSTABLE
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
133300
LYNNFELLS BRANCH
605 BROADWAY
SAUGUS
MA
01906
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
498607
SAUGUS MAIN BRANCH
466 LINCOLN AVE
SAUGUS
MA
01906
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
332970
SHARON MAIN OFFICE
7 SOUTH MAIN STREET
SHARON
MA
02067
NORFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3391183
SOMERVILLE BRANCH
250 ELM STREET
SOMERVILLE
MA
02144
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
2616263
SOUTH BOSTON BRANCH
470 WEST BROADWAY
SOUTH BOSTON
MA
02127
SUFFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
815802
STONEHAM BRANCH
163 MAIN STREET
STONEHAM
MA
02180
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
2379250
STOUGHTON BRANCH
397 WASHINGTON STREET
STOUGHTON
MA
02072
NORFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
934404
PARADISE ROAD BRANCH
405 PARADISE ROAD
SWAMPSCOTT
MA
01907
ESSEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3217845
COUNTY STREET BRANCH
742 COUNTY STREET
TAUNTON
MA
02780
BRISTOL
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
662408
WAKEFIELD BRANCH
445 MAIN STREET
WAKEFIELD
MA
01880
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
479802
PLYMOUTH SAVINGS MAIN OFFICE
226 MAIN STREET
WAREHAM
MA
02571
PLYMOUTH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
2950332
WATERTOWN SQUARE BRANCH
ONE CHURCH STREET
WATERTOWN
MA
02472
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
1412918
PLYMOUTH BRANCH
71 CARVER ROAD
WEST PLYMOUTH
MA
02360
PLYMOUTH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
921600
WESTFORD BRANCH
203 LITTLETON RD
WESTFORD
MA
01886
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
1472707
WEYMOUTH BRANCH
1150 WASHINGTON STREET
WEYMOUTH
MA
02189
NORFOLK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
367703
WILMINGTON BRANCH
370 MAIN ST
WILMINGTON
MA
01887
MIDDLESEX
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
2816474
CENTRIX MAIN OFFICE
1 ATWOOD LANE
BEDFORD
NH
03110
HILLSBOROUGH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
4456865
CONCORD BRANCH
11 SOUTH MAIN STREET
CONCORD
NH
03301
MERRIMACK
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3956050
CENTRAL AVENUE BRANCH
538 CENTRAL AVENUE
DOVER
NH
03820
STRAFFORD
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3153402
HOOKSETT ROAD BRANCH
41 HOOKSETT ROAD
MANCHESTER
NH
03104
HILLSBOROUGH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
4576204
TRAFALGAR SQUARE BRANCH
11 TRAFALGAR SQUARE, SUITE 105
NASHUA
NH
03063-1991
HILLSBOROUGH
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
OK
Full Service
3383656
PORTSMOUTH BRANCH
163 DEER STREET
PORTSMOUTH
NH
03801
ROCKINGHAM
UNITED STATES
Not Required
Not Required
EASTERN BANK
128904
Report Item 4: Insiders
(1), (2), (3)(a)(b)(c), and (4)(a)(b)©
(1)Names & Address
(City, State, Country)
(2) Principal Occupation if other
than with Bank Holding
Company
(3)(a) Title & Position with Bank
Holding Company
(3)(b) Title & position with
Subsidiaries (include names
of subsidiaries)
(3)© Title & Position with Other Businesses (include
names of other businesses)
(4)© List names of other
companies (includes partnerships)
if 25% or more of voting securities
are held (List names of companies
and percentage of voting securities
held)
Richard C. Bane Health Care Executive Corporator, Trustee, Executive
Committee Member
Director of Eastern Bank President/Owner - Bane Care Management LLC (and
affiliates)
Bane Care Management (and
affiliates), 60%
Boston, MA Partner - Boston Healthcare Ventures LLC
Boston Healthcare Ventures, LLC,
16%
Director - Tailored Risk Assurance Company N/A
Board Member - Mass Senior Care Association N/A
Luis Borgen Chief Financial Officer,
Athenahealth
Corporator, Trustee, Executive
Committee Member
Director of Eastern Bank Chief Financial Officer - Athenahealth N/A
Bolton, MA
Joseph Chung
Managing Director, Redstar
Ventures
Corporator, Trustee, Executive
Committee Member
Director of Eastern Bank Partner, Redstar Investments I, LLC
Redstar Investments I, LLC, 50%
Redstar Ventures, LLC 35%
Cambridge, MA Director - RSV Opco 5 N/A
Director - Money Experience, Inc. N/A
Paul M. Connolly Retired Corporator, Trustee, Executive
Committee Member
Director of Eastern Bank Director - John Hancock Insurance Companies N/A
Milton, MA Director - College Bound Dorchester N/A
Member, Advisory Board - UMass Boston College of
Management
N/A
Proprietor - Boston Athenaeum N/A
James B. Fitzgerald N/A
Chief Financial Officer &
Treasurer
Vice Chairman, Chief
Financial Officer & Chief
Administrative Officer of
Eastern Bank
Director - Foundation for Business Equity N/A
Boston, MA Trustee - Thompson Island N/A
Director - SBERA N/A
Trustee - Mass Taxpayers Foundation N/A
Bari Harlam Chief Marketing Officer Corporator, Trustee, Executive
Committee Member
Director of Eastern Bank Chief Marketing Officer - Hudson's Bay Company N/A
Cranston, RI Director - Le Tote N/A
Form FR Y -6
Eastern Bank Corporation
Fiscal Year Ending December 31, 2019
Report Item 4: Insiders
(1), (2), (3)(a)(b)(c), and (4)(a)(b)©
(1)Names & Address
(City, State, Country)
(2) Principal Occupation if other
than with Bank Holding
Company
(3)(a) Title & Position with Bank
Holding Company
(3)(b) Title & position with
Subsidiaries (include names
of subsidiaries)
(3)© Title & Position with Other Businesses (include
names of other businesses)
(4)© List names of other
companies (includes partnerships)
if 25% or more of voting securities
are held (List names of companies
and percentage of voting securities
held)
Form FR Y -6
Eastern Bank Corporation
Fiscal Year Ending December 31, 2019
Diane Hessan Chief Executive Officer Corporator, Trustee, Executive
Committee Member
Director of Eastern Bank CEO - Salient Ventures LLC N/A
Boston, MA Director - Brightcove N/A
Director - CoachUp N/A
Director - Tufts University N/A
Director - Mass Challenge N/A
Trustee - Beth Israel Deaconess N/A
Overseer - Boston Philharmonic N/A
Editorial Board - Boston Globe N/A
Director - Panera Bread N/A
Director - Schlesinger Group N/A
Richard E Holbrook Retired Chairman and CEO Chairman Emeritus, Corporator,
Trustee, Executive Committee
Member
Director of Eastern Bank
Member, Executive Committee - North Shore Medical
Center
N/A
Medfield, MA
Member, Finance Committee - North Shore Medical
Center
N/A
Member, Compensation Committee - North Shore
Medical Center
N/A
Board Member - Partners Healthcare System N/A
Chairman - Partners Audit and Compliance
Committee
N/A
Member, Nominating Committee - Partners
HealthCare
N/A
Member, Compensation Committee - Partners
HealthCare
N/A
Vice Chair Finance Committee - Partners HealthCare N/A
Board Member - Allways Health Partners N/A
Chairman, Audit Committee - Allways Health Partners N/A
Member, Finance Committee - Allways Health
Partners
N/A
Member, Compensation Committee - Allways Health
Partners
N/A
Treasurer - United Church of Christ Medfield N/A
Member, Audit Committee - Risk Management
Foundation (CRICO)
N/A
Report Item 4: Insiders
(1), (2), (3)(a)(b)(c), and (4)(a)(b)©
(1)Names & Address
(City, State, Country)
(2) Principal Occupation if other
than with Bank Holding
Company
(3)(a) Title & Position with Bank
Holding Company
(3)(b) Title & position with
Subsidiaries (include names
of subsidiaries)
(3)© Title & Position with Other Businesses (include
names of other businesses)
(4)© List names of other
companies (includes partnerships)
if 25% or more of voting securities
are held (List names of companies
and percentage of voting securities
held)
Form FR Y -6
Eastern Bank Corporation
Fiscal Year Ending December 31, 2019
Deborah C. Jackson President, Cambridge College Corporator, Trustee, Executive
Committee Member, Lead
Director
Director of Eastern Bank Director - John Hancock Investments N/A
Milton, MA President - Cambridge College N/A
Director - National Association of Corporate Directors,
New England
N/A
Director - Massachusetts Women's Forum N/A
Peter K. Markell Executive Vice President
Administration and Finance,
CFO & Treasurer
Corporator, Trustee, Executive
Committee Member
Director of Eastern Bank
Executive Vice President Administration and Finance,
CFO & Treasurer - Partners Healthcare System
N/A
Milton, MA Chair of Board - Boston College N/A
Director - Risk Management Foundation N/A
Director - McLean Hospital N/A
Jan Miller N/A President Vice Chairman and Chief
Commercial Banking Officer
of Eastern Bank
Director - Massachusetts Housing Investment
Corporation
N/A
Boston, MA
Quincy Miller N/A Vice Chair President of Eastern Bank Director - Blue Cross Blue Shield of MA N/A
Milton, MA Director - Consumer Bankers Association N/A
Director - Bottom Line N/A
Director - Alliance For Business Leadership N/A
Director - Boys and Girls Club of Boston N/A
Director - Foundation for Business Equity N/A
Board of Overseers - Greater Boston YMCA N/A
Robert F. Rivers N/A
Corporator, Trustee, Chairman,
& Chief Executive Officer
Director, Chairman & Chief
Executive Officer of Eastern
Bank
Chair - The Dimock Center N/A
Needham, MA Chair - Mass Business Roundtable N/A
Trustee - Stonehill College N/A
Director - Greater Boston Chamber of Commerce N/A
Director - The Lowell Plan N/A
Greg Shell
Managing Director, Bain Capital Corporator, Trustee, Executive
Committee Member
Director of Eastern Bank Managing Director, Bain Capital
N/A
Boston, MA Director - Fiduciary Trust N/A
Director - Boys and Girls Club N/A
Member of President's Council - Mass General
Hospital
N/A
Director - Harvard Pilgrim Health Care N/A
Paul D. Spiess Retired Corporator, Trustee, Executive
Committee Member
Director of Eastern Bank President - Parkhurst Place Inc. N/A
Amherst, NH
President and Director - Souhegan Valley Interfaith
Housing Corp.
N/A
Trustee - Spiess Family Farm Trust Spiess Family Farm Trust, 25%