0001108134bhlb:~~ResidentialMortgageBackedSecuritiesGuaranteedByUSGovernmentMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-31~~CapitalizedMortgageServicingRightsMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:MeasurementInputConstantPrepaymentRateMemberus-gaap:FairValueInputsLevel3Membersrt:WeightedAverageMember2022-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, ~~2020~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-15781

BERKSHIRE HILLS BANCORP, INC.

(Exact name of registrant as specified in its charter)


Delaware						04-3510455
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

60 State Street

Boston

Massachusetts

02109

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617) 641-9206,

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of Exchange on which registered

Common stock, par value $0.01 per share

BHLB

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý

No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one)

Large Accelerated Filer

Accelerated Filer

x☐

Non-Accelerated Filer

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of

the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15

U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ~~Yes~~ ☐ No ý

The aggregate market value of the voting and non-voting common equity held by non-affiliates was approximately ~~$548 million,~~$1.1 billion, based upon the closing price of ~~$11.02~~$24.77 as quoted on the New York Stock Exchange as of the last business day of the registrant’s most recently completed second fiscal quarter.

The number of shares outstanding of the registrant’s common stock as of February ~~25, 2021~~24, 2023 was ~~51,035,606.~~44,469,516.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Proxy Statement for the ~~2021~~2023 Annual Meeting of Shareholders are incorporated by reference in Part III of this Form 10-K.

Table of Contents

INDEX


PART I		4

ITEM 1.	BUSINESS	4

ITEM 1A.	RISK FACTORS	2829

ITEM 1B.	UNRESOLVED STAFF COMMENTS	3738

ITEM 2.	PROPERTIES	3738

ITEM 3.	LEGAL PROCEEDINGS	3839

ITEM 4.	MINE SAFETY DISCLOSURES	3839

PART II		3940

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	3940

ITEM 6.	[~~SELECTED FINANCIAL DATA~~RESERVED]	41

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	4742

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	6869

ITEM 8.	CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	71

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	71

ITEM 9A.	CONTROLS AND PROCEDURES	71

ITEM 9B.	OTHER INFORMATION	71

ITEM 9C.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	71

PART III		72

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE	73

ITEM 11.	EXECUTIVE COMPENSATION	7677

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS	7677

~~ITEM 13.~~	~~CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE~~	77

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ITEM 13.		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	78

ITEM 14.		PRINCIPAL ACCOUNTING FEES AND SERVICES	7778

PART IV			7879

ITEM 15.		EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	7879

ITEM 16.		FORM 10-K SUMMARY	8081

SIGNATURES			8182


TABLE INDEX

PART I			4

ITEM 1.			4

	ITEM 1 TABLE 1 — LOAN PORTFOLIO ANALYSIS		5

	ITEM 1 TABLE 2 — MATURITY AND SENSITIVITY OF LOAN PORTFOLIO		8

	ITEM 1 TABLE 3 — ~~PROBLEM ASSETS~~CREDIT QUALITY RATIOS		1011

	ITEM 1 TABLE 4 — ALLOCATION OF ALLOWANCE ~~FOR CREDIT LOSSES~~BY LOAN CATEGORY		12

	ITEM 1 TABLE 5 — ~~ALLOCATION OF ALLOWANCE BY LOAN CATEGORY~~		13

	~~ITEM 1 TABLE 6 — AMORTIZED COST AND FAIR VALUE OF SECURITIES~~		14

	~~ITEM 1 TABLE 7 —~~ WEIGHTED AVERAGE YIELD ON SECURITIES		1513

	ITEM 1 TABLE 86 — AVERAGE BALANCE AND WEIGHTED AVERAGE RATES FOR DEPOSITS		1614

	ITEM 1 TABLE 97 — MATURITY OF DEPOSITS > ~~$100,000~~$250,000		1615

PART II			39

~~ITEM 6~~			41

	~~ITEM 6 TABLE 3 — AVERAGE BALANCES, INTEREST AND AVERAGE YIELD COSTS~~		44

	~~ITEM 6 TABLE 4 — RATE VOLUME ANALYSIS~~		4640

ITEMS 7-7A.			4742

	ITEM 7 TABLE 1 — AVERAGE BALANCES, INTEREST AND AVERAGE YIELD COSTS		45

	ITEM 7 TABLE 2 — RATE VOLUME ANALYSIS		46

	ITEM 7 — 7A TABLE ~~1 — CONTRACTUAL OBLIGATIONS~~		66

	~~ITEM 7 — 7A TABLE 2~~3 — QUALITATIVE ASPECTS OF MARKET RISK		6970

Table of Contents

PART I

ITEM 1. BUSINESS

FORWARD-LOOKING STATEMENTS

Certain statements contained in this document that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (referred to as the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (referred to as the Securities Exchange Act), and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify these statements from the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions.

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including among other things, changes in general economic and business conditions, increased competitive pressures, changes in the interest rate environment and inflation, legislative and regulatory change, changes in the financial markets, and other risks and uncertainties disclosed from time to time in documents that Berkshire Hills Bancorp files with the Securities and Exchange Commission, including the Risk Factors in Item 1A of this report.

Further, the ongoing COVID-19 pandemic and the related local and national economic disruption may result in a continued decline in demand for our products and services; increased levels of loan delinquencies, problem assets and foreclosures; an increase in our allowance for loan losses; a decline in the value of loan collateral, including real estate; a greater decline in the yield on our interest-earning assets than the decline in the cost of our interest-bearing liabilities; and increased cybersecurity risks, as employees continue to work remotely.

Because of these and other uncertainties, Berkshire’s actual results, performance or achievements, or industry results, may be materially different from the results indicated by these forward-looking statements. In addition, Berkshire’s past results of operations do not necessarily indicate Berkshire’s combined future results. You should not place undue reliance on any of the forward-looking statements, which speak only as of the dates on which they were made. Berkshire is not undertaking an obligation to update forward-looking statements, even though its situation may change in the future, except as required under federal securities law. Berkshire qualifies all of its forward-looking statements by these cautionary statements.

GENERAL

Berkshire Hills Bancorp, Inc. (“Berkshire” or “the Company”) is headquartered in Boston, Massachusetts. Berkshire is a Delaware corporation and the holding company for Berkshire Bank (“the Bank”) ~~and Berkshire Insurance Group, Inc.~~.

Berkshire Bank is transforming what it means to bank its neighbors socially, humanly, and digitally to empower the financial potential of people, families, and businesses in its communities as it pursues its vision of being the leading socially responsible omni-channel community bank in the markets it serves. Berkshire Bank provides business and consumer banking, mortgage, wealth management, and investment services. At year-end ~~2020,~~2022, the Bank had ~~130~~100 full-service ~~banking offices in~~financial centers its New England ~~New York,~~ and ~~Mid-Atlantic footprint. The Bank has an agreement to sell its 8 Mid-Atlantic branches and has announced a plan to consolidate another 16 offices in its New England/~~New York footprint.The ~~actions are targeted to be completed by mid-year 2021,~~emergence of the global COVID-19 pandemic in the first quarter of 2020 affected many aspects of the Company’s operations and ~~the Bank has a target~~financial condition through 2022, as further described in other sections of ~~106 branches as a result of these actions.The Company offers a wide range of deposit, lending, insurance, and wealth management products to retail and commercial customers in its market areas.The Bank also operates a socially responsible platform, Reevx Labs~~TM ~~, to support emerging entrepreneurs, artists, and small non-profit organizations by providing them with the resources and connections needed to power them today and far into the 21~~st ~~century.~~this report.

FILINGS

Information regarding the Company is available through the Investor Relations tab at berkshirebank.com. The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge at sec.gov and, as soon as reasonably practicable after we electronically file such material with the Securities and Exchange Commission, at berkshirebank.com under the Investor Relations tab. Information on the website is not incorporated by reference and is not a part of this annual report on Form 10-K.

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COMPETITION

The Company is subject to strong competition from banks and other financial institutions and financial service providers. Its competition includes national and super-regional banks. Non-bank competitors include credit unions, brokerage firms, insurance providers, financial planners, and the mutual fund industry. New technology is reshaping customer interaction with financial service providers and the increase of internet-accessible financial institutions increases competition for the Company’s customers. The Company generally competes on the basis of customer service, relationship management, and the fair pricing of ~~loan and deposit products and wealth management and insurance services.~~its products. The location and convenience of branch offices is also a significant competitive factor, particularly regarding new offices. The Company is pursuing a “banker heavy, branch light” model in newer markets, and uses its mobile MyBanker teams which provide personalized service to customers with committed relationships. The Company does not rely on any individual, group, or entity for a material portion of its deposits. Due to recent mergers of in-market bank competitors, the Company is pursuing opportunities to expand its market share and talent recruitment. The Company seeks to differentiate itself with its DigitouchSM approach to personal service and user-friendly technology, as well as its commitment to corporate social responsibility. The Company recently introduced its new brand theme of “Where You Bank Matters” to highlight these differentiating factors.

LENDING ACTIVITIES

General. The Bank originates loans in the ~~four~~ basic portfolio categories discussed below. Lending activities are limited by federal and state laws and regulations. Loan interest rates and other key loan terms are affected principally by the Bank’s credit policy, asset/liability strategy, loan demand, competition, and the supply of money available for lending purposes. These factors, in turn, are affected by general and economic conditions, monetary policies of the federal government, including the Federal Reserve, legislative tax policies, and governmental budgetary matters. Most of the Bank’s loans held for investment are made in its market areas and are secured by real estate located in its market areas. Lending is therefore affected by activity in these real estate markets. The Bank ~~does not engage in subprime lending activities. The Bank~~ monitors and manages the amount of long-term fixed-rate lending volume. Adjustable-rate loan products generally reduce interest rate risk but may produce higher loan losses in the event of sustained rate increases. The Bank generally originates loans for investment except for residential mortgages, which are ~~generally~~sometimes originated for sale on a servicing released basis. Additionally, the Bank also originates Small Business Administration ("SBA") 7A loans for sale to investors. The Bank also conducts ~~wholesale purchases and sales of loans and~~ loan participations generally with other banks doing business in its markets, including selected national banks.The information discussed below describes the Company’s ongoing lending activities.~~The~~ Lending activities were affected by the emergence of the COVID-19 pandemic ~~conditions that affected the Company’s activities~~ in 2020 ~~are discussed in Management’s Discussion~~ and ~~Analysis in Item 7 of this report.~~subsequent government interventions and support, as well as economic and monetary disruptions resulting from these conditions.

Loan Portfolio Analysis. The following table sets forth the year-end composition of the Bank’s loan portfolio in dollar amounts and as a percentage of the portfolio at the dates indicated. Further information about the composition of the loan portfolio is contained in Note 6 -– Loans of the Consolidated Financial Statements.

Item 1 -–– Table 1 -–– Loan Portfolio Analysis


		2020				2019				2018				2017				2016					2022				2021				2020
(In millions)	(In millions)	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total		(In millions)	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total
Loans:	Loans:																					Loans:
Construction	Construction	$	455	5.6	%	$	449	4.7	%	$	371	4.1	%	$	385	4.6	%	$	351	5.4	%	Construction	$	320	3.9	%	$	324	4.7	%	$	455	5.6	%
Commercial multifamily	Commercial multifamily	483		6.0		632		6.7		552		6.1		495		6.0		349		5.3		Commercial multifamily	620		7.5		516		7.6		483		6.0
Commercial real estate owner occupied	Commercial real estate owner occupied	552		6.8		673		7.1		562		6.2		646		7.8		595		9.1		Commercial real estate owner occupied	641		7.7		607		8.9		552		6.8
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	2,119		26.2		2,190		23.0		1,849		20.4		1,700		20.5		1,253		19.1		Commercial real estate non-owner occupied	2,496		29.9		2,157		31.6		2,119		26.2
Commercial and industrial	Commercial and industrial	1,943		24.0		1,844		19.4		1,954		21.6		1,740		21.0		1,044		15.9		Commercial and industrial	1,445		17.3		1,285		18.8		1,943		24.0
Residential real estate	Residential real estate	1,932		23.9		2,853		30.0		2,727		30.2		2,264		27.3		2,047		31.3		Residential real estate	2,312		27.7		1,489		21.8		1,932		23.9
Home equity	Home equity	294		3.7		379		4.0		377		4.2		409		4.9		362		5.5		Home equity	227		2.7		252		3.7		294		3.7
Consumer other	Consumer other	303		3.8		483		5.1		651		7.2		660		7.9		549		8.4		Consumer other	274		3.3		196		2.9		303		3.8
Total	Total	$	8,081	100.0	%	$	9,503	100.0	%	$	9,043	100.0	%	$	8,299	100.0	%	$	6,550	100.0	%	Total	$	8,335	100.0	%	$	6,826	100.0	%	$	8,081	100.0	%
Allowance for credit losses ~~(1)~~	Allowance for credit losses ~~(1)~~	(127)				(64)				(61)				(52)				(44)				Allowance for credit losses ~~(1)~~	(96)				(106)				(127)
Net loans	Net loans	$	7,954			$	9,439			$	8,982			$	8,247			$	6,506			Net loans	$	8,239			$	6,720			$	7,954

~~(1) Beginning January 1, 2020, the allowance calculation is based on current expected loss methodology. Prior to January 1, 2020, the allowance calculation was based on the incurred loss model.~~

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Commercial Real Estate. The Bank originates commercial real estate loans on properties used for business purposes such as small office buildings, industrial, healthcare, lodging, recreation, or retail facilities. Commercial real estate loans are provided on owner-occupied properties and on investor-owned properties. The portfolio includes commercial 1-4 family and multifamily properties. Loans may generally be made with amortizations of up to 30 years and with interest rates that adjust periodically (primarily from short-term to five years). Most commercial real estate loans are originated with final maturities of 10 years or less. As part of its business activities, the Bank also enters into commercial loan ~~participations.~~participations and interest rate swaps.

Commercial real estate is generally managed within federal regulatory monitoring guidelines of 300% of risk based capital for non-owner occupied commercial real estate and 100% for construction loans. Total commercial real estate loans measured 259% of regulatory capital at year-end 2022 and construction real estate loans measured 26% of regulatory capital.

The Bank has hold limits for numerous categories of commercial specialty lending including healthcare, hospitality, designated franchises, and leasing.

Commercial real estate loans are among the largest of the Bank’s loans, and may have higher credit risk and lending spreads. Because repayment is often dependent on the successful operation or management of the properties, repayment of commercial real estate loans may be affected by adverse conditions in the real estate market or the economy. The Bank seeks to manage these risks through its underwriting disciplines and portfolio management processes. The Bank generally requires that borrowers have debt service coverage ratios (the ratio of available cash flows before debt service to debt service) of at least 1.25 times based on stabilized cash flows of leases in place, with some exceptions for national credit tenants. For variable rate loans, the Bank underwrites debt service coverage to interest rate shocks of 300 basis points or higher based on a minimum of 1.0 times coverage and it uses loan maturities to manage risk based on the lease base and interest sensitivity. Loans at origination may be made up to 80% of appraised value based on property type and risk, with sublimits of 75% or less for designated specialty property types. Generally, commercial real estate loans are supported by full or partial personal guarantees by the principals. ~~Credit enhancements in the form of additional collateral or guarantees are normally considered for start-up businesses without a qualifying cash flow history.~~

The Bank offers interest rate swaps to certain larger commercial mortgage borrowers. These swaps allow the Bank to originate a mortgage based on short-term ~~LIBOR~~published interest rates and allow the borrower to swap into a longer-term fixed rate. The Bank simultaneously sells an offsetting back-to-back swap to an investment grade national bank so that it does not retain this fixed-rate risk. The Bank also records fee income on these interest rate swaps based on the terms of the offsetting swaps with the bank counterparties.

The Bank originates construction loans to developers and commercial borrowers in and around its markets. The maximum loan to value limits for construction loans follow Federal Deposit Insurance Corporation ("FDIC") supervisory limits, up to a maximum of 85 percent. The Bank commits to provide the permanent mortgage financing on most of its construction loans on income-producing property. Advances on construction loans are made in accordance with a schedule reflecting the cost of the improvements. Construction loans include land acquisition loans up to a maximum 50 percent loan to value on raw land. Construction loans may have greater credit risk due to the dependence on completion of construction and other real estate improvements, as well as the sale or rental of the improved property. The Bank generally mitigates these risks with presale or preleasing requirements and phasing of construction.

Commercial and Industrial Loans ("C&I"). C&I loans are mostly managed through the Bank’s commercial middle market banking ~~organization.~~organization, as well as its Asset Based Lending Group, its Small Business Banking Group, and 44 Business Capital The Bank offers secured commercial term loans with repayment terms which are normally limited to the expected useful life of the asset being financed, and generally not exceeding ten years. The Bank also offers revolving loans, lines of credit, letters of credit, time notes and SBA guaranteed loans. Business lines of credit have adjustable rates of interest and can be committed or are payable on demand, subject to annual review and renewal. Commercial and industrial loans are generally secured by a variety of collateral such as accounts receivable, inventory and equipment, and are generally supported by personal guarantees. Loan-to-value ratios depend on the collateral type and generally do not exceed 80 percent of orderly liquidation ~~value.~~value or net book value as reported on the borrower’s financial statements. Some commercial loans may also be secured by liens on real estate. The Bank generally does not make unsecured commercial loans.

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Commercial and industrial loans are of higher risk and are made primarily on the basis of the borrower’s ability to make repayment from the cash flows of its business. Further, any collateral securing such loans may depreciate over time, may be difficult to monitor and appraise and may fluctuate in value. The Bank gives additional consideration to the borrower’s credit history and the guarantor’s capacity to help mitigate these risks. Additionally, the Bank uses loan structures including shorter terms, amortizations, and advance rate limitations to additionally mitigate credit risk. Credit enhancements in the form of additional collateral or guarantees are normally considered for start-up businesses without a qualifying cash flow history.

The Company considers ~~these~~commercial and industrial loans, together with its owner-occupied commercial real estate loans, as constituting the primary relationship based component of its commercial lending activities. The loans

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originated through the Company’s participation in the SBA’s Paycheck Protection Program (“PPP”) lending program in 2020 were classified as C&I loans. This program was an integral component of federal support programs in response to the emergence of the pandemic in the first half of 2020. These loans were viewed as zero credit risk due to the related SBA guarantee. These loans totaled $633 million at year-end 2020. Most of these loans were repaid via SBA forgiveness in 2021.

~~Asset Based Lending.~~ The Asset Based Lending Group serves the commercial middle market in New England, as well as the Bank’s market in northeastern New York and in the Mid-Atlantic. The group expands the Bank’s business lending offerings to include revolving lines of credit and term loans secured by accounts receivable, inventory, and other assets to manufacturers, distributors and select service companies experiencing seasonal working capital needs, rapid sales growth, a turnaround, buyout or recapitalization with credit needs generally ranging from $2 to $25 million. Asset based lending involves monitoring loan collateral so that outstanding balances are ~~always~~ properly ~~secured~~margined by business ~~assets,~~asset collateral, which reduces the risks associated with these loans.

Small Business ~~Banking.~~ Banking Group~~This group~~ is also referred to as Business Banking, and handles most business relationships which are smaller than the middle market category. Additionally, some smaller business needs are handled through the Bank’s retail branch system. Berkshire Bank also owns Firestone Financial Corp. ("Firestone"), which originated loans secured by business-essential equipment throughout the U.S. Key customer segments included the fitness, carnival, gaming, and entertainment industries. The origination of loans by Firestone was terminated in mid-2022 and the remaining $133 million portfolio at year-end 2022 is being run-off.

44 Business Capital is a dedicated SBA 7A program lending team based in the Philadelphia area. This team originates loans in the Northeast, Mid-Atlantic and nationally. 44 Business Capital also works with business banking and small business teams to provide SBA guaranteed loans to ~~business~~Business Banking Customers in Berkshire’s footprint. This team generally sells the guaranteed portions of these loans with servicing retained and the Bank retains the unguaranteed portions of the ~~loans.~~loans in its C&I loan portfolio. The unguaranteed loan balances are participated pari-passu with the SBA and are generally collateralized and supported by recourse to business principals. The Bank is a preferred SBA lender and closely manages the servicing portfolio pursuant to SBA requirements. This team is the Bank’s largest source of commercial lending fee ~~revenue, and it~~revenue. 44 Business Capital is ~~targeting to further expand these operations. Berkshire Bank also owns Firestone Financial Corp. ("Firestone"), which is located~~one of the top 20 bank originators of SBA 7A loans in ~~Needham, MA. Firestone originates loans secured by business-essential equipment through over 160 equipment distributors and manufacturers and directly via~~ the ~~end borrower in all 50 states. Key customer segments include the fitness, carnival, gaming, and entertainment industries.~~U.S.

Residential Mortgages. Through its mortgage banking operations, the Bank offers fixed-rate and adjustable-rate residential mortgage loans to individuals with maturities of up to 30 years that are fully amortizing with monthly loan payments. The majority of loans ~~are~~have been originated for investment, although the Bank targets more held for sale ~~with rate lock commitments which are recorded as derivative financial instruments. Mortgages are generally underwritten~~originations in the future. The majority of mortgages originated in 2022 were jumbo mortgages exceeding the maximum amounts according to U.S. government sponsored enterprise guidelines ~~designated~~and were viewed as ~~“A” or “A-” and referred to as “conforming loans”. The Bank also originates jumbo loans above conforming loan amounts which~~ generally ~~are~~ consistent with secondary market guidelines for these ~~loans and are often held in portfolio.~~loans. The Bank does not offer subprime mortgage lending programs. The Bank buys and sells seasoned mortgages primarily with smaller financial institutions operating in its markets. The Bank is developing correspondent channels in its markets as an additional business channel for newly originated mortgages.

The majority of the Bank’s secondary marketing is to U.S. secondary market investors on a servicing-released basis. The Bank also sells directly to government sponsored enterprises with servicing retained. Mortgage sales generally involve customary representations and warranties and are nonrecourse in the event of borrower default. The Bank is also an approved originator of loans for sale to the Federal Housing Administration (“FHA”), U.S. Department of Veteran Affairs (“VA”), state housing agency programs, and other government sponsored mortgage programs.

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Mortgage loan originations often include rate lock features intended to cover normal processing times. These rate locks introduce price risk into the Company’s operations and cause mortgage origination yields to lag market interest rates. The Bank does not offer interest-only or negative amortization mortgage loans. Adjustable rate mortgage loan interest rates may rise as interest rates rise, thereby increasing the potential for default. The Bank also originates construction loans which generally provide 15-month construction periods followed by a permanent mortgage loan, and follow the Bank’s normal mortgage underwriting guidelines. Mortgage banking also requires flexible and scalable operations due to the volatility of mortgage demand over time. Investor management is integral to maintaining the secondary market support that is ~~required~~a component for these operations. In 2021, the Bank entered into a third party relationship to service the residential mortgages and real estate secured consumer loans in its portfolio.

Consumer Loans. The Bank’s consumer loans are centrally underwritten and processed by its experienced consumer lending team based in Syracuse, New York. The ~~Bank’s primary consumer lending activity~~Bank engages in ~~recent years has been indirect auto lending. In 2019, the Company decided to end the origination of indirect auto loans.This decision reflects the Company’s heightened emphasis on community banking in its local markets. The Bank’s other major consumer lending activity is~~ prime home equity lending, following its conforming mortgage underwriting guidelines with more streamlined verifications and documentation. Most of these outstanding loans are

~~Table of Contents~~

prime based home equity lines with a maximum combined loan-to-value of 85 percent. Home equity line credit risks include the risk that higher interest rates will affect repayment and possible compression of collateral coverage on second lien home equity lines. The Company exited its prime indirect auto originations business in 2019 and has a remaining portfolio in runoff. In late 2021, the Company expanded its consumer lending in its markets through a third party relationship with financial technology company Upstart which originates unsecured consumer loans through the internet using artificial intelligence technology in combination with the Bank’s underwriting criteria. The Bank suspended originating loans through this partnership in mid-2022 due to the possible impact of a potential economic slowdown.

Maturity and Sensitivity of Loan Portfolio. The following table shows contractual final maturities of loans at year-end ~~2020.~~2022. The contractual maturities do not reflect premiums, discounts, deferred costs, or prepayments.

Item 1 - Table 2A - Loan Contractual Maturity - Scheduled loan amortizations are not included in the maturities presented.


Contractual Maturity	Contractual Maturity	One Year		One to		More Than				Contractual Maturity	One Year		One to		Five to		More Than
(In thousands)	(In thousands)	or Less		Five Years		Five Years		Total		(In thousands)	or Less		Five Years		Fifteen Years		Fifteen Years		Total
Loans:	Loans:									Loans:
Construction	Construction	$	80,625	$	206,398	$	167,490	$	454,513	Construction	$	12,852	$	233,495	$	64,985	$	8,120	$	319,452
Commercial multifamily	Commercial multifamily	32,296		191,876		259,178		483,350		Commercial multifamily	18,565		206,013		393,341		2,169		620,088
Commercial real estate owner occupied	Commercial real estate owner occupied	49,176		171,991		331,246		552,413		Commercial real estate owner occupied	27,964		177,362		353,804		81,359		640,489
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	187,556		1,062,087		869,620		2,119,263		Commercial real estate non-owner occupied	280,368		1,280,002		889,709		46,158		2,496,237
Commercial and industrial	Commercial and industrial	218,898		1,404,958		319,308		1,943,164		Commercial and industrial	236,565		948,245		246,527		13,899		1,445,236

Residential real estate	Residential real estate	12,308		37,218		1,882,155		1,931,681		Residential real estate	2,329		32,703		231,302		2,046,113		2,312,447
Home equity	Home equity	3,207		6,077		284,697		293,981		Home equity	428		2,333		71,894		152,795		227,450
Consumer other	Consumer other	10,022		229,877		63,255		303,154		Consumer other	7,962		208,030		43,577		14,341		273,910
Total	Total	$	594,088	$	3,310,482	$	4,176,949	$	8,081,519	Total	$	587,033	$	3,088,183	$	2,295,139	$	2,364,954	$	8,335,309

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Item 1 - Table 2B - Total loans due after one year as of December 31, 2022 - fixed and variable interest rates


(In thousands)	(In thousands)	Fixed Interest Rate		Variable Interest Rate		Total		(In thousands)	Fixed Interest Rate		Variable Interest Rate		Total
Loans:	Loans:							Loans:
Construction	Construction	$	2,969	$	370,919	$	373,888	Construction	$	75,136	$	231,464	$	306,600
Commercial multifamily	Commercial multifamily	135,881		315,173		451,054		Commercial multifamily	130,141		471,382		601,523
Commercial real estate owner occupied	Commercial real estate owner occupied	165,731		337,506		503,237		Commercial real estate owner occupied	228,887		383,638		612,525
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	600,778		1,330,929		1,931,707		Commercial real estate non-owner occupied	817,576		1,398,293		2,215,869
Commercial and industrial	Commercial and industrial	1,042,474		681,792		1,724,266		Commercial and industrial	360,681		847,990		1,208,671

Residential real estate	Residential real estate	1,450,034		469,339		1,919,373		Residential real estate	1,715,222		594,896		2,310,118
Home equity	Home equity	6,100		284,674		290,774		Home equity	2,308		224,714		227,022
Consumer other	Consumer other	288,582		4,550		293,132		Consumer other	257,550		8,398		265,948
Total	Total	$	3,692,549	$	3,794,882	$	7,487,431	Total	$	3,587,501	$	4,160,775	$	7,748,276

Loan Administration. Lending activities are governed by a loan policy approved by the Board’s Risk Management, Capital, and ~~Capital~~Compliance Committee. Internal staff perform and monitor post-closing loan documentation review, quality control, and commercial loan administration. The lending staff assigns a risk rating to all commercial loans, excluding point scored small business loans. Management primarily relies on internal risk management staff to review the risk ratings of the majority of commercial loan balances.

The Bank’s lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by the Risk Management, Capital and ~~Capital~~Compliance Committee and Management, under the leadership of the Chief Risk Officer. The Bank’s loan underwriting is based on a review of certain factors including risk ratings, repayment capacity, recourse, loan-to-value ratios, and material policy exceptions. The Risk Management, Capital and ~~Capital~~Compliance Committee has established individual and combined loan limits and lending approval authorities. Management’s Executive Loan Committee is responsible for commercial loan approvals in accordance with these standards and procedures. Generally, pass rated secured commercial loans can be approved jointly up to $7 million by the ~~regional lending manager~~business line Managing Director and ~~regional credit officer.~~Credit Director. Loans up to ~~$10~~$12.5 million can be approved with the additional signature of the Chief Credit Officer. Loans in excess of this amount, and designated lower rated loans are approved by the

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Executive Loan Committee. The Bank tracks loan underwriting exceptions and exception reports are actively monitored by executive lending management.

The Bank’s lending activities are conducted by its salaried and commissioned loan personnel. Designated salaried branch staff originate conforming residential mortgages and receive bonuses based on overall performance. Additionally, the Bank employs commissioned residential mortgage originators. Commercial lenders receive salaries and are eligible for bonuses based on individual and overall performance. The Bank purchases whole loans and participations in loans from banks headquartered in its market and from outside of its market. These loans are underwritten according to the Bank’s underwriting criteria and procedures and are generally serviced by the originating lender under terms of the applicable agreement. The Bank routinely sells newly originated, fixed-rate residential mortgages in the secondary market. Customer rate locks are offered without charge and rate locked applications are generally committed for forward sale or hedged with derivative financial instruments to minimize interest rate risk pending delivery of the loans to the investors. The Bank also sells interest rate derivatives to larger commercial borrowers desiring to fix their interest rates through interest rate swaps, and includes these derivatives in its underwriting and administrative procedures.

The Bank also sells residential mortgages and commercial loan participations on a non-recourse basis. The Bank issues loan commitments to its prospective borrowers conditioned on the occurrence of certain events. Loan origination commitments are made in writing on specified terms and conditions and are generally honored for up to 60 days from ~~approval;~~approval and may be honored for up to six months; some commercial commitments are made for longer terms. The Company also monitors pipelines of loan applications and has processes for issuing letters of interest for commercial loans and pre-approvals for residential mortgages, all of which are generally conditional on completion of underwriting prior to the issuance of formal commitments.

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The loan policy sets certain limits on concentrations of credit and requires periodic reporting of concentrations to the Risk Management, Capital and ~~Capital~~Compliance Committee. The Bank has heightened monitoring of its 25 largest borrower relationships. Commercial real estate is generally managed within federal regulatory monitoring guidelines of 300% of risk based capital for non-owner occupied commercial real estate and 100% for construction loans. The Bank has hold limits for numerous categories of commercial specialty lending including healthcare, hospitality, designated franchises, and leasing, as well as hold limits for designated commercial loan participations purchased. In most cases, these limits are below 100% of risk based capital for all outstanding loans in each monitored category.

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Problem Assets. The Bank prefers to work with borrowers to resolve problems rather than proceeding to foreclosure. For commercial loans, this may result in a period of forbearance or restructuring of the loan, which is normally done at current market terms and does not result in a “troubled” loan designation. For residential mortgage loans, the Bank generally follows FDIC guidelines to attempt a restructuring that will enable owner-occupants to remain in their home. However, if these processes fail to result in a performing loan, then the Bank generally will initiate foreclosure or other proceedings no later than the 90th day of a delinquency, as necessary, to minimize any potential loss. Management reports delinquent loans and non-performing assets to the Board quarterly. Loans are generally removed from accruing status when they reach 90 days delinquent, except for certain loans which are well secured and in the process of collection. Loan collections are managed by a combination of the related business units and the Bank’s special assets group, which focuses on larger, riskier collections and the recovery of purchased credit deteriorated loans.

Real estate obtained by the Bank as a result of loan collections, including foreclosures, is classified as real estate owned until sold. When property is acquired it is recorded at fair market value less estimated selling costs at the date of foreclosure, establishing a new cost basis. Holding costs and decreases in fair value after acquisition are expensed. Interest income ~~that would have been recorded for 2020, if non-accruing loans had been current~~

~~according to their original terms, amounted to $6.8 million. Included in the amount is $64 thousand related to~~

~~troubled debt restructurings. The amount of interest income on those loans that was recognized in net income in~~

~~2020 was $4.8 million. Included in this amount is $27 thousand related to troubled debt restructurings. Interest~~

~~income~~ on accruing troubled debt restructurings totaled ~~$1.1~~$0.1 million for ~~2020.~~2022. The total carrying value of

troubled debt restructurings was ~~$20.5~~$12.4 million at year-end.

~~Item 1 - Table 3 - Problem Assets~~

(In thousands) 2020 2019 2018 2017 2016
Non-accruing loans:
Construction $ — $ — $ 150 $ 159 $ —
Commercial multifamily 757 811 474 263 363
Commercial real estate owner occupied 4,509 15,389 16,555 3,747 2,841
Commercial real estate non-owner occupied 29,572 1,031 2,056 2,023 2,136
Commercial and industrial 12,441 11,218 6,003 7,314 7,523
Residential real estate 9,711 6,411 3,394 4,062 4,468
Home equity 2,654 1,798 1,662 3,645 3,192
Consumer other 5,304 2,982 2,131 1,686 1,717
Total non-performing loans $ 64,948 $ 39,640 $ 32,425 $ 22,899 $ 22,240
Other real estate owned 149 — — — 151
Repossessed assets 1,932 858 1,209 1,147 —
Total non-performing assets $ 67,029 $ 40,498 $ 33,634 $ 24,046 $ 22,391
Total non-performing loans/total loans 0.80 % 0.42 % 0.36 % 0.28 % 0.34 %
Total non-performing assets/total assets 0.52 % 0.31 % 0.28 % 0.21 % 0.24 %

Asset Classification and Delinquencies. The Bank performs an internal analysis of its commercial loan portfolio and assets to classify such loans and assets in a manner similar to that employed by federal banking regulators. There are four classifications for loans with higher than normal risk: Loss, Doubtful, Substandard, and Special Mention. Usually an asset classified as Loss is fully charged-off. Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values questionable, and there is a high possibility of loss. Assets that do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses, are designated Special Mention. Please see the additional discussion of non-accruing and potential problem loans in Item 7 and additional information in notes to the financial statements.Impaired loans acquired in

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business combinations are normally rated Substandard or lower and the fair value assigned to such loans at acquisition includes a component for the possibility of loss if deficiencies are not corrected.

Allowance for Credit Losses on Loans. The Bank’s loan portfolio is regularly reviewed by management to evaluate the adequacy of the allowance for ~~loan losses.~~credit losses on loans. Prior to 2020, the allowance represented management’s estimate of inherent incurred losses that are probable and estimable as of the date of the financial statements. The allowance included a specific component for impaired loans (a “specific loan loss reserve”) and a general component for portfolios of all outstanding loans (a “general loan loss reserve”). At the time of acquisition, no allowance for loan losses was assigned to loans acquired in business combinations. These loans were initially recorded at fair value, including the impact of expected losses, as of the acquisition date. An allowance on such loans was established subsequent to the acquisition date through the provision for loan losses based on an analysis of factors including environmental factors.

On January 1, 2020, the Company adopted the new loan loss allowance standard based on Current Expected Credit losses (“CECL”). Under this standard, management makes estimates of future economic conditions over the life of the loan portfolio and other future conditions and arrives at a reasonable estimate of expected loan losses. The basis of the allowance changed from an incurred model to an expected model based on this standard. As a result, the amount of the loan loss allowance and the loan loss provision beginning in 2020 is not comparable to prior years. Also, since different banks may use different estimates and arrive at different expectations, comparisons between banks are more difficult. Further, since the accounting is based on future projections our estimates may change significantly from period to period, the amounts of the allowance and provision may be more volatile than under the previous model. Further information about the allowance is discussed further in Note 1 - Summary of Significant Accounting Policies of the Consolidated Financial Statements.

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Management believes that it uses the best information available to establish the allowance. However, future adjustments to the allowance for ~~loan~~credit losses on loans may be necessary, and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making its determinations. There can be no assurance that the existing allowance for ~~loan~~credit losses is adequate or that increases will not be necessary should the quality of any loan or loan portfolio category deteriorate. Regulatory agencies may require the Bank to make additional provisions for credit losses based upon judgments different from those of management. Any material increase in the allowance may adversely affect the Bank’s financial condition and results of operations.

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Item 1 - Table 43 - ~~Allowance for~~ Credit ~~Losses~~Quality Ratios

(In thousands) 2020 2019 2018 2017 2016
Balance at beginning of year $ 63,575 $ 61,469 $ 51,834 $ 43,998 $ 39,308
Impact of ASC 326 25,434 — — — —
Charged-off loans:
Construction $ 834 $ — $ — $ — $ —
Commercial multifamily 100 837 32 86 50
Commercial real estate owner occupied 8,686 5,342 4,441 1,041 841
Commercial real estate non-owner occupied 11,653 934 3,007 3,181 2,152
Commercial and industrial 19,328 24,370 4,795 4,219 5,714
Residential real estate 2,285 1,180 1,481 2,033 2,926
Home equity 347 742 1,103 1,112 498
Consumer other 2,562 3,149 3,152 2,912 1,845
Total charged-off loans 45,795 36,554 18,011 14,584 14,026
Recoveries on charged-off loans:
Construction $ — $ — $ — $ — $ —
Commercial multifamily 100 — 11 59 60
Commercial real estate owner occupied 1,053 160 68 109 211
Commercial real estate non-owner occupied 307 1,094 289 52 33
Commercial and industrial 4,285 1,425 874 432 386
Residential real estate 1,359 186 191 321 306
Home equity 292 47 307 15 10
Consumer other 609 329 455 407 348
Total recoveries 8,005 3,241 2,195 1,395 1,354
Net loans charged-off 37,790 33,313 15,816 13,189 12,672
Provision for credit losses 76,083 35,419 25,451 21,025 17,362
Balance at end of year (1)
$ 127,302 $ 63,575 $ 61,469 $ 51,834 $ 43,998
Ratios:
Net charge-offs/average loans 0.41 % 0.35 % 0.18 % 0.19 % 0.21 %
Recoveries/charged-off loans 17.48 8.87 12.19 9.57 9.65
Net loans charged-off/allowance for credit losses 29.69 52.40 25.73 25.44 28.80
Non-accrual loans/total loans 0.80 0.42 0.36 0.28 0.34
Allowance for credit losses/total loans 1.58 0.67 0.68 0.62 0.67
Allowance for credit losses/non-accruing loans 196.01 160.38 189.57 226.36 197.83

~~(1) Beginning January 1, 2020, the allowance calculation is based on current expected loss methodology. Prior to January 1, 2020, the allowance calculation was based on the incurred loss model.~~


	2022		2021		2020



























Ratios:
Allowance for credit losses on loans/total loans	1.15	%	1.55	%	1.58	%
Non-accrual loans/total loans	0.37	%	0.52	%	0.80	%
Allowance for credit losses/non-accruing loans	309.41	%	300.33	%	196.01	%
Net charge-offs/average loans	0.27	%	0.29	%	0.41	%

Item 1 - Table 3.a - Net charge-offs to average loans for each loan category


	2022		2021		2020
Net charge-offs to average loans:
Construction	—	%	—	%	0.01	%
Commercial multifamily	—		—		—
Commercial real estate owner occupied	—		0.02		0.08
Commercial real estate non-owner occupied	0.06		0.18		0.12
Commercial and industrial	0.20		0.09		0.16
Residential real estate	(0.01)		—		0.01
Home equity	—		—		—
Consumer other	0.02		0.01		0.02

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The following tables present year-end data for the approximate allocation of the allowance for ~~loan~~credit losses on loans by loan categories at the dates indicated (including an apportionment of any unallocated amount). The first table shows for each category the amount of the allowance allocated to that category as a percentage of the outstanding loans in that category. The second table shows the allocated allowance together with the percentage of loans in each category to total loans. Management believes that the allowance can be allocated by category only on an approximate basis. The allocation of the allowance to each category is not indicative of future losses and does not restrict the use of any of the allowance to absorb losses in any category. ~~Due to the impact of accounting standards for acquired loans, data in the accompanying tables may not be comparable between accounting periods.~~

Item 1 - Table 5A4A - Allocation of Allowance for Credit Losses on Loans by Category (as of year-end)

2020 2019 2018 2017 2016
(Dollars in thousands) Amount
Allocated Percent Allocated to Total Loans in Each Category Amount
Allocated Percent Allocated to Total Loans in Each Category Amount
Allocated Percent Allocated to Total Loans in Each Category Amount
Allocated Percent Allocated to Total Loans in Each Category Amount
Allocated Percent Allocated to Total Loans in Each Category
Construction $ 5,111 1.1 % $ 2,713 0.6 % $ 2,030 0.6 % $ 1,993 0.5 % $ 2,104 0.6 %
Commercial multifamily 5,916 1.2 4,413 0.7 4,312 0.8 3,389 0.7 2,790 0.8
Commercial real estate owner occupied 12,380 2.2 4,880 0.7 5,083 0.9 4,847 0.8 4,865 0.8
Commercial real estate non-owner occupied 35,850 1.7 16,344 0.8 12,940 0.7 10,000 0.6 8,690 0.7
Commercial and industrial 25,013 1.3 20,099 1.1 17,558 0.9 14,975 0.9 10,597 1.0
Residential real estate 28,491 1.5 9,970 0.4 11,659 0.4 10,466 0.5 8,906 0.4
Home equity 6,482 2.2 1,470 0.4 1,772 0.5 1,224 0.3 1,776 0.5
Consumer other 8,059 2.7 3,686 0.8 6,115 0.9 4,940 0.8 4,270 0.8
Total (1)
$ 127,302 1.6 % $ 63,575 0.7 % $ 61,469 0.7 % $ 51,834 0.6 % $ 43,998 0.7 %

~~(1) Beginning January 1, 2020, the allowance calculation is based on current expected loss methodology. Prior to January 1, 2020, the allowance calculation was based on the incurred loss model.~~


	2022				2021				2020
(Dollars in thousands)	Amount Allocated		Percent Allocated to Total Loans in Each Category		Amount Allocated		Percent Allocated to Total Loans in Each Category		Amount Allocated		Percent Allocated to Total Loans in Each Category
Construction	$	1,227	0.4	%	$	3,206	1.0	%	$	5,111	1.1	%
Commercial multifamily	1,810		0.3		6,120		1.2		5,916		1.2
Commercial real estate owner occupied	10,739		1.7		12,752		2.1		12,380		2.2
Commercial real estate non-owner occupied	30,724		1.2		32,106		1.5		35,850		1.7
Commercial and industrial	18,743		1.3		22,584		1.8		25,013		1.3
Residential real estate	18,666		0.8		22,734		1.5		28,491		1.5
Home equity	2,173		1.0		4,006		1.6		6,482		2.2
Consumer other	12,188		4.5		2,586		1.3		8,059		2.7
Total	$	96,270	1.2	%	$	106,094	1.6	%	$	127,302	1.6	%

Item 1 - Table 5B4B - Allocation of Allowance for Credit Losses on Loans (as of year-end)


		2020				2019				2018				2017				2016					2022				2021				2020
(Dollars in thousands)	(Dollars in thousands)	Amount Allocated		Percent of Loans in Each Category to Total Loans		Amount Allocated		Percent of Loans in Each Category to Total Loans		Amount Allocated		Percent of Loans in Each Category to Total Loans		Amount Allocated		Percent of Loans in Each Category to Total Loans		Amount Allocated		Percent of Loans in Each Category to Total Loans		(Dollars in thousands)	Amount Allocated		Percent of Loans in Each Category to Total Loans		Amount Allocated		Percent of Loans in Each Category to Total Loans		Amount Allocated		Percent of Loans in Each Category to Total Loans
Construction	Construction	$	5,111	5.6	%	$	2,713	4.7	%	$	2,030	4.1	%	$	1,993	4.6	%	$	2,104	5.4	%	Construction	$	1,227	3.8	%	$	3,206	4.8	%	$	5,111	5.6	%
Commercial multifamily	Commercial multifamily	5,916		6.0		4,413		6.7		4,312		6.1		3,389		6.0		2,790		5.3		Commercial multifamily	1,810		7.4		6,120		7.5		5,916		6.0
Commercial real estate owner occupied	Commercial real estate owner occupied	12,380		6.8		4,880		7.1		5,083		6.2		4,847		7.8		4,865		9.1		Commercial real estate owner occupied	10,739		7.7		12,752		8.9		12,380		6.8
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	35,850		26.2		16,344		23.0		12,940		20.4		10,000		20.5		8,690		19.1		Commercial real estate non-owner occupied	30,724		30.0		32,106		31.6		35,850		26.2
Commercial and industrial	Commercial and industrial	25,013		24.0		20,099		19.4		17,558		21.6		14,975		21.0		10,597		15.9		Commercial and industrial	18,743		17.4		22,584		18.8		25,013		24.0
Residential real estate	Residential real estate	28,491		23.9		9,970		30.0		11,659		30.2		10,466		27.3		8,906		31.3		Residential real estate	18,666		27.7		22,734		21.8		28,491		23.9
Home equity	Home equity	6,482		3.7		1,470		4.0		1,772		4.2		1,224		4.9		1,776		5.5		Home equity	2,173		2.7		4,006		3.7		6,482		3.7
Consumer other	Consumer other	8,059		3.8		3,686		5.1		6,115		7.2		4,940		7.9		4,270		8.4		Consumer other	12,188		3.3		2,586		2.9		8,059		3.8
Total ~~(1)~~	Total ~~(1)~~	$	127,302	100.0	%	$	63,575	100.0	%	$	61,469	100.0	%	$	51,834	100.0	%	$	43,998	100.0	%	Total ~~(1)~~	$	96,270	100.0	%	$	106,094	100.0	%	$	127,302	100.0	%

~~(1) Beginning January 1, 2020, the allowance calculation is based on current expected loss methodology. Prior to January 1, 2020, the allowance calculation was based on the incurred loss model.~~

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INVESTMENT SECURITIES ACTIVITIES

The securities portfolio provides cash flow to protect the safety of customer deposits and as a potential source of liquidity. The portfolio is also used to manage interest rate risk and to earn a reasonable return on investment. Decisions are made in accordance with the Company’s investment policy and include consideration of risk, return, duration, and portfolio concentrations. Day-to-day oversight of the portfolio rests with the Chief Financial Officer and the Treasurer. The Enterprise Risk Management/Asset-Liability Committee meets multiple times each quarter and reviews investment strategies. The Risk Management, Capital and ~~Capital~~Compliance Committee of the Board of Directors provides general oversight of the investment function.

Historically, the Company has maintained short-term investment balances as a component of cash and cash equivalents which are a component of short-term liquidity management. Due to the pandemic, with a surge in demand deposits and a reduction in loan balances, the balance of short-term investments increased in 2020 and 2021 due to the comparatively low yields and spreads on longer duration investment securities. Most short-term investments have been maintained at the Federal Reserve Bank of Boston.

The Company has historically maintained a high-quality portfolio of managed duration mortgage-backed securities, together with a portfolio of municipal bonds including national and local issuers and local economic development bonds issued to non-profit organizations. Nearly all of the mortgage-backed securities are issued by Ginnie Mae, Fannie Mae, or Freddie Mac, consisting principally of collateralized mortgage obligations (generally consisting of planned amortization class bonds and pass-through securities). ~~Other than securities issued by the above agencies, no other issuer concentrations exceeding 10% of stockholders’ equity existed at year-end 2020.~~ The municipal portfolio provides tax-advantaged yield, and the local economic development bonds were originated by the Company to area borrowers. The Company invests in investment grade corporate bonds and Agency commercial mortgage-backed securities. Purchases of non-investment grade fixed-income securities have consisted primarily of capital instruments issued by local and regional financial institutions. The Company also invests in funds financing community reinvestment projects. The Bank owns restricted equity in the Federal Home Loan Bank of Boston (“FHLBB”) based on its operating relationship with the FHLBB. The Company has various hold limits limiting credit and instrument exposures.

The Company owns an interest rate swap against a tax advantaged economic development bond issued to a local not-for-profit organization, and as a result this security is carried as a trading account security. The Company generally designates debt securities as available for sale, but sometimes designates longer-duration municipal and other securities as held to maturity based on its intent. This also allows the Company to more effectively manage the potential impact of longer-duration, fixed-rate securities on ~~stockholders'~~shareholders' equity in the event of rising interest rates.

~~The following tables present the year-end amortized cost and fair value of the Company's securities, by type of security, for the three years indicated.~~

~~Item 1 - Table 6A Amortized Cost and Fair Value of Securities~~

2020 2019 2018
(In thousands) Amortized
Cost Fair
Value Amortized
Cost Fair
Value Amortized
Cost Fair
Value
Securities available for sale
Municipal bonds and obligations $ 90,273 $ 97,803 $ 104,325 $ 110,138 $ 109,648 $ 111,207
Mortgage-backed securities 1,452,526 1,483,608 1,037,205 1,043,652 1,182,552 1,160,130
Other bonds and obligations 111,178 113,821 155,809 157,765 129,073 128,310
Total securities available for sale $ 1,653,977 $ 1,695,232 $ 1,297,339 $ 1,311,555 $ 1,421,273 $ 1,399,647
Securities held to maturity
Municipal bonds and obligations $ 246,520 $ 266,626 $ 252,936 $ 266,026 $ 264,524 $ 264,492
Mortgage-backed securities 214,907 221,472 86,291 89,191 89,273 88,442
Tax advantaged economic development bonds 3,369 3,462 18,456 17,764 19,718 18,042
Other bonds and obligations 295 295 296 296 248 248
Total securities held to maturity $ 465,091 $ 491,855 $ 357,979 $ 373,277 $ 373,763 $ 371,224
Trading account security $ 8,655 $ 9,708 $ 9,390 $ 10,769 $ 10,090 $ 11,212
Marketable equity securities 18,061 18,513 37,138 41,556 55,471 56,638
Restricted equity securities 34,873 34,873 48,019 48,019 77,344 77,344

~~Item 1 - Table 6B - Amortized Cost and Fair Value of Securities~~

2020 2019 2018
(In thousands) Amortized
Cost Fair
Value Amortized
Cost Fair
Value Amortized
Cost Fair
Value
U.S. Treasuries, other Government agencies and corporations $ 1,685,494 $ 1,723,593 $ 1,160,634 $ 1,174,399 $ 1,327,296 $ 1,305,210
Municipal bonds and obligations and tax advantaged securities 348,817 377,599 385,107 404,697 403,980 404,953
Other 146,346 148,989 204,124 206,080 206,665 205,902
Total Securities $ 2,180,657 $ 2,250,181 $ 1,749,865 $ 1,785,176 $ 1,937,941 $ 1,916,065

~~The schedule includes available-for-sale and held-to-maturity securities, as well as the trading security, marketable equity securities, and restricted equity securities.~~

~~Table of Contents~~

The following table summarizes year-end ~~2020~~2022 amortized cost, weighted average yields, and contractual maturities of debt securities. Yields are shown on a fully taxable equivalent ~~basis.~~basis and are based on amortized cost. A significant portion of the mortgage-based securities are planned amortization class bonds. Their expected durations ~~are~~were targeted at 3-5 years, ~~at current~~but durations lengthened due to the slower prepayment speeds of all mortgage related instruments in the environment of rising interest rates ~~but the~~in 2022. The contractual maturities shown below reflect the underlying maturities of the collateral mortgages. Additionally, the mortgage-based securities maturities shown below are based on final maturities and do not include scheduled amortization. Yields include amortization and accretion of premiums and discounts. There were no material changes in the tax-exempt portfolio.

Item 1 - Table 75 - Weighted Average Yield


		One Year or Less				More than One Year to Five Years				More than Five Years to Ten Years				More than Ten Years				Total					One Year or Less				More than One Year to Five Years				More than Five Years to Ten Years				More than Ten Years				Total
(In millions)	(In millions)	Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		(In millions)	Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield
Municipal bonds and obligations	Municipal bonds and obligations	$	4.1	4.0	%	$	7.0	4.0	%	$	37.6	5.0	%	$	288.1	4.0	%	$	336.8	5.0	%	Municipal bonds and obligations	$	1.4	5.2	%	$	7.4	4.3	%	$	39.5	4.9	%	$	284.4	4.1	%	$	332.7	4.3	%
Mortgage-backed securities	Mortgage-backed securities	—		—	%	11.2		2.0	%	154.6		2.0	%	1,501.6		2.0	%	1,667.4		2.0	%	Mortgage-backed securities	0.1		2.1	%	43.4		2.2	%	229.0		1.8	%	1,581.1		1.7	%	1,853.6		1.5	%
Other bonds and obligations	Other bonds and obligations	31.1		—	%	4.4		5.0	%	53.3		5.0	%	26.0		3.0	%	114.8		3.0	%	Other bonds and obligations	12.1		3.6	%	6.1		7.1	%	38.7		4.3	%	1.5		3.8	%	58.4		2.0	%
Total	Total	$	35.2	0.6	%	$	22.6	3.5	%	$	245.5	3.3	%	$	1,815.7	2.2	%	$	2,119.0	2.3	%	Total	$	13.6	3.8	%	$	56.9	3.0	%	$	307.2	2.5	%	$	1,867.0	2.1	%	$	2,244.7	1.9	%

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DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS

Deposits are the major source of funds for the Bank’s lending and investment activities. Deposit accounts are the primary product and service interaction with the Bank’s customers. The Bank serves personal, commercial, non-profit, and municipal deposit customers. Most of the Bank’s deposits are generated from the areas surrounding its branch offices. The Bank offers a wide variety of deposit accounts with a range of interest rates and terms. The Bank also periodically offers promotional interest rates and terms for limited periods of time. The Bank’s deposit accounts consist of demand deposits (non-interest-bearing checking), NOW (interest-bearing checking), regular savings, money market savings, and time certificates of deposit. Additionally, the Bank offers a variety of retirement deposit accounts to personal and business customers.

The Bank emphasizes its transaction deposits – checking and NOW accounts – for personal accounts and checking accounts promoted to businesses. These accounts have the lowest marginal cost to the Bank and are also often a core account for a customer relationship. The Bank offers a courtesy overdraft program to improve customer service, and also provides debit cards and other electronic fee producing payment services to transaction account customers. The Bank offers targeted online and mobile deposit account opening capabilities for personal accounts. The Bank promotes remote deposit capture devices so that commercial accounts can make deposits from their place of business. ~~Additionally, the Bank offers a variety of retirement deposit accounts to personal and business customers.~~

Deposit related fees ~~are a significant source of fee income to the Bank, including~~include overdraft ~~and~~fees, interchange fees related to debit card ~~usage. Deposit~~usage, service ~~fee income also includes~~charges, and other miscellaneous transactions and convenience services sold to customers through the branch system as part of an overall service relationship. The Bank offers compensating balance arrangements for larger business customers as an alternative to fees charged for checking account services. Berkshire’s Business Connection is a personal financial services benefit package designed for the employees of its business customers.

In addition to providing service through its branches, Berkshire provides services to deposit customers through its private bankers, MyBankers, commercial/small business relationship managers, and call center representatives. Commercial cash management services are an important commercial service offered to commercial and governmental depositors and a fee income source to the bank. The Bank also operates a commercial payment processing business that serves regional and national payroll service bureau ~~customers.~~ customers, with the majority of volume originated by a leading national provider of payroll and human capital management software solutions.These payroll deposits often fluctuate daily by hundreds of millions of dollars depending on payroll cycles. Payroll deposits were concentrated in money market deposit balances at year-end 2022. The Bank was one of the top 50 bank ACH originators by volume in 2021 based on the most recent data available.

Online banking and mobile banking functionality is increasingly important as a component of deposit account access and service delivery. The Bank is also gradually deploying its MyTeller video tellers to complement and extend its service capabilities in its branches. The Bank has partnered with a third party fintech company to provide enhanced online deposit account opening services and plans in 2023 to implement a new online and mobile banking platform developed in partnership with this provider as an important milestone in its Digitouch

strategy. The Company also is monitoring the development of payment services which are growing in their importance in the personal and commercial deposit markets.

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The following table presents information concerning average balances and weighted average interest rates on the Bank’s interest-bearing deposit accounts for the years indicated.

Item 1 - Table 86 - Average Balance and Weighted Average Rates for Deposits


		2020						2019						2018							2022						2021						2020
(In millions)	(In millions)	Average Balance		Percent of Total Average Deposits		Weighted Average Rate		Average Balance		Percent of Total Average Deposits		Weighted Average Rate		Average Balance		Percent of Total Average Deposits		Weighted Average Rate		(In millions)	Average Balance		Percent of Total Average Deposits		Weighted Average Rate		Average Balance		Percent of Total Average Deposits		Weighted Average Rate		Average Balance		Percent of Total Average Deposits		Weighted Average Rate

Demand	Demand	$	2,324.6	23	%	—	%	$	1,745.2	18	%	—	%	$	1,622.4	19	%	—	%	Demand	$	2,914.9	30	%	—	%	$	3,008.5	30	%	—	%	$	2,324.6	23	%	—	%
NOW and other	NOW and other	1,216.6		12		0.3		1,053.9		11		0.6		824.7		9		0.5		NOW and other	1,416.7		14		0.4		976.4		10		0.1		1,216.6		12		0.3
Money market	Money market	2,713.6		26		0.6		2,542.6		26		1.2		2,432.2		28		0.9		Money market	2,809.1		29		0.5		3,293.5		32		0.2		2,713.6		26		0.6
Savings	Savings	914.1		9		0.1		798.2		8		0.2		740.8		9		0.2		Savings	1,114.8		11		0.1		1,111.6		11		0.1		914.1		9		0.1
Time	Time	3,102.9		30		1.7		3,754.2		37		2.0		3,075.5		35		1.7		Time	1,541.7		16		0.9		1,678.9		17		0.9		3,102.9		30		1.7
Total	Total	$	10,271.8	100	%	0.7	%	$	9,894.1	100	%	1.2	%	$	8,695.6	100	%	0.9	%	Total	$	9,797.2	100	%	0.9	%	$	10,068.9	100	%	0.3	%	$	10,271.8	100	%	0.7	%

Estimated uninsured deposits were $3.8 billion and $3.7 billion at December 31, 2022 and 2021, respectively. At year-end ~~2020,~~2022, time deposits in excess of the ~~Bank had~~FDIC insurance limit and estimated time ~~deposit accounts in amounts of $100 thousand or more maturing~~deposits that are otherwise uninsured by maturity were as follows:

Item 1 - Table 97 - Maturity of Deposits >$~~100,000~~250,000


Maturity Period	Maturity Period	Amount		Weighted Average Rate		Maturity Period	Time Deposits that Meet or Exceed the FDIC Insurance Limit		Estimated Aggregate Time Deposits that Meet or Exceed the FDIC Insurance Limit and Otherwise Uninsured Time Deposits
(In thousands)	(In thousands)					(In thousands)
Three months or less	Three months or less	$	458,997	1.46	%	Three months or less	$	38,117	$	59,192
Over 3 months through 6 months	Over 3 months through 6 months	337,721		1.14		Over 3 months through 6 months	42,668		42,836
Over 6 months through 12 months	Over 6 months through 12 months	359,777		1.13		Over 6 months through 12 months	142,382		164,035
Over 12 months	Over 12 months	565,266		1.26		Over 12 months	218,675		266,841
Total	Total	$	1,721,761	1.26	%	Total	$	441,842	$	532,904

The Bank’s deposits are insured by the FDIC. The Bank utilizes brokered time deposits to broaden its funding base, augment its interest rate risk management vehicles, and to support loan growth. The Bank also offers brokered reciprocal money market arrangements to provide additional deposit protection to certain large commercial and institutional accounts. These balances are viewed as part of overall relationship balances with regional customers. Brokered deposits are sourced through selected Board approved ~~brokers; these deposits are viewed as potentially more volatile than other deposits~~brokers and are managed as a component of the Bank's liquidity policies.

The Company also uses borrowings from the FHLBB as an additional source of funding, particularly for daily cash management and for funding longer duration assets. FHLBB advances also provide more pricing and option alternatives for particular asset/liability needs. The FHLBB functions as a central reserve bank providing credit for member institutions. As an FHLBB member, the Company is required to own capital stock of the organization. Borrowings from this institution are secured by a blanket lien on most of the Bank’s mortgage loans and mortgage-related securities, as well as certain other assets. Advances are made under several different credit programs with different lending standards, interest rates, and range of maturities. The Bank also has access to borrowings from the Federal Reserve Bank of Boston.

The Company had a $15 million trust preferred obligation and a $7 million trust preferred obligation outstanding, as well as ~~$74~~$100 million in ~~senior~~ subordinated notes at year-end ~~2020.~~2022. The Company’s common stock is listed on the New York Stock ~~Exchange.~~Exchange under the ticker “BHLB”. Subject to certain limitations, the Company can also choose to issue common stock, preferred stock, subordinated debt, or senior debt in public stock offerings or private placements.~~In 2020, the Company renewed its universal securities shelf registration with the SEC to facilitate potential future capital issuances.~~The Company ~~has maintained~~maintains a shelf registration as part of its routine capital ~~management for many years.~~management.

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DERIVATIVE FINANCIAL INSTRUMENTS

The Company offers interest rate swaps to commercial loan customers who wish to fix the interest rates on their loans, and the Company backs these swaps with offsetting swaps with national bank counterparties. With other lending institutions, the Company engages in risk participation agreements. These arrangements are structured similarly to its swaps with commercial borrowers, but a different bank is the lead underwriter. The Company gets paid a fee to take on the risk associated with having to make the lead bank whole on Berkshire’s portion of the pro-rated swap should the borrower default. These swaps are designated as economic hedges. Interest rate swaps that meet certain criteria to be viewed as conforming are required to be cleared through exchanges. The Bank has designated a national financial institution as its clearing agent.

The Company’s mortgage banking activities result in derivatives. Commitments to lend are provided on applications for residential mortgages intended for resale and are accounted for as non-hedging derivatives. The Company arranges offsetting forward sales commitments for most of these rate-locks with national bank counterparties, which are designated as economic hedges. Commitments on applications intended to be held for investment are not accounted for as derivative financial instruments.

The Company has a policy for managing its derivative financial instruments, and the policy and program activity are overseen by the Risk Management, Capital and ~~Capital~~Compliance Committee. Derivative financial instruments with counterparties which are not customers are limited to a select number of national financial institutions. Collateral may be required based on financial condition tests. The Company works with third-party firms which assist in marketing derivative transactions, executing transactions, and providing information for bookkeeping and accounting purposes.

The Company sometimes uses interest rate swap instruments for its own account to fix the interest rate on some of its borrowings, all of which have been designated as cash flow hedges. The Company may also use interest rate collars or other derivative instruments in managing its interest rate risk. The Company also has begun offering forward foreign exchange derivatives to its commercial markets as part of its expanded international banking services. The Company expects to back these forwards with offsetting forwards with national bank counterparties. This activity would be targeted to support routine commercial needs of customers engaged in international trading activities and would only be offered for bank approved currencies and ~~durations.~~durations.

LIBOR BASED INSTRUMENTS

The Company’s floating-rate funding, certain hedging transactions and certain of the Company’s products, such as floating-rate loans and mortgages, determine the applicable interest rate or payment amount by reference to a benchmark rate ~~such as~~using the London Interbank Offered Rate (“LIBOR”)~~, or~~. Pursuant to an index, currency, basket or other financial metric. LIBOR and certain other benchmark rates are the subject of recent national, international, and other regulatory guidance and proposals for reform. In July 2017, the Chief Executive of the Financial Conduct Authority (“FCA”) announced that the FCA intends to stop persuading or compelling its panel banks to submit rates for the calculation of LIBOR after 2021.

The Company has approximately 950 commercial loans with a total balance of $2.6 billion with the contract interest rate tied to LIBOR. Additionally, the Company has approximately 500 interest rate swap contracts with a notional value of approximately $3.8 billion, including customer, dealer, and risk participation agreements. Many of these interest rate swap contracts are associated with the LIBOR based commercial loans.

The Company established an enterprise-wide LIBOR transition committee in 2019. The committee has assessed the on and off-balance sheet products that will be impacted with the LIBOR transition. The areas with the most impact are LIBOR based interest rate swaps and commercial loans that utilize LIBOR as the indexed rate. During 2019 revised LIBOR fallback language was added to all new Commercial loan contracts that contemplatedbank regulations, the use of LIBOR as an index ~~rate. An impact assessment has been completed to identify~~for new contracts was prohibited beginning in 2022. The use of LIBOR as an index on existing “Legacy” contracts will be discontinued beginning in 2023. There is further ~~exposures, such as systems, processes,~~discussion of the LIBOR transition in Item 1A and ~~models affected by the discontinuation~~Item 7 of ~~LIBOR. The Company continues to develop and execute plans to transition products associated with LIBOR to alternative reference rates.~~this report.

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WEALTH MANAGEMENT SERVICES

The Company’s Wealth Management Group provides consultative investment management, trust administration, and financial planning to individuals, businesses, and institutions, with an emphasis on personal investment management. The Wealth Management Group has built a track record over more than a decade with its dedicated in-house investment management team. The Bank also provides a full line of investment products, financial planning, and brokerage services through BerkshireBanc Investment Services utilizing Commonwealth Financial Network as the broker/dealer. The Bank is integrating with its growing private banking and MyBanker teams to further develop wealth management account generation.

~~INSURANCE~~

~~As an independent insurance agent,~~ The Wealth Management Group reported $1.7 billion in total assets under management at year-end 2022. The Company expanded this team during the Berkshire Insurance Group represents a carefully selected group of financially sound, reputable insurance companies offering attractive coverage at competitive prices. The Insurance Group offers a full line of personalyear and commercial property and casualty insurance. It also offers employee benefits insurance and a full line of personal life, health, and financial services insurance products. Berkshire Insurance Group operates a focused cross-sell program of insurance and banking products through all offices and brancheshas introduced Socially Responsible Investment portfolios as another element of the ~~Bank with some~~Company’s overall vision of ~~the Group’s offices located within the Bank’s branches. The Group’s principal operations are in Western New England,~~being a leading socially responsible company, and ~~also provides its services in the Company’s other regions. The Group focuses on the Bank’s distribution channels in order to broaden its retail and commercial customer base.~~as part of a brand theme that Where You Invest Matters.

HUMAN CAPITAL MANAGEMENT

Berkshire’s people are the ~~core~~driving force behind its progress on Berkshire’s Exciting Strategic Transformation (BEST) plan and vision of ~~its ability to deliver on its strategic objectives, just as they have been for 175 years.~~being a high performing, leading socially responsible community bank in New England and beyond. The Company’s approach to human capital management is grounded in its ~~Be FIRST values. It~~corporate values and focuses ~~on strong~~on:

•Strong oversight ~~talent acquisition, development, engagement, retention,~~ and ~~offering a competitive benefits package.~~ risk management practices

•Recruitment

•Compensation & Benefits

•Training, Development, Engagement & Retention

•Health & Wellness

OVERSIGHT

The Board of Directors has ultimate responsibility for the strategy of the Company. The Compensation Committee of the Board of Directors oversees executive compensation matters and the Corporate Responsibility & Culture committee oversees company culture as well as diversity, equity and inclusion performance. The full Board also receives an annual briefing on employee engagement. The ~~Company further enhanced this oversight in 2020 by appointing an experienced human resources leader to Executive Vice President~~SEVP, Chief Human Resources & Culture ~~Officer.~~Officer provides management oversight on human capital matters. The Company proactively identifies potential human capital related risks, such as the labor market shortage, rising labor costs, and employee retention and designs strategies to mitigate those risks. Strong human capital management is viewed as integral to the Company's transformation and ability to meet its strategic objectives.

~~Talent acquisition is the first step~~RECRUITMENT

Berkshire operates in a highly competitive labor market with strong competition for top talent. The Company relies on and continues to ~~ensuring Berkshire has~~recruit employees with the right mix of skills, expertise and ~~experiences.~~experiences based on current openings and forecasted needs. The Company leverages several strategies to support its talent pipeline and talent acquisition activities including formal advertising, postings on targeted career sites, career events, internship placements, affinity group relationships, and the use of experienced external recruiters for key management and specialized positions. ~~After hiring, employees’ undergo an onboarding journey including attending~~Berkshire also has a virtual new hire orientation. Throughout an employees’ career Berkshire focus on development as the Company believes it’s a critical factor to long-term retention. In 2020, the Company launched a new mentoring program to pair high potential junior employees with senior staff to build on existing development opportunities. The Company reskilled and upskilled employees from across the bank to assist in government relief programs such as~~the SBA’s Paycheck Protection Program (“ PPP") and for employees looking to expand their professional experience in the classroom, the Company offers an education assistance program.~~small internal team of talent recruitment professionals.

Berkshire maintains a hybrid work model to expand its access to top talent and provide its employees with workplace flexibility. These strategies have proved effective in meeting the demand for talent demonstrated by the Company’s strong track record of attracting high-caliber talent across retail, commercial, wealth management, business banking, technology and operational areas. In addition, as market disruptions from mergers remain and recessionary pressures impact other industries, Berkshire will continue to leverage its differentiated brand and unique market positioning to hire community-focused bankers from its competitors and attract high-performing operational talent from outside the industry.

COMPENSATION & BENEFITS

A highly competitive labor market along with inflationary pressures has impacted labor costs for all businesses. Berkshire is not immune to these economic pressures. The Company continually evaluates its compensation strategies and ~~looks at~~benefits programs, benchmarks to industry and peers and surveys the landscape of best practices to ~~provide competitive pay~~develop compensation and benefits ~~packages.~~packages that reward performance and retain top talent at all levels of the Company. Against this backdrop, and in keeping with the Company’s socially responsible mission, Berkshire raised the minimum starting pay to $17/hour in 2022. It also enhanced its vacation benefit as well as its incentive plans across lines of business to provide opportunities for employees to earn higher compensation and bonuses for strong performance aligned with Berkshire’s strategic objectives.

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Berkshire provides comprehensive medical coverage, paid vacation, personal and sick time, paid protective leave for gender-based violence, a 401(k) plan with employer match, long-term disability insurance, and group term life insurance. In addition, Berkshire offers a day care reimbursement program, a dependent care expense account, family and medical leave along with flexible work arrangements, including the ability to work fully remote dependent on the duties of one’s job. All ~~of Berkshire’s~~ benefits are available to married same-sex or different-sex couples as well as domestic partners. In ~~2020,~~addition to its compensation and health benefits, Berkshire offers volunteer-time off, a matching-gift program, an employee assistance program, regular performance reviews, professional development and the You FIRST Fund to help employees impacted by personal financial hardships. Approximately 97% of employees are eligible for benefits.

TRAINING, DEVELOPMENT, ENGAGEMENT & RETENTION

Training and development programs provide employees with the knowledge and skills needed to succeed and have upward career mobility. They are critical components, along with competitive compensation and benefits programs, to having an engaged workforce. Ultimately an engaged workforce drives high levels of retention which reduces human capital risks, expense, and advances Berkshire’s progress and performance.

The Company provides several learning and training programs consistent with one’s job responsibilities, professional goals, and development plans. Employees have regular performance assessments to identify strengths and areas for further growth. Berkshire continues to reskill and upskill employees from across the Company ~~completed~~helping them advance along career paths by taking on new responsibilities and roles. The Company offers a ~~salary survey~~mentoring program for high potential junior employees along with leadership development programs. For employees looking to ensure pay and performance measures aligned with the markets it serves and a pay equity analysis to ensure that all employees, regardless of gender and ethnicity, in comparable roles are compensated equitably. Berkshire was listedexpand their professional experience in the ~~Bloomberg Gender-Equality Index for~~classroom, the ~~second consecutive year in recognition of its work~~Company offers educational assistance along with access to formal degree and ~~achieved a perfect score on the Human Rights Campaign Corporate Equality Index for the first time.~~certification programs.

Berkshire ~~employees' health, safety, and economic stability has and~~ continues to bemonitor the progress of its efforts to evaluate the effectiveness of programs and strategies on engagement. A comprehensive annual employee engagement and pulse survey is conducted to identify strengths and opportunity areas within the organization. Overall, employees felt there was a ~~priority as~~strong spirit of teamwork, that Berkshire genuinely cares for its communities, and they have strong relationships with their direct managers. Actions plans are developed for areas identified in the ~~Company continues~~survey that do not meet the Company’s high expectations.

While Berkshire has been impacted by higher-than-average turnover due to ~~navigate~~labor market disruptions, it is seeing positive momentum because of the ~~global~~actions it has taken to improve engagement and combat turnover including:

•Launched Company-wide reward and recognition program

•Enhanced vacation benefit

•Introduced wellness day

•Enhanced line of business incentive plans

•Established career paths for various job families

•Increased starting wage

•Offered mentoring program

•Developed robust employee communications program

Collectively these efforts have led to improved retention year over year, historically high employee engagement and being named a Forbes America’s Best Midsize Employers.

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HEALTH & WELLNESS

As the world began to emerge from the COVID-19 ~~pandemic.~~pandemic Berkshire ~~suspended non-essential business travel~~continued to proactively manage impacts to protect the health and ~~accelerated~~safety of its ~~ongoing Work from Home initiative to swiftly, safely~~employees, customers and ~~securely move 86%~~communities. During the height of ~~non-branch staff to a fully remote environment. The~~the pandemic, the Company provided protective equipment to front-line employees, including masks and gloves, and offered all additional paid sick time, paid vaccine time, paid quarantine/isolation leave, job protected personal leave, flexible work schedules for remote employees, premium pay for onsite employees and maintained full pay for employees with reduced schedules, as a result of the pandemic.

Berkshire ~~enhanced support~~works to protect and enhance the physical, mental and financial wellbeing of its workforce by providing programs, benefits and a health and wellness employee resource group. The Company, through its ~~Employee~~

~~Table~~insurance provider, offers a fitness, weight and mind/body reimbursement along with a year-round calendar of ~~Contents~~

~~Assistance Program~~various wellness related activities. Since physical and ~~launched the~~mental health go hand-in-hand with financial health, Berkshire provides access to financial education resources, webinars along with its You FIRST Fund to ~~help~~assist employees ~~impacted by personal~~experiencing financial hardships. AsIn addition, Berkshire provides a ~~result~~comprehensive employee assistance program which includes counseling services and resources for those experiencing mental health challenges. To further support the needs of ~~Berkshire’s collective actions, there were no bank related pandemic layoffs in 2020 and the Company instituted~~its workforce, Berkshire introduced a ~~special compensation program~~wellness day to provide a day off for employees ~~assisting with government relief programs.~~to disconnect, recharge and take care of themselves in whatever way works best for them.

FUTURE OF THE WORKPLACE

Berkshire continues to evolve and enhance its human capital management strategies to drive organizational growth in support of BEST while combating risks, such as the labor market shortage and rising labor costs. The Company expects to maintain its hybrid workplace over the long-term and invest in technology. While technology will play a bigger role in the future of Berkshire, helping to improve processes and drive efficiencies, people will always be at the core of its ability to deliver value to its customers, shareholders and communities. The Company remains confident that the Berkshire brand, value proposition and socially responsible vision will continue to be a differentiator in the market.


Human Capital*	◦Total Full Time Equivalent	~~1,505~~ 1310
	~~Voluntary~~ ◦Retention Rate	85 71%
	◦Promotion Rate	%20%
	◦Minimum Starting Salary	$17/hour
	◦Average Tenure (years)	7

*All metrics reported are as of orand for the year-ended December 31, ~~2020.~~2022.

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DIVERSITY, EQUITY ~~AND~~& INCLUSION

~~Berkshire’s journey to build~~Creating a ~~more~~ diverse, equitable, and inclusive ~~company~~(DEI) workplace is an essential enabler to continuing to drive forward progress on Berkshire’s Exciting Strategic Transformation (BEST), its BEST Community Comeback and vision. Ultimately Berkshire’s goal is to ensure that its workforce reflects the communities in which it operates, that its employees feel valued and can reach their full potential and that it improves the access and affordability of financial solutions to support economic growth of underrepresented populations and communities. The Company’s advances those goals through an integrated approach grounded in its ~~Be FIRST values. The Company’s goal is to build a workplace that reflects its communities' unique~~corporate values:

•Strong oversight and governance practices

•Recruitment & talent management

•Education and training

•Workplace programming through employee resource groups (ERGs)

•Financial solutions which drive economic equity

•Community programming focused on financial inclusion and entrepreneurship

•Supplier diversity ~~and creates wealth in underrepresented neighborhoods across its footprint.~~

The Company ~~focuses on its governance practices, employee education, talent acquisition & workplace culture, supplier diversity, and product and service offerings. A collection~~has a strong foundation of governance practices ~~serve as~~to ensure that diversity, equity and inclusion is embedded into Berkshire’s business activities. This includes the ~~foundation, ensuring the appropriate oversight. The~~ Corporate Responsibility & Culture Committee of the Board of Directors which has ultimate ~~responsibility for~~oversight responsibility. Berkshire’s Diversity, Equity ~~and Inclusion Program performance and ensuring Management creates a workplace culture consistent with its Be FIRST values. The Company’s Diversity~~ & Inclusion ~~Employee~~ Committee, which reports upinto the Board committee, provides additional management level oversight to the ~~Corporate Responsibility & Culture Committee, focuses on~~Company’s programming and performance. The Senior Vice President, Chief Diversity Officer manages the ~~diversity and inclusion strategy. The committee consists of employees from throughout the business and works to develop and execute goals, strategies, and tactics and monitor progress.~~Company’s DEI programming.

~~The Company offers seven Employee Resource Groups each of whom play an integral role for employees and the culture~~Berkshire continues working to improve representation within its workplace through recruitment initiatives while enhancing its internal talent pipeline to ensure representation at all levels of the ~~company. Each Employee Resource Group provides a safe space for dialogue, education,~~Company. Berkshire identifies opportunities in targeted markets and collective action on topics relevant to their mission. These groups continue to help the company facilitate important cultural shifts, update policies, host important cultural heritage events, and attend affinity group job fairs. In 2020, the Company rolled out a new suite of Diversity, Equity, and Inclusion trainings. In addition, it continues to developbusiness lines, develops deeper partnerships with ~~colleges,~~non-profit organizations and affinity groups, advertises positions on specialized career sites, participates in affinity career events and ~~non-profit organizations to expand its networks beyond those traditionally touched by the banking industry. The Company leverages~~uses internal ~~expertise and experienced~~as well as external recruitment professionals to ensure it receives candidate pools that reflect the rural and urban communities ~~where~~in which it operates. It works to develop and implement strategies aimed at increasing representation at each level of the Company. In addition, the Company regularly reviews the gender and ethnic diversity of its workforce at the employee, manager and executive management ~~level.~~level and completes a review of pay and performance measures to ensure that all employees, regardless of gender and ethnicity, in comparable roles are compensated equitably. As a result of Berkshire’s intentional and impactful efforts to date, Berkshire was listed in the Bloomberg Gender Equality Index and Human Rights Campaign’s Corporate Equality Index.


Diversity, Equity & Inclusion*	Percent of women in workforce	6867	%
	Percent of ethnic minorities in workforce	1413	%
	Percent ~~disabled in workforce~~of women on the Board	231	%
	Percent of ethnic minorities on the Board	31	%
	Percent of women in manager roles (officer+)	20	%
	Percent of ethnic minorities in manager roles (officer+)	4	%
	Percent of women in executive management roles	36	%
	Percent of ethnic minorities in executive management roles	14	%

*~~All~~Workforce metrics reported are as of December 31, ~~2020.~~2022. Board metrics reflect the current composition of the Board of Directors.

Berkshire provides a full suite of diversity, equity & inclusion trainings. The trainings help build understanding and provide employees with knowledge, skills and tactics they can put into practice. All new employees complete training at the time of hire and Berkshire intends to roll out enhancements to its training program which includes required annual and elective courses for all employees and hiring managers in 2023. In addition, Berkshire offers seven Employee Resource Groups (ERGs) each playing an integral role for employees and the culture of the company. Every Employee Resource Group provides a safe space for dialogue, education, and collective action on topics relevant to their members and the Company. Through the ERGs, employees concerns and ideas to strengthen Berkshire’s culture are elevated to members of management and the Diversity, Equity & Inclusion Committee for action, empowering employees to collectively be engines of positive change within the workplace and the broader community.

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The Company continues to work towards building economic equity in its communities by developing and offering safe, accessible, affordable financial solutions and programs including its MyFreedom Checking account, nationally certified by BankOn for its affordability, and the Futures Fund. The Futures Fund is a special purpose credit program which provides access to a low-interest, low barrier to entry line of credit in collaboration with non-profit partners who provide wrap around technical assistance to minority, LGBTQIA+ and other businesses owned by underrepresented individuals. Since launching the program in 2020, it has deployed nearly $1.5 million to underrepresented business owners. Beyond offering financial solutions and wellness programming, Berkshire also understands that a diverse third-party base is important to achieving its operational goals, supply chain resilience, vision and creating equity in its communities. As a result, Berkshire works to maintain a third-party base that reflects the communities in which it operates and, to the maximum extent possible, increase the utilization of third parties owned by underrepresented people.

Additional information on Berkshire’s ~~Culture,~~ Human Capital Management and Diversity, Equity & Inclusion practices can be found in the Company’s annual Corporate Responsibility Report, ~~at www.berkshirebank.com/csr,~~ which details the company's environmental, social and governance ~~and cultural~~ programs.

SUBSIDIARY ACTIVITIES

The Company wholly-owns ~~two active consolidated subsidiaries: the Bank and~~ Berkshire ~~Insurance Group, Inc.~~Bank. The Bank operates as a commercial bank under a Massachusetts trust company charter. ~~Berkshire Insurance Group is incorporated in Massachusetts.~~ Berkshire Bank owns Firestone Financial, LLC which is a Massachusetts limited liability company, as well as consolidated subsidiaries operated as Massachusetts securities corporations and other subsidiary entities. The Company also owns all of the common stock of Delaware statutory business trusts, Berkshire Hills Capital Trust I and SI Capital Trust II. The capital trusts are unconsolidated and their only material assets are trust preferred securities related to the junior subordinated debentures reported in the Company’s Consolidated Financial Statements. Additional information about the subsidiaries is contained in Exhibit 21 to this report.

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REGULATION AND SUPERVISION

The Company is a Delaware corporation and a bank holding company that has elected financial holding company status within the meaning of the Bank Holding Company Act of 1956, as amended. ~~As such, it~~It is registered with, supervised by and required to comply with the rules and regulations of the Federal Reserve Board. The Federal Reserve Board requires the Company to file various reports and also conducts examinations of the Company. The Company must receive the approval of the Federal Reserve Board to engage in certain transactions, such as acquisitions of additional banks and savings ~~associations.~~associations, and the Company must seek nonobjection for various capital actions, including stock repurchases.

The Bank is a Massachusetts-chartered trust company and its deposits are insured up to applicable limits by the FDIC. ~~The Bank was previously a Massachusetts-chartered savings bank and converted to a Massachusetts-chartered trust company in July 2014.~~ The Bank is subject to extensive regulation by the Massachusetts Commissioner of Banks (the “Commissioner”), as its chartering agency, and by the FDIC, as its deposit insurer. The Bank is required to file reports with the Commissioner and the FDIC concerning its activities and financial condition in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergerswith, or acquisitions of, other depository institutions or branches of other institutions. Under specified conditions, the Bank must also seek regulatory approval of capital distributions to the Company, its sole shareholder.

The Commissioner and the FDIC conduct periodic examinations to test the Bank’s safety and soundness and compliance with various regulatory requirements. The regulatory structure gives the regulatory authorities extensive discretion in connection with supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes. Any change in such regulatory requirements and policies, whether by the Commissioner, the Massachusetts legislature, the FDIC, the Federal Reserve Board, or Congress, could have a material adverse impact on the Company, the Bank, and their operations.

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Certain regulatory requirements applicable to the Company and the Bank are referred to below. The description of statutory provisions and regulations applicable to financial institutions and their holding companies set forth in this Form 10-K does not purport to be a complete description of such statutes and regulations and their effects on the Company and is qualified in its entirety by reference to the actual laws and ~~regulations.A~~regulations. A summary of the regulatory requirements referred to below is as follows:

•Massachusetts Banking Laws and Supervision

•Federal Banking Regulations

•Enforcement

•Holding Company Regulation

•Mergers and Acquisitions

•Other Regulations

•Taxation

Massachusetts Banking Laws and Supervision

General. As a Massachusetts-chartered depository institution, the Bank is subject to various Massachusetts statutes and regulations which govern, among other things, investment powers, lending and deposit-taking activities, borrowings, maintenance of surplus and reserve accounts, distribution of earnings and payment of dividends. In addition, the Bank is subject to Massachusetts consumer protection and civil rights laws and regulations. The approval of the Commissioner is required for a Massachusetts-chartered institution to establish or close branches, merge with other financial institutions, issue stock, and undertake certain other activities.

Massachusetts law and regulations generally allow Massachusetts institutions to engage in activities permissible for federally chartered banks or banks chartered by another state. There is a 30-day notice procedure to the Commissioner in order to engage in such activities. Massachusetts law also authorized Massachusetts institutions to engage in activities determined to be “financial in nature,” or incidental or complementary to such a financial activity, subject to a 30-day notice to the Commissioner.

Dividends. Under Massachusetts law, the Bank may declare cash dividends from net profits not more frequently than quarterly and non-cash dividends at any time. No dividends may be declared, credited, or paid if the institution’s capital stock is impaired. An institution with outstanding preferred stock may not, without the prior approval of the Commissioner, declare dividends to the common stock without also declaring dividends to the

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preferred stock. The approval of the Commissioner is generally required if the total of all dividends declared in any calendar year exceeds the total of its net profits for that year combined with its retained “net profits,” as defined, of the preceding two years. The Bank was required to obtain the approval of ~~both~~ the Commissioner ~~and the FDIC is required for the Bank~~ to pay ~~a dividend from its surplus account, which would currently be the case as to any~~ Bank ~~dividend~~dividends to the ~~Company.~~Company in 2022 and is expected to require such approval in 2023.

Loans to One Borrower Limitations. Massachusetts banking law grants broad lending authority. However, with certain limited exceptions, total obligations of one borrower to an institution may not exceed 20.0% of the total of the institution’s capital, which is defined under Massachusetts law as the sum of the institution’s capital stock, surplus account and undivided profits.

~~Investment Activities.~~ In general, Massachusetts-chartered institutions may invest in preferred and common stock of any corporation organized under the laws of the United States or any state provided such investments do not involve control of any corporation and do not, in the aggregate, exceed 4.0% of the bank’s deposits. Massachusetts-chartered institutions may also invest an amount equal to 1.0% of their deposits in stocks of Massachusetts corporations or companies with substantial employment in Massachusetts which have pledged to the Commissioner that such monies will be used for further development within the Commonwealth. However, these powers are constrained by federal law, which generally limit the activities and equity investments of state banks to those permitted for national banks.

Regulatory Enforcement Authority. Any Massachusetts-chartered institution that does not operate in accordance with the regulations, policies, and directives of the Commissioner may be sanctioned for non-compliance, including seizure of the property and business of the institution and suspension or revocation of its charter. The Commissioner may, under certain circumstances, suspend or remove officers or directors who have violated the law, conducted the institution’s business in a manner which is unsafe, unsound or contrary to the depositors’ interests, or been negligent in the performance of their duties. In addition, upon finding that an institution has engaged in an unfair or deceptive act or practice, the Commissioner may issue an order to cease and desist and impose a fine on the institution concerned. Finally, Massachusetts consumer protection and civil rights statutes applicable to the Bank permit private individual and class action lawsuits and provide for the rescission of consumer transactions, including loans, and the recovery of statutory and punitive damage and attorney’s fees in the case of certain violations of those statutes.

Massachusetts has other statutes or regulations that are similar to the federal provisions discussed below.

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Federal Regulations

Capital Requirements. Federal regulations require FDIC insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8.0%, and a 4.0% Tier 1 capital to total assets leverage ratio. The ~~existing~~definitions of these capital ~~requirements were effective January 1, 2015~~categories and the ratio metrics are ~~the result of a final rule implementing regulatory amendments based on recommendations of the Basel Committee on Banking Supervision and certain requirements of the Dodd-Frank Act.~~

Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital includes certain noncumulative perpetual preferred stock and related surplus and minority interestsset out in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of accumulated other comprehensive income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. The Bank chose the opt-out election. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations, including adjustments for goodwill and other intangible assets.

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In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, all assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests) are multiplied by a risk weight factor assigned by the regulations based on the risks believed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one to four-family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% and 600% is assigned to permissible equity interests, depending on certain specified factors.federal regulations. In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted asset above the amount necessary to meet its minimum risk-based capital requirements. ~~The capital conservation buffer was phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increasing each year until fully implemented at 2.5% on January 1, 2019.~~

In assessing an institution’s capital adequacy, the FDIC takes into consideration not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions where deemed necessary. As a bank holding company, the Company is also subject to regulatory capital requirements, as described in a subsequent section.

The approval of the FDIC is required for the Bank to pay a dividend to the Company from its surplus account. FDIC approval was required for Bank dividends payments in 2022 and such approval is expected to be required in 2023.

Investment Activities. The Federal Deposit Insurance Act generally limits the types of equity investments an FDIC-insured state-chartered bank, such as the Bank, may make and the kinds of activities in which such a bank may engage, as a principal, to those that are permissible for national banks.

Interstate Banking and Branching. Federal law permits an institution, such as the Bank, to acquire another institution by merger in a state other than Massachusetts unless the other state has opted out. Federal law, as amended by the Dodd-Frank Act, authorizes de novo branching into another state to the extent that the target state allows its ~~state chartered~~state-chartered banks to establish branches within its borders. As of December 31, ~~2020,~~2022, the Bank operated branches in New York, Vermont, Connecticut ~~New Jersey,~~ and ~~Pennsylvania~~Rhode Island, as well as Massachusetts. At its interstate branches, the Bank may conduct any activity authorized under Massachusetts law that is permissible either for an institution chartered in that state (subject to applicable federal restrictions) or a branch in that state of an out-of-state national bank. The New York State Superintendent of Banks, the Vermont Commissioner of Banking and Insurance, the Connecticut Commissioner of Banking ~~the New Jersey Commissioner of Banking and Insurance, the Pennsylvania Secretary of Banking and Securities,~~ and the Director of the Rhode Island Department of Business Regulation may exercise certain regulatory authority over the Bank’s branches in their respective states.

Prompt Corrective Regulatory Action. Federal law requires that federal bank regulatory authorities take “prompt corrective action” with respect to banks that do not meet minimum capital requirements. ~~For this purpose, the~~

The law establishes three categories of capital deficient institutions: undercapitalized, significantly undercapitalized, and critically undercapitalized. The FDIC regulations implementing the prompt corrective action law were amended to incorporate the previously discussed increased regulatory capital standards that were effective January 1, 2015. An institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater, and a common equity Tier 1 ratio of 6.5% or greater. An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater, and a common equity Tier 1 ratio of 4.5% or greater. An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0%, or a common equity Tier 1 ratio of less than 4.5%. An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0%, or a common equity Tier 1 ratio of less than 3.0%. An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%.

“Undercapitalized” banks must adhere to growth, capital distribution (including dividend), and other limitations and are required to submit a capital restoration plan. A bank’s compliance with such plans must be guaranteed by its holding company in an amount equal to the lesser of 5% of the institution’s total assets when deemed “undercapitalized” or the amount needed to comply with regulatory capital requirements. If an “undercapitalized”

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bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” banks must comply with one or more of a number of additional restrictions, including but not limited to an order by the FDIC to sell sufficient voting stock to become “adequately capitalized,” requirements to

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reduce assets and cease receipt of deposits from correspondent banks or dismiss directors or officers, and restrictions on interest rates paid on deposits, compensation of executive officers, and capital distributions by the holding company. “Critically undercapitalized” institutions must comply with additional sanctions including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it obtains such status.

At December 31, ~~2020,~~2022, the Bank met the criteria for being considered “well capitalized” as defined in the prompt corrective action regulations.

Transactions with Affiliates and Loans to Insiders. Transactions between depository institutions and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act. In a holding company context, at a minimum, the parent holding company of an institution and any companies which are controlled by the holding company are affiliates of the institution. Generally, Section 23A limits the extent to which the institution or its subsidiaries may engage in “covered transactions,” such as loans, with any one affiliate to 10% of such institution’s capital stock and surplus. There is also an aggregate limit on all such transactions with all affiliates to 20% of capital stock and surplus. Loans to affiliates and certain other specified transactions must comply with specified collateralization requirements. Section 23B requires that transactions with affiliates be on terms that are no less favorable to the institution or its subsidiary as similar transactions with non-affiliates.

Federal law also restricts an institution with respect to loans to directors, executive officers, and principal stockholders (“insiders”). Loans to insiders and their related interests may not exceed, together with all other outstanding loans to such persons and affiliated entities, the institution’s total capital and surplus. Loans to insiders above specified amounts must receive the prior approval of the Board of Directors. Further, loans to insiders must be made on terms substantially the same as offered in comparable transactions to other persons, except that such insiders may receive preferential loans made under a benefit or compensation program that is widely available to the institution’s employees and does not give preference to the insider over the employees. Federal law places additional limitations on loans to executive officers. Massachusetts law previously had a separate law regarding insider transactions, but that law was amended in 2015 to generally incorporate the federal restrictions.

Insurance of Deposit Accounts. The Bank’s deposit accounts are insured by the Deposit Insurance Fund of the FDIC up to applicable limits. The FDIC insures deposits up to the standard maximum deposit insurance amount (“SMDIA”) of $250,000.

The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund. ~~The Dodd-Frank Act required the FDIC to revise its procedures to base its assessments upon each insured institution’s total assets less tangible equity instead of deposits.~~

Under the ~~FDIC’s~~ risk-based assessment system, ~~insured institutions are assessed based on perceived risk to the Deposit Insurance Fund with~~ institutions deemed less risky of failure pay lower ~~FDIC~~ assessments. Assessments for institutions ~~with~~of less than $10 billion ~~or more~~ of assets are ~~primarily~~ based on ~~a scorecard approach by~~financial measures and supervisory ratings derived from statistical modeling estimating the ~~FDIC, including factors such as examination ratings and modeling measuring the~~probability of an institution’s ~~ability to withstand asset-related and funding-related stress and potential loss to the Deposit Insurance Fund should the bank fail.~~failure within three years. The assessment range (inclusive of possible adjustments specified by the regulations) for institutions with greater than $10 billion of total assets iswas 1.5 to 40 basis ~~points.~~points effective through December 31, 2022. The ~~Dodd-Frank Act required that banks of greater than $10 billion of assets bear the burden of raising the Deposit Insurance Fund reserve ratio from 1.15%~~FDIC has authority to ~~1.35%. Such institutions were subject~~increase insurance assessments and adopted a final rule in October 2022 to ~~an annual surcharge of 4.5~~increase initial base deposit insurance assessment rates by two basis points beginning in the first quarterly assessment period of total assets exceeding $10 billion, effective July 1, 2016. The FDIC announced in November 2018 that the 1.35% reserve ratio had been reached so that the surcharges would cease. In 2019, the FDIC distributed premium rebates to the Company and other bank peers as2023. As a result, effective January 1, 2023, assessment rates for institutions of ~~having collected excess premiums in earlier periods. The Deposit Insurance Fund ratio fell~~the Bank’s size will range from 2.5 to 1.30% as of June 30, 2020 due to extraordinary deposit growth resulting from economic conditions and government initiatives related to the COVID-19 pandemic. The FDIC had adopted a restoration plan for the fund to again achieve a 1.35% ratio within eight years. The current plan does not involve increased assessments or surcharges on insured institutions.

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42 basis points.

Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by a regulator. Management does not know of any practice, condition or violation that might lead to termination of FDIC deposit insurance.

The FDIC has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of the Bank. Management cannot predict what insurance assessment rates will be in the future.

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Federal Home Loan Bank System. The Bank is a member of the Federal Home Loan Bank system, which consists of 12 regional Federal Home Loan Banks that provide a central credit facility primarily for member institutions. The Bank, as a member, is required to acquire and hold shares of capital stock in the FHLBB.

The Federal Home Loan Banks are required to provide funds for certain purposes including contributing funds for affordable housing programs. These requirements, and general financial results, could reduce the amount of dividends that the Federal Home Loan Banks pay to their members and result in the Federal Home Loan Banks imposing a higher rate of interest on advances to their members. Historically, the FHLBB has paid dividends to member banks based on money market rates.

Enforcement

The FDIC has primary federal enforcement responsibility over ~~state chartered~~state-chartered banks that are not members of Federal Reserve System, which includes the Bank. The FDIC has authority to bring enforcement actions against such institutions and their “institution-related parties,” including officers, directors, certain shareholders, and attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution. Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institution or receivership or conservatorship in certain circumstances. Potential civil money penalties cover a wide range of violations and actions, and are adjusted annually for inflation. Such penalties currently range up to ~~$25~~more than $50 thousand per day or, in extreme cases, as high as ~~$1.0~~$2 million per day.

Holding Company Regulation

General. The Company is subject to examination, regulation, and periodic reporting as a bank holding company under the Bank Holding Company Act of 1956, as amended. The Company is required to obtain the prior approval of the Federal Reserve Board to acquire all, or substantially all, of the assets of any other bank or bank holding company. Prior Federal Reserve Board approval would be required for the Company to acquire direct or indirect ownership or control of any voting securities of any bank or bank holding company if, after such acquisition, it would, directly or indirectly, own or control more than five percent of any class of voting shares of the bank or bank holding company.

A bank holding company is generally prohibited from engaging in non-banking activities, or acquiring direct or indirect control of more than five percent of the voting securities of any company engaged in non-banking activities. The Federal Reserve Board has allowed by regulation some exceptions based on activities closely related to banking including: (i) making or servicing loans; (ii) performing certain data processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment or financial advisor; and (v) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.

The Gramm-Leach-Bliley Act of 1999 authorized a bank holding company that meets specified conditions, including being “well capitalized” and “well managed” as defined in the regulations, to opt to become a “financial holding company” and thereby engage in a broader array of financial activities. Such activities can include insurance and investment banking. The Company has elected to become a financial holding company.

The Company is subject to the Federal Reserve Board’s capital adequacy requirements for bank holding companies. The Dodd-Frank Act required the Federal Reserve Board to promulgate consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to institutions themselves. ~~The previously discussed final rule regarding regulatory~~

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~~capital requirements implemented the Dodd-Frank Act as to bank holding company capital standards.~~ Consolidated regulatory capital requirements identical to those applicable to the Bank ~~applied~~apply also to the ~~Company, effective January 1, 2015. As is the case with institutions themselves, the capital conservation buffer was phased in beginning in 2016 and was fully effective on January 1, 2019.~~Company.

Federal Reserve Board policy requires that a bank holding company serve as a source of financial strength to its subsidiary banks by standing ready to use available resources to provide adequate capital funds to those banks during periods of financial stress or adversity and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks where necessary. The Dodd-Frank Act codified the source of strength doctrine.

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The Federal Reserve Board has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by bank holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior consultation with and nonobjection of the Federal Reserve Board with respect to dividends in certain circumstances, such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate of earnings retention is inconsistent with the company’s capital needs and overall financial condition. ~~Such~~The Federal Reserve Board guidance also provides for consultation and nonobjection ~~was required~~ for ~~certain dividends paid by~~material increases in the ~~Company during 2020.~~amount of a bank holding company’s common stock dividend. The ability of a holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized.

Federal regulations require a bank holding company to give the Federal Reserve Board prior written notice of any repurchase or redemption of then outstanding equity securities if the gross consideration for the repurchase or redemption, when combined with the net consideration paid for all such repurchases or redemptions during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth. The Federal Reserve Board may disapprove such a purchase or redemption under certain circumstances. There is an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions. Federal Reserve ~~policy~~guidance provides for regulatory consultation and nonobjection under specified circumstances prior to a holding company redeeming or repurchasing regulatory capital instruments, ~~under specified circumstances~~including common stock, regardless of the applicability of the previously referenced notification requirement.Pursuant to regulatory policies, such circumstances include repurchasing common stock that would result in a net reduction as of the end of the quarter in the amount of such equity instruments outstanding compared with the beginning of the quarter. In these circumstances, Federal Reserve nonobjection is required. The Company obtained such nonobjection for its repurchase program in 2022 and for the repurchase program announced in January 2023.

These regulatory policies could affect the ability of the Company to pay dividends, repurchase shares of its stock, or otherwise engage in capital distributions.

The status of the Company as a registered bank holding company under the Bank Holding Company Act does not exempt it from certain federal and state laws and regulations applicable to corporations generally, including, without limitation, certain provisions of the federal securities laws.

Acquisition of the Company. Under the Change in Bank Control Act, no person may acquire control of a bank holding company such as the Company unless the Federal Reserve Board has been given 60 days’ prior written notice and has not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition. Control, as defined for this purpose, means ownership, control of or ~~holding irrevocable proxies representing~~power to vote 25% or more ~~than 25%~~ of any class of voting stock, control in any manner of the election of a majority of the company’s directors, or a determination by the regulator that the acquirer has the power to direct, or directly or indirectly to exercise a controlling influence over, the management or policies of the institution.stock. Acquisition of more than 10% of any class of a bank holding company’s voting stock constitutes a rebuttable presumption of control under the regulations under certain circumstances including where, is the case with the Company, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.

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Massachusetts Holding Company Regulation. In addition to the federal holding company regulations, a bank holding company organized or doing business in Massachusetts must comply with requirements under Massachusetts law. Approval of the Massachusetts regulatory authorities is generally required for the Company to acquire 25 percent or more of the voting stock of another depository institution. Similarly, prior regulatory approval would be necessary for any person or company to acquire 25 percent or more of the voting stock of the Company.

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Mergers and Acquisitions

The Company and the Bank have authority to engage, and have engaged, in acquisitions of other depository institutions. Such transactions are subject to a variety of conditions including, but not limited to, required stockholder approvals and the receipt of all necessary regulatory approvals. Necessary regulatory approvals include those required by the federal Bank Holding Company Act and/or Bank Merger Act, Massachusetts law and, if the target institution is located in a state other than Massachusetts, the law of that state. When considering merger applications, the federal regulators must evaluate such factors as the financial and managerial resources and future prospects of the parties, the convenience and needs of the communities to be served (including performance of the parties under the Community Reinvestment Act), competitive factors, any risk to the stability of the United States banking or financial system and the effectiveness of the institutions involved in combating money laundering activities. Both the Bank Holding Company Act and the Bank Merger Act provide for a waiting period of 15 to 30 days following approval by the federal banking regulator within which the United States Department of Justice may file objections to the merger under the federal antitrust laws. Massachusetts law requires the Commissioner (or Board of Bank Incorporation in certain cases) to consider such factors as whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage will be promoted (including whether the merger will result in net new benefits).

Other Regulations

Consumer Protection Laws. The Bank is subject to federal and state consumer protection statutes and regulations applicable to depository institutions. These include the Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; Home Mortgage Disclosure Act, requiring financial institutions to provide certain information about home mortgage and refinance loans; the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; the Fair Credit Reporting Act, governing the provision of consumer information to credit reporting agencies and the use of consumer information; the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and the Electronic Funds Transfer Act, governing automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services. Since the Bank has exceeded $10 billion of consolidated assets, compliance with such federal consumer protection statutes and regulations is examined for and enforced by the Consumer Finance Protection Bureau rather than the FDIC.

The Bank also is subject to Massachusetts and federal laws protecting the confidentiality of consumer financial records, and limiting the ability of the institution to share non-public personal information with third parties.

The Community Reinvestment Act (“CRA”) establishes a requirement for federal banking agencies that, in connection with examinations of depository institutions within their jurisdiction, the agencies evaluate the record of the depository institutions in meeting the credit needs of their local communities, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of those institutions. These factors are also considered in evaluating mergers, acquisitions and applications to open a branch or new facility. Under the CRA, institutions are assigned a rating of “outstanding,” “satisfactory,” “needs to improve,” or “substantial non-compliance.” A less than “satisfactory” rating would result in the suspension of any growth of the Bank through acquisitions or opening de novo branches until the rating is improved. As of the most recent CRA examination by the FDIC, the Bank’s CRA rating was “satisfactory.” On May 5, 2022, the OCC, FRB and FDIC released a notice of proposed rulemaking to strengthen and modernize the CRA regulations and framework.

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Anti-Money Laundering Laws. The Bank is subject to extensive anti-money laundering provisions and requirements, which require the institution to have in place a comprehensive customer identification program and an anti-money laundering program and procedures. These laws and regulations also prohibit depository institutions from engaging in business with foreign shell banks; require depository institutions to have due diligence procedures and, in some cases, enhanced due diligence procedures for foreign correspondent and private banking accounts; and improve information sharing between depository institutions and the U.S. government. The Bank has established policies and procedures intended to comply with these provisions.

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Taxation

The Company reports its income on a calendar year basis using the accrual method of accounting. This discussion of tax matters is only a summary and is not a comprehensive description of the tax rules applicable to the Company and its subsidiaries. Further discussion of income taxation is contained in a note to the financial statements. The federal income tax laws apply to the Company in the same manner as to other corporations with some exceptions. The Company may exclude from income 100 percent of dividends received from the Bank and from Berkshire Insurance Group as members of the same affiliated group of corporations. The Company reports income on a calendar year basis to the Commonwealth of Massachusetts. Massachusetts tax law generally permits special tax treatment for a qualifying limited purpose “securities corporation.” The Bank’s securities corporations all qualify for this treatment, and are taxed at a 1.3% rate on their gross income.

Inflation Reduction Act of 2022.The Inflation Reduction Act, which was signed into law on August 16, 2022, among other things, implements a new alternative minimum tax of 15% on corporations with profits in excess of $1 billion, a 1% excise tax on stock repurchases, and several tax incentives to promote clean energy and climate initiatives. These provisions are effective beginning January 1, 2023.

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ITEM 1A. RISK FACTORS

The risks set forth below, in addition to the other risks described in this Annual Report on Form 10-K, may adversely affect the Company's business, financial condition, strategic objectives, and operating results. In addition to the risks set forth below and the other risks described in this annual report, there may be additional risks and uncertainties that are not currently known to the Company or that the Company currently deems to be immaterial that could materially and adversely affect the Company's business, financial condition, strategic objectives, or operating results. As a result, past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. Further, to the extent that any of the information contained in this Annual Report on Form 10-K constitutes forward-looking statements, the risk factors set forth below also are cautionary statements identifying important factors that could cause actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company.

The COVID-19 global pandemic affected all aspects of the ~~company’s~~Company’s business insince 2020. The ~~event~~impact of the pandemic is discussed in the ~~Operating~~"Operating" risk ~~factor~~factors below, but it should be understood as affecting the overall risk environment and risk factors of the Company.

Risk Factors Summary

Lending Risks

•Deterioration in the Housing Sector, Commercial Real Estate, and Related Markets May Adversely Affect Business and Financial Results.

•The Company’s Emphasis on Commercial Lending May Expose the Company to Increased Lending Risks, Which Could Hurt Profits.

•As a Participating Lender in the Small Business Administration Paycheck Protection Program, the Company is Subject to Additional Risks of Litigation from Its Customers or Other Parties Regarding Its Processing of Loans for the Paycheck Protection Program, Which Could Have a Significant Adverse Impact On Its Business, Financial Position, Results of Operations, and Prospects.

•The Company is Subject to a Variety of Risks in Connection With Any Sale of Loans it May Conduct.

•The Company is Exposed to Risk of Environmental Liability When It Takes Title to Property.

•New Third Party Lending Relationships and Sourcing Channels May Increase Lending Risk

Operating Risks

•~~The~~Public Health Emergencies Like the COVID-19 Pandemic ~~is Adversely Affecting, and Will Likely Continue to~~May Adversely Affect, the Company’s Business, Financial Condition, Liquidity, and Results of Operations.

•The Company is Subject to Security and Operational Risks Relating to the Use of Technology that Could Damage the Company's Reputation and Business.

•The Company Faces Cybersecurity Risks, Including Denial of Service Attacks, Ransomware, Hacking and Identity Theft that Could Result in the Disclosure of Confidential Information or the Creation of Unauthorized Transactions, Which Could Adversely Affect the Company’s Business or Reputation and Create Significant Legal and Financial Exposure.

•Counterparties and Correspondents Expose the Company to Risks.

•The Company’s Business is Reliant on Outside Vendors.

•Tailoring The Bank's Delivery Model to Respond to Customer Preferences in Banking May Negatively Affect Earnings

•Development of New Products and Services May Impose Additional Costs on the Company and May Expose It to Increased Operational Risk.

•The Discontinuation of LIBOR and the ~~Emergence of One or More~~Transition to an Alternative ~~Benchmark Indices to Replace LIBOR~~Reference Rate Could Adversely Impact the Company’s Business and Results of Operations.

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Liquidity Risks

•The Company's Wholesale Funding Sources May Prove Insufficient to Replace Deposits at Maturity and Support Operations and Future Growth.

•The Company's Ability to Service Our Debt, Pay Dividends, and Otherwise Pay Obligations as They Come Due Is Substantially Dependent on Capital Distributions from the Bank, and These Distributions Are Subject to Regulatory Limits and Other Restrictions. The Company’s Stock Repurchase Program is also Dependent on These Distributions.

•The Loss Recorded in 2020 May Have an Adverse Effect on Future Dividend Payments to Common Shareholders.

•Secondary Mortgage Market Conditions Could Have a Material Impact on the Company’s Financial Condition and Results of Operations.

Interest ~~Rates~~Rate Risks

•Market Interest Rate Conditions Could Adversely Affect Results of Operations and Financial Condition.

Securities Market Value Risks

•Declines in the Value of Certain Investment Securities Could Require Write-Downs, Which Would Reduce Earnings.

Regulatory Matters Risks

•Legislative and Regulatory Initiatives May Affect Business Activities and Increase Operating Costs.

•Provisions of the Company's Certificate of Incorporation, Bylaws, and Delaware Law, as Well as State and Federal Banking Regulations, Could Delay or Prevent a Takeover of Us by a Third Party.

Significant Accounting Estimates Risks

•~~If the Company Determines Intangible Assets to be Impaired, the Company’s Financial Condition and Results Would Be Negatively Affected.~~

•Various Factors May Cause Our Allowance for Credit Losses on Loans to Increase.

•Fair Value Measurements May Be Affected by Inherent Uncertainties

Trading of the Company's Common Stock

•The Trading History of the Company’s Common Stock is Characterized By Low Trading Volume. The Value of Shareholder Investments May be Subject to Sudden Decreases Due to the Volatility of the Price of the Common Stock.

Lending

Deterioration in the Housing Sector, Commercial Real Estate, and Related Markets May Adversely Affect Business and Financial Results.

Real estate lending is a major business activity for the Company. Real estate market conditions affect the value and marketability of real estate collateral, and they also affect the cash flows, liquidity, and net worth of many borrowers whose operations and finances depend on real estate market conditions. We have a geographic concentration of loans in our market areas. Adverse conditions in the Company's market areas could reduce growth rates, affect the ability of our customers to repay their loans and increase loan losses, and generally affect the Company's financial condition and results of operations. Potential increases in interest rates could increase capitalization rates which could adversely affect commercial property appraisals and collateral value. Residential property values may be similarly adversely impacted.Pandemic impacts on the supply and demand of residential properties have caused unusual price appreciation in many markets, which may not be sustained if market conditions normalize.

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The Company’s Emphasis on Commercial Lending May Expose the Company to Increased Lending Risks, Which Could Hurt Profits.

The Company emphasizes commercial lending, which generally exposes the Company to a greater risk of nonpayment and loss because repayment of such loans often depends on the successful operations and income stream of the borrowers. Commercial loans are historically more susceptible to delinquency, default, fraud, and loss during economic downturns. Commercial lending involves larger loan sizes and larger relationship exposures, with greater potential impact on profits in the event of adverse loan performance. The majority of the Company’s commercial loans are secured by real estate and subject to the previously discussed real estate risk factors, as well as risks specific to individual properties and property types. ~~Geographic~~Recent expansion of the commercial lending team may ~~result in risks not previously~~

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~~experienced by~~expose the Company ~~or which it is unfamiliar~~to new markets and risks if new lenders are not integrated with ~~monitoring or resolving. Recent expansion has been focused on~~ the ~~Greater Boston market, where the Bank may be financing projects with larger loan amounts~~Company’s policies, controls, and ~~where the Bank has less experience than in its traditional market areas and where competition may result in different lending structures.~~

Commercial lending activities pose higher risk of fraud. In 2019, the Company wrote-off the $16 million balance of a secured commercial loan in circumstances involving alleged borrower fraud. This asset was a participating interest in a commercial loan managed by another financial institution. Such participating interests involve risks related to counterparty performance, as further described in a later risk factor. In the case of this loan, the Company has filed legal claims against the agent bank in pursuit of the recovery of some of the loss recorded by the Company. The outcome of such legal proceedings is subject to uncertainty, and the Company has not recognized any such potential recoveries in its financial records.

As a Participating Lender in the Small Business Administration Paycheck Protection Program, the Company is Subject to Additional Risks of Litigation from Its Customers or Other Parties Regarding Its Processing of Loans for the Paycheck Protection Program, Which Could Have a Significant Adverse Impact On Its Business, Financial Position, Results of Operations, and Prospects.

The COVID-19 pandemic and its impact on the economy have led to actions including the enactment of the Coronavirus Aid, Relief and Economic Security Act, which established the Paycheck Protection Program (“PPP”) administered by the Small Business Administration (“SBA”). Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved lenders that participate in the program, subject to numerous limitations and eligibility criteria. The Company is participating as a lender in the PPP and may be exposed to the risk of litigation. Since the initiation of the PPP, several banks have been subject to litigation or threatened litigation regarding the process and procedures that such lenders used in processing applications for the PPP. If any such litigation is filed or threatened and is not resolved in a manner favorable to the Company, it may result in significant cost or adversely affect our reputation. Any financial liability, litigation costs, or reputational damage caused by PPP-related litigation could have a material adverse impact on our business, financial position, results of operations and prospects.procedures.

The Company is Subject to a Variety of Risks in Connection With Any Sale of Loans it May Conduct.

~~In connection with the Company’s sale of one or more~~The Company routinely sells newly originated residential mortgage loans and SBA guaranteed business loans, and may also sell other loans or ~~loan portfolios, it~~loans portfolios. It may make certain representations and warranties to the purchaser concerning the loans sold and the procedures under which those loans have been originated and serviced. If any of these representations and warranties are invalid, the Company may be required to refund premiums, indemnify the purchaser for any related costs or losses, or it may be required to repurchase part or all of the affected loans, which may be impaired. The Company may also be required to repurchase loans as a result of borrower fraud or in the event of early payment default by the borrower on a loan it has sold. The Company’s ability to maintain seller/servicer relationships with government agencies and government backed entities may be jeopardized in the event of the emergence of one or more of the above risks. Demand for the Company’s loans in the secondary markets could also be affected by these risks, which could lead to a reduction in related business activities.

The Company may be required to reduce the value of any loans it marks as held for sale, which could adversely affect its results of operations. As a result of the Company’s strategic initiatives, the Company sold certain loans which were previously held for investment and conducted sales with buyers who it had not previously transacted with.

~~The Company~~ is Exposed to Risk of Environmental Liability When It Takes Title to Property.

In the course of its business, the Company may foreclose on and take title to real estate. As a result, the Company could be subject to environmental liabilities with respect to these properties for property damage, personal injury, investigation and clean-up costs. The costs associated with investigation or remediation activities could be substantial. The Company may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property.

New Third Party Lending Relationships and Sourcing Channels May Increase Lending Risk.

30The Company is expanding its lending sourcing channels, including a residential mortgage channel with local correspondents, partnering with fintech online lenders, and expanding its commercial loan sourcing channels.It is also relying more on third party loan servicing. These activities may increase the underwriting risks and loan administration risks in managing its lending activities.

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Operating

~~The~~Public Health Emergencies Such as the COVID-19 Pandemic ~~is Adversely Affecting, and Will Likely Continue to~~May Adversely Affect, the Company’s Business, Financial Condition, Liquidity, and Results of Operations.

The COVID-19 pandemic has negatively impacted the U.S. and global economy; disrupted U.S. and global supply ~~chains; lowered equity market valuations;~~chains and labor markets; created significant volatility and disruption in financial markets; ~~contributed to a decrease in the~~impacted rates and yields on U.S. Treasury securities; resulted in ~~ratings downgrades,~~increased credit ~~deterioration, and defaults~~risk in ~~many~~ certain industries; increased demands on capital and liquidity; and ~~dramatically increased unemployment levels~~affected employment wages, consumer confidence, and ~~decreased consumer confidence.~~inflation. In addition, the pandemic has resulted in temporary closures and curtailment of ~~many businesses~~individual and ~~the institution of social distancing and sheltering in place requirements in many states and communities, including those~~business activities in our footprint. The pandemic has ~~caused us, and could continue to cause us,~~resulted in increases in the Company's allowance for credit losses and ~~subsequent increases in credit losses in~~the recognition of impairment of our ~~loan portfolios.~~goodwill. Some of the risks the Company faces from the pandemic include, but are not limited to: the health and availability of our colleagues, the supply of labor, inflationary impacts on operating costs, the financial condition of our clients and the demand for our products and services, ~~falling~~ changes in interest rates, recognition of credit losses and increases in the allowance for credit losses, ~~especially~~ impactsif ~~businesses remain closed or restricted, unemployment continues to rise and clients and~~ customers draw on their lines of credit or draw down deposits or seek additional loans to help finance their businesses, and a significant deterioration of business conditions in our markets. ~~Furthermore, the pandemic has caused us to recognize impairment of our goodwill and there could be impairment of our financial assets.~~ Sustained adverse effects may also increase our cost of capital, prevent us from satisfying our minimum regulatory capital ratios and other supervisory requirements, or result in downgrades in our credit rating. The extent to which the COVID-19 pandemic impacts our business, financial condition, liquidity and results of operations will

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depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the continued effectiveness of our business continuity plan, the direct and indirect impact of the pandemic on our customers, colleagues, counterparties and service providers, and actions taken by governmental authorities and other third parties in response to the pandemic.

Governmental authorities have taken significant measures to provide economic assistance to individual households and businesses, stabilize the markets, and support economic growth. The success of these measures is unknown, and they may not be sufficient to mitigate the negative impact of the pandemic. Additionally, some measures, such as a deferment of loan payments and the significant reduction in interest rates to near zero, will have a negative impact on our business, financial condition, liquidity, and results of operations. We also face an increased risk of litigation and governmental and regulatory scrutiny as a result of the effects of the pandemic on market and economic conditions and actions governmental authorities take in response to those conditions.

The length of the pandemic and the effectiveness of the measures being put in place to address it are ~~unknown. Until the effects of the pandemic subside,~~ unknown and we ~~expect~~face possible continued impacts on liquidity, ~~reduced~~operating revenues, ~~in our businesses,~~ and increased customer defaults. Furthermore, the U.S. economy experienced a recession as a result of the pandemic, and it is probable that our business would be materially and adversely affected if current conditions do not improve sufficiently. credit performance.To the extent the pandemic adversely affects our business, financial condition, liquidity, or results of operations, it may also have the effect of heightening many of the other risks described in this Annual Report on Form 10-K.

The Company is Subject to Security and Operational Risks Relating to the Use of Technology that Could Damage the Company's Reputation and Business.

Security breaches of confidential information in our technology platforms could expose the Company to possible liability and damage its reputation. Any compromise of data security could also deter customers from using the Company's services. The Company relies on industry standard internet security and authentication systems to effect secure transmission of data. These precautions may not protect the Company's security systems from compromises or breaches and could result in damage to its reputation and business. The Company utilizes third party core banking software, in addition to other outsourced data processing. If third party providers encounter difficulties or if the Company has difficulty in communicating and/or transmitting with such third parties, it could significantly affect its ability to adequately process and account for customer transactions, which could significantly affect its business operations. The Company interfaces with electronic payments systems which are subject to security and operational risks. The Company utilizes file encryption in designated internal systems and networks and is subject to certain state and federal regulations regarding how the Company manages data security. The Company's enterprise governance risk and compliance function includes a framework of controls, policies and technologies to

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monitor and protect information from cyberattacks, mishandling, and loss, together with safeguards related to the confidentiality, integrity, and availability of information. Natural disasters and disaster recovery risks could affect its operating systems, which could affect its reputation. The Company's business continuity program addresses crisis management, business impact, and data and systems recovery. Potential problems with the management of technology security and operational risks may affect regulatory compliance, which could affect operating costs and expansion ~~plans.~~

plans.Implementation of certain new technologies, such as those related to artificial intelligence, automation and algorithms, may have unintended consequences due to their limitations, potential manipulation, or our failure to use them effectively.

The Company Faces Cybersecurity Risks, Including Denial of Service Attacks, Ransomware, Hacking and Identity Theft that Could Result in the Disclosure of Confidential Information or the Creation of Unauthorized Transactions, Which Could Adversely Affect the Company’s Business or Reputation and Create Significant Legal and Financial Exposure.

~~Banking institutions face increased cybersecurity risks due to the number of employees that are working remotely in regions impacted by stay-at-home orders.~~ Increased levels of remote access resulting from more work from home employees may create additional opportunities for cybercriminals to exploit vulnerabilities, and employees may be more susceptible to phishing and social engineering attempts due to work responsibilities at home. In addition, technological resources may be strained due to the number of remote users. ~~Banking institutions should evaluate their cybersecurity risks in light of these issues and update their existing risk factors for any material changes or developments~~

The Company’s computer systems and network infrastructure are subject to security risks and could be susceptible to cyber-attacks, such as denial of service attacks, hacking, terrorist activities or identity theft. Financial services institutions and companies engaged in data processing have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, steal financial assets, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks and other means. Denial of service attacks have been launched against a number of large financial services institutions. As a growing regional bank, the Company may be subject to similar attacks in the future. Hacking and identity theft risks could cause serious reputational harm and possible financial loss to the Company. Cyber threats are rapidly evolving and the Company may not be able to anticipate or prevent all such attacks.

The Company may incur increasing costs in an effort to minimize these risks and could be held liable for any security breach or loss. Despite efforts to ensure the integrity of its systems, the Company will not be able to anticipate all security breaches of these types, and the Company may not be able to implement effective preventive

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measures against such security breaches. The techniques used by cyber criminals change frequently and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations or hostile foreign governments. Those parties may also attempt to fraudulently induce employees, customers or other users of the Company’s systems to disclose sensitive information in order to gain access to its data or that of its clients or to conduct unauthorized financial transactions.

These risks may increase in the future as the Company continues to increase its mobile-payment and other internet-based product offerings and expands its internal usage of web-based products and applications. A successful penetration or circumvention of system security could cause serious negative consequences to the Company, including significant disruption of operations, misappropriation of confidential information of the Company or that of its customers, or damage to computers or systems of the Company or those of its customers and counterparties. A security breach could result in violations of applicable privacy and other laws, financial loss to the Company or to its customers, loss of confidence in the Company’s security measures, significant litigation exposure, and harm to the Company’s reputation, all of which could have a material adverse effect on the Company.

Counterparties and Correspondents Expose the Company to Risks.

The Company's use of derivative financial instruments exposes us to financial and contractual risks with counterparties. The Company maintains correspondent bank relationships, ~~manage~~purchase loans, manages certain loan participations, engage in securities and funding transactions, and undergo other activities with financial counterparties that are customary to its industry. The Company also utilizes services from major vendors of technology, telecommunications, and other essential operating services. There is financial, reputational, and operational risk in these relationships, which the Company seeks to manage through internal controls and procedures, but there are no assurances that the Company will not experience loss or interruption of its business as a result of unforeseen events

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with these providers. The Company's mortgage banking operations have exposed us to counterparty transactions including the use of third parties to participate in the management of interest rate risk and mortgage sales and hedging. Financial, reputational, and operational risks are inherent in these counterparty and correspondent relationships. The Company could experience losses if there are failures in the controls or accounting, including those related to derivatives activities or if there are performance failures by any counterparties. The risk of loss is increased when interest rates change suddenly and if the intended hedging objectives are not achieved as a result of market or counterparty behaviors.

The Company’s Business is Reliant on Outside Vendors.

The Company’s business is highly dependent on the use of certain outside vendors for its day-to-day operations. The Company’s operations and reputationare exposed to risk that a vendor may not perform in accordance with established performance standards required in its agreements for any number of reasons including a change in their senior management, their financial condition, their product line or mix and how they support existing customers, or a simple change in their strategic focus. While the Company has comprehensive programs, policies and procedures in place to mitigate risk at all phases of vendor management from selection, to performance monitoring and renewals, the failure of a vendor to perform in accordance with contractual agreements could be disruptive to its business, which could have a material adverse effect on its financial condition, strategic objectives, and results of operations.

Development of New Products and Services May Impose Additional Costs on the Company and May Expose It to Increased Operational Risk.

The Company’s financial performance depends, in part, on its ability to develop and market new and innovative services and to adopt or develop new technologies that differentiate its products or provide cost efficiencies, while avoiding increased related expenses. This dependency is exacerbated in the current “FinTech” environment, where financial institutions are investing significantly in evaluating new technologies, such as “Blockchain,” and developing potentially industry-changing new products, services and industry standards. The introduction of new products and services can entail significant time and resources, including regulatory approvals. Substantial risks and uncertainties are associated with the introduction of new products and services, including technical and control requirements that may need to be developed and implemented, rapid technological change in the industry, the Company’s ability to access technical and other information from its clients, the significant and ongoing investments required to bring new products and services to market in a timely manner at competitive prices and the

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preparation of marketing, sales and other materials that fully and accurately describe the product or service and its underlying risks. The Company’s failure to manage these risks and uncertainties also exposes it to enhanced risk of operational lapses which may result in the recognition of financial statement liabilities. Regulatory and internal control requirements, capital requirements, competitive alternatives, vendor relationships and shifting market preferences may also determine if such initiatives can be brought to market in a manner that is timely and attractive to the Company’s clients. Products and services relying on internet and mobile technologies may expose the Company to fraud and cybersecurity risks. Failure to successfully manage these risks in the development and implementation of new products or services could have a material adverse effect on the Company’s business and reputation, as well as on its consolidated results of operations and financial condition.

Tailoring The Bank’s Retail Delivery Model to Respond to Consumer Preferences in Banking May Negatively Affect Earnings.

The Company’s branch network continues to be a very significant source of new business generation, however, consumers continue to migrate much of their routine banking to self-service channels. In recognition of this shift in consumer patterns, we regularly review the branch network, which has resulted in branch consolidation accompanied by the enhancement of the Bank’s capabilities to serve its customers through alternate delivery channels. The benefits of this strategy will depend on our ability to realize expected benefits without experiencing significant customer attrition.

The Discontinuation of LIBOR and the ~~Emergence of One or More~~Transition to an Alternative ~~Benchmark Indices to Replace LIBOR~~Reference Rate Could Adversely Impact the Company’s Business and Results of Operations.

The ~~Company’s floating-rate funding, certain hedging transactions and~~interest rates paid on certain of the Company’s floating-rate funding, hedging transactions and products, such as floating-rate loans and mortgages, ~~determine the applicable interest rate or payment amount by reference~~are indexed to ~~a benchmark rate, such as~~ the London Interbank Offered Rate (“LIBOR”)~~, or to an index, currency, basket or other financial metric.~~. The use of LIBOR ~~and certain other benchmark rates are the subject of recent national, international, and other regulatory guidance and proposals for reform. LIBOR may be~~on new contracts was discontinued ~~as early as~~on December 31, ~~2021.~~2021, and LIBOR will cease publication after June 30, 2023.

Regulators and various financial industry groups have sponsored or formed committees (e.g., the Federal Reserve-sponsored Alternative Reference Rates Committee) to, among other things, facilitate the identification of an alternative benchmark index to replace LIBOR, and publish consultations on recommended practices for transitioning away from LIBOR, including (i) the utilization of recommended fallback language for LIBOR-linked financial instruments, and (ii) development of alternative pricing methodologies for recommended alternative benchmarks such as the Secured Overnight Financing Rate (“SOFR”). SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-based

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repurchase transactions. The March 2022 enactment of the Adjustable Interest Rate (LIBOR) Act and the Federal Reserve’s proposed implementing regulations established SOFR as the benchmark rate that will automatically apply to agreements that rely on LIBOR and do not have an alternative contractual fallback benchmark rate. The selected SOFR-based replacement benchmark rates may also apply automatically to contracts with fallback provisions that authorize a particular person to determine the replacement benchmark. The Company adopted SOFR as its preferred benchmark as an alternative to LIBOR for use in new contracts beginning on January 1, 2022.

At this time, it is still not possible to predict whether these recommendations and proposals will be broadly accepted in the market, whether they will continue to evolve, and what the effect of their implementation may be on the markets for floating-rate financial instruments.

The discontinuation of LIBOR could result in disputes with customers or other counterparties, changes to the Company’s risk exposures (for example, if the anticipated discontinuation of LIBOR adversely affects the availability or cost of floating-rate funding and, therefore, the Company’s exposure to fluctuations in interest rates), or otherwise result in losses on a product or having to pay more or receive less on securities that the Company has issued or owns. A substantial portion of the Company’s on- and off-balance sheet financial instruments are indexed to LIBOR, including interest rate swap agreements and other contracts used for hedging and trading account purposes, loans to commercial customers and consumers (including mortgage loans and other loans), and long-term borrowings. In addition, such uncertainty could result in pricing volatility and increased capital requirements, loss of market share in certain products, adverse tax or accounting impacts, and compliance, legal and operational costs and risks.

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Interest Rate Risks

Market Interest Rate Conditions Could Adversely Affect Results of Operations and Financial Condition

Net interest income is the Company's largest source of income. Changes in interest rates can affect the amount of interest we receive on loans and investments and the amount of interest we pay on deposits and borrowings, which may affect our net interest margins and other elements of net income. The Company’s interest rate sensitivity is discussed in more detail in Item 7A of this report and is the primary market risk to its condition and operations.

Changes in interest rates can also affect the demand for the Company’s products and services, supply conditions in the U.S. financial and capital markets, loan prepayments, the Company’s ability to originate real estate loans, the value of its assets, its ability to realize gains from the sale of assets, and loan delinquencies and defaults, all of which ultimately affect earnings. Changes in interest rates may also affect the market value of the Company’s investment securities portfolio, which may affect the level and adequate of its regulatory capital.

During 2022, in response to accelerated inflation, the Federal Reserve implemented monetary tightening policies, resulting in significantly increased interest rates. The Federal Reserve has signaled that further tightening is anticipated. If the interest rates paid on deposits and other borrowings increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected. In a rising rate environment, demand for loans may decrease and loans with adjustable interest rates are more likely to experience a higher rate of default. Additionally, changes in interest rates also affect the fair value of the securities portfolio. Generally, the value of securities moves inversely with changes in interest rates.

Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowings. In addition, in a falling rate environment or the recent pandemic-related environment where the Federal Reserve held the federal reference rate near 0.00%, loans may be prepaid sooner than we expect, which could result in a delay between when we receive the prepayment and when we are able to redeploy the funds into new interest-earning assets and in a decrease in the amount of interest income we are able to earn on those assets.

Any substantial, unexpected or prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations. Also, our interest rate risk modeling techniques and assumptions likely may not fully predict or capture the impact of actual interest rate changes on our balance sheet.

Liquidity

The Company's Wholesale Funding Sources May Prove Insufficient to Replace Deposits at Maturity and Support Operations and Future Growth.

The Company must maintain sufficient funds to respond to the needs of depositors and borrowers. As a part of its liquidity management, the Company uses a number of funding sources in addition to deposit growth and cash flows from loans and investments. These sources include Federal Home Loan Bank advances, proceeds from the sale of loans, and liquidity resources at the holding company. The Company uses brokered deposits both to support ongoing growth and to provide enhanced deposit insurance to support large dollar commercial relationships. The Company's financial flexibility will be severely constrained if the Company is unable to maintain access to wholesale funding or if adequate financing is not available to accommodate future growth at acceptable costs. Turbulence in the capital and credit markets may adversely affect liquidity and financial condition and the willingness of certain counterparties and customers to do business with the Company.

The Company's Ability to Service Our Debt, Pay Dividends, and Otherwise Pay Obligations as They Come Due Is Substantially Dependent on Capital Distributions from the Bank, and These Distributions Are Subject to Regulatory Limits and Other Restrictions. The Company’s Stock Repurchase Program is also Dependent on These Distributions.

A substantial source of holding company income is the receipt of dividends from the Bank, from which the Company services debt, pay obligations, and pay shareholder dividends. The availability of dividends from the Bank is limited by various statutes and regulations. It is possible, depending upon the financial condition of the Bank and other factors, that the applicable regulatory authorities could assert that payment of dividends or other types of payments are an unsafe or unsound practice. If the Bank is unable to pay dividends, the Company may not

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be able to service debt, pay debt obligations, or pay dividends on its common stock.

The ~~Loss Recorded in 2020 May Have an Adverse Effect on Future Dividend Payments~~Company may also be unable to ~~Common Shareholders.~~

~~Due to the loss in the first half of 2020 and~~repurchase common stock under its impact on retained earnings, the Bank will require the approval from the Massachusetts Division of Banks in order to continue to be a source of dividend income to the Company. Over the long term, these dividends are a source of funds to the parent to support dividend payments to Company shareholders. Also due to the loss, the Company requires nonobjection from the Federal Reserve Bank of Boston for future shareholder dividend payments. Future payments of dividends will also depend on the Board’s holistic assessment of the Company’s operating, risk, and financial situations and current circumstances, as well as regulatory assessments of these factors.Stock Repurchase Program.

Secondary Mortgage Market Conditions Could Have a Material Impact on the Company’s Financial Condition and Results of Operations.

In addition to being affected by interest rates, the secondary mortgage markets are also subject to investor demand for residential mortgage loans and increased investor yield requirements for these loans. These conditions may fluctuate or worsen in the future. As a result, a prolonged period of secondary market illiquidity may reduce the Company’s loan production volumes and operating results.

Secondary markets are significantly affected by Fannie Mae, Freddie Mac and Ginnie Mae (collectively, the “Agencies”) for loan purchases that meet their conforming loan requirements. These agencies could limit purchases

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of conforming loans due to capital constraints, a change in the criteria for conforming loans or other factors. Proposals to reform mortgage finance could affect the role of the Agencies and the market for conforming loans which comprise the majority of the Company’s mortgage lending and related originations income.

~~Interest Rates~~

~~Market Interest Rate Conditions Could Adversely Affect Results of Operations and Financial Condition.~~

Net interest income is the Company's largest source of income. Changes in interest rates can affect the level of net interest income and other elements of net income. The Company’s interest rate sensitivity is discussed in more detail in Item 7A of this report and is the primary market risk to its condition and operations. Changes in interest rates can also affect the demand for the Company’s products and services, and the supply conditions in the U.S. financial and capital markets. Changes in the level of interest rates may negatively affect the Company’s ability to originate real estate loans, the value of its assets and its ability to realize gains from the sale of assets, all of which ultimately affect earnings.

Securities Market Values

Declines in the Value of Certain Investment Securities Could Require Write-Downs, Which Would Reduce Earnings.

Declines in the value of investment securities due to market conditions and/or issuer impairment could result in losses that can reduce capital and earnings. Such declines can result from changes in interest rates and inflation. The Company’s investment in equity securities and non-investment grade debt securities present heightened credit and price risks. Under new accounting standards, equity gains and losses are recorded to current period operating results. The Company has an investment in the stock of the Federal Home Loan Bank of Boston ("FHLBB") which could result in write-down in the event of impairment.

Regulatory Matters

Legislative and Regulatory Initiatives May Affect Business Activities and Increase Operating Costs.

New federal or state laws and regulations could affect lending, funding practices, capital, and liquidity standards. New laws, regulations, and other regulatory changes may also increase compliance costs and affect business and operations. Moreover, the FDIC sets the cost of FDIC insurance premiums, which can affect profitability.

Regulatory capital requirements and their impact on the Company may change. The Company may need to raise additional capital in the future to support operations and continued growth. The Company's ability to raise capital, if needed, will depend on its condition and performance, and on market conditions.

New laws, regulations, and other regulatory changes, along with negative developments in the financial industry and the domestic and international credit markets, may significantly affect the markets in which the Company does business, the markets for and value of its loans and investments, and ongoing operations, costs and profitability. For more information, see “Regulation and Supervision” in Item 1 of this report.

~~In 2017, the Company crossed the~~With total assets over $10 billion, ~~asset threshold established by~~ the ~~Dodd-Frank Act. The~~ Company and the Bank are ~~now~~ subject to closer supervision by their primary regulators and, as to compliance with consumer protection laws and regulations, the Consumer Financial Protection Bureau. The Company and the Bank are subject to capital stress testing expectations which require significant resources and infrastructure. If the Company’s compliance with the enhanced supervision and requirements is insufficient, there can be significant negative consequences for its operations, profitability, and ability to further pursue its strategic growth plan.

Provisions of the Company's Certificate of Incorporation, Bylaws, and Delaware Law, as Well as State and Federal Banking Regulations, Could Delay or Prevent a Takeover of Us by a Third Party.

Provisions in the Company's certificate of incorporation and bylaws, the corporate law of the State of Delaware, and state and federal regulations could delay, defer or prevent a third party from acquiring us, despite the possible benefit stockholders, or otherwise adversely affect the price of its common stock. These provisions include: limitations on voting rights of beneficial owners of more than 10 percent of common stock; supermajority voting requirements for certain business combinations; the election of directors to terms of one year; and advance notice

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requirements for nominations for election to the Company's Board of Directors and for proposing matters that stockholders may act on at stockholder meetings. In addition, the Company is subject to Delaware laws, including one that prohibits engaging in a business combination with any interested stockholder for a period of three years from the date the person became an interested stockholder unless certain conditions are met. These provisions may

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discourage potential takeover attempts, discourage bids for the Company's common stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the holders of, its common stock. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors other than the candidates nominated by the Board.

Significant Accounting Estimates

~~If the Company Determines Intangible Assets to be Impaired, the Company’s Financial Condition and Results Would Be Negatively Affected.~~

When the Company completes a business combination, a portion of the purchase price of the acquisition is allocated to identifiable intangible assets. If the Company determines that the fair value of the intangible assets is less than the carrying value, the Company will be required to write down these assets. Any write-down would have a negative effect on the financial statements.

Various Factors May Cause our Allowance for Credit Losses on Loans to Increase.

The Company has an allowance for current expected credit losses on loans maintained through a provision for credit losses charged to expense. This represents our estimate of current expected credit losses based on an evaluation of risks within the portfolio of loans. The level of the allowance represents management’s estimate of current expected credit losses over the contractual life of the existing loan portfolio. The determination of the appropriate level of the allowance inherently involves a degree of subjectivity and requires that we make significant estimates of current credit risks and current trends and reasonable and supportable forecasts of future economic conditions, all of which may undergo frequent and material changes. Changes in economic and other conditions affecting borrowers, including inflation and interest rates, along with new information regarding existing loans other factors, may indicate the need for a future increase in the allowance.

Fair Value Measurements May Be Affected by Inherent Uncertainties

The Company uses fair value measurements to determine fair value disclosures and to record fair value adjustments to certain assets and liabilities, such as interest rate swaps, impaired loans, securities available for sale, and derivatives. Additionally, from time to time, the Company may be required to record certain assets at fair value on a non-recurring basis, such as certain impaired loans held for investment and capitalized servicing rights. Whenever there is no readily available market data, management uses its best estimate and assumptions in determining fair value, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if other assumptions had been used, our recorded earnings or disclosures could have been materially different from those reflected in these financial statements.

Trading of the Company's Common Stock

The Trading History of the Company’s Common Stock is Characterized By Low Trading Volume. The Value of Shareholder Investments May be Subject to Sudden Decreases Due to the Volatility of the Price of the Common Stock.

The level of interest and trading in the Company’s stock depends on many factors beyond the Company's control. The market price of the Company's common stock may be highly volatile and subject to wide fluctuations in response to numerous factors, including, but not limited to, the factors discussed in other risk factors and the following: actual or anticipated fluctuations in operating results; changes in interest ~~rates;~~rates and inflation; changes in the legal or regulatory environment; press releases, announcements or publicity relating to the Company or its competitors or relating to trends in its industry; changes in expectations as to future financial performance, including financial estimates or recommendations by securities analysts and investors; future sales of its common stock; changes in economic conditions in the marketplace, general conditions in the U.S. economy, financial markets or the banking industry; and other developments. These factors may adversely affect the trading price of the Company's common stock, regardless of actual operating performance, and could prevent stockholders from selling their common stock at a desirable price.

In the past, stockholders have brought securities class action litigation against a company following periods of volatility in the market price of their securities. The Company could be the target of similar litigation in the future, which could result in substantial costs and divert management’s attention and resources.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The Company's headquarters are located at 60 State Street in leased property in Boston, MA. The Bank's headquarters are located in owned and leased facilities located in Pittsfield, MA. The Company also owns or leases other facilities within its primary market areas: Greater Boston (including Worcester, MA); ~~Berkshire County, Massachusetts;~~ Pioneer Valley (Springfield area), Massachusetts; Berkshire County, Massachusetts; Southern Vermont; the Capital Region (Albany area), New York; Central New York; Central and Eastern Connecticut; and Southern Rhode ~~Island; and Princeton area, New Jersey.~~Island. As of December 31, ~~2020,~~2022 the Company had ~~130~~100 full-service ~~branches~~financial centers in Massachusetts, New York, Connecticut, ~~Vermont, Central New Jersey, and Eastern Pennsylvania.~~Based on its branch optimization plan, the Bank is targeting to sell its eight New Jersey and Pennsylvania branches and to consolidate 16 branches in its New England/New York footprint, reducing total branches to a target of 106 offices by midyear 2021. The Company opened a commercial banking office in Providence, Rhode Island, ~~in the beginning of 2021.~~and Vermont.

The Company also has regional locations which are full-service commercial offices located in Boston, MA.; Pittsfield, MA.; Springfield, MA.; Albany, N.Y.; East Syracuse, N.Y.; Hartford, CT.; Willimantic, CT. Worcester, MA.; Burlington, ~~MA.;~~MA, Providence RI, and ~~Lawrenceville, N.J. In addition, the Company has eight lending locations in Central/Eastern, Massachusetts.~~New Haven, CT. The Bank's ~~wholly-owned subsidiary, Firestone Financial, LLC,~~44 Business Capital lending division is headquartered in the Boston metro area. Berkshire Insurance Group Inc. operates from 12 locations in Western Massachusetts and East Syracuse, N.Y. in both stand-alone premises as well as in rented space located in the Bank’s premises.Blue Bell, Pennsylvania.

Berkshire continues to enhance its new retail branch design which eliminates traditional teller counters and provides an interactive customer service environment through “pod” stations which include automated cash handling technology. In many cases, this branch design also includes a multimedia community room which is offered for use by nonprofit community groups. The Company has begun introducing MyTeller automated remote teller stations at new offices and targeted existing offices.

The Bank has made its workplace more flexible as certain designated functions are approved for telecommuting arrangements. As a result of its ~~merger and~~ efficiency initiatives, the Bank has ~~excess facilities space~~been in ~~various locations which is some cases is owned or subject to lease.The Bank is considering alternative uses or dispositions~~the process of ~~excess office space, including uses in support of providing community benefit.The Bank opened a Reevx Labs community workspace in 2020 to increase~~identifying and reducing real estate utilized for its ~~presence and service to underbanked urban communities.~~operations.

~~Access to most Company properties was restricted during periods of 2020 due~~Due to the pandemic, the Company adapted its infrastructure and ~~special cleaning and safety~~ protocols ~~were instituted.~~Drive-up teller facilities, automated teller machines, and interactive teller machines were relied on to maintain ongoing customer access, in addition to the Bank’s internet, telephone, and mobile banking channels.~~Most back-office staff used home environments and telecommunications capacities~~ to accommodate the shift of back office operations out of the office ~~due~~and continues to ~~the pandemic.~~support this expanded capability and flexibility in pursuit of its strategies and human capital management.

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ITEM 3. LEGAL PROCEEDINGS

As of December 31, ~~2020,~~2022, neither the Company nor the Bank was involved in any pending legal proceedings believed by management to be material to the Company’s financial condition or results of operations. Periodically, there have been various claims and lawsuits involving the Bank, such as claims to enforce liens, condemnation proceedings on properties in which the Bank holds security interests, claims involving the making and servicing of real property loans, and other issues incident to the Bank’s business. A summary of certain legal matters involving unsettled litigation or pertaining to pending transactions are as follows:

On February 4, 2020, the Bank filed a complaint in the New York State Supreme Court for the County of Albany against Pioneer Bank (“Pioneer”) seeking damages of approximately $16.0 million. The complaint alleges that Pioneer is liable to the Bank for a credit loss of approximately $16.0 million suffered by the Bank in the third quarter of 2019 as a result of Pioneer’s breach of loan participation agreements in which it served as the lead bank, as well as constructive fraud, fraudulent concealment and/or negligent misrepresentation. Pioneer has filed a motion to dismiss aspects of the Bank’s complaint, which motion was allowed in part by the court to ~~which~~dismiss the Bank’s negligent misrepresentation claim, and denied in part by the court to allow all other claims by the Bank to proceed. Discovery is now underway in ~~the process of responding.~~this action. The Company wrote down the underlying credit loss in its entirety in the third quarter of 2019, but recognized a partial recovery of $1.7 million early in the second quarter of 2020. The Company has not accrued for any additional anticipated recovery at this time.

On September 11, 2020, the Company received notice of a demand letter served on the Company and the Bank by a former mortgagee of the Bank pursuant to the Massachusetts Consumer Protection Act, M.G.L Ch. 93A (“Chapter 93A). The demand letter alleges that a mortgage payoff statement tendered by the Bank to the mortgagee included a mortgage discharge preparation fee that is purportedly impermissible under Massachusetts law.The demand letter also claims that the Bank failed to provide a copy of the recorded mortgage discharge to the mortgagee in a timely manner. The demand letter further purports to state claims on behalf of a putative class of similarly situated Massachusetts mortgage customers of the Bank, who allegedly may have suffered similar violations of Massachusetts law. The demand letter seeks monetary damages for the original mortgagee claimant and the putative class, plus double or treble damages and reasonable attorneys’ fees, as may be allowed under Chapter 93A. The Company and the Bank have retained outside litigation counsel, who has responded to the demand letter and denied all claims on behalf of the Company and the Bank. No class action or other lawsuit has been served on the Company or the Bank as of the date of this filing.

On or about August 10, 2020, a former employee of the Bank’s subsidiary First Choice Loan Services Inc. (“FCLS”) filed a complaint in the Court of Common Pleas, Bucks County Pennsylvania against FCLS and two of its former senior corporate officers generally alleging wrongful termination as a result of purported whistleblower retaliation and other violations of New Jersey state employment law.The complaint also purports to name the Bank and the Company as additional defendants, even though neither entity ever employed, paid wages to or contracted with the plaintiff.On November 16, 2020, the plaintiff filed a First Amended Complaint reiterating the same claims against the same defendants. The Company's liability insurer has provided outside litigation counsel to defend the Company and the Bank in this matter, as well as FCLS and its former senior corporate officers. On December 7, 2020, defense counsel filed Preliminary Objections on behalf of the Company, the Bank, FCLS and FCLS’s former senior corporate officers denying the plaintiff’s claims and seeking dismissal of the case and an order that the plaintiff’s claims must proceed through arbitration in accordance with contractual obligations set forth in plaintiff’s previous employment agreement with FCLS. On June 30, 2021, the court dismissed the plaintiff’s complaint without prejudice in support of FCLS’s petition to compel arbitration. The parties have mutually agreed on an arbitrator to hear the case and are preparing for arbitration proceedings that are expected to occur in the second half of 2023. Discovery is currently ongoing among the parties.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

The common shares of the Company trade on the New York Stock Exchange under the symbol “BHLB”. ~~The following table sets forth the quarterly high and low sales price information and dividends declared per share of common stock in 2020 and 2019.~~

2020 High Low Dividends
Declared
First quarter $ 33.04 $ 11.43 $ 0.24
Second quarter 18.79 9.15 0.24
Third quarter 11.26 8.55 0.12
Fourth quarter 19.24 9.80 0.12

2019
First quarter $ 31.81 $ 26.02 $ 0.23
Second quarter 31.60 27.35 0.23
Third quarter 33.33 28.20 0.23
Fourth quarter 33.72 27.99 0.23

The Company had approximately ~~4,107~~3,806 holders of record of common stock at February ~~25, 2021.~~24, 2023.

Dividends

The Company intends to pay regular cash dividends to common shareholders; however, there is no assurance as to future dividends because they are dependent on the Company’s future earnings, capital requirements, financial condition, and regulatory environment. Dividends from the Bank have been a source of cash used by the Company to pay its dividends, and these dividends from the Bank are dependent on the Bank’s future earnings, capital requirements, and financial condition. Dividends from the Bank are currently subject to approval by the Massachusetts Division of ~~Banks.~~Banks and the FDIC. Further information about dividend restrictions is disclosed in Note 18 - Shareholders’ Equity and Earnings per Common Share of the Consolidated Financial Statements.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

The Company occasionally issues unregistered shares of common stock to vendors or as consideration in contracts for the purchase of assets, services, or operations. During ~~2020,~~2022 and 2021, there were no shares transferred. ~~During 2019, the Company transferred 1,936 shares.~~

Purchases of Equity Securities by the Issuer and Affiliated Purchases

InOn January 19, 2022, the ~~first quarter~~Company announced that its Board of ~~2020, stock repurchases were suspended as the pandemic emerged. The~~Directors approved a stock repurchase program ~~in effect on~~pursuant to which the Company is authorized to repurchase shares of Company common stock at a total cost of up to $140 million through December 31, ~~2019~~2022. This program expired ~~on March~~at year-end 2022.

On January 25, 2023, the Company announced that its Board of Directors approved a stock repurchase program pursuant to which the Company is authorized to repurchase shares of Company common stock at a total cost of up to $50 million through December 31, ~~2020 and was not replaced.~~2023.

~~Period~~

Total number of
shares purchased

Average price
paid per share

Total number of shares
purchased as part of
publicly announced
plans or programs

Maximum number of
shares that may yet
be purchased under
the plans or programs

~~October 1-31, 2020~~

—

~~November 1-30, 2020~~

—

~~December 1-31, 2020~~

—

~~Total~~

—


Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number of shares that may yet be purchased under the plans or programs
October 1-31, 2022	—	$	—	—	1,178,244
November 1-30, 2022	280,000	30.40		280,000	898,244
December 1-31, 2022	380,500	30.13		380,500	—
Total	660,500	$	30.24	660,500	—

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Common Stock Performance Graph

The performance graph compares the Company’s cumulative shareholder return on its common stock over the last five years to the cumulative return of the NYSE Composite Index and the KBW ~~NASAQ~~NASDAQ Regional Banking Index. Total shareholder return is measured by dividing total dividends (assuming dividend reinvestment) for the measurement period plus share price change for a period by the share price at the beginning of the measurement period. The Company’s cumulative shareholder return over a five-year period is based on an initial investment of $100 on December 31, ~~2015.~~2017. The performance graph represents past performance and should not be considered to be an indication of future performance.

Information used on the graph and table was obtained from a third party provider, a source believed to be reliable, but the Company is not responsible for any errors or omissions in such information.

Period Ending
Index 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20
Berkshire Hills Bancorp, Inc. 100.00 130.39 132.53 99.95 125.63 68.83
NYSE Composite Index 100.00 111.94 132.90 121.01 151.87 162.49
PHLX KBW Regional Banking Index 100.00 139.02 141.45 116.70 144.49 131.91


	Period Ending
Index	12/31/17	12/31/18	12/31/19	12/31/20	12/31/21	12/31/22
Berkshire Hills Bancorp, Inc.	100.00	75.44	84.82	51.87	87.72	94.00
NYSE Composite Index	100.00	91.05	114.28	122.26	147.54	133.75
KBW NASDAQ Regional Banking Index	100.00	82.50	102.15	93.25	127.42	118.59

Source: S&P Global Market Intelligence

ITEM 6. RESERVED

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~~ITEM 6. SELECTED FINANCIAL DATA~~

The following summary data is based in part on the Consolidated Financial Statements and accompanying notes, and other schedules appearing elsewhere in this Form 10-K. Historical data is also based in part on, and should be read in conjunction with, prior filings with the SEC.

At or For the Years Ended December 31,
(In thousands, except per share data) 2020 2019 2018 2017 2016
Per Common Share Data:
Net (loss)/earnings, diluted - continuing operations $ (10.21) $ 2.05 $ 2.36 $ 1.24 $ 1.88
Net (loss)/earnings, diluted - discontinued operations (0.39) (0.08) (0.07) 0.15 —
Net (loss)/earnings, diluted $ (10.60) $ 1.97 $ 2.29 $ 1.39 $ 1.88
Total book value per common share 23.37 34.65 33.30 32.14 30.65
Dividends 0.72 0.92 0.88 0.84 0.80
Common stock price:
High 33.04 33.72 44.25 40.00 37.35
Low 8.55 26.02 25.77 32.85 24.71
Close 17.12 32.88 26.97 36.60 36.85
Performance Ratios: (1)
Return on assets (4.15) % 0.75 % 0.90 % 0.56 % 0.74 %
Return on equity (37.50) 5.75 6.84 4.45 6.44
Net interest margin, fully taxable equivalent (FTE) (2) 2.72 3.17 3.40 3.40 3.31
Fee income/Net interest and fee income 18.10 23.86 23.36 29.41 22.80
Growth Ratios:
Total commercial loans (4.58) % 9.19 % 6.17 % 37.79 % 18.39 %
Total loans (14.95) 5.08 8.96 26.71 14.41
Total deposits (1.16) 15.07 2.66 32.13 18.48
Total net revenues, (compared to prior year) (14.73) 4.53 11.59 41.05 11.18
Earnings per share, (compared to prior year) (638.07) (13.97) 64.75 (26.06) 8.62
Selected Financial Data:
Total assets $ 12,838,013 $ 13,215,970 $ 12,212,231 $ 11,570,751 $ 9,162,542
Total earning assets 12,089,939 11,916,007 11,140,307 10,509,163 8,340,287
Securities 2,223,417 1,769,878 1,918,604 1,898,564 1,628,246
Total loans 8,081,519 9,502,428 9,043,253 8,299,338 6,549,787
Allowance for credit losses (127,302) (63,575) (61,469) (51,834) (43,998)
Total intangible assets 34,819 599,377 551,743 557,583 422,551
Total deposits 10,215,808 10,335,977 8,982,381 8,749,530 6,622,092
Total borrowings 571,637 827,550 1,517,816 1,137,075 1,313,997
Total shareholders’ equity 1,187,773 1,758,564 1,552,918 1,496,264 1,093,298

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At or For the Years Ended December 31,
2020 2019 2018 2017 2016
Selected Operating Data:
Total interest and dividend income $ 409,782 $ 509,513 $ 465,894 $ 355,076 $ 280,439
Total interest expense 93,000 144,255 109,694 64,113 48,172
Net interest income 316,782 365,258 356,200 290,963 232,267
Fee income 69,990 76,824 74,026 71,356 68,606
All other non-interest (loss)/income (3,683) 7,178 298 2,888 (2,755)
Total net revenue 383,089 449,260 430,524 365,207 298,118
Provision for credit losses 75,878 35,419 25,451 21,025 17,362
Total non-interest expense 840,239 289,857 266,893 252,978 203,302
(Loss)/income from continuing operations before income taxes (533,028) 123,984 138,180 91,204 77,454
Income tax (benefit)/expense from continuing operations (19,853) 22,463 28,961 42,088 18,784
Net (loss)/income from continuing operations (513,175) 101,521 109,219 49,116 58,670
(Loss)/income from discontinued operations before income taxes (26,855) (5,539) (4,767) 8,545 —
Income tax (benefit)/expense from discontinued operations (7,013) (1,468) (1,313) 2,414 —
Net (loss)/income from discontinued operations (19,842) (4,071) (3,454) 6,131 —
Net (loss)/income $ (533,017) $ 97,450 $ 105,765 $ 55,247 $ 58,670
Basic (loss)/earnings per common share:
Continuing operations $ (10.21) $ 2.06 $ 2.38 $ 1.24 $ 1.89
Discontinued operations (0.39) (0.08) (0.08) 0.16 —
Total basic (loss)/earnings per share $ (10.60) $ 1.98 $ 2.30 $ 1.40 $ 1.89
Diluted (loss)/earnings per common share:
Continuing operations $ (10.21) $ 2.05 $ 2.36 $ 1.24 $ 1.88
Discontinued operations (0.39) (0.08) (0.07) 0.15 —
Total diluted (loss)/earnings per share $ (10.60) $ 1.97 $ 2.29 $ 1.39 $ 1.88
Weighted average common shares outstanding - basic 50,270 49,263 46,024 39,456 30,988
Weighted average common shares outstanding - diluted 50,270 49,421 46,231 39,695 31,167
Dividends per preferred share $ 1.20 $ 1.84 $ 1.76 $ 0.42 $ —
Dividends per common share $ 0.72 $ 0.92 $ 0.88 $ 0.84 $ 0.80
Asset Quality and Condition Ratios: (3)
Net loans charged-off/average loans 0.41 % 0.35 % 0.18 % 0.19 % 0.21 %
Allowance for credit losses/total loans 1.58 0.67 0.68 0.62 0.67
Loans/deposits 79 92 101 95 99
Capital Ratios:
Tier 1 capital to average assets - Company 9.38 % 9.33 % 9.04 % 9.01 % 7.88 %
Total capital to risk-weighted assets - Company 16.10 13.73 12.99 12.43 11.87
Tier 1 capital to risk-weighted assets - Company 14.06 12.30 11.57 11.15 10.07
Shareholders’ equity/total assets 9.25 13.31 12.73 12.93 11.93

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~~(1) All performance ratios are annualized and are based on average balance sheet amounts, where applicable.~~

~~(2) Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.~~

(3) For periods prior to 2020, generally accepted accounting principles require that loans acquired in a business combination be recorded at fair value, whereas loans from business activities are recorded at cost. The fair value of loans acquired in a business combination includes expected loan losses, and there is no loan loss allowance recorded for these loans at the time of acquisition. Accordingly, the ratio of the loan loss allowance to total loans is reduced as a result of the existence of such loans, and this measure is not directly comparable to prior periods. Similarly, net loan charge-offs are normally reduced for loans acquired in a business combination since these loans are recorded net of expected loan losses. Therefore, the ratio of net loan charge-offs to average loans is reduced as a result of the existence of such loans, and this measure is not directly comparable to prior periods. Other institutions may have loans acquired in a business combination, and therefore there may be no direct comparability of these ratios between and among other institutions.

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~~Average Balances, Interest and Average Yields/Cost~~

The following table presents an analysis of average rates and yields on a fully taxable equivalent basis for the years presented. Tax exempt interest revenue is shown on a tax-equivalent basis for proper comparison.

~~Item 6 - Table 3 - Average Balance, Interest and Average Yields / Costs~~

2020 2019 2018
(Dollars in millions) Average
Balance Interest Average
Yield/
Rate Average
Balance Interest Average
Yield/
Rate Average
Balance Interest Average
Yield/
Rate
Assets
Loans: (1)
Commercial real estate $ 3,958.6 $ 151.5 3.83 % $ 3,789.5 $ 188.6 4.98 % $ 3,283.6 $ 167.7 5.11 %
Commercial and industrial loans 2,049.4 87.7 4.28 1,983.9 111.2 5.60 1,867.9 107.6 5.76
Residential loans 2,324.3 87.8 3.78 2,719.8 100.7 3.70 2,353.1 86.3 3.67
Consumer loans 828.1 31.3 3.78 1,038.4 46.5 4.48 1,115.3 47.2 4.23
Total loans 9,160.4 358.3 3.91 9,531.6 447.0 4.69 8,619.9 408.8 4.74
Investment securities (2) 1,845.2 54.6 2.96 1,846.9 62.6 3.39 1,931.7 64.4 3.33
Short-term investments and loans held for sale (3) 767.2 4.8 0.64 335.3 13.4 4.01 146.3 5.4 3.72
Total interest-earning assets 11,772.8 417.7 3.55 11,713.8 523.0 4.47 10,697.9 478.6 4.47
Intangible assets 316.1 578.1 554.6
Other non-interest earning assets (3) 772.3 669.1 516.9
Total assets $ 12,861.2 $ 12,961.0 $ 11,769.4
Liabilities and shareholders' equity
Deposits:
NOW and other $ 1,216.6 $ 3.5 0.29 % $ 1,053.9 $ 6.5 0.62 % $ 824.7 $ 4.0 0.49 %
Money market 2,713.6 15.3 0.56 2,542.6 31.4 1.23 2,432.2 21.9 0.90
Savings 914.1 0.9 0.10 798.2 1.2 0.15 740.8 1.1 0.15
Certificates of deposit 3,102.9 52.6 1.69 3,754.2 76.1 2.03 3,075.5 51.3 1.67
Total interest-bearing deposits 7,947.2 72.3 0.91 8,148.9 115.2 1.41 7,073.2 78.3 1.11
Borrowings and notes (4) 841.6 20.7 2.46 1,115.5 32.4 2.91 1,409.0 33.4 2.37
Total interest-bearing liabilities 8,788.8 93.0 1.06 9,264.4 147.6 1.59 8,482.2 111.7 1.32
Non-interest-bearing demand deposits 2,324.6 1,745.2 1,622.4
Other non-interest-bearing liabilities (3) 326.4 257.1 119.3
Total liabilities 11,439.8 11,266.7 10,223.9
Total shareholders' equity 1,421.4 1,694.3 1,545.5
Total liabilities and equity $ 12,861.2 $ 12,961.0 $ 11,769.4
Net interest income $ 324.7 $ 375.4 $ 366.9

~~Table of Contents~~

2020 2019 2018
(Dollars in millions) Average
Balance Interest Average
Yield/
Rate Average
Balance Interest Average
Yield/
Rate Average
Balance Interest Average
Yield/
Rate
Net interest spread 2.49 % 2.88 % 3.16 %
Net interest margin (5) 2.72 3.17 3.40
Cost of funds 0.84 1.34 1.11
Cost of deposits 0.71 1.16 0.90
Interest-earning assets/interest-bearing liabilities 133.95 126.44 126.12
Supplementary data
Total non-maturity deposits $ 7,168.9 $ 6,139.9 $ 5,620.1
Total deposits 10,271.8 9,894.1 8,695.6
Fully taxable equivalent adjustment 6.4 7.5 7.4

~~Notes:~~

~~(1) The average balances of loans include nonaccrual loans, and deferred fees and costs.~~

~~(2) The average balance of investment securities is based on amortized cost.~~

~~(3) Includes discontinued operations.~~

~~(4) The average balances of borrowings and notes include the capital lease obligation presented under other liabilities on the consolidated balance sheet.~~

(5) Purchase accounting accretion totaled $9.9 million, $14.5 million, and $23.1 million for the years-ended December 31, 2020, 2019, and 2018, respectively. The effect of purchase accounting accretion on the net interest margin was an increase in all years, which is shown sequentially as follows beginning with the most recent year and ending with the earliest year: 0.09%, 0.12%, and 0.22%.

~~Table of Contents~~

~~Rate/Volume Analysis~~

The following table presents the effects of rate and volume changes on the fully taxable equivalent net interest income. Tax exempt interest revenue is shown on a tax-equivalent basis for proper comparison. For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to (1) changes in rate (change in rate multiplied by prior year volume), (2) changes in volume (change in volume multiplied by prior year rate), and (3) changes in volume/rate (change in rate multiplied by change in volume) have been allocated proportionately based on the absolute value of the change due to the rate and the change due to volume.

~~Item 6 - Table 4 - Rate Volume Analysis~~

2020 Compared with 2019 2019 Compared with 2018
(Decrease) Increase Due to (Decrease) Increase Due to
(In thousands) Rate Volume Net Rate Volume Net
Interest income:
Commercial real estate $ (45,193) $ 8,096 $ (37,097) $ (4,367) $ 25,271 $ 20,904
Commercial and industrial loans (27,008) 3,561 (23,447) (2,978) 6,558 3,580
Residential loans 2,017 (14,907) (12,890) 901 13,571 14,472
Consumer loans (6,575) (8,592) (15,167) 2,630 (3,357) (727)
Total loans (76,759) (11,842) (88,601) (3,814) 42,043 38,229
Investment securities (7,945) (57) (8,002) 1,098 (2,863) (1,765)
Short-term investments and loans held for sale (1) (16,924) 8,297 (8,627) 455 7,544 7,999
Total interest income $ (101,628) $ (3,602) $ (105,230) $ (2,261) $ 46,724 $ 44,463
Interest expense:
NOW accounts $ (3,835) $ 882 $ (2,953) $ 1,217 $ 1,265 $ 2,482
Money market accounts (18,043) 1,985 (16,058) 8,411 1,036 9,447
Savings accounts (409) 156 (253) 5 86 91
Certificates of deposit (11,486) (12,093) (23,579) 12,250 12,562 24,812
Total deposits (33,773) (9,070) (42,843) 21,883 14,949 36,832
Borrowings (4,553) (7,206) (11,759) 6,695 (7,722) (1,027)
Total interest expense $ (38,326) $ (16,276) $ (54,602) $ 28,578 $ 7,227 $ 35,805
Change in net interest income $ (63,302) $ 12,674 $ (50,628) $ (30,839) $ 39,497 $ 8,658

~~(1) Includes discontinued operations.~~

~~NON-GAAP FINANCIAL MEASURES~~

This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures are intended to provide the reader with additional supplemental perspectives on operating results, performance trends, and financial condition. Non-GAAP financial measures are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is provided below. In all cases, it should be understood that non-GAAP measures do not depict amounts that accrue directly to the benefit of shareholders. An item which management excludes when computing non-GAAP adjusted earnings can be of substantial importance to the Company’s results for any particular quarter or year. The Company’s non-GAAP adjusted earnings information set forth is not necessarily comparable to non-GAAP information which may be presented by other companies. Each non-GAAP measure used by the Company in this report as supplemental financial data should be considered in conjunction with the Company’s GAAP financial information.

The Company utilizes the non-GAAP measure of adjusted earnings in evaluating operating trends, including components for operating revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations. These items primarily include securities gains/losses, merger costs, restructuring costs, goodwill impairment, and discontinued operations. Discontinued operations are the Company’s national mortgage banking operations for which the Company completed the wind down of operations in 2020. Merger costs consist primarily of severance/benefit related expenses, contract termination costs, systems conversion costs, variable compensation expenses, and professional fees. There were no merger costs in 2020 and merger costs in 2019 are primarily related to the acquisition of SI Financial Group, Inc. in May 2019. Restructuring costs generally consist of costs and losses associated with the disposition of assets and liabilities and lease terminations, including costs related to branch sales. Restructuring costs also include severance and consulting expenses related to the Company’s strategic review. They also include costs related to the consolidation of branches. Restructuring expense and other for 2020 primarily related to executive separation expense as a result of the CEO transition. Restructuring expense and other for 2019 primarily related to branch consolidations. Restructuring expense and other for 2018 primarily related to a core systems contract restructuring charge and executive separation expense as a result of the CEO transition.

The Company calculates certain profitability measures based on its adjusted revenue, expenses, and earnings. The Company also calculates adjusted earnings per share based on its measure of adjusted earnings. The Company views these amounts as important to understanding its operating trends, particularly due to the impact of accounting standards related to merger and acquisition activity. Analysts also rely on these measures in estimating and evaluating the Company’s performance. Management also believes that the computation of non-GAAP adjusted earnings and adjusted earnings per share may facilitate the comparison of the Company to other companies in the financial services industry.

Due to the anticipated earnings volatility resulting from loan loss provisions reflecting changes in estimates of uncertain future economic conditions under the new CECL accounting standard, many users of bank financial statements are focusing on Pre-Provision Net Revenue (“PPNR”). This is a measure of revenue less expenses, and is calculated before the loan loss provision and income tax expense. This measure gives clearer visibility of the operations of the company during the periods presented in the income statements, without the impact of period-end estimates of future uncertain events. This measure also enhances comparisons of operations across different banks, which might have significantly different period-end estimates of uncertain future economic conditions that affect the loan loss provision. Consistent with its previous practices measuring results on an adjusted basis before the impacts of acquisitions, divestitures, and other designated items, the Company has introduced the measure of Adjusted Pre-Provision Net Revenue (“Adjusted PPNR”) which measures PPNR excluding adjustments for items not viewed as related to ongoing operations. This measure is now integral to the Company’s analysis of its operations, and is not viewed as a substitute for GAAP measures of net income. Analysts also use this measure in assessing the Company’s operations and in making comparisons across banks. The Company and analysts also measure Adjusted PPNR/Assets in order to utilize the PPNR measure in assessing its comparative operating profitability. This measure primarily relies on the measures of adjusted revenue and adjusted expense already used in the Company’s calculation of its efficiency ratio.

~~The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community.~~

~~The following table summarizes the reconciliation of non-GAAP items recorded for the time periods indicated:~~

At or For the Years Ended
(Dollars in thousands) December 31, 2020 December 31, 2019 December 31, 2018
GAAP Net (loss)/income $ (533,017) $ 97,450 $ 105,765
Non-GAAP measures
Adj: Loss/(gain) on securities, net 7,520 (4,389) 3,719
Adj: Goodwill impairment 553,762 — —
Adj: Net gains on sale of business operations (1,240) — (460)
Adj: Acquisition, restructuring, conversion, and other related expenses (1) 5,839 28,046 10,752
Adj: Legal settlements — — 3,000
Adj: Systems vendor restructuring costs — — 8,379
Adj: Loss from discontinued operations before income taxes 26,855 5,539 4,767
Adj: Income taxes (29,342) (7,799) (7,102)
Net non-operating charges 563,394 21,397 23,055
Total adjusted net income (non-GAAP) $ 30,377 $ 118,847 $ 128,820
GAAP Total revenue from continuing operations $ 383,089 $ 449,260 $ 430,524
Adj: Loss/(gain) on securities, net 7,520 (4,389) 3,719
Adj: Net gains on sale of business operations (1,240) — (460)
Total adjusted operating revenue (non-GAAP) $ 389,369 $ 444,871 $ 433,783
GAAP Total non-interest expense from continuing operations $ 840,239 $ 289,857 $ 266,893
Less: Total non-operating expense (see above) (5,839) (28,046) (10,752)
Less: Goodwill impairment (553,762) — —
Less: Legal settlements — — (3,000)
Less: Systems vendor restructuring costs — — (8,379)
Adjusted operating non-interest expense (non-GAAP) $ 280,638 $ 261,811 $ 244,762
(in millions, except per share data)
Total average assets $ 12,861 $ 12,961 $ 11,769
Total average shareholders' equity 1,421 1,694 1,546
Total average tangible shareholders equity 1,105 1,116 991
Total average tangible common shareholders equity 1,088 1,076 950
Total tangible shareholders’ equity, period-end 1,153 1,159 1,001
Total tangible common shareholders’ equity, period-end 1,153 1,119 961
Total tangible assets, period-end 12,803 12,613 11,660
Total common shares outstanding, period-end (thousands) 50,833 49,585 45,417
Average diluted shares outstanding (thousands)
50,308 49,421 46,231
(Loss)/earnings per share, diluted $ (10.60) $ 1.97 $ 2.29
Plus: Net adjustments per share, diluted 11.20 0.43 0.50
Adjusted earnings per share, diluted 0.60 2.40 2.79
Book value per common share, period-end 23.37 34.65 33.30
Tangible book value per common share, period-end 22.68 22.56 21.15
Total shareholders' equity/total assets 9.25 13.31 12.72
Total tangible shareholders' equity/total tangible assets 9.01 9.19 8.59
At or For the Years Ended
(Dollars in thousands) December 31, 2020 December 31, 2019 December 31, 2018
Performance Ratios
GAAP return on assets (4.15) % 0.75 % 0.90 %
Adjusted return on assets 0.24 0.93 1.12
GAAP return on equity (37.50) 5.75 6.84
Adjusted return on equity 2.14 7.01 8.33
Adjusted return on tangible common equity 3.18 11.35 13.48
Efficiency ratio (2) 68.53 55.63 53.64
Supplementary Data (in thousands)
Tax benefit on tax-credit investments $ 4,699 $ 7,950 $ 5,876
Non-interest income charge on tax-credit investments (3,645) (6,455) (4,822)
Net income on tax-credit investments 1,054 1,495 1,054
Intangible amortization 6,181 5,783 4,934
Fully taxable equivalent income adjustment 6,402 7,451 7,423

~~(1)~~Acquisition, restructuring, conversion, and other related expenses included no merger and acquisition expenses for the year-ended December 31, 2020. For the year-ended 2019, these expenses included $18.7 million in merger and acquisition expenses and $9.3 million of restructuring expenses. For the year-ended 2018, these expenses included $8.9 million in merger and acquisition expenses and $1.8 million of restructuring, conversion, and other expenses.

~~(2)~~Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core non-interest income adjusted to include tax credit benefit of tax shelter investments. The Company uses this non-GAAP measure to provide important information regarding its operational efficiency.

~~Table of Contents~~

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

~~GENERAL~~

~~This discussion~~SELECTED FINANCIAL DATA

The following summary data is ~~intended to assist readers~~based in ~~understanding~~part on the ~~financial condition and results of operations Berkshire Hills Bancorp, Inc. (“Berkshire” or the “Company"), the changes in key items in the Company’s~~ Consolidated Financial Statements ~~(“financial statements”) from year to year~~ and ~~the primary reasons for those changes.~~

~~The objectives of~~accompanying notes, and other schedules appearing elsewhere in this ~~section are:~~

•~~To provide a narrative explanation of the Company’s financial statements that enables investors to see the company through the eyes of management;~~

•~~To enhance the financial disclosure~~Form 10-K. Historical data is also based in part on, and ~~provide the context within which financial information should be analyzed; and~~

•~~To provide information about the quality of, and potential future variability of, the Company’s earnings and cash flow.~~

~~This discussion includes the following sections:~~

•~~Summary of recent events and strategic initiatives~~

•~~Comparison of Financial Condition at December 31, 2020 and 2019~~

•~~Comparison of Operating Results for the Years Ended December 31, 2020 and 2019~~

•~~Comparison of Operating Results for the Years Ended December 31, 2019 and 2018~~

•~~Liquidity and Cash Flows~~

•~~Capital Resources~~

•~~Off-Balance Sheet Arrangements~~

•~~Discussion of accounting policies and pronouncements~~

~~The following discussion and analysis~~ should be read in conjunction with, prior filings with the Company’s financial statements and the notes thereto appearing in Item 8 of this document. In the following discussion, income statement comparisons are against the previous year and balance sheet comparisons are against the previous fiscal year-end, unless otherwise noted. Operating results discussed herein are not necessarily indicative of the results for the year 2021 or any future period. In management’s discussion and analysis of financial condition and results of operations, certain reclassifications have been made to make prior periods comparable. Tax-equivalent adjustments are the result of increasing income from tax-advantaged loans and securities by an amount equal to the taxes that would be paid if the income were fully taxable based on a 26% marginal rate (including state income taxes net of federal benefit). In the discussion, unless otherwise specified, references to earnings per share and "EPS" refer to diluted earnings per common share, including the dilutive impact of the convertible preferred shares.SEC.

Berkshire is a Delaware corporation headquartered in Boston and the holding company for Berkshire Bank (“the Bank”) and Berkshire Insurance Group, Inc. Established in 1846, the Bank operates as a commercial bank under a Massachusetts trust company charter.

~~BE FIRST CULTURE & CORPORATE RESPONSIBILITY~~

Berkshire Bank is a purpose and values-driven community bank. We believe that everyone, from every neighborhood, should be able to bank with dignity. We're committed to providing an ecosystem of socially responsible financial solutions to meet our customers’ needs, engaging with communities to ensure access and upward economic mobility, addressing racial equity and fostering a workplace culture where everyone belongs. Our Be FIRST values of Belonging, Focusing, Inclusion, Respect, Service, and Teamwork guide us as we evolve and navigate our environment to create long-term sustainable value for our stakeholders.

The spirit and work ethic that began 175 years ago when Berkshire Bank first opened its doors to meet the working class and entrepreneurs’ financial needs is still at the core of our company today. As the COVID-19 pandemic ravaged communities and shuttered businesses, we answered the call to assist our neighbors. We ensured our employees, customers, and communities' health, safety, and economic resiliency was the priority.We created the You FIRST employee assistance fund to help employees impacted by unexpected financial hardships. We assisted small businesses and consumers with loan forbearances and government assistance programs and we launched a


	At or For the Years Ended December 31,
(In thousands, except per share data)	2022			2021			2020			2019			2018
Per Common Share Data:
Net earnings/(loss), diluted - continuing operations	$	2.02		$	2.39		$	(10.21)		$	2.05		$	2.36
Net (loss)/earnings, diluted - discontinued operations	—			—			(0.39)			(0.08)			(0.07)
Net earnings/(loss), diluted	$	2.02		$	2.39		$	(10.60)		$	1.97		$	2.29

Total book value per common share	21.51			24.30			23.37			34.65			33.30

Dividends	0.54			0.48			0.72			0.92			0.88
Common stock price:
High	31.78			29.16			33.04			33.72			44.25
Low	23.62			16.35			8.55			26.02			25.77
Close	29.90			28.43			17.12			32.88			26.97
Performance Ratios: (1)
Return on assets	0.82		%	0.98		%	(4.15)		%	0.75		%	0.90		%

Return on equity	7.76			10.18			(37.50)			5.75			6.84


Return on tangible common equity	8.26			10.80			(48.60)			9.36			11.41
Net interest margin, fully taxable equivalent (FTE) (2)	3.26			2.60			2.72			3.17			3.40
Fee income/Net interest and fee income	15.66			22.49			18.10			23.86			23.36

Growth Ratios:
Total commercial loans	12.99		%	(12.09)		%	(4.58)		%	9.19		%	6.17		%
Total loans	22.11			(15.54)			(14.95)			5.08			8.96
Total deposits	2.57			(1.44)			(1.16)			15.07			2.66

Earnings per share, (compared to prior year)	(15.48)			122.55			(638.07)			(13.97)			64.75

Selected Financial Data:
Total assets	$	11,662,864		$	11,554,913		$	12,838,013		$	13,215,970		$	12,212,231
Total earning assets	10,913,069			10,899,109			12,089,939			11,916,007			11,140,307
Securities	2,033,436			2,548,590			2,223,417			1,769,878			1,918,604
Total loans	8,335,309			6,825,847			8,081,519			9,502,428			9,043,253
Allowance for credit losses	(96,270)			(106,094)			(127,302)			(63,575)			(61,469)
Total intangible assets	24,483			26,619			34,819			599,377			551,743
Total deposits	10,327,269			10,068,953			10,215,808			10,335,977			8,982,381
Total borrowings	125,509			110,844			571,637			827,550			1,517,816
Total shareholders’ equity	954,062			1,182,435			1,187,773			1,758,564			1,552,918

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~~fund to assist black and brown owned businesses most impacted by the pandemic.~~We also faced the stark reality that systematic racism continues to exist throughout the country. While many companies that had been on the sidelines stepped-up, Berkshire leaned in and responded with continued focus, commitment, and intentionality.

~~We continue to build on our~~ ~~Be FIRST Commitment~~, our roadmap for purpose-driven, socially responsible community banking. Our strong foundation of governance systems, including our Corporate Responsibility & Culture Committee of our Board of Directors, Diversity & Inclusion Employee Committee, Responsible & Sustainable Business Policy, and Social & Environmental Responsibility Risk Management practices collectively integrate social, environmental, cultural, and reputational considerations through all aspects of the company. Berkshire Bank continues to offer services to the underbanked through the Reevx Labs™ platform at ~~reevxlabs.com~~.

~~We engage directly with our stakeholders and populate several communications channels with strategic content including our Corporate Responsibility website~~ ~~www.berkshirebank.com/csr, annual report, and proxy statement to highlight our commitment to disclosure, transparency and socially responsible performance. Our annual~~ ~~Corporate Responsibility Report~~, which is aligned with Sustainability Accounting Standards Board (“SASB”) commercial bank disclosure topics, details the company's environmental, social, governance, and cultural programs as well as our progress on The Be FIRST Commitment. We are also incredibly proud to be recognized for our leadership and performance, including local, regional, national, and international awards. Among these honors The North American Inspiring Workplaces Award, Communitas Award for Leadership in Corporate Social Responsibility, Listing in the Bloomberg Gender-Equality Index and achieving a perfect score in the Human Rights Campaign Corporate Equality Index.

~~SUMMARY~~

~~The emergence of the COVID-19 global pandemic dominated the Company’s activities and results in 2020.Berkshire adjusted its business model to manage pandemic related impacts to its operations, its customers, and its operating profitability.The Company’s markets became a national and global disease hotspot early in the pandemic, in the second quarter.~~Government authorities shut down much societal and economic activity in March. Conditions improved in the third quarter, but another wave of disease incidence slowed further improvement, and economic conditions remained stressed through year-end.~~During the year, unprecedented federal fiscal and monetary stimulus was deployed nationally.~~The Federal Reserve Board of Governors lowered short-term interest rates by approximately 1.50% in the first quarter, and further actions by the Federal Reserve resulted in rates coming down across all maturities, resulting in a parallel downward rate shock of approximately 1.50%.~~Following an unprecedented economic contraction in the second quarter, the economy had partially recovered by the end of 2020.~~

~~The rollout of vaccinations and further federal and monetary support were expected to gradually further normalize conditions in 2021.~~

The Bank initially closed its branches except for drive-through tellers, and most back-office staff moved to work from home status. The Bank was able to resume most branch activities in the third quarter, while back-office staff continue to telecommute. Business activities shifted during this period to provide expedited support for supporting stimulus programs and servicing the needs of customers and communities arising from the emergency conditions. Numerous programs were developed to provide support and assistance to the Bank’s staff and communities, including granting of loan payment modifications pursuant to government guidelines and the origination of commercial Paycheck Protection Program (“PPP”) SBA guaranteed loans to support employment during the shutdown.~~Branch access restrictions were reintroduced in the fourth quarter and some government restrictions were resumed due to worsening public health.~~


	At or For the Years Ended December 31,
	2022			2021			2020			2019			2018
Selected Operating Data:
Total interest and dividend income	$	387,257		$	329,065		$	409,782		$	509,513		$	465,894
Total interest expense	42,660			37,899			93,000			144,255			109,694
Net interest income	344,597			291,166			316,782			365,258			356,200
Fee income	63,995			84,462			69,990			76,824			74,026
All other non-interest income/(loss)	4,942			58,786			(3,683)			7,178			298
Total net revenue	413,534			434,414			383,089			449,260			430,524
Provision for credit losses	11,000			(500)			75,878			35,419			25,451
Total non-interest expense	288,716			285,893			840,239			289,857			266,893
Income/(loss) from continuing operations before income taxes	113,818			149,021			(533,028)			123,984			138,180
Income tax expense/(benefit) from continuing operations	21,285			30,357			(19,853)			22,463			28,961
Net income/(loss) from continuing operations	92,533			118,664			(513,175)			101,521			109,219

(Loss)/income from discontinued operations before income taxes	—			—			(26,855)			(5,539)			(4,767)
Income tax (benefit)/expense from discontinued operations	—			—			(7,013)			(1,468)			(1,313)
Net (loss)/income from discontinued operations	—			—			(19,842)			(4,071)			(3,454)
Net income/(loss)	$	92,533		$	118,664		$	(533,017)		$	97,450		$	105,765

Basic earnings/(loss) per common share:
Continuing operations	$	2.03		$	2.41		$	(10.21)		$	2.06		$	2.38
Discontinued operations	—			—			(0.39)			(0.08)			(0.08)
Total basic earnings/(loss) per share	$	2.03		$	2.41		$	(10.60)		$	1.98		$	2.30

Diluted earnings/(loss) per common share:
Continuing operations	$	2.02		$	2.39		$	(10.21)		$	2.05		$	2.36
Discontinued operations	—			—			(0.39)			(0.08)			(0.07)
Total diluted earnings/(loss) per share	$	2.02		$	2.39		$	(10.60)		$	1.97		$	2.29

Weighted average common shares outstanding - basic	45,564			49,240			50,270			49,263			46,024
Weighted average common shares outstanding - diluted	45,914			49,554			50,270			49,421			46,231

Dividends per preferred share	$	—		$	—		$	1.20		$	1.84		$	1.76
Dividends per common share	$	0.54		$	0.48		$	0.72		$	0.92		$	0.88

Asset Quality and Condition Ratios: (3)
Net loans charged-off/average loans	0.27		%	0.29		%	0.41		%	0.35		%	0.18		%
Allowance for credit losses/total loans	1.15			1.55			1.58			0.67			0.68
Loans/deposits	81			68			79			92			101



Capital Ratios:
Tier 1 capital to average assets - Company	10.18		%	10.49		%	9.38		%	9.33		%	9.04		%
Total capital to risk-weighted assets - Company	14.60			17.32			16.10			13.73			12.99
Tier 1 capital to risk-weighted assets - Company	12.60			15.30			14.06			12.30			11.57


Shareholders’ equity/total assets	8.18			10.23			9.25			13.31			12.73

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~~Changes in the Company’s financial condition~~(1) All performance ratios are annualized and results were primarily due to the pandemic and the related changes in financial market conditions and economic expectations. Due to these downturns, the Company recorded large non-cash charges for goodwill impairment and the current expected credit loss provision during the year. These charges resulted in losses for the first and second quarters, but did not materially affect most regulatory capital measures, cash flows, or liquidity. Among the most significant financial impacts from the pandemic were the following:are based on average balance sheet amounts, where applicable.

•~~Goodwill impairment: In the second quarter, the Company recorded a $554 million noncash expense representing the full impairment and write-off of the carrying value of goodwill due to~~(2) Fully taxable equivalent considers the impact of ~~the COVID-19 disease on economic~~tax advantaged investment securities and ~~financial market conditions resulting~~loans.

(3) For periods prior to 2020, generally accepted accounting principles require that loans acquired in a ~~lower~~business combination be recorded at fair value, whereas loans from business activities are recorded at cost. The fair value of ~~the Company’s equity.~~

•~~Credit Loss Provision: A $65 million noncash credit loss provision expense was recorded~~loans acquired in ~~the first half of 2020 primarily representing projected pandemic related current~~a business combination includes expected credit losses, ~~in future periods under~~and there is no loan loss allowance recorded for these loans at the ~~new Current Expected Credit Losses (“CECL”) accounting standard.The full year provision was $76 million.~~

•~~Reduced Revenue: Net revenue from continuing operations decreased year-over-year by 15% due primarily to compression~~time of acquisition. Accordingly, the ratio of the ~~net interest margin resulting from the near zero interest rate policy implemented by the Federal Reserve Board of Governors, and reflecting the Company’s asset sensitive interest rate risk profile.The margin change also reflected a change in asset mix from~~loan loss allowance to total loans ~~and into lower yielding short-term investments and investment securities.~~

•~~Loan Modifications: Short-term loan payment deferrals were granted in accordance with terms established by bank regulators to lessen borrower hardship.Initial payment deferrals totaled~~ ~~$1.6 billion.~~ ~~The balance of active and in-process deferrals declined to $350 million at year-end.~~

•Balance Sheet Changes: A pandemic related deposit surge was primarily invested in short-term investment reserves held at the Federal Reserve Bank of Boston. The Company originated $708 million in PPP loans to support employment, and these loans partially offset reductions in other loan categories due tois reduced economic activity, liquidity from government stimulus, and accelerated prepayments. Demand deposits increased as borrowers stored liquidity resulting from government stimulus and reduced economic activity. T~~otal equity decreased but most regulatory capital ratios improved, and measures of liquidity improved due to reduced usage of wholesale funding and due to higher short-term investment balances.~~

~~Reflecting the above activity, the Company recorded a loss of $569 million, or $11.33 per share for the first six months of 2020.~~This loss was a result of noncash charges for goodwill impairment and the provision for current expected credit losses on loans. Results returned to profitability in the second half of the year, with second half earnings totaling $36 million, or $0.73 per share. Full year results were a loss of $533 million, or $10.60 per share.

In conformance with the industry guidelines issued by the Federal Reserve at the outset of the pandemic, the Company ceased repurchases of common stock in the first quarter, and let its outstanding repurchase authorization expire at the end of the first quarter. Also, the Company reduced its shareholder dividend by 50% in the third quarter of 2020. This reduction was made to better align the dividend payout and dividend yield with the reduced level of operating earnings in the current environment.

~~In October 2020, the Company announced the launch of best-in-class digital account opening technology.~~This platform provides benefits to the customer experience, to revenue generation, and to the Company’s operating efficiency. The company also enhanced its customer experience by upgrading its call center and rolling out its e-signature platform. These enhanced capabilities are significantly more valuable in today’s environment as a result of the ~~customer needs~~existence of such loans, and ~~accelerated digital transformation resulting from~~this measure is not directly comparable to prior periods. Similarly, net loan charge-offs are normally reduced for loans acquired in a business combination since these loans are recorded net of expected credit losses. Therefore, the ~~pandemic.~~

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~~Also in October 2020, the Company announced a strategic goal~~net loan charge-offs to ~~pursue expense management initiatives, due in part to the long-term revenue impacts of the near zero interest rate environment.~~Expense management also recognizes long-term changes in customer behaviors and the Bank’s operating model based on the accelerated transition to the digital economy resulting from the pandemic. In December 2020, as part of these initiatives, the Company announced a branch optimization plan. The Company announced that it had entered into an agreement for the sale of its 8 Mid-Atlantic branches, including the transfer of more than $600 million in deposits and $300 million in loans. Additionally, the Company announced a plan to consolidate 16 branches in its New England/New York footprint. Both of these initiatives are targeted for completion in the first half of 2021. The Company expects to recognize a net gain on the sale of the Mid-Atlantic branches, as well as charges in conjunction with the branch consolidations.

In addition to reshaping the branch office network, the Company is pursuing possibilities for identifying and releasing surplus corporate real estate, and making other operational adjustments to its business model. The Company also plans to formalize cost save opportunities arising from work from home as well as changes in procurement processes in the current environment.The Company’s goal is to streamline its business model in its core markets and leverage organic growth around that foundation. Two critical enablers are the technology that the Company has invested in and its personalized banking services program, MyBanker. Berkshire has been successfully deploying these mobile personal bankers for a number of years to bring service to customers where and when they need it and they remain integral to the distinctive customer experience that the Bank is developing as a 21st century community bank.

On August 10, 2020, the Company announced that, pursuant to a separation agreement, Richard M. Marotta had stepped down from his position as President and Chief Executive Officer of the Company and CEO of the Bank, as well as from his role as a Director to pursue new opportunities. Working within its leadership succession planning process, the Board appointed Sean A. Gray, to serve as Acting President and CEO for the Company. The Board initiated a CEO search process to consider a national search for candidates inside and outside of Berkshire.~~The Board established a working committee to oversee the search process and retainedthe firm of Spencer Stuart as its executive search consulting firm.On January 25, 2021 the Board announced the appointment of Nitin J. Mhatre as President and Chief Executive Officer of the Company and the Bank effective January 29, 2021.With the appointment of Mr. Mhatre, Mr. Gray resumed his ongoing duties as President and Chief Operating Officer of Berkshire Bank and Senior Executive Vice President of Berkshire Hills Bancorp, Inc.~~

Mr. Mhatre is a senior banking executive with 25 years of community and global banking experience. Most recently, as Executive Vice President, Community Banking at Webster Bank, Mr. Mhatre was a member of Webster Bank's executive team and led its consumer and business banking businesses. In this role, he was responsible for profitable growth of the Community Banking segment at the $31 billion bank and led a diverse team of more than 1,500 employees. Previously, he spent more than 13 years at Citi Group in various leadership roles across consumer-related businesses globally. Mr. Mhatre served on the Board of the Consumer Bankers Association headquartered in Washington D.C. since 2014 and was Chairman of the Board from 2019 to 2020. He also serves on the Board of Junior Achievement of Southwest New England headquartered in Hartford, CT.

~~The Board and management team are fully aligned on the Company's long-term strategic direction.~~That strategy focuses on improving core operating performance with a relationship banking model that serves Berkshire’s communities and clients in its footprint. Berkshire’s brand name and franchise in its markets, its differentiated customer service and culture, and its purpose-based values are all targeted to support meaningful improvement in shareholder returns.~~The Company has five current key initiatives:~~

•~~Optimizing Berkshire’s branch footprint through the announced branch sales and consolidations~~

•~~Rationalizing the balance sheet to maintain strong liquidity and capital metrics and support improvedprofitability and shareholder return~~

•~~Further implementing digitization and automation to improve customer engagement and operational efficiencies~~

•~~Focusing on core products and services to enhance customer relationships and the customer experience while exiting non-strategic products & business lines~~

•~~Continuing proactive management of asset quality through the pandemic cycle~~

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~~Berkshire continues to pursue its ongoing transformation into an innovative 21~~st century community bank, which has gained heightened relevance to stakeholders and the Company’s long-term opportunity as a result of this year’s events. Guided by its Be FIRST principles, the Company continues to foster a more inclusive, innovative and supportive culture, which is positioning Berkshire to deliver a differentiated and compelling community banking experience to everyone in its communities, including those who have been traditionally underbanked. Following its principles, the Company’s COVID-19 response included:

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~~COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2020 AND DECEMBER 31, 2019~~

~~Summary:~~ The major balance sheet changes were the result of the COVID-19 pandemic and its impacts on the economy and federal fiscal and monetary policy. Total loans decreased and demand deposits increased due to the slowdown in economic activity, resulting in less credit demand and the accumulation of customer liquidity – both of which benefited from federal stimulus. The funds from loan payoffs were primarily invested into short and long-term investments and demand deposit growth was primarily used to reduce wholesale funding sources and for short-term investments. The Company’s operating focus was on meeting customer needs and further strengthening its capital and liquidity in the face of unknown pandemic impacts on its markets.

Anticipated higher credit losses from the economic impacts of the pandemic resulted in higher loan loss provisions in the first half of the year, although traditional metrics of loan performance did not begin to significantly worsen until the fourth quarter.Loan performance was aided by loan modifications and SBA guaranteed PPP loans which were implemented pursuant to federal bank supervisory guidelines in an unprecedented response to supporting the economy and financial system.

The long-term impacts of the pandemic drove bank stock prices sharply lower, and in the second quarter the Company wrote-off the full $554 million balance of goodwill which had been accumulated over the past decade principally from bank acquisitions when stock prices were higher.~~This was the principal reason for the $378 million, or 3%, decrease in total assets to $12.8 billion in 2020.~~Excluding this write-off, total assets increased by $176 million, or 1%, due to demand deposit growth invested into short-term investments. Largely due to this impairment charge, shareholders’ equity decreased by $571 million, or 32%, to $1.19 billion.The goodwill impairment charge was non-cash and had no material impact on the Company’s tangible equity or regulatory capital metrics, which improved continuously through the year due to the reduction in risk weighted assets resulting from the proportional shift from loans to investments. Book value per common share measured $23.37 at period-end and the non-GAAP measure of tangible book value per share measured $22.68 per share.

The Company's goal is to provide a strong foundation for supporting growth in its customer accounts and revenue drivers across its major markets and business lines based on improvement in forecasted public health and market conditions.~~The majority of the $633 million of year-end PPP~~average loans is ~~expected to be forgiven by the SBA in 2021, contributing to a potential decrease in total loans during the year 2021.The sale of the Mid-Atlantic branches is also expected to result in a decrease in interest bearing assets and liabilities.~~

~~Investments:~~ ~~Due to loan runoff and deposit growth, total short-term investments increased by $992 million in 2020, and total investment securities increased by $454 million.Most short-term investments were held at the Federal Reserve Bank of Boston.~~The increase in investment securities was concentrated in Available for Sale ("AFS") agency mortgage-backed securities and agency commercial mortgage-backed securities. There have been accelerated prepayments of mortgage related securitiesreduced as a result of the ~~low interest rate environment. The Company purchased $894 million~~existence of such loans, and this measure is not directly comparable to prior periods. Other institutions may have loans acquired in ~~AFS securities in 2020, accepting lower yields in order to maintain~~a business combination, and ~~increase the size~~therefore there may be no direct comparability of ~~the portfolio.In the current environment of low interest rates, a generally flat yield curve,~~these ratios between and low credit spreads, the Company has been judicious about redeploying short-term investments into longer term structures while also maintaining balance sheet flexibility due to the general uncertainties of the current environment. The fourth quarter securities portfolio yield decreased year-over-year by 0.62% to 2.69%, reflecting ongoing rolldown of asset yields due to low rates.

The Company managed down the size of the corporate bond portfolio and has carefully monitored its exposure to credit risk in corporate and municipal obligations during the pandemic induced recession. At period-end, there were no delinquent or non-accruing debt securities.~~The Company liquidated most of its portfolio of corporate equity securities during the fourth quarter.These securities were a component of its capital gains management strategy related to tax credit investments; this strategy was no longer operative in 2020.The remaining equity securities at year-end were primarily bond mutual funds targeted toward Community Reinvestment Act eligible investments.The Company recorded $8 million in net securities losses during 2020 primarily due to the decline in the value of bank stocks which were a significant component of its equities portfolio.The portfolio of investment securities had~~among other institutions.

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~~an unrealized gain of $68 million, or 3.2%, at period-end due to the gain in debt security fair values resulting from the decrease in interest rates.~~

~~Loans:~~ ~~Total loans decreased by $1.42 billion, or 15%, to $8.08 billion in 2020.During the year, the Company originated $708 million in commercial PPP loans, of which $633 million remained outstanding at year-end.The Company also reclassified $301 million in loans to assets held for sale, due to the pending agreement for the sale of the Mid-Atlantic branches.Excluding these loans and the PPP loans, total loans decreased by $1.80 billion, or 18%.This included a 5% reduction in commercial real estate, a 39% reduction C&I loans, a 30% reduction in residential mortgages, and a 26% reduction in consumer balances.~~In the commercial markets, borrower demand decreased significantly due to the pandemic and the Company adjusted its business solicitation during the height of the economic shutdowns, while focusing its resources on the operational demands of supporting the PPP program and managing requests for loan modifications pursuant to government guidelines in support of its markets.~~Slower business activity led many borrowers to reduce C&I borrowings and to instead build liquidity.~~The Company curtailed business solicitation in certain COVID-19 sensitive industries, and trimmed its exposure to commercial wholesale and participation balances, while also allowing non-relationship exposures to runoff.~~The Company continued to see activity in its commercial lending channels and it remained disciplined in its selection, pricing, and underwriting processes.~~Based on market activity and forecast market conditions, the Company is targeting to grow its middle market commercial business, with a focus on asset based lending and small business banking, and selected opportunities in commercial real estate.~~The Company expects overall commercial borrowing demand to improve as pandemic conditions subside and forecast economic growth emerges.~~

~~The decrease in residential mortgages reflected heightened loan prepayments and refinancings due to the drop in interest rates.~~Additionally, the Company focused on completing the disposition of discontinued national mortgage banking operations, and also the supply of secondary market mortgages from area correspondent banks decreased as all banks coped with higher runoff.~~Home equity loans outstanding decreased due to reduced borrowing demand and the portfolio of indirect auto loans continued to runoff in accordance with the Company’s strategy.The fourth quarter yield on the loan portfolio decreased year-over-year by 0.90% to 3.62% in 2020 from 4.52% in 2019.This decrease reflected pandemic related impacts, including the decrease in market interest rates, higher prepayments of higher yielding loans, and the effect of the lower yielding PPP loans.Loans repricing within one year totaled $3.8 billion, or 46% of total loans at year-end 2020.~~

The majority of PPP loans were originated in the second quarter to existing borrowers to provide payroll support during the pandemic shutdown. These loans bear interest at 1% and most were primarily written with two year maturities. They are guaranteed by the SBA and most are expected to be repaid by the SBA as loans are forgiven.~~The PPP fees received from the SBA approximated 3% of the loan amounts. At year-end, the Company had a balance of~~ ~~$13~~ million in net deferred PPP loan fees paid by the SBA which is being amortized into net interest income based on the approximate two year expected lives of the loans. The unamortized deferred balance is recognized in net interest income at the time each loan is forgiven.~~The Company originated $708 million of PPP loans in 2020, of which~~ $~~633 million remained outstanding at year-end.With the issuance of additional forgiveness guidelines around year-end, the Company expects that the majority of PPP loans will be forgiven in the first half of 2021.~~

Based on its experience with borrowers during the pandemic, the Company has thoroughly assessed its commercial loan portfolio to determine the most significant sensitive industries based on exposure, risk rating, and use of federally supported lending and loan modification programs. The Company has focused on hospitality, Firestone (specialty equipment lending), restaurants, and nursing/assisted living facilities, which collectively totaled $868 million at year-end. The Company has evaluated the loans in these industries and has expanded its review of other commercial loans to broaden the scope and frequency of risk assessments. The Company initially identified a larger group of borrowers as potentially COVID-19 sensitive, including retail, arts and entertainment, medical, and construction.Based on its experience during the year, the Company has narrowed its focus of COVID-19 sensitivity to the four groups mentioned above. The Company views these COVID-19 sensitive loans as generally conforming to its longstanding financial disciplines for loan/value, debt service coverage, and recourse in conformity with customary industry practices. Based on its longstanding disciplines, the Company believes its exposures within these industries are reasonably diversified and structured to accomplish overall risk management objectives. The

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Company also monitors its outstanding loans to small business borrowers. Loans with balances of $1 million or less totaled $773 million at year-end. Some smaller balance commercial loans are monitored primarily based on payment status, with less availability of current borrower financial information. Small businesses and SBA borrowers have benefited from various government support programs and may be more vulnerable in future periods if government support programs are not continued.

~~Asset Quality:~~ Most asset performance measures remained within risk ranges viewed by the Company as moderate during the first nine months of 2020, including charge-offs, delinquencies, non-accruals, and troubled debt restructurings. Some measures moved adversely in the fourth quarter as pandemic impacts on loan performance emerged more clearly, particularly in COVID sensitive commercial industries. It is anticipated that some measures will remain elevated in 2021 as some borrowers experience impairment of their liquidity and capital resulting from accumulating economic impacts of the pandemic. Due to loan payment modifications granted pursuant to government guidelines, many borrowers did not make a full year of scheduled loan payments during 2020 but continued to accrue interest and were not reported as delinquent at year-end.

Asset quality benefited in 2020 from the PPP loans, which are intended to support payrolls and therefore support business operations and employment despite the contraction in the economy. Other federal stimulus measures included one-time payments issued to most taxpayers and supplemental unemployment insurance. Monetary actions drove interest rates to near zero, reducing debt service costs and supporting asset values in the public equities and credit markets. Under year-end legislation approved by Congress, further fiscal economic support was approved for disbursement in 2021.

Additionally, federal bank regulatory authorities encouraged banks to work with affected borrowers to provide loan payment modifications to protect liquidity and support solvency. Forbearances made before year-end in accordance with CARES Act guidelines are not reported as delinquencies and are not required to be analyzed as troubled debt restructurings. In 2020, loans with conforming loan modifications totaled $1.6 billion, with the majority of modifications consisting of payment deferrals to commercial customers. The Bank was initially proactive in reaching out to commercial customers to offer conforming modifications within regulatory guidelines. Most initial deferrals were 90 day deferrals of principal and interest payments, with deferred payments often added to the end of the loan term. While the majority of customers returned to scheduled payments during the year, some customers were provided additional deferrals during the year. In the fourth quarter, the majority of commercial loans receiving additional deferrals beyond 2020 agreed to pay current period interest during the deferral period. In most cases, commercial customers requesting further deferrals were individually underwritten, negotiated, and approved. Many in the hospitality segment and the Firestone segment were provided with fourth quarter deferrals beyond 90 days to reflect seasonal and specialty operations.~~Many hospitality modifications included interest reserves established by project sponsors.At year-end, loans with payment deferrals (including in-process deferrals) totaled $350 million, of which $331 million were commercial loans.Year-end deferrals measured 4.7% of total loans excluding PPP loans.~~

In part because of the loan deferral program, accruing delinquent loans did not increase during the year, reaching a quarterly low of 0.34% of total loans at year-end 2020, compared to 0.54% at year-end 2019.~~The deferral periods for the majority of deferred loans were scheduled to expire in the first four months of 2021.~~Under revised legislation passed by Congress at year-end 2020, banks can continue to provide qualifying loan modifications including payment deferrals throughout 2021 without reporting these loans as delinquent or as troubled debt restructurings.~~Under accounting principles, loans cannot be maintained as accruing interest if the bank does not expect to collect the full contractual amount of principal and interest from a borrower.Non-accruing loans remained little changed during the first nine months of the year, but increased to 0.80% of total loans as of year-end 2021, compared to 0.42% at the start of the year.This increase was largely due to two commercial relationships which were identified as substandard prior to the pandemic.~~One of these was a purchased credit deteriorated credit to a nursing/assisted living facility acquired in the 2019 bank merger, and one was a hospitality relationship in a market that became overbuilt.During the fourth quarter, the Company sold $22 million in hospitality loans which deteriorated during the pandemic.The Company continues to evaluate potential opportunities to sell deteriorated loans. Net loan charge-offs totaled $38 million in 2020 and $33 million in 2019. Charge-offs in 2020 included $12 million in hospitality loans written down in the fourth quarter due to pandemic related weaknesses. Charge-offs in 2019 included a $16 million charge in the third quarter for one commercial relationship with alleged fraud.

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~~During 2020, the Company identified certain commercial segments which were determined to be COVID-19 sensitive.~~
~~The Company refined this group during the year.The two primary segments deemed COVID-19 sensitive were hospitality loans and loans in the Company’s Firestone Financial specialty equipment lending group.Borrowers in both of these segments were more at risk of significant revenue declines due to mandated reductions in travel and social activity.Hospitality loans totaled $301 million and Firestone loans totaled $246 million at year-end.~~These two segments accounted for $225 million of the $331 million in total commercial active and in process deferrals at year-end 2020. They accounted for $158 million of the $338 million in year-end commercial criticized assets.~~For the hospitality loans, 91% of the year-end deferrals were scheduled for current interest payments and many of these were supported by interest reserve accounts.~~For the Firestone loans, the business lines with the most demonstrated COVID-19 risk were fitness ($71 million year-end balance) and location based entertainment such as bowling alleys and family oriented arcades ($44 million year-end balance).~~Together, these business lines comprised 68% of the Firestone deferrals and 58% of the Firestone criticized loans.~~Most of the borrowers in the hospitality and Firestone segments were expected to be able to resume operations and scheduled debt service if public health and social conditions allowed more normal revenue production to resume in the first half of 2021.~~Non-accruing loans to these segments totaled $18 million at year-end.~~

~~Year-end criticized loans increased in 2020 to $359 million, or 2.8%~~Average Balances, Interest and Average Yields/Cost

The following table presents an analysis of ~~total assets, compared to $237 million or 1.8% at year-end 2019.This increase was mainly due to the impact of the pandemic on the commercial loan portfolio.Approximately half of the $331 million in commercial deferred loans was rated criticized at year-end,~~average rates and ~~the pandemic impacts on these loans were the main driver of the growth in total criticized loans.~~For similar reasons, classified loans (which are those criticized loans rated substandard or lower) increased to $250 million from $162 million, including growth in non-accruing loans to $65 million from $40 million.~~Loans rated as criticized before the pandemic remained criticized despite any deferrals they may have been granted.~~The Company has traditionally viewed its potential problem loans as those loans from business activities which are rated as classified and continue to accrue interest. These loans have a possibility of loss if weaknesses are not corrected.~~Accruing classified loans totaled $185 million at year-end 2020.~~Due to the circumstances of the pandemic, the Company also views deferred special mention loans as having elevated risk of becoming substandard due to uncertainties related to public health. These loans totaled $49 million at year-end 2020.

~~Allowance for Credit Losses on Loans:~~ The Company implemented the Current Expected Credit Losses (“CECL”) accounting standard on January 1, 2020. The standard changed the basis of loss recognition from incurred to expected, and expanded the covered financial instruments. The allowance for credit losses on loans replaces the previous allowance for loan losses. The allowance balance increased by $63 million from $64 million at year-end 2019 to $127 million at year-end in 2020.

The allowance increased by $25 million to $89 million on January 1, 2020 due to the adoption of CECL. The Company established a $15 million reserve related to loan credit marks, and the amortized cost basis of purchased credit deteriorated loans was increased by this same $15 million amount. The remaining implementation increase was due to the recognition of additional expected losses over the life of the loan portfolio compared to those already incurred under the previous method.~~The allowance measured 0.94% of total loans at the adoption of CECL.~~

~~Excluding the impact of purchased credit deteriorated loans, the allowance measured 0.78% of total loans.The Company viewed this as its reasonable supportable estimate of expected credit losses over the expected future life of the portfolio.The estimate is based~~yields on a ~~methodology which considers historic loss rates for loans by collateral type and includes components~~fully taxable equivalent basis for the ~~impact of forecast economic conditions~~years presented. Tax exempt interest revenue is shown on ~~loss rates, as well as an evaluation of qualitative factors including current period loan performance metrics~~a tax-equivalent basis for proper comparison.

Item 7 - Table 3 - Average Balance, Interest and ~~consideration of the benefit of expected future government support in reducing possible loss rates.The economic forecast utilizes third party base case projections and estimates credit loss impacts for the next seven quarters.The allowance does not include reserves for interest receivable.An allowance for losses on credit commitments is included in other liabilities, and measured $8 million at year-end 2020.~~Average Yields / Costs

~~The allowance increased by $38 million from January 1, 2020 to $127 million at December 31, 2020.The allowance at year-end measured 1.58% of total loans and 1.71% of total loans excluding the PPP and mid-Atlantic loans.The 0.77% increase from 0.94% at the date of CECL adoption primarily reflected the projected economic~~


	2022						2021						2020
(Dollars in millions)	Average Balance		Interest		Average Yield/ Rate		Average Balance		Interest		Average Yield/ Rate		Average Balance		Interest		Average Yield/ Rate

Assets
Loans: (1)(2)
Commercial real estate	$	3,836.2	$	167.7	4.37	%	$	3,600.2	$	124.4	3.46	%	$	3,958.6	$	151.5	3.83	%
Commercial and industrial loans	1,435.3		74.7		5.20		1,527.6		71.8		4.70		2,049.4		87.7		4.28
Residential loans	1,784.2		63.3		3.55		1,560.4		58.4		3.75		2,324.3		87.8		3.78
Consumer loans	556.8		32.1		5.77		569.1		22.0		3.87		828.1		31.3		3.78
Total loans	7,612.5		337.8		4.44		7,257.3		276.6		3.81		9,160.4		358.3		3.91
Investment securities (2)(3)	2,489.7		51.2		2.06		2,283.6		49.4		2.16		1,845.2		54.6		2.96
Short-term investments and loans held for sale (4)	569.1		4.9		0.86		1,619.4		2.3		0.58		767.2		4.4		0.64
Mid-Atlantic region loans held for sale	—		—		—		179.5		7.1		3.97		25.2		0.4		1.07
Total interest-earning assets	10,671.3		393.9		3.69		11,339.8		335.4		2.60		11,798.0		417.7		3.55
Intangible assets	26.8						32.0						316.1
Other non-interest earning assets (4)	648.5						684.1						747.1
Total assets	$	11,346.6					$	12,055.9					$	12,861.2
Liabilities and shareholders' equity
Deposits:
NOW and other	$	1,416.7	$	6.1	0.43	%	$	1,340.2	$	1.0	0.07	%	$	1,216.6	$	3.5	0.29	%
Money market	2,809.1		13.8		0.49		2,749.7		5.3		0.19		2,713.6		15.3		0.56
Savings	1,114.8		0.4		0.03		1,067.7		0.5		0.05		914.1		0.9		0.10
Certificates of deposit	1,541.7		13.1		0.85		1,978.9		18.6		0.94		3,102.9		52.5		1.69
Total interest-bearing deposits	6,882.3		33.4		0.49		7,136.5		25.4		0.36		7,947.2		72.2		0.91
Borrowings and notes (5)	176.1		9.2		5.24		320.2		10.7		3.34		841.6		20.7		2.46
Mid-Atlantic region interest-bearing deposits	—		—		—		335.1		1.8		0.54		45.0		0.1		0.80
Total interest-bearing liabilities	7,058.4		42.6		0.60		7,791.8		37.9		0.49		8,833.8		93.0		1.06
Non-interest-bearing demand deposits	2,914.9						2,817.4						2,324.6
Other non-interest-bearing liabilities (4)	180.1						280.9						281.4
Total liabilities	10,153.4						10,890.1						11,439.8
Total shareholders' equity	1,193.2						1,165.8						1,421.4
Total liabilities and equity	$	11,346.6					$	12,055.9					$	12,861.2

Net interest income			$	351.3					$	297.5					$	324.7

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~~impacts~~


	2022					2021					2020
(Dollars in millions)	Average Balance		Interest	Average Yield/ Rate		Average Balance		Interest	Average Yield/ Rate		Average Balance		Interest	Average Yield/ Rate
Net interest spread				3.09	%				2.12	%				2.49	%
Net interest margin (6)				3.26					2.60					2.72
Cost of funds				0.43					0.35					0.84
Cost of deposits				0.34					0.26					0.71
Interest-earning assets/interest-bearing liabilities				151.19					149.67					133.95

Supplementary data
Total non-maturity deposits	$	8,255.5				$	7,975.0				$	7,168.9
Total deposits	9,797.2					9,954.0					10,271.8
Fully taxable equivalent adjustment	6.6					6.3					6.4

Notes:

(1) The average balances of loans include nonaccrual loans, and deferred fees and costs. As of December 31, 2022 and December 31, 2021, deferred fees related to PPP loans totaled $0.1 million and 0.2 million, respectively.

(2) The yield on tax-exempt loans and securities is computed on a fully tax-equivalent basis using a tax rate of 27%.

(3) The average balance of investment securities is based on amortized cost.

(4) Includes discontinued operations.

(5) The average balances of borrowings and notes include the ~~pandemic~~capital lease obligation presented under other liabilities on ~~estimated future loan losses~~the consolidated balance sheet.

(6) Purchase accounting accretion totaled $2.0 million, $6.7 million, and $9.9 million for the years-ended December 31, 2022, 2021, and 2020, respectively. The effect of purchase accounting accretion on the net interest margin was ~~driven both by the changed economic outlook and by the qualitative impact of the emergence of higher non-accruing loans.At year-end, the economic baseline expected confirmed COVID-19 cases to reach 47 million~~an increase in ~~2021,~~all years, which is shown sequentially as follows beginning with the ~~daily case rate peaking in December 2020~~most recent year and ~~abating by September 2021.GDP was projected to increase by 4.1% in 2021 after declining by 3.5% in 2020.Unemployment was expected improve to 6.9% in 2021, supported by a $2.8 trillion federal deficit spending projection. The 0.77% increase in~~ending with the allowance from the CECL adoption date is equivalent to approximately $60 million in net loan losses as the Company’s general estimate of future pandemic related loan losses in addition to the annual net loan loss rate when the economy is healthy. If conditions were to remain unchanged, the Company would anticipate that charge-offs would reduce the balance of the allowance as they emerge,earliest year: 0.02%, 0.09%, and that the ratio of the allowance to total loans would move towards the level before the emergence of the pandemic. Future loan loss provisions could result from adverse changes in conditions or from loan portfolio growth. No allowance is provided for PPP loans which are guaranteed by the SBA. Additionally, no allowance is provided on the loans held for sale as part of the pending mid-Atlantic branch sale.0.12%.

~~Goodwill and Other Assets:~~The sustained decrease in the price of the Company’s stock in the first half of 2020 was a basis for triggering an analysis of goodwill for impairment. Additionally, the annual impairment analysis was scheduled for the second quarter. Berkshire’s stock price was $11.02 at midyear, compared to $32.88 at year-end 2019. A goodwill impairment analysis was completed according to Accounting Standards Codification Section 350. Based on this analysis, the Company recorded a $554 million impairment charge during the second quarter to fully write-off the carrying balance of goodwill. This analysis was based on an estimate of the fair value of the company’s equity as one reporting unit. Fair value was estimated based on an income approach and a market approach, which were equally weighted in the analysis. Both valuation approaches supported a conclusion of full impairment. The goodwill balance had resulted primarily from a series of bank acquisitions which consisted primarily of an exchange of shares recorded based on stock market valuations at the time of acquisition. Over this time, bank stocks were generally valued at a premium to the net fair value of assets, resulting in the recording of goodwill for these premiums. Due to the pandemic recession and federal monetary actions reducing interest rates, the outlook for banking industry earnings contracted in 2020, and a number of bank stocks were trading at a discount to book value at midyear.~~The impairment analysis concluded that the fair value of the Company’s equity was lower than its carrying value, indicating a goodwill impairment.~~

The assets held for sale at year-end 2020 consisted mainly of the loans and fixed assets tied to the pending agreement for the sale of the Mid-Atlantic branches. This sale is targeted to be completed in the first half of 2021. The carrying amount of Other Assets increased by $98 million primarily due to the increased net fair value of commercial loan interest rate swaps and related economic hedges, reflecting the market value changes resulting from the pandemic impact on market interest rates.

~~Deposits:Total deposits decreased by $120 million, or 1%, to $10.2 billion in 2020.Due to the pending agreement for the sale of the Mid-Atlantic branches, the Company reclassified $617 million in deposits as liabilities held for sale.Adjusting for this reclassification, total deposits increased by $497 million, or 5%.This included a $302 million increase in the year-end balance of payroll deposits, which fluctuate daily.~~Total brokered deposit balances decreased by $597 million to $611 million in 2020 as the Company continued to reduce wholesale funding with proceeds from loan runoff and demand deposit growth. There was growth in demand deposits, as customers maintained higher liquidity during the pandemic, including the impacts of federal support and lower spending.~~Additionally, some funds shifted from higher rate maturing time deposits into money market balances as customers focused on shorter maturities due to the low and relatively flat yield curve.The cost of deposits decreased to 0.47% in the fourth quarter of 2020 from 1.11% in the fourth quarter of 2019.This reflected the pronounced decrease in short-term market interest rates, together with the unusual growth in demand deposit balances and the reduction in higher cost brokered time deposits.~~

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~~Borrowings and Other Liabilities:Total borrowings decreased by $256 million, or 31%, in 2020 as part of the Company’s strategy to deleverage and reduce reliance on higher cost wholesale funding sources.Including brokered deposits, total wholesale funding sources decreased by $854 million, or 43%, to $1.18 billion during 2020.The fourth quarter cost of borrowings decreased to 2.50% from 2.77%, while the fourth quarter cost of all funds decreased to 0.60% from 1.23%.~~As previously noted, the Mid-Atlantic deposits were reclassified as held for sale, and total liabilities held for sale related to this pending transaction measured $630 million at year-end 2020. The Company expects to settle this sale with loans and cash from short-term investments.Rate/Volume Analysis

~~Derivative Financial Instruments:~~ The ~~$3.9 billion period-end notional balance~~following table presents the effects of ~~derivative financial instruments was down slightly from $4.1 billion at~~rate and volume changes on the ~~start~~fully taxable equivalent net interest income. Tax exempt interest revenue is shown on a tax-equivalent basis for proper comparison. For each category of interest-earning assets and interest-bearing liabilities, information is provided with respect to changes attributable to (1) changes in rate (change in rate multiplied by prior year volume), (2) changes in volume (change in volume multiplied by prior year rate), and (3) changes in volume/rate (change in rate multiplied by change in volume) have been allocated proportionately based on the ~~year.~~ ~~This notional balance includes $1.7 billion in interest rate swaps with commercial loan customers and an equal balance of offsetting back to back swaps with national financial counterparties.The Company also has $0.3 billion in risk participations with dealer banks related to interest rate swaps where another bank is the lead.The estimated net fair~~absolute value of the ~~derivative financial instruments increased from approximately zero to $94 million~~change due to the ~~higher value of fixed~~ rate ~~customer swaps as a result of~~and the ~~decrease in interest rates. This asset is~~change due to volume. There are no out-of-period adjustments included in ~~other assets on~~ the ~~balance sheet. The Company delivered cash to the clearing house as a result of its increased obligation to national swap counterparties which is reported as a use of cash from financing activities~~rate/volume analysis in the ~~cash flow statement.~~

~~Shareholders' Equity:~~ Total shareholders’ equity decreased by $571 million, or 32%, to $1.19 billion in 2020 due to the income impact of the noncash charges of $554 million for goodwill impairment and $76 million for credit loss provision expense recorded during that time. The balance of retained earnings decreased from $361 million to ($233) million.The $41 million year-end 2019 balance of preferred stock was converted to common equity in accordance with the terms these securities, resulting in the issuance of 522 thousand common shares from treasury stock, which decreased to $31 million from $70 million.

~~The ratio of equity to assets stood at 9.3% at period-end, and the non-GAAP measure of tangible equity to tangible assets stood at 9.0%.The Company uses the non-GAAP measure of tangible equity which excludes goodwill and intangible assets and which is an important focus for the investment community.Tangible equity decreased by $6 million, or 1%, to $1.15 billion for the year.~~

All of the Company's measures of regulatory capital in relation to risk weighted assets improved during the year due to the runoff of non-PPP related loans and the zero risk weighting assigned to PPP loans because of the SBA guarantee, as well as due to the lower risk ratings of investments.The Company conducts equity stress analyses, including severe adverse pandemic loan loss scenarios based on forecasts provided by third parties. The Company believes that its capital is well cushioned above the Well Capitalized metrics in all of the adverse modeling scenarios based on the assumptions utilized.~~The Company’s total risk based capital ratio measured 16.1% at year-end 2020, compared to the 10% Well Capitalized standard for banks.The Company’s Tier 1 capital ratio stood at 14.1% at that date, compared to the 8% Well Capitalized standard for banks.~~

~~The Company repurchased $53 million of common stock in 2019.~~The Company’s plan had been to continue repurchasing shares to return capital to shareholders which was released by the balance sheet restructuring. The repurchase plan was suspended in the first quarter of 2020 as the pandemic emerged, and the existing authorization for share repurchases was allowed to expire at its March 31, 2020 maturity. During the first quarter, the Company filed a universal securities shelf registration for the routine purpose of renewing the shelf registration that expired in November 2019. The Company increased its quarterly dividend by $0.01 to $0.24 per share in the first quarter before the pandemic, in line with previous annual dividend increases. The Company decreased its dividend to $0.12 per share in the third quarter, to better align the dividend payout and dividend yield with its operating earnings as a result of the pandemic. Due to the loss recorded in 2020, any dividends intended by the Bank’s board of directors are presently subject to regulatory approval by the Massachusetts Banking Department and any shareholder dividends intended by the Company’s board of directors are subject to non-objection by the Federal Reserve.following table.

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The change in retained earnings due to the operating loss and the common dividend accounted for most of the net change in equity. The Company recorded a $19 million benefit to equity from other comprehensive income which mostly offset a $24 million reduction in equity due to the adoption of CECL. The other comprehensive income benefit was due to after-tax unrealized gains in the bond portfolio due to lower interest rates. The CECL adoption impact on equity was principally due to the increase in the allowance for credit losses on loans on the date of adoption due to the recognition of expected future losses in addition to incurred losses, as well as the increase in the allowance to offset the increase in the gross carrying value of purchased credit deteriorated loans.

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~~COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019~~

~~Summary:~~ Revenue and expense included the SI Financial operations acquired on May 17, 2019. Additionally, due to the COVID-19 pandemic Berkshire reported losses in the first half of 2020 due to non-cash charges of $554 million for goodwill impairment and $65 million for the provision for credit losses.~~As a result, many categories of revenue and expense are not directly comparable year-over-year for the first half of the year.Parts of this discussion focus on the second half of the year, where year-over-year results are more comparable and less affected by the merger and the pandemic.~~

~~Reflecting the above activity, the Company recorded a loss of $569 million, or $11.33 per share for the first six months of 2020.~~This loss was a result of noncash charges for goodwill impairment and the provision for credit losses on loans. Results returned to profitability in the second half of the year, with second half earnings totaling $36 million, or $0.73 per share. For the year, the Company lost $533 million, or $10.60 per share.~~In 2019, the Company recorded earnings for the year of $97 million, or $1.97 per share.For the second half of 2019, the Company’s earnings were $48 million, or $0.95 per share.~~

The Company calculates the non-GAAP financial measure of adjusted earnings to focus on earnings related to ongoing operations and excluding items described in the reconciliation of non-GAAP financial measures which was set forth in an earlier section of this report.~~Second half adjusted earnings were $40 million, or $0.80 per share, in 2020 compared to $59 million, or $1.15 per share in 2019.Adjusting items after-tax in the second half of 2020 totaled $4 million and were primarily related to the loss on discontinued operations and the CEO separation.Adjusting items for the second half of 2019 totaled $11 million after-tax and were primarily related to merger and restructuring expense.~~

The decrease in earnings and adjusted earnings was primarily due to pandemic related impacts on net interest income, which declined sequentially over the last five quarters to $76 million in the fourth quarter of 2020, compared to $91 million in the fourth quarter of 2019.~~The return on assets decreased to 0.48% from 0.78% for these respective periods.The return on equity decreased to 5.2% from 5.9%; this measure was impacted in 2020 by the write-off of goodwill, which measured 31% of equity at year-end 2019.~~

The Company has established a provision for credit losses on loans which it views as adequate to cover its reasonable estimate of expected credit losses, including pandemic related losses, based on forecast conditions at year-end.~~It is anticipated that net loan charge-offs will remain elevated in 2021 as predicted losses emerge and are recorded.~~Loan loss provision expense may be modest unless health and economic expectations change adversely. PPP loans are expected to contribute to net interest income in the first half of 2021 but this benefit is expected to decline in the second half of 2021.~~Benefits from the Company’s branch initiatives are initially expected to mostly be offset by pandemic related loan workout costs and strategic investments in core operations.The Company benefited from an income tax credit in 2020 due to the large pandemic credit loss provision in the first half of the year.~~

~~Revenue:Revenue was adversely impacted by the pandemic in 2020, including the impact of lower business volumes, fee waivers, and tighter margins.Net revenue from continuing operations decreased by $66 million, or 15%, to $383 million in 2020.Revenue in 2020 included a full year of revenue from SI Financial operations acquired in May 2019.The full year decrease included a $48 million decrease in net interest income, a $7 million decrease in fee income, and a $12 million adverse swing in net securities gains/losses.Second half revenue decreased by $37 million, or 16% to $196 million; this comparison fully includes acquired operations in both periods.~~

~~Net Interest Income:Net interest income from continuing operations decreased by $48 million, or 13% in 2020.This was the result of a 14% decrease in the net interest margin to 2.72% from 3.17%.The fourth quarter 2020 net interest margin was 2.61%.~~ ~~Quarterly net interest income peaked at $97 million in the third quarter of 2019, including the first full quarter of benefit from the acquired SI Financial operations.Net interest income decreased to $91 million in the fourth quarter of 2019 and then decreased sequentially in 2020 to $76 million in the final quarter.~~

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The margin was under pressure coming into 2020 due to the anticipated loss of purchased loan accretion income, including the impact of the CECL accounting standard. The Company’s interest rate risk profile is asset sensitive, and is structurally sensitive both to the decrease in interest rates and to the low and relatively flat yield curve.The approximate 1.50% decrease in short-term interest rates resulting from the Federal Reserve Bank’s near zero interest rate policy response to the pandemic was adverse to the Company’s net interest margin.~~Additionally, the Company took on higher cost funds at the start of the pandemic to further strengthen liquidity in the national emergency as part of its risk management protocol.Also, the decline in higher yielding loans has reduced this yield as the primary source of interest revenue.~~

Based on conditions at year-end, the Company is targeting that PPP loans will support net interest income in the first half of 2021, including the recognition of deferred revenues as these loans are forgiven.~~The Company expects that the majority of these loans will be forgiven in the first half of 2021 and that earning assets will decrease in the second half of the year.The sale of the Mid-Atlantic deposits and loans is also expected to contribute to a decrease in earning assets.~~Excluding the impact of PPP loans, the Company is targeting that, based on rate conditions at year-end, there will be further roll down of deposit costs in 2021 due to maturities of higher rate time deposits and of promotional rates previously offered on targeted money market deposits.~~The Company’s goal is that these lower costs will more than offset the margin impact of asset yields continuing to price down in the current low interest rate environment.Any margin benefit in the second half is not expected to offset the impact of lower earning assets, and therefore there may be continued pressure on net interest income in the second half of 2021.~~

~~Non-Interest Income:Fee income decreased year-over-year $7 million, or 9% due to pandemic impacts on deposit and loan fees.Deposit related fees decreased by $3 million, or 11%, due to a decrease in overdraft fee income totaling $4 million or 33%.This decrease was due to pandemic impacts which resulted in less consumer spending and higher household liquidity.~~Additionally, overdraft fees and other deposit fees reflected increased fee waivers, which were granted programmatically by the Company as part of its support to its communities during initial lockdowns.The $8 million, or 31%, decrease in loan related fees included a $4 million reduction in commercial swap fee income due to lower demand, along with impacts from market value adjustments to the carrying value of commercial loan swaps.~~Other pandemic related market value adjustments affecting 2020 results related to charges against mortgage servicing rights and fair valued loans.The Company has~~ ~~$54~~ ~~million in contractual balances on taxi medallion loans which are carried at a $2 million fair value.Recoveries on these assets are included in other income.~~Other non-interest income also includes securities gains/losses, which the Company does not view as related to its ongoing operations. The $10 million net securities loss in the first quarter of 2019 was due to the impact of the stock market selloff on the carrying value of equity securities. Non-interest income is net of charges totaling $4 million in 2020 and $6 million in 2019 for amortization of tax credit investments, which was more than offset by income tax expense credits of $5 million and $8 million in those respective years.

~~Provision for Credit Losses:~~ ~~In adopting the CECL accounting model, the Company moved from an incurred loss methodology to an expected loss methodology.Due to the emergence of the pandemic, the Company recorded future expected pandemic losses as provision expense against current period operations.Accordingly, provision expense increased year-over-year to $76 million from $35 million.The provision in 2019 included a component recognizing the incurred expense related to a $16 million charge-off in a fraud related commercial situation.The provision expense in 2020 was primarily due to the emergence of expected future loan losses as described in the earlier discussion of the Allowance for Credit Losses on Loans.~~

~~Non-Interest Expense:Total non-interest expense increased by $550 million to $840 million in 2020 from $290 million in 2019.This was due to the $554 million second quarter write-off of goodwill described in the earlier discussion of financial condition.~~Second half non-interest expense increased by 2% to $145 million in 2020 compared to 2019. The Company utilizes the non-GAAP financial measure of adjusted non-interest expense to assess its expenses related to ongoing operations. These adjustments in 2020 were primarily related to the CEO separation, and in 2019 they were primarily related to merger and restructuring charges.

~~Second half adjusted non-interest expense increased by $7 million, or 6%, to $139 million.This included a $2 million increase in FDIC insurance premium expense due to credits received in the second half of 2019.Technology~~

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spending increased by $3 million to enhance the Company’s technology infrastructure. Additionally, expenses in the second half of 2020 included $3 million in charges related to a lending operations project which was completed during the period.~~Full time equivalent staff in continuing operations at year-end totaled 1,505, compared to 1,550 positions at the start of the year.The Company has announced strategic initiatives for the sale and consolidation of branches in the first half of 2021.The Company expects to recognize a noncore net gain on the sale of these operations and non-core charges in conjunction through these consolidations.~~

~~Income Tax Expense:~~ Income taxes are discussed in a note to the financial statements; this note is important to an understanding of the results of operations. The Company recorded a tax benefit of $27 million in 2020 compared to a tax expense of $21 million in 2019. The Company recorded a $20 million benefit on 2020 continuing operations, resulting in a 4% benefit from the loss on continuing operations. The $20 million dollar benefit included a $15 million benefit from the $59 million deductible portion of goodwill related expense, as well as from $3.5 million in tax credit benefits. The tax rate on 2020 adjusted earnings was 8% due to the lower earnings. In 2019, the Company’s effective tax rate was 18% on pre-tax income from continuing operations. The Company received tax benefits at an effective rate of 26% on pre-tax losses of $27 million and $6 million on discontinued operations in 2020 and 2019, respectively.

~~Discontinued Operations:~~ ~~The Company completed the exit from its discontinued national mortgage banking operations in the final quarter of 2020.These operations recorded losses of $20 million and $4 million in 2020 and 2019, respectively.~~ ~~The losses included write-downs of related mortgage servicing rights which reflected the impact of higher mortgage prepayments as well as lower market pricing for the subject rights.Other factors contributing to the loss in 2020 were severance, contract, and hedge termination costs.Discontinued operations are excluded from the Company’s measure of adjusted income.~~

~~Total Comprehensive Income:~~ Total comprehensive (loss)/income includes net (loss)/income together with other comprehensive income, which primarily consists of unrealized gains/losses on debt securities available for sale, after tax. Due to falling interest rates in 2020 and 2019, Berkshire recorded unrealized debt securities gains in both years.~~As a result, comprehensive results were a ($514) million loss in 2020 and $123 million income in 2019.~~

~~Quarterly Results.~~Quarterly results for 2019 and 2020 are presented in a note to the financial statements. Results for all of these periods have been discussed in previous SEC Forms 10-Q and 10-K, except for operations in the fourth quarter of 2020.~~Second and third quarter results are often the strongest quarterly results due to higher business activity during the spring and summer.~~In 2020, economic activity declined at an unprecedented rated due to the pandemic. This was followed by a partial rebound in the third quarter, but disease resurgence resulted in further government restrictions in the fourth quarter.~~Third quarter results were the strongest in terms of operating income.Results in the first half of 2020 were a loss due to pandemic impacts on the provision for credit losses on loans and the goodwill write-down.~~Pandemic impacts contributed to fourth quarter 2020 results declining from the third quarter due to lower operating revenue, higher operating expense, and a higher provision for credit losses on loans.

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~~COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018~~

~~Summary~~: Revenue and expense in 2019 included the SI Financial operations acquired on May 17, 2019. As a result, many categories of revenue and expense increased in 2019 over the same period of 2018. Additionally, operations in 2019 included the benefit of restructuring actions in both years, and the benefit of the acquired Commerce Bank operations which were being fully integrated in the first half of 2018. Earnings per share reflected the shares issued as merger consideration for the SI Financial acquisition. References to revenue and expense in this discussion are generally related to continuing operations unless otherwise noted. Year-over-year profitability declined primarily due to the $16 million charge related to the write-off of one commercial loan due to alleged fraud. Profitability was also adversely impacted by a lower net interest margin due to the decline in purchased loan accretion, which had been anticipated, as well as the impact of lower interest rates on the Company’s asset sensitive balance sheet. Total purchase accounting accretion decreased to $14 million in 2019 from $23 million in 2018. The Company undertook various initiatives following its strategic review to help mitigate these margin impacts. Results were also lower due to higher merger charges related to the completion and integration of the SI Financial acquisition.The Company’s return on equity was 5.7% in 2019, compared to 6.8% in the prior year. Its non-GAAP measure of adjusted return on tangible common equity was 11.3% compared to 13.5% for these respective periods.

~~Revenue:~~ ~~Net revenue from continuing operations increased in 2019 by $19 million, or 4%, to $449 million in 2019 compared to the prior year, including acquired SI Financial operations.This increase was divided between net interest income and non-interest income.~~

~~Net Interest Income:~~ Net interest income from continuing operations increased by $9 million, or 3%, in 2019 compared to 2018. This growth was due to a 9% increase in average earning assets, which was partially offset by a decrease in the net interest margin. The increase in average earning assets included the impact of approximately $1.48 billion in earning assets acquired from SI Financial on May 17. This was offset by a net decline in other average earning assets due to the Company’s strategic initiative to reduce less strategically important loans and investments in order to decrease expensive wholesale funding sources and related leverage. The net interest margin decreased year-over-year to 3.17% from 3.40%, and the contribution from purchase accounting accretion decreased to 0.12% from 0.22%. The margin decreased further to 3.11% in the final quarter of the year, including a 0.17% contribution from purchase accounting accretion. The benefit of purchase accounting accretion decreased primarily due to the seasoning of purchased credit impaired loans from prior bank acquisitions. Purchase accounting accretion also benefited from accretion related to acquired SI Financial time deposits, which are contributing approximately 7 basis points per quarter accretion benefit which matured in the second quarter of 2020.

~~Non-Interest Income:~~ Non-interest income from continuing operations increased by $10 million, or 13%, in 2019 compared to 2018 due primarily to an $8 million swing in unrealized securities gains/losses which the Company views as non-operating in nature. Fee income increased by $3 million, or 4%, including the benefit of acquired operations.

~~Provision for Loan Losses.~~ ~~The provision increased year-over-year by $10 million, or 39%, including the impact of one fraud related commercial loan loss in the third quarter.~~

~~Non-Interest Expense:~~ Non-interest expense from continuing operations increased year-over-year by $23 million, or 9%, including acquired operations. Merger related expense included the completion of the SI Financial merger.The Company focuses on its non-GAAP financial measure of adjusted expense which excludes merger charges and other items set forth in the reconciliation of non-GAAP measures. Adjusted expense increased by $17 million, or 7%.Expenses in 2019 benefited from $3 million in FDIC premium rebates as a result of a return of FDIC reserves to smaller U.S. banks. The full efficiencies from the merger were not achieved until the fourth quarter of 2019.

~~Income Tax Expense:~~ The effective tax rate measured 18% in 2019, compared to 21% in 2018. This reflected the proportionate benefit of tax advantaged income on lower pretax earnings, along with structural changes in the Company’s tax position, including the impacts of the SI Financial acquisition.

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~~Discontinued Operations:~~These national mortgage banking operations became unprofitable in 2018 as a result of depressed industry conditions due to lower market demand for mortgages as interest rates rose in that period. While industry conditions improved in 2019 as interest rates moved downwards during the year, these operations continued to operate at a loss. The net loss was equivalent to $0.08 per share in 2019, compared to $0.07 per share in 2018. Total revenue improved to $41 million in 2019 from $39 million in 2018, but remained below the $55 million recorded during the profitable year of 2017. Most of the $5.5 million pretax loss in 2019 was due to a $4.5 million charge to write-down mortgage servicing rights based on market indications at year-end.

~~LIQUIDITY AND CASH FLOWS~~

Liquidity is the ability to meet cash needs at all times with available cash and established external liquidity sources or by conversion of other assets to cash at a reasonable price and in a timely manner. Berkshire evaluates liquidity at the holding company and on a consolidated basis, which is primarily a function of the Bank’s liquidity.

~~Total cash and cash equivalents increased to $1.6 billion at year-end 2020, compared to $0.6 billion at year-end 2019.Net cash provided by operating activities of continuing operations decreased slightly to $124 million in 2020 from $130 million in 2019.Net cash provided by operating activities of discontinued operations increased to $104 million from a use of $19 million in 2019 as these operations were liquidated during 2020.~~

~~The Company’s liquidity strengthened substantially in 2020.A $1.4 billion reduction in loans was primarily reinvested in investments.Short-term investments increased by $1.0 billion and investment securities increased by $0.5 billion.A $0.6 billion increase in demand deposits was used primarily to reduce wholesale funds, which decreased to $1.2 billion from $2.0 billion.The ratio of wholesale funds to assets decreased to 9% from 15%.The ratio of loans/deposits decreased to 79% from 92%.~~

~~The Company has an agreement to sell its 8 Mid-Atlantic branches, which is expected to be completed by midyear 2021.The Company is expected to provide in excess of $300 million in funds to complete this sale, which is expected to be funded from short-term investments.The planned consolidation of 16 additional branches in the first half of 2021 is targeted to be completed with strong deposit retention and no material reduction in total deposits.The Company may see some outflows of demand deposit balances which have accumulated during the pandemic and which may be drawn down by customers if economic conditions improve as expected.Any net outflows would most likely be funded from the excess levels of short-term investments that were built up in 2020.The Company also expects to use these funds to pay down maturing wholesale funds from brokered deposits and borrowings if conditions remain as anticipated.~~Due to the decrease in market interest rates in 2020, loan prepayment speeds increased, maturing time deposits tended to roll into money market deposits, and generally interest sensitive assets and liabilities both trended towards lower expected average lives, and therefore increased the potential of larger movements in loan and deposit balances depending on future conditions.

~~The Bank had unused FHLBB borrowing capacity totaling $1.0 billion at year-end, compared to $1.6 billion at the start of the year.The Bank also had available borrowing capacity of $816 million with the Federal Reserve Bank at period-end, compared to $201 million at the end of 2019.~~There were no PPP loans pledged at year-end 2020, and the Company did not make any material use of the Federal Reserve’s PPP Liquidity Facility during the year. The combination of on-balance sheet liquidity and off-balance sheet liquidity described above are viewed as strong support for any emerging liquidity needs.

Subsequent to first quarter-end, KBRA (the Kroll Bond Rating Agency) reaffirmed the Company’s and the Bank’s existing bond ratings, including the Bank’s A- ratings on deposits and senior debt. The ratings were affirmed with a negative outlook on the long-term ratings due to the uncertain economic impacts from the pandemic. The Company maintains ongoing relationships with correspondents and investment banks which provide further potential options for financial support to the Bank and the Company.At period-end, the Company had $84 million in cash at the parent held on deposit in the Bank. The holding company generally expects to maintain cash on hand equivalent to normal cash uses, including common stock dividends, for at least a one year period.~~Beginning in the third quarter of 2020, the Company cut its cash dividend to shareholders in half, reducing the quarterly cash dividend~~

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~~requirement from $12 million to $6 million.Over the long-term, the Company relies on cash dividends from the Bank to provide operating cash and cash for shareholder dividends.~~Due to the second quarter loss, the Bank was no longer in compliance with Massachusetts banking regulations which generally require positive retained earnings over the prior three years in order to pay cash dividends to the parent.The Company made application to the Massachusetts Division of Banks near year-end 2020 to approve a routine bank dividend to the parent to cover the quarterly shareholder dividend, and this application was approved by the Division Banks after year-end.~~The Bank’s goal is to continue to apply for approval of routine quarterly Bank dividends to the parent in the future.~~Total cash dividends paid by the Bank to the parent in 2020 were $44 million due to amounts paid in the first quarter in anticipation of share repurchases, which were suspended due to the onset of the pandemic.

The Company maintains a contingency funding plan based on its assessment of the liquidity stress environment. Contingency funding information, reporting, and assessment were intensified in the first quarter when financial markets began signaling distress. Primary liquidity data is reported on daily, and thirty day stress analytics are maintained on an updated basis. The Company maintains monthly and quarterly cash flow forecasts. A one year forward liquidity stress test evaluates stress across a variety of stress scenarios, including severe adverse loan loss scenarios due to the pandemic. The Company has defined strategic options which allow it to meet funding needs in all stress scenarios.

~~The Company’s guidelines allow it to respond to liquidity stress by placing higher emphasis when necessary on liquidity versus margin expansion.~~

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~~CAPITAL RESOURCES~~

The Company and the Bank target to maintain sufficient capital to qualify for the “Well Capitalized” designation by federal regulators. Berkshire’s long-term goal is to use capital efficiently to achieve its objective to become a higher performing company.

Berkshire views its adjusted internal return on tangible capital as a primary capital resource of the Company. This non-GAAP financial measure is based on the Company’s measure of adjusted earnings, which excludes net charges viewed as not related to ongoing operations. The Company focuses on internal capital generation to support shareholder dividends and organic growth and also to support non-operating charges and/or improvement in its capital ratios. The Company maintains a universal shelf registration of capital securities with the SEC. Additional discussion of the Company’s capital management is contained in the Shareholders’ Equity section of the discussion of Changes in Financial Condition in this report and in the Shareholders’ Equity note to the financial statements.

The Company has investment grade debt ratings and monitors capital market conditions. The Company views its regulatory capital as well cushioned above the “Well Capitalized” levels, and the Company believes that its plans are consistent with maintaining proper strong cushions above these levels. The Company conducts equity stress analyses, including severe adverse pandemic loss scenarios provided by third parties, in addition to Dodd-Frank stress testing. The Company believes that its capital is well cushioned above the Well Capitalized metrics in the adverse modeling scenarios based on the assumptions utilized.

Dividends by the holding company require notice and non-objection from the Federal Reserve Bank in the event that earnings are not sufficient to cover the dividend in the current period or for the four trailing quarters.~~The holding company also requires such notice and non-objection in order to conduct stock buybacks in a quarter which would reduce outstanding shares below the balance at the start of the quarter.~~In the first quarter, due to the pandemic, the Company allowed its existing board stock repurchase authorization and the related regulatory approval to expire without repurchasing additional shares which were contemplated at the start of the year and which were funded to the parent from the Bank during the first quarter.Due to the second quarter loss, the Company initiated a quarterly application process to the Federal Reserve Bank for notice and nonobjection for the routine quarterly dividend beginning in the third quarter. The amount of the dividend was cut in half based on considerations of Federal Reserve supervisory guidance and based on adjusting the dividend yield and payout ratio as a result the reduction in earnings. The Company expects to continue to provide notice and seek non-objection from the Federal Reserve Bank on a quarterly basis until it achieves four trailing quarters of income sufficient to cover dividends in those quarters. As discussed in the preceding section on Liquidity and Cash Flows, dividends from the Bank to the holding company are currently also subject to a procedure with the Massachusetts Division of Banks pursuant to state statute.

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~~CONTRACTUAL OBLIGATIONS~~

~~The year-end 2020 contractual obligations were as follows:~~

~~Item 7-7A - Table 4 Contractual Obligations~~

Less than One One to Three Three to Five After Five
(In thousands) Total Year Years Years Years
FHLBB borrowings (1) $ 474,357 $ 395,475 $ 69,405 $ 6,014 $ 3,463
Subordinated notes 97,280 — — — 97,280
Operating lease obligations (2) 63,894 9,214 16,086 11,258 27,336
Total Contractual Obligations $ 635,531 $ 404,689 $ 85,491 $ 17,272 $ 128,079

~~(1) Consists of borrowings from the Federal Home Loan Bank. The maturities extend through 2040 and the rates vary by borrowing.~~

~~(2) Consists of leases, bank branches, and ATMs through 2039.~~

~~Further information about borrowings and lease obligations is disclosed in Note 11 - Borrowed Funds and Note 16 - Leases of the Consolidated Financial Statements.~~

~~OFF-BALANCE SHEET ARRANGEMENTS~~

In the normal course of operations, Berkshire engages in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in the Company’s financial statements. As previously reported in the discussion of changes in financial condition, Berkshire has outstanding derivative financial instruments and engages in hedging activities, and the fair value of these contracts is recorded on the balance sheet.The Company’s agreement to sell its Mid-Atlantic branches is an off-balance sheet arrangement which is expected to be completed in the first half of 2021.

~~FAIR VALUE MEASUREMENTS~~

The most significant fair value measurements recorded by the Company are those related to assets and liabilities acquired in business combinations. These measurements are discussed further in the mergers and acquisitions note to the financial statements. The premium or discount value of acquired loans has historically been the most significant element of this presentation.

The Company makes further measurements of fair value of certain assets and liabilities, as described in the related note in the financial statements. The most significant measurements of recurring fair values of financial instruments primarily relate to securities available for sale, marketable equity securities, and derivative instruments. These measurements were included in the previous discussion of changes in financial condition, and were generally based on Level 2 market based inputs. Non-recurring fair value measurements primarily relate to certain corporate bonds, impaired loans, capitalized mortgage servicing rights, and other real estate owned. When measurement is required, these measures are generally based on Level 3 inputs. Acquired corporate bonds and industrial development bonds are valued based on Level 3 inputs.

Berkshire provides a summary of estimated fair values of financial instruments at each period-end. The premium or discount value of loans has historically been the most significant element of this presentation. This amount is a Level 3 estimate and reflects management’s subjective judgments.

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~~IMPACT OF INFLATION AND CHANGING PRICES~~

The financial statements and related financial data presented in this Form 10-K have been prepared in conformity with accounting principles generally accepted in the United States of America, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. Unlike many industrial companies, substantially all of the assets and liabilities of the Bank are monetary in nature. As a result, interest rates have a more significant impact on the Bank’s performance than the general level of inflation. Interest rates may be affected by inflation, but the direction and magnitude of the impact may vary. A sudden change in inflation (or expectations about inflation), with a related change in interest rates, would have a significant impact on our operations.

~~IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS~~

Please refer to the notes on Recently Adopted Accounting Principles and Future Application of Accounting Pronouncements in Note 1 - Summary of Significant Accounting Policies of the Consolidated Financial Statements.

~~APPLICATION OF CRITICAL ACCOUNTING POLICIES~~

The Company’s significant accounting policies are described in Note 1 to the financial statements. Modifications to significant accounting policies made during the year are also described in Note 1 to the financial statements. The preparation of the financial statements 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, and expenses, and to disclose contingent assets and liabilities. Actual results could differ from those estimates.

~~Management has identified the Company's most critical accounting policies as related to:~~

•~~Allowance for Credit Losses~~

•~~Goodwill and Identifiable Intangible Assets~~

•~~Fair Value of Financial Instruments~~

These particular significant accounting policies are considered most critical in that they are important to the Company’s financial condition and results, and they require management’s subjective and complex judgment as a result of the need to make estimates about the effects of matters that are inherently uncertain. All of these most critical accounting policies were significant in determining income and financial condition based on events in 2020.

~~ENTERPRISE RISK MANAGEMENT~~

Following sections of this report on Form 10-K include discussion of market risk and risk factors. Risk management is overseen by the Company’s Chief Risk Officer, who reports directly to the CEO. This position oversees compliance, information security, risk management policy, and coordinates with the strategic services function which monitors most aspects of credit quality. Enterprise risk assessments are brought to the Company’s Enterprise Risk Management Committee, and then are reported to the Board’s Risk Management and Capital Committee. The high level corporate risk assessment focuses on the following material business risks: credit risk, interest rate risk, price risk, liquidity risk, operational risk, compliance risk, strategic risk, and reputation risk. The credit risk category has the highest weighting. Based on management's recent review, all risks were within corporate appetites. Trends toward increasing risk were noted for credit risk and compliance risk due largely to the pandemic; liquidity risks were declining due to elevated liquid assets. For all material business risks, the inherent risk was viewed as heightened due to the environment, but the residual risk was viewed as medium/low to medium due to mitigating controls functioning in the Company.

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Item 7 - Table 4 - Rate Volume Analysis


	2022 Compared with 2021						2021 Compared with 2020
	(Decrease) Increase Due to						(Decrease) Increase Due to
(In thousands)	Rate		Volume		Net		Rate		Volume		Net

Interest income:
Commercial real estate	$	34,681	$	8,582	$	43,263	$	(14,027)	$	(13,071)	$	(27,098)
Commercial and industrial loans	7,397		(4,501)		2,896		7,962		(23,913)		(15,951)
Residential loans	(3,179)		8,061		4,882		(762)		(28,622)		(29,384)
Consumer loans	10,572		(482)		10,090		704		(10,014)		(9,310)
Total loans	49,471		11,660		61,131		(6,123)		(75,620)		(81,743)
Investment securities	(2,468)		4,316		1,848		(16,598)		11,341		(5,257)
Short-term investments and loans held for sale (1)	4,968		(2,335)		2,633		(5,508)		2,980		(2,528)
Mid-Atlantic region loans held for sale	—		(7,120)		(7,120)		(1,480)		8,600		7,120
Total interest income	$	51,971	$	6,521	$	58,492	$	(29,709)	$	(52,699)	$	(82,408)

Interest expense:
NOW accounts	$	5,053	$	62	$	5,115	$	(2,832)	$	327	$	(2,505)
Money market accounts	8,402		116		8,518		(10,259)		201		(10,058)
Savings accounts	(204)		23		(181)		(536)		137		(399)
Certificates of deposit	(1,593)		(3,839)		(5,432)		(18,740)		(15,233)		(33,973)
Total deposits	11,658		(3,638)		8,020		(32,367)		(14,568)		(46,935)
Borrowings	4,568		(6,010)		(1,442)		5,691		(15,702)		(10,011)
Mid-Atlantic region interest-bearing deposits	—		(1,820)		(1,820)		814		1,006		1,820
Total interest expense	$	16,226	$	(11,468)	$	4,758	$	(25,862)	$	(29,264)	$	(55,126)
Change in net interest income	$	35,745	$	17,989	$	53,734	$	(3,847)	$	(23,435)	$	(27,282)

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NON-GAAP FINANCIAL MEASURES

In 2022, the restructuring expense adjustment primarily related to the termination of leasehold interests and the write-down of related right of use assets and leasehold improvements in conjunction with branch consolidations and real estate reductions.

In 2021, the Company recorded a third quarter net gain of $52 million on the sale of the operations of the insurance subsidiary and the Mid-Atlantic branch operations. Expense adjustments in the first quarter 2021 were primarily related to branch consolidations. Third quarter 2021 adjustments included Federal Home Loan Bank borrowings prepayment costs. They also included other restructuring charges for efficiency initiatives in operations areas including write-downs on real estate moved to held for sale and severance related to staff reductions. The fourth quarter 2021 revenue adjustment was primarily related to trailing revenue on a previously reported sale, and the expense adjustment was due primarily to branch restructuring costs.

Discontinued operations are the Company’s national mortgage banking operations for which the Company completed the wind down of operations in 2020. Merger costs consist primarily of severance/benefit related expenses, contract termination costs, systems conversion costs, variable compensation expenses, and professional fees. There were no merger costs in 2020. Restructuring costs generally consist of costs and losses associated with the disposition of assets and liabilities and lease terminations, including costs related to branch sales. Restructuring costs also include severance and consulting expenses related to the Company’s strategic review. They also include costs related to the consolidation of branches. Restructuring expense and other for 2020 primarily related to executive separation expense as a result of the CEO transition.

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of acquisitions, divestitures, and other designated items, the Company has introduced the measure of Adjusted Pre-Provision Net Revenue (“Adjusted PPNR”) which measures PPNR excluding adjustments for items not viewed as related to ongoing operations. This measure is now integral to the Company’s analysis of its operations, and is not viewed as a substitute for GAAP measures of net income. Analysts also use this measure in assessing the Company’s operations and in making comparisons across banks. The Company and analysts also measure Adjusted PPNR/Assets in order to utilize the PPNR measure in assessing its comparative operating profitability. This measure primarily relies on the measures of adjusted revenue and adjusted expense already used in the Company’s calculation of its efficiency ratio.

The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community.

The following table summarizes the reconciliation of non-GAAP items recorded for the time periods indicated:


	At or For the Years Ended
(Dollars in thousands)		December 31, 2022		December 31, 2021		December 31, 2020
GAAP Net income/(loss)		$	92,533	$	118,664	$	(533,017)
Non-GAAP measures
Adj: Loss on securities, net		2,031		787		7,520
Adj: Goodwill impairment		—		—		553,762
Adj: Net gains on sale of business operations		—		(52,942)		(1,240)

Adj: Acquisition, restructuring, conversion, and other related expenses (1)		8,909		5,781		5,839




Adj: Loss from discontinued operations before income taxes		—		—		26,855
Adj: Income taxes		(2,940)		11,696		(29,342)

Net non-operating charges		8,000		(34,678)		563,394
Total adjusted net income (non-GAAP)		$	100,533	$	83,986	$	30,377


GAAP Total revenue from continuing operations		$	413,534	$	434,414	$	383,089
Adj: Loss on securities, net		2,031		787		7,520
Adj: Net gains on sale of business operations		—		(52,942)		(1,240)


Total adjusted operating revenue (non-GAAP)		$	415,565	$	382,259	$	389,369


GAAP Total non-interest expense from continuing operations		$	288,716	$	285,893	$	840,239
Less: Total non-operating expense (see above)		(8,909)		(5,781)		(5,839)

Less: Goodwill impairment		—		—		(553,762)


Adjusted operating non-interest expense (non-GAAP)		$	279,807	$	280,112	$	280,638

Pre-tax, pre-provision net revenue (PPNR) from continuing operations		$	124,818	$	148,521	$	(457,150)
Adjusted pre-tax, pre-provision net revenue (PPNR)		135,758		102,147		108,731

(in millions, except per share data)
Total average assets		$	11,347	$	12,056	$	12,861
Total average shareholders' equity		1,193		1,166		1,421
Total average tangible shareholders equity		1,166		1,134		1,105
Total average tangible common shareholders equity		1,166		1,134		1,088
Total tangible shareholders’ equity, period-end		930		1,153		1,153
Total tangible common shareholders’ equity, period-end		930		1,153		1,153
Total tangible assets, period-end		11,638		11,525		12,803

Total common shares outstanding, period-end (thousands)		44,361		48,667		50,833
Average diluted shares outstanding (thousands)		45,914		49,554		50,308





Earnings/(loss) per share, diluted		$	2.02	$	2.39	$	(10.60)
Plus: Net adjustments per share, diluted		0.17		(0.70)		11.20
Adjusted earnings per share, diluted		2.19		1.69		0.60
Book value per common share, period-end		21.51		24.30		23.37
Tangible book value per common share, period-end		20.95		23.69		22.68
Total shareholders' equity/total assets		8.18		10.23		9.25
Total tangible shareholders' equity/total tangible assets		7.99		10.00		9.01

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	At or For the Years Ended
(Dollars in thousands)		December 31, 2022			December 31, 2021			December 31, 2020
Performance Ratios
GAAP return on assets		0.82		%	0.98		%	(4.15)		%
Adjusted return on assets		0.89			0.70			0.24
GAAP return on equity		7.76			10.18			(37.46)
Adjusted return on equity		8.43			7.20			2.14
Adjusted return on tangible common equity		8.94			7.74			3.18
Efficiency ratio (2)		64.31			69.96			68.53

Supplementary Data (in thousands)
Tax benefit on tax-credit investments		$	4,880		$	4,372		$	4,699
Non-interest income charge on tax-credit investments		(3,508)			(3,445)			(3,645)
Net income on tax-credit investments		1,372			928			1,054
Intangible amortization		5,134			5,200			6,181
Fully taxable equivalent income adjustment		6,644			6,344			6,402

(1)Acquisition, restructuring, conversion, and other related expenses included no merger and acquisition expenses for the years -ended December 31, 2022, 2021 and 2020.

(2)Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core non-interest income adjusted to include tax credit benefit of tax shelter investments. The Company uses this non-GAAP measure to provide important information regarding its operational efficiency.

GENERAL

This discussion is intended to assist readers in understanding the financial condition and results of operations of Berkshire Hills Bancorp, Inc. (“Berkshire” or the “Company"), the changes in key items in the Company’s Consolidated Financial Statements (“financial statements”) from year to year, and the primary reasons for those changes.

The objectives of this section are:

•To provide a narrative explanation of the Company’s financial statements that enables investors to see the company through the eyes of management;

•To enhance the financial disclosure and provide the context within which financial information should be analyzed; and

•To provide information about the quality of, and potential future variability of, the Company’s earnings and cash flow.

This discussion includes the following sections:

•Summary

•Comparison of Financial Condition at December 31, 2022 and 2021

•Comparison of Operating Results for the Years Ended December 31, 2022 and 2021

•Liquidity and Cash Flows

•Capital Resources

•Application of Critical Accounting Policies

•Enterprise Risk Management

•LIBOR Transition

•Environmental, Social, Governance (ESG) and Commitment to Social Responsibility

The following discussion and analysis should be read in conjunction with the Company’s financial statements and the notes thereto appearing in Item 8 of this document. In the following discussion, income statement comparisons are against the previous year and balance sheet comparisons are against the previous fiscal year-end, unless otherwise noted. Operating results discussed herein are not necessarily indicative of the results for the year 2023 or any future period. In management’s discussion and analysis of financial condition and results of operations, certain

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reclassifications have been made to make prior periods comparable. Tax-equivalent adjustments are the result of increasing income from tax-advantaged loans and securities by an amount equal to the taxes that would be paid if the income were fully taxable based on a 27% marginal rate (including state income taxes net of federal benefit). In the discussion, unless otherwise specified, references to earnings per share and "EPS" refer to diluted earnings per common share.

Berkshire is a Delaware corporation headquartered in Boston and the holding company for Berkshire Bank (“the Bank”) Established in 1846, the Bank operates as a commercial bank under a Massachusetts trust company charter.

SUMMARY

The Company’s vision is to be a high performing, leading socially responsible community bank in New England and beyond. It offers a wide range of banking, investment, and financial services through its lines of business that include Commercial Banking, Retail Banking, Consumer Lending, Wealth Management, Private Banking, and its 44 Business Capital national SBA lending division. Berkshire’s vision is to empower the financial potential of its stakeholders by making banking available where, when, and how it's needed through a committed focus on exceptional customer service, digital banking, and positive community impact.

Berkshire is committed to unleashing the financial potential of all its stakeholders by leveraging its more than 175 years of expertise, leading performance on environmental, social and governance (ESG) matters and best-in-class fintech partnerships. Its differentiated DigiTouchSM approach, a powerful combination of personal service, including its MyBanker program, fused with the convenience of user-centric technology, targets high customer satisfaction and a frictionless experience.

Berkshire continued to drive forward its performance and make meaningful progress towards its Berkshire’s Exciting Strategic Transformation (BEST) goals in 2022. The Company increased its operating profitability during the year. Fourth quarter revenue and earnings per share reached a fourth quarter record. Due to $52 million in gains recorded on the sale of operations in the third quarter of 2021, total full year net profit decreased year-over-year by 22% to $93 million ($2.02 per share) in 2022 from $119 million ($2.39 per share) in 2021.

The Company uses the non-GAAP measure of adjusted earnings to assess its performance. This measure excludes items not viewed as related to ongoing operations. These items were presented and reconciled to GAAP measures in a previous section of this Item 7. The major exclusions were sale gains in 2021 and branch consolidation costs in both years. Adjusted earnings increased year-over-year by 20% to $101 million in 2022 from $84 million in 2021. Adjusted earnings per share increased by 30% to $2.19 from $1.69 and also reflected the benefit of share repurchases during both years.

The improvement in operating earnings was driven by positive operating leverage resulting from an 18% increase in net interest income and disciplined expense management. Net interest income benefited from the increase in interest rates and from 22% loan growth in the environment of favorable credit conditions during the year. Loan growth exceeded 10% in most major loan categories. Approximately 55% of total loan growth was recorded in residential mortgages, as the Company reinvested excess liquidity into higher yielding loans in conjunction with the expansion of the residential mortgage function serving the Company’s markets.

At year-end 2022, the Company arrived at the midpoint of its three year BEST strategic transformation plan. Fourth quarter 2022 results achieved the objective of moving into the target range of the plan for several key measures. A summary of the Company’s progress against these key targets is shown below.

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The Company’s BEST plan includes a focus on improving Berkshire’s capital structure. In June 2022, the Company issued a $100 million Sustainability Bond, a subordinated debt issuance which replaced at a lower rate of interest a $75 million bond which was called and repaid. The Company intends to use an amount equal to the net proceeds to finance or refinance new or existing social and environmental projects consistent with its Sustainable Financing Framework, which was established at midyear. In conjunction with this issuance, the Company received an inaugural investment grade long-term issuer rating of "Baa3", with a Positive rating outlook, from Moody’s Investors Service.

During 2022, the Company repurchased $125 million of common stock, representing 9% of shares outstanding at the start of the year. After year-end 2022, the Company announced a $50 million share repurchase program for 2023, representing approximately 4% of year-end 2022 outstanding shares. During the fourth quarter of 2022, the Company increased its quarterly common shareholder dividend by 50% to $0.18 per share from $0.12 per share. Total shareholder distributions from dividends and stock repurchases equaled $149 million in 2022, or 16% of year-end 2021 total equity. The Company remains strongly capitalized, with a 12.4% Common Equity Tier 1 Capital ratio at year-end 2022.

The improving credit environment in 2022 was reflected in the reduction in the ratio of the allowance for expected credit losses on loans to total loans; this ratio decreased to 1.15% at year-end 2022 from 1.55% at year-end 2021. This included the release of reserves related to the pandemic as expected elevated losses did not emerge due in part to the ongoing benefit from federal economic support measures. Net loan charge-offs measured 0.27% of average loans in 2022, compared to 0.29% in 2021. The ratio of total delinquent and nonaccrual loans measured a ten year low of 0.60% of loans at year-end 2022.

Inflation remained historically high throughout 2022, leading the Federal Reserve Bank to initiate a series of interest rate increases during the year, along with taking steps towards quantitative tightening. The three month U.S. Treasury rate increased by 436 basis points to 4.42% from 0.06% during the year. The increases were concentrated in the third quarter, with the target Federal Funds rate increasing by 300 basis points from mid-June to the beginning of November. The ten year Treasury rate increased during the year by 236 basis points to 3.88% from 1.52%. The

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Company’s interest rate sensitivity at the start of the year was modeled to be positively sensitive to increases in interest rates, which contributed to the growth in net interest income during the year.

The risk of recession has increased due to ongoing inflation, the higher interest rate environment, and the gradual reduction of excess liquidity in the economy. The Company views its markets as comparatively less sensitive to national trends in the economy and is pursuing strategies to continue to grow and improve operating profitability. The Company plans to roll out its new digital and mobile banking services in 2023. Its goal is that its DigiTouchSM customer engagement strategy and corporate responsibility profile will allow it to differentiate and grow profitably and responsibly in the anticipated environment where deposit costs and competition may further pressure funding costs.Optimization of digital platforms and reductions of excess premises are targeted to contribute additional efficiencies.

In October 2022, Chief Financial Officer Subhadeep Basu resigned, and Chief Accounting Officer Brett Brbovic was named Interim Chief Financial Officer. In January 2023, the Company named David Rosato as Senior Executive Vice President/Chief Financial Officer, effective February 6, 2023. Mr. Rosato was most recently Chief Financial Officer of Peoples United Financial, Inc., which was acquired by M&T Bank Corporation in 2022. Also in January 2023, the Company named James Brown as Senior Executive Vice President/Head of Commercial Banking and Philip Jurgeleit as Executive Vice President/Chief Credit Officer, filling vacancies in these positions resulting from retirements in the second half of 2022. Messrs. Brown and Jurgeleit have decades of related experience in the Company’s markets, including Boston Private Bank and Trust Company for Mr. Brown and Santander Bank for Mr. Jurgeleit.

Berkshire remains positively positioned to continue forward with its BEST program financial objectives while also enhancing its social and environmental performance. The Company was named one of America’s Most Trustworthy Companies by Newsweek, listed in the Bloomberg Gender Equality Index, named a Best Place to Work for LGBTQIA+ equality by the Human Rights Campaign and honored as the Sustainable Business of the Year in the bank category by the Sustainable Business Network of Massachusetts. Additionally, Berkshire accelerated further ahead of its BEST ESG performance goal, moving into an aggregated 17th percentile performance in an index of leading ESG ratings and ranked in the top 1% of U.S. banks in Bloomberg throughout the year. The Company continues to differentiate itself through its high performance on ESG matters and commitment to its communities.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2022 AND DECEMBER 31, 2021

Summary:Total assets were little changed in 2022, measuring $11.7 billion at year-end. Excess liquidity was reinvested into loan growth. A $0.9 billion decrease in cash and equivalents and a $0.5 billion decrease in investment securities were mostly offset by a $1.5 billion increase in loans. Total deposits increased by $0.3 billion, and the ratio of loans to deposits increased to 81% from 68% during the year. Most measures of asset quality remained strong and improving. Shareholders’ equity decreased by $228 million primarily due to an other comprehensive loss from unrealized bond losses in the environment of rising interest rates. Shareholder distributions in the form of dividends and stock repurchases reflected the Company’s plan to reduce excess capital through loan growth and shareholder distributions. The Common Equity Tier 1 Capital ratio remained strong at 12.4% at year-end. Year-end 2022 book value per share measured $21.51 and the non-GAAP measure of tangible book value per share measured $20.95. These measures were reduced by approximately $3.93 per share as a result of the after-tax unrealized bond loss.

Investments: Short-term investments decreased by $978 million, or 64%, to $540 million, or 5% of period-end assets, as excess liquid funds were reinvested into loans in the rising rate market.

The portfolio of investment securities decreased by $515 million, or 20%, to $2.03 billion, measuring 17% of period-end assets, compared to 22% at the start of the year. The Company allowed net run-off of investment securities to provide funds for loan growth. The net runoff tempered the Company’ exposure to unrealized bond losses in the rising interest rate environment. This helped to offset the impact of a lengthening of securities average lives due to slower prepayments of the mortgage related securities which constitute the bulk of the portfolio. Excluding short-term treasury securities, net monthly run-off from proceeds of maturities, amortization, and prepayments of investment securities was approximately $20 million per month based on conditions at year-end 2022.

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The portfolio is high quality, and has an average debt securities life of 6.9 years at period-end, which was increased from 4.6 years at the start of the year due primarily to slowing prepayment speeds of mortgage related instruments resulting from the significant increase in interest rates. The investment portfolio yield was 2.20% in the fourth quarter of 2022, compared to 2.04% in the fourth quarter of 2021. The investment portfolio is viewed as a significant source of liquidity for the Bank, as 93% of the $1.4 billion available for sale bond portfolio consists of Agency mortgage related products and Treasury notes.

The portfolio of available for sale investment securities had an unrealized loss of $238 million, or 14.3% of cost at year-end 2022, compared to an unrealized loss of $4 million, or 0.2% of cost, at year-end 2021, due to the impact of rising interest rates during 2022. The unrealized loss is a component of other comprehensive income but has no impact on bank regulatory capital. If portions of this loss were recognized through sale, this would reduce regulatory capital. The Company monitors the impact of the unrealized loss on the book value of capital and it views its position as within the range of peers in the current environment. Based on year-end 2022 conditions, the unrealized loss is expected to accrete into book value as the bond portfolio seasons through its 6.9 year average life with the expectation that the securities return to a par value at maturity.

Total Loans. Total loans increased by $1.51 billion, or 22%, to $8.34 billion in 2022. Growth was concentrated in residential real estate loans, which increased by $823 million, or 55%, to $2.31 billion. Commercial loans increased by $634 million, or 13%, to $5.52 billion. In addition to improved customer demand and expansion of the Company's lending teams, loan growth in 2022 was impacted by slower prepayment rates due to the rising rate environment during the year.

Berkshire has expanded its residential mortgage lending function to be more in line with its strategic positioning in its markets and in order to reinvest excess liquidity that had accumulated from loan run-off in earlier periods. The majority of originations were produced by an expanded team of in-house mortgage originators. The Company has also been developing third party mortgage channels, including flow originations from correspondents in its markets. This expansion produced high mortgage growth in 2022 despite the market contraction resulting from rising interest rates. Most production shifted towards jumbo 7/1 adjustable-rate mortgages that were held for investment. The Company has also expanded its secondary marketing capabilities with a goal of increasing the volume of conforming mortgages originated for sale in future periods. The Company’s goal is to build customer relationships from this portfolio. The mortgage loan yield decreased to 3.56% in the fourth quarter of 2022, compared to 3.82% in the fourth quarter of 2021, reflecting shifts in the product mix. Due to the lag in application and processing pipelines, the portfolio yield began to increase in the latter part of the year from the flow of higher rate new originations.

Commercial loan growth in 2022 resulted from the expansion of the commercial team, together with solid credit demand and supportive economic and credit conditions. Commercial loans had declined in earlier periods and reached a growth inflection point in the fourth quarter of 2021, with growth in all four quarters of 2022. For the year, major areas of growth were in commercial multifamily loans, non-owner occupied commercial real estate, and asset-based lending commercial and industrial balances. These real estate loans were spread across most of the major categories or property types. The Company measures its commercial real estate loans in accordance with regulatory monitoring guidelines and definitions. Total commercial real estate measured 259% of regulatory capital at year-end 2022 and construction loans measured 26% of regulatory capital.

Through loan selection, the Company shifted commercial real estate loan production towards credits with lower loan-to-value ratios during the year to reduce impacts of potential future recessionary conditions on property valuations.The Company manages commercial real estate loan concentrations within limits by property type.Due to potential shifts in workforce patterns, commercial office loans are subject to heightened monitoring.Excluding construction loans and medical and educational properties, the commercial office portfolio totaled approximately $548 million at year-end 2022, consisting primarily of suburban properties.There were no office property loans delinquent at that date.

Inflation has contributed to an increase in commercial borrowing demand, while the related increase in interest rates has raised borrowing costs, potentially restraining demand. The gathering impact of higher rates is expected to dampen economic conditions, resulting in potentially slower portfolio growth in future periods. Due primarily to commercial loans tied to short term indices, such as LIBOR or Prime, the commercial loan yield increased by 2.06% to 5.78% in the fourth quarter of 2022 from 3.72% in the fourth quarter of 2021. The Company’s

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underwriting includes an analysis of sensitivity to higher interest rates for most of its variable rate loans. Many of the larger variable rate commercial loans are backed by interest rate swaps which have the impact of fixing the interest cost to the borrower, thereby reducing the credit risk of higher interest rates.

After midyear, the Company announced that it would cease originating new loans in its Firestone Financial specialty lending; operation and allow the portfolio to run-off. This was a strategic decision in the context of Berkshire’s BEST plan to focus on core markets and products. The Firestone portfolio stood at $133 million at period-end and continues to have strong credit performance in line with its long history.

Consumer loans increased by $53 million, or 12%, to $501 million in 2022. Growth was driven by consumer unsecured loans originated through the Company’s partnership with the fintech Upstart. This portfolio totaled $140 million at period-end, and most of these loans were originated during the first half of the year and were generally subject to the Company’s prime underwriting standards. In July 2022 the Company announced that, due to the prevailing economic uncertainty, it was ceasing new originations through this partnership. Credit performance of this portfolio has exceeded the Company’s expectations. The yield on the consumer portfolio increased to 7.00% in the fourth quarter of 2022 from 3.96% in the fourth quarter of 2021 due to both the higher yield on Upstart loans and the increase in the Prime rate which is the index rate for most home equity loans.

Overall loan yields increased from the fourth quarter of 2021 due mainly to increases in market interest rates, primarily in relation to loans repricing within three months. The Company measures its loan beta, which is the ratio of the change in loan yields to a market index. Compared to the average federal funds target rate, the beta for the total loan portfolio measured 51% comparing the fourth quarter of 2022 to the fourth quarter of 2021. Comparing the most recent quarter to the linked quarter, the loan beta was 42%. The magnitude and consistency of these betas primarily reflects the large volume of loans contractually repricing based on Prime. LIBOR, or SOFR based indices.

At year-end 2022, 45% of total loans were scheduled to mature or reprice within three months. contributing to the modeled asset sensitivity of the Company’s interest rate risk profile at that date. This is down from 50% at year-end 2021.

Asset Quality and Credit Loss Allowance:Most major asset quality metrics remained solid as of year-end 2022, with many metrics at better levels than pre-pandemic. Total delinquent and non-accruing loans measured 0.60% of total loans at year-end, the lowest in more than a decade. Non-accruing loans measured 0.37% of total loans, compared to 0.52% at year-end 2021. Annualized net loan charge-offs measured 0.27% of average loans in 2022, compared to 0.29% in 2021. Charge-offs were concentrated in the second half of the year in one commercial and industrial credit which filed for bankruptcy in the fourth quarter. The $7 million remaining carrying balance of this loan was the largest component of year-end non-accruing commercial and industrial loans. Non-accruing loans declined in other major loan categories.

At period-end, accruing troubled debt restructurings totaled $12 million and accruing loans over 90 days delinquent totaled $7 million. Total criticized loans decreased to 2.3% of loans from 3.5% of loans at the start of the year, including classified loans which decreased to 1.4% of loans from 2.1% of loans. Classified loans include accruing substandard loans, which are regarded as potential problem loans and which declined to 1.1% of loans from 1.6% during the year.

The allowance for credit losses on loans decreased to $96 million at year-end 2022 from $106 million at year-end 2021. The ratio of the allowance to total loans decreased to 1.15% from 1.55%. This decline was primarily due to a reduction in the expected losses from economic and social disruptions related to COVID-19 conditions, as well as the general improvement in asset quality measures. The year-end allowance was based on a baseline economic forecast of ongoing economic growth but included a qualitative assessment of risks related to market and inflation conditions and future possible recession conditions. The allowance covers all current expected credit losses for all loans. In relation to outstanding loans, the allowance for all categories of loans decreased except for consumer loans due to the addition of the Upstart loans. The expected average lives of most categories of loans increased during the year, reflecting the strong portfolio growth and slower expected prepayment speeds.

Deposits and Borrowings:Total deposits increased by $258 million, or 3%, to $10.3 billion during 2022. Excluding the $474 million increase in payroll deposits and the $107 million decrease in brokered deposits, total deposits decreased by $109 million, or 1%, due primarily to a $156 million, or 5%, decrease in non-interest bearing

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demand deposit balances. The payroll deposits fluctuate daily, and totaled $1.48 billion at year-end, most of which was in money market deposit balances at year-end.

Deposit activity included the impact of increased customer spending rates as well as market competition from higher yielding investment instruments in the rising interest rate environment. The Company increased its promotions of time and money market accounts tied to demand deposit accounts.

The fourth quarter cost of deposits increased year-over-year by 0.50% to 0.69% by from 0.19%, including a 0.36% increase over the third quarter of 2022. The cost of interest-bearing deposits increased by 0.70% to 0.98% from 0.28% due primarily to a 1.00% increase in the cost of money market deposits to 1.16% in the fourth quarter of 2022 from 0.16% in the fourth quarter of 2021.

The Company measures its deposit beta, which is the ratio of the change in deposit costs to a market index. Compared to the average federal funds target rate, the deposit beta measured 25% for the fourth quarter of 2022 compared to the linked quarter. The deposit beta measured 0.14% for the fourth quarter of 2022 compared to the fourth quarter of 2021, which was the last full quarter before the Federal Reserve Bank began raising interest rates. The Company anticipates that the deposit beta will continue to increase into a possible range of 30-40% by the end of the interest rate cycle, depending in part on shifts in balances from lower cost accounts to higher cost accounts.

The Company’s wholesale funds consist of brokered deposits and borrowings. Wholesale funds decreased by $93 million, or 27%, to $246 million, or 2% of assets, from $340 million, or 3% of assets, in order to reduce the balance of higher cost funds.

On June 30, 2022, Berkshire completed the sale at par of $100 million in subordinated notes bearing interest at a fixed rate of 5.5% for the first five years. The notes will then reset quarterly to a floating rate per annum equal to a benchmark rate which is expected to be the Three-Month Term SOFR, plus 249 basis points. The notes have a ten year final maturity and generally may be called at par after five years. Berkshire is the first public U.S. community bank holding company with under $150 billion in total assets to issue a Sustainability Bond. The Company intends to use an amount equal to the net proceeds of its Sustainability Bond issuance to finance or refinance new or existing social and environmental projects consistent with its Sustainable Financing Framework. Sustainalytics, a Morningstar Company, and the global leader in high-quality ESG research, ratings, and data, has independently verified that Berkshire’s Sustainable Financing Framework "is credible and impactful and in alignment with” International Capital Market Association (ICMA) guidelines and principles.

On September 28, 2022, the Company prepaid the balance of its existing $75 million in subordinated debt bearing interest at 6.875% which became callable for the first time on that date since the original issuance ten years ago.

Derivative Financial Instruments: The notional amount of derivative financial instruments totaled $4.52 billion at year-end 2022, compared to $3.71 billion at year-end 2021.The increase was primarily due to $800 million in interest rate swaps and collars on commercial loans recorded as cash flow hedges in the second half of the year. This was in response to the increased sensitivity to a downward interest rate shock following the rapid rise in market interest rates during the year.The fair value of derivative financial instruments was a liability of $43 million at year-end 2022, compared to an asset of $43 million at year-end 2021, due to the impact of changes in interest rates on the value of outstanding commercial loan interest rate swaps.

Shareholders' Equity: Total shareholders’ equity decreased by $228 million, or 19% to $954 million in 2022. This decrease was primarily due to a $178 million net other comprehensive loss resulting mostly from the previously discussed unrealized loss on debt securities available for sale as a result of the increase in market interest rates. Additionally, the Company repurchased $125 million in common shares in 2022, representing approximately 9% of shares outstanding at year-end 2021.

The unrealized securities losses are not counted against regulatory equity. As a result, the decrease in regulatory capital was more modest and reflected shareholder distributions through stock repurchases and dividends. Including the impact of the loan growth, the Common Equity Tier 1 Capital remained relatively strong, decreasing to 12.4% from 15.0 at the start of the year. Similarly, the risk-based capital ratio remained comparatively strong at 14.6% compared to 17.3% at the start of the year.

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Across the banking industry, the unrealized losses on available for sale investment securities have led to significant compression of book value and the non-GAAP financial measure of tangible book value. The Company’s

book value per share decreased by $2.79 to $21.51 and period-end equity/assets decreased from 10.2% to 8.2%. Tangible book value per share decreased by $2.74 to $20.95, and the period-end ratio of tangible common equity/tangible assets decreased from 10.0% to 8.0%. The 2022 comprehensive loss on bonds represented approximately $3.93 per share of the decreases in the above per share book value metrics.

During the first nine months of 2022, the Company continued the quarterly shareholder dividend at $0.12 per share level it was reduced to as a result of the pandemic beginning in the third quarter of 2020. On November 4, 2022, the Company announced that it had increased its quarterly dividend to shareholders by 50% to $0.18 per share. This reflected growth in earnings since the announcement of the BEST strategic transformation plan in May 2021. The $0.18 dividend represented a yield of approximately 2.6% based on Berkshire’s closing share price of $27.44 on November 3, 2022 and was equivalent to a 29% payout compared to third quarter 2022 adjusted earnings.

Total shareholder distributions through stock repurchases and dividends measured $149 million in 2022. In January 2023, the Company announced a new 2023 stock repurchase program totaling $50 million, which was equivalent to approximately 4% of outstanding shares based on the share price at the time of the announcement.

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COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

Summary: Berkshire reported net income of $93 million, or $2.02 per share in 2022, compared to net income of $119 million, or $2.39 per share in 2021. In 2021, the Company recorded a pre-tax gain of $53 million on the sale of its Mid-Atlantic branch operations and its insurance and other operations. The Company uses the non-GAAP measure of adjusted income to assess its performance, with component measures of adjusted revenue and adjusted expense. These measures exclude items not viewed as related to ongoing operations, including the 2021 sale gains and consolidation expenses in both years.

Adjusted income increased in 2022 by 20% to $101 million compared to $84 million in 2021. This reflected a 9% increase in adjusted revenue and flat adjusted non-interest expense. Adjusted income per share increased by 30% in 2022 to $2.19 from $1.69 in 2021. This reflected the further benefit of stock repurchases in both years.

The 2022 return on equity measured 7.76% and the non-GAAP measure of adjusted return on tangible common equity measured 8.94%. Reflecting the improvement during the year, these measures reached 10.06% and 9.83% respectively in the final quarter of the year. The 2022 return on assets measured 0.82% and the non-GAAP measure of adjusted return on assets measured 0.89%. For the final quarter, these measures increased to 1.08% and 1.00% respectively.

The measure of Pre-tax Pre-provision Net Revenue (“PPNR”) totaled $125 million in 2022, and the non-GAAP measure of adjusted PPNR totaled $136 million. For the final quarter, these measures totaled $48 million and $45 million, respectively.

Revenue: Total net revenue decreased by 5% year-over-year due to the impact of the $53 million in sale gains in 2021. The non-GAAP measure of adjusted revenue excludes these gains and other gains and losses. Adjusted revenue increased by 9% due to an 18% increase in net interest income which was partially offset by a 22% decrease in non-interest income excluding gains and losses. Adjusted revenue comparisons between the two years were impacted by the sale of insurance operations and mid-Atlantic branch operations, which contributed to 2021 operating revenues for nine months before their sale.

Net Interest Income:Net interest income increased year-over-year by $53 million, or 18%. The netinterest margin increased by 25%, increasing by 66 basis points to 3.26% from 2.60%. The margin rose to 3.84% in the final quarter of the year. While average earning assets decreased year-over-year by 6%, the Company benefited from the $355 million, or 5% increase in average loans. The increase in the net interest margin reflected both from the benefit of higher interest rates, as well as the reinvestment of funds from short term investments into loans.

Per the early discussion of financial condition, the 2022 cumulative fourth quarter loan beta was 42%, while the deposit beta was 14%. This difference contributed substantially to the net interest income generated as the average target federal funds rate increased by 359 basis points to 3.84% in the fourth quarter of 2022 compared to 0.25% in the fourth quarter of 2021.

The shift from low yielding short-term investments into higher yielding loans also contributed to the increase in net interest income during the year. Additionally, the shift from some investment securities into loans further supported the increase in net interest income.

The Company’s models anticipate that the full cycle deposit beta will be in the 30-40% range. The Company anticipates that the increase in deposit costs may cause a reduction in the net interest margin in future periods based on the interest rate outlook at year-end 2022. The Company’s models indicate that the Company had modest positive interest rate sensitivity at year-end 2022, as discussed in Item 7A on market risk.At year-end 2022, market expectations anticipated further increases in short-term interest rates in 2023.

Non-Interest Income: Total fee income decreased year-over year by $20 million, or 24%. All major categories of fee income decreased except for deposit related fees, which increased by $2 million, or 7%. Insurance fees decreased by $7 million due to the sale of insurance operations in 2021. Loan fees decreased by $13 million, or 38%, primarily due to an $8 million decrease in SBA originations related revenues reflecting changes in the structure of the program and market spreads. Berkshire remained among the top 20 bank originators of SBA 7-A

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guaranteed loans in the U.S. Additionally, loan servicing fee revenue decreased by $2 million due to an outsourcing initiative in 2022. Mortgage banking fees decreased by $2 million, or 89%, as most mortgage originations were designated held for investment.

Provision for Credit Losses on Loans: The loan loss provision was an expense of $11 million in 2022 compared to a benefit of $500,000 in 2021. In both years, provision expense benefited from a release of reserves for expected pandemic related credit losses which did not emerge, including the impact of government support measures. The year-over-year increase also reflected the resumption of loan growth in 2022 compared to loan contraction in 2021. The Company has steadily reduced the coverage of its allowance for credit losses on loans based on improvements in asset quality and credit loss expectations. The balance of the allowance for credit losses on loans decreased to $96 million at year-end 2022 compared to $106 million at year-end 2021.

Non-Interest Expense:Comparisons of non-interest expense year-over-year were impacted by the sale of insurance and branch operations at the end of the third quarter of 2021 and the reinvestment in frontline bankers and technology. Comparisons are also affected by consolidation costs recorded in both years, primarily for branch consolidations, along with premises and operations initiatives.

Total non-interest expense increased year-over-year by $3 million, or 1%. Adjusted non-interest expense was flat. Restructuring and other non-operating expenses totaled $9 million in 2022 and $6 million in 2021. The Company consolidated six branch offices in 2022 and 16 branch offices in 2021. Including the 8 branches related to the mid-Atlantic branch operations which were sold, total branches decreased by 30 offices over the last two years to 100 branches at year-end 2022 compared to 130 branches at the beginning of 2021.

Occupancy related expenses decreased year-over-year by $4 million, or 10%. Technology related expenses increased by $2 million, or 5%. Professional expense decreased year-over-year by $4 million, or 24%, due primarily to elevated charges in the first quarter of 2021. Total full-time equivalent staff measured 1,310 positions at period-end, compared to 1,319 positions at the end of 2021.

Reflecting the improved net interest margin and strong expense control, as well as the exit from less efficient operations, the efficiency ratio improved to 64.3% in 2022 from 70.0% in 2021. This ratio improved to 58.3% in the final quarter of the year due to the cumulative impact of improvements during the year.

Income Tax Expense:Income taxes are discussed in a note to the financial statements; this note is important to an understanding of the results of operations.

The Company recorded a 19% effective tax rate in 2022 compared to a 20% effective tax rate in 2021. Including both the federal and state benefits, the 2022 effective tax rate benefited by 4.5% from tax exemptions on investment securities and other tax-advantaged investments. Including both the federal and state benefits, the effective tax rate was also reduced by 3.4% related to the Company’s tax credit investment projects. These projects provided $0.03 per share in net income benefit in 2022 and $0.02 per share in 2021, net of amortization charges recorded to non-interest income. The Company actively pursues tax credit investment projects to provide financial support to community development projects as part of its overall banking services while also generating an appropriate return on the Bank’s investment. In recent years these projects have included historic rehabilitation, low-income housing, new markets and renewable energy generation investments.

Total Comprehensive Income: Total comprehensive income includes net income together with other comprehensive income, which primarily consists of unrealized gains/losses on debt securities available for sale, after tax. Total comprehensive income was a loss of $85 million in 2022 compared to income of $85 million in 2021. The loss in 2022 results from the unrealized bond losses in 2022 due to the rise in interest rates during the year.

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LIQUIDITY AND CASH FLOWS

Short-Term Liquidity:In 2022, loan growth was the primary use of cash, which was mainly sourced from short-term investments and investment securities. The ratio of cash and cash equivalents to total assets decreased to 6% from 14% over this period in accordance with the Company’s plan to invest excess liquidity into higher yielding loans. Investment securities and wholesale funding are ongoing potential sources of cash to supplement deposit growth to support targeted loan growth.

At year-end 2022, the Bank had $2.1 billion in total borrowing availability with the FHLBB and the Federal Reserve Bank of Boston. This availability is collateralized with investment securities and loans to the extent utilized.

The Company continues to view itself as having sufficient liquidity with a high quality securities portfolio and well-positioned wholesale funding sources. The relative stability of deposit balances and costs was also viewed as positive in 2022 as an indicator of core funding in the Company’s markets. The ratio of loans to deposits measured 81% at period-end, compared to 68% at the start of the year. A number of metrics are utilized in establishing optimal and minimal liquidity targets and the Company is generally well positioned across these metrics.

In the environment prevailing at the end of 2022, some banks have reported deposit outflows as funds are withdrawn to reinvest in other higher yielding financial instruments, and also as excess pandemic related liquidity from federal support programs is spent down. The rising rate environment potentially constrains industry deposit demand growth. Additionally, the rising rates have contributed to the extension of the investment portfolio average life and the unrealized bond losses are a potential constraint on some options for the use of investments to support overall liquidity. The unrealized losses would affect regulatory capital if they were realized through the sale of the related securities, which could then impact the management of capital. The excess liquidity which has been widespread throughout the financial system during the pandemic may constrain funding sources if system wide liquidity is reduced. The Company is monitoring various scenarios as it continues to pursue organic growth and market share gains in the context of its BEST strategic plan.

The Company maintains a contingency funding plan based on its assessment of the liquidity stress environment. Primary liquidity data is reported on daily, and thirty-day stress analytics are maintained on an updated basis. A one year forward liquidity stress test evaluates stress across a variety of stress scenarios, including severe adverse loan loss scenarios. The Company has defined strategic options which allow it to materially meet funding needs in all stress scenarios.

Long-Term Liquidity:Over the long term, the Company targets to generate organic deposit growth that will fund organic loan growth. Operating earnings are expected to fund routine cash operating costs, shareholder distributions, and capital expenditures. As a depository institution, the Bank maintains a high-quality securities portfolio as a source of liquidity to service unexpected customer demand for loan advances or deposit withdrawals. The Company and Bank have investment grade debt ratings from Moody’s Investors Services and the KBRA bond rating firm. The Company also is active in secondary markets for residential mortgages and SBA guaranteed loans, which support its organic growth without relying on internal liquidity and capital resources. The Company is monitoring for potential shifts in deposit sources as customer usage of traditional banking channels is also impacted by the spread of fintech alternatives. The Company’s strategy is to actively partner with fintechs to pursue a strong position in the evolving financial marketplace, while evolving its own technology to support these partnerships. The Company is also monitoring potential shifts in deposit demand as it is being impacted by higher interest rates and inflation, and potentials impacts of an economic slowdown and lower customer liquidity.

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Parent Company Liquidity: Total cash held by the holding company was $90 million at year-end 2022. The Company targets to use cash at the holding company together with dividends from the Bank to fund holding company cash uses including modest operating expenditures, debt service, purchases of investments, shareholder dividends, and stock repurchases. The holding company generally expects to maintain cash on hand equivalent to normal cash uses, including common stock dividends, for at least a one year period. Bank dividends to the holding company presently require approval by the FDIC and the Massachusetts Division of Banks. The holding company’s goal is to maintain access to private and public credit markets to provide access to additional liquidity sources depending on conditions.

CAPITAL RESOURCES

Please see the “Shareholders’ Equity” section of the Comparison of Financial Condition for a discussion of shareholders’ equity together with the note on Shareholders' Equity in the consolidated financial statements.

The Company’s BEST plan includes the optimization of capital, including reducing excess capital through organic growth and capital returns to shareholders. The operation of this plan was evidenced in 2022 by loan growth and shareholder distributions, including a 50% increase in the shareholder dividend in the final quarter of the year. Capital optimization was also supported through the subordinated debt issuance, reducing the coupon compared to the existing debt which was later prepaid. In conjunction with this issuance, the Company received an inaugural investment grade bond rating from Moody’s and executed a landmark Sustainability Bond placement which expands capital market access for socially responsible investments.

The Company views its regulatory capital measures as providing it with an ample cushion of excess capital in relation to its operating condition, risk profile, and strategic plans, and compared to peers. The Company’s priorities for uses of its capital are based on maintaining strong capital, supporting organic growth and its BEST strategic plan, paying a dividend yield that in the long run is competitive and targets a 30-40% payout ratio, and distributing excess capital to shareholders through stock repurchases, with a goal of achieving an efficient level and composition of capital.

The Company repurchased approximately 5% of its shares in 2021 and an additional 9% in 2022. After year-end 2022, the Company announced a 2023 share repurchase program for approximately 4% of its outstanding shares. In large measure, these repurchases represented a return of capital that became excess as a result of the reduction of certain business activities and loans, including targeted runoff of selected portfolios.

The unrealized available for sale securities losses reduce the book value of equity. These losses are expected to accrete back into equity as the securities season to maturity. These losses are not deducted from regulatory capital which is the primary focus of the Company’s capital management. The measure of tangible book value is a focus of bank investors, together with the ratio of tangible equity to tangible assets and the measure of tangible book value per share. The non-GAAP measure of tangible equity to tangible assets decreased to 8.0% from 10.0% during 2022, and tangible book value per share decreased by 12% to $20.95 from $23.69. The Company is monitoring its tangible book value related metrics and it believes that its condition at period-end was within a general range for peers at that date.

The Company’s long-term goal is to maintain an efficient capital structure and to provide a return in excess of the cost of its common equity capital. The Company’s tier 2 capital includes a $100 million subordinated note. The Company maintains a universal shelf registration statement for capital securities with the SEC. The Company and Bank are investment grade rated by Moody's Investors Service and by the KBRA bond rating service. The Company’s stock is traded on the New York Stock Exchange and the Company views itself as having good access to current capital markets.

The Company performs capital stress testing at least annually and has a goal to remain qualifying for the “well capitalized” designation in the severely stressed scenario. The Company views its current stressed capital position as sound and conforming to its objectives.

In acting as a source of strength for the Bank, the Company relies on capital distributions from the Bank in order to provide operating and capital service for the Company, which in turn can access national financial markets to provide financial support to the Bank. Capital distributions from the Bank to the parent company presently require approval by the FDIC and the Massachusetts Division of Banking. Increased distributions from the Company to shareholders require notice to and nonobjection from the Federal Reserve Bank. In 2022, the Bank paid $108 million in dividends to the parent company.

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APPLICATION OF CRITICAL ACCOUNTING POLICIES

The Company’s significant accounting policies and modifications to significant accounting policies made during the year are described in Note 1 to the financial statements. The preparation of the financial statements is in accordance with GAAP and general practices applicable to the financial services industry. This preparation requires management to make estimates, assumptions, and judgements that affect the amounts reported in the financial statements and accompanying notes. The judgment and assumptions made are based upon historical experience, future forecasts, or other factors that management believes to be reasonable under the circumstances. Actual results could differ from those estimates, assumptions, and judgements.

Not all significant accounting policies require management to make difficult, subjective or complex judgments. Certain estimates inherently have a greater reliance on the use of assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. The following significant accounting policies are considered most critical in that they are important to the Company’s financial condition and results, and they require management’s subjective and complex judgment as a result of the need to make estimates about the effects of matters that are inherently uncertain. Both of these most critical accounting policies were significant in determining income and financial condition based on events in 2022.

Allowance for Credit Losses for Loans

The allowance for credit losses for loans (“ACLL”) represents management’s estimate of expected credit losses over the expected contractual life of our loan portfolio. Determining the appropriateness of the ACLL is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolio, in light of the factors then prevailing, may result in significant changes in the ACLL in those future periods.

The appropriateness of the ACLL could change significantly because current economic conditions and forecasts can change and future events are inherently difficult to predict. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall allowance because a wide variety of factors and inputs are considered in estimating the allowance and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all product types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. One of the most significant judgments used in determining the allowance for credit losses is the macroeconomic forecast provided by a third party. Changes in the macroeconomic forecast, especially for the national unemployment rate, could significantly impact the calculated estimated credit losses.

While management utilizes its best judgment and information available, the ultimate adequacy of our ACLL is dependent upon a variety of factors beyond our control, including the performance of our portfolios, the economy, and changes in interest rates. For detailed information on the ACLL see Note 1- Summary of Significant Accounting Policies and Note 6 – Loans and Allowance for Credit Losses.

Fair Value Measurements

The Company uses fair value measurements to determine fair value disclosures and to record fair value adjustments to certain assets and liabilities, such as interest rate swaps, impaired loans, securities available for sale, and derivatives. Our fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, from time to time, the Company may be required to record certain assets at fair value on a non-recurring basis, such as certain impaired loans held for investment and capitalized servicing rights. These non-recurring fair value adjustments typically involve write-downs of individual assets due to application of lower-of-cost or market accounting or other accounting standards.

Management has established and documented a process for determining fair value. The use of observable inputs is maximized and the use of unobservable inputs is minimized when developing fair value measurements. Whenever there is no readily available market data, management uses its best estimate and assumptions in determining fair value, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if other assumptions had been used, our recorded earnings or disclosures could have been materially different from those reflected in these financial statements. For detailed information on our use of fair value measurements and our

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related valuation methodologies, see Note 1 – Summary of Significant Accounting Policies and Note 21 – Fair Value Measurements for more information.

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ENTERPRISE RISK MANAGEMENT

Other sections of this report on Form 10-K include discussion of market risk and risk factors. Risk management is overseen by the Company’s Chief Risk Officer, who reports directly to the CEO. This position oversees risk management policy, credit, compliance, and information security. Enterprise risk assessments are brought to the Company’s Enterprise Risk Management Committee, and then are reported to the Board’s Risk Management, Capital & Compliance Committee.

The Company includes recessionary/inflationary risk overlays on all of the material business risks to capture the uncertainties of the economic environment. The Company has also developed recession toolkits and playbooks that outline mitigating factors and actions that strive to minimize losses under such scenarios. Both of these items are addressed throughout the assessments and dashboards provided to the above Committees.

The high level corporate risk assessment focuses on the following material business risks: credit risk, interest rate risk, price risk, liquidity risk, operational risk, compliance risk, strategic risk, and reputation risk, with the credit risk category having the highest weighting. For all material business risks, residual risk was viewed as medium/low to medium due to mitigating controls functioning in the Company. In 2022, price risk increased in relation to the corporate appetite due to the impact of higher interest rates on the behavior and value of various interest sensitive instruments and operations. Residual price risk was viewed as medium including the impact of mitigating factors and management actions in the risk management environment.

LIBOR TRANSITION

The Company’s use of LIBOR based instruments and the industry-wide transition program away from LIBOR are discussed in Item 1 (“Business”) and Item 1-A (“Risk Factors”) of this report. The Company has in excess of $5 billion in notional balances of LIBOR based instruments related primarily to its commercial banking operations. These include loans index on LIBOR, as well as interest rate swap contracts including customer, dealer, and risk participation agreements.

The Financial Conduct Authority (“FCA”) presently intends to continue publishing most LIBOR indices through June 2023 for use with legacy instruments contracted in 2021 or before. The Company continues to execute plans to transition instruments associated with LIBOR to alternative reference rates. The Company has approved the use of Term SOFR as the lead base case index to replace LIBOR for pricing of new contracts starting in 2022, with Daily Simple SOFR as an alternate. The Company continues to monitor market adoption of alternate index rates as information becomes available or as requested by customers or other counterparties.

As of December 31, 2022, the Company had approximately $1.9 billion in LIBOR based commercial loans, including $1.8 billion maturing after the LIBOR cessation date at midyear 2023. The Company is focused on converting the majority of these loans to one month term SOFR, working with customers, counsel, and its core loan servicing provider. The Company had converted $333 million in outstanding loans through year-end 2022.

ENVIRONMENTAL, SOCIAL, GOVERNANCE (ESG) & COMMITMENT TO SOCIAL RESPONSIBILITY

BERKSHIRE’S APPROACH

Since its founding in 1846, Berkshire continues to be a purpose-driven, values-guided, community-centered bank working to achieve its vision of becoming a high-performing leading socially responsible community bank. Berkshire empowers the financial potential of its stakeholders by making banking available where, when, and how it's needed through an uncompromising focus on exceptional customer service, digital banking, and positive community impact. It provides a wide range of accessible, affordable, safe, responsible and sustainable financial solutions through its consumer banking, commercial banking and wealth management divisions.

Berkshire believes where you bank matters, and that simple decision can have an outsized impact on your community. That’s why ESG factors are central to the company’s vision, mission, business practices, and Berkshire’s Exciting Strategic Transformation (BEST). This better approach to banking with ESG at its core helps manage risk and unlock new business opportunities to create an ecosystem of positive impact and value, which in turn drives Berkshire’s commercial performance, creating capacity to invest more in its business, employees, customers, shareholders and communities.

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BEST COMMUNITY COMEBACK

Berkshire launched the BEST Community Comeback in late 2021, a transformational commitment to empower its stakeholders’ financial potential. The plan focuses on four areas critical to the long-term vibrancy and success of its communities: fueling small businesses; community financing and philanthropy; financial access and empowerment; and funding environmental sustainability. Through this far-reaching initiative, Berkshire aims to help create more businesses and jobs, help more families achieve the dream of owning a home, and aid communities in becoming more environmentally efficient and eco-friendly. Berkshire has made steady progress towards achieving its goal of deploying $5 billion to support its communities by the end of 2024. As of year-end, Berkshire has deployed more than $1 billion in low-moderate income neighborhoods, over $300 million to support low-carbon projects and has transitioned its own electricity supply to 99% renewable since launching the program.

CENTER FOR WOMEN, WELLNESS & WEALTH

Berkshire launched the Center for Women, Wellness, and Wealth (CWWW) to provide women with tools to help create a future enriched with financial stability and wellness. The Center, through partnerships with community organizations, specialized experts and thought leaders, offers events on wellness and financial planning, philanthropic coaching and development support, and complimentary portfolio reviews through Berkshire Bank Wealth Management. Ultimately the Center is working to strengthen women’s financial lives by empowering active participation in financial decision making and addressing the longevity risk that women face through a transformative approach to wealth management which centers on balance, stability, growth and overall wellness.

SUSTAINABLE FINANCE & IMPACT INVESTMENTS

Berkshire became the first public U.S. community bank holding company with under $150 billion in assets to issue a Sustainability Bond with a $100 million issuance in 2022. The Company intends to use an amount equal to the net proceeds to finance or refinance new or existing social and environmental projects consistent with its Sustainable Financing Framework including renewable electricity generation; green buildings; renewable energy technology, storage and manufacturing; energy efficiency in commercial, residential and public buildings; affordable housing; workforce housing; and financial inclusion and access activities. The framework was independently verified by Sustainalytics, a Morningstar Company, for its impact and alignment with the International Capital Market Association's (ICMA) Sustainability Bond Guidelines 2021, Green Bond Principles 2021 and Social Bond Principles 2021. Berkshire intends to publish a report in 2023 describing the amount of net proceeds allocated to each eligible project category, descriptions of specific projects financed, unallocated balances and, where feasible, qualitative and quantitative measures of the expected environmental or social impact.

Beyond the issuance of its sustainability bond, Berkshire looks for innovative ways to advance its ESG positioning and its strategic business priorities through sustainable finance and impact investing. As a result, Berkshire makes targeted impact investments in Small Business Investment Companies (SBIC) and other strategically aligned assets that are within risk appetite and drive a competitive rate of return. The Company also has a strong tax-credit business whereby it makes targeted investments in low-income housing tax credits (LIHTC), historic tax credits (HTC) and solar tax credits to further Berkshire’s ESG goals and strengthen its Community Reinvestment Act (CRA) performance. These investments help bring to life important economic development, revitalization and renewable energy projects while providing an appropriate return to the bank consistent with its capital and tax strategies.

ESG INTEGRATION, OVERSIGHT & REPORTING

ESG factors are integral to Berkshire’s business practices, risk management program, competitive positioning and its ability to deliver on its Berkshire’s Exciting Strategic Transformation (BEST) program and realize its vision of becoming a high-performing, leading socially responsible community bank. Berkshire was one of the first banks in the country to establish a dedicated committee of its Board of Directors to oversee ESG matters and are a leader among community banks in integrating ESG standards into its business strategy and operations.

The Company maintains a strong foundation of governance systems, including:

•Board level oversight of ESG, Sustainability, Climate Change, Diversity and Culture

•Corporate Responsibility & Culture Committee of its Board of Directors

•Environmental, Social and Governance (ESG) Committee

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•Diversity Equity & Inclusion Committee

•Responsible & Sustainable Business Policy

•Lending, credit, deposit and investment policies which incorporate ESG exclusions and due diligence requirements

•Senior managers for ESG and Diversity along with active involvement from business unit leaders and front lines in managing ESG externalities and risks

This approach strengthens risk management practices consistent with the company’s enterprise risk management program and allows Berkshire to capitalize on business opportunities consistent with its strategy.

Berkshire regularly engages directly with its stakeholders to share information about the progress it’s made in its ESG performance, including through its Corporate Responsibility website, corporate annual report, and proxy statement. Additionally, Berkshire’s annual Corporate Responsibility/ESG Report, which is aligned with Sustainability Accounting Standards Board (“SASB”) and Task Force on Climate-Related Financial Disclosure (TCFD) disclosure standards, details the Company's ESG efforts and programs.

CLIMATE CHANGE

Climate Change manifesting in the form of both physical or transition risks could adversely, either directly or indirectly, affect Berkshire’s operations, businesses, customers, communities, and its stakeholders. As the transition to a low-carbon economy accelerates, new policy emerges, and market dynamics shift, Berkshire expects that its efforts to manage its environmental footprint, mitigate the risks associated with climate change, and support the transition will allow it to strengthen its positioning as a high performing, leading socially responsible community bank. The Company continues to evolve its practices to reflect its community bank mission as well as the size, scope, and complexity of its operations.

Berkshire is actively managing climate related risks and opportunities at the board, management and employee levels. The Company’s Board of Directors Corporate Responsibility & Culture Committee provides oversight on sustainability and climate change. Management and the board evaluate climate related risks and opportunities and incorporate the results of risk assessments and discussions into strategic planning, product development, programming and relevant risk mitigating measures. All business risks are also integrated into our Enterprise Risk Management program and discussed by other applicable Board Committees including the Risk Management, Capital & Compliance Committee. Both Committees report into the full board. Beyond board level oversight of climate matters, Berkshire maintains an Environmental, Social and Governance committee comprised of senior executives throughout the Company. Berkshire also completes an annual climate change risk assessment to evaluate the bank’s operations and lending activities for potential exposure to transition and physical risks.

The results of the risk assessment guide Berkshire’s forward climate management and environmental sustainability strategies to ensure its actively managing the risks and opportunities. The physical risks of climate change over short, medium and long-term horizons include weather-related events, such as flooding and tornados, and longer-term shifts in climate patterns, such as extreme heat, rising sea levels and more severe droughts. Such events could disrupt Berkshire’s operations, impact customers, or third parties on which Berkshire relies, including through direct damage to physical assets and indirect impacts from supply chain disruption and market volatility. This could impact borrowers’ ability to repay obligations, devalue physical assets resulting in uncertain residual values and affect third-parties ability to deliver on service expectations.

Transition risks over short, medium and long-term horizons can include changes in consumer preferences, additional regulatory requirements or policy such as taxes, and use of new technologies. Such developments could increase Berkshire, its customers and third-parties operating costs, reduce demand for services from select customer segments and impact current strategies. Reputation and customer relationships could be damaged as a result of Berkshire’s practices related to climate change mitigation as well as through its or its customers direct or indirect involvement with industries or projects with heighten climate related risks. Over the long-term, transition risks could also manifest in potential credit impacts affecting borrowers’ ability to repay obligations. Collectively these physical and transition risks are managed through ongoing monitoring, existing industry exclusions, due diligence processes, policies, insurance requirements, business continuity planning, target setting and product development.

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As Berkshire looks to further strengthen its management of climate related risks and opportunities, it expects to continue to formalize its climate risk management program and set formal targets to reduce its Greenhouse Gas (GHG) emissions, in addition to its existing sustainable finance and renewable electricity goals. As the Company moves further along in its climate journey, it expects to continue to enhance its disclosures, programs, mitigating controls and initiatives to minimize risk, reduce its emissions as well as capitalize on the many business opportunities arising from the transition to a lower-carbon economy. Further details on Berkshire’s Climate Change governance, risk management, strategy, metrics & targets and next steps can be found in its most recent Corporate Responsibility Report.

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RATINGS, AWARDS & RECOGNITION

We’re proud to be recognized for our performance with local, regional, national, and international awards as well as leading third party ESG ratings* including:

•Top 17% aggregated ESG rating, achieving one of five major BEST goals

•MSCI ESG- A

•ISS ESG Quality Score - Environment: 3, Social: 1, Governance: 2

•Bloomberg ESG Disclosure- 62.81

•Sustainalytics Rated

•Communitas Award for Leadership in Corporate Social Responsibility

•Sustainable Business Network of Massachusetts Sustainable Business of the Year – Bank

•Boston Business Journal Top Charitable Contributor

•America’s Most Trustworthy Companies – Newsweek

•Forbes America’s Best Midsize Employers

•Bloomberg Gender-Equality Index

•Human Rights Campaign Corporate Equality Index Best Place to Work for LGBTQ+ equality- 100% Score

*As of December 31, 2022

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MANAGEMENT OF INTEREST RATE RISK AND MARKET RISK ANALYSIS

Qualitative Aspects of Market Risk. The ~~Company’s most significant form of market risk is interest rate risk. The~~ Company seeks to ~~avoid fluctuations in its~~provide sustainable net interest income (NII) under varying economic conditions, while protecting the economic value of assets and ~~to maximize net interest income within acceptable levels~~liabilities from adverse effects of ~~risk through periods of changing~~changes in market interest rates. ~~The Company also seeks to manage~~While a number of market factors affect the ~~risk~~level of ~~interest rate changes to its net income~~NII and the economic value of ~~equity.~~ our assets and liabilities, changes in interest rates is the most significant aspect of our market risk. Berkshire’s general objective is to maintain a neutral or asset sensitive interest rate risk profile, as measured by the sensitivity of net interest income to market interest rate changes.

The Company maintains ~~an Enterprise Risk Management/Asset-Liability Committee (ERM/ALCO) that is responsible~~a regular cadence for ~~reviewing~~review and oversight of its asset-liability policies and interest rate risk ~~position. This Committee meets regularly,~~positioning with oversight from senior management and ~~the Chief Financial Officer and Treasurer report trends and interest rate risk position to the Risk Management and Capital Committee of~~ the Board of ~~Directors on at least a quarterly basis.~~Directors. The manner and extent of the movement of interest rates is an uncertainty that could have a positive or negative impact on the Company’s ~~net interest income and~~ earnings.

The Company manages its interest rate risk by analyzing the ~~sensitivities~~sensitivity and ~~adjusting the~~ mix of its assets and liabilities, including derivative financial instruments. The Company also uses secondary markets, brokerages, and counterparties to accommodate customer demand for long-term fixed rate loans and to provide it with flexibility in managing its balance sheet positions.

Quantitative Aspects of Market Risk. The Company ~~measures~~quantifies its ~~interest rate~~NII sensitivity ~~primarily by evaluating models~~using an earnings simulation model that compares a baseline view of ~~net interest income~~NII over ~~one year, two years,~~12 and ~~three year time horizons. The Company generally models~~24 month horizons, based on a ~~base case assuming no changes in~~static view of the balance sheet and market interest rates, ~~or balance sheet composition~~to a wide range of parallel and ~~then assuming various scenarios of ramped interest~~non-parallel rate ~~changes, shocked interest rate changes,~~shocks and ~~changes involving twists in~~ramps. In addition, the ~~yield curve. The Bank also evaluates its~~Company analyzes net income at risk and equity at risk from interest rate changes through discounted cash flow analysis. ~~This measure assesses~~The baseline view includes the ~~present value~~projected future impacts of previous interest rate changes ~~to equity~~that are projected based on ~~long-term impacts of rate changes beyond the time horizons evaluated for net interest income at risk.~~contractual and behavioral assumptions.

~~The Company uses a simulation model to measure the changes in net interest income.~~ The chart below shows ~~the~~an analysis of ~~the scenario~~scenarios where there is a parallel shock to interest rates ~~ramp up in~~and the impacts are measured for the first year ~~compared to a base case of flat interest rates, assuming a parallel shift in~~and second year after the ~~yield curve. Loans, deposits,~~shock. Modeled assets and ~~borrowings~~liabilities are ~~modeled expected~~assumed to reprice at ~~the~~respective repricing or maturity ~~date.~~dates. Pricing caps and floors are included in the ~~simulation model.~~results, where applicable. The Company uses prepayment ~~guidelines~~expectations set forth by market sources as well as Company generated data where applicable. Generally, cash flows from loans and securities are assumed to be reinvested to maintain a static balance sheet. Other assumptions about balance sheet mix are generally held constant. There were no material changes to the way that the Company measures market risk in ~~2020.~~2022. The ~~model at year-end 2020 included two adjustments reflecting conditions at that date.The modeled balance sheet excluded~~Company has changed its summary presentation of interest rate sensitivity from an analysis of ramped changes to interest rate shocks in order to better focus on the ~~assets~~dynamics and ~~liabilities related to~~uncertainties of the ~~Mid-Atlantic branch sale, including loans and deposits held for sale, with a reduction in short-term investments sufficient to fund the sale.The model also assumed that the balance of PPP loans expected to be repaid were not reinvested and these funds are modeled to payoff the corresponding wholesale funding as it matures.Neither of these adjustments was viewed as material to the projection results, and both of these items are targeted to be substantially completed by midyear 2021.~~current markets.

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~~Item 7-7A - Table 2 - Qualitative Aspects of Market Risk~~CHANGE IN NET INTEREST INCOME

Change in
Interest Rates-Basis
Points (Rate Ramp)
1- 12 Months 13- 24 Months
$ Change % Change $ Change % Change
(In thousands)
At December 31, 2020
+300 $ 5,578 1.78 % $ 27,942 9.17 %
+200 (108) (0.03) 12,199 4.01
+100 (3,090) (0.99) (943) (0.31)
-100 5,408 1.73 6,769 2.22
At December 31, 2019
+300 $ 17,080 4.70 % $ 28,003 7.60 %
+200 11,070 3.00 19,589 5.30
+100 5,107 1.40 10,289 2.80
-100 (6,559) (1.80) (13,611) (3.70)

Berkshire’s objective is to maintain a neutral or asset sensitive interest rate risk profile, as measured by the sensitivity of net interest income to market interest rate changes.As a lookback on 2020 positioning and market events, the Company was positioned to expect a decrease in net interest income in the unexpected event of a downward shift in interest rates, which is what happened early in 2020.~~A downward shock of 100 basis points was expected to result in approximately a 4% decrease in net interest income in the first year.Following the downward shock of approximately 150 basis points near the end of the first quarter, net interest income decreased sequentially by 10% in the second quarter.~~


Parallel Interest Rate Shock – Basis Points
	1-12 Months		13-24 Months
	% Change		% Change
At December 31, 2022

+200	1.8	%	6.1	%
+100	0.8		2.9
-100	(1.6)		(4.3)
-200	(5.2)		(10.8)

At December 31, 2021

+200	13.1		16.1
+100	5.6		6.5
-100	(0.1)		(1.2)
-200	NA		NA

The ~~Company’s~~Company was significantly asset sensitive at year-end 2021, which benefited the Company in the 2022 environment of rising interest rates. This environment also contributed to growing sensitivity ~~roughly doubled over~~during the ~~first nine months~~year to negative earnings impacts in the unexpected situation of the year. This was due to the influx of non-interest bearing demand deposit balances, the growth in short-term investments, the initial lengthening of wholesale fund maturities, runoff of higher rate fixed rate assets, and the assumed higher prepayment speeds of the remaining portfolio. Also, the reduction in base case net interest income increases the relative impact of changes due to interest rate ~~sensitivity. In line directionally with this modeled sensitivity, at~~decreases, as asset yields increased while deposit costs remained well-controlled. Over the ~~start~~course of the year, the ~~sharp decrease in interest rates in~~Company increased the ~~first quarter resulted in compression~~duration of assets with the growth of the ~~Company’s net interest margin in the first half of 2020. Also in line directionally with the model, the margin stabilized~~mortgage portfolio, and in the second half of the year ~~as deposit pricing began~~the Company employed hedging strategies with interest rate swaps and collars. As a result, year-end 2022 interest rate sensitivity was much closer to ~~catch~~neutral, while remaining modestly asset sensitive, in line with the market expectation of further interest rate increases in 2023. Changes to first year modeled net interest income were under 2% in modeled scenarios of 100 basis point shocks in both up ~~with loan yield compression.~~and down scenarios.This sensitivity was also under 2% for a 200 basis point upward shock, compared to the modeled 13.1% sensitivity at the start of the year. At year-end 2022, a down 200 basis point shock scenario was added to the model due to the increase in interest rates during the year.The change to first year modeled net interest income was down 5.2% under this scenario.

The ~~Company’s interest rate sensitivity decreased significantly in the final quarter of the year, with~~Company also models net interest income sensitivity ~~moving~~ to ~~nearly neutral at year-end.Contributing factors~~interest rate ramps over a twelve month period. In all cases, these sensitivities were ~~the branch sale agreement, an increase in investment securities, and accumulating impacts of payoffs of LIBOR based loans and shortening~~modestly lower than those modeled for interest rate shocks of the ~~liability maturity ladder. In the first year of the four modeled scenarios, the impact of~~same magnitude. At year-end 2022, the modeled ~~change in net interest income was less than 2% in all four scenarios. In the second modeled~~ year ~~the percentage change in net interest income was less than the~~one sensitivity ~~shown at year-end 2019 for all scenarios except the +300~~to a +100 basis point ~~scenario. At year-end 2020,~~interest rate ramp was 0.6% and the ~~greatest modeled~~year two sensitivity was in the second year of the +200 basis point and +300 basis point scenarios, where the positive interest sensitivity exceeded $10 million in annual net interest income based on the modeled parallel shifts in interest rates.

Due to the low level of interest rates, the modeled sensitivity of a downward shift in interest rates is affected by assumptions related to market influences on spreads and floors applied to zero rate indicates.Prime, mortgage rates, and deposits are floored. All other rates are zero bound. Measures of risk in an upward rate environment were close to neutral at year-end 2020 in both year one and year two of the 100 basis point upward scenarios, and in the first year of a 200 basis point increase.2.6%. The Company also models sensitivity to yield curve ~~twists. A steepening~~twists, and sensitivity remained positive in most scenarios for widening and narrowing of the yield ~~curve is more asset sensitive than the scenario of a parallel shift.~~The above sensitivities are compared to the baseline static model and based on current interest rates and modeling assumptions. Further flattening of the yield curve also presents the possibility of compressing the margin, including the impact of tighter market spreads due to competitive factors in such environments.curve.

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~~In addition to modeling~~While the sensitivity of net interest income is the ~~Company also models~~primary driver of the sensitivity of net income, ~~and~~the latter is more sensitive than the former since it is net of ~~equity at risk in~~expenses. In the ~~event~~case of ~~rate changes.The dollar amount~~the first year of a 100 basis point scenario, the modeled shock sensitivity of net income ~~at risk was modeled~~is 1.7% in an upward shock and -3.3% in a downward shock.

Economic value of equity sensitivity to ~~generally be the same as the amount of net-interest income at risk~~changes in ~~the two percent ramp up scenario.The Company’s equity at risk is normally modeled as liability sensitive, due to the overall shorter duration of its funding sources compared to earning assets.This liability sensitivity had shifted to near neutral~~market rates at year-end ~~2019, and equity at risk~~2022 was ~~asset sensitive at year-end 2020, increasing by approximately 3% in the event of~~neutral for a 200 basis point upward shock and was -5.4% for a similar downward shock.

A critical component of modeling is the assumption of deposit interest rate sensitivity (deposit “beta”). The Company expects the total deposits beta through the duration of an interest rate cycle to be in the area of 30-40%, which includes an assumption that non-interest bearing deposit balances remain unchanged for modeling purposes. The actual cost of deposits in 2022 has been less sensitive than the Company’s traditional modeling assumptions due to the rapid increase in interest rates and high liquidity in the economy in the unusual conditions prevailing in 2022.

Modeled interest rate sensitivity depends on other material assumptions. ~~Additionally, market~~Market risk exposure is affected by the level and shape of the yield curve in markets for financial instruments including U.S. Treasury obligations, forward interest rate derivatives, the U.S. prime interest rate, and LIBOR related rates. Also, the economic impact on customer and market behaviors of the COVID-19 pandemic remains uncertain and may cause actual events to differ from assumptions.

A critical component of the Company’s modeling is the assumption of deposit interest rate sensitivity, which the Company continues to model at a 40% beta level. Results in 2020 for non-brokered deposits were generally consistent with this assumption.The behavior of markets under the historically unusual conditions currently prevailing may be different from modeling assumptions, and the Company continues to monitor the markets and the assumptions in its model.

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ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements and supplementary data required by this item are presented elsewhere in this report beginning on page F-1, in the order shown below:


Management’s Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm (PCAOB ID 173)
Consolidated Balance Sheets as of December 31, ~~2020~~2022 and ~~2019~~2021
Consolidated Statements of Operations for the years ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018~~2020
Consolidated Statements of Comprehensive Income/(Loss)~~/Income~~ for the years ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018~~2020
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018~~2020
Consolidated Statements of Cash Flows for the years ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018~~2020
Notes to Consolidated Financial Statements

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

The Company’s management, including the Company’s Principal Executive Officer and Principal Financial Officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a and 15(d) -15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) as of December 31, ~~2019.~~2021. Based upon their evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of that date, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”): (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

The Company evaluated changes in its internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that occurred during the last fiscal quarter. The Company determined that there were no changes that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting. Management’s report on internal control over financial reporting and the independent registered public accounting firm’s report on the Company’s internal control over financial reporting are contained in “Item 8 — Consolidated Financial Statements and Supplementary Data.”

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

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PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

For information concerning the directors of the Company, the information contained under the sections captioned “Proposal 1 - Election of Directors for a One-Year Term” in Berkshire’s Proxy Statement for the ~~2021~~2023 Annual Meeting of Stockholders (“Proxy Statement”) is incorporated by reference. The following table sets forth certain information regarding the executive officers of the Company.


Name	Age	Position
Nitin J. Mhatre	5052	President and Chief Executive Officer of the Company; Chief Executive Officer - Berkshire Bank; Director of Berkshire Hills Bancorp and Berkshire Bank
Sean A. Gray	4546	Senior Executive Vice President, ~~of the Company;~~Chief Operating Officer; President - Berkshire Bank
~~James M. Moses~~David Rosato	4461	Senior Executive Vice President, Chief Financial Officer ~~of the Company;~~
Lucia “Lucy” Bellomia	57	Senior Executive Vice President, ~~Chief Financial Officer - Berkshire Bank~~Head of Retail Banking
~~George F. Bacigalupo~~James Brown	6657	Senior Executive Vice President, Head of Commercial Banking ~~- Berkshire Bank~~
~~Tami F. Gunsch~~Jennifer M. Carmichael	5846	Executive Vice President, Chief Internal Audit Officer
Jacqueline Courtwright	59	Senior Executive Vice President, Chief Human Resources and Culture Officer
Ashlee Flores	38	Executive Vice President, Chief Compliance Officer
Philip Jurgeleit	53	Executive Vice President, Chief Credit Officer
Gregory D. Lindenmuth	55	Senior Executive Vice President, Chief Risk Officer
Wm. Gordon Prescott	61	Senior Executive Vice President, General Counsel and Corporate Secretary
Sumant Pustake	38	Executive Vice President, Chief Transformation & Strategy Officer
Ellen Steinfeld	61	Senior Executive Vice President, Head of Consumer ~~Banking - Berkshire Bank~~
~~Gregory D. Lindenmuth~~	53	~~Senior Executive Vice President, Chief Risk Officer – Berkshire Bank~~
~~Deborah A. Stephenson~~	50	~~Senior Executive Vice President, Regulatory~~Lending & ~~Compliance- Berkshire Bank~~
~~Jennifer M. Carmichael~~	44	~~Executive Vice President, Chief Internal Audit Officer - Berkshire Bank~~
~~Jacqueline Courtwright~~	57	~~Executive Vice President, Chief Human Resources and Culture Officer – Berkshire Bank~~
~~Georgia Melas~~	57	~~Executive Vice President, Chief Credit Officer – Berkshire Bank~~
~~Wm. Gordon Prescott~~	59	~~Executive Vice President, General Counsel and Corporate Secretary - Berkshire Bank~~Payments
Jason T. White	4647	Senior Executive Vice President, , Chief Information Officer – Berkshire Bank

The executive officers are elected annually and hold office until their successors have been elected and qualified or until they are removed or replaced.

BIOGRAPHICAL INFORMATION


			Nitin J. Mhatre. Age ~~50.~~ 52. Mr. Mhatre was appointed to the role of President and Chief Executive Officer of the Company and Chief Executive Officer of the Bank in January 2021.He was also appointed as a Director of the Company and the Bank. Prior to joining the Company, Mr. Mhatre was Executive Vice President, Community Banking, at Webster Bank, where he led consumer and business banking businesses. Before joining Webster in 2009, Mr. Mhatre spent 13 years at Citi Group in various leadership roles across consumer-related businesses globally.
			Sean A. ~~Gray.~~Gray. Age ~~45.~~46. Mr. Gray was appointed to the role of Senior Executive Vice President, ~~and~~ Chief Operating ~~Officer of the Company and~~Officer; President of the Bank in November 2018. He was previously Senior Executive Vice President of the Company and Chief Operating Officer of the Bank since 2015. Mr. Gray joined the Company in retail banking in 2007 and attained the ~~positon~~position of Executive Vice President, Retail Banking. Previously, he was Vice President and Consumer Market Manager at Bank of America, in Waltham, Massachusetts.

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			David Rosato. Age 61. Mr. Rosato joined the Company in February 2023 as Senior Executive Vice President, Chief Financial Officer. He spent the last 15 years with People’s United Financial, Inc., eight of which as Chief Financial Officer. Prior to joining People’s United, Mr. Rosato worked at Webster Financial Corporation, including serving as its Treasurer, and M&T Bank Corporation. Mr. Rosato is a former board member of the Federal Home Loan Bank of Boston.
			Lucia “Lucy” Bellomia. Age 57. Ms. Bellomia is Senior Executive Vice President and Head of Retail Banking. She oversees the retail branch network, branch training, the MyBanker program, Call Center, Branch Operations, Retail Sales and Service Delivery. Prior to joining Berkshire in September 2021, she served as the Executive SVP, PM, Community Banking, Northeast Region, for Bank of America. She previously held positions at the Police and Fire Credit Union in Philadelphia, Santander Bank, PNC Bank, Sun National Bank, and Pioneer Savings and Loans.
			James ~~M. Moses. Age 44.~~Brown. Age 57. Mr. ~~Moses~~Brown joined the Company in January 2023 as Senior Executive Vice President, Commercial Banking. Mr. Brown is responsible for all aspects of commercial banking operations, including the middle-market, business banking and asset based lending teams. Previously, he spent more than 20 years at Boston Private Bank & Trust Company in multiple senior executive roles including Co-President, EVP, Head of Commercial Banking and Credit Administration, and Chief Lending Officer. He served with Silicon Valley Bank as Head of Specialty Commercial within the Private Bank, following the acquisition of Boston Private in 2021
			Jennifer M. Carmichael. Age 46. Ms. Carmichael was promoted to Executive Vice President, Chief Internal Audit Officer of Berkshire Bank in November 2020. She reports to the Audit Committee of the Board and administratively to the CEO. Ms. Carmichael previously served as Senior Vice President and Audit Manager. She joined the Bank in 2016 from Accume Partners where she served as Senior Audit Manager to several clients in the New York and New England regions, including Berkshire.
			Jacqueline Courtwright. Age 59. Ms. Courtwright is Senior Executive Vice President, Chief ~~Financial~~Human Resources and has served as Culture Officer ~~of the Company and the Bank,~~ since ~~joining the Bank in July 2016. Mr. Moses previously served at Webster Bank~~September 2020.She had been appointed as Senior Vice President, Chief Human Resources Officer in July 2019.Prior to joining Berkshire in 2012, Ms. Courtwright was VP, Human Resources Business Partner at Citizen Bank and ~~Asset/Liability Manager. Mr. Moses joined Webster~~also held senior human resource roles during her 20 years at KeyBank.

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			Ashlee Flores. Age 38. Ms. Flores was promoted to Executive Vice President, Chief Compliance Officer in September 2022. She oversees all aspects of the compliance risk management program, including compliance with the Bank Secrecy Act, Community Reinvestment Act, consumer protection laws and regulations, as well as the Security and Fraud Investigations functions. Ms. Flores previously served as SVP, Compliance, where she oversaw Berkshire Bank's compliance program. Prior to joining Berkshire Bank, Ms. Flores was a compliance officer at Hampden Bank in ~~2011 from M&T Bank~~Springfield, MA where ~~he spent four years in various roles including head mortgage trader, deposit products pricing manager,~~she managed the compliance and ~~consumer credit card product manager.~~audit program.
			~~George F. Bacigalupo.~~Philip Jurgeleit. Age ~~66.~~53. Mr. ~~Bacigalupo was promoted to Senior~~Jurgeleit joined the Company in January 2023 as Executive ~~Vice President, Head of Commercial Banking, Berkshire Bank in September 2015, having previously served as an Executive Vice President since October 2013 and Senior~~ Vice President, Chief Credit ~~Officer since 2011. Previously,~~Officer. He oversees all aspects of the company's credit underwriting, policy, and approval processes. Mr. ~~Bacigalupo was EVP~~Jurgeleit most recently served as SVP and Senior Director of ~~Specialty Lending~~Credit Risk at ~~TD Banknorth,~~Santander Bank where he ~~established the ABL and other middle-market lending groups. Subsequently, at TD Bank, he~~ was ~~the Senior Lender for New England.~~
			~~Tami F. Gunsch. Age 58.~~ ~~Ms. Gunsch is Senior Executive Vice President, Head of Consumer Banking, Berkshire Bank. Ms. Gunsch is~~ responsible for all aspects of credit risk management including credit approval, asset quality, underwriting guidelines, and credit policies for the ~~retail banking consumer experience. Ms. Gunsch has previously~~Middle Market, Mid-Corporate, Asset Based Lending, and Healthcare/Not-for-Profit business units. He also held ~~the positions of EVP, Retail Banking and Senior Vice President. Ms. Gunsch joined Berkshire from~~senior leadership roles at Citizens Bank, ~~in 2009 as First VP~~Webster Bank and Bank of ~~Retail Banking.~~America.
			Gregory D. Lindenmuth. Age ~~53.~~55. Mr. Lindenmuth is Senior Executive Vice President, Chief Risk Officer of the Bank, a position he was promoted to in October 2018. Mr. Lindenmuth joined Berkshire in 2016 from the FDIC where he was employed for 24 years and held multiple positions including Senior Risk Examiner for the Division of Risk Management Supervision and Acting Regional Manager for the Division of Insurance and Research. With the FDIC, Mr. Lindenmuth was also a Capital Markets, Mortgage Banking, and Fraud Specialist.
			~~Deborah Stephenson. Age 50.~~ Senior Executive Vice President, Compliance and Regulatory of Berkshire Bank. Ms. Stephenson joined the Company in 2014. She was previously Senior Vice President at Country Bank where she managed retail banking and human resources.
			~~Jennifer M. Carmichael, Age 44.~~ Ms. Carmichael was promoted to Executive Vice President, Chief Internal Audit Officer of Berkshire Bank in November 2020. She reports to the Audit Committee of the Board and administratively to the CEO. Ms. Carmichael previously served as Senior Vice President and Audit Manager. She joined the Bank in 2016 from Accume Partners where she served as Senior Audit Manager to several clients in the New York and New England regions, including Berkshire.

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			~~Jacqueline Courtwright, Age 57.~~ Ms. Courtwright was promoted in September 2020 to Executive Vice President, Chief Human Resources and Culture Officer at Berkshire Bank. She had been appointed as Senior Vice President, Chief Human Resources Officer in July 2019. Prior to joining Berkshire in 2012, Ms. Courtwright was VP, Human Resources Business Partner at Citizen Bank and also held senior human resource roles during her 20 years at KeyBank.
			~~Georgia Melas. Age 57.~~ Ms.Melas is Executive Vice President, Chief Credit Officer of Berkshire Bank, a position she was promoted to in October 2018. Ms. Melas joined Berkshire as Senior Vice President, Chief Credit Officer in 2015 from Key Bank where she held multiple positions including Senior Credit Officer, Commercial Banking.
			Wm. Gordon Prescott, Age ~~59.~~61. Mr. Prescott is Senior Executive Vice President, General Counsel and Corporate Secretary, ~~of the Bank,~~ a position he was promoted to in October 2018. Mr. Prescott joined Berkshire in 2008 as VP, General Counsel and Corporate Secretary. Mr. Prescott has 30 plus years of experience in the legal profession, including extensive experience as in-house corporate counsel, most recently with KB Toys Inc. prior to joining the Bank.
			Sumant Pustake. Age 38_. Mr. Pustake was promoted to Executive Vice President in February 2023 and has served as Chief Transformation and Strategy Officer since June 2021. Mr. Pustake previously oversaw Berkshire's corporate development efforts, where he served as the development leader and helped define and realize Berkshire’s vision and growth strategy. Prior to joining Berkshire Bank, he served as Vice President, Head of Corporate Credit for Commerce Bank and Trust at the time of its acquisition by Berkshire in 2017.

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			Ellen Steinfeld, Age 61.Ms. Steinfeld is Senior Executive Vice President and Head of Consumer Lending & Payments. She is responsible for Mortgage Banking sales and operations, Home Equity, Consumer Lending and Payments. Prior to joining Berkshire in September 2021, she was President of Innovative Lending Strategic Solutions LLC. Before her consulting role, she was Managing Director and US Consumer Lending Executive for TIAA-CREF, where she managed Mortgage Lending, Small Business Lending, Consumer Lending. She has also held management positions at Hudson City Savings, Citizens Bank, RBC Wealth Management, and E*TRADE Financial. (Note:Ms. Steinfeld’s stock ownership reports to the SEC are filed under her legal name of Ellen Tulchiner).
			Jason T. White, Age ~~46.~~47. Mr. White ~~was promoted to~~is Senior Executive Vice President and was named Chief Information Officer of Berkshire Bank in November 2020.He previously served as Senior Vice President, Chief Technology Officer since May 2019 when he joined the Bank following the acquisition of Savings Institute Bank & Trust, where he served as Chief Information Officer and Information Security Officer.

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Reference is made to the cover page of this report and to the section captioned “Additional Information - Other Information Relating to Directors and Executive Officers - Delinquent Section 16(a) Reports” in the Proxy Statement for information regarding compliance with Section 16(a) of the Exchange Act. For information concerning the audit committee and the audit committee financial expert, reference is made to the section captioned “Proposal 1 - Election of Directors for a One-Year Term", "Proposal 1 - Election of Directors for One Year Term - Corporate Governance - Committees of the Board of Directors”, and “Proposal 1 - Election of Directors for a One Year Term - Board Committees and Responsibilities" in the Proxy Statement.

For information concerning the Company’s code of ethics, the information contained under the section captioned “Proposal 1 - Election of Directors for a One Year Term - Corporate Governance - Code of Business Conduct and Anonymous Reporting Line Policy” in the Proxy Statement is incorporated herein by reference.

A copy of the Company’s code of ethics is available to stockholders on the Company’s website at:

berkshirebank.com under the Investor Relations tab.

~~http://ir.berkshirebank.com~~.

ITEM 11. EXECUTIVE COMPENSATION

For information regarding executive compensation, the sections captioned “Proposal 1 - Election of Directors for a One-Year Term”, “Proposal 1 - Election of Directors of a One Year Term - Corporate Governance - Committees of the Board of Directors”, and “Proposal 1 - Election of Directors for a One Year Term - Board Committees and Responsibilities” in the Proxy Statement are incorporated herein by reference.

For information regarding the Compensation Committee Report, the section captioned “Compensation Discussion and Analysis” in the Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

(a)Security Ownership of Certain Beneficial Owners

Information required by this item is incorporated herein by reference to the section captioned “Additional Information - Stock Ownership” in the Proxy Statement.

(b)Security Ownership of Management

Information required by this item is incorporated herein by reference to the section captioned “Additional Information - Stock Ownership” in the Proxy Statement.

(c)Changes in Control

Management of Berkshire knows of no arrangements, including any pledge by any person of securities of Berkshire, the operation of which may at a subsequent date result in a change in control of the registrant.

(d)Equity Compensation Plan Information

The following table sets forth information, as of December 31, ~~2020,~~2022, about Company common stock that may be issued upon exercise of options under stock-based benefit plans maintained by the Company, as well as the number of securities available for issuance under equity compensation plans:


Plan category	Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)	Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
Equity compensation plans approved by security holders	Equity compensation plans approved by security holders	112,280	$	22.95	898,483	Equity compensation plans approved by security holders	49,200	$	25.62	1,500,355
Equity compensation plans not approved by security holders	Equity compensation plans not approved by security holders	—	—		—	Equity compensation plans not approved by security holders	—	—		—

Total	Total	112,280	$	22.95	898,483	Total	49,200	$	25.62	1,500,355

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated herein by reference to the sections captioned “Additional Information - Other Information Relating to Directors and Executive Officers - Transactions with Related Persons" and “Additional Information - Other Information Relating to Directors and Executive Officers - Procedures Governing Related Persons Transactions” in the Proxy Statement. Information regarding director independence is incorporated herein by reference to the section “Proposal 1 - Election of Directors for a One Year Term” in the Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item is incorporated herein by reference to the section captioned “Proposal 3 — Ratification of the Appointment of the Independent Registered Public Accounting Firm” in the Proxy Statement.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) [1] Consolidated Financial Statements

•Report of Independent Registered Public Accounting Firm

•Consolidated Balance Sheets as of December 31, ~~2020~~2022 and ~~2019~~2021

•Consolidated Statements of Operations for the Years Ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018~~2020

•Consolidated Statements of Comprehensive (Loss)/Income for the Years Ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018~~2020

•Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018~~2020

•Consolidated Statements of Cash Flows for the Years Ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018~~2020

•Notes to Consolidated Financial Statements

The Consolidated Financial Statements required to be filed in our Annual Report on Form 10-K are included in Part II, Item 8 hereof.

[2] Financial Statement Schedules

All financial statement schedules are omitted because the required information is either included or is not applicable.

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[3] Exhibits


3.1						Amended Certificate of Incorporation of Berkshire Hills Bancorp, Inc. (1)
3.2						Amended and Restated Bylaws of Berkshire Hills Bancorp, Inc. (2)
~~3.3~~						~~Certificate of Amendment to the Certificate of Incorporation of Berkshire Hills Bancorp, Inc. (3)~~
3.4						Certificate of Designations of the Series B Non-Voting Preferred Stock ~~(4)~~(3)
4.1						Form of Common Stock Certificate of Berkshire Hills Bancorp, Inc. (1)
4.2						Note Subscription Agreement by and among Berkshire Hills Bancorp, Inc. and certain subscribers dated September 20, 2012 (5)
4.3						Description of Berkshire Hills Bancorp, Inc. Securities ~~(16)~~(6)
10.1						Three-Year Employment Agreement by and among Berkshire ~~Bank, Berkshire~~ Hills Bancorp, Inc., Berkshire Bank and ~~Richard M. Marotta (6)~~Nitin J. Mhatre (7)
10.2						~~Separation~~Berkshire Bank Supplemental Executive Retirement Agreement ~~between~~entered into with Nitin J. Mhatre (8)
10.3						Amended and Restated Three Year Change in Control Agreement by and among Berkshire Hills Bancorp, Inc., Berkshire Bank and ~~Richard M. Marotta (11)~~Sean A. Gray (9)
~~10.3~~10.4						Supplemental Executive Retirement Agreement between Berkshire Bank and Sean A. Gray ~~(6)~~(10)
~~10.4~~10.5						Three Year Executive Change in Control Agreement by and among Berkshire ~~Bank, Berkshire~~ Hills Bancorp, Inc., Berkshire Bank and George F. Bacigalupo ~~(7)~~
~~10.5~~						~~Three-Year Executive Change in Control Agreement by and among Berkshire Bank, Berkshire Hills Bancorp, Inc., and James M. Moses (8)~~(11)
10.6						~~Amended and Restated Three Year Change in Control Agreement by and among Berkshire Bank, Berkshire Hills Bancorp, Inc., and Sean A. Gray (9)~~
~~10.7~~						Berkshire Bank Enhanced Change in Control Severance Plan (Gregory D. Lindenmuth and ~~Tami Gunsch) (16)~~Brett Brbovic) (12)
~~10.8~~10.7						Form of Split Dollar Agreement entered into with Sean A. Gray ~~(10)~~(13)
~~10.9~~						~~Three Year Employment Agreement by and among Berkshire Bank, Berkshire Hills Bancorp, Inc. and Nitin Mhatre (12)~~
~~10.10~~10.8						Berkshire Bank Executive Long-Term Care Insurance Plan ~~(13)~~(14)
~~10.11~~10.9						Berkshire Hills Bancorp, Inc. 2018 Equity Incentive Plan ~~(14)~~(15)
10.10						Senior Executive Short Term Incentive Plan (16)
10.11						Berkshire Hills Bancorp, Inc. 2022 Equity Incentive Plan (17)
10.12						~~Senior Executive Short Term Incentive Plan (15)~~Transition Agreement and Release of Claims entered into with Subhadeep Basu (18)
10.13						Transition Agreement entered into with Deborah Stephenson (19)
21.0						Subsidiary Information
23.1						Consent of Crowe LLP
31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101						Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Statements of Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements tagged as blocks of text and in detail

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(1)						Incorporated herein by reference from the Exhibits to Form ~~S-1, Registration Statement and amendments thereto, initially~~10-Q as filed on ~~March 10, 2000, Registration No. 333-32146.~~August 9, 2018
(2)						Incorporated herein by reference from the Exhibits to the Form 8-K as filed on June 26, 2017.
(3)						Incorporated herein by reference from the Exhibits to ~~the~~ Form ~~10-Q as~~S-1, Registration Statement and amendments thereto, initially filed on ~~November 9, 2017.~~March 10, 2000, Registration No. 333-32146.
(4)						Incorporated herein by reference from the Exhibits to the Form 8-K as filed on October 16, 2017.
(5)						Incorporated herein by reference from the Exhibits to the Form 8-K as filed on September 26, 2012.
(6)						Incorporated herein by reference from ~~the Exhibits~~Exhibit 4.3 to the Form ~~8-K~~10-K as filed on February ~~22, 2019.~~28, 2020.
(7)						Incorporated herein by reference from the ~~Exhibits~~Exhibit to the Form ~~10-K~~8-K as filed on ~~March 17, 2014.~~January 26, 2021.
(8)						Incorporated herein by reference from the ~~Exhibits~~Exhibit to the Form 8-K as filed on ~~September 23, 2016.~~April 2, 2021.
(9)						Incorporated herein by reference from the Exhibits to the Form 10-K as filed on March 16, 2011.
(10)						Incorporated herein by reference from the ~~Exhibit~~Exhibits to the Form 8-K as filed on ~~January 19, 2011.~~February 22, 2019.
(11)						Incorporated herein by reference from the ~~Exhibit~~Exhibits to the Form ~~8-K~~10-K as filed on ~~August 13, 2020~~March 17, 2014.
(12)						Incorporated herein by reference from the Exhibits to the Form 10-K as filed on February 28, 2020.
(13)						Incorporated herein by reference from the Exhibit to the Form 8-K as filed on January ~~26, 2021.~~19, 2011.
~~(13)~~(14)						Incorporated herein by reference from the Exhibits to the Form 8-K as filed on January 23, 2015.
~~(14)~~(15)						Incorporated herein by reference from the Appendix to the Proxy Statement as filed on April 6, 2018.
~~(15)~~(16)						Incorporated herein by reference from the Exhibits to the Form 10-Q as filed on May 10, 2019.
~~(16)~~(17)						Incorporated herein by reference from the Appendix to the Proxy Statement as filed on April 8, 2022.
(18)						Incorporated herein by reference from the Exhibit to the Form ~~10-K~~8-K as filed on ~~February 28, 2020.~~October 13, 2022.
(19)						Incorporated herein by reference from the Exhibit to the Form 8-K as filed on September 12, 2022.

ITEM 16. FORM 10-K SUMMARY

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Berkshire Hills Bancorp, Inc.
Date: March 1, ~~2021~~2023	By:	/s/ Nitin J. Mhatre
		Nitin J. Mhatre
		President & Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Nitin J. Mhatre

Director, President, & Chief Executive Officer

March 1, ~~2021~~2023

Nitin J. Mhatre

(principal executive officer)

/s/ ~~James M. Moses~~R. David Rosato

Senior Executive Vice President, Chief Financial Officer

March 1, ~~2021~~2023

~~James M. Moses~~R. David Rosato

(principal financial ~~and accounting~~ officer)

/s/ ~~J. Williar Dunlaevy~~Brett Brbovic

Senior Managing Director, Chief Accounting Officer

March 1, 2023

Brett Brbovic

(principal accounting officer)

/s/ David M. Brunelle

~~Chairman~~Chairperson

March 1, ~~2021~~2023

~~J. Williar Dunlaevy~~David M. Brunelle

/s/ Baye Adofo-Wilson

Director

March 1, ~~2021~~2023

Baye Adofo-Wilson

/s/ ~~Rheo~~Nina A. ~~Brouillard~~Charnley

Director

March 1, ~~2021~~2023

~~Rheo~~Nina A. ~~Brouillard~~

~~/s/ David M. Brunelle~~

~~Director~~

~~March 1, 2021~~

~~David M. Brunelle~~

~~/s/ Robert M. Curley~~

~~Director~~

~~March 1, 2021~~

~~Robert M. Curley~~Charnley

/s/ John B. Davies

Director

March 1, ~~2021~~2023

John B. Davies

/s/ Mihir A. Desai

Director

March 1, 2023

Mihir A. Desai

/s/ William H. Hughes, III

Director

March 1, ~~2021~~2023

William H. Hughes, III

/s/ ~~Cornelius D. Mahoney~~Jeffrey W. Kip

Director

March 1, ~~2021~~2023

~~Cornelius D. Mahoney~~Jeffrey W. Kip

/s/ Sylvia Maxfield

Director

March 1, ~~2021~~2023

Sylvia Maxfield

/s/ Laurie Norton Moffatt

Director

March 1, ~~2021~~2023

Laurie Norton Moffatt

/s/ Karyn Polito

Director

March 1, 2023

Karyn Polito

/s/ Jonathan I. Shulman

Director

March 1, 2023

Jonathan I. Shulman

/s/ ~~Jonathan I. Shulman~~Michael A. Zaitzeff

Director

March 1, ~~2021~~2023

~~Jonathan I. Shulman~~Michael A. Zaitzeff

~~/s/ D. Jeffrey Templeton~~

~~Director~~

~~March 1, 2021~~

~~D. Jeffrey Templeton~~

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ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s Consolidated Financial Statements for external reporting purposes in accordance with generally accepted accounting principles.

As of December 31, ~~2020,~~2022, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control—Integrated Framework issued in 2013, by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, ~~2020~~2022 was effective.

The Company’s internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

The effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2020~~2022 has been audited by Crowe LLP, an independent registered public accounting firm, as stated in their report, which follows. This report expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2020.~~2022.


/s/ Nitin J. Mhatre						/s/ ~~James M. Moses~~R. David Rosato
Nitin J. Mhatre						~~James M. Moses~~R. David Rosato
President & Chief Executive Officer						Senior Executive Vice President & Chief Financial Officer
March 1, ~~2021~~2023						March 1, ~~2021~~2023

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and the Board of Directors

of Berkshire Hills Bancorp, Inc.

Boston, Massachusetts

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Berkshire Hills Bancorp, Inc. (the "Company") as of December 31, ~~2020~~2022 and ~~2019,~~2021, the related consolidated statements of operations, comprehensive (loss)/income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, ~~2020,~~2022, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, ~~2020,~~2022, based on criteria established in Internal Control – Integrated ~~Framework~~Framework: (2013) issued ~~in 2013~~ by the Committee of Sponsoring Organizations of the Treadway Commission ~~(“COSO”)~~(COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, ~~2020~~2022 and ~~2019,~~2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, ~~2020~~2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2020,~~2022, based on criteria established in Internal Control – Integrated ~~Framework~~Framework: (2013) issued ~~in 2013~~ by COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for credit losses effective January 1, 2020 due to the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification No. 326, Financial Instruments – Credit Losses (“ASC 326”). The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles. ~~The adoption of the new credit loss standard and its subsequent application is also communicated as a critical audit matter below.~~

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material

~~F-1~~

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misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and ~~the~~ significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control ~~over~~Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Credit Losses ~~– Reasonable and Supportable Forecast~~for loans

The ~~Company adopted ASC 326 (“CECL”) on January 1, 2020 as described in Note 1 and referred to in the change in accounting principle explanatory paragraph above. The estimates~~estimate of expected credit losses ~~under the CECL methodology required under ASC 326 are~~is based on relevant information about current conditions, past events, and reasonable and supportable forward-looking forecasts regarding collectability of the reported amounts. In order to estimate the expected credit losses for loans evaluated on a pooled basis, the Company ~~utilized~~utilizes a static ~~loss closed~~ pool ~~model~~migration methodology which ~~calculated~~calculates a historical loss rate for each of the identified loan segments. The historical loss rates ~~were~~are then adjusted ~~as necessary,~~ for current and asset specific characteristics (also referred to as ~~“qualitative adjustments”)~~qualitative adjustments) and for expected changes to current conditions over the reasonable and supportable forecast period (also referred to as ~~“forecast”)~~forecast). Each of these key components of the allowance for credit loss calculation is complex and requires a high volume of data input.

~~The forecast methodology employed by the Company is complex and involves significant management judgement along with a high degree of data input and manual intervention.~~

~~F-2~~F-3

Table of Contents

~~Given that~~Auditing the ~~estimation of~~allowance for credit losses ~~significantly changes under~~was especially challenging and identified by us as a critical audit matter given the ~~CECL methodology, including~~high volume of data inputs and judgements made by management.Auditing the ~~application of new accounting policies, the use of new subjective judgments, and changes made to the~~allowance for credit loss ~~estimation models, performing audit procedures to evaluate the implementation and subsequent application of ASC 326, in particular relating to reasonable and supportable forecast, for loans~~calculation involved ~~a high degree of auditor judgment and required~~ significant audit effort, including the ~~need to involve more~~involvement of experienced audit ~~personnel and firm valuation specialists.~~personnel.

The primary procedures we performed to address this critical audit matter included:

Testing the effectiveness of internal controls over management’s allowance for credit loss ~~forecast~~calculation including ~~controls addressing:~~the design and operating effectiveness to address:

•~~Testing the design and operating effectiveness of controls pertaining to the development of the reasonable and supportable forecast.~~

•~~Testing the design and operating effectiveness of controls pertaining to the completeness~~Completeness and accuracy of the ~~data~~reports utilized ~~in developing~~within the ~~reasonable and supportable forecast.~~allowance for credit loss calculation.

•~~Testing the design and operating effectiveness of controls pertaining to the key assumptions and expert judgments applied in the development of the reasonable and supportable forecast.~~

•~~Testing the design and operating effectiveness of the controls around the~~The mathematical accuracy of the ~~forecast~~allowance for credit loss calculation.

•The accuracy of application of information within the allowance for credit loss calculation.

•Significant assumptions and judgements applied within the allowance for credit loss calculation.

Substantively testing management’s ~~estimate, including evaluating their judgements and assumptions, for estimating~~process to estimate the ~~allowance for~~allowance for credit loss ~~forecast:~~calculation included:

•~~We tested the reasonable and supportable forecast for compliance with ASC 326, which included the use of firm valuation specialist.~~

•~~We tested~~Testing the completeness and accuracy of the underlying internal data utilized ~~in developing~~to prepare the ~~reasonable and supportable forecast.~~calculation.

•~~We tested~~Evaluating the ~~reasonableness of key assumptions~~relevance and ~~expert judgements applied in the development~~reliability of the ~~reasonable and supportable forecast, which included~~underlying external data utilized to prepare the ~~use of firm valuation specialist.~~calculation.

•~~We tested~~Testing the mathematical accuracy, including the application of data and assumptions, of the ~~forecast~~allowance for credit loss calculation.

•The reasonableness of the significant judgements and assumptions utilized within the allowance for credit loss calculation.

~~/s/~~ /s/Crowe LLP

We have served as the Company's auditor since 2017.

New York, New York

March 1, ~~2021~~2023

~~F-3~~F-4

Table of Contents

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS


		December 31,					December 31,
(In thousands, except share data)	(In thousands, except share data)	2020		2019		(In thousands, except share data)	2022		2021
Assets	Assets					Assets
Cash and due from banks	Cash and due from banks	$	91,219	$	105,447	Cash and due from banks	$	145,342	$	109,350
Short-term investments	Short-term investments	1,466,656		474,382		Short-term investments	540,013		1,518,457
Total cash and cash equivalents	Total cash and cash equivalents	1,557,875		579,829		Total cash and cash equivalents	685,355		1,627,807

Trading security	Trading security	9,708		10,769		Trading security	6,708		8,354
Marketable equity securities, at fair value	Marketable equity securities, at fair value	18,513		41,556		Marketable equity securities, at fair value	12,856		15,453
Securities available for sale, at fair value	Securities available for sale, at fair value	1,695,232		1,311,555		Securities available for sale, at fair value	1,423,200		1,877,585
Securities held to maturity (fair values of $491,855 in 2020 and $373,277 in 2019)		465,091		357,979
Securities held to maturity (fair values of $507,464 in 2022 and $647,236 in 2021)						Securities held to maturity (fair values of $507,464 in 2022 and $647,236 in 2021)	583,453		636,503
Federal Home Loan Bank stock and other restricted securities	Federal Home Loan Bank stock and other restricted securities	34,873		48,019		Federal Home Loan Bank stock and other restricted securities	7,219		10,800
Total securities	Total securities	2,223,417		1,769,878		Total securities	2,033,436		2,548,695
Less: Allowance for credit losses on investment	Less: Allowance for credit losses on investment	(104)		0		Less: Allowance for credit losses on investment	(91)		(105)
Net Securities	Net Securities	2,223,313		1,769,878		Net Securities	2,033,345		2,548,590

Loans held for sale	Loans held for sale	17,748		36,664		Loans held for sale	4,311		6,110

Total loans	Total loans	8,081,519		9,502,428		Total loans	8,335,309		6,825,847
Less: Allowance for credit losses on loans	Less: Allowance for credit losses on loans	(127,302)		(63,575)		Less: Allowance for credit losses on loans	(96,270)		(106,094)
Net loans	Net loans	7,954,217		9,438,853		Net loans	8,239,039		6,719,753

Premises and equipment, net	Premises and equipment, net	112,663		120,398		Premises and equipment, net	85,217		94,383
Other real estate owned		149		0
Goodwill		0		553,762

Other intangible assets	Other intangible assets	34,819		45,615		Other intangible assets	24,483		29,619
Cash surrender value of bank-owned life insurance	Cash surrender value of bank-owned life insurance	232,695		227,894		Cash surrender value of bank-owned life insurance	238,919		235,690

Other assets	Other assets	387,230		288,945		Other assets	348,935		288,384
Assets held for sale	Assets held for sale	317,304		0		Assets held for sale	3,260		4,577
Assets from discontinued operations		0		154,132

Total assets	Total assets	$	12,838,013	$	13,215,970	Total assets	$	11,662,864	$	11,554,913

Liabilities	Liabilities					Liabilities
Demand deposits	Demand deposits	$	2,484,249	$	1,884,100	Demand deposits	$	2,852,127	$	3,008,461
NOW and other deposits	NOW and other deposits	1,003,005		1,492,569		NOW and other deposits	1,054,596		976,401
Money market deposits	Money market deposits	3,371,353		2,528,656		Money market deposits	3,723,570		3,293,526
Savings deposits	Savings deposits	972,116		841,283		Savings deposits	1,063,269		1,111,625
Time deposits	Time deposits	2,385,085		3,589,369		Time deposits	1,633,707		1,678,940
Total deposits	Total deposits	10,215,808		10,335,977		Total deposits	10,327,269		10,068,953
Short-term debt		40,000		125,000

Long-term Federal Home Loan Bank advances	Long-term Federal Home Loan Bank advances	434,357		605,501		Long-term Federal Home Loan Bank advances	4,445		13,331
Subordinated notes	Subordinated notes	97,280		97,049		Subordinated notes	121,064		97,513
Total borrowings	Total borrowings	571,637		827,550		Total borrowings	125,509		110,844
Other liabilities	Other liabilities	232,730		267,398		Other liabilities	256,024		192,681
Liabilities held for sale		630,065		0
Liabilities from discontinued operations		0		26,481

Total liabilities	Total liabilities	11,650,240		11,457,406		Total liabilities	10,708,802		10,372,478

(continued)

December 31,
(In thousands, except share data) 2020 2019
Shareholders’ equity
Preferred Stock (Series B non-voting convertible preferred stock - $0.01 par value; 2,000,000 shares authorized, 0 shares issued and outstanding in 2020; 2,000,000 shares authorized, 521,607 shares issued and outstanding in 2019) 0 40,633
Common stock ($0.01 par value; 100,000,000 shares authorized and 51,903,190 shares issued and 50,833,087 shares outstanding in 2020; 100,000,000 shares authorized; 51,903,190 shares issued, and 49,585,143 shares outstanding in 2019) 528 517
Additional paid-in capital - common stock 1,427,239 1,422,441
Unearned compensation (6,245) (8,465)
Retained (deficit) earnings (233,344) 361,082
Accumulated other comprehensive income/(loss) 30,871 11,993
Treasury stock, at cost (1,070,103 shares in 2020 and 2,318,047 shares in 2019) (31,276) (69,637)
Total shareholders’ equity 1,187,773 1,758,564
Total liabilities and shareholders’ equity $ 12,838,013 $ 13,215,970

~~The accompanying notes are an integral part of these consolidated financial statements.~~

~~F-4~~

~~Table of Contents~~

~~BERKSHIRE HILLS BANCORP, INC.~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~

Years Ended December 31,
(In thousands) 2020 2019 2018
Interest and dividend income
Loans $ 358,015 $ 448,927 $ 406,222
Securities and other 51,767 60,586 59,672
Total interest and dividend income 409,782 509,513 465,894
Interest expense
Deposits 72,715 115,193 78,364
Borrowings and subordinated notes 20,285 29,062 31,330
Total interest expense 93,000 144,255 109,694
Net interest income 316,782 365,258 356,200
Non-interest income
Mortgage banking income 5,190 788 635
Loan related income 16,840 24,374 23,155
Deposit related fees 27,905 31,352 29,806
Insurance commissions and fees 10,770 10,957 10,983
Wealth management fees 9,285 9,353 9,447
Total fee income 69,990 76,824 74,026
Other 2,597 1,438 3,557
(Loss)/gain on securities, net (7,520) 4,389 (3,719)
Gain on sale of business operations and assets, net 1,240 1,351 460
Total non-interest income 66,307 84,002 74,324
Total net revenue 383,089 449,260 430,524
Provision for credit losses 75,878 35,419 25,451
Non-interest expense
Compensation and benefits 147,840 140,906 134,019
Occupancy and equipment 43,359 39,586 36,927
Technology and communications 32,364 26,523 27,147
Marketing and promotion 3,703 4,474 4,697
Professional services 11,907 10,798 7,343
FDIC premiums and assessments 5,876 3,861 5,734
Other real estate owned and foreclosures 125 154 68
Amortization of intangible assets 6,181 5,783 4,934
Goodwill impairment 553,762 0 0
Merger, restructuring and conversion related expenses 5,839 28,046 22,144
Other 29,283 29,726 23,880
Total non-interest expense 840,239 289,857 266,893
(Loss)/income from continuing operations before income taxes (533,028) 123,984 138,180
Income tax (benefit)/expense from continuing operations (19,853) 22,463 28,961
Net (loss)/income from continuing operations (513,175) 101,521 109,219
(Loss) from discontinued operations before income taxes (26,855) (5,539) (4,767)
Income tax (benefit) from discontinued operations (7,013) (1,468) (1,313)
Net (loss) from discontinued operations (19,842) (4,071) (3,454)
Net (loss)/income $ (533,017) $ 97,450 $ 105,765
Preferred stock dividend 313 960 918
(Loss)/income available to common shareholders $ (533,330) $ 96,490 $ 104,847
Years Ended December 31,
(in thousands, except per share data) 2020 2019 2018
Basic (loss)/earnings per share:
Continuing Operations $ (10.21) $ 2.06 $ 2.38
Discontinued operations (0.39) (0.08) (0.08)
Total basic (loss)/earnings per share $ (10.60) $ 1.98 $ 2.30
Diluted (loss)/earnings per share:
Continuing Operations $ (10.21) $ 2.05 $ 2.36
Discontinued operations (0.39) (0.08) (0.07)
Total diluted (loss)/earnings per share $ (10.60) $ 1.97 $ 2.29
Weighted average common shares outstanding:
Basic 50,270 49,263 46,024
Diluted 50,270 49,421 46,231


	December 31,
(In thousands, except share data)	2022		2021
Shareholders’ equity

Common stock ($0.01 par value; 100,000,000 shares authorized and 51,903,190 shares issued and 44,361,222 shares outstanding in 2022; 100,000,000 shares authorized; 51,903,190 shares issued, and 48,667,110 shares outstanding in 2021)	$	528	$	528
Additional paid-in capital - common stock	1,424,183		1,423,445
Unearned compensation	(8,598)		(9,056)
Retained (deficit)	(71,428)		(139,383)
Accumulated other comprehensive (loss)	(181,052)		(3,243)
Treasury stock, at cost (7,541,968 shares in 2022 and 3,236,080 shares in 2021)	(209,571)		(89,856)
Total shareholders’ equity	954,062		1,182,435
Total liabilities and shareholders’ equity	$	11,662,864	$	11,554,913

The accompanying notes are an integral part of these consolidated financial statements.

F-5

Table of Contents

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS


	Years Ended December 31,
(In thousands)	2022		2021		2020
Interest and dividend income
Loans	$	335,312	$	282,164	$	358,015
Securities and other	51,945		46,901		51,767
Total interest and dividend income	387,257		329,065		409,782
Interest expense
Deposits	33,437		27,236		72,715
Borrowings and subordinated notes	9,223		10,663		20,285
Total interest expense	42,660		37,899		93,000
Net interest income	344,597		291,166		316,782
Non-interest income
Deposit related fees	32,026		29,813		27,905
Loan fees and revenue	21,731		35,060		16,840
Insurance commissions and fees	—		7,003		10,770
Wealth management fees	10,008		10,530		9,285
Mortgage banking income	230		2,056		5,190
Total fee income	63,995		84,462		69,990
Other	6,973		6,631		2,597
(Loss) on securities, net	(2,031)		(787)		(7,520)
Gain on sale of business operations and assets, net	—		52,942		1,240

Total non-interest income	68,937		143,248		66,307
Total net revenue	413,534		434,414		383,089
Provision expense/(benefit) for credit losses	11,000		(500)		75,878
Non-interest expense
Compensation and benefits	152,741		150,589		147,840
Occupancy and equipment	37,638		41,782		43,359
Technology and communications	35,586		33,803		32,364
Marketing and promotion	5,103		2,749		3,703
Professional services	12,043		15,860		11,907
FDIC premiums and assessments	3,105		3,759		5,876
Other real estate owned and foreclosures	36		17		125
Amortization of intangible assets	5,134		5,200		6,181
Goodwill impairment	—		—		553,762
Merger, restructuring and conversion related expenses	8,909		5,781		5,839
Other	28,421		26,353		29,283
Total non-interest expense	288,716		285,893		840,239
Income/(loss) from continuing operations before income taxes	113,818		149,021		(533,028)
Income tax expense/(benefit) from continuing operations	21,285		30,357		(19,853)
Net income/(loss) from continuing operations	92,533		118,664		(513,175)

(Loss) from discontinued operations before income taxes	—		—		(26,855)
Income tax (benefit) from discontinued operations	—		—		(7,013)
Net (loss) from discontinued operations	—		—		(19,842)

Net income/(loss)	$	92,533	$	118,664	$	(533,017)
Preferred stock dividend	—		—		313
Income/(loss) available to common shareholders	$	92,533	$	118,664	$	(533,330)

	Years Ended December 31,
(in thousands, except per share data)	2022		2021		2020
Basic earnings/(loss) per share:
Continuing Operations	$	2.03	$	2.41	$	(10.21)
Discontinued operations	—		—		(0.39)
Total basic earnings/(loss) per share	$	2.03	$	2.41	$	(10.60)

Diluted earnings/(loss) per share:
Continuing Operations	$	2.02	$	2.39	$	(10.21)
Discontinued operations	—		—		(0.39)
Total diluted earnings/(loss) per share	$	2.02	$	2.39	$	(10.60)

Weighted average common shares outstanding:
Basic	45,564		49,240		50,270
Diluted	45,914		49,554		50,270

The accompanying notes are an integral part of these consolidated financial statements.

F-6

Table of Contenets

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME


		Years Ended December 31,							Years Ended December 31,
(In thousands)	(In thousands)	2020		2019		2018		(In thousands)	2022		2021		2020
Net (loss)/income		$	(533,017)	$	97,450	$	105,765
Other comprehensive income (loss), before tax:
Net income/(loss)								Net income/(loss)	$	92,533	$	118,664	$	(533,017)
Other comprehensive (loss)/income, before tax:								Other comprehensive (loss)/income, before tax:
Changes in unrealized gains and losses on securities available-for-sale	Changes in unrealized gains and losses on securities available-for-sale	25,726		34,530		(16,923)		Changes in unrealized gains and losses on securities available-for-sale	(235,081)		(46,794)		25,726

Changes in unrealized gains and losses on cash flow hedges								Changes in unrealized gains and losses on cash flow hedges	(6,667)		—		—

Changes in unrealized gains and losses on pension	Changes in unrealized gains and losses on pension	(489)		(270)		336		Changes in unrealized gains and losses on pension	1,674		993		(489)
Total other comprehensive income/(loss), before tax		25,237		34,260		(16,587)
Income taxes related to other comprehensive income (loss):
Total other comprehensive (loss)/income, before tax								Total other comprehensive (loss)/income, before tax	(240,074)		(45,801)		25,237
Income taxes related to other comprehensive (loss)/income:								Income taxes related to other comprehensive (loss)/income:
Changes in unrealized gains and losses on securities available-for-sale	Changes in unrealized gains and losses on securities available-for-sale	(6,471)		(8,873)		4,421		Changes in unrealized gains and losses on securities available-for-sale	60,922		11,937		(6,471)

Changes in unrealized gains and losses on cash flow hedges								Changes in unrealized gains and losses on cash flow hedges	1,789		—		—

Changes in unrealized gains and losses on pension	Changes in unrealized gains and losses on pension	112		76		(108)		Changes in unrealized gains and losses on pension	(446)		(250)		112
Total income tax (expense) benefit related to other comprehensive income (loss)		(6,359)		(8,797)		4,313
Total other comprehensive income/(loss)		18,878		25,463		(12,274)
Total income tax benefit/(expense) related to other comprehensive income (loss)								Total income tax benefit/(expense) related to other comprehensive income (loss)	62,265		11,687		(6,359)
Total other comprehensive (loss)/income								Total other comprehensive (loss)/income	(177,809)		(34,114)		18,878
Total comprehensive (loss)/income	Total comprehensive (loss)/income	$	(514,139)	$	122,913	$	93,491	Total comprehensive (loss)/income	$	(85,276)	$	84,550	$	(514,139)

The accompanying notes are an integral part of these consolidated financial statements.

~~F-6~~F-7

Table of Contents

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY


		Preferred Stock			Common Stock			Additional paid-in		Unearned		Retained (deficit)		Accumulated other comprehensive		Treasury					Preferred Stock			Common Stock			Additional paid-in		Unearned		Retained (deficit)		Accumulated other comprehensive		Treasury
(In thousands, except per share data)	(In thousands, except per share data)	Shares	Amount		Shares	Amount		capital		compensation		earnings		(loss) income		stock		Total		(In thousands, except per share data)	Shares	Amount		Shares	Amount		capital		compensation		earnings		(loss) income		stock		Total
Balance at January 1, 2018		522	$	40,633	45,290	$	460	$	1,242,487	$	(6,531)	$	239,179	$	4,161	$	(24,125)	$	1,496,264
Balance at January 1, 2020																				Balance at January 1, 2020	522	$	40,633	49,585	$	517	$	1,422,441	$	(8,465)	$	361,082	$	11,993	$	(69,637)	$	1,758,564

Comprehensive income:
Net income		—	—		—	—		—		—		105,765		—		—		105,765
Other net comprehensive (loss)		—	—		—	—		—		—		—		(12,274)		—		(12,274)
Total comprehensive income		—	—		—	—		—		—		105,765		(12,274)		—		93,491
Adoption of ASU No 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Liabilities		—	—		—	—		—		—		6,253		(6,253)		—		0
Adoption of ASU No 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income		—	—		—	—		—		—		(896)		896		—		0
Cash dividends declared on common shares ($0.88 per share)		—	—		—	—		—		—		(39,966)		—		—		(39,966)
Cash dividends declared on preferred shares ($1.76 per share)		—	—		—	—		—		—		(918)		—		—		(918)
Forfeited shares		—	—		(65)	—		90		2,189		—		—		(2,279)		0
Exercise of stock options		—	—		33	—		—		—		(578)		—		904		326
Restricted stock grants		—	—		185	—		2,157		(7,011)		—		—		4,854		0
Stock-based compensation		—	—		—	—		—		4,759		—		—		—		4,759

Other, net		—	—		(26)	—		279		—		0		—		(1,317)		(1,038)
Balance at December 31, 2018		522	$	40,633	45,417	$	460	$	1,245,013	$	(6,594)	$	308,839	$	(13,470)	$	(21,963)	$	1,552,918

Comprehensive income:			0
Net income		—	—		—	—		—		—		97,450		—		—		97,450
Comprehensive (loss):																				Comprehensive (loss):
Net (loss)																				Net (loss)	—	—		—	—		—		—		(533,017)		—		—		(533,017)
Other net comprehensive income	Other net comprehensive income	—	—		—	—		—		—		—		25,463		—		25,463		Other net comprehensive income	—	—		—	—		—		—		—		18,878		—		18,878
Total comprehensive income	Total comprehensive income	—	—		—	—		—		—		97,450		25,463		—		122,913		Total comprehensive income	—	—		—	—		—		—		(533,017)		18,878		—		(514,139)
Acquisition of SI Financial Group, Inc.		—	—		5,691	57		176,655		—		—		—		—		176,712
Cash dividends declared on common shares ($0.92 per share)		—	—		—	—		—		—		(44,147)		—		—		(44,147)
Cash dividends declared on preferred shares ($1.84 per share)		—	—		—	—		—		—		(960)		—		—		(960)
Impact of ASC 326 Adoption																				Impact of ASC 326 Adoption	—	—		—	—		—		—		(24,380)		—		—		(24,380)
Conversion of preferred stock to common stock																				Conversion of preferred stock to common stock	(522)	(40,633)		1,043	11		10,395		—		—		—		30,227		—
Cash dividends declared on common shares ($0.72 per share)																				Cash dividends declared on common shares ($0.72 per share)	—	—		—	—		—		—		(36,251)		—		—		(36,251)
Cash dividends declared on preferred shares ($1.20 per share)																				Cash dividends declared on preferred shares ($1.20 per share)	—	—		—	—		—		—		(313)		—		—		(313)
Treasury stock purchased	Treasury stock purchased	—	—		(1,726)	—		—		—		—		—		(52,746)		(52,746)		Treasury stock purchased	—	—		(14)	—		—		—		—		—		(473)		(473)
Forfeited shares	Forfeited shares	—	—		(65)	—		(251)		2,160		—		—		(1,909)		0		Forfeited shares	—	—		(91)	—		(1,570)		2,727		—		—		(1,157)		—
Exercise of stock options	Exercise of stock options	—	—		11	—		—		—		(100)		—		288		188		Exercise of stock options	—	—		37	—		—		—		(465)		—		1,129		664
Restricted stock grants	Restricted stock grants	—	—		299	—		932		(8,843)		—		—		7,911		0		Restricted stock grants	—	—		314	—		(4,121)		(5,234)		—		—		9,355		—
Stock-based compensation	Stock-based compensation	—	—		—	—		—		4,812		—		—		—		4,812		Stock-based compensation	—	—		—	—		—		4,727		—		—		—		4,727

Other, net	Other, net	—	—		(42)	—		92		—		—		—		(1,218)		(1,126)		Other, net	—	—		(41)	—		94		—		—		—		(720)		(626)
Balance at December 31, 2019		522	$	40,633	49,585	$	517	$	1,422,441	$	(8,465)	$	361,082	$	11,993	$	(69,637)	$	1,758,564
Balance at December 31, 2020																				Balance at December 31, 2020	—	$	—	50,833	$	528	$	1,427,239	$	(6,245)	$	(233,344)	$	30,871	$	(31,276)	$	1,187,773

Comprehensive income:	Comprehensive income:																			Comprehensive income:		0
Net loss		—	—		—	—		—		—		(533,017)		—		—		(533,017)
Other net comprehensive income		—	—		—	—		—		—		—		18,878		—		18,878
Net income																				Net income	—	—		—	—		—		—		118,664		—		—		118,664
Other net comprehensive (loss)																				Other net comprehensive (loss)	—	—		—	—		—		—		—		(34,114)		—		(34,114)
Total comprehensive income	Total comprehensive income	—	—		—	—		—		—		(533,017)		18,878		—		(514,139)		Total comprehensive income	—	—		—	—		—		—		118,664		(34,114)		—		84,550
Impact of ASC 326 Adoption		—	—		—	—		—		—		(24,380)		—		—		(24,380)
Conversion of preferred stock to common stock		(522)	(40,633)		1,043	11		10,395		—		—		—		30,227		0
Cash dividends declared common shares ($0.72 per share)		—	—		—	—		—		—		(36,251)		—		—		(36,251)
Cash dividends declared ($1.20 per share)		—	—		—	—		—		—		(313)		—		—		(313)
Cash dividends declared on common shares ($0.48 per share)																				Cash dividends declared on common shares ($0.48 per share)	—	—		—	—		—		—		(24,553)		—		—		(24,553)

Treasury stock purchased	Treasury stock purchased	—	—		(14)	—		—		—		—		—		(473)		(473)		Treasury stock purchased	—	—		(2,500)	—		—		—		—		—		(68,712)		(68,712)
Forfeited shares	Forfeited shares	—	—		(91)	—		(1,570)		2,727		—		—		(1,157)		0		Forfeited shares	—	—		(113)	—		90		2,644		—		—		(2,734)		—
Exercise of stock options	Exercise of stock options	—	—		37	—		—		—		(465)		—		1,129		664		Exercise of stock options	—	—		20	—		—		—		(150)		—		567		417
Restricted stock grants	Restricted stock grants	—	—		314	—		(4,121)		(5,234)		—		—		9,355		0		Restricted stock grants	—	—		476	—		(3,898)		(9,625)		—		—		13,523		—
Stock-based compensation	Stock-based compensation	—	—		0	—		—		4,727		—		—		—		4,727		Stock-based compensation	—	—		—	—		—		4,170		—		—		—		4,170
Other, net	Other, net	—	—		(41)	—		94		—		—		—		(720)		(626)		Other, net	—	—		(49)	—		14		—		—		—		(1,224)		(1,210)
Balance at December 31, 2020		0	$	0	50,833	$	528	$	1,427,239	$	(6,245)	$	(233,344)	$	30,871	$	(31,276)	$	1,187,773
Balance at December 31, 2021																				Balance at December 31, 2021	—	$	—	48,667	$	528	$	1,423,445	$	(9,056)	$	(139,383)	$	(3,243)	$	(89,856)	$	1,182,435

Comprehensive income:																				Comprehensive income:
Net income																				Net income	—	—		—	—		—		—		92,533		—		—		92,533
Other net comprehensive (loss)																				Other net comprehensive (loss)	—	—		—	—		—		—		—		(177,809)		—		(177,809)
Total comprehensive income																				Total comprehensive income	—	—		—	—		—		—		92,533		(177,809)		—		(85,276)

Cash dividends declared common shares ($0.54 per share)																				Cash dividends declared common shares ($0.54 per share)	—	—		—	—		—		—		(24,527)		—		—		(24,527)

Treasury stock purchased																				Treasury stock purchased	—	—		(4,485)	—		—		—		—		—		(124,519)		(124,519)
Forfeited shares																				Forfeited shares	—	—		(98)	—		189		2,560		—		—		(2,749)		—
Exercise of stock options																				Exercise of stock options	—	—		12	—		—		—		(51)		—		321		270
Restricted stock grants																				Restricted stock grants	—	—		328	—		537		(9,440)		—		—		8,903		—
Stock-based compensation																				Stock-based compensation	—	—		—	—		—		7,338		—		—		—		7,338
Other, net																				Other, net	—	—		(63)	—		12		—		—		—		(1,671)		(1,659)
Balance at December 31, 2022																				Balance at December 31, 2022	—	$	—	44,361	$	528	$	1,424,183	$	(8,598)	$	(71,428)	$	(181,052)	$	(209,571)	$	954,062

The accompanying notes are an integral part of these consolidated financial statements.

~~F-7~~F-8

Table of Contents

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


		Years Ended December 31,							Years Ended December 31,
(In thousands)	(In thousands)	2020		2019		2018		(In thousands)	2022		2021		2020
Cash flows from operating activities:	Cash flows from operating activities:							Cash flows from operating activities:
Net (loss)/income from continuing operations		(513,175)		101,521		109,219
Net income/(loss) from continuing operations								Net income/(loss) from continuing operations	$	92,533	$	118,664	$	(513,175)
Net (loss) from discontinued operations	Net (loss) from discontinued operations	(19,842)		(4,071)		(3,454)		Net (loss) from discontinued operations	—		—		(19,842)
Net (loss)/income		$	(533,017)	$	97,450	$	105,765
Net income/(loss)								Net income/(loss)	$	92,533	$	118,664	$	(533,017)
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		75,878		35,419		25,451
Provision expense/(benefit) for credit losses								Provision expense/(benefit) for credit losses	11,000		(500)		75,878
Net amortization of securities	Net amortization of securities	2,513		2,407		2,837		Net amortization of securities	2,886		1,939		2,513
Change in unamortized net loan origination costs and premiums	Change in unamortized net loan origination costs and premiums	21,856		12,759		(1,004)		Change in unamortized net loan origination costs and premiums	3,312		(1,918)		21,856
Premises and equipment depreciation and amortization expense	Premises and equipment depreciation and amortization expense	11,919		10,921		10,442		Premises and equipment depreciation and amortization expense	9,576		11,035		11,919
Stock-based compensation expense	Stock-based compensation expense	4,727		4,812		4,759		Stock-based compensation expense	7,338		4,170		4,727
Accretion of purchase accounting entries, net	Accretion of purchase accounting entries, net	(10,377)		(14,813)		(24,000)		Accretion of purchase accounting entries, net	(1,637)		(6,577)		(10,377)
Amortization of other intangibles	Amortization of other intangibles	6,181		5,783		4,934		Amortization of other intangibles	5,134		5,200		6,181

Income from cash surrender value of bank-owned life insurance policies	Income from cash surrender value of bank-owned life insurance policies	(5,354)		(5,349)		(6,232)		Income from cash surrender value of bank-owned life insurance policies	(5,540)		(5,561)		(5,354)
Securities losses/(gains), net	Securities losses/(gains), net	7,576		(4,389)		3,719		Securities losses/(gains), net	2,031		787		7,576
Net change in loans held-for-sale	Net change in loans held-for-sale	(4,267)		(5,137)		1,460		Net change in loans held-for-sale	5,168		5,775		(4,267)

Loss on disposition of assets	Loss on disposition of assets	327		3,443		152		Loss on disposition of assets	—		2,811		327
Loss on sale of real estate	Loss on sale of real estate	13		5		0		Loss on sale of real estate	—		6		13
Amortization of interest in tax-advantaged projects	Amortization of interest in tax-advantaged projects	3,645		6,455		4,618		Amortization of interest in tax-advantaged projects	3,508		3,444		3,645

Goodwill impairment	Goodwill impairment	553,762		0		0		Goodwill impairment	—		—		553,762
Gain on sale of business operations and other assets								Gain on sale of business operations and other assets	—		(52,942)		—
Prepayment penalties on repayment of Federal Home Loan Bank advances								Prepayment penalties on repayment of Federal Home Loan Bank advances	—		862		—
Net change in other	Net change in other	(31,247)		(23,418)		30,601		Net change in other	(12,076)		18,282		(31,247)
Net cash provided by operating activities of continuing operations	Net cash provided by operating activities of continuing operations	123,977		130,419		166,956		Net cash provided by operating activities of continuing operations	123,233		105,477		123,977
Net cash provided/(used) by operating activities of discontinued operations	Net cash provided/(used) by operating activities of discontinued operations	103,664		(18,894)		55,298		Net cash provided/(used) by operating activities of discontinued operations	—		—		103,664
Net cash provided by operating activities	Net cash provided by operating activities	227,641		111,525		222,254		Net cash provided by operating activities	$	123,233	$	105,477	$	227,641

Cash flows from investing activities:	Cash flows from investing activities:							Cash flows from investing activities:
Net decrease in trading security	Net decrease in trading security	734		701		665		Net decrease in trading security	818		776		734
Purchases of marketable equity securities	Purchases of marketable equity securities	(17,631)		(23,841)		(24,538)		Purchases of marketable equity securities	—		—		(17,631)
Proceeds from sales of marketable equity securities	Proceeds from sales of marketable equity securities	33,928		43,075		38,104		Proceeds from sales of marketable equity securities	—		2,880		33,928
Purchases of securities available for sale	Purchases of securities available for sale	(885,182)		(119,671)		(257,547)		Purchases of securities available for sale	(478,940)		(804,616)		(885,182)
Proceeds from sales of securities available for sale	Proceeds from sales of securities available for sale	69,337		136,229		499		Proceeds from sales of securities available for sale	149,994		—		69,337
Proceeds from maturities, calls, and prepayments of securities available for sale	Proceeds from maturities, calls, and prepayments of securities available for sale	457,586		240,586		188,076		Proceeds from maturities, calls, and prepayments of securities available for sale	548,423		575,538		457,586
Purchases of securities held to maturity	Purchases of securities held to maturity	(144,651)		(7,260)		(15,391)		Purchases of securities held to maturity	(807)		(219,470)		(144,651)
Proceeds from maturities, calls, and prepayments of securities held to maturity	Proceeds from maturities, calls, and prepayments of securities held to maturity	35,331		21,602		36,746		Proceeds from maturities, calls, and prepayments of securities held to maturity	51,961		46,061		35,331
Net change in loans	Net change in loans	1,054,029		694,657		(801,876)		Net change in loans	(1,559,012)		1,262,521		1,054,029
Acquisitions, net of cash paid		0		110,774		0
Net change in Mid-Atlantic region loans held for sale								Net change in Mid-Atlantic region loans held for sale	—		50,914		—

Proceeds from surrender of bank-owned life insurance	Proceeds from surrender of bank-owned life insurance	553		2,451		854		Proceeds from surrender of bank-owned life insurance	2,311		2,566		553

Purchase of Federal Home Loan Bank stock	Purchase of Federal Home Loan Bank stock	(6,741)		(112,208)		(76,090)		Purchase of Federal Home Loan Bank stock	(124,331)		—		(6,741)
Proceeds from sales of Federal Home Loan Bank stock	Proceeds from sales of Federal Home Loan Bank stock	19,887		149,455		61,831		Proceeds from sales of Federal Home Loan Bank stock	127,912		24,078		19,887
Net investment in limited partnership tax credits	Net investment in limited partnership tax credits	(7,280)		(4,387)		(4,724)		Net investment in limited partnership tax credits	(14,537)		(2,878)		(7,280)
Purchase of premises and equipment, net	Purchase of premises and equipment, net	(7,208)		(10,565)		(9,349)		Purchase of premises and equipment, net	(1,495)		(1,606)		(7,208)
(Continued)	(Continued)							(Continued)

~~F-8~~F-9

Table of Contents

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONCLUDED)


		Years ended December 31,							Years ended��December 31,
(In thousands)	(In thousands)	2020		2019		2018		(In thousands)	2022		2021		2020
Proceeds from sales of seasoned commercial loan portfolios	Proceeds from sales of seasoned commercial loan portfolios	37,988		81,147		0		Proceeds from sales of seasoned commercial loan portfolios	24,323		16,417		37,988

Proceeds from sales of other real estate owned	Proceeds from sales of other real estate owned	171		150		1,600		Proceeds from sales of other real estate owned	—		187		171
Cash outflows from sale of business operations and other assets								Cash outflows from sale of business operations and other assets	—		(352,814)		—
Net investing cash flows provided/(used) by discontinued operations	Net investing cash flows provided/(used) by discontinued operations	252		(313)		(377)		Net investing cash flows provided/(used) by discontinued operations	—		—		252
Net cash provided/(used) by investing activities		641,103		1,202,582		(861,517)
Net cash (used)/provided by investing activities								Net cash (used)/provided by investing activities	$	(1,273,380)	$	600,554	$	641,103

Cash flows from financing activities:	Cash flows from financing activities:							Cash flows from financing activities:
Net increase in deposits	Net increase in deposits	$	499,657	$	23,996	$	233,704	Net increase in deposits	$	258,316	$	(154,052)	$	499,657
Net change in Mid-Atlantic region deposits held for sale								Net change in Mid-Atlantic region deposits held for sale	—		20,953		—
Proceeds from Federal Home Loan Bank advances and other borrowings	Proceeds from Federal Home Loan Bank advances and other borrowings	326,277		5,384,982		4,767,766		Proceeds from Federal Home Loan Bank advances and other borrowings	51,275		—		326,277
Repayments of Federal Home Loan Bank advances and other borrowings	Repayments of Federal Home Loan Bank advances and other borrowings	(582,648)		(6,228,780)		(4,387,223)		Repayments of Federal Home Loan Bank advances and other borrowings	(60,196)		(462,059)		(582,648)

Proceeds from issuance of subordinated debt								Proceeds from issuance of subordinated debt	98,032		—		—
Repayment from calling of subordinated debt								Repayment from calling of subordinated debt	(75,000)		—		—
Purchase of treasury stock	Purchase of treasury stock	(473)		(52,746)		0		Purchase of treasury stock	(124,519)		(68,712)		(473)
Exercise of stock options	Exercise of stock options	664		188		326		Exercise of stock options	270		417		664
Common and preferred stock cash dividends paid	Common and preferred stock cash dividends paid	(36,564)		(45,107)		(40,884)		Common and preferred stock cash dividends paid	(24,527)		(24,553)		(36,564)
Settlement of derivative contracts with financial institution counterparties	Settlement of derivative contracts with financial institution counterparties	(97,611)		0		0		Settlement of derivative contracts with financial institution counterparties	84,044		51,907		(97,611)

Net cash provided/(used) by financing activities	Net cash provided/(used) by financing activities	109,302		(917,467)		573,689		Net cash provided/(used) by financing activities	$	207,695	$	(636,099)	$	109,302

Net change in cash and cash equivalents	Net change in cash and cash equivalents	978,046		396,640		(65,574)		Net change in cash and cash equivalents	(942,452)		69,932		978,046

Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	579,829		183,189		248,763		Cash and cash equivalents at beginning of year	1,627,807		1,557,875		579,829

Cash and cash equivalents at end of year	Cash and cash equivalents at end of year	$	1,557,875	$	579,829	$	183,189	Cash and cash equivalents at end of year	685,355		1,627,807		1,557,875

Supplemental cash flow information:	Supplemental cash flow information:							Supplemental cash flow information:
Interest paid on deposits	Interest paid on deposits	$	82,319	$	119,695	$	74,565	Interest paid on deposits	$	32,782	$	29,606	$	82,319
Interest paid on borrowed funds	Interest paid on borrowed funds	21,277		33,406		32,274		Interest paid on borrowed funds	9,043		11,385		21,277
Income taxes (refunded)/paid, net	Income taxes (refunded)/paid, net	(13,864)		19,818		3,029		Income taxes (refunded)/paid, net	28,439		14,816		(13,864)

Acquisition of non-cash assets and liabilities:
Assets acquired		0		1,595,054		0
Liabilities assumed		0		(1,530,010)		0

Other non-cash changes:	Other non-cash changes:							Other non-cash changes:
Other net comprehensive income/(loss)		18,878		25,463		(12,274)
Other net comprehensive (loss)/income								Other net comprehensive (loss)/income	$	(177,809)	$	(34,114)	$	18,878
Impact to retained earnings from adoption of ASC 326, net of tax	Impact to retained earnings from adoption of ASC 326, net of tax	24,380		—		—		Impact to retained earnings from adoption of ASC 326, net of tax	—		—		24,380
Mid-Atlantic assets reclassified to held for sale	Mid-Atlantic assets reclassified to held for sale	317,304		0		0		Mid-Atlantic assets reclassified to held for sale	—		—		317,304
Mid- Atlantic liabilities reclassified to held for sale		630,065		0		0
Reclass of seasoned loan portfolios to held-for-sale, net		14,845		120,307		0
Mid-Atlantic liabilities reclassified to held for sale								Mid-Atlantic liabilities reclassified to held for sale	—		—		630,065
Mid-Atlantic loans held-for-sale reclassified to portfolio loans, net								Mid-Atlantic loans held-for-sale reclassified to portfolio loans, net	—		29,418		—
Mid-Atlantic deposits held-for-sale reclassified to deposits, net								Mid-Atlantic deposits held-for-sale reclassified to deposits, net	—		7,197		—
Seasoned loan portfolios reclassified to held-for-sale, net								Seasoned loan portfolios reclassified to held-for-sale, net	3,369		11,660		14,845
Held-for-sale loans reclassified to held-for-investment, net								Held-for-sale loans reclassified to held-for-investment, net	606		—		—
Premises and equipment reclassified to held-for-sale								Premises and equipment reclassified to held-for-sale	1,380		4,577		—
Real estate owned acquired in settlement of loans	Real estate owned acquired in settlement of loans	224		0		1,600		Real estate owned acquired in settlement of loans	—		—		224
Premium payable on cash flow hedges								Premium payable on cash flow hedges	2,296		—		—

The accompanying notes are an integral part of these consolidated financial statements.

~~F-9~~F-10

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018~~2020

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

The Consolidated Financial Statements (the “financial statements”) of Berkshire Hills Bancorp, Inc. and its subsidiaries (the “Company” or “Berkshire”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company is a Delaware corporation, headquartered in Boston, Massachusetts, and the holding company for Berkshire Bank (the “Bank”), a Massachusetts-chartered trust company headquartered in Pittsfield, ~~Massachusetts, and Berkshire Insurance Group, Inc.~~Massachusetts. These financial statements include the accounts of the Company, its wholly-owned subsidiaries and the Bank’s consolidated subsidiaries. In consolidation, all significant intercompany accounts and transactions are eliminated. The results of operations of companies or assets acquired are included only from the dates of acquisition. All material wholly-owned and majority-owned subsidiaries are consolidated unless GAAP requires otherwise.

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date these financial statements were issued.

Reclassifications

Certain items in prior financial statements have been reclassified to conform to the current presentation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from those estimates.

Refer to Note 17 – Other Commitments, Contingencies, and Off-Balance Sheet Activities for pandemic related risks and uncertainties.

Business Combinations

Business combinations are accounted for using the acquisition method of accounting. Under this method, the accounts of an acquired entity are included with the acquirer’s accounts as of the date of acquisition with any excess of purchase price over the fair value of the net assets acquired (including identifiable intangibles) capitalized as goodwill.

To consummate an acquisition, the Company will typically issue common stock and/or pay cash, depending on the terms of the acquisition agreement. The value of common shares issued is determined based upon the market price of the stock as of the closing of the acquisition.

Cash and Cash equivalents

Cash and cash equivalents include cash, balances due from banks, and short-term investments, all of which had an original maturity within 90 days. Due to the nature of cash and cash equivalents and the near term maturity, the Company estimated that the carrying amount of such instruments approximated fair value. The nature of the Bank’s business requires that it maintain amounts due from banks which at times, may exceed federally insured limits. The Bank has not experienced any losses on such amounts and all amounts are maintained with well-capitalized institutions.

Trading Security

The Company accounts for a tax advantaged economic development bond originated in 2008 at fair value, in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 320. The bond has been designated as a trading account security and is recorded at fair value, with changes in unrealized gains and losses recorded through earnings each period as part of non-interest income.

~~F-10~~F-11

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Securities

Debt securities that management has the intent and ability to hold to maturity are classified as held to maturity and carried at amortized cost. All other debt securities are classified as available for sale and carried at fair value, with unrealized gains and losses reported as a component of other net comprehensive income. Equity securities are carried at fair value, with changes in fair value reported in net income. Management determines the appropriate classification of securities at the time of purchase. Restricted equity securities, such as stock in the Federal Home Loan Bank of Boston (“FHLBB”) are carried at cost. There are no quoted market prices for the Company’s restricted equity securities. The Bank is a member of the FHLBB, which requires that members maintain an investment in FHLBB stock, which may be redeemed based on certain conditions. The Bank reviews for impairment based on the ultimate recoverability of the cost bases in the FHLBB stock.

Purchase premiums and discounts are recognized in interest income using the interest method, without anticipating prepayments, except mortgage-backed securities where prepayments are anticipated, over the terms of the securities. Premiums on callable debt securities are amortized to their earliest call date. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

The Company measures expected credit losses on held to maturity debt securities on a collective basis. Accrued interest receivable on held to maturity debt securities is excluded from the estimate of credit losses. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

The Company evaluates available for sale debt securities in an unrealized loss position by first assessing whether it intends to sell or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For available for sale debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

Loans Held for Sale

Loans originated with the intent to be sold in the secondary market are accounted for under the fair value option. Non-refundable fees and direct loan origination costs related to residential mortgage loans held for sale are recognized in non-interest income or non-interest expense as earned or incurred. Fair value is primarily determined based on quoted prices for similar loans in active markets. Gains and losses on sales of residential mortgage loans (sales proceeds minus carrying value) are recorded in non-interest income.

Loans that were previously held for investment that the Company has an active plan to sell are transferred to loans held for sale at the lower of cost or market (fair value). The market price is primarily determined based on quoted prices for similar loans in active markets or agreed upon sales prices. Gains are recorded in non-interest income at sale to the extent that the sale price of the loan exceeds carrying value. Any reduction in the loan’s value, prior to being transferred to loans held for sale, is reflected as a charge-off of the recorded investment in the loan resulting in a new cost basis, with a corresponding reduction in the allowance for ~~loan~~credit losses. Further decreases in the fair value of the loan are recognized in non-interest expense.

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Loans

Loans are reported at their amortized cost. Amortized cost is the principal balance outstanding, net of the unamortized balance of any deferred fees or costs and the unamortized balance of any premiums or discounts on loans purchased or acquired through mergers. Interest income is accrued on the unpaid principal balance. Interest income includes net accretion or amortization of deferred fees or costs and of premiums or discounts. Direct loan origination costs, net of any origination fees, in addition to premiums and discounts on loans, are deferred and recognized as an adjustment of the related loan yield using the interest method. Interest on loans, excluding automobile and unsecured consumer loans, is generally not accrued on loans which are ninety days or more past due unless the loan is well-secured and in the process of collection. Past due status is based on contractual terms of the loan. Automobile and unsecured consumer loans generally continue accruing until one hundred and twenty days delinquent, at which time they are charged off. All interest accrued but not collected for loans that are placed on non-accrual or charged-off is reversed against interest income, except for certain loans designated as well-secured. The interest on non-accrual loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Purchase Credit Deteriorated (PCD) Loans

Loans that the Company acquired in acquisitions include some loans that have experienced more than insignificant credit deterioration since origination. PCD loans are recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision expense.

Allowance for Credit Losses for Loans

The allowance for credit losses for loans (“ACLL”) is comprised of the allowance for ~~loan~~credit losses on loans and the allowance for unfunded commitments which is accounted for as a separate liability in other liabilities on the consolidated balance ~~sheet.~~sheets. The ACLL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Accrued interest receivable is excluded from the estimate of credit losses.

The level of the ACLL represents management’s estimate of expected credit losses over the expected life of the loans at the balance sheet date. The Company uses a static pool migration analysis method, applying expected historical loss trend and observed economic metrics. The level of the ACLL is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past and current events, utilizing a 7 quarter reasonable and supportable forecast period with a 1 year reversion period. The ACLL reserve is overlaid with qualitative factors based upon:

•the existence and growth of concentrations of credit;

•the volume and severity of past due financial assets, including nonaccrual assets;

•the institutions lending and credit review as well as the experience and ability of relevant management and staff and;

•the effect of other external factors such as regulatory, competition, regional market conditions, legal and technological environment and other events such as natural disasters;

•the effect of other economic factors such as economic stimulus and customer forbearance programs.

The allowance for unfunded commitments is maintained at a level by the Company to be sufficient to absorb expected lifetime losses related to unfunded credit facilities (including unfunded loan commitments and letters of credit).) The Company’s allowance for credit losses on unfunded commitments is recognized as a liability (other liability on the Consolidated Balance Sheets), with adjustments to the reserve recognized in other noninterest expense in the Consolidated Statements of Operations.

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The ACLL is measured on a collective (pool) basis when similar risk characteristics exist. The Company evaluates its risk characteristics of loans based on regulatory call report code with sub-segmentation based on underlying collateral for certain loan types. Risk characteristics relevant to each portfolio segment are as follows:

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Construction – Loans in this segment primarily include real estate development loans for which payment is derived from sale of the property or long term financing at completion. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.

Commercial real estate multifamily, owner occupied and non-owner – Loans in this segment are primarily owner-occupied or income-producing properties throughout New England and Northeastern New York. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy, which in turn, will have an effect on the credit quality in this segment. Management monitors the cash flows of these loans.

Commercial and industrial loans – Loans in this segment are made to businesses and are generally secured by assets of the business such as accounts receivable, inventory, marketable securities, other liquid collateral, equipment and other business assets. Repayment is expected from the cash flows of the business. Loans in this segment include asset based loans which generally have no scheduled repayment which are closely monitored against formula based collateral advance ratios. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality of this segment.

Residential real estate – All loans in this segment are collateralized by residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Home equity and other consumer loans – Loans in this segment are primarily home equity lines of credit, automobile loans and other consumer loans. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Loans that do not share risk characteristics are evaluated on an individual basis, which the Company has determined to be non-accrual loans over a certain threshold, loans that were determined to be Troubled Debt Restructurings (“TDRs”) and PCD loans.Loans evaluated individually are not also included in the collective evaluation. Estimates of specific allowance may be determined by the present value of anticipated future cash flows or the loan’s observable fair market value, or the fair value of the collateral less costs to sell, if the loan is collateral dependent. However, for collateral dependent loans, the amount of the amortized cost in a loan that exceeds the fair value of the collateral is charged-off against the allowance for ~~loan~~credit losses on loans in lieu of an allocation of a specific allowance amount when such an amount has been identified definitively as uncollectible.

Prior to the adoption of ASC 326 on January 1, 2020, the Company calculated the allowance for loan losses using incurred losses methodology.

Bank-Owned Life Insurance

Bank-owned life insurance policies are reflected on the Consolidated Balance Sheets at the amount that can be realized under the insurance contract at the balance sheet date which is the cash surrender value. Changes in the net cash surrender value of the policies, as well as insurance proceeds received, are reflected in non-interest income on the Consolidated Statements of Operations and are not subject to income taxes.

Foreclosed and Repossessed Assets

Other real estate owned is comprised of real estate acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. Repossessed collateral is primarily comprised of taxi medallions. Both other real estate owned and repossessed collateral are held for sale and are initially recorded at the fair value less estimated costs to sell at the date of foreclosure or repossession, establishing a new cost basis. The shortfall, if any, of the loan balance over the fair value of the property or collateral (excluding taxi medallions), less cost to sell, at the time of transfer from loans to other real estate owned or repossessed collateral is charged to the allowance for ~~loan losses.~~ credit losses on loans.

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Subsequent to transfer, the asset is carried at lower of cost or fair value less cost to sell and periodically evaluated for impairment. The shortfall, if any, of the loan balance over the fair value of the collateral comprised of taxi medallions at the time of transfer from loans to repossessed collateral is charged to non-interest income. Subsequent impairments in the fair value of other real estate owned and repossessed collateral are charged to expense in the period incurred. Net operating income or expense related to other real estate owned and repossessed collateral is included in operating expenses in the accompanying Consolidated Statements of Operations. Because of changing market conditions, there are inherent uncertainties in the assumptions with respect to the estimated fair value of other real estate owned and repossessed collateral. Because of these inherent uncertainties, the amount ultimately

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realized on other real estate owned and repossessed collateral may differ from the amounts reflected in the financial statements.

Capitalized Servicing Rights

Capitalized servicing rights are included in “other assets” in the Consolidated Balance Sheets. Servicing assets are initially recognized as separate assets at fair value when rights are acquired through purchase or through sale of financial assets with servicing retained.

The Company's servicing rights accounted for under the fair value method are carried on the Consolidated Balance Sheets at fair value with changes in fair value recorded in income in the period in which the change occurs. Changes in the fair value of servicing rights are primarily due to changes in valuation assumptions, such as discount rates and prepayment speeds, and the collection and realization of expected cash flows.

The Company’s servicing rights accounted for under the amortization method are initially recorded at fair value. Under that method, capitalized servicing rights are charged to expense in proportion to and over the period of estimated net servicing income. Fair value of the servicing rights is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, prepayment speeds and default rates and losses. Impairment is recognized through a valuation allowance for an individual tranche, to the extent that fair value is less than the capitalized amount for the tranches. If the Company later determines that all or a portion of the impairment no longer exists for a particular tranche, a reduction of the allowance may be recorded as an increase to income.

Premises and Equipment

Land is carried at cost. Buildings, improvements, and equipment are carried at cost less accumulated depreciation and amortization computed on the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized on the straight-line method over the shorter of the lease term, plus optional terms if certain conditions are met, or the estimated useful life of the asset.

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Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is assessed annually for impairment, and more frequently if events or changes in circumstances indicate that there may be an impairment. Adverse changes in the economic environment, declining operations, unanticipated competition, loss of key personnel, or other factors could result in a decline in the implied fair value of goodwill. Subsequent reversals of goodwill impairment are prohibited. As of December 31, 2020, the Company no longer has goodwill.

Other Intangibles

Intangible assets are acquired assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset or liability.

The fair values of these assets are generally determined based on appraisals and are subsequently amortized on a straight-line basis or an accelerated basis over their estimated lives. Management assesses the recoverability of these intangible assets at least annually or whenever events or changes in circumstances indicate that their carrying value may not be recoverable. If the carrying amount exceeds fair value, an impairment charge is recorded to income.

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Transfers of Financial Assets

Transfers of an entire financial asset, group of entire financial assets, or a participating interest in an entire financial asset are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets.

Income Taxes

Deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable for future years to differences between financial statement and tax bases of existing assets and liabilities. The effect of tax rate changes on deferred taxes is recognized in the income tax provision in the period that includes the enactment date. A tax valuation allowance is established, as needed, to reduce net deferred tax assets to the amount expected to be realized. In the event it becomes more likely than not that some or all of the deferred tax asset allowances will not be needed, the valuation allowance will be adjusted.

In the ordinary course of business there is inherent uncertainty in quantifying the Company’s income tax

positions. Income tax positions and recorded tax benefits are based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, we have determined the amount of the tax benefit to be recognized by estimating the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is more-likely-than-not that a tax benefit will not be sustained, no tax benefit has been recognized in the financial statements. Where applicable, associated interest and penalties have also been recognized. We recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense.

Insurance Commissions

Commission revenue is recognized as of the effective date of the insurance policy or the date the customer is billed, whichever is later, net of return commissions related to policy cancellations. Policy cancellation is a variable consideration that is not deemed significant and thus, does not impact the amount of revenue recognized.

In addition, the Company may receive additional performance commissions based on achieving certain sales and loss experience measures. Such commissions are recognized when determinable, which is generally when such commissions are received or when the Company receives data from the insurance companies that allows the reasonable estimation of these amounts.

On September 1, 2021, the Company completed the sale of substantially all of the assets, and the assumption of certain liabilities, of Berkshire Insurance Group, Inc. (“BIG”) to Brown & Brown of Massachusetts, LLC ("Buyer"), a Massachusetts limited liability company. This sale was made pursuant to the Asset Purchase Agreement dated August 24, 2021. The Buyer paid BIG an aggregate purchase price of $41.5 million, minus $1.6 million for executive goodwill purchase price payments paid by the Buyer at the Closing to certain executives of BIG. The Company recorded a $37.2 million pre-tax gain related to this sale in 2021, which is included in gain on sale of business operations and assets on the Consolidated Statements of Operations.

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Stock-Based Compensation

The Company measures and recognizes compensation cost relating to share-based payment transactions based on the grant-date fair value of the equity instruments issued. The fair value of restricted stock is recorded as unearned

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compensation. The deferred expense is amortized to compensation expense based on one of several permitted attribution methods over the longer of the required service period or performance period. For performance-based restricted stock awards, the Company estimates the degree to which performance conditions will be met to determine the number of shares that will vest and the related compensation expense. Compensation expense is adjusted in the period such estimates change.

Income tax benefits and/or tax deficiencies related to stock compensation determined as the difference between compensation cost recognized for financial reporting purposes and the deduction for tax, are recognized in the income statement as income tax expense or benefit in the period in which they occur.

Wealth Management

Wealth management assets held in a fiduciary or agent capacity are not included in the accompanying Consolidated

Balance Sheets because they are not assets of the Company.

Wealth management fees is primarily comprised of fees earned from consultative investment management, trust administration, tax return preparation, and financial planning. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based on the daily accrual of the market value of the investment accounts and the applicable fee rate.

Derivative Instruments and Hedging Activities

The Company enters into interest rate swap agreements as part of the Company’s interest rate risk management strategy for certain assets and liabilities and not for speculative purposes. Based on the Company’s intended use for the interest rate swap at inception, the Company designates the derivative as either an economic hedge of an asset or liability or a hedging instrument subject to the hedge accounting provisions of ASC 815, “Derivatives and Hedging.”

Interest rate swaps designated as economic hedges are recorded at fair value within other assets or liabilities. Changes in the fair value of these derivatives are recorded directly through earnings.

For interest rate swaps that management intends to apply the hedge accounting provisions of ASC 815, the Company formally documents at inception all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking the various hedges. Additionally, the Company uses dollar offset or regression analysis at the hedge’s inception and for each reporting period thereafter, to assess whether the derivative used in its hedging transaction is expected to be and has been highly effective in offsetting changes in the fair value or cash flows of the hedged item. The Company discontinues hedge accounting when it is determined that a derivative is not expected to be or has ceased to be highly effective as a hedge, and then reflects changes in fair value of the derivative in earnings after termination of the hedge relationship.

The Company has characterized its interest rate swaps that qualify under ASC 815 hedge accounting as cash flow hedges. Cash flow hedges are used to minimize the variability in cash flows of assets or liabilities, or forecasted transactions caused by interest rate fluctuations, and are recorded at fair value in other assets or liabilities within the Company’s balance sheets. Changes in the fair value of these cash flow hedges are initially recorded in accumulated other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings. Any hedge ineffectiveness assessed as part of the Company’s quarterly analysis is recorded directly to earnings.

The Company enters into commitments to lend with borrowers, and forward commitments to sell loans or to-be-announced mortgage-backed bonds to investors to hedge against the inherent interest rate and pricing risk associated with selling loans. The commitments to lend generally terminate once the loan is funded, the lock period expires or the borrower decides not to contract for the loan. The forward commitments generally terminate once the loan is sold, the commitment period expires or the borrower decides not to contract for the loan. These commitments are considered derivatives which are accounted for by recognizing their estimated fair value on the Consolidated Balance Sheets as either a freestanding asset or liability. See Note 15 - Derivative Instruments and Hedging Activities to the financial statements for more information on commitments to lend and forward commitments.

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Off-Balance Sheet Financial Instruments

In the ordinary course of business, the Company enters into off-balance sheet financial instruments, consisting primarily of credit related financial instruments. These financial instruments are recorded in the financial statements when they are funded or related fees are incurred or received.

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Fair Value Hierarchy

The Company groups assets and liabilities that are measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1 - Valuation is based on quoted prices in active markets for identical assets or liabilities. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 - Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using unobservable techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Employee Benefits

The Company maintains an employer sponsored 401(k) plan to which participants may make contributions in the form of salary deferrals and the Company provides matching contributions in accordance with the terms of the plan. Contributions due under the terms of the defined contribution plans are accrued as earned by employees.

Due to the Rome Bancorp acquisition in 2011, the Company inherited a noncontributory, qualified, defined benefit pension plan for certain employees who met age and service requirements; as well as other post-retirement benefits, principally health care and group life insurance. The Rome pension plan and postretirement benefits that were acquired in connection with the whole-bank acquisition were frozen prior to the close of the transaction. The pension benefit in the form of a life annuity is based on the employee’s combined years of service, age, and compensation. The Company also has a long-term care post-retirement benefit plan for certain executives where upon disability, associated benefits are funded by insurance policies or paid directly by the Company.

In order to measure the expense associated with the Plans, various assumptions are made including the discount rate, expected return on plan assets, anticipated mortality rates, and expected future healthcare costs. The assumptions are based on historical experience as well as current facts and circumstances. The Company uses a December 31 measurement date for its plans. As of the measurement date, plan assets are determined based on fair value, generally representing observable market prices. The projected benefit obligation is primarily determined based on the present value of projected benefit distributions at an assumed discount rate.

Net periodic pension benefit costs include interest costs based on an assumed discount rate, the expected return on plan assets based on actuarially derived market-related values, and the amortization of net actuarial losses. Net periodic postretirement benefit costs include service costs, interest costs based on an assumed discount rate, and the amortization of prior service credits and net actuarial gains. Differences between expected and actual results in each year are included in the net actuarial gain or loss amount, which is recognized in other comprehensive income. The net actuarial gain or loss in excess of a 10% corridor is amortized in net periodic benefit cost over the average remaining service period of active participants in the Plans. The prior service credit is amortized over the average remaining service period to full eligibility for participating employees expected to receive benefits.

The Company recognizes in its ~~statement of condition~~consolidated balance sheets an asset for a plan’s overfunded status or a liability for a plan’s underfunded status. The Company also measures the Plans’ assets and obligations that determine its funded status as of the end of the fiscal year and recognizes those changes in other comprehensive ~~income,~~income/(loss), net of tax.

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Due to the SI Financial acquisition in 2019, the Company inherited a tax-qualified defined benefit pension plan. The plan was frozen effective September 6, 2013 and SI Financial recorded a contingent obligation to settle the plan at a future date, which was assumed by the Company. The plan is a single plan under the Internal Revenue Code and, as a result, all of the assets stand behind all of liabilities. Accordingly, contributions made by a participating employer may be used to provide benefits to participants of other participating employers.

Operating Segments

The Company operates as 1one consolidated reportable segment. The chief operating decision-maker evaluates consolidated results and makes decisions for resource allocation on this same data. Management periodically reviews and redefines its segment reporting as internal reporting practices evolve and components of the business change. The financial statements reflect the financial results of the Company's 1one reportable operating segment.

Recently Adopted Accounting Principles

~~In January 2017, the FASB issued ASU No. 2017-04, “Intangibles: Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The ASU simplifies the test for goodwill impairment~~There were no new applicable material accounting pronouncements adopted by eliminating the second step of the current two-step method. Under the new accounting guidance, entities will compare the fair value of a reporting unit with its carrying amount. If the carrying amount exceeds the reporting unit’s fair value, the entity is required to recognize an impairment charge for this amount. Current guidance requires an entity to proceed to a second step, whereby the entity would determine the fair value of its assets and liabilities. The new method applies to all reporting units. The performance of a qualitative assessment is still allowable. This accounting guidance is effective prospectively for interim and annual reporting periods beginning after December 15, 2019. The adoption of ASU No. 2017-04 did not impact the Company's Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU eliminates, adds, and modifies certain disclosure requirements for fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU No. 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019. Entities are also allowed to elect early adoption for the eliminated or modified disclosure requirements and delay adoption of the new disclosure requirements until their effective date. As ASU No. 2018-13 only revises disclosure requirements, it did not have a material impact on the Company’s Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” ASU No. 2018-15 clarifies certain aspects of ASU No. 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement,” which was issued in April 2015. Specifically, ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU No. 2018-15 does not affect the accounting for the service element of a hosting arrangement that is a service contract. ASU No. 2018-15 is effective for interim and annual reporting periods beginning after December 15, 2019. The adoption did not have a material impact on the Company's Consolidated Financial Statements.

In June 2016, the FASB issued ASU No. 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” and related subsequent amendments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected losses under the CECL methodology is applicable to financial assets measured at amortized cost, as well as unfunded commitments that are considered off-balance sheet credit exposures at the reporting date. The measurement is based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to enhance their credit loss estimates. The update requires enhanced disclosures to help investors and

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other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For available for sale debt securities with unrealized losses, Topic 326 requires credit losses to be recognized as an allowance rather than a reduction in the amortized cost of the securities. As a result, improvements to estimated credit losses are recognized immediately in earnings rather than as interest income over time. The current expected credit loss measurement will be used to estimate the allowance for credit losses (“ACL”) over the life of the financial assets. The amendments in this update became effective for annual periods and interim periods within those annual periods beginning after December 15, 2019.

~~As previously disclosed,~~ the Company assembled a cross-functional working group that met regularly to oversee the implementation plan which included assessment and documentation of processes and internal controls, model development and documentation, assessing existing loan and loss data, assessing models for default and loss estimates, and conducting parallel runs and reviews throughsince December 31, ~~2019.~~

Under CECL the Company determines its allowance for credit losses on loans using pools of assets with similar risk characteristics. The Company evaluates its risk characteristics of loans based on regulatory call report code with sub-segmentation based on underlying collateral for certain loan types. Loans that no longer match the risk profile of the pool are individually assessed for credit losses. The Company’s lifetime credit loss models are based on historical data and incorporate forecasts of macroeconomic variables, expected prepayments and recoveries. Enhancements were made in the third quarter of 2020 to the Company’s economic adjustment calculation. The Company implemented segment-level loss calculations based on the equation of the fit line which replaced the previous calculation using a range. This allows the model to calculate a specific point estimate for the loss rate as compared to using a mid-point of a range. Additionally, the Company utilized actual loan runoff by segment whereas previously a calculation was utilized for the weighted average life period. The enhancements to the economic adjustment calculation were accounted for as a change in estimate and were not considered material to the overall calculation. Outside of the model, non-economic qualitative factors are applied to further refine the expected loss calculation for each portfolio. A seven quarter reasonable and supportable forecast period with a 1 year reversion period is currently used for all loan portfolios. When the risk characteristics of a loan no longer match the characteristics of the collective pool, the loan is removed from the pool and individually assessed for credit losses. Generally, non-accrual loans above a threshold deemed appropriate by management, TDRs, potential TDRs, and collateral dependent loans are individually assessed.

The individual assessment for credit impairment is generally based on a discounted cash flow approach unless the asset is collateral dependent. A loan is considered collateral dependent when repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Collateral dependent loans are individually assessed and the expected credit loss is based on the fair value of the collateral. The fair value is reduced for estimated costs to sell if the value of the collateral is expected to be realized through sale.

The Company has elected to present accrued interest receivable separately from the amortized cost basis on the balance sheet and is not currently estimating an allowance for credit loss on accrued interest. This election applies to loans as well as debt securities. The Company's non-accrual policies have not changed as a result of adopting CECL.

The Company adopted CECL on January 1, 2020 using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures. Results for the reporting periods after January 1, 2020 are presented under Topic 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. On the adoption date, the Company increased the allowance for credit losses for loans by $25.4 million and increased the allowance for credit losses for unfunded loan commitments by $8.0 million (in other liabilities). The increase related to the Company's acquired loan portfolio totaled $15.3 million. Under the previously applicable accounting guidance, any remaining unamortized loan discount on an individual loan could be used to offset a charge-off for that loan, so the allowance for loan losses needed for the acquired loans was reduced by the remaining loan discounts. The new ASU removes the ability to offset a charge-off against the remaining loan

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

discount and requires an allowance for credit losses to be recognized in addition to the loan discount. The impact of adopting the ASU, and at each subsequent reporting period, is highly dependent on credit quality, macroeconomic forecasts and conditions, composition of our loans and available-for-sale securities portfolio, along with other management judgments. The FASB provided transition relief, allowing entities to irrevocably elect, upon adoption of CECL, the fair value option (FVO) on financial instruments that were previously recorded at amortized cost and are within the scope of ASC 326-20 if the instruments are eligible for the FVO under ASC 825-10. It is applied through a cumulative-effect adjustment to retained earnings. The Company elected the FVO for the taxi medallion portfolio resulting in a $15.3 million reduction in loan valuation. As of January 1, 2020, the Company recorded a cumulative-effect adjustment of $24.4 million decrease in retained earnings, net of deferred tax balances of $9.0 million.

~~The Company recorded an allowance for credit losses as of January 1, 2020 on its securities held to maturity of $0.3 million.~~

The Company adopted CECL using the prospective transition approach for financial assets purchased with credit deterioration (“PCD”) that were previously classified as purchased credit impaired and accounted for under ASC 310-30. In accordance with the standard, Berkshire did not reassess whether PCI assets met the definition of PCD assets as of the date of adoption. On January 1, 2020, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $15.3 million to the allowance for credit losses for loans which is net of $11.9 million adjustment for confirmed losses. The remaining noncredit discount in the amount of $3.2 million will be accreted into interest income at the effective interest rate as of January 1, 2020.

~~The impact of the January 1, 2020, adoption entry is summarized in the table below:~~

(in thousands) December 31, 2019 Pre-ASC 326 Adoption Impact of Adoption January 1, 2020 Post-ASC 326 Adoption
Assets:
Loans 9,502,428 — 9,502,428
PCD gross up — 15,326 15,326
Fair value option — (15,291) (15,291)
Total loans 9,502,428 35 9,502,463
Allowance for credit losses on loans 63,575 25,434 89,009
Allowance for credit losses on securities — 309 309
Deferred tax assets, net 51,165 8,993 60,158
Liabilities and shareholders' equity:
Other liabilities (ACL unfunded loan commitments) 100 7,993 8,093
Retained earnings 361,082 (24,380) 336,702

In December 2018, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. In March 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC announced an interim final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The interim final rule maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company is adopting the capital transition relief over the permissible five-year period.

On March 27, 2020, the Coronavirus, Aid, Relief, and Economic Security ("CARES") Act, which provides relief from certain requirements under GAAP, was signed into law. Section 4013 of the CARES Act gives entities temporary relief from the accounting and disclosure requirements for troubled debt restructurings ("TDRs") under

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

ASC 310-40 in certain situations. In addition, on April 7, 2020, certain regulatory banking agencies issued an interagency statement that offers practical expedients for evaluating whether loan modifications in response to the COVID-19 pandemic are TDRs. The interagency statement was originally issued on March 22, 2020, but was revised to address the relationship between their original TDR guidance and the guidance in Section 4013 of the CARES Act. To qualify for TDR accounting and disclosure relief under the CARES Act, the applicable loan must not have been more than 30 days past due as of December 31, 2019, and the modification must be executed during the period beginning on March 1, 2020, and ending on the earlier of December 31, 2020, or the date that is 60 days after the termination date of the national emergency declared by the president on March 13, 2020, under the National Emergencies Act related to the outbreak of COVID-19. The CARES Act applies to modifications made as a result of COVID-19, including forbearance agreements, interest rate modifications, repayment plans, and other arrangements to defer or delay payment of principal or interest. The interagency statement does not require the modification to be completed within a certain time period if it is related to COVID-19 and the loan was not more than 30 days past due as of the date of the Company’s implementation of its modification programs. Moreover, the interagency statement applies to short-term modifications including payment deferrals, fee waivers, extensions of repayment terms, or other insignificant payment delays as a result of COVID-19. The Company will apply Section 4013 of the CARES Act and the interagency statement in connection with applicable modifications. For modifications that qualify under either the CARES Act or the interagency statement, TDR accounting and reporting is suspended through the period of the modification; however, the Company will continue to apply its existing non-accrual policies including consideration of the loan's past due status which is determined on the basis of the contractual terms of the loan. Once a loan has been contractually modified, the past due status is generally based on the updated terms including payment deferrals.2021.

Future Application of Accounting Pronouncements

In ~~August 2018,~~March 2022, the FASB issued ASU No. ~~2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)~~2022-01, “Derivatives and Hedging (Topic 815): ~~Disclosure Framework - Changes~~Fair Value Hedging – Portfolio Layer Method.” The guidance expands the current last-of-layer method to allow multiple hedge layers of a single closed portfolio (renamed to portfolio layer method) and expands the portfolio layer method to include nonprepayable financial assets. The ASU specifies eligible hedging instruments in a single-layer hedge and provides additional guidance on accounting for and disclosure of hedge basis adjustments that are applicable to the ~~Disclosure Requirements~~portfolio layer method. Further, hedge basis adjustments should be considered when determining credit losses for Defined Benefit Plans.” This ASU amends and modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The amendments in this update remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. ASU No. 2018-14 is effective for fiscal years ending after December 15, 2020, with early adoption permitted. As ASU No. 2018-14 only revises disclosure requirements, it will not have a material impact on the Consolidated Financial Statements.

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU No. 2019-12 removes specific exceptions to the general principles in FASB ASC Topic 740. It eliminates the need for an organization to analyze whether the following apply in a given period: (1) exception to the incremental approach for intraperiod tax allocation; (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments; and (3) exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU 2019-12 also improves financial statement preparers’ application of income tax-related guidance and simplifies: (1) franchise taxes that are partially based on income; (2) transactions with a government that result in a step upassets included in the ~~tax basis of goodwill; (3) separate financial statements of legal entities that are not subject to tax; and (4) enacted changes in tax laws in interim periods.~~closed portfolio. The amendments in this ASU ~~become~~are effective for fiscal years beginning after December 15, ~~2020,~~2022, and interim periods within those fiscal years. Early adoption is permitted. The adoption is not expected to have a material impact on the ~~Company's~~Company’s Consolidated Financial Statements.

In ~~January 2020,~~March 2022, the FASB issued ASU No. ~~2020-01, “Investments - Equity Securities~~2022-02, “Financial Instruments – Credit Losses (Topic ~~321), Investments - Equity Method~~326): Troubled Debt Restructurings and ~~Joint Ventures (Topic 323),~~Vintage Disclosures.” The ASU eliminates the troubled debt restructuring (“TDR”) accounting model that was adopted with Topic 326, “Financial Instruments – Credit Losses” and Derivatives and Hedging (Topic 815): Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues Task Force)”. ASU No. 2020-01 clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accountingenhances disclosure requirements for certain ~~forward contracts~~loan refinancings and ~~purchased options accounted for under Topic 815.~~restructurings when a borrower is experiencing financial difficulty. The ~~amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method~~ASU requires prospective disclosure of ~~accounting for the purposes~~current-period gross write-offs by year of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. In addition, this ASU provides direction that a company should not consider whether the underlying securities would be accounted for under the equity method or the fair

~~F-21~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~value option when it is determining the accounting for certain forward contracts and purchased options, upon either settlement or exercise.~~origination. The amendments in this ASU ~~become~~are effective for fiscal years beginning after December 15, ~~2020,~~2022, and interim periods within those fiscal years. ~~Early adoption is permitted, and the amendments are to be applied prospectively.~~ The adoption is not expected to have a material impact on the ~~Company's~~Company’s Consolidated Financial Statements.

In March 2020, the FASB issued ASU No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU No. 2020-04 provides temporary optional expedients and exceptions to GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as SOFR. For instance, entities can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can also elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. Finally, entities can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. It is anticipated that this ASU will simplify any modifications that are executed between the selected start date (yet to be determined) and December 31, 2022 that are directly related to LIBOR transition by allowing prospective recognition of the continuation of the contract, rather than extinguishment of the old contract resulting in writing off unamortized fees/costs. The Company is currently evaluating the impact of adopting the new guidance on the Consolidated Financial Statements.

In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope.” ASU No. 2021-01 clarifies that certain optional expedients and exceptions in ASC 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU No. 2021-01 also amends the expedients and exceptions in ASC 848 to capture the incremental consequences of the scope clarification and to tailor the existing guidance to derivative instruments affected by the discounting transition. ASU No. 2021-01 was effective upon issuance and generally can be applied through December 31, 2022. The adoption of ASU 2021-01 did not significantly impact the Company’s Consolidated Financial Statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. DISCONTINUED OPERATIONS AND ~~HELD FOR~~BRANCH SALE

During the first quarter of 2019, the Company reached the decision to pursue the sale of the national mortgage banking operations of First Choice Loan Services, Inc. (“FCLS”) – a subsidiary of the Bank. The decision was based on a number of strategic priorities and other factors, including the competitiveness of the mortgage industry. As a result of these actions, the Company classified the operations of FCLS as discontinued under ASC 205-20. The Consolidated Balance Sheets, Consolidated Statements of Operations, and Consolidated Statements of Cash Flows present discontinued operations retrospectively for current and prior periods.

On May 7, 2020, the Company completed a transaction to sell certain assets and liabilities related to the operations of FCLS. During the fourth quarter of 2020, the Company completed the final wind-down of the operations of FCLS. Operating results for the year ended December 31, 2020, ~~include~~included expenses related to the wind-down of operations.

~~The following is a summary of the~~At year-end 2022 and 2021, there were no assets ~~and~~or liabilities ofrelated to the discontinued operations of ~~FCLS at December 31, 2020 and December 31, 2019:~~

(in thousands) December 31, 2020 December 31, 2019
Assets
Loans held for sale, at fair value $ 0 $ 132,655
Premises and equipment, net 0 1,073
Mortgage servicing rights, at fair value 0 12,299
Mortgage banking derivatives 0 2,329
Right-of-use asset 0 3,462
Deferred tax 0 (3,418)
Other assets 0 5,732
Total assets $ 0 $ 154,132
Liabilities
Customer payments in process $ 0 $ 15,372
Lease liability 0 3,494
Other liabilities 0 7,615
Total liabilities $ 0 $ 26,481
FCLS.

FCLS funded its lending operations and maintained working capital through an intercompany line-of-credit with the Bank. Although the wind-down of FCLS resulted in settlement of these borrowings, debt was not allocated to discontinued operations due to the intercompany nature of the borrowings.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

The following presents operating results of the discontinued operations of FCLS for the years ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018:~~2020:

Years Ended December 31,
(in thousands) 2020 2019 2018
Interest income $ 1,525 $ 6,085 $ 5,267
Interest expense 391 3,372 2,131
Net interest income 1,134 2,713 3,136
Non-interest (loss)/income (4,740) 38,517 35,574
Total net revenue (3,606) 41,230 38,710
Non-interest expense 23,249 46,769 43,477
(Loss) from discontinued operations before income taxes (26,855) (5,539) (4,767)
Income tax (benefit) (7,013) (1,468) (1,313)
Net (loss) from discontinued operations $ (19,842) $ (4,071) $ (3,454)

FCLS also originated mortgages designated as held-for-investment. This component of FCLS’s operations was not considered discontinued, since the Company expects to continue to originate mortgages designated as held-for-investment in its footprint on a small scale through processes considered as continuing operations.


	Years Ended December 31,
(in thousands)	2022		2021		2020
Interest income	$	—	$	—	$	1,525
Interest expense	—		—		391
Net interest income	—		—		1,134
Non-interest (loss)/income	—		—		(4,740)
Total net revenue	—		—		(3,606)
Non-interest expense	—		—		23,249
(Loss) from discontinued operations before income taxes	—		—		(26,855)
Income tax (benefit)	—		—		(7,013)
Net (loss) from discontinued operations	$	—	$	—	$	(19,842)

Mid-Atlantic Branch Sale

~~The~~On August 27, 2021 the Company ~~has entered into an agreement to sell its 8~~completed the sale of eight Mid-Atlantic branches to Investors Bank of Short Hills, New ~~Jersey, subject~~Jersey. This sale was made pursuant to ~~customary regulatory approvals. The transfer is targeted for completion in~~a purchase and assumption agreement entered into by the ~~first half of 2021. The branch sale includes loans with a total balance of $301 million and deposit accounts with a total balance of $617 million as of~~banks on December ~~31,~~2, 2020. These balances are included in assets held for sale and liabilities held for sale on the Consolidated Balance Sheets. The buyer has agreed to pay a premium equal to 3.0% of the final deposit balance transferred.

The sale ~~includes~~included all branch premises and equipment, and Investors also assumed related operations and the ~~agreement provides that the buyer intends to offer~~ employment ~~to all~~of associated staff. ~~Berkshire expects to complete the net transfer with funds from short-term investments.~~ The branch sale ~~will have no effect on~~is not expected to impact Berkshire’s growing Mid-Atlantic specialized commercial lending operations, including SBA lending at its 44 Business Capital Division and its asset-based lending relationships.

The ~~following is~~sale involved the assignment of deposits which totaled $631 million and loans which totaled $220 million as of August 27, 2021. These instruments were classified as held for sale in the financial statements and were not included in total deposits and total loans reported by the Company at December 31, 2020. Investors Bank paid a ~~summary~~premium of 3.0% of the deposit balance transferred. The Company provided a settlement cash payment of $391 million as part of the sale for the assumption of covered deposit liabilities by Investors. The Company recorded a $14.7 million pre-tax gain related to this branch sale in 2021, which is included in gain on sale of business operations and assets on the Consolidated Statements of Operations.

As of December 31, 2022 and 2021, there were no assets and liabilities held for sale related to the branch ~~sale at December 31, 2020:~~sale.


~~(in thousands)~~	~~December 31, 2020~~
~~Assets~~
~~Loans~~	$	~~300,599~~
~~Other assets~~	~~16,705~~



~~Total assets~~	$	~~317,304~~
~~Liabilities~~
~~Deposits~~	$	~~617,377~~
~~Other liabilities~~	~~12,688~~
~~Total liabilities~~	$	~~630,065~~

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NOTE 3. CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand, amounts due from banks, and short-term investments with original maturities of 90 days or less. ~~Short-term~~At year-end 2022, there were no short-term investments pledged as collateral support for derivative financial contracts. At year-end 2021, short-term investments included ~~$75.1 million and $96.3~~$43.7 million pledged as collateral support for derivative financial ~~contracts at year-end 2020 and 2019, respectively.~~contracts. The Federal Reserve Bank requires the Bank to maintain certain reserve requirements of vault cash and/or deposits. As of December 31, ~~2020,~~2022 and 2021, the reserve requirement was ~~0. The reserve requirement, included in cash and equivalents, as of December 31, 2019 was $18.3 million.~~zero.

NOTE 4. TRADING SECURITY

The Company holds a tax advantaged economic development bond that is being accounted for at fair value. The security had an amortized cost of ~~$8.7~~$7.1 million and ~~$9.4~~$7.9 million and a fair value of ~~$9.7~~$6.7 million and ~~$10.8~~$8.4 million at year-end ~~2020~~2022 and ~~2019,~~2021, respectively. Unrealized losses recorded through income on this security totaled $0.8 million, $0.6 million, and $0.3 million ~~$0.3 million,~~for 2022, 2021, and ~~$0.4 million for~~ 2020, ~~2019, and 2018,~~ respectively. As discussed further in Note 15 - Derivative Instruments and Hedging Activities, the Company has entered into a swap contract to swap-out the fixed rate of the security in exchange for a variable rate. The Company does not purchase securities with the intent of selling them in the near term, and there are no other debt securities in the trading portfolio at year-end ~~2020~~2022 and ~~2019.~~2021.

~~F-25~~F-21

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5. SECURITIES

The following is a summary of securities available for sale (“AFS”) , held to maturity (“HTM”), and marketable equity securities:


(In thousands)	(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance		(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance
December 31, 2020
December 31, 2022												December 31, 2022
Securities available for sale	Securities available for sale											Securities available for sale
Debt securities:	Debt securities:											Debt securities:
U.S Treasuries												U.S Treasuries	$	11,972	$	1	$	—	$	11,973	$	—
Municipal bonds and obligations	Municipal bonds and obligations	$	90,273	$	7,530	$	0	$	97,803	$	0	Municipal bonds and obligations	65,943		422		(3,030)		63,335		—
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	740,225		16,836		(235)		756,826		0		Agency collateralized mortgage obligations	631,732		—		(99,787)		531,945		—
Agency mortgage-backed securities	Agency mortgage-backed securities	433,311		4,954		(133)		438,132		0		Agency mortgage-backed securities	643,308		1		(96,996)		546,313		—
Agency commercial mortgage-backed securities	Agency commercial mortgage-backed securities	278,990		9,835		(175)		288,650		0		Agency commercial mortgage-backed securities	264,218		—		(35,750)		228,468		—
Corporate bonds	Corporate bonds	59,098		942		(10)		60,030		0		Corporate bonds	43,368		80		(2,938)		40,510		—

Other bonds and obligations	Other bonds and obligations	52,080		1,719		(8)		53,791		0		Other bonds and obligations	655		67		(66)		656		—
Total securities available for sale	Total securities available for sale	1,653,977		41,816		(561)		1,695,232		0		Total securities available for sale	1,661,196		571		(238,567)		1,423,200		—
Securities held to maturity	Securities held to maturity											Securities held to maturity
Municipal bonds and obligations	Municipal bonds and obligations	246,520		20,106		0		266,626		64		Municipal bonds and obligations	266,793		691		(23,704)		243,780		66
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	153,561		5,989		(171)		159,379		0		Agency collateralized mortgage obligations	128,136		—		(20,420)		107,716		—
Agency mortgage-backed securities	Agency mortgage-backed securities	35,865		198		(29)		36,034		0		Agency mortgage-backed securities	50,958		—		(9,240)		41,718		—
Agency commercial mortgage-backed securities	Agency commercial mortgage-backed securities	25,481		590		(12)		26,059		0		Agency commercial mortgage-backed securities	135,206		—		(23,203)		112,003		—
Tax advantaged economic development bonds	Tax advantaged economic development bonds	3,369		93		0		3,462		40		Tax advantaged economic development bonds	2,069		8		(121)		1,956		25
Other bonds and obligations	Other bonds and obligations	295		0		0		295		0		Other bonds and obligations	291		—		—		291		—
Total securities held to maturity	Total securities held to maturity	465,091		26,976		(212)		491,855		104		Total securities held to maturity	583,453		699		(76,688)		507,464		91

Marketable equity securities	Marketable equity securities	18,061		767		(315)		18,513		—		Marketable equity securities	15,035		—		(2,179)		12,856		—
Total	Total	$	2,137,129	$	69,559	$	(1,088)	$	2,205,600	$	104	Total	$	2,259,684	$	1,270	$	(317,434)	$	1,943,520	$	91

December 31, 2019
December 31, 2021												December 31, 2021
Securities available for sale	Securities available for sale											Securities available for sale
Debt securities:	Debt securities:											Debt securities:
U.S Treasuries												U.S Treasuries	$	59,972	$	1	$	—	$	59,973	$	—
Municipal bonds and obligations	Municipal bonds and obligations	$	104,325	$	5,813	$	0	$	110,138	$	0	Municipal bonds and obligations	71,822		5,355		—		77,177		—
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	742,550		6,431		(169)		748,812		0		Agency collateralized mortgage obligations	693,782		5,566		(11,012)		688,336		—
Agency mortgage-backed securities	Agency mortgage-backed securities	146,589		1,515		(360)		147,744		0		Agency mortgage-backed securities	711,154		2,347		(7,642)		705,859		—
Agency commercial mortgage-backed securities	Agency commercial mortgage-backed securities	148,066		176		(1,146)		147,096		0		Agency commercial mortgage-backed securities	300,259		3,949		(3,628)		300,580		—
Corporate bonds	Corporate bonds	115,395		1,788		(607)		116,576		0		Corporate bonds	44,824		950		(114)		45,660		—

Other bonds and obligations	Other bonds and obligations	40,414		780		(5)		41,189		0		Other bonds and obligations	—		—		—		—		—
Total securities available for sale	Total securities available for sale	1,297,339		16,503		(2,287)		1,311,555		0		Total securities available for sale	1,881,813		18,168		(22,396)		1,877,585		—
Securities held to maturity	Securities held to maturity											Securities held to maturity
Municipal bonds and obligations	Municipal bonds and obligations	252,936		13,095		(5)		266,026		0		Municipal bonds and obligations	281,515		16,151		(693)		296,973		70
Agency collateralized mortgage-backed securities	Agency collateralized mortgage-backed securities	69,667		2,870		(50)		72,487		0		Agency collateralized mortgage-backed securities	149,195		3,203		(3,513)		148,885		—
Agency mortgage-backed securities	Agency mortgage-backed securities	6,271		29		0		6,300		0		Agency mortgage-backed securities	57,327		95		(1,498)		55,924		—
Agency commercial mortgage-backed securities	Agency commercial mortgage-backed securities	10,353		51		0		10,404		0		Agency commercial mortgage-backed securities	145,573		266		(3,289)		142,550		—
Tax advantaged economic development bonds	Tax advantaged economic development bonds	18,456		218		(910)		17,764		0		Tax advantaged economic development bonds	2,728		26		(15)		2,739		35
Other bonds and obligations	Other bonds and obligations	296		0		0		296		0		Other bonds and obligations	165		—		—		165		—
Total securities held to maturity	Total securities held to maturity	357,979		16,263		(965)		373,277		0		Total securities held to maturity	636,503		19,741		(9,008)		647,236		105

Marketable equity securities	Marketable equity securities	37,138		5,147		(729)		41,556		—		Marketable equity securities	15,689		67		(303)		15,453		—
Total	Total	$	1,692,456	$	37,913	$	(3,981)	$	1,726,388	$	0	Total	$	2,534,005	$	37,976	$	(31,707)	$	2,540,274	$	105

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At year-end ~~2020~~2022 and ~~2019,~~2021, accumulated net unrealized ~~gains/~~(losses) on AFS securities included in accumulated other comprehensive ~~income/~~(loss)/income were ~~$41.3~~losses of $238.0 million and ~~$14.2~~$4.2 million, respectively. At year-end ~~2020~~2022 and ~~2019,~~2021, accumulated net unrealized gains on the securities reclassified from AFS to HTM ~~securities~~ included in accumulated other comprehensive ~~income/~~(loss)/income were ~~$3.7~~$1.1 million and ~~$5.0~~$2.4 million, respectively. The year-end ~~2020~~2022 and ~~2019~~2021 related income tax benefit/(liability)~~/benefit~~ of ~~$(11.5)~~$61.3 million and ~~$(5.1)~~$0.4 million, respectively, was also included in accumulated other comprehensive ~~income/~~(loss).

The following table summarizes the activity in the allowance for credit losses for debt securities held to maturity by security type for the ~~year~~years ended December 31, 2022, 2021 and 2020:

(In thousands) Municipal bonds and obligations Tax advantaged economic development bonds Total
Balance at December 31, 2019 $ 0 $ 0 $ 0
Impact of ASC 326 adoption 83 226 309
Provision for credit losses- reversal (19) (186) (205)
Balance at December 31, 2020 $ 64 $ 40 $ 104


(In thousands)	Municipal bonds and obligations		Tax advantaged economic development bonds		Total
Balance at December 31, 2021	$	70	$	35	$	105

Provision (benefit) for credit losses	(4)		(10)		(14)
Balance at December 31, 2022	$	66	$	25	$	91


(In thousands)	Municipal bonds and obligations		Tax advantaged economic development bonds		Total
Balance at December 31, 2020	$	64	$	40	$	104

Provision expense for credit losses	6		(5)		1
Balance at December 31, 2021	$	70	$	35	$	105


(In thousands)	Municipal bonds and obligations		Tax advantaged economic development bonds		Total
Balance at December 31, 2019	$	—	$	—	$	—
Impact of ASC 326 adoption	83		226		309
Provision (benefit) for credit losses	(19)		(186)		(205)
Balance at December 31, 2020	$	64	$	40	$	104

Credit Quality Information

The Company monitors the credit quality of held to maturity securities through credit ratings from various rating agencies. Credit ratings express opinions about the credit quality of a security and are utilized by the Company to make informed decisions. Investment grade securities are rated BBB-/Baa3 or higher and generally considered by the rating agencies and market participants to be of low credit risk. Conversely, securities rated below investment grade are considered to have distinctively higher credit risk than investment grade securities. For securities without credit ratings, the Company utilizes other financial information indicating the financial health of the underlying municipality, agency, or organization.

As of December 31, ~~2020,~~2022, none of the Company's investment securities were delinquent or in non-accrual status.

F-23

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amortized cost and estimated fair value of AFS and HTM securities, segregated by contractual maturity at year-end ~~2020~~2022 are presented below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities and collateralized mortgage obligations are shown in total, as their maturities are highly variable.


		Available for sale				Held to maturity					Available for sale				Held to maturity
(In thousands)	(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within 1 year	Within 1 year	$	33,248	$	33,265	$	1,950	$	1,952	Within 1 year	$	12,482	$	12,482	$	995	$	995
Over 1 year to 5 years	Over 1 year to 5 years	8,148		8,276		3,216		3,233		Over 1 year to 5 years	11,254		11,269		2,191		2,181
Over 5 years to 10 years	Over 5 years to 10 years	67,952		69,619		23,050		24,026		Over 5 years to 10 years	49,729		46,904		28,544		28,543
Over 10 years	Over 10 years	92,103		100,464		221,968		241,172		Over 10 years	48,473		45,819		237,423		214,308
Total bonds and obligations	Total bonds and obligations	201,451		211,624		250,184		270,383		Total bonds and obligations	121,938		116,474		269,153		246,027
Mortgage-backed securities	Mortgage-backed securities	1,452,526		1,483,608		214,907		221,472		Mortgage-backed securities	1,539,258		1,306,726		314,300		261,437
Total	Total	$	1,653,977	$	1,695,232	$	465,091	$	491,855	Total	$	1,661,196	$	1,423,200	$	583,453	$	507,464

At year-end ~~2020~~2022 and ~~2019,~~2021, the Company had pledged securities as collateral for certain municipal deposits and for interest rate swaps with certain counterparties. The total amortized cost and fair values of these pledged securities follows. Additionally, there is a blanket lien on certain securities to collateralize borrowings from the FHLBB, as discussed further in Note 11 - Borrowed Funds.

~~F-27~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~


		2020				2019					2022				2021
(In thousands)	(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value		(In thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Securities pledged to swap counterparties	Securities pledged to swap counterparties	$	37,532	$	37,815	$	25,728	$	25,828	Securities pledged to swap counterparties	$	11,972	$	11,973	$	34,773	$	34,896
Securities pledged for municipal deposits	Securities pledged for municipal deposits	156,047		166,570		168,740		175,719		Securities pledged for municipal deposits	304,741		276,804		183,408		189,535

Total	Total	$	193,579	$	204,385	$	194,468	$	201,547	Total	$	316,713	$	288,777	$	218,181	$	224,431

~~Purchases~~Proceeds from the sale of AFS securities totaled ~~$885~~$150 million in ~~2020 and $120 million in 2019.~~2022. During 2021, there were no sales of AFS securities. Proceeds from the sale of AFS securities totaled $69 million in ~~2020 and $136 million in 2019. The~~2020.The amounts for the sale of AFS securities were reclassified out of accumulated other comprehensive (loss)/income and into earnings. The components of net recognized gains and losses on the sale of AFS securities and the fair value change of marketable equities are as follows:


(In thousands)	(In thousands)	2020		2019		2018		(In thousands)	2022		2021		2020
Gross recognized gains	Gross recognized gains	$	4,602	$	7,492	$	3,256	Gross recognized gains	$	72	$	108	$	4,602
Gross recognized losses	Gross recognized losses	(11,133)		(3,103)		(6,975)		Gross recognized losses	(2,009)		(550)		(11,133)

Net recognized gains/(losses)		$	(6,531)	$	4,389	$	(3,719)
Net recognized (losses)								Net recognized (losses)	$	(1,937)	$	(442)	$	(6,531)

~~F-28~~F-24

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Debt securities with unrealized losses, segregated by the duration of their continuous unrealized loss positions, are summarized as follows:


		Less Than Twelve Months				Over Twelve Months				Total					Less Than Twelve Months				Over Twelve Months				Total
(In thousands)	(In thousands)	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		(In thousands)	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
December 31, 2020
December 31, 2022														December 31, 2022

Securities available for sale	Securities available for sale													Securities available for sale
Debt securities:	Debt securities:													Debt securities:

Municipal bonds and obligations														Municipal bonds and obligations	$	2,406	$	36,696	$	624	$	2,763	$	3,030	$	39,459
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	$	235	$	77,898	$	0	$	0	$	235	$	77,898	Agency collateralized mortgage obligations	23,052		247,509		76,735		284,434		99,787		531,943
Agency mortgage-backed securities	Agency mortgage-backed securities	131		39,939		2		256		133		40,195		Agency mortgage-backed securities	3,124		37,540		93,872		508,683		96,996		546,223
Agency commercial mortgage-back securities	Agency commercial mortgage-back securities	175		51,435		0		0		175		51,435		Agency commercial mortgage-back securities	9,885		96,396		25,865		132,043		35,750		228,439
Corporate bonds	Corporate bonds	10		4,875		0		0		10		4,875		Corporate bonds	1,709		25,657		1,229		9,929		2,938		35,586

Other bonds and obligations	Other bonds and obligations	0		0		8		1,030		8		1,030		Other bonds and obligations	—		—		66		295		66		295

Total securities available for sale	Total securities available for sale	$	551	$	174,147	$	10	$	1,286	$	561	$	175,433	Total securities available for sale	$	40,176	$	443,798	$	198,391	$	938,147	$	238,567	$	1,381,945

Securities held to maturity	Securities held to maturity													Securities held to maturity

Municipal bonds and obligations														Municipal bonds and obligations	5,476		125,494		18,228		38,341		23,704		163,835
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	171		25,048		0		0		171		25,048		Agency collateralized mortgage obligations	2,734		49,539		17,686		58,177		20,420		107,716
Agency mortgage-backed securities	Agency mortgage-backed securities	29		20,710		0		0		29		20,710		Agency mortgage-backed securities	300		2,419		8,940		39,299		9,240		41,718
Agency commercial mortgage-back securities	Agency commercial mortgage-back securities	12		10,216		0		0		12		10,216		Agency commercial mortgage-back securities	447		9,713		22,756		102,290		23,203		112,003

Tax advantaged economic development bonds														Tax advantaged economic development bonds	1		142		120		1,008		121		1,150
Total securities held to maturity	Total securities held to maturity	212		55,974		0		0		212		55,974		Total securities held to maturity	8,958		187,307		67,730		239,115		76,688		426,422

Total	Total	$	763	$	230,121	$	10	$	1,286	$	773	$	231,407	Total	$	49,134	$	631,105	$	266,121	$	1,177,262	$	315,255	$	1,808,367

December 31, 2019
December 31, 2021														December 31, 2021
Securities available for sale	Securities available for sale													Securities available for sale
Debt securities:	Debt securities:													Debt securities:

Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	$	127	$	52,623	$	42	$	6,267	$	169	$	58,890	Agency collateralized mortgage obligations	$	9,626	$	375,132	$	1,386	$	27,025	$	11,012	$	402,157
Agency mortgage-backed securities	Agency mortgage-backed securities	59		10,640		301		23,404		360		34,044		Agency mortgage-backed securities	3,179		222,887		4,463		175,941		7,642		398,828
Agency commercial mortgage-backed securities	Agency commercial mortgage-backed securities	1,097		116,324		49		11,250		1,146		127,574		Agency commercial mortgage-backed securities	1,609		103,354		2,019		49,313		3,628		152,667
Corporate bonds	Corporate bonds	0		0		607		42,823		607		42,823		Corporate bonds	114		11,115		—		—		114		11,115

Other bonds and obligations		4		1,239		1		29		5		1,268

Total securities available for sale	Total securities available for sale	$	1,287	$	180,826	$	1,000	$	83,773	$	2,287	$	264,599	Total securities available for sale	$	14,528	$	712,488	$	7,868	$	252,279	$	22,396	$	964,767

Securities held to maturity	Securities held to maturity													Securities held to maturity
Municipal bonds and obligations	Municipal bonds and obligations	5		800		0		0		5		800		Municipal bonds and obligations	693		36,981		—		—		693		36,981
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	50		9,778		0		0		50		9,778		Agency collateralized mortgage obligations	1,808		49,308		1,705		36,212		3,513		85,520

Agency mortgage-backed securities														Agency mortgage-backed securities	839		26,656		659		26,025		1,498		52,681
Agency commercial mortgage-back securities														Agency commercial mortgage-back securities	1,255		80,406		2,034		51,654		3,289		132,060
Tax advantaged economic development bonds	Tax advantaged economic development bonds	0		0		910		6,925		910		6,925		Tax advantaged economic development bonds	15		1,255		—		—		15		1,255
Total securities held to maturity	Total securities held to maturity	55		10,578		910		6,925		965		17,503		Total securities held to maturity	4,610		194,606		4,398		113,891		9,008		308,497

Total	Total	$	1,342	$	191,404	$	1,910	$	90,698	$	3,252	$	282,102	Total	$	19,138	$	907,094	$	12,266	$	366,170	$	31,404	$	1,273,264

F-25

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Debt Securities

The Company expects to recover its amortized cost basis on all debt securities in its AFS and HTM portfolios. Furthermore, the Company does not intend to sell nor does it anticipate that it will be required to sell any of its securities in an unrealized loss position as of December 31, ~~2020,~~2022, prior to this recovery. The Company’s ability and intent to hold these securities until recovery is supported by the Company’s strong capital and liquidity positions.

The following summarizes, by investment security type, the basis for the conclusion that the debt securities in an unrealized loss position within the Company’s AFS and HTM portfolios did not maintain other-than-temporary impairment ("OTTI") at year-end ~~2020:~~2022:

AFS municipal bonds and obligations

~~F-29~~At year-end 2022, 46 out of 94 securities in the Company’s portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 7.1% of the amortized cost of securities in unrealized loss positions. The Company continually monitors the municipal bond sector of the market carefully and periodically evaluates the appropriate level of exposure to the market. At this time, the Company feels the bonds in this portfolio carry minimal risk of default and the Company is appropriately compensated for that risk. There were no material underlying credit downgrades during the quarter. All securities are performing.

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

AFS collateralized mortgage obligations

At year-end ~~2020, 12~~2022, 243 out of ~~225~~245 securities in the Company’s portfolio of AFS collateralized mortgage obligations were in unrealized loss positions. Aggregate unrealized losses represented ~~0.3%~~15.8% of the amortized cost of securities in unrealized loss positions. The Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), and Government National Mortgage Association ("GNMA") guarantee the contractual cash flows of all of the Company's collateralized residential mortgage obligations. The securities are investment grade rated and there were no material underlying credit downgrades during ~~2020.~~2022. All securities are performing.

AFS commercial and residential mortgage-backed securities

At year-end ~~2020, 17~~2022, 137 out of ~~125~~139 securities in the Company’s portfolio of AFS mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented ~~0.3%~~14.6% of the amortized cost of securities in unrealized loss positions. The FNMA, FHLMC, and GNMA guarantee the contractual cash flows of the Company’s mortgage-backed securities. The securities are investment grade rated and there were no material underlying credit downgrades during ~~2020.~~2022. All securities are performing.

AFS corporate bonds

At year-end ~~2020, 1~~2022, 13 out of 15 securities in the Company’s portfolio of AFS corporate bonds were in unrealized loss positions. The aggregate unrealized loss represents ~~0.2%~~7.6% of the amortized cost of bonds in unrealized loss positions. The Company reviews the financial strength of these bonds and has concluded that the amortized cost remains supported by the expected future cash flows of these securities.

AFS other bonds and obligations

At year-end ~~2020, 3~~2022, 2 out of 73 securities in the Company’s portfolio of other bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented ~~0.8%~~18.3% of the amortized cost of securities in unrealized loss positions. The securities are all investment grade rated, and there were no material underlying credit downgrades during ~~2020.~~2022. All securities are performing.

HTM municipal bonds and obligations

At year-end 2022, 119 out of 190 securities in the Company’s portfolio of HTM municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 12.6% of the amortized cost of securities in unrealized loss positions. The Company continually monitors the municipal bond sector of the market carefully and periodically evaluates the appropriate level of exposure to the market. At this time, the Company feels the bonds in this portfolio carry minimal risk of default and the Company is appropriately compensated for that risk. There were no material underlying credit downgrades during the quarter. All securities are performing.

F-26

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HTM collateralized mortgage obligations

At year-end ~~2020, 2~~2022, 13 out of 13 securities in the Company’s portfolio of HTM collateralized mortgage obligations were in an unrealized loss position. Aggregate unrealized losses represented ~~0.7%~~15.9% of the amortized cost of the security in an unrealized loss position. The FNMA, FHLMC, and GNMA guarantee the contractual cash flows of all of the Company's collateralized residential mortgage obligations. The securities are investment grade rated, and there were no material underlying credit downgrades during ~~2020.~~2022. All securities are performing.

HTM commercial and residential mortgage-backed securities

At year-end ~~2020, 2~~2022, 17 out of 617 securities in the Company’s portfolio of HTM mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented ~~0.1%~~17.4% of the amortized cost of securities in unrealized loss positions. The FNMA, FHLMC, and GNMA guarantee the contractual cash flows of the Company’s mortgage-backed securities. The securities are investment grade rated and there were no material underlying credit downgrades during ~~2020.~~2022. All securities are performing.

HTM tax-advantaged economic development bonds

At year-end 2022, 2 out of 3 securities in the Company’s portfolio of tax-advantaged economic development

bonds were in unrealized loss positions. Aggregate unrealized losses represented 9.5% of the amortized cost of

securities in unrealized loss position. The Company believes that more likely than not all the principal outstanding

will be collected. All securities are performing.

~~F-30~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

NOTE 6. LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES

Upon adoption of ASC 326, the Company evaluates its risk characteristics of loans based on regulatory call report code with sub-segmentation based on underlying collateral for certain loan types. Prior to the adoption of ASC 326, under the incurred loss model, the Company evaluated its risk characteristics of loans based on purpose of the loans. The composition of loans by portfolio segment as of December 31, 2020 and January 1, 2021 follows:

(In thousands) December 31, 2019 Statement Balance Impact of ASC 326 Adoption January 1, 2020 Post-ASC 326 Adoption
Loans:
Construction $ 448,452 $ 187 $ 448,639
Commercial multifamily 631,740 252 631,992
Commercial real estate owner occupied 673,308 3,185 676,493
Commercial real estate non-owner occupied 2,189,780 6,540 2,196,320
Commercial and industrial 1,843,683 (12,212) 1,831,471
Residential real estate 2,853,385 1,868 2,855,253
Home equity 378,793 10 378,803
Consumer other 483,287 205 483,492
Total $ 9,502,428 $ 35 $ 9,502,463
Allowance:
Construction $ 2,713 $ (342) $ 2,371
Commercial multifamily 4,413 (1,842) 2,571
Commercial real estate owner occupied 4,880 6,062 10,942
Commercial real estate non-owner occupied 16,344 11,201 27,545
Commercial and industrial 20,099 (2,189) 17,910
Residential real estate 9,970 6,799 16,769
Home equity 1,470 4,884 6,354
Consumer other 3,686 861 4,547
Total $ 63,575 $ 25,434 $ 89,009

~~F-31~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

The following is a summary of total loans by regulatory call report code with sub-segmentation based on underlying collateral for certain loan types:


(In thousands)	(In thousands)	December 31, 2020		December 31, 2019		(In thousands)	December 31, 2022		December 31, 2021
Construction	Construction	$	454,513	$	448,452	Construction	$	319,452	$	324,282
Commercial multifamily	Commercial multifamily	483,350		631,740		Commercial multifamily	620,088		515,817
Commercial real estate owner occupied	Commercial real estate owner occupied	552,413		673,308		Commercial real estate owner occupied	640,489		606,477
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	2,119,263		2,189,780		Commercial real estate non-owner occupied	2,496,237		2,156,929
Commercial and industrial	Commercial and industrial	1,943,164		1,843,683		Commercial and industrial	1,445,236		1,284,429

Residential real estate	Residential real estate	1,931,681		2,853,385		Residential real estate	2,312,447		1,489,248
Home equity	Home equity	293,981		378,793		Home equity	227,450		252,366
Consumer other	Consumer other	303,154		483,287		Consumer other	273,910		196,299
Total loans	Total loans	$	8,081,519	$	9,502,428	Total loans	$	8,335,309	$	6,825,847

Allowance for credit losses	Allowance for credit losses	127,302		63,575		Allowance for credit losses	96,270		106,094
Net loans	Net loans	$	7,954,217	$	9,438,853	Net loans	$	8,239,039	$	6,719,753

As of December 31, ~~2020,~~2022 and 2021, outstanding loans originated under the Small Business Administration ("SBA") Paycheck Protection Program ("PPP") totaled ~~$633.3 million.~~$5.8 million and $29.9 million, respectively. These loans are 100% guaranteed by the SBA and the full principal amount of the loan may qualify for forgiveness. These loans are included in commercial and industrial.

In 2022, the Company purchased loans aggregating $718 million and sold loans aggregating $366 million. In 2021, the Company purchased loans aggregating $211 million and sold loans aggregating $560 million. In 2020, the Company purchased loans aggregating $98 million and sold loans aggregating $415 million. ~~In 2019, the Company purchased loans aggregating $432 million and sold loans aggregating $310 million.~~ Net gains on sales of loans were ~~$10.6~~$12.5 million, ~~$12.0~~$20.7 million, and ~~$9.3~~$10.6 million for the years ~~2020, 2019,~~2022, 2021, and ~~2018,~~2020, respectively. These amounts are included in Loan ~~Related Income~~Fees and Revenue on the Consolidated Statements of Operations.

F-27

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Most of the Company’s lending activity occurs within its primary markets in Massachusetts, Southern Vermont, and Northeastern New York. Most of the loan portfolio is secured by real estate, including residential mortgages, commercial mortgages, and home equity loans. Year-end loans to operators of non-residential buildings totaled ~~$1.5~~$1.9 billion, or ~~19.0%~~22.7%, and ~~$1.7~~$1.6 billion, or ~~18.1%~~24.0% of total loans in ~~2020~~2022 and ~~2019,~~2021, respectively. There were no other concentrations of loans related to any single industry in excess of 10% of total loans at year-end ~~2020~~2022 or ~~2019.~~2021.

As of December 31, ~~2020,~~2022 and December 31, 2021, the Company ~~maintained foreclosed residential real estate property with a fair value of $149 thousand. As of December 31, 2019, the Company maintained~~had no foreclosed residential real estate property. Additionally, residential mortgage loans collateralized by real estate property that are in the process of foreclosure as of December 31, ~~2020~~2022 and December 31, ~~2019~~2021 totaled ~~$3.3~~$3.0 million and ~~$6.5~~$1.4 million, respectively, including sold loans serviced by the Company.

At year-end ~~2020,~~2022 and 2021, the Company had pledged loans totaling ~~$925 million~~$0.8 billion and $0.7 billion, respectively, to the Federal Reserve Bank of Boston as collateral for certain borrowing arrangements. Also, residential first mortgage loans are subject to a blanket lien for FHLBB advances. See Note 11 - Borrowed Funds.

At year-end ~~2020~~2022 and ~~2019,~~2021, the Company’s commitments outstanding to related parties totaled ~~$2.0~~$1.5 million and ~~$1.8~~$1.7 million, respectively, and the loans outstanding against these commitments totaled ~~$1.1~~$0.8 million and $1.0 million, respectively. Related parties include directors and executive officers of the Company and its subsidiaries, as well as their respective affiliates in which they have a controlling interest and immediate family members. For the years ~~2020~~2022 and ~~2019,~~2021, all related party loans were performing.

Risk characteristics relevant to each portfolio segment are as follows:

Construction -Loans in this segment primarily include real estate development loans for which payment is derived from sale of the property or long term financing at completion. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.

Commercial real estate multifamily, owner occupied and non-owner - Loans in these segments are primarily owner-occupied or income-producing properties throughout New England and Northeastern New York. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy, which in turn, will have an effect on the credit quality in this segment. Management monitors the cash flows of these loans.

Commercial and industrial loans - Loans in this segment are made to businesses and are generally secured by assets of the business such as accounts receivable, inventory, marketable securities, other liquid collateral, equipment and other business assets. Repayment is expected from the cash flows of the business. Loans in this segment include asset based loans which generally have no scheduled repayment and which are closely monitored against formula based collateral advance ratios. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.

Residential real estate - All loans in this segment are collateralized by residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Home equity and other consumer loans - Loans in this segment are primarily home equity lines of credit, automobile loans and other consumer loans. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

~~F-32~~F-28

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Allowance for Credit Losses for Loans

The Allowance for Credit Losses for Loans (“ACLL”) is comprised of the allowance for credit losses on loans, and the allowance for unfunded commitments is accounted for as a separate liability in other liabilities on the Consolidated Balance Sheets. The level of the ACLL represents management’s estimate of expected credit losses over the expected life of the loans at the balance sheet date. The Company uses a static pool migration analysis method, applying expected historical loss trend and observed economic metrics. The level of the ACLL is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past and current events, utilizing a 7 quarter reasonable and supportable forecast period with a 1 year reversion period. The ACLL reserve is overlaid with qualitative factors based upon:

•the existence and growth of concentrations of credit;

•the volume and severity of past due financial assets, including nonaccrual assets;

•the institutions lending and credit review as well as the experience and ability of relevant management and staff and;

•the effect of other external factors such as regulatory, competition, regional market conditions, legal and technological environment and other events such as natural disasters;

•the effect of other economic factors such as economic stimulus and customer forbearance programs.

F-29

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s activity in the allowance for credit losses for loans for the ~~year~~years ended December 31, 2022, December 31, 2021 and December 31, 2020 was as follows:


(In thousands)	(In thousands)	Balance at Beginning of Period		Impact of Adopting ASC 326		Sub-total		Charge-offs		Recoveries		Provision for Credit Losses		Balance at End of Period		(In thousands)	Balance at Beginning of Period		Charge-offs		Recoveries		Provision for Credit Losses		Balance at End of Period
Year ended December 31, 2020
Year ended December 31, 2022																Year ended December 31, 2022
Construction	Construction	$	2,713	$	(342)	$	2,371	$	(834)	$	0	$	3,574	$	5,111	Construction	$	3,206	$	—	$	—	$	(1,979)	$	1,227
Commercial multifamily	Commercial multifamily	4,413		(1,842)		2,571		(100)		100		3,345		5,916		Commercial multifamily	6,120		(94)		112		(4,328)		1,810
Commercial real estate owner occupied	Commercial real estate owner occupied	4,880		6,062		10,942		(8,686)		1,053		9,071		12,380		Commercial real estate owner occupied	12,752		(687)		702		(2,028)		10,739
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	16,344		11,201		27,545		(11,653)		307		19,651		35,850		Commercial real estate non-owner occupied	32,106		(5,894)		1,549		2,963		30,724
Commercial and industrial	Commercial and industrial	20,099		(2,189)		17,910		(19,328)		4,285		22,146		25,013		Commercial and industrial	22,584		(18,447)		3,050		11,556		18,743

Residential real estate	Residential real estate	9,970		6,799		16,769		(2,285)		1,359		12,648		28,491		Residential real estate	22,406		(555)		1,019		(4,204)		18,666
Home equity	Home equity	1,470		4,884		6,354		(347)		292		183		6,482		Home equity	4,006		(166)		283		(1,950)		2,173
Consumer other	Consumer other	3,686		861		4,547		(2,562)		609		5,465		8,059		Consumer other	2,914		(2,215)		505		10,984		12,188
Total allowance for credit losses	Total allowance for credit losses	$	63,575	$	25,434	$	89,009	$	(45,795)	$	8,005	$	76,083	$	127,302	Total allowance for credit losses	$	106,094	$	(28,058)	$	7,220	$	11,014	$	96,270


(In thousands)	Balance at Beginning of Period		Charge-offs		Recoveries		Provision for Credit Losses		Balance at End of Period
Year ended December 31, 2021
Construction	$	5,111	$	—	$	—	$	(1,905)	$	3,206
Commercial multifamily	5,916		(404)		157		451		6,120
Commercial real estate owner occupied	12,380		(1,640)		204		1,808		12,752
Commercial real estate non-owner occupied	35,850		(14,557)		2,522		8,291		32,106
Commercial and industrial	25,013		(10,841)		4,565		3,847		22,584

Residential real estate	28,491		(1,664)		1,767		(6,188)		22,406
Home equity	6,482		(334)		335		(2,477)		4,006
Consumer other	8,059		(1,578)		761		(4,328)		2,914
Total allowance for credit losses	$	127,302	$	(31,018)	$	10,311	$	(501)	$	106,094


(In thousands)	Balance at Beginning of Period		Impact of Adopting ASC 326		Sub-total		Charge-offs		Recoveries		Provision for Credit Losses		Balance at End of Period
Year ended December 31, 2020
Construction	$	2,713	$	(342)	$	2,371	$	(834)	$	—	$	3,574	$	5,111
Commercial multifamily	4,413		(1,842)		2,571		(100)		100		3,345		5,916
Commercial real estate owner occupied	4,880		6,062		10,942		(8,686)		1,053		9,071		12,380
Commercial real estate non-owner occupied	16,344		11,201		27,545		(11,653)		307		19,651		35,850
Commercial and industrial	20,099		(2,189)		17,910		(19,328)		4,285		22,146		25,013

Residential real estate	9,970		6,799		16,769		(2,285)		1,359		12,648		28,491
Home equity	1,470		4,884		6,354		(347)		292		183		6,482
Consumer other	3,686		861		4,547		(2,562)		609		5,465		8,059
Total allowance for credit losses	$	63,575	$	25,434	$	89,009	$	(45,795)	$	8,005	$	76,083	$	127,302

F-30

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s allowance for credit losses on unfunded commitments is recognized as a liability (other liability on ~~consolidated balance sheet)~~the Consolidated Balance Sheets), with adjustments to the reserve recognized in other noninterest expense in the Consolidated Statements of Operations. The Company’s activity in the allowance for credit losses on unfunded commitments for the ~~year~~years ended December 31, 2022, December 31, 2021, and December 31, 2020 was as follows:


(In thousands)	Total
Balance at December 31, 2021	$	7,043
Expense for credit losses	1,545
Balance at December 31, 2022	$	8,588


(In thousands)	Total
Balance at December 31, 2020	$	7,629
Release of expense for credit losses	(586)
Balance at December 31, 2021	$	7,043


(In thousands)	Total
Balance at December 31, 2019	$	100
Impact of adopting ASC 326	7,993
Sub-Total	8,093
Release of expense for credit losses	(464)
Balance at December 31, 2020	$	7,629

~~F-33~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Credit Quality Information

The Company monitors the credit quality of its portfolio by using internal risk ratings that are based on regulatory guidance. Loans that are given a Pass rating are not considered a problem credit. Loans that are classified as Special Mention loans are considered to have potential weaknesses and are evaluated closely by management. Substandard, including non-accruing loans, are loans for which a definitive weakness has been identified and which may make full collection of contractual cash flows questionable. Doubtful loans are those with identified weaknesses that make full collection of contractual cash flows, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

For commercial credits, the Company assigns an internal risk rating at origination and reviews the rating annually, semiannually, or quarterly depending on the risk rating. The rating is also reassessed at any point in time when management becomes aware of information that may affect the borrower’s ability to fulfill their obligations.

The Company risk rates its residential mortgages, including 1-4 family and residential construction loans, based on a three rating system: Pass, Special Mention, and Substandard. Loans that are current within 59 days are rated Pass. Residential mortgages that are 60-89 days delinquent are rated Special Mention. Loans delinquent for 90 days or greater are rated Substandard and generally placed on non-accrual status.

~~F-34~~F-31

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the Company’s loans by risk category:


		Term Loans Amortized Cost Basis by Origination Year																			Term Loans Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total		(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
As of December 31, 2020
As of December 31, 2022																				As of December 31, 2022
Construction	Construction																			Construction
Risk rating	Risk rating																			Risk rating
Pass	Pass	$	38,374	$	255,377	$	114,690	$	28,474	$	9,519	$	2,766	$	1,000	$	0	$	450,200	Pass	$	153,393	$	133,708	$	25,634	$	3,432	$	1,361	$	1,924	$	—	$	—	$	319,452
Special Mention	Special Mention	0		0		313		0		0		0		0		0		313		Special Mention	—		—		—		—		—		—		—		—		—
Substandard	Substandard	0		0		0		4,000		0		0		0		0		4,000		Substandard	—		—		—		—		—		—		—		—		—
Total	Total	$	38,374	$	255,377	$	115,003	$	32,474	$	9,519	$	2,766	$	1,000	$	0	$	454,513	Total	$	153,393	$	133,708	$	25,634	$	3,432	$	1,361	$	1,924	$	—	$	—	$	319,452

Commercial multifamily:	Commercial multifamily:																			Commercial multifamily:
Risk rating	Risk rating																			Risk rating
Pass	Pass	$	31,438	$	57,659	$	74,932	$	77,746	$	81,066	$	153,818	$	20	$	0	$	476,679	Pass	$	205,124	$	61,032	$	27,583	$	100,696	$	67,675	$	149,633	$	205	$	—	$	611,948
Special Mention	Special Mention	0		0		0		0		0		0		0		0		0		Special Mention	—		—		2,628		—		—		—		—		—		2,628
Substandard	Substandard	0		0		0		0		47		6,479		145		0		6,671		Substandard	—		—		—		—		5,512		—		—		—		5,512
Total	Total	$	31,438	$	57,659	$	74,932	$	77,746	$	81,113	$	160,297	$	165	$	0	$	483,350	Total	$	205,124	$	61,032	$	30,211	$	100,696	$	73,187	$	149,633	$	205	$	—	$	620,088

Commercial real estate owner occupied:	Commercial real estate owner occupied:																			Commercial real estate owner occupied:
Risk rating	Risk rating																			Risk rating
Pass	Pass	$	58,327	$	84,839	$	104,797	$	64,693	$	44,300	$	169,197	$	1,194	$	0	$	527,347	Pass	$	131,096	$	127,270	$	58,835	$	82,576	$	75,322	$	154,056	$	3,464	$	—	$	632,619
Special Mention	Special Mention	535		2,569		1,136		1,009		800		2,579		0		0		8,628		Special Mention	—		—		387		—		—		—		—		—		387
Substandard	Substandard	0		1,266		3,597		1,685		1,439		8,451		0		0		16,438		Substandard	1,003		122		31		282		1,056		4,989		—		—		7,483
Total	Total	$	58,862	$	88,674	$	109,530	$	67,387	$	46,539	$	180,227	$	1,194	$	0	$	552,413	Total	$	132,099	$	127,392	$	59,253	$	82,858	$	76,378	$	159,045	$	3,464	$	—	$	640,489

Commercial real estate non-owner occupied:	Commercial real estate non-owner occupied:																			Commercial real estate non-owner occupied:
Risk rating	Risk rating																			Risk rating
Pass	Pass	$	180,520	$	292,386	$	435,440	$	223,935	$	303,221	$	497,066	$	15,393	$	0	$	1,947,961	Pass	$	621,685	$	410,359	$	175,456	$	333,783	$	313,124	$	530,322	$	17,846	$	—	$	2,402,575
Special Mention	Special Mention	0		279		2,068		6,958		11,798		44,961		1,068		0		67,132		Special Mention	—		—		—		—		20,000		18,462		—		—		38,462
Substandard	Substandard	7,804		3,529		4,235		19,632		2,124		66,651		195		0		104,170		Substandard	—		—		7,237		13,623		15,610		18,730		—		—		55,200
Total	Total	$	188,324	$	296,194	$	441,743	$	250,525	$	317,143	$	608,678	$	16,656	$	0	$	2,119,263	Total	$	621,685	$	410,359	$	182,693	$	347,406	$	348,734	$	567,514	$	17,846	$	—	$	2,496,237

Commercial and industrial:	Commercial and industrial:																			Commercial and industrial:
Risk rating	Risk rating																			Risk rating
Pass	Pass	$	754,260	$	159,046	$	205,651	$	130,985	$	48,326	$	148,222	$	368,769	$	0	$	1,815,259	Pass	$	282,781	$	147,070	$	56,880	$	67,975	$	83,223	$	99,367	$	648,956	$	—	$	1,386,252
Special Mention	Special Mention	1,467		5,753		5,267		2,851		1,601		65		12,408		0		29,412		Special Mention	—		5,811		1,290		1,332		11,502		912		2,632		—		23,479
Substandard	Substandard	7,392		39,822		24,951		7,765		3,504		5,630		9,099		0		98,163		Substandard	204		496		3,640		8,139		1,981		2,799		10,581		—		27,840
Doubtful	Doubtful	0		0		0		0		0		0		330		0		330		Doubtful	—		—		—		—		—		56		7,609		—		7,665
Total	Total	$	763,119	$	204,621	$	235,869	$	141,601	$	53,431	$	153,917	$	390,606	$	0	$	1,943,164	Total	$	282,985	$	153,377	$	61,810	$	77,446	$	96,706	$	103,134	$	669,778	$	—	$	1,445,236

Residential real estate	Residential real estate																			Residential real estate
Risk rating	Risk rating																			Risk rating
Pass	Pass	$	150,583	$	146,142	$	272,399	$	320,384	$	333,159	$	691,078	$	3,281	$	0	$	1,917,026	Pass	$	997,981	$	280,308	$	96,548	$	70,845	$	138,894	$	713,744	$	165	$	—	$	2,298,485
Special Mention	Special Mention	384		0		454		1,430		0		362		0		0		2,630		Special Mention	—		364		—		861		202		707		—		—		2,134
Substandard	Substandard	991		39		703		902		417		8,964		9		0		12,025		Substandard	—		284		448		267		1,857		8,972		—		—		11,828
Total	Total	$	151,958	$	146,181	$	273,556	$	322,716	$	333,576	$	700,404	$	3,290	$	0	$	1,931,681	Total	$	997,981	$	280,956	$	96,996	$	71,973	$	140,953	$	723,423	$	165	$	—	$	2,312,447

~~F-35~~F-32

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
As of December 31, 2021
Construction
Risk rating
Pass	$	71,784	$	52,725	$	117,784	$	66,950	$	3,839	$	1,721	$	50	$	—	$	314,853
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		9,429		—		—		—		—		9,429
Total	$	71,784	$	52,725	$	117,784	$	76,379	$	3,839	$	1,721	$	50	$	—	$	324,282

Commercial multifamily:
Risk rating
Pass	$	63,630	$	28,172	$	98,455	$	59,720	$	76,699	$	176,020	$	457	$	—	$	503,153
Special Mention	—		2,700		—		5,598		—		—		—		—		8,298
Substandard	—		—		—		—		—		4,230		136		—		4,366
Total	$	63,630	$	30,872	$	98,455	$	65,318	$	76,699	$	180,250	$	593	$	—	$	515,817

Commercial real estate owner occupied:
Risk rating
Pass	$	154,434	$	50,236	$	85,687	$	91,316	$	45,995	$	157,346	$	3,206	$	—	$	588,220
Special Mention	—		525		869		1,668		1,405		1,157		—		—		5,624
Substandard	—		—		2,113		1,593		838		8,089		—		—		12,633
Total	$	154,434	$	50,761	$	88,669	$	94,577	$	48,238	$	166,592	$	3,206	$	—	$	606,477

Commercial real estate non-owner occupied:
Risk rating
Pass	$	426,086	$	176,172	$	296,985	$	349,947	$	204,043	$	585,044	$	19,511	$	—	$	2,057,788
Special Mention	—		221		3,472		7,632		2,302		27,268		—		—		40,895
Substandard	—		7,588		—		2,784		33,472		14,303		99		—		58,246
Total	$	426,086	$	183,981	$	300,457	$	360,363	$	239,817	$	626,615	$	19,610	$	—	$	2,156,929

Commercial and industrial:
Risk rating
Pass	$	187,257	$	130,520	$	114,153	$	156,443	$	54,190	$	136,837	$	424,393	$	—	$	1,203,793
Special Mention	661		1,691		10,824		5,092		1,433		488		22,468		—		42,657
Substandard	211		2,494		9,609		3,145		2,020		2,330		17,935		—		37,744
Doubtful	—		—		—		—		—		15		220		—		235
Total	$	188,129	$	134,705	$	134,586	$	164,680	$	57,643	$	139,670	$	465,016	$	—	$	1,284,429









Residential real estate
Risk rating
Pass	$	214,306	$	114,536	$	86,997	$	169,537	$	189,980	$	697,401	$	293	$	—	$	1,473,050
Special Mention	—		—		—		120		502		1,557		—		—		2,179
Substandard	1,239		—		142		1,849		2,161		8,628		—		—		14,019
Total	$	215,545	$	114,536	$	87,139	$	171,506	$	192,643	$	707,586	$	293	$	—	$	1,489,248

F-33

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For home equity and consumer other loan portfolio segments, Berkshire evaluates credit quality based on the aging status of the loan and by payment activity. The performing or nonperforming status is updated on an ongoing basis dependent upon improvement and deterioration in credit quality. The following table presents the amortized cost based on payment activity:


		Term Loans Amortized Cost Basis by Origination Year																			Term Loans Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total		(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
As of December 31, 2020
As of December 31, 2022																				As of December 31, 2022
Home equity:	Home equity:																			Home equity:
Payment performance	Payment performance																			Payment performance
Performing	Performing	$	2,445	$	1,960	$	316	$	1,859	$	499	$	1,882	$	282,123	$	0	$	291,084	Performing	$	—	$	114	$	454	$	—	$	—	$	17	$	224,746	$	—	$	225,331
Nonperforming	Nonperforming	0		0		1		0		0		0		2,896		0		2,897		Nonperforming	—		—		—		—		—		—		2,119		—		2,119
Total	Total	$	2,445	$	1,960	$	317	$	1,859	$	499	$	1,882	$	285,019	$	0	$	293,981	Total	$	—	$	114	$	454	$	—	$	—	$	17	$	226,865	$	—	$	227,450

Consumer other:	Consumer other:																			Consumer other:
Payment performance	Payment performance																			Payment performance
Performing	Performing	$	15,193	$	35,317	$	101,730	$	69,366	$	35,421	$	31,327	$	9,339	$	0	$	297,693	Performing	$	161,157	$	28,279	$	8,312	$	12,670	$	27,608	$	24,682	$	9,070	$	—	$	271,778
Nonperforming	Nonperforming	39		316		1,511		1,599		1,585		407		4		0		5,461		Nonperforming	588		137		44		280		477		567		39		—		2,132
Total	Total	$	15,232	$	35,633	$	103,241	$	70,965	$	37,006	$	31,734	$	9,343	$	0	$	303,154	Total	$	161,745	$	28,416	$	8,356	$	12,950	$	28,085	$	25,249	$	9,109	$	—	$	273,910


	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
As of December 31, 2021
Home equity:
Payment performance
Performing	$	125	$	469	$	—	$	—	$	—	$	24	$	249,590	$	—	$	250,208
Nonperforming	—		—		—		—		—		—		2,158		—		2,158
Total	$	125	$	469	$	—	$	—	$	—	$	24	$	251,748	$	—	$	252,366

Consumer other:
Payment performance
Performing	$	37,994	$	11,189	$	21,548	$	55,577	$	30,632	$	28,797	$	7,505	$	—	$	193,242
Nonperforming	8		46		290		797		746		1,139		31		—		3,057
Total	$	38,002	$	11,235	$	21,838	$	56,374	$	31,378	$	29,936	$	7,536	$	—	$	196,299

~~F-36~~F-34

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information about total loans rated Special Mention or lower at December 31, 2022 and December 31, 2021. The table below includes consumer loans that are Special Mention and Substandard accruing that are classified as performing based on payment activity.


(In thousands)	December 31, 2022		December 31, 2021
Non-Accrual	$	31,114	$	35,326
Substandard Accruing	88,665		106,560
Total Classified	119,779		141,886
Special Mention	68,127		100,071
Total Criticized	$	187,906	$	241,957

The following is a summary of loans by past due status at December 31, ~~2020:~~2022 and December 31, 2021:


(In thousands)	(In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans		(In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans
December 31, 2020
December 31, 2022														December 31, 2022
Construction	Construction	$	0	$	0	$	0	$	0	$	454,513	$	454,513	Construction	$	—	$	—	$	—	$	—	$	319,452	$	319,452
Commercial multifamily	Commercial multifamily	0		0		757		757		482,593		483,350		Commercial multifamily	—		214		—		214		619,874		620,088
Commercial real estate owner occupied	Commercial real estate owner occupied	809		631		4,894		6,334		546,079		552,413		Commercial real estate owner occupied	122		—		3,302		3,424		637,065		640,489
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	315		168		38,389		38,872		2,080,391		2,119,263		Commercial real estate non-owner occupied	143		—		191		334		2,495,903		2,496,237
Commercial and industrial	Commercial and industrial	3,016		3,259		12,982		19,257		1,923,907		1,943,164		Commercial and industrial	1,173		1,438		18,658		21,269		1,423,967		1,445,236

Residential real estate	Residential real estate	2,068		2,630		11,115		15,813		1,915,868		1,931,681		Residential real estate	3,694		2,134		11,724		17,552		2,294,895		2,312,447
Home equity	Home equity	244		284		2,897		3,425		290,556		293,981		Home equity	168		57		2,119		2,344		225,106		227,450
Consumer other	Consumer other	2,109		777		5,364		8,250		294,904		303,154		Consumer other	1,990		1,028		2,158		5,176		268,734		273,910
Total	Total	$	8,561	$	7,749	$	76,398	$	92,708	$	7,988,811	$	8,081,519	Total	$	7,290	$	4,871	$	38,152	$	50,313	$	8,284,996	$	8,335,309


(In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans
December 31, 2021
Construction	$	—	$	—	$	—	$	—	$	324,282	$	324,282
Commercial multifamily	82		306		187		575		515,242		515,817
Commercial real estate owner occupied	—		400		4,221		4,621		601,856		606,477
Commercial real estate non-owner occupied	25,420		653		9,049		35,122		2,121,807		2,156,929
Commercial and industrial	2,700		709		6,836		10,245		1,274,184		1,284,429

Residential real estate	5,529		2,015		13,264		20,808		1,468,440		1,489,248
Home equity	258		108		2,158		2,524		249,842		252,366
Consumer other	1,363		320		2,882		4,565		191,734		196,299
Total	$	35,352	$	4,511	$	38,597	$	78,460	$	6,747,387	$	6,825,847

~~F-37~~F-35

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of loans on nonaccrual status and loans past due 90 days or more and still accruing as of December 31, ~~2020:~~2022 and December 31, 2021:


		January 1, 2020		December 31, 2020									December 31, 2022
(In thousands)	(In thousands)	Nonaccrual Amortized Cost		Nonaccrual Amortized Cost		Nonaccrual With No Related Allowance		Past Due 90 Days or Greater and Accruing		Interest Income Recognized on Nonaccrual		(In thousands)	Nonaccrual Amortized Cost		Nonaccrual With No Related Allowance		Past Due 90 Days or Greater and Accruing		Interest Income Recognized on Nonaccrual
Construction	Construction	$	0	$	0	$	0	$	0	$	0	Construction	$	—	$	—	$	—	$	—
Commercial multifamily	Commercial multifamily	811		757		591		0		0		Commercial multifamily	—		—		—		—
Commercial real estate owner occupied	Commercial real estate owner occupied	15,389		4,509		2,290		385		0		Commercial real estate owner occupied	2,202		1,411		1,100		—
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	1,031		29,572		13,912		8,817		0		Commercial real estate non-owner occupied	191		73		—		—
Commercial and industrial	Commercial and industrial	11,218		12,441		4,725		541		0		Commercial and industrial	16,992		14,223		1,666		—

Residential real estate	Residential real estate	6,411		9,711		5,739		1,404		0		Residential real estate	8,901		5,307		2,823		—
Home equity	Home equity	1,798		2,654		159		243		0		Home equity	1,568		388		551		—
Consumer other	Consumer other	2,982		5,304		2		60		0		Consumer other	1,260		2		898		—
Total	Total	$	39,640	$	64,948	$	27,418	$	11,450	$	0	Total	$	31,114	$	21,404	$	7,038	$	—

The commercial and industrial loans nonaccrual amortized cost as of December 31, 2022 included medallion loans with a fair value of $0.6 million and a contractual balance of $10.9 million.


	December 31, 2021
(In thousands)	Nonaccrual Amortized Cost		Nonaccrual With No Related Allowance		Past Due 90 Days or Greater and Accruing		Interest Income Recognized on Nonaccrual
Construction	$	—	$	—	$	—	$	—
Commercial multifamily	187		187		—		—
Commercial real estate owner occupied	4,221		2,413		—		—
Commercial real estate non-owner occupied	8,877		8,412		172		—
Commercial and industrial	6,747		1,506		89		—

Residential real estate	10,698		6,511		2,566		—
Home equity	1,901		141		257		—
Consumer other	2,695		4		187		—
Total	$	35,326	$	19,174	$	3,271	$	—

The commercial and industrial loans nonaccrual amortized cost as of December 31, ~~2020~~2021 included medallion loans with a fair value of ~~$2.3~~$1.2 million and a contractual balance of ~~$53.9~~$31.4 million.

The following table summarizes information about total loans rated Special Mention or lower at December 31, 2020. The table below includes consumer loans that are Special Mention and Substandard accruing that are classified as performing based on payment activity.


~~(In thousands)~~	~~December 31, 2020~~
~~Non-Accrual~~	$	~~64,948~~
~~Substandard Accruing~~	~~185,207~~
~~Total Classified~~	~~250,155~~
~~Special Mention~~	~~109,299~~
~~Total Criticized~~	$	~~359,454~~

F-36

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. Expected credit losses for collateral-dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value. The following table presents the amortized cost basis of individually analyzed collateral-dependent loans by loan portfolio segment:

~~F-38~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~


		Type of Collateral				Type of Collateral
(In thousands)	(In thousands)	Real Estate		Investment Securities/Cash			Other		(In thousands)	Real Estate		Investment Securities/Cash		Other
December 31, 2020

December 31, 2022									December 31, 2022
Construction									Construction	$	—	$	—	$	—
Commercial multifamily	Commercial multifamily	$	591	$	0		$	0	Commercial multifamily	—		—		—
Commercial real estate owner occupied	Commercial real estate owner occupied	5,714		0			0		Commercial real estate owner occupied	2,793		—		—
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	30,950		0			0		Commercial real estate non-owner occupied	384		—		—
Commercial and industrial	Commercial and industrial	973		36			3,758		Commercial and industrial	288		—		16,931

Residential real estate	Residential real estate	5,081		0			0		Residential real estate	3,910		—		—
Home equity	Home equity	145		0			0		Home equity	501		—		—
Consumer other	Consumer other	51		0			0		Consumer other	2		—		—
Total loans	Total loans	$	43,505	$	36		$	3,758	Total loans	$	7,878	$	—	$	16,931


	Type of Collateral
(In thousands)	Real Estate		Investment Securities/Cash		Other
December 31, 2021
Construction	$	9,429	$	—	$	—
Commercial multifamily	188		—		—
Commercial real estate owner occupied	4,466		—		—
Commercial real estate non-owner occupied	9,501		—		—
Commercial and industrial	526		—		1,040

Residential real estate	7,035		—		—
Home equity	262		—		—
Consumer other	2		—		—
Total loans	$	31,409	$	—	$	1,040

~~F-39~~

F-37

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Troubled Debt Restructuring Loans

The Company’s loan portfolio also includes certain loans that have been modified in a Troubled Debt Restructuring ("TDR"), where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months. TDRs are evaluated individually for impairment and may result in a specific allowance amount allocated to an individual loan.

The following table presents activity in TDRs for the ~~year~~years ended December 31, ~~2020:~~2022 and December 31, 2021:


(In thousands)	(In thousands)	Balance at Beginning of Period		Principal Payments		TDR Status Change		Other Additions/(Reductions)		Newly Identified TDRs		Balance at End of Period		(In thousands)	Balance at Beginning of Period		Principal Payments		TDR Status Change		Other Additions/(Reductions)		Newly Identified TDRs		Balance at End of Period
Year ended December 31, 2020

Year ended December 31, 2022														Year ended December 31, 2022
Construction														Construction	$	9,429	$	—	$	—	$	(9,429)	$	—	$	—
Commercial multifamily	Commercial multifamily	$	793	$	(39)	$	0	$	0	$	0	$	754	Commercial multifamily	703		(41)		—		(174)		—		488
Commercial real estate owner occupied	Commercial real estate owner occupied	13,331		(5,734)		0		(5,884)		18		1,731		Commercial real estate owner occupied	2,733		(75)		—		(69)		—		2,589
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	1,373		(1)		0		1,719		10,593		13,684		Commercial real estate non-owner occupied	9,310		(33)		—		(8,311)		—		966
Commercial and industrial	Commercial and industrial	1,449		(289)		0		(60)		1,586		2,686		Commercial and industrial	3,656		(895)		—		(359)		3,245		5,647

Residential real estate	Residential real estate	2,045		(160)		0		(361)		0		1,524		Residential real estate	1,117		(81)		—		(67)		—		969
Home equity	Home equity	277		(22)		0		(122)		0		133		Home equity	121		(81)		—		—		50		90
Consumer other	Consumer other	48		(12)		0		0		0		36		Consumer other	33		(15)		—		(56)		1,649		1,611
Total	Total	$	19,316	$	(6,257)	$	0	$	(4,708)	$	12,197	$	20,548	Total	$	27,102	$	(1,221)	$	—	$	(18,465)	$	4,944	$	12,360


(In thousands)	Balance at Beginning of Period		Principal Payments		TDR Status Change		Other Additions/(Reductions)		Newly Identified TDRs		Balance at End of Period
Year ended December 31, 2021
Construction	$	—	$	—	$	—	$	—	$	9,429	$	9,429
Commercial multifamily	754		(51)		—		—		—		703
Commercial real estate owner occupied	1,731		(96)		—		(168)		1,266		2,733
Commercial real estate non-owner occupied	13,684		(14,562)		—		(791)		10,979		9,310
Commercial and industrial	2,686		(3,916)		—		(199)		5,085		3,656

Residential real estate	1,524		(233)		—		(174)		—		1,117
Home equity	133		(12)		—		—		—		121
Consumer other	36		(8)		—		5		—		33
Total	$	20,548	$	(18,878)	$	—	$	(1,327)	$	26,759	$	27,102

~~F-40~~F-38

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents loans modified as TDRs that occurred during the years ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018:~~2020:


(dollars in thousands)	Total
Year ended December 31, 2022
TDR:
Number of loans	93
Pre-modification outstanding recorded investment	$	4,944
Post-modification outstanding recorded investment	$	4,944

Year ended December 31, 2021
TDR:
Number of loans	18
Pre-modification outstanding recorded investment	$	26,759
Post-modification outstanding recorded investment	$	26,759

Year ended December 31, 2020
TDR:
Number of loans	16
Pre-modification outstanding recorded investment	$	12,197
Post-modification outstanding recorded investment	$	12,197

~~Year ended December 31, 2019~~
~~TDR:~~
~~Number of loans~~	13
~~Pre-modification outstanding recorded investment~~	$	~~2,063~~
~~Post-modification outstanding recorded investment~~	$	~~2,063~~

~~Year ended December 31, 2018~~
~~TDR:~~
~~Number of loans~~	10
~~Pre-modification outstanding recorded investment~~	$	~~2,685~~
~~Post-modification outstanding recorded investment~~	$	~~2,685~~

The following table discloses the modifications for TDRs where a concession has been made within the previous 12 months, that then defaulted in the respective reporting period. For the years ended 2022, there were two loans restructured that had subsequently defaulted during the reporting period. For the year ended 2021, there were four loans restructured that had subsequently defaulted during the reporting period. There were 0no TDRs for which there was a payment default within twelve months following the modification during the year ended ~~December 31,~~ 2020. ~~For the year ended 2019, there was 1 loan that was restructured that had subsequently defaulted during the reporting period.~~


(dollars in thousands)	(dollars in thousands)	Number of Loans	Recorded Investment		(dollars in thousands)	Number of Loans	Recorded Investment
Year ended December 31, 2019
Commercial and industrial - other		1	$	195
Year ended December 31, 2022					Year ended December 31, 2022
Commercial and industrial					Commercial and industrial	1	$	105
Consumer other					Consumer other	1	$	10
Total	Total	1	$	195	Total	2	$	115


(dollars in thousands)	Number of Loans	Recorded Investment
Year ended December 31, 2021
Commercial real estate non-owner occupied	2	$	18,746
Commercial and industrial	2	$	71
Total	4	$	18,817

Beginning in March 2020, the Company has offered three-month payment deferrals for customers with a current payment status who were negatively impacted by economic disruption caused by the COVID-19 pandemic. These loans were not recorded as TDRs. Refer to Note 17 - Other Commitments, Contingencies, and Off-Balance Sheet Activities for more information regarding these modifications.

~~F-41~~F-39

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Prior to the adoption of ASC 326 on January 1, 2020, the Company calculated allowance for loan losses using incurred losses methodology. The following tables are disclosures related to loans in prior periods.

~~The following is a summary of total loans as of December 31, 2019:~~

December 31, 2019
(In thousands) Business
Activities Loans Acquired
Loans Total
Commercial real estate:
Construction $ 382,014 $ 47,792 $ 429,806
Other commercial real estate 2,414,942 1,189,521 3,604,463
Total commercial real estate 2,796,956 1,237,313 4,034,269
Commercial and industrial loans: 1,442,617 397,891 1,840,508
Total commercial loans 4,239,573 1,635,204 5,874,777
Residential mortgages:
1-4 family 2,143,817 533,536 2,677,353
Construction 4,641 3,478 8,119
Total residential mortgages 2,148,458 537,014 2,685,472
Consumer loans:
Home equity 273,867 106,724 380,591
Auto and other 504,599 56,989 561,588
Total consumer loans 778,466 163,713 942,179
Total loans $ 7,166,497 $ 2,335,931 $ 9,502,428

~~F-42~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Total unamortized net costs and premiums included in the December 31, 2019 total loans for business activity loans were the following:~~


~~(In thousands)~~	~~December 31, 2019~~
~~Unamortized net loan origination costs~~	$	~~13,259~~
~~Unamortized net premium on purchased loans~~	~~2,643~~
~~Total unamortized net costs and premiums~~	$	~~15,902~~

~~The following table summarizes activity in the accretable yield for the acquired loan portfolio that falls under the purview of ASC 310-30,~~ ~~Loans and Debt Securities Acquired with Deteriorated Credit Quality~~:

(In thousands) 2019 2018
Balance at beginning of period $ 2,840 $ 11,561
Acquisitions 4,200 0
Accretion (9,619) (23,109)
Net reclassification from nonaccretable difference 7,430 17,347
Payments received, net (837) (2,878)
Reclassification to TDR 9 0
Disposals 0 (81)
Balance at end of period 4,023 2,840

~~The following is a summary of past due loans at December 31, 2019:~~

~~Business Activities Loans~~

(in thousands) 30-59 Days
Past Due 60-89 Days
Past Due >90 Days Past Due Total Past
Due Current Total Loans Past Due >
90 days and
Accruing
December 31, 2019
Commercial real estate:
Construction $ 0 $ 0 $ 0 $ 0 $ 382,014 $ 382,014 $ 0
Commercial real estate 423 89 15,623 16,135 2,398,807 2,414,942 0
Total 423 89 15,623 16,135 2,780,821 2,796,956 0
Commercial and industrial loans
Total 2,841 2,033 10,662 15,536 1,427,081 1,442,617 122
Residential mortgages:
1-4 family 1,669 714 3,350 5,733 2,138,084 2,143,817 800
Construction 0 0 0 0 4,641 4,641 0
Total 1,669 714 3,350 5,733 2,142,725 2,148,458 800
Consumer loans:
Home equity 149 0 1,147 1,296 272,571 273,867 52
Auto and other 4,709 990 2,729 8,428 496,171 504,599 1
Total 4,858 990 3,876 9,724 768,742 778,466 53
Total $ 9,791 $ 3,826 $ 33,511 $ 47,128 $ 7,119,369 $ 7,166,497 $ 975

~~F-43~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Acquired Loans~~

(in thousands) 30-59 Days
Past Due 60-89 Days
Past Due >90 Days Past Due Total Past
Due Acquired
Credit
Impaired Total Loans Past Due >
90 days and
Accruing
December 31, 2019
Commercial real estate:
Construction $ 0 $ 0 $ 0 $ 0 $ 1,396 $ 47,792 $ 0
Commercial real estate 3,907 245 10,247 14,399 21,639 1,189,521 5,751
Total 3,907 245 10,247 14,399 23,035 1,237,313 5,751
Commercial and industrial loans
Total 888 299 1,275 2,462 26,718 397,891 442
Residential mortgages:
1-4 family 745 491 932 2,168 10,840 533,536 139
Construction 0 0 0 0 0 3,478 0
Total 745 491 932 2,168 10,840 537,014 139
Consumer loans:
Home equity 346 222 789 1,357 540 106,724 72
Auto and other 120 22 265 407 286 56,989 0
Total 466 244 1,054 1,764 826 163,713 72
Total $ 6,006 $ 1,279 $ 13,508 $ 20,793 $ 61,419 $ 2,335,931 $ 6,404

~~The following is summary information pertaining to non-accrual loans at December 31, 2019:~~

December 31, 2019
(In thousands) Business Activities
Loans Acquired Loans Total
Commercial real estate:
Construction $ 0 $ 0 $ 0
Other commercial real estate 15,623 4,496 20,119
Total 15,623 4,496 20,119
Commercial and industrial loans:
Total 10,540 833 11,373
Residential mortgages:
1-4 family 2,550 793 3,343
Construction 0 0 0
Total 2,550 793 3,343
Consumer loans:
Home equity 1,095 717 1,812
Auto and other 2,728 265 2,993
Total 3,823 982 4,805
Total non-accrual loans $ 32,536 $ 7,104 $ 39,640

~~F-44~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Loans evaluated for impairment as of December 31, 2019 were as follows:~~

~~Business Activities Loans~~

(In thousands) Commercial
real estate Commercial
and industrial Residential
mortgages Consumer Total
Loans receivable:
Balance at end of year
Individually evaluated for impairment $ 19,192 $ 9,167 $ 3,019 $ 630 $ 32,008
Collectively evaluated 2,777,764 1,433,450 2,145,439 777,836 7,134,489
Total $ 2,796,956 $ 1,442,617 $ 2,148,458 $ 778,466 $ 7,166,497

~~Acquired Loans~~

(In thousands) Commercial
real estate Commercial
and industrial Residential
mortgages Consumer Total
Loans receivable:
Balance at end of year
Individually evaluated for impairment $ 4,241 $ 464 $ 372 $ 575 $ 5,652
Purchased credit-impaired loans 23,035 26,718 10,840 826 61,419
Collectively evaluated 1,210,037 370,709 525,802 162,312 2,268,860
Total $ 1,237,313 $ 397,891 $ 537,014 $ 163,713 $ 2,335,931

~~The following is a summary of impaired loans at December 31, 2019:~~

~~Business Activities Loans~~

December 31, 2019
(In thousands) Recorded Investment (1) Unpaid Principal
Balance (2) Related Allowance
With no related allowance:
Other commercial real estate loans $ 18,676 $ 37,493 $ —
Commercial and industrial loans 4,805 10,104 —
Residential mortgages - 1-4 family 433 699 —
Consumer - home equity 32 238 —
Consumer - other 0 0 —
With an allowance recorded:
Other commercial real estate loans $ 550 $ 1,411 $ 20
Commercial and industrial loans 4,166 12,136 122
Residential mortgages - 1-4 family 2,615 2,924 109
Consumer - home equity 594 614 42
Consumer - other 8 8 1
Total
Commercial real estate $ 19,226 $ 38,904 $ 20
Commercial and industrial loans 8,971 22,240 122
Residential mortgages 3,048 3,623 109
Consumer 634 860 43
Total impaired loans $ 31,879 $ 65,627 $ 294

(1) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on the Consolidated Balance Sheet.

~~(2) The Unpaid Principal Balance represents the customer's legal obligation to the Company.~~

~~F-45~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Acquired Loans~~

December 31, 2019
(In thousands) Recorded Investment (1) Unpaid Principal
Balance (2) Related Allowance
With no related allowance:
Other commercial real estate loans $ 3,200 $ 6,021 $ —
Other commercial and industrial loans 437 532 —
Residential mortgages - 1-4 family 292 293 —
Consumer - home equity 416 844 —
Consumer - other 0 0 —
With an allowance recorded:
Other commercial real estate loans $ 1,033 $ 1,050 $ 97
Commercial and industrial loans 28 30 1
Residential mortgages - 1-4 family 84 110 8
Consumer - home equity 121 123 6
Consumer - other 39 37 6
Total
Commercial real estate $ 4,233 $ 7,071 $ 97
Commercial and industrial loans 465 562 1
Residential mortgages 376 403 8
Consumer 576 1,004 12
Total impaired loans $ 5,650 $ 9,040 $ 118

~~(2) The Unpaid Principal Balance represents the customer's legal obligation to the Company.~~

~~F-46~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~The following is a summary of the average recorded investment and interest income recognized on impaired loans as of December 31, 2019 and 2018:~~

~~Business Activities Loans~~

December 31, 2019 December 31, 2018
(in thousands) Average Recorded
Investment Cash Basis Interest
Income Recognized Average Recorded
Investment Cash Basis Interest
Income Recognized
With no related allowance:
Other commercial real estate $ 19,805 $ 586 $ 24,078 $ 373
Other commercial and industrial 3,165 523 914 245
Residential mortgages - 1-4 family 185 17 428 20
Consumer-home equity 148 3 107 10
Consumer-other 0 0 0 0
With an allowance recorded:
Other commercial real estate $ 374 $ 107 $ 555 $ 30
Other commercial and industrial 2,533 793 1,259 139
Residential mortgages - 1-4 family 2,427 150 1,407 75
Consumer-home equity 349 32 98 6
Consumer - other 11 1 15 1
Total
Commercial real estate $ 20,179 $ 693 $ 24,633 $ 403
Commercial and industrial 5,698 1,316 2,173 384
Residential mortgages 2,612 167 1,835 95
Consumer loans 508 36 220 17
Total impaired loans $ 28,997 $ 2,212 $ 28,861 $ 899

~~F-47~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Acquired Loans~~

December 31, 2019 December 31, 2018
(in thousands) Average Recorded
Investment Cash Basis Interest
Income Recognized Average Recorded
Investment Cash Basis Interest
Income Recognized
With no related allowance:
Other commercial real estate $ 1,603 $ 117 $ 3,280 $ 263
Other commercial and industrial 441 51 428 68
Residential mortgages - 1-4 family 241 11 290 9
Consumer - home equity 475 23 635 4
Consumer - other 0 0 13 1
With an allowance recorded:
Other commercial real estate $ 1,005 $ 59 $ 950 $ 53
Other commercial and industrial 29 2 197 41
Residential mortgages - 1-4 family 88 7 26 9
Consumer - home equity 68 6 89 12
Consumer - other 41 2 11 3
Total
Commercial real estate $ 2,608 $ 176 $ 4,230 $ 316
Commercial and industrial 470 53 625 109
Residential mortgages 329 18 316 18
Consumer loans 584 31 748 20
Total impaired loans $ 3,991 $ 278 $ 5,919 $ 463

~~NaN additional funds are committed to be advanced in connection with impaired loans.~~

~~The following table presents the Company’s TDR activity in 2019 and 2018:~~

(In thousands) 2019 2018
Balance at beginning of year $ 27,415 $ 41,990
Principal payments (6,086) (8,547)
TDR status change (1) 0 0
Other reductions (2) (4,076) (8,713)
Newly identified TDRs 2,063 2,685
Balance at end of year $ 19,316 $ 27,415

~~_____________________~~

(1) TDR status change classification represents TDR loans with a specified interest rate equal to or greater than the rate that the Company was willing to accept at the time of the restructuring for a new loan with comparable risk and the loan was on current payment status and not impaired based on the terms specified by the restructuring agreement.

~~(2) Other reductions classification consists of transfer to other real estate owned, charge-offs to loans, and other loan sale payoffs.~~

~~F-48~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Allowance for Loan Losses~~

~~Activity in the allowance for loan losses for 2019 and 2018 was as follows:~~

Business Activities Loans

(In thousands)
2019 Commercial
real estate Commercial and
industrial loans Residential
mortgages Consumer Total
Balance at beginning of period $ 21,732 $ 16,504 $ 10,535 $ 7,368 $ 56,139
Charged-off loans 6,577 23,799 635 3,322 34,333
Recoveries on charged-off loans 570 1,012 57 253 1,892
Provision/(releases) for loan losses 9,033 25,404 (1,417) 458 33,478
Balance at end of period $ 24,758 $ 19,121 $ 8,540 $ 4,757 $ 57,176
Individually evaluated for impairment 20 122 109 43 294
Collectively evaluated 24,738 18,999 8,431 4,714 56,882
Total $ 24,758 $ 19,121 $ 8,540 $ 4,757 $ 57,176

Business Activities Loans
(In thousands)
2018 Commercial
real estate Commercial and
industrial loans Residential
mortgages Consumer Total
Balance at beginning of period $ 16,843 $ 13,850 $ 9,420 $ 5,807 $ 45,920
Charged-off loans 5,859 4,275 157 3,187 13,478
Recoveries on charged-off loans 50 620 114 363 1,147
Provision/(releases) for loan losses 10,698 6,309 1,158 4,385 22,550
Balance at end of period $ 21,732 $ 16,504 $ 10,535 $ 7,368 $ 56,139
Individually evaluated for impairment 9 49 128 11 197
Collectively evaluated 21,723 16,455 10,407 7,357 55,942
Total $ 21,732 $ 16,504 $ 10,535 $ 7,368 $ 56,139

Acquired Loans
(In thousands)
2019 Commercial
real estate Commercial and
industrial loans Residential
mortgages Consumer Total
Balance at beginning of period $ 3,153 $ 1,064 $ 630 $ 483 $ 5,330
Charged-off loans 830 571 263 557 2,221
Recoveries on charged-off loans 672 438 116 123 1,349
Provision/(releases) for loan losses 1,111 126 365 339 1,941
Balance at end of period $ 4,106 $ 1,057 $ 848 $ 388 $ 6,399
Individually evaluated for impairment 97 1 8 12 118
Collectively evaluated 4,009 1,056 840 376 6,281
Total $ 4,106 $ 1,057 $ 848 $ 388 $ 6,399

~~F-49~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Acquired Loans
(In thousands)
2018 Commercial
real estate Commercial and
industrial loans Residential
mortgages Consumer Total
Balance at beginning of period $ 3,856 $ 1,125 $ 598 $ 335 $ 5,914
Charged-off loans 1,812 524 1,091 1,106 4,533
Recoveries on charged-off loans 294 286 51 417 1,048
Provision/(releases) for loan losses 815 177 1,072 837 2,901
Balance at end of period $ 3,153 $ 1,064 $ 630 $ 483 $ 5,330
Individually evaluated for impairment 9 4 36 48 97
Collectively evaluated 3,144 1,060 594 435 5,233
Total $ 3,153 $ 1,064 $ 630 $ 483 $ 5,330

~~F-50~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~The following tables present the Company’s loans by risk rating at December 31, 2019:~~

~~Business Activities Loans~~

~~Commercial Real Estate~~

~~Credit Risk Profile by Creditworthiness Category~~

December 31, 2019
(In thousands) Construction Real Estate Total Commercial Real Estate
Grade:
Pass $ 382,014 $ 2,354,375 $ 2,736,389
Special mention 0 12,167 12,167
Substandard 0 48,400 48,400
Total $ 382,014 $ 2,414,942 $ 2,796,956

~~Commercial and Industrial Loans~~

~~Credit Risk Profile by Creditworthiness Category~~


	~~December 31, 2019~~
~~(In thousands)~~	~~Total Commercial and Industrial Loans~~
~~Grade:~~
~~Pass~~	$	~~1,366,342~~
~~Special mention~~	~~50,072~~
~~Substandard~~	~~24,112~~
~~Doubtful~~	~~2,091~~
~~Total~~	$	~~1,442,617~~

~~Residential Mortgages~~

~~Credit Risk Profile by Internally Assigned Grade~~

December 31, 2019
(In thousands) 1-4 Family Construction Total Residential Mortgages
Grade:
Pass $ 2,139,753 $ 4,641 $ 2,144,394
Special mention 714 0 714
Substandard 3,350 0 3,350
Total $ 2,143,817 $ 4,641 $ 2,148,458

~~Consumer Loans~~

~~Credit Risk Profile Based on Payment Activity~~

December 31, 2019
(In thousands) Home Equity Auto and Other Total Consumer Loans
Performing $ 272,772 $ 501,871 $ 774,643
Nonperforming 1,095 2,728 3,823
Total $ 273,867 $ 504,599 $ 778,466

~~F-51~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Acquired Loans~~

~~Commercial Real Estate~~

~~Credit Risk Profile by Creditworthiness Category~~

December 31, 2019
(In thousands) Construction Real Estate Total Commercial Real Estate
Grade:
Pass $ 46,396 $ 1,130,333 $ 1,176,729
Special mention 0 5,993 5,993
Substandard 1,396 53,195 54,591
Total $ 47,792 $ 1,189,521 $ 1,237,313

~~Commercial and Industrial Loans~~

~~Credit Risk Profile by Creditworthiness Category~~


	~~December 31, 2019~~
~~(In thousands)~~	~~Total Commercial and Industrial Loans~~
~~Grade:~~
~~Pass~~	$	~~373,744~~
~~Special mention~~	~~4,404~~
~~Substandard~~	~~19,743~~

~~Total~~	$	~~397,891~~

~~Residential Mortgages~~

~~Credit Risk Profile by Internally Assigned Grade~~

December 31, 2019
(In thousands) 1-4 Family Construction Total Residential Mortgages
Grade:
Pass $ 528,282 $ 3,478 $ 531,760
Special mention 592 0 592
Substandard 4,662 0 4,662
Total $ 533,536 $ 3,478 $ 537,014

~~Consumer Loans~~

~~Credit Risk Profile Based on Payment Activity~~

December 31, 2019
(In thousands) Home Equity Auto and Other Total Consumer Loans
Performing $ 106,007 $ 56,724 $ 162,731
Nonperforming 717 265 982
Total $ 106,724 $ 56,989 $ 163,713

~~F-52~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

The following table summarizes information about total loans rated Special Mention or lower at December 31, 2019. The table below includes consumer loans that are Special Mention and Substandard accruing that are classified in the above table as performing based on payment activity.

December 31, 2019
(In thousands) Business
Activities Loans Acquired Loans Total
Non-Accrual $ 32,536 $ 7,104 $ 39,640
Substandard Accruing 49,293 73,131 122,424
Total Classified 81,829 80,235 162,064
Special Mention 63,943 11,341 75,284
Total Criticized $ 145,772 $ 91,576 $ 237,348

NOTE 7. PREMISES AND EQUIPMENT

Year-end premises and equipment are summarized as follows:

(In thousands) 2020 2019 Estimated Useful
Life
Land $ 17,716 $ 17,816 N/A
Buildings and improvements 113,853 116,997 5 - 39 years
Furniture and equipment (1)
63,590 64,044 3 - 7 years
Construction in process (1)
4,035 1,580
Premises and equipment, gross 199,194 200,437
Accumulated depreciation and amortization (1)
(86,531) (78,966)
Premises and equipment, net $ 112,663 $ 121,471
Premises and equipment, net from discontinued operations 0 1,073
Premises and equipment, net from continuing operations $ 112,663 $ 120,398

~~(1) Includes premises and equipment classified as discontinued operations. See Note 2 - Discontinued Operations for more information.~~


(In thousands)	2022		2021		Estimated Useful Life
Land	$	15,536	$	15,786	N/A
Buildings and improvements	99,977		104,327		5 - 39 years
Furniture and equipment	63,554		62,420		3 - 7 years
Construction in process	1,147		703
Premises and equipment, gross	180,214		183,236
Accumulated depreciation and amortization	(94,997)		(88,853)

Premises and equipment, net	$	85,217	$	94,383

Depreciation and amortization expense including discontinued operations for the years ~~2020, 2019,~~2022, 2021, and ~~2018~~2020 amounted to ~~$12.5~~$9.6 million, ~~$11.8~~$11.0 million, and ~~$10.8~~$12.5 million, respectively.

~~F-53~~F-40

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8. ~~GOODWILL AND~~ OTHER INTANGIBLES

Goodwill and other intangible assets are presented in the tables below. The Company had 0 acquisition during 2020. There was one acquisition during 2019. In accordance with applicable accounting guidance, the Company allocated the amount paid to the fair value of the net assets acquired, with any excess amounts recorded as goodwill. The goodwill balance is allocated to the consolidated Company. The activity impacting goodwill in 2020 and 2019 is as follows:

(In thousands) 2020 2019
Balance, beginning of the period $ 553,762 $ 518,325
Goodwill acquired and adjusted:
SI Financial Group, Inc. 0 36,379
Adjustments (1) 0 (942)
Impairment (553,762) 0
Balance, end of the period $ 0 $ 553,762

~~(1)In 2019, goodwill related to the SI Financial Group acquisition was adjusted to reflect new information available during the one-year measurement period.~~

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is assessed annually for impairment and more frequently if events or changes in circumstances indicate that there may be an impairment. The Company tests goodwill impairment annually as of June 30 using second quarter data.

The Company compares the fair value of the reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The fair value of the reporting unit was determined using the guideline public company method. As a result of the assessment, the Company recognized a full goodwill impairment during the year ended December 31, 2020. NaN impairment was recorded on goodwill for 2019.

The primary causes of the goodwill impairment were economic and industry conditions resulting from the COVID-19 pandemic that caused volatility and reductions in the market capitalization of the Company and its peer banks, increased loan provision estimates, increased discount rates and other changes in variables driven by the uncertain macro-environment that resulted in the estimated fair value of the reporting unit being less than the reporting unit’s carrying value.

~~F-54~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

The components of other intangible assets are as follows:

(In thousands) Gross Intangible
Assets Accumulated
Amortization Net Intangible
Assets
December 31, 2020
Non-maturity deposits (core deposit intangible) (1)
$ 77,213 $ (45,257) $ 31,956
Insurance contracts 7,558 (7,558) 0
All other intangible assets 7,866 (5,003) 2,863
Total $ 92,637 $ (57,818) $ 34,819
December 31, 2019
Non-maturity deposits (core deposit intangible) $ 84,903 $ (42,663) $ 42,240
Insurance contracts 7,558 (7,553) 5
All other intangible assets 7,866 (4,496) 3,370
Total $ 100,327 $ (54,712) $ 45,615

~~(1)As of December 31, 2020, the Company reclassified $4.6 million of net core deposit intangible to held-for-sale related to the assets and liabilities associated with the Mid-Atlantic branch sale.~~


(In thousands)	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
December 31, 2022
Non-maturity deposits (core deposit intangible)	$	77,213	$	(54,618)	$	22,595

All other intangible assets	7,866		(5,978)		1,888
Total	$	85,079	$	(60,596)	$	24,483

December 31, 2021
Non-maturity deposits (core deposit intangible)	$	77,213	$	(49,963)	$	27,250

All other intangible assets	7,866		(5,497)		2,369
Total	$	85,079	$	(55,460)	$	29,619

Other intangible assets are amortized on a straight-line or accelerated basis over their estimated lives, which range from four to fifteen years. Amortization expense related to intangibles totaled $5.1 million in 2022, $5.2 million in 2021, and $6.2 million in ~~2020, $5.8 million in 2019, and $4.9 million in 2018.~~2020.

The estimated aggregate future amortization expense for intangible assets remaining at year-end ~~2020~~2022 is as follows: ~~2021- $5.3 million; 2022- $5.1 million;~~ 2023- $4.8 million; 2024- $4.6 million; 2025- $4.5 million; 2026- $4.5 million; 2027- $3.6 million; and thereafter- ~~$10.6~~$2.5 million. For the years 2022, 2021, and 2020, ~~2019, and 2018, 0~~no impairment charges were identified for the Company’s intangible assets.

~~F-55~~F-41

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9. OTHER ASSETS

Year-end other assets are summarized as follows:

(In thousands) 2020 2019
Capitalized servicing rights (1)
$ 16,348 $ 26,451
Accrued interest receivable 46,919 36,462
Accrued federal and state tax receivable 40,751 23,786
Right-of-use assets (1)
60,018 76,332
Derivative assets (1)
160,071 80,190
Deferred tax asset 46,370 51,165
Other (1)
16,753 18,381
Total other assets $ 387,230 $ 312,767
Total other assets from discontinued operations 0 23,822
Total other assets from continuing operations $ 387,230 $ 288,945

~~(1) Includes other assets classified as discontinued operations. See Note 2 - Discontinued Operations for more information.~~


(In thousands)	2022		2021
Capitalized servicing rights	$	13,047	$	16,022
Accrued interest receivable	46,868		33,534
Accrued federal and state tax receivable	34,386		30,614
Right-of-use assets	46,411		52,180
Derivative assets	54,241		79,528

Deferred tax asset	118,331		52,620
Other	35,651		23,886
Total other assets	$	348,935	$	288,384

The Bank sells loans in the secondary market and retains the right to service many of these loans. The Bank earns fees for the servicing provided. ~~Loans~~At years end 2022 and 2021, loans sold and serviced for others amounted to $1.5 billion and $1.6 billion, respectively. For year ended 2020, loans sold and serviced for others from continuing operations amounted to $1.5 ~~billion, $1.7 billion, and $1.4 billion at year-end~~billion. For year ended 2020, ~~2019, and 2018, respectively. Loans~~loans sold and serviced for others from discontinued operations amounted to $0.6 ~~billion, $1.4 billion, and $0.8 billion at year-end 2020, 2019, and 2018.~~billion. Loans serviced for others are not included in the accompanying Consolidated Balance Sheets. The risks inherent in servicing assets relate primarily to changes in prepayments that result from shifts in interest rates. ~~Contractually~~For the years 2022 and 2021, contractually specified servicing fees were $5.5 million and $8.0 million, respectively, and are included as a component of loan related fees within non-interest income. For the year 2020, contractually specified servicing fees from continuing operations were $5.5 million ~~$5.6 million,~~ and ~~$4.6 million for the years 2020, 2019, and 2018, respectively, and~~are included as a component of loan related fees within non-interest ~~income. Contractually~~income on the Consolidated Statements of Operations. For the year 2020, contractually specified servicing fees from discontinued operations were $2.1 million ~~$1.9 million,~~ and ~~$1.0 million for the years 2020, 2019, and 2018, respectively, and~~are included as a component of other income in Note 2 - Discontinued Operations. Refer to Note 20 - Fair Value Measurements for significant assumptions and inputs used in the valuation at year-end ~~2020.~~2022.

Servicing rights activity was as follows:


(In thousands)	(In thousands)	2020		2019		(In thousands)	2022		2021		2020
Balance at beginning of year	Balance at beginning of year	$	26,451	$	23,376	Balance at beginning of year	$	16,022	$	16,348	$	26,451

Additions	Additions	3,875		16,837		Additions	3,119		4,568		3,875
Amortization	Amortization	(3,761)		(3,240)		Amortization	(4,590)		(4,921)		(3,761)
Change in fair value		(9,266)		(5,822)
Payoffs						Payoffs	(958)		—		—

Allowance adjustment	Allowance adjustment	(951)		(4,700)		Allowance adjustment	(546)		27		(10,217)
Balance at end of year (1)		$	16,348	$	26,451

Balance at end of year						Balance at end of year	$	13,047	$	16,022	$	16,348

(1)As of December 31, ~~2020~~2022 and December 31, ~~2019,~~2021, the servicing rights included in the total balance accounted for at fair value were ~~$3.0~~$1.8 million and ~~$12.3~~$2.0 million, respectively.

At December 31, 2022, the fair value of servicing rights was $16.7 million. At December 31, 2021, the fair value of servicing rights was $16.6 million.

~~F-56~~F-42

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. DEPOSITS

A summary of year-end time deposits is as follows:


(In thousands)	(In thousands)	2020		2019		(In thousands)	2022		2021
Maturity date:	Maturity date:					Maturity date:
Within 1 year	Within 1 year	$	1,582,492	$	2,734,870	Within 1 year	$	912,756	$	1,228,874
Over 1 year to 2 years	Over 1 year to 2 years	545,100		582,622		Over 1 year to 2 years	606,856		280,403
Over 2 years to 3 years	Over 2 years to 3 years	171,810		145,976		Over 2 years to 3 years	68,984		81,391
Over 3 years to 4 years	Over 3 years to 4 years	32,358		90,731		Over 3 years to 4 years	28,441		52,000
Over 4 years to 5 years	Over 4 years to 5 years	51,073		33,754		Over 4 years to 5 years	15,835		34,605
Over 5 years	Over 5 years	2,252		1,416		Over 5 years	835		1,667
Total	Total	$	2,385,085	$	3,589,369	Total	$	1,633,707	$	1,678,940
Account balances:	Account balances:					Account balances:
Less than $100,000	Less than $100,000	$	663,324	$	905,190	Less than $100,000	$	549,265	$	676,979
$100,000 through $250,000	$100,000 through $250,000	1,219,210		2,027,717		$100,000 through $250,000	642,600		610,174
$250,000 or more	$250,000 or more	502,551		656,462		$250,000 or more	441,842		391,787
Total	Total	$	2,385,085	$	3,589,369	Total	$	1,633,707	$	1,678,940

Included in total deposits on the Consolidated Balance Sheets are brokered deposits of ~~$0.6 billion~~$120.9 million and ~~$1.2 billion~~$228.1 million at December 31, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively. Also included in total deposits are reciprocal deposits of ~~$119.0~~$71.1 million and ~~$91.7~~$89.2 million at December 31, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively, as well as related party deposits of ~~$177.2~~$22.3 million and ~~$63.9~~$17.1 million at December 31, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively.

~~F-57~~F-43

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. BORROWED FUNDS

Borrowed funds at December 31, ~~2020~~2022 and ~~2019~~2021 are summarized, as follows:


		2020				2019					2022				2021
(in thousands, except rates)	(in thousands, except rates)	Principal		Weighted Average Rate		Principal		Weighted Average Rate		(in thousands, except rates)	Principal		Weighted Average Rate		Principal		Weighted Average Rate
Short-term borrowings:	Short-term borrowings:									Short-term borrowings:
Advances from the FHLBB	Advances from the FHLBB	$	40,000	1.05	%	$	125,000	2.06	%	Advances from the FHLBB	$	—	—	%	$	—	—	%

Total short-term borrowings:	Total short-term borrowings:	40,000		1.05		125,000		2.06		Total short-term borrowings:	—		—		—		—
Long-term borrowings:	Long-term borrowings:									Long-term borrowings:
Advances from the FHLBB	Advances from the FHLBB	434,357		1.89		605,501		2.16		Advances from the FHLBB	4,445		0.71		13,331		1.75
Paycheck Protection Program Liquidity Facility ("PPPLF")		0		0		0		0

Subordinated notes	Subordinated notes	74,411		7.00		74,232		7.00		Subordinated notes	98,089		5.50		74,590		7.00
Junior subordinated borrowing - Trust I	Junior subordinated borrowing - Trust I	15,464		2.06		15,464		3.76		Junior subordinated borrowing - Trust I	15,464		6.54		15,464		2.01
Junior subordinated borrowing - Trust II	Junior subordinated borrowing - Trust II	7,405		1.92		7,353		3.59		Junior subordinated borrowing - Trust II	7,511		6.47		7,459		1.90
Total long-term borrowings:	Total long-term borrowings:	531,637		2.61		702,550		2.72		Total long-term borrowings:	125,509		5.52		110,844		5.33
Total	Total	$	571,637	2.50	%	$	827,550	2.62	%	Total	$	125,509	5.52	%	$	110,844	5.33	%

Short-term debt includes Federal Home Loan Bank of Boston (“FHLBB”) advances with an original maturity of less than one year. ~~At year-end 2020, the Company maintained a short-term line-of-credit through a correspondent bank with 0 balance outstanding.~~ The Bank ~~also~~ maintains a $3.0 million secured line of credit with the FHLBB that bears a daily adjustable rate calculated by the FHLBB. There was 0no outstanding balance on the FHLBB line of credit for the periods ended December 31, ~~2020~~2022 and December 31, ~~2019.~~2021. The Bank's available borrowing capacity with the FHLB was ~~$1.0~~$1.5 billion and ~~$1.6~~$1.5 billion for the periods ended December 31, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively. The Company was in compliance with all debt covenants as of December 31, ~~2020.~~2022.

The Bank is approved to borrow on a short-term basis from the Federal Reserve Bank of Boston as a non-member bank. The Bank has pledged certain loans and securities to the Federal Reserve Bank to support this arrangement. ~~NaN~~No borrowings with the Federal Reserve Bank of Boston took place for the periods ended December 31, ~~2020~~2022 and December 31, ~~2019.~~2021. As a participant in the SBA Paycheck Protection Program ("PPP"), the Bank may pledge originated loans as collateral at face value to the Federal Reserve Bank of Boston for term financings. As of December 31, ~~2020,~~2022, the Bank had no pledged PPP loans. The Bank's available borrowing capacity with the Federal Reserve Bank was ~~$815.6~~$647.9 million and ~~$201.3~~$511.0 million for the periods ended December 31, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively.

Long-term FHLBB advances consist of advances with an original maturity of more than one year and are subject to

prepayment penalties. There were no callable advances outstanding at December 31, 2022. The advances outstanding at December 31, ~~2020~~2022 included amortizing advances totaling $4.4 million. The advances outstanding at December 31, 2021 included callable advances totaling $10 million and amortizing advances totaling ~~$5.2 million. The advances outstanding at December 31, 2019 included callable advances totaling $10 million and amortizing advances totaling $4.4~~$3.3 million. All FHLBB borrowings, including the line of credit, are secured by a blanket security agreement on certain qualified collateral, principally all residential first mortgage loans and certain securities.

~~F-58~~F-44

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of maturities of FHLBB advances at year-end ~~2020~~2022 is as follows:


		2020					2022
(In thousands)	(In thousands)	Amount		Weighted Average Rate		(In thousands)	Amount		Weighted Average Rate
Fixed rate advances maturing:	Fixed rate advances maturing:					Fixed rate advances maturing:
2021		$	395,475	1.80	%
2022		58,489		1.92
2023	2023	10,916		2.17		2023	$	—	—	%
2024	2024	54		0		2024	25		—
2025 and beyond		9,423		1.63
2025						2025	—		—
2026						2026	557		2.20
2027 and beyond						2027 and beyond	3,863		0.50

Total FHLBB advances	Total FHLBB advances	$	474,357	1.82	%	Total FHLBB advances	$	4,445	0.71	%

The Company did 0tnot have variable-rate FHLB advances for the period ended December 31, ~~2020~~2022 and December 31, ~~2019.~~2021.

In ~~September 2012,~~June 2022, the Company issued ~~fifteen~~ten year subordinated notes in the amount of ~~$75.0 million at a discount of 1.15%.~~$100.0 million. The interest rate is fixed at ~~6.875%~~5.50% for the first ~~ten~~five years. After ~~ten~~five years, the notes become callable and ~~convert~~will bear interest at a floating rate per annum equal to ~~an interest~~a benchmark rate ~~of three month LIBOR~~(which is expected to be Three-Month Term SOFR), plus ~~5.113%.~~249 basis points. The subordinated note includes reduction to the note principal balance of ~~$215 thousand and $338 thousand~~$1.9 million for unamortized debt issuance costs as of December 31, ~~2020 and December 31, 2019, respectively.~~2022.

In September 2022, the Company called the fifteen year subordinated notes that were issued in September 2012 in the amount of $75 million.

The Company holds 100% of the common stock of Berkshire Hills Capital Trust I (“Trust I”) which is included in other assets with a cost of $0.5 million. The sole asset of Trust I is $15.5 million of the Company’s junior subordinated debentures due in 2035. These debentures bear interest at a variable rate equal to LIBOR plus 1.85% and had a rate of ~~2.06%~~6.54% and ~~3.76%~~2.01% at December 31, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively. The Company has the right to defer payments of interest for up to five years on the debentures at any time, or from time to time, with certain limitations, including a restriction on the payment of dividends to shareholders while such interest payments on the debentures have been deferred. The Company has not exercised this right to defer payments. The Company has the right to redeem the debentures at par value on each quarterly payment date. Trust I is considered a variable interest entity for which the Company is not the primary beneficiary. Accordingly, Trust I is not consolidated into the Company’s financial statements.

The Company holds 100% of the common stock of SI Capital Trust II (“Trust II”) which is included in other assets

with a cost of $0.2 million. The sole asset of Trust II is $8.2 million of the Company’s junior subordinated

debentures due in 2036. These debentures bear interest at a variable rate equal to LIBOR plus 1.70% and had a rate

of ~~1.92%~~6.47% and ~~3.59%~~1.90% at December 31, ~~2020~~2022 and December 31, ~~2019.~~2021. The Company has the right to defer payments of interest for up to five years on the debentures at any time, or from time to time, with certain limitations, including a restriction on the payment of dividends to shareholders while such interest payments on the debentures have been deferred. The Company has not exercised this right to defer payments. The Company has the right to redeem the debentures at par value. Trust II is considered a variable interest entity for which the Company is not the primary beneficiary. Accordingly, Trust II is not consolidated into the Company’s financial statements.

~~F-59~~F-45

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12. OTHER LIABILITIES

Year-end other liabilities are summarized as follows:


(In thousands)	(In thousands)	2020		2019		(In thousands)	2022		2021
Derivative liabilities	Derivative liabilities	$	65,758	$	80,681	Derivative liabilities	$	97,030	$	35,194
Capital and financing lease obligations		10,383		10,883
Asset purchase settlement payable (1)		0		189
Finance lease liabilities						Finance lease liabilities	9,306		9,862

Employee benefits liability	Employee benefits liability	38,830		44,781		Employee benefits liability	45,175		45,498
Operating lease liabilities ~~(1)~~	Operating lease liabilities ~~(1)~~	63,894		80,734		Operating lease liabilities ~~(1)~~	53,736		55,674
Accrued interest payable	Accrued interest payable	3,867		11,625		Accrued interest payable	1,610		775
Customer transaction clearing accounts	Customer transaction clearing accounts	11,261		4,310		Customer transaction clearing accounts	5,758		5,718
Other ~~(1)~~	Other ~~(1)~~	38,737		60,676		Other ~~(1)~~	43,409		39,960
Total other liabilities	Total other liabilities	$	232,730	$	293,879	Total other liabilities	$	256,024	$	192,681
Total other liabilities from discontinued operations		0		26,481
Total other liabilities from continuing operations		$	232,730	$	267,398

~~(1) Includes other liabilities classified as discontinued operations. See Note 2 - Discontinued Operations for more information.~~

6046

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13. EMPLOYEE BENEFIT PLANS

Pension Plan

The Company maintains a legacy, employer-sponsored defined benefit pension plan (the “Plan”) for which participation and benefit accruals were frozen on January 1, 2003. The Plan was assumed in connection with the Rome Bancorp acquisition in 2011. Accordingly, 0no employees are permitted to commence participation in the Plan and future salary increases and years of credited service are not considered when computing an employee’s benefits under the Plan. As of December 31, ~~2020,~~2022, all minimum Employee Retirement Income Security Act (“ERISA”) funding requirements have been met.

Information regarding the pension plan is as follows:


		December 31,					December 31,
(In thousands)	(In thousands)	2020		2019		(In thousands)	2022		2021
Change in projected benefit obligation:	Change in projected benefit obligation:					Change in projected benefit obligation:
Projected benefit obligation at beginning of year	Projected benefit obligation at beginning of year	$	5,848	$	5,669	Projected benefit obligation at beginning of year	$	5,328	$	6,121
Service Cost	Service Cost	66		72		Service Cost	68		59
Interest cost	Interest cost	178		228		Interest cost	141		140
Actuarial loss	Actuarial loss	519		542		Actuarial loss	(1,508)		(211)
Benefits paid	Benefits paid	(337)		(333)		Benefits paid	(263)		(321)
Settlements	Settlements	(153)		(330)		Settlements	(37)		(460)
Projected benefit obligation at end of year	Projected benefit obligation at end of year	6,121		5,848		Projected benefit obligation at end of year	3,729		5,328

Accumulated benefit obligation	Accumulated benefit obligation	6,121		5,848		Accumulated benefit obligation	3,729		5,328

Change in fair value of plan assets:	Change in fair value of plan assets:					Change in fair value of plan assets:
Fair value of plan assets at plan beginning of year	Fair value of plan assets at plan beginning of year	5,799		5,522		Fair value of plan assets at plan beginning of year	5,962		6,049
Actual return on plan assets	Actual return on plan assets	740		940		Actual return on plan assets	(979)		694
Contributions by employer	Contributions by employer	0		0		Contributions by employer	—		—
Benefits paid	Benefits paid	(337)		(333)		Benefits paid	(263)		(321)
Settlements	Settlements	(153)		(330)		Settlements	(37)		(460)
Fair value of plan assets at end of year	Fair value of plan assets at end of year	6,049		5,799		Fair value of plan assets at end of year	4,683		5,962

Underfunded status		$	72	$	49
(Overfunded) status						(Overfunded) status	$	(954)	$	(634)


Amounts Recognized on Consolidated Balance Sheets	Amounts Recognized on Consolidated Balance Sheets					Amounts Recognized on Consolidated Balance Sheets

Other Liabilities		$	72	$	49
Other assets						Other assets	$	954	$	634
Other liabilities						Other liabilities	—		—

Net periodic pension cost is comprised of the following:


		December 31,					December 31,
(In thousands)	(In thousands)	2020		2019		(In thousands)	2022		2021		2020
Service Cost	Service Cost	$	66	$	72	Service Cost	$	68	$	59	$	66
Interest Cost	Interest Cost	178		228		Interest Cost	141		140		178
Expected return on plan assets	Expected return on plan assets	(393)		(373)		Expected return on plan assets	(376)		(410)		(393)
Amortization of unrecognized actuarial loss	Amortization of unrecognized actuarial loss	94		117		Amortization of unrecognized actuarial loss	11		103		94
Net periodic pension costs		$	(55)	$	44
Net periodic pension (credit)						Net periodic pension (credit)	$	(156)	$	(108)	$	(55)

~~F-61~~F-47

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in plan assets and benefit obligations recognized in accumulated other comprehensive income are as follows:


		December 31,					December 31,
(In thousands)	(In thousands)	2020		2019		(In thousands)	2022		2021		2020
Amortization of actuarial (loss)	Amortization of actuarial (loss)	$	(94)	$	(117)	Amortization of actuarial (loss)	$	(11)	$	(103)	$	(94)
Actuarial (gain) loss		171		(25)
Actuarial (gain)						Actuarial (gain)	(154)		(495)		171
Settlement charge	Settlement charge	0		(70)		Settlement charge	—		(58)		—
Total recognized in accumulated other comprehensive income	Total recognized in accumulated other comprehensive income	77		(212)		Total recognized in accumulated other comprehensive income	(165)		(656)		77
Total recognized in net periodic pension cost recognized and other comprehensive income	Total recognized in net periodic pension cost recognized and other comprehensive income	$	22	$	(168)	Total recognized in net periodic pension cost recognized and other comprehensive income	$	(321)	$	(764)	$	22

The amounts in accumulated other comprehensive (loss)/income that have not yet been recognized as components of net periodic benefit cost are a net loss of $0.5 million, $0.7 million, and $1.3 million in 2022, 2021 and ~~$1.2 million in~~ 2020, ~~and 2019,~~ respectively.

The Company did not make any cash contributions to the pension trust during ~~2020~~2022 and ~~2019.~~2021. The Company does 0tnot expect to make any cash contributions in ~~2021.~~2023. The amount expected to be amortized from other comprehensive income into net periodic pension cost over the next fiscal year is ~~$103~~$6 thousand.

The principal actuarial assumptions used are as follows:


		December 31,					December 31,
		2020		2019			2022		2021		2020
Projected benefit obligation	Projected benefit obligation					Projected benefit obligation
Discount rate	Discount rate	2.35	%	3.15	%	Discount rate	5.21	%	2.73	%	2.35	%
Net periodic pension cost	Net periodic pension cost					Net periodic pension cost
Discount rate	Discount rate	3.15	%	4.16	%	Discount rate	2.73	%	2.35	%	3.15	%
Long term rate of return on plan assets	Long term rate of return on plan assets	7.00	%	7.00	%	Long term rate of return on plan assets	6.50	%	7.00	%	7.00	%

The discount rate that is used in the measurement of the pension obligation is determined by comparing the expected future retirement payment cash flows of the pension plan to the Above Median FTSE Pension Discount Curve as of the measurement date. The expected long-term rate of return on Plan assets reflects long-term earnings expectations on existing Plan assets and those contributions expected to be received during the current plan year. In estimating that rate, appropriate consideration was given to historical returns earned by Plan assets in the fund and the rates of return expected to be available for reinvestment. The rates of return were adjusted to reflect current capital market assumptions and changes in investment allocations.

The Company’s overall investment strategy with respect to the Plan’s assets is primarily for preservation of capital and to provide regular dividend and interest payments. The Plan’s targeted asset allocation is 65% equity securities via investment in the Long-Term Growth - Equity Portfolio ("LTGE"), 34% intermediate-term investment grade bonds via investment in the Long-Term Growth - Fixed-Income Portfolio ("LTGFI"), and 1% in cash equivalents portfolio (for liquidity). Equity securities include investments in a diverse mix of equity funds to gain exposure in the US and international markets. The fixed income portion of the Plan assets is a diversified portfolio that primarily invests in intermediate-term bond funds. The overall rate of return is based on the historical performance of the assets applied against the Plan’s target allocation, and is adjusted for the long-term inflation rate.

The fair values for investment securities are determined by quoted prices in active markets, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

~~F-62~~F-48

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair value of the Plan’s assets by category within the fair value hierarchy are as follows at December 31, ~~2020~~2022 and December 31, ~~2019.~~2021. The Plan did not hold any assets classified as Level 3, nor were there any transfers.


		December 31, 2020							December 31, 2022
Asset Category (In thousands)	Asset Category (In thousands)	Total		Level 1		Level 2		Asset Category (In thousands)	Total		Level 1		Level 2
Equity Mutual Funds:	Equity Mutual Funds:							Equity Mutual Funds:
Large-Cap	Large-Cap	$	1,996	$	0	$	1,996	Large-Cap	$	1,441	$	—	$	1,441
Mid-Cap	Mid-Cap	519		0		519		Mid-Cap	383		—		383
Small-Cap	Small-Cap	500		0		500		Small-Cap	318		—		318
International	International	1,049		0		1,049		International	814		—		814

Fixed Income - US Core	Fixed Income - US Core	1,403		0		1,403		Fixed Income - US Core	1,167		—		1,167
Intermediate Duration	Intermediate Duration	470		0		470		Intermediate Duration	396		—		396
Cash Equivalents - money market	Cash Equivalents - money market	112		38		74		Cash Equivalents - money market	164		72		92
Total	Total	$	6,049	$	38	$	6,011	Total	$	4,683	$	72	$	4,611


		December 31, 2019							December 31, 2021
Asset Category (In thousands)	Asset Category (In thousands)	Total		Level 1		Level 2		Asset Category (In thousands)	Total		Level 1		Level 2
Equity Mutual Funds:	Equity Mutual Funds:							Equity Mutual Funds:
Large-Cap	Large-Cap	$	1,900	$	0	$	1,900	Large-Cap	$	1,914	$	—	$	1,914
Mid-Cap	Mid-Cap	453		0		453		Mid-Cap	509		—		509
Small-Cap	Small-Cap	429		0		429		Small-Cap	421		—		421
International	International	828		0		828		International	1,026		—		1,026

Fixed Income - US Core	Fixed Income - US Core	1,535		0		1,535		Fixed Income - US Core	1,446		—		1,446
Intermediate Duration	Intermediate Duration	517		0		517		Intermediate Duration	482		—		482
Cash Equivalents - money market	Cash Equivalents - money market	137		60		77		Cash Equivalents - money market	164		62		102
Total	Total	$	5,799	$	60	$	5,739	Total	$	5,962	$	62	$	5,900

Estimated benefit payments under the pension plans over the next 10 years at December 31, ~~2020~~2022 are as follows:


Year	Year	Payments (In thousands)	Year	Payments (In thousands)
2021		370
2022		382
2023	2023	367	2023	298
2024	2024	357	2024	292
2025 - 2030		1,888
2025			2025	283
2026			2026	275
2027 - 2032			2027 - 2032	1,574

Multi-Employer Pension Plan

As a result of the Company's acquisition of SI Financial Group, Inc. (“SIFI”), the Company participates in the Pentegra Defined Benefit Plan for Financial Institutions (the “Plan”), a tax-qualified defined benefit pension plan. The Plan operates as a multiple-employer plan under ERISA and the Internal Revenue Code, and as a multi-employer plan for accounting purposes. The Plan was frozen effective September 6, 2013. The Company made contributions of ~~$377~~$124 thousand in ~~2020.~~2022. As of July 1, ~~2020,~~2022, the Plan held assets with a market value of ~~$4.5~~$4.3 million and liabilities with a market value of ~~$7.9~~$5.9 million. The funded status (market value of plan assets divided by funding target) of the Plan, was greater than 80% as of July 1, ~~2020,~~2022, as required by federal and state regulations. Market value of the Plan's assets reflects contributions received through June 30, ~~2020.~~2022. There are no collective bargaining agreements in place that require contributions to the Plan by the Company. The Plan is a single plan under the Internal Revenue Code and, as a result, all of the assets stand behind all of the liabilities. Accordingly, contributions made by a participating employer may be used to provide benefits to participants of other participating employers.

~~F-63~~F-49

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Postretirement Benefits

The Company maintains an unfunded postretirement medical plan assumed in connection with the Rome Bancorp acquisition in 2011. The postretirement plan has been modified so that participation is closed to those employees who did not meet the retirement eligibility requirements by March 31, 2011. The Company contributes partially to medical benefits and life insurance coverage for retirees. Such retirees and their surviving spouses are responsible for the remainder of the medical benefits, including increases in premiums levels, between the total premium and the Company’s contribution.

The Company also has an executive long-term care (“LTC”) postretirement benefit plan which started August 1, 2014. The LTC plan reimburses executives for certain costs in the event of a future chronic illness. Funding of the plan comes from Company paid insurance policies or direct payments. At plan’s inception, a $558 thousand benefit obligation was recorded against equity representing the prior service cost of plan participants.

Information regarding the postretirement plans is as follows:


		December 31,					December 31,
(In thousands)	(In thousands)	2020		2019		(In thousands)	2022		2021
Change in accumulated postretirement benefit obligation:	Change in accumulated postretirement benefit obligation:					Change in accumulated postretirement benefit obligation:
Accumulated post-retirement benefit obligation at beginning of year	Accumulated post-retirement benefit obligation at beginning of year	$	4,039	$	3,422	Accumulated post-retirement benefit obligation at beginning of year	$	4,521	$	4,641

Service Cost	Service Cost	39		38		Service Cost	12		13
Interest cost	Interest cost	129		142		Interest cost	122		113
Participant contributions	Participant contributions	0		0		Participant contributions	—		—
Actuarial loss	Actuarial loss	507		565		Actuarial loss	(1,396)		(198)
Benefits paid	Benefits paid	(73)		(128)		Benefits paid	(44)		(48)

Accumulated post-retirement benefit obligation at end of year	Accumulated post-retirement benefit obligation at end of year	$	4,641	$	4,039	Accumulated post-retirement benefit obligation at end of year	$	3,215	$	4,521

Change in plan assets:	Change in plan assets:					Change in plan assets:
Fair value of plan assets at beginning of year	Fair value of plan assets at beginning of year	$	0	$	0	Fair value of plan assets at beginning of year	$	—	$	—
Contributions by employer	Contributions by employer	73		128		Contributions by employer	44		48
Contributions by participant	Contributions by participant	0		0		Contributions by participant	—		—
Benefits paid	Benefits paid	(73)		(128)		Benefits paid	(44)		(48)
Fair value of plan assets at end of year	Fair value of plan assets at end of year	$	0	$	0	Fair value of plan assets at end of year	$	—	$	—


Amounts Recognized on Consolidated Balance Sheets	Amounts Recognized on Consolidated Balance Sheets					Amounts Recognized on Consolidated Balance Sheets
Other Liabilities	Other Liabilities	$	4,641	$	4,039	Other Liabilities	$	3,215	$	4,521

Net periodic post-retirement cost is comprised of the following:


		December 31,					December 31,
(In thousands)	(In thousands)	2020		2019		(In thousands)	2022		2021		2020
Service cost	Service cost	$	39	$	38	Service cost	$	12	$	13	$	39
Interest costs	Interest costs	129		142		Interest costs	122		113		129
Amortization of net prior service credit	Amortization of net prior service credit	84		83		Amortization of net prior service credit	83		83		84
Amortization of net actuarial loss	Amortization of net actuarial loss	12		0		Amortization of net actuarial loss	30		55		12
Net periodic post-retirement costs	Net periodic post-retirement costs	$	264	$	263	Net periodic post-retirement costs	$	247	$	264	$	264

~~F-64~~F-50

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in benefit obligations recognized in accumulated other comprehensive income are as follows:


		December 31,					December 31,
(In thousands)	(In thousands)	2020		2019		(In thousands)	2022		2021		2020

Amortization of prior service credit	Amortization of prior service credit	$	(84)	$	(83)	Amortization of prior service credit	$	(83)	$	(83)	$	(84)
Net actuarial loss (gain)		496		374
Net actuarial (gain)						Net actuarial (gain)	(1,426)		(253)		496
Total recognized in accumulated other comprehensive income	Total recognized in accumulated other comprehensive income	412		291		Total recognized in accumulated other comprehensive income	(1,509)		(336)		412
Accrued post-retirement liability recognized	Accrued post-retirement liability recognized	$	4,641	$	4,039	Accrued post-retirement liability recognized	$	3,215	$	4,521	$	4,641

The amounts in accumulated other comprehensive income that have not yet been recognized as components of net periodic benefit cost are as follows:


		December 31,					December 31,
(In thousands)	(In thousands)	2020		2019		(In thousands)	2022		2021		2020
Net prior service cost (credit)		$	1,325	$	1,409
Net actuarial loss (gain)		869		374
Net prior service cost						Net prior service cost	$	1,159	$	1,242	$	1,325
Net actuarial (gain)/loss						Net actuarial (gain)/loss	(812)		615		869
Total recognized in accumulated other comprehensive income	Total recognized in accumulated other comprehensive income	$	2,194	$	1,783	Total recognized in accumulated other comprehensive income	$	347	$	1,857	$	2,194

The amount expected to be amortized from other comprehensive (loss)/income into net periodic postretirement cost over the next fiscal year is $83 thousand.

The discount rates used in the measurement of the postretirement plan obligations are determined by comparing the expected future retirement payment cash flows of the plans to the Above Median FTSE Pension Discount Curve as of the measurement date.

The assumed discount rates on a weighted-average basis were ~~2.16%~~5.12% and ~~3.06%~~2.30% as of December 31, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively. The Company has fixed contributions, therefore, the annual rate of increase in healthcare costs is not used in measuring the accumulated post-retirement benefit medical obligation.

For participants in the LTC plan covered by insurance policies, no increase in annual premiums is assumed based on the history of the corresponding insurance provider.

Estimated benefit payments under the post-retirement benefit plan over the next ten years at December 31, ~~2020~~2022 are as follows:


Year	Year	Payments (In thousands)	Year	Payments (In thousands)
2021		123
2022		121
2023	2023	118	2023	122
2024	2024	117	2024	122
2025 - 2030		642
2025			2025	119
2026			2026	115
2027 - 2032			2027 - 2032	951

~~F-65~~F-51

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

401(k) Plan

The Company provides a 401(k) Plan in which most eligible employees participate. Expense related to the plan was $2.9 million in 2022, $3.2 million in 2021, and $3.5 million in ~~2020, $4.1 million in 2019, and $3.9 million in 2018.~~

~~Employee Stock Ownership Plan (“ESOP”)~~

As part of the SI Financial acquisition in 2019, the Company acquired an ESOP plan that was frozen and terminated prior to the completion of the transaction. On acquisition date, all amounts in the plan were vested and the loan under the plans was repaid from the sale proceeds of unallocated shares.2020.

Other Plans

The Company maintains supplemental executive retirement plans (“SERPs”) for select current and former executives. Benefits generally commence no earlier than age sixty-two and are payable either as an annuity or as a lump sum at the executive’s option. Most of these SERPs were assumed in connection with acquisitions. At year-end ~~2020~~2022 and ~~2019,~~2021, the accrued liability for these SERPs was ~~$20.1~~$19.4 million and ~~$20.3~~$20.0 million, respectively. SERP expense was $2.0 million in ~~2020, $0.9~~2022, $2.0 million in ~~2019,~~2021, and ~~$0.6~~$2.0 million in ~~2018,~~2020, and is recognized over the required service period.

During 2020, the Company released $0.9 million of accrued SERP liability, following a transition in the Company's Chief Executive Officer position. The separation agreement did not entitle the former executive to any future benefits, including the associated SERP, other than those described in the agreement.

The Company has endorsement split-dollar arrangements pertaining to certain current and former executives and directors. Under these arrangements, the Company purchased policies insuring the lives of the executives and directors, and separately entered into agreements to split the policy benefits with the individuals. There are no post-retirement benefits associated with these policies. The Company also assumed split-dollar life insurance agreements from multiple prior acquisitions. The accrued liability for these split-dollar arrangements was $7.9 million as of year-end ~~2020~~2022 and ~~$7.1~~$7.8 million as of year-end ~~2019.~~2021.

~~F-66~~F-52

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14. INCOME TAXES

Provision for Income Taxes

The components of the Company’s provision for income taxes for the years ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018~~2020 were, as follows:


(In thousands)	(In thousands)	2020		2019		2018		(In thousands)	2022		2021		2020
Current:	Current:							Current:
Federal tax (benefit)/expense		$	(19,889)	$	16,576	$	12,634
State tax (benefit)/expense		(3,976)		5,323		4,114
Total current tax (benefit)/expense (1)		(23,865)		21,899		16,748
Federal tax expense/(benefit)								Federal tax expense/(benefit)	$	17,915	$	17,340	$	(19,889)
State tax expense/(benefit)								State tax expense/(benefit)	6,831		7,580		(3,976)
Total current tax expense/(benefit) (1)								Total current tax expense/(benefit) (1)	24,746		24,920		(23,865)
Deferred:	Deferred:							Deferred:
Federal tax expense		2,048		908		8,443
Federal tax expense/(benefit)								Federal tax expense/(benefit)	(2,274)		5,125		2,048
State tax expense/(benefit)	State tax expense/(benefit)	1,964		(344)		3,770		State tax expense/(benefit)	(1,187)		112		1,964
Total deferred tax expense		4,012		564		12,213
Total deferred tax expense/(benefit)								Total deferred tax expense/(benefit)	(3,461)		5,237		4,012
Change in valuation allowance	Change in valuation allowance	0		0		0		Change in valuation allowance	—		200		—
Income tax (benefit)/expense from continuing operations		$	(19,853)	$	22,463	$	28,961
Income tax expense/(benefit) from continuing operations								Income tax expense/(benefit) from continuing operations	$	21,285	$	30,357	$	(19,853)
Income tax (benefit) from discontinued operations	Income tax (benefit) from discontinued operations	(7,013)		(1,468)		(1,313)		Income tax (benefit) from discontinued operations	—		—		(7,013)
Total	Total	$	(26,866)	$	20,995	$	27,648	Total	$	21,285	$	30,357	$	(26,866)

(1) On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was signed into law. The CARES Act includes several provisions that temporarily modify the corporate net operating loss (“NOL”) carryback rules for federal income tax purposes. Specifically, the CARES Act allows a five-year carryback of any NOL generated in a taxable year beginning after December 31, 2017, and before January 1, 2021. The Company recorded a $6 million federal income tax benefit in 2020, and an additional $500 thousand benefit in 2021 resulting from the carryback of its 2020 NOL to recover federal income taxes paid in 2015 through ~~2017 at~~2018 (at a 35% federal income tax ~~rate.~~rate for years 2015 through 2017).

Effective Tax Rate

The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018:~~2020:


		2020				2019				2018					2022				2021				2020
(In thousands, except rates)	(In thousands, except rates)	Amount		Rate		Amount		Rate		Amount		Rate		(In thousands, except rates)	Amount		Rate		Amount		Rate		Amount		Rate
Statutory tax rate	Statutory tax rate	$	(111,936)	21.0	%	$	26,037	21.0	%	$	29,018	21.0	%	Statutory tax rate	$	23,902	21.0	%	$	31,294	21.0	%	$	(111,936)	21.0	%
Increase (decrease) resulting from:	Increase (decrease) resulting from:													Increase (decrease) resulting from:
State taxes, net of federal tax benefit	State taxes, net of federal tax benefit	(1,589)		0.3		3,641		2.9		7,081		5.1		State taxes, net of federal tax benefit	4,459		3.9		6,077		4.1		(1,589)		0.3
Tax exempt income - investments, net	Tax exempt income - investments, net	(3,184)		0.6		(3,527)		(2.8)		(3,620)		(2.6)		Tax exempt income - investments, net	(3,515)		(3.1)		(3,475)		(2.3)		(3,184)		0.6
Bank-owned life insurance	Bank-owned life insurance	(1,283)		0.3		(1,305)		(1.1)		(1,337)		(1.0)		Bank-owned life insurance	(1,258)		(1.1)		(1,348)		(0.9)		(1,283)		0.3
Goodwill impairment	Goodwill impairment	103,912		(19.5)		0		0		0		0		Goodwill impairment	—				—		—		103,912		(19.5)
Non-deductible merger costs		0		0		122		0.1		181		0.1

Tax credits, net of basis reduction	Tax credits, net of basis reduction	(1,812)		0.3		(3,531)		(2.8)		(3,574)		(2.6)		Tax credits, net of basis reduction	(2,129)		(1.9)		(2,881)		(1.9)		(1,812)		0.3

Change in valuation allowance														Change in valuation allowance	—		—		200		0.1		—		—
Tax rate benefit on net operating loss carryback	Tax rate benefit on net operating loss carryback	(6,040)		1.1		0		0		0		0		Tax rate benefit on net operating loss carryback	—		—		(493)		(0.3)		(6,040)		1.1
Other, net	Other, net	2,079		(0.4)		1,026		0.8		1,212		0.9		Other, net	(174)		(0.1)		983		0.6		2,079		(0.4)

Effective tax rate	Effective tax rate	$	(19,853)	3.7	%	$	22,463	18.1	%	$	28,961	20.9	%	Effective tax rate	$	21,285	18.7	%	$	30,357	20.4	%	$	(19,853)	3.7	%

~~F-67~~F-53

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred Tax Assets and Liabilities

As of December 31, ~~2020~~2022 and ~~2019,~~2021, significant components of the Company’s deferred tax assets and liabilities were, as follows:


(In thousands)	(In thousands)	2020		2019		(In thousands)	2022		2021
Deferred tax assets:	Deferred tax assets:					Deferred tax assets:
Allowance for credit losses	Allowance for credit losses	$	35,650	$	17,446	Allowance for credit losses	$	28,312	$	30,441

Unrealized capital loss on tax credit investments	Unrealized capital loss on tax credit investments	2,360		6,195		Unrealized capital loss on tax credit investments	1,603		1,451

Net unrealized loss on securities available for sale, swaps, and pension in OCI						Net unrealized loss on securities available for sale, swaps, and pension in OCI	63,335		1,085
Employee benefit plans	Employee benefit plans	7,607		10,565		Employee benefit plans	11,659		8,435
Purchase accounting adjustments	Purchase accounting adjustments	8,843		39,359		Purchase accounting adjustments	4,342		4,829
Net operating loss carryforwards	Net operating loss carryforwards	1,753		951		Net operating loss carryforwards	503		1,139

Deferred loan fees						Deferred loan fees	4,049		2,449
Lease liability	Lease liability	20,119		22,497		Lease liability	14,148		14,940
Premises and equipment	Premises and equipment	1,097		739		Premises and equipment	2,630		1,850
Nonaccrual interest	Nonaccrual interest	1,780		587		Nonaccrual interest	1,069		1,722
Intangible amortization						Intangible amortization	659		—
Other	Other	1,733		501		Other	1,778		1,845
Deferred tax assets, net before valuation allowances	Deferred tax assets, net before valuation allowances	80,942		98,840		Deferred tax assets, net before valuation allowances	134,087		70,186
Valuation allowance	Valuation allowance	(200)		(200)		Valuation allowance	(400)		(400)
Deferred tax assets, net of valuation allowances	Deferred tax assets, net of valuation allowances	$	80,742	$	98,640	Deferred tax assets, net of valuation allowances	$	133,687	$	69,786

Deferred tax liabilities:	Deferred tax liabilities:					Deferred tax liabilities:

Net unrealized gain on securities available for sale and pension in OCI		$	(10,602)	$	(4,244)

Loan servicing rights	Loan servicing rights	(1,674)		(4,669)		Loan servicing rights	$	(1,212)	$	(1,488)
Deferred loan fees		(368)		(1,667)

Intangible amortization	Intangible amortization	(2,277)		(18,557)		Intangible amortization	—		(545)
Unamortized tax credit reserve	Unamortized tax credit reserve	(1,086)		(1,142)		Unamortized tax credit reserve	(1,687)		(1,075)
Right-of-use asset	Right-of-use asset	(18,365)		(20,614)		Right-of-use asset	(12,457)		(14,058)
Deferred tax liabilities	Deferred tax liabilities	$	(34,372)	$	(50,893)	Deferred tax liabilities	$	(15,356)	$	(17,166)
Deferred tax assets, net	Deferred tax assets, net	$	46,370	$	47,747	Deferred tax assets, net	$	118,331	$	52,620

Deferred tax liabilities from discontinued operations		$	0	$	(3,418)
Deferred tax assets, net from continuing operations		$	46,370	$	51,165

The Company’s net deferred tax asset ~~decreased~~increased by ~~$1.4~~$65.7 million during ~~2020.~~2022 and $62.3 million of this change is related to unrealized losses in OCI.

Deferred tax assets, net of valuation allowances, are expected to be realized through the reversal of existing taxable temporary differences and future taxable income.

~~F-68~~

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Valuation Allowances

The components of the Company’s valuation allowance on its deferred tax asset, net as of December 31, ~~2020~~2022 and ~~2019~~2021 were, as follows:

(in thousands) 2020 2019
State tax basis difference, net of Federal tax benefit $ (200) $ (200)
Valuation allowances $ (200) $ (200)


(in thousands)	2022		2021


State valuation allowances	$	(400)	$	(400)

The state tax basis difference, net of Federal ~~tax~~ benefit, was originally recorded in 2012, due to management’s assessment that it is more likely than not that certain deferred tax assets recorded for the difference between the book basis and the state tax basis in certain tax credit limited partnership investments (LPs) will not be realized. Management anticipates that the remaining excess state tax basis will be realized as a capital loss upon disposition, and that it is unlikely that the Company will have capital gains against which to offset such capital losses.

~~There was 0 change in the valuation allowance during 2020.~~ The valuation allowance as of December 31, ~~2020~~2022 is subject to change in the future as the Company continues to periodically assess the likelihood of realizing its deferred tax assets.

F-54

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Tax Attributes

At December 31, ~~2020,~~2022, the Company has ~~$4.5~~$1.5 million of federal net operating loss carryforwards, the utilization of which are limited under Internal Revenue Code Section 382. These net operating losses begin to expire in 2029. The related deferred tax asset is ~~$1.0 million.~~$315 thousand.

State net operating loss carryforwards, net of valuation allowance described above, are expected to be utilized in ~~2021.~~the future and begin to expire in 2023. The related gross deferred tax asset is ~~$803~~$188 thousand.

Unrecognized Tax Benefits

On a periodic basis, the Company evaluates its income tax positions based on tax laws and regulations and financial reporting considerations, and records adjustments as appropriate. This evaluation takes into consideration the status of taxing authorities’ current examinations of the Company’s tax returns, recent positions taken by the taxing authorities on similar transactions, if any, and the overall tax environment in relation to uncertain tax positions.

The following table presents changes in unrecognized tax benefits for the years ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018:~~2020:


(In thousands)	(In thousands)	2020		2019		2018		(In thousands)	2022		2021		2020
Unrecognized tax benefits at January 1	Unrecognized tax benefits at January 1	$	238	$	467	$	304	Unrecognized tax benefits at January 1	$	1,025	$	516	$	238
Increase in gross amounts of tax positions related to prior years	Increase in gross amounts of tax positions related to prior years	309		26		533		Increase in gross amounts of tax positions related to prior years	17		509		309
Decrease in gross amounts of tax positions related to prior years	Decrease in gross amounts of tax positions related to prior years	0		0		(370)		Decrease in gross amounts of tax positions related to prior years	—		—		—
Decrease due to settlement with taxing authority	Decrease due to settlement with taxing authority	0		(185)		0		Decrease due to settlement with taxing authority	—		—		—

Decrease due to lapse in statute of limitations	Decrease due to lapse in statute of limitations	(31)		(70)		0		Decrease due to lapse in statute of limitations	—		—		(31)
Unrecognized tax benefits at December 31	Unrecognized tax benefits at December 31	$	516	$	238	$	467	Unrecognized tax benefits at December 31	$	1,042	$	1,025	$	516

It is reasonably possible that over the next twelve months the amount of unrecognized tax benefits may change from the reevaluation of uncertain tax positions arising in examinations, in appeals, or in the courts, or from the closure of tax ~~statutes. The~~statutes.The Company does not expect any significant changes in unrecognized tax benefits during the next twelve months.

All of the Company’s unrecognized tax benefits, if recognized, would be recorded as a component of income tax expense, therefore, affecting the effective tax rate. The Company recognizes interest and penalties, if any, related to the liability for uncertain tax positions as a component of income tax expense. The accrual for interest and penalties was not material for all years presented.

~~F-69~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction as well as in various states. In the normal course of business, the Company is subject to U.S. federal, state, and local income tax examinations by tax authorities. ~~The~~Other than open statutes of limitation pertaining specifically to the amended returns filed for 2015 through 2018 to claim NOL carryback refunds, the Company is no longer subject to examination for tax years prior to ~~2017~~2019 including any related income tax filings from its recent acquisitions. The Company ~~has been selected for~~is not under audit in ~~the state~~any jurisdiction as of ~~New York for tax years 2015-2017.~~December 31, 2022.

~~F-70~~F-55

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

At year-end ~~2020,~~2022, the Company held derivatives with a total notional amount of ~~$3.9~~$4.5 billion. That amount included $0.6 billion in interest rate swap derivatives and $0.2 billion in interest rate collars that were designated as cash flow hedges for accounting purposes. The Company had economic hedges and non-hedging derivatives totaling ~~$3.8~~$3.7 billion and ~~$40.1~~$4.1 million, respectively, which are not designated as hedges for accounting purposes and are therefore recorded at fair value with changes in fair value recorded directly through earnings. Economic hedges included interest rate swaps totaling ~~$3.5~~$3.4 billion, risk participation agreements with dealer banks of ~~$326.9~~$341.9 million, and ~~$11.5~~$0.9 million in forward commitment contracts. ~~Forward sale commitments and commitments to lend are included in discontinued operations.~~

As part of the Company’s risk management strategy, the Company enters into interest rate swap agreements to mitigate the interest rate risk inherent in certain of the Company’s assets and liabilities. Interest rate swap agreements involve the risk of dealing with both Bank customers and institutional derivative counterparties and their ability to meet contractual terms. The agreements are entered into with counterparties that meet established credit standards and contain master netting and collateral provisions protecting the at-risk party. The derivatives program is overseen by the Risk Management, Capital and Compliance Committee of the Company’s Board of Directors. Based on adherence to the Company’s credit standards and the presence of the netting and collateral provisions, the Company believes that the credit risk inherent in these contracts was not significant at December 31, ~~2020.~~2022.

The Company had no pledged collateral to derivative counterparties in the form of cash ~~totaling $75.1~~at year-end 2022. The Company had pledged securities to derivative counterparties with an amortized cost of $12.0 million and a fair value of $12.0 million at year-end 2022. At December 31, 2021, the Company pledged cash collateral of $43.7 million and securities with an amortized cost of ~~$37.5~~$34.8 million and a fair value of ~~$37.8 million at year-end 2020. At December 31, 2019, the Company pledged cash collateral of $96.3 million and securities with an amortized cost of $25.7 million and a fair value of $25.8~~$34.9 million. The Company does not typically require its commercial customers to post cash or securities as collateral on its program of back-to-back economic hedges. However certain language is written into the International Swaps Dealers Association, Inc. (“ISDA”) and loan documents where, in default situations, the Bank is allowed to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability. The Company may need to post additional collateral in the future in proportion to potential increases in unrealized loss positions.

F-56

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Information about interest rate swap agreements and non-hedging derivative assets and liabilities at December 31, ~~2020~~2022 follows:


		Notional Amount			Weighted Average Maturity		Weighted Average Rate					Estimated Fair Value Asset (Liability)				Notional Amount			Weighted Average Maturity	Weighted Average Rate				Estimated Fair Value Asset (Liability)
December 31, 2020						Received			Contract pay rate
December 31, 2022														December 31, 2022				Notional Amount		Weighted Average Maturity		Received		Contract pay rate		Estimated Fair Value Asset (Liability)
				(In thousands)		(In years)									(In thousands)

Cash flow hedges:														Cash flow hedges:
Interest rate swaps on commercial loans (1)														Interest rate swaps on commercial loans (1)		$	400,000		2.7	4.09	%	3.51	%	$	—
Forward-starting interest rate swaps on commercial loans (1)														Forward-starting interest rate swaps on commercial loans (1)		200,000			3.3	—	%	3.90	%	—
Interest rate collars on commercial loans														Interest rate collars on commercial loans		200,000			3.5					1,937
Total cash flow hedges														Total cash flow hedges		800,000								1,937

Economic hedges:	Economic hedges:													Economic hedges:
Interest rate swap on tax advantaged economic development bond	Interest rate swap on tax advantaged economic development bond	$	8,654		8.9		0.52	%		5.09	%	$	(1,778)	Interest rate swap on tax advantaged economic development bond		$	7,062		6.9	4.49	%	5.09	%	$	(193)
Interest rate swaps on loans with commercial loan customers		1,734,978			6.1		4.15	%		1.95	%	159,016
Reverse interest rate swaps on loans with commercial loan customers		1,734,978			6.1		1.95	%		4.15	%	(64,645)
Interest rate swaps on loans with commercial loan customers (1)														Interest rate swaps on loans with commercial loan customers (1)		1,685,263			5.7	4.11	%	5.55	%	(95,114)
Reverse interest rate swaps on loans with commercial loan customers (1)														Reverse interest rate swaps on loans with commercial loan customers (1)		1,685,263			5.7	5.55	%	4.11	%	50,267
Risk participation agreements with dealer banks	Risk participation agreements with dealer banks	326,862			8.0							665		Risk participation agreements with dealer banks		341,885			6.6					(89)
Forward sale commitments	Forward sale commitments	11,544			0.2							320		Forward sale commitments		927			0.2					8
Total economic hedges	Total economic hedges	3,817,016										93,578		Total economic hedges		3,720,400								(45,121)

Non-hedging derivatives:	Non-hedging derivatives:													Non-hedging derivatives:
Commitments to lend	Commitments to lend	40,099			0.2							735		Commitments to lend		4,114			0.2					17
Total non-hedging derivatives	Total non-hedging derivatives	40,099										735		Total non-hedging derivatives		4,114								17

Total	Total	$	3,857,115									$	94,313	Total		$	4,524,514							$	(43,167)

(1) Fair value estimates include the impact of $38.3 million settled to market contract agreements.

~~F-71~~F-57

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Information about interest rate swap agreements and non-hedging derivative asset and liabilities at December 31, ~~2019~~2021 follows:


		Notional Amount			Weighted Average Maturity		Weighted Average Rate					Estimated Fair Value Asset (Liability)				Notional Amount			Weighted Average Maturity	Weighted Average Rate								Estimated Fair Value Asset (Liability)
December 31, 2019						Received			Contract pay rate
December 31, 2021														December 31, 2021				Notional Amount		Weighted Average Maturity				Received				Contract pay rate				Estimated Fair Value Asset (Liability)
				(In thousands)		(In years)									(In thousands)

Economic hedges:	Economic hedges:													Economic hedges:
Interest rate swap on tax advantaged economic development bond	Interest rate swap on tax advantaged economic development bond	$	9,390		9.9		2.08	%		5.09	%	$	(1,488)	Interest rate swap on tax advantaged economic development bond		$	7,879		7.9			0.47	%			5.09	%			$	(1,158)
Interest rate swaps on loans with commercial loan customers	Interest rate swaps on loans with commercial loan customers	1,669,895			6.4		4.38	%		3.28	%	75,326		Interest rate swaps on loans with commercial loan customers		1,684,238			5.8	3.99	%			1.91	%			74,348
Reverse interest rate swaps on loans with commercial loan customers(1)	Reverse interest rate swaps on loans with commercial loan customers(1)	1,669,895			6.4		3.28	%		4.38	%	(77,051)		Reverse interest rate swaps on loans with commercial loan customers(1)		1,684,238			5.8	1.91	%			3.99	%			(30,454)
Risk participation agreements with dealer banks	Risk participation agreements with dealer banks	315,140			7.5							320		Risk participation agreements with dealer banks		320,981			5.8									432
Forward sale commitments ~~(1)~~	Forward sale commitments ~~(1)~~	237,412			0.2							(227)		Forward sale commitments ~~(1)~~		6,377			0.2									134
Total economic hedges	Total economic hedges	3,901,732										(3,120)		Total economic hedges		3,703,713												43,302

Non-hedging derivatives:	Non-hedging derivatives:													Non-hedging derivatives:
Commitments to lend ~~(1)~~	Commitments to lend ~~(1)~~	168,997			0.2							2,628		Commitments to lend ~~(1)~~		8,192			0.2									124
Total non-hedging derivatives	Total non-hedging derivatives	168,997										2,628		Total non-hedging derivatives		8,192												124

Total	Total	$	4,070,729									$	(492)	Total		$	3,711,905											$	43,426

(1) ~~Includes~~Fair value estimates include the impact of ~~discontinued operations.~~$45.7 million settled to market contract agreements.

~~F-72~~F-58

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash flow hedges

The effective portion of unrealized changes in the fair value of derivatives accounted for as cash flow hedges is reported in other comprehensive (loss)/income and subsequently reclassified to earnings in the same period or periods during which the hedged transaction is forecasted to affect earnings. Each quarter, the Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged item or transaction. The ineffective portion of changes in the fair value of the derivatives is recognized directly in earnings. All cash flow hedges are considered highly effective.

The Company has designated its interest rate collars as cash flow hedges. The structure of these instruments is such that the Company pays the counterparty an incremental amount if the collar index exceeds the cap rate. Conversely, the Company receives an incremental amount if the index falls below the floor rate. No payments are required if the collar index falls between the cap and floor rates.

As of December 31, 2022, the Company had six interest rate swap contracts and two forward-starting interest rate swap contracts with a combined notional value of $600.0 million. The two forward starting swaps will become effective in 2023. The interest rate swaps have durations of two to four years. This hedge strategy converts commercial variable rate loans to fixed interest rates, thereby protecting the Company from floating interest rate variability.

In December 2022, the Company entered into two interest rate collars. The first interest rate collar has a 3.00% floor and a 5.75% cap with a notional value of $100.0 million. The second interest rate collar has a 3.25% floor and a 5.75% cap with a notional value of $100.0 million. The interest rate collars have durations of three to four years. The structure of these instruments is such that the Company pays the counterparty an incremental amount if the collar index exceeds the cap rate. Conversely, the Company receives an incremental amount if the index falls below the floor rate. No payments are required if the collar index falls between the cap and floor rates.

Amounts included in the Consolidated Statements of Operations and in the other comprehensive (loss)/income section of the Consolidated Statements of Comprehensive (Loss)/Income (related to interest rate derivatives designated as hedges of cash flows), were as follows:


	Years Ended December 31,
(In thousands)	2022		2021		2020
Interest rate swaps and collars on commercial loans:
Unrealized (loss) recognized in accumulated other comprehensive loss	$	(6,667)	$	—	$	—

Less: Reclassification of unrealized (loss) from accumulated other comprehensive loss to interest expense	—		—		—



Net tax benefit on items recognized in accumulated other comprehensive income	1,789		—		—

Other comprehensive loss recorded in accumulated other comprehensive (loss)/income, net of reclassification adjustments and tax effects	$	(4,878)	$	—	$	—
Net interest expense recognized in interest expense on hedged commercial loans	$	(15)	$	—	$	—

F-59

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Economic hedges

As of December 31, ~~2020~~2022 the Company has an interest rate swap with a ~~$8.7~~$7.1 million notional amount to swap out the fixed rate of interest on an economic development bond bearing a fixed rate of 5.09%, currently within the Company’s trading portfolio under the fair value option, in exchange for a LIBOR-based floating rate. The intent of the economic hedge is to improve the Company’s asset sensitivity to changing interest rates in anticipation of favorable average floating rates of interest over the 21-year life of the bond. The fair value changes of the economic development bond are mostly offset by fair value changes of the related interest rate swap.

The Company also offers certain derivative products directly to qualified commercial borrowers. The Company economically hedges derivative transactions executed with commercial borrowers by entering into mirror-image, offsetting derivatives with third-party financial institutions. The transaction allows the Company’s customer to convert a variable-rate loan to a fixed rate loan. Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts mostly offset each other in earnings. ~~Credit~~There was no credit valuation loss ~~adjustments~~adjustment arising from the difference in credit worthiness of the commercial loan and financial institution counterparties ~~totaled $1.5 million at year-end 2020.~~as of December 31, 2022. The interest income and expense on these mirror image swaps exactly offset each other.

The Company has risk participation agreements with dealer banks. Risk participation agreements occur when the Company participates on a loan and a swap where another bank is the lead. The Company earns a fee to take on the risk associated with having to make the lead bank whole on Berkshire’s portion of the pro-rated swap should the borrower default.

The Company utilizes forward sale commitments to hedge interest rate risk and the associated effects on the fair value of interest rate lock commitments and loans held for sale. The forward sale commitments are accounted for as derivatives with changes in fair value recorded in current period earnings. ~~Forward sale commitments are~~

~~included in discontinued operations.~~

The company uses the following types of forward sale commitments contracts:

•Best efforts loan sales,

•Mandatory delivery loan sales, and

•To be announced (TBA) mortgage-backed securities sales.

A best efforts contract refers to a loan sales agreement where the Company commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. The Company may enter into a best efforts contract once the price is known, which is shortly after the potential borrower’s interest rate is locked.

A mandatory delivery contract is a loan sales agreement where the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. Generally, the Company may enter into mandatory delivery contracts shortly after the loan closes with a customer.

The Company may sell to-be-announced mortgage-backed securities to hedge the changes in fair value of interest rate lock commitments and held for sale loans, which do not have corresponding best efforts or mandatory delivery contracts. These security sales transactions are closed once mandatory contracts are written. On the closing date the price of the security is locked-in, and the sale is paired-off with a purchase of the same security. Settlement of the security purchase/sale transaction is done with cash on a net-basis.

~~F-73~~F-60

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Non-hedging derivatives

The Company enters into commitments to lend for residential mortgage loans, which commit the Company to lend funds to a potential borrower at a specific interest rate and within a specified period of time. Commitments that relate to the origination of mortgage loans that will be held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding commitments expose the Company to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The commitments are free-standing derivatives which are carried at fair value with changes recorded in non-interest income in the Company’s Consolidated Statements of Operations. Changes in the fair value of commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time. ~~Commitments to lend are included in discontinued operations.~~

Amounts included in the Consolidated Statements of Operations related to economic hedges and non-hedging derivatives were as follows:


		Years Ended December 31,							Years Ended December 31,
(In thousands)	(In thousands)	2020		2019		2018		(In thousands)	2022		2021		2020

Economic hedges	Economic hedges							Economic hedges
Interest rate swap on industrial revenue bond:	Interest rate swap on industrial revenue bond:							Interest rate swap on industrial revenue bond:
Unrealized (loss)/gain recognized in other non-interest income		$	(289)	$	(248)	$	409
Unrealized gain/(loss) recognized in other non-interest income								Unrealized gain/(loss) recognized in other non-interest income	$	941	$	619	$	(289)

Interest rate swaps on loans with commercial loan customers:	Interest rate swaps on loans with commercial loan customers:							Interest rate swaps on loans with commercial loan customers:
Unrealized (loss)/gain recognized in other non-interest income								Unrealized (loss)/gain recognized in other non-interest income	(171,272)		(86,099)		85,206
Favorable/(unfavorable) change in credit valuation adjustment recognized in other non-interest income								Favorable/(unfavorable) change in credit valuation adjustment recognized in other non-interest income	1,809		1,431		(1,516)
Reverse interest rate swaps on loans with commercial loan customers:								Reverse interest rate swaps on loans with commercial loan customers:
Unrealized gain/(loss) recognized in other non-interest income	Unrealized gain/(loss) recognized in other non-interest income	85,206		65,098		8,758		Unrealized gain/(loss) recognized in other non-interest income	171,272		86,099		(85,206)
(Unfavorable) change in credit valuation adjustment recognized in other non-interest income		(1,516)		(1,214)		(519)
Reverse interest rate swaps on loans with commercial loan customers:
Unrealized (loss)/gain recognized in other non-interest income		(85,206)		(65,098)		(8,758)

Risk Participation Agreements:	Risk Participation Agreements:							Risk Participation Agreements:

Unrealized gain/(loss) recognized in other non-interest income		345		83		263
Unrealized (loss)/gain recognized in other non-interest income								Unrealized (loss)/gain recognized in other non-interest income	(521)		(233)		345

Forward Commitments:	Forward Commitments:							Forward Commitments:

Unrealized gain/(loss) recognized in discontinued operations		547		507		(611)
Unrealized (loss)/gain recognized in other non-interest income								Unrealized (loss)/gain recognized in other non-interest income	(126)		(186)		—
Unrealized (loss)/gain recognized in discontinued operations								Unrealized (loss)/gain recognized in discontinued operations	—		—		547
Realized (loss) in discontinued operations	Realized (loss) in discontinued operations	(8,205)		(9,195)		(1,532)		Realized (loss) in discontinued operations	—		—		(8,205)

Non-hedging derivatives	Non-hedging derivatives							Non-hedging derivatives
Commitments to lend:	Commitments to lend:							Commitments to lend:
Unrealized (loss)/gain recognized in discontinued operations		$	(1,893)	$	(1,299)	$	3,358
Unrealized (loss) recognized in other non-interest income								Unrealized (loss) recognized in other non-interest income	$	(107)	$	(611)	$	—
Unrealized (loss) recognized in discontinued operations								Unrealized (loss) recognized in discontinued operations	—		—		(1,893)
Realized gain in other non-interest income								Realized gain in other non-interest income	462		2,854		—
Realized gain in discontinued operations	Realized gain in discontinued operations	15,672		57,699		33,982		Realized gain in discontinued operations	—		—		15,672

~~F-74~~F-61

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Assets and Liabilities Subject to Enforceable Master Netting Arrangements

Interest Rate Swap Agreements (“Swap Agreements”)

The Company enters into swap agreements to facilitate the risk management strategies for commercial banking customers. The Company mitigates this risk by entering into equal and offsetting swap agreements with highly rated third party financial institutions. The swap agreements are free-standing derivatives and are recorded at fair value in the Company’s Consolidated Balance Sheets. The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral generally in the form of marketable securities is received or posted by the counterparty with net liability positions, respectively, in accordance with contract thresholds.

The Company had net asset positions with its financial institution counterparties totaling ~~$1.0~~$51.2 million and ~~$0.6~~$2.2 million as of December 31, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively. The Company had net asset positions with its commercial banking counterparties totaling ~~$159.0~~$1.0 million and ~~$76.4~~$76.8 million as of December 31, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively.

The Company had net liability positions with its financial institution counterparties totaling ~~$66.8~~$1.2 million and ~~$78.8~~$33.3 million as of December 31, ~~2020~~2022 and December 31, ~~2019,~~2021, respectively. ~~The Company had no net liability positions with its commercial banking counterparties as of December 31, 2020.~~ The Company had net liability positions with its commercial banking counterparties totaling ~~$1.1~~$96.1 million and $2.5 million as of December 31, ~~2019.~~2022 and December 31, 2021, respectively. The Company has collateral pledged to cover this liability.

The following table presents the assets and liabilities subject to an enforceable master netting arrangement as of December 31, ~~2020~~2022 and December 31, ~~2019:~~2021:

Offsetting of Financial Assets and Derivative Assets


		Gross Amounts of Recognized Assets				Gross Amounts Offset in the Statements of Condition			Net Amounts of Assets Presented in the Statements of Condition			Gross Amounts Not Offset in the Statements of Condition										Gross Amounts of Recognized Assets				Gross Amounts Offset in the Statements of Condition				Net Amounts of Assets Presented in the Statements of Condition				Gross Amounts Not Offset in the Statements of Condition
								Financial Instruments				Cash Collateral Received													Financial Instruments								Cash Collateral Received
(in thousands)	(in thousands)										Net Amount			(in thousands)															Net Amount
As of December 31, 2020
As of December 31, 2022																			As of December 31, 2022
Interest Rate Swap Agreements:	Interest Rate Swap Agreements:																		Interest Rate Swap Agreements:
Institutional counterparties	Institutional counterparties			$	1,124				$	(78)		$	1,046		$	0	$	0		$	1,046			Institutional counterparties			$	96,295			$	(45,046)			$	51,249		$	—		$	—	$	51,249
Commercial counterparties	Commercial counterparties	159,016				0			159,016			0			0		159,016		Commercial counterparties			975				—				975				—			—			975
Total	Total	$	160,140			$	(78)		$	160,062		$	0		$	0	$	160,062	Total			$	97,270			$	(45,046)			$	52,224			$	—		$	—		$	52,224

Offsetting of Financial Liabilities and Derivative Liabilities


		Gross Amounts of Recognized Liabilities				Gross Amounts Offset in the Statements of Condition			Net Amounts of Liabilities Presented in the Statement of Condition			Gross Amounts Not Offset in the Statements of Condition										Gross Amounts of Recognized Liabilities				Gross Amounts Offset in the Statements of Condition				Net Amounts of Liabilities Presented in the Statement of Condition				Gross Amounts Not Offset in the Statements of Condition
								Financial Instruments				Cash Collateral Received													Financial Instruments								Cash Collateral Received
(in thousands)	(in thousands)										Net Amount			(in thousands)															Net Amount
As of December 31, 2020
As of December 31, 2022																			As of December 31, 2022
Interest Rate Swap Agreements:	Interest Rate Swap Agreements:																		Interest Rate Swap Agreements:
Institutional counterparties	Institutional counterparties			$	(164,543)				$	97,740		$	(66,803)		$	37,815	$	75,070		$	46,082			Institutional counterparties			$	(1,271)			$	36			$	(1,235)		$	11,973		$	—	$	10,738
Commercial counterparties	Commercial counterparties	0				0			0			0			0		0		Commercial counterparties			(102,595)				6,507				(96,088)				—			—			(96,088)
Total	Total	$	(164,543)			$	97,740		$	(66,803)		$	37,815		$	75,070	$	46,082	Total			$	(103,866)			$	6,543			$	(97,323)			$	11,973		$	—		$	(85,350)

~~F-75~~F-62

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Offsetting of Financial Assets and Derivative Assets


		Gross Amounts of Recognized Assets				Gross Amounts Offset in the Statements of Condition			Net Amounts of Assets Presented in the Statements of Condition			Gross Amounts Not Offset in the Statements of Condition										Gross Amounts of Recognized Assets				Gross Amounts Offset in the Statements of Condition				Net Amounts of Assets Presented in the Statements of Condition				Gross Amounts Not Offset in the Statements of Condition
								Financial Instruments				Cash Collateral Received													Financial Instruments								Cash Collateral Received
(in thousands)	(in thousands)										Net Amount			(in thousands)															Net Amount
As of December 31, 2019
As of December 31, 2021																			As of December 31, 2021
Interest Rate Swap Agreements:	Interest Rate Swap Agreements:																		Interest Rate Swap Agreements:
Institutional counterparties	Institutional counterparties			$	640				$	(54)		$	586		$	0	$	0		$	586			Institutional counterparties			$	2,223			$	(75)			$	2,148		$	—		$	—	$	2,148
Commercial counterparties	Commercial counterparties	76,428				(22)			76,406			0			0		76,406		Commercial counterparties			76,809				—				76,809				—			—			76,809
Total	Total	$	77,068			$	(76)		$	76,992		$	0		$	0	$	76,992	Total			$	79,032			$	(75)			$	78,957			$	—		$	—		$	78,957

Offsetting of Financial Liabilities and Derivative Liabilities


		Gross Amounts of Recognized Liabilities				Gross Amounts Offset in the Statements of Condition			Net Amounts of Liabilities Presented in the Statement of Condition			Gross Amounts Not Offset in the Statements of Condition											Gross Amounts of Recognized Liabilities				Gross Amounts Offset in the Statements of Condition				Net Amounts of Liabilities Presented in the Statement of Condition				Gross Amounts Not Offset in the Statements of Condition
								Financial Instruments			Cash Collateral Received															Financial Instruments				Cash Collateral Received
(in thousands)	(in thousands)											Net Amount		(in thousands)																				Net Amount
As of December 31, 2019
As of December 31, 2021																				As of December 31, 2021
Interest Rate Swap Agreements:	Interest Rate Swap Agreements:																			Interest Rate Swap Agreements:
Institutional counterparties	Institutional counterparties			$	(80,024)				$	1,219		$	(78,805)			$	25,828	$	96,310		$	43,333			Institutional counterparties			$	(78,146)			$	44,814			$	(33,332)			$	34,896		$	43,694	$	45,258
Commercial counterparties	Commercial counterparties	(1,080)				0			(1,080)			0		0				(1,080)		Commercial counterparties			(2,461)				—				(2,461)				—			—				(2,461)
Total	Total	$	(81,104)			$	1,219		$	(79,885)		$	25,828	$	96,310			$	42,253	Total			$	(80,607)			$	44,814			$	(35,793)			$	34,896		$	43,694			$	42,797

~~F-76~~F-63

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16. LEASES

Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches, ATM locations, and office space. Most of the Company’s leases are classified as operating leases. At December 31, ~~2020~~2022 lease expiration dates ranged from 1 month to 1917 years.

The following table represents the Consolidated Balance Sheets classification of the Company’s right-of-use (“ROU”) assets and lease liabilities:


(In thousands)	(In thousands)		December 31, 2020		December 31, 2019		(In thousands)		December 31, 2022		December 31, 2021
Lease Right-of-Use Assets	Lease Right-of-Use Assets	Classification					Lease Right-of-Use Assets	Classification
Operating lease right-of-use assets ~~(1)~~	Operating lease right-of-use assets ~~(1)~~	Other assets	$	60,018	$	76,332	Operating lease right-of-use assets ~~(1)~~	Other assets	$	46,411	$	52,180
Finance lease right-of-use assets	Finance lease right-of-use assets	Premises and equipment, net	7,197		7,720		Finance lease right-of-use assets	Premises and equipment, net	6,151		6,674
Total Lease Right-of-Use Assets	Total Lease Right-of-Use Assets		$	67,215	$	84,052	Total Lease Right-of-Use Assets		$	52,562	$	58,854

Lease Liabilities	Lease Liabilities						Lease Liabilities
Operating lease liabilities ~~(2)~~	Operating lease liabilities ~~(2)~~	Other liabilities	$	63,894	$	80,734	Operating lease liabilities ~~(2)~~	Other liabilities	$	53,736	$	55,674
Finance lease liabilities	Finance lease liabilities	Other liabilities	10,383		10,883		Finance lease liabilities	Other liabilities	9,306		9,862
Total Lease Liabilities	Total Lease Liabilities		$	74,277	$	91,617	Total Lease Liabilities		$	63,042	$	65,536

(1) There are 0 operating lease right-of-use assets classified as discontinued operations as of December 31, 2020. There are operating lease right-of-use assets classified as discontinued operations of $3.5 million as of December 31, 2019.

(2) There are 0 operating lease liabilities classified as discontinued operations as of December 31, 2020. There are operating lease liabilities classified as discontinued operations of $3.5 million as of December 31, 2019.

Supplemental information related to leases was as follows:


		December 31, 2020		December 31, 2019			December 31, 2022		December 31, 2021
Weighted-Average Remaining Lease Term (in years)	Weighted-Average Remaining Lease Term (in years)					Weighted-Average Remaining Lease Term (in years)
Operating leases	Operating leases	9.8		10.3		Operating leases	9.3		9.5
Finance leases	Finance leases	13.8		14.8		Finance leases	11.8		12.8

Weighted-Average Discount Rate	Weighted-Average Discount Rate					Weighted-Average Discount Rate
Operating leases	Operating leases	2.81	%	3.36	%	Operating leases	2.56	%	2.77	%
Finance leases	Finance leases	5.00	%	5.00	%	Finance leases	5.00	%	5.00	%

The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For real estate leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes, and insurance are not included in the measurement of the lease liability since they are generally able to be segregated.

The Company does not have any material sub-lease agreements.

Lease expense for operating leases for the year ended December 31, 2022 was $9.7 million. Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

Lease expense for operating leases for the year ended December 31, 2021 was $10.9 million. Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

Lease expense for operating leases for the year ended December 31, 2020 was $13.5 million, of which $1.2 million was related to FCLS and is reported as discontinued operations. Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

Lease expense for operating leases for the year ended December 31, 2019 was $14.4 million, of which $2.8 million was related to FCLS and is reported as discontinued operations. Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

~~F-77~~F-64

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental cash flow information related to leases was as follows:


(In thousands)	(In thousands)	December 31, 2020		December 31, 2019		(In thousands)	December 31, 2022		December 31, 2021		December 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases ~~(1)~~	Operating cash flows from operating leases ~~(1)~~	$	13,750	$	14,731	Operating cash flows from operating leases ~~(1)~~	$	9,438	$	10,897	$	13,750
Operating cash flows from finance leases	Operating cash flows from finance leases	530		553		Operating cash flows from finance leases	476		503		530
Financing cash flows from finance leases	Financing cash flows from finance leases	500		435		Financing cash flows from finance leases	555		528		500

Right-of-use assets obtained in exchange for lease obligations:	Right-of-use assets obtained in exchange for lease obligations:					Right-of-use assets obtained in exchange for lease obligations:
Operating leases ~~(1)~~	Operating leases ~~(1)~~	7,083		88,079		Operating leases ~~(1)~~	5,730		2,976		7,083
Finance leases	Finance leases	0		0		Finance leases	—		—		—

~~(1)~~ ~~Includes operating cash flows from operating leases related to discontinued operations of $1.2 million and $2.8 million at December 31, 2020 and December 31, 2019, respectively.~~

The following table presents a maturity analysis of the Company’s lease liability by lease classification at December 31, ~~2020:~~2022:


(In thousands)	(In thousands)	Operating Leases		Finance Leases		(In thousands)	Operating Leases		Finance Leases
2021		$	10,875	$	1,023
2022		9,990		1,031
2023	2023	8,752		1,037		2023	$	9,743	$	1,035
2024	2024	7,508		1,037		2024	8,225		1,037
2025	2025	5,668		1,037		2025	6,501		1,037
2026						2026	5,480		1,037
2027						2027	4,713		1,037
Thereafter	Thereafter	31,215		9,223		Thereafter	25,313		7,149
Total undiscounted lease payments	Total undiscounted lease payments	74,008		14,388		Total undiscounted lease payments	59,975		12,332
Less amounts representing interest	Less amounts representing interest	(10,114)		(4,005)		Less amounts representing interest	(6,239)		(3,026)
Lease liability	Lease liability	$	63,894	$	10,383	Lease liability	$	53,736	$	9,306

~~F-78~~F-65

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17. OTHER COMMITMENTS, CONTINGENCIES, AND OFF-BALANCE SHEET ACTIVITIES

~~In December 2019, a novel strain of coronavirus (“COVID-19”) was reported to have surfaced in China and has since spread to a number of other countries, including the United States.~~ In March 2020, the World Health Organization declared ~~COVID-19~~a novel strain of coronavirus ("COVID-19") a global pandemic and the United States declared a National Public Health Emergency. The impact of the COVID-19 pandemic is fluid and continues to evolve,which isadversely affecting some of the Company’s clients. The COVID-19 pandemic and its associated impacts on trade (including supply chains and export levels), travel, employee productivity, unemployment, consumer spending, and other economic activities has resulted in less economic activity, lower equity market valuations and significant volatility and disruption in financial markets and has had an adverse effect on the Company’s business, financial condition and results of operations. The ultimate extent of thecontinuing impact of the COVID-19 pandemic on the Company’s business, financial condition and results of operations is currently uncertain and will depend on various developments and other factors, including, among others, the duration and scope of the pandemic, as well as governmental, regulatory and private sector responses to the pandemic, and the associated impacts on the economy, financial markets, and our clients, employees, and vendors.

The Company’s business, financial condition and results of operations generally rely upon the ability of the Company’s borrowers to repay their loans, the value of collateral underlying the Company’s secured loans, and demand for loans and other products and services the Company offers, which are highly dependent on the business environment in the Company’s primary markets where it operates and in the United States as a whole.

During the current year, the Company’s results of operations were negatively impacted by full impairment of the Company's goodwill, an increase in its provision for credit losses and related allowance for credit losses, a decline in the fair value of its equity portfolio, and a decline in valuation of assets. These circumstances could cause the Company to experience a material adverse effect on our business operations, asset valuations, financial condition, results of operations and prospects. Material adverse impacts may include all or a combination of valuation impairments on the Company’s intangible assets, investments, loans, loan servicing rights, ~~deferre~~ddeferred tax assets, lease right-of-use assets, or counter-party risk derivatives.

Beginning in March 2020, the Company ~~has~~ offered three-month payment deferrals for customers with a current payment status who were negatively impacted by economic disruption caused by the COVID-19 pandemic. ~~Through~~As of December 31, ~~2020,~~2022, the Company had 1 active modified ~~5,701 loans~~loan outstanding with a carrying value of ~~$1.5 billion.~~$12.4 million. As of December 31, ~~2020,~~2021, the Company had ~~746~~19 active modified loans outstanding with a carrying value of ~~$316.1~~$14.4 million, which excluded loans returning to payment or awaiting evaluation for further deferral. The Company continues to accrue interest on these loans during the deferral period. In accordance with interagency guidance issued in March 2020 and Section 4013 (Temporary Relief from Troubled Debt Restructurings) of the CARES Act, these short-term deferrals are not considered troubled debt restructurings (“TDRs”) unless the borrower was previously experiencing financial difficulty. In addition, the risk-ratings on COVID-19 modified loans did not automatically change as a result of payment deferrals, and these loans will not be considered past due until after the deferral period is over and scheduled payments resume. Section 4013 (Temporary Relief from Troubled Debt Restructurings) of the CARES Act expired on December 31, 2021.

~~F-79~~F-66

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Credit Related Financial Instruments. The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit, and interest rate risk in excess of the amount recognized in the accompanying Consolidated Balance Sheets.

The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument is represented by the contractual amount of these commitments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments. A summary of financial instruments outstanding whose contract amounts represent credit risk is as follows at year-end:

(In thousands) 2020 2019
Commitments to originate new loans (1)
$ 211,485 $ 143,812
Unused funds on commercial and other lines of credit 944,678 850,761
Unadvanced funds on home equity lines of credit 371,080 384,723
Unadvanced funds on construction and real estate loans 226,736 440,599
Standby letters of credit 24,501 15,527
Total $ 1,778,480 $ 1,835,422

(1) As of December 31, 2020, there were no commitments to originate new loans related to discontinued operations. As of December 31, 2019, commitments to originate new loans include $132.7 million related to discontinued operations.


(In thousands)	2022		2021
Commitments to originate new loans	$	305,474	$	588,034
Unused funds on commercial and other lines of credit	966,523		902,598
Unadvanced funds on home equity lines of credit	336,924		334,784
Unadvanced funds on construction and real estate loans	694,091		340,336
Standby letters of credit	21,387		14,475
Total	$	2,324,399	$	2,180,227

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis.

Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These letters of credit are primarily issued to support borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company considers standby letters of credit to be guarantees and the amount of the recorded liability related to such guarantees was not material at year-end ~~2020~~2022 and ~~2019.~~2021.

Employment and Change in Control Agreements. The Company and the Bank have change in control agreements with several officers which provide a severance payment in the event employment is terminated in conjunction with a defined change in control.

Legal Claims. Various legal claims arise from time to time in the normal course of business. As of December 31, ~~2020,~~2022, neither the Company nor the Bank was involved in any pending legal proceedings believed by management to be material, that are not accrued for, to the Company’s financial condition or results of operations. ~~As of December 31, 2020, the Company had litigation accrual of $110 thousand. As of December 31, 2019, the Company had litigation accrual of $2.0 million.~~

~~F-80~~F-67

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 18. SHAREHOLDERS’ EQUITY AND EARNINGS PER COMMON SHARE

Minimum Regulatory Capital Requirements

The Company and Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if imposed, could have a direct material impact on the Company’s Consolidated Financial Statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital to average assets (as defined). As of year-end ~~2020~~2022 and ~~2019,~~2021, the Bank and the Company met the capital adequacy requirements. Regulators may set higher expected capital requirements in some cases based on their examinations.

At December 31, ~~2020,~~2022, the capital levels of both the Company and the Bank exceeded all regulatory capital requirements and their regulatory capital ratios were above the minimum levels. The capital levels of both the Company and the Bank at December 31, ~~2020~~2022 also exceeded the minimum capital requirements including the currently applicable BASEL III capital conservation buffer of 1.875%.

As of year-end ~~2020~~2022 and ~~2019,~~2021, the Bank met the conditions to be classified as “well capitalized” under the relevant regulatory framework. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the following tables.

~~F-81~~F-68

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company and Bank’s actual and required capital amounts were as follows:


						Minimum Capital Requirement						Minimum to be Well Capitalized Under Prompt Corrective Action Provisions													Minimum Capital Requirement
		Actual															Actual
(Dollars in thousands)	(Dollars in thousands)	Amount		Ratio				Amount			Ratio			Amount				Ratio	(Dollars in thousands)		Amount			Ratio			Amount			Ratio
December 31, 2020
December 31, 2022																	December 31, 2022
Company (Consolidated)	Company (Consolidated)																Company (Consolidated)
Total capital to risk-weighted assets	Total capital to risk-weighted assets	$	1,337,008	16.10	%	$	664,239		8.00	%		N/A			N/A		Total capital to risk-weighted assets		$	1,336,029		14.60	%		$	732,070		8.00	%
Common Equity Tier 1 Capital to risk weighted assets	Common Equity Tier 1 Capital to risk weighted assets	1,145,329		13.79		373,634			4.50			N/A			N/A		Common Equity Tier 1 Capital to risk weighted assets		1,130,522			12.35			411,789			4.50
Tier 1 capital to risk-weighted assets	Tier 1 capital to risk-weighted assets	1,167,512		14.06		498,179			6.00			N/A			N/A		Tier 1 capital to risk-weighted assets		1,152,808			12.60			549,052			6.00
Tier 1 capital to average assets	Tier 1 capital to average assets	1,167,512		9.38		332,119			4.00			N/A			N/A		Tier 1 capital to average assets		1,152,808			10.18			366,035			4.00
Bank
Total capital to risk-weighted assets		$	1,243,287	14.99	%	$	663,429		8.00	%		$	961,659		10.00	%
Common Equity Tier 1 Capital to risk weighted assets		1,148,205		13.85		373,179			4.50			625,079			6.50
Tier 1 capital to risk-weighted assets		1,148,205		13.85		497,572			6.00			769,327			8.00
Tier 1 capital to average assets		1,148,205		9.23		331,715			4.00			480,830			5.00
December 31, 2019
Total risk-weighted assets																	Total risk-weighted assets		9,150,869			N/A			N/A			N/A

December 31, 2021																	December 31, 2021
Company (Consolidated)	Company (Consolidated)																Company (Consolidated)
Total capital to risk-weighted assets	Total capital to risk-weighted assets	$	1,321,910	13.73	%	$	770,294		8.00	%		N/A			N/A		Total capital to risk-weighted assets		$	1,359,470		17.32	%		$	628,026		8.00	%
Common Equity Tier 1 Capital to risk weighted assets	Common Equity Tier 1 Capital to risk weighted assets	1,161,800		12.07		433,290			4.50			N/A			N/A		Common Equity Tier 1 Capital to risk weighted assets		1,178,497			15.01			353,265			4.50
Tier 1 capital to risk-weighted assets	Tier 1 capital to risk-weighted assets	1,183,932		12.30		577,720			6.00			N/A			N/A		Tier 1 capital to risk-weighted assets		1,200,732			15.30			471,020			6.00
Tier 1 capital to average assets	Tier 1 capital to average assets	1,183,932		9.33		385,147			4.00			N/A			N/A		Tier 1 capital to average assets		1,200,732			10.49			314,013			4.00
Bank
Total capital to risk-weighted assets		$	1,233,278	12.82	%	$	769,327		8.00	%		$	961,659		10.00	%
Common Equity Tier 1 Capital to risk weighted assets		1,169,535		12.16		432,747			4.50			625,079			6.50
Tier 1 capital to risk-weighted assets		1,169,535		12.16		576,996			6.00			769,327			8.00
Tier 1 capital to average assets		1,169,535		9.14		384,664			4.00			480,830			5.00
Total risk-weighted assets																	Total risk-weighted assets		7,850,331			N/A			N/A			N/A


					Minimum Capital Requirement				Minimum to be Well Capitalized Under Prompt Corrective Action Provisions
	Actual
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2022
Bank
Total capital to risk-weighted assets	$	1,239,722	13.56	%	$	731,259	8.00	%	$	914,074	10.00	%
Common Equity Tier 1 Capital to risk weighted assets	1,155,280		12.64		411,333		4.50		594,148		6.50
Tier 1 capital to risk-weighted assets	1,155,280		12.64		548,444		6.00		731,259		8.00
Tier 1 capital to average assets	1,155,280		10.20		365,629		4.00		457,037		5.00
Total risk-weighted assets	9,140,737		N/A		N/A		N/A		N/A		N/A

December 31, 2021
Bank
Total capital to risk-weighted assets	$	1,244,604	15.87	%	$	627,478	8.00	%	$	784,348	10.00	%
Common Equity Tier 1 Capital to risk weighted assets	1,160,458		14.80		352,956		4.50		509,826		6.50
Tier 1 capital to risk-weighted assets	1,160,458		14.80		470,609		6.00		627,478		8.00
Tier 1 capital to average assets	1,160,458		10.13		313,739		4.00		392,174		5.00
Total risk-weighted assets	7,843,477		N/A		N/A		N/A		N/A		N/A

~~F-82~~F-69

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Common stock

The Bank is subject to dividend restrictions imposed by various regulators, including a limitation on the total of all dividends that the Bank may pay to the Company in any calendar year. The total of all dividends shall not exceed the Bank’s net income for the current year (as defined by statute), plus the Bank’s net income retained for the two previous years, without regulatory approval. Dividends from the Bank are an important source of funds to the Company to make dividend payments on its common and preferred stock, to make payments on its borrowings, and for its other cash needs. The ability of the Company and the Bank to pay dividends is dependent on regulatory policies and regulatory capital requirements. The ability to pay such dividends in the future may be adversely affected by new legislation or regulations, or by changes in regulatory policies relating to capital, safety and soundness, and other regulatory concerns.

The payment of dividends by the Company is subject to Delaware law, which generally limits dividends to an amount equal to an excess of the net assets of a company (the amount by which total assets exceed total liabilities) over statutory capital, or if there is no excess, to the Company’s net profits for the current and/or immediately preceding fiscal year.

~~Preferred stock~~

The Company previously issued Series B Non-Voting Preferred Stock. Each preferred share is convertible into 2 shares of the Company's common stock under specified conditions. The shares are considered participating, but do not maintain preferential treatment over common shares. Proportional dividends on the preferred shares are not payable unless also declared for common shares. The preferred shares were converted to common stock during 2020 and therefore there were 0 preferred shares issued and outstanding as of December 31, 2020.

Accumulated other comprehensive income

Year-end components of accumulated other comprehensive (loss)/income are as follows:


(In thousands)	(In thousands)	2020		2019		(In thousands)	2022		2021
Other accumulated comprehensive income/(loss), before tax:
Net unrealized holding gain/(loss) on AFS securities		$	44,988	$	19,262

Other accumulated comprehensive (loss), before tax:						Other accumulated comprehensive (loss), before tax:
Net unrealized holding (loss) on AFS securities						Net unrealized holding (loss) on AFS securities	$	(236,887)	$	(1,806)
Net (loss) on effective cash flow hedging derivatives						Net (loss) on effective cash flow hedging derivatives	(6,667)		—

Net unrealized holding (loss) on pension plans	Net unrealized holding (loss) on pension plans	(3,511)		(3,022)		Net unrealized holding (loss) on pension plans	(844)		(2,518)

Income taxes related to items of accumulated other comprehensive (loss)/income:	Income taxes related to items of accumulated other comprehensive (loss)/income:					Income taxes related to items of accumulated other comprehensive (loss)/income:
Net unrealized holding (gain)/loss on AFS securities		(11,530)		(5,059)

Net unrealized holding loss on AFS securities						Net unrealized holding loss on AFS securities	61,329		407
Net loss on effective cash flow hedging derivatives						Net loss on effective cash flow hedging derivatives	1,789		—

Net unrealized holding loss on pension plans	Net unrealized holding loss on pension plans	924		812		Net unrealized holding loss on pension plans	228		674
Accumulated other comprehensive income		$	30,871	$	11,993
Accumulated other comprehensive (loss)						Accumulated other comprehensive (loss)	$	(181,052)	$	(3,243)

~~F-83~~F-70

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the components of other comprehensive (loss)/income for the years ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018:~~2020:


(In thousands)	(In thousands)	Before Tax		Tax Effect		Net of Tax		(In thousands)	Before Tax		Tax Effect		Net of Tax
Year Ended December 31, 2020
Net unrealized holding gain on AFS securities:
Year Ended December 31, 2022								Year Ended December 31, 2022
Net unrealized holding (loss) on AFS securities:								Net unrealized holding (loss) on AFS securities:
Net unrealized (loss) arising during the period								Net unrealized (loss) arising during the period	$	(235,075)	$	60,920	$	(174,155)
Less: reclassification adjustment for (losses) realized in net income								Less: reclassification adjustment for (losses) realized in net income	6		(2)		4
Net unrealized holding (loss) on AFS securities								Net unrealized holding (loss) on AFS securities	(235,081)		60,922		(174,159)

Net loss on cash flow hedging derivatives:								Net loss on cash flow hedging derivatives:
Net unrealized gain arising during the period	Net unrealized gain arising during the period	$	25,721	$	(6,470)	$	19,251	Net unrealized gain arising during the period	(6,667)		1,789		(4,878)
Less: reclassification adjustment for (losses) realized in net income	Less: reclassification adjustment for (losses) realized in net income	(5)		1		(4)		Less: reclassification adjustment for (losses) realized in net income	—		—		—
Net unrealized holding gain on AFS securities		25,726		(6,471)		19,255

Net (loss) on cash flow hedging derivatives								Net (loss) on cash flow hedging derivatives	(6,667)		1,789		(4,878)

Net unrealized holding (loss) on pension plans	Net unrealized holding (loss) on pension plans							Net unrealized holding (loss) on pension plans
Net unrealized (loss) arising during the period		(489)		112		(377)
Net unrealized gain arising during the period								Net unrealized gain arising during the period	1,674		(446)		1,228
Less: reclassification adjustment for (losses) realized in net income	Less: reclassification adjustment for (losses) realized in net income	0		0		0		Less: reclassification adjustment for (losses) realized in net income	—		—		—
Net unrealized holding (loss) on pension plans	Net unrealized holding (loss) on pension plans	(489)		112		(377)		Net unrealized holding (loss) on pension plans	1,674		(446)		1,228
Other comprehensive gain		$	25,237	$	(6,359)	$	18,878
Other comprehensive loss								Other comprehensive loss	$	(240,074)	$	62,265	$	(177,809)

(In thousands) Before Tax Tax Effect Net of Tax
Year Ended December 31, 2019
Net unrealized holding gain on AFS securities:
Net unrealized gain arising during the period $ 34,591 $ (8,890) $ 25,701
Less: reclassification adjustment for gains realized in net income 61 (17) 44
Net unrealized holding gain on AFS securities 34,530 (8,873) 25,657
Net unrealized holding (loss) on pension plans
Net unrealized (loss) arising during the period (270) 76 (194)
Less: reclassification adjustment for (losses) realized in net income 0 0 0
Net unrealized holding (loss) on pension plans (270) 76 (194)
Other comprehensive gain $ 34,260 $ (8,797) $ 25,463
Less: reclassification related to adoption of ASU 2016-01 0 0 0
Less: reclassification related to adoption of ASU 2018-02 0 0 0
Total change to accumulated other comprehensive (loss) $ 34,260 $ (8,797) $ 25,463


(In thousands)	Before Tax		Tax Effect		Net of Tax
Year Ended December 31, 2021
Net unrealized holding (loss) on AFS securities:
Net unrealized (loss) arising during the period	$	(46,794)	$	11,937	$	(34,857)
Less: reclassification adjustment for gains realized in net income	—		—		—
Net unrealized holding (loss) on AFS securities	(46,794)		11,937		(34,857)

Net unrealized holding (loss) on pension plans
Net unrealized (loss) arising during the period	993		(250)		743
Less: reclassification adjustment for (losses) realized in net income	—		—		—
Net unrealized holding (loss) on pension plans	993		(250)		743










Other comprehensive (loss)	$	(45,801)	$	11,687	$	(34,114)


(In thousands)	(In thousands)	Before Tax		Tax Effect		Net of Tax		(In thousands)	Before Tax		Tax Effect		Net of Tax
Year Ended December 31, 2018
Net unrealized holding (loss) on AFS securities:
Net unrealized (loss) arising during the period		$	(16,917)	$	4,419	$	(12,498)
Year Ended December 31, 2020								Year Ended December 31, 2020
Net unrealized holding gain on AFS securities:								Net unrealized holding gain on AFS securities:
Net unrealized gain arising during the period								Net unrealized gain arising during the period	$	25,721	$	(6,470)	$	19,251
Less: reclassification adjustment for gains realized in net income	Less: reclassification adjustment for gains realized in net income	6		(2)		4		Less: reclassification adjustment for gains realized in net income	(5)		1		(4)
Net unrealized holding (loss) on AFS securities		(16,923)		4,421		(12,502)
Net unrealized holding gain on AFS securities								Net unrealized holding gain on AFS securities	25,726		(6,471)		19,255

Net unrealized holding (loss) on pension plans	Net unrealized holding (loss) on pension plans							Net unrealized holding (loss) on pension plans
Net unrealized gain arising during the period		135		(54)		81
Net unrealized (loss) arising during the period								Net unrealized (loss) arising during the period	(489)		112		(377)
Less: reclassification adjustment for (losses) realized in net income	Less: reclassification adjustment for (losses) realized in net income	(201)		54		(147)		Less: reclassification adjustment for (losses) realized in net income	—		—		—
Net unrealized holding loss on pension plans	Net unrealized holding loss on pension plans	336		(108)		228		Net unrealized holding loss on pension plans	(489)		112		(377)

Other comprehensive (loss)		$	(16,587)	$	4,313	$	(12,274)
Less: reclassification related to adoption of ASU 2016-01		8,379		(2,126)		6,253
Less: reclassification related to adoption of ASU 2018-02		0		(896)		(896)
Total change to accumulated other comprehensive (loss)		$	(24,966)	$	7,335	$	(17,631)
Other comprehensive income								Other comprehensive income	$	25,237	$	(6,359)	$	18,878

~~F-84~~F-71

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the changes in each component of accumulated other comprehensive ~~income/~~(loss),/income, for the years ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018:~~2020:


(in thousands)	(in thousands)	Net unrealized holding gain (loss) on AFS Securities		Net unrealized holding gain (loss) on pension plans		Total		(in thousands)	Net unrealized holding gain (loss) on AFS Securities		Net loss on effective cash flow hedging derivatives		Net unrealized holding gain (loss) on pension plans		Total
Year Ended December 31, 2020
Balance at Beginning of Year		$	14,204	$	(2,211)	$	11,993
Other comprehensive gain/(loss) before reclassifications		19,251		(377)		18,874
Amounts reclassified from accumulated other comprehensive income		(4)		0		(4)
Total other comprehensive income/(loss)		19,255		(377)		18,878
Balance at End of Period		$	33,459	$	(2,588)	$	30,871

Year Ended December 31, 2019
Balance at Beginning of Year		$	(11,453)	$	(2,017)	$	(13,470)
Other comprehensive gain/(loss) before reclassifications		25,701		(194)		25,507
Amounts reclassified from accumulated other comprehensive income		44		0		44
Total other comprehensive income/(loss)		25,657		(194)		25,463
Balance at End of Period		$	14,204	$	(2,211)	$	11,993

Year Ended December 31, 2018
Year Ended December 31, 2022								Year Ended December 31, 2022
Balance at Beginning of Year	Balance at Beginning of Year	$	6,008	$	(1,847)	$	4,161	Balance at Beginning of Year	$	(1,398)	$	—	$	(1,845)	$	(3,243)
Other comprehensive (loss)/income before reclassifications	Other comprehensive (loss)/income before reclassifications	(12,498)		81		(12,417)		Other comprehensive (loss)/income before reclassifications	(174,155)		(4,878)		1,228		(177,805)
Amounts reclassified from accumulated other comprehensive income	Amounts reclassified from accumulated other comprehensive income	4		(147)		(143)		Amounts reclassified from accumulated other comprehensive income	4		—		—		4
Total other comprehensive (loss)/income	Total other comprehensive (loss)/income	(12,502)		228		(12,274)		Total other comprehensive (loss)/income	(174,159)		(4,878)		1,228		(177,809)
Less: amounts reclassified from accumulated other comprehensive income (loss) related to adoption of ASU 2016-01 and ASU 2018-02		4,959		398		5,357
Balance at End of Period	Balance at End of Period	$	(11,453)	$	(2,017)	$	(13,470)	Balance at End of Period	$	(175,557)	$	(4,878)	$	(617)	$	(181,052)

Year Ended December 31, 2021								Year Ended December 31, 2021
Balance at Beginning of Year								Balance at Beginning of Year	$	33,459	$	—	$	(2,588)	$	30,871
Other comprehensive income/(loss)/income before reclassifications								Other comprehensive income/(loss)/income before reclassifications	(34,857)		—		743		(34,114)
Amounts reclassified from accumulated other comprehensive income								Amounts reclassified from accumulated other comprehensive income	—		—		—		—
Total other comprehensive (loss)/income								Total other comprehensive (loss)/income	(34,857)		—		743		(34,114)
Balance at End of Period								Balance at End of Period	$	(1,398)	$	—	$	(1,845)	$	(3,243)

Year Ended December 31, 2020								Year Ended December 31, 2020
Balance at Beginning of Year								Balance at Beginning of Year	$	14,204	$	—	$	(2,211)	$	11,993
Other comprehensive income/(loss) before reclassifications								Other comprehensive income/(loss) before reclassifications	19,251		—		(377)		18,874
Amounts reclassified from accumulated other comprehensive income								Amounts reclassified from accumulated other comprehensive income	(4)		—		—		(4)
Total other comprehensive income/(loss)								Total other comprehensive income/(loss)	19,255		—		(377)		18,878

Balance at End of Period								Balance at End of Period	$	33,459	$	—	$	(2,588)	$	30,871

~~F-85~~F-72

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the amounts reclassified out of each component of accumulated other comprehensive (loss)/income for the years ended December 31, ~~2020, 2019,~~2022, 2021, and ~~2018:~~2020:


											Affected Line Item in the Statement Where Net Income Is Presented								Affected Line Item in the Statement Where Net Income Is Presented
		Years Ended December 31,											Years Ended December 31,
(in thousands)	(in thousands)	2020			2019			2018				(in thousands)	2022		2021		2020
Realized (losses)/gains on AFS securities:
Realized gains/(losses) on AFS securities:												Realized gains/(losses) on AFS securities:
													$	6	$	—	$	(5)	Non-interest income
													(2)		—		1		Tax expense
													4		—		(4)

Realized (losses) on cash flow hedging derivatives:												Realized (losses) on cash flow hedging derivatives:
		$	(5)		$	61		$	6		Non-interest income		—		—		—		Interest expense
		1			(17)			(2)			Tax expense		—		—		—		Non-interest income
		(4)			44			4					—		—		—		Non-interest expense
													—		—		—		Tax benefit
				—			—			—

Realized (losses) on pension plans
Realized (losses) on pension plans:												Realized (losses) on pension plans:
		0			0			(201)			Non-interest expense		—		—		—		Non-interest expense
		0			0			54			Tax expense		—		—		—		Tax expense
		0			0			(147)					—		—		—
Total reclassifications for the period	Total reclassifications for the period	$	(4)		$	44		$	(143)			Total reclassifications for the period	$	4	$	—	$	(4)

~~F-86~~F-73

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Earnings/(Loss)~~/Earnings~~ Per Common Share

Basic earnings/(loss)~~/earnings~~ per common share (“EPS”) excludes dilution and is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding for the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock options) were exercised or converted into additional common shares that would then share in the earnings of the entity. Diluted EPS is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding for the year, plus an incremental number of common-equivalent shares computed using the treasury stock method.

~~(Loss)/earnings~~Earnings/(loss) per common share has been computed based on the following (average diluted shares outstanding is calculated using the treasury stock method):


		Years Ended December 31,							Years Ended December 31,
(In thousands, except per share data)	(In thousands, except per share data)	2020		2019		2018		(In thousands, except per share data)	2022		2021		2020
Net (loss)/income from continuing operations		$	(513,175)	$	101,521	$	109,219
Net income/(loss) from continuing operations								Net income/(loss) from continuing operations	$	92,533	$	118,664	$	(513,175)
Net (loss) from discontinued operations	Net (loss) from discontinued operations	(19,842)		(4,071)		(3,454)		Net (loss) from discontinued operations	—		—		(19,842)
Net (loss)/income		$	(533,017)	$	97,450	$	105,765
Net income/(loss)								Net income/(loss)	$	92,533	$	118,664	$	(533,017)

Average number of common shares issued	Average number of common shares issued	51,903		49,782		46,212		Average number of common shares issued	51,903		51,903		51,903
Less: average number of treasury shares	Less: average number of treasury shares	1,569		1,142		810		Less: average number of treasury shares	5,577		1,951		1,569
Less: average number of unvested stock award shares	Less: average number of unvested stock award shares	505		420		421		Less: average number of unvested stock award shares	762		712		505
Plus: average participating preferred shares	Plus: average participating preferred shares	441		1,043		1,043		Plus: average participating preferred shares	—		—		441
Average number of basic common shares outstanding	Average number of basic common shares outstanding	50,270		49,263		46,024		Average number of basic common shares outstanding	45,564		49,240		50,270
Plus: dilutive effect of unvested stock award shares	Plus: dilutive effect of unvested stock award shares	0		122		180		Plus: dilutive effect of unvested stock award shares	345		309		—
Plus: dilutive effect of stock options outstanding	Plus: dilutive effect of stock options outstanding	0		36		27		Plus: dilutive effect of stock options outstanding	5		5		—
Average number of diluted common shares outstanding	Average number of diluted common shares outstanding	50,270		49,421		46,231		Average number of diluted common shares outstanding	45,914		49,554		50,270

Basic (loss)/earnings per share:
Basic earnings/(loss) per share:								Basic earnings/(loss) per share:
Continuing Operations	Continuing Operations	$	(10.21)	$	2.06	$	2.38	Continuing Operations	$	2.03	$	2.41	$	(10.21)
Discontinued operations	Discontinued operations	(0.39)		(0.08)		(0.08)		Discontinued operations	—		—		(0.39)
Basic (loss)/earnings per common share		$	(10.60)	$	1.98	$	2.30
Basic earnings/(loss) per common share								Basic earnings/(loss) per common share	$	2.03	$	2.41	$	(10.60)

Diluted (loss)/earnings per share:
Diluted earnings/(loss) per share:								Diluted earnings/(loss) per share:
Continuing Operations	Continuing Operations	$	(10.21)	$	2.05	$	2.36	Continuing Operations	$	2.02	$	2.39	$	(10.21)
Discontinued operations	Discontinued operations	(0.39)		(0.08)		(0.07)		Discontinued operations	—		—		(0.39)
Diluted (loss)/earnings per common share		$	(10.60)	$	1.97	$	2.29
Diluted earnings/(loss) per common share								Diluted earnings/(loss) per common share	$	2.02	$	2.39	$	(10.60)

For the year ended 2022, 64 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations.For the year ended 2021, 88 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations. Due to the net loss in 2020, all unvested restricted stock and options were considered anti-dilutive and therefore excluded from the earnings per share calculations. For the year ended 2019, 61 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations. For the year ended 2018, 38 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations.

~~F-87~~F-74

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19. STOCK-BASED COMPENSATION PLANS

The ~~2018~~2022 Equity Incentive Plan (the ~~“2018~~“2022 Plan”) permits the granting of a combination of Restricted Stock awards and incentive and non-qualified stock options (“Stock Options”) to employees and directors. A total of ~~1.0~~1.2 million shares was authorized under the Plan. Awards may be granted as either Restricted Stock or Stock Options provided that any shares that are granted as Restricted Stock are counted against the share limit set forth as (1) 3one for every one share of Restricted Stock granted and (2) 1one for every one share of Stock Option granted. As of the ~~2018~~2022 Plan's effective date, all expired, canceled, and forfeited shares under the ~~2013~~2018 Plan are included in the ~~2018~~2022 Plan's available shares. As of year-end ~~2020,~~2022, the Company had the ability to grant approximately ~~0.9~~1.5 million shares under this plan.

A summary of activity in the Company’s stock compensation plans is shown below:


		Non-vested Stock Awards Outstanding			Stock Options Outstanding				Non-vested Stock Awards Outstanding			Stock Options Outstanding
(Shares in thousands)	(Shares in thousands)	Number of Shares	Weighted- Average Grant Date Fair Value		Number of Shares	Weighted- Average Exercise Price		(Shares in thousands)	Number of Shares	Weighted- Average Grant Date Fair Value		Number of Shares	Weighted- Average Exercise Price
Balance, December 31, 2019		450	$	32.47	153	$	22.00
Balance, December 31, 2021								Balance, December 31, 2021	710	$	20.16	80	$	25.21
Granted	Granted	314	16.69		0	0		Granted	328	28.75		—	—
Acquired	Acquired	—	—		0	0		Acquired	—	—		—	—
Stock options exercised	Stock options exercised	—	—		(37)	17.85		Stock options exercised	—	—		(12)	22.97
Stock awards vested	Stock awards vested	(156)	33.18		—	—		Stock awards vested	(236)	21.80		—	—
Forfeited	Forfeited	(91)	29.86		0	0		Forfeited	(98)	26.03		—	—
Expired	Expired	—	—		(4)	11.99		Expired	—	—		(19)	23.38
Balance, December 31, 2020		517	$	28.35	112	$	22.95
Balance, December 31, 2022								Balance, December 31, 2022	704	$	22.85	49	$	25.62

Stock Awards

The total compensation cost for stock awards recognized as expense was ~~$4.7~~$7.3 million, ~~$4.8~~$4.2 million, and ~~$4.8~~$4.7 million, in the years ~~2020, 2019,~~2022, 2021, and ~~2018,~~2020, respectively. The total recognized tax benefit associated with this compensation cost was ~~$1.2~~$2.0 million, ~~$1.3~~$1.0 million, and ~~$1.3~~$1.2 million, respectively.

The weighted average fair value of stock awards granted was $28.75, $20.22, and $16.69 ~~$29.47,~~in 2022, 2021, and ~~$37.87 in~~ 2020, ~~2019, and 2018,~~ respectively. Stock awards vest over periods up to five years and are valued at the closing price of the stock on the grant date. Certain awards vest based on the Company's performance over established measurement periods. The total fair value of stock awards vested during 2022, 2021, and 2020 ~~2019, and 2018~~ was ~~$5.2~~$5.1 million, ~~$4.8~~$4.3 million, and ~~$4.8~~$5.2 million respectively. The unrecognized stock-based compensation expense related to unvested stock awards was ~~$6.2~~$8.6 million as of year-end ~~2020.~~2022. This amount is expected to be recognized over a weighted average period of two years.

~~F-88~~F-75

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Option Awards

Option awards are granted with an exercise price equal to the market price of the Company’s stock at the date of grant, and vest over periods up to five years. The options grant the holder the right to acquire a share of the Company’s common stock for each option held, and have a contractual life of ten years. As of year-end ~~2020,~~2022, the weighted average remaining contractual term for options outstanding is three years.

The Company generally issues shares from treasury stock as options are exercised. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The expected dividend yield and expected term are based on management estimates. The expected volatility is based on historical volatility. The risk-free interest rates for the expected term are based on the U.S. Treasury yield curve in effect at the time of the grant. The Company did not grant options during ~~2020. The Company acquired options in the SI Financial Group transaction in 2019, but did not grant additional options during 2019. The Company did not grant options during 2018.~~2022 and 2021.

The total intrinsic value of options exercised was ~~$246~~$62 thousand, ~~$149~~$102 thousand, and ~~$855~~$246 thousand for the years 2022, 2021, and 2020, ~~2019, and 2018,~~ respectively. ~~During 2020, the~~The expense pertaining to options vesting was $13 thousand, $14 thousand, and $96 ~~thousand. During 2019,~~thousand for the ~~expense pertaining to options vesting was $93 thousand. There was 0 expense pertaining to options vesting in 2018.~~years 2022, 2021, and 2020, respectively. The tax benefit associated with stock option expense for ~~both~~2022, 2021 and 2020 was $3 thousand, $4 thousand, and ~~2019 was~~ $25 ~~thousand. There was 0 tax benefit associated with stock option expense in 2018.~~thousand, respectively. The unrecognized stock-based compensation expense related to unvested stock options as of year-end 2022, 2021 and 2020 was $1 thousand, $14 thousand, and ~~2019 was~~ $27 thousand, ~~and $124 thousand,~~ respectively. ~~There was 0 unrecognized stock-based compensation expense related to unvested stock options as of year-end 2018.~~

~~F-89~~F-76

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20. FAIR VALUE MEASUREMENTS

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities that are carried at fair value, including assets classified as discontinued operations on the consolidated balance sheets. ~~See Note 2 - Discontinued Operations for more information on assets and liabilities classified as discontinued operations.~~

Recurring Fair Value Measurements of Financial Instruments

The following table summarizes assets and liabilities measured at fair value on a recurring basis as of year-end ~~2020~~2022 and ~~2019~~2021 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:


		December 31, 2020									December 31, 2022
(In thousands)	(In thousands)	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value		(In thousands)	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value

Trading security	Trading security	$	0	$	0	$	9,708	$	9,708	Trading security	$	—	$	—	$	6,708	$	6,708
Available-for-sale securities:	Available-for-sale securities:									Available-for-sale securities:
U.S Treasuries										U.S Treasuries	11,973		—		—		11,973
Municipal bonds and obligations	Municipal bonds and obligations	0		97,803		0		97,803		Municipal bonds and obligations	—		63,335		—		63,335
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	0		756,826		0		756,826		Agency collateralized mortgage obligations	—		531,945		—		531,945
Agency residential mortgage-backed securities	Agency residential mortgage-backed securities	0		438,132		0		438,132		Agency residential mortgage-backed securities	—		546,313		—		546,313
Agency commercial mortgage-backed securities	Agency commercial mortgage-backed securities	0		288,650		0		288,650		Agency commercial mortgage-backed securities	—		228,468		—		228,468
Corporate bonds	Corporate bonds	0		45,030		15,000		60,030		Corporate bonds	—		36,510		4,000		40,510

Other bonds and obligations	Other bonds and obligations	0		53,791		0		53,791		Other bonds and obligations	—		656		—		656
Marketable equity securities	Marketable equity securities	17,841		672		0		18,513		Marketable equity securities	12,856		—		—		12,856
Loans held for investment	Loans held for investment	0		0		2,265		2,265		Loans held for investment	—		—		605		605
Loans held for sale	Loans held for sale	0		12,992		4,756		17,748		Loans held for sale	—		942		—		942
Derivative assets	Derivative assets	0		159,016		1,055		160,071		Derivative assets	—		54,216		25		54,241
Capitalized servicing rights	Capitalized servicing rights	0		0		3,033		3,033		Capitalized servicing rights	—		—		1,846		1,846
Derivative liabilities	Derivative liabilities	0		65,758		0		65,758		Derivative liabilities	—		97,030		—		97,030


											December 31, 2021
		December 31, 2019									Level 1		Level 2		Level 3		Total
(In thousands)	(In thousands)	Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Fair Value		(In thousands)	Inputs		Inputs		Inputs		Fair Value

Trading security	Trading security	$	0	$	0	$	10,769	$	10,769	Trading security	$	—	$	—	$	8,354	$	8,354
Available-for-sale securities:
Securities available for sale:										Securities available for sale:
U.S Treasuries										U.S Treasuries	—		59,973		—		59,973
Municipal bonds and obligations	Municipal bonds and obligations	0		110,138		0		110,138		Municipal bonds and obligations	—		77,177		—		77,177
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	0		748,812		0		748,812		Agency collateralized mortgage obligations	—		688,336		—		688,336
Agency residential mortgage-backed securities	Agency residential mortgage-backed securities	0		147,744		0		147,744		Agency residential mortgage-backed securities	—		705,859		—		705,859
Agency commercial mortgage-backed securities	Agency commercial mortgage-backed securities	0		147,096		0		147,096		Agency commercial mortgage-backed securities	—		300,580		—		300,580
Corporate bonds	Corporate bonds	0		73,610		42,966		116,576		Corporate bonds	—		41,630		4,030		45,660

Other bonds and obligations		0		41,189		0		41,189

Marketable equity securities	Marketable equity securities	40,499		1,057		0		41,556		Marketable equity securities	14,798		655		—		15,453
Loans held for sale (1)		0		140,280		0		140,280
Derivative assets (1)		0		77,562		2,628		80,190
Capitalized servicing rights (1)		0		0		12,299		12,299
Derivative liabilities (1)		227		80,454		0		80,681
Loans held for investment at fair value										Loans held for investment at fair value	—		—		1,200		1,200
Loans held for sale										Loans held for sale	—		6,110		—		6,110
Derivative assets										Derivative assets	—		79,270		258		79,528
Capitalized servicing rights										Capitalized servicing rights	—		—		1,966		1,966
Derivative liabilities										Derivative liabilities	—		35,194		—		35,194

~~(1) Includes assets and liabilities classified as discontinued operations.~~

~~F-90~~F-77

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, ~~2020,~~2022, there were no transfers between Level 1, 2 and 3. During the year ended December 31, ~~2019,~~2021, the Company had ~~4 transfers~~one transfer totaling ~~$44.0~~$4.0 million in corporate bonds from Level 2 to Level 3 based on recent inactivity in the market related to pricing information for similar bonds. ~~There~~During the year ended December 31, 2022, there were 0no transfers between Level 1, 2 and ~~3 during the years ended December 31, 2018.~~3.

Trading Security at Fair Value. The Company holds 1one security designated as a trading security. It is a tax advantaged economic development bond issued to the Company by a local nonprofit which provides wellness and health programs. The determination of the fair value for this security is determined based on a discounted cash flow methodology. Certain inputs to the fair value calculation are unobservable and there is little to no market activity in the security; therefore, the security meets the definition of a Level 3 security. The discount rate used in the valuation of the security is sensitive to movements in the 3-month LIBOR rate.

Securities Available for Sale and Marketable Equity Securities. Marketable equity securities classified as Level 1 consist of publicly-traded equity securities for which the fair values can be obtained through quoted market prices in active exchange markets. Marketable equity securities classified as Level 2 consist of securities with infrequent trades in active exchange markets, and pricing is primarily sourced from third party pricing services. AFS securities classified as Level 2 include most of the Company’s debt securities. The pricing on Level 2 and Level 3 was primarily sourced from third party pricing services, overseen by management, and is based on models that consider standard input factors such as dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and condition, among other things. Level 3 pricing includes inputs unobservable to market participants.

Loans Held for Investment. The Company’s held for investment loan portfolio includes loans originated by Company and loans acquired through business combinations. The Company intends to hold these assets until maturity as a part of its business operations. For one acquired portfolio subset, the Company previously accounted for these purchased-credit impaired loans as a pool under ASC 310, as they were determined to have common risk characteristics. These loans were recorded at fair value on acquisition date and subsequently evaluated for impairment collectively. Upon adoption of ASC 326, the Company elected the fair value option on this portfolio, recognizing a $11.2 million fair value write-down charged to Retained Earnings, net of deferred tax impact, as of January 1, 2020. The fair value of this loan portfolio is determined based on a discounted cash flow methodology. Certain inputs to the fair value calculation are unobservable; therefore, the loans meet the definition of Level 3 assets. The discount rate used in the valuation is consistent with assets that have significant credit deterioration. The cash flow assumptions include payment schedules for loans with current payment histories and estimated collateral value for delinquent loans. All of these loans were nonperforming as of December 31, ~~2020.~~2022.

Aggregate Fair Value

December 31, 2020

Aggregate

Less Aggregate

December 31, 2022

Aggregate

Less Aggregate

(In thousands)

Fair Value

Unpaid Principal

(In thousands)

Fair Value

Unpaid Principal

Loans held for investment at fair value

2,265

53,945

(51,680)

Loans held for investment at fair value

605

10,948

(10,343)

Aggregate Fair Value

December 31, 2021

Aggregate

Less Aggregate

(In thousands)

Fair Value

Unpaid Principal

Loans held for investment at fair value

1,200

31,430

(30,230)

Loans held for sale. The Company elected the fair value option for all mortgage loans originated for sale (HFS) that were originated for sale on or after May 1, 2012. Loans HFS are classified as Level 2 as the fair value is based on input factors such as quoted prices for similar loans in active markets.

Aggregate
Fair Value Aggregate
Unpaid Principal Aggregate Fair Value
Less Aggregate
Unpaid Principal
December 31, 2020 (In thousands)
Loans held for sale - continuing operations $ 12,992 $ 12,639 $ 353
Loans held for sale - discontinued operations 0 0 0
Loans held for sale $ 12,992 $ 12,639 $ 353


	Aggregate Fair Value		Aggregate Unpaid Principal		Aggregate Fair Value Less Aggregate Unpaid Principal
December 31, 2022 (In thousands)
Loans held for sale	$	942	$	927	$	15

Aggregate
Fair Value Aggregate
Unpaid Principal Aggregate Fair Value
Less Aggregate
Unpaid Principal
December 31, 2019 (In thousands)
Loans held for sale - continuing operations $ 7,625 $ 7,485 $ 140
Loans held for sale - discontinued operations 132,655 129,622 3,033
Loans held for sale $ 140,280 $ 137,107 $ 3,173


	Aggregate Fair Value		Aggregate Unpaid Principal		Aggregate Fair Value Less Aggregate Unpaid Principal
December 31, 2021 (In thousands)
Loans held for sale	$	6,110	$	5,926	$	184

~~F-91~~F-78

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The changes in fair value of loans held for sale for the year ended December 31, 2022 were losses of $169 thousand. The changes in fair value of loans held for sale for the year ended December 31, 2021 were losses of $169 thousand. The changes in fair value of loans held for sale for the year ended December 31, 2020 were gains of $212 thousand from continuing operations and gains of $3.0 million from discontinued operations. ~~The changes in fair value~~During 2022, originations of loans held for sale totaled $20 million and sales of loans originated for ~~the year ended December 31, 2019 were gains~~sale totaled $25 million. During 2021, originations of ~~$97 thousand from continuing operations~~loans held for sale totaled $104 million and ~~losses~~sales of ~~$138 thousand from discontinued operations.~~loans originated for sale totaled $108 million. During 2020, originations of loans held for sale from continuing operations totaled $150 million and sales of loans originated for sale from continuing operations totaled $141 million. During 2020, originations of loans held for sale from discontinued operations totaled $624 ~~billion~~million and sales of loans originated for sale from discontinued operations totaled $755 ~~billion. During 2019, originations of loans held for sale from continuing operations totaled $67 million and sales of loans originated for sale from continuing operations totaled $62~~ million. ~~During 2019, originations of loans held for sale from discontinued operations totaled $2.9 billion and sales of loans originated for sale from discontinued operations totaled $2.8 billion.~~

Interest Rate Swaps. The valuation of the Company’s interest rate swaps is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves.

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings.

Although the Company has determined that the majority of the inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of year-end ~~2020,~~2022, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Commitments to Lend. The Company enters into commitments to lend for residential mortgage loans intended for sale, which commit the Company to lend funds to a potential borrower at a certain interest rate and within a specified period of time. The estimated fair value of commitments to originate residential mortgage loans for sale is based on quoted prices for similar loans in active markets. However, this value is adjusted by a factor which considers the likelihood that the loan commitment will ultimately close, and by the non-refundable costs of originating the loan. The closing ratio is derived from the Bank’s internal data and is adjusted using significant management judgment. The costs to originate are primarily based on the Company’s internal commission rates that are not observable. As such, these commitments to lend are classified as Level 3 measurements. ~~Commitments to lend are included in discontinued operations. See Note 2 - Discontinued Operations for more information on assets and liabilities classified as discontinued operations.~~

Forward Sale Commitments. The Company utilizes forward sale commitments as economic hedges against potential changes in the values of the commitments to lend and loans originated for sale. To be announced (TBA) mortgage-backed securities forward commitment sales are used as hedging instruments, are classified as Level 1, and consist of publicly-traded debt securities for which identical fair values can be obtained through quoted market prices in active exchange markets. The fair values of the Company’s best efforts and mandatory delivery loan sale commitments are determined similarly to the commitments to lend using quoted prices in the market place that are observable. However, costs to originate and closing ratios included in the calculation are internally generated and are based on management’s judgment and prior experience, which are considered factors that are not observable. As such, best efforts and mandatory forward sale commitments are classified as Level 3 measurements. ~~Forward sale commitments are included in discontinued operations. See Note 2 - Discontinued Operations for more information on assets and liabilities classified as discontinued operations.~~

~~F-92~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Capitalized Servicing Rights. The Company accounts for certain capitalized servicing rights at fair value in its Consolidated Financial Statements, as the Company is permitted to elect the fair value option for each specific instrument. A loan servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans exceed adequate compensation for performing the servicing. The fair value of servicing rights is estimated using a present value cash flow model. The most important assumptions used

F-79

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

in the valuation model are the anticipated rate of the loan prepayments and discount rates. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy.

~~F-93~~

~~Table of Contents~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

The table below presents the changes in Level 3 assets that were measured at fair value on a recurring basis at year-end ~~2020~~2022 and ~~2019:~~2021:


		Assets (Liabilities)													Assets (Liabilities)
(In thousands)	(In thousands)	Trading Security		Securities Available for Sale		Loans Held for Investment		Commitments to Lend (1)		Forward Commitments (1)		Capitalized Servicing Rights (1)		(In thousands)	Trading Security		Securities Available for Sale		Loans Held for Investment		Commitments to Lend		Forward Commitments		Capitalized Servicing Rights

Balance as of December 31, 2018		$	11,212	$	0	$	0	$	3,927	$	0	$	11,485

Unrealized (loss), net recognized in other non-interest income		258		—		—		—		—		—
Unrealized gain/(loss), net recognized in discontinued operations		—		—		—		55,771		0		(10,322)
Unrealized gain included in accumulated other comprehensive loss		—		(162)		—		—		—		—
Transfers to Level 3		—		43,128		—		—		—		—
Paydown of trading security		(701)		—		—		—		—		—
Transfers to loans held for sale		—		—		—		(57,070)		—		—

Additions to servicing rights		—		—		—		—		—		11,136
Balance as of December 31, 2019		$	10,769	$	42,966	$	0	$	2,628	$	0	$	12,299
Adoption of ASC 326		—		—		7,660		—		—		0
Balance as of December 31, 2020														Balance as of December 31, 2020	$	9,708	$	15,000	$	2,265	$	735	$	320	$	3,033
Maturities, calls, and prepayments of AFS Security	Maturities, calls, and prepayments of AFS Security	—		(30,000)		—		—		—				Maturities, calls, and prepayments of AFS Security	—		(15,000)		—		—		—		—
Unrealized (loss) gain, net recognized in other non-interest income	Unrealized (loss) gain, net recognized in other non-interest income	(327)		—		(1,283)		—		—		(822)		Unrealized (loss) gain, net recognized in other non-interest income	(578)		—		1,645		1,995		(186)		(1,067)
Unrealized gain/(loss), net recognized in discontinued operations		—		—		—		16,565		320		(8,444)
Unrealized (loss) included in accumulated other comprehensive loss		—		2,034		—		—		—		—
Unrealized gain included in accumulated other comprehensive loss														Unrealized gain included in accumulated other comprehensive loss	—		30		—		—		—		—
Transfers to Level 3	Transfers to Level 3	—		0		—		—		—		—		Transfers to Level 3	—		4,000		—		—		—		—
Paydown of asset	Paydown of asset	(734)		—		(4,112)		—		—		—		Paydown of asset	(776)		—		(2,710)		—		—		—
Transfers to loans held for sale	Transfers to loans held for sale	—		—				(18,458)		—		—		Transfers to loans held for sale	—		—		—		(2,606)		—		—
Additions to servicing rights	Additions to servicing rights	—		—				—		—		0		Additions to servicing rights	—		—		—		—		—		—
Balance as of December 31, 2020		$	9,708	$	15,000	$	2,265	$	735	$	320	$	3,033
Balance as of December 31, 2021														Balance as of December 31, 2021	$	8,354	$	4,030	$	1,200	$	124	$	134	$	1,966

Unrealized gains/(losses) relating to instruments still held at December 31, 2020		$	1,053	$	287	$	0	$	735	$	320	$	0
Unrealized gains/(losses) relating to instruments still held at December 31, 2019		$	1,379	$	(162)	$	0	$	2,628	$	0	$	0
Maturities, calls, and prepayments of AFS Security														Maturities, calls, and prepayments of AFS Security	$	—	$	—	$	—	$	—	$	—
Unrealized (loss) gain, net recognized in other non-interest income														Unrealized (loss) gain, net recognized in other non-interest income	(828)		—		314		200		(126)		(120)

Unrealized (loss) in included in accumulated other comprehensive loss														Unrealized (loss) in included in accumulated other comprehensive loss	—		(30)		—		—		—		—
Transfers to Level 3														Transfers to Level 3	—		—		—		—		—		—
Paydown of asset														Paydown of asset	(818)		—		(909)		—		—		—
Transfers to loans held for sale														Transfers to loans held for sale	—		—				(307)		—		—
Additions to servicing rights														Additions to servicing rights	—		—				—		—		—
Balance as of December 31, 2022														Balance as of December 31, 2022	$	6,708	$	4,000	$	605	$	17	$	8	$	1,846

Unrealized gains/(losses) relating to instruments still held at December 31, 2022														Unrealized gains/(losses) relating to instruments still held at December 31, 2022	$	(354)	$	—	$	—	$	17	$	8	$	—
Unrealized gains/(losses) relating to instruments still held at December 31, 2021														Unrealized gains/(losses) relating to instruments still held at December 31, 2021	$	475	$	30	$	—	$	124	$	134	$	—

~~(1) For 2019, these assets were classified as assets from discontinued operations on the consolidated balance sheets.~~

~~F-94~~F-80

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Quantitative information about the significant unobservable inputs within Level 3 recurring assets/(liabilities) as of December 31, ~~2020~~2022 and ~~2019~~2021 are as follows:


		Fair Value				Significant Unobservable Input Value				Fair Value				Significant Unobservable Input Value
(In thousands)	(In thousands)	December 31, 2020		Valuation Techniques	Unobservable Inputs				(In thousands)	December 31, 2022		Valuation Techniques	Unobservable Inputs
Assets	Assets								Assets
Trading Security	Trading Security	$	9,708	Discounted Cash Flow	Discount Rate	2.72		%	Trading Security	$	6,708	Discounted Cash Flow	Discount Rate	5.92		%
Securities Available for Sale	Securities Available for Sale	15,000		Indication from Market Maker	Price	102.00		%	Securities Available for Sale	4,000		Indication from Market Maker	Price	100.00		%
Loans held for investment	Loans held for investment	2,265		Discounted Cash Flow	Discount Rate	30.00		%	Loans held for investment	605		Discounted Cash Flow	Discount Rate	25.00		%
					Collateral Value	$8.1 - $21.9							Collateral Value	$— - $20.4
Commitments to Lend	Commitments to Lend	735		Historical Trend	Closing Ratio	74.54		%	Commitments to Lend	17		Historical Trend	Closing Ratio	80.63		%
				Pricing Model	Origination Costs, per loan	$	3					Pricing Model	Origination Costs, per loan	$	2
Forward Commitments	Forward Commitments	320		Historical Trend	Closing Ratio	74.54		%	Forward Commitments	8		Historical Trend	Closing Ratio	80.63		%
				Pricing Model	Origination Costs, per loan	$	3					Pricing Model	Origination Costs, per loan	$	2
Capitalized Servicing Rights	Capitalized Servicing Rights	3,033		Discounted cash flow	Constant prepayment rate (CPR)	26.52		%	Capitalized Servicing Rights	1,846		Discounted cash flow	Constant prepayment rate (CPR)	11.07		%
					Discount rate	10.00		%					Discount rate	9.56		%
Total	Total	$	31,061						Total	$	13,184


		Fair Value				Significant Unobservable Input Value				Fair Value				Significant Unobservable Input Value
(In thousands)	(In thousands)	December 31, 2019		Valuation Techniques	Unobservable Inputs				(In thousands)	December 31, 2021		Valuation Techniques	Unobservable Inputs
Assets	Assets								Assets
Trading Security									Trading Security	$	8,354	Discounted Cash Flow	Discount Rate	3.35		%
Securities Available for Sale									Securities Available for Sale	4,030		Indication from Market Maker	Price	101.00		%
Loans held for investment									Loans held for investment	1,200		Discounted Cash Flow	Discount Rate	25.00		%
													Collateral Value	$6.3 - $19.8
Trading Security		$	10,769	Discounted Cash Flow	Discount Rate	2.21		%
Commitments to Lend									Commitments to Lend	124		Historical Trend	Closing Ratio	82.09		%
												Pricing Model	Origination Costs, per loan	$	3
Forward Commitments									Forward Commitments	134		Historical Trend	Closing Ratio	82.09		%
												Pricing Model	Origination Costs, per loan	$	3

Securities Available for Sale		42,966		Indication from Market Maker	Price	97.00% - 100.00%
Commitments to Lend (1)		2,628		Historical Trend	Closing Ratio	77.81		%

				Pricing Model	Origination Costs, per loan	$	3
Capitalized Servicing Rights (1)		12,299		Discounted cash flow	Constant prepayment rate (CPR)	11.50		%
Capitalized Servicing Rights									Capitalized Servicing Rights	1,966		Discounted cash flow	Constant prepayment rate (CPR)	19.41		%
					Discount rate	10.00		%					Discount rate	9.50		%

Total	Total	$	68,662						Total	$	15,808

~~(1) Classified as assets from discontinued operations on the consolidated balance sheets.~~

~~F-95~~F-81

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Non-Recurring Fair Value Measurements

The Company is required, on a non-recurring basis, to adjust the carrying value or provide valuation allowances for certain assets using fair value measurements in accordance with GAAP. The following is a summary of applicable non-recurring fair value measurements. There are no liabilities measured on a non-recurring basis.

December 31, ~~2020~~2022

Fair Value Measurements as of December 31, ~~2018~~2022

(In thousands)

Level 3
Inputs

Assets

Individually evaluated loans

~~28,028~~14,571

December ~~2020~~2022

Loans held for sale

3,369

December 2022

Capitalized servicing rights

~~13,315~~11,201

December ~~2020~~2022

~~Other real estate owned~~

~~149~~

~~December 2020~~

Total

~~41,492~~29,141

December 31, ~~2019~~2021

Fair Value Measurements as of December 31, ~~2017~~2021

(In thousands)

Level 3
Inputs

Assets

Individually evaluated loans

~~8,831~~12,482

December ~~2019~~2021

Capitalized servicing rights

~~14,152~~14,056

December ~~2019~~2021

Total

~~22,983~~26,538

Quantitative information about the significant unobservable inputs within Level 3 non-recurring assets as of December 31, ~~2020~~2022 and ~~2019~~2021 are as follows:

~~(in thousands)~~

~~December 31, 2020~~

~~Valuation Techniques~~

~~Unobservable Inputs~~

~~Range (Weighted Average) (a)~~

~~Assets~~

~~Individually evaluated loans~~

~~28,028~~

~~Fair value of collateral~~

~~Loss severity~~

~~0.07% to 100.00% (46.36%)~~

~~Appraised value~~

~~$0 to $11,432 ($9,800)~~

~~Capitalized servicing rights~~

~~13,315~~

~~Discounted cash flow~~

~~Constant prepayment rate (CPR)~~

~~14.49% to 23.29% (16.98%)~~

~~Discount rate~~

~~10.00% to 11.00% (10.56%)~~

~~Other real estate owned~~

~~149~~

~~Fair value of collateral~~

~~Appraised value~~

~~$94 - $182~~

~~Total Assets~~

~~41,492~~

(in thousands)

December 31, 2022

Valuation Techniques

Unobservable Inputs

Range (Weighted Average) (a)

Assets

Individually evaluated loans

14,571

Fair value of collateral

Discounted Cash Flow- Loss Severity

(100.00)% to 74.74% ((40.02)%)

Appraised value

$0 to $2,160 ($643)

Loans held for sale

3,369

Fair value of collateral

Appraised value

3,369

Capitalized servicing rights

11,201

Discounted cash flow

Constant prepayment rate (CPR)

5.81% to 13.18% (10.94)%

Discount rate

9.59% to 22.70% (16.83%)

Total Assets

29,141

(a) Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individual properties.

~~F-96~~F-82

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

December 31, ~~2019~~2021

Valuation Techniques

Unobservable Inputs

~~Range (Weighted Average) (a)~~

Assets

Range (Weighted Average) (a)

Individually evaluated loans

~~8,831~~12,482

Fair value of collateral

Loss severity

~~15.72%~~(35.96)% to ~~0.12% (4.50%~~133.09% (49.14%)

Appraised value

$80 to ~~$1,548~~$405 ($~~736)~~256)

Capitalized servicing rights

~~14,152~~14,056

Discounted cash flow

Constant prepayment rate (CPR)

~~9.44%~~6.24% to ~~14.12% (12.25%~~17.73% (13.29%)

Discount rate

~~10.00%~~9.59% to ~~13.50% (11.78%~~13.11% (11.97%)

Total Assets

~~22,983~~26,538

There were no Level 1 or Level 2 nonrecurring fair value measurements for year-end ~~2020~~2022 and ~~2019.~~2021.

Individually evaluated loans. Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records non-recurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Non-recurring adjustments can also include certain impairment amounts for collateral-dependent loans calculated when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation does not necessarily represent the fair value of the loan. Real estate collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace. However, the choice of observable data is subject to significant judgment, and there are often adjustments based on judgment in order to make observable data comparable and to consider the impact of time, the condition of properties, interest rates, and other market factors on current values. Additionally, commercial real estate appraisals frequently involve discounting of projected cash flows, which relies inherently on unobservable data. Therefore, real estate collateral related nonrecurring fair value measurement adjustments have generally been classified as Level 3. Estimates of fair value for other collateral that supports commercial loans are generally based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3.

Loans Transferred to Held for Sale. Once a decision has been made to sell loans not previously classified as held for sale, these loans are transferred into the held for sale category and carried at the lower of cost or fair value. Real estate collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace. The choice of observable data is subject to significant judgment, and there are often adjustments based on judgment in order to make observable data comparable and to consider the impact of time, the condition of properties, interest rates, and other market factors on current values. Nonrecurring fair value measurement adjustments that relate to real estate collateral have generally been classified as Level 3. Estimates of fair value for other collateral that supports commercial loans are generally based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3.

Capitalized loan servicing rights. A loan servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans exceed adequate compensation for performing the servicing. The fair value of servicing rights is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Adjustments are only recorded when the discounted cash flows derived from the valuation model are less than the carrying value of the asset. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy.

~~F-97~~F-83

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summary of Estimated Fair Values of Financial Instruments

The following tables summarize the estimated fair values, which represent exit price, and related carrying amounts, of the Company’s financial instruments. Certain financial instruments and all non-financial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein may not necessarily represent the underlying fair value of the Company. Certain assets and liabilities in the following disclosures include balances classified as discontinued operations. ~~See Note 2 - Discontinued Operations for more information on assets and liabilities classified as discontinued operations.~~


		December 31, 2020															December 31, 2022
		Carrying Amount		Fair Value													Carrying Amount			Fair Value
(In thousands)	(In thousands)					Level 1			Level 2			Level 3	(In thousands)						Level 1			Level 2		Level 3
Financial Assets	Financial Assets															Financial Assets

Cash and cash equivalents	Cash and cash equivalents	$	1,557,875	$	1,557,875		$	1,557,875		$	0		$	0	Cash and cash equivalents		$	685,355		$	685,355	$	685,355	$	—	$	—
Trading security	Trading security	9,708		9,708			0			0			9,708		Trading security		6,708			6,708		—		—		6,708
Marketable equity securities	Marketable equity securities	18,513		18,513			17,841			672			0		Marketable equity securities		12,856			12,856		12,856		—		—
Securities available for sale	Securities available for sale	1,695,232		1,695,232			0			1,680,232			15,000		Securities available for sale		1,423,200			1,423,200		11,973		1,407,227		4,000
Securities held to maturity	Securities held to maturity	465,091		491,855			0			488,393			3,462		Securities held to maturity		583,453			507,464		—		505,508		1,956
FHLB stock and restricted equity securities	FHLB stock and restricted equity securities	34,873		N/A			N/A			N/A			N/A		FHLB stock and restricted equity securities		7,219			N/A		N/A		N/A		N/A
Net loans	Net loans	7,954,217		8,243,437			0			0			8,243,437		Net loans		8,239,039			8,194,110		—		—		8,194,110
Loans held for sale	Loans held for sale	17,748		17,748			0			12,992			4,756		Loans held for sale		4,311			4,311		—		942		3,369
Accrued interest receivable	Accrued interest receivable	46,919		46,919			0			46,919			0		Accrued interest receivable		46,868			46,868		—		46,868		—

Derivative assets	Derivative assets	160,071		160,071			0			159,016			1,055		Derivative assets		54,241			54,241		—		54,216		25
Assets held for sale		317,304		317,304			0			16,705			300,599

Financial Liabilities	Financial Liabilities														Financial Liabilities

Total deposits	Total deposits	10,215,808		10,230,822			0			10,230,822			0		Total deposits		10,327,269			10,283,543		—		10,283,543		—
Short-term debt	Short-term debt	40,000		40,025			0			40,025			0		Short-term debt		—			—		—		—		—
Long-term FHLB advances	Long-term FHLB advances	434,357		438,064			0			438,064			0		Long-term FHLB advances		4,445			2,782		—		2,782		—
Subordinated notes	Subordinated notes	97,280		95,178			0			95,178			0		Subordinated notes		121,064			110,853		—		110,853		—
Derivative liabilities	Derivative liabilities	65,758		65,758			0			65,758			0		Derivative liabilities		97,030			97,030		—		97,030		—
Liabilities held for sale		630,065		631,268			0			631,268			0

December 31, 2019
Carrying
Amount Fair
Value
(In thousands) Level 1 Level 2 Level 3
Financial Assets
Cash and cash equivalents $ 579,829 $ 579,829 $ 579,829 $ 0 $ 0
Trading security 10,769 10,769 0 0 10,769
Marketable equity securities 41,556 41,556 40,500 1,056 0
Securities available for sale 1,311,555 1,311,555 0 1,267,573 43,982
Securities held to maturity 357,979 373,277 0 355,513 17,764
FHLB stock and restricted equity securities 48,019 N/A N/A N/A N/A
Net loans 9,438,853 9,653,550 0 0 9,653,550
Loans held for sale (1) 169,319 169,319 0 140,280 29,039
Accrued interest receivable 36,462 36,462 0 36,462 0
Derivative assets (1) 80,190 80,190 0 77,562 2,628
Financial Liabilities
Total deposits 10,335,977 10,338,993 0 10,338,993 0
Short-term debt 125,000 125,081 0 125,081 0
Long-term FHLB advances 605,501 606,381 0 606,381 0
Subordinated notes 97,049 101,055 0 101,055 0
Derivative liabilities (1) 80,681 80,681 227 80,454 0

~~(1) Includes assets and liabilities classified as discontinued operations.~~


	December 31, 2021
	Carrying Amount		Fair Value
(In thousands)					Level 1		Level 2		Level 3

Financial Assets
Cash and cash equivalents	$	1,627,807	$	1,627,807	$	1,627,807	$	—	$	—
Trading security	8,354		8,354		—		—		8,354
Marketable equity securities	15,453		15,453		14,798		655		—
Securities available for sale	1,877,585		1,877,585		—		1,873,555		4,030
Securities held to maturity	636,503		647,236		—		644,497		2,739
FHLB stock and restricted equity securities	10,800		N/A		N/A		N/A		N/A
Net loans	6,719,753		6,850,975		—		—		6,850,975
Loans held for sale	6,110		6,110		—		6,110		—
Accrued interest receivable	33,534		33,534		—		33,534		—

Derivative assets	79,528		79,528		—		79,270		258
Assets held for sale	—		—		—		—		—

Financial Liabilities
Total deposits	10,068,953		10,073,217		—		10,073,217		—
Short-term debt	—		—		—		—		—
Long-term FHLB advances	13,331		13,053		—		13,053		—
Subordinated notes	97,513		95,006		—		95,006		—
Derivative liabilities	35,194		35,194		—		35,194		—

~~F-98~~F-84

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 21. CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY

Condensed financial information pertaining only to the Parent, Berkshire Hills Bancorp, is as follows.

CONDENSED BALANCE SHEETS


		December 31,					December 31,
(In thousands)	(In thousands)	2020		2019		(In thousands)	2022		2021
Assets	Assets					Assets
Cash due from Berkshire Bank	Cash due from Berkshire Bank	$	83,510	$	74,153	Cash due from Berkshire Bank	$	90,022	$	108,946
Investment in subsidiaries	Investment in subsidiaries	1,202,755		1,777,717		Investment in subsidiaries	986,805		1,172,439
Marketable equity securities, at fair value		158		4,840

Other assets	Other assets	188		438		Other assets	1,445		213
Total assets	Total assets	$	1,286,611	$	1,857,148	Total assets	$	1,078,272	$	1,281,598

Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity					Liabilities and Shareholders’ Equity

Subordinated notes	Subordinated notes	$	97,280	$	97,049	Subordinated notes	$	121,064	$	97,513
Accrued expenses	Accrued expenses	1,558		1,535		Accrued expenses	3,146		1,650
Shareholders’ equity	Shareholders’ equity	1,187,773		1,758,564		Shareholders’ equity	954,062		1,182,435
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	1,286,611	$	1,857,148	Total liabilities and shareholders’ equity	$	1,078,272	$	1,281,598

CONDENSED STATEMENTS OF OPERATIONS


		Years Ended December 31,							Years Ended December 31,
(In thousands)	(In thousands)	2020		2019		2018		(In thousands)	2022		2021		2020
Income:	Income:							Income:
Dividends from subsidiaries	Dividends from subsidiaries	$	46,300	$	104,700	$	48,500	Dividends from subsidiaries	$	108,000	$	118,000	$	46,300
Other	Other	(2,185)		1,258		506		Other	23		31		(2,185)
Total income	Total income	44,115		105,958		49,006		Total income	108,023		118,031		44,115
Interest expense	Interest expense	5,335		5,335		5,335		Interest expense	7,044		5,393		5,335
Non-interest expenses	Non-interest expenses	2,866		4,129		3,034		Non-interest expenses	2,754		2,719		2,866
Total expense	Total expense	8,201		9,464		8,369		Total expense	9,798		8,112		8,201
Income before income taxes and equity in undistributed income of subsidiaries	Income before income taxes and equity in undistributed income of subsidiaries	35,914		96,494		40,637		Income before income taxes and equity in undistributed income of subsidiaries	98,225		109,919		35,914
Income tax (benefit)	Income tax (benefit)	(2,719)		(2,054)		(1,068)		Income tax (benefit)	(2,586)		(2,136)		(2,719)
Income before equity in undistributed income of subsidiaries	Income before equity in undistributed income of subsidiaries	38,633		98,548		41,705		Income before equity in undistributed income of subsidiaries	100,811		112,055		38,633
Equity in undistributed results of operations of subsidiaries	Equity in undistributed results of operations of subsidiaries	(571,650)		(1,098)		64,060		Equity in undistributed results of operations of subsidiaries	(8,278)		6,609		(571,650)

Net (loss)/income		(533,017)		97,450		105,765
Net income/(loss)								Net income/(loss)	92,533		118,664		(533,017)
Preferred stock dividend	Preferred stock dividend	313		960		918		Preferred stock dividend	—		—		313
(Loss)/income available to common shareholders		$	(533,330)	$	96,490	$	104,847
Income/(loss) available to common shareholders								Income/(loss) available to common shareholders	$	92,533	$	118,664	$	(533,330)

Comprehensive (loss)/income	Comprehensive (loss)/income	$	(514,139)	$	122,912	$	88,133	Comprehensive (loss)/income	$	(85,276)	$	84,550	$	(514,139)

~~F-99~~F-85

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED STATEMENTS OF CASH FLOWS


		Years Ended December 31,							Years Ended December 31,
(In thousands)	(In thousands)	2020		2019		2018		(In thousands)	2022		2021		2020
Cash flows from operating activities:	Cash flows from operating activities:							Cash flows from operating activities:
Net (loss)/income		$	(533,017)	$	97,450	$	105,765
Adjustments to reconcile net income to net cash (used) provided by operating activities:
Net income/(loss)								Net income/(loss)	$	92,533	$	118,664	$	(533,017)
Adjustments to reconcile net income to net cash provided/(used) by operating activities:								Adjustments to reconcile net income to net cash provided/(used) by operating activities:
Equity in undistributed results of operations of subsidiaries	Equity in undistributed results of operations of subsidiaries	571,650		1,098		(64,060)		Equity in undistributed results of operations of subsidiaries	8,278		(6,609)		571,650
Other, net	Other, net	2,603		(4,457)		20,916		Other, net	5,998		5,816		2,603
Net cash provided by operating activities	Net cash provided by operating activities	41,236		94,091		62,621		Net cash provided by operating activities	106,809		117,871		41,236

Cash flows from investing activities:	Cash flows from investing activities:							Cash flows from investing activities:
Advances to subsidiaries	Advances to subsidiaries	0		0		(85,000)		Advances to subsidiaries	—		—		—

Purchase of securities	Purchase of securities	(489)		0		(128)		Purchase of securities	—		—		(489)
Sale of securities	Sale of securities	4,658		6,989		13,550		Sale of securities	—		167		4,658
Other, net	Other, net	0		987		0		Other, net	—		—		—
Net cash provided/(used) by investing activities		4,169		7,976		(71,578)
Net cash provided by investing activities								Net cash provided by investing activities	—		167		4,169

Cash flows from financing activities:	Cash flows from financing activities:							Cash flows from financing activities:
Proceed from issuance of short term debt		231		431		178
Proceed from repayment of long term debt		0		0		35,000
Proceeds from issuance of short term debt								Proceeds from issuance of short term debt	—		232		231
Proceeds from issuance of long term debt								Proceeds from issuance of long term debt	98,032		—		—
Repayment of long term debt								Repayment of long term debt	(75,000)		—		—

Net proceeds from common stock	Net proceeds from common stock	0		0		325		Net proceeds from common stock	—		—		—

Payment to repurchase common stock	Payment to repurchase common stock	(473)		(52,746)		0		Payment to repurchase common stock	(124,519)		(68,712)		(473)
Common stock cash dividends paid	Common stock cash dividends paid	(36,251)		(44,147)		(39,966)		Common stock cash dividends paid	(24,527)		(24,553)		(36,251)
Preferred stock cash dividends paid	Preferred stock cash dividends paid	(313)		(960)		(918)		Preferred stock cash dividends paid	—		—		(313)
Other, net	Other, net	758		188		278		Other, net	281		431		758
Net cash (used) in financing activities	Net cash (used) in financing activities	(36,048)		(97,234)		(5,103)		Net cash (used) in financing activities	(125,733)		(92,602)		(36,048)

Net change in cash and cash equivalents	Net change in cash and cash equivalents	9,357		4,833		(14,060)		Net change in cash and cash equivalents	(18,924)		25,436		9,357

Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	74,153		69,320		83,380		Cash and cash equivalents at beginning of year	108,946		83,510		74,153

Cash and cash equivalents at end of year	Cash and cash equivalents at end of year	$	83,510	$	74,153	$	69,320	Cash and cash equivalents at end of year	$	90,022	$	108,946	$	83,510

~~F-100~~F-86

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 22. QUARTERLY DATA (UNAUDITED)

Quarterly results of operations were as follows:

2020 2019
(In thousands, except per share data) Fourth Quarter Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter
Interest and dividend income $ 92,131 $ 97,768 $ 103,688 $ 116,195 $ 125,441 $ 133,725 $ 129,238 $ 121,109
Interest expense 16,422 20,713 26,098 29,767 34,108 36,854 37,643 35,650
Net interest income 75,709 77,055 77,590 86,428 91,333 96,871 91,595 85,459
Non-interest income 23,327 19,963 17,381 5,636 23,362 21,406 17,512 21,722
Total revenue 99,036 97,018 94,971 92,064 114,695 118,277 109,107 107,181
Provision for loan losses 10,000 1,200 29,871 34,807 5,351 22,600 3,467 4,001
Non-interest expense 71,796 72,843 624,275 71,325 70,287 71,011 76,568 71,991
Income/(loss) from continuing operations before income taxes 17,240 22,975 (559,175) (14,068) 39,057 24,666 29,072 31,189
Income tax (benefit)/expense (1,659) (68) (16,130) (1,996) 6,421 4,007 5,118 6,917
Net income/(loss) from continuing operations 18,899 23,043 (543,045) (12,072) 32,636 20,659 23,954 24,272
(Loss)/income from discontinued operations, net of tax (3,890) (1,818) (6,336) (7,798) (6,885) 1,957 1,494 (637)
Net income/(loss) $ 15,009 $ 21,225 $ (549,381) $ (19,870) $ 25,751 $ 22,616 $ 25,448 $ 23,635
Basic earnings/(loss) per share:
Continuing operations $ 0.38 $ 0.46 $ (10.80) $ (0.24) $ 0.65 $ 0.40 $ 0.49 $ 0.52
Discontinued operations (0.08) (0.04) (0.13) (0.16) (0.14) 0.04 0.03 (0.01)
Basic earnings/(loss) per common share $ 0.30 $ 0.42 $ (10.93) $ (0.40) $ 0.51 $ 0.44 $ 0.52 $ 0.51
Diluted earnings/(loss) per share:
Continuing operations $ 0.38 $ 0.46 $ (10.80) $ (0.24) $ 0.65 $ 0.40 $ 0.49 $ 0.52
Discontinued operations (0.08) (0.04) (0.13) (0.16) (0.14) 0.04 0.03 (0.01)
Diluted earnings/(loss) per share $ 0.30 $ 0.42 $ (10.93) $ (0.40) $ 0.51 $ 0.44 $ 0.52 $ 0.51
Weighted average common shares outstanding:
Basic 50,308 50,329 50,246 50,204 50,494 51,422 48,961 46,113
Diluted 50,355 50,329 50,246 50,204 50,702 51,545 49,114 46,261


	2022								2021
(In thousands, except per share data)	Fourth Quarter		Third Quarter		Second Quarter		First Quarter		Fourth Quarter		Third Quarter		Second Quarter		First Quarter
Interest and dividend income	$	121,384	$	103,671	$	87,379	$	74,823	$	75,860	$	79,688	$	85,364	$	88,153
Interest expense	19,292		11,587		6,021		5,760		6,548		8,320		9,971		13,060
Net interest income	102,092		92,084		81,358		69,063		69,312		71,368		75,393		75,093
Non-interest income	15,654		16,251		16,351		20,681		21,409		73,635		22,011		26,193
Total revenue	117,746		108,335		97,709		89,744		90,721		145,003		97,404		101,286
Provision expense/(benefit) for credit losses	12,000		3,000		—		(4,000)		(3,000)		(4,000)		—		6,500
Non-interest expense	70,014		81,677		68,475		68,550		69,407		69,460		68,872		78,154
Income before income taxes	35,732		23,658		29,234		25,194		24,314		79,543		28,532		16,632
Income tax expense	5,227		4,941		6,119		4,998		4,066		15,794		6,896		3,601


Net income	$	30,505	$	18,717	$	23,115	$	20,196	$	20,248	$	63,749	$	21,636	$	13,031




Basic earnings per share	$	0.69	$	0.42	$	0.50	$	0.42	$	0.42	$	1.32	$	0.43	$	0.26




Diluted earnings per share	$	0.69	$	0.42	$	0.50	$	0.42	$	0.42	$	1.31	$	0.43	$	0.26

Weighted average common shares outstanding:
Basic	44,105		44,700		45,818		47,668		47,958		48,395		50,321		50,330
Diluted	44,484		45,034		46,102		48,067		48,340		48,744		50,608		50,565

~~F-101~~F-87

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 23. NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES

Presented below is net interest income after provision for credit losses for the three years ended ~~2020, 2019,~~2022, 2021, and ~~2018,~~2020, respectively:


		Years Ended December 31,							Years Ended December 31,
(In thousands)	(In thousands)	2020		2019		2018		(In thousands)	2022		2021		2020
Net interest income	Net interest income	$	316,782	$	365,258	$	356,200	Net interest income	$	344,597	$	291,166	$	316,782
Provision for credit losses		75,878		35,419		25,451
Provision expense/(benefit) for credit losses								Provision expense/(benefit) for credit losses	11,000		(500)		75,878
Net interest income after provision for credit losses	Net interest income after provision for credit losses	240,904		329,839		330,749		Net interest income after provision for credit losses	333,597		291,666		240,904
Total non-interest income	Total non-interest income	66,307		84,002		74,324		Total non-interest income	68,937		143,248		66,307
Total non-interest expense	Total non-interest expense	840,239		289,857		266,893		Total non-interest expense	288,716		285,893		840,239
(Loss)/income from continuing operations before income taxes		(533,028)		123,984		138,180
Income tax (benefit)/expense		(19,853)		22,463		28,961
Net (loss)/income from continuing operations		(513,175)		101,521		109,219
Income/(loss) from continuing operations before income taxes								Income/(loss) from continuing operations before income taxes	113,818		149,021		(533,028)
Income tax expense/(benefit)								Income tax expense/(benefit)	21,285		30,357		(19,853)
Net income/(loss) from continuing operations								Net income/(loss) from continuing operations	92,533		118,664		(513,175)
(Loss) from discontinued operations before income taxes	(Loss) from discontinued operations before income taxes	(26,855)		(5,539)		(4,767)		(Loss) from discontinued operations before income taxes	—		—		(26,855)
Income tax (benefit)	Income tax (benefit)	(7,013)		(1,468)		(1,313)		Income tax (benefit)	—		—		(7,013)
Net (loss) from discontinued operations	Net (loss) from discontinued operations	(19,842)		(4,071)		(3,454)		Net (loss) from discontinued operations	—		—		(19,842)
Net (loss)/income		$	(533,017)	$	97,450	$	105,765
Net income/(loss)								Net income/(loss)	$	92,533	$	118,664	$	(533,017)

~~F-102~~F-88

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 24. REVENUE

Revenue from contracts with customers in the scope of Topic 606 is recognized within noninterest income. The Company does not have any material significant payment terms as payment is received at or shortly after the satisfaction of the performance obligation. The value of unsatisfied performance obligations for contracts with an original expected length of one year or less are not disclosed. The Company recognizes incremental costs of obtaining contracts as an expense when incurred for contracts with a term of one year or less.

Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain non-interest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives, and certain credit card fees are also not in scope of Topic 606. Topic 606 is applicable to non-interest revenue streams such as wealth management fees, insurance commissions and fees, administrative services for customer deposit accounts, interchange fees, and sale of owned real estate properties.

The following presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the years ended ~~2020, 2019,~~2022, 2021, and ~~2018,~~2020, respectively.


		Years Ended December 31,							Years Ended December 31,
(In thousands)	(In thousands)	2020		2019		2018		(In thousands)	2022		2021		2020
Non-interest income	Non-interest income							Non-interest income
In-scope of Topic 606:	In-scope of Topic 606:							In-scope of Topic 606:
Service charges on deposit accounts	Service charges on deposit accounts	$	19,239	$	23,122	$	21,046	Service charges on deposit accounts	$	22,396	$	20,249	$	19,239
Insurance commissions and fees		10,770		10,957		10,983
Wealth management fees	Wealth management fees	9,285		9,353		9,447		Wealth management fees	10,008		10,530		9,285
Interchange income	Interchange income	7,559		6,266		7,177		Interchange income	8,470		8,321		7,559
Insurance commissions and fees								Insurance commissions and fees	—		7,003		10,770
Non-interest income (in-scope of Topic 606)	Non-interest income (in-scope of Topic 606)	$	46,853	$	49,698	$	48,653	Non-interest income (in-scope of Topic 606)	$	40,874	$	46,103	$	46,853
Non-interest income (out-of-scope of Topic 606)	Non-interest income (out-of-scope of Topic 606)	19,454		34,304		25,671		Non-interest income (out-of-scope of Topic 606)	28,063		97,145		19,454
Total non-interest income from continuing operations	Total non-interest income from continuing operations	$	66,307	$	84,002	$	74,324	Total non-interest income from continuing operations	$	68,937	$	143,248	$	66,307

Non-interest income streams in-scope of Topic 606 are discussed below.

Service Charges on Deposit Accounts. Service charges on deposit accounts consist of monthly service fees (i.e. business analysis fees and consumer service charges) and other deposit account related fees. The Company's performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Other deposit account related fees are largely transactional based, and therefore, the Company's performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts. The Company may, from time to time, waive certain fees (e.g., NSF fee) for customers but generally do not reduce the transaction price to reflect variability for future reversals due to the insignificance of the amounts. Waiver of fees reduces the revenue in the period the waiver is granted to the customer.

~~Insurance Commissions and Fees.~~ Commission revenue is recognized as of the effective date of the insurance policy or the date the customer is billed, whichever is later, net of return commissions related to policy cancellations. Policy cancellation is a variable consideration that is not deemed significant and thus, does not impact the amount of revenue recognized.

~~F-103~~F-89

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Wealth Management Fees. Wealth management fees are primarily comprised of fees earned from consultative investment management, trust administration, tax return preparation, and financial planning. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based on the daily accrual of the market value of the investment accounts and the applicable fee rate.

Interchange Fees. Interchange fees are transaction fees paid to the card-issuing bank to cover handling costs, fraud and bad debt costs, and the risk involved in approving the payment. Due to the day-to-day nature of these fees they are settled on a daily basis and are accounted for as they are received.

Insurance Commissions and Fees. Commission revenue is recognized as of the effective date of the insurance policy or the date the customer is billed, whichever is later, net of return commissions related to policy cancellations. Policy cancellation is a variable consideration that is not deemed significant and thus, does not impact the amount of revenue recognized.

On September 1, 2021, the Company completed the sale of substantially all of the assets, and the assumption of certain liabilities, of Berkshire Insurance Group, Inc.

Gains/Losses on Sales of OREO. The sale of OREO and other nonfinancial assets are accounted for with the derecognition of the asset in question once a contract exists and control of the asset has been transferred to the buyer. The gain or loss on the sale is calculated as the difference between the carrying value of the asset and the transaction price.

~~F-104~~F-90


2020	High		Low		Dividends Declared
First quarter	$	33.04	$	11.43	$	0.24
Second quarter	18.79		9.15		0.24
Third quarter	11.26		8.55		0.12
Fourth quarter	19.24		9.80		0.12


2019
First quarter	$	31.81	$	26.02	$	0.23
Second quarter	31.60		27.35		0.23
Third quarter	33.33		28.20		0.23
Fourth quarter	33.72		27.99		0.23


	Period Ending
Index	12/31/15	12/31/16	12/31/17	12/31/18	12/31/19	12/31/20
Berkshire Hills Bancorp, Inc.	100.00	130.39	132.53	99.95	125.63	68.83
NYSE Composite Index	100.00	111.94	132.90	121.01	151.87	162.49
PHLX KBW Regional Banking Index	100.00	139.02	141.45	116.70	144.49	131.91


	2020 Compared with 2019						2019 Compared with 2018
	(Decrease) Increase Due to						(Decrease) Increase Due to
(In thousands)	Rate		Volume		Net		Rate		Volume		Net

Interest income:
Commercial real estate	$	(45,193)	$	8,096	$	(37,097)	$	(4,367)	$	25,271	$	20,904
Commercial and industrial loans	(27,008)		3,561		(23,447)		(2,978)		6,558		3,580
Residential loans	2,017		(14,907)		(12,890)		901		13,571		14,472
Consumer loans	(6,575)		(8,592)		(15,167)		2,630		(3,357)		(727)
Total loans	(76,759)		(11,842)		(88,601)		(3,814)		42,043		38,229
Investment securities	(7,945)		(57)		(8,002)		1,098		(2,863)		(1,765)
Short-term investments and loans held for sale (1)	(16,924)		8,297		(8,627)		455		7,544		7,999
Total interest income	$	(101,628)	$	(3,602)	$	(105,230)	$	(2,261)	$	46,724	$	44,463

Interest expense:
NOW accounts	$	(3,835)	$	882	$	(2,953)	$	1,217	$	1,265	$	2,482
Money market accounts	(18,043)		1,985		(16,058)		8,411		1,036		9,447
Savings accounts	(409)		156		(253)		5		86		91
Certificates of deposit	(11,486)		(12,093)		(23,579)		12,250		12,562		24,812
Total deposits	(33,773)		(9,070)		(42,843)		21,883		14,949		36,832
Borrowings	(4,553)		(7,206)		(11,759)		6,695		(7,722)		(1,027)
Total interest expense	$	(38,326)	$	(16,276)	$	(54,602)	$	28,578	$	7,227	$	35,805
Change in net interest income	$	(63,302)	$	12,674	$	(50,628)	$	(30,839)	$	39,497	$	8,658


			Less than One		One to Three		Three to Five		After Five
(In thousands)	Total		Year		Years		Years		Years
FHLBB borrowings (1)	$	474,357	$	395,475	$	69,405	$	6,014	$	3,463
Subordinated notes	97,280		—		—		—		97,280
Operating lease obligations (2)	63,894		9,214		16,086		11,258		27,336
Total Contractual Obligations	$	635,531	$	404,689	$	85,491	$	17,272	$	128,079


Change in Interest Rates-Basis Points (Rate Ramp)
	1- 12 Months				13- 24 Months
	$ Change		% Change		$ Change		% Change
(In thousands)
At December 31, 2020
+300	$	5,578	1.78	%	$	27,942	9.17	%
+200	(108)		(0.03)		12,199		4.01
+100	(3,090)		(0.99)		(943)		(0.31)
-100	5,408		1.73		6,769		2.22

At December 31, 2019
+300	$	17,080	4.70	%	$	28,003	7.60	%
+200	11,070		3.00		19,589		5.30
+100	5,107		1.40		10,289		2.80
-100	(6,559)		(1.80)		(13,611)		(3.70)


(in thousands)	December 31, 2019 Pre-ASC 326 Adoption	Impact of Adoption	January 1, 2020 Post-ASC 326 Adoption
Assets:
Loans	9,502,428	—	9,502,428
PCD gross up	—	15,326	15,326
Fair value option	—	(15,291)	(15,291)
Total loans	9,502,428	35	9,502,463
Allowance for credit losses on loans	63,575	25,434	89,009
Allowance for credit losses on securities	—	309	309
Deferred tax assets, net	51,165	8,993	60,158

Liabilities and shareholders' equity:
Other liabilities (ACL unfunded loan commitments)	100	7,993	8,093
Retained earnings	361,082	(24,380)	336,702


(In thousands)	December 31, 2019 Statement Balance		Impact of ASC 326 Adoption		January 1, 2020 Post-ASC 326 Adoption
Loans:
Construction	$	448,452	$	187	$	448,639
Commercial multifamily	631,740		252		631,992
Commercial real estate owner occupied	673,308		3,185		676,493
Commercial real estate non-owner occupied	2,189,780		6,540		2,196,320
Commercial and industrial	1,843,683		(12,212)		1,831,471

Residential real estate	2,853,385		1,868		2,855,253
Home equity	378,793		10		378,803
Consumer other	483,287		205		483,492
Total	$	9,502,428	$	35	$	9,502,463

Allowance:
Construction	$	2,713	$	(342)	$	2,371
Commercial multifamily	4,413		(1,842)		2,571
Commercial real estate owner occupied	4,880		6,062		10,942
Commercial real estate non-owner occupied	16,344		11,201		27,545
Commercial and industrial	20,099		(2,189)		17,910

Residential real estate	9,970		6,799		16,769
Home equity	1,470		4,884		6,354
Consumer other	3,686		861		4,547
Total	$	63,575	$	25,434	$	89,009


	December 31, 2019
(In thousands)	Business Activities Loans		Acquired Loans		Total
Commercial real estate:
Construction	$	382,014	$	47,792	$	429,806

Other commercial real estate	2,414,942		1,189,521		3,604,463
Total commercial real estate	2,796,956		1,237,313		4,034,269

Commercial and industrial loans:	1,442,617		397,891		1,840,508




Total commercial loans	4,239,573		1,635,204		5,874,777

Residential mortgages:
1-4 family	2,143,817		533,536		2,677,353
Construction	4,641		3,478		8,119
Total residential mortgages	2,148,458		537,014		2,685,472

Consumer loans:
Home equity	273,867		106,724		380,591
Auto and other	504,599		56,989		561,588
Total consumer loans	778,466		163,713		942,179

Total loans	$	7,166,497	$	2,335,931	$	9,502,428


(in thousands)	30-59 Days Past Due		60-89 Days Past Due		>90 Days Past Due		Total Past Due		Current		Total Loans		Past Due > 90 days and Accruing
December 31, 2019
Commercial real estate:
Construction	$	0	$	0	$	0	$	0	$	382,014	$	382,014	$	0

Commercial real estate	423		89		15,623		16,135		2,398,807		2,414,942		0
Total	423		89		15,623		16,135		2,780,821		2,796,956		0
Commercial and industrial loans


Total	2,841		2,033		10,662		15,536		1,427,081		1,442,617		122
Residential mortgages:
1-4 family	1,669		714		3,350		5,733		2,138,084		2,143,817		800
Construction	0		0		0		0		4,641		4,641		0
Total	1,669		714		3,350		5,733		2,142,725		2,148,458		800
Consumer loans:
Home equity	149		0		1,147		1,296		272,571		273,867		52
Auto and other	4,709		990		2,729		8,428		496,171		504,599		1
Total	4,858		990		3,876		9,724		768,742		778,466		53
Total	$	9,791	$	3,826	$	33,511	$	47,128	$	7,119,369	$	7,166,497	$	975


	December 31, 2019
(In thousands)	Business Activities Loans		Acquired Loans		Total
Commercial real estate:
Construction	$	0	$	0	$	0

Other commercial real estate	15,623		4,496		20,119
Total	15,623		4,496		20,119
Commercial and industrial loans:


Total	10,540		833		11,373

Residential mortgages:
1-4 family	2,550		793		3,343
Construction	0		0		0
Total	2,550		793		3,343
Consumer loans:
Home equity	1,095		717		1,812
Auto and other	2,728		265		2,993
Total	3,823		982		4,805

Total non-accrual loans	$	32,536	$	7,104	$	39,640


(In thousands)	Commercial real estate		Commercial and industrial		Residential mortgages		Consumer		Total
Loans receivable:
Balance at end of year
Individually evaluated for impairment	$	19,192	$	9,167	$	3,019	$	630	$	32,008
Collectively evaluated	2,777,764		1,433,450		2,145,439		777,836		7,134,489
Total	$	2,796,956	$	1,442,617	$	2,148,458	$	778,466	$	7,166,497


	December 31, 2019
(In thousands)	Recorded Investment (1)		Unpaid Principal Balance (2)		Related Allowance
With no related allowance:


Other commercial real estate loans	$	18,676	$	37,493	$	—
Commercial and industrial loans	4,805		10,104		—
Residential mortgages - 1-4 family	433		699		—
Consumer - home equity	32		238		—
Consumer - other	0		0		—

With an allowance recorded:


Other commercial real estate loans	$	550	$	1,411	$	20
Commercial and industrial loans	4,166		12,136		122
Residential mortgages - 1-4 family	2,615		2,924		109
Consumer - home equity	594		614		42
Consumer - other	8		8		1

Total
Commercial real estate	$	19,226	$	38,904	$	20
Commercial and industrial loans	8,971		22,240		122
Residential mortgages	3,048		3,623		109
Consumer	634		860		43
Total impaired loans	$	31,879	$	65,627	$	294


	December 31, 2019				December 31, 2018
(in thousands)	Average Recorded Investment		Cash Basis Interest Income Recognized		Average Recorded Investment		Cash Basis Interest Income Recognized
With no related allowance:


Other commercial real estate	$	19,805	$	586	$	24,078	$	373
Other commercial and industrial	3,165		523		914		245
Residential mortgages - 1-4 family	185		17		428		20
Consumer-home equity	148		3		107		10
Consumer-other	0		0		0		0

With an allowance recorded:


Other commercial real estate	$	374	$	107	$	555	$	30
Other commercial and industrial	2,533		793		1,259		139
Residential mortgages - 1-4 family	2,427		150		1,407		75
Consumer-home equity	349		32		98		6
Consumer - other	11		1		15		1

Total
Commercial real estate	$	20,179	$	693	$	24,633	$	403
Commercial and industrial	5,698		1,316		2,173		384
Residential mortgages	2,612		167		1,835		95
Consumer loans	508		36		220		17
Total impaired loans	$	28,997	$	2,212	$	28,861	$	899


Business Activities Loans
(In thousands) 2019	Commercial real estate		Commercial and industrial loans		Residential mortgages		Consumer		Total
Balance at beginning of period	$	21,732	$	16,504	$	10,535	$	7,368	$	56,139
Charged-off loans	6,577		23,799		635		3,322		34,333
Recoveries on charged-off loans	570		1,012		57		253		1,892
Provision/(releases) for loan losses	9,033		25,404		(1,417)		458		33,478
Balance at end of period	$	24,758	$	19,121	$	8,540	$	4,757	$	57,176

Individually evaluated for impairment	20		122		109		43		294
Collectively evaluated	24,738		18,999		8,431		4,714		56,882
Total	$	24,758	$	19,121	$	8,540	$	4,757	$	57,176


Business Activities Loans
(In thousands) 2018	Commercial real estate		Commercial and industrial loans		Residential mortgages		Consumer		Total
Balance at beginning of period	$	16,843	$	13,850	$	9,420	$	5,807	$	45,920
Charged-off loans	5,859		4,275		157		3,187		13,478
Recoveries on charged-off loans	50		620		114		363		1,147
Provision/(releases) for loan losses	10,698		6,309		1,158		4,385		22,550
Balance at end of period	$	21,732	$	16,504	$	10,535	$	7,368	$	56,139

Individually evaluated for impairment	9		49		128		11		197
Collectively evaluated	21,723		16,455		10,407		7,357		55,942
Total	$	21,732	$	16,504	$	10,535	$	7,368	$	56,139