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Berkshire is a Delaware corporation and the holding company for Berkshire Bank (“the Bank”).
−Removed: Berkshire Bank is transforming what it means to bank its neighbors socially, humanly, and digitally to empower the financial potential of people, families, and businesses in its communities as it pursues its vision of being the leading socially responsible omni-channel community bank in the markets it serves.
−Removed: Berkshire Bank provides business and consumer banking, mortgage, wealth management, and investment services.
−Removed: At year-end 2022, the Bank had 100 full-service financial centers its New England and New York footprint.
−Removed: The emergence of the global COVID-19 pandemic in the first quarter of 2020 affected many aspects of the Company’s operations and financial condition through 2022, as further described in other sections of this report.
+Added: provides Commercial Banking, Retail Banking, Consumer Lending, Private Banking and Wealth Management services.
+Added: At year-end 2023, the Bank had $12.4 billion in assets and 96 full-service financial centers in its New England and New York footprint.
Information regarding the Company is available through the Investor Relations tab at berkshirebank.com.
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The Company is pursuing a “banker heavy, branch light” model in newer markets, and uses its mobile MyBanker teams which provide personalized service to customers with committed relationships.
−Removed: The Company does not rely on any individual, group, or entity for a material portion of its deposits.
Due to recent mergers of in-market bank competitors, the Company is pursuing opportunities to expand its market share and talent recruitment.
−Removed: The Company seeks to differentiate itself with its Digitouch SM approach to personal service and user-friendly technology, as well as its commitment to corporate social responsibility.
+Added: The Company seeks to differentiate itself with its Digitouch SM approach to personal service and user-friendly technology, as well as its commitment to corporate responsibility.
The Company recently introduced its new brand theme of “Where You Bank Matters” to highlight these differentiating factors.
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The Bank also conducts loan participations generally with other banks doing business in its markets, including selected national banks.
−Removed: The information discussed below describes the Company’s ongoing lending activities.
−Removed: Lending activities were affected by the emergence of the COVID-19 pandemic in 2020 and subsequent government interventions and support, as well as economic and monetary disruptions resulting from these conditions.
Loan Portfolio Analysis.
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Net loans $ 8,934 $ 8,239 $ 6,720
+Added: There is further information about the above components of the loan portfolio, and the risk characteristics relevant to each portfolio segment, in the “Loans and Related Allowance for Credit Losses” footnote to the financial statements referenced in Item 8 of this report.
+Added: There is also information about the loan portfolio and changes in the portfolio during 2023 in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this report.
+Added: There is reference made to Commercial and Retail Loans, as well as to Commercial Real Estate loans.
+Added: Commercial Real Estate loans include Construction, Commercial Multi-Family, Commercial Real Estate Owner Occupied, and Commercial Real Estate Non-Owner Occupied.
+Added: Commercial loans include Commercial Real Estate loans and Commercial and Industrial Loans.
+Added: Retail loans include Residential Real Estate loans and Consumer loans, which are comprised of Home Equity loans and Consumer other loans.
Commercial Real Estate.
−Removed: The Bank originates commercial real estate loans on properties used for business purposes such as small office buildings, industrial, healthcare, lodging, recreation, or retail facilities.
−Removed: Commercial real estate loans are provided on owner-occupied properties and on investor-owned properties.
−Removed: The portfolio includes commercial 1-4 family and multifamily properties.
−Removed: Loans may generally be made with amortizations of up to 30 years and with interest rates that adjust periodically (primarily from short-term to five years).
−Removed: Most commercial real estate loans are originated with final maturities of 10 years or less.
+Added: The Bank originates commercial real estate loans on properties used for business purposes such as retail, multifamily, office, healthcare, hospitality, industrial, and manufacturing facilities.
+Added: Commercial real estate loans are provided on owner-occupied properties and on investor-owned properties and also include construction loans.
+Added: Loans may generally be made with amortizations of up to 30 years and with final maturities of 10 years or less.
As part of its business activities, the Bank also enters into commercial loan participations and interest rate swaps.
−Removed: Commercial real estate is generally managed within federal regulatory monitoring guidelines of 300% of risk based capital for non-owner occupied commercial real estate and 100% for construction loans.
−Removed: Total commercial real estate loans measured 259% of regulatory capital at year-end 2022 and construction real estate loans measured 26% of regulatory capital.
−Removed: The Bank has hold limits for numerous categories of commercial specialty lending including healthcare, hospitality, designated franchises, and leasing.
−Removed: Commercial real estate loans are among the largest of the Bank’s loans, and may have higher credit risk and lending spreads.
+Added: Commercial real estate is generally managed within federal regulatory monitoring guidelines of 300% of capital, with construction loans within 100% of capital, as defined in the guidance.
+Added: Total supervisory commercial real estate loans measured 287% of regulatory capital at year-end 2023 and construction real estate loans measured 43% of regulatory capital as defined in accordance with regulatory monitory guidelines.
+Added: The Bank has hold limits for numerous categories of commercial lending including healthcare, hospitality, retail, and construction.
+Added: Commercial real estate loans are among the largest of the Bank’s loans, and may have higher credit risk than the overall credit portfolio.
Because repayment is often dependent on the successful operation or management of the properties, repayment of commercial real estate loans may be affected by adverse conditions in the real estate market or the economy.
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The Bank generally requires that borrowers have debt service coverage ratios (the ratio of available cash flows before debt service to debt service) of at least 1.25 times based on stabilized cash flows of leases in place, with some exceptions for national credit tenants.
−Removed: For variable rate loans, the Bank underwrites debt service coverage to interest rate shocks of 300 basis points or higher based on a minimum of 1.0 times coverage and it uses loan maturities to manage risk based on the lease base and interest sensitivity.
−Removed: Loans at origination may be made up to 80% of appraised value based on property type and risk, with sublimits of 75% or less for designated specialty property types.
+Added: For adjustable rate loans, the Bank’s underwriting stresses debt service coverage to interest rate shocks of 400 basis points or higher based on a minimum of 1.0 times coverage and it uses loan maturities to manage risk based on the lease base and interest sensitivity.
+Added: Loans at origination may be made up to 80% of appraised value based on property type and risk, with sublimits of 75% or less for designated industry types.
Generally, commercial real estate loans are supported by full or partial personal guarantees by the principals.
+Added: The economic environment in 2023 was affected by higher interest rates as a result of federal monetary policy.
+Added: An environment of higher interest rates can affect overall property values and operating debt service coverage across the spectrum of commercial real estate.
+Added: Additionally, there have been changes in supply and demand factors in commercial real estate following the pandemic.
+Added: Most prominently, metropolitan office properties have reported higher vacancy rates in many markets across the nation due to the shift towards work from home, with lower demand for office space in some markets.
+Added: Loans that are scheduled to mature in the near term are being reviewed closely for risk to repayment or renewal.
+Added: The Company has a diversified commercial real estate portfolio primarily located in suburban markets in its footprint.
+Added: As discussed in Item 7, the performance of the loan portfolio in 2023 generally improved and was well within the historic range at December 31, 2023.
+Added: At year-end 2023, commercial real estate loans which were modified and experiencing financial difficulty were 0.33% of total commercial real estate loans.
+Added: Loans rated substandard were 1.94% of commercial real estate loans, compared to 1.67% at year-end 2022.
+Added: At year-end 2023, the largest components of the commercial real estate portfolio (over 5% of the portfolio and excluding construction) were retail trade (21%), multifamily (13%), office (11%), healthcare (9%), and hospitality (8%).
+Added: The largest category, retail trade, was primarily comprised of properties anchored by strong grocery and big box tenants in suburban areas – with no significant tenant concentrations, and negligible indoor mall exposure.
+Added: The $493 million office portfolio was approximately 66% composed of Class A properties and approximately 68% of the office portfolio was maturing after 2025.
+Added: Boston properties were 13% of the office portfolio, with no high-rise office buildings.
+Added: There were no charge-offs of office loans in 2023, and nonaccrual office loans were 0.7% of total office loans at December 31, 2023.
+Added: Construction loans consisted primarily of multifamily (approximately 39%) and healthcare approximately (17%).
The Bank offers interest rate swaps to certain larger commercial mortgage borrowers.
−Removed: These swaps allow the Bank to originate a mortgage based on short-term published interest rates and allow the borrower to swap into a longer-term fixed rate.
−Removed: The Bank simultaneously sells an offsetting back-to-back swap to an investment grade national bank so that it does not retain this fixed-rate risk.
−Removed: The Bank also records fee income on these interest rate swaps based on the terms of the offsetting swaps with the bank counterparties.
−Removed: The Bank originates construction loans to developers and commercial borrowers in and around its markets.
+Added: These swaps allow the Bank to originate a mortgage based on a floating rate of interest and allow the borrower to swap into a fixed rate.
+Added: The Bank then concurrently enters into offsetting positions with third-party financial institutions.
+Added: The Bank may record fee income associated with offering the interest rate swaps to its borrowers.
+Added: The Bank originates construction loans to developers and commercial borrowers in its footprint.
The maximum loan to value limits for construction loans follow Federal Deposit Insurance Corporation ("FDIC") supervisory limits, up to a maximum of 85 percent.
−Removed: The Bank commits to provide the permanent mortgage financing on most of its construction loans on income-producing property.
+Added: The Bank commits to provide the permanent mortgage financing on most of its
+Added: construction loans on income-producing property.
Advances on construction loans are made in accordance with a schedule reflecting the cost of the improvements.
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Commercial and Industrial Loans ("C&I").
−Removed: C&I loans are mostly managed through the Bank’s commercial middle market banking organization, as well as its Asset Based Lending Group, its Small Business Banking Group, and 44 Business Capital The Bank offers secured commercial term loans with repayment terms which are normally limited to the expected useful life of the asset being financed, and generally not exceeding ten years.
+Added: C&I loans are mostly managed through the Bank’s commercial middle market banking organization, as well as its Asset Based Lending Group, its Small Business Banking Group, and 44 Business Capital.
+Added: The Bank offers secured commercial term loans with repayment terms which are normally limited to the expected useful life of the asset being financed, and generally not exceeding ten years.
The Bank also offers revolving loans, lines of credit, letters of credit, time notes and SBA guaranteed loans.
−Removed: Business lines of credit have adjustable rates of interest and can be committed or are payable on demand, subject to annual review and renewal.
+Added: Business lines of credit have interest rates that adjust, and are generally subject to annual review and renewal.
Commercial and industrial loans are generally secured by a variety of collateral such as accounts receivable, inventory and equipment, and are generally supported by personal guarantees.
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The Company considers commercial and industrial loans, together with its owner-occupied commercial real estate loans, as constituting the primary relationship based component of its commercial lending activities.
−Removed: The loans originated through the Company’s participation in the SBA’s Paycheck Protection Program (“PPP”) lending program in 2020 were classified as C&I loans.
−Removed: This program was an integral component of federal support programs in response to the emergence of the pandemic in the first half of 2020.
−Removed: These loans were viewed as zero credit risk due to the related SBA guarantee.
−Removed: These loans totaled $633 million at year-end 2020.
−Removed: Most of these loans were repaid via SBA forgiveness in 2021.
+Added: Commercial and industrial loans are commonly structured as variable rate loans, and are accordingly impacted by the recent environment of rising interest rates.
The Asset Based Lending Group serves the commercial middle market in New England, as well as the Bank’s market in northeastern New York and in the Mid-Atlantic.
−Removed: The group expands the Bank’s business lending offerings to include revolving lines of credit and term loans secured by accounts receivable, inventory, and other assets to manufacturers, distributors and select service companies experiencing seasonal working capital needs, rapid sales growth, a turnaround, buyout or recapitalization with credit needs generally ranging from $2 to $25 million.
+Added: The group expands the Bank’s business lending offerings to include revolving lines of credit and term loans secured by accounts receivable, inventory, and other assets to manufacturers, distributors and select service companies experiencing seasonal working capital needs, rapid sales growth, a turnaround, buyout or recapitalization with credit needs generally ranging from $2 million to $25 million.
Asset based lending involves monitoring loan collateral so that outstanding balances are properly margined by business asset collateral, which reduces the risks associated with these loans.
−Removed: Small Business Banking Group is also referred to as Business Banking, and handles most business relationships which are smaller than the middle market category.
+Added: Small Business Banking Group handles most business relationships which are smaller than the middle market category.
Additionally, some smaller business needs are handled through the Bank’s retail branch system.
−Removed: Berkshire Bank also owns Firestone Financial Corp.
+Added: Berkshire Bank also owns Firestone Financial LLC.
("Firestone"), which originated loans secured by business-essential equipment throughout the U.S.
Key customer segments included the fitness, carnival, gaming, and entertainment industries.
−Removed: The origination of loans by Firestone was terminated in mid-2022 and the remaining $133 million portfolio at year-end 2022 is being run-off.
+Added: The origination of loans by Firestone was terminated in mid-2022 and the remaining portfolio totaled $77 million at December 31, 2023.
44 Business Capital is a dedicated SBA 7A program lending team based in the Philadelphia area.
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The Bank buys and sells seasoned mortgages primarily with smaller financial institutions operating in its markets.
−Removed: The Bank is developing correspondent channels in its markets as an additional business channel for newly originated mortgages.
Mortgage loan originations often include rate lock features intended to cover normal processing times.
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Investor management is integral to maintaining the secondary market support that is a component for these operations.
−Removed: In 2021, the Bank entered into a third party relationship to service the residential mortgages and real estate secured consumer loans in its portfolio.
Consumer Loans.
−Removed: The Bank’s consumer loans are centrally underwritten and processed by its experienced consumer lending team based in Syracuse, New York.
+Added: The Bank’s consumer loans are centrally underwritten and processed by its experienced consumer lending team.
The Bank engages in prime home equity lending, following its conforming mortgage underwriting guidelines with more streamlined verifications and documentation.
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In late 2021, the Company expanded its consumer lending in its markets through a third party relationship with financial technology company Upstart which originates unsecured consumer loans through the internet using artificial intelligence technology in combination with the Bank’s underwriting criteria.
−Removed: The Bank suspended originating loans through this partnership in mid-2022 due to the possible impact of a potential economic slowdown.
+Added: The Bank suspended originating loans through this partnership in mid-2022 and the remaining portfolio totaled $90 million at December 31, 2023.
Maturity and Sensitivity of Loan Portfolio.
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The Bank tracks loan underwriting exceptions and exception reports are actively monitored by executive lending management.
+Added: In 2023, the Company's administrative monitoring of the commercial real estate portfolio, the largest segment of the loan portfolio, reflects its risk based focus.
+Added: It reviewed the larger exposures of all commercial real estate loans maturing in the next five years, including reviewing debt service coverage.
+Added: It has expanded its monitoring of portfolio-level lease expirations and continued its review of trends in commercial real estate appraisals.
+Added: The monitoring of lease expirations was increased and the review of trends in commercial real estate appraisals was expanded.
+Added: The Company is reviewing trends in large loan originations and increasing its monitoring of portfolio components and trends, with a focus on office loans and multifamily.
+Added: Trends in lease maturities and renewals are updated periodically.
+Added: Upcoming loan maturities and larger variable and adjustable rate loans are being monitored.
The Bank’s lending activities are conducted by its salaried and commissioned loan personnel.
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Loans are generally removed from accruing status when they reach 90 days delinquent, except for certain loans which are well secured and in the process of collection.
+Added: The Company’s ongoing quarterly process of reviewing larger criticized loans evaluates risk ratings and accrual status based on updated information about loan performance and related risk management issues at the loan level.
Loan collections are managed by a combination of the related business units and the Bank’s special assets group, which focuses on larger, riskier collections and the recovery of purchased credit deteriorated loans.
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Holding costs and decreases in fair value after acquisition are expensed.
−Removed: Interest income on accruing troubled debt restructurings totaled $0.1 million for 2022.
−Removed: The total carrying value of troubled debt restructurings was $12.4 million at year-end.
Asset Classification and Delinquencies.
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Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values questionable, and there is a high possibility of loss.
−Removed: Assets that do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses, are designated Special Mention.
−Removed: Please see the additional discussion of non-accruing and potential problem loans in Item 7 and additional information in notes to the financial statements.
−Removed: Impaired loans acquired in business combinations are normally rated Substandard or lower and the fair value assigned to such loans at acquisition includes a component for the possibility of loss if deficiencies are not corrected.
+Added: Special mention are assets that do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses.
+Added: Please see the additional discussion of nonaccruing and potential problem loans in Item 7 and additional information in notes to the financial statements.
Allowance for Credit Losses on Loans.
The Bank’s loan portfolio is regularly reviewed by management to evaluate the adequacy of the allowance for credit losses on loans.
−Removed: Prior to 2020, the allowance represented management’s estimate of inherent incurred losses that are probable and estimable as of the date of the financial statements.
−Removed: On January 1, 2020, the Company adopted the new loan loss allowance standard based on Current Expected Credit losses (“CECL”).
−Removed: Under this standard, management makes estimates of future economic conditions over the life of the loan portfolio and other future conditions and arrives at a reasonable estimate of expected loan losses.
−Removed: The basis of the allowance changed from an incurred model to an expected model based on this standard.
−Removed: As a result, the amount of the loan loss allowance and the loan loss provision beginning in 2020 is not comparable to prior years.
−Removed: Also, since different banks may use different estimates and arrive at different expectations, comparisons between banks are more difficult.
−Removed: Further, since the accounting is based on future projections our estimates may change significantly from period to period, the amounts of the allowance and provision may be more volatile than under the previous model.
+Added: Management makes estimates of future economic conditions over the life of the loan portfolio and other future conditions and arrives at a reasonable estimate of expected loan losses.
+Added: Different banks may use different estimates and arrive at different expectations, and therefore, comparisons between banks may be difficult.
+Added: The accounting is based on future projections and our estimates may change significantly from period to period, and accordingly, the amounts of the allowance and provision may vary between periods.
Further information about the allowance is discussed further in Note 1 - Summary of Significant Accounting Policies of the Consolidated Financial Statements.
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Allowance for credit losses on loans/total loans 1.17 % 1.15 % 1.55 %
−Removed: Non-accrual loans/total loans 0.37 % 0.52 % 0.80 %
−Removed: Allowance for credit losses/non-accruing loans 309.41 % 300.33 % 196.01 %
+Added: Nonaccrual loans/total loans
+Added: 0.24 % 0.37 % 0.52 %
+Added: Allowance for credit losses/nonaccruing loans
+Added: 492.47 % 309.41 % 300.33 %
Net charge-offs/average loans 0.26 % 0.27 % 0.29 %
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INVESTMENT SECURITIES ACTIVITIES
−Removed: The securities portfolio provides cash flow to protect the safety of customer deposits and as a potential source of liquidity.
−Removed: The portfolio is also used to manage interest rate risk and to earn a reasonable return on investment.
−Removed: Decisions are made in accordance with the Company’s investment policy and include consideration of risk, return, duration, and portfolio concentrations.
−Removed: Day-to-day oversight of the portfolio rests with the Chief Financial Officer and the Treasurer.
−Removed: The Enterprise Risk Management/Asset-Liability Committee meets multiple times each quarter and reviews investment strategies.
−Removed: The Risk Management, Capital and Compliance Committee of the Board of Directors provides general oversight of the investment function.
−Removed: Historically, the Company has maintained short-term investment balances as a component of cash and cash equivalents which are a component of short-term liquidity management.
−Removed: Due to the pandemic, with a surge in demand deposits and a reduction in loan balances, the balance of short-term investments increased in 2020 and 2021 due to the comparatively low yields and spreads on longer duration investment securities.
−Removed: Most short-term investments have been maintained at the Federal Reserve Bank of Boston.
−Removed: The Company has historically maintained a high-quality portfolio of managed duration mortgage-backed securities, together with a portfolio of municipal bonds including national and local issuers and local economic development bonds issued to non-profit organizations.
−Removed: Nearly all of the mortgage-backed securities are issued by Ginnie Mae, Fannie Mae, or Freddie Mac, consisting principally of collateralized mortgage obligations (generally consisting of planned amortization class bonds and pass-through securities).
−Removed: The municipal portfolio provides tax-advantaged yield, and the local economic development bonds were originated by the Company to area borrowers.
−Removed: The Company invests in investment grade corporate bonds and Agency commercial mortgage-backed securities.
−Removed: Purchases of non-investment grade fixed-income securities have consisted primarily of capital instruments issued by local and regional financial institutions.
−Removed: The Company also invests in funds financing community reinvestment projects.
−Removed: The Bank owns restricted equity in the Federal Home Loan Bank of Boston (“FHLBB”) based on its operating relationship with the FHLBB.
−Removed: The Company has various hold limits limiting credit and instrument exposures.
−Removed: The Company owns an interest rate swap against a tax advantaged economic development bond issued to a local not-for-profit organization, and as a result this security is carried as a trading account security.
−Removed: The Company generally designates debt securities as available for sale, but sometimes designates longer-duration municipal and other securities as held to maturity based on its intent.
−Removed: This also allows the Company to more effectively manage the potential impact of longer-duration, fixed-rate securities on shareholders' equity in the event of rising interest rates.
+Added: The securities portfolio provides a source of liquidity, income and interest rate risk management.
+Added: Decisions are made in accordance with the Company’s investment policy which is reviewed and approved by the Board and includes consideration of risk, return, duration, and portfolio concentrations.
+Added: The Company has historically maintained a high-quality portfolio of managed duration residential and commercial mortgage-backed securities, together with a portfolio of state and municipal bonds and obligations of national and local issuers.
+Added: All of the mortgage-backed securities are issued by Fannie Mae, Ginnie Mae, or Freddie Mac.
+Added: The Company generally designates debt securities as available for sale, but sometimes designates securities as held to maturity based on its intent.
+Added: The Company periodically invests in corporate bonds, investment grade and non-rated fixed-income capital instruments issued by local and regional financial institutions, and funds financing community reinvestment projects.
+Added: Due to elevated market interest rates, the net fair value of the investment securities portfolio was below amortized costs at year-end 2023.
+Added: Please see Note 4 – Securities in the financial statement for more information.
+Added: The Company’s ability and intent to hold the portfolio at year-end 2023 was consistent with its liquidity and capital resources as discussed in Item 7 of this report.
The following table summarizes year-end 2023 amortized cost, weighted average yields, and contractual maturities of debt securities.
Yields are shown on a fully taxable-equivalent basis and are based on amortized cost.
−Removed: A significant portion of the mortgage-based securities are planned amortization class bonds.
−Removed: Their expected durations were targeted at 3-5 years, but durations lengthened due to the slower prepayment speeds of all mortgage related instruments in the environment of rising interest rates in 2022.
−Removed: The contractual maturities shown below reflect the underlying maturities of the collateral mortgages.
−Removed: Additionally, the mortgage-based securities maturities shown below are based on final maturities and do not include scheduled amortization.
+Added: A proportion of the mortgage-backed securities are planned amortization class bonds.
+Added: The contractual maturities of mortgage-backed securities shown below reflect the maturities of the underlying mortgage collateral based on final maturities and do not include scheduled amortization.
Yields include amortization and accretion of premiums and discounts.
−Removed: There were no material changes in the tax-exempt portfolio.
Item 1 - Table 5 - Weighted Average Yield
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Deposits are the major source of funds for the Bank’s lending and investment activities.
−Removed: Deposit accounts are the primary product and service interaction with the Bank’s customers.
The Bank serves personal, commercial, non-profit, and municipal deposit customers.
−Removed: Most of the Bank’s deposits are generated from the areas surrounding its branch offices.
The Bank offers a wide variety of deposit accounts with a range of interest rates and terms.
−Removed: The Bank also periodically offers promotional interest rates and terms for limited periods of time.
+Added: The Bank may also periodically offer promotional interest rates and terms for limited periods of time.
The Bank’s deposit accounts consist of demand deposits (non-interest-bearing checking), NOW (interest-bearing checking), regular savings, money market savings, and time certificates of deposit.
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The Bank offers compensating balance arrangements for larger business customers as an alternative to fees charged for checking account services.
−Removed: Berkshire’s Business Connection is a personal financial services benefit package designed for the employees of its business customers.
In addition to providing service through its branches, Berkshire provides services to deposit customers through its private bankers, MyBankers, commercial/small business relationship managers, and call center representatives.
Commercial cash management services are an important commercial service offered to commercial and governmental depositors and a fee income source to the bank.
−Removed: The Bank also operates a commercial payment processing business that serves regional and national payroll service bureau customers, with the majority of volume originated by a leading national provider of payroll and human capital management software solutions.These payroll deposits often fluctuate daily by hundreds of millions of dollars depending on payroll cycles.
−Removed: Payroll deposits were concentrated in money market deposit balances at year-end 2022.
−Removed: The Bank was one of the top 50 bank ACH originators by volume in 2021 based on the most recent data available.
+Added: The Bank also operates a commercial payment processing business that serves regional and national payroll service bureau customers.
+Added: These payroll deposits often fluctuate daily by hundreds of millions of dollars depending on payroll cycles.
Online banking and mobile banking functionality is increasingly important as a component of deposit account access and service delivery.
−Removed: The Bank is also gradually deploying its MyTeller video tellers to complement and extend its service capabilities in its branches.
−Removed: The Bank has partnered with a third party fintech company to provide enhanced online deposit account opening services and plans in 2023 to implement a new online and mobile banking platform developed in partnership with this provider as an important milestone in its Digitouch SM strategy.
+Added: The Bank has partnered with a third party fintech company to provide enhanced online deposit account opening services and new online and mobile banking platform developed in partnership with this provider as an important milestone in its Digitouch SM strategy.
The Company also is monitoring the development of payment services which are growing in their importance in the personal and commercial deposit markets.
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Estimated uninsured deposits were $4.6 billion and $3.8 billion at December 31, 2023 and 2022, respectively.
+Added: Estimated uninsured deposits are based on the same methodologies and assumptions used for the Bank's regulatory reporting requirements.
+Added: Estimated uninsured deposits adjusted to exclude internal accounts and collateralized deposits were $3.7 billion and $3.2 billion at December 31, 2023 and 2022, respectively.
At year-end 2023, time deposits in excess of the FDIC insurance limit and estimated time deposits that are otherwise uninsured by maturity were as follows:
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FDIC Insurance
−Removed: Limit Estimated Aggregate
−Removed: Time Deposits that
−Removed: Meet or Exceed the
+Added: Limit Estimated Portion of Time Deposits in Excess of the FDIC Insurance Limit
+Added: Estimated Aggregate
+Added: Time Deposits in Excess of the
FDIC Insurance
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The Bank’s deposits are insured by the FDIC.
−Removed: The Bank utilizes brokered time deposits to broaden its funding base, augment its interest rate risk management vehicles, and to support loan growth.
+Added: The Bank utilizes brokered certificates of deposits (CDs) to diversify its funding base, augment its interest rate risk management positioning, and to support loan growth.
+Added: Brokered CDs are sourced through select approved brokers and are managed as a component of the Bank's Liquidity Policy.
The Bank also offers brokered reciprocal money market arrangements to provide additional deposit protection to certain large commercial and institutional accounts.
These balances are viewed as part of overall relationship balances with regional customers.
−Removed: Brokered deposits are sourced through selected Board approved brokers and are managed as a component of the Bank's liquidity policies.
−Removed: The Company also uses borrowings from the FHLBB as an additional source of funding, particularly for daily cash management and for funding longer duration assets.
−Removed: FHLBB advances also provide more pricing and option alternatives for particular asset/liability needs.
−Removed: The FHLBB functions as a central reserve bank providing credit for member institutions.
−Removed: As an FHLBB member, the Company is required to own capital stock of the organization.
−Removed: Borrowings from this institution are secured by a blanket lien on most of the Bank’s mortgage loans and mortgage-related securities, as well as certain other assets.
−Removed: Advances are made under several different credit programs with different lending standards, interest rates, and range of maturities.
+Added: The Bank is a member of the Federal Home Loan Bank (‘‘FHLB’’) of Boston, which provides a source of funding for member institutions and is a tool to manage liquidity and interest rate risk.
+Added: The Bank is subject to the rules and requirements of the FHLB, including the requirement to acquire and hold shares of capital stock in the FHLB.
+Added: The Bank was in compliance with FHLB rules and requirements as of December 31, 2023.
The Bank also has access to borrowings from the Federal Reserve Bank of Boston.
−Removed: The Company had a $15 million trust preferred obligation and a $7 million trust preferred obligation outstanding, as well as $100 million in subordinated notes at year-end 2022.
+Added: The Company had $100 million in subordinated notes, a $15 million trust preferred obligation and a $7 million trust preferred obligation outstanding at year-end 2023.
The Company’s common stock is listed on the New York Stock Exchange under the ticker “BHLB”.
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DERIVATIVE FINANCIAL INSTRUMENTS
−Removed: The Company offers interest rate swaps to commercial loan customers who wish to fix the interest rates on their loans, and the Company backs these swaps with offsetting swaps with national bank counterparties.
−Removed: With other lending institutions, the Company engages in risk participation agreements.
−Removed: These arrangements are structured similarly to its swaps with commercial borrowers, but a different bank is the lead underwriter.
−Removed: The Company gets paid a fee to take on the risk associated with having to make the lead bank whole on Berkshire’s portion of the pro-rated swap should the borrower default.
−Removed: These swaps are designated as economic hedges.
−Removed: Interest rate swaps that meet certain criteria to be viewed as conforming are required to be cleared through exchanges.
−Removed: The Bank has designated a national financial institution as its clearing agent.
−Removed: The Company’s mortgage banking activities result in derivatives.
−Removed: Commitments to lend are provided on applications for residential mortgages intended for resale and are accounted for as non-hedging derivatives.
−Removed: The Company arranges offsetting forward sales commitments for most of these rate-locks with national bank counterparties, which are designated as economic hedges.
−Removed: Commitments on applications intended to be held for investment are not accounted for as derivative financial instruments.
−Removed: The Company has a policy for managing its derivative financial instruments, and the policy and program activity are overseen by the Risk Management, Capital and Compliance Committee.
−Removed: Derivative financial instruments with counterparties which are not customers are limited to a select number of national financial institutions.
−Removed: Collateral may be required based on financial condition tests.
−Removed: The Company works with third-party firms which assist in marketing derivative transactions, executing transactions, and providing information for bookkeeping and accounting purposes.
−Removed: The Company sometimes uses interest rate swap instruments for its own account to fix the interest rate on some of its borrowings, all of which have been designated as cash flow hedges.
−Removed: The Company may also use interest rate collars or other derivative instruments in managing its interest rate risk.
−Removed: The Company also has begun offering forward foreign exchange derivatives to its commercial markets as part of its expanded international banking services.
−Removed: The Company expects to back these forwards with offsetting forwards with national bank counterparties.
−Removed: This activity would be targeted to support routine commercial needs of customers engaged in international trading activities and would only be offered for bank approved currencies and durations .
−Removed: LIBOR BASED INSTRUMENTS
−Removed: The Company’s floating-rate funding, certain hedging transactions and certain of the Company’s products, such as floating-rate loans and mortgages, determine the applicable interest rate or payment amount by reference to a benchmark rate using the London Interbank Offered Rate (“LIBOR”).
−Removed: Pursuant to bank regulations, the use of LIBOR as an index for new contracts was prohibited beginning in 2022.
−Removed: The use of LIBOR as an index on existing “Legacy” contracts will be discontinued beginning in 2023.
−Removed: There is further discussion of the LIBOR transition in Item 1A and Item 7 of this report.
+Added: The Company offers interest rate swaps to commercial loan customers who wish to fix the interest rate on their loans, and concurrently enters into offsetting positions with third-party financial institutions.
+Added: The Company may also enter into risk participation agreements with other lending institutions for customer related positions.
+Added: On a limited basis, the Company offers foreign exchange services to customers on both a spot and forward basis.
+Added: The Company may also use derivative financial instruments to manage its interest rate risk associated with the Company’s loan portfolios and borrowings.
+Added: All derivative financial instruments eligible for clearing are cleared through the Chicago Mercantile Exchange (“CME”).
WEALTH MANAGEMENT SERVICES
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The Wealth Management Group reported $1.4 billion in total assets under management at year-end 2023.
−Removed: The Company expanded this team during the year and has introduced Socially Responsible Investment portfolios as another element of the Company’s overall vision of being a leading socially responsible company, and as part of a brand theme that Where You Invest Matters .
HUMAN CAPITAL MANAGEMENT
−Removed: Berkshire’s people are the driving force behind its progress on Berkshire’s Exciting Strategic Transformation (BEST) plan and vision of being a high performing, leading socially responsible community bank in New England and beyond.
−Removed: The Company’s approach to human capital management is grounded in its corporate values and focuses on:
+Added: Berkshire’s people are the driving force behind its progress on its strategic goals, ability to deliver tailored financial solutions for its clients and vision to be a high-performing, relationship-focused, community-driven bank.
+Added: The Company’s approach to human capital management is grounded in its corporate values, business strategy and focuses on:
• Strong oversight and risk management practices
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The Board of Directors has ultimate responsibility for the strategy of the Company.
−Removed: The Compensation Committee of the Board of Directors oversees executive compensation matters and the Corporate Responsibility & Culture committee oversees company culture as well as diversity, equity and inclusion performance.
+Added: The Compensation Committee of the Board of Directors oversees executive compensation matters and the Corporate Responsibility & Culture committee oversees company culture as well as diversity, equity and inclusion.
The full Board also receives an annual briefing on employee engagement.
The SEVP, Chief Human Resources & Culture Officer provides management oversight on human capital matters.
−Removed: The Company proactively identifies potential human capital related risks, such as the labor market shortage, rising labor costs, and employee retention and designs strategies to mitigate those risks.
−Removed: Strong human capital management is viewed as integral to the Company's transformation and ability to meet its strategic objectives.
+Added: The Company proactively identifies potential human capital related risks, such as the labor market shortage, skills gap, rising labor and health care costs, and employee retention and designs strategies to mitigate those risks.
+Added: Strong human capital management is viewed as integral to the Company's ability to meet its strategic objectives, deliver a superior client experience and drive sustainable shareholder returns.
Berkshire operates in a highly competitive labor market with strong competition for top talent.
−Removed: The Company relies on and continues to recruit employees with the right mix of skills, expertise and experiences based on current openings and forecasted needs.
+Added: The Company relies on and continues to recruit employees with the right mix of skills, expertise and experiences.
+Added: The Company forecasts its hiring needs based on attrition, skills assessments, market conditions, resource availability and strategic objectives.
+Added: This helps inform corporate strategies to fill current and future open positions.
The Company leverages several strategies to support its talent pipeline and talent acquisition activities including formal advertising, postings on targeted career sites, career events, internship placements, affinity group relationships, and the use of experienced external recruiters for key management and specialized positions.
−Removed: Berkshire also has a small internal team of talent recruitment professionals.
+Added: Berkshire also maintains a small internal team of talent recruitment professionals.
Berkshire maintains a hybrid work model to expand its access to top talent and provide its employees with workplace flexibility.
−Removed: These strategies have proved effective in meeting the demand for talent demonstrated by the Company’s strong track record of attracting high-caliber talent across retail, commercial, wealth management, business banking, technology and operational areas.
−Removed: In addition, as market disruptions from mergers remain and recessionary pressures impact other industries, Berkshire will continue to leverage its differentiated brand and unique market positioning to hire community-focused bankers from its competitors and attract high-performing operational talent from outside the industry.
+Added: These strategies have proved effective in meeting the demand for talent demonstrated by the Company’s strong track record of attracting high-caliber talent across retail, commercial, private banking, wealth management, business banking, technology and operational areas.
+Added: In addition, as market disruptions from mergers remain and macroeconomic pressures impact many companies, Berkshire will continue to leverage its differentiated brand and unique market positioning to hire community-focused bankers from its competitors and attract high-performing operational talent from outside the industry.
COMPENSATION & BENEFITS
−Removed: A highly competitive labor market along with inflationary pressures has impacted labor costs for all businesses.
+Added: A highly competitive labor market along with inflationary and macroeconomic pressures has impacted labor costs for all businesses.
Berkshire is not immune to these economic pressures.
The Company continually evaluates its compensation strategies and benefits programs, benchmarks to industry and peers and surveys the landscape of best practices to develop compensation and benefits packages that reward performance and retain top talent at all levels of the Company.
−Removed: Against this backdrop, and in keeping with the Company’s socially responsible mission, Berkshire raised the minimum starting pay to $17/hour in 2022.
−Removed: It also enhanced its vacation benefit as well as its incentive plans across lines of business to provide opportunities for employees to earn higher compensation and bonuses for strong performance aligned with Berkshire’s strategic objectives.
+Added: Against this backdrop, Berkshire raised the minimum starting pay to $17/hour and enhanced its vacation, wellness and bereavement benefits.
+Added: It also restructured its incentive plans across lines of business to provide opportunities for employees to earn higher compensation and bonuses for strong performance aligned with Berkshire’s financial and non-financial objectives.
Berkshire provides comprehensive medical coverage, paid vacation, personal and sick time, paid protective leave for gender-based violence, a 401(k) plan with employer match, long-term disability insurance, and group term life insurance.
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In addition to its compensation and health benefits, Berkshire offers volunteer-time off, a matching-gift program, an employee assistance program, regular performance reviews, professional development and the You FIRST Fund to help employees impacted by personal financial hardships.
−Removed: Approximately 97% of employees are eligible for benefits.
+Added: Nearly 100% (99.6%) of employees are eligible for benefits.
TRAINING, DEVELOPMENT, ENGAGEMENT & RETENTION
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They are critical components, along with competitive compensation and benefits programs, to having an engaged workforce.
−Removed: Ultimately an engaged workforce drives high levels of retention which reduces human capital risks, expense, and advances Berkshire’s progress and performance.
+Added: Ultimately an engaged workforce drives high levels of productivity and retention which reduces human capital risks, expense, and advances Berkshire’s progress and performance.
The Company provides several learning and training programs consistent with one’s job responsibilities, professional goals, and development plans.
−Removed: Employees have regular performance assessments to identify strengths and areas for further growth.
−Removed: Berkshire continues to reskill and upskill employees from across the Company helping them advance along career paths by taking on new responsibilities and roles.
−Removed: The Company offers a mentoring program for high potential junior employees along with leadership development programs.
−Removed: For employees looking to expand their professional experience in the classroom, the Company offers educational assistance along with access to formal degree and certification programs.
−Removed: Berkshire continues to monitor the progress of its efforts to evaluate the effectiveness of programs and strategies on engagement.
−Removed: A comprehensive annual employee engagement and pulse survey is conducted to identify strengths and opportunity areas within the organization.
+Added: Employees have regular performance assessments to identify strengths, areas for further growth and career interests.
+Added: Berkshire continues to reskill and upskill employees from across the Company helping them advance along career paths by taking on expanded responsibilities and roles.
+Added: The Company offers a mentoring program for high potential employees along with development programs as Berkshire remains committed to providing pathways for its associates to grow and maintains succession plans for key leadership positions.
+Added: Berkshire encourages its employees to participate in appropriate educational opportunities to expand their professional experience, aid them in their current position or support their self-development to benefit both the employee and Company.
+Added: As such, the Company offers educational assistance along with access to formal degree and certification programs, including college courses and Center for Financial Training (CFT) programs.
+Added: Berkshire continues to monitor the progress of its efforts to evaluate the effectiveness of programs and strategies on retention and engagement.
+Added: A comprehensive annual employee engagement survey is conducted to identify strengths and opportunity areas within the organization.
Overall, employees felt there was a strong spirit of teamwork, that Berkshire genuinely cares for its communities, and they have strong relationships with their direct managers.
Actions plans are developed for areas identified in the survey that do not meet the Company’s high expectations.
−Removed: While Berkshire has been impacted by higher-than-average turnover due to labor market disruptions, it is seeing positive momentum because of the actions it has taken to improve engagement and combat turnover including:
+Added: Beyond a formal engagement survey, Berkshire provides regular opportunities for managers and employees to ask questions, raise concerns and make suggestions for ways to build a better and stronger company.
+Added: This includes regular quarterly employee town halls and leadership forums, an employee suggestion program and regional gatherings that provide employees with direct access to Company leaders.
+Added: Berkshire continues to make progress reducing turnover, which decreased year-over-year.
+Added: This progress is the direct result of the actions it has taken to improve engagement and combat turnover including:
• Launched Company-wide reward and recognition program
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• Developed robust employee communications program
−Removed: Collectively these efforts have led to improved retention year over year, historically high employee engagement and being named a Forbes America’s Best Midsize Employers.
+Added: • New employee events
+Added: Collectively these efforts have led to improved retention in each of the last three years, record high employee engagement and being named a Forbes America’s Best Midsize Employers.
HEALTH & WELLNESS
−Removed: As the world began to emerge from the COVID-19 pandemic Berkshire continued to proactively manage impacts to protect the health and safety of its employees, customers and communities.
−Removed: During the height of the pandemic, the Company provided protective equipment to front-line employees, including masks and gloves, and offered all additional paid sick time, paid vaccine time, paid quarantine/isolation leave, job protected personal leave, flexible work schedules for remote employees, premium pay for onsite employees and maintained full pay for employees with reduced schedules, as a result of the pandemic.
−Removed: Berkshire works to protect and enhance the physical, mental and financial wellbeing of its workforce by providing programs, benefits and a health and wellness employee resource group.
+Added: Berkshire works hard to keep its employees safe, healthy and support their physical, mental and financial wellbeing.
+Added: It provides its workforce comprehensive programs, benefits and a health and wellness employee resource group.
+Added: The Company also creates a workplace environment that is accessible and free from occupational hazards.
The Company, through its insurance provider, offers a fitness, weight and mind/body reimbursement along with a year-round calendar of various wellness related activities.
Since physical and mental health go hand-in-hand with financial health, Berkshire provides access to financial education resources, webinars along with its You FIRST Fund to assist employees experiencing financial hardships.
−Removed: In addition, Berkshire provides a comprehensive employee assistance program which includes counseling services and resources for those experiencing mental health challenges.
−Removed: To further support the needs of its workforce, Berkshire introduced a wellness day to provide a day off for employees to disconnect, recharge and take care of themselves in whatever way works best for them.
−Removed: FUTURE OF THE WORKPLACE
−Removed: Berkshire continues to evolve and enhance its human capital management strategies to drive organizational growth in support of BEST while combating risks, such as the labor market shortage and rising labor costs.
−Removed: The Company expects to maintain its hybrid workplace over the long-term and invest in technology.
−Removed: While technology will play a bigger role in the future of Berkshire, helping to improve processes and drive efficiencies, people will always be at the core of its ability to deliver value to its customers, shareholders and communities.
−Removed: The Company remains confident that the Berkshire brand, value proposition and socially responsible vision will continue to be a differentiator in the market.
−Removed: Human Capital* ◦ Total Full Time Equivalent
+Added: Additionally, Berkshire provides a comprehensive employee assistance program which includes counseling services and resources for those experiencing mental health challenges.
+Added: To further support the needs of its workforce, employees have access to a wellness day to disconnect, recharge and take care of themselves in whatever way works best for them.
+Added: The Health & Wellness Employee Resource Group provides yet another channel for employees to participate in regular programming and advocate for health and wellness options that suit their needs and interests.
+Added: WORKPLACE OF THE FUTURE
+Added: Berkshire continues to evolve and enhance its human capital management strategies to drive organizational growth in support of strategic priorities while combating risks, such as the labor market shortage, skills gap and rising labor and health costs.
+Added: The Company expects to maintain its hybrid workplace over the long-term, invest in technology to streamline processes and ensure the workforce structure is aligned with the Company’s forward operating needs.
+Added: While technology continues to play a bigger role in the future of Berkshire, helping to improve processes and drive efficiencies, people will always be at the core of its ability to deliver expert advisement and tailored solutions to its clients which in turn drives value for its shareholders and communities.
+Added: The Company remains confident that the Berkshire brand, value proposition and vision will continue to be a differentiator in the market.
+Added: SELECT HUMAN CAPITAL METRICS
+Added: † Human Capital* † Total number of FTEs
+Added: † Turnover Rate
† Retention Rate
† Promotion Rate
−Removed: ◦ Minimum Starting Salary
−Removed: ◦ Average Tenure (years)
+Added: † Minimum Starting Pay
+Added: † Average Tenure (years) 7 years
* All metrics reported are as of and for the year-ended December 31, 2023.
−Removed: DIVERSITY, EQUITY & INCLUSION
−Removed: Creating a diverse, equitable, and inclusive (DEI) workplace is an essential enabler to continuing to drive forward progress on Berkshire’s Exciting Strategic Transformation (BEST), its BEST Community Comeback and vision.
−Removed: Ultimately Berkshire’s goal is to ensure that its workforce reflects the communities in which it operates, that its employees feel valued and can reach their full potential and that it improves the access and affordability of financial solutions to support economic growth of underrepresented populations and communities.
−Removed: The Company’s advances those goals through an integrated approach grounded in its corporate values:
+Added: DIVERSITY, EQUITY & INCLUSION ("DEI")
+Added: Creating a diverse, accessible, inclusive and equitable workplace is an essential enabler to advancing the Company’s strategic goals, social and environmental commitments and vision.
+Added: Ultimately Berkshire’s goal is to attract and retain individuals from a wide range of backgrounds, cultures and experiences so that the workforce, executives and board composition reflect the diversity of the communities in which it operates.
+Added: It also seeks to ensure equity, accessibility, fairness and impartiality in all aspects of the Company’s workplace, banking practices and financial solutions while fostering an inclusive environment where all employees feel valued, respected and empowered.
+Added: The Company advances those goals through an integrated approach that includes:
• Strong oversight and governance practices
−Removed: • Recruitment & talent management
+Added: • Talent management and recruitment
• Education and training
−Removed: • Workplace programming through employee resource groups (ERGs)
−Removed: • Financial solutions which drive economic equity
−Removed: • Community programming focused on financial inclusion and entrepreneurship
+Added: • Workplace programming
+Added: • Multicultural community engagement
+Added: • Equitable product and service development
• Supplier diversity
The Company has a strong foundation of governance practices to ensure that diversity, equity and inclusion is embedded into Berkshire’s business activities.
−Removed: This includes the Corporate Responsibility & Culture Committee of the Board of Directors which has ultimate oversight responsibility.
+Added: This includes the Corporate Responsibility & Culture Committee of the Board of Directors which oversees DEI performance.
Berkshire’s Diversity, Equity & Inclusion Committee, which reports into the Board committee, provides additional management level oversight to the Company’s programming and performance.
−Removed: The Senior Vice President, Chief Diversity Officer manages the Company’s DEI programming.
+Added: The Senior Vice President, Chief Diversity Officer leads and executes the Company’s DEI programming.
Berkshire continues working to improve representation within its workplace through recruitment initiatives while enhancing its internal talent pipeline to ensure representation at all levels of the Company.
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As a result of Berkshire’s intentional and impactful efforts to date, Berkshire was listed in the Bloomberg Gender Equality Index and Human Rights Campaign’s Corporate Equality Index.
−Removed: Diversity, Equity & Inclusion* Percent of women in workforce 67 %
−Removed: Percent of ethnic minorities in workforce 13 %
−Removed: Percent of women on the Board 31 %
−Removed: Percent of ethnic minorities on the Board 31 %
−Removed: Percent of women in manager roles (officer+) 20 %
−Removed: Percent of ethnic minorities in manager roles (officer+) 4 %
−Removed: Percent of women in executive management roles 36 %
−Removed: Percent of ethnic minorities in executive management roles 14 %
+Added: † Diversity, Equity & Inclusion*
+Added: † Percent of workforce comprised of women
+Added: † Percent of workforce comprised of ethnic minorities
+Added: † Percent of the Board comprised of women
+Added: † Percent of the Board comprised of ethnic minorities
+Added: † Percent of manager roles (officer+) comprised of women
+Added: † Percent of manager roles (officer+) comprised of ethnic minorities
+Added: † Percent of executive management roles comprised of women
+Added: † Percent of executive management roles comprised of ethnic minorities
*Workforce metrics reported are as of December 31, 2023.
−Removed: Board metrics reflect the current composition of the Board of Directors.
Berkshire provides a full suite of diversity, equity & inclusion trainings.
The trainings help build understanding and provide employees with knowledge, skills and tactics they can put into practice.
−Removed: All new employees complete training at the time of hire and Berkshire intends to roll out enhancements to its training program which includes required annual and elective courses for all employees and hiring managers in 2023.
−Removed: In addition, Berkshire offers seven Employee Resource Groups (ERGs) each playing an integral role for employees and the culture of the company.
−Removed: Every Employee Resource Group provides a safe space for dialogue, education, and collective action on topics relevant to their members and the Company.
+Added: All employees complete training annually through a combination of required and elective DEI-themed courses.
+Added: Berkshire intends to enhance its training program in 2024 to deepen alignment with corporate goals.
+Added: The training programs help form the basis for more inclusive recruitment, hiring, retention and customer service strategies going forward.
+Added: In addition, Berkshire offers six Employee Resource Groups ("ERGs"), each playing an integral role for employees and the culture of the company.
+Added: Every Employee Resource Group provides a safe space for dialogue, education, programming and
+Added: collective action on topics relevant to their members and the Company.
Through the ERGs, employees’ concerns and ideas to strengthen Berkshire’s culture are elevated to members of management and the Diversity, Equity & Inclusion Committee for action, empowering employees to collectively be engines of positive change within the workplace and the broader community.
−Removed: The Company continues to work towards building economic equity in its communities by developing and offering safe, accessible, affordable financial solutions and programs including its MyFreedom Checking account, nationally certified by BankOn for its affordability, and the Futures Fund.
+Added: The Company continues to work toward building economic equity in its communities by developing and offering safe, accessible, affordable financial solutions and programs including its MyFreedom Checking account, nationally certified by BankOn for its affordability, and the Futures Fund.
The Futures Fund is a special purpose credit program which provides access to a low-interest, low barrier to entry line of credit in collaboration with non-profit partners who provide wrap around technical assistance to minority, LGBTQIA+ and other businesses owned by underrepresented individuals.
Since launching the program in 2020, it has deployed nearly $1.7 million to underrepresented business owners.
−Removed: Beyond offering financial solutions and wellness programming, Berkshire also understands that a diverse third-party base is important to achieving its operational goals, supply chain resilience, vision and creating equity in its communities.
+Added: Beyond offering financial solutions and wellness programming, Berkshire also understands that a diverse third-party base is important to achieving its operational goals, supply chain resilience, and vision.
As a result, Berkshire works to maintain a third-party base that reflects the communities in which it operates and, to the maximum extent possible, increase the utilization of third parties owned by underrepresented people.
−Removed: Additional information on Berkshire’s Human Capital Management and Diversity, Equity & Inclusion practices can be found in the Company’s annual Corporate Responsibility Report, which details the company's environmental, social and governance programs.
+Added: Additional information on Berkshire’s Human Capital Management and Diversity, Equity & Inclusion practices can be found in the Company’s annual Corporate Responsibility & Sustainability Report, which details the company's environmental, social and governance programs.
SUBSIDIARY ACTIVITIES
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Certain regulatory requirements applicable to the Company and the Bank are referred to below.
−Removed: The description of statutory provisions and regulations applicable to financial institutions and their holding companies set forth in this Form 10-K does not purport to be a complete description of such statutes and regulations and their effects on the Company and is qualified in its entirety by reference to the actual laws and regulations.
+Added: The description of statutory provisions and regulations applicable to financial institutions and their holding companies set forth in this Form 10-K does not purport to be a complete description of such statutes and regulations and their effects on the Company and the Bank and is qualified in its entirety by reference to the actual laws and regulations.
A summary of the regulatory requirements referred to below is as follows:
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There is a 30-day notice procedure to the Commissioner in order to engage in such activities.
−Removed: Massachusetts law also authorized Massachusetts institutions to engage in activities determined to be “financial in nature,” or incidental or complementary to such a financial activity, subject to a 30-day notice to the Commissioner.
+Added: Massachusetts law also authorizes Massachusetts institutions to engage in activities determined to be “financial in nature,” or incidental or complementary to such a financial activity, subject to a 30-day notice to the Commissioner.
Under Massachusetts law, the Bank may declare cash dividends from net profits not more frequently than quarterly and non-cash dividends at any time.
1 unchanged sentence
An institution with outstanding preferred stock may not, without the prior approval of the Commissioner, declare dividends to the common stock without also declaring dividends to the preferred stock.
−Removed: The approval of the Commissioner is generally required if the total of all dividends declared in any calendar year exceeds the total of its net profits for that year combined with its retained “net profits,” as defined, of the preceding two years.
−Removed: The Bank was required to obtain the approval of the Commissioner to pay Bank dividends to the Company in 2022 and is expected to require such approval in 2023.
+Added: The approval of the Commissioner is generally required if the total of all dividends declared in any calendar year exceeds the total of its net profits for that year combined with its retained “net profits,” as defined, over the preceding two years.
+Added: The Bank was required to obtain the approval of the Commissioner to pay Bank dividends to the Company in 2023.
Loans to One Borrower Limitations.
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In addition, upon finding that an institution has engaged in an unfair or deceptive act or practice, the Commissioner may issue an order to cease and desist and impose a fine on the institution concerned.
−Removed: Finally, Massachusetts consumer protection and civil rights statutes applicable to the Bank permit private individual and class action lawsuits and provide for the rescission of consumer transactions, including loans, and the recovery of statutory and punitive damage and attorney’s fees in the case of certain violations of those statutes.
+Added: Finally, Massachusetts consumer protection and civil rights statutes applicable to the Bank permit private individual and class action lawsuits and provide for the rescission of consumer transactions, including loans, and the recovery of statutory and punitive damages and attorney’s fees in the case of certain violations of those statutes.
Massachusetts has other statutes or regulations that are similar to the federal provisions discussed below.
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Federal regulations require FDIC insured depository institutions to meet several minimum capital standards:
−Removed: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8.0%, and a 4.0% Tier 1 capital to total assets leverage ratio.
+Added: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets ratio of 8.0%, and a 4.0% Tier 1 capital to total assets leverage ratio.
The definitions of these capital categories and the ratio metrics are set out in federal regulations.
−Removed: In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted asset above the amount necessary to meet its minimum risk-based capital requirements.
+Added: In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.
In assessing an institution’s capital adequacy, the FDIC takes into consideration not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements for individual institutions where deemed necessary.
1 unchanged sentence
The approval of the FDIC is required for the Bank to pay a dividend to the Company from its surplus account.
−Removed: FDIC approval was required for Bank dividends payments in 2022 and such approval is expected to be required in 2023.
+Added: FDIC approval was required for Bank dividend payments in 2023 and such approval is expected to be required in 2024.
Investment Activities.
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The FDIC regulations implementing the prompt corrective action law were amended to incorporate the previously discussed increased regulatory capital standards that were effective January 1, 2015.
−Removed: An institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater, and a common equity Tier 1 ratio of 6.5% or greater.
−Removed: An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater, and a common equity Tier 1 ratio of 4.5% or greater.
−Removed: An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0%, or a common equity Tier 1 ratio of less than 4.5%.
−Removed: An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0%, or a common equity Tier 1 ratio of less than 3.0%.
+Added: An institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a common equity Tier 1 ratio of 6.5% or greater, and a leverage ratio of 5.0% or greater.
+Added: An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a common equity Tier 1 ratio of 4.5% or greater, and a leverage ratio of 4.0% or greater.
+Added: An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a common equity Tier 1 ratio of less than 4.5%, or a leverage ratio of less than 4.0%.
+Added: An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a common equity Tier 1 ratio of less than 3.0%, or a leverage ratio of less than 3.0%.
An institution is considered to be “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%.
“Undercapitalized” banks must adhere to growth, capital distribution (including dividend), and other limitations and are required to submit a capital restoration plan.
−Removed: A bank’s compliance with such plans must be guaranteed by its holding company in an amount equal to the lesser of 5% of the institution’s total assets when deemed “undercapitalized” or the amount needed to comply with regulatory capital requirements.
−Removed: If an “undercapitalized”
−Removed: bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” banks must comply with one or more of a number of additional restrictions, including but not limited to an order by the FDIC to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce assets and cease receipt of deposits from correspondent banks or dismiss directors or officers, and restrictions on interest rates paid on deposits, compensation of executive officers, and capital distributions by the holding company.
−Removed: “Critically undercapitalized” institutions must comply with additional sanctions including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it obtains such status.
+Added: A bank’s compliance with such capital restoration plans must be guaranteed by its holding company in an amount equal to the lesser of 5% of the institution’s total assets when deemed “undercapitalized” or the amount needed to comply with regulatory capital requirements.
+Added: If an “undercapitalized” bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” banks must comply with one or more of a number of additional restrictions, including but not limited to an order by the FDIC to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce assets and cease receipt of deposits from correspondent banks or dismiss directors or officers, and restrictions on interest rates paid on deposits, compensation of executive officers, and capital distributions by the holding company.
+Added: “Critically undercapitalized” institutions must comply with additional sanctions including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after they obtain such status.
At December 31, 2023, the Bank met the criteria for being considered “well capitalized” as defined in the prompt corrective action regulations.
Transactions with Affiliates and Loans to Insiders.
−Removed: Transactions between depository institutions and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act.
+Added: Transactions between depository institutions and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act and the Act’s implementing regulation, Regulation W.
In a holding company context, at a minimum, the parent holding company of an institution and any companies which are controlled by the holding company are affiliates of the institution.
−Removed: Generally, Section 23A limits the extent to which the institution or its subsidiaries may engage in “covered transactions,” such as loans, with any one affiliate to 10% of such institution’s capital stock and surplus.
−Removed: There is also an aggregate limit on all such transactions with all affiliates to 20% of capital stock and surplus.
+Added: Generally, Section 23A limits the extent to which the institution or its subsidiaries may engage with any one affiliate in “covered transactions,” such as loans, to 10% of such institution’s capital stock and surplus.
+Added: There is also an aggregate limit on all such “covered transactions” with all affiliates to 20% of the institution’s capital stock and surplus.
Loans to affiliates and certain other specified transactions must comply with specified collateralization requirements.
−Removed: Section 23B requires that transactions with affiliates be on terms that are no less favorable to the institution or its subsidiary as similar transactions with non-affiliates.
−Removed: Federal law also restricts an institution with respect to loans to directors, executive officers, and principal stockholders (“insiders”).
−Removed: Loans to insiders and their related interests may not exceed, together with all other outstanding loans to such persons and affiliated entities, the institution’s total capital and surplus.
−Removed: Loans to insiders above specified amounts must receive the prior approval of the Board of Directors.
−Removed: Further, loans to insiders must be made on terms substantially the same as offered in comparable transactions to other persons, except that such insiders may receive preferential loans made under a benefit or compensation program that is widely available to the institution’s employees and does not give preference to the insider over the employees.
+Added: Section 23B generally requires that transactions with affiliates be on terms and under circumstances that are substantially the same, or at least as favorable to the institution or its subsidiary, as comparable transactions with or involving non-affiliates.
+Added: Federal law also restricts an institution with respect to loans to the institution’s or its affiliates’ directors, executive officers, and principal stockholders (“insiders”).
+Added: Loans to insiders and their related interests may not exceed, together with all other outstanding loans to such insiders and their related interests, the institution’s unimpaired capital and surplus.
+Added: Loans to insiders above specified amounts must receive the prior approval of the majority of the Board of Directors.
+Added: Further, loans to insiders must be made on terms substantially the same as offered in comparable transactions to non-insiders, although insiders may receive loans made under a benefit or compensation program that is widely available to the institution’s employees and does not give preference to the insider over other employees.
Federal law places additional limitations on loans to executive officers.
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Under the risk-based assessment system, institutions deemed less risky of failure pay lower assessments.
−Removed: Assessments for institutions of less than $10 billion of assets are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution’s failure within three years.
The assessment range (inclusive of possible adjustments specified by the regulations) for institutions with greater than $10 billion of total assets was 1.5 to 40 basis points effective through December 31, 2022.
The FDIC has authority to increase insurance assessments and adopted a final rule in October 2022 to increase initial base deposit insurance assessment rates by two basis points beginning in the first quarterly assessment period of 2023.
−Removed: As a result, effective January 1, 2023, assessment rates for institutions of the Bank’s size will range from 2.5 to 42 basis points.
−Removed: Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by a regulator.
+Added: As a result, effective January 1, 2023, assessment rates for institutions of the Bank’s size range from 2.5 to 42 basis points.
+Added: Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, order or condition imposed by a regulator.
Management does not know of any practice, condition or violation that might lead to termination of FDIC deposit insurance.
−Removed: The FDIC has authority to increase insurance assessments.
−Removed: A significant increase in insurance premiums would likely have an adverse effect on the operating expenses and results of operations of the Bank.
−Removed: Management cannot predict what insurance assessment rates will be in the future.
Federal Home Loan Bank System .
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These requirements, and general financial results, could reduce the amount of dividends that the Federal Home Loan Banks pay to their members and result in the Federal Home Loan Banks imposing a higher rate of interest on advances to their members.
−Removed: Historically, the FHLBB has paid dividends to member banks based on money market rates.
The FDIC has primary federal enforcement responsibility over state-chartered banks that are not members of Federal Reserve System, which includes the Bank.
−Removed: The FDIC has authority to bring enforcement actions against such institutions and their “institution-related parties,” including officers, directors, certain shareholders, and attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution.
+Added: The FDIC has authority to bring enforcement actions against such institutions and their “institution-related parties,” including officers, directors, certain shareholders, and attorneys, appraisers and accountants who knowingly or recklessly participate in prescribed types of misconduct which caused or were likely to cause more than a minimal loss to, or a significant adverse effect on, an insured institution.
Formal enforcement action may range from the issuance of a capital directive or cease and desist order to removal of officers and/or directors of the institution or receivership or conservatorship in certain circumstances.
−Removed: Potential civil money penalties cover a wide range of violations and actions, and are adjusted annually for inflation.
+Added: Potential civil money penalties can be assessed for a wide range of legal and regulatory violations and for unsafe or unsound practices, and are adjusted annually for inflation.
Such penalties currently range up to more than $50 thousand per day or, in extreme cases, as high as $2.37 million per day.
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Control, as defined for this purpose, means ownership, control of or power to vote 25% or more of any class of voting stock.
−Removed: Acquisition of more than 10% of any class of a bank holding company’s voting stock constitutes a rebuttable presumption of control under the regulations under certain circumstances including where, is the case with the Company, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.
+Added: Acquisition of more than 10% of any class of a bank holding company’s voting stock constitutes a rebuttable presumption of control under the regulations under certain circumstances including where, as is the case with the Company, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.
Massachusetts Holding Company Regulation.
−Removed: In addition to the federal holding company regulations, a bank holding company organized or doing business in Massachusetts must comply with requirements under Massachusetts law.
+Added: In addition to the federal bank holding company regulations, a bank holding company organized or doing business in Massachusetts must comply with requirements under Massachusetts law.
Approval of the Massachusetts regulatory authorities is generally required for the Company to acquire 25 percent or more of the voting stock of another depository institution.
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Necessary regulatory approvals include those required by the federal Bank Holding Company Act and/or Bank Merger Act, Massachusetts law and, if the target institution is located in a state other than Massachusetts, the law of that state.
−Removed: When considering merger applications, the federal regulators must evaluate such factors as the financial and managerial resources and future prospects of the parties, the convenience and needs of the communities to be served (including performance of the parties under the Community Reinvestment Act), competitive factors, any risk to the stability of the United States banking or financial system and the effectiveness of the institutions involved in combating money laundering activities.
+Added: When considering merger applications, the federal regulators must evaluate such factors as the financial and managerial resources and future prospects of the parties, the convenience and needs of the communities to be served (including performance of the parties under the Community Reinvestment Act (“CRA”)), competitive factors, any risk to the stability of the United States banking or financial system and the effectiveness of the institutions involved in combating money laundering activities.
Both the Bank Holding Company Act and the Bank Merger Act provide for a waiting period of 15 to 30 days following approval by the federal banking regulator within which the United States Department of Justice may file objections to the merger under the federal antitrust laws.
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Home Mortgage Disclosure Act, requiring financial institutions to provide certain information about home mortgage and refinance loans;
−Removed: the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;
+Added: the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited bases in extending credit;
the Fair Credit Reporting Act, governing the provision of consumer information to credit reporting agencies and the use of consumer information;
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and the Electronic Funds Transfer Act, governing automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.
−Removed: Since the Bank has exceeded $10 billion of consolidated assets, compliance with such federal consumer protection statutes and regulations is examined for and enforced by the Consumer Finance Protection Bureau rather than the FDIC.
+Added: Since the Bank has exceeded $10 billion of consolidated assets, compliance with such federal consumer protection statutes and regulations is examined for and enforced by the Consumer Finance Protection Bureau.
The Bank also is subject to Massachusetts and federal laws protecting the confidentiality of consumer financial records, and limiting the ability of the institution to share non-public personal information with third parties.
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Under the CRA, institutions are assigned a rating of “outstanding,” “satisfactory,” “needs to improve,” or “substantial non-compliance.” A less than “satisfactory” rating would result in the suspension of any growth of the Bank through acquisitions or opening de novo branches until the rating is improved.
−Removed: As of the most recent CRA examination by the FDIC, the Bank’s CRA rating was “satisfactory.” On May 5, 2022, the OCC, FRB and FDIC released a notice of proposed rulemaking to strengthen and modernize the CRA regulations and framework.
+Added: As of the most recent CRA examination by the FDIC, the Bank’s CRA rating was “satisfactory.” On October 24, 2023, the FDIC, the Federal Reserve Board, and the Office of the Comptroller of the Currency issued a final rule to strengthen and modernize the CRA regulations.
+Added: Under the final rule, banks with assets of at least $2 billion as of December 31 in both of the prior two calendar years will be a “large bank.” The agencies will evaluate large banks under four performance tests:
+Added: the Retail Lending Test, the Retail Services and Products Test, the Community Development Financing Test, and the Community Development Services Test.
+Added: The applicability date for the majority of the provisions in the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027.
+Added: Cybersecurity and Protection of Customers’ Personal Information.
+Added: The provisions of Gramm-Leach-Bliley Act (GLBA) regarding privacy generally prohibit financial institutions from disclosing nonpublic personal financial information of consumer customers to third parties for certain purposes unless those customers have the opportunity to opt out.
+Added: The Fair Credit Reporting Act (FCRA) restricts information sharing among affiliates for marketing purposes.
+Added: Both the FCRA and Regulation V, which are issued by the Federal Reserve Board, govern the use and provision of information to consumer reporting agencies.
+Added: In addition, federal banking regulators regularly issue guidance concerning cybersecurity standards to help enhance cyber risk management among financial institutions.
+Added: Under these statutory frameworks and guidance, financial institutions such as ours are expected to implement layers of security controls designed to establish multiple lines of defense and to provide for risk management processes that address the risks posed by compromised customer credentials, including security measures to reliably authenticate customers when they access the financial institution’s internet-based services.
+Added: Moreover, management of the financial institution is responsible for maintaining disaster and business continuity planning and processes designed to ensure speedy recovery and resumption of the institution’s operations after an intrusive cyber-attack or other type of compromise of customer data or information technology systems, including appropriate processes to address data and network restoration, if needed.
+Added: The financial institution is also responsible for accounting for the disaster recovery and business continuity plans and processes of its critical third party service providers.
+Added: Failing to observe its obligations under regulatory guidance could subject the Company regulatory sanctions such as financial penalties.
+Added: For a further discussion of risks related to cybersecurity, see Item 1A “Risk Factors.”
+Added: As a banking organization, the Company is required to notify its primary federal regulator as soon as possible but no later than 36 hours after the Company’s discovery of a computer-security incident that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the Company’s:
+Added: (1) ability to carry out banking operations, activities, or processes, or deliver banking products and services to a material portion of its customer base, in the ordinary course of business;
+Added: (2) business lines, including associated operations, services, functions, and support, that upon failure would result in a material loss of revenue, profit, or franchise value;
+Added: or (3) operations, including associated services, functions, and support, as applicable, the failure or discontinuance of which would pose a threat to the financial stability of the United States.
+Added: The Company also notes that in August 2023, the Securities and Exchange Commission adopted a final rule that requires registrants such as the Company to file a Form 8-K to disclose any material cybersecurity incident it suffers.
+Added: If an event requiring disclosure under the final rule were to occur, the Company’s disclosure would need to include the impact of the incident on the Company, as well as the material aspects of the nature, scope, and timing of the incident.
+Added: The final rule also requires registrants such as the Company to describe, on Form 10-K, their processes for assessing, identifying and managing material risks from cybersecurity threats and whether those risks have materially affected the registrant.
+Added: The final rule also requires registrants such as the Company to describe Board oversight of risks emanating from cybersecurity threats and management’s role and expertise in assessing and managing material risks from cybersecurity threats.
+Added: See Item 1C “Cybersecurity” for more information.
+Added: Finally, the Company notes that there has been a recent uptick in activity among state regulators with respect to implementing privacy and cybersecurity standards and regulations.
+Added: Some states have adopted laws and regulations requiring financial institutions to maintain cybersecurity programs and make details available regarding those programs.
+Added: Also, some states have either implemented, or modified, their data breach notification and/or data privacy rules.
+Added: While the Company cannot predict future legislative or regulatory actions of the various states, the Company expects continued activity in this area and will continue to monitor for developments in the states in which it operates.
Anti-Money Laundering Laws .
−Removed: The Bank is subject to extensive anti-money laundering provisions and requirements, which require the institution to have in place a comprehensive customer identification program and an anti-money laundering program and procedures.
+Added: The Bank is subject to extensive anti-money laundering statutes and regulations, which require the institution to have in place an anti-money laundering compliance program and procedures and a customer identification program, among other things.
These laws and regulations also prohibit depository institutions from engaging in business with foreign shell banks;
require depository institutions to have due diligence procedures and, in some cases, enhanced due diligence procedures for foreign correspondent and private banking accounts;
−Removed: and improve information sharing between depository institutions and the U.S.
−Removed: The Bank has established policies and procedures intended to comply with these provisions.
+Added: and require information sharing with the U.S.
+Added: government in certain circumstances.
+Added: The Bank has established policies and procedures intended to comply with these statutes and regulations.
The Company reports its income on a calendar year basis using the accrual method of accounting.
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The Inflation Reduction Act, which was signed into law on August 16, 2022, among other things, implements a new alternative minimum tax of 15% on corporations with profits in excess of $1 billion, a 1% excise tax on stock repurchases, and several tax incentives to promote clean energy and climate initiatives.
−Removed: These provisions are effective beginning January 1, 2023.
+Added: These provisions were effective beginning January 1, 2023.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.