# WEBSTER FINANCIAL CORP (WBS) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from WEBSTER FINANCIAL CORP's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/801337/000080133725000004/wbs-20241231.htm
Accession: 0000801337-25-000004
Filing date: 2025-03-03
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/WBS/
All MD&A years: /company/WBS/mda/
Previous year: /company/WBS/mda/fy2023/ (FY 2023)
Next year: /company/WBS/mda/fy2025/ (FY 2025)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information that management believes is necessary to understand the Company’s consolidated financial condition, results of operations, and cash flows for the year ended December 31, 2024, as compared to 2023. This information should be read in conjunction with the Company’s Consolidated Financial Statements, and the accompanying Notes thereto, contained in Part II - Item 8. Financial Statements and Supplementary Data, as well as other information set forth throughout this report. For discussion and analysis of the Company’s 2023 results, as compared to 2022, refer to Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 27, 2024. The Company’s consolidated financial condition and operating results for the year ended December 31, 2024, are not necessarily indicative of the consolidated financial condition or operating results that may be attained in future periods.

Results of Operations

The following table summarizes selected financial highlights and key performance indicators:

[[GREPCENT_TABLE]]
[["","At or for the years ended December 31,"],["(In thousands, except per share data)","2024","","2023","","2022"],["Income and performance ratios:"],["Net income","$","768,707","","","$","867,840","","","$","644,283"],["Net income available to common stockholders","752,057","","","851,190","","","628,364"],["Earnings per diluted common share","4.37","","","4.91","","","3.72"],["Return on average assets","1.00","%","","1.18","%","","0.99","%"],["Return on average tangible common stockholders\u2019 equity (non-GAAP)","14.35","","","16.95","","","13.34"],["Return on average common stockholders\u2019 equity","8.71","","","10.59","","","8.44"],["Non-interest income as a percentage of total revenue","9.72","","","11.85","","","17.81"],["Asset quality:"],["ACL on loans and leases","$","689,566","","","$","635,737","","","$","594,741"],["Non-performing assets (1)","461,751","","","218,600","","","206,136"],["ACL on loans and leases / total loans and leases","1.31","%","","1.25","%","","1.20","%"],["Net charge-offs / average loans and leases","0.32","","","0.21","","","0.15"],["Non-performing loans and leases / total loans and leases (1)","0.88","","","0.41","","","0.41"],["Non-performing assets / total loans and leases plus OREO and repossessed assets (1)","0.88","","","0.43","","","0.41"],["ACL on loans and leases / non-performing loans and leases (1)","149.47","","","303.39","","","291.84"],["Other ratios:"],["Tangible common equity (non-GAAP)","7.45","%","","7.73","%","","7.38","%"],["Tier 1 Risk-Based Capital","12.06","","","11.62","","","11.23"],["Total Risk-Based Capital","14.24","","","13.72","","","13.25"],["CET1 Risk-Based Capital","11.54","","","11.11","","","10.71"],["Stockholders\u2019 equity / total assets","11.56","","","11.60","","","11.30"],["Net interest margin","3.42","","","3.52","","","3.49"],["Efficiency ratio (non-GAAP)","45.43","","","42.15","","","43.42"],["Equity and share related:"],["Common stockholders\u2019 equity","$","8,849,235","","","$","8,406,017","","","$","7,772,207"],["Book value per common share","51.63","","","48.87","","","44.67"],["Tangible book value per common share (non-GAAP)","32.95","","","32.39","","","29.07"],["Common stock closing price","55.22","","","50.76","","","47.34"],["Dividends and equivalents declared per common share","1.60","","","1.60","","","1.60"],["Common shares issued and outstanding","171,391","","","172,022","","","174,008"],["Weighted-average common shares outstanding - basic","169,820","","","171,775","","","167,452"],["Weighted-average common shares - diluted","170,192","","","171,883","","","167,547"]]
[[/GREPCENT_TABLE]]

(1)Non-performing asset balances and related asset quality ratios exclude the impact of net unamortized (discounts)/premiums and net unamortized deferred (fees)/costs on loans and leases.

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Non-GAAP Financial Measures

The non-GAAP financial measures identified in the preceding table provide both management and investors with information useful in understanding the Company’s financial position, results of operations, the strength of its capital position, and overall business performance. These non-GAAP financial measures are used by management for performance measurement purposes, as well as for internal planning and forecasting, and by securities analysts, investors, and other interested parties to assess peer company operating performance. Management believes that this presentation, together with the accompanying reconciliations, provides investors with a more complete understanding of the factors and trends affecting the Company’s business and allows investors to view its performance in a similar manner.

Tangible book value per common share represents stockholders’ equity less preferred stock and goodwill and other intangible assets (tangible common equity) divided by common shares outstanding at the end of the reporting period. The tangible common equity ratio represents tangible common equity divided by total assets less goodwill and other intangible assets (tangible assets). Both of these measures are used by management to evaluate the Company’s capital position. The annualized return on average tangible common stockholders’ equity is calculated using net income available to common stockholders, adjusted for the annualized tax-effected amortization of intangible assets, as a percentage of average tangible common equity. This measure is used by management to assess the Company’s performance against its peer financial institutions. The efficiency ratio, which represents the costs expended to generate a dollar of revenue, is calculated excluding certain non-operational items in order to measure how well the Company is managing its recurring operating expenses.

These non-GAAP financial measures should not be considered a substitute for GAAP basis financial measures. Because

non-GAAP financial measures are not standardized, it may not be possible to compare these with other companies that present financial measures having the same or similar names.

The following tables reconcile non-GAAP financial measures to the most comparable financial measures defined by GAAP:

[[GREPCENT_TABLE]]
[["","At December 31,"],["(In thousands, except per share data)","2024","","2023","","2022"],["Tangible book value per common share:"],["Stockholders\u2019 equity","$","9,133,214","","","$","8,689,996","","","$","8,056,186"],["Less: Preferred stock","283,979","","","283,979","","","283,979"],["Goodwill and other intangible assets","3,202,369","","","2,834,600","","","2,713,446"],["Tangible common stockholders\u2019 equity","$","5,646,866","","","$","5,571,417","","","$","5,058,761"],["Common shares outstanding","171,391","","","172,022","","","174,008"],["Tangible book value per common share","$","32.95","","","$","32.39","","","$","29.07"],["Book value per common share (GAAP)","$","51.63","","","$","48.87","","","$","44.67"],["Tangible common equity ratio:"],["Tangible common stockholders\u2019 equity","$","5,646,866","","","$","5,571,417","","","$","5,058,761"],["Total assets","$","79,025,073","","","$","74,945,249","","","$","71,277,521"],["Less: Goodwill and other intangible assets","3,202,369","","","2,834,600","","","2,713,446"],["Tangible assets","$","75,822,704","","","$","72,110,649","","","$","68,564,075"],["Tangible common equity ratio","7.45","%","","7.73","%","","7.38","%"],["Common stockholders\u2019 equity to total assets (GAAP)","11.20","%","","11.22","%","","10.90","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","For the years ended December 31,"],["(In thousands)","2024","","2023","","2022"],["Return on average tangible common stockholders\u2019 equity:"],["Net income","$","768,707","","","$","867,840","","","$","644,283"],["Less: Preferred stock dividends","16,650","","","16,650","","","15,919"],["Add: Intangible assets amortization, tax-affected","28,505","","","28,604","","","25,233"],["Net income adjusted for preferred stock dividends and intangible assets amortization","$","780,562","","","$","879,794","","","$","653,597"],["Average stockholders\u2019 equity","$","8,919,675","","","$","8,323,955","","","$","7,721,488"],["Less: Average preferred stock","283,979","","","283,979","","","272,179"],["Average goodwill and other intangible assets","3,195,988","","","2,848,114","","","2,548,254"],["Average tangible common stockholders\u2019 equity","$","5,439,708","","","$","5,191,862","","","$","4,901,055"],["Return on average tangible common stockholders\u2019 equity","14.35","%","","16.95","%","","13.34","%"],["Return on average common stockholders\u2019 equity (GAAP)","8.71","%","","10.59","%","","8.44","%"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","For the years ended December 31,"],["(In thousands)","2024","","2023","","2022"],["Efficiency ratio:"],["Non-interest expense","$","1,351,279","","","$","1,416,355","","","$","1,396,473"],["Less: Foreclosed property activity","(1,413)","","","(1,282)","","","(906)"],["Intangible assets amortization","36,082","","","36,207","","","31,940"],["Operating lease depreciation","1,541","","","5,569","","","8,193"],["Merger-related expenses (1)","3,139","","","162,517","","","246,461"],["Common stock contribution to charitable foundation","\u2014","","","\u2014","","","10,500"],["FDIC special assessment","10,318","","","47,164","","","\u2014"],["Strategic restructuring costs and other (2)","22,169","","","\u2014","","","(3,032)"],["Adjusted non-interest expense","$","1,279,443","","","$","1,166,180","","","$","1,103,317"],["Net interest income","$","2,338,387","","","$","2,337,269","","","$","2,034,286"],["Add: FTE adjustment","57,517","","","68,939","","","47,128"],["Non-interest income","251,899","","","314,337","","","440,783"],["Other income (3)","29,440","","","18,059","","","22,887"],["Less: Operating lease depreciation","1,541","","","5,569","","","8,193"],["(Loss) on sale of investment securities, net","(136,224)","","","(33,620)","","","(6,751)"],["Gain on extinguishment of borrowings","\u2014","","","\u2014","","","2,548"],["Net (loss) on sale of factored receivables portfolio","(15,977)","","","\u2014","","","\u2014"],["Net gain on sale of mortgage servicing rights","11,655","","","\u2014","","","\u2014"],["Adjusted income","$","2,816,248","","","$","2,766,655","","","$","2,541,094"],["Efficiency ratio","45.43","%","","42.15","%","","43.42","%"],["Non-interest expense as a percentage of total revenue (GAAP)","52.17","%","","53.41","%","","56.42","%"]]
[[/GREPCENT_TABLE]]

(1)Merger-related expenses included Ametros acquisition expenses for the year ended December 31, 2024, and primarily Sterling merger expenses for the years ended December 31, 2023, and 2022. Additional information regarding the acquisition of Ametros can be found within Note 2: Acquisitions and Joint Ventures in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data.

(2)Strategic restructuring costs and other primarily included severance, technology contract termination costs, and the partial impairment of the payroll finance customer relationship intangible asset for the year ended December 31, 2024. For the year ended December 31, 2022, the charge primarily reflects modifications to the Company’s strategic initiatives that were announced in 2020 as a result of the Company re-evaluating its strategic priorities as a combined organization in connection with the Sterling merger.

(3)Other income (non-GAAP) reflects a tax-equivalent adjustment on income generated from low income housing tax-credit investments.

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Net Interest Income

Net interest income is the Company’s primary source of revenue, representing 90.3%, and 88.1% of total revenues for the years ended December 31, 2024, and 2023, respectively. Net interest income is the difference between interest income on

interest-earning assets (i.e., loans and leases and investment securities) and interest expense on interest-bearing liabilities

(i.e., deposits and borrowings), which are used to fund interest-earning assets and other activities. Net interest margin is calculated as the ratio of FTE net interest income to average interest-earning assets.

Net interest income, net interest margin, average yields, and ratios on an FTE basis are considered non-GAAP financial measures, and are used by management to evaluate the comparability of the Company’s revenue arising from both taxable and non-taxable sources. FTE adjustments are determined assuming a statutory federal income tax rate of 21%.

Net interest income and net interest margin are influenced by the volume and mix of interest-earning assets and interest-bearing liabilities, changes in interest rate levels, re-pricing frequencies, contractual maturities, prepayment behavior, and the use of interest rate derivative financial instruments. These factors are affected by changes in economic conditions which impacts monetary policies, competition for loans and deposits, as well as the extent of interest lost on non-performing assets.

Net interest income remained relatively flat at $2.3 billion for the years ended December 31, 2024, and 2023. On an FTE basis, net interest income also remained relatively flat. Net interest margin decreased 10 basis points from 3.52% for the year ended December 31, 2023, to 3.42% for the year ended December 31, 2024.

Average total interest-earning assets increased $1.9 billion, or 2.8%, from $68.3 billion for the year ended December 31, 2023, to $70.2 billion for the year ended December 31, 2024, and the average yield on average total interest-earning assets increased 26 basis points from 5.42% for the year ended December 31, 2023, to 5.68% for the year ended December 31, 2024. The change in the average balance and the average yield for total interest-earning assets was primarily due to the following:

Average total investment securities increased $1.8 billion, or 11.1%, from $15.6 billion for the year ended December 31, 2023, to $17.4 billion for the year ended December 31, 2024, primarily due to a higher volume of purchases, partially offset by paydown activities and sales of available-for-sale securities. At December 31, 2024, and 2023, average total investment securities comprised 24.7% and 22.9% of average total interest-earning assets, respectively. The average yield on average total investment securities increased 92 basis points from 3.06% for the year ended December 31, 2023, to 3.98% for the year ended December 31, 2024, primarily due to the reinvestment of proceeds received from sales and maturities of lower yielding securities for securities at higher yields.

Average loans and leases increased $1.0 billion, or 1.9%, from $50.6 billion for the year ended December 31, 2023, to $51.6 billion for the year ended December 31, 2024, primarily due to growth in commercial real estate, commercial non-mortgage, and residential mortgages, partially offset by the run-off of warehouse lending and the transfer of the payroll finance and factored receivables loan portfolios to held for sale in March 2024. At December 31, 2024, and 2023, average loans and leases comprised 73.6% and 74.2% of average total interest-earning assets, respectively. The average yield on average loans and leases increased 10 basis points from 6.15% for the year ended December 31, 2023, to 6.25% for the year ended December 31, 2024, primarily due to higher market rates, partially offset by lower purchase accounting accretion on loans acquired in the Sterling merger.

Average loans held for sale increased $115.1 million, or 400.9%, from $28.7 million for the year ended December 31, 2023, to $143.8 million for the year ended December 31, 2024, primarily due to the payroll finance and factored receivables loan portfolios, which were transferred to held for sale in March 2024. The factored receivables loan portfolio was sold in September 2024, and the payroll finance loan portfolio was transferred back to held for investment in December 2024. At December 31, 2024, and 2023, average loans held for sale comprised 0.2% and a negligible percent of average total interest-earning assets, respectively. The average yield on average loans held for sale increased 711 basis points from 2.56% for the year ended December 31, 2023, to 9.67% for the year ended December 31, 2024, primarily due to higher yields on the payroll finance and factored receivables loan portfolios.

Average interest-bearing deposits decreased $0.9 billion, or 53.7%, from $1.6 billion for the year ended December 31, 2023, to $0.7 billion for the year ended December 31, 2024, which was a direct result of the Company’s risk management approach to hold higher levels of on-balance sheet liquidity in 2023. At December 31, 2024, and 2023, average interest-bearing deposits comprised 1.0% and 2.3% of average total interest-earning assets, respectively. The average yield on average interest-bearing deposits increased 2 basis points from 5.14% for the year ended December 31, 2023, to 5.16% for the year ended December 31, 2024, primarily due to the net impact from changes in market rates throughout 2024.

Average total interest-bearing liabilities increased $1.9 billion, or 3.0%, from $63.9 billion for the year ended December 31, 2023, to $65.8 billion for the year ended December 31, 2024, and the average rate on average total interest-bearing liabilities increased 39 basis points from 2.02% for the year ended December 31, 2023, to 2.41% for the year ended December 31, 2024. The change in the average balance and the average rate for total interest-bearing liabilities was primarily due to the following:

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Average total deposits increased $4.2 billion, or 7.2%, from $58.2 billion for the year ended December 31, 2023, to $62.4 billion for the year ended December 31, 2024, reflecting an increase of $5.4 billion in interest-bearing deposits, partially offset by a decrease of $1.2 billion in non-interest-bearing deposits. The increase in average total deposits was primarily due to growth in interLINK, money markets, and certificates of deposit, the acquisition of Ametros, and higher average HSA balances, partially offset by lower average balances in non-interest-bearing demand, savings, and brokered certificates of deposit. At December 31, 2024, and 2023, average total deposits comprised 94.8% and 91.1% of average total interest-bearing liabilities, respectively. The average rate on average total deposits increased 54 basis points from 1.75% for the year ended December 31, 2023, to 2.29% for the year ended December 31, 2024, primarily due to higher market rates and growth in higher costing deposit products, such as money markets and certificates of deposit. Average higher costing time deposits as a percentage of average total interest-bearing deposits moderately increased from 14.0% for the year ended December 31, 2023, to 14.6% for the year ended December 31, 2024, primarily due to the shift in customer preferences from non-interest-bearing demand and savings to higher rate certificates of deposit, partially offset by the impact from growth in other deposit products.

Average FHLB advances decreased $2.0 billion, or 46.3%, from $4.3 billion for the year ended December 31, 2023, to $2.3 billion for the year ended December 31, 2024, primarily due to the paydown of short-term advances and a change in short-term borrowings mix. At December 31, 2024, and 2023, average FHLB advances comprised 3.5% and 6.7% of total average interest-bearing liabilities, respectively. The average rate on average FHLB advances increased 25 basis points from 5.21% for the year ended December 31, 2023, to 5.46% for the year ended December 31, 2024, primarily due to the refinancing of maturities at higher market rates.

Average long-term debt decreased $0.1 billion, or 12.1%, from $1.0 billion for the year ended December 31, 2023, to $0.9 billion for the year ended December 31, 2024, primarily due the maturity of its 4.375% senior notes in February 2024. At December 31, 2024, and 2023, average long-term debt comprised 1.4% and 1.6% of average total interest-bearing liabilities, respectively. The average rate on average long-term debt decreased 12 basis points from 3.69% for the year ended December 31, 2023, to 3.57% for the year ended December 31, 2024, also primarily due to the maturity of its 4.375% senior notes in February 2024.

Average federal funds purchased decreased $113.2 million, or 67.6%, from $167.5 million for the year ended December 31, 2023, to $54.3 million for the year ended December 31, 2024, primarily due to the paydown of overnight funding and change in short-term borrowings mix. At December 31, 2024, and 2023, average federal funds purchased comprised 0.1% and 0.3% of average total interest-bearing liabilities, respectively. The average rate on average federal funds purchased increased 85 basis points from 4.70% for the year ended December 31, 2023, to 5.55% for the year ended December 31, 2024, primarily due to increases in market rates.

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The following table summarizes daily average balances, interest, and average yield/rate by major category, and net interest margin on an FTE basis:

[[GREPCENT_TABLE]]
[["","Years ended December 31,"],["","2024","","2023","","2022"],["(In thousands)","Average Balance","Interest Income/Expense","Average Yield/Rate","","Average Balance","Interest Income/Expense","Average Yield/Rate","","Average Balance","Interest Income/Expense","Average Yield/Rate"],["Assets:"],["Interest-earning assets:"],["Loans and leases (1)","$","51,597,443","","$","3,224,653","","6.25","%","","$","50,637,569","","$","3,113,709","","6.15","%","","$","43,751,112","","$","1,967,761","","4.50","%"],["Investment securities: (2)"],["Taxable","15,823,052","","651,507","","4.12","","","13,057,669","","423,289","","3.22","","","12,424,967","","295,158","","2.36"],["Non-taxable","1,533,701","","38,758","","2.53","","","2,569,015","","54,207","","2.18","","","2,540,540","","50,442","","2.05"],["Total investment securities","17,356,753","","690,265","","3.98","","","15,626,684","","477,496","","3.06","","","14,965,507","","345,600","","2.31"],["FHLB and FRB stock","330,418","","18,633","","5.64","","","408,673","","24,785","","6.06","","","289,595","","8,775","","3.03"],["Interest-bearing deposits (3)","723,688","","37,341","","5.16","","","1,564,255","","80,475","","5.14","","","596,912","","9,651","","1.62"],["Loans held for sale","143,812","","13,911","","9.67","","","28,710","","734","","2.56","","","9,842","","78","","0.80"],["Total interest-earning assets","70,152,114","","$","3,984,803","","5.68","%","","68,265,891","","$","3,697,199","","5.42","%","","59,612,968","","$","2,331,865","","3.91","%"],["Non-interest-earning assets (2)","6,461,020","","","","","5,557,991","","","","","5,149,240"],["Total assets","$","76,613,134","","","","","$","73,823,882","","","","","$","64,762,208"],["Liabilities and Stockholders\u2019 Equity:"],["Interest-bearing liabilities:"],["Demand deposits","$","10,387,807","","$","\u2014","","\u2014","%","","$","11,596,949","","$","\u2014","","\u2014","%","","$","12,912,894","","$","\u2014","","\u2014","%"],["Health savings accounts","8,650,485","","13,139","","0.15","","","8,249,332","","12,366","","0.15","","","7,826,576","","6,315","","0.08"],["Interest-bearing checking, money market, and savings","35,789,961","","1,070,949","","2.99","","","31,874,457","","756,521","","2.37","","","28,266,128","","115,271","","0.41"],["Time deposits","7,597,612","","343,116","","4.52","","","6,531,610","","252,531","","3.87","","","2,838,502","","16,966","","0.60"],["Total deposits","62,425,865","","1,427,204","","2.29","","","58,252,348","","1,021,418","","1.75","","","51,844,100","","138,552","","0.27"],["Securities sold under agreements to repurchase","142,025","","1,098","","0.77","","","210,676","","1,231","","0.58","","","466,282","","3,614","","0.78"],["Federal funds purchased","54,303","","3,015","","5.55","","","167,495","","7,871","","4.70","","","598,269","","15,444","","2.58"],["Other borrowings","\u2014","","\u2014","","\u2014","","","\u2014","","\u2014","","\u2014","","","\u2014","","1","","\u2014"],["FHLB advances","2,296,048","","125,329","","5.46","","","4,275,394","","222,537","","5.21","","","1,965,577","","58,557","","2.98"],["Long-term debt (2)","903,603","","32,253","","3.57","","","1,027,869","","37,934","","3.69","","","995,341","","34,283","","3.44"],["Total interest-bearing liabilities","65,821,844","","$","1,588,899","","2.41","%","","63,933,782","","$","1,290,991","","2.02","%","","55,869,569","","$","250,451","","0.45","%"],["Non-interest-bearing liabilities (2)","1,871,615","","","","","1,566,145","","","","","1,171,151"],["Total liabilities","67,693,459","","","","","65,499,927","","","","","57,040,720"],["Preferred stock","283,979","","","","","283,979","","","","","272,179"],["Common stockholders\u2019 equity","8,635,696","","","","","8,039,976","","","","","7,449,309"],["Total stockholders\u2019 equity","8,919,675","","","","","8,323,955","","","","","7,721,488"],["Total liabilities and stockholders' equity","$","76,613,134","","","","","$","73,823,882","","","","","$","64,762,208"],["Net interest income (FTE)","","2,395,904","","","","","2,406,208","","","","","2,081,414"],["Less: FTE adjustment","","(57,517)","","","","","(68,939)","","","","","(47,128)"],["Net interest income","","$","2,338,387","","","","","$","2,337,269","","","","","$","2,034,286"],["Net interest margin (FTE)","","","3.42","%","","","","3.52","%","","","","3.49","%"]]
[[/GREPCENT_TABLE]]

(1)Non-accrual loans have been included in the computation of average balances.

(2)In order to provide the users of the Company’s financial statements with a more transparent view of the actual consolidated average balances that are used in the calculation of net interest margin, the Company has recast, in the above table, certain consolidated average balances for the years ended December 31, 2023, and 2022, to reflect a change in presentation being applied retrospectively. Specifically, adjustments were made to exclude average unsettled trades of $108.9 million and $70.9 million, respectively, and average available-for-sale unrealized losses of $895.8 million and $507.7 million, respectively, from investment securities, and to exclude an average basis adjustment of $30.8 million and $36.1 million, respectively, from long-term debt related to a de-designated fair value hedge. Rather, effective as of December 31, 2024, these average balances are being presented in average non-interest-earning assets and average non-interest-bearing liabilities, respectively. There was no change to the related yields/rates, net interest income, or net interest margin that had been previously disclosed.

(3)Interest-bearing deposits are a component of cash and cash equivalents on the Consolidated Statements of Cash Flows included in Part II - Item 8. Financial Statements and Supplementary Data.

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The following table summarizes the change in net interest income attributable to changes in rate and volume, and reflects net interest income on an FTE basis:

[[GREPCENT_TABLE]]
[["","Years ended December 31,"],["","2024 vs. 2023Increase (decrease) due to","","2023 vs. 2022Increase (decrease) due to"],["(In thousands)","Rate (1)","Volume","Total","","Rate (1)","Volume","Total"],["Change in interest on interest-earning assets:"],["Loans and leases","$","78,816","$","32,128","$","110,944","","$","833,430","$","312,518","$","1,145,948"],["Investment securities (2)","160,500","52,269","212,769","","116,541","15,355","131,896"],["FHLB and FRB stock","(1,406)","(4,746)","(6,152)","","12,402","3,608","16,010"],["Interest-bearing deposits","110","(43,244)","(43,134)","","55,184","15,640","70,824"],["Loans held for sale","13,743","(566)","13,177","","364","292","656"],["Total interest income","$","251,763","$","35,841","$","287,604","","$","1,017,921","$","347,413","$","1,365,334"],["Change in interest on interest-bearing liabilities:"],["Health savings accounts","$","172","$","601","$","773","","$","5,710","$","341","$","6,051"],["Interest-bearing checking, money market, and savings","177,558","136,870","314,428","","596,023","45,227","641,250"],["Time deposits","60,165","30,420","90,585","","178,262","57,303","235,565"],["Securities sold under agreements to repurchase","268","(401)","(133)","","(402)","(1,981)","(2,383)"],["Federal funds purchased","463","(5,319)","(4,856)","","3,547","(11,120)","(7,573)"],["Other borrowings","\u2014","\u2014","\u2014","","(1)","\u2014","(1)"],["FHLB advances","5,818","(103,026)","(97,208)","","95,168","68,812","163,980"],["Long-term debt (2)","(1,095)","(4,586)","(5,681)","","2,531","1,120","3,651"],["Total interest expense","$","243,349","$","54,559","$","297,908","","$","880,838","$","159,702","$","1,040,540"],["Net change in net interest income","$","8,414","$","(18,718)","$","(10,304)","","$","137,083","$","187,711","$","324,794"]]
[[/GREPCENT_TABLE]]

(1)The change attributable to mix, a combined impact of rate and volume, is included with the change due to rate.

(2)The increase due to rate and volume for 2023 vs. 2022 for investment securities and long-term debt were recast in connection with the change in presentation of certain consolidated average balances effective in 2024, as discussed on the previous page.

Provision for Credit Losses

The provision for credit losses was $222.0 million and $150.7 million for the year ended December 31, 2024, and 2023, respectively. The balance for the year ended December 31, 2023, included a discrete merger-related charge of $6.8 million, which increased the provision for unfunded loan commitments. Excluding this charge, the provision for credit losses increased $78.1 million, primarily due to the impact of the current macroeconomic environment on credit performance, risk rating migration, loan portfolio mix, and organic loan growth.

Additional information regarding the Company’s provision for credit losses and ACL can be found under the sections captioned “Loans and Leases” through “Allowance for Credit Losses on Loans and Leases” contained elsewhere in this Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

38

Table of Contents

Non-Interest Income

[[GREPCENT_TABLE]]
[["","Years ended December 31,"],["(In thousands)","2024","","2023","","2022"],["Deposit service fees","$","161,144","","","$","169,318","","","$","198,472"],["Loan and lease related fees","76,384","","","84,861","","","102,987"],["Wealth and investment services","33,234","","","28,999","","","40,277"],["Cash surrender value of life insurance policies","27,712","","","26,228","","","29,237"],["(Loss) on sale of investment securities, net","(136,224)","","","(33,620)","","","(6,751)"],["Other income","89,649","","","38,551","","","76,561"],["Total non-interest income","$","251,899","","","$","314,337","","","$","440,783"]]
[[/GREPCENT_TABLE]]

Total non-interest income decreased $62.4 million, or 19.9%, from $314.3 million for the year ended December 31, 2023, to $251.9 million for the year ended December 31, 2024, primarily due to Net losses on sale of investment securities and decreases in Deposit service fees and Loan and lease related fees, partially offset by an increase in Other income.

Deposit service fees decreased $8.2 million, or 4.8%, from $169.3 million for the year ended December 31, 2023, to

$161.1 million for the year ended December 31, 2024, primarily due to a decrease in overdraft and account service fees, partially offset by an increase in cash management fees.

Loan and lease related fees decreased $8.5 million, or 10.0%, from $84.9 million for the year ended December 31, 2023, to $76.4 million for the year ended December 31, 2024, primarily due to a decrease in loan servicing fees, partially offset by increases in amendment and letter of credit fees, and lower mortgage servicing rights amortization.

Net losses on sale of investment securities increased $102.6 million, or 305.2%, from $33.6 million for the year ended December 31, 2023, to $136.2 million for the year ended December 31, 2024. During the year ended December 31, 2024, the Company sold $2.3 billion of Municipal bonds and notes, Agency MBS, Corporate debt securities, Agency CMBS, Government agency debentures, and Agency CMOs classified as available-for-sale for proceeds of $2.1 billion. During the year ended December 31, 2023, the Company sold $827.0 million of Municipal bonds and notes, U.S. Treasury notes, and Corporate debt securities classified as available-for-sale for proceeds of $789.6 million. The amounts included in non-interest income reflect the portion of the losses that were not due to credit related factors.

Other income increased $51.1 million, or 132.5%, from $38.5 million for the year ended December 31, 2023, to $89.6 million for the year ended December 31, 2024, primarily due to $23.0 million of incremental fee income related to the acquired Ametros business, a $11.7 million net gain on sale of mortgage servicing rights, a $4.4 million net gain on sale of multi-family loans (securitization), proceeds from bank-owned life insurance policies, direct investment gains, and customer derivative activities, partially offset by a $16.0 million net loss on sale of the factored receivables portfolio.

39

Table of Contents

Non-Interest Expense

[[GREPCENT_TABLE]]
[["","Years ended December 31,"],["(In thousands)","2024","","2023","","2022"],["Compensation and benefits","$","762,794","","","$","711,752","","","$","723,620"],["Occupancy","72,161","","","77,520","","","113,899"],["Technology and equipment","195,017","","","197,928","","","186,384"],["Intangible assets amortization","36,082","","","36,207","","","31,940"],["Marketing","18,751","","","18,622","","","16,438"],["Professional and outside services","58,253","","","107,497","","","117,530"],["Deposit insurance","68,912","","","98,081","","","26,574"],["Other expense","139,309","","","168,748","","","180,088"],["Total non-interest expense","$","1,351,279","","","$","1,416,355","","","$","1,396,473"]]
[[/GREPCENT_TABLE]]

Total non-interest expense slightly decreased by 4.5% from the year ended December 31, 2023, to the year ended December 31, 2024. Although the financial statement caption as a whole did not change significantly, notable fluctuations were experienced in Compensation and benefits, Occupancy, Professional and outside services, Deposit insurance, and Other expense.

Compensation and benefits increased $51.1 million, or 7.2%, from $711.7 million for the year ended December 31, 2023, to $762.8 million for the year ended December 31, 2024, primarily due to higher compensation, performance-based incentives, and employee benefits, and the impact from the employees acquired in the Ametros acquisition.

Occupancy decreased $5.3 million, or 6.9%, from $77.5 million for the year ended December 31, 2023, to $72.2 million for the year ended December 31, 2024, primarily due a $3.4 million net gain recognized on an early lease termination and lower rent and related property tax expense.

Professional and outside services decreased $49.2 million, or 45.8%, from $107.5 million for the year ended December 31, 2023, to $58.3 million for the year ended December 31, 2024, primarily due to a decrease in technology consulting fees, which were higher in 2023 as a result of the core conversion of the legacy Webster and legacy Sterling platforms.

Deposit insurance decreased $29.2 million, or 29.7%, from $98.1 million for the year ended December 31, 2023, to

$68.9 million for the year ended December 31, 2024, primarily due to the impact of the FDIC special assessment, partially offset by the impact resulting from an increase in the Company’s deposit insurance assessment base.

Other expense decreased $29.4 million, or 17.4%, from $168.7 million for the year ended December 31, 2023, to $139.3 million for the year ended December 31, 2024, primarily due to decreases in contract termination costs, other miscellaneous expenses, check card expense, and operating lease depreciation, partially offset by an increase in franchise taxes, loan workout expense, and a $1.9 million impairment loss on the payroll finance customer relationship intangible asset.

40

Table of Contents

Income Taxes

The Company recognized income tax expense of $248.3 million and $216.7 million for the years ended December 31, 2024, and 2023, respectively, reflecting effective tax rates of 24.4% and 20.0%, respectively.

During the fourth quarter of 2024, the Company recognized a DTA valuation adjustment of $29.4 million resulting from a change in management’s estimate about the realizability of its SALT DTAs applicable to net operating loss carryforwards due to an estimated decrease in future taxable income for SALT purposes. Both the $31.6 million increase in income tax expense and the 4.4% point increase in the effective tax rate, from December 31, 2023, to December 31, 2024, primarily reflect the recognition of the $29.4 million DTA valuation adjustment, and the recognition of $10.9 million of discrete tax expense during the first quarter of 2024, which related to items recognized in prior years. The impact from these effects was partially offset by the lower level of pre-tax income in 2024 as compared to 2023.

At December 31, 2024, and 2023, the Company’s valuation allowance on its DTAs was $64.4 million and $28.7 million, respectively, of which $62.7 million and $28.7 million, respectively, were related to the portion of SALT net operating loss and credit carryforwards that, in management’s judgment, are not more likely than not to be realized. The $62.7 million at December 31, 2024, primarily reflects the $29.4 million DTA valuation adjustment recognized during the fourth quarter of 2024, and $3.1 million related to the Ametros acquisition. At December 31, 2024, and 2023, the Company’s gross DTAs included $67.7 million and $64.2 million, respectively, applicable to SALT net operating loss and credit carryforwards that are available to offset future taxable income.

The ultimate realization of DTAs is dependent on the generation of future taxable income during the periods in which the net operating loss and credit carryforwards are available. In making its assessment, management considers the Company’s forecasted future results of operations, estimates the content and apportionment of its income by legal entity over the near term for SALT purposes, and also applies longer-term growth rate assumptions. Based on its estimates, management believes it is more likely than not that the Company will realize its DTAs, net of the valuation allowance, at December 31, 2024. However, it is possible that some or all of the Company’s net operating loss and credit carryforwards could expire unused, or that more net operating loss and credit carryforwards could be utilized than estimated, either as a result of changes in future forecasted levels of taxable income or if future economic or market conditions or interest rates were to vary significantly from the Company's forecasts and, in turn, impact its future results of operations.

Additional information regarding the Company’s income taxes, including DTAs, can be found within Note 9: Income Taxes in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data.

Segment Reporting

The Company’s operations are organized into three reportable segments that represent its differentiated lines of business: Commercial Banking, Healthcare Financial Services, and Consumer Banking. The Company’s CODM uses PPNR to allocate resources and assess the performance of each segment. Certain Treasury activities and other functional divisions, such as information technology, human resources, risk management, bank operations, and the operations of interLINK, as well as amounts required to reconcile non-GAAP profitability metrics to those reported in accordance with GAAP, are included in the Corporate and Reconciling category. Additional information regarding the Company’s reportable segments and its segment reporting methodology can be found within Note 21: Segment Reporting in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data.

Effective January 1, 2024, the Company realigned certain of its Business Banking operations to better serve its customers and deliver operational efficiencies. Under this realignment, $1.5 billion of loans and $2.2 billion of deposits were reassigned, and $77.2 million of goodwill was reallocated on a relative fair value basis, from Commercial Banking to Consumer Banking. There was no goodwill impairment as a result of this realignment. Prior period amounts have been recast accordingly.

With the acquisition of Ametros on January 24, 2024, the Company formed the Healthcare Financial Services reportable segment, which includes the aggregated financial information of the HSA Bank and Ametros operating segments. The financial information presented within Healthcare Financial Services for the years ended December 31, 2023, and 2022, reflects that only of the HSA Bank operating segment.

41

Table of Contents

Commercial Banking

Operating Results:

[[GREPCENT_TABLE]]
[["","Years ended December 31,"],["(In thousands)","2024","","2023","","2022"],["Net interest income","$","1,348,346","","","$","1,436,616","","","$","1,252,306"],["Non-interest income","143,104","","","125,265","","","164,044"],["Non-interest expense","418,467","","","394,942","","","362,843"],["Pre-tax, pre-provision net revenue","$","1,072,983","","","$","1,166,939","","","$","1,053,507"]]
[[/GREPCENT_TABLE]]

Commercial Banking’s PPNR decreased $94.0 million, or 8.1%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023, due to a decrease in net interest income and an increase in non-interest expense, partially offset by an increase in non-interest income. The $88.3 million decrease in net interest income is primarily due to higher deposit costs and a decrease in loan interest rate spread, partially offset by higher average loan and deposit balances. The $17.8 million increase in non-interest income is primarily due to direct investment activities, higher cash management fees, and a $4.4 million net gain on sale of multi-family loans (securitization), partially offset by lower loan servicing fees. The $23.5 million increase in non-interest expense is primarily due to higher compensation and benefits costs, and increases in technology and operational support costs.

Selected Balance Sheet and Off-Balance Sheet Information:

[[GREPCENT_TABLE]]
[["","At December 31,"],["(In thousands)","2024","","2023"],["Loans and leases","$","40,616,156","","","$","39,480,945"],["Deposits","16,251,850","","","16,053,850"],["Assets under administration / management (off-balance sheet)","2,965,624","","","2,911,293"]]
[[/GREPCENT_TABLE]]

Loans and leases increased $1.1 billion, or 2.9%, at December 31, 2024, as compared to at December 31, 2023, primarily due to organic growth in commercial non-mortgage and commercial real estate, partially offset by net principal paydowns in asset-based lending and equipment finance loans and leases. Total portfolio originations for the years ended December 31, 2024, and 2023, were $9.7 billion and $9.0 billion, respectively. The $0.7 billion increase was primarily due to increases in commercial non-mortgage and equipment finance originations, partially offset by a decrease in commercial real estate originations.

Deposits increased $198.0 million, or 1.2%, at December 31, 2024, as compared to at December 31, 2023, primarily due to higher account balances in money market and savings, partially offset by lower account balances in non-interest-bearing demand and checking.

Assets under administration and assets under management, in aggregate, increased $54.3 million, or 1.9%, at December 31, 2024, as compared to December 31, 2023, primarily due to an increase in investment account balances as a result of higher valuations in the equity markets, partially offset by net outflows during the year.

42

Table of Contents

Healthcare Financial Services

Operating Results:

[[GREPCENT_TABLE]]
[["","Years ended December 31,"],["(In thousands)","2024","","2023","","2022"],["Net interest income","$","366,927","","","$","302,856","","","$","218,149"],["Non-interest income","110,207","","","88,113","","","104,586"],["Non-interest expense","214,089","","","168,160","","","151,329"],["Pre-tax, pre-provision, net revenue","$","263,045","","","$","222,809","","","$","171,406"]]
[[/GREPCENT_TABLE]]

Healthcare Financial Services’ PPNR increased $40.2 million, or 18.1%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023, due to increases in net interest income and non-interest income, partially offset by an increase in non-interest expense. The $64.0 million increase in net interest income is primarily due to the acquisition of Ametros, and increase in HSA net deposit spread, and HSA deposit growth. The $22.1 million increase in non-interest income is primarily due to incremental fee income related to the acquired Ametros business and higher interchange fee activity in 2024, partially offset by a decrease in customer account and other fees. The $45.9 million increase in non-interest expense is primarily due to incremental expenses related to the acquired Ametros business, higher employee compensation and benefits costs, and an increase in service contract expenses related to account growth, partially offset by a decrease in occupancy expenses.

Selected Balance Sheet and Off-Balance Sheet Information:

[[GREPCENT_TABLE]]
[["","At December 31,"],["(In thousands)","2024","","2023"],["Deposits","$","9,966,773","","","$","8,287,705"],["Assets under administration, through linked investment accounts (off-balance sheet)","5,321,736","","","4,641,830"]]
[[/GREPCENT_TABLE]]

Deposits increased $1.7 billion, or 20.3%, at December 31, 2024, as compared to at December 31, 2023, primarily due to the acquisition of Ametros, additional HSA account holders, HSA deposit growth, and a discrete transfer of cash associated with accounts that were previously held by former investment partners.

Assets under administration, through linked investment accounts, increased $679.9 million, or 14.6%, at December 31, 2024, as compared to at December 31, 2023, primarily due to additional HSA account holders and an increase in investment account balances as a result of higher valuations in the equity markets.

43

Table of Contents

Consumer Banking

Operating Results:

[[GREPCENT_TABLE]]
[["","Years ended December 31,"],["(In thousands)","2024","","2023","","2022"],["Net interest income","$","812,743","","","$","898,898","","","$","814,867"],["Non-interest income","113,638","","","114,851","","","127,084"],["Non-interest expense","471,402","","","469,629","","","461,390"],["Pre-tax, pre-provision net revenue","$","454,979","","","$","544,120","","","$","480,561"]]
[[/GREPCENT_TABLE]]

Consumer Banking’s PPNR decreased $89.1 million, or 16.4%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023, due to decreases in net interest income and non-interest income and an increase in non-interest expense. The $86.1 million decrease in net interest income is primarily due to higher deposit costs, partially offset by an increase in loan interest rate spreads and higher average loan and deposit balances. The $1.2 million decrease in non-interest income is primarily due to lower deposit service fees and loan servicing fees, partially offset by a $11.7 million net gain on sale or mortgage servicing rights and an increase in investment services income. The $1.8 million increase in non-interest expense is primarily due to higher compensation and benefits costs and an increase in operational support costs, partially offset by lower processing costs, occupancy, and professional services.

Selected Balance Sheet Information:

[[GREPCENT_TABLE]]
[["","At December 31,"],["(In thousands)","2024","","2023"],["Loans","$","11,886,095","","","$","11,234,743"],["Deposits","27,332,786","","","26,251,722"],["Assets under administration (off-balance sheet)","7,997,114","","","7,876,437"]]
[[/GREPCENT_TABLE]]

Loans increased $0.7 billion, or 5.8%, at December 31, 2024, as compared to at December 31, 2023, primarily due to growth in residential mortgages, small business commercial non-real estate loans, and other consumer loans, partially offset by net principal paydowns in home equities and small business commercial real estate loans. Total portfolio originations for the years ended December 31, 2024, and 2023, were $1.9 billion and $1.5 billion, respectively. The $0.4 billion increase was primarily due an increase in residential mortgage originations, which were lower in prior year as a result of the sharp increase in market rates and low housing inventories.

Deposits increased $1.1 billion, or 4.1%, at December 31, 2024, as compared to at December 31, 2023, primarily due to higher balances in interest-bearing deposit products, particularly money market, savings, and certificates of deposit, which was driven by higher interest rates, partially offset by lower balances in non-interest-bearing demand accounts.

Assets under administration increased $120.7 million, or 1.5%, at December 31, 2024, as compared to December 31, 2023, primarily due to an increase in investment account balances as a result of higher valuations in the equity markets and net inflows during the year.

44

Table of Contents

Financial Condition

Total assets increased $4.1 billion, or 5.4%, from $74.9 billion at December 31, 2023, to $79.0 billion at December 31, 2024. The change in total assets was primarily attributed to the following, which experienced changes greater than $100 million:

•Cash and cash equivalents, which comprises Cash and due from banks and Interest-bearing deposits, increased $358.6 million, primarily due to an increase in interest-bearing deposits held at the FRB;

•Total investment securities, net increased $1.4 billion, primarily reflecting a $1.4 billion increase in the held-to-maturity portfolio, whereas the available-for-sale portfolio remained relatively flat. The increase in held-to-maturity was primarily due to purchases exceeding paydown activities, particularly across the Agency MBS and Agency CMBS categories. Throughout 2024, the Company sold $2.3 billion of available-for-sale Municipal bonds and notes, Agency MBS, Corporate debt securities, Agency CMBS, Government agency debentures, and Agency CMOs as part of its securities repositioning, in which the proceeds received were primarily reinvested in higher yielding Agency MBS and Agency CMBS;

•Loans and leases increased $1.8 billion, primarily due to $11.6 billion of originations during the year ended December 31, 2024, particularly across the commercial non-mortgage, commercial real estate, and residential mortgage categories, partially offset by net principal paydowns, and commercial loan sales, including the sale of the factored receivables portfolio and sale of multi-family loans (securitization);

•Goodwill and other net intangible assets increased, in aggregate, $367.8 million, primarily due to the acquisition of Ametros on January 24, 2024, which resulted in the recognition of $228.2 million in goodwill, a $182.8 million core deposit intangible asset, and a $6.1 million trade name. Offsetting this increase was the $19.7 million customer relationship intangible asset write-off associated with the factored receivables portfolio sale and a $1.9 million impairment loss on the payroll finance customer relationship intangible asset, along with routine amortization expense; and

•Accrued interest receivable and other assets increased $267.4 million. Notable drivers of the change included increases in LIHTC investments, other alternative investments, and prepaid expenses, partially offset by a decrease in treasury derivative assets.

Total liabilities increased $3.6 billion, or 5.5%, from $66.3 billion at December 31, 2023, to $69.9 billion at December 31, 2024. The change in total liabilities was attributed to the following:

•Total deposits increased $4.0 billion, reflecting a $4.4 billion increase in interest-bearing deposits, partially offset by a $0.4 billion decrease in non-interest-bearing deposits. The increase in total deposits was primarily due an increase in interLINK money market sweep deposits, the addition of Ametros, a discrete transfer of cash associated with HSA accounts that were previously held by former investment partners, and balance growth all customer-facing interest-bearing deposit products. Offsetting these increases was a decrease in brokered certificates of deposit due to wholesale funding mix. Throughout 2024, customers continued to shift their deposit preferences from non-interest-bearing demand to higher yielding deposit products, particularly money markets and certificates of deposit;

•Securities sold under agreements to repurchase and federal funds purchased decreased $114.2 million, primarily due to a change in short-term funding mix, which resulted in zero federal funds purchased at December 31, 2024, as compared to $100.0 million at December 31, 2023;

•FHLB advances decreased $249.9 million, primarily due to a change in short-term funding mix;

•Long-term debt decreased $139.6 million, primarily due to the maturity of its 4.375% senior notes in February 2024; and

•Accrued expenses and other liabilities increased $171.6 million. Notable drivers of the change included increases in unfunded commitments for LIHTC investments, accrued compensation, accrued income taxes, and deferred revenue, partially offset by decreases in operating lease liabilities and accrued interest payable.

Total stockholders’ equity increased $0.4 billion, or 5.1%, from $8.7 billion at December 31, 2023, to $9.1 billion at December 31, 2024. The change in stockholders’ equity was attributed to the following:

•Net income recognized of $768.7 million;

•Other comprehensive loss, net of tax, of $5.8 million;

•Dividends paid to common and preferred stockholders of $275.4 million and $16.7 million, respectively;

•Stock-based compensation expense of $55.1 million;

•Stock options exercised of $0.3 million; and

•Repurchases of common stock of $65.8 million under the Company’s common stock repurchase program and $17.2 million related to employee share-based compensation plans.

45

Table of Contents

Investment Securities

Through its Corporate Treasury function, the Company maintains and invests in debt securities that are primarily used to provide a source of liquidity for operating needs, as a means to manage the Company’s interest-rate risk, and to generate interest income. The Company’s investment securities are classified into two major categories: available-for-sale and

held-to-maturity.

The ALCO manages the Company’s investment securities in accordance with regulatory guidelines and corporate policies, which include limitations on aspects such as concentrations in and types of investments, as well as minimum risk ratings per type of security. In addition, the OCC may further establish individual limits on certain types of investments if the concentration in such security presents a safety and soundness concern. Although the Bank held the entirety of the Company’s investment securities portfolio at both December 31, 2024, and 2023, the Holding Company may also directly hold investments.

The following table summarizes the balances and percentage composition of the Company’s investment securities:

[[GREPCENT_TABLE]]
[["","At December 31,"],["","2024","","2023"],["(In thousands)","Amount","%","","Amount","%"],["Available-for-sale:"],["Government agency debentures","$","186,426","","2.1","%","","$","264,633","","3.0","%"],["Municipal bonds and notes","110,876","","1.2","","","1,573,233","","17.6"],["Agency CMO","29,043","","0.3","","","48,941","","0.5"],["Agency MBS","4,519,785","","50.2","","","3,347,098","","37.4"],["Agency CMBS","3,034,392","","33.8","","","2,288,071","","25.5"],["CMBS","625,388","","6.9","","","763,749","","8.5"],["Corporate debt","452,266","","5.0","","","622,155","","6.9"],["Private label MBS","39,219","","0.4","","","42,808","","0.5"],["Other","9,205","","0.1","","","9,041","","0.1"],["Total available-for-sale","$","9,006,600","","100.0","%","","$","8,959,729","","100.0","%"],["Held-to-maturity:"],["Agency CMO","$","19,847","","0.2","%","","$","23,470","","0.3","%"],["Agency MBS","3,109,411","","36.8","","","2,409,521","","34.1"],["Agency CMBS","4,357,505","","51.6","","","3,625,627","","51.2"],["Municipal bonds and notes (1)","891,909","","10.6","","","916,104","","13.0"],["CMBS","65,690","","0.8","","","100,075","","1.4"],["Total held-to-maturity","$","8,444,362","","100.0","%","","$","7,074,797","","100.0","%"],["Total investment securities","$","17,450,962","","","","$","16,034,526"]]
[[/GREPCENT_TABLE]]

(1)The balances at both December 31, 2024, and 2023, exclude the $0.2 million ACL recorded on held-to-maturity securities.

Available-for-sale securities remained relatively flat at approximately $9.0 billion at both December 31, 2024, and December 31, 2023. During the year ended December 31, 2024, the Company sold $2.3 billion of Municipal bonds and notes, Agency MBS, Corporate debt securities, Agency CMBS, Government agency debentures, and Agency CMOs, as part of its securities repositioning, which resulted in net realized losses of $138.8 million. Because $2.6 million of the realized losses on sale were due to credit related factors, such amount has been included in the Provision for credit losses. Proceeds received from the Company’s securities repositioning were primarily reinvested in higher yielding Agency MBS and Agency CMBS. The average FTE yield on the available-for-sale portfolio was 4.17% for the year ended December 31, 2024, as compared to 3.11% for the year ended December 31, 2023. The 106 basis point increase is primarily due to higher interest rates on recent securities purchases, as compared to interest rates on securities with paydown activities or that were sold.

At December 31, 2024, and 2023, gross unrealized losses on available-for-sale securities were $725.9 million and $759.4 million, respectively. The $33.5 million decrease is primarily due to the net realized losses on sale, partially offset by increases in market rates. On a quarterly basis, each available-for-sale security that is in an unrealized loss position is evaluated to determine whether the decline in fair value below the amortized cost basis is a result of any credit related factors. During the fourth quarter of 2024, a $0.9 million ACL was recorded related to a single available-for-sale Corporate debt security. Each of the Company’s other available-for-sale securities in an unrealized loss position at December 31, 2024, are investment grade, current as to principal and interest, and their price changes are consistent with interest and credit spreads when adjusting for duration, convexity, rating, and industry differences. Based on current market conditions and the Company’s targeted balance sheet composition strategy, the Company intends to hold its available-for-sale securities in unrealized loss positions through the anticipated recovery period. There was no ACL recorded on available-for-sale securities at December 31, 2023.

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Held-to-maturity securities increased $1.3 billion, or 19.4%, from $7.1 billion at December 31, 2023, to $8.4 billion at December 31, 2024, primarily due to purchases exceeding paydown activities, particularly across the Agency MBS and Agency CMBS categories. The average FTE yield on the held-to-maturity portfolio was 3.75% for the year ended December 31, 2024, as compared to 2.99% for the year ended December 31, 2023. The 76 basis point increase is primarily due to higher interest rates on recent securities purchases, as compared to interest rates on securities with paydown activities.

At December 31, 2024, and 2023, gross unrealized losses on held-to-maturity securities were $1.0 billion and $0.8 billion, respectively. The $0.2 billion increase is primarily due to increases in market rates. Held-to-maturity securities are evaluated for credit losses on a quarterly basis under the CECL methodology. At both December 31, 2024, and 2023, the ACL on held-to-maturity securities was $0.2 million.

The following table summarizes the maturity distribution of investment securities by the earlier of either contractual maturity or call date, as applicable, along with their respective weighted-average yields:

[[GREPCENT_TABLE]]
[["","At December 31, 2024"],["","1 Year or Less","1 - 5 Years","5 - 10 Years","After 10 Years","Total"],["(In thousands)","Amount","Weighted-AverageYield (1)","Amount","Weighted-AverageYield (1)","Amount","Weighted-AverageYield (1)","Amount","Weighted-AverageYield (1)","Amount","Weighted-AverageYield (1)"],["Available-for-sale:"],["Government agency debentures","$","\u2014","","\u2014","%","$","\u2014","","\u2014","%","$","32,576","","2.42","%","$","153,851","","3.43","%","$","186,427","","3.25","%"],["Municipal bonds and notes","6,234","","2.91","","856","","4.32","","27,521","","2.24","","76,265","","2.17","","110,876","","2.25"],["Agency CMO","88","","2.98","","\u2014","","\u2014","","1,904","","3.47","","27,051","","2.87","","29,043","","2.91"],["Agency MBS","\u2014","","\u2014","","3,926","","1.28","","880","","3.86","","4,514,979","","4.70","","4,519,785","","4.70"],["Agency CMBS","\u2014","","\u2014","","102,852","","4.72","","172,272","","4.40","","2,759,268","","5.01","","3,034,392","","4.97"],["CMBS","\u2014","","\u2014","","58,206","","6.22","","\u2014","","\u2014","","567,182","","6.03","","625,388","","6.04"],["Corporate debt","\u2014","","\u2014","","72,432","","3.96","","337,446","","3.36","","42,387","","3.55","","452,265","","3.47"],["Private label MBS","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","39,219","","4.01","","39,219","","4.01"],["Other","\u2014","","\u2014","","4,932","","3.80","","4,273","","2.70","","\u2014","","\u2014","","9,205","","3.29"],["Total available-for-sale","$","6,322","","2.91","%","$","243,204","","4.78","%","$","576,872","","3.56","%","$","8,180,202","","4.84","%","$","9,006,600","","4.75","%"],["Held-to-maturity:"],["Agency CMO","$","\u2014","","\u2014","%","$","\u2014","","\u2014","%","$","\u2014","","\u2014","%","$","19,847","","2.90","%","$","19,847","","2.90","%"],["Agency MBS","3","","2.50","","188","","2.02","","33,035","","2.58","","3,076,185","","3.44","","3,109,411","","3.44"],["Agency CMBS","\u2014","","\u2014","","113,151","","2.67","","\u2014","","\u2014","","4,244,354","","4.22","","4,357,505","","4.18"],["Municipal bonds and notes","49,228","","2.98","","45,439","","2.70","","208,421","","2.84","","588,821","","3.27","","891,909","","3.12"],["CMBS","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","65,690","","2.39","","65,690","","2.39"],["Total held-to-maturity","$","49,231","","2.98","%","$","158,778","","2.68","%","$","241,456","","2.81","%","$","7,994,897","","3.84","%","$","8,444,362","","3.78","%"],["Total investment securities (2)","$","55,553","","2.97","%","$","401,982","","3.95","%","$","818,328","","3.34","%","$","16,175,099","","4.34","%","$","17,450,962","","4.28","%"]]
[[/GREPCENT_TABLE]]

(1)Weighted-average yields exclude FTE adjustments and hedge adjustments, and are calculated on a pre-tax basis using the current yield inclusive of premium amortization and discount accretion for each security, major type, and maturity bucket.

(2)Available-for-sale securities are presented at fair value and held-to-maturity securities are presented at amortized cost before any allowance for credit losses.

Additional information regarding the Company’s investment securities’ portfolios can be found within Note 3: Investment Securities in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data.

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Loans and Leases

The following table summarizes the amortized cost and percentage composition of the Company’s loans and leases:

[[GREPCENT_TABLE]]
[["","At December 31,"],["","2024","","2023"],["(In thousands)","Amount","%","","Amount","%"],["Commercial non-mortgage","$","18,037,942","","34.4","%","","$","16,885,475","","33.3","%"],["Asset-based","1,404,007","","2.7","","","1,557,841","","3.1"],["Commercial real estate","14,492,436","","27.6","","","13,569,762","","26.7"],["Multi-family","6,898,600","","13.1","","","7,587,970","","15.0"],["Equipment financing","1,235,016","","2.3","","","1,328,786","","2.6"],["Residential","8,853,669","","16.9","","","8,227,923","","16.2"],["Home equity","1,427,692","","2.7","","","1,516,955","","3.0"],["Other consumer","155,806","","0.3","","","51,340","","0.1"],["Total loans and leases (1)","$","52,505,168","","100.0","%","","$","50,726,052","","100.0","%"]]
[[/GREPCENT_TABLE]]

(1)The amortized cost balances at December 31, 2024, and 2023, exclude the ACL recorded on loans and leases of $689.6 million and $635.7 million, respectively.

The following table summarizes loans and leases by contractual maturity, along with the indication of whether interest rates are fixed or variable:

[[GREPCENT_TABLE]]
[["","At December 31, 2024"],["(In thousands)","1 Year or Less","1 - 5 Years","5 - 15 Years","After 15 Years","Total"],["Fixed rate:"],["Commercial non-mortgage","$","199,605","","$","1,564,308","","$","2,346,083","","$","1,414,579","","$","5,524,575"],["Asset-based","63,262","","495,153","","\u2014","","\u2014","","558,415"],["Commercial real estate","914,709","","2,294,353","","684,444","","135,895","","4,029,401"],["Multi-family","500,800","","3,527,696","","863,116","","57,820","","4,949,432"],["Equipment financing","83,596","","864,654","","286,766","","\u2014","","1,235,016"],["Residential","2,649","","37,188","","357,272","","5,278,532","","5,675,641"],["Home equity","2,457","","19,917","","159,985","","212,291","","394,650"],["Other consumer","14,233","","99,900","","13,395","","37","","127,565"],["Total fixed rate loans and leases","$","1,781,311","","$","8,903,169","","$","4,711,061","","$","7,099,154","","$","22,494,695"],["Variable rate:"],["Commercial non-mortgage","$","3,817,361","","$","7,010,505","","$","1,559,738","","$","125,762","","$","12,513,366"],["Asset-based","376,628","","468,964","","\u2014","","\u2014","","845,592"],["Commercial real estate","2,594,975","","5,001,499","","2,240,437","","626,124","","10,463,035"],["Multi-family","276,066","","994,692","","675,218","","3,193","","1,949,169"],["Residential","1,062","","8,060","","258,389","","2,910,517","","3,178,028"],["Home equity","923","","6,313","","104,910","","920,896","","1,033,042"],["Other consumer","5,437","","21,113","","1,691","","\u2014","","28,241"],["Total variable rate loans and leases (1)","$","7,072,452","","$","13,511,146","","$","4,840,383","","$","4,586,492","","$","30,010,473"],["Total loans and leases (2)","$","8,853,763","","$","22,414,315","","$","9,551,444","","$","11,685,646","","$","52,505,168"]]
[[/GREPCENT_TABLE]]

(1)The Company has a back-to-back swap program, whereby it enters into an interest rate swap with a qualified customer and simultaneously enters into an equal and opposite interest-rate swap with a swap counterparty, to hedge interest rate risk. At December 31, 2024, there were 886 customer interest rate swaps arrangements with a total notional amount of $7.3 billion to convert floating-rate loan payments to fixed-rate loan payments, and 43 customer interest rate cap arrangements with a total notional amount of $1.4 billion limiting how high interest rates can rise on variable rate loans and leases in a rising interest rate environment.

(2)Amounts exclude total accrued interest receivable of $265.0 million.

Portfolio Concentrations

The Company actively monitors and manages concentrations of credit risk pertaining to specific industries, geographies, property types, and other characteristics that may exist in its loan and lease portfolio. At December 31, 2024, and 2023, commercial non-mortgage, commercial real estate, and multi-family loans comprised 75.1% and 75.0%, respectively, of the Company’s loan and lease portfolio, with a large portion of the borrowers or properties associated with these loans geographically concentrated in New York City and the proximate areas.

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The following table summarizes the percentage composition of commercial non-mortgage loans by industry, as determined using NAICS codes, which are used by the Company to categorize loans based on the borrower’s type of business:

[[GREPCENT_TABLE]]
[["","","","At December 31,"],["","","","2024","","","2023"],["Finance","","","25.7","%","","","24.4","%"],["Services","","","16.1","","","","17.3"],["Public Administration","","","15.8","","","","14.0"],["Communications","","","7.7","","","","6.9"],["Manufacturing","","","6.4","","","","6.9"],["Real Estate","","","5.0","","","","4.8"],["Retail & Wholesale","","","4.6","","","","5.2"],["Healthcare","","","4.6","","","","5.0"],["Transportation & Public Utilities","","","3.0","","","","3.3"],["Construction","","","2.3","","","","2.8"],["Other","","","8.8","","","","9.4"],["Total Commercial non-mortgage","","","100.0","%","","","100.0","%"]]
[[/GREPCENT_TABLE]]

As illustrated above, concentrations are generally consistent from period to period. Any change in composition is consistent with the Company’s portfolio growth strategy.

The following tables summarize the percentage composition of commercial real estate and multi-family loans by both geography and property type, and whether the properties are owner occupied or non-owner occupied:

[[GREPCENT_TABLE]]
[["","","At December 31,"],["","","2024","","2023"],["Geography:","","Owner Occupied","Non-Owner Occupied","Total","","Owner Occupied","Non-Owner Occupied","Total"],["New York City","","2.9","%","32.6","%","35.5","%","","2.0","%","33.4","%","35.4","%"],["Other New York Counties","","2.6","","11.7","","14.3","","","2.3","","13.4","","15.7"],["Connecticut","","2.4","","6.3","","8.7","","","2.2","","6.1","","8.3"],["New Jersey","","1.6","","6.9","","8.5","","","0.7","","7.5","","8.2"],["Massachusetts","","1.4","","4.9","","6.3","","","1.3","","5.0","","6.3"],["Southeast","","1.0","","10.2","","11.2","","","0.7","","10.3","","11.0"],["Other","","1.4","","14.1","","15.5","","","1.0","","14.1","","15.1"],["Total Commercial real estate & Multi-family","","13.3","%","86.7","%","100.0","%","","10.2","%","89.8","%","100.0","%"],["","","At December 31,"],["","","2024","","2023"],["Property Type:","","Owner Occupied","Non-Owner Occupied","Total","","Owner Occupied","Non-Owner Occupied","Total"],["Multi-family","","0.4","%","34.3","%","34.7","%","","0.4","%","35.3","%","35.7","%"],["Industrial & Warehouse","","3.1","","14.6","","17.7","","","2.8","","13.6","","16.4"],["Retail","","0.5","","8.1","","8.6","","","0.5","","7.9","","8.4"],["Construction","","0.1","","7.7","","7.8","","","0.2","","6.7","","6.9"],["Healthcare & Senior Living","","4.3","","1.9","","6.2","","","1.8","","5.6","","7.4"],["Medical Office","","0.1","","4.2","","4.3","","","0.1","","3.1","","3.2"],["Traditional Office","","\u2014","","3.8","","3.8","","","\u2014","","4.9","","4.9"],["Hotel","","\u2014","","2.1","","2.1","","","\u2014","","2.3","","2.3"],["Other","","4.8","","10.0","","14.8","","","4.4","","10.4","","14.8"],["Total Commercial real estate & Multi-family","","13.3","%","86.7","%","100.0","%","","10.2","%","89.8","%","100.0","%"]]
[[/GREPCENT_TABLE]]

The weighted-average LTV ratio for non-owner occupied commercial real estate and multi-family loans at December 31, 2024, and 2023, was 57% and 56%, respectively. The Company calculates its LTV ratios primarily using appraisals at origination unless a full appraisal is subsequently required based on deal-specific events.

Given the foundational change in office demand driven by the acceptance of remote work options, the commercial real estate market has continued to experience an increase in office property vacancies. As such, commercial real estate performance across the United States related to the traditional office sector continues to be an area of uncertainty. At December 31, 2024, the outstanding principal balance of traditional office commercial real estate loans was approximately $0.8 billion, which had reserves of $43.3 million established against it. While the Company does anticipate ongoing change in the traditional office sector, management believes that its reserve levels reflect the expected credit losses in the portfolio.

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Credit Policies and Procedures

The Bank has credit policies and procedures in place designed to support its lending activities within an acceptable level of risk, which are reviewed and approved by management and the Board of Directors on a regular basis. To assist with this process, management inspects reports generated by the Company’s loan reporting systems related to loan production, loan quality, concentrations of credit, loan delinquencies, non-performing loans, and potential problem loans.

Commercial non-mortgage, asset-based, and equipment finance loans are underwritten after evaluating and understanding the borrower’s ability to operate and service its debt. Assessment of the borrower’s management is a critical element of the underwriting process and credit decision. Once it has been determined that the borrower’s management possesses sound ethics and a solid business acumen, current and projected cash flows are examined to determine the ability of the borrower to repay obligations, as contracted. Commercial non-mortgage, asset-based, and equipment finance loans are primarily made based on the identified cash flows of the borrower, and secondarily on the underlying collateral provided by the borrower. However, the cash flows of borrowers may not be as expected, and the collateral securing these loans, as applicable, may fluctuate in value. Most commercial non-mortgage, asset-based, and equipment finance loans are secured by the assets being financed and may incorporate personal guarantees of the principal balance.

Commercial real estate loans, including multi-family, are subject to underwriting standards and processes similar to those for commercial non-mortgage, asset-based, and equipment finance loans. These loans are primarily viewed as cash flow loans, and secondarily as loans secured by real estate. Repayment of commercial real estate loans is largely dependent on the successful operation of the property securing the loan, the market in which the property is located, and the tenants of the property securing the loan. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. All transactions are appraised to determine market value. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. Management periodically utilizes third-party experts to provide insight and guidance about economic conditions and trends affecting its commercial real estate loan portfolio.

The Bank requires a valuation of real estate collateral, which generally includes third-party appraisals, at the time of origination or renewal in accordance with regulatory guidance. On an annual basis, appraisal assumptions and other factors are internally reviewed to determine whether an incremental third-party appraisal is warranted. New appraisals are obtained sooner if a loan becomes adversely classified, substandard, or non-accrual.

Consumer loans are subject to policies and procedures developed to manage the specific risk characteristics of the portfolio. These policies and procedures, coupled with relatively small individual loan amounts and predominately collateralized loan structures, are spread across many different borrowers, minimizing the level of credit risk. Trend and outlook reports are reviewed by management on a regular basis, and policies and procedures are modified or developed, as needed. Underwriting factors for residential mortgage and home equity loans include the borrower’s FICO score, the loan amount relative to property value, and the borrower’s debt-to-income level. The Bank originates both qualified mortgage and non-qualified mortgage loans.

Allowance for Credit Losses on Loans and Leases

The ACL on loans and leases increased $53.9 million, or 8.5%, from $635.7 million at December 31, 2023, to $689.6 million at December 31, 2024, primarily due to the impact of the current macroeconomic environment on credit performance, risk rating migration, loan portfolio mix, and organic loan growth, partially offset by net charge-offs.

The following table summarizes the percentage allocation of the ACL across the loans and leases categories:

[[GREPCENT_TABLE]]
[["","At December 31,"],["","2024","","2023"],["(In thousands)","Amount","% (1)","","Amount","% (1)"],["Commercial non-mortgage","$","270,613","39.2","%","","$","211,699","33.3","%"],["Asset-based","30,049","4.4","","","15,828","2.5"],["Commercial real estate","245,124","35.5","","","248,921","39.2"],["Multi-family","70,998","10.3","","","80,582","12.7"],["Equipment financing","19,087","2.8","","","20,633","3.2"],["Residential","27,354","4.0","","","29,739","4.7"],["Home equity","19,625","2.8","","","26,154","4.1"],["Other consumer","6,716","1.0","","","2,181","0.3"],["Total ACL on loans and leases","$","689,566","100.0","%","","$","635,737","100.0","%"]]
[[/GREPCENT_TABLE]]

(1)The ACL allocated to a single loan and lease category does not preclude its availability to absorb losses in other categories.

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Methodology

The Company’s ACL on loans and leases is considered to be a critical accounting policy. The ACL on loans and leases is a contra-asset account that offsets the amortized cost basis of loans and leases for the credit losses that are expected to occur over the life of the asset. Executive management reviews and advises on the adequacy of the allowance on a quarterly basis, which is maintained at a level that management deems to be sufficient to cover expected losses within the loan and lease portfolios.

The ACL on loans and leases is determined using the CECL model, whereby an expected lifetime credit loss is recognized at the origination or purchase of an asset, including those acquired through a business combination, which is then reassessed at each reporting date over the contractual life of the asset. The calculation of expected credit losses includes consideration of past events, current conditions, and reasonable and supportable economic forecasts that affect the collectability of the reported amounts. Generally, expected credit losses are determined through a pooled, collective assessment of loans and leases with similar risk characteristics. However, if the risk characteristics of a loan or lease change such that it no longer aligns to that of the collectively assessed pool, it is removed from the population and individually assessed for credit losses. The total ACL on loans and leases recorded by management represents the aggregated estimated credit loss determined through both the collective and individual assessments.

Collectively Assessed Loans and Leases. Collectively assessed loans and leases are segmented based on product type and credit quality, and expected losses are determined using models that follow a PD, LGD, or EAD framework. Under these frameworks, expected credit losses are calculated as the product of the probability of a loan defaulting, expected loss given the occurrence of a default, and the expected exposure of a loan at default. Summing the product across loans over their lives yields the lifetime expected credit losses for a given portfolio. The Company’s PD and LGD calculations are predictive models that measure the current risk profile of the loan pools using forecasts of future macroeconomic conditions, historical loss information, loan-level risk attributes, and credit quality indicators. The calculation of EAD follows an iterative process to determine the expected remaining principal balance of a loan based on historical paydown rates for loans of a similar segment within the same portfolio. The calculation of portfolio exposure in future quarters incorporates expected losses, the loan’s amortization schedule, and prepayment rates.

The Company’s models incorporate a single economic forecast scenario and macroeconomic assumptions over a reasonable

and supportable forecast period. The development of the reasonable and supportable forecast assumes that each portfolio will revert to its long-term loss rate expectation. The reasonable and supportable forecast period is two years after which the reversion period is one year. Models use output reversion and revert to mean historical portfolio loss rates on a straight-line basis in the third year of the forecast.

The Company incorporates forecasts of macroeconomic variables in the determination of expected credit losses. Macroeconomic variables are selected for each class of financing receivable based on relevant factors, such as asset type and the correlation of the variables to credit losses, among others. Data from the forecast scenario of these macroeconomic variables are used as inputs to the modeled loss calculation.

A portion of the collective ACL is comprised of qualitative adjustments for risk characteristics that are not reflected or captured in the quantitative models, but are likely to impact the measurement of estimated credit losses. Qualitative adjustments are based on management’s judgment of the Company, market, industry, or business specific data, may be applied in relation to economic forecasts when relevant facts and circumstances are expected to impact credit losses, particularly in times of significant volatility in economic activity. Qualitative factors used in the Company’s models for all loan and lease portfolios include, but are not limited to, nature and volume of portfolio growth, credit quality trends, underwriting exception levels, quality of internal loan review, credit concentrations, and staffing trends. The qualitative portion of the collective ACL accounted for approximately 39% and 43% of the total ACL on loans and leases at December 31, 2024, and 2023, respectively. The balance of qualitative reserves primarily relates to credit quality trends and credit concentration factors, and overall remained relatively stable from period to period, whereas the lower percentage in the current year was primarily due to an increase in quantitative reserves resulting from commercial risk rating migration.

Individually Assessed Loans and Leases. If the risk characteristics of a loan or lease change such that it no longer matches the risk characteristics of the collectively assessed pool, it is removed from the population and individually assessed for credit losses. Generally, all non-accrual loans and loans with a charge-off are individually assessed. The measurement method used to calculate the expected credit loss on an individually assessed loan or lease is dependent on the type and whether the loan or lease is considered to be collateral dependent. Methods for collateral dependent commercial loans are either based on the fair value of the collateral less estimated cost to sell when the basis of repayment is the sale of collateral, or the present value of the expected cash flows from the operation of the collateral. For non-collateral dependent loans, either a discounted cash flow method or other loss factor method is used. Any individually assessed loan or lease for which no specific allowance is deemed necessary is either the result of sufficient cash flows or sufficient collateral coverage relative to the amortized cost of the asset.

Additional information regarding the Company’s ACL methodology can be found within Note 1: Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data.

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Asset Quality Ratios

The Company manages asset quality using risk tolerance levels established through the Company’s underwriting standards, servicing, and management of its loan and lease portfolio. Loans and leases for which a heightened risk of loss has been identified are regularly monitored to mitigate further deterioration and preserve asset quality in future periods. Non-performing assets, credit losses, and net charge-offs are considered by management to be key measures of asset quality.

The following table summarizes key asset quality ratios and their underlying components:

[[GREPCENT_TABLE]]
[["","At or for the years ended December 31,"],["(In thousands)","2024","","2023","","2022"],["Non-performing loans and leases (1) (2)","$","461,326","","","$","209,544","","","$","203,791"],["Total loans and leases","52,505,168","","","50,726,052","","","49,764,426"],["Non-performing loans and leases as a percentage of loans and leases","0.88","%","","0.41","%","","0.41","%"],["Total non-performing loans and leases (1)","$","461,326","","","$","209,544","","","$","203,791"],["Add: OREO and repossessed assets","425","","","9,056","","","2,345"],["Total Non-performing assets (1)","$","461,751","","","$","218,600","","","$","206,136"],["Total loans and leases plus OREO and repossessed assets","$","52,505,593","","","$","50,735,108","","","$","49,766,771"],["Non-performing assets as a percentage of loans and leases plus OREO and repossessed assets","0.88","%","","0.43","%","","0.41","%"],["Non-performing assets (1)","$","461,751","","","$","218,600","","","$","206,136"],["Total assets","79,025,073","","","74,945,249","","","71,277,521"],["Non-performing assets as a percentage of total assets","0.58","%","","0.29","%","","0.29","%"],["ACL on loans and leases","$","689,566","","","$","635,737","","","$","594,741"],["Non-performing loans and leases (1)","461,326","","","209,544","","","203,791"],["ACL on loans and leases as a percentage of non-performing loans and leases","149.47","%","","303.39","%","","291.84","%"],["ACL on loans and leases","$","689,566","","","$","635,737","","","$","594,741"],["Total loans and leases","52,505,168","","","50,726,052","","","49,764,426"],["ACL on loans and leases as a percentage of loans and leases","1.31","%","","1.25","%","","1.20","%"],["ACL on loans and leases","$","689,566","","","$","635,737","","","$","594,741"],["Net charge-offs","166,914","","","108,086","","","67,288"],["Ratio of ACL on loans and leases to net charge-offs","4.13x","","5.88x","","8.84x"]]
[[/GREPCENT_TABLE]]

(1)Non-performing asset balances and related asset quality ratios exclude the impact of net unamortized (discounts)/premiums and net unamortized deferred (fees)/costs on loans and leases.

(2)The increase from 2023 to 2024 is primarily due to non-performing commercial non-mortgage and commercial real estate loans.

The following table summarizes net charge-offs (recoveries) as a percentage of average loans and leases for each category:

[[GREPCENT_TABLE]]
[["","At or for the years ended December 31,"],["","2024","","2023","","2022"],["(In thousands)","Net Charge-offs (Recoveries)","Average Balance","%","","Net Charge-offs (Recoveries)","Average Balance","%","","Net Charge-offs (Recoveries)","Average Balance","%"],["Commercial non-mortgage","$","88,525","$","17,071,748","","0.52","%","","$","13,531","$","16,900,423","","0.08","%","","$","44,250","$","13,625,382","","0.32","%"],["Asset-based","6,090","1,474,703","","0.41","","","17,088","1,699,064","","1.01","","","4,473","1,746,888","","0.26"],["Commercial real estate","39,776","14,222,437","","0.28","","","62,208","13,397,036","","0.46","","","20,471","11,299,259","","0.18"],["Multi-family","22,761","7,622,410","","0.30","","","3,447","7,072,507","","0.05","","","1,298","6,025,702","","0.02"],["Equipment financing","10,239","1,258,733","","0.81","","","4,949","1,509,948","","0.33","","","931","1,660,935","","0.06"],["Warehouse lending","\u2014","\u2014","","\u2014","","","\u2014","316,729","","\u2014","","","\u2014","537,430","","\u2014"],["Residential","(953)","8,403,098","","(0.01)","","","3,601","8,126,878","","0.04","","","(1,377)","7,112,890","","(0.02)"],["Home equity","(2,890)","1,464,894","","(0.20)","","","(123)","1,560,707","","(0.01)","","","(4,201)","1,663,198","","(0.25)"],["Other consumer","3,366","79,420","","4.24","","","3,385","54,277","","6.24","","","1,443","79,428","","1.82"],["Total","$","166,914","$","51,597,443","","0.32","%","","$","108,086","$","50,637,569","","0.21","%","","$","67,288","$","43,751,112","","0.15","%"]]
[[/GREPCENT_TABLE]]

Net charge-offs increased $58.8 million, or 54.4%, to $166.9 million for the year ended December 31, 2024, as compared to $108.1 million for the year ended December 31, 2023, primarily due to increases in net charge-offs in the commercial non-mortgage, multi-family, and equipment finance categories, partially offset by decreases in net charge-offs in the commercial real estate and asset-based lending categories.

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Liquidity and Capital Resources

The Company manages its cash flow requirements through proactive liquidity measures at both the Holding Company and the Bank. In order to maintain stable, cost-effective funding, and to promote overall balance sheet strength, the liquidity position of the Company is continuously monitored, and adjustments are made to balance sources and uses of funds, as appropriate.

At December 31, 2024, management is not aware of any events that are reasonably likely to have a material adverse effect on the Company’s liquidity position, capital resources, or operating activities. The Company has taken appropriate measures to mitigate the risk that such requirements, if implemented, may have on its business, financial positions, and results of operations.

Cash inflows are provided through a variety of sources, including principal and interest payments on loans and investments, unpledged securities that can be sold or utilized to secure funding, and new deposits. The Company is committed to maintaining a strong base of core deposits, which consist of demand, interest-bearing checking, savings, health savings, and money market accounts, to support growth in its loan portfolios. Management actively monitors the interest rate environment and makes adjustments to its deposit strategy in response to evolving market conditions, funding needs, and client relationship dynamics.

Holding Company Liquidity. The primary source of liquidity at the Holding Company is dividends from the Bank. To a lesser extent, investment income, net proceeds from investment sales, borrowings, and public offerings may provide additional liquidity. The Holding Company generally uses its funds for principal and interest payments on senior notes, subordinated notes, and junior subordinated debt, dividend payments to preferred and common stockholders, repurchases of its common stock, and purchases of investment securities, as applicable.

There are certain restrictions on the Bank’s payment of dividends to the Holding Company, which can be found within the section captioned “Supervision and Regulation” in Part I - Item 1. Business, and within Note 14: Regulatory Capital and Restrictions in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data. During the year ended December 31, 2024, the Bank paid $600.0 million in dividends to the Holding Company. At December 31, 2024, there was $747.3 million of retained earnings available for the payment of dividends by the Bank to the Holding Company. On January 29, 2025, the Bank was approved to pay the Holding Company $100.0 million in dividends for the first quarter of 2025.

The quarterly cash dividend to common stockholders remained at $0.40 per common share throughout 2024. On January 29, 2025, it was announced that the Holding Company’s Board of Directors had declared a quarterly cash dividend of $0.40 per share on Webster common stock. For the Series F Preferred Stock and Series G Preferred Stock, quarterly cash dividends of $328.125 per share and $16.25 per share were declared, respectively. The Company continues to monitor economic forecasts, anticipated earnings, and its capital position in the determination of its dividend payments.

The Holding Company maintains a common stock repurchase program, which was approved by the Board of Directors, that authorizes management to purchase shares of its common stock in open market or privately negotiated transactions, through block trades, and pursuant to any adopted predetermined trading plan, subject to certain conditions. During the year ended December 31, 2024, the Holding Company repurchased 1,408,426 shares under the repurchase program at a weighted-average price of $46.44 per share, totaling $65.4 million. At December 31, 2024, the Holding Company’s remaining purchase authority was $228.0 million. In addition, the Company will periodically acquire common shares outside of the repurchase program related to employee stock compensation plan activity. During the year ended December 31, 2024, the Company repurchased 361,324 shares at a weighted-average price of $47.64 per share, totaling $17.2 million, for this purpose.

Webster Bank Liquidity. The Bank’s primary source of funding is its core deposits. Including time deposits, the Bank had a loan to total deposit ratio of 81.1% and 83.5% at December 31, 2024, and 2023, respectively.

The Bank is required by OCC regulations to maintain a sufficient level of liquidity to ensure safe and sound operations. The adequacy of liquidity, as assessed by the OCC, depends on factors such as overall asset and liability structure, market conditions, competition, and the nature of the institution’s deposit and loan customers. At December 31, 2024, the Bank exceeded all regulatory liquidity requirements. The Company has designed a detailed contingency plan in order to respond to any liquidity concerns in a prompt and comprehensive manner, including early detection of potential problems and corrective action to address liquidity stress scenarios.

Capital Requirements. The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory actions by regulators that could have a direct material effect on the Company’s Consolidated Financial Statements. Under capital adequacy guidelines and/or the regulatory framework for prompt corrective action (applies to the Bank only), both the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated pursuant to regulatory directives. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

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Quantitative measures established by Basel III to ensure capital adequacy require the Company and the Bank to maintain minimum ratios of CET1 Risk-Based Capital, Tier 1 Risk-Based Capital, Total Risk-Based Capital, and Tier 1 Leverage Capital, as defined in the regulations.

The following table presents the minimum ratios required as of December 31, 2024, and 2023:

[[GREPCENT_TABLE]]
[["","","Adequately Capitalized","","Well Capitalized"],["CET1 Risk-Based Capital","","4.5","%","","6.5","%"],["Tier 1 Risk-Based Capital","","6.0","","","8.0"],["Total Risk-Based Capital","","8.0","","","10.0"],["Tier 1 Leverage Capital","","4.0","","","5.0"]]
[[/GREPCENT_TABLE]]

At December 31, 2024, and 2023, both the Company and the Bank were classified as “well-capitalized.” Management believes that no events or changes have occurred subsequent to year-end and through the date of this Annual Report on Form 10-K that would change this designation.

The Company’s and the Bank’s capital ratios, which exceeded minimum regulatory requirements, were as follows:

[[GREPCENT_TABLE]]
[["","","At December 31,"],["","","2024 (2)","","2023 (2)"],["(In thousands)","","Capital/Assets","","Ratio","","Capital/Assets","","Ratio"],["Webster Financial Corporation"],["CET1 Risk-Based Capital","","$","6,318,876","","","11.54","%","","$","6,188,433","","","11.11","%"],["Tier 1 Risk-Based Capital","","6,602,855","","","12.06","","","6,472,412","","","11.62","%"],["Total Risk-Based Capital","","7,800,717","","","14.24","","","7,643,423","","","13.72","%"],["Tier 1 Leverage Capital","","6,602,855","","","8.70","","","6,472,412","","","9.06","%"],["Risk-weighted assets (1)","","54,767,609","","","","","55,715,341"],["Webster Bank"],["CET1 Risk-Based Capital","","$","6,847,474","","","12.53","%","","$","6,913,443","","","12.43","%"],["Tier 1 Risk-Based Capital","","6,847,474","","","12.53","","","6,913,443","","","12.43","%"],["Total Risk-Based Capital","","7,512,143","","","13.74","","","7,494,332","","","13.47","%"],["Tier 1 Leverage Capital","","6,847,474","","","9.04","","","6,913,443","","","9.69","%"],["Risk-weighted assets (1)","","54,667,360","","","","","55,618,551"]]
[[/GREPCENT_TABLE]]

(1)During the third quarter of 2024, the Company performed a risk-weighted asset optimization analysis of certain of its loan portfolios and off-balance sheet commitments to determine eligibility for reduced risk-weighting. As a result of this analysis, both the Company and the Bank experienced a reduction in risk-weighted assets which, in turn, resulted in increases to their CET1 Risk-Based Capital, Tier 1 Risk-Based Capital, and Total Risk-Based Capital ratios.

(2)In accordance with regulatory capital rules, the Company elected to delay the estimated impact of the adoption of CECL on its regulatory capital over a two-year deferral period, which ended on January 1, 2022, and a subsequent three-year transition period, which ended on December 31, 2024. During the three-year transition period, regulatory capital ratios phased out the aggregate amount of the regulatory capital benefit provided from the delayed CECL adoption in the initial two years. For 2023 and 2024, the Company was allowed 50% and 25%, respectively, of the regulatory capital benefit as of December 31, 2021, with full absorption occurring in 2025.

Additional information regarding the required regulatory capital levels and ratios applicable to the Company and the Bank can be found within Note 14: Regulatory Capital and Restrictions in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data.

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Sources and Uses of Funds

Sources of Funds. Deposits are the primary source of cash flows for the Bank’s lending activities and general operational needs. Loan and securities repayments, proceeds from sales of loans and securities held for sale, and maturities also provide cash flows. While scheduled loan and securities repayments are a relatively stable source of funds, prepayments and other deposit inflows are influenced by economic conditions and prevailing interest rates, the timing of which are inherently uncertain. Additional sources of funds are provided by both short-term and long-term borrowings, and to a lesser extent, dividends received as part of the Bank’s membership with the FHLB and FRB.

Deposits. The Bank offers a wide variety of checking and savings deposit products designed to meet the transactional and investment needs of its consumer and business customers. The Bank’s deposit services include, but are not limited to, ATM and debit card use, direct deposit, ACH payments, mobile banking, internet-based banking, banking by mail, account transfers, and overdraft protection, among others. The Bank manages the flow of funds in its deposit accounts and interest rates consistent with FDIC regulations. The Bank’s Consumer and Digital Pricing Committee and its Commercial and Institutional Liability and Loan Pricing Committee both meet regularly to determine pricing and marketing initiatives. In addition, the Bank may use brokered certificates of deposit as a funding source, which are managed based on established limits set by the ALCO.

Total deposits were $64.8 billion and $60.8 billion at December 31, 2024, and 2023, respectively. The $4.0 billion increase was primarily due an increase in interLINK money market sweep deposits, the addition of Ametros, a discrete transfer of cash associated with HSA accounts that were previously held by former investment partners, and balance growth in all customer- facing interest-bearing deposit products. Offsetting these increases was a decrease in brokered certificates of deposit due to wholesale funding mix. Throughout 2024, customers continued to shift their deposit preferences from non-interest-bearing demand to higher yielding deposit products, particularly money markets and certificates of deposit.

The following table summarizes daily average balances of deposits by type and the weighted-average rates paid thereon:

[[GREPCENT_TABLE]]
[["","Years ended December 31,"],["","2024","","2023","","2022"],["(In thousands)","Average Balance","Average Rate","","Average Balance","Average Rate","","Average Balance","Average Rate"],["Non-interest-bearing:"],["Demand","$","10,387,807","","\u2014","%","","$","11,596,949","","\u2014","%","","$","12,912,894","","\u2014","%"],["Interest-bearing:"],["Checking","9,555,367","","1.89","","","8,845,284","","1.48","","","8,842,792","","0.34"],["Health savings accounts","8,650,485","","0.15","","","8,249,332","","0.15","","","7,826,576","","0.08"],["Money market","19,354,659","","4.05","","","15,769,533","","3.61","","","10,797,645","","0.66"],["Savings","6,879,935","","1.54","","","7,259,640","","0.78","","","8,625,691","","0.16"],["Certificates of deposit","5,896,230","","4.30","","","4,534,008","","3.34","","","2,519,417","","0.27"],["Brokered certificates of deposit","1,701,382","","5.25","","","1,997,602","","5.07","","","319,085","","3.24"],["Total interest-bearing","52,038,058","","2.74","","","46,655,399","","2.19","","","38,931,206","","0.36"],["Total average deposits","$","62,425,865","","2.29","%","","$","58,252,348","","1.75","%","","$","51,844,100","","0.27","%"]]
[[/GREPCENT_TABLE]]

Uninsured deposits represent the portion of deposit accounts in U.S. offices that exceed the FDIC insurance limit or similar state deposit insurance regime, and amounts in any other uninsured investment or deposit accounts that are classified as deposits and not subject to any federal or state deposit insurance regimes. The Company calculates its uninsured deposit balances based on the methodologies and assumptions used for regulatory reporting requirements, which includes an estimated portion and affiliate deposits. At December 31, 2024, and 2023, total uninsured deposits as per regulatory reporting requirements and reported on Schedule RC-O of the Bank’s Call Report were $22.6 billion and $21.0 billion, respectively.

The following table summarizes additional uninsured deposits information after certain exclusions:

[[GREPCENT_TABLE]]
[["(In thousands)","At December 31, 2024"],["Uninsured deposits, per regulatory reporting requirements","$","22,553,081"],["Less: Affiliate deposits","(3,992,862)"],["Collateralized deposits","(4,578,438)"],["Uninsured deposits, after exclusions","$","13,981,781"],["Immediately available liquidity (1)","$","23,606,741"],["Uninsured deposits coverage","168.8","%"]]
[[/GREPCENT_TABLE]]

(1)Reflects $8.7 billion and $13.3 billion of additional borrowing capacity from the FHLB and the FRB, respectively, and $1.7 billion of interest-bearing deposits held at the FRB.

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Uninsured deposits, after adjusting for affiliate deposits and collateralized deposits, represented 21.6% of total deposits at December 31, 2024. Management believes that this presentation provides a more accurate view of deposits at risk given that affiliate deposits are not customer-facing, and therefore are eliminated upon consolidation, and collateralized deposits are secured by other means. As of the date of this Annual Report on Form 10-K, the Company’s uninsured deposits as a percentage of total deposits, adjusted for affiliate deposits and collateralized deposits, is consistent with the percentage reported at December 31, 2024.

The following table summarizes the portion of U.S. time deposits in excess of the FDIC insurance limit and time deposits otherwise uninsured by contractual maturity:

[[GREPCENT_TABLE]]
[["(In thousands)","At December 31, 2024"],["Portion of U.S. time deposits in excess of insurance limit","$","536,327"],["Time deposits otherwise uninsured with a maturity of:"],["3 months or less","$","326,291"],["Over 3 months through 6 months","195,162"],["Over 6 months through 12 months","14,009"],["Over 12 months","865"]]
[[/GREPCENT_TABLE]]

Additional information regarding period-end deposit balances and rates can be found within Note 10: Deposits in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data.

Borrowings. The Bank’s primary borrowing sources include securities sold under agreements to repurchase, federal funds purchased, FHLB advances, and long-term debt. Total borrowings were $3.4 billion and $3.9 billion at December 31, 2024, and 2023, respectively, and represented 4.3% and 5.2% of total assets, respectively. The $0.5 billion decrease is primarily due to decreases of $0.3 billion, $0.1 billion, and $0.1 billion in FHLB advances, long-term debt, and federal funds purchased, respectively.

Securities sold under agreements to repurchase are generally a form of short-term funding for the Bank in which it sells securities to counterparties with an agreement to buy them back in the future at a fixed price. Securities sold under agreements to repurchase remained relatively flat at $0.3 billion at both December 31, 2024, and 2023, respectively.

The Bank may also purchase term and overnight federal funds to meet its short-term liquidity needs. Due to a change in short-term funding mix, there were no federal funds purchased at December 31, 2024. Federal funds purchased totaled $100.0 million at December 31, 2023.

FHLB advances are not only utilized as a source of funding, but also for interest rate risk management purposes. FHLB advances totaled $2.1 billion and $2.4 billion at December 31, 2024, and 2023, respectively. The $0.3 billion decrease is primarily due to a change in short-term funding mix.

Long-term debt consists of senior notes maturing in 2029, subordinated notes maturing in 2029 and 2030, and junior subordinated notes maturing in 2033. Long-term debt totaled $909.2 million, and $1.0 billion, at December 31, 2024, and 2023, respectively. The $139.6 million decrease is primarily due to the maturity of its 4.375% senior notes in February 2024.

The Bank had additional borrowing capacity from the FHLB of $8.7 billion and $12.5 billion at December 31, 2024, and 2023, respectively. The Bank also had additional borrowing capacity from the FRB of $13.3 billion and $6.6 billion at December 31, 2024, and 2023, respectively. Unencumbered investment securities of $1.0 billion at December 31, 2024, could have been used for collateral on borrowings or to increase borrowing capacity by either $0.8 billion with the FHLB or $0.9 billion with the FRB.

The following table summarizes daily average balances of borrowings by type and the weighted-average rates paid thereon:

[[GREPCENT_TABLE]]
[["","Years ended December 31,"],["","2024","","2023","","2022"],["(In thousands)","Average Balance","Average Rate","","Average Balance","Average Rate","","Average Balance","Average Rate"],["Securities sold under agreements to repurchase","$","142,025","","0.77","%","","$","210,676","","0.58","%","","$","466,282","","0.78","%"],["Federal funds purchased","54,303","","5.55","","","167,495","","4.70","","","598,269","","2.58"],["FHLB advances","2,296,048","","5.46","","","4,275,394","","5.21","","","1,965,577","","2.98"],["Long-term debt","903,603","","3.57","","","1,027,869","","3.69","","","995,341","","3.44"],["Total average borrowings","$","3,395,979","","4.76","%","","$","5,681,434","","4.74","%","","$","4,025,469","","2.78","%"]]
[[/GREPCENT_TABLE]]

Additional information regarding period-end borrowings balances and rates can be found within Note 11: Borrowings in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data.

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Federal Home Loan Bank and Federal Reserve Bank Stock. The Bank is a member of the FHLB System, which consists of 11 district FHLBs, each of which is subject to the supervision and regulation of the Federal Housing Finance Agency. An activity-based capital stock investment in the FHLB is required in order for the Bank to maintain its membership and access advances and other extensions of credit for sources of funds and liquidity purposes. The FHLB capital stock investment is restricted as there is no market for it, and it can only be redeemed by the FHLB. The Bank held FHLB capital stock of $91.7 million and $99.0 million at December 31, 2024, and 2023, respectively. During the year ended December 31, 2024, the Bank received $8.7 million in dividends from the FHLB. The most recent FHLB quarterly cash dividend in 2024 was paid on November 4, 2024, in an amount equal to an annual yield of 8.36%.

The Bank is also required to hold FRB stock equal to 6% of its capital and surplus, of which 50% is paid. The remaining 50% is subject to call when deemed necessary by the Federal Reserve System. Similar to FHLB stock, the FRB capital stock investment is restricted as there is no market for it, and it can only be redeemed by the FRB. The Bank held FRB capital stock of $229.6 million and $227.9 million at December 31, 2024, and 2023, respectively. During the year ended December 31, 2024, the Bank received $9.9 million in dividends from the FRB. The most recent FRB semi-annual cash dividend in 2024 was paid on December 31, 2024, in an amount equal to an annual yield of 4.24%.

Uses of Funds. The Company enters into various contractual obligations in the normal course of business that require future cash payments and that could impact its short-term and long-term liquidity and capital resource needs. The following table summarizes significant fixed and determinable contractual obligations at December 31, 2024. The actual timing and amounts of future cash payments may differ from the amounts presented. Based on the Company’s current liquidity position, it is expected that our sources of funds will be sufficient to fulfill these obligations when they come due.

[[GREPCENT_TABLE]]
[["","Payments Due by Period (1)"],["(In thousands)","2025","2026","2027","2028","2029","Thereafter","Total"],["Senior notes","$","\u2014","","$","\u2014","","$","\u2014","","$","\u2014","","$","300,000","","$","\u2014","","$","300,000"],["Subordinated notes","\u2014","","\u2014","","\u2014","","\u2014","","274,000","","225,000","","499,000"],["Junior subordinated debt","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","77,320","","77,320"],["FHLB advances","2,100,000","","\u2014","","218","","215","","642","","9,033","","2,110,108"],["Securities sold under agreements to repurchase","344,168","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","344,168"],["Time deposits","8,091,695","","72,078","","32,656","","18,766","","19,759","","\u2014","","8,234,954"],["Operating lease liabilities","33,221","","36,103","","31,516","","27,780","","23,408","","64,338","","216,366"],["Contingent consideration","12,707","","\u2014","","\u2014","","\u2014","","\u2014","","\u2014","","12,707"],["Royalty liabilities","1,000","","1,000","","1,000","","1,000","","1,000","","5,064","","10,064"],["Purchase obligations (2)","102,998","","46,551","","20,930","","10,361","","19,458","","10,522","","210,820"],["Total contractual obligations","$","10,685,789","","$","155,732","","$","86,320","","$","58,122","","$","638,267","","$","391,277","","$","12,015,507"]]
[[/GREPCENT_TABLE]]

(1)Interest payments on borrowings have been excluded.

(2)Purchase obligations represent agreements to purchase goods or services of $1.0 million or more that are enforceable and legally binding and specify all significant terms.

In addition, in the normal course of business, the Company offers financial instruments with off-balance sheet risk to meet the financing needs of its customers. These transactions include commitments to extend credit and commercial and standby letters of credit, which involve, to a varying degree, elements of credit risk. Since many of these commitments are expected to expire unused or be only partially funded, the total commitment amount of $12.2 billion at December 31, 2024, does not necessarily reflect future cash payments.

The Company also enters into commitments to invest in venture capital and private equity funds and tax credit structures to assist the Bank in meeting its responsibilities under the CRA. The total unfunded commitment for these alternative investments was $837.2 million at December 31, 2024. However, the timing of capital calls cannot be reasonably estimated, and depending on the nature of the contract, the entirety of the capital committed by the Company may not be called.

Pension obligations are funded by the Company, as needed, to provide for participant benefit payments as it relates to the Company’s frozen, non-contributory, qualified defined benefit pension plan. Decisions to contribute to the defined benefit pension plan are made based upon pension funding requirements under the Pension Protection Act, the maximum amount deductible under the Internal Revenue Code, the actual performance of plan assets, and trends in the regulatory environment. The Company was not required to contribute to the defined benefit pension plan in 2024, nor does it currently anticipate that it will be required to contribute in 2025. The Company’s non-qualified supplemental executive retirement plans and other post-employment benefit plans are unfunded. Expected future net benefit payments related to the Company’s defined benefit pension and other postretirement benefit plans include $12.8 million in less than one year, $26.6 million in one to three years, $28.0 million in three to five years, and $71.7 million after five years.

At December 31, 2024, the Company’s Consolidated Balance Sheet reflects a liability for uncertain tax positions of $13.8 million and $6.9 million of accrued interest and penalties, respectively. The ultimate timing and amount of any related future cash settlements cannot be predicted with reasonable certainty.

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On November 29, 2023, the FDIC published a final rule implementing a special assessment for certain banks to recover losses incurred by protecting uninsured depositors of Silicon Valley Bank and Signature Bank upon their failure in March 2023. At December 31, 2024, the Company’s remaining accrual for its estimated special assessment charge was $39.8 million, which is anticipated to be collected over a remainder of seven quarterly assessment periods. The FDIC retains the right to cease collection early, extend the special assessment collection period, and impose shortfall special assessments if actual losses exceed the amounts collected. The Company continues to monitor the estimated loss attributable to the protection of uninsured depositors at Silicon Valley Bank and Signature Bank, which could impact the amount of its accrued liability.

In connection with the completion of a multi-family securitization during the third quarter of 2024, the Company assumed an obligation to reimburse, or guarantee, losses incurred by the multi-family securitization trusts of up to 12% of the aggregate UPB of the loans at the time of sale. Essentially, this obligation represents a first credit loss enhancement provided by the Company. Based on the credit quality of the multi-family loans, among other factors, the Company estimated the amount of its reimbursement obligation to be $3.3 million at December 31, 2024. The Company was not required to make any guarantee payments to Freddie Mac during the fourth quarter of 2024. However, in the event that value of the assets in the multi-family securitization trusts significantly declined, the Company’s maximum exposure to loss could be $36.4 million.

Additional information regarding credit-related financial instruments and the FDIC special assessment, alternative investments, the multi-family securitization, defined benefit pension and other postretirement benefit plans, and income taxes can be found within Note 23: Commitments and Contingencies, Note 15: Variable Interest Entities, Note 5: Transfers and Servicing of Financial Assets, Note 19: Retirement Benefit Plans, and Note 9: Income Taxes, respectively, in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data.

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Asset/Liability Management and Market Risk

An effective asset/liability management process must balance the risks and rewards from both short-term and long-term interest rate risk when determining the Company’s strategy and action. To facilitate this process, interest rate sensitivity is monitored on an ongoing basis by the Company’s ALCO, whose primary goal is to manage interest rate risk and maximize net income and net economic value over time in changing interest rate environments. Limits for earnings at risk are set for parallel ramps in interest rates over a twelve-month period of up and down 100, 200, and 300 basis points, and for interest rate curve twist shocks of up and down 50 and 100 basis points. Limits for net economic value, referred to as equity at risk, are set for parallel shocks in interest rates of up and down 100, 200, and 300 basis points. The ALCO also regularly reviews earnings at risk scenarios for non-parallel changes in interest rates, as well as longer-term earnings at risk for up to four years in the future.

Management measures interest rate risk using simulation analysis and asset/liability modeling software to calculate the Company’s earnings at risk and equity at risk. Key assumptions relate to the behavior of interest rates and spreads, prepayment speeds, and the run-off of deposits. From these simulations, interest rate risk is quantified, and appropriate strategies are formulated and implemented. The model includes projections of future loan and deposit volume, pricing of each of the products, and deposit beta assumptions, among others. During the third quarter of 2024, other key model assumptions related to loan prepayment speeds, deposit beta, and average lives were updated based on the most recent studies. While these updates partially contributed to a change in asset/liability sensitivities, the overall impact to net interest income was not material.

Deposit beta is defined as the change in deposit rate for interest-bearing and non-interest-bearing deposits due to changes in market rates (increase or decrease). The model assumes a deposit beta by each product. The deposit beta for each product is a function of prior rate cycle, prior deposit beta, current rate cycle expectation, level of competition, and line of business input.

Earnings at risk is defined as the change in net interest income due to changes in interest rates. Essentially, interest rates are assumed to change up or down in a parallel fashion, and the net interest income results in each scenario are compared to a flat rate base scenario. The flat rate base scenario holds the end of period yield curve constant over a twelve-month forecast horizon. The earnings at risk simulation analysis incorporates assumptions about balance sheet changes (i.e., product mix, growth, and loan and deposit pricing). Overall, it is a measure of short-term interest rate risk. At December 31, 2024, and 2023, the flat rate base scenario assumed a federal funds rate of 4.50% and 5.50%, respectively. The federal funds rate target range was 4.25-4.50% at December 31, 2024, and 5.25-5.50% at December 31, 2023.

Equity at risk is defined as the change in the net economic value of financial assets and financial liabilities due to changes in interest rates compared to a base net economic value. Equity at risk analyzes sensitivity in the present value of cash flows over the expected life of existing financial assets, financial liabilities, and off-balance sheet financial instruments. It is a measure of the long-term interest rate risk to future earnings’ streams embedded in the current balance sheet.

The Bank regularly evaluates rate exposure over long-term using equity at risk. The Bank deploys various techniques to a yield curve shocks, static balance sheet, basis risks, and options risks. The level of uncertainty around key assumption increases with time, which may limit its effectiveness.

Asset sensitivity is defined as earnings or net economic value increasing when interest rates rise and decreasing when interest rates fall, as compared to a base scenario. In other words, financial assets are more sensitive to changing interest rates than liabilities, and therefore, re-price faster. Likewise, liability sensitivity is defined as earnings or net economic value decreasing when interest rates rise and increasing when interest rates fall, as compared to a base scenario.

Key assumptions underlying the present value of cash flows include the behavior of interest rates and spreads, asset prepayment speeds, and attrition rates on deposits. Cash flow projections from the model are compared to market expectations for similar collateral types and adjusted based on experience with the Bank’s own portfolio. The model’s valuation results are compared to observable market prices for similar instruments whenever possible. The behavior of deposit and loan customers is studied using historical time series analysis to model future customer behavior under varying interest rate environments.

The equity at risk simulation process uses multiple interest rate paths generated by an arbitrage-free trinomial lattice term structure model. The base case rate scenario, against which all others are compared, currently uses the month-end SOFR/swap yield curve as a starting point to derive forward rates for future months. Using interest rate swap option volatilities as inputs, the model creates multiple rate paths for this scenario with forward rates as the mean. In shock scenarios, the starting yield curve is shocked up or down in a parallel fashion. Future rate paths are then constructed in a similar manner to the base case scenario.

Cash flows for all financial instruments are generated using product specific prepayment models and account specific system data for properties such as maturity date, amortization type, coupon rate, repricing frequency, and repricing date. The asset/liability simulation software is enhanced with a mortgage prepayment model and a collateralized mortgage obligation database. Financial instruments with explicit options (i.e., caps, floors, puts, and calls) and implicit options (i.e., prepayment and early withdrawal abilities) require such modeling approach to quantify value and risk more accurately.

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On the asset side, risk is impacted the most by residential mortgage loans and mortgage-backed securities, which can typically prepay at any time without penalty and may have embedded caps and floors. In the loan portfolio, floors are a benefit to interest income in low interest rate environments. Floating-rate loans at floors pay a higher interest rate than a loan at a fully indexed rate without a floor, as with a floor, there is a limit on how low the interest rate can fall. As market rates rise, however, the interest rate paid on these loans does not rise until the fully indexed rate rises through the contractual floor.

On the liability side, there is a large concentration of customers with indeterminate maturity deposits who have options to add or withdraw funds from their accounts at any time. Implicit floors on deposits, based on historical data, are modeled. The Bank also has the option to change the interest rate paid on these deposits at any time.

Four main tools are used for managing interest rate risk:

•the size, duration, and credit risk of the investment portfolio;

•the size and duration of the wholesale funding portfolio;

•interest rate contracts; and

•the pricing and structure of loans and deposits.

The ALCO meets frequently to make decisions on the investment and funding portfolios based on the economic outlook, its interest rate expectations, the risk position, and other factors. The ALCO delegates pricing and product design responsibilities to individuals and sub-committees, but continuously monitors and influences their actions on a regular basis.

Various interest rate contracts, including futures, options, swaps, caps, and floors, can be used to manage interest rate risk. These contracts involve, to varying degrees, levels of credit and interest rate risk. The notional amount of the derivative instrument, or the amount from which interest and other payments are derived, is not exchanged, and therefore, should not be used as a measure of credit risk.

In addition, certain derivative instruments are used by the Bank to manage the risk of loss associated with its mortgage banking activities. Generally, prior to closing and funds disbursement, an interest-rate lock commitment is extended to the borrower. During this time, the Bank is subject to the risk that market interest rates may change, which could impact pricing on loan sales. In an effort to mitigate this risk, the Bank establishes forward delivery sales commitments, thereby setting the sales price.

The Company will also hold futures, options, and forward foreign currency exchange contracts to minimize the price volatility of certain financial assets and financial liabilities. Changes in the market value of these derivative positions are recognized in earnings. Additional information regarding derivatives can be found within Note 17: Derivative Financial Instruments in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data.

The following table summarizes the estimated impact that gradual parallel changes in interest rates of up and down 100, 200, and 300 basis points might have on the Company’s net interest income over a twelve-month period starting at December 31, 2024, and 2023, as compared to actual net interest income and assuming no changes in interest rates:

[[GREPCENT_TABLE]]
[["","-300bp","-200bp","-100bp","+100bp","+200bp","+300bp"],["December 31, 2024","(1.6)%","(0.6)%","\u2014%","0.4%","0.6%","0.8%"],["December 31, 2023","(7.2)%","(4.5)%","(2.0)%","1.7%","3.3%","5.4%"]]
[[/GREPCENT_TABLE]]

Asset sensitivity in terms of net interest income decreased at December 31, 2024, as compared to at December 31, 2023, primarily due to changes in the overall balance sheet composition, which included an increase in fixed-rate investment securities as a result of securities repositioning in 2024, an increase in fixed-rate residential loans, and an increase in higher cost deposit products, such as interLINK money market sweep deposits, certificates of deposit, and online savings, partially offset by a decrease in demand deposit accounts.

The following table summarizes the estimated impact that yield curve twists or immediate non-parallel changes in interest rates of up and down 50 and 100 basis points might have on the Company’s net interest income for the subsequent twelve-month period starting at December 31, 2024, and 2023:

[[GREPCENT_TABLE]]
[["","Short End of the Yield Curve","","Long End of the Yield Curve"],["","-100bp","-50bp","+50bp","+100bp","","-100bp","-50bp","+50bp","+100bp"],["December 31, 2024","2.1%","1.0%","(0.7)%","(1.6)%","","(2.2)%","(1.0)%","1.0%","1.9%"],["December 31, 2023","(1.8)%","(0.8)%","0.4%","0.7%","","(2.3)%","(1.1)%","1.1%","2.2%"]]
[[/GREPCENT_TABLE]]

These non-parallel scenarios are modeled with the short end of the yield curve moving up or down 50 and 100 basis points, while the long end of the yield curve remains unchanged, and vice versa. The short end of the yield curve is defined as terms less than eighteen months, and the long end of the yield curve is defined as terms greater than eighteen months. The results reflect the annualized impact of immediate interest rate changes.

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Sensitivity to the short end of the yield curve for net interest income changed from being asset sensitive to liability sensitive at December 31, 2024, as compared to December 31, 2023, primarily due to a change in deposit mix. As discussed above, in 2024, the Company experienced an increase in higher cost deposit products, such as interLINK money market sweep deposits, certificates of deposit, and online savings. In addition, the Company’s 2024 securities repositioning resulted in an increase in fixed-rate investment securities, further contributing to decreased asset sensitivity at the short end of the yield curve. Sensitivity to the long end of the yield curve generally remained unchanged from December 31, 2023, to December 31, 2024.

The following table summarizes the estimated economic value of financial assets, financial liabilities, and off-balance sheet financial instruments and the corresponding estimated change in economic value if interest rates were to instantaneously increase or decrease by 100 basis points at December 31, 2024, and 2023:

[[GREPCENT_TABLE]]
[["","Book Value","Estimated Economic Value","Estimated Economic Value Change"],["(In thousands)","-100bp","+100bp"],["At December 31, 2024"],["Assets","$","79,025,073","$","73,921,262","$","2,180,555","","$","(2,223,719)"],["Liabilities","69,891,859","60,952,551","2,089,770","","(1,813,843)"],["Net","$","9,133,214","$","12,968,711","$","90,785","","$","(409,876)"],["Net change as % base net economic value","","","0.7","%","(3.2)","%"],["At December 31, 2023"],["Assets","$","74,945,249","$","70,356,779","$","1,297,870","$","(1,350,496)"],["Liabilities","66,255,253","61,722,480","1,960,088","(1,786,228)"],["Net","$","8,689,996","$","8,634,299","$","(662,218)","$","435,732"],["Net change as % base net economic value","","","(7.7)%","5.0","%"]]
[[/GREPCENT_TABLE]]

Changes in economic value can best be described through duration, which is a measure of the price sensitivity of financial instruments due to changes in interest rates. For fixed-rate financial instruments, it can be thought of as the weighted-average expected time to receive future cash flows, whereas for floating-rate financial instruments, it can be thought of as the weighted-average expected time until the next rate reset. Overall, the longer the duration, the greater the price sensitivity due to changes in interest rates. Generally, increases in interest rates reduce the economic value of fixed-rate financial assets as future discounted cash flows are worth less at higher interest rates. In a rising interest rate environment, the economic value of financial liabilities decreases for the same reason. A reduction in the economic value of financial liabilities is a benefit to the Company. Floating-rate financial instruments may have durations as short as one day, and therefore, may have very little price sensitivity due to changes in interest rates.

Duration gap represents the difference between the duration of financial assets and financial liabilities. A duration gap at or near zero would imply that the balance sheet is matched, and therefore, would exhibit no change in estimated economic value for changes in interest rates. At December 31, 2024, and 2023, the Company’s duration gap was 0.0 years and negative 1.1 years, respectively. A negative duration gap implies that the duration of financial liabilities is longer than the duration of financial assets, and therefore, liabilities have more price sensitivity than assets and will reset their interest rates at a slower pace. Consequently, the Company’s net estimated economic value would generally be expected to increase when interest rates rise, as the benefit of the decreased value of financial liabilities would more than offset the decreased value of financial assets. The opposite would generally be expected to occur when interest rates fall. Earnings would also generally be expected to increase when interest rates rise, and decrease when interest rates fall over the long-term, absent the effects of any new business booked in the future.

These earnings and net economic value estimates are subject to factors that could cause actual results to differ, and also assume that management does not take any additional action to mitigate any positive or negative effects from changing interest rates. Management believes that the Company’s interest rate risk position at December 31, 2024, represents a reasonable level of risk given the current interest rate outlook. Management continues to monitor interest rates and other relevant factors given recent market volatility and is prepared to take additional action, as necessary.

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Critical Accounting Estimates

The preparation of the Company’s Consolidated Financial Statements, and accompanying notes thereto, in accordance with GAAP and practices generally applicable to the financial services industry, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the disclosure of contingent assets and liabilities. While management’s estimates are made based on historical experience, current available information, and other factors that are deemed to be relevant, actual results could significantly differ from those estimates.

Accounting estimates are necessary in the application of certain accounting policies and can be susceptible to significant change in the near term. Critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had, or are reasonably likely to have, a material impact on the Company’s financial condition or results of operations. Management has identified that the Company’s most critical accounting estimates are those related to the ACL on loans and leases and business combinations accounting policies. These accounting policies and their underlying estimates are discussed directly with the Audit Committee of the Board of Directors.

Allowance for Credit Losses on Loans and Leases

The ACL on loans and leases is a reserve established through a provision for credit losses charged to expense, which represents management’s best estimate of expected lifetime credit losses within the Company’s loan and lease portfolios at the balance sheet date. The calculation of expected credit losses is determined using predictive methods and models that follow a PD, LGD, EAD, or loss rate framework, and include consideration of past events, current conditions, macroeconomic variables (i.e., unemployment, gross domestic product, property values, and interest rate spreads), and reasonable and supportable economic forecasts that affect the collectability of the reported amounts. Changes to the ACL on loans and leases, and therefore, to the related provision for credit losses, can materially affect financial results.

The determination of the appropriate level of ACL on loans and leases inherently involves a high degree of subjectivity and requires the Company to make significant estimates of current credit risks and trends using existing qualitative and quantitative information, and reasonable and supportable forecasts of future economic conditions, all of which may undergo frequent and material changes. Changes in economic conditions affecting borrowers and macroeconomic variables that the Company is more susceptible to, unforeseen events such as natural disasters and pandemics, along with new information regarding existing loans, identification of additional problem loans, the fair value of underlying collateral, and other factors, both within and outside the Company’s control, may indicate the need for an increase or decrease in the ACL on loans and leases.

It is difficult to estimate the sensitivity of how potential changes in any one economic factor or input might affect the overall reserve because a wide variety of factors and inputs are considered in estimating the ACL and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all product types. Further, changes in factors and inputs may also be directionally inconsistent, such that improvement in one factor may offset deterioration in others.

Executive management reviews and advises on the adequacy of the ACL on loans and leases on a quarterly basis. Although the overall balance is determined based on specific portfolio segments and individually assessed assets, the entire balance is available to absorb credit losses for any of the loan and lease portfolios.

Additional information regarding the determination of the ACL on loans and leases, including the Company’s valuation methodology, can be found in Part II under the section captioned “Allowance for Credit Losses on Loans and Leases” contained elsewhere in this Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and within Note 1: Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements contained in Item 8. Financial Statements and Supplementary Data.

Business Combinations

The acquisition method of accounting generally requires that the identifiable assets acquired and liabilities assumed in business combinations are recorded at fair value as of the acquisition date. The determination of fair value often involves the use of internal or third-party valuation techniques, such as discounted cash flow analyses. Particularly, the valuation techniques used to estimate the fair value of the core deposit intangible asset acquired in the Ametros acquisition included estimates related to discount rates, client attrition rates, an alternative cost of funds, and other relevant factors, which are inherently subjective. A description of the valuation methodologies used to estimate the fair values of the significant assets acquired and liabilities assumed in the Ametros acquisition can be found within Note 2: Acquisitions and Joint Ventures in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data.