Beacon Financial Corp 10-K

ITEM 9A. CONTROLS AND PROCEDURES The Company’s management, including the Company’s Principal Executive Officer and Principal Financial Officer, have evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a and 15(d) -15(e) promulgated under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) as of December 31, 2021. Based upon their evaluation, the Principal Executive Officer and Principal Financial Officer concluded that, as of that date, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”): (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING The Company evaluated changes in its internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that occurred during the last fiscal quarter. The Company determined that there were no changes that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting. Management’s report on internal control over financial reporting and the independent registered public accounting firm’s report on the Company’s internal control over financial reporting are contained in “Item 8 — Consolidated Financial Statements and Supplementary Data.” ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 71 Table of Contents PART III 72 Table of Contents ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE For information concerning the directors of the Company, the information contained under the sections captioned “Proposal 1 - Election of Directors for a One-Year Term” in Berkshire’s Proxy Statement for the 2023 Annual Meeting of Stockholders (“Proxy Statement”) is incorporated by reference. The following table sets forth certain information regarding the executive officers of the Company. Name Age Position Nitin J. Mhatre 52 President and Chief Executive Officer of the Company; Chief Executive Officer - Berkshire Bank; Director of Berkshire Hills Bancorp and Berkshire Bank Sean A. Gray 46 Senior Executive Vice President, Chief Operating Officer; President - Berkshire Bank David Rosato 61 Senior Executive Vice President, Chief Financial Officer Lucia “Lucy” Bellomia 57 Senior Executive Vice President, Head of Retail Banking James Brown 57 Senior Executive Vice President, Head of Commercial Banking Jennifer M. Carmichael 46 Executive Vice President, Chief Internal Audit Officer Jacqueline Courtwright 59 Senior Executive Vice President, Chief Human Resources and Culture Officer Ashlee Flores 38 Executive Vice President, Chief Compliance Officer Philip Jurgeleit 53 Executive Vice President, Chief Credit Officer Gregory D. Lindenmuth 55 Senior Executive Vice President, Chief Risk Officer Wm. Gordon Prescott 61 Senior Executive Vice President, General Counsel and Corporate Secretary Sumant Pustake 38 Executive Vice President, Chief Transformation & Strategy Officer Ellen Steinfeld 61 Senior Executive Vice President, Head of Consumer Lending & Payments Jason T. White 47 Senior Executive Vice President, Chief Information Officer – Berkshire Bank The executive officers are elected annually and hold office until their successors have been elected and qualified or until they are removed or replaced. BIOGRAPHICAL INFORMATION Nitin J. Mhatre. Age 52. Mr. Mhatre was appointed to the role of President and Chief Executive Officer of the Company and Chief Executive Officer of the Bank in January 2021. He was also appointed as a Director of the Company and the Bank. Prior to joining the Company, Mr. Mhatre was Executive Vice President, Community Banking, at Webster Bank, where he led consumer and business banking businesses. Before joining Webster in 2009, Mr. Mhatre spent 13 years at Citi Group in various leadership roles across consumer-related businesses globally. Sean A. Gray . Age 46. Mr. Gray was appointed to the role of Senior Executive Vice President, Chief Operating Officer; President of the Bank in November 2018. He was previously Senior Executive Vice President of the Company and Chief Operating Officer of the Bank since 2015. Mr. Gray joined the Company in retail banking in 2007 and attained the position of Executive Vice President, Retail Banking. Previously, he was Vice President and Consumer Market Manager at Bank of America, in Waltham, Massachusetts. 73 Table of Contents David Rosato. Age 61. Mr. Rosato joined the Company in February 2023 as Senior Executive Vice President, Chief Financial Officer. He spent the last 15 years with People’s United Financial, Inc., eight of which as Chief Financial Officer. Prior to joining People’s United, Mr. Rosato worked at Webster Financial Corporation, including serving as its Treasurer, and M&T Bank Corporation. Mr. Rosato is a former board member of the Federal Home Loan Bank of Boston. Lucia “Lucy” Bellomia. Age 57. Ms. Bellomia is Senior Executive Vice President and Head of Retail Banking. She oversees the retail branch network, branch training, the MyBanker program, Call Center, Branch Operations, Retail Sales and Service Delivery. Prior to joining Berkshire in September 2021, she served as the Executive SVP, PM, Community Banking, Northeast Region, for Bank of America. She previously held positions at the Police and Fire Credit Union in Philadelphia, Santander Bank, PNC Bank, Sun National Bank, and Pioneer Savings and Loans. James Brown. Age 57. Mr. Brown joined the Company in January 2023 as Senior Executive Vice President, Commercial Banking. Mr. Brown is responsible for all aspects of commercial banking operations, including the middle-market, business banking and asset based lending teams. Previously, he spent more than 20 years at Boston Private Bank & Trust Company in multiple senior executive roles including Co-President, EVP, Head of Commercial Banking and Credit Administration, and Chief Lending Officer. He served with Silicon Valley Bank as Head of Specialty Commercial within the Private Bank, following the acquisition of Boston Private in 2021 Jennifer M. Carmichael. Age 46. Ms. Carmichael was promoted to Executive Vice President, Chief Internal Audit Officer of Berkshire Bank in November 2020. She reports to the Audit Committee of the Board and administratively to the CEO. Ms. Carmichael previously served as Senior Vice President and Audit Manager. She joined the Bank in 2016 from Accume Partners where she served as Senior Audit Manager to several clients in the New York and New England regions, including Berkshire. Jacqueline Courtwright. Age 59. Ms. Courtwright is Senior Executive Vice President, Chief Human Resources and has served as Culture Officer since September 2020. She had been appointed as Senior Vice President, Chief Human Resources Officer in July 2019. Prior to joining Berkshire in 2012, Ms. Courtwright was VP, Human Resources Business Partner at Citizen Bank and also held senior human resource roles during her 20 years at KeyBank. 74 Table of Contents Ashlee Flores. Age 38. Ms. Flores was promoted to Executive Vice President, Chief Compliance Officer in September 2022. She oversees all aspects of the compliance risk management program, including compliance with the Bank Secrecy Act, Community Reinvestment Act, consumer protection laws and regulations, as well as the Security and Fraud Investigations functions. Ms. Flores previously served as SVP, Compliance, where she oversaw Berkshire Bank's compliance program. Prior to joining Berkshire Bank, Ms. Flores was a compliance officer at Hampden Bank in Springfield, MA where she managed the compliance and audit program. Philip Jurgeleit. Age 53. Mr. Jurgeleit joined the Company in January 2023 as Executive Vice President, Chief Credit Officer. He oversees all aspects of the company's credit underwriting, policy, and approval processes. Mr. Jurgeleit most recently served as SVP and Senior Director of Credit Risk at Santander Bank where he was responsible for all aspects of credit risk management including credit approval, asset quality, underwriting guidelines, and credit policies for the Middle Market, Mid-Corporate, Asset Based Lending, and Healthcare/Not-for-Profit business units. He also held senior leadership roles at Citizens Bank, Webster Bank and Bank of America. Gregory D. Lindenmuth. Age 55. Mr. Lindenmuth is Senior Executive Vice President, Chief Risk Officer of the Bank, a position he was promoted to in October 2018. Mr. Lindenmuth joined Berkshire in 2016 from the FDIC where he was employed for 24 years and held multiple positions including Senior Risk Examiner for the Division of Risk Management Supervision and Acting Regional Manager for the Division of Insurance and Research. With the FDIC, Mr. Lindenmuth was also a Capital Markets, Mortgage Banking, and Fraud Specialist. Wm. Gordon Prescott, Age 61. Mr. Prescott is Senior Executive Vice President, General Counsel and Corporate Secretary, a position he was promoted to in October 2018. Mr. Prescott joined Berkshire in 2008 as VP, General Counsel and Corporate Secretary. Mr. Prescott has 30 plus years of experience in the legal profession, including extensive experience as in-house corporate counsel, most recently with KB Toys Inc. prior to joining the Bank. Sumant Pustake. Age 38_. Mr. Pustake was promoted to Executive Vice President in February 2023 and has served as Chief Transformation and Strategy Officer since June 2021. Mr. Pustake previously oversaw Berkshire's corporate development efforts, where he served as the development leader and helped define and realize Berkshire’s vision and growth strategy. Prior to joining Berkshire Bank, he served as Vice President, Head of Corporate Credit for Commerce Bank and Trust at the time of its acquisition by Berkshire in 2017. 75 Table of Contents Ellen Steinfeld, Age 61. Ms. Steinfeld is Senior Executive Vice President and Head of Consumer Lending & Payments. She is responsible for Mortgage Banking sales and operations, Home Equity, Consumer Lending and Payments. Prior to joining Berkshire in September 2021, she was President of Innovative Lending Strategic Solutions LLC. Before her consulting role, she was Managing Director and US Consumer Lending Executive for TIAA-CREF, where she managed Mortgage Lending, Small Business Lending, Consumer Lending. She has also held management positions at Hudson City Savings, Citizens Bank, RBC Wealth Management, and E*TRADE Financial. (Note: Ms. Steinfeld’s stock ownership reports to the SEC are filed under her legal name of Ellen Tulchiner). Jason T. White, Age 47. Mr. White is Senior Executive Vice President and was named Chief Information Officer of Berkshire Bank in November 2020. He previously served as Senior Vice President, Chief Technology Officer since May 2019 when he joined the Bank following the acquisition of Savings Institute Bank & Trust, where he served as Chief Information Officer and Information Security Officer. 76 Table of Contents Reference is made to the cover page of this report and to the section captioned “Additional Information - Other Information Relating to Directors and Executive Officers - Delinquent Section 16(a) Reports” in the Proxy Statement for information regarding compliance with Section 16(a) of the Exchange Act. For information concerning the audit committee and the audit committee financial expert, reference is made to the section captioned “Proposal 1 - Election of Directors for a One-Year Term", "Proposal 1 - Election of Directors for One Year Term - Corporate Governance - Committees of the Board of Directors”, and “Proposal 1 - Election of Directors for a One Year Term - Board Committees and Responsibilities" in the Proxy Statement. For information concerning the Company’s code of ethics, the information contained under the section captioned “Proposal 1 - Election of Directors for a One Year Term - Corporate Governance - Code of Business Conduct and Anonymous Reporting Line Policy” in the Proxy Statement is incorporated herein by reference. A copy of the Company’s code of ethics is available to stockholders on the Company’s website at: berkshirebank.com under the Investor Relations tab. ITEM 11. EXECUTIVE COMPENSATION For information regarding executive compensation, the sections captioned “Proposal 1 - Election of Directors for a One-Year Term”, “Proposal 1 - Election of Directors of a One Year Term - Corporate Governance - Committees of the Board of Directors”, and “Proposal 1 - Election of Directors for a One Year Term - Board Committees and Responsibilities” in the Proxy Statement are incorporated herein by reference. For information regarding the Compensation Committee Report, the section captioned “Compensation Discussion and Analysis” in the Proxy Statement is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS (a) Security Ownership of Certain Beneficial Owners Information required by this item is incorporated herein by reference to the section captioned “Additional Information - Stock Ownership” in the Proxy Statement. (b) Security Ownership of Management Information required by this item is incorporated herein by reference to the section captioned “Additional Information - Stock Ownership” in the Proxy Statement. (c) Changes in Control Management of Berkshire knows of no arrangements, including any pledge by any person of securities of Berkshire, the operation of which may at a subsequent date result in a change in control of the registrant. (d) Equity Compensation Plan Information The following table sets forth information, as of December 31, 2022, about Company common stock that may be issued upon exercise of options under stock-based benefit plans maintained by the Company, as well as the number of securities available for issuance under equity compensation plans: Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column) Equity compensation plans approved by security holders 49,200 $ 25.62 1,500,355 Equity compensation plans not approved by security holders — — — Total 49,200 $ 25.62 1,500,355 77 Table of Contents ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item is incorporated herein by reference to the sections captioned “Additional Information - Other Information Relating to Directors and Executive Officers - Transactions with Related Persons" and “Additional Information - Other Information Relating to Directors and Executive Officers - Procedures Governing Related Persons Transactions” in the Proxy Statement. Information regarding director independence is incorporated herein by reference to the section “Proposal 1 - Election of Directors for a One Year Term” in the Proxy Statement. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this item is incorporated herein by reference to the section captioned “Proposal 3 — Ratification of the Appointment of the Independent Registered Public Accounting Firm” in the Proxy Statement. 78 Table of Contents PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) [1] Consolidated Financial Statements • Report of Independent Registered Public Accounting Firm • Consolidated Balance Sheets as of December 31, 2022 and 2021 • Consolidated Statements of Operations for the Years Ended December 31, 2022, 2021, and 2020 • Consolidated Statements of Comprehensive (Loss)/Income for the Years Ended December 31, 2022, 2021, and 2020 • Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 2022, 2021, and 2020 • Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021, and 2020 • Notes to Consolidated Financial Statements The Consolidated Financial Statements required to be filed in our Annual Report on Form 10-K are included in Part II, Item 8 hereof. [2] Financial Statement Schedules All financial statement schedules are omitted because the required information is either included or is not applicable. 79 Table of Contents [3] Exhibits 3.1 Amended Certificate of Incorporation of Berkshire Hills Bancorp, Inc. (1) 3.2 Amended and Restated Bylaws of Berkshire Hills Bancorp, Inc. (2) 3.4 Certificate of Designations of the Series B Non-Voting Preferred Stock (3) 4.1 Form of Common Stock Certificate of Berkshire Hills Bancorp, Inc. (1) 4.2 Note Subscription Agreement by and among Berkshire Hills Bancorp, Inc. and certain subscribers dated September 20, 2012 (5) 4.3 Description of Berkshire Hills Bancorp, Inc. Securities (6) 10.1 Three-Year Employment Agreement by and among Berkshire Hills Bancorp, Inc., Berkshire Bank and Nitin J. Mhatre (7) 10.2 Berkshire Bank Supplemental Executive Retirement Agreement entered into with Nitin J. Mhatre (8) 10.3 Amended and Restated Three Year Change in Control Agreement by and among Berkshire Hills Bancorp, Inc., Berkshire Bank and Sean A. Gray (9) 10.4 Supplemental Executive Retirement Agreement between Berkshire Bank and Sean A. Gray (10) 10.5 Three Year Executive Change in Control Agreement by and among Berkshire Hills Bancorp, Inc. Berkshire Bank and George F. Bacigalupo (11) 10.6 Berkshire Bank Enhanced Change in Control Severance Plan (Gregory D. Lindenmuth and Brett Brbovic) (12) 10.7 Form of Split Dollar Agreement entered into with Sean A. Gray (13) 10.8 Berkshire Bank Executive Long-Term Care Insurance Plan (14) 10.9 Berkshire Hills Bancorp, Inc. 2018 Equity Incentive Plan (15) 10.10 Senior Executive Short Term Incentive Plan (16) 10.11 Berkshire Hills Bancorp, Inc. 2022 Equity Incentive Plan (17) 10.12 Transition Agreement and Release of Claims entered into with Subhadeep Basu (18) 10.13 Transition Agreement entered into with Deborah Stephenson (19) 21.0 Subsidiary Information 23.1 Consent of Crowe LLP 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Statements of Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements tagged as blocks of text and in detail 80 Table of Contents (1) Incorporated herein by reference from the Exhibits to Form 10-Q as filed on August 9, 2018 (2) Incorporated herein by reference from the Exhibits to the Form 8-K as filed on June 26, 2017. (3) Incorporated herein by reference from the Exhibits to Form S-1, Registration Statement and amendments thereto, initially filed on March 10, 2000, Registration No. 333-32146. (4) Incorporated herein by reference from the Exhibits to the Form 8-K as filed on October 16, 2017. (5) Incorporated herein by reference from the Exhibits to the Form 8-K as filed on September 26, 2012. (6) Incorporated herein by reference from Exhibit 4.3 to the Form 10-K as filed on February 28, 2020. (7) Incorporated herein by reference from the Exhibit to the Form 8-K as filed on January 26, 2021. (8) Incorporated herein by reference from the Exhibit to the Form 8-K as filed on April 2, 2021. (9) Incorporated herein by reference from the Exhibits to the Form 10-K as filed on March 16, 2011. (10) Incorporated herein by reference from the Exhibits to the Form 8-K as filed on February 22, 2019. (11) Incorporated herein by reference from the Exhibits to the Form 10-K as filed on March 17, 2014. (12) Incorporated herein by reference from the Exhibits to the Form 10-K as filed on February 28, 2020. (13) Incorporated herein by reference from the Exhibit to the Form 8-K as filed on January 19, 2011. (14) Incorporated herein by reference from the Exhibits to the Form 8-K as filed on January 23, 2015. (15) Incorporated herein by reference from the Appendix to the Proxy Statement as filed on April 6, 2018. (16) Incorporated herein by reference from the Exhibits to the Form 10-Q as filed on May 10, 2019. (17) Incorporated herein by reference from the Appendix to the Proxy Statement as filed on April 8, 2022. (18) Incorporated herein by reference from the Exhibit to the Form 8-K as filed on October 13, 2022. (19) Incorporated herein by reference from the Exhibit to the Form 8-K as filed on September 12, 2022. ITEM 16. FORM 10-K SUMMARY None. 81 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Berkshire Hills Bancorp, Inc. Date: March 1, 2023 By: /s/ Nitin J. Mhatre Nitin J. Mhatre President & Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Nitin J. Mhatre Director, President, & Chief Executive Officer March 1, 2023 Nitin J. Mhatre (principal executive officer) /s/ R. David Rosato Senior Executive Vice President, Chief Financial Officer March 1, 2023 R. David Rosato (principal financial officer) /s/ Brett Brbovic Senior Managing Director, Chief Accounting Officer March 1, 2023 Brett Brbovic (principal accounting officer) /s/ David M. Brunelle Chairperson March 1, 2023 David M. Brunelle /s/ Baye Adofo-Wilson Director March 1, 2023 Baye Adofo-Wilson /s/ Nina A. Charnley Director March 1, 2023 Nina A. Charnley /s/ John B. Davies Director March 1, 2023 John B. Davies /s/ Mihir A. Desai Director March 1, 2023 Mihir A. Desai /s/ William H. Hughes, III Director March 1, 2023 William H. Hughes, III /s/ Jeffrey W. Kip Director March 1, 2023 Jeffrey W. Kip /s/ Sylvia Maxfield Director March 1, 2023 Sylvia Maxfield /s/ Laurie Norton Moffatt Director March 1, 2023 Laurie Norton Moffatt /s/ Karyn Polito Director March 1, 2023 Karyn Polito /s/ Jonathan I. Shulman Director March 1, 2023 Jonathan I. Shulman /s/ Michael A. Zaitzeff Director March 1, 2023 Michael A. Zaitzeff 82 Table of Contents ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s Consolidated Financial Statements for external reporting purposes in accordance with generally accepted accounting principles. As of December 31, 2022, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control—Integrated Framework issued in 2013, by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2022 was effective. The Company’s internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2022 has been audited by Crowe LLP, an independent registered public accounting firm, as stated in their report, which follows. This report expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022. /s/ Nitin J. Mhatre /s/ R. David Rosato Nitin J. Mhatre R. David Rosato President & Chief Executive Officer Senior Executive Vice President & Chief Financial Officer March 1, 2023 March 1, 2023 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and the Board of Directors of Berkshire Hills Bancorp, Inc. Boston, Massachusetts Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Berkshire Hills Bancorp, Inc. (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive (loss)/income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO. Change in Accounting Principle As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for credit losses effective January 1, 2020 due to the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification No. 326, Financial Instruments – Credit Losses (“ASC 326”). The Company adopted the new credit loss standard using the modified retrospective method such that prior period amounts are not adjusted and continue to be reported in accordance with previously applicable generally accepted accounting principles. Basis for Opinions The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. F-2 Table of Contents We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Allowance for Credit Losses for loans The estimate of expected credit losses is based on relevant information about current conditions, past events, and reasonable and supportable forward-looking forecasts regarding collectability of the reported amounts. In order to estimate the expected credit losses for loans evaluated on a pooled basis, the Company utilizes a static pool migration methodology which calculates a historical loss rate for each of the identified loan segments. The historical loss rates are then adjusted for current and asset specific characteristics (also referred to as qualitative adjustments) and for expected changes to current conditions over the reasonable and supportable forecast period (also referred to as forecast). Each of these key components of the allowance for credit loss calculation is complex and requires a high volume of data input. F-3 Table of Contents Auditing the allowance for credit losses was especially challenging and identified by us as a critical audit matter given the high volume of data inputs and judgements made by management. Auditing the allowance for credit loss calculation involved significant audit effort, including the involvement of experienced audit personnel. The primary procedures we performed to address this critical audit matter included: Testing the effectiveness of internal controls over management’s allowance for credit loss calculation including the design and operating effectiveness to address: • Completeness and accuracy of the reports utilized within the allowance for credit loss calculation. • The mathematical accuracy of the allowance for credit loss calculation. • The accuracy of application of information within the allowance for credit loss calculation. • Significant assumptions and judgements applied within the allowance for credit loss calculation. Substantively testing management’s process to e stimate the allow ance f or credit loss calcu lation included: • Testing the completeness and accuracy of the underlying internal data utilized to prepare the calculation. • Evaluating the relevance and reliability of the underlying external data utilized to prepare the calculation. • Testing the mathematical accuracy, including the application of data and assumptions, of the allowance for credit loss calculation. • The reasonableness of the significant judgements and assumptions utilized within the allowance for credit loss calculation. /s/ Crowe LLP We have served as the Company's auditor since 2017. New York, New York March 1, 2023 F-4 Table of Contents BERKSHIRE HILLS BANCORP, INC. CONSOLIDATED BALANCE SHEETS December 31, (In thousands, except share data) 2022 2021 Assets Cash and due from banks $ 145,342 $ 109,350 Short-term investments 540,013 1,518,457 Total cash and cash equivalents 685,355 1,627,807 Trading security 6,708 8,354 Marketable equity securities, at fair value 12,856 15,453 Securities available for sale, at fair value 1,423,200 1,877,585 Securities held to maturity (fair values of $ 507,464 in 2022 and $ 647,236 in 2021) 583,453 636,503 Federal Home Loan Bank stock and other restricted securities 7,219 10,800 Total securities 2,033,436 2,548,695 Less: Allowance for credit losses on investment ( 91 ) ( 105 ) Net Securities 2,033,345 2,548,590 Loans held for sale 4,311 6,110 Total loans 8,335,309 6,825,847 Less: Allowance for credit losses on loans ( 96,270 ) ( 106,094 ) Net loans 8,239,039 6,719,753 Premises and equipment, net 85,217 94,383 Other intangible assets 24,483 29,619 Cash surrender value of bank-owned life insurance 238,919 235,690 Other assets 348,935 288,384 Assets held for sale 3,260 4,577 Total assets $ 11,662,864 $ 11,554,913 Liabilities Demand deposits $ 2,852,127 $ 3,008,461 NOW and other deposits 1,054,596 976,401 Money market deposits 3,723,570 3,293,526 Savings deposits 1,063,269 1,111,625 Time deposits 1,633,707 1,678,940 Total deposits 10,327,269 10,068,953 Long-term Federal Home Loan Bank advances 4,445 13,331 Subordinated notes 121,064 97,513 Total borrowings 125,509 110,844 Other liabilities 256,024 192,681 Total liabilities 10,708,802 10,372,478 (continued) December 31, (In thousands, except share data) 2022 2021 Shareholders’ equity Common stock ($ 0.01 par value; 100,000,000 shares authorized and 51,903,190 shares issued and 44,361,222 shares outstanding in 2022; 100,000,000 shares authorized; 51,903,190 shares issued, and 48,667,110 shares outstanding in 2021) $ 528 $ 528 Additional paid-in capital - common stock 1,424,183 1,423,445 Unearned compensation ( 8,598 ) ( 9,056 ) Retained (deficit) ( 71,428 ) ( 139,383 ) Accumulated other comprehensive (loss) ( 181,052 ) ( 3,243 ) Treasury stock, at cost ( 7,541,968 shares in 2022 and 3,236,080 shares in 2021) ( 209,571 ) ( 89,856 ) Total shareholders’ equity 954,062 1,182,435 Total liabilities and shareholders’ equity $ 11,662,864 $ 11,554,913 The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents BERKSHIRE HILLS BANCORP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, (In thousands) 2022 2021 2020 Interest and dividend income Loans $ 335,312 $ 282,164 $ 358,015 Securities and other 51,945 46,901 51,767 Total interest and dividend income 387,257 329,065 409,782 Interest expense Deposits 33,437 27,236 72,715 Borrowings and subordinated notes 9,223 10,663 20,285 Total interest expense 42,660 37,899 93,000 Net interest income 344,597 291,166 316,782 Non-interest income Deposit related fees 32,026 29,813 27,905 Loan fees and revenue 21,731 35,060 16,840 Insurance commissions and fees — 7,003 10,770 Wealth management fees 10,008 10,530 9,285 Mortgage banking income 230 2,056 5,190 Total fee income 63,995 84,462 69,990 Other 6,973 6,631 2,597 (Loss) on securities, net ( 2,031 ) ( 787 ) ( 7,520 ) Gain on sale of business operations and assets, net — 52,942 1,240 Total non-interest income 68,937 143,248 66,307 Total net revenue 413,534 434,414 383,089 Provision expense/(benefit) for credit losses 11,000 ( 500 ) 75,878 Non-interest expense Compensation and benefits 152,741 150,589 147,840 Occupancy and equipment 37,638 41,782 43,359 Technology and communications 35,586 33,803 32,364 Marketing and promotion 5,103 2,749 3,703 Professional services 12,043 15,860 11,907 FDIC premiums and assessments 3,105 3,759 5,876 Other real estate owned and foreclosures 36 17 125 Amortization of intangible assets 5,134 5,200 6,181 Goodwill impairment — — 553,762 Merger, restructuring and conversion related expenses 8,909 5,781 5,839 Other 28,421 26,353 29,283 Total non-interest expense 288,716 285,893 840,239 Income/(loss) from continuing operations before income taxes 113,818 149,021 ( 533,028 ) Income tax expense/(benefit) from continuing operations 21,285 30,357 ( 19,853 ) Net income/(loss) from continuing operations 92,533 118,664 ( 513,175 ) (Loss) from discontinued operations before income taxes — — ( 26,855 ) Income tax (benefit) from discontinued operations — — ( 7,013 ) Net (loss) from discontinued operations — — ( 19,842 ) Net income/(loss) $ 92,533 $ 118,664 $ ( 533,017 ) Preferred stock dividend — — 313 Income/(loss) available to common shareholders $ 92,533 $ 118,664 $ ( 533,330 ) Years Ended December 31, (in thousands, except per share data) 2022 2021 2020 Basic earnings/(loss) per share: Continuing Operations $ 2.03 $ 2.41 $ ( 10.21 ) Discontinued operations — — ( 0.39 ) Total basic earnings/(loss) per share $ 2.03 $ 2.41 $ ( 10.60 ) Diluted earnings/(loss) per share: Continuing Operations $ 2.02 $ 2.39 $ ( 10.21 ) Discontinued operations — — ( 0.39 ) Total diluted earnings/(loss) per share $ 2.02 $ 2.39 $ ( 10.60 ) Weighted average common shares outstanding: Basic 45,564 49,240 50,270 Diluted 45,914 49,554 50,270 The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contenets BERKSHIRE HILLS BANCORP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME Years Ended December 31, (In thousands) 2022 2021 2020 Net income/(loss) $ 92,533 $ 118,664 $ ( 533,017 ) Other comprehensive (loss)/income, before tax: Changes in unrealized gains and losses on securities available-for-sale ( 235,081 ) ( 46,794 ) 25,726 Changes in unrealized gains and losses on cash flow hedges ( 6,667 ) — — Changes in unrealized gains and losses on pension 1,674 993 ( 489 ) Total other comprehensive (loss)/income, before tax ( 240,074 ) ( 45,801 ) 25,237 Income taxes related to other comprehensive (loss)/income: Changes in unrealized gains and losses on securities available-for-sale 60,922 11,937 ( 6,471 ) Changes in unrealized gains and losses on cash flow hedges 1,789 — — Changes in unrealized gains and losses on pension ( 446 ) ( 250 ) 112 Total income tax benefit/(expense) related to other comprehensive income (loss) 62,265 11,687 ( 6,359 ) Total other comprehensive (loss)/income ( 177,809 ) ( 34,114 ) 18,878 Total comprehensive (loss)/income $ ( 85,276 ) $ 84,550 $ ( 514,139 ) The accompanying notes are an integral part of these consolidated financial statements. F-7 Table of Contents BERKSHIRE HILLS BANCORP, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY Preferred Stock Common Stock Additional paid-in Unearned Retained (deficit) Accumulated other comprehensive Treasury (In thousands, except per share data) Shares Amount Shares Amount capital compensation earnings (loss) income stock Total Balance at January 1, 2020 522 $ 40,633 49,585 $ 517 $ 1,422,441 $ ( 8,465 ) $ 361,082 $ 11,993 $ ( 69,637 ) $ 1,758,564 Comprehensive (loss): Net (loss) — — — — — — ( 533,017 ) — — ( 533,017 ) Other net comprehensive income — — — — — — — 18,878 — 18,878 Total comprehensive income — — — — — — ( 533,017 ) 18,878 — ( 514,139 ) Impact of ASC 326 Adoption — — — — — — ( 24,380 ) — — ( 24,380 ) Conversion of preferred stock to common stock ( 522 ) ( 40,633 ) 1,043 11 10,395 — — — 30,227 — Cash dividends declared on common shares ($ 0.72 per share) — — — — — — ( 36,251 ) — — ( 36,251 ) Cash dividends declared on preferred shares ($ 1.20 per share) — — — — — — ( 313 ) — — ( 313 ) Treasury stock purchased — — ( 14 ) — — — — — ( 473 ) ( 473 ) Forfeited shares — — ( 91 ) — ( 1,570 ) 2,727 — — ( 1,157 ) — Exercise of stock options — — 37 — — — ( 465 ) — 1,129 664 Restricted stock grants — — 314 — ( 4,121 ) ( 5,234 ) — — 9,355 — Stock-based compensation — — — — — 4,727 — — — 4,727 Other, net — — ( 41 ) — 94 — — — ( 720 ) ( 626 ) Balance at December 31, 2020 — $ — 50,833 $ 528 $ 1,427,239 $ ( 6,245 ) $ ( 233,344 ) $ 30,871 $ ( 31,276 ) $ 1,187,773 Comprehensive income: 0 Net income — — — — — — 118,664 — — 118,664 Other net comprehensive (loss) — — — — — — — ( 34,114 ) — ( 34,114 ) Total comprehensive income — — — — — — 118,664 ( 34,114 ) — 84,550 Cash dividends declared on common shares ($ 0.48 per share) — — — — — — ( 24,553 ) — — ( 24,553 ) Treasury stock purchased — — ( 2,500 ) — — — — — ( 68,712 ) ( 68,712 ) Forfeited shares — — ( 113 ) — 90 2,644 — — ( 2,734 ) — Exercise of stock options — — 20 — — — ( 150 ) — 567 417 Restricted stock grants — — 476 — ( 3,898 ) ( 9,625 ) — — 13,523 — Stock-based compensation — — — — — 4,170 — — — 4,170 Other, net — — ( 49 ) — 14 — — — ( 1,224 ) ( 1,210 ) Balance at December 31, 2021 — $ — 48,667 $ 528 $ 1,423,445 $ ( 9,056 ) $ ( 139,383 ) $ ( 3,243 ) $ ( 89,856 ) $ 1,182,435 Comprehensive income: Net income — — — — — — 92,533 — — 92,533 Other net comprehensive (loss) — — — — — — — ( 177,809 ) — ( 177,809 ) Total comprehensive income — — — — — — 92,533 ( 177,809 ) — ( 85,276 ) Cash dividends declared common shares ($ 0.54 per share) — — — — — — ( 24,527 ) — — ( 24,527 ) Treasury stock purchased — — ( 4,485 ) — — — — — ( 124,519 ) ( 124,519 ) Forfeited shares — — ( 98 ) — 189 2,560 — — ( 2,749 ) — Exercise of stock options — — 12 — — — ( 51 ) — 321 270 Restricted stock grants — — 328 — 537 ( 9,440 ) — — 8,903 — Stock-based compensation — — — — — 7,338 — — — 7,338 Other, net — — ( 63 ) — 12 — — — ( 1,671 ) ( 1,659 ) Balance at December 31, 2022 — $ — 44,361 $ 528 $ 1,424,183 $ ( 8,598 ) $ ( 71,428 ) $ ( 181,052 ) $ ( 209,571 ) $ 954,062 The accompanying notes are an integral part of these consolidated financial statements. F-8 Table of Contents BERKSHIRE HILLS BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, (In thousands) 2022 2021 2020 Cash flows from operating activities: Net income/(loss) from continuing operations $ 92,533 $ 118,664 $ ( 513,175 ) Net (loss) from discontinued operations — — ( 19,842 ) Net income/(loss) $ 92,533 $ 118,664 $ ( 533,017 ) Adjustments to reconcile net income to net cash provided by operating activities: Provision expense/(benefit) for credit losses 11,000 ( 500 ) 75,878 Net amortization of securities 2,886 1,939 2,513 Change in unamortized net loan origination costs and premiums 3,312 ( 1,918 ) 21,856 Premises and equipment depreciation and amortization expense 9,576 11,035 11,919 Stock-based compensation expense 7,338 4,170 4,727 Accretion of purchase accounting entries, net ( 1,637 ) ( 6,577 ) ( 10,377 ) Amortization of other intangibles 5,134 5,200 6,181 Income from cash surrender value of bank-owned life insurance policies ( 5,540 ) ( 5,561 ) ( 5,354 ) Securities losses/(gains), net 2,031 787 7,576 Net change in loans held-for-sale 5,168 5,775 ( 4,267 ) Loss on disposition of assets — 2,811 327 Loss on sale of real estate — 6 13 Amortization of interest in tax-advantaged projects 3,508 3,444 3,645 Goodwill impairment — — 553,762 Gain on sale of business operations and other assets — ( 52,942 ) — Prepayment penalties on repayment of Federal Home Loan Bank advances — 862 — Net change in other ( 12,076 ) 18,282 ( 31,247 ) Net cash provided by operating activities of continuing operations 123,233 105,477 123,977 Net cash provided/(used) by operating activities of discontinued operations — — 103,664 Net cash provided by operating activities $ 123,233 $ 105,477 $ 227,641 Cash flows from investing activities: Net decrease in trading security 818 776 734 Purchases of marketable equity securities — — ( 17,631 ) Proceeds from sales of marketable equity securities — 2,880 33,928 Purchases of securities available for sale ( 478,940 ) ( 804,616 ) ( 885,182 ) Proceeds from sales of securities available for sale 149,994 — 69,337 Proceeds from maturities, calls, and prepayments of securities available for sale 548,423 575,538 457,586 Purchases of securities held to maturity ( 807 ) ( 219,470 ) ( 144,651 ) Proceeds from maturities, calls, and prepayments of securities held to maturity 51,961 46,061 35,331 Net change in loans ( 1,559,012 ) 1,262,521 1,054,029 Net change in Mid-Atlantic region loans held for sale — 50,914 — Proceeds from surrender of bank-owned life insurance 2,311 2,566 553 Purchase of Federal Home Loan Bank stock ( 124,331 ) — ( 6,741 ) Proceeds from sales of Federal Home Loan Bank stock 127,912 24,078 19,887 Net investment in limited partnership tax credits ( 14,537 ) ( 2,878 ) ( 7,280 ) Purchase of premises and equipment, net ( 1,495 ) ( 1,606 ) ( 7,208 ) (Continued) F-9 Table of Contents BERKSHIRE HILLS BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONCLUDED) Years ended December 31, (In thousands) 2022 2021 2020 Proceeds from sales of seasoned commercial loan portfolios 24,323 16,417 37,988 Proceeds from sales of other real estate owned — 187 171 Cash outflows from sale of business operations and other assets — ( 352,814 ) — Net investing cash flows provided/(used) by discontinued operations — — 252 Net cash (used)/provided by investing activities $ ( 1,273,380 ) $ 600,554 $ 641,103 Cash flows from financing activities: Net increase in deposits $ 258,316 $ ( 154,052 ) $ 499,657 Net change in Mid-Atlantic region deposits held for sale — 20,953 — Proceeds from Federal Home Loan Bank advances and other borrowings 51,275 — 326,277 Repayments of Federal Home Loan Bank advances and other borrowings ( 60,196 ) ( 462,059 ) ( 582,648 ) Proceeds from issuance of subordinated debt 98,032 — — Repayment from calling of subordinated debt ( 75,000 ) — — Purchase of treasury stock ( 124,519 ) ( 68,712 ) ( 473 ) Exercise of stock options 270 417 664 Common and preferred stock cash dividends paid ( 24,527 ) ( 24,553 ) ( 36,564 ) Settlement of derivative contracts with financial institution counterparties 84,044 51,907 ( 97,611 ) Net cash provided/(used) by financing activities $ 207,695 $ ( 636,099 ) $ 109,302 Net change in cash and cash equivalents ( 942,452 ) 69,932 978,046 Cash and cash equivalents at beginning of year 1,627,807 1,557,875 579,829 Cash and cash equivalents at end of year 685,355 1,627,807 1,557,875 Supplemental cash flow information: Interest paid on deposits $ 32,782 $ 29,606 $ 82,319 Interest paid on borrowed funds 9,043 11,385 21,277 Income taxes (refunded)/paid, net 28,439 14,816 ( 13,864 ) Other non-cash changes: Other net comprehensive (loss)/income $ ( 177,809 ) $ ( 34,114 ) $ 18,878 Impact to retained earnings from adoption of ASC 326, net of tax — — 24,380 Mid-Atlantic assets reclassified to held for sale — — 317,304 Mid-Atlantic liabilities reclassified to held for sale — — 630,065 Mid-Atlantic loans held-for-sale reclassified to portfolio loans, net — 29,418 — Mid-Atlantic deposits held-for-sale reclassified to deposits, net — 7,197 — Seasoned loan portfolios reclassified to held-for-sale, net 3,369 11,660 14,845 Held-for-sale loans reclassified to held-for-investment, net 606 — — Premises and equipment reclassified to held-for-sale 1,380 4,577 — Real estate owned acquired in settlement of loans — — 224 Premium payable on cash flow hedges 2,296 — — The accompanying notes are an integral part of these consolidated financial statements. F-10 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2022, 2021, and 2020 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Consolidation The Consolidated Financial Statements (the “financial statements”) of Berkshire Hills Bancorp, Inc. and its subsidiaries (the “Company” or “Berkshire”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company is a Delaware corporation, headquartered in Boston, Massachusetts, and the holding company for Berkshire Bank (the “Bank”), a Massachusetts-chartered trust company headquartered in Pittsfield, Massachusetts. These financial statements include the accounts of the Company, its wholly-owned subsidiaries and the Bank’s consolidated subsidiaries. In consolidation, all significant intercompany accounts and transactions are eliminated. The results of operations of companies or assets acquired are included only from the dates of acquisition. All material wholly-owned and majority-owned subsidiaries are consolidated unless GAAP requires otherwise. The Company has evaluated subsequent events for potential recognition and/or disclosure through the date these financial statements were issued. Reclassifications Certain items in prior financial statements have been reclassified to conform to the current presentation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from those estimates. Refer to Note 17 – Other Commitments, Contingencies, and Off-Balance Sheet Activities for pandemic related risks and uncertainties. Business Combinations Business combinations are accounted for using the acquisition method of accounting. Under this method, the accounts of an acquired entity are included with the acquirer’s accounts as of the date of acquisition with any excess of purchase price over the fair value of the net assets acquired (including identifiable intangibles) capitalized as goodwill. To consummate an acquisition, the Company will typically issue common stock and/or pay cash, depending on the terms of the acquisition agreement. The value of common shares issued is determined based upon the market price of the stock as of the closing of the acquisition. Cash and Cash equivalents Cash and cash equivalents include cash, balances due from banks, and short-term investments, all of which had an original maturity within 90 days. Due to the nature of cash and cash equivalents and the near term maturity, the Company estimated that the carrying amount of such instruments approximated fair value. The nature of the Bank’s business requires that it maintain amounts due from banks which at times, may exceed federally insured limits. The Bank has not experienced any losses on such amounts and all amounts are maintained with well-capitalized institutions. Trading Security The Company accounts for a tax advantaged economic development bond originated in 2008 at fair value, in accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 320. The bond has been designated as a trading account security and is recorded at fair value, with changes in unrealized gains and losses recorded through earnings each period as part of non-interest income. F-11 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Securities Debt securities that management has the intent and ability to hold to maturity are classified as held to maturity and carried at amortized cost. All other debt securities are classified as available for sale and carried at fair value, with unrealized gains and losses reported as a component of other net comprehensive income. Equity securities are carried at fair value, with changes in fair value reported in net income. Management determines the appropriate classification of securities at the time of purchase. Restricted equity securities, such as stock in the Federal Home Loan Bank of Boston (“FHLBB”) are carried at cost. There are no quoted market prices for the Company’s restricted equity securities. The Bank is a member of the FHLBB, which requires that members maintain an investment in FHLBB stock, which may be redeemed based on certain conditions. The Bank reviews for impairment based on the ultimate recoverability of the cost bases in the FHLBB stock. Purchase premiums and discounts are recognized in interest income using the interest method, without anticipating prepayments, except mortgage-backed securities where prepayments are anticipated, over the terms of the securities. Premiums on callable debt securities are amortized to their earliest call date. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method. The Company measures expected credit losses on held to maturity debt securities on a collective basis. Accrued interest receivable on held to maturity debt securities is excluded from the estimate of credit losses. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The Company evaluates available for sale debt securities in an unrealized loss position by first assessing whether it intends to sell or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For available for sale debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Loans Held for Sale Loans originated with the intent to be sold in the secondary market are accounted for under the fair value option. Non-refundable fees and direct loan origination costs related to residential mortgage loans held for sale are recognized in non-interest income or non-interest expense as earned or incurred. Fair value is primarily determined based on quoted prices for similar loans in active markets. Gains and losses on sales of residential mortgage loans (sales proceeds minus carrying value) are recorded in non-interest income. Loans that were previously held for investment that the Company has an active plan to sell are transferred to loans held for sale at the lower of cost or market (fair value). The market price is primarily determined based on quoted prices for similar loans in active markets or agreed upon sales prices. Gains are recorded in non-interest income at sale to the extent that the sale price of the loan exceeds carrying value. Any reduction in the loan’s value, prior to being transferred to loans held for sale, is reflected as a charge-off of the recorded investment in the loan resulting in a new cost basis, with a corresponding reduction in the allowance for credit losses. Further decreases in the fair value of the loan are recognized in non-interest expense. F-12 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Loans Loans are reported at their amortized cost. Amortized cost is the principal balance outstanding, net of the unamortized balance of any deferred fees or costs and the unamortized balance of any premiums or discounts on loans purchased or acquired through mergers. Interest income is accrued on the unpaid principal balance. Interest income includes net accretion or amortization of deferred fees or costs and of premiums or discounts. Direct loan origination costs, net of any origination fees, in addition to premiums and discounts on loans, are deferred and recognized as an adjustment of the related loan yield using the interest method. Interest on loans, excluding automobile and unsecured consumer loans, is generally not accrued on loans which are ninety days or more past due unless the loan is well-secured and in the process of collection. Past due status is based on contractual terms of the loan. Automobile and unsecured consumer loans generally continue accruing until one hundred and twenty days delinquent, at which time they are charged off. All interest accrued but not collected for loans that are placed on non-accrual or charged-off is reversed against interest income, except for certain loans designated as well-secured. The interest on non-accrual loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Purchase Credit Deteriorated (PCD) Loans Loans that the Company acquired in acquisitions include some loans that have experienced more than insignificant credit deterioration since origination. PCD loans are recorded at the amount paid. An allowance for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for credit losses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision expense. Allowance for Credit Losses for Loans The allowance for credit losses for loans (“ACLL”) is comprised of the allowance for credit losses on loans and the allowance for unfunded commitments which is accounted for as a separate liability in other liabilities on the consolidated balance sheets. The ACLL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Accrued interest receivable is excluded from the estimate of credit losses. The level of the ACLL represents management’s estimate of expected credit losses over the expected life of the loans at the balance sheet date. The Company uses a static pool migration analysis method, applying expected historical loss trend and observed economic metrics. The level of the ACLL is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past and current events, utilizing a 7 quarter reasonable and supportable forecast period with a 1 year reversion period. The ACLL reserve is overlaid with qualitative factors based upon: • the existence and growth of concentrations of credit; • the volume and severity of past due financial assets, including nonaccrual assets; • the institutions lending and credit review as well as the experience and ability of relevant management and staff and; • the effect of other external factors such as regulatory, competition, regional market conditions, legal and technological environment and other events such as natural disasters; • the effect of other economic factors such as economic stimulus and customer forbearance programs. The allowance for unfunded commitments is maintained at a level by the Company to be sufficient to absorb expected lifetime losses related to unfunded credit facilities (including unfunded loan commitments and letters of credit).) The Company’s allowance for credit losses on unfunded commitments is recognized as a liability (other liability on the Consolidated Balance Sheets), with adjustments to the reserve recognized in other noninterest expense in the Consolidated Statements of Operations. F-13 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The ACLL is measured on a collective (pool) basis when similar risk characteristics exist. The Company evaluates its risk characteristics of loans based on regulatory call report code with sub-segmentation based on underlying collateral for certain loan types. Risk characteristics relevant to each portfolio segment are as follows: Construction – Loans in this segment primarily include real estate development loans for which payment is derived from sale of the property or long term financing at completion. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions. Commercial real estate multifamily, owner occupied and non-owner – Loans in this segment are primarily owner-occupied or income-producing properties throughout New England and Northeastern New York. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy, which in turn, will have an effect on the credit quality in this segment. Management monitors the cash flows of these loans. Commercial and industrial loans – Loans in this segment are made to businesses and are generally secured by assets of the business such as accounts receivable, inventory, marketable securities, other liquid collateral, equipment and other business assets. Repayment is expected from the cash flows of the business. Loans in this segment include asset based loans which generally have no scheduled repayment which are closely monitored against formula based collateral advance ratios. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality of this segment. Residential real estate – All loans in this segment are collateralized by residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment. Home equity and other consumer loans – Loans in this segment are primarily home equity lines of credit, automobile loans and other consumer loans. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment. Loans that do not share risk characteristics are evaluated on an individual basis, which the Company has determined to be non-accrual loans over a certain threshold, loans that were determined to be Troubled Debt Restructurings (“TDRs”) and PCD loans. Loans evaluated individually are not also included in the collective evaluation. Estimates of specific allowance may be determined by the present value of anticipated future cash flows or the loan’s observable fair market value, or the fair value of the collateral less costs to sell, if the loan is collateral dependent. However, for collateral dependent loans, the amount of the amortized cost in a loan that exceeds the fair value of the collateral is charged-off against the allowance for credit losses on loans in lieu of an allocation of a specific allowance amount when such an amount has been identified definitively as uncollectible. Prior to the adoption of ASC 326 on January 1, 2020, the Company calculated the allowance for loan losses using incurred losses methodology. Bank-Owned Life Insurance Bank-owned life insurance policies are reflected on the Consolidated Balance Sheets at the amount that can be realized under the insurance contract at the balance sheet date which is the cash surrender value. Changes in the net cash surrender value of the policies, as well as insurance proceeds received, are reflected in non-interest income on the Consolidated Statements of Operations and are not subject to income taxes. Foreclosed and Repossessed Assets Other real estate owned is comprised of real estate acquired through foreclosure proceedings or acceptance of a deed in lieu of foreclosure. Repossessed collateral is primarily comprised of taxi medallions. Both other real estate owned and repossessed collateral are held for sale and are initially recorded at the fair value less estimated costs to sell at the date of foreclosure or repossession, establishing a new cost basis. The shortfall, if any, of the loan balance over the fair value of the property or collateral (excluding taxi medallions), less cost to sell, at the time of transfer from loans to other real estate owned or repossessed collateral is charged to the allowance for credit losses on loans. F-14 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Subsequent to transfer, the asset is carried at lower of cost or fair value less cost to sell and periodically evaluated for impairment. The shortfall, if any, of the loan balance over the fair value of the collateral comprised of taxi medallions at the time of transfer from loans to repossessed collateral is charged to non-interest income. Subsequent impairments in the fair value of other real estate owned and repossessed collateral are charged to expense in the period incurred. Net operating income or expense related to other real estate owned and repossessed collateral is included in operating expenses in the accompanying Consolidated Statements of Operations. Because of changing market conditions, there are inherent uncertainties in the assumptions with respect to the estimated fair value of other real estate owned and repossessed collateral. Because of these inherent uncertainties, the amount ultimately realized on other real estate owned and repossessed collateral may differ from the amounts reflected in the financial statements. Capitalized Servicing Rights Capitalized servicing rights are included in “other assets” in the Consolidated Balance Sheets. Servicing assets are initially recognized as separate assets at fair value when rights are acquired through purchase or through sale of financial assets with servicing retained. The Company's servicing rights accounted for under the fair value method are carried on the Consolidated Balance Sheets at fair value with changes in fair value recorded in income in the period in which the change occurs. Changes in the fair value of servicing rights are primarily due to changes in valuation assumptions, such as discount rates and prepayment speeds, and the collection and realization of expected cash flows. The Company’s servicing rights accounted for under the amortization method are initially recorded at fair value. Under that method, capitalized servicing rights are charged to expense in proportion to and over the period of estimated net servicing income. Fair value of the servicing rights is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, prepayment speeds and default rates and losses. Impairment is recognized through a valuation allowance for an individual tranche, to the extent that fair value is less than the capitalized amount for the tranches. If the Company later determines that all or a portion of the impairment no longer exists for a particular tranche, a reduction of the allowance may be recorded as an increase to income. Premises and Equipment Land is carried at cost. Buildings, improvements, and equipment are carried at cost less accumulated depreciation and amortization computed on the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized on the straight-line method over the shorter of the lease term, plus optional terms if certain conditions are met, or the estimated useful life of the asset. Goodwill Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is assessed annually for impairment, and more frequently if events or changes in circumstances indicate that there may be an impairment. Adverse changes in the economic environment, declining operations, unanticipated competition, loss of key personnel, or other factors could result in a decline in the implied fair value of goodwill. Subsequent reversals of goodwill impairment are prohibited. As of December 31, 2020, the Company no longer has goodwill. Other Intangibles Intangible assets are acquired assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset or liability. The fair values of these assets are generally determined based on appraisals and are subsequently amortized on a straight-line basis or an accelerated basis over their estimated lives. Management assesses the recoverability of these intangible assets at least annually or whenever events or changes in circumstances indicate that their carrying value may not be recoverable. If the carrying amount exceeds fair value, an impairment charge is recorded to income. F-15 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Transfers of Financial Assets Transfers of an entire financial asset, group of entire financial assets, or a participating interest in an entire financial asset are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets. Income Taxes Deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable for future years to differences between financial statement and tax bases of existing assets and liabilities. The effect of tax rate changes on deferred taxes is recognized in the income tax provision in the period that includes the enactment date. A tax valuation allowance is established, as needed, to reduce net deferred tax assets to the amount expected to be realized. In the event it becomes more likely than not that some or all of the deferred tax asset allowances will not be needed, the valuation allowance will be adjusted. In the ordinary course of business there is inherent uncertainty in quantifying the Company’s income tax positions. Income tax positions and recorded tax benefits are based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, we have determined the amount of the tax benefit to be recognized by estimating the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is more-likely-than-not that a tax benefit will not be sustained, no tax benefit has been recognized in the financial statements. Where applicable, associated interest and penalties have also been recognized. We recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. Insurance Commissions Commission revenue is recognized as of the effective date of the insurance policy or the date the customer is billed, whichever is later, net of return commissions related to policy cancellations. Policy cancellation is a variable consideration that is not deemed significant and thus, does not impact the amount of revenue recognized. In addition, the Company may receive additional performance commissions based on achieving certain sales and loss experience measures. Such commissions are recognized when determinable, which is generally when such commissions are received or when the Company receives data from the insurance companies that allows the reasonable estimation of these amounts. On September 1, 2021, the Company completed the sale of substantially all of the assets, and the assumption of certain liabilities, of Berkshire Insurance Group, Inc. (“BIG”) to Brown & Brown of Massachusetts, LLC ("Buyer"), a Massachusetts limited liability company. This sale was made pursuant to the Asset Purchase Agreement dated August 24, 2021. The Buyer paid BIG an aggregate purchase price of $ 41.5 million, minus $ 1.6 million for executive goodwill purchase price payments paid by the Buyer at the Closing to certain executives of BIG. The Company recorded a $ 37.2 million pre-tax gain related to this sale in 2021, which is included in gain on sale of business operations and assets on the Consolidated Statements of Operations. F-16 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Stock-Based Compensation The Company measures and recognizes compensation cost relating to share-based payment transactions based on the grant-date fair value of the equity instruments issued. The fair value of restricted stock is recorded as unearned compensation. The deferred expense is amortized to compensation expense based on one of several permitted attribution methods over the longer of the required service period or performance period. For performance-based restricted stock awards, the Company estimates the degree to which performance conditions will be met to determine the number of shares that will vest and the related compensation expense. Compensation expense is adjusted in the period such estimates change. Income tax benefits and/or tax deficiencies related to stock compensation determined as the difference between compensation cost recognized for financial reporting purposes and the deduction for tax, are recognized in the income statement as income tax expense or benefit in the period in which they occur. Wealth Management Wealth management assets held in a fiduciary or agent capacity are not included in the accompanying Consolidated Balance Sheets because they are not assets of the Company. Wealth management fees is primarily comprised of fees earned from consultative investment management, trust administration, tax return preparation, and financial planning. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based on the daily accrual of the market value of the investment accounts and the applicable fee rate. Derivative Instruments and Hedging Activities The Company enters into interest rate swap agreements as part of the Company’s interest rate risk management strategy for certain assets and liabilities and not for speculative purposes. Based on the Company’s intended use for the interest rate swap at inception, the Company designates the derivative as either an economic hedge of an asset or liability or a hedging instrument subject to the hedge accounting provisions of ASC 815, “Derivatives and Hedging.” Interest rate swaps designated as economic hedges are recorded at fair value within other assets or liabilities. Changes in the fair value of these derivatives are recorded directly through earnings. For interest rate swaps that management intends to apply the hedge accounting provisions of ASC 815, the Company formally documents at inception all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking the various hedges. Additionally, the Company uses dollar offset or regression analysis at the hedge’s inception and for each reporting period thereafter, to assess whether the derivative used in its hedging transaction is expected to be and has been highly effective in offsetting changes in the fair value or cash flows of the hedged item. The Company discontinues hedge accounting when it is determined that a derivative is not expected to be or has ceased to be highly effective as a hedge, and then reflects changes in fair value of the derivative in earnings after termination of the hedge relationship. The Company enters into commitments to lend with borrowers, and forward commitments to sell loans or to-be-announced mortgage-backed bonds to investors to hedge against the inherent interest rate and pricing risk associated with selling loans. The commitments to lend generally terminate once the loan is funded, the lock period expires or the borrower decides not to contract for the loan. The forward commitments generally terminate once the loan is sold, the commitment period expires or the borrower decides not to contract for the loan. These commitments are considered derivatives which are accounted for by recognizing their estimated fair value on the Consolidated Balance Sheets as either a freestanding asset or liability. See Note 15 - Derivative Instruments and Hedging Activities to the financial statements for more information on commitments to lend and forward commitments. Off-Balance Sheet Financial Instruments In the ordinary course of business, the Company enters into off-balance sheet financial instruments, consisting primarily of credit related financial instruments. These financial instruments are recorded in the financial statements when they are funded or related fees are incurred or received. F-17 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fair Value Hierarchy The Company groups assets and liabilities that are measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Level 1 - Valuation is based on quoted prices in active markets for identical assets or liabilities. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2 - Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using unobservable techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. Employee Benefits The Company maintains an employer sponsored 401(k) plan to which participants may make contributions in the form of salary deferrals and the Company provides matching contributions in accordance with the terms of the plan. Contributions due under the terms of the defined contribution plans are accrued as earned by employees. Due to the Rome Bancorp acquisition in 2011, the Company inherited a noncontributory, qualified, defined benefit pension plan for certain employees who met age and service requirements; as well as other post-retirement benefits, principally health care and group life insurance. The Rome pension plan and postretirement benefits that were acquired in connection with the whole-bank acquisition were frozen prior to the close of the transaction. The pension benefit in the form of a life annuity is based on the employee’s combined years of service, age, and compensation. The Company also has a long-term care post-retirement benefit plan for certain executives where upon disability, associated benefits are funded by insurance policies or paid directly by the Company. In order to measure the expense associated with the Plans, various assumptions are made including the discount rate, expected return on plan assets, anticipated mortality rates, and expected future healthcare costs. The assumptions are based on historical experience as well as current facts and circumstances. The Company uses a December 31 measurement date for its plans. As of the measurement date, plan assets are determined based on fair value, generally representing observable market prices. The projected benefit obligation is primarily determined based on the present value of projected benefit distributions at an assumed discount rate. Net periodic pension benefit costs include interest costs based on an assumed discount rate, the expected return on plan assets based on actuarially derived market-related values, and the amortization of net actuarial losses. Net periodic postretirement benefit costs include service costs, interest costs based on an assumed discount rate, and the amortization of prior service credits and net actuarial gains. Differences between expected and actual results in each year are included in the net actuarial gain or loss amount, which is recognized in other comprehensive income. The net actuarial gain or loss in excess of a 10% corridor is amortized in net periodic benefit cost over the average remaining service period of active participants in the Plans. The prior service credit is amortized over the average remaining service period to full eligibility for participating employees expected to receive benefits. The Company recognizes in its consolidated balance sheets an asset for a plan’s overfunded status or a liability for a plan’s underfunded status. The Company also measures the Plans’ assets and obligations that determine its funded status as of the end of the fiscal year and recognizes those changes in other comprehensive income/(loss), net of tax. F-18 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Due to the SI Financial acquisition in 2019, the Company inherited a tax-qualified defined benefit pension plan. The plan was frozen effective September 6, 2013 and SI Financial recorded a contingent obligation to settle the plan at a future date, which was assumed by the Company. The plan is a single plan under the Internal Revenue Code and, as a result, all of the assets stand behind all of liabilities. Accordingly, contributions made by a participating employer may be used to provide benefits to participants of other participating employers. Operating Segments The Company operates as one consolidated reportable segment. The chief operating decision-maker evaluates consolidated results and makes decisions for resource allocation on this same data. Management periodically reviews and redefines its segment reporting as internal reporting practices evolve and components of the business change. The financial statements reflect the financial results of the Company's one reportable operating segment. Recently Adopted Accounting Principles There were no new applicable material accounting pronouncements adopted by the Company since December 31, 2021. Future Application of Accounting Pronouncements In March 2022, the FASB issued ASU No. 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method.” The guidance expands the current last-of-layer method to allow multiple hedge layers of a single closed portfolio (renamed to portfolio layer method) and expands the portfolio layer method to include nonprepayable financial assets. The ASU specifies eligible hedging instruments in a single-layer hedge and provides additional guidance on accounting for and disclosure of hedge basis adjustments that are applicable to the portfolio layer method. Further, hedge basis adjustments should be considered when determining credit losses for assets included in the closed portfolio. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted. The adoption is not expected to have a material impact on the Company’s Consolidated Financial Statements. In March 2022, the FASB issued ASU No. 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” The ASU eliminates the troubled debt restructuring (“TDR”) accounting model that was adopted with Topic 326, “Financial Instruments – Credit Losses” and enhances disclosure requirements for certain loan refinancings and restructurings when a borrower is experiencing financial difficulty. The ASU requires prospective disclosure of current-period gross write-offs by year of origination. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The adoption is not expected to have a material impact on the Company’s Consolidated Financial Statements. F-19 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2. DISCONTINUED OPERATIONS AND BRANCH SALE During the first quarter of 2019, the Company reached the decision to pursue the sale of the national mortgage banking operations of First Choice Loan Services, Inc. (“FCLS”) – a subsidiary of the Bank. The decision was based on a number of strategic priorities and other factors, including the competitiveness of the mortgage industry. As a result of these actions, the Company classified the operations of FCLS as discontinued under ASC 205-20. The Consolidated Balance Sheets, Consolidated Statements of Operations, and Consolidated Statements of Cash Flows present discontinued operations retrospectively for current and prior periods. On May 7, 2020, the Company completed a transaction to sell certain assets and liabilities related to the operations of FCLS. During the fourth quarter of 2020, the Company completed the final wind-down of the operations of FCLS. Operating results for the year ended December 31, 2020, included expenses related to the wind-down of operations. At year-end 2022 and 2021, there were no assets or liabilities related to the discontinued operations of FCLS. The following presents operating results of the discontinued operations of FCLS for the years ended December 31, 2022, 2021, and 2020: Years Ended December 31, (in thousands) 2022 2021 2020 Interest income $ — $ — $ 1,525 Interest expense — — 391 Net interest income — — 1,134 Non-interest (loss)/income — — ( 4,740 ) Total net revenue — — ( 3,606 ) Non-interest expense — — 23,249 (Loss) from discontinued operations before income taxes — — ( 26,855 ) Income tax (benefit) — — ( 7,013 ) Net (loss) from discontinued operations $ — $ — $ ( 19,842 ) Mid-Atlantic Branch Sale On August 27, 2021 the Company completed the sale of eight Mid-Atlantic branches to Investors Bank of Short Hills, New Jersey. This sale was made pursuant to a purchase and assumption agreement entered into by the banks on December 2, 2020. The sale included all branch premises and equipment, and Investors also assumed related operations and the employment of associated staff. The branch sale is not expected to impact Berkshire’s growing Mid-Atlantic specialized commercial lending operations, including SBA lending at its 44 Business Capital Division and its asset-based lending relationships. The sale involved the assignment of deposits which totaled $ 631 million and loans which totaled $ 220 million as of August 27, 2021. These instruments were classified as held for sale in the financial statements and were not included in total deposits and total loans reported by the Company at December 31, 2020. Investors Bank paid a premium of 3.0 % of the deposit balance transferred. The Company provided a settlement cash payment of $ 391 million as part of the sale for the assumption of covered deposit liabilities by Investors. The Company recorded a $ 14.7 million pre-tax gain related to this branch sale in 2021, which is included in gain on sale of business operations and assets on the Consolidated Statements of Operations. As of December 31, 2022 and 2021, there were no assets and liabilities held for sale related to the branch sale. F-20 Table of Contents NOTE 3. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, amounts due from banks, and short-term investments with original maturities of 90 days or less. At year-end 2022, there were no short-term investments pledged as collateral support for derivative financial contracts. At year-end 2021, short-term investments included $ 43.7 million pledged as collateral support for derivative financial contracts. The Federal Reserve Bank requires the Bank to maintain certain reserve requirements of vault cash and/or deposits. As of December 31, 2022 and 2021, the reserve requirement was zero . NOTE 4. TRADING SECURITY The Company holds a tax advantaged economic development bond that is being accounted for at fair value. The security had an amortized cost of $ 7.1 million and $ 7.9 million and a fair value of $ 6.7 million and $ 8.4 million at year-end 2022 and 2021, respectively. Unrealized losses recorded through income on this security totaled $ 0.8 million, $ 0.6 million, and $ 0.3 million for 2022, 2021, and 2020, respectively. As discussed further in Note 15 - Derivative Instruments and Hedging Activities, the Company has entered into a swap contract to swap-out the fixed rate of the security in exchange for a variable rate. The Company does not purchase securities with the intent of selling them in the near term, and there are no other debt securities in the trading portfolio at year-end 2022 and 2021 . F-21 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5. SECURITIES The following is a summary of securities available for sale (“AFS”) , held to maturity (“HTM”), and marketable equity securities: (In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Allowance December 31, 2022 Securities available for sale Debt securities: U.S Treasuries $ 11,972 $ 1 $ — $ 11,973 $ — Municipal bonds and obligations 65,943 422 ( 3,030 ) 63,335 — Agency collateralized mortgage obligations 631,732 — ( 99,787 ) 531,945 — Agency mortgage-backed securities 643,308 1 ( 96,996 ) 546,313 — Agency commercial mortgage-backed securities 264,218 — ( 35,750 ) 228,468 — Corporate bonds 43,368 80 ( 2,938 ) 40,510 — Other bonds and obligations 655 67 ( 66 ) 656 — Total securities available for sale 1,661,196 571 ( 238,567 ) 1,423,200 — Securities held to maturity Municipal bonds and obligations 266,793 691 ( 23,704 ) 243,780 66 Agency collateralized mortgage obligations 128,136 — ( 20,420 ) 107,716 — Agency mortgage-backed securities 50,958 — ( 9,240 ) 41,718 — Agency commercial mortgage-backed securities 135,206 — ( 23,203 ) 112,003 — Tax advantaged economic development bonds 2,069 8 ( 121 ) 1,956 25 Other bonds and obligations 291 — — 291 — Total securities held to maturity 583,453 699 ( 76,688 ) 507,464 91 Marketable equity securities 15,035 — ( 2,179 ) 12,856 — Total $ 2,259,684 $ 1,270 $ ( 317,434 ) $ 1,943,520 $ 91 December 31, 2021 Securities available for sale Debt securities: U.S Treasuries $ 59,972 $ 1 $ — $ 59,973 $ — Municipal bonds and obligations 71,822 5,355 — 77,177 — Agency collateralized mortgage obligations 693,782 5,566 ( 11,012 ) 688,336 — Agency mortgage-backed securities 711,154 2,347 ( 7,642 ) 705,859 — Agency commercial mortgage-backed securities 300,259 3,949 ( 3,628 ) 300,580 — Corporate bonds 44,824 950 ( 114 ) 45,660 — Other bonds and obligations — — — — — Total securities available for sale 1,881,813 18,168 ( 22,396 ) 1,877,585 — Securities held to maturity Municipal bonds and obligations 281,515 16,151 ( 693 ) 296,973 70 Agency collateralized mortgage-backed securities 149,195 3,203 ( 3,513 ) 148,885 — Agency mortgage-backed securities 57,327 95 ( 1,498 ) 55,924 — Agency commercial mortgage-backed securities 145,573 266 ( 3,289 ) 142,550 — Tax advantaged economic development bonds 2,728 26 ( 15 ) 2,739 35 Other bonds and obligations 165 — — 165 — Total securities held to maturity 636,503 19,741 ( 9,008 ) 647,236 105 Marketable equity securities 15,689 67 ( 303 ) 15,453 — Total $ 2,534,005 $ 37,976 $ ( 31,707 ) $ 2,540,274 $ 105 ` F-22 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS At year-end 2022 and 2021, accumulated net unrealized (losses) on AFS securities included in accumulated other comprehensive (loss)/income were losses of $ 238.0 million and $ 4.2 million, respectively. At year-end 2022 and 2021, accumulated net unrealized gains on the securities reclassified from AFS to HTM included in accumulated other comprehensive (loss)/income were $ 1.1 million and $ 2.4 million, respectively. The year-end 2022 and 2021 related income tax benefit/(liability) of $ 61.3 million and $ 0.4 million, respectively, was also included in accumulated other comprehensive (loss). The following table summarizes the activity in the allowance for credit losses for debt securities held to maturity by security type for the years ended December 31, 2022, 2021 and 2020: (In thousands) Municipal bonds and obligations Tax advantaged economic development bonds Total Balance at December 31, 2021 $ 70 $ 35 $ 105 Provision (benefit) for credit losses ( 4 ) ( 10 ) ( 14 ) Balance at December 31, 2022 $ 66 $ 25 $ 91 (In thousands) Municipal bonds and obligations Tax advantaged economic development bonds Total Balance at December 31, 2020 $ 64 $ 40 $ 104 Provision expense for credit losses 6 ( 5 ) 1 Balance at December 31, 2021 $ 70 $ 35 $ 105 (In thousands) Municipal bonds and obligations Tax advantaged economic development bonds Total Balance at December 31, 2019 $ — $ — $ — Impact of ASC 326 adoption 83 226 309 Provision (benefit) for credit losses ( 19 ) ( 186 ) ( 205 ) Balance at December 31, 2020 $ 64 $ 40 $ 104 Credit Quality Information The Company monitors the credit quality of held to maturity securities through credit ratings from various rating agencies. Credit ratings express opinions about the credit quality of a security and are utilized by the Company to make informed decisions. Investment grade securities are rated BBB-/Baa3 or higher and generally considered by the rating agencies and market participants to be of low credit risk. Conversely, securities rated below investment grade are considered to have distinctively higher credit risk than investment grade securities. For securities without credit ratings, the Company utilizes other financial information indicating the financial health of the underlying municipality, agency, or organization. As of December 31, 2022, none of the Company's investment securities were delinquent or in non-accrual status. F-23 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The amortized cost and estimated fair value of AFS and HTM securities, segregated by contractual maturity at year-end 2022 are presented below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities and collateralized mortgage obligations are shown in total, as their maturities are highly variable. Available for sale Held to maturity (In thousands) Amortized Cost Fair Value Amortized Cost Fair Value Within 1 year $ 12,482 $ 12,482 $ 995 $ 995 Over 1 year to 5 years 11,254 11,269 2,191 2,181 Over 5 years to 10 years 49,729 46,904 28,544 28,543 Over 10 years 48,473 45,819 237,423 214,308 Total bonds and obligations 121,938 116,474 269,153 246,027 Mortgage-backed securities 1,539,258 1,306,726 314,300 261,437 Total $ 1,661,196 $ 1,423,200 $ 583,453 $ 507,464 At year-end 2022 and 2021, the Company had pledged securities as collateral for certain municipal deposits and for interest rate swaps with certain counterparties. The total amortized cost and fair values of these pledged securities follows. Additionally, there is a blanket lien on certain securities to collateralize borrowings from the FHLBB, as discussed further in Note 11 - Borrowed Funds. 2022 2021 (In thousands) Amortized Cost Fair Value Amortized Cost Fair Value Securities pledged to swap counterparties $ 11,972 $ 11,973 $ 34,773 $ 34,896 Securities pledged for municipal deposits 304,741 276,804 183,408 189,535 Total $ 316,713 $ 288,777 $ 218,181 $ 224,431 Proceeds from the sale of AFS securities totaled $ 150 million in 2022. During 2021, there were no sales of AFS securities. Proceeds from the sale of AFS securities totaled $ 69 million in 2020.The amounts for the sale of AFS securities were reclassified out of accumulated other comprehensive (loss)/income and into earnings. The components of net recognized gains and losses on the sale of AFS securities and the fair value change of marketable equities are as follows: (In thousands) 2022 2021 2020 Gross recognized gains $ 72 $ 108 $ 4,602 Gross recognized losses ( 2,009 ) ( 550 ) ( 11,133 ) Net recognized (losses) $ ( 1,937 ) $ ( 442 ) $ ( 6,531 ) F-24 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Debt securities with unrealized losses, segregated by the duration of their continuous unrealized loss positions, are summarized as follows: Less Than Twelve Months Over Twelve Months Total (In thousands) Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value December 31, 2022 Securities available for sale Debt securities: Municipal bonds and obligations $ 2,406 $ 36,696 $ 624 $ 2,763 $ 3,030 $ 39,459 Agency collateralized mortgage obligations 23,052 247,509 76,735 284,434 99,787 531,943 Agency mortgage-backed securities 3,124 37,540 93,872 508,683 96,996 546,223 Agency commercial mortgage-back securities 9,885 96,396 25,865 132,043 35,750 228,439 Corporate bonds 1,709 25,657 1,229 9,929 2,938 35,586 Other bonds and obligations — — 66 295 66 295 Total securities available for sale $ 40,176 $ 443,798 $ 198,391 $ 938,147 $ 238,567 $ 1,381,945 Securities held to maturity Municipal bonds and obligations 5,476 125,494 18,228 38,341 23,704 163,835 Agency collateralized mortgage obligations 2,734 49,539 17,686 58,177 20,420 107,716 Agency mortgage-backed securities 300 2,419 8,940 39,299 9,240 41,718 Agency commercial mortgage-back securities 447 9,713 22,756 102,290 23,203 112,003 Tax advantaged economic development bonds 1 142 120 1,008 121 1,150 Total securities held to maturity 8,958 187,307 67,730 239,115 76,688 426,422 Total $ 49,134 $ 631,105 $ 266,121 $ 1,177,262 $ 315,255 $ 1,808,367 December 31, 2021 Securities available for sale Debt securities: Agency collateralized mortgage obligations $ 9,626 $ 375,132 $ 1,386 $ 27,025 $ 11,012 $ 402,157 Agency mortgage-backed securities 3,179 222,887 4,463 175,941 7,642 398,828 Agency commercial mortgage-backed securities 1,609 103,354 2,019 49,313 3,628 152,667 Corporate bonds 114 11,115 — — 114 11,115 Total securities available for sale $ 14,528 $ 712,488 $ 7,868 $ 252,279 $ 22,396 $ 964,767 Securities held to maturity Municipal bonds and obligations 693 36,981 — — 693 36,981 Agency collateralized mortgage obligations 1,808 49,308 1,705 36,212 3,513 85,520 Agency mortgage-backed securities 839 26,656 659 26,025 1,498 52,681 Agency commercial mortgage-back securities 1,255 80,406 2,034 51,654 3,289 132,060 Tax advantaged economic development bonds 15 1,255 — — 15 1,255 Total securities held to maturity 4,610 194,606 4,398 113,891 9,008 308,497 Total $ 19,138 $ 907,094 $ 12,266 $ 366,170 $ 31,404 $ 1,273,264 F-25 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Debt Securities The Company expects to recover its amortized cost basis on all debt securities in its AFS and HTM portfolios. Furthermore, the Company does not intend to sell nor does it anticipate that it will be required to sell any of its securities in an unrealized loss position as of December 31, 2022, prior to this recovery. The Company’s ability and intent to hold these securities until recovery is supported by the Company’s strong capital and liquidity positions. The following summarizes, by investment security type, the basis for the conclusion that the debt securities in an unrealized loss position within the Company’s AFS and HTM portfolios did not maintain other-than-temporary impairment ("OTTI") at year-end 2022: AFS municipal bonds and obligations At year-end 2022, 46 out of 94 securities in the Company’s portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 7.1 % of the amortized cost of securities in unrealized loss positions. The Company continually monitors the municipal bond sector of the market carefully and periodically evaluates the appropriate level of exposure to the market. At this time, the Company feels the bonds in this portfolio carry minimal risk of default and the Company is appropriately compensated for that risk. There were no material underlying credit downgrades during the quarter. All securities are performing. AFS collateralized mortgage obligations At year-end 2022, 243 out of 245 securities in the Company’s portfolio of AFS collateralized mortgage obligations were in unrealized loss positions. Aggregate unrealized losses represented 15.8 % of the amortized cost of securities in unrealized loss positions. The Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), and Government National Mortgage Association ("GNMA") guarantee the contractual cash flows of all of the Company's collateralized residential mortgage obligations. The securities are investment grade rated and there were no material underlying credit downgrades during 2022. All securities are performing. AFS commercial and residential mortgage-backed securities At year-end 2022, 137 out of 139 securities in the Company’s portfolio of AFS mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 14.6 % of the amortized cost of securities in unrealized loss positions. The FNMA, FHLMC, and GNMA guarantee the contractual cash flows of the Company’s mortgage-backed securities. The securities are investment grade rated and there were no material underlying credit downgrades during 2022. All securities are performing. AFS corporate bonds At year-end 2022, 13 out of 15 securities in the Company’s portfolio of AFS corporate bonds were in unrealized loss positions. The aggregate unrealized loss represents 7.6 % of the amortized cost of bonds in unrealized loss positions. The Company reviews the financial strength of these bonds and has concluded that the amortized cost remains supported by the expected future cash flows of these securities. AFS other bonds and obligations At year-end 2022, 2 out of 3 securities in the Company’s portfolio of other bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 18.3 % of the amortized cost of securities in unrealized loss positions. The securities are all investment grade rated, and there were no material underlying credit downgrades during 2022. All securities are performing. HTM municipal bonds and obligations At year-end 2022, 119 out of 190 securities in the Company’s portfolio of HTM municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 12.6 % of the amortized cost of securities in unrealized loss positions. The Company continually monitors the municipal bond sector of the market carefully and periodically evaluates the appropriate level of exposure to the market. At this time, the Company feels the bonds in this portfolio carry minimal risk of default and the Company is appropriately compensated for that risk. There were no material underlying credit downgrades during the quarter. All securities are performing. F-26 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS HTM collateralized mortgage obligations At year-end 2022, 13 out of 13 securities in the Company’s portfolio of HTM collateralized mortgage obligations were in an unrealized loss position. Aggregate unrealized losses represented 15.9 % of the amortized cost of the security in an unrealized loss position. The FNMA, FHLMC, and GNMA guarantee the contractual cash flows of all of the Company's collateralized residential mortgage obligations. The securities are investment grade rated, and there were no material underlying credit downgrades during 2022. All securities are performing. HTM commercial and residential mortgage-backed securities At year-end 2022, 17 out of 17 securities in the Company’s portfolio of HTM mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 17.4 % of the amortized cost of securities in unrealized loss positions. The FNMA, FHLMC, and GNMA guarantee the contractual cash flows of the Company’s mortgage-backed securities. The securities are investment grade rated and there were no material underlying credit downgrades during 2022. All securities are performing. HTM tax-advantaged economic development bonds At year-end 2022, 2 out of 3 securities in the Company’s portfolio of tax-advantaged economic development bonds were in unrealized loss positions. Aggregate unrealized losses represented 9.5 % of the amortized cost of securities in unrealized loss position. The Company believes that more likely than not all the principal outstanding will be collected. All securities are performing. NOTE 6. LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES The following is a summary of total loans by regulatory call report code with sub-segmentation based on underlying collateral for certain loan types: (In thousands) December 31, 2022 December 31, 2021 Construction $ 319,452 $ 324,282 Commercial multifamily 620,088 515,817 Commercial real estate owner occupied 640,489 606,477 Commercial real estate non-owner occupied 2,496,237 2,156,929 Commercial and industrial 1,445,236 1,284,429 Residential real estate 2,312,447 1,489,248 Home equity 227,450 252,366 Consumer other 273,910 196,299 Total loans $ 8,335,309 $ 6,825,847 Allowance for credit losses 96,270 106,094 Net loans $ 8,239,039 $ 6,719,753 As of December 31, 2022 and 2021, outstanding loans originated under the Small Business Administration ("SBA") Paycheck Protection Program ("PPP") totaled $ 5.8 million and $ 29.9 million, respectively. These loans are 100% guaranteed by the SBA and the full principal amount of the loan may qualify for forgiveness. These loans are included in commercial and industrial. In 2022, the Company purchased loans aggregating $ 718 million and sold loans aggregating $ 366 million. In 2021, the Company purchased loans aggregating $ 211 million and sold loans aggregating $ 560 million. In 2020, the Company purchased loans aggregating $ 98 million and sold loans aggregating $ 415 million. Net gains on sales of loans were $ 12.5 million, $ 20.7 million, and $ 10.6 million for the years 2022, 2021, and 2020, respectively. These amounts are included in Loan Fees and Revenue on the Consolidated Statements of Operations. F-27 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Most of the Company’s lending activity occurs within its primary markets in Massachusetts, Southern Vermont, and Northeastern New York. Most of the loan portfolio is secured by real estate, including residential mortgages, commercial mortgages, and home equity loans. Year-end loans to operators of non-residential buildings totaled $ 1.9 billion, or 22.7 %, and $ 1.6 billion, or 24.0 % of total loans in 2022 and 2021, respectively. There were no other concentrations of loans related to any single industry in excess of 10% of total loans at year-end 2022 or 2021. As of December 31, 2022 and December 31, 2021, the Company had no foreclosed residential real estate property. Additionally, residential mortgage loans collateralized by real estate property that are in the process of foreclosure as of December 31, 2022 and December 31, 2021 totaled $ 3.0 million and $ 1.4 million, respectively, including sold loans serviced by the Company. At year-end 2022 and 2021, the Company had pledged loans totaling $ 0.8 billion and $ 0.7 billion, respectively, to the Federal Reserve Bank of Boston as collateral for certain borrowing arrangements. Also, residential first mortgage loans are subject to a blanket lien for FHLBB advances. See Note 11 - Borrowed Funds. At year-end 2022 and 2021, the Company’s commitments outstanding to related parties totaled $ 1.5 million and $ 1.7 million, respectively, and the loans outstanding against these commitments totaled $ 0.8 million and $ 1.0 million, respectively. Related parties include directors and executive officers of the Company and its subsidiaries, as well as their respective affiliates in which they have a controlling interest and immediate family members. For the years 2022 and 2021, all related party loans were performing. Risk characteristics relevant to each portfolio segment are as follows: Construction - Loans in this segment primarily include real estate development loans for which payment is derived from sale of the property or long term financing at completion. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions. Commercial real estate multifamily, owner occupied and non-owner - Loans in these segments are primarily owner-occupied or income-producing properties throughout New England and Northeastern New York. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy, which in turn, will have an effect on the credit quality in this segment. Management monitors the cash flows of these loans. Commercial and industrial loans - Loans in this segment are made to businesses and are generally secured by assets of the business such as accounts receivable, inventory, marketable securities, other liquid collateral, equipment and other business assets. Repayment is expected from the cash flows of the business. Loans in this segment include asset based loans which generally have no scheduled repayment and which are closely monitored against formula based collateral advance ratios. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment. Residential real estate - All loans in this segment are collateralized by residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment. Home equity and other consumer loans - Loans in this segment are primarily home equity lines of credit, automobile loans and other consumer loans. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment. F-28 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Allowance for Credit Losses for Loans The Allowance for Credit Losses for Loans (“ACLL”) is comprised of the allowance for credit losses on loans, and the allowance for unfunded commitments is accounted for as a separate liability in other liabilities on the Consolidated Balance Sheets. The level of the ACLL represents management’s estimate of expected credit losses over the expected life of the loans at the balance sheet date. The Company uses a static pool migration analysis method, applying expected historical loss trend and observed economic metrics. The level of the ACLL is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past and current events, utilizing a 7 quarter reasonable and supportable forecast period with a 1 year reversion period. The ACLL reserve is overlaid with qualitative factors based upon: • the existence and growth of concentrations of credit; • the volume and severity of past due financial assets, including nonaccrual assets; • the institutions lending and credit review as well as the experience and ability of relevant management and staff and; • the effect of other external factors such as regulatory, competition, regional market conditions, legal and technological environment and other events such as natural disasters; • the effect of other economic factors such as economic stimulus and customer forbearance programs. The allowance for unfunded commitments is maintained at a level by the Company to be sufficient to absorb expected lifetime losses related to unfunded credit facilities (including unfunded loan commitments and letters of credit) and is included in other liabilities on the consolidated balance sheets. F-29 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company’s activity in the allowance for credit losses for loans for the years ended December 31, 2022, December 31, 2021 and December 31, 2020 was as follows: (In thousands) Balance at Beginning of Period Charge-offs Recoveries Provision for Credit Losses Balance at End of Period Year ended December 31, 2022 Construction $ 3,206 $ — $ — $ ( 1,979 ) $ 1,227 Commercial multifamily 6,120 ( 94 ) 112 ( 4,328 ) 1,810 Commercial real estate owner occupied 12,752 ( 687 ) 702 ( 2,028 ) 10,739 Commercial real estate non-owner occupied 32,106 ( 5,894 ) 1,549 2,963 30,724 Commercial and industrial 22,584 ( 18,447 ) 3,050 11,556 18,743 Residential real estate 22,406 ( 555 ) 1,019 ( 4,204 ) 18,666 Home equity 4,006 ( 166 ) 283 ( 1,950 ) 2,173 Consumer other 2,914 ( 2,215 ) 505 10,984 12,188 Total allowance for credit losses $ 106,094 $ ( 28,058 ) $ 7,220 $ 11,014 $ 96,270 (In thousands) Balance at Beginning of Period Charge-offs Recoveries Provision for Credit Losses Balance at End of Period Year ended December 31, 2021 Construction $ 5,111 $ — $ — $ ( 1,905 ) $ 3,206 Commercial multifamily 5,916 ( 404 ) 157 451 6,120 Commercial real estate owner occupied 12,380 ( 1,640 ) 204 1,808 12,752 Commercial real estate non-owner occupied 35,850 ( 14,557 ) 2,522 8,291 32,106 Commercial and industrial 25,013 ( 10,841 ) 4,565 3,847 22,584 Residential real estate 28,491 ( 1,664 ) 1,767 ( 6,188 ) 22,406 Home equity 6,482 ( 334 ) 335 ( 2,477 ) 4,006 Consumer other 8,059 ( 1,578 ) 761 ( 4,328 ) 2,914 Total allowance for credit losses $ 127,302 $ ( 31,018 ) $ 10,311 $ ( 501 ) $ 106,094 (In thousands) Balance at Beginning of Period Impact of Adopting ASC 326 Sub-total Charge-offs Recoveries Provision for Credit Losses Balance at End of Period Year ended December 31, 2020 Construction $ 2,713 $ ( 342 ) $ 2,371 $ ( 834 ) $ — $ 3,574 $ 5,111 Commercial multifamily 4,413 ( 1,842 ) 2,571 ( 100 ) 100 3,345 5,916 Commercial real estate owner occupied 4,880 6,062 10,942 ( 8,686 ) 1,053 9,071 12,380 Commercial real estate non-owner occupied 16,344 11,201 27,545 ( 11,653 ) 307 19,651 35,850 Commercial and industrial 20,099 ( 2,189 ) 17,910 ( 19,328 ) 4,285 22,146 25,013 Residential real estate 9,970 6,799 16,769 ( 2,285 ) 1,359 12,648 28,491 Home equity 1,470 4,884 6,354 ( 347 ) 292 183 6,482 Consumer other 3,686 861 4,547 ( 2,562 ) 609 5,465 8,059 Total allowance for credit losses $ 63,575 $ 25,434 $ 89,009 $ ( 45,795 ) $ 8,005 $ 76,083 $ 127,302 F-30 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company’s allowance for credit losses on unfunded commitments is recognized as a liability (other liability on the Consolidated Balance Sheets), with adjustments to the reserve recognized in other noninterest expense in the Consolidated Statements of Operations. The Company’s activity in the allowance for credit losses on unfunded commitments for the years ended December 31, 2022, December 31, 2021, and December 31, 2020 was as follows: (In thousands) Total Balance at December 31, 2021 $ 7,043 Expense for credit losses 1,545 Balance at December 31, 2022 $ 8,588 (In thousands) Total Balance at December 31, 2020 $ 7,629 Release of expense for credit losses ( 586 ) Balance at December 31, 2021 $ 7,043 (In thousands) Total Balance at December 31, 2019 $ 100 Impact of adopting ASC 326 7,993 Sub-Total 8,093 Release of expense for credit losses ( 464 ) Balance at December 31, 2020 $ 7,629 Credit Quality Information The Company monitors the credit quality of its portfolio by using internal risk ratings that are based on regulatory guidance. Loans that are given a Pass rating are not considered a problem credit. Loans that are classified as Special Mention loans are considered to have potential weaknesses and are evaluated closely by management. Substandard, including non-accruing loans, are loans for which a definitive weakness has been identified and which may make full collection of contractual cash flows questionable. Doubtful loans are those with identified weaknesses that make full collection of contractual cash flows, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. For commercial credits, the Company assigns an internal risk rating at origination and reviews the rating annually, semiannually, or quarterly depending on the risk rating. The rating is also reassessed at any point in time when management becomes aware of information that may affect the borrower’s ability to fulfill their obligations. The Company risk rates its residential mortgages, including 1-4 family and residential construction loans, based on a three rating system: Pass, Special Mention, and Substandard. Loans that are current within 59 days are rated Pass. Residential mortgages that are 60-89 days delinquent are rated Special Mention. Loans delinquent for 90 days or greater are rated Substandard and generally placed on non-accrual status. F-31 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the Company’s loans by risk category: Term Loans Amortized Cost Basis by Origination Year (In thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total As of December 31, 2022 Construction Risk rating Pass $ 153,393 $ 133,708 $ 25,634 $ 3,432 $ 1,361 $ 1,924 $ — $ — $ 319,452 Special Mention — — — — — — — — — Substandard — — — — — — — — — Total $ 153,393 $ 133,708 $ 25,634 $ 3,432 $ 1,361 $ 1,924 $ — $ — $ 319,452 Commercial multifamily: Risk rating Pass $ 205,124 $ 61,032 $ 27,583 $ 100,696 $ 67,675 $ 149,633 $ 205 $ — $ 611,948 Special Mention — — 2,628 — — — — — 2,628 Substandard — — — — 5,512 — — — 5,512 Total $ 205,124 $ 61,032 $ 30,211 $ 100,696 $ 73,187 $ 149,633 $ 205 $ — $ 620,088 Commercial real estate owner occupied: Risk rating Pass $ 131,096 $ 127,270 $ 58,835 $ 82,576 $ 75,322 $ 154,056 $ 3,464 $ — $ 632,619 Special Mention — — 387 — — — — — 387 Substandard 1,003 122 31 282 1,056 4,989 — — 7,483 Total $ 132,099 $ 127,392 $ 59,253 $ 82,858 $ 76,378 $ 159,045 $ 3,464 $ — $ 640,489 Commercial real estate non-owner occupied: Risk rating Pass $ 621,685 $ 410,359 $ 175,456 $ 333,783 $ 313,124 $ 530,322 $ 17,846 $ — $ 2,402,575 Special Mention — — — — 20,000 18,462 — — 38,462 Substandard — — 7,237 13,623 15,610 18,730 — — 55,200 Total $ 621,685 $ 410,359 $ 182,693 $ 347,406 $ 348,734 $ 567,514 $ 17,846 $ — $ 2,496,237 Commercial and industrial: Risk rating Pass $ 282,781 $ 147,070 $ 56,880 $ 67,975 $ 83,223 $ 99,367 $ 648,956 $ — $ 1,386,252 Special Mention — 5,811 1,290 1,332 11,502 912 2,632 — 23,479 Substandard 204 496 3,640 8,139 1,981 2,799 10,581 — 27,840 Doubtful — — — — — 56 7,609 — 7,665 Total $ 282,985 $ 153,377 $ 61,810 $ 77,446 $ 96,706 $ 103,134 $ 669,778 $ — $ 1,445,236 Residential real estate Risk rating Pass $ 997,981 $ 280,308 $ 96,548 $ 70,845 $ 138,894 $ 713,744 $ 165 $ — $ 2,298,485 Special Mention — 364 — 861 202 707 — — 2,134 Substandard — 284 448 267 1,857 8,972 — — 11,828 Total $ 997,981 $ 280,956 $ 96,996 $ 71,973 $ 140,953 $ 723,423 $ 165 $ — $ 2,312,447 F-32 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Term Loans Amortized Cost Basis by Origination Year (In thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total As of December 31, 2021 Construction Risk rating Pass $ 71,784 $ 52,725 $ 117,784 $ 66,950 $ 3,839 $ 1,721 $ 50 $ — $ 314,853 Special Mention — — — — — — — — — Substandard — — — 9,429 — — — — 9,429 Total $ 71,784 $ 52,725 $ 117,784 $ 76,379 $ 3,839 $ 1,721 $ 50 $ — $ 324,282 Commercial multifamily: Risk rating Pass $ 63,630 $ 28,172 $ 98,455 $ 59,720 $ 76,699 $ 176,020 $ 457 $ — $ 503,153 Special Mention — 2,700 — 5,598 — — — — 8,298 Substandard — — — — — 4,230 136 — 4,366 Total $ 63,630 $ 30,872 $ 98,455 $ 65,318 $ 76,699 $ 180,250 $ 593 $ — $ 515,817 Commercial real estate owner occupied: Risk rating Pass $ 154,434 $ 50,236 $ 85,687 $ 91,316 $ 45,995 $ 157,346 $ 3,206 $ — $ 588,220 Special Mention — 525 869 1,668 1,405 1,157 — — 5,624 Substandard — — 2,113 1,593 838 8,089 — — 12,633 Total $ 154,434 $ 50,761 $ 88,669 $ 94,577 $ 48,238 $ 166,592 $ 3,206 $ — $ 606,477 Commercial real estate non-owner occupied: Risk rating Pass $ 426,086 $ 176,172 $ 296,985 $ 349,947 $ 204,043 $ 585,044 $ 19,511 $ — $ 2,057,788 Special Mention — 221 3,472 7,632 2,302 27,268 — — 40,895 Substandard — 7,588 — 2,784 33,472 14,303 99 — 58,246 Total $ 426,086 $ 183,981 $ 300,457 $ 360,363 $ 239,817 $ 626,615 $ 19,610 $ — $ 2,156,929 Commercial and industrial: Risk rating Pass $ 187,257 $ 130,520 $ 114,153 $ 156,443 $ 54,190 $ 136,837 $ 424,393 $ — $ 1,203,793 Special Mention 661 1,691 10,824 5,092 1,433 488 22,468 — 42,657 Substandard 211 2,494 9,609 3,145 2,020 2,330 17,935 — 37,744 Doubtful — — — — — 15 220 — 235 Total $ 188,129 $ 134,705 $ 134,586 $ 164,680 $ 57,643 $ 139,670 $ 465,016 $ — $ 1,284,429 Residential real estate Risk rating Pass $ 214,306 $ 114,536 $ 86,997 $ 169,537 $ 189,980 $ 697,401 $ 293 $ — $ 1,473,050 Special Mention — — — 120 502 1,557 — — 2,179 Substandard 1,239 — 142 1,849 2,161 8,628 — — 14,019 Total $ 215,545 $ 114,536 $ 87,139 $ 171,506 $ 192,643 $ 707,586 $ 293 $ — $ 1,489,248 F-33 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For home equity and consumer other loan portfolio segments, Berkshire evaluates credit quality based on the aging status of the loan and by payment activity. The performing or nonperforming status is updated on an ongoing basis dependent upon improvement and deterioration in credit quality. The following table presents the amortized cost based on payment activity: Term Loans Amortized Cost Basis by Origination Year (In thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total As of December 31, 2022 Home equity: Payment performance Performing $ — $ 114 $ 454 $ — $ — $ 17 $ 224,746 $ — $ 225,331 Nonperforming — — — — — — 2,119 — 2,119 Total $ — $ 114 $ 454 $ — $ — $ 17 $ 226,865 $ — $ 227,450 Consumer other: Payment performance Performing $ 161,157 $ 28,279 $ 8,312 $ 12,670 $ 27,608 $ 24,682 $ 9,070 $ — $ 271,778 Nonperforming 588 137 44 280 477 567 39 — 2,132 Total $ 161,745 $ 28,416 $ 8,356 $ 12,950 $ 28,085 $ 25,249 $ 9,109 $ — $ 273,910 Term Loans Amortized Cost Basis by Origination Year (In thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total As of December 31, 2021 Home equity: Payment performance Performing $ 125 $ 469 $ — $ — $ — $ 24 $ 249,590 $ — $ 250,208 Nonperforming — — — — — — 2,158 — 2,158 Total $ 125 $ 469 $ — $ — $ — $ 24 $ 251,748 $ — $ 252,366 Consumer other: Payment performance Performing $ 37,994 $ 11,189 $ 21,548 $ 55,577 $ 30,632 $ 28,797 $ 7,505 $ — $ 193,242 Nonperforming 8 46 290 797 746 1,139 31 — 3,057 Total $ 38,002 $ 11,235 $ 21,838 $ 56,374 $ 31,378 $ 29,936 $ 7,536 $ — $ 196,299 F-34 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes information about total loans rated Special Mention or lower at December 31, 2022 and December 31, 2021. The table below includes consumer loans that are Special Mention and Substandard accruing that are classified as performing based on payment activity. (In thousands) December 31, 2022 December 31, 2021 Non-Accrual $ 31,114 $ 35,326 Substandard Accruing 88,665 106,560 Total Classified 119,779 141,886 Special Mention 68,127 100,071 Total Criticized $ 187,906 $ 241,957 The following is a summary of loans by past due status at December 31, 2022 and December 31, 2021: (In thousands) 30-59 Days Past Due 60-89 Days Past Due 90 Days or Greater Past Due Total Past Due Current Total Loans December 31, 2022 Construction $ — $ — $ — $ — $ 319,452 $ 319,452 Commercial multifamily — 214 — 214 619,874 620,088 Commercial real estate owner occupied 122 — 3,302 3,424 637,065 640,489 Commercial real estate non-owner occupied 143 — 191 334 2,495,903 2,496,237 Commercial and industrial 1,173 1,438 18,658 21,269 1,423,967 1,445,236 Residential real estate 3,694 2,134 11,724 17,552 2,294,895 2,312,447 Home equity 168 57 2,119 2,344 225,106 227,450 Consumer other 1,990 1,028 2,158 5,176 268,734 273,910 Total $ 7,290 $ 4,871 $ 38,152 $ 50,313 $ 8,284,996 $ 8,335,309 (In thousands) 30-59 Days Past Due 60-89 Days Past Due 90 Days or Greater Past Due Total Past Due Current Total Loans December 31, 2021 Construction $ — $ — $ — $ — $ 324,282 $ 324,282 Commercial multifamily 82 306 187 575 515,242 515,817 Commercial real estate owner occupied — 400 4,221 4,621 601,856 606,477 Commercial real estate non-owner occupied 25,420 653 9,049 35,122 2,121,807 2,156,929 Commercial and industrial 2,700 709 6,836 10,245 1,274,184 1,284,429 Residential real estate 5,529 2,015 13,264 20,808 1,468,440 1,489,248 Home equity 258 108 2,158 2,524 249,842 252,366 Consumer other 1,363 320 2,882 4,565 191,734 196,299 Total $ 35,352 $ 4,511 $ 38,597 $ 78,460 $ 6,747,387 $ 6,825,847 F-35 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following is a summary of loans on nonaccrual status and loans past due 90 days or more and still accruing as of December 31, 2022 and December 31, 2021: December 31, 2022 (In thousands) Nonaccrual Amortized Cost Nonaccrual With No Related Allowance Past Due 90 Days or Greater and Accruing Interest Income Recognized on Nonaccrual Construction $ — $ — $ — $ — Commercial multifamily — — — — Commercial real estate owner occupied 2,202 1,411 1,100 — Commercial real estate non-owner occupied 191 73 — — Commercial and industrial 16,992 14,223 1,666 — Residential real estate 8,901 5,307 2,823 — Home equity 1,568 388 551 — Consumer other 1,260 2 898 — Total $ 31,114 $ 21,404 $ 7,038 $ — The commercial and industrial loans nonaccrual amortized cost as of December 31, 2022 included medallion loans with a fair value of $ 0.6 million and a contractual balance of $ 10.9 million. December 31, 2021 (In thousands) Nonaccrual Amortized Cost Nonaccrual With No Related Allowance Past Due 90 Days or Greater and Accruing Interest Income Recognized on Nonaccrual Construction $ — $ — $ — $ — Commercial multifamily 187 187 — — Commercial real estate owner occupied 4,221 2,413 — — Commercial real estate non-owner occupied 8,877 8,412 172 — Commercial and industrial 6,747 1,506 89 — Residential real estate 10,698 6,511 2,566 — Home equity 1,901 141 257 — Consumer other 2,695 4 187 — Total $ 35,326 $ 19,174 $ 3,271 $ — The commercial and industrial loans nonaccrual amortized cost as of December 31, 2021 included medallion loans with a fair value of $ 1.2 million and a contractual balance of $ 31.4 million. F-36 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. Expected credit losses for collateral-dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value. The following table presents the amortized cost basis of individually analyzed collateral-dependent loans by loan portfolio segment: Type of Collateral (In thousands) Real Estate Investment Securities/Cash Other December 31, 2022 Construction $ — $ — $ — Commercial multifamily — — — Commercial real estate owner occupied 2,793 — — Commercial real estate non-owner occupied 384 — — Commercial and industrial 288 — 16,931 Residential real estate 3,910 — — Home equity 501 — — Consumer other 2 — — Total loans $ 7,878 $ — $ 16,931 Type of Collateral (In thousands) Real Estate Investment Securities/Cash Other December 31, 2021 Construction $ 9,429 $ — $ — Commercial multifamily 188 — — Commercial real estate owner occupied 4,466 — — Commercial real estate non-owner occupied 9,501 — — Commercial and industrial 526 — 1,040 Residential real estate 7,035 — — Home equity 262 — — Consumer other 2 — — Total loans $ 31,409 $ — $ 1,040 F-37 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Troubled Debt Restructuring Loans The Company’s loan portfolio also includes certain loans that have been modified in a Troubled Debt Restructuring ("TDR"), where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months. TDRs are evaluated individually for impairment and may result in a specific allowance amount allocated to an individual loan. The following table presents activity in TDRs for the years ended December 31, 2022 and December 31, 2021: (In thousands) Balance at Beginning of Period Principal Payments TDR Status Change Other Additions/(Reductions) Newly Identified TDRs Balance at End of Period Year ended December 31, 2022 Construction $ 9,429 $ — $ — $ ( 9,429 ) $ — $ — Commercial multifamily 703 ( 41 ) — ( 174 ) — 488 Commercial real estate owner occupied 2,733 ( 75 ) — ( 69 ) — 2,589 Commercial real estate non-owner occupied 9,310 ( 33 ) — ( 8,311 ) — 966 Commercial and industrial 3,656 ( 895 ) — ( 359 ) 3,245 5,647 Residential real estate 1,117 ( 81 ) — ( 67 ) — 969 Home equity 121 ( 81 ) — — 50 90 Consumer other 33 ( 15 ) — ( 56 ) 1,649 1,611 Total $ 27,102 $ ( 1,221 ) $ — $ ( 18,465 ) $ 4,944 $ 12,360 (In thousands) Balance at Beginning of Period Principal Payments TDR Status Change Other Additions/(Reductions) Newly Identified TDRs Balance at End of Period Year ended December 31, 2021 Construction $ — $ — $ — $ — $ 9,429 $ 9,429 Commercial multifamily 754 ( 51 ) — — — 703 Commercial real estate owner occupied 1,731 ( 96 ) — ( 168 ) 1,266 2,733 Commercial real estate non-owner occupied 13,684 ( 14,562 ) — ( 791 ) 10,979 9,310 Commercial and industrial 2,686 ( 3,916 ) — ( 199 ) 5,085 3,656 Residential real estate 1,524 ( 233 ) — ( 174 ) — 1,117 Home equity 133 ( 12 ) — — — 121 Consumer other 36 ( 8 ) — 5 — 33 Total $ 20,548 $ ( 18,878 ) $ — $ ( 1,327 ) $ 26,759 $ 27,102 F-38 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents loans modified as TDRs that occurred during the years ended December 31, 2022, 2021, and 2020: (dollars in thousands) Total Year ended December 31, 2022 TDR: Number of loans 93 Pre-modification outstanding recorded investment $ 4,944 Post-modification outstanding recorded investment $ 4,944 Year ended December 31, 2021 TDR: Number of loans 18 Pre-modification outstanding recorded investment $ 26,759 Post-modification outstanding recorded investment $ 26,759 Year ended December 31, 2020 TDR: Number of loans 16 Pre-modification outstanding recorded investment $ 12,197 Post-modification outstanding recorded investment $ 12,197 The following table discloses the modifications for TDRs where a concession has been made within the previous 12 months, that then defaulted in the respective reporting period. For the years ended 2022, there were two loans restructured that had subsequently defaulted during the reporting period. For the year ended 2021, there were four loans restructured that had subsequently defaulted during the reporting period. There were no TDRs for which there was a payment default within twelve months following the modification during the year ended 2020. (dollars in thousands) Number of Loans Recorded Investment Year ended December 31, 2022 Commercial and industrial 1 $ 105 Consumer other 1 $ 10 Total 2 $ 115 (dollars in thousands) Number of Loans Recorded Investment Year ended December 31, 2021 Commercial real estate non-owner occupied 2 $ 18,746 Commercial and industrial 2 $ 71 Total 4 $ 18,817 F-39 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7. PREMISES AND EQUIPMENT Year-end premises and equipment are summarized as follows: (In thousands) 2022 2021 Estimated Useful Life Land $ 15,536 $ 15,786 N/A Buildings and improvements 99,977 104,327 5 - 39 years Furniture and equipment 63,554 62,420 3 - 7 years Construction in process 1,147 703 Premises and equipment, gross 180,214 183,236 Accumulated depreciation and amortization ( 94,997 ) ( 88,853 ) Premises and equipment, net $ 85,217 $ 94,383 Depreciation and amortization expense including discontinued operations for the years 2022, 2021, and 2020 amounted to $ 9.6 million, $ 11.0 million, and $ 12.5 million, respectively. F-40 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8. OTHER INTANGIBLES The components of other intangible assets are as follows: (In thousands) Gross Intangible Assets Accumulated Amortization Net Intangible Assets December 31, 2022 Non-maturity deposits (core deposit intangible) $ 77,213 $ ( 54,618 ) $ 22,595 All other intangible assets 7,866 ( 5,978 ) 1,888 Total $ 85,079 $ ( 60,596 ) $ 24,483 December 31, 2021 Non-maturity deposits (core deposit intangible) $ 77,213 $ ( 49,963 ) $ 27,250 All other intangible assets 7,866 ( 5,497 ) 2,369 Total $ 85,079 $ ( 55,460 ) $ 29,619 Other intangible assets are amortized on a straight-line or accelerated basis over their estimated lives, which range from four to fifteen years . Amortization expense related to intangibles totaled $ 5.1 million in 2022, $ 5.2 million in 2021, and $ 6.2 million in 2020. The estimated aggregate future amortization expense for intangible assets remaining at year-end 2022 is as follows: 2023- $ 4.8 million; 2024- $ 4.6 million; 2025- $ 4.5 million; 2026- $ 4.5 million; 2027- $ 3.6 million; and thereafter- $ 2.5 million. For the years 2022, 2021, and 2020, no impairment charges were identified for the Company’s intangible assets. F-41 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9. OTHER ASSETS Year-end other assets are summarized as follows: (In thousands) 2022 2021 Capitalized servicing rights $ 13,047 $ 16,022 Accrued interest receivable 46,868 33,534 Accrued federal and state tax receivable 34,386 30,614 Right-of-use assets 46,411 52,180 Derivative assets 54,241 79,528 Deferred tax asset 118,331 52,620 Other 35,651 23,886 Total other assets $ 348,935 $ 288,384 The Bank sells loans in the secondary market and retains the right to service many of these loans. The Bank earns fees for the servicing provided. At years end 2022 and 2021, loans sold and serviced for others amounted to $ 1.5 billion and $ 1.6 billion, respectively. For year ended 2020, loans sold and serviced for others from continuing operations amounted to $ 1.5 billion. For year ended 2020, loans sold and serviced for others from discontinued operations amounted to $ 0.6 billion. Loans serviced for others are not included in the accompanying Consolidated Balance Sheets. The risks inherent in servicing assets relate primarily to changes in prepayments that result from shifts in interest rates. For the years 2022 and 2021, contractually specified servicing fees were $ 5.5 million and $ 8.0 million, respectively, and are included as a component of loan related fees within non-interest income . For the year 2020, contractually specified servicing fees from continuing operations were $ 5.5 million and are included as a component of loan related fees within non-interest income on the Consolidated Statements of Operations. For the year 2020, contractually specified servicing fees from discontinued operations were $ 2.1 million and are included as a component of other income in Note 2 - Discontinued Operations. Refer to Note 20 - Fair Value Measurements for significant assumptions and inputs used in the valuation at year-end 2022. Servicing rights activity was as follows: (In thousands) 2022 2021 2020 Balance at beginning of year $ 16,022 $ 16,348 $ 26,451 Additions 3,119 4,568 3,875 Amortization ( 4,590 ) ( 4,921 ) ( 3,761 ) Payoffs ( 958 ) — — Allowance adjustment ( 546 ) 27 ( 10,217 ) Balance at end of year $ 13,047 $ 16,022 $ 16,348 (1) As of December 31, 2022 and December 31, 2021, the servicing rights included in the total balance accounted for at fair value were $ 1.8 million and $ 2.0 million, respectively. At December 31, 2022, the fair value of servicing rights was $ 16.7 million. At December 31, 2021, the fair value of servicing rights was $ 16.6 million. F-42 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10. DEPOSITS A summary of year-end time deposits is as follows: (In thousands) 2022 2021 Maturity date: Within 1 year $ 912,756 $ 1,228,874 Over 1 year to 2 years 606,856 280,403 Over 2 years to 3 years 68,984 81,391 Over 3 years to 4 years 28,441 52,000 Over 4 years to 5 years 15,835 34,605 Over 5 years 835 1,667 Total $ 1,633,707 $ 1,678,940 Account balances: Less than $100,000 $ 549,265 $ 676,979 $100,000 through $250,000 642,600 610,174 $250,000 or more 441,842 391,787 Total $ 1,633,707 $ 1,678,940 Included in total deposits on the Consolidated Balance Sheets are brokered deposits of $ 120.9 million and $ 228.1 million at December 31, 2022 and December 31, 2021, respectively. Also included in total deposits are reciprocal deposits of $ 71.1 million and $ 89.2 million at December 31, 2022 and December 31, 2021, respectively, as well as related party deposits of $ 22.3 million and $ 17.1 million at December 31, 2022 and December 31, 2021, respectively. F-43 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11. BORROWED FUNDS Borrowed funds at December 31, 2022 and 2021 are summarized, as follows: 2022 2021 (in thousands, except rates) Principal Weighted Average Rate Principal Weighted Average Rate Short-term borrowings: Advances from the FHLBB $ — — % $ — — % Total short-term borrowings: — — — — Long-term borrowings: Advances from the FHLBB 4,445 0.71 13,331 1.75 Subordinated notes 98,089 5.50 74,590 7.00 Junior subordinated borrowing - Trust I 15,464 6.54 15,464 2.01 Junior subordinated borrowing - Trust II 7,511 6.47 7,459 1.90 Total long-term borrowings: 125,509 5.52 110,844 5.33 Total $ 125,509 5.52 % $ 110,844 5.33 % Short-term debt includes Federal Home Loan Bank of Boston (“FHLBB”) advances with an original maturity of less than one year. The Bank maintains a $ 3.0 million secured line of credit with the FHLBB that bears a daily adjustable rate calculated by the FHLBB. There was no outstanding balance on the FHLBB line of credit for the periods ended December 31, 2022 and December 31, 2021. The Bank's available borrowing capacity with the FHLB was $ 1.5 billion and $ 1.5 billion for the periods ended December 31, 2022 and December 31, 2021, respectively. The Company was in compliance with all debt covenants as of December 31, 2022. The Bank is approved to borrow on a short-term basis from the Federal Reserve Bank of Boston as a non-member bank. The Bank has pledged certain loans and securities to the Federal Reserve Bank to support this arrangement. No borrowings with the Federal Reserve Bank of Boston took place for the periods ended December 31, 2022 and December 31, 2021. As a participant in the SBA Paycheck Protection Program ("PPP"), the Bank may pledge originated loans as collateral at face value to the Federal Reserve Bank of Boston for term financings. As of December 31, 2022, the Bank had no pledged PPP loans. The Bank's available borrowing capacity with the Federal Reserve Bank was $ 647.9 million and $ 511.0 million for the periods ended December 31, 2022 and December 31, 2021, respectively. Long-term FHLBB advances consist of advances with an original maturity of more than one year and are subject to prepayment penalties. There were no callable advances outstanding at December 31, 2022. The advances outstanding at December 31, 2022 included amortizing advances totaling $ 4.4 million. The advances outstanding at December 31, 2021 included callable advances totaling $ 10 million and amortizing advances totaling $ 3.3 million. All FHLBB borrowings, including the line of credit, are secured by a blanket security agreement on certain qualified collateral, principally all residential first mortgage loans and certain securities. F-44 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A summary of maturities of FHLBB advances at year-end 2022 is as follows: 2022 (In thousands) Amount Weighted Average Rate Fixed rate advances maturing: 2023 $ — — % 2024 25 — 2025 — — 2026 557 2.20 2027 and beyond 3,863 0.50 Total FHLBB advances $ 4,445 0.71 % The Company did no t have variable-rate FHLB advances for the period ended December 31, 2022 and December 31, 2021. In June 2022, the Company issued ten year subordinated notes in the amount of $ 100.0 million. The interest rate is fixed at 5.50 % for the first five years . After five years , the notes become callable and will bear interest at a floating rate per annum equal to a benchmark rate (which is expected to be Three-Month Term SOFR), plus 249 basis points. The subordinated note includes reduction to the note principal balance of $ 1.9 million for unamortized debt issuance costs as of December 31, 2022. In September 2022, the Company called the fifteen year subordinated notes that were issued in September 2012 in the amount of $ 75 million. The Company holds 100 % of the common stock of Berkshire Hills Capital Trust I (“Trust I”) which is included in other assets with a cost of $ 0.5 million. The sole asset of Trust I is $ 15.5 million of the Company’s junior subordinated debentures due in 2035. These debentures bear interest at a variable rate equal to LIBOR plus 1.85 % and had a rate of 6.54 % and 2.01 % at December 31, 2022 and December 31, 2021, respectively. The Company has the right to defer payments of interest for up to five years on the debentures at any time, or from time to time, with certain limitations, including a restriction on the payment of dividends to shareholders while such interest payments on the debentures have been deferred. The Company has not exercised this right to defer payments. The Company has the right to redeem the debentures at par value on each quarterly payment date. Trust I is considered a variable interest entity for which the Company is not the primary beneficiary. Accordingly, Trust I is not consolidated into the Company’s financial statements. The Company holds 100 % of the common stock of SI Capital Trust II (“Trust II”) which is included in other assets with a cost of $ 0.2 million. The sole asset of Trust II is $ 8.2 million of the Company’s junior subordinated debentures due in 2036. These debentures bear interest at a variable rate equal to LIBOR plus 1.70 % and had a rate of 6.47 % and 1.90 % at December 31, 2022 and December 31, 2021. The Company has the right to defer payments of interest for up to five years on the debentures at any time, or from time to time, with certain limitations, including a restriction on the payment of dividends to shareholders while such interest payments on the debentures have been deferred. The Company has not exercised this right to defer payments. The Company has the right to redeem the debentures at par value. Trust II is considered a variable interest entity for which the Company is not the primary beneficiary. Accordingly, Trust II is not consolidated into the Company’s financial statements. F-45 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 12. OTHER LIABILITIES Year-end other liabilities are summarized as follows: (In thousands) 2022 2021 Derivative liabilities $ 97,030 $ 35,194 Finance lease liabilities 9,306 9,862 Employee benefits liability 45,175 45,498 Operating lease liabilities 53,736 55,674 Accrued interest payable 1,610 775 Customer transaction clearing accounts 5,758 5,718 Other 43,409 39,960 Total other liabilities $ 256,024 $ 192,681 46 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 13. EMPLOYEE BENEFIT PLANS Pension Plan The Company maintains a legacy, employer-sponsored defined benefit pension plan (the “Plan”) for which participation and benefit accruals were frozen on January 1, 2003. The Plan was assumed in connection with the Rome Bancorp acquisition in 2011. Accordingly, no employees are permitted to commence participation in the Plan and future salary increases and years of credited service are not considered when computing an employee’s benefits under the Plan. As of December 31, 2022, all minimum Employee Retirement Income Security Act (“ERISA”) funding requirements have been met. Information regarding the pension plan is as follows: December 31, (In thousands) 2022 2021 Change in projected benefit obligation: Projected benefit obligation at beginning of year $ 5,328 $ 6,121 Service Cost 68 59 Interest cost 141 140 Actuarial loss ( 1,508 ) ( 211 ) Benefits paid ( 263 ) ( 321 ) Settlements ( 37 ) ( 460 ) Projected benefit obligation at end of year 3,729 5,328 Accumulated benefit obligation 3,729 5,328 Change in fair value of plan assets: Fair value of plan assets at plan beginning of year 5,962 6,049 Actual return on plan assets ( 979 ) 694 Contributions by employer — — Benefits paid ( 263 ) ( 321 ) Settlements ( 37 ) ( 460 ) Fair value of plan assets at end of year 4,683 5,962 (Overfunded) status $ ( 954 ) $ ( 634 ) Amounts Recognized on Consolidated Balance Sheets Other assets $ 954 $ 634 Other liabilities — — Net periodic pension cost is comprised of the following: December 31, (In thousands) 2022 2021 2020 Service Cost $ 68 $ 59 $ 66 Interest Cost 141 140 178 Expected return on plan assets ( 376 ) ( 410 ) ( 393 ) Amortization of unrecognized actuarial loss 11 103 94 Net periodic pension (credit) $ ( 156 ) $ ( 108 ) $ ( 55 ) F-47 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Changes in plan assets and benefit obligations recognized in accumulated other comprehensive income are as follows: December 31, (In thousands) 2022 2021 2020 Amortization of actuarial (loss) $ ( 11 ) $ ( 103 ) $ ( 94 ) Actuarial (gain) ( 154 ) ( 495 ) 171 Settlement charge — ( 58 ) — Total recognized in accumulated other comprehensive income ( 165 ) ( 656 ) 77 Total recognized in net periodic pension cost recognized and other comprehensive income $ ( 321 ) $ ( 764 ) $ 22 The amounts in accumulated other comprehensive (loss)/income that have not yet been recognized as components of net periodic benefit cost are a net loss of $ 0.5 million, $ 0.7 million, and $ 1.3 million in 2022, 2021 and 2020, respectively. The Company did not make any cash contributions to the pension trust during 2022 and 2021. The Company does no t expect to make any cash contributions in 2023. The amount expected to be amortized from other comprehensive income into net periodic pension cost over the next fiscal year is $ 6 thousand. The principal actuarial assumptions used are as follows: December 31, 2022 2021 2020 Projected benefit obligation Discount rate 5.21 % 2.73 % 2.35 % Net periodic pension cost Discount rate 2.73 % 2.35 % 3.15 % Long term rate of return on plan assets 6.50 % 7.00 % 7.00 % The discount rate that is used in the measurement of the pension obligation is determined by comparing the expected future retirement payment cash flows of the pension plan to the Above Median FTSE Pension Discount Curve as of the measurement date. The expected long-term rate of return on Plan assets reflects long-term earnings expectations on existing Plan assets and those contributions expected to be received during the current plan year. In estimating that rate, appropriate consideration was given to historical returns earned by Plan assets in the fund and the rates of return expected to be available for reinvestment. The rates of return were adjusted to reflect current capital market assumptions and changes in investment allocations. The Company’s overall investment strategy with respect to the Plan’s assets is primarily for preservation of capital and to provide regular dividend and interest payments. The Plan’s targeted asset allocation is 65 % equity securities via investment in the Long-Term Growth - Equity Portfolio ("LTGE"), 34 % intermediate-term investment grade bonds via investment in the Long-Term Growth - Fixed-Income Portfolio ("LTGFI"), and 1 % in cash equivalents portfolio (for liquidity). Equity securities include investments in a diverse mix of equity funds to gain exposure in the US and international markets. The fixed income portion of the Plan assets is a diversified portfolio that primarily invests in intermediate-term bond funds. The overall rate of return is based on the historical performance of the assets applied against the Plan’s target allocation, and is adjusted for the long-term inflation rate. The fair values for investment securities are determined by quoted prices in active markets, if available (Level 1). For securities where quoted prices are not available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3). F-48 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The fair value of the Plan’s assets by category within the fair value hierarchy are as follows at December 31, 2022 and December 31, 2021. The Plan did not hold any assets classified as Level 3, nor were there any transfers. December 31, 2022 Asset Category (In thousands) Total Level 1 Level 2 Equity Mutual Funds: Large-Cap $ 1,441 $ — $ 1,441 Mid-Cap 383 — 383 Small-Cap 318 — 318 International 814 — 814 Fixed Income - US Core 1,167 — 1,167 Intermediate Duration 396 — 396 Cash Equivalents - money market 164 72 92 Total $ 4,683 $ 72 $ 4,611 December 31, 2021 Asset Category (In thousands) Total Level 1 Level 2 Equity Mutual Funds: Large-Cap $ 1,914 $ — $ 1,914 Mid-Cap 509 — 509 Small-Cap 421 — 421 International 1,026 — 1,026 Fixed Income - US Core 1,446 — 1,446 Intermediate Duration 482 — 482 Cash Equivalents - money market 164 62 102 Total $ 5,962 $ 62 $ 5,900 Estimated benefit payments under the pension plans over the next 10 years at December 31, 2022 are as follows: Year Payments (In thousands) 2023 298 2024 292 2025 283 2026 275 2027 - 2032 1,574 Multi-Employer Pension Plan As a result of the Company's acquisition of SI Financial Group, Inc. (“SIFI”), the Company participates in the Pentegra Defined Benefit Plan for Financial Institutions (the “Plan”), a tax-qualified defined benefit pension plan. The Plan operates as a multiple-employer plan under ERISA and the Internal Revenue Code, and as a multi-employer plan for accounting purposes. The Plan was frozen effective September 6, 2013. The Company made contributions of $ 124 thousand in 2022. As of July 1, 2022, the Plan held assets with a market value of $ 4.3 million and liabilities with a market value of $ 5.9 million. The funded status (market value of plan assets divided by funding target) of the Plan, was greater than 80 % as of July 1, 2022, as required by federal and state regulations. Market value of the Plan's assets reflects contributions received through June 30, 2022. There are no collective bargaining agreements in place that require contributions to the Plan by the Company. The Plan is a single plan under the Internal Revenue Code and, as a result, all of the assets stand behind all of the liabilities. Accordingly, contributions made by a participating employer may be used to provide benefits to participants of other participating employers. F-49 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Postretirement Benefits The Company maintains an unfunded postretirement medical plan assumed in connection with the Rome Bancorp acquisition in 2011. The postretirement plan has been modified so that participation is closed to those employees who did not meet the retirement eligibility requirements by March 31, 2011. The Company contributes partially to medical benefits and life insurance coverage for retirees. Such retirees and their surviving spouses are responsible for the remainder of the medical benefits, including increases in premiums levels, between the total premium and the Company’s contribution. The Company also has an executive long-term care (“LTC”) postretirement benefit plan which started August 1, 2014. The LTC plan reimburses executives for certain costs in the event of a future chronic illness. Funding of the plan comes from Company paid insurance policies or direct payments. At plan’s inception, a $ 558 thousand benefit obligation was recorded against equity representing the prior service cost of plan participants. Information regarding the postretirement plans is as follows: December 31, (In thousands) 2022 2021 Change in accumulated postretirement benefit obligation: Accumulated post-retirement benefit obligation at beginning of year $ 4,521 $ 4,641 Service Cost 12 13 Interest cost 122 113 Participant contributions — — Actuarial loss ( 1,396 ) ( 198 ) Benefits paid ( 44 ) ( 48 ) Accumulated post-retirement benefit obligation at end of year $ 3,215 $ 4,521 Change in plan assets: Fair value of plan assets at beginning of year $ — $ — Contributions by employer 44 48 Contributions by participant — — Benefits paid ( 44 ) ( 48 ) Fair value of plan assets at end of year $ — $ — Amounts Recognized on Consolidated Balance Sheets Other Liabilities $ 3,215 $ 4,521 Net periodic post-retirement cost is comprised of the following: December 31, (In thousands) 2022 2021 2020 Service cost $ 12 $ 13 $ 39 Interest costs 122 113 129 Amortization of net prior service credit 83 83 84 Amortization of net actuarial loss 30 55 12 Net periodic post-retirement costs $ 247 $ 264 $ 264 F-50 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Changes in benefit obligations recognized in accumulated other comprehensive income are as follows: December 31, (In thousands) 2022 2021 2020 Amortization of prior service credit $ ( 83 ) $ ( 83 ) $ ( 84 ) Net actuarial (gain) ( 1,426 ) ( 253 ) 496 Total recognized in accumulated other comprehensive income ( 1,509 ) ( 336 ) 412 Accrued post-retirement liability recognized $ 3,215 $ 4,521 $ 4,641 The amounts in accumulated other comprehensive income that have not yet been recognized as components of net periodic benefit cost are as follows: December 31, (In thousands) 2022 2021 2020 Net prior service cost $ 1,159 $ 1,242 $ 1,325 Net actuarial (gain)/loss ( 812 ) 615 869 Total recognized in accumulated other comprehensive income $ 347 $ 1,857 $ 2,194 The amount expected to be amortized from other comprehensive (loss)/income into net periodic postretirement cost over the next fiscal year is $ 83 thousand. The discount rates used in the measurement of the postretirement plan obligations are determined by comparing the expected future retirement payment cash flows of the plans to the Above Median FTSE Pension Discount Curve as of the measurement date. The assumed discount rates on a weighted-average basis were 5.12 % and 2.30 % as of December 31, 2022 and December 31, 2021, respectively. The Company has fixed contributions, therefore, the annual rate of increase in healthcare costs is not used in measuring the accumulated post-retirement benefit medical obligation. For participants in the LTC plan covered by insurance policies, no increase in annual premiums is assumed based on the history of the corresponding insurance provider. Estimated benefit payments under the post-retirement benefit plan over the next ten years at December 31, 2022 are as follows: Year Payments (In thousands) 2023 122 2024 122 2025 119 2026 115 2027 - 2032 951 F-51 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 401(k) Plan The Company provides a 401(k) Plan in which most eligible employees participate. Expense related to the plan was $ 2.9 million in 2022, $ 3.2 million in 2021, and $ 3.5 million in 2020. Other Plans The Company maintains supplemental executive retirement plans (“SERPs”) for select current and former executives. Benefits generally commence no earlier than age sixty-two and are payable either as an annuity or as a lump sum at the executive’s option. Most of these SERPs were assumed in connection with acquisitions. At year-end 2022 and 2021, the accrued liability for these SERPs was $ 19.4 million and $ 20.0 million, respectively. SERP expense was $ 2.0 million in 2022, $ 2.0 million in 2021, and $ 2.0 million in 2020, and is recognized over the required service period. The Company has endorsement split-dollar arrangements pertaining to certain current and former executives and directors. Under these arrangements, the Company purchased policies insuring the lives of the executives and directors, and separately entered into agreements to split the policy benefits with the individuals. There are no post-retirement benefits associated with these policies. The Company also assumed split-dollar life insurance agreements from multiple prior acquisitions. The accrued liability for these split-dollar arrangements was $ 7.9 million as of year-end 2022 and $ 7.8 million as of year-end 2021. F-52 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 14. INCOME TAXES Provision for Income Taxes The components of the Company’s provision for income taxes for the years ended December 31, 2022, 2021, and 2020 were, as follows: (In thousands) 2022 2021 2020 Current: Federal tax expense/(benefit) $ 17,915 $ 17,340 $ ( 19,889 ) State tax expense/(benefit) 6,831 7,580 ( 3,976 ) Total current tax expense/(benefit) (1) 24,746 24,920 ( 23,865 ) Deferred: Federal tax expense/(benefit) ( 2,274 ) 5,125 2,048 State tax expense/(benefit) ( 1,187 ) 112 1,964 Total deferred tax expense/(benefit) ( 3,461 ) 5,237 4,012 Change in valuation allowance — 200 — Income tax expense/(benefit) from continuing operations $ 21,285 $ 30,357 $ ( 19,853 ) Income tax (benefit) from discontinued operations — — ( 7,013 ) Total $ 21,285 $ 30,357 $ ( 26,866 ) (1) On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was signed into law. The CARES Act includes several provisions that temporarily modify the corporate net operating loss (“NOL”) carryback rules for federal income tax purposes. Specifically, the CARES Act allows a five-year carryback of any NOL generated in a taxable year beginning after December 31, 2017, and before January 1, 2021. The Company recorded a $ 6 million federal income tax benefit in 2020, and an additional $ 500 thousand benefit in 2021 resulting from the carryback of its 2020 NOL to recover federal income taxes paid in 2015 through 2018 (at a 35% federal income tax rate for years 2015 through 2017). Effective Tax Rate The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended December 31, 2022, 2021, and 2020: 2022 2021 2020 (In thousands, except rates) Amount Rate Amount Rate Amount Rate Statutory tax rate $ 23,902 21.0 % $ 31,294 21.0 % $ ( 111,936 ) 21.0 % Increase (decrease) resulting from: State taxes, net of federal tax benefit 4,459 3.9 6,077 4.1 ( 1,589 ) 0.3 Tax exempt income - investments, net ( 3,515 ) ( 3.1 ) ( 3,475 ) ( 2.3 ) ( 3,184 ) 0.6 Bank-owned life insurance ( 1,258 ) ( 1.1 ) ( 1,348 ) ( 0.9 ) ( 1,283 ) 0.3 Goodwill impairment — — — 103,912 ( 19.5 ) Tax credits, net of basis reduction ( 2,129 ) ( 1.9 ) ( 2,881 ) ( 1.9 ) ( 1,812 ) 0.3 Change in valuation allowance — — 200 0.1 — — Tax rate benefit on net operating loss carryback — — ( 493 ) ( 0.3 ) ( 6,040 ) 1.1 Other, net ( 174 ) ( 0.1 ) 983 0.6 2,079 ( 0.4 ) Effective tax rate $ 21,285 18.7 % $ 30,357 20.4 % $ ( 19,853 ) 3.7 % F-53 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Deferred Tax Assets and Liabilities As of December 31, 2022 and 2021, significant components of the Company’s deferred tax assets and liabilities were, as follows: (In thousands) 2022 2021 Deferred tax assets: Allowance for credit losses $ 28,312 $ 30,441 Unrealized capital loss on tax credit investments 1,603 1,451 Net unrealized loss on securities available for sale, swaps, and pension in OCI 63,335 1,085 Employee benefit plans 11,659 8,435 Purchase accounting adjustments 4,342 4,829 Net operating loss carryforwards 503 1,139 Deferred loan fees 4,049 2,449 Lease liability 14,148 14,940 Premises and equipment 2,630 1,850 Nonaccrual interest 1,069 1,722 Intangible amortization 659 — Other 1,778 1,845 Deferred tax assets, net before valuation allowances 134,087 70,186 Valuation allowance ( 400 ) ( 400 ) Deferred tax assets, net of valuation allowances $ 133,687 $ 69,786 Deferred tax liabilities: Loan servicing rights $ ( 1,212 ) $ ( 1,488 ) Intangible amortization — ( 545 ) Unamortized tax credit reserve ( 1,687 ) ( 1,075 ) Right-of-use asset ( 12,457 ) ( 14,058 ) Deferred tax liabilities $ ( 15,356 ) $ ( 17,166 ) Deferred tax assets, net $ 118,331 $ 52,620 The Company’s net deferred tax asset increased by $ 65.7 million during 2022 and $ 62.3 million of this change is related to unrealized losses in OCI. Deferred tax assets, net of valuation allowances, are expected to be realized through the reversal of existing taxable temporary differences and future taxable income. Valuation Allowances The components of the Company’s valuation allowance on its deferred tax asset, net as of December 31, 2022 and 2021 were, as follows: (in thousands) 2022 2021 State valuation allowances $ ( 400 ) $ ( 400 ) The state tax basis difference, net of Federal benefit, was originally recorded in 2012, due to management’s assessment that it is more likely than not that certain deferred tax assets recorded for the difference between the book basis and the state tax basis in certain tax credit limited partnership investments (LPs) will not be realized. Management anticipates that the remaining excess state tax basis will be realized as a capital loss upon disposition, and that it is unlikely that the Company will have capital gains against which to offset such capital losses. The valuation allowance as of December 31, 2022 is subject to change in the future as the Company continues to periodically assess the likelihood of realizing its deferred tax assets. F-54 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tax Attributes At December 31, 2022, the Company has $ 1.5 million of federal net operating loss carryforwards, the utilization of which are limited under Internal Revenue Code Section 382. These net operating losses begin to expire in 2029. The related deferred tax asset is $ 315 thousand. State net operating loss carryforwards, net of valuation allowance described above, are expected to be utilized in the future and begin to expire in 2023. The related gross deferred tax asset is $ 188 thousand. Unrecognized Tax Benefits On a periodic basis, the Company evaluates its income tax positions based on tax laws and regulations and financial reporting considerations, and records adjustments as appropriate. This evaluation takes into consideration the status of taxing authorities’ current examinations of the Company’s tax returns, recent positions taken by the taxing authorities on similar transactions, if any, and the overall tax environment in relation to uncertain tax positions. The following table presents changes in unrecognized tax benefits for the years ended December 31, 2022, 2021, and 2020: (In thousands) 2022 2021 2020 Unrecognized tax benefits at January 1 $ 1,025 $ 516 $ 238 Increase in gross amounts of tax positions related to prior years 17 509 309 Decrease in gross amounts of tax positions related to prior years — — — Decrease due to settlement with taxing authority — — — Decrease due to lapse in statute of limitations — — ( 31 ) Unrecognized tax benefits at December 31 $ 1,042 $ 1,025 $ 516 It is reasonably possible that over the next twelve months the amount of unrecognized tax benefits may change from the reevaluation of uncertain tax positions arising in examinations, in appeals, or in the courts, or from the closure of tax statutes.The Company does not expect any significant changes in unrecognized tax benefits during the next twelve months. All of the Company’s unrecognized tax benefits, if recognized, would be recorded as a component of income tax expense, therefore, affecting the effective tax rate. The Company recognizes interest and penalties, if any, related to the liability for uncertain tax positions as a component of income tax expense. The accrual for interest and penalties was not material for all years presented. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction as well as in various states. In the normal course of business, the Company is subject to U.S. federal, state, and local income tax examinations by tax authorities. Other than open statutes of limitation pertaining specifically to the amended returns filed for 2015 through 2018 to claim NOL carryback refunds, the Company is no longer subject to examination for tax years prior to 2019 including any related income tax filings from its recent acquisitions. The Company is not under audit in any jurisdiction as of December 31, 2022. F-55 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 15. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES At year-end 2022, the Company held derivatives with a total notional amount of $ 4.5 billion. That amount included $ 0.6 billion in interest rate swap derivatives and $ 0.2 billion in interest rate collars that were designated as cash flow hedges for accounting purposes. The Company had economic hedges and non-hedging derivatives totaling $ 3.7 billion and $ 4.1 million, respectively, which are not designated as hedges for accounting purposes and are therefore recorded at fair value with changes in fair value recorded directly through earnings. Economic hedges included interest rate swaps totaling $ 3.4 billion, risk participation agreements with dealer banks of $ 341.9 million, and $ 0.9 million in forward commitment contracts. As part of the Company’s risk management strategy, the Company enters into interest rate swap agreements to mitigate the interest rate risk inherent in certain of the Company’s assets and liabilities. Interest rate swap agreements involve the risk of dealing with both Bank customers and institutional derivative counterparties and their ability to meet contractual terms. The agreements are entered into with counterparties that meet established credit standards and contain master netting and collateral provisions protecting the at-risk party. The derivatives program is overseen by the Risk Management, Capital and Compliance Committee of the Company’s Board of Directors. Based on adherence to the Company’s credit standards and the presence of the netting and collateral provisions, the Company believes that the credit risk inherent in these contracts was not significant at December 31, 2022. The Company had no pledged collateral to derivative counterparties in the form of cash at year-end 2022. The Company had pledged securities to derivative counterparties with an amortized cost of $ 12.0 million and a fair value of $ 12.0 million at year-end 2022. At December 31, 2021, the Company pledged cash collateral of $ 43.7 million and securities with an amortized cost of $ 34.8 million and a fair value of $ 34.9 million. The Company does not typically require its commercial customers to post cash or securities as collateral on its program of back-to-back economic hedges. However certain language is written into the International Swaps Dealers Association, Inc. (“ISDA”) and loan documents where, in default situations, the Bank is allowed to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability. The Company may need to post additional collateral in the future in proportion to potential increases in unrealized loss positions. F-56 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Information about interest rate swap agreements and non-hedging derivative assets and liabilities at December 31, 2022 follows: Notional Amount Weighted Average Maturity Weighted Average Rate Estimated Fair Value Asset (Liability) December 31, 2022 Received Contract pay rate (In thousands) (In years) (In thousands) Cash flow hedges: Interest rate swaps on commercial loans (1) $ 400,000 2.7 4.09 % 3.51 % $ — Forward-starting interest rate swaps on commercial loans (1) 200,000 3.3 — % 3.90 % — Interest rate collars on commercial loans 200,000 3.5 1,937 Total cash flow hedges 800,000 1,937 Economic hedges: Interest rate swap on tax advantaged economic development bond $ 7,062 6.9 4.49 % 5.09 % $ ( 193 ) Interest rate swaps on loans with commercial loan customers (1) 1,685,263 5.7 4.11 % 5.55 % ( 95,114 ) Reverse interest rate swaps on loans with commercial loan customers (1) 1,685,263 5.7 5.55 % 4.11 % 50,267 Risk participation agreements with dealer banks 341,885 6.6 ( 89 ) Forward sale commitments 927 0.2 8 Total economic hedges 3,720,400 ( 45,121 ) Non-hedging derivatives: Commitments to lend 4,114 0.2 17 Total non-hedging derivatives 4,114 17 Total $ 4,524,514 $ ( 43,167 ) (1) Fair value estimates include the impact of $ 38.3 million settled to market contract agreements. F-57 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Information about interest rate swap agreements and non-hedging derivative asset and liabilities at December 31, 2021 follows: Notional Amount Weighted Average Maturity Weighted Average Rate Estimated Fair Value Asset (Liability) December 31, 2021 Received Contract pay rate (In thousands) (In years) (In thousands) Economic hedges: Interest rate swap on tax advantaged economic development bond $ 7,879 7.9 0.47 % 5.09 % $ ( 1,158 ) Interest rate swaps on loans with commercial loan customers 1,684,238 5.8 3.99 % 1.91 % 74,348 Reverse interest rate swaps on loans with commercial loan customers (1) 1,684,238 5.8 1.91 % 3.99 % ( 30,454 ) Risk participation agreements with dealer banks 320,981 5.8 432 Forward sale commitments 6,377 0.2 134 Total economic hedges 3,703,713 43,302 Non-hedging derivatives: Commitments to lend 8,192 0.2 124 Total non-hedging derivatives 8,192 124 Total $ 3,711,905 $ 43,426 (1) Fair value estimates include the impact of $ 45.7 million settled to market contract agreements. F-58 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Cash flow hedges The effective portion of unrealized changes in the fair value of derivatives accounted for as cash flow hedges is reported in other comprehensive (loss)/income and subsequently reclassified to earnings in the same period or periods during which the hedged transaction is forecasted to affect earnings. Each quarter, the Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged item or transaction. The ineffective portion of changes in the fair value of the derivatives is recognized directly in earnings. All cash flow hedges are considered highly effective. The Company has designated its interest rate collars as cash flow hedges. The structure of these instruments is such that the Company pays the counterparty an incremental amount if the collar index exceeds the cap rate. Conversely, the Company receives an incremental amount if the index falls below the floor rate. No payments are required if the collar index falls between the cap and floor rates. As of December 31, 2022, the Company had six interest rate swap contracts and two forward-starting interest rate swap contracts with a combined notional value of $ 600.0 million. The two forward starting swaps will become effective in 2023. The interest rate swaps have durations of two to four years . This hedge strategy converts commercial variable rate loans to fixed interest rates, thereby protecting the Company from floating interest rate variability. In December 2022, the Company entered into two interest rate collars. The first interest rate collar has a 3.00 % floor and a 5.75 % cap with a notional value of $ 100.0 million. The second interest rate collar has a 3.25 % floor and a 5.75 % cap with a notional value of $ 100.0 million. The interest rate collars have durations of three to four years . The structure of these instruments is such that the Company pays the counterparty an incremental amount if the collar index exceeds the cap rate. Conversely, the Company receives an incremental amount if the index falls below the floor rate. No payments are required if the collar index falls between the cap and floor rates. Amounts included in the Consolidated Statements of Operations and in the other comprehensive (loss)/income section of the Consolidated Statements of Comprehensive (Loss)/Income (related to interest rate derivatives designated as hedges of cash flows), were as follows: Years Ended December 31, (In thousands) 2022 2021 2020 Interest rate swaps and collars on commercial loans: Unrealized (loss) recognized in accumulated other comprehensive loss $ ( 6,667 ) $ — $ — Less: Reclassification of unrealized (loss) from accumulated other comprehensive loss to interest expense — — — Net tax benefit on items recognized in accumulated other comprehensive income 1,789 — — Other comprehensive loss recorded in accumulated other comprehensive (loss)/income, net of reclassification adjustments and tax effects $ ( 4,878 ) $ — $ — Net interest expense recognized in interest expense on hedged commercial loans $ ( 15 ) $ — $ — F-59 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Economic hedges As of December 31, 2022 the Company has an interest rate swap with a $ 7.1 million notional amount to swap out the fixed rate of interest on an economic development bond bearing a fixed rate of 5.09 %, currently within the Company’s trading portfolio under the fair value option, in exchange for a LIBOR-based floating rate. The intent of the economic hedge is to improve the Company’s asset sensitivity to changing interest rates in anticipation of favorable average floating rates of interest over the 21 -year life of the bond. The fair value changes of the economic development bond are mostly offset by fair value changes of the related interest rate swap. The Company also offers certain derivative products directly to qualified commercial borrowers. The Company economically hedges derivative transactions executed with commercial borrowers by entering into mirror-image, offsetting derivatives with third-party financial institutions. The transaction allows the Company’s customer to convert a variable-rate loan to a fixed rate loan. Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts mostly offset each other in earnings. There was no credit valuation loss adjustment arising from the difference in credit worthiness of the commercial loan and financial institution counterparties as of December 31, 2022. The interest income and expense on these mirror image swaps exactly offset each other. The Company has risk participation agreements with dealer banks. Risk participation agreements occur when the Company participates on a loan and a swap where another bank is the lead. The Company earns a fee to take on the risk associated with having to make the lead bank whole on Berkshire’s portion of the pro-rated swap should the borrower default. The Company utilizes forward sale commitments to hedge interest rate risk and the associated effects on the fair value of interest rate lock commitments and loans held for sale. The forward sale commitments are accounted for as derivatives with changes in fair value recorded in current period earnings. The company uses the following types of forward sale commitments contracts: • Best efforts loan sales, • Mandatory delivery loan sales, and • To be announced (TBA) mortgage-backed securities sales. A best efforts contract refers to a loan sales agreement where the Company commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. The Company may enter into a best efforts contract once the price is known, which is shortly after the potential borrower’s interest rate is locked. A mandatory delivery contract is a loan sales agreement where the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. Generally, the Company may enter into mandatory delivery contracts shortly after the loan closes with a customer. The Company may sell to-be-announced mortgage-backed securities to hedge the changes in fair value of interest rate lock commitments and held for sale loans, which do not have corresponding best efforts or mandatory delivery contracts. These security sales transactions are closed once mandatory contracts are written. On the closing date the price of the security is locked-in, and the sale is paired-off with a purchase of the same security. Settlement of the security purchase/sale transaction is done with cash on a net-basis. F-60 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Non-hedging derivatives The Company enters into commitments to lend for residential mortgage loans, which commit the Company to lend funds to a potential borrower at a specific interest rate and within a specified period of time. Commitments that relate to the origination of mortgage loans that will be held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding commitments expose the Company to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The commitments are free-standing derivatives which are carried at fair value with changes recorded in non-interest income in the Company’s Consolidated Statements of Operations. Changes in the fair value of commitments subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time. Amounts included in the Consolidated Statements of Operations related to economic hedges and non-hedging derivatives were as follows: Years Ended December 31, (In thousands) 2022 2021 2020 Economic hedges Interest rate swap on industrial revenue bond: Unrealized gain/(loss) recognized in other non-interest income $ 941 $ 619 $ ( 289 ) Interest rate swaps on loans with commercial loan customers: Unrealized (loss)/gain recognized in other non-interest income ( 171,272 ) ( 86,099 ) 85,206 Favorable/(unfavorable) change in credit valuation adjustment recognized in other non-interest income 1,809 1,431 ( 1,516 ) Reverse interest rate swaps on loans with commercial loan customers: Unrealized gain/(loss) recognized in other non-interest income 171,272 86,099 ( 85,206 ) Risk Participation Agreements: Unrealized (loss)/gain recognized in other non-interest income ( 521 ) ( 233 ) 345 Forward Commitments: Unrealized (loss)/gain recognized in other non-interest income ( 126 ) ( 186 ) — Unrealized (loss)/gain recognized in discontinued operations — — 547 Realized (loss) in discontinued operations — — ( 8,205 ) Non-hedging derivatives Commitments to lend: Unrealized (loss) recognized in other non-interest income $ ( 107 ) $ ( 611 ) $ — Unrealized (loss) recognized in discontinued operations — — ( 1,893 ) Realized gain in other non-interest income 462 2,854 — Realized gain in discontinued operations — — 15,672 F-61 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Assets and Liabilities Subject to Enforceable Master Netting Arrangements Interest Rate Swap Agreements (“Swap Agreements”) The Company enters into swap agreements to facilitate the risk management strategies for commercial banking customers. The Company mitigates this risk by entering into equal and offsetting swap agreements with highly rated third party financial institutions. The swap agreements are free-standing derivatives and are recorded at fair value in the Company’s Consolidated Balance Sheets. The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral generally in the form of marketable securities is received or posted by the counterparty with net liability positions, respectively, in accordance with contract thresholds. The Company had net asset positions with its financial institution counterparties totaling $ 51.2 million and $ 2.2 million as of December 31, 2022 and December 31, 2021, respectively. The Company had net asset positions with its commercial banking counterparties totaling $ 1.0 million and $ 76.8 million as of December 31, 2022 and December 31, 2021, respectively. The Company had net liability positions with its financial institution counterparties totaling $ 1.2 million and $ 33.3 million as of December 31, 2022 and December 31, 2021, respectively. The Company had net liability positions with its commercial banking counterparties totaling $ 96.1 million and $ 2.5 million as of December 31, 2022 and December 31, 2021, respectively. The Company has collateral pledged to cover this liability. The following table presents the assets and liabilities subject to an enforceable master netting arrangement as of December 31, 2022 and December 31, 2021: Offsetting of Financial Assets and Derivative Assets Gross Amounts of Recognized Assets Gross Amounts Offset in the Statements of Condition Net Amounts of Assets Presented in the Statements of Condition Gross Amounts Not Offset in the Statements of Condition Financial Instruments Cash Collateral Received (in thousands) Net Amount As of December 31, 2022 Interest Rate Swap Agreements: Institutional counterparties $ 96,295 $ ( 45,046 ) $ 51,249 $ — $ — $ 51,249 Commercial counterparties 975 — 975 — — 975 Total $ 97,270 $ ( 45,046 ) $ 52,224 $ — $ — $ 52,224 Offsetting of Financial Liabilities and Derivative Liabilities Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Statements of Condition Net Amounts of Liabilities Presented in the Statement of Condition Gross Amounts Not Offset in the Statements of Condition Financial Instruments Cash Collateral Received (in thousands) Net Amount As of December 31, 2022 Interest Rate Swap Agreements: Institutional counterparties $ ( 1,271 ) $ 36 $ ( 1,235 ) $ 11,973 $ — $ 10,738 Commercial counterparties ( 102,595 ) 6,507 ( 96,088 ) — — ( 96,088 ) Total $ ( 103,866 ) $ 6,543 $ ( 97,323 ) $ 11,973 $ — $ ( 85,350 ) F-62 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Offsetting of Financial Assets and Derivative Assets Gross Amounts of Recognized Assets Gross Amounts Offset in the Statements of Condition Net Amounts of Assets Presented in the Statements of Condition Gross Amounts Not Offset in the Statements of Condition Financial Instruments Cash Collateral Received (in thousands) Net Amount As of December 31, 2021 Interest Rate Swap Agreements: Institutional counterparties $ 2,223 $ ( 75 ) $ 2,148 $ — $ — $ 2,148 Commercial counterparties 76,809 — 76,809 — — 76,809 Total $ 79,032 $ ( 75 ) $ 78,957 $ — $ — $ 78,957 Offsetting of Financial Liabilities and Derivative Liabilities Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Statements of Condition Net Amounts of Liabilities Presented in the Statement of Condition Gross Amounts Not Offset in the Statements of Condition Financial Instruments Cash Collateral Received (in thousands) Net Amount As of December 31, 2021 Interest Rate Swap Agreements: Institutional counterparties $ ( 78,146 ) $ 44,814 $ ( 33,332 ) $ 34,896 $ 43,694 $ 45,258 Commercial counterparties ( 2,461 ) — ( 2,461 ) — — ( 2,461 ) Total $ ( 80,607 ) $ 44,814 $ ( 35,793 ) $ 34,896 $ 43,694 $ 42,797 F-63 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 16. LEASES Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches, ATM locations, and office space. Most of the Company’s leases are classified as operating leases. At December 31, 2022 lease expiration dates ranged from 1 month to 17 years. The following table represents the Consolidated Balance Sheets classification of the Company’s right-of-use (“ROU”) assets and lease liabilities: (In thousands) December 31, 2022 December 31, 2021 Lease Right-of-Use Assets Classification Operating lease right-of-use assets Other assets $ 46,411 $ 52,180 Finance lease right-of-use assets Premises and equipment, net 6,151 6,674 Total Lease Right-of-Use Assets $ 52,562 $ 58,854 Lease Liabilities Operating lease liabilities Other liabilities $ 53,736 $ 55,674 Finance lease liabilities Other liabilities 9,306 9,862 Total Lease Liabilities $ 63,042 $ 65,536 Supplemental information related to leases was as follows: December 31, 2022 December 31, 2021 Weighted-Average Remaining Lease Term (in years) Operating leases 9.3 9.5 Finance leases 11.8 12.8 Weighted-Average Discount Rate Operating leases 2.56 % 2.77 % Finance leases 5.00 % 5.00 % The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For real estate leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes, and insurance are not included in the measurement of the lease liability since they are generally able to be segregated. The Company does not have any material sub-lease agreements. Lease expense for operating leases for the year ended December 31, 2022 was $ 9.7 million. Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities. Lease expense for operating leases for the year ended December 31, 2021 was $ 10.9 million. Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities. Lease expense for operating leases for the year ended December 31, 2020 was $ 13.5 million, of which $ 1.2 million was related to FCLS and is reported as discontinued operations. Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities. F-64 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Supplemental cash flow information related to leases was as follows: (In thousands) December 31, 2022 December 31, 2021 December 31, 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 9,438 $ 10,897 $ 13,750 Operating cash flows from finance leases 476 503 530 Financing cash flows from finance leases 555 528 500 Right-of-use assets obtained in exchange for lease obligations: Operating leases 5,730 2,976 7,083 Finance leases — — — The following table presents a maturity analysis of the Company’s lease liability by lease classification at December 31, 2022: (In thousands) Operating Leases Finance Leases 2023 $ 9,743 $ 1,035 2024 8,225 1,037 2025 6,501 1,037 2026 5,480 1,037 2027 4,713 1,037 Thereafter 25,313 7,149 Total undiscounted lease payments 59,975 12,332 Less amounts representing interest ( 6,239 ) ( 3,026 ) Lease liability $ 53,736 $ 9,306 F-65 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 17. OTHER COMMITMENTS, CONTINGENCIES, AND OFF-BALANCE SHEET ACTIVITIES In March 2020, the World Health Organization declared a novel strain of coronavirus ("COVID-19") a global pandemic and the United States declared a National Public Health Emergency. The impact of the COVID-19 pandemic is fluid and continues to evolve, which is adversely affecting some of the Company’s clients. The continuing impact of the COVID-19 pandemic on the Company’s business, financial condition and results of operations is currently uncertain and will depend on various developments and other factors, including, among others, the duration and scope of the pandemic, as well as governmental, regulatory and private sector responses to the pandemic, and the associated impacts on the economy, financial markets, and our clients, employees, and vendors. The Company’s business, financial condition and results of operations generally rely upon the ability of the Company’s borrowers to repay their loans, the value of collateral underlying the Company’s secured loans, and demand for loans and other products and services the Company offers, which are highly dependent on the business environment in the Company’s primary markets where it operates and in the United States as a whole. These circumstances could cause the Company to experience a material adverse effect on our business operations, asset valuations, financial condition, results of operations and prospects. Material adverse impacts may include all or a combination of valuation impairments on the Company’s intangible assets, investments, loans, loan servicing rights, deferred tax assets, lease right-of-use assets, or counter-party risk derivatives. Beginning in March 2020, the Company offered three-month payment deferrals for customers with a current payment status who were negatively impacted by economic disruption caused by the COVID-19 pandemic. As of December 31, 2022, the Company had 1 active modified loan outstanding with a carrying value of $ 12.4 million. As of December 31, 2021, the Company had 19 active modified loans outstanding with a carrying value of $ 14.4 million, which excluded loans returning to payment or awaiting evaluation for further deferral. The Company continues to accrue interest on these loans during the deferral period. In accordance with interagency guidance issued in March 2020 and Section 4013 (Temporary Relief from Troubled Debt Restructurings) of the CARES Act, these short-term deferrals are not considered troubled debt restructurings (“TDRs”) unless the borrower was previously experiencing financial difficulty. In addition, the risk-ratings on COVID-19 modified loans did not automatically change as a result of payment deferrals, and these loans will not be considered past due until after the deferral period is over and scheduled payments resume. Section 4013 (Temporary Relief from Troubled Debt Restructurings) of the CARES Act expired on December 31, 2021. F-66 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Credit Related Financial Instruments. The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit, and interest rate risk in excess of the amount recognized in the accompanying Consolidated Balance Sheets. The Company’s exposure to credit loss in the event of non-performance by the other party to the financial instrument is represented by the contractual amount of these commitments. The Company uses the same credit policies in making commitments as it does for on-balance-sheet instruments. A summary of financial instruments outstanding whose contract amounts represent credit risk is as follows at year-end: (In thousands) 2022 2021 Commitments to originate new loans $ 305,474 $ 588,034 Unused funds on commercial and other lines of credit 966,523 902,598 Unadvanced funds on home equity lines of credit 336,924 334,784 Unadvanced funds on construction and real estate loans 694,091 340,336 Standby letters of credit 21,387 14,475 Total $ 2,324,399 $ 2,180,227 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These letters of credit are primarily issued to support borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company considers standby letters of credit to be guarantees and the amount of the recorded liability related to such guarantees was not material at year-end 2022 and 2021. Employment and Change in Control Agreements. The Company and the Bank have change in control agreements with several officers which provide a severance payment in the event employment is terminated in conjunction with a defined change in control. Legal Claims. Various legal claims arise from time to time in the normal course of business. As of December 31, 2022, neither the Company nor the Bank was involved in any pending legal proceedings believed by management to be material, that are not accrued for, to the Company’s financial condition or results of operations. F-67 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 18. SHAREHOLDERS’ EQUITY AND EARNINGS PER COMMON SHARE Minimum Regulatory Capital Requirements The Company and Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if imposed, could have a direct material impact on the Company’s Consolidated Financial Statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital to average assets (as defined). As of year-end 2022 and 2021, the Bank and the Company met the capital adequacy requirements. Regulators may set higher expected capital requirements in some cases based on their examinations. At December 31, 2022, the capital levels of both the Company and the Bank exceeded all regulatory capital requirements and their regulatory capital ratios were above the minimum levels. The capital levels of both the Company and the Bank at December 31, 2022 also exceeded the minimum capital requirements including the currently applicable BASEL III capital conservation buffer of 1.875%. As of year-end 2022 and 2021, the Bank met the conditions to be classified as “well capitalized” under the relevant regulatory framework. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the following tables. F-68 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company and Bank’s actual and required capital amounts were as follows: Minimum Capital Requirement Actual (Dollars in thousands) Amount Ratio Amount Ratio December 31, 2022 Company (Consolidated) Total capital to risk-weighted assets $ 1,336,029 14.60 % $ 732,070 8.00 % Common Equity Tier 1 Capital to risk weighted assets 1,130,522 12.35 411,789 4.50 Tier 1 capital to risk-weighted assets 1,152,808 12.60 549,052 6.00 Tier 1 capital to average assets 1,152,808 10.18 366,035 4.00 Total risk-weighted assets 9,150,869 N/A N/A N/A December 31, 2021 Company (Consolidated) Total capital to risk-weighted assets $ 1,359,470 17.32 % $ 628,026 8.00 % Common Equity Tier 1 Capital to risk weighted assets 1,178,497 15.01 353,265 4.50 Tier 1 capital to risk-weighted assets 1,200,732 15.30 471,020 6.00 Tier 1 capital to average assets 1,200,732 10.49 314,013 4.00 Total risk-weighted assets 7,850,331 N/A N/A N/A Minimum Capital Requirement Minimum to be Well Capitalized Under Prompt Corrective Action Provisions Actual (Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio December 31, 2022 Bank Total capital to risk-weighted assets $ 1,239,722 13.56 % $ 731,259 8.00 % $ 914,074 10.00 % Common Equity Tier 1 Capital to risk weighted assets 1,155,280 12.64 411,333 4.50 594,148 6.50 Tier 1 capital to risk-weighted assets 1,155,280 12.64 548,444 6.00 731,259 8.00 Tier 1 capital to average assets 1,155,280 10.20 365,629 4.00 457,037 5.00 Total risk-weighted assets 9,140,737 N/A N/A N/A N/A N/A December 31, 2021 Bank Total capital to risk-weighted assets $ 1,244,604 15.87 % $ 627,478 8.00 % $ 784,348 10.00 % Common Equity Tier 1 Capital to risk weighted assets 1,160,458 14.80 352,956 4.50 509,826 6.50 Tier 1 capital to risk-weighted assets 1,160,458 14.80 470,609 6.00 627,478 8.00 Tier 1 capital to average assets 1,160,458 10.13 313,739 4.00 392,174 5.00 Total risk-weighted assets 7,843,477 N/A N/A N/A N/A N/A F-69 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Common stock The Bank is subject to dividend restrictions imposed by various regulators, including a limitation on the total of all dividends that the Bank may pay to the Company in any calendar year. The total of all dividends shall not exceed the Bank’s net income for the current year (as defined by statute), plus the Bank’s net income retained for the two previous years, without regulatory approval. Dividends from the Bank are an important source of funds to the Company to make dividend payments on its common and preferred stock, to make payments on its borrowings, and for its other cash needs. The ability of the Company and the Bank to pay dividends is dependent on regulatory policies and regulatory capital requirements. The ability to pay such dividends in the future may be adversely affected by new legislation or regulations, or by changes in regulatory policies relating to capital, safety and soundness, and other regulatory concerns. The payment of dividends by the Company is subject to Delaware law, which generally limits dividends to an amount equal to an excess of the net assets of a company (the amount by which total assets exceed total liabilities) over statutory capital, or if there is no excess, to the Company’s net profits for the current and/or immediately preceding fiscal year. Accumulated other comprehensive income Year-end components of accumulated other comprehensive (loss)/income are as follows: (In thousands) 2022 2021 Other accumulated comprehensive (loss), before tax: Net unrealized holding (loss) on AFS securities $ ( 236,887 ) $ ( 1,806 ) Net (loss) on effective cash flow hedging derivatives ( 6,667 ) — Net unrealized holding (loss) on pension plans ( 844 ) ( 2,518 ) Income taxes related to items of accumulated other comprehensive (loss)/income: Net unrealized holding loss on AFS securities 61,329 407 Net loss on effective cash flow hedging derivatives 1,789 — Net unrealized holding loss on pension plans 228 674 Accumulated other comprehensive (loss) $ ( 181,052 ) $ ( 3,243 ) F-70 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the components of other comprehensive (loss)/income for the years ended December 31, 2022, 2021, and 2020: (In thousands) Before Tax Tax Effect Net of Tax Year Ended December 31, 2022 Net unrealized holding (loss) on AFS securities: Net unrealized (loss) arising during the period $ ( 235,075 ) $ 60,920 $ ( 174,155 ) Less: reclassification adjustment for (losses) realized in net income 6 ( 2 ) 4 Net unrealized holding (loss) on AFS securities ( 235,081 ) 60,922 ( 174,159 ) Net loss on cash flow hedging derivatives: Net unrealized gain arising during the period ( 6,667 ) 1,789 ( 4,878 ) Less: reclassification adjustment for (losses) realized in net income — — — Net (loss) on cash flow hedging derivatives ( 6,667 ) 1,789 ( 4,878 ) Net unrealized holding (loss) on pension plans Net unrealized gain arising during the period 1,674 ( 446 ) 1,228 Less: reclassification adjustment for (losses) realized in net income — — — Net unrealized holding (loss) on pension plans 1,674 ( 446 ) 1,228 Other comprehensive loss $ ( 240,074 ) $ 62,265 $ ( 177,809 ) (In thousands) Before Tax Tax Effect Net of Tax Year Ended December 31, 2021 Net unrealized holding (loss) on AFS securities: Net unrealized (loss) arising during the period $ ( 46,794 ) $ 11,937 $ ( 34,857 ) Less: reclassification adjustment for gains realized in net income — — — Net unrealized holding (loss) on AFS securities ( 46,794 ) 11,937 ( 34,857 ) Net unrealized holding (loss) on pension plans Net unrealized (loss) arising during the period 993 ( 250 ) 743 Less: reclassification adjustment for (losses) realized in net income — — — Net unrealized holding (loss) on pension plans 993 ( 250 ) 743 Other comprehensive (loss) $ ( 45,801 ) $ 11,687 $ ( 34,114 ) (In thousands) Before Tax Tax Effect Net of Tax Year Ended December 31, 2020 Net unrealized holding gain on AFS securities: Net unrealized gain arising during the period $ 25,721 $ ( 6,470 ) $ 19,251 Less: reclassification adjustment for gains realized in net income ( 5 ) 1 ( 4 ) Net unrealized holding gain on AFS securities 25,726 ( 6,471 ) 19,255 Net unrealized holding (loss) on pension plans Net unrealized (loss) arising during the period ( 489 ) 112 ( 377 ) Less: reclassification adjustment for (losses) realized in net income — — — Net unrealized holding loss on pension plans ( 489 ) 112 ( 377 ) Other comprehensive income $ 25,237 $ ( 6,359 ) $ 18,878 F-71 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the changes in each component of accumulated other comprehensive (loss)/income, for the years ended December 31, 2022, 2021, and 2020: (in thousands) Net unrealized holding gain (loss) on AFS Securities Net loss on effective cash flow hedging derivatives Net unrealized holding gain (loss) on pension plans Total Year Ended December 31, 2022 Balance at Beginning of Year $ ( 1,398 ) $ — $ ( 1,845 ) $ ( 3,243 ) Other comprehensive (loss)/income before reclassifications ( 174,155 ) ( 4,878 ) 1,228 ( 177,805 ) Amounts reclassified from accumulated other comprehensive income 4 — — 4 Total other comprehensive (loss)/income ( 174,159 ) ( 4,878 ) 1,228 ( 177,809 ) Balance at End of Period $ ( 175,557 ) $ ( 4,878 ) $ ( 617 ) $ ( 181,052 ) Year Ended December 31, 2021 Balance at Beginning of Year $ 33,459 $ — $ ( 2,588 ) $ 30,871 Other comprehensive income/(loss)/income before reclassifications ( 34,857 ) — 743 ( 34,114 ) Amounts reclassified from accumulated other comprehensive income — — — — Total other comprehensive (loss)/income ( 34,857 ) — 743 ( 34,114 ) Balance at End of Period $ ( 1,398 ) $ — $ ( 1,845 ) $ ( 3,243 ) Year Ended December 31, 2020 Balance at Beginning of Year $ 14,204 $ — $ ( 2,211 ) $ 11,993 Other comprehensive income/(loss) before reclassifications 19,251 — ( 377 ) 18,874 Amounts reclassified from accumulated other comprehensive income ( 4 ) — — ( 4 ) Total other comprehensive income/(loss) 19,255 — ( 377 ) 18,878 Balance at End of Period $ 33,459 $ — $ ( 2,588 ) $ 30,871 F-72 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the amounts reclassified out of each component of accumulated other comprehensive (loss)/income for the years ended December 31, 2022, 2021, and 2020: Affected Line Item in the Statement Where Net Income Is Presented Years Ended December 31, (in thousands) 2022 2021 2020 Realized gains/(losses) on AFS securities: $ 6 $ — $ ( 5 ) Non-interest income ( 2 ) — 1 Tax expense 4 — ( 4 ) Realized (losses) on cash flow hedging derivatives: — — — Interest expense — — — Non-interest income — — — Non-interest expense — — — Tax benefit — — — Realized (losses) on pension plans: — — — Non-interest expense — — — Tax expense — — — Total reclassifications for the period $ 4 $ — $ ( 4 ) F-73 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Earnings/(Loss) Per Common Share Basic earnings/(loss) per common share (“EPS”) excludes dilution and is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding for the year. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as stock options) were exercised or converted into additional common shares that would then share in the earnings of the entity. Diluted EPS is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding for the year, plus an incremental number of common-equivalent shares computed using the treasury stock method. Earnings/(loss) per common share has been computed based on the following (average diluted shares outstanding is calculated using the treasury stock method): Years Ended December 31, (In thousands, except per share data) 2022 2021 2020 Net income/(loss) from continuing operations $ 92,533 $ 118,664 $ ( 513,175 ) Net (loss) from discontinued operations — — ( 19,842 ) Net income/(loss) $ 92,533 $ 118,664 $ ( 533,017 ) Average number of common shares issued 51,903 51,903 51,903 Less: average number of treasury shares 5,577 1,951 1,569 Less: average number of unvested stock award shares 762 712 505 Plus: average participating preferred shares — — 441 Average number of basic common shares outstanding 45,564 49,240 50,270 Plus: dilutive effect of unvested stock award shares 345 309 — Plus: dilutive effect of stock options outstanding 5 5 — Average number of diluted common shares outstanding 45,914 49,554 50,270 Basic earnings/(loss) per share: Continuing Operations $ 2.03 $ 2.41 $ ( 10.21 ) Discontinued operations — — ( 0.39 ) Basic earnings/(loss) per common share $ 2.03 $ 2.41 $ ( 10.60 ) Diluted earnings/(loss) per share: Continuing Operations $ 2.02 $ 2.39 $ ( 10.21 ) Discontinued operations — — ( 0.39 ) Diluted earnings/(loss) per common share $ 2.02 $ 2.39 $ ( 10.60 ) For the year ended 2022, 64 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations.For the year ended 2021, 88 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations. Due to the net loss in 2020, all unvested restricted stock and options were considered anti-dilutive and therefore excluded from the earnings per share calculations. F-74 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 19. STOCK-BASED COMPENSATION PLANS The 2022 Equity Incentive Plan (the “2022 Plan”) permits the granting of a combination of Restricted Stock awards and incentive and non-qualified stock options (“Stock Options”) to employees and directors. A total of 1.2 million shares was authorized under the Plan. Awards may be granted as either Restricted Stock or Stock Options provided that any shares that are granted as Restricted Stock are counted against the share limit set forth as (1) one for every one share of Restricted Stock granted and (2) one for every one share of Stock Option granted. As of the 2022 Plan's effective date, all expired, canceled, and forfeited shares under the 2018 Plan are included in the 2022 Plan's available shares. As of year-end 2022, the Company had the ability to grant approximately 1.5 million shares under this plan. A summary of activity in the Company’s stock compensation plans is shown below: Non-vested Stock Awards Outstanding Stock Options Outstanding (Shares in thousands) Number of Shares Weighted- Average Grant Date Fair Value Number of Shares Weighted- Average Exercise Price Balance, December 31, 2021 710 $ 20.16 80 $ 25.21 Granted 328 28.75 — — Acquired — — — — Stock options exercised — — ( 12 ) 22.97 Stock awards vested ( 236 ) 21.80 — — Forfeited ( 98 ) 26.03 — — Expired — — ( 19 ) 23.38 Balance, December 31, 2022 704 $ 22.85 49 $ 25.62 Stock Awards The total compensation cost for stock awards recognized as expense was $ 7.3 million, $ 4.2 million, and $ 4.7 million, in the years 2022, 2021, and 2020, respectively. The total recognized tax benefit associated with this compensation cost was $ 2.0 million, $ 1.0 million, and $ 1.2 million, respectively. The weighted average fair value of stock awards granted was $ 28.75 , $ 20.22 , and $ 16.69 in 2022, 2021, and 2020, respectively. Stock awards vest over periods up to five years and are valued at the closing price of the stock on the grant date. Certain awards vest based on the Company's performance over established measurement periods. The total fair value of stock awards vested during 2022, 2021, and 2020 was $ 5.1 million, $ 4.3 million, and $ 5.2 million respectively. The unrecognized stock-based compensation expense related to unvested stock awards was $ 8.6 million as of year-end 2022. This amount is expected to be recognized over a weighted average period of two years . F-75 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Option Awards Option awards are granted with an exercise price equal to the market price of the Company’s stock at the date of grant, and vest over periods up to five years . The options grant the holder the right to acquire a share of the Company’s common stock for each option held, and have a contractual life of ten years . As of year-end 2022, the weighted average remaining contractual term for options outstanding is three years . The Company generally issues shares from treasury stock as options are exercised. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The expected dividend yield and expected term are based on management estimates. The expected volatility is based on historical volatility. The risk-free interest rates for the expected term are based on the U.S. Treasury yield curve in effect at the time of the grant. The Company did not grant options during 2022 and 2021. The total intrinsic value of options exercised was $ 62 thousand, $ 102 thousand, and $ 246 thousand for the years 2022, 2021, and 2020, respectively. The expense pertaining to options vesting was $ 13 thousand, $ 14 thousand, and $ 96 thousand for the years 2022, 2021, and 2020, respectively. The tax benefit associated with stock option expense for 2022, 2021 and 2020 was $ 3 thousand, $ 4 thousand, and $ 25 thousand, respectively. The unrecognized stock-based compensation expense related to unvested stock options as of year-end 2022, 2021 and 2020 was $ 1 thousand, $ 14 thousand, and $ 27 thousand, respectively. F-76 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 20. FAIR VALUE MEASUREMENTS A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities that are carried at fair value, including assets classified as discontinued operations on the consolidated balance sheets. Recurring Fair Value Measurements of Financial Instruments The following table summarizes assets and liabilities measured at fair value on a recurring basis as of year-end 2022 and 2021 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value: December 31, 2022 (In thousands) Level 1 Inputs Level 2 Inputs Level 3 Inputs Total Fair Value Trading security $ — $ — $ 6,708 $ 6,708 Available-for-sale securities: U.S Treasuries 11,973 — — 11,973 Municipal bonds and obligations — 63,335 — 63,335 Agency collateralized mortgage obligations — 531,945 — 531,945 Agency residential mortgage-backed securities — 546,313 — 546,313 Agency commercial mortgage-backed securities — 228,468 — 228,468 Corporate bonds — 36,510 4,000 40,510 Other bonds and obligations — 656 — 656 Marketable equity securities 12,856 — — 12,856 Loans held for investment — — 605 605 Loans held for sale — 942 — 942 Derivative assets — 54,216 25 54,241 Capitalized servicing rights — — 1,846 1,846 Derivative liabilities — 97,030 — 97,030 December 31, 2021 Level 1 Level 2 Level 3 Total (In thousands) Inputs Inputs Inputs Fair Value Trading security $ — $ — $ 8,354 $ 8,354 Securities available for sale: U.S Treasuries — 59,973 — 59,973 Municipal bonds and obligations — 77,177 — 77,177 Agency collateralized mortgage obligations — 688,336 — 688,336 Agency residential mortgage-backed securities — 705,859 — 705,859 Agency commercial mortgage-backed securities — 300,580 — 300,580 Corporate bonds — 41,630 4,030 45,660 Marketable equity securities 14,798 655 — 15,453 Loans held for investment at fair value — — 1,200 1,200 Loans held for sale — 6,110 — 6,110 Derivative assets — 79,270 258 79,528 Capitalized servicing rights — — 1,966 1,966 Derivative liabilities — 35,194 — 35,194 F-77 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During the year ended December 31, 2022, there were no transfers between Level 1, 2 and 3. During the year ended December 31, 2021, the Company had one transfer totaling $ 4.0 million in corporate bonds from Level 2 to Level 3 based on recent inactivity in the market related to pricing information for similar bonds. During the year ended December 31, 2022, there were no transfers between Level 1, 2 and 3. Trading Security at Fair Value. The Company holds one security designated as a trading security. It is a tax advantaged economic development bond issued to the Company by a local nonprofit which provides wellness and health programs. The determination of the fair value for this security is determined based on a discounted cash flow methodology. Certain inputs to the fair value calculation are unobservable and there is little to no market activity in the security; therefore, the security meets the definition of a Level 3 security. The discount rate used in the valuation of the security is sensitive to movements in the 3-month LIBOR rate. Securities Available for Sale and Marketable Equity Securities . Marketable equity securities classified as Level 1 consist of publicly-traded equity securities for which the fair values can be obtained through quoted market prices in active exchange markets. Marketable equity securities classified as Level 2 consist of securities with infrequent trades in active exchange markets, and pricing is primarily sourced from third party pricing services. AFS securities classified as Level 2 include most of the Company’s debt securities. The pricing on Level 2 and Level 3 was primarily sourced from third party pricing services, overseen by management, and is based on models that consider standard input factors such as dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and condition, among other things. Level 3 pricing includes inputs unobservable to market participants. Loans Held for Investment. The Company’s held for investment loan portfolio includes loans originated by Company and loans acquired through business combinations. The Company intends to hold these assets until maturity as a part of its business operations. For one acquired portfolio subset, the Company previously accounted for these purchased-credit impaired loans as a pool under ASC 310, as they were determined to have common risk characteristics. These loans were recorded at fair value on acquisition date and subsequently evaluated for impairment collectively. Upon adoption of ASC 326, the Company elected the fair value option on this portfolio, recognizing a $ 11.2 million fair value write-down charged to Retained Earnings, net of deferred tax impact, as of January 1, 2020. The fair value of this loan portfolio is determined based on a discounted cash flow methodology. Certain inputs to the fair value calculation are unobservable; therefore, the loans meet the definition of Level 3 assets. The discount rate used in the valuation is consistent with assets that have significant credit deterioration. The cash flow assumptions include payment schedules for loans with current payment histories and estimated collateral value for delinquent loans. All of these loans were nonperforming as of December 31, 2022. Aggregate Fair Value December 31, 2022 Aggregate Aggregate Less Aggregate (In thousands) Fair Value Unpaid Principal Unpaid Principal Loans held for investment at fair value $ 605 $ 10,948 $ ( 10,343 ) Aggregate Fair Value December 31, 2021 Aggregate Aggregate Less Aggregate (In thousands) Fair Value Unpaid Principal Unpaid Principal Loans held for investment at fair value $ 1,200 $ 31,430 $ ( 30,230 ) Loans held for sale. The Company elected the fair value option for all mortgage loans originated for sale (HFS) that were originated for sale on or after May 1, 2012. Loans HFS are classified as Level 2 as the fair value is based on input factors such as quoted prices for similar loans in active markets. Aggregate Fair Value Aggregate Unpaid Principal Aggregate Fair Value Less Aggregate Unpaid Principal December 31, 2022 (In thousands) Loans held for sale $ 942 $ 927 $ 15 Aggregate Fair Value Aggregate Unpaid Principal Aggregate Fair Value Less Aggregate Unpaid Principal December 31, 2021 (In thousands) Loans held for sale $ 6,110 $ 5,926 $ 184 F-78 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The changes in fair value of loans held for sale for the year ended December 31, 2022 were losses of $ 169 thousand. The changes in fair value of loans held for sale for the year ended December 31, 2021 were losses of $ 169 thousand. The changes in fair value of loans held for sale for the year ended December 31, 2020 were gains of $ 212 thousand from continuing operations and gains of $ 3.0 million from discontinued operations. During 2022, originations of loans held for sale totaled $ 20 million and sales of loans originated for sale totaled $ 25 million. During 2021, originations of loans held for sale totaled $ 104 million and sales of loans originated for sale totaled $ 108 million. During 2020, originations of loans held for sale from continuing operations totaled $ 150 million and sales of loans originated for sale from continuing operations totaled $ 141 million. During 2020, originations of loans held for sale from discontinued operations totaled $ 624 million and sales of loans originated for sale from discontinued operations totaled $ 755 million. Interest Rate Swaps. The valuation of the Company’s interest rate swaps is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings. Although the Company has determined that the majority of the inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of year-end 2022, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. Commitments to Lend. The Company enters into commitments to lend for residential mortgage loans intended for sale, which commit the Company to lend funds to a potential borrower at a certain interest rate and within a specified period of time. The estimated fair value of commitments to originate residential mortgage loans for sale is based on quoted prices for similar loans in active markets. However, this value is adjusted by a factor which considers the likelihood that the loan commitment will ultimately close, and by the non-refundable costs of originating the loan. The closing ratio is derived from the Bank’s internal data and is adjusted using significant management judgment. The costs to originate are primarily based on the Company’s internal commission rates that are not observable. As such, these commitments to lend are classified as Level 3 measurements. Forward Sale Commitments . The Company utilizes forward sale commitments as economic hedges against potential changes in the values of the commitments to lend and loans originated for sale. To be announced (TBA) mortgage-backed securities forward commitment sales are used as hedging instruments, are classified as Level 1, and consist of publicly-traded debt securities for which identical fair values can be obtained through quoted market prices in active exchange markets. The fair values of the Company’s best efforts and mandatory delivery loan sale commitments are determined similarly to the commitments to lend using quoted prices in the market place that are observable. However, costs to originate and closing ratios included in the calculation are internally generated and are based on management’s judgment and prior experience, which are considered factors that are not observable. As such, best efforts and mandatory forward sale commitments are classified as Level 3 measurements. Capitalized Servicing Rights. The Company accounts for certain capitalized servicing rights at fair value in its Consolidated Financial Statements, as the Company is permitted to elect the fair value option for each specific instrument. A loan servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans exceed adequate compensation for performing the servicing. The fair value of servicing rights is estimated using a present value cash flow model. The most important assumptions used F-79 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS in the valuation model are the anticipated rate of the loan prepayments and discount rates. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy. The table below presents the changes in Level 3 assets that were measured at fair value on a recurring basis at year-end 2022 and 2021: Assets (Liabilities) (In thousands) Trading Security Securities Available for Sale Loans Held for Investment Commitments to Lend Forward Commitments Capitalized Servicing Rights Balance as of December 31, 2020 $ 9,708 $ 15,000 $ 2,265 $ 735 $ 320 $ 3,033 Maturities, calls, and prepayments of AFS Security — ( 15,000 ) — — — — Unrealized (loss) gain, net recognized in other non-interest income ( 578 ) — 1,645 1,995 ( 186 ) ( 1,067 ) Unrealized gain included in accumulated other comprehensive loss — 30 — — — — Transfers to Level 3 — 4,000 — — — — Paydown of asset ( 776 ) — ( 2,710 ) — — — Transfers to loans held for sale — — — ( 2,606 ) — — Additions to servicing rights — — — — — — Balance as of December 31, 2021 $ 8,354 $ 4,030 $ 1,200 $ 124 $ 134 $ 1,966 Maturities, calls, and prepayments of AFS Security $ — $ — $ — $ — $ — Unrealized (loss) gain, net recognized in other non-interest income ( 828 ) — 314 200 ( 126 ) ( 120 ) Unrealized (loss) in included in accumulated other comprehensive loss — ( 30 ) — — — — Transfers to Level 3 — — — — — — Paydown of asset ( 818 ) — ( 909 ) — — — Transfers to loans held for sale — — ( 307 ) — — Additions to servicing rights — — — — — Balance as of December 31, 2022 $ 6,708 $ 4,000 $ 605 $ 17 $ 8 $ 1,846 Unrealized gains/(losses) relating to instruments still held at December 31, 2022 $ ( 354 ) $ — $ — $ 17 $ 8 $ — Unrealized gains/(losses) relating to instruments still held at December 31, 2021 $ 475 $ 30 $ — $ 124 $ 134 $ — F-80 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Quantitative information about the significant unobservable inputs within Level 3 recurring assets/(liabilities) as of December 31, 2022 and 2021 are as follows: Fair Value Significant Unobservable Input Value (In thousands) December 31, 2022 Valuation Techniques Unobservable Inputs Assets Trading Security $ 6,708 Discounted Cash Flow Discount Rate 5.92 % Securities Available for Sale 4,000 Indication from Market Maker Price 100.00 % Loans held for investment 605 Discounted Cash Flow Discount Rate 25.00 % Collateral Value $ — - $ 20.4 Commitments to Lend 17 Historical Trend Closing Ratio 80.63 % Pricing Model Origination Costs, per loan $ 2 Forward Commitments 8 Historical Trend Closing Ratio 80.63 % Pricing Model Origination Costs, per loan $ 2 Capitalized Servicing Rights 1,846 Discounted cash flow Constant prepayment rate (CPR) 11.07 % Discount rate 9.56 % Total $ 13,184 Fair Value Significant Unobservable Input Value (In thousands) December 31, 2021 Valuation Techniques Unobservable Inputs Assets Trading Security $ 8,354 Discounted Cash Flow Discount Rate 3.35 % Securities Available for Sale 4,030 Indication from Market Maker Price 101.00 % Loans held for investment 1,200 Discounted Cash Flow Discount Rate 25.00 % Collateral Value $ 6.3 - $ 19.8 Commitments to Lend 124 Historical Trend Closing Ratio 82.09 % Pricing Model Origination Costs, per loan $ 3 Forward Commitments 134 Historical Trend Closing Ratio 82.09 % Pricing Model Origination Costs, per loan $ 3 Capitalized Servicing Rights 1,966 Discounted cash flow Constant prepayment rate (CPR) 19.41 % Discount rate 9.50 % Total $ 15,808 F-81 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Non-Recurring Fair Value Measurements The Company is required, on a non-recurring basis, to adjust the carrying value or provide valuation allowances for certain assets using fair value measurements in accordance with GAAP. The following is a summary of applicable non-recurring fair value measurements. There are no liabilities measured on a non-recurring basis. December 31, 2022 Fair Value Measurements as of December 31, 2022 (In thousands) Level 3 Inputs Level 3 Inputs Assets Individually evaluated loans $ 14,571 December 2022 Loans held for sale 3,369 December 2022 Capitalized servicing rights 11,201 December 2022 Total $ 29,141 December 31, 2021 Fair Value Measurements as of December 31, 2021 (In thousands) Level 3 Inputs Level 3 Inputs Assets Individually evaluated loans $ 12,482 December 2021 Capitalized servicing rights 14,056 December 2021 Total $ 26,538 Quantitative information about the significant unobservable inputs within Level 3 non-recurring assets as of December 31, 2022 and 2021 are as follows: (in thousands) December 31, 2022 Valuation Techniques Unobservable Inputs Range (Weighted Average) (a) Assets Individually evaluated loans $ 14,571 Fair value of collateral Discounted Cash Flow- Loss Severity ( 100.00 )% to 74.74 % (( 40.02 )%) Appraised value $ 0 to $ 2,160 ($ 643 ) Loans held for sale 3,369 Fair value of collateral Appraised value 3,369 Capitalized servicing rights 11,201 Discounted cash flow Constant prepayment rate (CPR) 5.81 % to 13.18 % ( 10.94 )% Discount rate 9.59 % to 22.70 % ( 16.83 %) Total Assets $ 29,141 (a) Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individual properties. F-82 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) December 31, 2021 Valuation Techniques Unobservable Inputs Assets Range (Weighted Average) (a) Individually evaluated loans $ 12,482 Fair value of collateral Loss severity ( 35.96 )% to 133.09 % ( 49.14 %) Appraised value $ 0 to $ 405 ($ 256 ) Capitalized servicing rights 14,056 Discounted cash flow Constant prepayment rate (CPR) 6.24 % to 17.73 % ( 13.29 %) Discount rate 9.59 % to 13.11 % ( 11.97 %) Total Assets $ 26,538 (a) Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individual properties. There were no Level 1 or Level 2 nonrecurring fair value measurements for year-end 2022 and 2021. Individually evaluated loans. Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records non-recurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Non-recurring adjustments can also include certain impairment amounts for collateral-dependent loans calculated when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation does not necessarily represent the fair value of the loan. Real estate collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace. However, the choice of observable data is subject to significant judgment, and there are often adjustments based on judgment in order to make observable data comparable and to consider the impact of time, the condition of properties, interest rates, and other market factors on current values. Additionally, commercial real estate appraisals frequently involve discounting of projected cash flows, which relies inherently on unobservable data. Therefore, real estate collateral related nonrecurring fair value measurement adjustments have generally been classified as Level 3. Estimates of fair value for other collateral that supports commercial loans are generally based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3. Loans Transferred to Held for Sale. Once a decision has been made to sell loans not previously classified as held for sale, these loans are transferred into the held for sale category and carried at the lower of cost or fair value. Real estate collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace. The choice of observable data is subject to significant judgment, and there are often adjustments based on judgment in order to make observable data comparable and to consider the impact of time, the condition of properties, interest rates, and other market factors on current values. Nonrecurring fair value measurement adjustments that relate to real estate collateral have generally been classified as Level 3. Estimates of fair value for other collateral that supports commercial loans are generally based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3. Capitalized loan servicing rights . A loan servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans exceed adequate compensation for performing the servicing. The fair value of servicing rights is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Adjustments are only recorded when the discounted cash flows derived from the valuation model are less than the carrying value of the asset. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy. F-83 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Summary of Estimated Fair Values of Financial Instruments The following tables summarize the estimated fair values, which represent exit price, and related carrying amounts, of the Company’s financial instruments. Certain financial instruments and all non-financial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein may not necessarily represent the underlying fair value of the Company. Certain assets and liabilities in the following disclosures include balances classified as discontinued operations. December 31, 2022 Carrying Amount Fair Value (In thousands) Level 1 Level 2 Level 3 Financial Assets Cash and cash equivalents $ 685,355 $ 685,355 $ 685,355 $ — $ — Trading security 6,708 6,708 — — 6,708 Marketable equity securities 12,856 12,856 12,856 — — Securities available for sale 1,423,200 1,423,200 11,973 1,407,227 4,000 Securities held to maturity 583,453 507,464 — 505,508 1,956 FHLB stock and restricted equity securities 7,219 N/A N/A N/A N/A Net loans 8,239,039 8,194,110 — — 8,194,110 Loans held for sale 4,311 4,311 — 942 3,369 Accrued interest receivable 46,868 46,868 — 46,868 — Derivative assets 54,241 54,241 — 54,216 25 Financial Liabilities Total deposits 10,327,269 10,283,543 — 10,283,543 — Short-term debt — — — — — Long-term FHLB advances 4,445 2,782 — 2,782 — Subordinated notes 121,064 110,853 — 110,853 — Derivative liabilities 97,030 97,030 — 97,030 — December 31, 2021 Carrying Amount Fair Value (In thousands) Level 1 Level 2 Level 3 Financial Assets Cash and cash equivalents $ 1,627,807 $ 1,627,807 $ 1,627,807 $ — $ — Trading security 8,354 8,354 — — 8,354 Marketable equity securities 15,453 15,453 14,798 655 — Securities available for sale 1,877,585 1,877,585 — 1,873,555 4,030 Securities held to maturity 636,503 647,236 — 644,497 2,739 FHLB stock and restricted equity securities 10,800 N/A N/A N/A N/A Net loans 6,719,753 6,850,975 — — 6,850,975 Loans held for sale 6,110 6,110 — 6,110 — Accrued interest receivable 33,534 33,534 — 33,534 — Derivative assets 79,528 79,528 — 79,270 258 Assets held for sale — — — — — Financial Liabilities Total deposits 10,068,953 10,073,217 — 10,073,217 — Short-term debt — — — — — Long-term FHLB advances 13,331 13,053 — 13,053 — Subordinated notes 97,513 95,006 — 95,006 — Derivative liabilities 35,194 35,194 — 35,194 — F-84 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 21. CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY Condensed financial information pertaining only to the Parent, Berkshire Hills Bancorp, is as follows. CONDENSED BALANCE SHEETS December 31, (In thousands) 2022 2021 Assets Cash due from Berkshire Bank $ 90,022 $ 108,946 Investment in subsidiaries 986,805 1,172,439 Other assets 1,445 213 Total assets $ 1,078,272 $ 1,281,598 Liabilities and Shareholders’ Equity Subordinated notes $ 121,064 $ 97,513 Accrued expenses 3,146 1,650 Shareholders’ equity 954,062 1,182,435 Total liabilities and shareholders’ equity $ 1,078,272 $ 1,281,598 CONDENSED STATEMENTS OF OPERATIONS Years Ended December 31, (In thousands) 2022 2021 2020 Income: Dividends from subsidiaries $ 108,000 $ 118,000 $ 46,300 Other 23 31 ( 2,185 ) Total income 108,023 118,031 44,115 Interest expense 7,044 5,393 5,335 Non-interest expenses 2,754 2,719 2,866 Total expense 9,798 8,112 8,201 Income before income taxes and equity in undistributed income of subsidiaries 98,225 109,919 35,914 Income tax (benefit) ( 2,586 ) ( 2,136 ) ( 2,719 ) Income before equity in undistributed income of subsidiaries 100,811 112,055 38,633 Equity in undistributed results of operations of subsidiaries ( 8,278 ) 6,609 ( 571,650 ) Net income/(loss) 92,533 118,664 ( 533,017 ) Preferred stock dividend — — 313 Income/(loss) available to common shareholders $ 92,533 $ 118,664 $ ( 533,330 ) Comprehensive (loss)/income $ ( 85,276 ) $ 84,550 $ ( 514,139 ) F-85 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONDENSED STATEMENTS OF CASH FLOWS Years Ended December 31, (In thousands) 2022 2021 2020 Cash flows from operating activities: Net income/(loss) $ 92,533 $ 118,664 $ ( 533,017 ) Adjustments to reconcile net income to net cash provided/(used) by operating activities: Equity in undistributed results of operations of subsidiaries 8,278 ( 6,609 ) 571,650 Other, net 5,998 5,816 2,603 Net cash provided by operating activities 106,809 117,871 41,236 Cash flows from investing activities: Advances to subsidiaries — — — Purchase of securities — — ( 489 ) Sale of securities — 167 4,658 Other, net — — — Net cash provided by investing activities — 167 4,169 Cash flows from financing activities: Proceeds from issuance of short term debt — 232 231 Proceeds from issuance of long term debt 98,032 — — Repayment of long term debt ( 75,000 ) — — Net proceeds from common stock — — — Payment to repurchase common stock ( 124,519 ) ( 68,712 ) ( 473 ) Common stock cash dividends paid ( 24,527 ) ( 24,553 ) ( 36,251 ) Preferred stock cash dividends paid — — ( 313 ) Other, net 281 431 758 Net cash (used) in financing activities ( 125,733 ) ( 92,602 ) ( 36,048 ) Net change in cash and cash equivalents ( 18,924 ) 25,436 9,357 Cash and cash equivalents at beginning of year 108,946 83,510 74,153 Cash and cash equivalents at end of year $ 90,022 $ 108,946 $ 83,510 F-86 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 22. QUARTERLY DATA (UNAUDITED) Quarterly results of operations were as follows: 2022 2021 (In thousands, except per share data) Fourth Quarter Third Quarter Second Quarter First Quarter Fourth Quarter Third Quarter Second Quarter First Quarter Interest and dividend income $ 121,384 $ 103,671 $ 87,379 $ 74,823 $ 75,860 $ 79,688 $ 85,364 $ 88,153 Interest expense 19,292 11,587 6,021 5,760 6,548 8,320 9,971 13,060 Net interest income 102,092 92,084 81,358 69,063 69,312 71,368 75,393 75,093 Non-interest income 15,654 16,251 16,351 20,681 21,409 73,635 22,011 26,193 Total revenue 117,746 108,335 97,709 89,744 90,721 145,003 97,404 101,286 Provision expense/(benefit) for credit losses 12,000 3,000 — ( 4,000 ) ( 3,000 ) ( 4,000 ) — 6,500 Non-interest expense 70,014 81,677 68,475 68,550 69,407 69,460 68,872 78,154 Income before income taxes 35,732 23,658 29,234 25,194 24,314 79,543 28,532 16,632 Income tax expense 5,227 4,941 6,119 4,998 4,066 15,794 6,896 3,601 Net income $ 30,505 $ 18,717 $ 23,115 $ 20,196 $ 20,248 $ 63,749 $ 21,636 $ 13,031 Basic earnings per share $ 0.69 $ 0.42 $ 0.50 $ 0.42 $ 0.42 $ 1.32 $ 0.43 $ 0.26 Diluted earnings per share $ 0.69 $ 0.42 $ 0.50 $ 0.42 $ 0.42 $ 1.31 $ 0.43 $ 0.26 Weighted average common shares outstanding: Basic 44,105 44,700 45,818 47,668 47,958 48,395 50,321 50,330 Diluted 44,484 45,034 46,102 48,067 48,340 48,744 50,608 50,565 F-87 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 23. NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES Presented below is net interest income after provision for credit losses for the three years ended 2022, 2021, and 2020, respectively: Years Ended December 31, (In thousands) 2022 2021 2020 Net interest income $ 344,597 $ 291,166 $ 316,782 Provision expense/(benefit) for credit losses 11,000 ( 500 ) 75,878 Net interest income after provision for credit losses 333,597 291,666 240,904 Total non-interest income 68,937 143,248 66,307 Total non-interest expense 288,716 285,893 840,239 Income/(loss) from continuing operations before income taxes 113,818 149,021 ( 533,028 ) Income tax expense/(benefit) 21,285 30,357 ( 19,853 ) Net income/(loss) from continuing operations 92,533 118,664 ( 513,175 ) (Loss) from discontinued operations before income taxes — — ( 26,855 ) Income tax (benefit) — — ( 7,013 ) Net (loss) from discontinued operations — — ( 19,842 ) Net income/(loss) $ 92,533 $ 118,664 $ ( 533,017 ) F-88 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 24. REVENUE Revenue from contracts with customers in the scope of Topic 606 is recognized within noninterest income. The Company does not have any material significant payment terms as payment is received at or shortly after the satisfaction of the performance obligation. The value of unsatisfied performance obligations for contracts with an original expected length of one year or less are not disclosed. The Company recognizes incremental costs of obtaining contracts as an expense when incurred for contracts with a term of one year or less. Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain non-interest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives, and certain credit card fees are also not in scope of Topic 606. Topic 606 is applicable to non-interest revenue streams such as wealth management fees, insurance commissions and fees, administrative services for customer deposit accounts, interchange fees, and sale of owned real estate properties. The following presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the years ended 2022, 2021, and 2020, respectively. Years Ended December 31, (In thousands) 2022 2021 2020 Non-interest income In-scope of Topic 606: Service charges on deposit accounts $ 22,396 $ 20,249 $ 19,239 Wealth management fees 10,008 10,530 9,285 Interchange income 8,470 8,321 7,559 Insurance commissions and fees — 7,003 10,770 Non-interest income (in-scope of Topic 606) $ 40,874 $ 46,103 $ 46,853 Non-interest income (out-of-scope of Topic 606) 28,063 97,145 19,454 Total non-interest income from continuing operations $ 68,937 $ 143,248 $ 66,307 Non-interest income streams in-scope of Topic 606 are discussed below. Service Charges on Deposit Accounts. Service charges on deposit accounts consist of monthly service fees (i.e. business analysis fees and consumer service charges) and other deposit account related fees. The Company's performance obligation for monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Other deposit account related fees are largely transactional based, and therefore, the Company's performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts. The Company may, from time to time, waive certain fees (e.g., NSF fee) for customers but generally do not reduce the transaction price to reflect variability for future reversals due to the insignificance of the amounts. Waiver of fees reduces the revenue in the period the waiver is granted to the customer. F-89 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Wealth Management Fees. Wealth management fees are primarily comprised of fees earned from consultative investment management, trust administration, tax return preparation, and financial planning. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based on the daily accrual of the market value of the investment accounts and the applicable fee rate. Interchange Fees. Interchange fees are transaction fees paid to the card-issuing bank to cover handling costs, fraud and bad debt costs, and the risk involved in approving the payment. Due to the day-to-day nature of these fees they are settled on a daily basis and are accounted for as they are received. Insurance Commissions and Fees. Commission revenue is recognized as of the effective date of the insurance policy or the date the customer is billed, whichever is later, net of return commissions related to policy cancellations. Policy cancellation is a variable consideration that is not deemed significant and thus, does not impact the amount of revenue recognized. In addition, the Company may receive additional performance commissions based on achieving certain sales and loss experience measures. Such commissions are recognized when determinable, which is generally when such commissions are received or when the Company receives data from the insurance companies that allows the reasonable estimation of these amounts. On September 1, 2021, the Company completed the sale of substantially all of the assets, and the assumption of certain liabilities, of Berkshire Insurance Group, Inc. Gains/Losses on Sales of OREO. The sale of OREO and other nonfinancial assets are accounted for with the derecognition of the asset in question once a contract exists and control of the asset has been transferred to the buyer. The gain or loss on the sale is calculated as the difference between the carrying value of the asset and the transaction price. F-90