EBC

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How EBC rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

Text kept

63%

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120

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−235

words, now 18,250

New in FY2025

Various risks, including risks associated with changes in interest rates, loan losses, cybersecurity and regulatory compliance, are inherent in our business and our industry generally. • Increases in interest rates have had and in the future could have a material adverse effect on many areas of our business, including net interest income, the earnings and volume of interest-earning assets and interest-bearing liabilities, and loan delinquency, and increases in interest rates may have a material adverse effect on our operating results. • If our allowance for loan losses is insufficient to cover actual loan losses, our earnings and capital could decrease. • The geographic concentration of our loan portfolio and lending activities in eastern Massachusetts, southern and coastal New Hampshire, and Rhode Island makes us vulnerable to a downturn in our local economy. • We face security risks to our information databases, including information we maintain relating to our customers, as precautions taken by us and our vendors may not be completely effective to prevent unauthorized access, human error, phishing attacks or other events that could impact the security, reliability, confidentiality, integrity and availability of our systems or those of our vendors. • We operate in a highly competitive industry, and technological advances have lowered barriers to entry and made it possible for non-banks to offer products and services, such as loans and payment services, that traditionally were banking products. • We may be unable to successfully execute on our strategic plan or performance targets, including through a failure to attract or retain the necessary highly skilled and qualified personnel. • Actions of activist shareholders could cause us to incur substantial costs, divert management’s attention and resources and have an adverse effect on our business. • The fair value of our investments, including our securities portfolio, has declined due to increases in interest rates beginning in March 2022 and could decline further in the future due to increases in interest rates.
Unrealized gains and losses, net of tax, in the estimated fair value of the available-for-sale portfolio is recorded as other comprehensive income, which has the effect of reducing our shareholders’ equity and therefore our tangible book value per share, which is a metric many investors in our common stock consider. • Commercial loans, including those secured by commercial real estate, are generally riskier than other types of loans and constitute a significant portion of our loan and lease portfolio. • We face significant legal and regulatory risks, both from regulatory investigations and proceedings and from private actions brought against us. • Operational risk and losses can result from factors such as internal and external fraud; errors by employees or third parties; failure to document transactions properly or to obtain proper authorization; failure to comply with applicable regulatory requirements and conduct of business rules; equipment failures, including those caused by natural disasters or utility outages; business continuity and data security system failures, including those encountered while implementing major new computer systems or upgrades to existing systems; or the inadequacy or failure of systems and controls, including those of our suppliers or counterparties. • We may be adversely affected by weaknesses in financial institutions, the financial markets and economic conditions in the United States, market changes, or changes in equity markets. • We are subject to capital and liquidity standards that may change from time to time, and we may be unable to raise additional capital if needed on terms that are acceptable to us, or at all. • Our business is subject to extensive state and federal regulations, which often limit or restrict our activities and may impose material financial requirements or limitations on the conduct of our business. • We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions, or could impede or materially delay our receipt of regulatory approval to acquire other companies. • We may incur fines, penalties and other negative consequences from regulatory violations, which could include inadvertent or unintentional violations. • We may be unable to disclose some restrictions or limitations on our operations imposed by our regulators.
There are various risks associated with acquisitions, any of which could have a material adverse effect on our business. • We may be unsuccessful in realizing the expected benefits of the HarborOne acquisition or other acquired businesses, including failure to retain key employees or customers, incurrence of unexpected difficulty or expense in integrating operations, technologies or customers, assumption of significant (and potentially unknown) liabilities, and inexperience with the products and/or geographies offered by the acquired business, all of which could divert our management’s attention and/or negatively impact our financial results. • When we acquire a business, a portion of the purchase price of the acquisition typically is allocated to goodwill and other identifiable intangible assets.
Risks Related to Acquisitions The Company may fail to realize all of the anticipated benefits of HarborOne or other acquired businesses, particularly if the integration of the acquired businesses is more difficult than expected.
The Company may fail to realize some or all of the anticipated benefits of HarborOne or other acquired businesses if the integration process takes longer or is more costly than expected.
The integration process, which is ongoing for HarborOne, could result in the loss of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies that could adversely affect our ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the merger.
The Company may be unsuccessful in retaining personnel.
The success of the acquisition of HarborOne or other previously acquired companies depends in part on the Company’s ability to retain key employees currently employed by the Company and employees who join the Company from the acquired company.
If the Company is unable to retain key employees, including management, who are critical to the successful integration and future operations of the combined company, the Company could face disruptions in its business and operations, loss of existing customers, loss of key information and, expertise and unanticipated additional recruitment costs.
In addition, if key employees terminate their employment, management’s attention may be diverted from successfully integrating the acquired company to hiring suitable replacements, all of which may cause the Company’s business to suffer.
The Company has incurred and expects to continue to incur costs related to the acquisition and integration of HarborOne and other businesses.
The Company incurs significant, non-recurring costs when it agrees to acquire other businesses.
The Company may also incur additional costs to retain key employees.
Regulatory approvals required for future business acquisitions, if any, may not be received, may take longer to receive than expected, or may impose burdensome conditions, which could impose additional costs and could delay or prevent completion of the acquisition.
These governmental entities, including the Federal Reserve Board, the FDIC, the Massachusetts Division of Banks, the New Hampshire Banking Department, and Rhode Island Department of Business Regulation, may impose conditions on the completion of the transaction or require changes to the terms of the transaction, require divestitures or place restrictions on our conduct after the completion of the transaction.
Though we are not focused on acquisitions, if in the future we acquire other companies, our business may be negatively impacted by certain risks inherent with such acquisitions.
A significant component of our historic growth has been through acquisitions of other financial institutions or business lines.
We may not be able to grow our business in the future through acquisitions for a number of reasons, including: • Market conditions and the attractiveness of acquisition opportunities compared to other uses of capital; • Competition with other prospective buyers resulting in our inability to undertake an acquisition at an acceptable price or in our paying a substantial premium over the fair value of the net assets of the acquired business; • Inability to obtain regulatory or shareholder approvals, delays in obtaining regulatory approvals; or the imposition of costly or burdensome conditions to regulatory approvals; • Potential difficulties relating to the integration of the operations, technologies, products and the key employees or management of the acquired business, resulting in the diversion of resources from the operation of our existing business; • Acquisitions of new lines of business may present risks that are different from those that we are accustomed to managing, requiring us to implement new or enhanced procedures and controls and diverting resources from the operation of our existing business; • Inability to maintain existing customers of the acquired business or to sell the products and services of the acquired business to our existing customers; • Assumption of or potential exposure to significant liabilities of the acquired business, some of which may be unknown or contingent at the time of acquisition; • Exposure to potential asset quality issues of the acquired business; • Failure to mitigate deposit erosion or loan quality deterioration at the acquired business; • Potential changes in banking or tax laws or regulations that may affect the acquired business; • Inability to improve the revenues and profitability or realize the cost savings and synergies expected of the acquired business; • Potential future impairment of the value of goodwill and intangible assets acquired, as discussed below and elsewhere in this Annual Report on Form 10-K; and • Identification of internal control deficiencies of the acquired business.
At December 31, 2025, our allowance for loan losses was $331.8 million, or 1.44% of total loans, compared to $229.0 million, or 1.29% of total loans, at December 31, 2024.
We primarily serve individuals, businesses and municipalities located in eastern and central Massachusetts, including the greater Boston metropolitan area, southern New Hampshire, including its coastal region, and Rhode Island.
At December 31, 2025, approximately $16.7 billion, or 89.6% of our total loans secured by real estate were secured by real estate located in this market area.
We face continuing and growing security risks to our information systems including information we maintain relating to our customers.
Our electronic communications and information systems infrastructure, as well as the systems infrastructures of the vendors we use, may be vulnerable to unauthorized access, human error, computer viruses, denial-of-service attacks, malicious code, spam attacks, phishing, ransomware or other forms of social engineering and other events that could impact the security, reliability, confidentiality, integrity and availability of our systems or those of our vendors.
Financial services institutions and companies engaged in data processing have reported breaches in the security of their systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, disable or degrade service or sabotage systems.
For example, a type of artificial intelligence program (AI) known as “Agentic AI” has further exacerbated risks by allowing bad actors to more easily use sophisticated and iterative methods of facilitating fraud through the creation of synthetic identities and “deepfake” images and documentation.
We regularly assess and test our security systems and disaster preparedness, including back-up systems, but the risks are continually escalating.
We may not be able to fully protect against these events given the rapid evolution of new vulnerabilities, the complex and distributed nature of our systems, our interdependence on the systems of other companies and the increased sophistication of potential attack vectors and methods against our systems.
Federal and state bank regulatory agencies have demonstrated a willingness to permit non-traditional bank charters for fintechs, which increases competition in the industry.
In addition, other fintechs, through commercials relationships with existing banks, offer deposit-like products to their customers under current and proposed interagency guidelines on third party relationships.
In addition, large technology companies have begun to make efforts toward providing financial services directly to their customers and are expected to continue to explore new ways to do so.
Many of these companies have fewer regulatory constraints, and some have lower cost structures, in part due to the lack of physical locations and regulatory compliance costs.
In addition to external competition, as described below, the financial services industry, including the banking sector, is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services.
New, unexpected technological changes could have a disruptive effect on the way banks offer products and services.
We believe our success depends on our ability to use technology to offer products and services that provide convenience to customers and to create additional efficiencies in our operations.
However, we may not be able to keep up with the rapid pace of technological changes or be successful in marketing these products and services to our customers.
We may not be able to successfully implement and integrate future system enhancements, or such implementations could be delayed materially, or could become obsolete quickly due to the increasing rates of technological innovation, which could adversely impact our ability to meet our legal and regulatory requirements, which could result in regulatory fines.
In addition, future system enhancements could have higher than expected costs and/or result in operating inefficiencies, which could increase implementation and ongoing operational costs.
Failure to optimize future system enhancements could result in impairment charges that adversely impact our financial condition and results of operations.
In addition, we may incur significant training, licensing, maintenance, consulting and amortization expenses during and after systems enhancements or implementations.
References in this Annual Report to “AI” refer to both Generative AI and Agentic AI, unless otherwise specified.

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Gone since FY2024

There are various risks associated with our acquisition growth strategy, any of which could have a material adverse effect on our business. • We may be unsuccessful in realizing the expected benefits of the Cambridge acquisition or other acquired businesses, including failure to retain key employees or customers, incurrence of unexpected difficulty or expense in integrating operations, technologies or customers, assumption of significant (and potentially unknown) liabilities, and inexperience with the products and/or geographies offered by the acquired business, all of which could divert our management’s attention and/or negatively impact our financial results. • When we acquire a business, a portion of the purchase price of the acquisition may be allocated to goodwill and other identifiable intangible assets.
Various risks, including risks associated with changes in interest rates, loan losses, cybersecurity and regulatory compliance, are inherent in our business and our industry generally. • Increases in interest rates have had and in the future may have a material adverse effect on many areas of our business, including net interest income, the earnings and volume of interest-earning assets and interest-bearing liabilities, and loan delinquency, and increases in interest rates may have a material adverse effect on our operating results. • If our allowance for loan losses is insufficient to cover actual loan losses, our earnings and capital could decrease. • The geographic concentration of our loan portfolio and lending activities in eastern Massachusetts and southern and coastal New Hampshire makes us vulnerable to a downturn in our local economy. • We face security risks to our information databases, including information we maintain relating to our customers, as precautions taken by us and our vendors may not be completely effective to prevent unauthorized access, human error, phishing attacks or other events that could impact the security, reliability, confidentiality, integrity and availability of our systems or those of our vendors. • We operate in a highly competitive industry, and technological advances have lowered barriers to entry and made it possible for non-banks to offer products and services, such as loans and payment services, that traditionally were banking products. • We may be unable to successfully execute on our strategic plan or performance targets, including through a failure to attract or retain the necessary highly skilled and qualified personnel. • The fair value of our investments, including our securities portfolio, has declined due to increases in interest rates beginning in March 2022 and may decline further in the future.
Unrealized gains and losses, net of tax, in the estimated fair value of the available-for-sale portfolio is recorded as other comprehensive income, which has the effect of reducing our shareholders’ equity and therefore our tangible book value per share, which is a metric many investors in our common stock consider. • Commercial loans, including those secured by commercial real estate, are generally riskier than other types of loans and constitute a significant portion of our loan and lease portfolio. • We face significant legal and regulatory risks, both from regulatory investigations and proceedings and from private actions brought against us. • Operational risk and losses can result from factors such as internal and external fraud; errors by employees or third parties; failure to document transactions properly or to obtain proper authorization; failure to comply with applicable regulatory requirements and conduct of business rules; equipment failures, including those caused by natural disasters or utility outages; business continuity and data security system failures, including those encountered while implementing major new computer systems or upgrades to existing systems; or the inadequacy or failure of systems and controls, including those of our suppliers or counterparties. • We may be adversely affected by weaknesses in financial institutions, the financial markets and economic conditions in the United States, market changes, or changes in equity markets. • We are subject to capital and liquidity standards that may change from time to time, and we may be unable to raise additional capital if needed on terms that are acceptable to us, or at all. • Our business is subject to extensive state and federal regulations, which often limit or restrict our activities and may impose material financial requirements or limitations on the conduct of our business. • We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions, or could impede or materially delay our receipt of regulatory approval to acquire other companies. • We may incur fines, penalties and other negative consequences from regulatory violations, which could include inadvertent or unintentional violations. • We may be unable to disclose some restrictions or limitations on our operations imposed by our regulators. • Our stock-based benefit plan, which we adopted in 2021, has increased and is expected to continue to increase our annual compensation and benefit expenses.
Risks Related to Our Acquisition Strategy The Company may fail to realize all of the anticipated benefits of Cambridge or other acquired businesses, particularly if the integration of the acquired businesses is more difficult than expected.
The Company may fail to realize some or all of the anticipated benefits of Cambridge or other acquired businesses if the integration process takes longer or is more costly than expected.
The integration process, which is ongoing for Cambridge, could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that could adversely affect our ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the merger.
The Company may be unsuccessful in retaining our personnel or the personnel of the company we acquire.
The success of any merger or other acquisition that we pursue will depend in part on the Company’s ability to retain the talents and dedication of key employees currently employed by the Company and employees who join the Company from the acquired company.
If the Company is unable to retain key employees, including management, who are critical to the successful integration and future operations of the combined company, the Company could face disruptions in its operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs.
In addition, if key employees terminate their employment, the Company’s business activities may be adversely affected, and management’s attention may be diverted from successfully integrating the Company and the acquired company to hiring suitable replacements, all of which may cause the Company’s business to suffer.
In addition, the Company may not be able to locate or retain suitable replacements for any key employees who leave the combined company.
The Company has incurred and expects to continue to incur costs related to the acquisition and integration of Cambridge and other businesses.
The Company routinely incurs significant, non-recurring costs when it agrees to acquire other businesses.
The Company may also incur additional costs to retain key employees of the Company and the acquired business.
Regulatory approvals related to proposed business acquisitions may not be received, may take longer to receive than expected, or may impose burdensome conditions, which could impose additional costs and could delay or prevent completion of the acquisition.
These governmental entities, including the Federal Reserve Board, the FDIC, the Massachusetts Division of Banks and the New Hampshire Banking Department, may impose conditions on the completion of the transaction or require changes to the terms of the transaction, require divestitures or place restrictions on our conduct after the completion of the transaction.
The degree of scrutiny that our regulators give to mergers and other acquisitions can change from time to time.
In general, we anticipate that as the Company increases in size and complexity, our proposed mergers and other acquisitions will receive greater regulatory scrutiny and the time that regulators will take to process the applications will increase.
In September 2024, the Department of Justice’s Antitrust Division and the FDIC announced that each respective agency has withdrawn the 1995 Bank Merger Competitive Review Guidelines (the “1995 Guidelines”).
The Department of Justice’s Antitrust Division announced that it will instead evaluate the bank mergers using its 2023 Merger Guidelines that apply across all industries.
As of the date of this Annual Report on Form 10-K, the Federal Reserve Board has not released any new guidance on its approach to bank merger reviews, nor has it withdrawn from the 1995 Guidelines.
Past statements from the Federal Reserve Board staff indicate that the Federal Reserve Board is not actively planning to alter its approach to bank merger reviews.
The 2023 Merger Guidelines set forth more stringent concentration limits than the 1995 Bank Merger Guidelines.
The 2023 Merger Guidelines provide additional, largely qualitative grounds on which the Department of Justice could object to a transaction beyond traditional local market concentration.
At this time, we are unable to predict whether the actions taken by the FDIC and the Department of Justice will have a material adverse effect on our ability to acquire or merge with banking companies in our market area.
To the extent that we acquire other companies, our business may be negatively impacted by certain risks inherent with such acquisitions.
A significant component of our business strategy is to grow through acquisitions of other financial institutions or business lines as opportunities arise.
Although we have been successful with this strategy in the past, we may not be able to grow our business in the future through acquisitions for a number of reasons, including: • Competition with other prospective buyers resulting in our inability to complete an acquisition or in our paying a substantial premium over the fair value of the net assets of the acquired business; • Inability to obtain regulatory or shareholder approvals, delays in obtaining regulatory approvals; or the imposition of costly or burdensome conditions to regulatory approvals; • Potential difficulties and/or unexpected expenses relating to the integration of the operations, technologies, products and the key employees of the acquired business, resulting in the diversion of resources from the operation of our existing business; • Acquisitions of new lines of business may present risks that are different in kind or degree compared to those that we are accustomed to managing, requiring us to implement new or enhance existing procedures and controls and diverting resources from the operation of our existing business; • Inability to maintain existing customers of the acquired business or to sell the products and services of the acquired business to our existing customers; • Inability to retain key management of the acquired business; • Assumption of or potential exposure to significant liabilities of the acquired business, some of which may be unknown or contingent at the time of acquisition, including, without limitation, liabilities for regulatory and compliance issues; • Exposure to potential asset quality issues of the acquired business; • Failure to mitigate deposit erosion or loan quality deterioration at the acquired business; • Potential changes in banking or tax laws or regulations that may affect the acquired business; • Inability to improve the revenues and profitability or realize the cost savings and synergies expected of the acquired business; • Potential future impairment of the value of goodwill and intangible assets acquired, as discussed below and elsewhere in this Annual Report on Form 10-K; and • Identification of internal control deficiencies of the acquired business.
We may be unsuccessful identifying and competing for acquisitions.
We regularly look for acquisition opportunities of banks and financial institutions that meet our criteria, some of which may be material to our business and financial performance and could involve significant cash expenditures or result in a material increase in the number of shares of our common stock that are outstanding.
We face competition from other financial services institutions, some of which may have greater financial resources than us, when considering acquisition opportunities.
Accordingly, attractive opportunities may not be available to us, and there can be no assurance that we will be successful in identifying, completing or integrating future acquisitions.
We may not be able to acquire other institutions on acceptable terms.
The ability to grow may be limited if we are unable to successfully make acquisitions in the future.
The fair values of our investment portfolio can be adversely affected by changes in interest rates or expectations of changes, and inflation rates or expectations of inflation, among other factors.
The FOMC may and often does change its view as to whether the federal funds rate target band should increase or decrease and the rate at which such change should occur.
The FOMC decreased the federal funds rate by 50 basis points to a target range of 4.75% to 5.00% in September 2024 and by 25 basis points in November and December, reducing the federal funds rate target band at year end to 4.25% from 4.50%.
However, in December 2024, the FOMC revised its outlook for rate cuts in 2025, indicating that FOMC members anticipated two reductions in 2025 instead of the four reductions that the FOMC members anticipated in September 2024.
Powell, Chairman of the Board of Governors of the Federal Reserve System, stated in December 2024 that after the FOMC decreased the federal funds rate target band in 2024 by a total of 100 basis points, the FOMC could be more cautious as it considers further adjustments, emphasizing that in considering the extent and timing of additional adjustments to the target range for the federal funds rate, the FOMC will assess future economic data.
Chairman Powell further explained in December 2024 that if the United States economy remains strong and inflation does not continue to move sustainably toward the FOMC’s 2% target, the FOMC could decide to slow the pace at which it chooses to reduce the federal funds rate target band, but alternatively if the labor market were to weaken unexpectedly or inflation were to decline more quickly than anticipated, the FOMC could choose to accelerate the pace at which it chooses to reduce the federal funds rate target band.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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