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What changed in Beacon Financial Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Beacon Financial Corp's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+395 added−405 removedSource: 10-K (2025-03-03) vs 10-K (2024-02-28)

Top changes in Beacon Financial Corp's 2024 10-K

395 paragraphs added · 405 removed · 218 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

103 edited+21 added−62 removed134 unchanged
Biggest changeItem 1 - Table 4A - Allocation of Allowance for Credit Losses on Loans by Category (as of year-end) 2023 2022 2021 (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 $ 2,885 0.5 % $ 1,227 0.4 % $ 3,206 1.0 % Commercial multifamily 2,475 0.4 1,810 0.3 6,120 1.2 Commercial real estate owner occupied 9,443 1.5 10,739 1.7 12,752 2.1 Commercial real estate non-owner occupied 38,221 1.5 30,724 1.2 32,106 1.5 Commercial and industrial 18,602 1.4 18,743 1.3 22,584 1.8 Residential real estate 19,622 0.7 18,666 0.8 22,734 1.5 Home equity 2,015 0.9 2,173 1.0 4,006 1.6 Consumer other 12,094 5.5 12,188 4.5 2,586 1.3 Total $ 105,357 1.2 % $ 96,270 1.2 % $ 106,094 1.6 % Item 1 - Table 4B - Allocation of Allowance for Credit Losses on Loans (as of year-end) 2023 2022 2021 (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 $ 2,885 7.1 % $ 1,227 3.8 % $ 3,206 4.8 % Commercial multifamily 2,475 6.6 1,810 7.4 6,120 7.5 Commercial real estate owner occupied 9,443 7.0 10,739 7.7 12,752 8.9 Commercial real estate non-owner occupied 38,221 28.8 30,724 30.0 32,106 31.6 Commercial and industrial 18,602 15.0 18,743 17.4 22,584 18.8 Residential real estate 19,622 30.5 18,666 27.7 22,734 21.8 Home equity 2,015 2.5 2,173 2.7 4,006 3.7 Consumer other 12,094 2.5 12,188 3.3 2,586 2.9 Total $ 105,357 100.0 % $ 96,270 100.0 % $ 106,094 100.0 % 12 Table of Contents INVESTMENT SECURITIES ACTIVITIES The securities portfolio provides a source of liquidity, income and interest rate risk management.
Biggest changeItem 1 - Table 4A - Allocation of Allowance for Credit Losses on Loans by Category (as of year-end) 2024 2023 2022 (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 $ 4,463 0.6 % $ 2,885 0.5 % $ 1,227 0.4 % Commercial multifamily 4,084 0.6 2,475 0.4 1,810 0.3 Commercial real estate owner occupied 11,303 1.6 9,443 1.5 10,739 1.7 Commercial real estate non-owner occupied 38,520 1.4 38,221 1.5 30,724 1.2 Commercial and industrial 25,549 1.8 18,602 1.4 18,743 1.3 Residential real estate 22,479 0.8 19,622 0.7 18,666 0.8 Home equity 2,392 1.0 2,015 0.9 2,173 1.0 Consumer other 5,910 5.1 12,094 5.5 12,188 4.5 Total $ 114,700 1.2 % $ 105,357 1.2 % $ 96,270 1.2 % Item 1 - Table 4B - Allocation of Allowance for Credit Losses on Loans (as of year-end) 2024 2023 2022 (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 $ 4,463 7.7 % $ 2,885 7.1 % $ 1,227 3.8 % Commercial multifamily 4,084 6.8 2,475 6.6 1,810 7.4 Commercial real estate owner occupied 11,303 7.4 9,443 7.0 10,739 7.7 Commercial real estate non-owner occupied 38,520 29.5 38,221 28.8 30,724 30.0 Commercial and industrial 25,549 15.4 18,602 15.0 18,743 17.4 Residential real estate 22,479 29.5 19,622 30.5 18,666 27.7 Home equity 2,392 2.5 2,015 2.5 2,173 2.7 Consumer other 5,910 1.2 12,094 2.5 12,188 3.3 Total $ 114,700 100.0 % $ 105,357 100.0 % $ 96,270 100.0 % 12 Table of Contents INVESTMENT SECURITIES ACTIVITIES The securities portfolio provides a source of liquidity, income and interest rate risk management.
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 bases 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.
These include the Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; the 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 bases 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.
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.
Federal Reserve Board policy requires that a bank holding company serve as a source of financial and managerial 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.
Finally, the Company notes that there has been a recent uptick in activity among state regulators with respect to implementing privacy and cybersecurity standards and regulations. Some states have adopted laws and regulations requiring financial institutions to maintain cybersecurity programs and make details available regarding those programs.
Finally, the Company notes that there has been a recent uptick in activity among state legislatures and regulators with respect to implementing privacy and cybersecurity standards and regulations. Some states have adopted laws and regulations requiring financial institutions to maintain cybersecurity programs and make details available regarding those programs.
For a further discussion of risks related to cybersecurity, see Item 1A “Risk Factors.” As a banking organization, the Company is required to notify its primary federal regulator as soon as possible but no later than 36 hours after the Company’s discovery of a computer-security incident that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the Company’s: (1) ability to carry out banking operations, activities, or processes, or deliver banking products and services to a material portion of its customer base, in the ordinary course of business; (2) business lines, including associated operations, services, functions, and support, that upon failure would result in a material loss of revenue, profit, or franchise value; or (3) operations, including associated services, functions, and support, as applicable, the failure or discontinuance of which would pose a threat to the financial stability of the United States.
For a further discussion of risks related to cybersecurity, see Item 1A “Risk Factors.” As a banking organization, the Bank is required to notify its primary federal regulator as soon as possible but no later than 36 hours after the Bank’s discovery of a computer-security incident that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the Bank’s: (1) ability to carry out banking operations, activities, or processes, or deliver banking products and services to a material portion of its customer base, in the ordinary course of business; (2) business lines, including associated operations, services, functions, and support, that upon failure would result in a material loss of revenue, profit, or franchise value; or (3) operations, including associated services, functions, and support, as applicable, the failure or discontinuance of which would pose a threat to the financial stability of the United States.
The FDIC has authority to increase insurance assessments and adopted a final rule in October 2022 to increase initial base deposit insurance assessment rates by two basis points beginning in the first quarterly assessment period of 2023. As a result, effective January 1, 2023, assessment rates for institutions of the Bank’s size range from 2.5 to 42 basis points.
The FDIC has authority to increase insurance assessments and adopted a final rule in October 2022 to increase initial base deposit insurance assessment rates by two basis points beginning in the first quarterly assessment period of 2023. As a result, effective assessment rates for institutions of the Bank’s size range from 2.5 to 42 basis points.
The Bank was in compliance with FHLB rules and requirements as of December 31, 2023. The Bank also has access to borrowings from the Federal Reserve Bank of Boston. The Company had $100 million in subordinated notes, a $15 million trust preferred obligation and a $7 million trust preferred obligation outstanding at year-end 2023.
The Bank was in compliance with FHLB rules and requirements as of December 31, 2024. The Bank also has access to borrowings from the Federal Reserve Bank of Boston. The Company had $100 million in subordinated notes, a $15 million trust preferred obligation and a $7 million trust preferred obligation outstanding at year-end 2024.
The Bank also conducts loan participations generally with other banks doing business in its markets, including selected national banks. 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.
The Bank also conducts loan participations generally with other banks doing business in its markets, including selected national banks. 5 Table of Contents 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.
The financial institution is also responsible for accounting for the disaster recovery and business continuity plans and processes of its critical third party service providers. Failing to observe its obligations under regulatory guidance could subject the Company regulatory sanctions such as financial penalties.
The financial institution is also responsible for accounting for the disaster recovery and business continuity plans and processes of its critical third party service providers. Failing to observe its obligations under regulatory guidance could subject the Bank to regulatory sanctions such as financial penalties.
There is also information about the loan portfolio and changes in the portfolio during 2023 in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this report. There is reference made to Commercial and Retail Loans, as well as to Commercial Real Estate loans.
There is also information about the loan portfolio and changes in the portfolio during 2024 in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this report. There is reference made to Commercial and Retail Loans, as well as to Commercial Real Estate loans.
The Bank tracks loan underwriting exceptions and exception reports are actively monitored by executive lending management. 9 Table of Contents In 2023, the Company's administrative monitoring of the commercial real estate portfolio, the largest segment of the loan portfolio, reflects its risk based focus.
The Bank tracks loan underwriting exceptions and exception reports are actively monitored by executive lending management. 9 Table of Contents The Company's administrative monitoring of the commercial real estate portfolio, the largest segment of the loan portfolio, reflects its risk based focus.
A bank’s compliance with such capital restoration 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.
A bank’s compliance with such a capital restoration plan 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.
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. 25 Table of Contents Mergers and Acquisitions The Company and the Bank have authority to engage, and have engaged, in acquisitions of other depository institutions.
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. Mergers and Acquisitions The Company and the Bank have authority to engage, and have engaged, in acquisitions of other depository institutions.
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%. 22 Table of Contents “Undercapitalized” banks must adhere to growth, capital distribution (including dividend), and other limitations and are required to submit a capital restoration plan.
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.
Special mention are assets that do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses. Please see the additional discussion of nonaccruing and potential problem loans in Item 7 and additional information in notes to the financial statements. Allowance for Credit Losses on Loans.
Special mention are assets that do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses. Please see the additional discussion of non-accruing and potential problem loans in Item 7 and additional information in notes to the financial statements. Allowance for Credit Losses on Loans.
Also, some states have either implemented, or modified, their data breach notification and/or data privacy rules. While the Company cannot predict future legislative or regulatory actions of the various states, the Company expects continued activity in this area and will continue to monitor for developments in the states in which it operates. Anti-Money Laundering Laws .
Also, some states have either implemented, or modified, their data breach notification and/or data privacy rules. While the Company cannot predict future legislative or regulatory actions of the various states, the Company expects continued activity in this area and will continue to monitor for developments in the states in which it and the Bank operate. Anti-Money Laundering Laws .
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”). The Bank provides Commercial Banking, Retail Banking, Consumer Lending, Private Banking and Wealth Management services.
Berkshire qualifies all of its forward-looking statements by these cautionary statements. GENERAL Berkshire Hills Bancorp, Inc. is headquartered in Boston, Massachusetts. Berkshire is a Delaware corporation and the holding company for Berkshire Bank (“the Bank”). The Bank provides Commercial Banking, Retail Banking, Consumer Lending, Private Banking and Wealth Management services.
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 dividend payments in 2023 and such approval is expected to be required in 2024. Investment Activities.
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 dividend payments in 2024 and such approval is expected to be required in 2025. 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 .
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. 19 Table of Contents Interstate Banking and Branching .
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, as is the case with the Company, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934. Massachusetts Holding Company Regulation.
Acquisition of more than 10% of any class of a bank holding company’s voting stock constitutes a rebuttable presumption of control under the Change in Bank Control Act’s regulations under certain circumstances including where, as is the case with the Company, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934. Massachusetts Holding Company Regulation.
Commercial Real Estate loans include Construction, Commercial Multi-Family, Commercial Real Estate Owner Occupied, and Commercial Real Estate Non-Owner Occupied. Commercial loans include Commercial Real Estate loans and Commercial and Industrial Loans. Retail loans include Residential Real Estate loans and Consumer loans, which are comprised of Home Equity loans and Consumer other loans. 5 Table of Contents Commercial Real Estate.
Commercial Real Estate loans include Construction, Commercial Multi-Family, Commercial Real Estate Owner Occupied, and Commercial Real Estate Non-Owner Occupied. Commercial loans include Commercial Real Estate loans and Commercial and Industrial Loans. Retail loans include Residential Real Estate loans and Consumer loans, which are comprised of Home Equity loans and Consumer other loans. 6 Table of Contents Commercial Real Estate.
The Bank was required to obtain the approval of the Commissioner to pay Bank dividends to the Company in 2023. Loans to One Borrower Limitations. Massachusetts banking law grants broad lending authority.
The Bank was required to obtain the approval of the Commissioner to pay Bank dividends to the Company in 2024. Loans to One Borrower Limitations. Massachusetts banking law grants broad lending authority.
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.
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 22 Table of Contents circumstances, Federal Reserve nonobjection is required.
The Bank suspended originating loans through this partnership in mid-2022 and the remaining portfolio totaled $90 million at December 31, 2023. 8 Table of Contents Maturity and Sensitivity of Loan Portfolio. The following table shows contractual final maturities of loans at year-end 2023. The contractual maturities do not reflect premiums, discounts, deferred costs, or prepayments.
The Bank suspended originating loans through this partnership in mid-2022 and the remaining portfolio totaled $7 million at December 31, 2024. 8 Table of Contents Maturity and Sensitivity of Loan Portfolio. The following table shows contractual final maturities of loans at year-end 2024. The contractual maturities do not reflect premiums, discounts, deferred costs, or prepayments.
The Dodd-Frank Act codified the source of strength doctrine. 24 Table of Contents 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.
The Dodd-Frank Act codified the source of strength doctrine. 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.
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 common equity Tier 1 ratio of 4.5% or greater, and a leverage ratio of 4.0% or greater.
An institution is deemed to be “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 common equity Tier 1 ratio of 4.5% or greater, and a leverage ratio of 4.0% or greater.
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. 20 Table of Contents Certain regulatory requirements applicable to the Company and the Bank are referred to below.
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. Certain regulatory requirements applicable to the Company and the Bank are referred to below.
As of December 31, 2023, the Bank operated branches in New York, Vermont, Connecticut and Rhode Island, as well as Massachusetts.
As of December 31, 2024, the Bank operated branches in New York, Vermont, Connecticut and Rhode Island, as well as Massachusetts.
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 common equity Tier 1 ratio of less than 4.5%, or a leverage ratio of less than 4.0%.
An institution is deemed to be “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 common equity Tier 1 ratio of less than 4.5%, or a leverage ratio of less than 4.0%.
It reviewed the larger exposures of all commercial real estate loans maturing in the next five years, including reviewing debt service coverage. It has expanded its monitoring of portfolio-level lease expirations and continued its review of trends in commercial real estate appraisals.
The Company periodically reviews the larger exposures of all commercial real estate loans maturing in the next five years, including reviewing debt service coverage. It has expanded its monitoring of portfolio-level lease expirations and continued its review of trends in commercial real estate appraisals.
The final rule also requires registrants such as the Company to describe, on Form 10-K, their processes for assessing, identifying and managing material risks from cybersecurity threats and whether those risks have materially affected the registrant.
The final rule also requires registrants such as the Company to describe, on Form 10-K, their processes for assessing, identifying and managing material risks from cybersecurity threats and whether those risks 24 Table of Contents have materially affected the registrant.
There is a 30-day notice procedure to the Commissioner in order to engage in such activities. Massachusetts law also authorizes 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.
There is a 30-day notice procedure to the Commissioner in order to engage in such activities. Massachusetts law also authorizes 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. 18 Table of Contents Dividends.
The New York State Superintendent of Banks, the Vermont Commissioner of Banking and Insurance, the Connecticut Commissioner of Banking 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.
The New York State Superintendent of Financial Services, the Vermont Commissioner of the Department of Financial Regulation, the Connecticut Commissioner of Banking 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.
Management does not know of any practice, condition or violation that might lead to termination of FDIC deposit insurance. 23 Table of Contents 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.
Management does not know of any practice, condition or violation that might lead to termination of FDIC deposit insurance. Federal Home Loan Bank System . The Bank is a member of the Federal Home Loan Bank system, which consists of 11 regional Federal Home Loan Banks that provide a central credit facility primarily for member institutions.
The Company obtained such nonobjection for its repurchase program in 2023 and for the repurchase program announced in January 2024. 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 Company obtained such nonobjection for its repurchase program in 2024. These regulatory policies could affect the ability of the Company to pay dividends, repurchase shares of its stock, or otherwise engage in capital distributions.
Item 1 - Table 3 - Credit Quality Ratios 2023 2022 2021 Ratios: Allowance for credit losses on loans/total loans 1.17 % 1.15 % 1.55 % Nonaccrual loans/total loans 0.24 % 0.37 % 0.52 % Allowance for credit losses/nonaccruing loans 492.47 % 309.41 % 300.33 % Net charge-offs/average loans 0.26 % 0.27 % 0.29 % Item 1 - Table 3.a - Net charge-offs to average loans for each loan category 2023 2022 2021 Net charge-offs to average loans: Construction — % — % — % Commercial multifamily — — — Commercial real estate owner occupied (0.01) — 0.02 Commercial real estate non-owner occupied — 0.06 0.17 Commercial and industrial 0.17 0.20 0.09 Residential real estate — (0.01) — Home equity — — — Consumer other 0.10 0.02 0.01 11 Table of Contents The following tables present year-end data for the approximate allocation of the allowance for credit losses on loans by loan categories at the dates indicated (including an apportionment of any unallocated amount).
Item 1 - Table 3 - Credit Quality Ratios 2024 2023 2022 Ratios: Allowance for credit losses on loans/total loans 1.22 % 1.17 % 1.15 % Nonaccrual loans/total loans 0.26 % 0.24 % 0.37 % Allowance for credit losses/nonaccruing loans 469.18 % 492.47 % 309.41 % Net charge-offs/average loans 0.16 % 0.26 % 0.27 % Item 1 - Table 3.a - Net charge-offs to average loans for each loan category 2024 2023 2022 Net charge-offs to average loans: Construction — % — % — % Commercial multifamily 0.01 — — Commercial real estate owner occupied — (0.01) — Commercial real estate non-owner occupied — — 0.06 Commercial and industrial 0.06 0.17 0.20 Residential real estate (0.01) — (0.01) Home equity — — — Consumer other 0.10 0.10 0.02 11 Table of Contents The following tables present year-end data for the approximate allocation of the allowance for credit losses on loans by loan categories at the dates indicated (including an apportionment of any unallocated amount).
Estimated uninsured deposits are based on the same methodologies and assumptions used for the Bank's regulatory reporting requirements. Estimated uninsured deposits adjusted to exclude internal accounts and collateralized deposits were $3.7 billion and $3.2 billion at December 31, 2023 and 2022, respectively.
Estimated uninsured deposits are based on the same methodologies and assumptions used for the Bank's regulatory reporting requirements. Estimated uninsured deposits adjusted to exclude internal accounts and collateralized deposits were $4.0 billion and $3.7 billion at December 31, 2024 and 2023, respectively.
Potential civil money penalties can be assessed for a wide range of legal and regulatory violations and for unsafe or unsound practices, and are adjusted annually for inflation. Such penalties currently range up to more than $50 thousand per day or, in extreme cases, as high as $2.37 million per day. Holding Company Regulation General.
Potential civil money penalties can be assessed for a wide range of legal and regulatory violations and for unsafe or unsound practices, and are adjusted annually for inflation. Such penalties currently range up to more than $12 thousand per day or, in extreme cases, as high as $2.51 million per day. 21 Table of Contents Holding Company Regulation General.
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.
Berkshire provides a robust incentive plan to reward performance, 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.
Loans may generally be made with amortizations of up to 30 years and with final maturities of 10 years or less. As part of its business activities, the Bank also enters into commercial loan participations and interest rate swaps.
Loans may generally be made with amortizations of up to 30 years and with final maturities of 10 years or less. As part of its business activities, the Bank also enters into commercial loan participations and interest rate swaps. The Bank originates construction loans to developers and commercial borrowers in its footprint.
Yields are shown on a fully taxable-equivalent basis and are based on amortized cost. A proportion of the mortgage-backed securities are planned amortization class bonds. The contractual maturities of mortgage-backed securities shown below reflect the maturities of the underlying mortgage collateral based on final maturities and do not include scheduled amortization. Yields include amortization and accretion of premiums and discounts.
A proportion of the mortgage-backed securities are planned amortization class bonds. The contractual maturities of mortgage-backed securities shown below reflect the maturities of the underlying mortgage collateral based on final maturities and do not include scheduled amortization. Yields include amortization and accretion of premiums and discounts.
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.
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.
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. Under the risk-based assessment system, institutions deemed less risky of failure pay lower assessments.
The FDIC insures deposits up to the standard maximum deposit insurance amount (“SMDIA”) of $250,000 per depositor for each account ownership category. The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund. Under the risk-based assessment system, institutions deemed less risky of failure pay lower assessments.
The origination of loans by Firestone was terminated in mid-2022 and the remaining portfolio totaled $77 million at December 31, 2023. 44 Business Capital is a dedicated SBA 7A program lending team based in the Philadelphia area.
The origination of loans by Firestone was terminated in mid-2022 and the remaining portfolio totaled $41 million at December 31, 2024. 7 Table of Contents 44 Business Capital is a dedicated SBA 7A program lending team based in the Philadelphia area.
This helps inform corporate strategies to fill current and future open positions. 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.
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.
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.
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.
Massachusetts has other statutes or regulations that are similar to the federal provisions discussed below. 21 Table of Contents Federal Regulations Capital Requirements.
Massachusetts has other statutes or regulations that are similar to the federal provisions discussed below. Federal Regulations Capital Requirements.
Both the FCRA and Regulation V, which are issued by the Federal Reserve Board, govern the use and provision of information to consumer reporting agencies. In addition, federal banking regulators regularly issue guidance concerning cybersecurity standards to help enhance cyber risk management among financial institutions.
Both the FCRA and Regulation V, the implementing regulation administered by the Consumer Financial Protection Bureau, govern the use and provision of information to consumer reporting agencies. In addition, federal banking regulators regularly issue guidance concerning cybersecurity standards to help enhance cyber risk management among financial institutions.
Item 1 – Table 1 – – Loan Portfolio Analysis 2023 2022 2021 (In millions) Amount Percent of Total Amount Percent of Total Amount Percent of Total Loans: Construction $ 640 7.1 % $ 320 3.9 % $ 324 4.7 % Commercial multifamily 599 6.6 620 7.5 516 7.6 Commercial real estate owner occupied 629 7.0 641 7.7 607 8.9 Commercial real estate non-owner occupied 2,607 28.8 2,496 29.9 2,157 31.6 Commercial and industrial 1,359 15.1 1,445 17.3 1,285 18.8 Residential real estate 2,760 30.5 2,312 27.7 1,489 21.8 Home equity 224 2.5 227 2.7 252 3.7 Consumer other 221 2.4 274 3.3 196 2.9 Total $ 9,039 100.0 % $ 8,335 100.0 % $ 6,826 100.0 % Allowance for credit losses (105) (96) (106) Net loans $ 8,934 $ 8,239 $ 6,720 There is further information about the above components of the loan portfolio, and the risk characteristics relevant to each portfolio segment, in the “Loans and Related Allowance for Credit Losses” footnote to the financial statements referenced in Item 8 of this report.
Item 1 – Table 1 – – Loan Portfolio Analysis 2024 2023 2022 (In millions) Amount Percent of Total Amount Percent of Total Amount Percent of Total Loans: Construction $ 726 7.8 % $ 640 7.1 % $ 320 3.9 % Commercial multifamily 637 6.8 599 6.6 620 7.5 Commercial real estate owner occupied 695 7.4 629 7.0 641 7.7 Commercial real estate non-owner occupied 2,770 29.5 2,607 28.8 2,496 29.9 Commercial and industrial 1,439 15.3 1,359 15.1 1,445 17.3 Residential real estate 2,772 29.5 2,760 30.5 2,312 27.7 Home equity 230 2.5 224 2.5 227 2.7 Consumer other 116 1.2 221 2.4 274 3.3 Total $ 9,385 100.0 % $ 9,039 100.0 % $ 8,335 100.0 % Allowance for credit losses (115) (105) (96) Net loans $ 9,270 $ 8,934 $ 8,239 There is further information about the above components of the loan portfolio, and the risk characteristics relevant to each portfolio segment, in the “Loans and Related Allowance for Credit Losses” footnote to the financial statements referenced in Item 8 of this report.
The Bank is subject to extensive anti-money laundering statutes and regulations, which require the institution to have in place an anti-money laundering compliance program and procedures and a customer identification program, among other things.
The Bank is subject to extensive anti-money laundering and countering the financing of terrorism (“AML/CFT”) statutes and regulations, which require the institution to have in place an AML/CFT compliance program and procedures and a customer identification program, among other things.
Item 1 - Table 6 - Average Balance and Weighted Average Rates for Deposits 2023 2022 2021 (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 $ 2,584.6 27 % — % $ 2,914.9 30 % — % $ 3,008.5 30 % — % NOW and other 1,048.9 11 0.6 1,416.7 14 0.4 976.4 10 0.1 Money market 2,727.3 28 3.4 2,809.1 29 0.5 3,293.5 32 0.2 Savings 1,067.2 11 1.0 1,114.8 11 0.1 1,111.6 11 0.1 Time 2,275.8 23 4.0 1,541.7 16 0.9 1,678.9 17 0.9 Total $ 9,703.8 100 % 2.4 % $ 9,797.2 100 % 0.9 % $ 10,068.9 100 % 0.3 % Estimated uninsured deposits were $4.6 billion and $3.8 billion at December 31, 2023 and 2022, respectively.
Item 1 - Table 6 - Average Balance and Weighted Average Rates for Deposits 2024 2023 2022 (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 $ 2,283.7 24 % — % $ 2,584.6 27 % — % $ 2,914.9 30 % — % NOW and other 767.4 8 0.5 1,048.9 11 0.6 1,416.7 14 0.4 Money market 2,993.1 31 2.8 2,727.3 28 3.4 2,809.1 29 0.5 Savings 1,011.8 11 1.1 1,067.2 11 1.0 1,114.8 11 0.1 Time 2,480.2 26 3.3 2,275.8 23 4.0 1,541.7 16 0.9 Total $ 9,536.2 100 % 2.0 % $ 9,703.8 100 % 2.4 % $ 9,797.2 100 % 0.9 % Estimated uninsured deposits were $5.0 billion and $4.6 billion at December 31, 2024 and 2023, respectively.
In 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. Nearly 100% (99.6%) of employees are eligible for benefits.
In addition to its compensation and health benefits, Berkshire offers a rewards and recognition program, wellness day, 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.
The Company recently introduced its new brand theme of “Where You Bank Matters” to highlight these differentiating factors. 4 Table of Contents LENDING ACTIVITIES General. The Bank originates loans in the basic portfolio categories discussed below. Lending activities are limited by federal and state laws and regulations.
The Company's brand theme of “Where You Bank Matters” is targeted to highlight these differentiating factors. LENDING ACTIVITIES General. The Bank originates loans in the basic portfolio categories discussed below. Lending activities are limited by federal and state laws and regulations.
The Bank is integrating with its growing private banking and MyBanker teams to further develop wealth management account generation. The Wealth Management Group reported $1.4 billion in total assets under management at year-end 2023.
The Bank is integrating with its growing private banking and MyBanker teams to further develop wealth management account generation. The Wealth Management Group reported $1.6 billion in total assets under management and $2.0 billion in assets under supervision at year-end 2024. The comparable totals at year-end 2023 were $1.5 billion and $1.9 billion, respectively.
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 have been originated for investment, although the Bank targets more held for sale originations in the future.
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 have been originated for investment. The Bank does not offer subprime mortgage lending programs.
HUMAN CAPITAL MANAGEMENT Berkshire’s people are the driving force behind its progress on its strategic goals, ability to deliver tailored financial solutions for its clients and vision to be a high-performing, relationship-focused, community-driven bank.
HUMAN CAPITAL MANAGEMENT Berkshire’s people are the driving force behind its progress on its strategic goals and ability to deliver tailored financial solutions for its clients.
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.
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.
Item 1 - Table 5 - 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 (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 $ 0.7 6.5 % $ 6.9 4.3 % $ 53.6 4.8 % $ 254.6 4.0 % $ 315.8 4.2 % Mortgage-backed securities — — % 18.3 2.2 % 94.1 2.1 % 1,272.6 1.6 % 1,385.0 1.7 % Other bonds and obligations 8.0 1.0 % 6.1 8.6 % 38.2 4.3 % 1.5 5.0 % 53.8 4.3 % Total $ 8.7 1.4 % $ 31.3 3.9 % $ 185.9 3.3 % $ 1,528.7 2.0 % $ 1,754.6 2.2 % 13 Table of Contents DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS Deposits are the major source of funds for the Bank’s lending and investment activities.
Item 1 - Table 5 - 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 (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 $ 1.0 0.3 % $ 8.3 1.4 % $ 77.9 2.4 % $ 212.6 0.8 % $ 299.8 1.0 % Mortgage-backed securities 7.9 1.2 % 4.0 0.2 % 58.5 0.9 % 888.1 1.4 % 958.5 1.3 % Other bonds and obligations 7.0 0.4 % 15.8 5.9 % 23.6 0.6 % 0.8 — % 47.2 0.2 % Total $ 15.9 2.0 % $ 28.1 7.4 % $ 160.0 3.9 % $ 1,101.5 2.2 % $ 1,305.5 2.5 % 13 Table of Contents DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS Deposits are the major source of funds for the Bank’s lending and investment activities.
The applicability date for the majority of the provisions in the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027. 26 Table of Contents Cybersecurity and Protection of Customers’ Personal Information.
Under the CRA regulations, the applicability date for the majority of the provisions is January 1, 2026, and additional requirements will be applicable under the regulations on January 1, 2027.
Upcoming loan maturities and larger variable and adjustable rate loans are being monitored. 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.
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.
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 benefits are available to married same-sex or different-sex couples as well as domestic partners.
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 remote dependent on the duties of one’s job.
Please see Note 4 – Securities in the financial statement for more information. The Company’s ability and intent to hold the portfolio at year-end 2023 was consistent with its liquidity and capital resources as discussed in Item 7 of this report. The following table summarizes year-end 2023 amortized cost, weighted average yields, and contractual maturities of debt securities.
The Company’s ability and intent to hold the portfolio at year-end 2024 was consistent with its liquidity and capital resources as discussed in Item 7 of this report. The following table summarizes year-end 2024 amortized cost, weighted average yields, and contractual maturities of debt securities. Yields are shown on a fully taxable-equivalent basis and are based on amortized cost.
Control, as defined for this purpose, means ownership, control of or power to vote 25% or more of any class of voting stock.
Control, as defined for this purpose, means the power, directly or indirectly, to direct the management or policies of an insured depository institution, or the ownership, control of or power to vote 25% or more of any class of voting stock.
The Bank has established policies and procedures intended to comply with these statutes and regulations. 27 Table of Contents Taxation The Company reports its income on a calendar year basis using the accrual method of accounting.
The Bank has established policies and procedures intended to comply with these statutes and regulations. 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.
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. 44 Business Capital is one of the top 20 bank originators of SBA 7A loans in the U.S. 7 Table of Contents Residential Mortgages.
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. Residential Mortgages.
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.
PROFESSIONAL DEVELOPMENT, ENGAGEMENT & RETENTION Training and development programs provide employees with the knowledge and skills 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 productivity and retention which reduces human capital risks, expense, and advances Berkshire’s performance.
The Bank is a Massachusetts-chartered trust company and its deposits are insured up to applicable limits by the FDIC. 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 subject to extensive regulation by the Massachusetts Commissioner of Banks (the “Commissioner”), as its chartering agency, and by the FDIC, as its primary regulator and deposit insurer.
The monitoring of lease expirations was increased and the review of trends in commercial real estate appraisals was expanded. The Company is reviewing trends in large loan originations and increasing its monitoring of portfolio components and trends, with a focus on office loans and multifamily. Trends in lease maturities and renewals are updated periodically.
The Company is reviewing trends in large loan originations and has increased its monitoring of portfolio components and trends, with a focus on office loans and multifamily. Trends in lease maturities and renewals are updated periodically. Upcoming loan maturities and larger variable and adjustable rate loans are being monitored.
The Bank originates construction loans to developers and commercial borrowers in its footprint. 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 6 Table of Contents construction loans on income-producing property.
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 many 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.
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.
The Bank buys and sells seasoned mortgages primarily with smaller financial institutions operating in its markets. 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.
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.
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.
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, and the Company must seek nonobjection for various capital actions, including stock repurchases.
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, 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.
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. The Company’s ongoing quarterly process of reviewing larger criticized loans evaluates risk ratings and accrual status based on updated information about loan performance and related risk management issues at the loan level.
The Company’s ongoing quarterly process of reviewing larger criticized loans evaluates risk ratings and accrual status based on updated information about loan performance and related risk management issues at the loan level.
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 a component for these operations. Consumer Loans. The Bank’s consumer loans are centrally underwritten and processed by its experienced consumer lending team.
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 a component for these operations. Consumer Loans. The Bank engages in prime home equity lending, following its conforming mortgage underwriting guidelines with more streamlined verifications and documentation.
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.
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 reports income on a calendar year basis to the Commonwealth of Massachusetts.
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 Company exited its prime indirect auto originations business in 2019 and has a remaining portfolio in runoff. The Company previously originated consumer loans 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.
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 or net book value as reported on the borrower’s financial statements.
Loan-to-value ratios depend on the collateral type and generally do not exceed 80 percent of orderly liquidation 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.
The Company periodically invests in corporate bonds, investment grade and non-rated fixed-income capital instruments issued by local and regional financial institutions, and funds financing community reinvestment projects. Due to elevated market interest rates, the net fair value of the investment securities portfolio was below amortized costs at year-end 2023.
The Company periodically invests in corporate bonds, investment grade and non-rated fixed-income capital instruments issued by local and regional financial institutions, and funds financing community reinvestment projects. Investment securities were sold in the fourth quarter of 2023 and first quarter of 2024.
The Company continually evaluates its compensation strategies and benefits programs, benchmarks to industry and peers and surveys the landscape of best practices to develop compensation and benefits packages that reward performance and retain top talent at all levels of the Company. Against this backdrop, Berkshire raised the minimum starting pay to $17/hour and enhanced its vacation, wellness and bereavement benefits.
Berkshire also maintains a small internal team of talent recruitment professionals. 16 Table of Contents COMPENSATION & BENEFITS The Company continually evaluates its compensation strategies and benefits programs, benchmarks to industry and peers and surveys the landscape of best practices to develop compensation and benefits packages that reward performance and retain top talent at all levels of the Company.
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.
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. 23 Table of Contents 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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisk 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. • 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. 28 Table of Contents Operating Risks • Effects of Conditions in the Financial Markets and Economic Conditions Generally, Including Macroeconomic Pressures Such as Inflation, Supply Chain Issues, and Geopolitical Risks Associated with International Conflict, and General Economic Conditions, Either Nationally or In Our Market Areas, That Are Worse Than Expected. • The Effects of any Public Health Emergencies and Pandemic Disease, Natural Disaster, War, Acts of Terrorism, Accident, or Similar Action or Event (collectively, "an event") 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 Sensitive 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 Soundness of Other Financial Institutions Could Adversely Affect Us. • Legal and Regulatory Proceedings and Related Matters Could Adversely Affect Us and the Banking Industry in General. • Loss of Key Employees Could Disrupt Relationships With Certain Customers. • Mergers, Acquisitions and Dispositions Involve Numerous Risks and Uncertainties.
Biggest changeOperating Risks • General Economic Conditions, Either Nationally or in Our Market Areas, Which May Be Affected by Macroeconomic Factors, Including Inflation, Unemployment, Government Policies, Supply Chain Issues, and Geopolitical Risks Associated with International Conflict, May Be Worse Than Expected. • The Effects of any Public Health Emergencies and Pandemic Disease, Natural Disaster, War, Acts of Terrorism, Accident, or Similar Action or Event (collectively, "an Event") 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 Sensitive 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. 26 Table of Contents • 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 Soundness of Other Financial Institutions Could Adversely Affect Us. • Legal and Regulatory Proceedings and Related Matters Could Adversely Affect Us and the Banking Industry in General. • Loss of Key Employees Could Disrupt Relationships With Certain Customers. • Mergers, Acquisitions and Dispositions Involve Numerous Risks and Uncertainties.
Generally, our financial performance, and in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of the collateral securing those loans, as well as demand for loans and other products and services we offer, is very dependent on the business environment in the markets we operate in and the United States as a whole.
Generally, our financial performance, and in particular the ability of borrowers to pay interest on and repay principal of outstanding loans and the value of the collateral securing those loans, as well as demand for loans and other products and services we offer, is very dependent on the business environment in the markets we operate in locally and the United States as a whole.
Because payments on loans secured by commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy or changes in government regulations or changes in the level of interest rates.
Because payments on loans secured by commercial real estate often depend upon the successful operation and management of the properties and the businesses which operate from within them, repayment of such loans may be affected by factors outside the borrower’s control, such as adverse conditions in the real estate market or the economy, changes in government regulations and fiscal policy, or changes in the level of interest rates.
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 preparation of marketing, sales and other materials that fully and accurately describe the product or service and its 33 Table of Contents underlying risks.
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 preparation of marketing, sales and other materials that fully and accurately describe the product or service and its underlying risks.
Such events and developments could materially and adversely affect our business or financial condition, including through declines in deposits, increased costs of funds, potential liquidity pressures, increased regulation, and declines and volatility in the price of our common stock. Legal and regulatory proceedings and related matters could adversely affect us and the banking industry in general.
Such events and developments could materially and adversely affect our business or financial condition, including through declines in deposits, increased costs of funds, potential liquidity pressures, increased regulation and enforcement activity, and declines and volatility in the price of our common stock. Legal and Regulatory Proceedings and Related Matters Could Adversely Affect Us and the Banking Industry in General.
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, issuance of Brokered CDs, proceeds from the sale of loans, and liquidity resources at the holding company.
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, issuance of brokered certificates of deposit, proceeds from the sale of loans, and liquidity resources at the holding company.
The Company’s Stock Repurchase Program is also Dependent on These Distributions. 36 Table of Contents A substantial source of holding company income is the receipt of dividends from the Bank, from which the Company services debt, pays obligations, and pays shareholder dividends. The availability of dividends from the Bank is limited by various statutes and regulations.
The Company’s Stock Repurchase Program is also Dependent on These Distributions. 37 Table of Contents A substantial source of holding company income is the receipt of dividends from the Bank, from which the Company services debt, pays obligations, and pays shareholder dividends. The availability of dividends from the Bank is limited by various statutes and regulations.
To the extent a 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. 31 Table of Contents The Company is Subject to Security and Operational Risks Relating to the Use of Technology that Could Damage the Company's Reputation and Business.
To the extent a 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.
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 sensitive 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.
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 sensitive information, destroy data, steal financial assets, disable or degrade service, or sabotage systems, 33 Table of Contents often through the introduction of computer viruses or malware, cyber-attacks and other means.
Further, the demand for deposits may be reduced due to a variety of factors such as negative trends in the banking sector, the level of 35 Table of Contents and/or composition of our uninsured deposits, demographic patterns, changes in customer preferences, reductions in consumers’ disposable income, the monetary policy of the Federal Reserve or regulatory actions that decrease customer access to particular products.
Further, the demand for deposits may be reduced due to a variety of factors such as negative trends in the banking sector, the level of and/or composition of our uninsured deposits, demographic patterns, changes in customer preferences, reductions in consumers’ disposable income, the monetary policy of the Federal Reserve or regulatory actions that decrease customer access to particular products.
While we believe our relationships with key personnel are strong, we cannot guarantee that all of our key personnel will remain with us, which could result in the loss of some customers, which may have a negative impact on our business, financial condition, and results of operations. 34 Table of Contents Mergers, acquisitions and dispositions involve numerous risks and uncertainties.
While we believe our relationships with key personnel are strong, we cannot guarantee that all of our key personnel will remain with us, which could result in the loss of some customers, which may have a negative impact on our business, financial condition, and results of operations. Mergers, Acquisitions and Dispositions Involve Numerous Risks and Uncertainties.
The occurrence of any of these conditions could have a material adverse effect on our financial condition and results of operations. The Effects of any Public Health Emergencies and Pandemic Disease, Natural Disaster, War, Acts of Terrorism, Accident, or Similar Action or Event (Collectively, "an Event") May Adversely Affect, the Company’s Business, Financial Condition, Liquidity, and Results of Operations.
The occurrence of any of these conditions could have a material adverse effect on our financial condition and results of operations. 32 Table of Contents The Effects of any Public Health Emergencies and Pandemic Disease, Natural Disaster, War, Acts of Terrorism, Accident, or Similar Action or Event (Collectively, "an Event") May Adversely Affect, the Company’s Business, Financial Condition, Liquidity, and Results of Operations.
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.
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. 39 Table of Contents In the past, stockholders have brought securities class action litigation against a company following periods of volatility in the market price of their securities.
Loss of key employees could disrupt relationships with certain customers. Our customer relationships are crucial to the success of our business, and the loss of key employees with significant customer relationships could lead to the loss of business if the customers were to follow that employee to a competitor.
Our customer relationships are crucial to the success of our business, and the loss of key employees with significant customer relationships could lead to the loss of business if the customers were to follow that employee to a competitor.
Bank failures and stresses may lead to negative depositor confidence in depository institutions. Systemic impacts may have a material adverse effect on our financial condition and results of operations and stock price. In 2023, several large banks failed due to deposit runs.
Bank Failures and Stresses May Lead to Negative Depositor Confidence in Depository Institutions. Systemic Impacts May have a Material Adverse Effect on our Financial Condition and Results of Operations and Stock Price. In 2023, several large regional banks failed due to deposit runs and liquidity issues.
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.
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 38 Table of Contents benefit stockholders, or otherwise adversely affect the price of its common stock.
A successful penetration or circumvention of system security could cause serious negative consequences to the Company, 32 Table of Contents including significant disruption of operations, misappropriation of sensitive 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 successful penetration or circumvention of system security could cause serious negative consequences to the Company, including significant disruption of operations, misappropriation of sensitive 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.
If any of these representations and warranties are invalid, the Company may be required to refund premiums, indemnify the 30 Table of Contents purchaser for any related costs or losses, or it may be required to repurchase part or all of the affected loans.
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.
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.
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 34 Table of Contents channels.
The Company has in the past and may in the future pursue mergers, acquisitions and disposition opportunities involving financial institutions and financial services companies. Mergers, acquisitions and dispositions involve a number of risks and challenges.
In addition to the proposed Mergers, the Company has in the past and may in the future pursue mergers, acquisitions and disposition opportunities involving financial institutions and financial services companies. Mergers, acquisitions and dispositions involve a number of risks and challenges.
Liquidity Risks • Liquidity is Essential to the Company’s Business and a Lack of Liquidity Could Adversely Affect the Company’s Financial Condition and Results of Operations. • Bank failures and stresses may lead to negative depositor confidence in depository institutions.
Interest Rate Risks • Market Interest Rate Conditions Could Adversely Affect Results of Operations and Financial Condition. Liquidity Risks • Liquidity is Essential to the Company’s Business and a Lack of Liquidity Could Adversely Affect the Company’s Financial Condition and Results of Operations. • Bank Failures and Stresses May Lead to Negative Depositor Confidence in Depository Institutions.
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.
This dependency is exacerbated in the current “FinTech” environment, where financial institutions are investing significantly in evaluating new technologies, such as artificial intelligence, blockchain applications, 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.
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.
Significant Accounting Estimates 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.
Deposit balances can decrease when customers perceive alternative investments as providing a better risk adjusted return, which are strongly influenced by such external factors as the direction of interest rates, local and national economic conditions and the availability and attractiveness of alternative investments.
The Company’s most important source of funds is its deposits. Deposit balances can decrease when customers perceive alternative investments as providing a better risk 36 Table of Contents adjusted return, which are strongly influenced by such external factors as the direction of interest rates, local and national economic conditions and the availability and attractiveness of alternative investments.
Adverse economic conditions may result from a variety of factors, including domestic and global economic and political developments, including plateauing or decreasing economic growth and business activity, recessions, interest rates, inflation, pressures on the commercial real estate market, uncertainty regarding the U.S. government's debt limit, a potential U.S. government shutdown, recent stress in the banking sector, international conflict, civil unrest.
Adverse economic conditions may result from a variety of factors, including domestic and global economic and political developments, such as plateauing or decreasing economic growth and business activity, high unemployment rates, recessions, fluctuations in interest rates, inflation, pressures on the commercial real estate market, uncertainty regarding the U.S. government's debt limit, U.S.
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 Value of Shareholder Investments May be Subject to Sudden Decreases Due to the Volatility of the Price of the Common Stock .
Any substantial, unexpected or prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations.
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. Any substantial, unexpected or prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations.
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. • Changes in Tax Laws and Accounting Policies and Practices. 29 Table of Contents Significant Accounting Estimates Risks • Various Factors May Cause Our Allowance for Credit Losses on Loans to Increase. • Fair Value Measurements May Be Affected by Inherent Uncertainties.
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. • Changes in Tax Laws and Accounting Policies and Practices.
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.
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.
Additionally, from time to time, the regulatory agencies and other authoritative bodies, such as the Financial Accounting Standards Board ("FASB"), change the financial accounting and reporting standards that govern the preparation of the Company's financial statements.
Additionally, from time to time, the regulatory agencies and other authoritative bodies, such as the Financial Accounting Standards Board ("FASB"), change the financial accounting and reporting standards that govern the preparation of the Company's financial statements. These changes can be hard to predict and can materially impact how management records and reports the Company's financial condition and results of operations.
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.
The Company's ability to raise capital, if needed, will depend on its condition and performance, and on market conditions.
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 or unrated debt securities present heightened credit and price risks.
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 Stock Repurchase Program is also Dependent on These Distributions. • Secondary Mortgage Market Conditions Could Have a Material Impact on the Company’s Financial Condition and Results of Operations. Interest Rate Risks • Market Interest Rate Conditions Could Adversely Affect Results of Operations and Financial Condition.
The Company’s Stock Repurchase Program is also Dependent on These Distributions. • Secondary Mortgage Market Conditions Could Have a Material Impact on the Company’s Financial Condition and Results of Operations. Securities Market Value Risks • Declines in the Value of Certain Investment Securities Could Require Write-Downs, Which Would Reduce Earnings.
Furthermore, adverse determinations in such matters could result in actions by our regulators that could materially adversely affect our business, financial condition or results of operations. There can be no assurance that other proceedings, which may have a material adverse effect on our business, results of operations or financial condition will not arise in the near or long-term future.
There can be no assurance that other proceedings, which may have a material adverse effect on our business, results of operations or financial condition will not arise in the near or long-term future. 35 Table of Contents Loss of Key Employees Could Disrupt Relationships With Certain Customers.
Under applicable 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.
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.
An inability to raise funds through deposits, borrowings, the sale and maturities of loans and securities and other sources could have a substantial negative effect on liquidity. The Company’s most important source of funds is its deposits.
The Company relies on its ability to generate deposits and effectively manage the repayment of its liabilities to ensure that there is adequate liquidity to fund operations. An inability to raise funds through deposits, borrowings, the sale and maturities of loans and securities and other sources could have a substantial negative effect on liquidity.
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.
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 Risks Liquidity is Essential to the Company’s Business and a Lack of Liquidity Could Adversely Affect the Company’s Financial Condition and Results of Operations. Liquidity is essential to the Company’s business.
Operating Risks Effects of conditions in the financial markets and economic conditions generally, including macroeconomic pressures such as inflation, supply chain issues, and geopolitical risks associated with international conflict, and general economic conditions, either nationally or in our market areas, that are worse than expected.
Operating Risks General Economic Conditions, Either Nationally or in Our Market Areas, Which May Be Affected by Macroeconomic Factors, Including Inflation, Unemployment, Government Policies, Supply Chain Issues, and Geopolitical Risks Associated with International Conflict, May Be Worse Than Expected.
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.
Many of these factors are beyond the control of Berkshire. As a consequence, Berkshire stockholders could lose the value of their investment in Berkshire common stock. Lending Risks 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.
A favorable business environment is generally characterized by, among other factors, economic growth, efficient capital markets, low inflation, low unemployment, high business and investor confidence, and strong business earnings.
Government fiscal and monitory policy, a potential U.S. government shutdown, recent stress in the banking sector, international conflict, civil unrest, and natural disasters. A favorable business environment is generally characterized by, among other factors, economic growth, efficient capital markets, low inflation, low unemployment, high business and investor confidence, and strong business earnings.
Residential property values may be similarly adversely impacted. Pandemic impacts on the supply of and demand for commercial and residential properties have caused unusual valuation changes in many markets, which may not be sustained if market conditions normalize. As of December 31, 2023, commercial real estate loans comprised approximately 49% of our loan portfolio.
Residential property values may be similarly adversely impacted. 31 Table of Contents As of December 31, 2024, commercial real estate loans comprised approximately 51% of our loan portfolio.
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. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 39 Table of Contents
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. Other Risks Negative Public Opinion Could Damage the Company’s Reputation and Impact Business Operations and Revenues. As a financial institution, the Company’s earnings and capital are subject to risk associated with negative public opinion.
These 38 Table of Contents changes can be hard to predict and can materially impact how management records and reports the Company's financial condition and results of operations. Significant Accounting Estimates Various Factors May Cause our Allowance for Credit Losses on Loans to Increase.
Significant Accounting Estimates Risks • 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.
Removed
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.
Added
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. 25 Table of Contents Risk Factors Summary Merger-Related Risks • Berkshire Will Be Subject to Business Uncertainties and Contractual Restrictions While the Mergers Are Pending. • The Announcement of the Proposed Mergers Could Disrupt Berkshire’s Relationships with its Customers, Suppliers, Business Partners and Others, As Well As Its Operating Results and Business Generally. • The Merger Agreement Limits Berkshire’s Ability to Pursue Alternatives to the Mergers and May Discourage Other Companies from Trying to Acquire Berkshire. • In Connection with the Mergers, Berkshire Will Assume Brookline’s Outstanding Debt Obligations, and the Combined Company’s Level Of Indebtedness Following the Completion of the Mergers Could Adversely Affect the Combined Company’s Ability to Raise Additional Capital and Meet Its Obligations Under Existing Indebtedness. • The Combined Company Will Incur Significant Transaction and Merger-Related Costs In Connection with the Mergers. • If the Mergers Are Not Completed, Berkshire Will Have Incurred Substantial Expenses Without Its Stockholders Realizing The Expected Benefits of the Mergers. • Berkshire and Brookline May Not Be Able to Successfully Integrate the Two Companies or to Realize the Anticipated Benefits of the Mergers. • The Merger Agreement May Be Terminated In Accordance With Its Terms, and the Mergers May Not Be Completed. • The Need for Regulatory Approvals May Delay the Date of Completion of the Mergers or May Diminish the Benefits of the Mergers. • Litigation Against Berkshire or Brookline, or the Members of Berkshire’s or Brookline’s Board of Directors, Could Prevent or Delay the Completion of the Mergers. • The Future Results of the Combined Company Following the Mergers May Suffer if the Combined Company Does Not Effectively Manage Its Expanded Operations. • The Market Price of Berkshire’s Common Stock After the Mergers May Be Affected By Factors Different from Those Currently Affecting Berkshire’s Common Stock. • Current Holders of Berkshire’s Common Stock Will Have a Significantly Reduced Ownership and Voting Interest in the Combined Company After the Mergers and Will Therefore Have Less Voting Influence Over the Combined Company. • The Market Price of Berkshire Common Stock May Decline in the Future as a Result of the Mergers.
Removed
The COVID-19 global pandemic affected all aspects of the Company’s business since 2020. The impact of the pandemic is discussed in the "Operating" risk factors below, but it should be understood as affecting the overall risk environment and risk factors of the Company.
Added
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. • 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.
Removed
Securities Market Value Risks • Declines in the Value of Certain Investment Securities Could Require Write-Downs, Which Would Reduce Earnings.
Added
Other Risks • Negative Public Opinion Could Damage the Company’s Reputation and Impact Business Operations and Revenues. 27 Table of Contents Merger-Related Risks Berkshire Will Be Subject to Business Uncertainties and Contractual Restrictions While the Mergers Are Pending.
Removed
In recent years, commercial real estate markets have been particularly impacted by the economic disruption resulting from the COVID-19 pandemic. The COVID-19 pandemic has also been a catalyst for the evolution of various remote work options which could impact the long-term performance of some types of office properties within our commercial real estate portfolio.
Added
On December 16, 2024, Berkshire, Commerce Acquisition Sub, Inc., a direct, wholly-owned subsidiary of Berkshire (“Merger Sub”) and Brookline entered into a merger agreement (the “Merger Agreement”) pursuant to which Berkshire and Brookline have agreed to combine their respective businesses in a merger of equals.
Removed
Accordingly, the federal banking regulatory agencies have issued advisories on managing commercial real estate concentrations in a challenging economic environment.
Added
Under the Merger Agreement, Merger Sub will merge with and into Brookline, with Brookline as the surviving corporation (the “Merger”), immediately followed by the merger of Brookline with and into Berkshire, with Berkshire as the surviving corporation (the “Holdco Merger”).
Removed
Unfavorable or uncertain economic and market conditions can be caused by declines in economic growth, business activity or investor or business confidence; high unemployment, natural disasters; increases in inflation or interest rates; limitations on the availability or increases in the cost of credit and capital; or a combination of these or other factors.
Added
Immediately following the Merger and the Holdco Merger (collectively, the “Mergers”), Berkshire Bank, the wholly-owned subsidiary of Berkshire, as well as Brookline’s two other banking subsidiaries, PCSB Bank and Bank Rhode Island, will merge with and into Brookline Bank, the wholly-owned subsidiary of Brookline, with Brookline Bank as the surviving corporation (collectively, the “Bank Merger”).
Removed
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.
Added
Uncertainty about the effect of the Mergers on employees and customers may have an adverse effect on Berkshire. These uncertainties may impair Berkshire’s ability to attract, retain and motivate key personnel until the Mergers are completed, and could cause customers and others who deal with Berkshire to seek to change existing business relationships with Berkshire.
Removed
In addition, in a rate environment where the Federal Reserve held the federal reference rate near 0.00%, accelerated loan repayments may 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.
Added
In addition, the Merger Agreement requires that Berkshire conduct its business in the ordinary course of business consistent with past practice and restricts Berkshire from taking certain actions prior to the effective time or termination of the Merger Agreement without Brookline’s consent in writing.
Removed
Liquidity Risks Liquidity is essential to the Company’s business and a lack of liquidity could adversely affect the Company’s financial condition and results of operations. Liquidity is essential to the Company’s business. The Company relies on its ability to generate deposits and effectively manage the repayment of its liabilities to ensure that there is adequate liquidity to fund operations.
Added
These restrictions may prevent Berkshire from pursuing attractive business opportunities that may arise prior to the completion of the Mergers. The Announcement of the Proposed Mergers Could Disrupt Berkshire’s Relationships with its Customers, Suppliers, Business Partners and Others, As Well As its Operating Results and Business Generally.
Removed
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.
Added
Whether or not the Mergers are ultimately consummated, as a result of uncertainty related to the Mergers, risks relating to the impact of the announcement of the Mergers on Berkshire’s business include the following: • employees may experience uncertainty about their future roles, which might adversely affect Berkshire’s ability to retain and hire key personnel and other employees; • customers, suppliers, business partners and other parties with which Berkshire maintains business relationships may experience uncertainty about their respective futures and seek alternative relationships with third parties, seek to alter their business relationships with Berkshire or fail to extend an existing relationship with Berkshire; and • Berkshire has expended and will continue to expend significant costs, fees and expenses for professional services and transaction costs in connection with the proposed Mergers.
Removed
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.
Added
If any of the aforementioned risks were to materialize, they could lead to significant costs which may impact Berkshire’s results of operations and financial condition. The Merger Agreement Limits Berkshire’s Ability to Pursue Alternatives to the Mergers and May Discourage Other Companies from Trying to Acquire Berkshire.
Removed
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.
Added
The Merger Agreement contains “no shop” covenants that restrict Berkshire’s ability to, directly or indirectly, among other things initiate, solicit, knowingly encourage or knowingly facilitate, inquiries or proposals with respect to, or, subject to certain exceptions generally related to the exercise of fiduciary duties by Berkshire’s board of directors, engage in any negotiations concerning, or provide any confidential or non-public information or data relating to, any alternative acquisition proposals.
Removed
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.
Added
These provisions, which include a $45.0 million termination fee payable under certain circumstances, may discourage a potential third-party acquirer that might have an interest in acquiring all or a significant part of Berkshire from considering or making that acquisition proposal. 28 Table of Contents In Connection with the Mergers, Berkshire Will Assume Brookline’s Outstanding Debt Obligations, and the Combined Company’s Level Of Indebtedness Following the Completion of the Mergers Could Adversely Affect the Combined Company’s Ability to Raise Additional Capital and Meet its Obligations Under Existing Indebtedness.
Removed
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 and 2023, 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.
Added
In connection with the Mergers, Berkshire has agreed to assume, or to cause its subsidiary to assume, Brookline’s outstanding indebtedness. Berkshire’s existing debt, together with any future incurrence of additional indebtedness, and the assumption of Brookline’s outstanding indebtedness, could have important consequences for the combined company’s creditors and the combined company’s stockholders.
Removed
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.
Added
For example, it could: • limit the combined company’s ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general corporate or other purposes; • restrict the combined company from making strategic acquisitions or cause the combined company to make non-strategic divestitures; • restrict the combined company from paying dividends to its stockholders; • increase the combined company’s vulnerability to general economic and industry conditions; and • require a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on the combined company’s indebtedness, thereby reducing the combined company’s ability to use cash flows to fund its operations, capital expenditures and future business opportunities.
Removed
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.
Added
The Combined Company Will Incur Significant Transaction and Merger-Related Costs In Connection with the Mergers. Berkshire and Brookline will incur costs to combine the operations of the two companies. Berkshire and Brookline are collecting information to formulate detailed integration plans to deliver planned synergies. Additional unanticipated costs may be incurred in the integration of the businesses of Berkshire and Brookline.
Removed
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.
Added
Whether or not the Mergers are consummated, Berkshire will incur substantial expenses, such as legal, accounting, printing and financial advisory fees, in pursuing the Mergers.
Removed
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.
Added
Although Berkshire expects that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transactions and merger-related costs over time, this net benefit may not be achieved in the near term, or at all.
Removed
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. 37 Table of Contents Securities Market Values Declines in the Value of Certain Investment Securities Could Require Write-Downs, Which Would Reduce Earnings.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

2 edited+2 added−0 removed14 unchanged
Biggest changeThe Information Security Program is overseen by the Company’s Chief Information Security Officer (CISO), who reports directly to the Chief Risk Officer. The CISO is responsible for the implementation, maintenance, and enforcement of the Information Security Program and related policies and standards.
Biggest changeThe Information Security Program is overseen by the Company’s Information Security Officer ("ISO"), who reports directly to the Chief Risk Officer. The ISO has held this position with the Company since May, 2024, and has worked at the Company in cybersecurity for almost 12 years and in the information technology industry for more than 16 years.
This includes incident response training on how to communicate potential or actual incidents. 40 Table of Contents The Company continues to face risks from cybersecurity threats that could have a material adverse effect on its business, financial condition, results of operations, or reputation.
This includes incident response training on how to communicate potential or actual incidents. 41 Table of Contents 42 Table of Contents The Company continues to face risks from cybersecurity threats that could have a material adverse effect on its business, financial condition, results of operations, or reputation.
Added
The Chief Risk Officer has held the position at the Company since October 2016, when he joined the Company 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.
Added
During his tenure with the FDIC, the CRO served from time to time as the Examiner-in-Charge for Berkshire Bank and numerous other banks throughout New England. The ISO is responsible for the implementation, maintenance, and enforcement of the Information Security Program and related policies and standards.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed3 unchanged
Biggest changeAs of December 31, 2023 the Company had 96 full-service financial centers in Massachusetts, New York, Connecticut, Rhode Island, 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.; Glastonbury, CT.; Willimantic, CT. Worcester, MA.; Burlington, MA, and Providence RI.
Biggest changeAs of December 31, 2024 the Company had 83 full-service financial centers in Massachusetts, New York, Connecticut, Rhode Island, 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.; Glastonbury, CT.; Willimantic, CT. Worcester, MA.; Burlington, MA, and Providence RI.
Due to the pandemic, the Company adapted its infrastructure and protocols to accommodate the shift of back office operations out of the office and continues to support this expanded capability and flexibility in pursuit of its strategies and human capital management. 41 Table of Contents
Due to the pandemic, the Company adapted its infrastructure and protocols to accommodate the shift of back office operations out of the office and continues to support this expanded capability and flexibility in pursuit of its strategies and human capital management. 43 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

5 edited+3 added−0 removed10 unchanged
Biggest changeOn 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 or third quarter of 2024. Discovery is continuing between the parties. ITEM 4.
Biggest changeOn June 30, 2021, the court dismissed the plaintiff’s complaint without prejudice in support of FCLS’s petition to compel arbitration. The parties are preparing for arbitration proceedings that are expected to occur no earlier than the second quarter of 2025. Discovery is continuing between the parties in preparation for final arbitration.
On January 30, 2023, as part of its response to the Bank’s amended complaint, Pioneer filed a counterclaim against the Bank alleging (i) certain breaches by the Bank of the 2019 loan participation agreement stemming from actions that the Bank took to protect its interests after it learned of the facts and circumstances that caused the underlying credit loss, and (ii) that as a result of accepting the partial recovery of approximately $1.7 million in Q2 2020 the Bank should be deemed to have ratified the 2019 loan participation agreement and mooted its claims against Pioneer.
On January 30, 2023, as part of its response to the Bank’s amended complaint, Pioneer filed a counterclaim against the Bank alleging (i) certain breaches by the Bank of the 2019 loan participation agreement stemming from actions that the Bank took to protect its interests after it learned of the facts and circumstances that caused the underlying credit loss, and (ii) that as a result of accepting the partial recovery of approximately $1.7 million in the second quarter of 2020 the Bank should be deemed to have ratified the 2019 loan participation agreement and mooted its claims against Pioneer.
ITEM 3. LEGAL PROCEEDINGS As of December 31, 2023, 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.
ITEM 3. LEGAL PROCEEDINGS As of December 31, 2024, 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.
MINE SAFETY DISCLOSURES Not Applicable. 42 Table of Contents PART II
MINE SAFETY DISCLOSURES Not Applicable. 44 Table of Contents PART II
Further discovery is continuing between the parties. On or about August 10, 2020, a former employee of the Bank’s subsidiary First Choice Loan Services Inc.
Further discovery is continuing between the parties, and the Bank continues to actively build its case in this matter On or about August 10, 2020, a former employee of the Bank’s subsidiary First Choice Loan Services Inc.
Added
On or about May 13, 2024, a complaint was filed against the B ank in the United States District Court for the Northern District of New York, Syracuse Division by an individual who claims to have filed the complaint on behalf of a purported class of victims of an alleged Ponzi scheme perpetrated by a former Berkshire Bank customer.
Added
On October 31, 2024, the court dismissed the plaintiff’s complaint with prejudice for failure to state a claim upon which relief could be granted under Federal Rules of Civil Procedure 12(b)(6) and 9(b).
Added
In connection with bankruptcy proceedings involving the former customer and his operating entities, the Bank has received a Rule 2004 subpoena from the bankruptcy trustee seeking information related to the Ponzi scheme. At this time, no claim has been asserted against the Bank in the bankruptcy proceedings, nor has the trustee threatened to pursue litigation. ITEM 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+2 added−2 removed4 unchanged
Biggest changePeriod 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, 2023 151,027 $ 19.16 151,027 1,055,914 November 1-30, 2023 124,090 20.38 124,090 931,824 December 1-31, 2023 52,831 22.43 52,831 — Total 327,948 $ 20.15 327,948 — 43 Table of Contents 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 NASDAQ Regional Banking Index.
Biggest changePeriod 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, 2024 — $ — — 839,589 November 1-30, 2024 — — — 839,589 December 1-31, 2024 — — — — Total — $ — — — 45 Table of Contents 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 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, 2018.
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, 2019.
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 Company had approximately 3,661 holders of record of common stock at February 23, 2024.
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 Company had approximately 3,504 holders of record of common stock at February 24, 2025.
Purchases of Equity Securities by the Issuer and Affiliated Purchases 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, 2023. This program expired at year-end 2023.
Purchases of Equity Securities by the Issuer and Affiliated Purchases On January 25, 2024, 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 $40 million through December 31, 2024.
During 2023 and 2022, there were no shares transferred.
During 2024 and 2023, there were no shares transferred.
Removed
On January 25, 2024, 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 $40 million through December 31, 2024.
Added
Period Ending Index 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 Berkshire Hills Bancorp, Inc. 100.00 54.79 92.70 99.34 85.10 100.31 NYSE Composite Index 100.00 106.99 129.11 117.04 133.16 154.19 KBW NASDAQ Regional Banking Index 100.00 91.29 124.74 116.10 115.64 130.90 Source: S&P Global Market Intelligence Shown below is the annual total shareholder return by year based on the above data.
Removed
Period Ending Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Berkshire Hills Bancorp, Inc. 100.00 125.69 68.86 116.51 124.86 106.96 NYSE Composite Index 100.00 125.51 134.28 162.04 146.89 167.12 KBW NASDAQ Regional Banking Index 100.00 123.81 113.03 154.45 143.75 143.17 Source: S&P Global Market Intelligence ITEM 6. RESERVED 44 Table of Contents
Added
Annual Total Shareholder Return Year Ending Index 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 Berkshire Hills Bancorp, Inc. (45.21) 69.20 7.17 (14.33) 17.87 NYSE Composite Index 6.99 20.68 (9.35) 13.77 15.79 KBW NASDAQ Regional Banking Index (8.71) 36.64 (6.93) (0.40) 13.20 46 Table of Contents ITEM 6. RESERVED 47 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

47 edited+89 added−102 removed37 unchanged
Biggest changeThe 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, 2023 December 31, 2022 December 31, 2021 GAAP Net income $ 69,598 $ 92,533 $ 118,664 Non-GAAP measures Adj: Fair value adjustments on securities (1) — 2,037 787 Adj: Loss/(gain) on sale of AFS securities 25,057 (6) — Adj: Net gains on sale of business operations — — (52,942) Adj: Acquisition, restructuring, conversion, and other related expenses (2) 6,261 8,909 5,781 Adj: Income taxes (7,723) (2,940) 11,696 Net non-operating charges 23,595 8,000 (34,678) Operating net income (non-GAAP) $ 93,193 $ 100,533 $ 83,986 GAAP Total revenue from continuing operations $ 411,829 $ 413,534 $ 434,414 Adj: Fair value adjustments on securities — 2,037 787 Adj: Loss/(gain) on sale of AFS securities 25,057 (6) — Adj: Net gains on sale of business operations — — (52,942) Operating revenue (non-GAAP) $ 436,886 $ 413,528 $ 382,259 GAAP Total non-interest expense from continuing operations $ 301,508 $ 288,716 $ 285,893 Less: Total non-operating expense (see above) (6,261) (8,909) (5,781) Operating non-interest expense (non-GAAP) $ 295,247 $ 279,807 $ 280,112 Pre-tax, pre-provision net revenue (PPNR) $ 110,321 $ 124,818 $ 148,521 Operating pre-tax, pre-provision net revenue (PPNR) 141,639 135,758 102,147 (in millions, except per share data) Total average assets $ 11,838 $ 11,216 $ 12,081 Total average shareholders' equity, including unrealized losses on AFS securities 984 1,063 1,191 Total average shareholders' equity, excluding unrealized losses on AFS securities 1,226 1,193 1,166 Total average tangible shareholders' equity, including unrealized losses on AFS securities 962 1,036 1,159 Total average tangible shareholders' equity, excluding unrealized losses on AFS securities 1,204 1,166 1,134 Total tangible shareholders’ equity, period-end 993 930 1,153 Total tangible assets, period-end 12,411 11,638 11,525 Total common shares outstanding, period-end (thousands) 43,501 44,361 48,667 Average diluted shares outstanding (thousands) 43,504 45,914 49,554 Earnings per share, diluted $ 1.60 $ 2.02 $ 2.39 Plus: Net adjustments per share, diluted 0.54 0.17 (0.70) Operating earnings per share, diluted 2.14 2.19 1.69 Book value per common share, period-end 23.27 21.51 24.30 Tangible book value per common share, period-end 22.82 20.95 23.69 Total shareholders' equity/total assets 8.14 8.18 10.23 Total tangible shareholders' equity/total tangible assets 8.00 7.99 10.00 52 Table of Contents At or For the Years Ended (Dollars in thousands) December 31, 2023 December 31, 2022 December 31, 2021 Performance Ratios Return on equity, including unrealized losses on AFS securities 7.07 % 8.70 % 9.96 % Return on equity, excluding unrealized losses on AFS securities 5.68 7.76 10.18 Operating return on equity, including unrealized losses on AFS securities 9.47 9.46 7.05 Operating return on equity, excluding unrealized losses on AFS securities 7.60 8.43 7.20 Return on tangible common equity, including unrealized losses on AFS securities (3) 7.60 9.29 10.57 Return on tangible common equity, excluding unrealized losses on AFS securities (3) 6.07 8.26 10.80 Operating return on tangible common equity, including unrealized losses on AFS securities (3) 10.05 10.07 7.58 Operating return on tangible common equity, excluding unrealized losses on AFS securities (3) 8.03 8.94 7.74 Return on assets 0.59 0.82 0.98 Operating return on assets 0.79 0.90 0.70 Efficiency ratio (4) 63.88 64.31 69.96 Supplementary Data (in thousands) Tax benefit on tax-credit investments $ 9,863 $ 4,880 $ 4,372 Non-interest income charge on tax-credit investments (8,018) (3,508) (3,445) Net income on tax-credit investments 1,845 1,372 928 Intangible amortization 4,820 5,134 5,200 Fully taxable equivalent income adjustment 7,870 6,644 6,344 ____________________________________ (1) Starting in 2023, fair value adjustments on securities are included in operating income.
Biggest changeThe Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community. 53 Table of Contents 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, 2024 December 31, 2023 December 31, 2022 GAAP Net income $ 61,003 $ 69,598 $ 92,533 Non-GAAP measures Adj: Fair value adjustments on securities (1) — — 2,037 Adj: Loss/(gain) on sale of securities 49,937 25,057 (6) Adj: Net gains on sale of business operations (16,241) — — Adj: Merger, restructuring, conversion, and other related expenses (2) 9,493 6,261 8,909 Adj: Income taxes (9,319) (7,723) (2,940) Net non-operating charges 33,870 23,595 8,000 Operating net income (non-GAAP) $ 94,873 $ 93,193 $ 100,533 GAAP Total revenue from continuing operations $ 400,000 $ 411,829 $ 413,534 Adj: Fair value adjustments on securities — — 2,037 Adj: Loss/(gain) on sale of AFS securities 49,937 25,057 (6) Adj: Net gains on sale of business operations (16,241) — — Operating revenue (non-GAAP) $ 433,696 $ 436,886 $ 415,565 GAAP Total non-interest expense from continuing operations $ 296,486 $ 301,508 $ 288,716 Less: Total non-operating expense (see above) (9,493) (6,261) (8,909) Operating non-interest expense (non-GAAP) $ 286,993 $ 295,247 $ 279,807 Pre-tax, pre-provision net revenue (PPNR) $ 103,514 $ 110,321 $ 124,818 Operating pre-tax, pre-provision net revenue (PPNR) 146,703 141,639 135,758 (in millions, except per share data) Total average assets $ 11,683 $ 11,838 $ 11,216 Total average shareholders' equity 1,044 984 1,063 Total average tangible shareholders' equity 1,027 962 1,036 Total tangible shareholders’ equity, period-end 1,152 993 930 Total tangible assets, period-end 12,258 12,411 11,638 Total common shares outstanding, period-end (thousands) 46,424 43,501 44,361 Average diluted shares outstanding (thousands) 42,761 43,504 45,914 Earnings per share, diluted $ 1.43 $ 1.60 $ 2.02 Plus: Net adjustments per share, diluted 0.79 0.54 0.17 Operating earnings per share, diluted 2.22 2.14 2.19 Book value per common share, period-end 25.15 23.27 21.51 Tangible book value per common share, period-end 24.82 22.82 20.95 Total shareholders' equity/total assets 9.51 8.14 8.18 Total tangible shareholders' equity/total tangible assets 9.40 8.00 7.99 54 Table of Contents At or For the Years Ended (Dollars in thousands) December 31, 2024 December 31, 2023 December 31, 2022 Performance Ratios (5) Return on equity 5.84 % 7.07 % 8.70 % Operating return on equity 9.09 9.47 9.46 Return on tangible common equity (3) 6.27 7.60 9.29 Operating return on tangible common equity (3) 9.56 10.05 10.07 Return on assets 0.52 0.59 0.82 Operating return on assets 0.81 0.79 0.90 Efficiency ratio (4) 63.94 63.88 64.31 Supplementary Data (in thousands) Tax benefit on tax-credit investments N/M $ 9,863 $ 4,880 Non-interest income charge on tax-credit investments N/M (8,018) (3,508) Net income on tax-credit investments N/M 1,845 1,372 Intangible amortization 4,601 4,820 5,134 Fully taxable equivalent income adjustment 7,985 7,870 6,644 ____________________________________ (1) Starting in 2023, fair value adjustments on securities are included in operating income.
Tax exempt interest revenue is shown on a tax-equivalent basis for proper comparison.
Tax exempt interest revenue is shown on a tax-equivalent basis for proper comparison.
(4) 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.
(4) 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 operating 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.
(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) The average balances of borrowings and notes include the finance lease obligation presented under other liabilities on the consolidated balance sheet.
(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) The average balances of borrowings and notes include the finance lease obligation presented under other liabilities on the consolidated balance sheets.
As a result of rising interest rates, available for sale bond portfolios in banks are subject to unrealized losses which result in charges against other comprehensive income (“AOCI”) and reduce the book value of shareholders’ equity.
As a result of rising interest rates, available for sale bond portfolios in banks are generally subject to unrealized losses which result in charges against accumulated other comprehensive income (“AOCI”) and reduce the book value of shareholders’ equity.
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 2024 or any future period.
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 2025 or any future period.
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: 0.01%, 0.02%, and 0.09%. 49 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.
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: 0.01%, 0.01%, and 0.02%. 51 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.
Risk management is overseen by the Company’s Chief Risk Officer, who reports directly to the CEO. This position oversees risk management policy, credit, loan review, 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.
Risk management is overseen by the Company’s Chief Risk Officer, who reports directly to the CEO. This position oversees risk management, credit, loan review, compliance, data governance, 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.
Berkshire’s integrated approach to managing the environmental, social and governance externalities helps reduce 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.
Berkshire’s integrated approach to strong governance and managing environmental and social externalities helps reduce risk and unlock new business opportunities to create an ecosystem of positive impact and value, which in turn supports Berkshire’s commercial performance, creating capacity to invest more in its business, employees, customers, shareholders and communities.
Both of these most critical accounting policies were significant in determining income and financial condition based on events in 2023. 60 Table of Contents Allowance for Credit Losses on Loans The allowance for credit losses on loans (“ACLL”) represents management’s estimate of expected credit losses over the expected contractual life of our loan portfolio.
Both of these most critical accounting policies were significant in determining income and financial condition based on events in 2024. 63 Table of Contents Allowance for Credit Losses on Loans The allowance for credit losses on loans (“ACLL”) represents management’s estimate of expected credit losses over the expected contractual life of our loan portfolio.
For detailed information on our use of fair value measurements and our related valuation methodologies, see Note 1 – Summary of Significant Accounting Policies and Note 21 – Fair Value Measurements for more information. ENTERPRISE RISK MANAGEMENT Other sections of this report on Form 10-K include discussion of market risk and risk factors.
For detailed information on our use of fair value measurements and our related valuation methodologies, see Note 1 – Summary of Significant Accounting Policies and Note 19 – Fair Value Measurements for more information. 64 Table of Contents ENTERPRISE RISK MANAGEMENT Other sections of this report on Form 10-K include discussion of market risk and risk factors.
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 competitive positioning.
As the transition to a low-carbon economy continues, 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 long-term positioning.
(2) Acquisition, restructuring, conversion, and other related expenses included no merger and acquisition expenses for the years ended December 31, 2023, 2022 and 2021. (3) Amortization of intangible assets is adjusted assuming a 27% marginal tax rate.
(2) Merger, restructuring, conversion, and other related expenses included $6.6 million of merger expenses for the year ended December 31, 2024. Merger, restructuring, conversion, and other related expenses included no merger and acquisition expenses for the years ended December 31, 2023 and 2022. (3) Amortization of intangible assets is adjusted assuming a 27% marginal tax rate.
For detailed information on the ACLL see Note 1- Summary of Significant Accounting Policies and Note 6 – Loans and Allowance for Credit Losses.
For detailed information on the ACLL see Note 1- Summary of Significant Accounting Policies and Note 5 – Loans and Related Allowance for Credit Losses.
For all material business risks, residual risk was viewed as medium/low to medium due to mitigating controls functioning in the Company. In 2023, price risk remained elevated in relation to 61 Table of Contents the corporate appetite due to the impact of higher interest rates on the behavior and value of various interest sensitive instruments and operations.
For all material business risks, residual risk was viewed as medium/low to medium due to mitigating controls functioning in the Company. In 2024, price risk remained elevated in relation to the corporate appetite due to the impact of higher interest rates on the behavior and value of various interest sensitive instruments.
This discussion includes the following sections: • Comparison of Operating Results for the Years Ended December 31, 2023 and 2022 • Comparison of Financial Condition at December 31, 2023 and 2022 • Liquidity and Cash Flows • Capital Resources • Application of Critical Accounting Policies • Enterprise Risk Management 53 Table of Contents • LIBOR Transition • Corporate Responsibility and Sustainability 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.
This discussion includes the following sections: • Summary • Comparison of Operating Results for the Years Ended December 31, 2024 and 2023 • Comparison of Financial Condition at December 31, 2024 and 2023 • Liquidity and Cash Flows • Capital Resources • Application of Critical Accounting Policies • Enterprise Risk Management • Corporate Responsibility and Sustainability 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 2023, adjustments were primarily related to branch consolidations, severance charges related to a workforce reduction, and loss on sale of AFS securities. Starting in 2023, fair value adjustments on securities are included in operating income.
In 2024, adjustments were primarily related to the pending merger, branch sales and consolidations, and loss on sale of AFS securities. In 2023, adjustments were primarily related to branch consolidations, severance charges related to a workforce reduction, and loss on sale of AFS securities. Starting in 2023, fair value adjustments on securities are included in operating income.
The Company continues to evolve its practices to align with its mission, current and expected regulations as well as the size, scope, and complexity of its operations.
The Company expects to evolve its practices to align with risks, current and expected regulations as well as the size, scope, and complexity of its operations.
At or For the Years Ended December 31, (In thousands, except per share data) 2023 2022 2021 2020 2019 Per Common Share Data: Net earnings/(loss), diluted - continuing operations $ 1.60 $ 2.02 $ 2.39 $ (10.21) $ 2.05 Net (loss), diluted - discontinued operations — — — (0.39) (0.08) Net earnings/(loss), diluted $ 1.60 $ 2.02 $ 2.39 $ (10.60) $ 1.97 Total book value per common share 23.27 21.51 24.30 23.37 34.65 Dividends 0.72 0.54 0.48 0.72 0.92 Common stock price: High 31.52 31.78 29.16 33.04 33.72 Low 18.07 23.62 16.35 8.55 26.02 Close 24.83 29.90 28.43 17.12 32.88 Performance Ratios: (1) Return on assets 0.59 % 0.82 % 0.98 % (4.15) % 0.75 % Return on equity, including unrealized losses on AFS securities 7.07 8.70 9.96 37.15 5.73 Return on equity, excluding unrealized losses on AFS securities 5.68 7.76 10.18 (37.50) 5.75 Return on tangible common equity, including unrealized losses on AFS securities (2) 7.60 9.29 10.57 (46.88) 9.31 Return on tangible common equity, excluding unrealized losses on AFS securities (2) 6.07 8.26 10.80 (48.60) 9.36 Net interest margin, fully taxable equivalent ("FTE") (3) 3.27 3.26 2.60 2.72 3.17 Growth Ratios: Total commercial loans 5.66 % 12.99 % (12.09) % (4.58) % 9.19 % Total loans 8.45 22.11 (15.54) 14.95 5.08 Total deposits 2.96 2.57 (1.44) (1.16) 15.07 Earnings per share, (compared to prior year) (20.79) (15.48) 122.55 (638.07) (13.97) Selected Financial Data: Total assets $ 12,430,821 $ 11,662,864 $ 11,554,913 $ 12,838,013 $ 13,215,970 Total earning assets 11,704,515 10,913,069 10,899,109 12,089,939 11,916,007 Securities 1,607,496 2,033,436 2,548,590 2,223,417 1,769,878 Total loans 9,039,686 8,335,309 6,825,847 8,081,519 9,502,428 Allowance for credit losses (105,357) (96,270) (106,094) (127,302) (63,575) Total intangible assets 19,664 24,483 26,619 34,819 599,377 Total deposits 10,633,384 10,327,269 10,068,953 10,215,808 10,335,977 Total borrowings 506,586 125,509 110,844 571,637 827,550 Total shareholders’ equity 1,012,221 954,062 1,182,435 1,187,773 1,758,564 45 Table of Contents At or For the Years Ended December 31, 2023 2022 2021 2020 2019 Selected Operating Data: Total interest and dividend income $ 576,299 $ 387,257 $ 329,065 $ 409,782 $ 509,513 Total interest expense 207,252 42,660 37,899 93,000 144,255 Net interest income 369,047 344,597 291,166 316,782 356,258 Fee income 65,281 63,995 84,462 69,990 76,824 All other non-interest income/(loss) (22,499) 4,942 58,786 (3,683) 7,178 Total net revenue 411,829 413,534 434,414 383,089 449,260 Provision for credit losses 31,999 11,000 (500) 75,878 35,419 Total non-interest expense 301,508 288,716 285,893 840,239 289,857 Income/(loss) from continuing operations before income taxes 78,322 113,818 149,021 (533,028) 123,984 Income tax expense/(benefit) from continuing operations 8,724 21,285 30,357 (19,853) 22,463 Net income/(loss) from continuing operations 69,598 92,533 118,664 (513,175) 101,521 (Loss)/income from discontinued operations before income taxes — — — (26,855) (5,539) Income tax (benefit)/expense from discontinued operations — — — (7,013) (1,468) Net (loss)/income from discontinued operations — — — (19,842) (4,071) Net income/(loss) $ 69,598 $ 92,533 $ 118,664 $ (533,017) $ 97,450 Basic earnings/(loss) per common share: Continuing operations $ 1.61 $ 2.03 $ 2.41 $ (10.21) $ 2.06 Discontinued operations — — — (0.39) (0.08) Total basic earnings/(loss) per share $ 1.61 $ 2.03 $ 2.41 $ (10.60) $ 1.98 Diluted earnings/(loss) per common share: Continuing operations $ 1.60 $ 2.02 $ 2.39 $ (10.21) $ 2.05 Discontinued operations — — — (0.39) (0.08) Total diluted earnings/(loss) per share $ 1.60 $ 2.02 $ 2.39 $ (10.60) $ 1.97 Weighted average common shares outstanding - basic 43,288 45,564 49,240 50,270 49,263 Weighted average common shares outstanding - diluted 43,504 45,914 49,554 50,270 49,421 Dividends per preferred share $ — $ — $ — $ 1.20 $ 1.84 Dividends per common share $ 0.72 $ 0.54 $ 0.48 $ 0.72 $ 0.92 Asset Quality and Condition Ratios: (4) Net loans charged-off/average loans 0.26 % 0.27 % 0.29 % 0.41 % 0.35 % Allowance for credit losses/total loans 1.17 1.15 1.55 1.58 0.67 Loans/deposits 85 81 68 79 92 Capital Ratios: Tier 1 capital to average assets - Company 9.65 % 10.18 % 10.49 % 9.38 % 9.33 % Total capital to risk-weighted assets - Company 14.36 14.60 17.32 16.10 13.73 Tier 1 capital to risk-weighted assets - Company 12.27 12.60 15.30 14.06 12.30 Shareholders’ equity/total assets 8.14 8.18 10.23 9.25 13.31 46 Table of Contents ___________________________________ (1) All performance ratios are annualized and are based on average balance sheet amounts, where applicable.
At or For the Years Ended December 31, (In thousands, except per share data) 2024 2023 2022 2021 2020 Per Common Share Data: Net earnings/(loss), diluted - continuing operations $ 1.43 $ 1.60 $ 2.02 $ 2.39 $ (10.21) Net (loss), diluted - discontinued operations — — — — (0.39) Net earnings/(loss), diluted $ 1.43 $ 1.60 $ 2.02 $ 2.39 $ (10.60) Total book value per common share 25.15 23.27 21.51 24.30 23.37 Dividends 0.72 0.72 0.54 0.48 0.72 Common stock price: High 32.36 31.52 31.78 29.16 33.04 Low 20.50 18.07 23.62 16.35 8.55 Close 28.43 24.83 29.90 28.43 17.12 Performance Ratios: (1) Return on assets 0.52 % 0.59 % 0.82 % 0.98 % (4.15) % Return on equity 5.84 7.07 8.70 9.96 37.15 Return on tangible common equity (2) 6.27 7.60 9.29 10.57 (46.88) Net interest margin, fully taxable equivalent ("FTE") (3) 3.16 3.27 3.26 2.60 2.72 Growth Ratios: Total commercial loans 7.32 % 5.66 % 12.99 % (12.09) % (4.58) % Total loans 3.82 8.45 22.11 (15.54) 14.95 Total deposits (2.43) 2.96 2.57 (1.44) (1.16) Earnings per share, (compared to prior year) (10.63) (20.79) (15.48) 122.55 (638.07) Selected Financial Data: Total assets $ 12,273,408 $ 12,430,821 $ 11,662,864 $ 11,554,913 $ 12,838,013 Total earning assets 11,522,562 11,704,515 10,913,069 10,899,109 12,089,939 Securities 1,188,859 2,033,436 2,033,436 2,548,590 2,223,417 Total loans 9,384,994 9,039,686 8,335,309 6,825,847 8,081,519 Allowance for credit losses (114,700) (105,357) (96,270) (106,094) (127,302) Total intangible assets 15,064 19,664 24,483 26,619 34,819 Total deposits 10,375,204 10,633,384 10,327,269 10,068,953 10,215,808 Total borrowings 438,094 125,509 125,509 110,844 571,637 Total shareholders’ equity 1,167,424 1,012,221 954,062 1,182,435 1,187,773 48 Table of Contents At or For the Years Ended December 31, 2024 2023 2022 2021 2020 Selected Operating Data: Total interest and dividend income $ 613,938 $ 576,299 $ 387,257 $ 329,065 $ 409,782 Total interest expense 262,352 207,252 42,660 37,899 93,000 Net interest income 351,586 369,047 344,597 291,166 316,782 Fee income 68,527 65,281 63,995 84,462 69,990 All other non-interest income/(loss) (20,113) (22,499) 4,942 58,786 (3,683) Total net revenue 400,000 411,829 413,534 434,414 383,089 Provision for credit losses 23,999 31,999 11,000 (500) 75,878 Total non-interest expense 296,486 301,508 288,716 285,893 840,239 Income/(loss) from continuing operations before income taxes 79,515 78,322 113,818 149,021 (533,028) Income tax expense/(benefit) from continuing operations 18,512 8,724 21,285 30,357 (19,853) Net income/(loss) from continuing operations 61,003 69,598 92,533 118,664 (513,175) (Loss)/income from discontinued operations before income taxes — — — — (26,855) Income tax (benefit)/expense from discontinued operations — — — — (7,013) Net (loss)/income from discontinued operations — — — — (19,842) Net income/(loss) $ 61,003 $ 69,598 $ 92,533 $ 118,664 $ (533,017) Basic earnings/(loss) per common share: Continuing operations $ 1.44 $ 1.61 $ 2.03 $ 2.41 $ (10.21) Discontinued operations — — — — (0.39) Total basic earnings/(loss) per share $ 1.44 $ 1.61 $ 2.03 $ 2.41 $ (10.60) Diluted earnings/(loss) per common share: Continuing operations $ 1.43 $ 1.60 $ 2.02 $ 2.39 $ (10.21) Discontinued operations — — — — (0.39) Total diluted earnings/(loss) per share $ 1.43 $ 1.60 $ 2.02 $ 2.39 $ (10.60) Weighted average common shares outstanding - basic 42,508 43,288 45,564 49,240 50,270 Weighted average common shares outstanding - diluted 42,761 43,504 45,914 49,554 50,270 Dividends per preferred share $ — $ — $ — $ 1.20 $ 1.84 Dividends per common share $ 0.72 $ 0.72 $ 0.54 $ 0.48 $ 0.72 Asset Quality and Condition Ratios: Net loans charged-off/average loans 0.16 % 0.26 % 0.27 % 0.29 % 0.41 % Allowance for credit losses/total loans 1.22 1.17 1.15 1.55 1.58 Loans/deposits 90 85 81 68 79 Capital Ratios: Tier 1 capital to average assets - Company 10.97 % 9.65 % 10.18 % 10.49 % 9.38 % Total capital to risk-weighted assets - Company 15.45 14.36 14.60 17.32 16.10 Tier 1 capital to risk-weighted assets - Company 13.22 12.27 12.60 15.30 14.06 Shareholders’ equity/total assets 9.51 8.14 8.18 10.23 9.25 ___________________________________ (1) All performance ratios are annualized and are based on average balance sheet amounts, where applicable.
The Company’s goal is to maintain sound capitalization and use capital generation to support organic growth and shareholder distributions in the form of dividends and stock repurchases. The Company’s goal is to maintain a “well-capitalized” regulatory designation under projected and stressed financial projections. In recent periods, the Company has returned excess capital to shareholders through stock repurchases.
The Company’s goal is to maintain sound capitalization and use capital generation to support organic growth and shareholder distributions in the form of dividends and stock repurchases. The Company’s goal is to maintain a “well-capitalized” regulatory designation under projected and stressed financial projections.
(5) Purchase accounting accretion totaled $0.7 million, $2.0 million, and $6.7 million for the years-ended December 31, 2023, 2022, and 2021, respectively.
(5) Purchase accounting accretion totaled $1.3 million, $0.7 million, and $2.0 million for the years-ended December 31, 2024, 2023, and 2022, respectively.
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. 59 Table of Contents Additional information about capital resources and regulatory capital is contained in the notes to the consolidated financial statements and in Item 1 of this report.
CAPITAL RESOURCES Please see the Note 17 - Shareholders’ Equity and Earnings per Common Share of the Comparison of Financial Condition for a discussion of shareholders’ equity together with the note on Shareholders' Equity in the consolidated financial statements. 62 Table of Contents Additional information about capital resources and regulatory capital is contained in the notes to the consolidated financial statements and in Item 1 of this report.
The Company calculates certain profitability measures based on its operating revenue, expenses, and earnings. The Company also calculates operating 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.
The Company also calculates operating 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.
Analysts also rely on these measures in estimating and evaluating the Company’s performance. Management also believes that the computation of non-GAAP operating earnings and operating earnings per share may facilitate the comparison of the Company to other companies in the financial services industry.
Management also believes that the computation of non-GAAP operating earnings and operating earnings per share may facilitate the comparison of the Company to other companies in the financial services industry.
Item 7 - Table 1 - Average Balance, Interest and Average Yields / Costs 2023 2022 2021 (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 $ 4,326.8 $ 272.5 6.30 % $ 3,836.2 $ 167.6 4.37 % $ 3,600.2 $ 124.4 3.46 % Commercial and industrial loans 1,455.9 107.9 7.41 1,435.3 74.7 5.20 1,527.6 71.8 4.70 Residential loans 2,512.3 98.1 3.91 1,784.2 63.3 3.55 1,560.4 58.4 3.75 Consumer loans 518.5 37.8 7.29 556.8 32.1 5.77 569.1 22.0 3.87 Total loans 8,813.5 516.3 5.86 7,612.5 337.7 4.44 7,257.3 276.6 3.81 Investment securities (2)(3) 2,186.6 50.8 2.32 2,489.7 51.2 2.06 2,283.6 49.4 2.16 Short-term investments and loans held for sale (4) 372.4 17.1 4.59 569.1 4.9 0.86 1,619.4 2.3 0.58 Mid-Atlantic region loans held for sale — — — — — — 179.5 7.1 3.97 Total interest-earning assets 11,372.5 584.2 5.14 10,671.3 393.8 3.69 11,339.8 335.4 2.60 Intangible assets 21.9 26.8 32.0 Other non-interest earning assets (4) 443.2 518.2 708.8 Total assets $ 11,837.6 $ 11,216.3 $ 12,080.6 Liabilities and shareholders' equity Deposits: Non-interest-bearing demand deposits $ 2,584.6 $ — — % $ 2,914.9 $ — — % $ 2,817.4 $ — — % NOW and other 1,048.9 14.9 1.42 % 1,416.7 6.1 0.43 % 1,340.2 1.0 0.07 % Money market 2,727.3 65.6 2.40 2,809.1 13.8 0.49 2,749.7 5.3 0.19 Savings 1,067.2 6.1 0.57 1,114.8 0.4 0.03 1,067.7 0.5 0.05 Certificates of deposit 2,275.8 72.4 3.18 1,541.7 13.1 0.85 1,978.9 18.6 0.94 Total deposits 9,703.8 159.0 1.64 9,797.2 33.4 0.34 9,953.9 25.4 0.26 Borrowings and notes (4) 913.6 48.3 5.29 176.1 9.2 5.24 320.2 10.7 3.34 Mid-Atlantic region interest-bearing deposits — — — — — — 335.1 1.8 0.54 Total funding liabilities 10,617.4 207.3 1.95 9,973.3 42.6 0.43 10,609.2 37.9 0.35 Other non-interest-bearing liabilities 236.3 180.1 280.9 Total liabilities 10,853.7 10,153.4 10,890.1 Total shareholders' equity 983.9 1,062.9 1,190.5 Total liabilities and equity $ 11,837.6 $ 11,216.3 $ 12,080.6 Net interest margin (5) 3.27 3.26 2.60 Supplementary data Net Interest Income, non FTE $ 369.0 $ 344.6 $ 291.2 FTE income adjustment (6) 7.9 6.6 6.3 Net Interest Income, FTE 376.9 351.2 297.5 48 Table of Contents _________________________________ Notes: (1) The average balances of loans include nonaccrual loans, and deferred fees and costs.
Item 7 - Table 1 - Average Balance, Interest and Average Yields / Costs 2024 2023 2022 (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 $ 4,673.2 $ 307.6 6.48 % $ 4,326.8 $ 272.5 6.30 % $ 3,836.2 $ 167.6 4.37 % Commercial and industrial loans 1,388.6 106.9 7.57 1,455.9 107.9 7.41 1,435.3 74.7 5.20 Residential loans 2,691.2 114.3 4.25 2,512.3 98.1 3.91 1,784.2 63.3 3.55 Consumer loans 423.0 30.3 7.13 518.5 37.8 7.29 556.8 32.1 5.77 Total loans 9,176.0 559.1 6.04 8,813.5 516.3 5.86 7,612.5 337.7 4.44 Investment securities (2)(3) 1,435.7 35.7 2.49 2,186.6 50.8 2.32 2,489.7 51.2 2.06 Short-term investments and loans held for sale (4) 528.7 25.7 4.86 372.4 17.1 4.59 569.1 4.9 0.86 New York branch loans held for sale 26.3 1.5 5.71 — — — — — — Total interest-earning assets 11,166.7 622.0 5.51 11,372.5 584.2 5.14 10,671.3 393.8 3.69 Intangible assets 17.1 21.9 26.8 Other non-interest earning assets (4) 499.3 443.2 518.2 Total assets $ 11,683.1 $ 11,837.6 $ 11,216.3 Liabilities and shareholders' equity Deposits: Non-interest-bearing demand deposits $ 2,283.7 $ — — % $ 2,584.6 $ — — % $ 2,914.9 $ — — % NOW and other 767.4 11.1 1.45 % 1,048.9 14.9 1.42 % 1,416.7 6.1 0.43 % Money market 2,993.1 96.8 3.23 2,727.3 65.6 2.40 2,809.1 13.8 0.49 Savings 1,011.8 10.9 1.07 1,067.2 6.1 0.57 1,114.8 0.4 0.03 Certificates of deposit 2,480.2 104.3 4.20 2,275.8 72.4 3.18 1,541.7 13.1 0.85 Total deposits 9,536.2 223.1 2.39 9,703.8 159.0 1.64 9,797.2 33.4 0.34 Borrowings and notes (4) 624.9 34.3 5.42 913.6 48.3 5.29 176.1 9.2 5.24 New York branch non-interest-bearing deposits held for sale 45.4 — — — — — — — — New York branch interest-bearing deposits held for sale 181.6 5.0 2.75 — — — — — — Total funding liabilities 10,388.1 262.4 2.52 10,617.4 207.3 1.95 9,973.3 42.6 0.43 Other non-interest-bearing liabilities 250.8 236.3 180.1 Total liabilities 10,638.9 10,853.7 10,153.4 Total shareholders' equity 1,044.2 983.9 1,062.9 Total liabilities and equity $ 11,683.1 $ 11,837.6 $ 11,216.3 Net interest margin (5) 3.16 3.27 3.26 Supplementary data Net Interest Income, non FTE $ 351.6 $ 369.0 $ 344.6 FTE income adjustment 8.0 7.9 6.6 Net Interest Income, FTE 359.6 376.9 351.2 50 Table of Contents _________________________________ Notes: (1) The average balances of loans include nonaccrual loans, and deferred fees and costs.
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 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. The Company calculates certain profitability measures based on its operating revenue, expenses, and earnings.
Item 7 - Table 2 - Rate Volume Analysis 2023 Compared with 2022 2022 Compared with 2021 (Decrease) Increase Due to (Decrease) Increase Due to (In thousands) Rate Volume Net Rate Volume Net Interest income: Commercial real estate $ 81,238 $ 23,568 $ 104,806 $ 34,681 $ 8,582 $ 43,263 Commercial and industrial loans 32,105 1,086 33,191 7,397 (4,501) 2,896 Residential loans 6,883 27,931 34,814 (3,179) 8,061 4,882 Consumer loans 8,004 (2,329) 5,675 10,572 (482) 10,090 Total loans 128,230 50,256 178,486 49,471 11,660 61,131 Investment securities 6,239 (6,628) (389) (2,468) 4,316 1,848 Short-term investments and loans held for sale (1) 14,416 (2,244) 12,172 4,968 (2,335) 2,633 Mid-Atlantic region loans held for sale — — — — (7,120) (7,120) Total interest income $ 148,885 $ 41,384 $ 190,269 $ 51,971 $ 6,521 $ 58,492 Interest expense: NOW accounts $ 6,380 $ 2,324 $ 8,704 $ 5,053 $ 62 $ 5,115 Money market accounts 59,450 (7,713) 51,737 8,402 116 8,518 Savings accounts 5,299 453 5,752 (204) 23 (181) Certificates of deposit 60,555 (1,271) 59,284 (1,593) (3,839) (5,432) Total deposits 131,684 (6,207) 125,477 11,658 (3,638) 8,020 Borrowings 8 39,111 39,119 4,568 (6,010) (1,442) Mid-Atlantic region interest-bearing deposits — — — — (1,820) (1,820) Total interest expense $ 131,692 $ 32,904 $ 164,596 $ 16,226 $ (11,468) $ 4,758 Change in net interest income $ 17,193 $ 8,480 $ 25,673 $ 35,745 $ 17,989 $ 53,734 50 Table of Contents 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”).
Item 7 - Table 2 - Rate Volume Analysis 2024 Compared with 2023 2023 Compared with 2022 (Decrease) Increase Due to (Decrease) Increase Due to (In thousands) Rate Volume Net Rate Volume Net Interest income: Commercial real estate $ 9,222 $ 25,933 $ 35,155 $ 81,238 $ 23,568 $ 104,806 Commercial and industrial loans 2,872 (3,865) (993) 32,105 1,086 33,191 Residential loans 8,845 7,261 16,106 6,883 27,931 34,814 Consumer loans (773) (6,757) (7,530) 8,004 (2,329) 5,675 Total loans 20,166 22,572 42,738 128,230 50,256 178,486 Investment securities 3,309 (18,450) (15,141) 6,239 (6,628) (389) Short-term investments and loans held for sale 1,078 7,551 8,629 14,416 (2,244) 12,172 New York branch loans held for sale — 1,527 1,527 — — — Total interest income $ 24,553 $ 13,200 $ 37,753 $ 148,885 $ 41,384 $ 190,269 Interest expense: NOW accounts $ 751 $ (4,500) $ (3,749) $ 6,380 $ 2,324 $ 8,704 Money market accounts 25,195 6,039 31,234 59,450 (7,713) 51,737 Savings accounts 4,280 476 4,756 5,299 453 5,752 Certificates of deposit 30,455 1,408 31,863 60,555 (1,271) 59,284 Total deposits 60,681 3,423 64,104 131,684 (6,207) 125,477 Borrowings 2,189 (16,193) (14,004) 8 39,111 39,119 New York branch interest-bearing deposits — 4,998 4,998 — (1,820) (1,820) Total interest expense $ 62,870 $ (7,772) $ 55,098 $ 131,692 $ 32,904 $ 164,596 Change in net interest income $ (38,317) $ 20,972 $ (17,345) $ 17,193 $ 8,480 $ 25,673 52 Table of Contents 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”).
The Company and analysts also measure Operating PPNR/Assets in order to utilize the PPNR measure in assessing its comparative operating profitability.
The Company and analysts also measure Operating PPNR/Assets in order to utilize the PPNR measure in assessing its comparative operating profitability. This measure primarily relies on the measures of operating revenue and operating expense already used in the Company’s calculation of its efficiency ratio.
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 last year.
Berkshire was one of the first banks in the country to establish a dedicated committee of its Board of Directors to oversee these matters and became the first public U.S. community bank holding company with under $150 billion in assets to issue and successfully allocate a Sustainability Bond with a $100 million issuance.
Additionally, Berkshire’s annual Corporate Responsibility & Sustainability 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 programs and performance. BEST Community Comeback Berkshire launched the BEST Community Comeback in late 2021, a transformational commitment to empower its stakeholders’ financial potential.
Berkshire remains a leader among community banks in sustainability performance and regularly engages directly with its stakeholders to share information about its progress. The Company’s annual Sustainability Report, which is aligned with disclosure standards from Sustainability Accounting Standards Board (“SASB”) and Task Force on Climate-Related Financial Disclosure ("TCFD"), detail the Company's programs and performance.
Differences arising between Berkshire’s effective income tax rate and the U.S. federal statutory rate of 21% are generally attributable to: (i) tax-exempt interest earned on certain investments; (ii) tax-exempt income from BOLI; (iii) tax credit investment benefits; and (iv) state income taxes.
Differences arising between Berkshire’s effective income tax rate and the U.S. federal statutory rate of 21% are primarily attributable to: (i) tax-exempt interest earned on certain investments; (ii) tax-exempt income from BOLI; (iii) non-deductible merger costs; and (iv) state income taxes. 59 Table of Contents COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2024 AND DECEMBER 31, 2023 General Total assets decreased $0.2 billion, or 1%, to $12.3 billion in 2024.
In response to persistent high inflation, the Federal Reserve Board increased the target federal funds rate during 2022 and 2023.
In response to persistent high inflation, the Federal Reserve Board increased the maximum target federal funds rate beginning in the first quarter of 2022. The rate increased from 0.25% in the first quarter of 2022 to 5.50% in the third quarter of 2023, increasing in each sequential quarter.
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.
The Company’s Board of Directors Corporate Responsibility & Culture Committee provides oversight of sustainability and climate matters. 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.
Tangible common equity totaled $993 million at period-end and was net of an accumulated other comprehensive loss totaling $143 million. While the Company monitors the book value of equity and related metrics, it primarily manages capital based on regulatory capital measures, with a focus on the common equity Tier 1 capital ratio.
While the Company monitors the book value of equity and related metrics, it primarily manages capital based on regulatory capital measures, with a focus on the common equity Tier 1 capital ratio. This ratio measured 13.0% at year-end 2024 compared to 12.0% at year-end 2023. This improvement included the benefit of the $100 million capital placement in December 2024.
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. 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.
Climate Impact Climate change manifesting in the form of both physical or transition risks along with the Company’s mitigating practices could adversely, either directly or indirectly, affect Berkshire’s operations, businesses, customers, communities, and its stakeholders.
Liquidity management addresses both the Company’s ability to fund new loans and investments as opportunities arise, to meet customer deposit withdrawals and to repay borrowings and subordinated notes as they mature. In the first quarter of 2023, the banking industry faced heightened focus on liquidity following the failure of several large banks.
Liquidity management addresses both the Company’s ability to fund new loans and investments pursuant to commitments and as opportunities arise, to meet customer deposit withdrawals and to repay borrowings and subordinated notes as they mature. The Company views its liquidity as satisfactory for current conditions as well as for stressed scenarios in its liquidity testing models.
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.
Operating return on tangible common equity excluding AFS unrealized losses was 8.32%, 8.03%, and 8.94% for the years ended December 31, 2024, 2023, and 2022, respectively. 55 Table of Contents GENERAL This discussion is intended to assist readers in understanding the financial condition and results of operations of 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.
At December 31, 2023, cash and equivalents totaled $1.2 billion and securities available for sale totaled $1.0 billion. Unused borrowing capacity at that date from the Federal Home Loan Bank of Boston “FHLBB” and the Federal Reserve Bank of Boston (“FRB”) totaled $4.0 billion, compared to $2.1 billion at year-end 2022.
Unused borrowing availability at period-end from the Federal Home Loan Bank of Boston “FHLBB” and the Federal Reserve Bank of Boston (“FRB”) totaled $4.1 billion at year-end 2024, compared to $4.0 billion at year-end 2023. Borrowings from these sources are supported by collateral, to the extent utilized. Cash balances at the holding company totaled $164 million at period-end.
Ratings, Awards & Recognition Berkshire is proud to be recognized for its performance with local, regional, national, and international awards as well as leading third party ESG ratings* including: • Top 20% aggregated ESG rating, achieving one of five major BEST goals • MSCI ESG- A • ISS ESG Quality Score - Environment: 3, Social: 2, Governance: 2 • Bloomberg ESG Disclosure- 62.81 • Sustainalytics Rated • Communitas Award for Leadership in Corporate Social Responsibility • Boston Business Journal Top Charitable Contributor • America’s Most Trustworthy Companies – Newsweek • America’s Best Regional Banks - Newsweek • Forbes America’s Best Midsize Employers • Bloomberg Gender-Equality Index 64 Table of Contents • Human Rights Campaign Corporate Equality Index *As of December 31, 2023
Awards & Recognition Berkshire is proud to be recognized for its performance with local, regional, national, and international awards including: • American Bankers Association Community Commitment Award • America’s Most Trustworthy Companies – Newsweek • America’s Best Regional Banks – Newsweek • America’s Greatest Workplaces – Newsweek • America’s Best Mid-Size Companies – TIME • Communitas Award for Leadership in Corporate Social Responsibility • Boston Business Journal Top Charitable Contributor • Human Rights Campaign Equality 100 66 Table of Contents
In the discussion, unless otherwise specified, references to earnings per share and "EPS" refer to diluted earnings per common share.
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 the Bank. Established in 1846, the Bank operates as a commercial bank under a Massachusetts trust company charter.
(2) Non-GAAP financial measure. Refer to "Reconciliation of Non-GAAP Financial Measures" for additional information. (3) Fully taxable equivalent considers the impact of tax advantaged investment securities and loans. (4) 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.
(2) Non-GAAP financial measure. Refer to "Reconciliation of Non-GAAP Financial Measures" for additional information. (3) Fully taxable equivalent considers the impact of tax advantaged investment securities and loans. 49 Table of Contents 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.
Derivative Financial Instruments The notional amount of derivative financial instruments totaled $4.8 billion at period-end, increasing $263 million from year-end 2022. The net fair value of these instruments at December 31, 2023 was a liability of $30 million, compared to a liability of $43 million at December 31, 2022.
The net fair value of these instruments at period-end was a liability of $31 million, compared to $30 million at year-end 2023. Included in derivative financial instruments are $800 million in cash flow hedges on commercial loans, of which $275 million mature in 2025, $425 million mature in 2026, and $100 million mature in 2027.
Berkshire’s total shareholders’ equity was $1.01 billion at December 31, 2023 compared to $954 million at December 31, 2022. The year-end common equity Tier 1 capital ratio was 12.0% in 2023 and 12.4% in 2022 . Tangible common equity as a percentage of tangible assets was 8.0% at both of those dates.
The share issuance in December was priced at $29.00 per share. Reflecting primarily the increase in equity, the year-end ratio of equity to assets increased to 9.5% from 8.1% and the non-GAAP measure of tangible common equity to tangible assets increased to 9.4% from 8.0%. The common equity Tier 1 capital ratio increased to 13.0% from 12.0%.
The Company’s 2023 non-GAAP measure of operating income totaled $93.2 million, or $2.14 per diluted share, compared to $100.5 million, or $2.19 per share, for 2022. Year-over-year, higher net interest income was more than offset by higher loan loss provision expense and operating non-interest expense. Per share results benefited from share repurchases.
The decrease in 2024 was due primarily to higher non-operating losses on the sale of securities. The Company’s non-GAAP measure of operating income totaled $95 million, or $2.22 per share in 2024, compared to $93 million, or $2.14 per share in 2023.
Restructuring expense in 2022 was primarily due to the consolidation of six branch offices. The Company’s non-GAAP measure of operating non-interest expense increased year-over-year by $15.4 million, or 6%. This was primarily due to a $6.5 million, or 4%, increase in compensation expense and a $6.3 million, or 18%, increase in technology related expense.
The non-GAAP measure of operating non-interest expense decreased by $8 million, or 3%, to $287 million. This primarily reflected lower operating expenses due to branch sales and consolidations. Non-operating expenses of $9 million in 2024 and $6 million in 2023 included branch and facilities consolidations in both years, and 2024 expenses related to the pending merger.
For more than 175 years, Berkshire has provided strength, stability and trusted advice to create a positive impact for its clients and communities while upholding equitable, ethical, responsible and sustainable business practices. Berkshire’s longstanding commitment to operating equitably, responsibly and sustainably is interwoven into the company’s vision, mission, business practices, and strategic goals.
CORPORATE RESPONSIBILITY & SUSTAINABILITY The Company’s longstanding commitment to operating responsibly and sustainably is interwoven into the company’s vision, mission, business practices, and strategic goals.
Other comprehensive income reflected a decrease in the after-tax net unrealized losses on available for sale debt securities and derivative hedges primarily due to the $25 million realized loss on the sale of securities near year-end 2023.
The unrealized loss on available for sale securities decreased by $47 million in 2024 to $142 million at year-end 2024 due to the $50 million loss realized on the sale of securities in the first quarter.
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The fair value of loans acquired in a business combination includes expected credit losses, and there is no loan loss allowance recorded for these loans at the time of acquisition.
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(5) Return on tangible common equity excluding AFS unrealized losses was 5.45%, 6.07%, and 8.26% for the years ended December 31, 2024, 2023, and 2022, respectively.
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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 credit losses.
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On December 16, 2024, the Company entered into a definitive agreement for a merger of equals with Brookline Bancorp, Inc., a Boston-based multi-bank holding company with $11.9 billion in assets and branches in Massachusetts, Rhode Island, and New York.
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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.
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This merger is targeted to be completed in the second half of 2025, subject to customary shareholder and regulatory approvals, and closing conditions. 56 Table of Contents SUMMARY Berkshire reported 2024 net income of $61 million, or $1.43 per share, compared to $70 million, or $1.60 per share, in 2023.
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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. 47 Table of Contents 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.
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The 4% increase in operating EPS included the benefit of lower credit loss provision expense and lower non-interest expense, together with a 2% reduction in average diluted shares due to ongoing share repurchases. Berkshire’s 2024 return on assets was 0.52%; the operating return on assets was 0.81%.
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In 2021, the Company recorded a net gain of $52 million on the sale of the operations of the insurance subsidiary and the Mid-Atlantic branch operations. Expense adjustments in 2021 were primarily related to branch consolidations, borrowings prepayment costs, and restructuring charges for efficiency initiatives in operation areas including write-downs on real estate and severance related to staff reductions.
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The return on tangible common equity was 6.3%; the operating return on tangible common equity was 9.6%. The efficiency ratio measured 63.9%. The 2024 shareholder dividend was $0.72 per share in 2024. Period-end book value per share increased 8% to $25.15 and the non-GAAP measure of tangible equity to tangible assets increased 9% to $24.82 for the year.
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This measure primarily relies on the measures of operating revenue and operating expense already used in the Company’s calculation of its efficiency ratio. 51 Table of Contents The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community.
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Operating income and profitability improved sequentially in every quarter of the year, reflecting the cumulative benefit of the Company’s ongoing growth initiatives together with strategic optimization programs. Results also benefited from strong credit discipline, rigorous expense management, investments in new client-facing bankers and enhancements to the digital platform and consumer product offerings.
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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. 54 Table of Contents COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 Summary Berkshire reported 2023 net income of $69.6 million, or $1.60 per diluted share, compared to $92.5 million, or $2.02, per share in 2022.
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Strategic initiatives included: • Network Optimization: The Company consolidated four branches in 2023 and three branches in 2024, and additionally exited surplus back-office premises. Staff count was reduced through a workforce realignment in the first half of 2024. The sale of ten New York branches was completed in the third quarter of 2024.
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Net income in 2023 included net pre-tax non-operating charges totaling $31.3 million ($23.6 million after-tax), or $0.54 per share. Net income in 2022 included net pre-tax non-operating charges totaling $10.9 million ($8.0 million after-tax), or $0.17 per share.
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The sale concentrated the Bank’s overall geographic footprint and reduced certain expenses.
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Non-operating charges included restructuring charges in both years and a $25.1 million loss on the sale of securities in the fourth quarter of 2023. Due to this loss, the Company reported a net loss of $1 million in the fourth quarter of 2023.
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With the branch sale and consolidations, Berkshire’s total branch count was reduced to 83 offices in New England and New York, including 16 offices in its Albany and Rome/Utica markets. • Sales of Securities: Investment securities were sold in the fourth quarter of 2023 and first quarter of 2024.
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Berkshire’s 2023 return on average assets was 0.59% (0.79% on an operating basis) compared to 0.82% (0.90% on an operating basis) for 2022. Return on average tangible common equity including unrealized loss on AFS securities was 7.60% (10.05% on an operating basis) in 2023 compared to 9.29% (10.07% on an operating basis) in 2022.
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This allowed the Company to reposition its balance sheet to improve net interest income and to fund the branch sale.
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Return on average tangible common equity excluding unrealized loss on AFS securities was 6.07% (8.03% on an operating basis) in 2023 compared to 8.26% (8.94% on an operating basis) in 2022. Compared to 2022, fully taxable equivalent ("FTE") net interest income increased $25.7 million to $376.9 million. The net interest margin was little changed, increasing one basis point to 3.27%.
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The securities were carried at fair value on the Company’s balance sheet and the non-operating losses on sale therefore had no effect on shareholders’ equity. • Sales of Targeted Loan Portfolios: The Company sold most of its remaining Upstart consumer loan portfolio, which was in run-off mode.
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Average total earning assets increased year-over-year by $701 million, reflecting a $1.20 billion increase in average loans, partially offset by a $303 million decrease in average securities and a $197 million decrease in average short-term investments and HFS loans.
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In addition to this, the Company also sold a package of $47 million of seasoned residential mortgages. • Growth Initiatives: During 2024, the Company announced the recruitment of commercial deposit relationship managers and private bankers.
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Average total funding liabilities increased year-over-year by $644 million compared to the year-ago average, reflecting a $738 million increase in average borrowings, partially offset by a $93 million decrease in average deposits. Year-over-year, non-interest income excluding losses/gains decreased $3.6 million and total non-interest expense increased $12.8 million. The efficiency ratio was 63.88% in 2023 compared to 64.31% in 2022.
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Additionally, it announced the planned move and expansion of a Boston branch to bolster its commercial and private banking teams serving the Greater Boston market. • Digital Enhancements: In the third quarter, the Bank launched Berkshire One, its innovative suite of digital-first banking solutions to complement its branch and concierge banking channels.
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The provision for credit losses on loans was $32.0 million in 2023, compared to $11.0 million in 2022. The allowance for credit losses on loans was $105.4 million, or 1.17% of total loans, at December 31, 2023, compared to $96.3 million, or 1.15% of total loans at December 31, 2022.
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Including the impact of branch and loan sales, in 2024 the Company recorded 4% loan growth and a 2% deposit decrease. Excluding the impact of these sales, Berkshire produced 5% loan growth and 1% deposit growth in 2024. Measures of asset quality remained favorable in 2024.
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The average maximum target Federal Funds rate increased from 0.25% in the first quarter of 2022 to 5.50% in the fourth quarter of 2023, increasing in each sequential quarter, with the largest quarterly increases occurring in the second and third quarters of 2022. The net interest margin increased by one basis point to 3.27% in 2023.
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Delinquent and non-performing loans were 0.52% of total period-end loans; this was the lowest quarterly level in nearly two decades. Net loan charge-offs measured 0.16% of average total loans in 2024, compared to 0.26% in the prior year. Liquidity remained satisfactory in 2024, with the year-end loans to deposits ratio measuring 90% in 2024 compared to 85% in 2023.
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Net interest income increased year-over-year by $24 million, or 7%, due to a 7% increase in average earning assets funded by higher average borrowings. Total interest income increased $189 million and total interest expense increased $165 million.
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Total shareholders’ equity increased by $155 million, or 15%, to $1.2 billion during the year, including the proceeds of a $100 million common stock placement in December in conjunction with the merger agreement. The common equity Tier 1 capital ratio stood at 13.0% at year-end 2024.
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The FTE interest adjustment increased $1 million. 55 Table of Contents Full year total average earning assets increased $701 million in 2023 compared to 2022, primarily reflecting an increase of $1.20 billion in average loans offset by decreases of $303 million in average securities and $197 million in short-term investments and loans HFS.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBase case EVE Sensitivity is calculated by estimating the net present value of all future cash flows from existing assets and liabilities using current interest rates. The current spot interest rate curve is shocked up and down to generate new interest rate curves for parallel rate shock scenarios.
Biggest changeThese assumptions can have significant impacts on valuation results as the assumptions remain in effect for the entire life of each asset and liability. All key assumptions are subject to periodic review. Base case EVE Sensitivity is calculated by estimating the net present value of all future cash flows from existing assets and liabilities using current interest rates.
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, 2023 and 2022 Consolidated Statements of Income for the years ended December 31, 2023, 2022, and 2021 Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2023, 2022, and 2021 Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2023, 2022, and 2021 Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022, and 2021 Notes to Consolidated Financial Statements ITEM 9.
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, 2024 and 2023 Consolidated Statements of Income for the years ended December 31, 2024, 2023, and 2022 Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 31, 2024, 2023, and 2022 Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2024, 2023, and 2022 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022 Notes to Consolidated Financial Statements ITEM 9.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk represents the risk of loss to earnings and the economic values of certain assets and liabilities resulting from changes in interest rates. The only significant market risk exposure for the Company is Interest Rate Risk (“IRR”).
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk represents the risk of loss to earnings, capital and the economic values of certain assets and liabilities resulting from changes in interest rates and equity prices. The only significant market risk exposure for the Company is Interest Rate Risk (“IRR”).
Combined, these assumptions can be inherently uncertain, and as a result, actual results may differ from IRR modeling due to the timing, magnitude and frequency of interest rate changes, future business conditions, as well as unanticipated changes in management strategies. The Company uses two sets of standard scenarios to measure NII Sensitivity.
Combined, these assumptions can be inherently uncertain, and as a result, actual results may differ from simulation forecasts due to the timing, magnitude and frequency of interest rate changes, future business conditions, as well as unanticipated changes in management strategies. The Company uses two sets of standard scenarios to measure NII Sensitivity.
This simulation captures underlying product behaviors, such as asset and liability repricing dates, interest rate indices and spreads, and rate caps and floors, and it applies appropriate behavioral attributes such as prepayment assumptions.
This simulation captures underlying product behaviors, such as asset and liability repricing dates, balloon dates, interest rate indices and spreads, rate caps and floors, as well as other behavioral attributes.
These new curves are then used to recalculate EVE Sensitivity for rate shock scenarios. The following table sets forth the estimated percent change in the Company’s EVE Sensitivity, assuming various instantaneous parallel shocks in interest rates.
The current spot interest rate curve is shocked up and down. These new interest rate curves are then used to recalculate EVE Sensitivity for rate shock scenarios. The following table sets forth the estimated percent change in the Company’s EVE Sensitivity from the base case scenario, assuming various instantaneous parallel shocks in interest rates.
The following tables set forth the estimated percent change in the Company’s NII Sensitivity over one-year simulation periods beginning December 31, 2023 and December 31, 2022. 65 Table of Contents ITEM 7 - 7A TABLE 3 - QUALITATIVE ASPECTS OF MARKET RISK Parallel Interest Rate Shock (basis points) Estimated Percent Change in Net Interest Income December 31, 2023 December 31, 2022 +200 0.5 % 1.8 % +100 0.3 0.8 -100 (0.6) (1.6) -200 (2.1) (5.2) Yield Curve Twist Interest Rate Shock December 31, 2023 December 31, 2022 Short End +100 (0.5) % 0.1 % Short End -100 (0.5) (1.3) Long End +100 1.1 1.0 Long End -100 (1.1) (1.2) NII Sensitivity results indicate that the Company’s asset sensitivity has declined at year-end 2023 compared to year-end 2022.
The following tables set forth the estimated percent change in the Company’s NII Sensitivity compared to the flat rate scenario over one-year simulation periods beginning December 31, 2024 and December 31, 2023. 67 Table of Contents ITEM 7 - 7A TABLE 3 - QUALITATIVE ASPECTS OF MARKET RISK Parallel Interest Rate Shock (basis points) Estimated Percent Change in Net Interest Income December 31, 2024 December 31, 2023 +200 2.2 % 0.5 % +100 1.2 0.3 -100 (1.4) (0.6) -200 (2.9) (2.1) Yield Curve Twist Interest Rate Shock December 31, 2024 December 31, 2023 Short End +100 (0.4) % (0.5) % Short End -100 0.3 (0.5) Long End +100 1.6 1.1 Long End -100 (1.7) (1.1) The Company’s NII sensitivity results at period-end were mostly little changed from the start of the year, with modest asset sensitivity in parallel shock simulations.
Estimated Percent Change in Economic Value of Equity Parallel Shock Rate Change (basis points December 31, 2023 December 31, 2022 +200 (3.9) % — % +100 (1.8) — -100 1.2 (1.5) -200 1.3 (5.4) The Company’s EVE Sensitivity profile indicates that at December 31, 2023 the balance sheet has remained largely neutral compared to December 31, 2022.
Estimated Percent Change in Economic Value of Equity Parallel Shock Rate Change (basis points 12/31/2024 12/31/2023 +200 (1.4) % (3.9) % +100 (0.6) (1.8) -100 0.2 1.2 -200 (0.1) 1.3 The Company’s EVE Sensitivity profile indicates that at December 31, 2024 the balance sheet was modestly liability sensitive, with this sensitivity decreasing compared to December 31, 2023. 68 Table of Contents ITEM 8.
As with NII modeling, EVE Sensitivity captures product characteristics such as loan resets, repricing terms, maturity dates, rate caps and floors. Key assumptions include loan prepayment speeds, deposit pricing elasticity and non-maturity deposit attrition rates.
Economic Value of Equity ("EVE") Sensitivity is conducted to ascertain a longer-term view of the Company’s exposure to changes in interest rates. As with NII modeling, EVE Sensitivity captures product characteristics such as loan resets, repricing terms, maturity and amortization dates, rate caps and floors. Key assumptions include loan prepayment speeds, deposit pricing elasticity and non-maturity deposit attrition rates.
The Company manages IRR through simulations of NII and equity at risk (“EVE”). These two measurements are complementary and provide both short-term and long-term risk profiles of the Company. NII Sensitivity is used to measure the potential NII exposure to changes in market rates over a period of time, such as 12 or 24 months.
These two measurements are complementary and provide both short-term and long-term risk profiles of the Company. Net Interest Income (“NII”) at Risk Simulation is used to measure the sensitivity of net interest income to changes in market rates over a 12 month period assuming a static balance sheet.
This is a result of the Company’s core business activities of making loans and accepting deposits. The effective management of IRR is essential to achieving the Company’s financial objectives. The Company’s goal is to support the net interest margin and net interest income (“NII”) over entire interest rate cycles regardless of changes in either short- or long-term interest rates.
This is a result of the Company’s core business activities of making loans and accepting deposits, as well as investments and funding activities. The effective management of IRR is essential to achieving the Company’s financial objectives. This responsibility resides with the Asset Liability Committee (“ALCO”).
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This change reflected several factors, including continued growth of the residential mortgage portfolio, increased utilization of short-term borrowings, further deposit mix shift towards interest-bearing, and less flooring on non-maturity deposits in downward modeled scenarios. EVE Sensitivity is conducted to ascertain a longer-term view of the Company’s exposure to changes in interest rates.
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The ALCO’s role is to establish an effective asset/liability decision-making process to aid in managing risk exposures and achieving strategic objectives and corporate financial goals. The Company manages IRR by using two primary risk measurement techniques: simulation of net interest income and simulation of economic value of equity.
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EVE was impacted by the same factors that affected NII sensitivity discussed above, particularly the increase in residential mortgages and short-term borrowings. 66 Table of Contents ITEM 8.
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The simulation of net interest income also requires a number of key assumptions such as (i) prepayment projections for loans and securities; (ii) new business loan spreads; and (iii) deposit pricing assumptions.
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The slight increase in asset sensitivity year-over-year was due to the impact of the December 2024 $100 million equity raise along with the approaching maturities of some fixed rate hedges in 2025.
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Yield curve twist simulations were mostly little changed from the prior year-end, with slight liability sensitivity in the short end of the yield curve and modest asset sensitivity on the long end.
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In the situation of a normalization of the yield curve to a positive slope due to both lower short-term rates and higher long-term rates, the result is modeled to be positive to net interest income in the framework of a static balance sheet.

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