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Item 1. Business

2026-03-02 compared with 2025-03-03 · 271 added, 666 removed, 9 unchanged (99% of the section changed)

FORWARD-LOOKING STATEMENTS

Certain statements contained in this document that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (referred to as the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (referred to as the Securities Exchange Act), and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

You can identify these statements from the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions.

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including among other things, factors related to the pending merger between Berkshire Hills Bancorp, Inc.

(“Berkshire” or “the Company”) and Brookline Bancorp, Inc., including delays or impediments to completing the transaction, legal proceedings that may be instituted against the Company, expenses associated with the transaction, restrictions on Berkshire’s business during the pendency of the transaction, diversion of management’s attention from other business operations and opportunities, reactions of customers and employees to the transaction, challenges integrating the companies, and any failure to realize anticipated benefits of the transaction, and other factors such as changes in general economic and business conditions, increased competitive pressures, changes in the interest rate environment and inflation, legislative and regulatory change, changes in the financial markets, and other risks and uncertainties disclosed from time to time in documents that Berkshire files with the Securities and Exchange Commission, including the Risk Factors in Item 1A of this report.

Because of these and other uncertainties, Berkshire’s actual results, performance or achievements, or industry results, may be materially different from the results indicated by these forward-looking statements.

In addition, Berkshire’s past results of operations do not necessarily indicate Berkshire’s combined future results.

You should not place undue reliance on any of the forward-looking statements, which speak only as of the dates on which they were made.

Berkshire is not undertaking an obligation to update forward-looking statements, even though its situation may change in the future, except as required under federal securities law.

Berkshire qualifies all of its forward-looking statements by these cautionary statements.

Berkshire Hills Bancorp, Inc.

is headquartered in Boston, Massachusetts.

Berkshire is a Delaware corporation and the holding company for Berkshire Bank (“the Bank”).

The Bank provides Commercial Banking, Retail Banking, Consumer Lending, Private Banking and Wealth Management services.

At year-end 2024, the Bank had $12.3 billion in assets and 83 full-service financial centers in its New England and New York footprint.

On December 16, 2024, the Company entered into a definitive agreement (“the Agreement”) for a merger of equals with Brookline Bancorp, Inc.

(“Brookline”) the parent company of Brookline Bank, Bank Rhode Island, and PCSB Bank.

Pursuant to the Agreement, Brookline will merge with and into Berkshire in an all-stock transaction valued at approximately $1.1 billion, or $12.68 per share of Brookline common stock, based on the $30.20 closing price of Berkshire common stock on December 13, 2024.

Under the terms of the Agreement, each outstanding share of Brookline common stock will be exchanged for the right to receive 0.42 shares of Berkshire common stock.

As a result of the transaction and a $100 million Berkshire common stock offering conducted to support the transaction, Berkshire shareholders will own approximately 55% (including the investors in the Berkshire common stock offering) and Brookline shareholders will own approximately 45% of the outstanding shares of the combined company.

The combined company will trade on the New York Stock Exchange and will announce a new name and ticker symbol prior to closing.

The combined bank will also operate under a new name to be announced prior to closing.

The executive headquarters for the combined company will be located at 131 Clarendon Street in Boston, MA, with operations centers located throughout the Northeast.

The transaction is expected to close by the end of the second half of 2025, subject to satisfaction of customary closing conditions, including receipt of required regulatory approvals and approvals from Berkshire and Brookline shareholders.

Information regarding the Company is available through the Investor Relations tab at berkshirebank.com.

The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge at sec.gov and, as soon as reasonably practicable after we electronically file such material with the Securities and Exchange Commission, at berkshirebank.com under the Investor Relations tab.

Information on the website is not incorporated by reference and is not a part of this annual report on Form 10-K.

Beacon Financial Corporation, a Delaware corporation, is the holding company for Beacon Bank & Trust and its subsidiaries and Clarendon Private.

The Company offers a wide range of commercial, business and retail banking services, including a full complement of cash management products, foreign exchange services, on-line and mobile banking services, consumer and residential loans and wealth management services.

Clarendon Private is a registered investment advisor with the SEC.

Through Clarendon Private and the Trust and Investments Division of the Bank, the Company offers a wide range of wealth management services to individuals, families, endowments and foundations to help these clients meet their long-term financial goals.

As a full-service financial institution with 147 banking offices throughout New England and New York, the Bank and its subsidiaries focus their efforts on developing and deepening long-term banking relationships with qualified customers through a full complement of products, excellent customer service, and strong risk management.

The Company's headquarters and executive management are located at 131 Clarendon Street, Boston, Massachusetts 02116, and its telephone number is 617-425-4600.

Completion of Merger of Equals

On September 1, 2025, the Company completed its merger of equals with Brookline Bancorp, Inc.

(“Legacy Brookline”), pursuant to the Agreement and Plan of Merger, dated as of December 16, 2024, by and among the Company, Commerce Acquisition Sub, Inc.

and Legacy Brookline (the “Merger Agreement”).

On September 1, 2025, Commerce Acquisition Sub, Inc.

merged with and into Legacy Brookline (the “Merger”), immediately followed by the merger of Legacy Brookline with and

into the Company (the “Holdco Merger”), with the Company as the resulting corporation.

The Company also changed its name from Berkshire Hills Bancorp, Inc.

to Beacon Financial Corporation and changed the New York Stock Exchange ticker symbol for its common stock from “BHLB” to “BBT.”

Immediately following the Holdco Merger, Berkshire Bank, a wholly owned subsidiary of the Company, Bank Rhode Island, a wholly owned subsidiary of Legacy Brookline, and PCSB Bank, a wholly owned subsidiary of Legacy Brookline, each merged with and into Brookline Bank, a wholly owned subsidiary of Legacy Brookline, with Brookline Bank as the surviving bank (the “Bank Mergers” and, together with the Merger and the Holdco Merger, the “Transaction”).

In connection with the Bank Mergers, Brookline Bank changed its name to Beacon Bank & Trust.

The Transaction was treated as a business combination under ASC 805 and was accounted for as a reverse merger using the acquisition method of accounting.

Therefore, Legacy Brookline was deemed the acquirer for financial reporting purposes even though Legacy Berkshire was the legal acquirer.

As such, the historical financial statements of Legacy Brookline became the historical financial statements of the combined company.

Overview of Results

The loan and lease portfolio increased $8.3 billion, or 84.4%, to $18.0 billion at December 31, 2025 from $9.8 billion at December 31, 2024.

The Company's commercial loan portfolios, which totaled $14.0 billion, or 77.4% of total loans and leases, as of December 31, 2025, increased $5.7 billion, or 69.8%, from $8.2 billion, or 84.1% of total loans and leases, as of December 31, 2024.

Total deposits increased $10.6 billion, or 119.2%, to $19.5 billion at December 31, 2025 from $8.9 billion as of December 31, 2024.

Core deposits, which include demand checking, NOW, non-payroll money market and savings accounts, increased 112.6% to $13.1 billion as of December 31, 2025 from $6.1 billion at December 31, 2024.

The Company's core deposits were 67.0% of total deposits at December 31, 2025, a decrease from 69.1% at December 31, 2024.

The Bank also operates a commercial payment processing business that serves regional and national payroll service bureau customers.

These payroll deposits, included in money market often fluctuate daily by hundreds of millions of dollars depending on payroll cycles.

Payroll deposits, included in money market accounts in the accompanying consolidated balance sheets, totaled $1.9 billion as of December 31, 2025, all of which was assumed in the Transaction.

The allowance for loan and lease losses increased $127.8 million, or 102.1%, to $252.8 million as of December 31, 2025 from $125.1 million as of December 31, 2024.

The ratio of the allowance for loan and lease losses to total loans and leases was 1.40% as of December 31, 2025 compared to 1.28% as of December 31, 2024.

Nonperforming assets as of December 31, 2025 were $116.7 million, up from $70.5 million at the end of 2024.

Nonperforming assets were 0.50% and 0.59% of total assets as of December 31, 2025 and December 31, 2024, respectively.

Net interest income increased $173.5 million, or 52.6%, to $503.1 million in 2025 compared to $329.6 million in 2024.

Net interest margin increased 50 basis points to 3.56% in 2025 from 3.06% in 2024.

Net income for 2025 increased $21.6 million, or 31.4%, to $90.3 million from $68.7 million for 2024.

Basic and fully diluted earnings per common share ("EPS") increased to $1.03 for 2025 from $0.77 for 2024.

“Management's Discussion and Analysis of Financial Condition and Results of Operations.”

The Company is subject to strong competition from banks and other financial institutions and financial service providers.

Its competition includes national and super-regional banks.

Non-bank competitors include credit unions, brokerage firms, insurance providers, financial planners, and the mutual fund industry.

New technology is reshaping customer interaction with financial service providers and the increase of internet-accessible financial institutions increases competition for the Company’s customers.

The Company generally competes on the basis of customer service, relationship management, and the fair pricing of its products.

The location and convenience of branch offices is also a significant competitive factor, particularly regarding new offices.

The Company is pursuing a “banker heavy, branch light” model in newer markets, and uses its mobile MyBanker teams which provide personalized service to customers with committed relationships.

Due to recent mergers of in-market bank competitors, the Company is pursuing opportunities to expand its market share and talent recruitment.

The Company seeks to differentiate itself with its Digitouch SM approach to personal service and user-friendly technology, as well as its commitment to corporate responsibility.

The Company's brand theme of “Where You Bank Matters” is targeted to highlight these differentiating factors.

LENDING ACTIVITIES

The Company faces considerable competition from banking and non-banking organizations, including traditional banks, online banks, financial technology companies, wealth management companies and others, in its market area for all aspects of banking and related service activities.

Competitive factors considered for loan generation include product offerings, interest rates, terms offered, services provided and geographic locations.

Competitive factors considered in attracting and retaining deposits include product offerings and rate of return, convenient branch locations and automated teller machines and online access to accounts.

Market Area and Credit Risk Concentration

The Bank originates loans in the basic portfolio categories discussed below.

1 unchanged sentence

Loan interest rates and other key loan terms are affected principally by the Bank’s credit policy, asset/liability strategy, loan demand, competition, and the supply of money available for lending purposes.

These factors, in turn, are affected by general and economic conditions, monetary policies of the federal government, including the Federal Reserve, legislative tax policies, and governmental budgetary matters.

These factors, in turn, are affected by general and economic conditions, monetary policies of the federal government, including the FRB, legislative tax policies, and governmental budgetary matters.

Most of the Bank’s loans held for investment are made in its market areas and are secured by real estate located in its market areas.

Lending is therefore affected by activity in these real estate markets.

The Bank monitors and manages the amount of long-term fixed-rate lending volume.

Adjustable-rate loan products generally reduce interest rate risk but may produce higher loan losses in the event of sustained rate increases.

The Bank generally originates loans for investment except for residential mortgages, which are sometimes originated for sale on a servicing released basis.

Additionally, the Bank also originates Small Business Administration ("SBA") 7A loans for sale to investors.

The Bank also conducts loan participations generally with other banks doing business in its markets, including selected national banks.

Loan Portfolio Analysis.

The following table sets forth the year-end composition of the Bank’s loan portfolio in dollar amounts and as a percentage of the portfolio at the dates indicated.

Further information about the composition of the loan portfolio is contained in Note 5 – Loans and Related Allowances for Credit Losses.

Item 1 – Table 1 – – Loan Portfolio Analysis

2024 2023 2022

(In millions) Amount Percent of Total Amount Percent of Total Amount Percent of Total

Construction $ 726 7.8 % $ 640 7.1 % $ 320 3.9 %

Commercial multifamily 637 6.8 599 6.6 620 7.5

Commercial real estate owner occupied 695 7.4 629 7.0 641 7.7

Commercial real estate non-owner occupied 2,770 29.5 2,607 28.8 2,496 29.9

Commercial and industrial 1,439 15.3 1,359 15.1 1,445 17.3

Residential real estate 2,772 29.5 2,760 30.5 2,312 27.7

Home equity 230 2.5 224 2.5 227 2.7

Consumer other 116 1.2 221 2.4 274 3.3

Total $ 9,385 100.0 % $ 9,039 100.0 % $ 8,335 100.0 %

Allowance for credit losses (115) (105) (96)

Net loans $ 9,270 $ 8,934 $ 8,239

There is further information about the above components of the loan portfolio, and the risk characteristics relevant to each portfolio segment, in the “Loans and Related Allowance for Credit Losses” footnote to the financial statements referenced in Item 8 of this report.

There is also information about the loan portfolio and changes in the portfolio during 2024 in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this report.

There is reference made to Commercial and Retail Loans, as well as to Commercial Real Estate loans.

Commercial Real Estate loans include Construction, Commercial Multi-Family, Commercial Real Estate Owner Occupied, and Commercial Real Estate Non-Owner Occupied.

Commercial loans include Commercial Real Estate loans and Commercial and Industrial Loans.

Retail loans include Residential Real Estate loans and Consumer loans, which are comprised of Home Equity loans and Consumer other loans.

Commercial Real Estate.

The Bank originates commercial real estate loans on properties used for business purposes such as retail, multifamily, office, healthcare, hospitality, industrial, and manufacturing facilities.

Commercial real estate loans are provided on owner-occupied properties and on investor-owned properties and also include construction loans.

Loans may generally be made with amortizations of up to 30 years and with final maturities of 10 years or less.

As part of its business activities, the Bank also enters into commercial loan participations and interest rate swaps.

The Bank originates construction loans to developers and commercial borrowers in its footprint.

The maximum loan to value limits for construction loans follow Federal Deposit Insurance Corporation ("FDIC") supervisory limits, up to a maximum of 85 percent.

The Bank commits to provide the permanent mortgage financing on many of its construction loans on income-producing property.

Advances on construction loans are made in accordance with a schedule reflecting the cost of the improvements.

Construction loans include land acquisition loans up to a maximum 50 percent loan to value on raw land.

Construction loans may have greater credit risk due to the dependence on completion of construction and other real estate improvements, as well as the sale or rental of the improved property.

The Bank generally mitigates these risks with presale or preleasing requirements and phasing of construction.

Commercial and Industrial Loans ("C&I").

C&I loans are mostly managed through the Bank’s commercial middle market banking organization, as well as its Asset Based Lending Group, its Small Business Banking Group, and 44 Business Capital.

The Bank offers secured commercial term loans with repayment terms which are normally limited to the expected useful life of the asset being financed, and generally not exceeding ten years.

The Bank also offers revolving loans, lines of credit, letters of credit, time notes and SBA guaranteed loans.

Business lines of credit have 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.

Loan-to-value ratios depend on the collateral type and generally do not exceed 80 percent of orderly liquidation value or net book value as reported on the borrower’s financial statements.

Some commercial loans may also be secured by liens on real estate.

The Bank generally does not make unsecured commercial loans.

Commercial and industrial loans are of higher risk and are made primarily on the basis of the borrower’s ability to make repayment from the cash flows of its business.

Further, any collateral securing such loans may depreciate over time, may be difficult to monitor and appraise and may fluctuate in value.

The Bank gives additional consideration to the borrower’s credit history and the guarantor’s capacity to help mitigate these risks.

Additionally, the Bank uses loan structures including shorter terms, amortizations, and advance rate limitations to additionally mitigate credit risk.

Credit enhancements in the form of additional collateral or guarantees are normally considered for start-up businesses without a qualifying cash flow history.

The Company considers 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.

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.

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.

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.

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.

The origination of loans by Firestone was terminated in mid-2022 and the remaining portfolio totaled $41 million at December 31, 2024.

44 Business Capital is a dedicated SBA 7A program lending team based in the Philadelphia area.

This team originates loans in the Northeast, Mid-Atlantic and nationally.

44 Business Capital also works with business banking and small business teams to provide SBA guaranteed loans to Business Banking Customers in Berkshire’s footprint.

This team generally sells the guaranteed portions of these loans with servicing retained and the Bank retains the unguaranteed portions of the loans in its C&I loan portfolio.

The unguaranteed loan balances are participated pari-passu with the SBA and are generally collateralized and supported by recourse to business principals.

The Bank is a preferred SBA lender and closely manages the servicing portfolio pursuant to SBA requirements.

This team is the Bank’s largest source of commercial lending fee revenue.

Residential Mortgages.

Through its mortgage banking operations, the Bank offers fixed-rate and adjustable-rate residential mortgage loans to individuals with maturities of up to 30 years that are fully amortizing with monthly loan payments.

The majority of loans have been originated for investment.

The Bank does not offer subprime mortgage lending programs.

The Bank buys and sells seasoned mortgages primarily with smaller financial institutions operating in its markets.

Mortgage loan originations often include rate lock features intended to cover normal processing times.

These rate locks introduce price risk into the Company’s operations and cause mortgage origination yields to lag market interest rates.

The Bank does not offer interest-only or negative amortization mortgage loans.

Adjustable rate mortgage loan interest rates may rise as interest rates rise, thereby increasing the potential for default.

The Bank also originates construction loans which generally provide 15-month construction periods followed by a permanent mortgage loan, and follow the Bank’s normal mortgage underwriting guidelines.

Mortgage banking also requires flexible and scalable operations due to the volatility of mortgage demand over time.

Investor management is integral to maintaining the secondary market support that is a component for these operations.

Commercial real estate loans.

Multi-family and commercial real estate mortgage loans typically generate higher yields, but also involve greater credit risk.

In addition, many of the Bank's borrowers have more than one multi-family or commercial real estate loan outstanding.

The Bank manages this credit risk by prudent underwriting with conservative debt service coverage and loan-to-value ratios at origination;

lending to seasoned real estate owners/managers, frequently with personal guarantees of repayment;

using reasonable appraisal practices;

cross-collateralizing loans to one borrower when deemed prudent;

and limiting the amount and types of construction lending.

Commercial loans and equipment leasing.

The Bank originates commercial loans, leases and lines of credit for working capital and other business related purposes.

Because commercial loans are typically made on the basis of the borrower's ability to repay from the cash flow of the business, the availability of funds for the repayment of commercial and industrial loans may be significantly dependent on the success of the business itself.

Further, the collateral securing the loans may be difficult to value, may fluctuate in value based on the success of the business and may deteriorate over time.

For this reason, these loans and leases involve greater credit risk.

Loans and leases originated by Eastern Funding generally earn higher yields because the borrowers are typically small businesses with limited capital such as laundries, fitness centers and tow truck operators.

The Bank manages the credit risk inherent in commercial lending by requiring strong debt service coverage ratios;

limiting loan-to-value ratios;

securing personal guarantees from borrowers;

and limiting industry concentrations, franchisee concentrations and the duration of loan maturities.

Consumer loans.

The Bank engages in prime home equity lending, following its conforming mortgage underwriting guidelines with more streamlined verifications and documentation.

Most of these outstanding loans are prime based home equity lines with a maximum combined loan-to-value of 85 percent.

Home equity line credit risks include the risk that higher interest rates will affect repayment and possible compression of collateral coverage on second lien home equity lines.

The Company exited its prime indirect auto originations business in 2019 and has a remaining portfolio in runoff.

The Company previously originated consumer loans through a third party relationship with financial technology company Upstart which originates unsecured consumer loans through the internet using artificial intelligence technology in combination with the Bank’s underwriting criteria.

The Bank suspended originating loans through this partnership in mid-2022 and the remaining portfolio totaled $7 million at December 31, 2024.

Maturity and Sensitivity of Loan Portfolio.

The following table shows contractual final maturities of loans at year-end 2024.

The contractual maturities do not reflect premiums, discounts, deferred costs, or prepayments.

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

Contractual Maturity One Year One to Five to More Than

(In thousands) or Less Five Years Fifteen Years Fifteen Years Total

Construction $ 226,597 $ 372,565 $ 122,696 $ 4,486 $ 726,344

Commercial multifamily 44,855 298,067 290,263 3,620 636,805

Commercial real estate owner occupied 87,341 213,585 306,569 87,835 695,330

Commercial real estate non-owner occupied 435,963 1,649,267 673,356 10,861 2,769,447

Commercial and industrial 363,851 747,410 312,243 15,671 1,439,175

Residential real estate 1,709 29,154 178,223 2,562,683 2,771,769

Home equity 168 1,174 66,430 162,593 230,365

Consumer other 3,278 57,174 48,394 6,913 115,759

Total $ 1,163,762 $ 3,368,396 $ 1,998,174 $ 2,854,662 $ 9,384,994

Item 1 - Table 2B - Total loans due after one year as of December 31, 2024 - fixed and variable interest rates

(In thousands) Fixed Interest Rate Variable Interest Rate Total

Construction $ 84,347 $ 415,400 $ 499,747

Commercial multifamily 98,202 493,748 591,950

Commercial real estate owner occupied 195,268 412,721 607,989

Commercial real estate non-owner occupied 992,582 1,340,902 2,333,484

Commercial and industrial 298,814 776,510 1,075,324

Residential real estate 1,723,851 1,046,209 2,770,060

Home equity 4,780 225,417 230,197

Consumer other 111,881 600 112,481

Total $ 3,509,725 $ 4,711,507 $ 8,221,232

Loan Administration.

Lending activities are governed by a loan policy approved by the Board’s Risk Management, Capital, and Compliance Committee.

Internal staff perform and monitor post-closing loan documentation review, quality control, and commercial loan administration.

The lending staff assigns a risk rating to all commercial loans, excluding point scored small business loans.

Management primarily relies on internal risk management staff to review the risk ratings of the majority of commercial loan balances.

The Bank’s lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by the Risk Management, Capital and Compliance Committee and Management, under the leadership of the Chief Risk Officer.

The Bank’s loan underwriting is based on a review of certain factors including risk ratings, repayment capacity, recourse, loan-to-value ratios, and material policy exceptions.

The Risk Management, Capital and Compliance Committee has established individual and combined loan limits and lending approval authorities.

Management’s Executive Loan Committee is responsible for commercial loan approvals in accordance with these standards and procedures.

Generally, pass rated secured commercial loans can be approved jointly up to $7 million by the business line Managing Director and Credit Director.

Loans up to $12.5 million can be approved with the additional signature of the Chief Credit Officer.

Loans in excess of this amount, and designated lower rated loans are approved by the Executive Loan Committee.

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

The Company's administrative monitoring of the commercial real estate portfolio, the largest segment of the loan portfolio, reflects its risk based focus.

The Company periodically reviews the larger exposures of all commercial real estate loans maturing in the next five years, including reviewing debt service coverage.

It has expanded its monitoring of portfolio-level lease expirations and continued its review of trends in commercial real estate appraisals.

The Company is reviewing trends in large loan originations and has increased its monitoring of portfolio components and trends, with a focus on office loans and multifamily.

Trends in lease maturities and renewals are updated periodically.

Upcoming loan maturities and larger variable and adjustable rate loans are being monitored.

The Bank’s lending activities are conducted by its salaried and commissioned loan personnel.

Designated salaried branch staff originate conforming residential mortgages and receive bonuses based on overall performance.

Additionally, the Bank employs commissioned residential mortgage originators.

Commercial lenders receive salaries and are eligible for bonuses based on individual and overall performance.

The Bank purchases whole loans and participations in loans from banks headquartered in its market and from outside of its market.

These loans are underwritten according to the Bank’s underwriting criteria and procedures and are generally serviced by the originating lender under terms of the applicable agreement.

The Bank routinely sells newly originated, fixed-rate residential mortgages in the secondary market.

Customer rate locks are offered without charge and rate locked applications are generally committed for forward sale or hedged with derivative financial instruments to minimize interest rate risk pending delivery of the loans to the investors.

The Bank also sells interest rate derivatives to larger commercial borrowers desiring to fix their interest rates through interest rate swaps, and includes these derivatives in its underwriting and administrative procedures.

The Bank also sells residential mortgages and commercial loan participations on a non-recourse basis.

The Bank issues loan commitments to its prospective borrowers conditioned on the occurrence of certain events.

Loan origination commitments are made in writing on specified terms and conditions and are generally honored for up to 60 days from approval and may be honored for up to six months;

some commercial commitments are made for longer terms.

The Company also monitors pipelines of loan applications and has processes for issuing letters of interest for commercial loans and pre-approvals for residential mortgages, all of which are generally conditional on completion of underwriting prior to the issuance of formal commitments.

The loan policy sets certain limits on concentrations of credit and requires periodic reporting of concentrations to the Risk Management, Capital and Compliance Committee.

The Bank has heightened monitoring of its 25 largest borrower relationships.

Commercial real estate is generally managed within federal regulatory monitoring guidelines of 300% of risk based capital for non-owner occupied commercial real estate and 100% for construction loans.

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

In most cases, these limits are below 100% of risk based capital for all outstanding loans in each monitored category.

Based on the supervisory definition of commercial real estate loans which excludes owner-occupied properties, the supervisory measure of commercial real estate loans to total bank regulatory capital measured 292% at period-end, compared to 286% at year-end 2023.

The supervisory measure of construction loans to bank regulatory capital measured 54% and 51% at the above respective dates.

Problem Assets.

The Bank prefers to work with borrowers to resolve problems rather than proceeding to foreclosure.

The Company monitors modifications of loans to borrowers in financial distress and tracks the subsequent performance of these loans.

For residential mortgage loans, the Bank generally follows FDIC guidelines to attempt a restructuring that will enable owner-occupants to remain in their home.

However, if these processes fail to result in a performing loan, then the Bank generally will initiate foreclosure or other proceedings no later than the 90th day of a delinquency, as necessary, to minimize any potential loss.

Management reports delinquent loans and non-performing assets to the Board quarterly.

Loans are generally removed from accruing status when they reach 90 days delinquent, except for certain loans which are well secured and in the process of collection.

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.

Real estate obtained by the Bank as a result of loan collections, including foreclosures, is classified as real estate owned until sold.

When property is acquired it is recorded at fair market value less estimated selling costs at the date of foreclosure, establishing a new cost basis.

Holding costs and decreases in fair value after acquisition are expensed.

Asset Classification and Delinquencies.

The Bank performs an internal analysis of its commercial loan portfolio and assets to classify such loans and assets in a manner similar to that employed by federal banking regulators.

There are four classifications for loans with higher than normal risk:

Loss, Doubtful, Substandard, and Special Mention.

Usually an asset classified as Loss is fully charged-off.

Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected.

Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values questionable, and there is a high possibility of loss.

Special mention are assets that do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses.

Please see the additional discussion of non-accruing and potential problem loans in Item 7 and additional information in notes to the financial statements.

Allowance for Credit Losses on Loans.

The Bank’s loan portfolio is regularly reviewed by management to evaluate the adequacy of the allowance for credit losses on loans.

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.

Different banks may use different estimates and arrive at different expectations, and therefore, comparisons between banks may be difficult.

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.

Management believes that it uses the best information available to establish the allowance.

However, future adjustments to the allowance for credit losses on loans may be necessary, and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making its determinations.

There can be no assurance that the existing allowance for credit losses is adequate or that increases will not be necessary should the quality of any loan or loan portfolio category deteriorate.

Regulatory agencies may require the Bank to make additional provisions for credit losses based upon judgments different from those of management.

Any material increase in the allowance may adversely affect the Bank’s financial condition and results of operations.

Item 1 - Table 3 - Credit Quality Ratios

2024 2023 2022

Allowance for credit losses on loans/total loans 1.22 % 1.17 % 1.15 %

Nonaccrual loans/total loans

0.26 % 0.24 % 0.37 %

Allowance for credit losses/nonaccruing loans

469.18 % 492.47 % 309.41 %

Net charge-offs/average loans 0.16 % 0.26 % 0.27 %

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

2024 2023 2022

Net charge-offs to average loans:

Construction — % — % — %

Commercial multifamily 0.01 — —

Commercial real estate owner occupied — (0.01) —

Commercial real estate non-owner occupied — — 0.06

Commercial and industrial 0.06 0.17 0.20

Residential real estate (0.01) — (0.01)

Home equity — — —

Consumer other 0.10 0.10 0.02

The following tables present year-end data for the approximate allocation of the allowance for credit losses on loans by loan categories at the dates indicated (including an apportionment of any unallocated amount).

The first table shows for each category the amount of the allowance allocated to that category as a percentage of the outstanding loans in that category.

The second table shows the allocated allowance together with the percentage of loans in each category to total loans.

Management believes that the allowance can be allocated by category only on an approximate basis.

The allocation of the allowance to each category is not indicative of future losses and does not restrict the use of any of the allowance to absorb losses in any category.

Item 1 - Table 4A - Allocation of Allowance for Credit Losses on Loans by Category (as of year-end)

2024 2023 2022

(Dollars in thousands) Amount

Allocated Percent Allocated to Total Loans in Each Category Amount

Allocated Percent Allocated to Total Loans in Each Category

Construction $ 4,463 0.6 % $ 2,885 0.5 % $ 1,227 0.4 %

Commercial multifamily 4,084 0.6 2,475 0.4 1,810 0.3

Commercial real estate owner occupied 11,303 1.6 9,443 1.5 10,739 1.7

Commercial real estate non-owner occupied 38,520 1.4 38,221 1.5 30,724 1.2

Commercial and industrial 25,549 1.8 18,602 1.4 18,743 1.3

Residential real estate 22,479 0.8 19,622 0.7 18,666 0.8

Home equity 2,392 1.0 2,015 0.9 2,173 1.0

Consumer other 5,910 5.1 12,094 5.5 12,188 4.5

Total $ 114,700 1.2 % $ 105,357 1.2 % $ 96,270 1.2 %

Item 1 - Table 4B - Allocation of Allowance for Credit Losses on Loans (as of year-end)

2024 2023 2022

(Dollars in thousands) Amount

Allocated Percent

Category to Total

Allocated Percent

Category to Total

Allocated Percent

Category to Total

Construction $ 4,463 7.7 % $ 2,885 7.1 % $ 1,227 3.8 %

Commercial multifamily 4,084 6.8 2,475 6.6 1,810 7.4

Commercial real estate owner occupied 11,303 7.4 9,443 7.0 10,739 7.7

Commercial real estate non-owner occupied 38,520 29.5 38,221 28.8 30,724 30.0

Commercial and industrial 25,549 15.4 18,602 15.0 18,743 17.4

Residential real estate 22,479 29.5 19,622 30.5 18,666 27.7

Home equity 2,392 2.5 2,015 2.5 2,173 2.7

Consumer other 5,910 1.2 12,094 2.5 12,188 3.3

Total $ 114,700 100.0 % $ 105,357 100.0 % $ 96,270 100.0 %

INVESTMENT SECURITIES ACTIVITIES

The securities portfolio provides a source of liquidity, income and interest rate risk management.

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.

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.

All of the mortgage-backed securities are issued by Fannie Mae, Ginnie Mae, or Freddie Mac.

The Company generally designates debt securities as available for sale, but sometimes designates securities as held to maturity based on its intent.

The Company periodically invests in corporate bonds, investment grade and non-rated fixed-income capital instruments issued by local and regional financial institutions, and funds financing community reinvestment projects.

Investment securities were sold in the fourth quarter of 2023 and first quarter of 2024.

This allowed the Company to reposition its balance sheet to improve net interest income and to fund the branch sale.

The securities were carried at fair value on the Company’s balance sheet and the non-operating losses on sale therefore had no effect on shareholders’ equity.

Due to elevated market interest rates, the net fair value of the investment securities portfolio was below amortized costs at year-end 2024.

Please see Note 4 – Securities in the financial statement for more information.

The Company’s ability and intent to hold the portfolio at year-end 2024 was consistent with its liquidity and capital resources as discussed in Item 7 of this report.

The following table summarizes year-end 2024 amortized cost, weighted average yields, and contractual maturities of debt securities.

Yields are shown on a fully taxable-equivalent basis and are based on amortized cost.

A proportion of the mortgage-backed securities are planned amortization class bonds.

The contractual maturities of mortgage-backed securities shown below reflect the maturities of the underlying mortgage collateral based on final maturities and do not include scheduled amortization.

Yields include amortization and accretion of premiums and discounts.

Item 1 - Table 5 - Weighted Average Yield

One Year or Less More than One

Year to Five Years More than Five Years

to Ten Years More than Ten Years Total

(In millions) Amortized

Cost Weighted

Yield Amortized

Cost Weighted

Yield Amortized

Cost Weighted

Yield Amortized

Cost Weighted

Yield Amortized

Cost Weighted

Municipal bonds and obligations $ 1.0 0.3 % $ 8.3 1.4 % $ 77.9 2.4 % $ 212.6 0.8 % $ 299.8 1.0 %

Mortgage-backed securities 7.9 1.2 % 4.0 0.2 % 58.5 0.9 % 888.1 1.4 % 958.5 1.3 %

Other bonds and obligations 7.0 0.4 % 15.8 5.9 % 23.6 0.6 % 0.8 — % 47.2 0.2 %

Total $ 15.9 2.0 % $ 28.1 7.4 % $ 160.0 3.9 % $ 1,101.5 2.2 % $ 1,305.5 2.5 %

DEPOSIT ACTIVITIES AND OTHER SOURCES OF FUNDS

Deposits are the major source of funds for the Bank’s lending and investment activities.

The Bank serves personal, commercial, non-profit, and municipal deposit customers.

The Bank offers a wide variety of deposit accounts with a range of interest rates and terms.

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.

Additionally, the Bank offers a variety of retirement deposit accounts to personal and business customers.

The Bank emphasizes its transaction deposits – checking and NOW accounts – for personal accounts and checking accounts promoted to businesses.

These accounts have the lowest marginal cost to the Bank and are also often a core account for a customer relationship.

The Bank offers a courtesy overdraft program to improve customer service, and also provides debit cards and other electronic fee producing payment services to transaction account customers.

The Bank offers targeted online and mobile deposit account opening capabilities for personal accounts.

The Bank promotes remote deposit capture devices so that commercial accounts can make deposits from their place of business.

Deposit related fees include overdraft fees, interchange fees related to debit card usage, service charges, and other miscellaneous transactions and convenience services sold to customers through the branch system as part of an overall service relationship.

The Bank offers compensating balance arrangements for larger business customers as an alternative to fees charged for checking account services.

In addition to providing service through its branches, Berkshire provides services to deposit customers through its private bankers, MyBankers, commercial/small business relationship managers, and call center representatives.

Commercial cash management services are an important commercial service offered to commercial and governmental depositors and a fee income source to the bank.

The Bank also operates a commercial payment processing business that serves regional and national payroll service bureau customers.

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.

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.

In 2024, the Bank introduced the Berkshire One offering, an innovative suite of digital-first banking solutions developed by strategically integrating advanced technology to enhance customer satisfaction and operational efficiency.

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

Item 1 - Table 6 - Average Balance and Weighted Average Rates for Deposits

2024 2023 2022

(In millions) Average

Balance Percent

Deposits Weighted

Balance Percent

Deposits Weighted

Balance Percent

Deposits Weighted

Demand $ 2,283.7 24 % — % $ 2,584.6 27 % — % $ 2,914.9 30 % — %

NOW and other 767.4 8 0.5 1,048.9 11 0.6 1,416.7 14 0.4

Money market 2,993.1 31 2.8 2,727.3 28 3.4 2,809.1 29 0.5

Savings 1,011.8 11 1.1 1,067.2 11 1.0 1,114.8 11 0.1

Time 2,480.2 26 3.3 2,275.8 23 4.0 1,541.7 16 0.9

Total $ 9,536.2 100 % 2.0 % $ 9,703.8 100 % 2.4 % $ 9,797.2 100 % 0.9 %

Estimated uninsured deposits were $5.0 billion and $4.6 billion at December 31, 2024 and 2023, respectively.

Estimated uninsured deposits are based on the same methodologies and assumptions used for the Bank's regulatory reporting requirements.

Estimated uninsured deposits adjusted to exclude internal accounts and collateralized deposits were $4.0 billion and $3.7 billion at December 31, 2024 and 2023, respectively.

At year-end 2024, time deposits in excess of the FDIC insurance limit and estimated time deposits that are otherwise uninsured by maturity were as follows:

Item 1 - Table 7 - Maturity of Deposits >$250,000

Maturity Period Time Deposits that

Meet or Exceed the

FDIC Insurance

Limit Estimated Portion of Time Deposits in Excess of the FDIC Insurance Limit

Estimated Aggregate

Time Deposits in Excess of the

FDIC Insurance

Limit and Otherwise

Uninsured Time

(In thousands)

Three months or less $ 373,572 $ 124,844 $ 124,844

Over 3 months through 6 months 228,142 62,443 62,443

Over 6 months through 12 months 64,707 24,130 24,130

Over 12 months 45,098 19,026 19,026

Total $ 711,519 $ 230,443 $ 230,443

The Bank’s deposits are insured by the FDIC.

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.

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.

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.

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.

The Bank was in compliance with FHLB rules and requirements as of December 31, 2024.

The Bank also has access to borrowings from the Federal Reserve Bank of Boston.

The Company had $100 million in subordinated notes, a $15 million trust preferred obligation and a $7 million trust preferred obligation outstanding at year-end 2024.

The Company’s common stock is listed on the New York Stock Exchange under the ticker “BHLB”.

Subject to certain limitations, the Company can also choose to issue common stock, preferred stock, subordinated debt, or senior debt in public stock offerings or private placements.

The Company maintains a shelf registration as part of its routine capital management.

DERIVATIVE FINANCIAL INSTRUMENTS

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.

The Company may also enter into risk participation agreements with other lending institutions for customer related positions.

On a limited basis, the Company offers foreign exchange services to customers on both a spot and forward basis.

The Company may also use derivative financial instruments to manage its interest rate risk associated with the Company’s loan portfolios and borrowings.

All derivative financial instruments eligible for clearing are cleared through the Chicago Mercantile Exchange (“CME”).

WEALTH MANAGEMENT SERVICES

The Company’s Wealth Management Group provides consultative investment management, trust administration, and financial planning to individuals, businesses, and institutions, with an emphasis on personal investment management.

The Wealth Management Group has built a track record over more than a decade with its dedicated in-house investment management team.

The Bank also provides a full line of investment products, financial planning, and brokerage services through BerkshireBanc Investment Services utilizing Commonwealth Financial Network as the broker/dealer.

The Bank is integrating with its growing private banking and MyBanker teams to further develop wealth management account generation.

The Wealth Management Group reported $1.6 billion in total assets under management and $2.0 billion in assets under supervision at year-end 2024.

The comparable totals at year-end 2023 were $1.5 billion and $1.9 billion, respectively.

HUMAN CAPITAL MANAGEMENT

Berkshire’s people are the driving force behind its progress on its strategic goals and ability to deliver tailored financial solutions for its clients.

The Company’s approach to human capital management is grounded in its corporate values, business strategy and focuses on:

• Strong oversight and risk management practices

• Recruitment

• Compensation & Benefits

• Professional Development, Engagement & Retention

• Health & Wellness

In 2024, the company realigned its workforce to ensure its organizational structure supported its operating needs and strategic objectives while it continued to build on successful strategies to recruit, develop, engage and retain top talent.

At year-end 2024, the Company had 1,216 full time equivalent staff, including 1,193 full-time positions and 45 part-time positions.

The Compensation Committee of the Board of Directors oversees executive compensation, and the Corporate Responsibility & Culture committee oversees company culture and related human capital matters.

The SEVP, Chief Human Resources & Culture Officer provides management oversight on human capital matters.

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.

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.

The Company relies on and continues to recruit employees with the right mix of skills, expertise and experiences.

The Company forecasts its hiring needs based on attrition, skills assessments, market conditions, resource availability and strategic objectives.

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.

Berkshire also maintains a small internal team of talent recruitment professionals.

COMPENSATION & BENEFITS

The Company continually evaluates its compensation strategies and benefits programs, benchmarks to industry and peers and surveys the landscape of best practices to develop compensation and benefits packages that reward performance and retain top talent at all levels of the Company.

Berkshire provides a robust incentive plan to reward performance, comprehensive medical coverage, paid vacation, personal and sick time, paid protective leave for gender-based violence, a 401(k) plan with employer match, long-term disability insurance, and group term life insurance.

In addition, Berkshire offers a day care reimbursement program, a dependent care expense account, family and medical leave along with flexible work arrangements, including the ability to work remote dependent on the duties of one’s job.

In addition to its compensation and health benefits, Berkshire offers a rewards and recognition program, wellness day, volunteer-time off, a matching-gift program, an employee assistance program, regular performance reviews, professional development and the You FIRST Fund to help employees impacted by personal financial hardships.

PROFESSIONAL DEVELOPMENT, ENGAGEMENT & RETENTION

Training and development programs provide employees with the knowledge and skills to succeed and have upward career mobility.

They are critical components, along with competitive compensation and benefits programs, to having an engaged workforce.

Ultimately an engaged workforce drives high levels of productivity and retention which reduces human capital risks, expense, and advances Berkshire’s performance.

The Company provides learning programs consistent with one’s job responsibilities, professional goals, and development plans.

Employees have regular performance assessments to identify strengths, areas for further growth and career interests.

Berkshire reskills and upskills employees from across the Company helping them advance along career paths by taking on expanded responsibilities and roles.

The Company offers a mentoring program for high potential employees and encourages employees to pursue appropriate educational opportunities.

Berkshire remains committed to providing pathways for its bankers to grow and maintains succession plans for key leadership positions.

Berkshire monitors the progress of its efforts to evaluate the effectiveness of programs and strategies through a comprehensive employee engagement survey and regular forums between employees and management.

The Company believes that its programs and strategies have been a differentiator in the market.

Further information on Berkshire Human Capital Management practices can be found in the Company’s most recent Sustainability Report.

SELECT HUMAN CAPITAL METRICS

Number of Employees

Number of Full-Time Employees

Number of Part-Time Employees

Turnover Rate

Retention Rate

*Workforce metrics reported are as of or for the year ended December 31, 2024

SUBSIDIARY ACTIVITIES

The Company wholly-owns Berkshire Bank.

The Bank operates as a commercial bank under a Massachusetts trust company charter.

Berkshire Bank owns Firestone Financial, LLC which is a Massachusetts limited liability company, as well as consolidated subsidiaries operated as Massachusetts securities corporations and other subsidiary entities.

The Company also owns all of the common stock of Delaware statutory business trusts, Berkshire Hills Capital Trust I and SI Capital Trust II.

The capital trusts are unconsolidated and their only material assets are trust preferred securities related to the junior subordinated debentures reported in the Company’s Consolidated Financial Statements.

Additional information about the subsidiaries is contained in Exhibit 21 to this report.

REGULATION AND SUPERVISION

The Company is a Delaware corporation and a bank holding company that has elected financial holding company status within the meaning of the Bank Holding Company Act of 1956, as amended.

It is registered with, supervised by and required to comply with the rules and regulations of the Federal Reserve Board.

The Federal Reserve Board requires the Company to file various reports and also conducts examinations of the Company.

The Company must receive the approval of the Federal Reserve Board to engage in certain transactions, such as acquisitions of additional banks and savings associations, and the Company must seek nonobjection for various capital actions, including stock repurchases.

The Bank is a Massachusetts-chartered trust company and its deposits are insured up to applicable limits by the FDIC.

The Bank is subject to extensive regulation by the Massachusetts Commissioner of Banks (the “Commissioner”), as its chartering agency, and by the FDIC, as its primary regulator and deposit insurer.

The Bank is required to file reports with the Commissioner and the FDIC concerning its activities and financial condition in addition to obtaining regulatory approvals prior to entering into certain transactions such as mergers with, or acquisitions of, other depository institutions or branches of other institutions.

Under specified conditions, the Bank must also seek regulatory approval of capital distributions to the Company, its sole shareholder.

The Commissioner and the FDIC conduct periodic examinations to test the Bank’s safety and soundness and compliance with various regulatory requirements.

The regulatory structure gives the regulatory authorities extensive discretion in connection with supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate loan loss reserves for regulatory purposes.

Any change in such regulatory requirements and policies, whether by the Commissioner, the Massachusetts legislature, the FDIC, the Federal Reserve Board, or Congress, could have a material adverse impact on the Company, the Bank, and their operations.

Certain regulatory requirements applicable to the Company and the Bank are referred to below.

The description of statutory provisions and regulations applicable to financial institutions and their holding companies set forth in this Form 10-K does not purport to be a complete description of such statutes and regulations and their effects on the Company and 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:

• Massachusetts Banking Laws and Supervision

• Federal Banking Regulations

• Enforcement

• Holding Company Regulation

• Mergers and Acquisitions

• Other Regulations

Massachusetts Banking Laws and Supervision

As a Massachusetts-chartered depository institution, the Bank is subject to various Massachusetts statutes and regulations which govern, among other things, investment powers, lending and deposit-taking activities, borrowings, maintenance of surplus and reserve accounts, distribution of earnings and payment of dividends.

In addition, the Bank is subject to Massachusetts consumer protection and civil rights laws and regulations.

The approval of the Commissioner is required for a Massachusetts-chartered institution to establish or close branches, merge with other financial institutions, issue stock, and undertake certain other activities.

Massachusetts law and regulations generally allow Massachusetts institutions to engage in activities permissible for federally chartered banks or banks chartered by another state.

There is a 30-day notice procedure to the Commissioner in order to engage in such activities.

Massachusetts law also 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.

No dividends may be declared, credited, or paid if the institution’s capital stock is impaired.

An institution with outstanding preferred stock may not, without the prior approval of the Commissioner, declare dividends to the common stock without also declaring dividends to the preferred stock.

The approval of the Commissioner is generally required if the total of all dividends declared in any calendar year exceeds the total of its net profits for that year combined with its retained “net profits,” as defined, over the preceding two years.

The Bank was required to obtain the approval of the Commissioner to pay Bank dividends to the Company in 2024.

Loans to One Borrower Limitations.

Massachusetts banking law grants broad lending authority.

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

Regulatory Enforcement Authority.

Any Massachusetts-chartered institution that does not operate in accordance with the regulations, policies, and directives of the Commissioner may be sanctioned for non-compliance, including seizure of the property and business of the institution and suspension or revocation of its charter.

The Commissioner may, under certain circumstances, suspend or remove officers or directors who have violated the law, conducted the institution’s business in a manner which is unsafe, unsound or contrary to the depositors’ interests, or been negligent in the performance of their duties.

In addition, upon finding that an institution has engaged in an unfair or deceptive act or practice, the Commissioner may issue an order to cease and desist and impose a fine on the institution concerned.

Finally, Massachusetts consumer protection and civil rights statutes applicable to the Bank permit private individual and class action lawsuits and provide for the rescission of consumer transactions, including loans, and the recovery of statutory and punitive 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.

Federal Regulations

Capital Requirements.

Federal regulations require FDIC insured depository institutions to meet several minimum capital standards:

a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets 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.

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.

As a bank holding company, the Company is also subject to regulatory capital requirements, as described in a subsequent section.

The approval of the FDIC is required for the Bank to pay a dividend to the Company from its surplus account.

FDIC approval was required for Bank dividend payments in 2024 and such approval is expected to be required in 2025.

Investment Activities.

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

Interstate Banking and Branching .

Federal law permits an institution, such as the Bank, to acquire another institution by merger in a state other than Massachusetts unless the other state has opted out.

Federal law, as amended by the Dodd-Frank Act, authorizes de novo branching into another state to the extent that the target state allows its state-chartered banks to establish branches within its borders.

As of December 31, 2024, the Bank operated branches in New York, Vermont, Connecticut and Rhode Island, as well as Massachusetts.

At its interstate branches, the Bank may conduct any activity authorized under Massachusetts law that is permissible either for an institution chartered in that state (subject to applicable federal restrictions) or a branch in that state of an out-of-state national bank.

The New York State Superintendent of Financial Services, the Vermont Commissioner of the Department of Financial Regulation, the Connecticut Commissioner of Banking and the Director of the Rhode Island Department of Business Regulation may exercise certain regulatory authority over the Bank’s branches in their respective states.

Prompt Corrective Regulatory Action.

Federal law requires that federal bank regulatory authorities take “prompt corrective action” with respect to banks that do not meet minimum capital requirements.

The law establishes three categories of capital deficient institutions:

undercapitalized, significantly undercapitalized, and critically undercapitalized.

The FDIC regulations implementing the prompt corrective action law were amended to incorporate the previously discussed increased regulatory capital standards that were effective January 1, 2015.

An institution is deemed to be “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a common equity Tier 1 ratio of 6.5% or greater, and a leverage ratio of 5.0% or greater.

An institution is deemed to be “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a common equity Tier 1 ratio of 4.5% or greater, and a leverage ratio of 4.0% or greater.

An institution is deemed to be “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a common equity Tier 1 ratio of less than 4.5%, or a leverage ratio of less than 4.0%.

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.

A bank’s compliance with such a capital restoration plan must be guaranteed by its holding company in an amount equal to the lesser of 5% of the institution’s total assets when deemed “undercapitalized” or the amount needed to comply with regulatory capital requirements.

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.

“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, 2024, the Bank met the criteria for being considered “well capitalized” as defined in the prompt corrective action regulations.

Transactions with Affiliates and Loans to Insiders.

Transactions between depository institutions and their affiliates are governed by Sections 23A and 23B of the Federal Reserve Act 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.

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.

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.

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.

Federal law also restricts an institution with respect to loans to the institution’s or its affiliates’ directors, executive officers, and principal stockholders (“insiders”).

Loans to insiders and their related interests may not exceed, together with all other outstanding loans to such insiders and their related interests, the institution’s unimpaired capital and surplus.

Loans to insiders above specified amounts must receive the prior approval of the majority of the Board of Directors.

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.

Massachusetts law previously had a separate law regarding insider transactions, but that law was amended in 2015 to generally incorporate the federal restrictions.

Insurance of Deposit Accounts .

The Bank’s deposit accounts are insured by the Deposit Insurance Fund of the FDIC up to applicable limits.

The FDIC insures deposits up to the standard maximum deposit insurance amount (“SMDIA”) of $250,000 per depositor for each account ownership category.

The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund.

Under the risk-based assessment system, institutions deemed less risky of failure pay lower assessments.

The FDIC has authority to increase insurance assessments and adopted a final rule in October 2022 to increase initial base deposit insurance assessment rates by two basis points beginning in the first quarterly assessment period of 2023.

As a result, effective assessment rates for institutions of the Bank’s size range from 2.5 to 42 basis points.

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.

Federal Home Loan Bank System .

The Bank is a member of the Federal Home Loan Bank system, which consists of 11 regional Federal Home Loan Banks that provide a central credit facility primarily for member institutions.

The Bank, as a member, is required to acquire and hold shares of capital stock in the FHLBB.

The Federal Home Loan Banks are required to provide funds for certain purposes including contributing funds for affordable housing programs.

These requirements, and general financial results, could reduce the amount of dividends that the Federal Home Loan Banks pay to their members and result in the Federal Home Loan Banks imposing a higher rate of interest on advances to their members.

The FDIC has primary federal enforcement responsibility over state-chartered banks that are not members of Federal Reserve System, which includes the Bank.

The FDIC has authority to bring enforcement actions against such institutions and their “institution-related parties,” including officers, directors, certain shareholders, and attorneys, appraisers and accountants who knowingly or recklessly participate in 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.

Potential civil money penalties can be assessed for a wide range of legal and regulatory violations and for unsafe or unsound practices, and are adjusted annually for inflation.

Such penalties currently range up to more than $12 thousand per day or, in extreme cases, as high as $2.51 million per day.

Holding Company Regulation

The Company is subject to examination, regulation, and periodic reporting as a bank holding company under the Bank Holding Company Act of 1956, as amended.

The Company is required to obtain the prior approval of the Federal Reserve Board to acquire all, or substantially all, of the assets of any other bank or bank holding company.

Prior Federal Reserve Board approval would be required for the Company to acquire direct or indirect ownership or control of any voting securities of any bank or bank holding company if, after such acquisition, it would, directly or indirectly, own or control more than five percent of any class of voting shares of the bank or bank holding company.

A bank holding company is generally prohibited from engaging in non-banking activities, or acquiring direct or indirect control of more than five percent of the voting securities of any company engaged in non-banking activities.

The Federal Reserve Board has allowed by regulation some exceptions based on activities closely related to banking including:

(i) making or servicing loans;

(ii) performing certain data processing services;

(iii) providing discount brokerage services;

(iv) acting as fiduciary, investment or financial advisor;

and (v) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.

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

Such activities can include insurance and investment banking.

The Company has elected to become a financial holding company.

The Company is subject to the Federal Reserve Board’s capital adequacy requirements for bank holding companies.

The Dodd-Frank Act required the Federal Reserve Board to promulgate consolidated capital requirements for depository institution holding companies that are no less stringent, both quantitatively and in terms of components of capital, than those applicable to institutions themselves.

Consolidated regulatory capital requirements identical to those applicable to the Bank apply also to the Company.

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

The Dodd-Frank Act codified the source of strength doctrine.

The Federal Reserve Board has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by bank holding companies.

In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition.

Regulatory guidance provides for prior consultation with and nonobjection of the Federal Reserve Board with respect to dividends in certain circumstances, such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate of earnings retention is inconsistent with the company’s capital needs and overall financial condition.

The Federal Reserve Board guidance also provides for consultation and nonobjection for material increases in the amount of a bank holding company’s common stock dividend.

The ability of a holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized.

Federal regulations require a bank holding company to give the Federal Reserve Board prior written notice of any repurchase or redemption of then outstanding equity securities if the gross consideration for the repurchase or redemption, when combined with the net consideration paid for all such repurchases or redemptions during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth.

The Federal Reserve Board may disapprove such a purchase or redemption under certain circumstances.

There is an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions.

Federal Reserve guidance provides for regulatory consultation and nonobjection under specified circumstances prior to a holding company redeeming or repurchasing regulatory capital instruments, including common stock, regardless of the applicability of the previously referenced notification requirement.

Pursuant to regulatory policies, such circumstances include repurchasing common stock that would result in a net reduction as of the end of the quarter in the amount of such equity instruments outstanding compared with the beginning of the quarter.

circumstances, Federal Reserve nonobjection is required.

The Company obtained such nonobjection for its repurchase program in 2024.

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

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

Acquisition of the Company.

Under the Change in Bank Control Act, no person may acquire control of a bank holding company such as the Company unless the Federal Reserve Board has been given 60 days’ prior written notice and has not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition.

Control, as defined for this purpose, means the power, directly or indirectly, to direct the management or policies of an insured depository institution, or the ownership, control of or power to vote 25% or more of any class of voting stock.

Acquisition of more than 10% of any class of a bank holding company’s voting stock constitutes a rebuttable presumption of control under the Change in Bank Control Act’s regulations under certain circumstances including where, as is the case with the Company, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.

Massachusetts Holding Company Regulation.

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.

Similarly, prior regulatory approval would be necessary for any person or company to acquire 25 percent or more of the voting stock of the Company.

Mergers and Acquisitions

The Company and the Bank have authority to engage, and have engaged, in acquisitions of other depository institutions.

Such transactions are subject to a variety of conditions including, but not limited to, required stockholder approvals and the receipt of all necessary regulatory approvals.

Necessary regulatory approvals include those required by the federal Bank Holding Company Act and/or Bank Merger Act, Massachusetts law and, if the target institution is located in a state other than Massachusetts, the law of that state.

When considering merger applications, the federal regulators must evaluate such factors as the financial and managerial resources and future prospects of the parties, the convenience and needs of the communities to be served (including performance of the parties under the Community Reinvestment Act (“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.

Massachusetts law requires the Commissioner (or Board of Bank Incorporation in certain cases) to consider such factors as whether competition among banking institutions will be unreasonably affected and whether public convenience and advantage will be promoted (including whether the merger will result in net new benefits).

Other Regulations

Consumer Protection Laws.

The Bank is subject to federal and state consumer protection statutes and regulations applicable to depository institutions.

These include the Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

the Home Mortgage Disclosure Act, requiring financial institutions to provide certain information about home mortgage and refinance loans;

the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited bases in extending credit;

the Fair Credit Reporting Act, governing the provision of consumer information to credit reporting agencies and the use of consumer information;

the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

and the Electronic Funds Transfer Act, governing automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services.

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.

The Community Reinvestment Act (“CRA”) establishes a requirement for federal banking agencies that, in connection with examinations of depository institutions within their jurisdiction, the agencies evaluate the record of the depository institutions in meeting the credit needs of their local communities, including low- and moderate-income neighborhoods, consistent with the safe and sound operation of those institutions.

These factors are also considered in evaluating mergers, acquisitions and applications to open a branch or new facility.

Under the CRA, institutions are assigned a rating of “outstanding,” “satisfactory,” “needs to improve,” or “substantial non-compliance.” A less than “satisfactory” rating would result in the suspension of any growth of the Bank through acquisitions or opening de novo branches until the rating is improved.

As of the most recent CRA examination by the FDIC, the Bank’s CRA rating was “satisfactory.” On 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.

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:

the Retail Lending Test, the Retail Services and Products Test, the Community Development Financing Test, and the Community Development Services Test.

Under the CRA regulations, the applicability date for the majority of the provisions is January 1, 2026, and additional requirements will be applicable under the regulations on January 1, 2027.

On March 29, 2024, a federal court in the Northern District of Texas issued a preliminary injunction of the new CRA regulations, enjoining the federal banking agencies from enforcing the regulations against the plaintiff bank industry trade groups, and extending the regulations’ implementation dates day-for-day for each day the injunction is in place.

Cybersecurity and Protection of Customers’ Personal Information.

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.

The Fair Credit Reporting Act (FCRA) restricts information sharing among affiliates for marketing purposes.

Both the FCRA and Regulation V, the implementing regulation administered by the Consumer Financial Protection Bureau, govern the use and provision of information to consumer reporting agencies.

In addition, federal banking regulators regularly issue guidance concerning cybersecurity standards to help enhance cyber risk management among financial institutions.

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.

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.

The financial institution is also responsible for accounting for the disaster recovery and business continuity plans and processes of its critical third party service providers.

Failing to observe its obligations under regulatory guidance could subject the Bank to regulatory sanctions such as financial penalties.

For a further discussion of risks related to cybersecurity, see Item 1A “Risk Factors.”

As a banking organization, the Bank is required to notify its primary federal regulator as soon as possible but no later than 36 hours after the Bank’s discovery of a computer-security incident that has materially disrupted or degraded, or is reasonably likely to materially disrupt or degrade, the Bank’s:

(1) ability to carry out banking operations, activities, or processes, or deliver banking products and services to a material portion of its customer base, in the ordinary course of business;

(2) business lines, including associated operations, services, functions, and support, that upon failure would result in a material loss of revenue, profit, or franchise value;

or (3) operations, including associated services, functions, and support, as applicable, the failure or discontinuance of which would pose a threat to the financial stability of the United States.

The 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.

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.

The final rule also requires registrants such as the Company to describe, on Form 10-K, their processes for assessing, identifying and managing material risks from cybersecurity threats and whether those risks

have materially affected the registrant.

The final rule also requires registrants such as the Company to describe Board oversight of risks emanating from cybersecurity threats and management’s role and expertise in assessing and managing material risks from cybersecurity threats.

See Item 1C “Cybersecurity” for more information.

Finally, the Company notes that there has been a recent uptick in activity among state legislatures and regulators with respect to implementing privacy and cybersecurity standards and regulations.

Some states have adopted laws and regulations requiring financial institutions to maintain cybersecurity programs and make details available regarding those programs.

Also, some states have either implemented, or modified, their data breach notification and/or data privacy rules.

While the Company cannot predict future legislative or regulatory actions of the various states, the Company expects continued activity in this area and will continue to monitor for developments in the states in which it and the Bank operate.

Anti-Money Laundering Laws .

The Bank is subject to extensive anti-money laundering and countering the financing of terrorism (“AML/CFT”) statutes and regulations, which require the institution to have in place an AML/CFT compliance program and procedures and a customer identification program, among other things.

These laws and regulations also prohibit depository institutions from engaging in business with foreign shell banks;

require depository institutions to have due diligence procedures and, in some cases, enhanced due diligence procedures for foreign correspondent and private banking accounts;

and require information sharing with the U.S.

government in certain circumstances.

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.

This discussion of tax matters is only a summary and is not a comprehensive description of the tax rules applicable to the Company and its subsidiaries.

Further discussion of income taxation is contained in a note to the financial statements.

The federal income tax laws apply to the Company in the same manner as to other corporations with some exceptions.

The Company reports income on a calendar year basis to the Commonwealth of Massachusetts.

Massachusetts tax law generally permits special tax treatment for a qualifying limited purpose “securities corporation.” The Bank’s securities corporations all qualify for this treatment, and are taxed at a 1.3% rate on their gross income.

Inflation Reduction Act of 2022 .

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

These provisions were effective beginning January 1, 2023.

Our consumers value personalized service, local community knowledge and engagement and the choice between branch access and technology solutions.

The Bank's consumer loan portfolios, which include residential mortgage loans, home equity loans and lines of credit, and other consumer loans, cater to the borrowing needs of this customer base.

Credit risk in these portfolios is managed by limiting loan-to-value ratios at loan origination and by requiring borrowers to demonstrate strong credit histories.

Economic Conditions and Governmental Policies

Repayment of multi-family and commercial real estate loans are generally dependent on the properties generating sufficient income to cover operating expenses and debt service.

Repayment of commercial loans and leases generally are dependent on the demand for the borrowers' products or services and the ability of borrowers to compete and operate on a profitable basis.

Repayment of residential mortgage loans and home equity loans generally are dependent on the financial well-being of the borrowers and their capacity to service their debt levels.

The asset quality of the Company's loan and lease portfolio, therefore, is greatly affected by the economy.

Should there be any setback in the economy or increase in the unemployment rates in the areas in which the Company operates, the resulting negative consequences could affect occupancy rates in the properties financed by the Company and cause certain individual and business borrowers to be unable to service their debt obligations.

Personnel and Human Capital Resources

As of December 31, 2025, the Company had 1,972 full-time employees and 78 part-time employees.

The employees are not represented by a collective bargaining unit and the Company considers its relationship with its employees to be good.

We encourage and support the growth and development of our employees.

Continual learning and career development is advanced through ongoing performance and development conversations with employees, internally developed training programs, customized corporate training engagements and educational reimbursement programs.

The safety, health and wellness of our employees is a top priority.

On an ongoing basis, we promote the health and wellness of our employees by strongly encouraging work-life balance, offering flexible work schedules, keeping the employee portion of health care premiums to a minimum and sponsoring various wellness programs.

We believe our commitment to living out our core values, actively prioritizing concern for our employees' well-being, supporting our employees' career goals, offering competitive wages and providing valuable fringe benefits aids in retention of our top-performing employees.

Access to Available Information

As a public company, Beacon Financial Corporation is subject to the informational requirements of the Exchange Act, and in accordance therewith, files reports, proxy and information statements and other information with the SEC.

The Company makes available on or through its internet website, www.beaconfinancialcorporation.com, without charge, its annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC.

The Company's reports filed with, or furnished to, the SEC are also available at the SEC's website at www.sec.gov.

Press releases are also maintained on the Company's website.

The Company operates through its primary subsidiary, Beacon Bank & Trust.

The Company also provides equipment financing through the Bank's Eastern Funding subsidiary, SBA lending through the Bank's 44 Business Capital division, and private wealth services through Clarendon Private.

Information on the Company's and any subsidiary's website is not incorporated by reference into this document and should not be considered part of this Report.

The Company's common stock is traded on the New York Stock Exchange under the symbol “BBT”.

Supervision and Regulation

The following discussion addresses elements of the regulatory framework applicable to bank holding companies and their subsidiaries.

This regulatory framework is intended primarily for the protection of the safety and soundness of depository institutions, the federal deposit insurance system, and depositors, rather than for the protection of shareholders of a bank holding company such as the Company.

As a bank holding company, the Company is subject to regulation, supervision and examination by the FRB under the BHCA, and by the Commissioner under Massachusetts General Laws Chapter 167A.

The FRB is also the primary federal regulator of the Bank.

In addition, the Bank is a Massachusetts state-chartered bank and a member of the Federal Reserve System, and its deposits are insured by the FDIC.

As such, the Bank is subject to regulation, supervision and examination by the FRB, the MDOB and, to a lesser extent, the FDIC.

The following is a summary of certain aspects of various statutes and regulations applicable to the Company and its subsidiaries.

This summary is not a comprehensive analysis of all applicable law, and is qualified by reference to the full text of the statutes and regulations referenced below, which may be modified or amended from time to time.

Regulation of the Company

The Company is subject to regulation, supervision and examination by the FRB, which has the authority, among other things, to order bank holding companies to cease and desist from unsafe or unsound banking practices;

to assess civil money penalties;

and to order termination of non-banking activities or termination of ownership and control of a non-banking subsidiary by a bank holding company.

Source of Strength

Bank holding companies are required to serve as a source of financial strength for their subsidiary banks.

Under this requirement, the Company is expected to commit resources to support the Bank, including at times when the bank holding company may not have the resources to provide the additional financial support required by its subsidiary Bank.

In the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a bank subsidiary will be assumed by the bankruptcy trustee and entitled to priority of payment.

Acquisitions and Activities

The BHCA prohibits a bank holding company, without prior approval of the FRB, from acquiring all or substantially all the assets of a bank, acquiring control of a bank, merging or consolidating with another bank holding company, or acquiring direct or indirect ownership or control of any voting shares of another bank or bank holding company if, after such acquisition, the acquiring bank holding company would control more than 5% of any class of the voting shares of such other bank or bank holding company.

The BHCA also generally prohibits a bank holding company from engaging directly or indirectly in activities other than those of banking, managing or controlling banks or furnishing services to its subsidiary banks.

However, among other permitted activities, a bank holding company may engage directly or indirectly in, and acquire control of companies engaged in, activities that the FRB has determined to be closely related to banking, subject to certain notification requirements.

The Company has elected financial holding company status pursuant to the provisions of the GLBA.

As a financial holding company, the Company is authorized to engage in certain financial activities in which a bank holding company that has not elected to be a financial holding company may not engage.

Permissible financial activities for a financial holding company include banking,

insurance and securities activities, as well as merchant banking and additional activities that the FRB, in consultation with the Secretary of the Treasury, determines to be financial in nature, incidental to such financial activities, or complementary activities that do not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.

Limitations on Acquisitions of Company Common Stock

The Change in Bank Control Act prohibits a person or group of persons from acquiring “control” of a bank holding company unless the FRB has been notified and has not objected to the transaction.

Under rebuttable presumptions of control established by the FRB, the acquisition of control of voting securities of a bank holding company constitutes an acquisition of control under the Change in Bank Control Act, requiring prior notice to and non-objection by the FRB, if, immediately after the transaction, the acquiring person (or persons acting in concert) will own, control, or hold with power to vote 10% or more of any class of voting securities of the bank holding company, and if either (i) the bank holding company has registered securities under Section 12 of the Exchange Act, or (ii) no other person will own, control, or hold the power to vote a greater percentage of that class of voting securities immediately after the transaction.

In addition, the BHCA prohibits any company from acquiring control of a bank or bank holding company without first having obtained the approval of the FRB.

Among other circumstances, under the BHCA, a company has control of a bank or bank holding company if the company owns, controls or holds with power to vote 25% or more of a class of voting securities of the bank or bank holding company;

controls in any manner the election of a majority of directors or trustees of the bank or bank holding company;

or the FRB has determined, after notice and opportunity for hearing, that the company has the power to exercise a controlling influence over the management or policies of the bank or bank holding company.

The FRB has established presumptions of control under which the acquisition of control of 5% or more of a class of voting securities of a bank holding company, together with other factors enumerated by the FRB, could constitute the acquisition of control of a bank holding company for purposes of the BHCA.

Additionally, an existing bank holding company must obtain prior approval of the FRB to acquire 5% or more of a class of voting securities of a bank or bank holding company.

Regulation of the Bank

The Bank is subject to regulation, supervision and examination by the MDOB and the FRB.

The Bank’s branches outside its home state of Massachusetts are also subject to the regulation, supervision and examination of host state regulators.

The enforcement powers available to federal and state banking regulators include, among other things, the ability to issue cease and desist or removal orders to terminate insurance of deposits;

to assess civil money penalties;

to issue directives to increase capital;

to place the bank into receivership;

and to initiate injunctive actions against banking organizations and institution-affiliated parties.

Deposit Insurance

Deposit obligations of the Bank are insured by the FDIC's Deposit Insurance Fund (“DIF”) up to $250,000 per separately insured depositor for deposits held in the same right and capacity.

The DIF is funded mainly through quarterly insurance assessments on insured banks based on their assessment base.

In November 2023, the FDIC approved a final rule to implement a special assessment to recover, over eight quarters beginning with the first quarter of 2024, losses to the DIF arising from the bank failures of Spring 2023.

In December 2025, the FDIC updated its estimate of the DIF’s losses and reduced the final assessment rate for the eighth collection quarter.

For 2025, the FDIC insurance expense for the Bank was $7.8 million.

The FDIC has the authority to adjust deposit insurance assessment rates at any time.

In addition, under the FDIA, the FDIC may terminate deposit insurance, among other circumstances, upon a finding that the institution has engaged in unsafe and 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 the FDIC.

Acquisitions and Branching

The Bank must seek prior approval from the FRB to acquire another bank or establish a new branch office.

The Bank must also seek prior approval from the MDOB to acquire another bank or establish a new branch office.

Well capitalized and well managed banks may acquire other banks in any state, subject to certain deposit concentration limits and other conditions, pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, as amended by the Dodd-Frank Act.

In addition, the Dodd-Frank Act authorizes a state-chartered bank to establish new branches on an interstate basis to the same extent a bank chartered by the host state may establish branches.

Activities and Investments of Insured State-Chartered Banks

The FDIA generally limits the types of equity investments that FDIC-insured state-chartered member banks, such as the Bank, may make and the kinds of activities in which such banks may engage, as a principal, to those that are permissible for national banks.

Further, the GLBA permits state banks, to the extent permitted under state law, to engage through “financial subsidiaries” in certain activities which are permissible for subsidiaries of a financial holding company.

In order to form a financial subsidiary, a state-chartered bank must be well capitalized, and must comply with certain capital deduction, risk management and affiliate transaction rules, among other requirements.

In addition, the Federal Reserve Act provides that state member banks are subject to the same restrictions with respect to purchasing, selling, underwriting, and holding of investment securities as national banks.

Brokered Deposits

The FDIA and federal regulations generally limit the ability of an insured depository institution to accept, renew or roll over any brokered deposit unless the institution's capital category is “well capitalized” or, with regulatory approval, “adequately capitalized.” Additionally, increased reliance on brokered deposits can increase an institution’s deposit insurance assessment.

Section 202 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which was enacted in 2018, amended the FDIA to exempt a capped amount of reciprocal deposits from treatment as brokered deposits for certain insured depository institutions.

The Community Reinvestment Act

The CRA requires the FRB to evaluate the Bank with regard to its performance in helping to meet the credit needs of the communities the Bank serves, including low and moderate-income neighborhoods, consistent with safe and sound banking operations, and to take this record into consideration when evaluating certain applications.

Failure of an institution to receive at least a “satisfactory” rating could inhibit the institution or its parent company from undertaking certain activities, including engaging in activities permitted as a financial holding company under GLBA and acquisitions of other financial institutions.

The Bank has achieved a rating of “satisfactory” on its most recent CRA examination.

Massachusetts and Connecticut (with respect to in-state branches) have adopted specific community reinvestment requirements which are substantially similar to those of the FRB.

On October 24, 2023, the federal banking agencies issued a final rule revising their framework for evaluating banks’ records of community investment under the CRA.

On July 16, 2025, these agencies issued a proposal to rescind the October 2023 final rule and reinstate the CRA framework that existed prior to the October 2023 final rule.

The Bank’s most recent performance evaluation was conducted using the CRA framework that existed prior to the October 2023 final rule.

Lending Restrictions

Federal law limits a bank's authority to extend credit to directors and executive officers of the bank or its affiliates and persons or companies that own, control or have power to vote more than 10% of any class of securities of a bank or an affiliate of a bank, as well as to entities controlled by such persons.

Among other things, extensions of credit to insiders are required to be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons.

Also, the terms of such extensions of credit may not involve more than the normal risk of repayment or present other unfavorable features and may not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the bank's capital.

Capital Adequacy and Safety and Soundness

Regulatory Capital Requirements

The FRB has issued risk-based and leverage capital rules applicable to U.S.

banking organizations such as the Company and the Bank.

These rules are intended to reflect the relationship between the banking organization's capital and the degree of risk associated with its operations based on transactions recorded on-balance sheet as well as off-balance sheet items.

The FRB may from time to time require that a banking organization maintain capital above the minimum levels discussed below, due to the banking organization's financial condition or actual or anticipated growth.

The capital adequacy rules define qualifying capital instruments and specify minimum amounts of capital that banking organizations are required to maintain as a percentage of assets.

Common equity Tier 1 capital generally includes common stock and related surplus, retained earnings and, in certain cases and subject to certain limitations, minority interest in consolidated subsidiaries, less goodwill, other non-qualifying intangible assets and certain other deductions.

Tier 1 capital for banks and bank holding companies generally consists of the sum of common equity Tier 1 elements, non-cumulative perpetual

preferred stock, and related surplus in certain cases and subject to limitations, minority interests in consolidated subsidiaries that do not qualify as common equity Tier 1 capital, less certain deductions.

Tier 2 capital generally consists of hybrid capital instruments, perpetual debt and mandatory convertible debt securities, cumulative perpetual preferred stock, term subordinated debt and intermediate-term preferred stock, and, subject to limitations, allowances for loan losses.

The sum of Tier 1 and Tier 2 capital less certain required deductions represents qualifying total risk-based capital.

Newly-issued trust preferred securities generally are not counted as Tier 1 capital, but the Company’s currently outstanding trust preferred securities were grandfathered and continue to count toward its Tier 1 capital.

In addition, under rules that became effective January 1, 2015, accumulated other comprehensive income (positive or negative) must be reflected in Tier 1 capital;

however, the Company was permitted to make a one-time, permanent election to continue to exclude accumulated other comprehensive income from capital.

The Company made this election.

Under the capital rules, risk-based capital ratios are calculated by dividing common equity Tier 1, Tier 1, and total risk capital, respectively, by risk-weighted assets.

Assets and off-balance sheet credit equivalents are assigned to one of several categories of risk-weights, based primarily on relative risk.

Under the FRB's rules, the Company and the Bank are each required to maintain a minimum common equity Tier 1 capital ratio requirement of 4.5%, a minimum Tier 1 capital ratio requirement of 6.0%, a minimum total capital requirement of 8.0% and a minimum leverage ratio requirement of 4.0%.

Additionally, these rules require an institution to maintain a capital conservation buffer of common equity Tier 1 capital in an amount above the minimum risk-based capital requirements for "adequately capitalized" institutions of more than 2.5% of total risk weighted assets, or face restrictions on the ability to pay dividends, pay discretionary bonuses, and to engaged in share repurchases.

A bank holding company, such as the Company, is considered "well capitalized" if the bank holding company (i) has a total risk based capital ratio of at least 10.0%, (ii) has a Tier 1 risk-based capital ratio of at least 6.0%, and (iii) is not subject to any written agreement order, capital directive or prompt corrective action directive to meet and maintain a specific capital level for any capital measure.

In addition, under the FRB's prompt corrective action rules, a state member bank is considered “well capitalized” if it (i) has a total risk-based capital ratio of 10.0% or greater;

(ii) a Tier 1 risk-based capital ratio of 8.0% or greater;

(iii) a common equity Tier 1 equity ratio of at least 6.5% or greater, (iv) a leverage capital ratio of 5.0% or greater;

and (v) is not subject to any written agreement, order, capital directive, or prompt corrective action directive to meet and maintain a specific capital level for any capital measure.

The Bank is currently considered well-capitalized under all regulatory definitions.

Generally, a bank, upon receiving notice that it is not adequately capitalized (i.e., that it is “undercapitalized”), becomes subject to the prompt corrective action provisions of Section 38 of FDIA that, for example, (i) restrict payment of capital distributions and management fees, (ii) require that its federal bank regulator monitor the condition of the institution and its efforts to restore its capital, (iii) require submission of a capital restoration plan, (iv) restrict the growth of the institution's assets, and (v) require prior regulatory approval of certain expansion proposals.

A bank that is required to submit a capital restoration plan must concurrently submit a performance guarantee by each company that controls the bank.

A bank that is “critically undercapitalized” (i.e., has a ratio of tangible equity to total assets that is equal to or less than 2.0%) will be subject to further restrictions, and generally will be placed in conservatorship or receivership within 90 days.

The Bank is considered “well capitalized” under the FRB's prompt corrective action rules and the Company is considered “well capitalized” under the FRB's rules applicable to bank holding companies.

Safety and Soundness Standards

Guidelines adopted by the federal bank regulatory agencies pursuant to the FDIA establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits.

Among other things, the guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director or principal stockholder.

Dividend Restrictions

The Company is a legal entity separate and distinct from the Bank.

The revenues and cash flows of the Company (on a parent company only basis) are derived primarily from dividends paid to it by the Bank.

The right of the Company, and consequently the right of shareholders of the Company, to participate in any distribution of the assets or earnings of the Bank through the payment of such dividends or otherwise is subject to the prior claims of creditors of the Bank (including depositors), except to the extent that certain claims of the Company in a creditor capacity may be recognized.

Restrictions on Bank Holding Company Dividends

The FRB has authority to prohibit bank holding companies from paying dividends if such payment is deemed to be an unsafe or unsound practice.

The FRB has indicated generally that it may be an unsafe or unsound practice for bank holding companies to pay dividends unless the bank holding company's net income for the prior year is sufficient to fund the dividends

and the expected rate of earnings retention is consistent with the organization's capital needs, asset quality and overall financial condition.

Further, under the FRB's capital rules, the Company's ability to pay dividends will be restricted if it does not maintain the required capital conservation buffer.

See “Capital Adequacy and Safety and Soundness-Regulatory Capital Requirements” above.

Restrictions on Bank Dividends

The FRB has the authority to use its enforcement powers to prohibit a bank from paying dividends if, in its opinion, the payment of dividends would constitute an unsafe or unsound practice.

Federal law also prohibits the payment of dividends by a bank that will result in the bank failing to meet its applicable capital requirements on a pro forma basis.

In addition, a state member bank may not declare or pay a dividend:

(i) if the total of all dividends declared during the calendar year, including the proposed dividend, exceeds the sum of the bank's net income during the current calendar year and the retained net income of the prior two calendar years;

or (ii) that would exceed its undivided profits;

in either case, unless the dividend has been approved by the FRB.

Payment of dividends by a bank is also restricted pursuant to various state regulatory limitations, including limitations on capital distributions that could require a bank to obtain the approval of the MDOB prior to making a distribution.

Certain Transactions by Bank Holding Companies with their Affiliates

There are various statutory restrictions on the extent to which insured depository institutions may lend to, provide credit to, or otherwise engage in “covered transactions” with their holding companies or other affiliates.

An insured depository institution (and its subsidiaries) may not lend money to, or engage in covered transactions with, its non-depository institution affiliates if the aggregate amount of covered transactions outstanding involving the bank, plus the proposed transaction, exceeds the following limits:

(i) in the case of any one such affiliate, 10% of the capital stock and surplus of the insured depository institution;

and (ii) in the case of all affiliates, 20% of the capital stock and surplus of the insured depository institution.

For this purpose, “covered transactions” are defined by statute to include, among other things, a loan or extension of credit to an affiliate, a purchase of or investment in securities issued by an affiliate, a purchase of assets from an affiliate, the acceptance of securities issued by an affiliate as collateral for a loan or extension of credit to any person or company, or the issuance of a guarantee, acceptance or letter of credit on behalf of an affiliate.

Covered transactions are also subject to certain collateral security requirements.

Covered transactions as well as other types of transactions between a bank and a bank holding company must be conducted under terms and conditions, including credit standards, that are at least as favorable to the bank as prevailing market terms.

In addition, Section 106 of the Bank Holding Company Act Amendments of 1970 provides that, to further competition, a bank holding company and its subsidiaries are prohibited from engaging in certain tying arrangements in connection with any extension of credit, lease or sale of property of any kind, or the furnishing of any service.

Enhanced Prudential Supervision

The Dodd-Frank Act and other federal banking laws subject companies with $10 billion or more of consolidated assets to additional regulatory requirements.

Section 1075 of the Dodd-Frank Act, commonly known as the “Durbin Amendment”, amended the Electronic Fund Transfer Act to restrict the amount of interchange fees that may be charged and prohibit network exclusivity for debit card transactions.

The Bank was required to begin complying with the restrictions on interchange fees by July 1, 2024, which have negatively impacted payment network fees and is expected to continue to negatively impact future payment network fees.

In addition, Section 619 of the Dodd-Frank Act, commonly known as the “Volcker Rule”, which generally prohibits banking entities from engaging in proprietary trading and from acquiring or retaining an ownership interest in or sponsoring certain types of investment funds, does not apply to an insured depository institution if it, and every company that controls it, has total consolidated assets of $10 billion or less and consolidated trading assets and liabilities that are 5% or less of consolidated assets.

The Bank has been subject to the Volcker Rule since 2023.

Finally, Section 1025 of the Dodd-Frank Act provides that the CFPB has authority to examine any insured depository institution with total assets of more than $10 billion and any affiliate thereof.

Consumer Protection Regulation

The Company and the Bank are subject to a number of federal and state laws designed to protect consumers and prohibit unfair or deceptive business practices.

These laws include the Equal Credit Opportunity Act, Fair Housing Act, Home Ownership Protection Act, Fair Credit Reporting Act, as amended by the FACT Act, GLBA, TILA, the CRA, the Home Mortgage Disclosure Act, Real Estate Settlement Procedures Act, National Flood Insurance Act and various state law counterparts.

These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must interact with customers when taking deposits, making loans, collecting loans and providing other services.

Further, the CFPB also has a broad mandate to prohibit unfair, deceptive or abusive acts and practices and is specifically empowered to require certain disclosures to consumers and draft model disclosure forms.

Failure to comply with consumer protection laws and regulations can subject financial institutions to enforcement actions, fines and other penalties.

The CFPB examines the Bank for compliance with consumer protection laws and enforces CFPB rules with respect to the Bank.

The Dodd-Frank Act prescribes certain standards that mortgage lenders must consider before making a residential mortgage loan, including verifying a borrower's ability to repay such mortgage loan, and allows borrowers to assert violations of certain provisions of the TILA as a defense to foreclosure proceedings.

Additionally, the CFPB's qualified mortgage rule requires creditors, such as the Bank, to make a reasonable good faith determination of a consumer's ability to repay any consumer credit transaction secured by a dwelling prior to making the loan.

Privacy and Customer Information Security

The GLBA requires financial institutions to implement policies and procedures regarding the disclosure of nonpublic personal information about consumers to nonaffiliated third parties.

In general, the Bank must provide its customers with an annual disclosure that explains its policies and procedures regarding the disclosure of such nonpublic personal information and, except as otherwise required or permitted by law, the Bank is prohibited from disclosing such information except as provided in such policies and procedures.

If the financial institution only discloses information under exceptions from the GLBA that do not require an opt out to be provided and if there has been no change in the financial institutions privacy policies and procedures since its most recent disclosures provide to customers, an annual disclosure is not required to be provided by the financial institution.

The GLBA also requires that the Bank develops, implement and maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer information (as defined under GLBA), to protect against anticipated threats or hazards to the security or integrity of such information and to protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer.

The Bank is also required to send a notice to customers whose “sensitive information” has been compromised if unauthorized use of this information is “reasonably possible.” Most of the states, including the states where the Bank operates, have enacted legislation concerning breaches of data security and the duties of the Bank in response to data breaches.

Congress continues to consider federal legislation that would require consumer notice of data security breaches.

Pursuant to the FACT Act, the Bank must also develop and implement a written identity theft prevention program to detect, prevent, and mitigate identity theft in connection with the opening of certain accounts or certain existing accounts.

Additionally, the FACT Act amended the Fair Credit Reporting Act to generally prohibit a person from using information received from an affiliate to make a solicitation for marketing purposes to a consumer, unless the consumer is given notice and a reasonable opportunity and method to opt out of the making of such solicitations.

Anti-Money Laundering

The Bank Secrecy Act

Under the BSA, a financial institution is required to have systems in place to detect certain transactions, based on the size and nature of the transaction.

Financial institutions are generally required to report to the U.S.

Treasury any cash transactions involving at least $10,000.

In addition, financial institutions are required to file suspicious activity reports for any transaction or series of transactions that involve more than $5,000 and which the financial institution knows, suspects or has reason to suspect involves illegal funds, is designed to evade the requirements of the BSA or has no lawful purpose.

The USA PATRIOT Act, which amended the BSA, is designed to deny terrorists and others the ability to obtain anonymous access to the U.S.

financial system.

The USA PATRIOT Act, together with the implementing regulations of various federal regulatory agencies, has caused financial institutions, such as the Bank, to adopt and implement additional policies or amend existing policies and procedures with respect to, among other things, anti-money laundering compliance, suspicious activity, currency transaction reporting, customer identity verification and customer risk analysis.

In evaluating an application to acquire a bank or to merge banks or effect a purchase of assets and assumption of deposits and other liabilities, the applicable federal banking regulator must consider the anti-money laundering compliance record of both the applicant and the target.

Office of Foreign Assets Control

has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others.

These sanctions, which are administered by OFAC, take many different forms.

Generally, however, they contain one or more of the following elements:

(i) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on “U.S.

persons” engaging in financial or other transactions relating to a sanctioned country or with certain designated persons and entities;

(ii) a blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S.

jurisdiction (including property in the possession or control of U.S.

and (iii) restrictions on transactions with or involving certain persons or entities.

Blocked assets (for example, property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC.

Failure to comply with these sanctions could have serious legal and reputational consequences for the Company.

As of December 31, 2025, the Company did not have any transactions with sanctioned countries, nationals, and others.

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.

What changed 10-K

Item 1. Business