Discontinued Operations

9 Months Ended

Sep. 30, 2024

Discontinued Operations and Disposal Groups [Abstract]

On September 19, 2023, the Company announced that it had entered into an asset purchase agreement (“the agreement”) with Arthur J. Gallagher & Co. (“Gallagher”) to sell substantially all of the assets of its insurance agency business

for a gross purchase price of $515.0 million. The agreement also provided for the assumption of certain liabilities of the insurance agency business by Gallagher. Management made the decision to sell certain assets of its insurance agency business to recognize the valuation premium of the business, while allowing the Company to focus on growth and strategic initiatives of its core banking business.

In September 2023, following the approval of the sale by the Company’s board of directors, the Company reclassified substantially all of the assets and certain liabilities of its insurance agency business as held for sale in connection with a planned disposition of the business. A business is classified as held for sale when management, having the authority to approve the action, commits to a plan to sell the business, the sale is probable to occur during the next 12 months at a price that is reasonable in relation to its current fair value, and certain other criteria are met. In accordance with ASC 205, Presentation of Financial Statements, the Company classifies operations as discontinued when they meet all the criteria to be classified as held for sale and when the sale represents a strategic shift that will have a major impact on the Company’s financial condition and results of operations.

On October 31, 2023, the Company completed the sale of its insurance agency business for net cash consideration at closing of $498.1 million, subject to customary post-closing working capital adjustments. The net cash proceeds at closing included the gross purchase price pursuant to the agreement of $515.0 million and an estimated working capital adjustment of $4.2 million, which were reduced by transaction expenses of $17.0 million and the settlement of certain obligations of the Company primarily related to employee post-retirement liabilities that originated prior to closing of $4.1 million. In addition, the Company transferred $7.4 million in fiduciary cash to Gallagher upon closing which is included in the determination of the gain on sale as of December 31, 2023 but was not included in the amount of net cash consideration of $498.1 million. In connection with the sale, the Company recognized a gain on sale of $408.6 million, which was subject to certain post-closing adjustments during the 120 day post-closing settlement period which ended on February 28, 2024. The amount of the post-closing settlement was not material. The Company recognized indirect noninterest expenses associated with the sale of approximately $22.3 million.

The following table presents operating results of the discontinued insurance agency business for the three and nine months ended September 30, 2023:


	Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023
	(In thousands)
Noninterest income:
Insurance commissions	$	25,897	$	85,177
Other noninterest income	13		51
Total noninterest income	25,910		85,228
Noninterest expense:
Salaries and employee benefits	24,655		57,991
Office occupancy and equipment	2,755		4,279
Data processing	1,013		3,216
Professional services	1,291		2,615
Marketing expenses	53		152
Amortization of intangible assets	665		2,002
Other	1,514		3,976
Total noninterest expense	31,946		74,231
(Loss) income from discontinued operations before income tax expense	(6,036)		10,997
Income tax (benefit) expense	(1,685)		3,125
(Loss) income from discontinued operations, net of taxes (1)	$	(4,351)	$	7,872

(1)Represents net income from discontinued operations that is presented in the Consolidated Statements of Income.

Certain income and expense amounts were excluded from discontinued operations as they relate to assets and liabilities which were not assumed by Gallagher. The following is a summary of such items and the corresponding income tax effect for the three and nine months ended September 30, 2023:


	Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023
	(In thousands)
Noninterest income:
(Loss) income from investments held in rabbi trusts	$	(91)	$	489
Other noninterest income (1)	15		44
Total noninterest (loss) income	(76)		533
Noninterest expense:
Salaries and employee benefits (2)	(96)		484
Office occupancy and equipment (3)	102		343
Other (4)	474		1,468
Total noninterest expense	480		2,295
Loss before income tax expense	(556)		(1,762)
Income tax benefit	(156)		(495)
Net loss	$	(400)	$	(1,267)

(1)Includes income on Company-owned life insurance policies which were not disposed of and were transferred to the Bank upon sale of assets of Eastern Insurance Group.

(2)Includes expenses associated with certain employee post-retirement benefit plan expenses.

(3)Includes depreciation expense associated with buildings and related improvements and ROU asset amortization related to one lease which were not disposed of and were transferred to the Bank as of January 1, 2024.

(4)Includes intercompany expenses and other credits associated with the Defined Benefit Plan and the BEP. Components of net periodic benefit cost associated with the Defined Benefit Plan and the BEP included in other noninterest expense above were a net credit for the period presented.

Continuing Involvement

Pursuant to the agreement, the Company agreed to provide certain transitional services to Gallagher for up to six months following the closing of the sale. Such services included certain information and technology support and human resources support. The Company was compensated for such services on a monthly basis, and the total compensation over the six month period plus reimbursement of amounts paid by the Company in connection with its performance of the transitional services was not material.