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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended: ~~June~~September 30, 2023


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

For the transition period from to

Commission File Number: 001-15781

BERKSHIRE HILLS BANCORP, INC.

(Exact name of registrant as specified in its charter)

Delaware

04-3510455

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

60 State Street

Boston

Massachusetts

02109

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (800) 773-5601, ext. 133773

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

BHLB

The New York Stock Exchange

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

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

Table of Contents

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

Large accelerated filer ý Accelerated filer o

Non-accelerated filer o Smaller reporting company ☐

Emerging growth company ☐

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

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

As of ~~August~~November 7, 2023, the Registrant had ~~44,009,048~~43,670,239 shares of common stock, $0.01 par value per share, outstanding

Table of Contents

BERKSHIRE HILLS BANCORP, INC.

FORM 10-Q

INDEX

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements (unaudited)

Consolidated Balance Sheets as of ~~June~~September 30, 2023 and December 31, 2022

Consolidated Statements of Income for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2023 and 2022

Consolidated Statements of Comprehensive (Loss)/Income for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2023 and 2022

Consolidated Statements of Changes in Shareholders’ Equity for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, 2023 and 2022

Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, 2023 and 2022

Notes to Consolidated Financial Statements (Unaudited)

Note 1

Basis of Presentation

Note 2

Trading Securities

Note 3

Securities Available for Sale, Held to Maturity, and Equity Securities

Note 4

Loans and Allowance for Credit Losses

Derivative Financial Instruments and Hedging Activities

Capital Ratios and Shareholders' Equity

Stock-Based Compensation Plans

4950

Note 12

Fair Value Measurements

5051

Note 13

Net Interest Income after Provision/(Benefit) for Credit Losses

5960

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

6061

Selected Financial Data

6061

Average Balances and Average Yields/Rates

6263

Non-GAAP Financial Measures

6465

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

7677

Item 4.

Controls and Procedures

7879

Table of Contents

PART I

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS


		June 30, 2023			December 31, 2022			September 30, 2023		December 31, 2022
(In thousands, except share data)	(In thousands, except share data)			(In thousands, except share data)
Assets	Assets								Assets
Cash and due from banks	Cash and due from banks	$	120,285		$	145,342	Cash and due from banks	$	120,634	$	145,342
Short-term investments	Short-term investments	520,315			540,013		Short-term investments	542,836		540,013
Total cash and cash equivalents	Total cash and cash equivalents	640,600			685,355		Total cash and cash equivalents	663,470		685,355

Trading securities, at fair value	Trading securities, at fair value	6,405			6,708		Trading securities, at fair value	6,171		6,708
Equity securities, at fair value	Equity securities, at fair value	12,868			12,856		Equity securities, at fair value	12,325		12,856
Securities available for sale, at fair value	Securities available for sale, at fair value	1,340,331			1,423,200		Securities available for sale, at fair value	1,260,391		1,423,200
Securities held to maturity (fair values of $487,960 and $507,464)		563,765			583,453
Securities held to maturity (fair values of $453,729 and $507,464)							Securities held to maturity (fair values of $453,729 and $507,464)	552,981		583,453
Federal Home Loan Bank stock	Federal Home Loan Bank stock	34,714			7,219		Federal Home Loan Bank stock	38,912		7,219
Total securities	Total securities	1,958,083			2,033,436		Total securities	1,870,780		2,033,436
Less: Allowance for credit losses on held to maturity securities	Less: Allowance for credit losses on held to maturity securities	(71)			(91)		Less: Allowance for credit losses on held to maturity securities	(69)		(91)
Net securities	Net securities	1,958,012			2,033,345		Net securities	1,870,711		2,033,345

Loans held for sale	Loans held for sale	8,708			4,311		Loans held for sale	2,342		4,311

Total loans	Total loans	8,882,402			8,335,309		Total loans	8,984,377		8,335,309
Less: Allowance for credit losses on loans	Less: Allowance for credit losses on loans	(100,219)			(96,270)		Less: Allowance for credit losses on loans	(102,792)		(96,270)
Net loans	Net loans	8,782,183			8,239,039		Net loans	8,881,585		8,239,039

Premises and equipment, net	Premises and equipment, net	76,903			85,217		Premises and equipment, net	70,042		85,217

Other intangible assets	Other intangible assets	22,074			24,483		Other intangible assets	20,869		24,483
Cash surrender value of bank-owned life insurance policies	Cash surrender value of bank-owned life insurance policies	241,314			238,919		Cash surrender value of bank-owned life insurance policies	242,172		238,919

Other assets	Other assets	352,307			348,935		Other assets	377,605		348,935
Assets held for sale	Assets held for sale	8,220			3,260		Assets held for sale	11,157		3,260

Total assets	Total assets	$	12,090,321		$	11,662,864	Total assets	$	12,139,953	$	11,662,864

Liabilities	Liabilities						Liabilities
Demand deposits	Demand deposits	$	2,594,528		$	2,852,127	Demand deposits	$	2,530,441	$	2,852,127
NOW and other deposits	NOW and other deposits	944,775			1,054,596		NOW and other deposits	843,032		1,054,596
Money market deposits	Money market deposits	3,005,081			3,723,570		Money market deposits	3,075,307		3,723,570
Savings deposits	Savings deposits	1,088,405			1,063,269		Savings deposits	1,086,329		1,063,269
Time deposits	Time deposits	2,435,618			1,633,707		Time deposits	2,445,435		1,633,707
Total deposits	Total deposits	10,068,407			10,327,269		Total deposits	9,980,544		10,327,269
Short-term debt	Short-term debt	470,000			—		Short-term debt	670,000		—
Long-term Federal Home Loan Bank advances and other	Long-term Federal Home Loan Bank advances and other	204,345			4,445		Long-term Federal Home Loan Bank advances and other	134,295		4,445
Subordinated borrowings	Subordinated borrowings	121,238			121,064		Subordinated borrowings	121,300		121,064
Total borrowings	Total borrowings	795,583			125,509		Total borrowings	925,595		125,509
Other liabilities	Other liabilities	252,950			256,024		Other liabilities	282,805		256,024

Total liabilities	Total liabilities	$	11,116,940		$	10,708,802	Total liabilities	$	11,188,944	$	10,708,802
(continued)	(continued)						(continued)
		June 30, 2023			December 31, 2022			September 30, 2023		December 31, 2022

Shareholders’ equity	Shareholders’ equity						Shareholders’ equity

Common stock ($0.01 par value; 100,000,000 shares authorized and 51,903,190 shares issued and 44,033,094 shares outstanding in 2023; 51,903,190 shares issued and 44,361,222 shares outstanding in 2022)		528			528
Common stock ($0.01 par value; 100,000,000 shares authorized and 51,903,190 shares issued and 43,822,473 shares outstanding in 2023; 51,903,190 shares issued and 44,361,222 shares outstanding in 2022)							Common stock ($0.01 par value; 100,000,000 shares authorized and 51,903,190 shares issued and 43,822,473 shares outstanding in 2023; 51,903,190 shares issued and 44,361,222 shares outstanding in 2022)	528		528
Additional paid-in capital - common stock	Additional paid-in capital - common stock	1,423,856			1,424,183		Additional paid-in capital - common stock	1,423,720		1,424,183
Unearned compensation	Unearned compensation	(14,470)			(8,598)		Unearned compensation	(12,004)		(8,598)
Retained (deficit)	Retained (deficit)	(35,490)			(71,428)		Retained (deficit)	(23,846)		(71,428)
Accumulated other comprehensive (loss)	Accumulated other comprehensive (loss)	(186,240)			(181,052)		Accumulated other comprehensive (loss)	(218,386)		(181,052)
Treasury stock, at cost (7,870,096 shares in 2023 and 7,541,968 shares in 2022)		(214,803)			(209,571)
Treasury stock, at cost (8,080,717 shares in 2023 and 7,541,968 shares in 2022)							Treasury stock, at cost (8,080,717 shares in 2023 and 7,541,968 shares in 2022)	(219,003)		(209,571)
Total shareholders’ equity	Total shareholders’ equity	973,381			954,062		Total shareholders’ equity	951,009		954,062
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	12,090,321		$	11,662,864	Total liabilities and shareholders’ equity	$	12,139,953	$	11,662,864

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share data)	(In thousands, except per share data)	2023		2022		2023		2022		(In thousands, except per share data)	2023		2022		2023		2022
Interest and dividend income	Interest and dividend income									Interest and dividend income
Loans	Loans	$	126,871	$	74,843	$	244,364	$	137,317	Loans	$	132,816	$	90,266	$	377,180	$	227,583
Securities and other	Securities and other	18,554		12,536		33,377		24,885		Securities and other	15,205		13,405		48,582		38,290
Total interest and dividend income	Total interest and dividend income	145,425		87,379		277,741		162,202		Total interest and dividend income	148,021		103,671		425,762		265,873
Interest expense	Interest expense									Interest expense
Deposits	Deposits	35,966		4,170		62,048		8,344		Deposits	44,008		8,164		106,056		16,508
Borrowings	Borrowings	16,700		1,851		25,401		3,437		Borrowings	13,679		3,423		39,080		6,860
Total interest expense	Total interest expense	52,666		6,021		87,449		11,781		Total interest expense	57,687		11,587		145,136		23,368
Net interest income	Net interest income	92,759		81,358		190,292		150,421		Net interest income	90,334		92,084		280,626		242,505
Non-interest income	Non-interest income									Non-interest income
Deposit related fees	Deposit related fees	8,571		8,005		16,882		15,356		Deposit related fees	8,792		8,377		25,674		23,733
Loan fees and other	Loan fees and other	3,189		1,113		5,658		6,052		Loan fees and other	2,879		1,292		8,537		7,344

Gain on SBA loan sales	Gain on SBA loan sales	2,910		3,619		5,404		6,964		Gain on SBA loan sales	2,548		2,551		7,952		9,515
Wealth management fees	Wealth management fees	2,583		2,775		5,322		5,400		Wealth management fees	2,481		2,353		7,803		7,753

Total fee income	Total fee income	17,253		15,512		33,266		33,772		Total fee income	16,700		14,573		49,966		48,345
Other, net	Other, net	(137)		1,812		222		4,978		Other, net	1,232		2,154		1,454		7,132
Fair value adjustments on securities	Fair value adjustments on securities	(22)		(973)		212		(1,718)		Fair value adjustments on securities	(467)		(476)		(255)		(2,194)

Total non-interest income	Total non-interest income	17,094		16,351		33,700		37,032		Total non-interest income	17,465		16,251		51,165		53,283
Total net revenue	Total net revenue	109,853		97,709		223,992		187,453		Total net revenue	107,799		108,335		331,791		295,788
Provision expense/(benefit) for credit losses	Provision expense/(benefit) for credit losses	8,000		—		16,999		(4,000)		Provision expense/(benefit) for credit losses	8,000		3,000		24,999		(1,000)
Non-interest expense	Non-interest expense									Non-interest expense
Compensation and benefits	Compensation and benefits	39,960		37,830		79,031		75,351		Compensation and benefits	40,155		39,422		119,186		114,773
Occupancy and equipment	Occupancy and equipment	8,970		9,438		18,349		19,505		Occupancy and equipment	8,816		8,702		27,165		28,207
Technology and communications	Technology and communications	10,465		8,611		19,936		17,138		Technology and communications	10,616		8,719		30,552		25,857
Marketing and promotion	Marketing and promotion	1,510		1,472		2,718		2,583		Marketing and promotion	1,552		1,290		4,270		3,873
Professional services	Professional services	2,526		2,913		5,803		5,605		Professional services	2,423		3,285		8,226		8,890
FDIC premiums and assessments	FDIC premiums and assessments	1,834		658		3,260		1,645		FDIC premiums and assessments	1,905		476		5,165		2,121
Other real estate owned and foreclosures	Other real estate owned and foreclosures	—		23		—		23		Other real estate owned and foreclosures	—		13		—		36
Amortization of intangible assets	Amortization of intangible assets	1,205		1,286		2,410		2,572		Amortization of intangible assets	1,205		1,285		3,615		3,857

Acquisition, restructuring, and other expenses		21		35		(15)		53
Restructuring and other expenses										Restructuring and other expenses	2,607		11,473		2,592		11,526
Other	Other	7,557		6,209		14,511		12,550		Other	7,234		7,012		21,745		19,562
Total non-interest expense	Total non-interest expense	74,048		68,475		146,003		137,025		Total non-interest expense	76,513		81,677		222,516		218,702

Income before income taxes	Income before income taxes	$	27,805	$	29,234	$	60,990	$	54,428	Income before income taxes	$	23,286	$	23,658	$	84,276	$	78,086
Income tax expense	Income tax expense	3,944		6,119		9,492		11,117		Income tax expense	3,741		4,941		13,233		16,058
Net income	Net income	$	23,861	$	23,115	$	51,498	$	43,311	Net income	$	19,545	$	18,717	$	71,043	$	62,028

Basic earnings per common share	Basic earnings per common share	$	0.55	$	0.50	$	1.18	$	0.93	Basic earnings per common share	$	0.45	$	0.42	$	1.64	$	1.35
Diluted earnings per common share	Diluted earnings per common share	$	0.55	$	0.50	$	1.18	$	0.92	Diluted earnings per common share	$	0.45	$	0.42	$	1.63	$	1.34

Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	43,443		45,818		43,564		46,733		Basic	43,164		44,700		43,435		46,056
Diluted	Diluted	43,532		46,102		43,780		47,074		Diluted	43,347		45,034		43,640		46,396

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	(In thousands)	2023		2022		2023		2022		(In thousands)	2023		2022		2023		2022
Net income	Net income	$	23,861	$	23,115	$	51,498	$	43,311	Net income	$	19,545	$	18,717	$	71,043	$	62,028
Other comprehensive (loss), before tax:	Other comprehensive (loss), before tax:									Other comprehensive (loss), before tax:
Changes in unrealized (loss) on debt securities available-for-sale	Changes in unrealized (loss) on debt securities available-for-sale	(24,842)		(60,487)		(874)		(161,860)		Changes in unrealized (loss) on debt securities available-for-sale	(40,525)		(83,073)		(41,398)		(244,933)
Changes in unrealized (loss) on derivative hedges	Changes in unrealized (loss) on derivative hedges	(11,910)		—		(6,112)		—		Changes in unrealized (loss) on derivative hedges	(2,959)		(5,555)		(9,072)		(5,555)

Income taxes related to other comprehensive (loss):	Income taxes related to other comprehensive (loss):									Income taxes related to other comprehensive (loss):
Changes in unrealized (loss) on debt securities available-for-sale	Changes in unrealized (loss) on debt securities available-for-sale	6,381		15,725		157		42,104		Changes in unrealized (loss) on debt securities available-for-sale	10,544		21,639		10,701		63,743
Changes in unrealized (loss) on derivative hedges	Changes in unrealized (loss) on derivative hedges	3,197		—		1,641		—		Changes in unrealized (loss) on derivative hedges	794		1,494		2,435		1,494

Total other comprehensive (loss)	Total other comprehensive (loss)	(27,174)		(44,762)		(5,188)		(119,756)		Total other comprehensive (loss)	(32,146)		(65,495)		(37,334)		(185,251)
Total comprehensive (loss)/income	Total comprehensive (loss)/income	$	(3,313)	$	(21,647)	$	46,310	$	(76,445)	Total comprehensive (loss)/income	$	(12,601)	$	(46,778)	$	33,709	$	(123,223)

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY


		Common stock		Additional paid-in capital			Unearned compensation		Retained earnings (deficit)				Accumulated other comprehensive (loss)		Treasury stock												Common stock				Additional paid-in capital		Unearned compensation			Retained earnings (deficit)		Accumulated other comprehensive (loss)				Treasury stock
(In thousands)	(In thousands)		Shares			Amount											Total		(In thousands)											Amount					Treasury stock									Total
Balance at March 31, 2022			47,792	$	528		$	1,423,679			$	(10,284)					$	(125,343)			$	(78,237)			$	(116,482)		$	1,093,861
Balance at June 30, 2022																									Balance at June 30, 2022							45,788				$	528			$	1,424,081			$	(12,824)			$	(106,997)			$	(122,999)			$	(167,739)	$	1,014,050
Comprehensive (loss):	Comprehensive (loss):																								Comprehensive (loss):
Net income	Net income		—	—			—		—				23,115		—				—				23,115		Net income						—		—			—		—				18,717				—				—				18,717
Other comprehensive (loss)	Other comprehensive (loss)		—	—			—		—				—		(44,762)				—				(44,762)		Other comprehensive (loss)						—		—			—		—				—				(65,495)				—				(65,495)
Total comprehensive income/(loss)	Total comprehensive income/(loss)		—	—			—		—				23,115		(44,762)				—				(21,647)		Total comprehensive income/(loss)						—		—			—		—				18,717				(65,495)				—				(46,778)
Cash dividends declared on common shares ($0.24 per share)			—	—			—		—				(4,769)		—				—				(4,769)
Cash dividends declared on common shares ($0.12 per share)																									Cash dividends declared on common shares ($0.12 per share)						—		—			—		—				(5,493)				—				—				(5,493)

Treasury shares repurchased	Treasury shares repurchased		(2,147)	—			—		—				—		—				(55,040)				(55,040)		Treasury shares repurchased						(705)		—			—		—				—				—				(20,249)				(20,249)
Forfeited shares	Forfeited shares		(15)	—			9		375				—		—				(384)				—		Forfeited shares						(23)		—			90		553				—				—				(643)				—
Exercise of stock options	Exercise of stock options		—	—			—		—				—		—				—				—		Exercise of stock options						11		—			—		—				(47)				—				292				245
Restricted stock grants	Restricted stock grants		175	—			391		(5,035)				—		—				4,644				—		Restricted stock grants						7		—			(17)		(188)				—				—				205				—
Stock-based compensation	Stock-based compensation		—	—			—		2,120				—		—				—				2,120		Stock-based compensation						—		—			—		1,733				—				—				—				1,733

Other, net	Other, net		(17)	—			2		—				—		—				(477)				(475)		Other, net						(38)		—			4		—				—				—				(950)				(946)
Balance at June 30, 2022			45,788	$	528		$	1,424,081	$	(12,824)			$	(106,997)	$	(122,999)			$	(167,739)			$	1,014,050
Balance at September 30, 2022																									Balance at September 30, 2022						45,040		$	528		$	1,424,158	$	(10,726)			$	(93,820)			$	(188,494)			$	(189,084)			$	942,562

Balance at March 31, 2023			44,411	$	528		$	1,424,563	$	(10,920)			$	(51,398)	$	(159,066)			$	(208,227)			$	995,480
Comprehensive income:
Balance at June 30, 2023																									Balance at June 30, 2023						44,033		$	528		$	1,423,856	$	(14,470)			$	(35,490)			$	(186,240)			$	(214,803)			$	973,381
Comprehensive (loss):																									Comprehensive (loss):
Net income	Net income		—	—			—		—				23,861		—				—				23,861		Net income						—		—			—		—				19,545				—				—				19,545
Other comprehensive (loss)	Other comprehensive (loss)		—	—			—		—				—		(27,174)				—				(27,174)		Other comprehensive (loss)						—		—			—		—				—				(32,146)				—				(32,146)
Total comprehensive income			—	—			—		—				23,861		(27,174)				—				(3,313)
Impact of ASU No. 2022-02 Adoption			—	—			—		—				—		—				—				—
Total comprehensive income/(loss)																									Total comprehensive income/(loss)						—		—			—		—				19,545				(32,146)				—				(12,601)

Cash dividends declared on common shares ($0.36 per share)			—	—			—		—				(7,953)		—				—				(7,953)

Cash dividends declared on common shares $0.18 per share)																									Cash dividends declared on common shares $0.18 per share)						—		—			—		—				(7,901)				—				—				(7,901)

Treasury shares repurchased	Treasury shares repurchased		(581)	—			—		—				—		—				(12,378)				(12,378)		Treasury shares repurchased						(179)		—			—		—				—				—				(3,578)				(3,578)
Forfeited shares	Forfeited shares		(18)	—			(50)		428				—		—				(378)				—		Forfeited shares						(23)		—			(82)		572				—				—				(490)				—
Exercise of stock options	Exercise of stock options		—	—			—		—				—		—				—				—		Exercise of stock options						—		—			—		—				—				—				—				—
Restricted stock grants	Restricted stock grants		249	—			(654)		(6,236)				—		—				6,890				—		Restricted stock grants						8		—			(54)		(172)				—				—				226				—
Stock-based compensation	Stock-based compensation		—	—			—		2,258				—		—				—				2,258		Stock-based compensation						—		—			—		2,066				—				—				—				2,066

Other, net	Other, net		(28)	—			(3)		—				—		—				(710)				(713)		Other, net						(17)		—			—		—				—				—				(358)				(358)
Balance at June 30, 2023			44,033	$	528		$	1,423,856	$	(14,470)			$	(35,490)	$	(186,240)			$	(214,803)			$	973,381
Balance at September 30, 2023																									Balance at September 30, 2023						43,822		$	528		$	1,423,720	$	(12,004)			$	(23,846)			$	(218,386)			$	(219,003)			$	951,009

Table of Contents


		Common stock		Additional paid-in capital			Unearned compensation		Retained earnings (deficit)				Accumulated other comprehensive (loss)		Treasury stock												Common stock					Additional paid-in capital	Unearned compensation			Retained earnings (deficit)		Accumulated other comprehensive (loss)				Treasury stock
(In thousands)	(In thousands)		Shares			Amount											Total		(In thousands)												Amount				Treasury stock									Total
Balance at December 31, 2021	Balance at December 31, 2021		48,667	$	528		$	1,423,445			$	(9,056)					$	(139,383)			$	(3,243)			$	(89,856)		$	1,182,435	Balance at December 31, 2021						48,667				$	528			$	1,423,445			$	(9,056)			$	(139,383)			$	(89,856)	$	1,182,435
Comprehensive (loss):	Comprehensive (loss):																								Comprehensive (loss):
Net income	Net income		—	—			—		—				43,311		—				—				43,311		Net income							—	—			—		—				62,028				—				—				62,028
Other comprehensive (loss)	Other comprehensive (loss)		—	—			—		—				—		(119,756)				—				(119,756)		Other comprehensive (loss)							—	—			—		—				—				(185,251)				—				(185,251)
Total comprehensive income/(loss)	Total comprehensive income/(loss)		—	—			—		—				43,311		(119,756)				—				(76,445)		Total comprehensive income/(loss)							—	—			—		—				62,028				(185,251)				—				(123,223)
Cash dividends declared on common shares ($0.24 per share)			—	—			—		—				(10,921)		—				—				(10,921)

Treasury shares repurchased			(3,119)	—			—		—				—		—				(84,295)				(84,295)
Forfeited shares			(51)	—			79		1,358				—		—				(1,437)				—
Exercise of stock options			1	—			—		—				(4)		—				29				25
Restricted stock grants			314	—			552		(9,052)				—		—				8,500				—
Stock-based compensation			—	—			—		3,926				—		—				—				3,926

Other, net			(24)	—			5		—				—		—				(680)				(675)
Balance at June 30, 2022			45,788	$	528		$	1,424,081	$	(12,824)			$	(106,997)	$	(122,999)			$	(167,739)			$	1,014,050

Balance at December 31, 2022			44,361	$	528		$	1,424,183	$	(8,598)			$	(71,428)	$	(181,052)			$	(209,571)			$	954,062
Comprehensive income:
Net income			—	—			—		—				51,498		—				—				51,498
Other comprehensive (loss)			—	—			—		—				—		(5,188)				—				(5,188)
Total comprehensive income			—	—			—		—				51,498		(5,188)				—				46,310
Impact of ASU No. 2022-02 Adoption			—	—			—		—				401		—				—				401

Cash dividends declared on common shares ($0.36 per share)	Cash dividends declared on common shares ($0.36 per share)		—	—			—		—				(15,961)		—				—				(15,961)		Cash dividends declared on common shares ($0.36 per share)							—	—			—		—				(16,414)				—				—				(16,414)

Treasury shares repurchased	Treasury shares repurchased		(628)	—			—		—				—		—				(13,568)				(13,568)		Treasury shares repurchased							(3,825)	—			—		—				—				—				(104,543)				(104,543)
Forfeited shares	Forfeited shares		(49)	—			37		1,261				—		—				(1,298)				—		Forfeited shares							(75)	—			169		1,911				—				—				(2,080)				—
Exercise of stock options	Exercise of stock options		—	—			—		—				—		—				—				—		Exercise of stock options							12	—			—		—				(51)				—				320				269
Restricted stock grants	Restricted stock grants		392	—			(209)		(10,587)				—		—				10,796				—		Restricted stock grants							321	—			536		(9,240)				—				—				8,704				—
Stock-based compensation	Stock-based compensation		—	—			—		3,454				—		—				—				3,454		Stock-based compensation							—	—			—		5,659				—				—				—				5,659

Other, net	Other, net		(43)	—			(155)		—				—		—				(1,162)				(1,317)		Other, net							(60)	—			8		—				—				—				(1,629)				(1,621)
Balance at June 30, 2023			44,033	$	528		$	1,423,856	$	(14,470)			$	(35,490)	$	(186,240)			$	(214,803)			$	973,381
Balance at September 30, 2022																									Balance at September 30, 2022							45,040	$	528		$	1,424,158	$	(10,726)			$	(93,820)			$	(188,494)			$	(189,084)			$	942,562

Balance at December 31, 2022																									Balance at December 31, 2022							44,361	$	528		$	1,424,183	$	(8,598)			$	(71,428)			$	(181,052)			$	(209,571)			$	954,062
Comprehensive income:																									Comprehensive income:
Net income																									Net income							—	—			—		—				71,043				—				—				71,043
Other comprehensive (loss)																									Other comprehensive (loss)							—	—			—		—				—				(37,334)				—				(37,334)
Total comprehensive income																									Total comprehensive income							—	—			—		—				71,043				(37,334)				—				33,709
Impact of ASU No. 2022-02 Adoption																									Impact of ASU No. 2022-02 Adoption							—	—			—		—				401				—				—				401

Cash dividends declared on common shares ($0.54 per share)																									Cash dividends declared on common shares ($0.54 per share)							—	—			—		—				(23,862)				—				—				(23,862)

Treasury shares repurchased																									Treasury shares repurchased							(807)	—			—		—				—				—				(17,146)				(17,146)
Forfeited shares																									Forfeited shares							(72)	—			(45)		1,833				—				—				(1,789)				(1)
Exercise of stock options																									Exercise of stock options							—	—			—		—				—				—				—				—
Restricted stock grants																									Restricted stock grants							400	—			(262)		(10,760)				—				—				11,022				—
Stock-based compensation																									Stock-based compensation							—	—			—		5,521				—				—				—				5,521

Other, net																									Other, net							(60)	—			(156)		—				—				—				(1,519)				(1,675)
Balance at September 30, 2023																									Balance at September 30, 2023							43,822	$	528		$	1,423,720	$	(12,004)			$	(23,846)			$	(218,386)			$	(219,003)			$	951,009

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS


		Six Months Ended June 30,					Nine Months Ended September 30,
(In thousands)	(In thousands)	2023		2022		(In thousands)	2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:

Net income	Net income	$	51,498	$	43,311	Net income	$	71,043	$	62,028
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Provision/(benefit) for credit losses	Provision/(benefit) for credit losses	16,999		(4,000)		Provision/(benefit) for credit losses	24,999		(1,000)
Net (accretion)/amortization of securities	Net (accretion)/amortization of securities	480		1,383		Net (accretion)/amortization of securities	965		2,288
Change in unamortized net loan costs and premiums	Change in unamortized net loan costs and premiums	(474)		2,471		Change in unamortized net loan costs and premiums	145		2,557
Premises and equipment depreciation and amortization expense	Premises and equipment depreciation and amortization expense	4,327		4,907		Premises and equipment depreciation and amortization expense	6,404		7,257
Stock-based compensation expense	Stock-based compensation expense	3,454		3,926		Stock-based compensation expense	5,521		5,659
Accretion of purchase accounting entries, net	Accretion of purchase accounting entries, net	(330)		(1,464)		Accretion of purchase accounting entries, net	(503)		(1,467)
Amortization of other intangibles	Amortization of other intangibles	2,410		2,572		Amortization of other intangibles	3,615		3,857

Income from cash surrender value of bank-owned life insurance policies	Income from cash surrender value of bank-owned life insurance policies	(2,395)		(2,697)		Income from cash surrender value of bank-owned life insurance policies	(3,910)		(4,139)
(Gain) on SBA loan sales	(Gain) on SBA loan sales	(5,404)		(3,619)		(Gain) on SBA loan sales	(7,952)		(9,515)
Fair value adjustments on securities	Fair value adjustments on securities	(212)		1,718		Fair value adjustments on securities	255		2,194
Net change in loans held-for-sale	Net change in loans held-for-sale	(4,397)		4,442		Net change in loans held-for-sale	1,969		4,954

Amortization of interest in tax-advantaged projects	Amortization of interest in tax-advantaged projects	4,495		708		Amortization of interest in tax-advantaged projects	5,959		1,153

Net change in other	Net change in other	(9,399)		(42,990)		Net change in other	(3,804)		12,401

Net cash provided by operating activities	Net cash provided by operating activities	61,052		10,668		Net cash provided by operating activities	104,706		88,227

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Net decrease in trading security	Net decrease in trading security	426		404		Net decrease in trading security	641		609

Purchases of securities available for sale	Purchases of securities available for sale	(36,798)		(386,637)		Purchases of securities available for sale	(44,586)		(428,068)
Proceeds from sales of securities available for sale	Proceeds from sales of securities available for sale	—		149,994		Proceeds from sales of securities available for sale	—		149,994
Proceeds from maturities, calls, and prepayments of securities available for sale	Proceeds from maturities, calls, and prepayments of securities available for sale	119,390		255,045		Proceeds from maturities, calls, and prepayments of securities available for sale	166,552		440,025
Purchases of securities held to maturity	Purchases of securities held to maturity	(700)		(575)		Purchases of securities held to maturity	(700)		(807)
Proceeds from maturities, calls, and prepayments of securities held to maturity	Proceeds from maturities, calls, and prepayments of securities held to maturity	19,461		33,514		Proceeds from maturities, calls, and prepayments of securities held to maturity	29,852		43,384
Net change in loans	Net change in loans	(553,530)		(977,443)		Net change in loans	(658,823)		(1,130,744)

Proceeds from surrender of bank-owned life insurance	Proceeds from surrender of bank-owned life insurance	—		842		Proceeds from surrender of bank-owned life insurance	657		1,777
Purchase of Federal Home Loan Bank stock	Purchase of Federal Home Loan Bank stock	(340,879)		(32,466)		Purchase of Federal Home Loan Bank stock	(449,336)		(66,486)
Proceeds from redemption of Federal Home Loan Bank stock	Proceeds from redemption of Federal Home Loan Bank stock	313,384		33,901		Proceeds from redemption of Federal Home Loan Bank stock	417,643		70,022
Net investment in limited partnership tax credits	Net investment in limited partnership tax credits	—		(721)		Net investment in limited partnership tax credits	—		(1,443)

Purchase of premises and equipment, net	Purchase of premises and equipment, net	(753)		(730)		Purchase of premises and equipment, net	(753)		(730)

Net cash (used) by investing activities	Net cash (used) by investing activities	(479,999)		(924,872)		Net cash (used) by investing activities	(538,853)		(922,467)

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONCLUDED)


		Six Months Ended June 30,					Nine Months Ended September 30,
(In thousands)	(In thousands)	2023		2022		(In thousands)	2023		2022
(continued)	(continued)					(continued)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net (decrease)/increase in deposits	Net (decrease)/increase in deposits	(258,862)		45,711		Net (decrease)/increase in deposits	(346,725)		(80,832)

Proceeds from Federal Home Loan Bank advances and other borrowings	Proceeds from Federal Home Loan Bank advances and other borrowings	8,425,000		51,275		Proceeds from Federal Home Loan Bank advances and other borrowings	10,010,000		51,275
Repayments of Federal Home Loan Bank advances and other borrowings	Repayments of Federal Home Loan Bank advances and other borrowings	(7,755,100)		(6,096)		Repayments of Federal Home Loan Bank advances and other borrowings	(9,210,150)		(60,146)
Proceeds from issuance of subordinated debt	Proceeds from issuance of subordinated debt	—		98,032		Proceeds from issuance of subordinated debt	—		98,032

Repayment from calling of subordinated debt						Repayment from calling of subordinated debt	—		(75,000)
Purchase of treasury stock	Purchase of treasury stock	(13,568)		(84,295)		Purchase of treasury stock	(17,146)		(104,543)
Exercise of stock options	Exercise of stock options	—		25		Exercise of stock options	—		269
Common stock cash dividends paid	Common stock cash dividends paid	(15,961)		(10,921)		Common stock cash dividends paid	(23,862)		(16,414)
Settlement of derivative contracts with financial institution counterparties	Settlement of derivative contracts with financial institution counterparties	(7,317)		63,683		Settlement of derivative contracts with financial institution counterparties	145		88,705
Net cash provided by financing activities	Net cash provided by financing activities	374,192		157,414		Net cash provided by financing activities	412,262		(98,654)

Net change in cash and cash equivalents	Net change in cash and cash equivalents	(44,755)		(756,790)		Net change in cash and cash equivalents	(21,885)		(932,894)

Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	685,355		1,627,807		Cash and cash equivalents at beginning of period	685,355		1,627,807

Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	640,600	$	871,017	Cash and cash equivalents at end of period	$	663,470	$	694,913

Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Interest paid on deposits	Interest paid on deposits	$	58,472	$	8,810	Interest paid on deposits	$	98,428	$	16,290
Interest paid on borrowed funds	Interest paid on borrowed funds	23,488		3,396		Interest paid on borrowed funds	36,165		7,016
Income taxes paid, net	Income taxes paid, net	7,633		12,590		Income taxes paid, net	7,743		15,241

Other non-cash changes:	Other non-cash changes:					Other non-cash changes:
Other net comprehensive income	Other net comprehensive income	$	(5,188)	$	(119,756)	Other net comprehensive income	$	(37,334)	$	(185,251)

Impact to retained earnings from adoption of ASU 2022-02	Impact to retained earnings from adoption of ASU 2022-02	401		—		Impact to retained earnings from adoption of ASU 2022-02	401		—

Reclassification of seasoned loan portfolios to held-for-sale, net						Reclassification of seasoned loan portfolios to held-for-sale, net	—		3,574

Properties transferred to held for sale	Properties transferred to held for sale	4,960		—		Properties transferred to held for sale	8,714		—
Reclassification of held-for-sale loans to held-for-investment, net	Reclassification of held-for-sale loans to held-for-investment, net	—		606		Reclassification of held-for-sale loans to held-for-investment, net	—		606

The accompanying notes are an integral part of these consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

The Consolidated Financial Statements (the “financial statements”) of Berkshire Hills Bancorp, Inc. and its subsidiaries (the “Company” or “Berkshire”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company is a Delaware corporation, headquartered in Boston, Massachusetts, and the holding company for Berkshire Bank (the “Bank”), a Massachusetts-chartered trust company headquartered in Pittsfield, Massachusetts. These financial statements include the accounts of the Company, its wholly-owned subsidiaries and the Bank’s consolidated subsidiaries. In consolidation, all significant intercompany accounts and transactions are eliminated. The results of operations of companies or assets acquired are included only from the dates of acquisition. All material wholly-owned and majority-owned subsidiaries are consolidated unless GAAP requires otherwise.

The Company has evaluated subsequent events for potential recognition and/or disclosure through the date these financial statements were issued.

These interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X, and accordingly, certain information and footnote disclosures normally included in financial statements prepared according to GAAP have been omitted.

The results for any interim period are not necessarily indicative of results for the full year. These consolidated financial statements should be read in conjunction with the audited financial statements and disclosures Berkshire Hills Bancorp, Inc. previously filed with the Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. In management’s opinion, all adjustments necessary for a fair statement are reflected in the interim periods.

Reclassifications

Certain items in prior financial statements have been reclassified to conform to the current presentation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from those estimates.

Recently Adopted Accounting Principles

Effective January 1, 2023, the Company adopted ASU No. 2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” The adoption did not have a material impact on the Company’s Consolidated Financial Statements.

The ASU eliminates the troubled debt restructuring (“TDR”) accounting model that was adopted with Topic 326, “Financial Instruments – Credit Losses” and enhances disclosure requirements for certain loan refinancings and restructurings when a borrower is experiencing financial difficulty. The ASU requires prospective disclosure of current-period gross write-offs by year of origination. Refer to Note 4 – Loans and Allowance for Credit Losses for the new financial statement disclosures applicable under this update.

Future Application of Accounting Pronouncements

In March 2023, the FASB issued ASU No. 2023-02, “Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force).” The guidance is intended to improve the accounting and disclosures for investments in tax credit structures. The ASU allows entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. Previously, this method was only available for qualifying investments in low-income housing tax credit structures. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. The Company is still evaluating; however, the adoption is not expected to have a material impact on the Company’s Consolidated Financial Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. TRADING SECURITIES

The Company holds a tax-advantaged economic development bond accounted for at fair value. The security had an amortized cost of ~~$6.6~~$6.4 million and $7.1 million, and a fair value of ~~$6.4~~$6.2 million and $6.7 million, at ~~June~~September 30, 2023 and December 31, 2022, respectively. As discussed further in Note 7 - Derivative Financial Instruments and Hedging Activities, the Company entered into a swap contract to swap-out the fixed rate of the security in exchange for a variable rate. The Company does not purchase securities with the intent of selling them in the near term, and there were no other securities in the trading portfolio at ~~June~~September 30, 2023 or December 31, 2022.

NOTE 3. SECURITIES AVAILABLE FOR SALE, HELD TO MATURITY, AND

EQUITY SECURITIES

The following is a summary of securities available for sale, held to maturity, and marketable equity securities:


(In thousands)	(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance		(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance
June 30, 2023
September 30, 2023												September 30, 2023
Securities available for sale	Securities available for sale											Securities available for sale
U.S Treasuries	U.S Treasuries	$	7,979	$	2	$	—	$	7,981			U.S Treasuries	$	7,873	$	—	$	—	$	7,873
Municipal bonds and obligations	Municipal bonds and obligations	65,840		275		(2,493)		63,622		—		Municipal bonds and obligations	65,397		—		(6,703)		58,694		—
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	591,299		—		(99,959)		491,340		—		Agency collateralized mortgage obligations	570,205		—		(109,849)		460,356		—
Agency mortgage-backed securities	Agency mortgage-backed securities	611,157		—		(92,605)		518,552		—		Agency mortgage-backed securities	595,518		—		(112,317)		483,201		—
Agency commercial mortgage-backed securities	Agency commercial mortgage-backed securities	258,283		—		(38,506)		219,777		—		Agency commercial mortgage-backed securities	255,891		—		(44,520)		211,371		—
Corporate bonds	Corporate bonds	43,331		60		(4,988)		38,403		—		Corporate bonds	43,312		59		(5,131)		38,240		—
Other bonds and obligations	Other bonds and obligations	655		67		(66)		656		—		Other bonds and obligations	655		67		(66)		656		—
Total securities available for sale	Total securities available for sale	1,578,544		404		(238,617)		1,340,331		—		Total securities available for sale	1,538,851		126		(278,586)		1,260,391		—

Securities held to maturity	Securities held to maturity											Securities held to maturity
Municipal bonds and obligations	Municipal bonds and obligations	259,843		401		(21,405)		238,839		49		Municipal bonds and obligations	255,888		33		(36,047)		219,874		48
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	120,349		—		(20,469)		99,880		—		Agency collateralized mortgage obligations	116,267		—		(22,592)		93,675		—
Agency mortgage-backed securities	Agency mortgage-backed securities	49,231		—		(8,973)		40,258		—		Agency mortgage-backed securities	48,196		—		(10,839)		37,357		—
Agency commercial mortgage-backed securities	Agency commercial mortgage-backed securities	132,320		—		(25,272)		107,048		—		Agency commercial mortgage-backed securities	130,705		—		(29,721)		100,984		—
Tax advantaged economic development bonds	Tax advantaged economic development bonds	1,734		7		(94)		1,647		22		Tax advantaged economic development bonds	1,637		6		(92)		1,551		21
Other bonds and obligations	Other bonds and obligations	288		—		—		288		—		Other bonds and obligations	288		—		—		288		—
Total securities held to maturity	Total securities held to maturity	563,765		408		(76,213)		487,960		71		Total securities held to maturity	552,981		39		(99,291)		453,729		69

Marketable equity securities		15,035		—		(2,167)		12,868		—
Equity securities												Equity securities	15,035		—		(2,710)		12,325		—
Total	Total	$	2,157,344	$	812	$	(316,997)	$	1,841,159	$	71	Total	$	2,106,867	$	165	$	(380,587)	$	1,726,445	$	69

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(In thousands)	(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance		(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance
December 31, 2022	December 31, 2022											December 31, 2022
Securities available for sale	Securities available for sale											Securities available for sale
U.S Treasuries	U.S Treasuries	$	11,972	$	1	$	—	$	11,973	$	—	U.S Treasuries	$	11,972	$	1	$	—	$	11,973	$	—
Municipal bonds and obligations	Municipal bonds and obligations	65,943		422		(3,030)		63,335		—		Municipal bonds and obligations	65,943		422		(3,030)		63,335		—
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	631,732		—		(99,787)		531,945		—		Agency collateralized mortgage obligations	631,732		—		(99,787)		531,945		—
Agency mortgage-backed securities	Agency mortgage-backed securities	643,308		1		(96,996)		546,313		—		Agency mortgage-backed securities	643,308		1		(96,996)		546,313		—
Agency commercial mortgage-backed securities	Agency commercial mortgage-backed securities	264,218		—		(35,750)		228,468		—		Agency commercial mortgage-backed securities	264,218		—		(35,750)		228,468		—
Corporate bonds	Corporate bonds	43,368		80		(2,938)		40,510		—		Corporate bonds	43,368		80		(2,938)		40,510		—

Other bonds and obligations	Other bonds and obligations	655		67		(66)		656		—		Other bonds and obligations	655		67		(66)		656		—
Total securities available for sale	Total securities available for sale	1,661,196		571		(238,567)		1,423,200		—		Total securities available for sale	1,661,196		571		(238,567)		1,423,200		—

Securities held to maturity	Securities held to maturity											Securities held to maturity
Municipal bonds and obligations	Municipal bonds and obligations	266,793		691		(23,704)		243,780		66		Municipal bonds and obligations	266,793		691		(23,704)		243,780		66
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	128,136		—		(20,420)		107,716		—		Agency collateralized mortgage obligations	128,136		—		(20,420)		107,716		—
Agency mortgage-backed securities	Agency mortgage-backed securities	50,958		—		(9,240)		41,718		—		Agency mortgage-backed securities	50,958		—		(9,240)		41,718		—
Agency commercial mortgage-backed securities	Agency commercial mortgage-backed securities	135,206		—		(23,203)		112,003		—		Agency commercial mortgage-backed securities	135,206		—		(23,203)		112,003		—
Tax advantaged economic development bonds	Tax advantaged economic development bonds	2,069		8		(121)		1,956		25		Tax advantaged economic development bonds	2,069		8		(121)		1,956		25
Other bonds and obligations	Other bonds and obligations	291		—		—		291		—		Other bonds and obligations	291		—		—		291		—
Total securities held to maturity	Total securities held to maturity	583,453		699		(76,688)		507,464		91		Total securities held to maturity	583,453		699		(76,688)		507,464		91

Marketable equity securities		15,035		—		(2,179)		12,856		—
Equity securities												Equity securities	15,035		—		(2,179)		12,856		—
Total	Total	$	2,259,684	$	1,270	$	(317,434)	$	1,943,520	$	91	Total	$	2,259,684	$	1,270	$	(317,434)	$	1,943,520	$	91

The following table summarizes the activity in the allowance for credit losses for debt securities held to maturity by security type for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022:


(In thousands)	(In thousands)	Municipal bonds and obligations		Tax advantaged economic development bonds		Total		(In thousands)	Municipal bonds and obligations		Tax advantaged economic development bonds		Total
Balance at March 31, 2023		$	49	$	22	$	71
Balance at June, 2023								Balance at June, 2023	$	49	$	22	$	71
(Benefit)/provision for credit losses	(Benefit)/provision for credit losses	—		—		—		(Benefit)/provision for credit losses	(1)		(1)		(2)
Balance at June 30, 2023		$	49	$	22	$	71
Balance at September 30, 2023								Balance at September 30, 2023	$	48	$	21	$	69


(In thousands)	(In thousands)	Municipal bonds and obligations		Tax advantaged economic development bonds		Total		(In thousands)	Municipal bonds and obligations		Tax advantaged economic development bonds		Total
Balance at March 31, 2022		$	67	$	32	$	99
Balance at June 30, 2022								Balance at June 30, 2022	$	66	$	28	$	94
(Benefit)/provision for credit losses	(Benefit)/provision for credit losses	(1)		(4)		(5)		(Benefit)/provision for credit losses	1		—		1
Balance at June 30, 2022		$	66	$	28	$	94
Balance at September 30, 2022								Balance at September 30, 2022	$	67	$	28	$	95

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands) Municipal bonds and obligations Tax advantaged economic development bonds Total
Balance at December 31, 2022 $ 66 $ 25 $ 91
(Benefit)/provision for credit losses (17) (3) (20)
Balance at June 30, 2023 $ 49 $ 22 $ 71
(In thousands) Municipal bonds and obligations Tax advantaged economic development bonds Total
Balance at December 31, 2021 $ 70 $ 35 $ 105
(Benefit)/provision for credit losses (4) (7) (11)
Balance at June 30, 2022 $ 66 $ 28 $ 94


(In thousands)	Municipal bonds and obligations		Tax advantaged economic development bonds		Total
Balance at December 31, 2022	$	66	$	25	$	91
(Benefit)/provision for credit losses	(18)		(4)		(22)
Balance at September 30, 2023	$	48	$	21	$	69


(In thousands)	Municipal bonds and obligations		Tax advantaged economic development bonds		Total
Balance at December 31, 2021	$	70	$	35	$	105
(Benefit)/provision for credit losses	(3)		(7)		(10)
Balance at September 30, 2022	$	67	$	28	$	95

Credit Quality Information

The Company monitors the credit quality of held to maturity securities through credit ratings from various rating agencies. Credit ratings express opinions about the credit quality of a security and are utilized by the Company to make informed decisions. Investment grade securities are rated BBB-/Baa3 or higher and generally considered by the rating agencies and market participants to be of low credit risk. Conversely, securities rated below investment grade are considered to have distinctively higher credit risk than investment grade securities. For securities without credit ratings, the Company utilizes other financial information indicating the financial health of the underlying municipality, agency, or organization.

As of ~~June~~September 30, 2023, none of the Company's investment securities were delinquent or in non-accrual status.

The amortized cost and estimated fair value of available for sale (“AFS”) and held to maturity (“HTM”) securities segregated by contractual maturity at ~~June~~September 30, 2023 are presented below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities are shown in total, as their maturities are highly variable.


		Available for sale				Held to maturity					Available for sale				Held to maturity
		Amortized		Fair		Amortized		Fair			Amortized		Fair		Amortized		Fair
(In thousands)	(In thousands)	Cost		Value		Cost		Value		(In thousands)	Cost		Value		Cost		Value

Within 1 year	Within 1 year	$	8,799	$	8,800	$	894	$	894	Within 1 year	$	8,693	$	8,692	$	822	$	822
Over 1 year to 5 years	Over 1 year to 5 years	10,866		10,754		2,309		2,298		Over 1 year to 5 years	11,291		11,068		1,683		1,667
Over 5 years to 10 years	Over 5 years to 10 years	54,612		49,747		36,477		36,281		Over 5 years to 10 years	54,720		48,694		36,012		34,653
Over 10 years	Over 10 years	43,528		41,361		222,185		201,301		Over 10 years	42,533		37,009		219,296		184,571
Total bonds and obligations	Total bonds and obligations	117,805		110,662		261,865		240,774		Total bonds and obligations	117,237		105,463		257,813		221,713

Mortgage-backed securities	Mortgage-backed securities	1,460,739		1,229,669		301,900		247,186		Mortgage-backed securities	1,421,614		1,154,928		295,168		232,016
Total	Total	$	1,578,544	$	1,340,331	$	563,765	$	487,960	Total	$	1,538,851	$	1,260,391	$	552,981	$	453,729

During the three and ~~six~~nine months ended ~~June~~September 30, 2023, purchases of AFS securities totaled ~~$7.9~~$7.8 million and ~~$36.8~~$44.6 million, respectively. During the three and ~~six~~nine months ended ~~June~~September 30, 2023, there were no sales of AFS securities. During the three and nine months ended ~~June 30, 2022, there were no purchases of securities. During the six months ended June~~September 30, 2022, purchases of AFS securities totaled ~~$386.6 million.~~$41.4 million and $428.1 million, respectively. During the three ~~and six~~ months ended ~~June~~September 30, 2022, there were no sales of AFS securities. During the nine months ended September 30, 2022, proceeds from sales of AFS securities totaled $150 million. During the three ~~and six~~ months ended ~~June~~September 30, 2022, there were no gross gains or gross losses.

During the nine months ended September 30, 2022, gross gains totaled $6 thousand and there were no gross losses.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Securities available for sale and held to maturity with unrealized losses, segregated by the duration of their continuous unrealized loss positions, are summarized as follows:


		Less Than Twelve Months				Over Twelve Months				Total					Less Than Twelve Months				Over Twelve Months				Total
		Gross				Gross				Gross					Gross				Gross				Gross
		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair			Unrealized		Fair		Unrealized		Fair		Unrealized		Fair
(In thousands)	(In thousands)	Losses		Value		Losses		Value		Losses		Value		(In thousands)	Losses		Value		Losses		Value		Losses		Value
June 30, 2023
September 30, 2023														September 30, 2023

Securities available for sale	Securities available for sale													Securities available for sale

Municipal bonds and obligations	Municipal bonds and obligations	$	550	$	24,993	$	1,943	$	17,862	$	2,493	$	42,855	Municipal bonds and obligations	$	2,779	$	37,869	$	3,924	$	20,200	$	6,703	$	58,069
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	113		2,276		99,846		489,064		99,959		491,340		Agency collateralized mortgage obligations	—		—		109,849		460,356		109,849		460,356
Agency mortgage-backed securities	Agency mortgage-backed securities	157		2,648		92,448		515,824		92,605		518,472		Agency mortgage-backed securities	6		285		112,311		482,909		112,317		483,194
Agency commercial mortgage-backed securities	Agency commercial mortgage-backed securities	1,042		9,678		37,464		210,099		38,506		219,777		Agency commercial mortgage-backed securities	—		—		44,520		211,362		44,520		211,362
Corporate bonds	Corporate bonds	1,064		12,797		3,924		24,698		4,988		37,495		Corporate bonds	441		7,809		4,690		29,523		5,131		37,332

Other bonds and obligations	Other bonds and obligations	—		—		66		295		66		295		Other bonds and obligations	—		—		66		295		66		295

Total securities available for sale	Total securities available for sale	$	2,926	$	52,392	$	235,691	$	1,257,842	$	238,617	$	1,310,234	Total securities available for sale	$	3,226	$	45,963	$	275,360	$	1,204,645	$	278,586	$	1,250,608

Securities held to maturity	Securities held to maturity													Securities held to maturity
Municipal bonds and obligations	Municipal bonds and obligations	$	1,710	$	89,477	$	19,695	$	74,807	$	21,405	$	164,284	Municipal bonds and obligations	$	7,986	$	128,129	$	28,061	$	80,778	$	36,047	$	208,907
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	1,709		34,330		18,760		65,550		20,469		99,880		Agency collateralized mortgage obligations	1		21		22,591		93,654		22,592		93,675
Agency mortgage-backed securities	Agency mortgage-backed securities	—		—		8,973		40,258		8,973		40,258		Agency mortgage-backed securities	—		—		10,839		37,357		10,839		37,357
Agency commercial mortgage-backed securities	Agency commercial mortgage-backed securities	—		—		25,272		107,048		25,272		107,048		Agency commercial mortgage-backed securities	—		—		29,721		100,984		29,721		100,984
Tax advantaged economic development bonds	Tax advantaged economic development bonds	—		—		94		962		94		962		Tax advantaged economic development bonds	—		—		92		927		92		927
Total securities held to maturity	Total securities held to maturity	3,419		123,807		72,794		288,625		76,213		412,432		Total securities held to maturity	7,987		128,150		91,304		313,700		99,291		441,850

Total	Total	$	6,345	$	176,199	$	308,485	$	1,546,467	$	314,830	$	1,722,666	Total	$	11,213	$	174,113	$	366,664	$	1,518,345	$	377,877	$	1,692,458

December 31, 2022	December 31, 2022													December 31, 2022

Securities available for sale	Securities available for sale													Securities available for sale
Municipal bonds and obligations	Municipal bonds and obligations	$	2,406	$	36,696	$	624	$	2,763	$	3,030	$	39,459	Municipal bonds and obligations	$	2,406	$	36,696	$	624	$	2,763	$	3,030	$	39,459
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	23,052		247,509		76,735		284,434		99,787		531,943		Agency collateralized mortgage obligations	23,052		247,509		76,735		284,434		99,787		531,943
Agency mortgage-backed securities	Agency mortgage-backed securities	3,124		37,540		93,872		508,683		96,996		546,223		Agency mortgage-backed securities	3,124		37,540		93,872		508,683		96,996		546,223
Agency commercial mortgage-backed securities	Agency commercial mortgage-backed securities	9,885		96,396		25,865		132,043		35,750		228,439		Agency commercial mortgage-backed securities	9,885		96,396		25,865		132,043		35,750		228,439
Corporate bonds	Corporate bonds	1,709		25,657		1,229		9,929		2,938		35,586		Corporate bonds	1,709		25,657		1,229		9,929		2,938		35,586

Other bonds and obligations	Other bonds and obligations	—		—		66		295		66		295		Other bonds and obligations	—		—		66		295		66		295

Total securities available for sale	Total securities available for sale	$	40,176	$	443,798	$	198,391	$	938,147	$	238,567	$	1,381,945	Total securities available for sale	$	40,176	$	443,798	$	198,391	$	938,147	$	238,567	$	1,381,945

Securities held to maturity	Securities held to maturity													Securities held to maturity
Municipal bonds and obligations	Municipal bonds and obligations	$	5,476	$	125,494	$	18,228	$	38,341	$	23,704	$	163,835	Municipal bonds and obligations	$	5,476	$	125,494	$	18,228	$	38,341	$	23,704	$	163,835
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	2,734		49,539		17,686		58,177		20,420		107,716		Agency collateralized mortgage obligations	2,734		49,539		17,686		58,177		20,420		107,716
Agency mortgage-backed securities	Agency mortgage-backed securities	300		2,419		8,940		39,299		9,240		41,718		Agency mortgage-backed securities	300		2,419		8,940		39,299		9,240		41,718
Agency commercial mortgage-backed securities	Agency commercial mortgage-backed securities	447		9,713		22,756		102,290		23,203		112,003		Agency commercial mortgage-backed securities	447		9,713		22,756		102,290		23,203		112,003
Tax advantaged economic development bonds	Tax advantaged economic development bonds	1		142		120		1,008		121		1,150		Tax advantaged economic development bonds	1		142		120		1,008		121		1,150
Total securities held to maturity	Total securities held to maturity	8,958		187,307		67,730		239,115		76,688		426,422		Total securities held to maturity	8,958		187,307		67,730		239,115		76,688		426,422
Total	Total	$	49,134	$	631,105	$	266,121	$	1,177,262	$	315,255	$	1,808,367	Total	$	49,134	$	631,105	$	266,121	$	1,177,262	$	315,255	$	1,808,367

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Debt Securities

The Company expects to recover its amortized cost basis on all debt securities in its AFS and HTM portfolios. Furthermore, the Company does not intend to sell nor does it anticipate that it will be required to sell any of its securities in an unrealized loss position as of ~~June~~September 30, 2023, prior to this recovery. The Company’s ability and intent to hold these securities until recovery is supported by the Company’s strong capital and liquidity positions as well as its historically low portfolio turnover.

The following summarizes, by investment security type, the basis for the conclusion that the debt securities in an unrealized loss position within the Company’s AFS and HTM portfolios were not other-than-temporarily impaired at ~~June~~September 30, 2023:

AFS municipal bonds and obligations

At ~~June~~September 30, 2023, 5390 of the 9493 securities in the Company’s portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented ~~5.5%~~10.4% of the amortized cost of securities in unrealized loss positions. The Company continually monitors the municipal bond sector of the market carefully and periodically evaluates the appropriate level of exposure to the market. At this time, the Company feels the bonds in this portfolio carry minimal risk of default and the Company is appropriately compensated for that risk. There were no material underlying credit downgrades during the quarter. All securities are performing.

AFS collateralized mortgage obligations

At ~~June~~September 30, 2023, ~~240~~238 of the ~~242~~240 securities in the Company’s portfolio of AFS collateralized mortgage obligations were in unrealized loss positions. Aggregate unrealized losses represented ~~16.9%~~19.3% of the amortized cost of securities in unrealized loss positions. The Federal National Mortgage Association (“FNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”), and Government National Mortgage Association (“GNMA”) guarantee the contractual cash flows of all of the Company’s collateralized mortgage obligations. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.

AFS commercial and residential mortgage-backed securities

At ~~June~~September 30, 2023, ~~137~~135 of the ~~139~~136 securities in the Company’s portfolio of AFS mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented ~~15.1%~~18.4% of the amortized cost of securities in unrealized loss positions. The FNMA, FHLMC, and GNMA guarantee the contractual cash flows of all of the Company’s mortgage-backed securities. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.

AFS corporate bonds

At ~~June~~September 30, 2023, 14 of the 15 securities in the Company’s portfolio of AFS corporate bonds were in unrealized loss positions. Aggregate unrealized losses represents ~~11.7%~~12.1% of the amortized cost of the bonds in unrealized loss positions. The Company reviews the financial strength of all of these bonds and has concluded that the amortized cost remains supported by the expected future cash flows of these securities. All securities are performing.

AFS other bonds and obligations

At ~~June~~September 30, 2023, 2 of the 3 securities in the Company’s portfolio of AFS other bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represents 18.3% of the amortized cost of the bonds in unrealized loss positions. The Company reviews the financial strength of all of these bonds and has concluded that the amortized cost remains supported by the expected future cash flows of these securities. All securities are performing.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

HTM municipal bonds and obligations

At ~~June~~September 30, 2023, ~~115~~159 of the ~~183~~178 securities in the Company’s portfolio of HTM municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented ~~11.5%~~14.7% of the amortized cost of securities in unrealized loss positions. The Company continually monitors the municipal bond sector of the market carefully and periodically evaluates the appropriate level of exposure to the market. At this time, the Company feels the bonds in this portfolio carry minimal risk of default and the Company is appropriately compensated for that risk. There were no material underlying credit downgrades during the quarter. All securities are performing.

HTM collateralized mortgage obligations

At ~~June~~September 30, 2023, 1312 of the 1312 securities in the Company’s portfolio of HTM collateralized mortgage obligations were in unrealized loss positions. Aggregate unrealized losses represented ~~17.0%~~19.4% of the amortized cost of the securities in unrealized loss positions. The FNMA, FHLMC, and GNMA guarantee the contractual cash flows of all of the Company's collateralized residential mortgage obligations. The securities are investment grade rated, and there were no material underlying credit downgrades during the quarter. All securities are performing.

HTM commercial and residential mortgage-backed securities

At ~~June~~September 30, 2023, 17 of the 17 securities in the Company’s portfolio of HTM mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented ~~18.9%~~22.7% of the amortized cost of securities in unrealized loss positions. The FNMA, FHLMC, and GNMA guarantee the contractual cash flows of the Company’s mortgage-backed securities. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.

HTM tax-advantaged economic development bonds

At ~~June~~September 30, 2023, 1 of the 2 securities in the Company’s portfolio of tax-advantaged economic development bonds was in unrealized loss positions. Aggregate unrealized losses represented ~~8.9%~~9.1% of the amortized cost of the security in unrealized loss positions. The Company believes that more likely than not all the principal outstanding will be collected. All securities are performing.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES

The following is a summary of total loans by regulatory call report code with sub-segmentation based on underlying collateral for certain loan types:


(In thousands)	(In thousands)	June 30, 2023		December 31, 2022		(In thousands)	September 30, 2023		December 31, 2022
Construction	Construction	$	443,856	$	319,452	Construction	$	561,691	$	319,452
Commercial multifamily	Commercial multifamily	597,472		620,088		Commercial multifamily	602,120		620,088
Commercial real estate owner occupied	Commercial real estate owner occupied	696,771		640,489		Commercial real estate owner occupied	658,189		640,489
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	2,557,036		2,496,237		Commercial real estate non-owner occupied	2,605,823		2,496,237
Commercial and industrial	Commercial and industrial	1,438,062		1,445,236		Commercial and industrial	1,363,771		1,445,236

Residential real estate	Residential real estate	2,677,053		2,312,447		Residential real estate	2,729,411		2,312,447
Home equity	Home equity	225,434		227,450		Home equity	227,052		227,450
Consumer other	Consumer other	246,718		273,910		Consumer other	236,320		273,910
Total loans	Total loans	$	8,882,402	$	8,335,309	Total loans	$	8,984,377	$	8,335,309

Allowance for credit losses	Allowance for credit losses	100,219		96,270		Allowance for credit losses	(102,792)		(96,270)
Net loans	Net loans	$	8,782,183	$	8,239,039	Net loans	$	8,881,585	$	8,239,039

During the three and ~~six~~nine months ended ~~June~~September 30, 2023, ~~and June 30, 2022,~~ there were no loans reclassified to held for sale. ~~Held~~Transferred held for sale loans are not contained in the balances within this note and are accounted for at the lower of carrying value or fair market value within loans held for sale on the Consolidated Balance Sheet.

Risk characteristics relevant to each portfolio segment are as follows:

Construction - Loans in this segment primarily include real estate development loans for which payment is derived from sale of the property or long term financing at completion. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.

Commercial real estate multifamily, owner occupied and non-owner - Loans in these segments are primarily owner-occupied or income-producing properties throughout New England and Northeastern New York. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy, which in turn, will have an effect on the credit quality in this segment. Management monitors the cash flows of these loans.

Commercial and industrial loans - Loans in this segment are made to businesses and are generally secured by assets of the business such as accounts receivable, inventory, marketable securities, other liquid collateral, equipment and other business assets. Repayment is expected from the cash flows of the business. Loans in this segment include asset based loans which generally have no scheduled repayment and which are closely monitored against formula based collateral advance ratios. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.

Residential real estate - All loans in this segment are collateralized by residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Home equity and other consumer loans - Loans in this segment are primarily home equity lines of credit, automobile loans and other consumer loans. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Allowance for Credit Losses for Loans

The Allowance for Credit Losses for Loans (“ACLL”) is comprised of the allowance for loan losses, and the allowance for unfunded commitments is accounted for as a separate liability in other liabilities on the balance sheet. The level of the ACLL represents management’s estimate of expected credit losses over the expected life of the loans at the balance sheet date. The Company uses a static pool migration analysis method, applying expected historical loss trend and observed economic metrics. The level of the ACLL is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past and current events, utilizing a 7 quarter reasonable and supportable forecast period with a 1 year reversion period. The ACLL reserve is overlaid with qualitative factors based upon:

•the existence and growth of concentrations of credit;

•the volume and severity of past due financial assets, including nonaccrual assets;

•the institutions lending and credit review as well as the experience and ability of relevant management and staff and;

•the effect of other external factors such as regulatory, competition, regional market conditions, legal and technological environment and other events such as natural disasters;

•the effect of other economic factors such as economic stimulus and customer forbearance programs.

The allowance for unfunded commitments is maintained at a level by the Company to be sufficient to absorb expected lifetime losses related to unfunded credit facilities (including unfunded loan commitments and letters of credit) and is included in other liabilities on the consolidated balance sheet.

The Company’s activity in the allowance for credit losses for loans for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and ~~June~~September 30, 2022 was as follows:

(In thousands) Balance at Beginning of Period Adoption of ASU No. 2022-02 Charge-offs Recoveries Provision for Credit Losses Balance at End of Period
Three months ended June 30, 2023
Construction $ 1,536 $ — $ (1) $ — $ 18 $ 1,553
Commercial multifamily 1,698 — — — 368 2,066
Commercial real estate owner occupied 10,278 — (394) 596 (137) 10,343
Commercial real estate non-owner occupied 33,408 — — 81 2,833 36,322
Commercial and industrial 20,164 — (4,595) 815 2,357 18,741
Residential real estate 17,590 — (210) 76 762 18,218
Home equity 2,320 — (7) 132 127 2,572
Consumer other 10,997 — (2,478) 213 1,672 10,404
Total allowance for credit losses $ 97,991 $ — $ (7,685) $ 1,913 $ 8,000 $ 100,219


(In thousands)	(In thousands)	Balance at Beginning of Period		Charge-offs		Recoveries		Provision for Credit Losses		Balance at End of Period		(In thousands)	Balance at Beginning of Period		Adoption of ASU No. 2022-02		Charge-offs		Recoveries		Provision/(Benefit) for Credit Losses		Balance at End of Period
Three months ended June 30, 2022
Three months ended September 30, 2023												Three months ended September 30, 2023
Construction	Construction	$	2,505	$	—	$	—	$	(795)	$	1,710	Construction	$	1,553	$	—	$	—	$	—	$	1,949	$	3,502
Commercial multifamily	Commercial multifamily	5,771		—		—		(1,150)		4,621		Commercial multifamily	2,066		—		—		—		339		2,405
Commercial real estate owner occupied	Commercial real estate owner occupied	11,498		(298)		97		(609)		10,688		Commercial real estate owner occupied	10,343		—		(25)		116		(979)		9,455
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	25,814		—		46		305		26,165		Commercial real estate non-owner occupied	36,322		—		(1)		20		(3,059)		33,282
Commercial and industrial	Commercial and industrial	22,949		(752)		584		133		22,914		Commercial and industrial	18,741		—		(3,997)		617		3,158		18,519

Residential real estate	Residential real estate	17,816		(216)		199		(1,389)		16,410		Residential real estate	18,218		—		(72)		92		1,766		20,004
Home equity	Home equity	3,303		—		112		(587)		2,828		Home equity	2,572		—		(71)		278		(677)		2,102
		9,819		(332)		101		4,097		13,685
Consumer other												Consumer other	10,404		—		(2,578)		192		5,505		13,523
Total allowance for credit losses	Total allowance for credit losses	$	99,475	$	(1,598)	$	1,139	$	5	$	99,021	Total allowance for credit losses	$	100,219	$	—	$	(6,744)	$	1,315	$	8,002	$	102,792

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(In thousands)	(In thousands)	Balance at Beginning of Period		Adoption of ASU No. 2022-02		Charge-offs		Recoveries		Provision for Credit Losses		Balance at End of Period		(In thousands)	Balance at Beginning of Period		Charge-offs		Recoveries		Provision/(Benefit) for Credit Losses		Balance at End of Period
Six months ended June 30, 2023
Three months ended September 30, 2022														Three months ended September 30, 2022
Construction	Construction	$	1,227	$	—	$	(1)	$	—	$	327	$	1,553	Construction	$	1,710	$	—	$	—	$	(479)	$	1,231
Commercial multifamily	Commercial multifamily	1,810		—		—		6		250		2,066		Commercial multifamily	4,621		(94)		112		(2,919)		1,720
Commercial real estate owner occupied	Commercial real estate owner occupied	10,739		24		(464)		641		(597)		10,343		Commercial real estate owner occupied	10,687		(176)		256		(582)		10,185
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	30,724		—		—		175		5,423		36,322		Commercial real estate non-owner occupied	26,166		(1,012)		153		4,114		29,421
Commercial and industrial	Commercial and industrial	18,743		(23)		(10,627)		1,119		9,529		18,741		Commercial and industrial	22,914		(5,545)		616		650		18,635

Residential real estate	Residential real estate	18,666		2		(240)		463		(673)		18,218		Residential real estate	16,411		(102)		131		3,398		19,838
Home equity	Home equity	2,173		—		(18)		159		258		2,572		Home equity	2,828		(9)		9		(407)		2,421
Consumer other		12,188		(404)		(4,271)		389		2,502		10,404
															13,684		(486)		140		(776)		12,562
Total allowance for credit losses	Total allowance for credit losses	$	96,270	$	(401)	$	(15,621)	$	2,952	$	17,019	$	100,219	Total allowance for credit losses	$	99,021	$	(7,424)	$	1,417	$	2,999	$	96,013


(In thousands)	(In thousands)	Balance at Beginning of Period		Charge-offs		Recoveries		Provision for Credit Losses		Balance at End of Period		(In thousands)	Balance at Beginning of Period		Adoption of ASU No. 2022-02		Charge-offs		Recoveries		Provision for Credit Losses		Balance at End of Period
Six months ended June 30, 2022
Nine months ended September 30, 2023												Nine months ended September 30, 2023
Construction	Construction	$	3,206	$	—	$	—	$	(1,496)	$	1,710	Construction	$	1,227	$	—	$	(1)	$	—	$	2,276	$	3,502
Commercial multifamily	Commercial multifamily	6,120		—		—		(1,499)		4,621		Commercial multifamily	1,810		—		—		6		589		2,405
Commercial real estate owner occupied	Commercial real estate owner occupied	12,752		(428)		306		(1,942)		10,688		Commercial real estate owner occupied	10,739		24		(489)		758		(1,577)		9,455
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	32,106		(4,884)		1,312		(2,369)		26,165		Commercial real estate non-owner occupied	30,724		—		(1)		195		2,364		33,282
Commercial and industrial	Commercial and industrial	22,584		(1,405)		1,872		(137)		22,914		Commercial and industrial	18,743		(23)		(14,625)		1,736		12,688		18,519

Residential real estate	Residential real estate	22,406		(380)		587		(6,203)		16,410		Residential real estate	18,666		2		(313)		555		1,094		20,004
Home equity	Home equity	4,006		—		246		(1,424)		2,828		Home equity	2,173		—		(88)		437		(420)		2,102
Consumer other	Consumer other	2,914		(548)		238		11,081		13,685		Consumer other	12,188		(404)		(6,848)		580		8,007		13,523
Total allowance for credit losses	Total allowance for credit losses	$	106,094	$	(7,645)	$	4,561	$	(3,989)	$	99,021	Total allowance for credit losses	$	96,270	$	(401)	$	(22,365)	$	4,267	$	25,021	$	102,792


(In thousands)	Balance at Beginning of Period		Charge-offs		Recoveries		Provision for Credit Losses		Balance at End of Period
Nine months ended September 30, 2022
Construction	$	3,206	$	—	$	—	$	(1,975)	$	1,231
Commercial multifamily	6,120		(94)		112		(4,418)		1,720
Commercial real estate owner occupied	12,752		(603)		562		(2,526)		10,185
Commercial real estate non-owner occupied	32,106		(5,895)		1,464		1,746		29,421
Commercial and industrial	22,584		(6,951)		2,485		517		18,635

Residential real estate	22,406		(480)		719		(2,807)		19,838
Home equity	4,006		(9)		255		(1,831)		2,421
Consumer other	2,914		(1,031)		375		10,304		12,562
Total allowance for credit losses	$	106,094	$	(15,063)	$	5,972	$	(990)	$	96,013

The Company’s allowance for credit losses on unfunded commitments is recognized as a liability (other liabilities on the consolidated balance sheet), with adjustments to the reserve recognized in other noninterest expense in the consolidated statement of income. The Company’s activity in the allowance for credit losses on unfunded commitments for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022 was as follows:

Three Months Ended
June 30,
(In thousands) 2023 2022
Balance at beginning of period $ 8,687 $ 7,043
Expense for credit losses — —
Balance at end of period $ 8,687 $ 7,043

Six Months Ended June 30,
(In thousands) 2023 2022
Balance at beginning of period $ 8,588 $ 7,043
Expense for credit losses 99 —
Balance at end of period $ 8,687 $ 7,043
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Three Months Ended September 30,
(In thousands)	2023		2022
Balance at beginning of period	$	8,687	$	7,043


Expense for credit losses	300		700
Balance at end of period	$	8,987	$	7,743


	Nine Months Ended September 30,
(In thousands)	2023		2022
Balance at beginning of period	$	8,588	$	7,043


Expense for credit losses	399		700
Balance at end of period	$	8,987	$	7,743

1920

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Credit Quality Information

The Company monitors the credit quality of its portfolio by using internal risk ratings that are based on regulatory guidance. Loans that are given a Pass rating are not considered a problem credit. Loans that are classified as Special Mention loans are considered to have potential weaknesses and are evaluated closely by management. Substandard, including non-accruing loans, are loans for which a definitive weakness has been identified and which may make full collection of contractual cash flows questionable. Doubtful loans are those with identified weaknesses that make full collection of contractual cash flows, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

For commercial credits, the Company assigns an internal risk rating at origination and reviews the rating annual, semiannually, or quarterly depending on the risk rating. The rating is also reassessed at any point in time when management becomes aware of information that may affect the borrower’s ability to fulfill their obligations.

The Company risk rates its residential mortgages, including 1-4 family and residential construction loans, based on a three rating system: Pass, Special Mention, and Substandard. Loans that are current within 59 days are rated Pass. Residential mortgages that are 60-89 days delinquent are rated Special Mention. Loans delinquent for 90 days or greater are rated Substandard and generally placed on non-accrual status.

2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the Company’s loans by risk category:


		Term Loans Amortized Cost Basis by Origination Year																			Term Loans Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total		(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
As of June 30, 2023
As of September 30, 2023																				As of September 30, 2023
Construction	Construction																			Construction
Current period gross write-offs	Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	1	$	—	$	—	$	1	Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	1	$	—	$	—	$	1

Risk rating	Risk rating																			Risk rating
Pass	Pass	$	39,770	$	220,919	$	136,426	$	26,884	$	2,961	$	498	$	—	$	—	$	427,458	Pass	$	71,516	$	301,236	$	139,599	$	29,177	$	2,553	$	564	$	—	$	—	$	544,645
Special Mention	Special Mention	—		—		—		—		—		—		—		—		—		Special Mention	—		—		471		—		—		—		—		—		471
Substandard	Substandard	—		—		16,398		—		—		—		—		—		16,398		Substandard	—		—		16,575		—		—		—		—		—		16,575
Total	Total	$	39,770	$	220,919	$	152,824	$	26,884	$	2,961	$	498	$	—	$	—	$	443,856	Total	$	71,516	$	301,236	$	156,645	$	29,177	$	2,553	$	564	$	—	$	—	$	561,691
Commercial multifamily:	Commercial multifamily:																			Commercial multifamily:
Current period gross write-offs	Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Risk rating	Risk rating																			Risk rating
Pass	Pass	$	9,125	$	204,033	$	52,630	$	27,276	$	96,568	$	198,555	$	974	$	—	$	589,161	Pass	$	8,974	$	217,062	$	57,061	$	27,126	$	95,398	$	187,225	$	998	$	—	$	593,844
Special Mention	Special Mention	—		—		—		—		—		—		—		—		—		Special Mention	—		—		—		—		—		—		—		—		—
Substandard	Substandard	—		—		246		2,591		—		5,474		—		—		8,311		Substandard	—		—		244		2,573		—		5,459		—		—		8,276
Total	Total	$	9,125	$	204,033	$	52,876	$	29,867	$	96,568	$	204,029	$	974	$	—	$	597,472	Total	$	8,974	$	217,062	$	57,305	$	29,699	$	95,398	$	192,684	$	998	$	—	$	602,120
Commercial real estate owner occupied:	Commercial real estate owner occupied:																			Commercial real estate owner occupied:
Current period gross write-offs	Current period gross write-offs	$	—	$	—	$	—	$	380	$	—	$	84	$	—	$	—	$	464	Current period gross write-offs	$	—	$	—	$	—	$	380	$	—	$	109	$	—	$	—	$	489

Risk rating	Risk rating																			Risk rating
Pass	Pass	$	51,966	$	128,185	$	131,822	$	50,248	$	98,040	$	223,794	$	1,538	$	—	$	685,593	Pass	$	80,561	$	123,110	$	126,637	$	68,938	$	71,603	$	173,060	$	1,642	$	—	$	645,551
Special Mention	Special Mention	—		11		—		387		4,412		200		—		—		5,010		Special Mention	—		—		—		387		885		2,447		—		—		3,719
Substandard	Substandard	—		—		82		107		369		5,610		—		—		6,168		Substandard	—		11		81		47		4,141		4,639		—		—		8,919
Total	Total	$	51,966	$	128,196	$	131,904	$	50,742	$	102,821	$	229,604	$	1,538	$	—	$	696,771	Total	$	80,561	$	123,121	$	126,718	$	69,372	$	76,629	$	180,146	$	1,642	$	—	$	658,189
Commercial real estate non-owner occupied:	Commercial real estate non-owner occupied:																			Commercial real estate non-owner occupied:
Current period gross write-offs	Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	Current period gross write-offs	$	—	$	—	$	—	$	—	$	1	$	—	$	—	$	—	$	1

Risk rating	Risk rating																			Risk rating
Pass	Pass	$	208,347	$	630,930	$	391,646	$	172,266	$	248,566	$	792,740	$	17,388	$	—	$	2,461,883	Pass	$	349,765	$	584,973	$	386,493	$	141,534	$	279,849	$	767,366	$	18,312	$	—	$	2,528,292
Special Mention	Special Mention	—		—		—		—		47,261		9,966		—		—		57,227		Special Mention	—		—		—		—		27,219		12,806		—		—		40,025
Substandard	Substandard	—		—		—		6,994		5,944		24,988		—		—		37,926		Substandard	—		—		—		6,923		5,879		24,704		—		—		37,506
Total	Total	$	208,347	$	630,930	$	391,646	$	179,260	$	301,771	$	827,694	$	17,388	$	—	$	2,557,036	Total	$	349,765	$	584,973	$	386,493	$	148,457	$	312,947	$	804,876	$	18,312	$	—	$	2,605,823
Commercial and industrial:	Commercial and industrial:																			Commercial and industrial:
Current period gross write-offs	Current period gross write-offs	$	—	$	—	$	395	$	1,656	$	733	$	5,531	$	2,312	$	—	$	10,627	Current period gross write-offs	$	—	$	700	$	645	$	2,158	$	1,429	$	7,380	$	2,313	$	—	$	14,625

Risk rating	Risk rating																			Risk rating
Pass	Pass	$	95,442	$	240,907	$	132,980	$	43,719	$	48,622	$	178,417	$	619,184	$	—	$	1,359,271	Pass	$	100,443	$	234,213	$	124,139	$	49,315	$	43,656	$	129,863	$	596,559	$	—	$	1,278,188
Special Mention	Special Mention	175		3,369		1,830		2,257		1,986		1,854		21,159		—		32,630		Special Mention	1,801		3,323		4,829		2,111		633		1,574		17,575		—		31,846
Substandard	Substandard	487		1,002		9,503		3,157		6,285		13,414		9,272		—		43,120		Substandard	460		915		9,060		1,542		5,353		17,823		17,058		—		52,211
Doubtful	Doubtful	—		—		—		—		—		47		2,994		—		3,041		Doubtful	—		—		—		—		—		—		1,526		—		1,526
Total	Total	$	96,104	$	245,278	$	144,313	$	49,133	$	56,893	$	193,732	$	652,609	$	—	$	1,438,062	Total	$	102,704	$	238,451	$	138,028	$	52,968	$	49,642	$	149,260	$	632,718	$	—	$	1,363,771

2122

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


		Term Loans Amortized Cost Basis by Origination Year																			Term Loans Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total		(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Residential real estate	Residential real estate																			Residential real estate
Current period gross write-offs	Current period gross write-offs	$	—	$	50	$	—	$	—	$	174	$	16	$	—	$	—	$	240	Current period gross write-offs	$	—	$	50	$	—	$	50	$	174	$	39	$	—	$	—	$	313

Risk rating	Risk rating																			Risk rating
Pass	Pass	$	419,626	$	997,566	$	271,542	$	92,781	$	69,856	$	810,003	$	201	$	—	$	2,661,575	Pass	$	527,326	$	986,269	$	269,172	$	91,540	$	66,691	$	774,516	$	141	$	—	$	2,715,655
Special Mention	Special Mention	—		—		1,378		—		237		910		—		—		2,525		Special Mention	—		—		—		—		741		816		—		—		1,557
Substandard	Substandard	—		134		581		432		1,194		10,612		—		—		12,953		Substandard	—		132		1,024		379		1,361		9,303		—		—		12,199
Total	Total	$	419,626	$	997,700	$	273,501	$	93,213	$	71,287	$	821,525	$	201	$	—	$	2,677,053	Total	$	527,326	$	986,401	$	270,196	$	91,919	$	68,793	$	784,635	$	141	$	—	$	2,729,411

2223

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
As of December 31, 2022
Construction
Risk rating
Pass	$	153,393	$	133,708	$	25,634	$	3,432	$	1,361	$	1,924	$	—	$	—	$	319,452
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total	$	153,393	$	133,708	$	25,634	$	3,432	$	1,361	$	1,924	$	—	$	—	$	319,452

Commercial multifamily:
Risk rating
Pass	$	205,124	$	61,032	$	27,583	$	100,696	$	67,675	$	149,633	$	205	$	—	$	611,948
Special Mention	—		—		2,628		—		—		—		—		—		2,628
Substandard	—		—		—		—		5,512		—		—		—		5,512
Total	$	205,124	$	61,032	$	30,211	$	100,696	$	73,187	$	149,633	$	205	$	—	$	620,088

Commercial real estate owner occupied:
Risk rating
Pass	$	131,096	$	127,270	$	58,835	$	82,576	$	75,322	$	154,056	$	3,464	$	—	$	632,619
Special Mention	—		—		387		—		—		—		—		—		387
Substandard	1,003		122		31		282		1,056		4,989		—		—		7,483
Total	$	132,099	$	127,392	$	59,253	$	82,858	$	76,378	$	159,045	$	3,464	$	—	$	640,489

Commercial real estate non-owner occupied:
Risk rating
Pass	$	621,685	$	410,359	$	175,456	$	333,783	$	313,124	$	530,322	$	17,846	$	—	$	2,402,575
Special Mention	—		—		—		—		20,000		18,462		—		—		38,462
Substandard	—		—		7,237		13,623		15,610		18,730		—		—		55,200
Total	$	621,685	$	410,359	$	182,693	$	347,406	$	348,734	$	567,514	$	17,846	$	—	$	2,496,237

Commercial and industrial:
Risk rating
Pass	$	282,781	$	147,070	$	56,880	$	67,975	$	83,223	$	99,367	$	648,956	$	—	$	1,386,252
Special Mention	—		5,811		1,290		1,332		11,502		912		2,632		—		23,479
Substandard	204		496		3,640		8,139		1,981		2,799		10,581		—		27,840
Doubtful	—		—		—		—		—		56		7,609		—		7,665
Total	$	282,985	$	153,377	$	61,810	$	77,446	$	96,706	$	103,134	$	669,778	$	—	$	1,445,236









Residential real estate
Risk rating
Pass	$	997,981	$	280,308	$	96,548	$	70,845	$	138,894	$	713,744	$	165	$	—	$	2,298,485
Special Mention	—		364		—		861		202		707		—		—		2,134
Substandard	—		284		448		267		1,857		8,972		—		—		11,828
Total	$	997,981	$	280,956	$	96,996	$	71,973	$	140,953	$	723,423	$	165	$	—	$	2,312,447

2324

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For home equity and consumer other loan portfolio segments, Berkshire evaluates credit quality based on the aging status of the loan and by payment activity. The performing or nonperforming status is updated on an ongoing basis dependent upon improvement and deterioration in credit quality. The following table presents the amortized cost based on payment activity:


		Term Loans Amortized Cost Basis by Origination Year																			Term Loans Amortized Cost Basis by Origination Year
(In thousands)	(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total		(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
As of June 30, 2023
As of September 30, 2023																				As of September 30, 2023
Home equity:	Home equity:																			Home equity:
Current period gross write-offs	Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	18	$	—	$	18	Current period gross write-offs	$	—	$	—	$	—	$	70	$	—	$	—	$	18	$	—	$	88

Payment performance	Payment performance																			Payment performance
Performing	Performing	$	—	$	—	$	108	$	446	$	—	$	2,523	$	220,260	$	—	$	223,337	Performing	$	—	$	—	$	—	$	443	$	—	$	2,615	$	222,691	$	—	$	225,749
Nonperforming	Nonperforming	—		—		—		—		—		—		2,097		—		2,097		Nonperforming	—		—		—		—		—		—		1,303		—		1,303
Total	Total	$	—	$	—	$	108	$	446	$	—	$	2,523	$	222,357	$	—	$	225,434	Total	$	—	$	—	$	—	$	443	$	—	$	2,615	$	223,994	$	—	$	227,052

Consumer other:	Consumer other:																			Consumer other:
Current period gross write-offs	Current period gross write-offs	$	1	$	3,622	$	466	$	7	$	33	$	142	$	—	$	—	$	4,271	Current period gross write-offs	$	65	$	5,729	$	804	$	11	$	44	$	195	$	—	$	—	$	6,848

Payment performance	Payment performance																			Payment performance
Performing	Performing	$	26,460	$	134,609	$	23,959	$	7,082	$	9,591	$	33,090	$	10,208	$	—	$	244,999	Performing	$	40,770	$	121,690	$	21,794	$	6,468	$	8,261	$	26,015	$	10,561	$	—	$	235,559
Nonperforming	Nonperforming	7		583		139		35		148		805		2		—		1,719		Nonperforming	17		116		60		29		139		386		14		—		761
Total	Total	$	26,467	$	135,192	$	24,098	$	7,117	$	9,739	$	33,895	$	10,210	$	—	$	246,718	Total	$	40,787	$	121,806	$	21,854	$	6,497	$	8,400	$	26,401	$	10,575	$	—	$	236,320


	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
As of December 31, 2022
Home equity:
Payment performance
Performing	$	—	$	114	$	454	$	—	$	—	$	17	$	224,746	$	—	$	225,331
Nonperforming	—		—		—		—		—		—		2,119		—		2,119
Total	$	—	$	114	$	454	$	—	$	—	$	17	$	226,865	$	—	$	227,450

Consumer other:
Payment performance
Performing	$	161,157	$	28,279	$	8,312	$	12,670	$	27,608	$	24,682	$	9,070	$	—	$	271,778
Nonperforming	588		137		44		280		477		567		39		—		2,132
Total	$	161,745	$	28,416	$	8,356	$	12,950	$	28,085	$	25,249	$	9,109	$	—	$	273,910

2425

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of loans by past due status at ~~June~~September 30, 2023 and December 31, 2022:


(In thousands)	(In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans		(In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans
June 30, 2023
September 30, 2023														September 30, 2023
Construction	Construction	$	—	$	—	$	—	$	—	$	443,856	$	443,856	Construction	$	—	$	—	$	—	$	—	$	561,691	$	561,691
Commercial multifamily	Commercial multifamily	—		—		—		—		597,472		597,472		Commercial multifamily	5,853		—		—		5,853		596,267		602,120
Commercial real estate owner occupied	Commercial real estate owner occupied	959		650		2,207		3,816		692,955		696,771		Commercial real estate owner occupied	334		599		1,423		2,356		655,833		658,189
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	151		117		162		430		2,556,606		2,557,036		Commercial real estate non-owner occupied	240		132		4,010		4,382		2,601,441		2,605,823
Commercial and industrial	Commercial and industrial	1,316		679		17,156		19,151		1,418,911		1,438,062		Commercial and industrial	1,263		267		11,086		12,616		1,351,155		1,363,771

Residential real estate	Residential real estate	4,328		2,526		12,859		19,713		2,657,340		2,677,053		Residential real estate	3,988		1,557		12,170		17,715		2,711,696		2,729,411
Home equity	Home equity	547		327		2,097		2,971		222,463		225,434		Home equity	688		26		1,616		2,330		224,722		227,052
Consumer other	Consumer other	1,918		1,629		1,719		5,266		241,452		246,718		Consumer other	2,111		1,642		2,076		5,829		230,491		236,320
Total	Total	$	9,219	$	5,928	$	36,200	$	51,347	$	8,831,055	$	8,882,402	Total	$	14,477	$	4,223	$	32,381	$	51,081	$	8,933,296	$	8,984,377


(In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans
December 31, 2022
Construction	$	—	$	—	$	—	$	—	$	319,452	$	319,452
Commercial multifamily	—		214		—		214		619,874		620,088
Commercial real estate owner occupied	122		—		3,302		3,424		637,065		640,489
Commercial real estate non-owner occupied	143		—		191		334		2,495,903		2,496,237
Commercial and industrial	1,173		1,438		18,658		21,269		1,423,967		1,445,236

Residential real estate	3,694		2,134		11,724		17,552		2,294,895		2,312,447
Home equity	168		57		2,119		2,344		225,106		227,450
Consumer other	1,990		1,028		2,158		5,176		268,734		273,910
Total	$	7,290	$	4,871	$	38,152	$	50,313	$	8,284,996	$	8,335,309

2526

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of loans on nonaccrual status and loans past due 90 days or more and still accruing as of ~~June~~September 30, 2023 and December 31, 2022:


(In thousands)	(In thousands)	Nonaccrual Amortized Cost		Nonaccrual With No Related Allowance		Past Due 90 Days or Greater and Accruing		Interest Income Recognized on Nonaccrual		(In thousands)	Nonaccrual Amortized Cost		Nonaccrual With No Related Allowance		Past Due 90 Days or Greater and Accruing		Interest Income Recognized on Nonaccrual
At or for the three months ended June 30, 2023
At or for the three months ended September 30, 2023										At or for the three months ended September 30, 2023
Construction	Construction	$	—	$	—	$	—	$	—	Construction	$	—	$	—	$	—	$	—
Commercial multifamily	Commercial multifamily	—		—		—		—		Commercial multifamily	—		—		—		—
Commercial real estate owner occupied	Commercial real estate owner occupied	1,399		421		808		—		Commercial real estate owner occupied	1,212		257		211		—
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	162		59		—		—		Commercial real estate non-owner occupied	4,010		52		—		—
Commercial and industrial	Commercial and industrial	15,489		8,503		1,667		—		Commercial and industrial	10,982		8,271		104		—

Residential real estate	Residential real estate	8,971		5,668		3,888		—		Residential real estate	8,368		4,678		3,802		—
Home equity	Home equity	1,491		452		606		—		Home equity	1,303		442		313		—
Consumer other	Consumer other	876		—		843		—		Consumer other	761		—		1,315		—
Total	Total	$	28,388	$	15,103	$	7,812	$	—	Total	$	26,636	$	13,700	$	5,745	$	—

The commercial and industrial loans nonaccrual amortized cost as of ~~June~~September 30, 2023 included medallion loans with a fair value of $0.4 million and a contractual balance of ~~$9.3~~$9.1 million.



(In thousands)	Nonaccrual Amortized Cost		Nonaccrual With No Related Allowance		Past Due 90 Days or Greater and Accruing		Interest Income Recognized on Nonaccrual
At or for the three months ended December 31, 2022
Construction	$	—	$	—	$	—	$	—
Commercial multifamily	—		—		—		—
Commercial real estate owner occupied	2,202		1,411		1,100		—
Commercial real estate non-owner occupied	191		73		—		—
Commercial and industrial	16,992		14,223		1,666		—

Residential real estate	8,901		5,307		2,823		—
Home equity	1,568		388		551		—
Consumer other	1,260		2		898		—
Total	$	31,114	$	21,404	$	7,038	$	—

The commercial and industrial loans nonaccrual amortized cost as of December 31, 2022 included medallion loans with a fair value of $0.6 million and a contractual balance of $10.9 million.

The following table summarizes information about total loans rated Special Mention or lower at ~~June~~September 30, 2023 and December 31, 2022. The table below includes consumer loans that are Special Mention and Substandard accruing that are classified as performing based on payment activity.


(In thousands)	(In thousands)	June 30, 2023		December 31, 2022		(In thousands)	September 30, 2023		December 31, 2022
Non-Accrual	Non-Accrual	$	28,388	$	31,114	Non-Accrual	$	26,636	$	31,114
Substandard Accruing	Substandard Accruing	103,327		88,665		Substandard Accruing	114,252		88,665
Total Classified	Total Classified	131,715		119,779		Total Classified	140,888		119,779
Special Mention	Special Mention	99,318		68,127		Special Mention	79,258		68,127
Total Criticized	Total Criticized	$	231,033	$	187,906	Total Criticized	$	220,146	$	187,906

2627

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. Expected credit losses for collateral-dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value. The following table presents the amortized cost basis of individually analyzed collateral-dependent loans by loan portfolio segment:


		Type of Collateral				Type of Collateral
(In thousands)	(In thousands)	Real Estate		Investment Securities/Cash			Other		(In thousands)	Real Estate		Investment Securities/Cash		Other
June 30, 2023
September 30, 2023									September 30, 2023
Construction	Construction	$	—	$	—		$	—	Construction	$	—	$	—	$	—
Commercial multifamily	Commercial multifamily			—			—		Commercial multifamily			—		—
Commercial real estate owner occupied	Commercial real estate owner occupied	798		—			—		Commercial real estate owner occupied	633		—		—
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	666		—			—		Commercial real estate non-owner occupied	352		—		—
Commercial and industrial	Commercial and industrial	5,022		—			7,320		Commercial and industrial	4,813		—		3,420

Residential real estate	Residential real estate	7,514		—			—		Residential real estate	6,951		—		—
Home equity	Home equity	471		—			—		Home equity	458		—		—
Consumer other	Consumer other	—		—			—		Consumer other	42		—		—
Total loans	Total loans	$	14,471	$	—		$	7,320	Total loans	$	13,249	$	—	$	3,420

December 31, 2022	December 31, 2022								December 31, 2022
Construction	Construction	$	—	$	—		$	—	Construction	$	—	$	—	$	—
Commercial multifamily	Commercial multifamily	—		—			—		Commercial multifamily	—		—		—
Commercial real estate owner occupied	Commercial real estate owner occupied	2,793		—			—		Commercial real estate owner occupied	2,793		—		—
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	384		—			—		Commercial real estate non-owner occupied	384		—		—
Commercial and industrial	Commercial and industrial	288		—			16,931		Commercial and industrial	288		—		16,931

Residential real estate	Residential real estate	3,910		—			—		Residential real estate	3,910		—		—
Home equity	Home equity	501		—			—		Home equity	501		—		—
Consumer other	Consumer other	2		—			—		Consumer other	2		—		—
Total loans	Total loans	$	7,878	$	—		$	16,931	Total loans	$	7,878	$	—	$	16,931

2728

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Modified Loans

Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For the loans included in the "combination" columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: a term extension and principal forgiveness, an other-than-insignificant payment delay and/or an interest rate reduction.

The following table presents the amortized cost basis of loans at ~~June~~September 30, 2023 that were both experiencing financial difficulty and modified during the three and ~~six~~nine months ended ~~June~~September 30, 2023, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below:


(In thousands)	(In thousands)	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Combination Term Extension and Principal Forgiveness		Combination Term Extension and Interest Rate Reduction		Total Class of Financing Receivable		(In thousands)	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Combination Term Extension and Principal Forgiveness		Combination Term Extension and Interest Rate Reduction		Total Class of Financing Receivable
Three months ended June 30, 2023
Three months ended September 30, 2023																Three months ended September 30, 2023
Construction	Construction	$	—	$	—	$	—	$	—	$	—	$	—	—	%	Construction	$	—	$	—	$	—	$	—	$	—	$	—	—	%
Commercial multifamily	Commercial multifamily	—		—		—		—		—		—		—		Commercial multifamily	—		—		—		—		—		—		—
Commercial real estate owner occupied	Commercial real estate owner occupied	—		—		—		—		—		—		—		Commercial real estate owner occupied	—		—		—		—		—		—		—
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	—		—		11,733		—		—		—		0.46		Commercial real estate non-owner occupied	—		—		—		—		—		—
Commercial and industrial	Commercial and industrial	—		—		1,291		—		—		—		0.09		Commercial and industrial	—		34		6,240		—		—		—		0.46	%
Residential real estate	Residential real estate	—		—		—		—		—		—		—		Residential real estate	—		—		—		—		—		—		—
Home equity	Home equity	—		—		—		—		—		—		—		Home equity	—		—		—		—		—		—		—
Consumer other	Consumer other	—		—		—		—		—		—		—		Consumer other	—		—		—		—		—		—		—
Total	Total	$	—	$	—	$	13,024	$	—	$	—	$	—	—	%	Total	$	—	$	34	$	6,240	$	—	$	—	$	—	0.07	%

2829

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(In thousands)	(In thousands)	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Combination Term Extension and Principal Forgiveness		Combination Term Extension and Interest Rate Reduction		Total Class of Financing Receivable		(In thousands)	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Combination Term Extension and Principal Forgiveness		Combination Term Extension and Interest Rate Reduction		Total Class of Financing Receivable
Six months ended June 30, 2023
Nine months ended September 30, 2023																Nine months ended September 30, 2023
Construction	Construction	$	—	$	—	$	—	$	—	$	—	$	—	—	%	Construction	$	—	$	—	$	—	$	—	$	—	$	—	—	%
Commercial multifamily	Commercial multifamily	—		—		—		—		—		—		—		Commercial multifamily	—		—		—		—		—		—		—
Commercial real estate owner occupied	Commercial real estate owner occupied	—		387		—		—		—		—		0.06		Commercial real estate owner occupied	—		387		—		—		—		—		0.06
Commercial real estate non-owner occupied	Commercial real estate non-owner occupied	—		—		11,733		—		—		—		0.46		Commercial real estate non-owner occupied	—		—		11,733		—		—		—		0.85
Commercial and industrial	Commercial and industrial	—		—		1,291		—		10		—		0.09		Commercial and industrial	—		34		7,531		—		10		—		0.56
Residential real estate	Residential real estate	—		—		—		—		—		—		—		Residential real estate	—		—		—		—		—		—		—
Home equity	Home equity	—		—		—		—		—		—		—		Home equity	—		—		—		—		—		—		—
Consumer other	Consumer other	—		—		—		—		—		—		—		Consumer other	—		—		—		—		—		—		—
Total	Total	$	—	$	387	$	13,024	$	—	$	10	$	—	—	%	Total	$	—	$	421	$	19,264	$	—	$	10	$	—	0.22	%

The Company has not committed to lend additional amounts to the borrowers included in the previous table.

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. ~~The following table presents the performance~~As of ~~such~~September 30, 2023, there were no loans that ~~have been~~were modified ~~in the last twelve months.~~to borrowers experiencing financial difficulty that were past due.

~~(In thousands)~~

~~30 - 59 Days Past Due~~

~~60 - 89 Days Past Due~~

~~Greater Than 89 Days Past Due~~

~~Total Past Due~~

~~Three months ended June 30, 2023~~

~~Construction~~

—

~~Commercial multifamily~~

—

~~Commercial real estate owner occupied~~

—

~~Commercial real estate non-owner occupied~~

—

~~Commercial and industrial~~

—

~~Residential real estate~~

—

~~Home equity~~

—

~~Consumer other~~

—

~~Total~~

—

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In thousands)~~

~~30 - 59 Days Past Due~~

~~60 - 89 Days Past Due~~

~~Greater Than 89 Days Past Due~~

~~Total Past Due~~

~~Six months ended June 30, 2023~~

~~Construction~~

—

~~Commercial multifamily~~

—

~~Commercial real estate owner occupied~~

—

~~Commercial real estate non-owner occupied~~

—

~~Commercial and industrial~~

—

~~Residential real estate~~

—

~~Home equity~~

—

~~Consumer other~~

—

~~Total~~

—

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three and ~~six~~nine months ended ~~June~~September 30, 2023:


(In thousands)	Principal Forgiveness		Weighted Average Interest Rate Reduction		Weighted Average Term Extension (months)
Three months ended ~~June~~September 30, 2023
Construction	$	—	—	%	0
Commercial multifamily	—		—		0
Commercial real estate owner occupied	—		—		0
Commercial real estate non-owner occupied	—		—		120
Commercial and industrial	—		—		~~119~~17
Residential real estate	—		—		0
Home equity	—		—		0
Consumer other	—		—		0

(In thousands) Principal Forgiveness Weighted Average Interest Rate Reduction Weighted Average Term Extension (months)
Six months ended June 30, 2023
Construction $ — — % 0
Commercial multifamily — — 0
Commercial real estate owner occupied — — 120
Commercial real estate non-owner occupied — — 0
Commercial and industrial — 1.25 118
Residential real estate — — 0
Home equity — — 0
Consumer other — — 0

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(In thousands)	Principal Forgiveness		Weighted Average Interest Rate Reduction		Weighted Average Term Extension (months)
Nine months ended September 30, 2023
Construction	$	—	—	%	0
Commercial multifamily	—		—		0
Commercial real estate owner occupied	—		—		120
Commercial real estate non-owner occupied	—		—		12
Commercial and industrial	—		1.00		34
Residential real estate	—		—		0
Home equity	—		—		0
Consumer other	—		—		0

There were no loans that had a payment default during the three and ~~six~~nine months ended ~~June~~September 30, 2023 that were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.

Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

3031

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5. DEPOSITS

A summary of time deposits is as follows:


(In thousands)	(In thousands)	June 30, 2023		December 31, 2022		(In thousands)	September 30, 2023		December 31, 2022
Time less than $100,000	Time less than $100,000	$	669,592	$	549,265	Time less than $100,000	$	666,406	$	549,265
Time $100,000 through $250,000	Time $100,000 through $250,000	1,102,571		642,600		Time $100,000 through $250,000	1,158,816		642,600
Time more than $250,000	Time more than $250,000	663,455		441,842		Time more than $250,000	620,213		441,842
Total time deposits	Total time deposits	$	2,435,618	$	1,633,707	Total time deposits	$	2,445,435	$	1,633,707

NOTE 6. BORROWED FUNDS

Borrowed funds at ~~June~~September 30, 2023 and December 31, 2022 are summarized as follows:


		June 30, 2023				December 31, 2022					September 30, 2023				December 31, 2022
				Weighted				Weighted					Weighted				Weighted
				Average				Average					Average				Average
(Dollars in thousands)	(Dollars in thousands)	Principal		Rate		Principal		Rate		(Dollars in thousands)	Principal		Rate		Principal		Rate
Short-term borrowings:
Short-term debt:										Short-term debt:
Advances from the FHLB	Advances from the FHLB	$	470,000	5.45	%	$	—	—	%	Advances from the FHLB	$	670,000	5.57	%	$	—	—	%

Total short-term borrowings:	Total short-term borrowings:	470,000		5.45		—		—		Total short-term borrowings:	670,000		5.57		—		—
Long-term borrowings:
Long-term debt:										Long-term debt:
Advances from the FHLB and other borrowings	Advances from the FHLB and other borrowings	204,345		3.83		4,445		0.71		Advances from the FHLB and other borrowings	134,295		4.06		4,445		0.71

Subordinated borrowings	Subordinated borrowings	98,237		5.50		98,089		5.50		Subordinated borrowings	98,286		5.50		98,089		5.50
Junior subordinated borrowing - Trust I	Junior subordinated borrowing - Trust I	15,464		7.24		15,464		6.54		Junior subordinated borrowing - Trust I	15,464		7.49		15,464		6.54
Junior subordinated borrowing - Trust II	Junior subordinated borrowing - Trust II	7,537		7.25		7,511		6.47		Junior subordinated borrowing - Trust II	7,550		7.37		7,511		6.47

Total long-term borrowings:	Total long-term borrowings:	325,583		4.58		125,509		5.52		Total long-term borrowings:	255,595		4.92		125,509		5.52
Total	Total	$	795,583	5.09	%	$	125,509	5.52	%	Total	$	925,595	5.39	%	$	125,509	5.52	%

Short-term debt includes Federal Home Loan Bank (“FHLB”) advances with an original maturity of less than one year. The Bank also maintains a $3.0 million secured line of credit with the FHLB that bears a daily adjustable rate calculated by the FHLB. There was no outstanding balance on the FHLB line of credit for the periods ended ~~June~~September 30, 2023 and December 31, 2022. The Bank's available borrowing capacity with the FHLB was ~~$2.2~~$2.0 billion and $1.5 billion for the periods ended ~~June~~September 30, 2023 and December 31, 2022.

The Bank is approved to borrow on a short-term basis from the Federal Reserve Bank of Boston as a non-member bank. The Bank has pledged certain loans and securities to the Federal Reserve Bank to support this arrangement. The Bank had no borrowings with the Federal Reserve Bank under this arrangement during the periods ended ~~June~~September 30, 2023 and December 31, 2022, ~~respectivvely.~~respectively. The Bank's available borrowing capacity with the Federal Reserve Bank was $1.4 billion and $0.6 billion for the periods ended ~~June~~September 30, 2023 and December 31, 2022, respectively.

Long-term FHLB advances consist of advances with an original maturity of more than one year and are subject to prepayment penalties. The advances outstanding at ~~June~~September 30, 2023 included callable advances totaling ~~$130.0~~$60.0 million

and amortizing advances totaling $4.3 million. There were no callable advances outstanding at December 31, 2022. The advances outstanding at December 31, 2022 included amortizing advances totaling $4.4 million. All FHLB borrowings, including the line of credit, are secured by a blanket security agreement on certain qualified collateral, principally all residential first mortgage loans and certain securities.

3132

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of maturities of FHLB advances as of ~~June~~September 30, 2023 is as follows:


		June 30, 2023				September 30, 2023
				Weighted Average						Weighted Average
(In thousands, except rates)	(In thousands, except rates)	Principal		Rate			(In thousands, except rates)	Principal		Rate
Fixed rate advances maturing:	Fixed rate advances maturing:						Fixed rate advances maturing:
2023	2023	$	460,000	5.45	%		2023	$	660,000	5.57	%
2024	2024	40,017		5.05			2024	40,014		5.05
2025	2025	40,000		4.55			2025	40,000		4.55
2026	2026	65,539		3.61			2026	30,530		3.68
2027 and beyond	2027 and beyond	68,789		3.16			2027 and beyond	33,751		3.07
Total FHLB advances	Total FHLB advances	$	674,345	4.96	%		Total FHLB advances	$	804,295	5.32	%

The Company did not have variable-rate FHLB advances for the periods ended ~~June~~September 30, 2023 and December 31, 2022, respectively.

In June 2022, the Company issued ten year subordinated notes in the amount of $100.0 million. The interest rate is fixed at 5.50% for the first five years. After five years, the notes become callable and will bear interest at a floating rate per annum equal to a benchmark rate (which is expected to be Three-Month Term SOFR), plus 249 basis points. The subordinated note includes reduction to the note principal balance of ~~$1.8~~$1.7 million for unamortized debt issuance costs as of ~~June~~September 30, 2023.

The Company holds 100% of the common stock of Berkshire Hills Capital Trust I (“Trust I”) which is included in other assets at a cost of $0.5 million. The sole asset of Trust I is $15.5 million of the Company’s junior subordinated debentures due in 2035. These debentures bear interest at a variable rate equal to ~~LIBOR~~3-month CME Term SOFR plus 1.85% and had a rate of ~~7.24%~~7.49% and 6.54% at ~~June~~September 30, 2023 and December 31, 2022, respectively. The Company has the right to defer payments of interest for up to five years on the debentures at any time, or from time to time, with certain limitations, including a restriction on the payment of dividends to shareholders while such interest payments on the debentures have been deferred. The Company has not exercised this right to defer payments. The Company has the right to redeem the debentures at par value. Trust I is considered a variable interest entity for which the Company is not the primary beneficiary. Accordingly, Trust I is not consolidated into the Company’s financial statements.

The Company holds 100% of the common stock of SI Capital Trust II (“Trust II”) which is included in other assets at a cost of $0.2 million. The sole asset of Trust II is $8.2 million of the Company’s junior subordinated debentures due in 2036. These debentures bear interest at a variable rate equal to ~~LIBOR~~3-month CME Term SOFR plus 1.70% and had a rate of ~~7.25%~~7.37% and 6.47% at ~~June~~September 30, 2023 and December 31, 2022, respectively. The Company has the right to defer payments of interest for up to five years on the debentures at any time, or from time to time, with certain limitations, including a restriction on the payment of dividends to shareholders while such interest payments on the debentures have been deferred. The Company has not exercised this right to defer payments. The Company has the right to redeem the debentures at par value. Trust II is considered a variable interest entity for which the Company is not the primary beneficiary. Accordingly, Trust II is not consolidated into the Company’s financial statements.

3233

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

As of ~~June~~September 30, 2023, the Company held derivatives with a total notional amount of ~~$4.5~~$4.8 billion. That amount included $0.8 billion in interest rate swap derivatives that were designated as cash flow hedges for accounting purposes. The Company also had economic hedges totaling ~~$3.7~~$4.0 billion and ~~$9.4~~$6.4 million non-hedging derivatives, which are not designated as hedges for accounting purposes with changes in fair value recorded directly through earnings. Economic hedges included interest rate swaps totaling $3.6 billion, risk participation agreements with dealer banks of $0.4 billion, and $2.3 million in forward commitment contracts.

As of December 30, 2022, the Company held derivatives with a total notional amount of $4.5 billion. That amount included $0.6 billion in interest rate swap derivatives and $0.2 billion in interest rate collars that were designated as cash flow hedges for accounting purposes. The Company had economic hedges and non-hedging derivatives totaling $3.7 billion and $4.1 million, respectively, which are not designated as hedges for accounting purposes and are therefore recorded at fair value with changes in fair value recorded directly through earnings. Economic hedges included interest rate swaps totaling $3.4 billion, risk participation agreements with dealer banks of ~~$0.3 billion,~~$341.9 million, and ~~$8.9~~$0.9 million in forward commitment contracts.

As part of the Company’s risk management strategy, the Company enters into interest rate swap agreements to mitigate the interest rate risk inherent in certain of the Company’s assets and liabilities. Interest rate swap agreements involve the risk of dealing with both Bank customers and institutional derivative counterparties and their ability to meet contractual terms. The agreements are entered into with counterparties that meet established credit standards and contain master netting and collateral provisions protecting the at-risk party. The derivatives program is overseen by the Risk Management and Capital Committee of the Company’s Board of Directors. Based on adherence to the Company’s credit standards and the presence of the netting and collateral provisions, the Company believes that the credit risk inherent in these contracts was not significant at ~~June~~September 30, 2023.

The Company had no pledged collateral to derivative counterparties in the form of cash as of ~~June~~September 30, 2023. The Company had pledged securities to derivative counterparties with an amortized cost of ~~$10.1~~$10.0 million and a fair value of ~~$9.9~~$9.7 million as of ~~June~~September 30, 2023. The Company does not typically require its commercial customers to post cash or securities as collateral on its program of back-to-back economic hedges. However certain language is written into the International Swaps Dealers Association, Inc. (“ISDA”) and loan documents where, in default situations, the Bank is allowed to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability. The Company may need to post additional collateral in the future in proportion to potential increases in unrealized loss positions.

3334

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Information about derivative assets and liabilities at ~~June~~September 30, 2023, follows:


				Weighted	Weighted Average Rate				Estimated					Weighted	Weighted Average Rate				Estimated
		Notional		Average			Contract		Fair Value			Notional		Average			Contract		Fair Value
		Amount		Maturity	Received		pay rate		Asset (Liability)			Amount		Maturity	Received		pay rate		Asset (Liability)
		(In thousands)		(In years)					(In thousands)			(In thousands)		(In years)					(In thousands)
Cash flow hedges:	Cash flow hedges:										Cash flow hedges:
Interest rate swaps on commercial loans (1)	Interest rate swaps on commercial loans (1)	$	600,000	2.4	5.07	%	3.64	%	$	714	Interest rate swaps on commercial loans (1)	$	600,000	2.1	3.64	%	5.32	%	$	841

Interest rate collars on commercial loans	Interest rate collars on commercial loans	200,000		3.0					781		Interest rate collars on commercial loans	200,000		2.8					105
Total cash flow hedges	Total cash flow hedges	800,000							1,495		Total cash flow hedges	800,000							946

Economic hedges:	Economic hedges:										Economic hedges:
Interest rate swap on tax advantaged economic development bond	Interest rate swap on tax advantaged economic development bond	$	6,637	6.4	4.55	%	5.09	%	$	(118)	Interest rate swap on tax advantaged economic development bond	$	6,421	6.2	4.96	%	5.09	%	$	(30)
Interest rate swaps on loans with commercial loan customers	Interest rate swaps on loans with commercial loan customers	1,683,400		5.3	4.16	%	6.28	%	(92,320)		Interest rate swaps on loans with commercial loan customers	1,788,086		5.0	4.30	%	6.42	%	(117,048)
Offsetting interest rate swaps on loans with commercial loan customers (1)	Offsetting interest rate swaps on loans with commercial loan customers (1)	1,683,400		5.3	6.28	%	4.16	%	49,004		Offsetting interest rate swaps on loans with commercial loan customers (1)	1,788,086		5.0	6.42	%	4.30	%	63,705
Risk participation agreements with dealer banks	Risk participation agreements with dealer banks	348,136		4.1					(81)		Risk participation agreements with dealer banks	377,852		5.7					(16)
Forward sale commitments	Forward sale commitments	8,876		0.2					63		Forward sale commitments	2,312		0.2					10
Total economic hedges	Total economic hedges	3,730,449							(43,452)		Total economic hedges	3,962,757							(53,379)

Non-hedging derivatives:	Non-hedging derivatives:										Non-hedging derivatives:
Commitments to lend	Commitments to lend	9,369		0.2					37		Commitments to lend	6,409		0.2					(9)
Total non-hedging derivatives	Total non-hedging derivatives	9,369							37		Total non-hedging derivatives	6,409							(9)

Total	Total	$	4,539,818						$	(41,920)	Total	$	4,769,166						$	(52,442)

(1) Fair value estimates include the impact of ~~$31.0~~$38.5 million settled to market contract agreements.

3435

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Information about derivative assets and liabilities at December 31, 2022, follows:


			Weighted	Weighted Average Rate				Estimated
	Notional		Average			Contract		Fair Value
	Amount		Maturity	Received		pay rate		Asset (Liability)
	(In thousands)		(In years)					(In thousands)
Cash flow hedges:
Interest rate swaps on commercial loans	$	400,000	2.7	4.09	%	3.51	%	$	—
Forward-starting interest rate swaps on commercial loans	200,000		3.3	—	%	3.90	%	—
Interest rate collars on commercial loans	200,000		3.5					1,937
	800,000							1,937

Economic hedges:
Interest rate swap on tax advantaged economic development bond	$	7,062	6.9	4.49	%	5.09	%	$	(193)
Interest rate swaps on loans with commercial loan customers	1,685,263		5.7	4.11	%	5.55	%	(95,114)
Offsetting interest rate swaps on loans with commercial loan customers (1)	1,685,263		5.7	5.55	%	4.11	%	50,267
Risk participation agreements with dealer banks	341,885		6.6					(89)
Forward sale commitments	927		0.2					8
Total economic hedges	3,720,400							(45,121)

Non-hedging derivatives:
Commitments to lend	4,114		0.2					17
Total non-hedging derivatives	4,114							17

Total	$	4,524,514						$	(43,167)

(1) Fair value estimates include the impact of $38.3 million settled to market contract agreements.

3536

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash flow hedges

The effective portion of unrealized changes in the fair value of derivatives accounted for as cash flow hedges is reported in other comprehensive income and subsequently reclassified to earnings in the same period or periods during which the hedged transaction is forecasted to affect earnings. Each quarter, the Company assesses the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged item or transaction. The ineffective portion of changes in the fair value of the derivatives is recognized directly in earnings. All cash flow hedges are considered

highly effective.

As of ~~June~~September 30, 2023, the Company had eight interest rate swap contracts with a notional value of $800.0 million. The interest rate swaps have durations of two to three years. This hedge strategy converts commercial variable rate loans to fixed interest rates, thereby protecting the Company from floating interest rate variability.

As of ~~June~~September 30, 2023, the Company had two interest rate collars. The first interest rate collar has a 3.00% floor and a 5.75% cap with a notional value of $100.0 million. The second interest rate collar has a 3.25% floor and a 5.75% cap with a notional value of $100.0 million. The interest rate collars have durations of three to four years. The structure of these instruments is such that the Company pays the counterparty an incremental amount if the collar index exceeds the cap rate. Conversely, the Company receives an incremental amount if the index falls below the floor rate. No payments are required if the collar index falls between the cap and floor rates.

Amounts included in the Consolidated Statements of Income and in the other comprehensive income section of the Consolidated Statements of Comprehensive Income (related to interest rate derivatives designated as hedges of cash flows), were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	(In thousands)	2023		2022		2023		2022		(In thousands)	2023		2022		2023		2022
Interest rate swaps on commercial loans:	Interest rate swaps on commercial loans:									Interest rate swaps on commercial loans:
Unrealized (loss) recognized in accumulated other comprehensive loss	Unrealized (loss) recognized in accumulated other comprehensive loss	$	(11,753)	$	—	$	(5,798)	$	—	Unrealized (loss) recognized in accumulated other comprehensive loss	$	(2,800)	$	(5,555)	$	(8,599)	$	(5,555)

Less: Reclassification of unrealized (loss) from accumulated other comprehensive loss to interest expense		(157)		—		(314)		—
Reclassification of unrealized (loss) from accumulated other comprehensive loss to interest expense										Reclassification of unrealized (loss) from accumulated other comprehensive loss to interest expense	(159)		—		(473)		—

Net tax benefit on items recognized in accumulated other comprehensive income	Net tax benefit on items recognized in accumulated other comprehensive income	3,197		—		1,641		—		Net tax benefit on items recognized in accumulated other comprehensive income	794		1,494		2,435		1,494

Other comprehensive loss recorded in accumulated other comprehensive income, net of reclassification adjustments and tax effects	Other comprehensive loss recorded in accumulated other comprehensive income, net of reclassification adjustments and tax effects	$	(8,713)	$	—	$	(4,471)	$	—	Other comprehensive loss recorded in accumulated other comprehensive income, net of reclassification adjustments and tax effects	$	(2,165)	$	(4,061)	$	(6,637)	$	(4,061)

Net interest expense recognized on hedged commercial loans	Net interest expense recognized on hedged commercial loans	$	2,034	$	—	$	3,327	$	—	Net interest expense recognized on hedged commercial loans	$	2,621	$	(136)	$	6,262	$	(136)

3637

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Economic hedges

As of ~~June~~September 30, 2023, the Company has an interest rate swap with a ~~$6.6~~$6.4 million notional amount to swap out the fixed rate of interest on an economic development bond bearing a fixed rate of 5.09%, currently within the Company’s trading portfolio under the fair value option, in exchange for a ~~LIBOR-based~~SOFR-based floating rate. The intent of the economic hedge is to improve the Company’s asset sensitivity to changing interest rates in anticipation of favorable average floating rates of interest over the 21-year life of the bond. The fair value changes of the economic development bond are mostly offset by fair value changes of the related interest rate swap.

The Company also offers certain derivative products directly to qualified commercial borrowers. The Company economically hedges derivative transactions executed with commercial borrowers by entering into mirror-image, offsetting derivatives with third-party financial institutions. The transaction allows the Company’s customer to convert a variable-rate loan to a fixed rate loan. Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts mostly offset each other in earnings. There was no credit valuation loss adjustment arising from the difference in credit worthiness of the commercial loan and financial institution counterparties as of ~~June~~September 30, 2023. The interest income and expense on these mirror image swaps exactly offset each other.

The Company has risk participation agreements with dealer banks. Risk participation agreements occur when the Company participates on a loan and a swap where another bank is the lead. The Company gets paid a fee to take on the risk associated with having to make the lead bank whole on Berkshire’s portion of the pro-rated swap should the borrower default. Changes in fair value are recorded in current period earnings.

The Company utilizes forward sale commitments to hedge interest rate risk and the associated effects on the fair value of interest rate lock commitments and loans originated for sale. The forward sale commitments are accounted for as derivatives with changes in fair value recorded in current period earnings.

The Company uses the following types of forward sale commitments contracts:

•Best efforts loan sales,

•Mandatory delivery loan sales, and

•To Be Announced (“TBA”) mortgage-backed securities sales.

A best efforts contract refers to a loan sale agreement where the Company commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. The Company may enter into a best efforts contract once the price is known, which is shortly after the potential borrower’s interest rate is locked.

A mandatory delivery contract is a loan sale agreement where the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. Generally, the Company may enter into mandatory delivery contracts shortly after the loan closes with a customer.

The Company may sell TBA mortgage-backed securities to hedge the changes in fair value of interest rate lock commitments and held for sale loans, which do not have corresponding best efforts or mandatory delivery contracts. These security sales transactions are closed once mandatory contracts are written. On the closing date the price of the security is locked-in, and the sale is paired-off with a purchase of the same security. Settlement of the security purchase/sale transaction is done with cash on a net-basis.

3738

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Non-hedging derivatives

The Company enters into interest rate lock commitments (“IRLCs”), or commitments to lend, for residential mortgage loans, which commit the Company to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs that relate to the origination of mortgage loans that will be held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose the Company to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The IRLCs are free-standing derivatives which are carried at fair value with changes recorded in non-interest income in the Company’s consolidated statements of operations. Changes in the fair value of IRLCs subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time.

Amounts included in the Consolidated Statements of Income related to economic hedges and non-hedging derivatives were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	(In thousands)	2023		2022		2023		2022		(In thousands)	2023		2022		2023		2022
Economic hedges	Economic hedges									Economic hedges
Interest rate swap on industrial revenue bond:	Interest rate swap on industrial revenue bond:									Interest rate swap on industrial revenue bond:
Unrealized gain recognized in other non-interest income	Unrealized gain recognized in other non-interest income	$	142	$	217	$	75	$	649	Unrealized gain recognized in other non-interest income	$	88	$	304	$	163	$	953

Interest rate swaps on loans with commercial loan customers:	Interest rate swaps on loans with commercial loan customers:									Interest rate swaps on loans with commercial loan customers:
Unrealized (loss)/gain recognized in other non-interest income		(24,230)		(44,927)		2,794		(123,625)
Unrealized (loss) recognized in other non-interest income										Unrealized (loss) recognized in other non-interest income	(24,728)		(53,788)		(21,934)		(177,413)
Favorable change in credit valuation adjustment recognized in other non-interest income	Favorable change in credit valuation adjustment recognized in other non-interest income	—		—		—		1,809		Favorable change in credit valuation adjustment recognized in other non-interest income	—		—		—		1,809

Offsetting interest rate swaps on loans with commercial loan customers:	Offsetting interest rate swaps on loans with commercial loan customers:									Offsetting interest rate swaps on loans with commercial loan customers:
Unrealized gain/(loss) recognized in other non-interest income		24,230		44,927		(2,794)		123,625
Unrealized gain recognized in other non-interest income										Unrealized gain recognized in other non-interest income	24,728		53,788		21,934		177,413

Risk participation agreements:	Risk participation agreements:									Risk participation agreements:
Unrealized gain/(loss) recognized in other non-interest income	Unrealized gain/(loss) recognized in other non-interest income	25		(292)		8		(400)		Unrealized gain/(loss) recognized in other non-interest income	65		(19)		73		(419)

Forward commitments:	Forward commitments:									Forward commitments:
Unrealized gain/(loss) recognized in other non-interest income		48		11		55		(116)
Unrealized (loss)/gain recognized in other non-interest income										Unrealized (loss)/gain recognized in other non-interest income	(53)		(11)		2		(127)

Non-hedging derivatives	Non-hedging derivatives									Non-hedging derivatives
Commitments to lend	Commitments to lend									Commitments to lend
Unrealized gain/(loss) recognized in other non-interest income		$	11	$	8	$	20	$	(98)
Unrealized (loss) recognized in other non-interest income										Unrealized (loss) recognized in other non-interest income	$	(46)	$	(100)	$	(26)	$	(108)

Realized gain in other non-interest income	Realized gain in other non-interest income	54		90		94		342		Realized gain in other non-interest income	210		78		304		420

3839

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Assets and Liabilities Subject to Enforceable Master Netting Arrangements

Interest Rate Swap Agreements (“Swap Agreements”)

The Company enters into swap agreements to facilitate the risk management strategies for commercial banking customers. The Company mitigates this risk by entering into equal and offsetting swap agreements with highly rated third party financial institutions. The swap agreements are free-standing derivatives and are recorded at fair value in the Company’s consolidated statements of condition. The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral generally in the form of marketable securities is received or posted by the counterparty with net liability positions, respectively, in accordance with contract thresholds.

The Company had net asset positions with its financial institution counterparties totaling ~~$45.5~~$64.0 million and $51.2 million as of ~~June~~September 30, 2023 and December 31, 2022, respectively. The Company had net asset positions with its commercial banking counterparties totaling ~~$2.3~~$0.3 million and $1.0 million as of ~~June~~September 30, 2023 and December 31, 2022, respectively. The Company had net liability positions with its financial institution counterparties totaling ~~$1.6~~$0.3 million and $1.2 million as of ~~June~~September 30, 2023 and December 31, 2022, respectively. The Company had net liability positions with its commercial banking counterparties totaling ~~$93.1~~$116.6 million and $96.1 million as of ~~June~~September 30, 2023 and December 31, 2022. The Company has collateral pledged to cover this liability.

The following table presents the assets and liabilities subject to an enforceable master netting arrangement as of ~~June~~September 30, 2023 and December 31, 2022:

Offsetting of Financial Assets and Derivative Assets


		Gross Amounts of		Gross Amounts Offset in the		Net Amounts of Assets Presented in the		Gross Amounts Not Offset in the Statements of Condition							Gross Amounts of		Gross Amounts Offset in the		Net Amounts of Assets Presented in the		Gross Amounts Not Offset in the Statements of Condition
		Recognized		Statements of		Statements of		Financial		Cash					Recognized		Statements of		Statements of		Financial		Cash
(In thousands)	(In thousands)	Assets		Condition		Condition		Instruments		Collateral Received		Net Amount		(In thousands)	Assets		Condition		Condition		Instruments		Collateral Received		Net Amount
June 30, 2023
September 30, 2023														September 30, 2023
Interest Rate Swap Agreements:	Interest Rate Swap Agreements:													Interest Rate Swap Agreements:
Institutional counterparties	Institutional counterparties	$	93,842	$	(43,336)	$	50,506	$	—	$	—	$	50,506	Institutional counterparties	$	117,306	$	(53,346)	$	63,960	$	—	$	—	$	63,960
Commercial counterparties	Commercial counterparties	2,250		—		2,250		—		—		2,250		Commercial counterparties	261		—		261		—		—		261
Total	Total	$	96,092	$	(43,336)	$	52,756	$	—	$	—	$	52,756	Total	$	117,567	$	(53,346)	$	64,221	$	—	$	—	$	64,221

Offsetting of Financial Liabilities and Derivative Liabilities


		Gross Amounts of		Gross Amounts Offset in the		Net Amounts of Liabilities Presented in the		Gross Amounts Not Offset in the Statements of Condition							Gross Amounts of		Gross Amounts Offset in the		Net Amounts of Liabilities Presented in the		Gross Amounts Not Offset in the Statements of Condition
		Recognized		Statements of		Statements of		Financial		Cash					Recognized		Statements of		Statements of		Financial		Cash
(In thousands)	(In thousands)	Liabilities		Condition		Condition		Instruments		Collateral Pledged		Net Amount		(In thousands)	Liabilities		Condition		Condition		Instruments		Collateral Pledged		Net Amount
June 30, 2023
September 30, 2023														September 30, 2023
Interest Rate Swap Agreements:	Interest Rate Swap Agreements:													Interest Rate Swap Agreements:
Institutional counterparties	Institutional counterparties	$	(1,600)	$	5	$	(1,595)	$	9,918	$	—	$	8,323	Institutional counterparties	$	(274)	$	2	$	(272)	$	9,676	$	—	$	9,404
Commercial counterparties	Commercial counterparties	(105,357)		12,294		(93,063)		—		—		(93,063)		Commercial counterparties	(131,221)		14,857		(116,364)		—		—		(116,364)
Total	Total	$	(106,957)	$	12,299	$	(94,658)	$	9,918	$	—	$	(84,740)	Total	$	(131,495)	$	14,859	$	(116,636)	$	9,676	$	—	$	(106,960)

3940

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Offsetting of Financial Assets and Derivative Assets


	Gross Amounts of		Gross Amounts Offset in the		Net Amounts of Assets Presented in the		Gross Amounts Not Offset in the Statements of Condition
	Recognized		Statements of		Statements of		Financial		Cash
(In thousands)	Assets		Condition		Condition		Instruments		Collateral Received		Net Amount
December 31, 2022
Interest Rate Swap Agreements:
Institutional counterparties	$	96,295	$	(45,046)	$	51,249	$	—	$	—	$	51,249
Commercial counterparties	975		—		975		—		—		975
Total	$	97,270	$	(45,046)	$	52,224	$	—	$	—	$	52,224

Offsetting of Financial Liabilities and Derivative Liabilities


	Gross Amounts of		Gross Amounts Offset in the		Net Amounts of Liabilities Presented in the		Gross Amounts Not Offset in the Statements of Condition
	Recognized		Statements of		Statements of		Financial		Cash
(In thousands)	Liabilities		Condition		Condition		Instruments		Collateral Pledged		Net Amount
December 31, 2022
Interest Rate Swap Agreements:
Institutional counterparties	$	(1,271)	$	36	$	(1,235)	$	11,973	$	—	$	10,738
Commercial counterparties	(102,595)		6,507		(96,088)		—		—		(96,088)
Total	$	(103,866)	$	6,543	$	(97,323)	$	11,973	$	—	$	(85,350)

4041

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8. LEASES

Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches, ATM locations, and office space. Most of the Company’s leases are classified as operating leases. At ~~June~~September 30, 2023, lease expiration dates ranged from 1 month to 1716 years.

The following table represents the Consolidated Balance Sheets classification of the Company’s right-of-use (“ROU”) assets and lease liabilities:


(In thousands)	(In thousands)		June 30, 2023		December 31, 2022		(In thousands)		September 30, 2023		December 31, 2022
Lease Right-of-Use Assets	Lease Right-of-Use Assets	Classification					Lease Right-of-Use Assets	Classification
Operating lease right-of-use assets	Operating lease right-of-use assets	Other assets	$	48,305	$	46,411	Operating lease right-of-use assets	Other assets	$	48,173	$	46,411
Finance lease right-of-use assets	Finance lease right-of-use assets	Premises and equipment, net	5,857		6,151		Finance lease right-of-use assets	Premises and equipment, net	5,727		6,151
Total Lease Right-of-Use Assets	Total Lease Right-of-Use Assets		$	54,162	$	52,562	Total Lease Right-of-Use Assets		$	53,900	$	52,562

Lease Liabilities	Lease Liabilities						Lease Liabilities
Operating lease liabilities	Operating lease liabilities	Other liabilities	$	54,315	$	53,736	Operating lease liabilities	Other liabilities	$	54,128	$	53,736
Finance lease liabilities	Finance lease liabilities	Other liabilities	8,979		9,306		Finance lease liabilities	Other liabilities	8,831		9,306
Total Lease Liabilities	Total Lease Liabilities		$	63,294	$	63,042	Total Lease Liabilities		$	62,959	$	63,042

Supplemental information related to leases was as follows:


		June 30, 2023		December 31, 2022			September 30, 2023		December 31, 2022
Weighted-Average Remaining Lease Term (in years)	Weighted-Average Remaining Lease Term (in years)					Weighted-Average Remaining Lease Term (in years)
Operating leases	Operating leases	8.7		9.3		Operating leases	8.5		9.3
Finance leases	Finance leases	11.3		11.8		Finance leases	11.1		11.8

Weighted-Average Discount Rate	Weighted-Average Discount Rate					Weighted-Average Discount Rate
Operating leases	Operating leases	2.78	%	2.56	%	Operating leases	2.85	%	2.56	%
Finance leases	Finance leases	5.00	%	5.00	%	Finance leases	5.00	%	5.00	%

The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For real estate leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes, and insurance are not included in the measurement of the lease liability since they are generally able to be segregated.

The Company does not have any material sub-lease agreements.

Lease expense for operating leases for the three months ended ~~June~~September 30, 2023 was ~~$2.3~~$2.2 million. Lease expense for operating leases for the ~~six~~nine months ended ~~June~~September 30, 2023 was ~~$4.6~~$6.9 million. Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

Lease expense for operating leases for the three months ended ~~June~~September 30, 2022 was ~~$2.6~~$2.2 million. Lease expense for operating leases for the ~~six~~nine months ended ~~June~~September 30, 2022 was ~~$5.1~~$7.3 million. Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.

4142

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental cash flow information related to leases was as follows:


		Three Months Ended					Three Months Ended
(In thousands)	(In thousands)	June 30, 2023		June 30, 2022		(In thousands)	September 30, 2023		September 30, 2022
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	2,251	$	2,533	Operating cash flows from operating leases	$	2,267	$	2,518
Operating cash flows from finance leases	Operating cash flows from finance leases	112		120		Operating cash flows from finance leases	112		119
Financing cash flows from finance leases	Financing cash flows from finance leases	148		138		Financing cash flows from finance leases	148		139


		Six Months Ended					Nine Months Ended
(In thousands)	(In thousands)	June 30, 2023		June 30, 2022		(In thousands)	September 30, 2023		September 30, 2022
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	4,524	$	5,149	Operating cash flows from operating leases	$	6,800	$	7,657
Operating cash flows from finance leases	Operating cash flows from finance leases	225		240		Operating cash flows from finance leases	336		359
Financing cash flows from finance leases	Financing cash flows from finance leases	295		276		Financing cash flows from finance leases	443		414

The following table presents a maturity analysis of the Company’s lease liability by lease classification at ~~June~~September 30, 2023:


(In thousands)	(In thousands)	Operating Leases		Finance Leases		(In thousands)	Operating Leases		Finance Leases
2023	2023	$	4,775	$	519	2023	$	2,399	$	260
2024	2024	9,247		1,039		2024	9,470		1,039
2025	2025	7,770		1,039		2025	8,259		1,039
2026	2026	6,838		1,039		2026	7,262		1,039
2027	2027	6,030		1,039		2027	6,383		1,039
Thereafter	Thereafter	25,963		7,075		Thereafter	26,594		7,075
Total undiscounted lease payments	Total undiscounted lease payments	60,623		11,750		Total undiscounted lease payments	60,367		11,491
Less amounts representing interest	Less amounts representing interest	(6,308)		(2,771)		Less amounts representing interest	(6,239)		(2,660)
Lease liability	Lease liability	$	54,315	$	8,979	Lease liability	$	54,128	$	8,831

4243

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9. CAPITAL RATIOS AND SHAREHOLDERS’ EQUITY

The actual and required capital ratios were as follows:


		June 30, 2023		December 31, 2022		Minimum Capital Requirement			September 30, 2023		December 31, 2022		Minimum Capital Requirement
Company (consolidated)	Company (consolidated)							Company (consolidated)
Total capital to risk-weighted assets	Total capital to risk-weighted assets	14.4	%	14.6	%	8.0	%	Total capital to risk-weighted assets	14.4	%	14.6	%	8.0	%
Common equity tier 1 capital to risk-weighted assets	Common equity tier 1 capital to risk-weighted assets	12.1		12.4		4.5		Common equity tier 1 capital to risk-weighted assets	12.1		12.4		4.5
Tier 1 capital to risk-weighted assets	Tier 1 capital to risk-weighted assets	12.3		12.6		6.0		Tier 1 capital to risk-weighted assets	12.3		12.6		6.0
Tier 1 capital to average assets	Tier 1 capital to average assets	9.6		10.2		4.0		Tier 1 capital to average assets	9.8		10.2		4.0


		June 30, 2023		December 31, 2022		Regulatory Minimum to be Adequately Capitalized		Regulatory Minimum to be Well Capitalized			September 30, 2023		December 31, 2022		Regulatory Minimum to be Adequately Capitalized		Regulatory Minimum to be Well Capitalized
Bank	Bank									Bank
Total capital to risk-weighted assets	Total capital to risk-weighted assets	13.4	%	13.6	%	8.0	%	10.0	%	Total capital to risk-weighted assets	13.4	%	13.6	%	8.0	%	10.0	%
Common equity tier 1 capital to risk-weighted assets	Common equity tier 1 capital to risk-weighted assets	12.4		12.6		4.5		6.5		Common equity tier 1 capital to risk-weighted assets	12.4		12.6		4.5		6.5
Tier 1 capital to risk-weighted assets	Tier 1 capital to risk-weighted assets	12.4		12.6		6.0		8.0		Tier 1 capital to risk-weighted assets	12.4		12.6		6.0		8.0
Tier 1 capital to average assets	Tier 1 capital to average assets	9.6		10.2		4.0		5.0		Tier 1 capital to average assets	9.7		10.2		4.0		5.0

The Company and the Bank are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Failure to meet capital requirements can initiate regulatory action. At each date shown, the Company met the minimum capital requirements and the Bank met the conditions to be classified as “well capitalized” under the relevant regulatory framework. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table above.

As of January 1, 2019, banking organizations must maintain a minimum Common equity Tier 1 risk-based capital ratio of 7.0%, a minimum Tier 1 risk-based capital ratio of 8.5%, and a minimum Total risk-based capital ratio of 10.5%, including a 2.5% capital conservation buffer. Capital rules impose restrictions on capital distributions and certain discretionary cash bonus payments if the capital conservation buffer is not met.

At ~~June~~September 30, 2023, the capital levels of both the Company and the Bank exceeded all regulatory capital requirements and the Bank's regulatory capital ratios were above the minimum levels required to be considered well capitalized for regulatory purposes. The capital levels of both the Company and the Bank at ~~June~~September 30, 2023 also exceeded the minimum capital requirements including the currently applicable capital conservation buffer of 2.5%.

4344

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accumulated other comprehensive (loss)

Components of accumulated other comprehensive (loss) is as follows:


(In thousands)	(In thousands)	June 30, 2023		December 31, 2022		(In thousands)	September 30, 2023		December 31, 2022
Other accumulated comprehensive income, before tax:	Other accumulated comprehensive income, before tax:					Other accumulated comprehensive income, before tax:
Net unrealized holding (loss) on AFS securities	Net unrealized holding (loss) on AFS securities	$	(237,760)	$	(236,887)	Net unrealized holding (loss) on AFS securities	$	(278,285)	$	(236,887)
Net unrealized (loss) on cash flow hedging derivatives	Net unrealized (loss) on cash flow hedging derivatives	(12,780)		(6,667)		Net unrealized (loss) on cash flow hedging derivatives	(15,739)		(6,667)
Net unrealized holding (loss) on pension plans	Net unrealized holding (loss) on pension plans	(844)		(844)		Net unrealized holding (loss) on pension plans	(844)		(844)

Income taxes related to items of accumulated other comprehensive income:	Income taxes related to items of accumulated other comprehensive income:					Income taxes related to items of accumulated other comprehensive income:
Net unrealized tax benefit on AFS securities	Net unrealized tax benefit on AFS securities	61,486		61,329		Net unrealized tax benefit on AFS securities	72,030		61,329
Net unrealized tax benefit on cash flow hedging derivatives	Net unrealized tax benefit on cash flow hedging derivatives	3,430		1,789		Net unrealized tax benefit on cash flow hedging derivatives	4,224		1,789
Net unrealized tax benefit on pension plans	Net unrealized tax benefit on pension plans	228		228		Net unrealized tax benefit on pension plans	228		228
Accumulated other comprehensive loss	Accumulated other comprehensive loss	$	(186,240)	$	(181,052)	Accumulated other comprehensive loss	$	(218,386)	$	(181,052)

The following table presents the components of other comprehensive (loss) for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022:


(In thousands)	(In thousands)	Before Tax		Tax Effect		Net of Tax		(In thousands)	Before Tax		Tax Effect		Net of Tax
Three Months Ended June 30, 2023
Three Months Ended September 30, 2023								Three Months Ended September 30, 2023
Net unrealized holding loss on AFS securities:	Net unrealized holding loss on AFS securities:	x						Net unrealized holding loss on AFS securities:	x
Net unrealized (losses) arising during the period	Net unrealized (losses) arising during the period	$	(24,842)	$	6,381	$	(18,461)	Net unrealized (losses) arising during the period	$	(40,525)	$	10,544	$	(29,981)
Less: reclassification adjustment for gains realized in net income	Less: reclassification adjustment for gains realized in net income	—		—		—		Less: reclassification adjustment for gains realized in net income	—		—		—
Net unrealized holding gain on AFS securities	Net unrealized holding gain on AFS securities	(24,842)		6,381		(18,461)		Net unrealized holding gain on AFS securities	(40,525)		10,544		(29,981)

Net unrealized gain on cash flow hedging derivatives:
Net unrealized (loss) arising during the period		(12,067)		3,239		(8,828)
Less: reclassification adjustment for (losses) realized in net income		(157)		42		(115)
Net unrealized gain on cash flow hedging derivatives		(11,910)		3,197		(8,713)

Other comprehensive income		$	(36,752)	$	9,578	$	(27,174)

Three Months Ended June 30, 2022
Net unrealized holding loss on AFS securities:
Net unrealized (losses) arising during the period		$	(60,481)	$	15,723	$	(44,758)
Less: reclassification adjustment for gains realized in net income		6		(2)		4
Net unrealized holding (loss) on AFS securities		(60,487)		15,725		(44,762)

Net unrealized loss on cash flow hedging derivatives:	Net unrealized loss on cash flow hedging derivatives:							Net unrealized loss on cash flow hedging derivatives:
Net unrealized (loss) arising during the period	Net unrealized (loss) arising during the period	—		—		—		Net unrealized (loss) arising during the period	(3,118)		836		(2,282)
Less: reclassification adjustment for (losses) realized in net income	Less: reclassification adjustment for (losses) realized in net income	—		—		—		Less: reclassification adjustment for (losses) realized in net income	(159)		42		(117)
Net unrealized gain on cash flow hedging derivatives		—		—		—
Net unrealized loss on cash flow hedging derivatives								Net unrealized loss on cash flow hedging derivatives	(2,959)		794		(2,165)

Other comprehensive (loss)	Other comprehensive (loss)	$	(60,487)	$	15,725	$	(44,762)	Other comprehensive (loss)	$	(43,484)	$	11,338	$	(32,146)

Three Months Ended September 30, 2022								Three Months Ended September 30, 2022
Net unrealized holding loss on AFS securities:								Net unrealized holding loss on AFS securities:
Net unrealized (losses) arising during the period								Net unrealized (losses) arising during the period	$	(83,073)	$	21,639	$	(61,434)
Less: reclassification adjustment for gains realized in net income								Less: reclassification adjustment for gains realized in net income	—		—		—
Net unrealized holding (loss) on AFS securities								Net unrealized holding (loss) on AFS securities	(83,073)		21,639		(61,434)

Net unrealized loss on cash flow hedging derivatives:								Net unrealized loss on cash flow hedging derivatives:
Net unrealized (loss) arising during the period								Net unrealized (loss) arising during the period	(5,555)		1,494		(4,061)
Less: reclassification adjustment for (losses) realized in net income								Less: reclassification adjustment for (losses) realized in net income	—		—		—
Net unrealized (loss) on cash flow hedging derivatives								Net unrealized (loss) on cash flow hedging derivatives	(5,555)		1,494		(4,061)

Other comprehensive (loss)								Other comprehensive (loss)	$	(88,628)	$	23,133	$	(65,495)

4445

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(In thousands)	(In thousands)	Before Tax		Tax Effect		Net of Tax		(In thousands)	Before Tax		Tax Effect		Net of Tax
Six Months Ended June 30, 2023
Net unrealized holding gain on AFS securities:
Net unrealized gains arising during the period		$	(874)	$	157	$	(717)
Nine Months Ended September 30, 2023								Nine Months Ended September 30, 2023
Net unrealized holding loss on AFS securities:								Net unrealized holding loss on AFS securities:
Net unrealized (losses) arising during the period								Net unrealized (losses) arising during the period	$	(41,398)	$	10,701	$	(30,697)
Less: reclassification adjustment for gains realized in net income	Less: reclassification adjustment for gains realized in net income	—		—		—		Less: reclassification adjustment for gains realized in net income	—		—		—
Net unrealized holding gain on AFS securities		(874)		157		(717)
Net unrealized holding (loss) on AFS securities								Net unrealized holding (loss) on AFS securities	(41,398)		10,701		(30,697)

Net unrealized gain on cash flow hedging derivatives:
Net unrealized gain arising during the period		(6,426)		1,725		(4,701)
Net unrealized loss on cash flow hedging derivatives:								Net unrealized loss on cash flow hedging derivatives:
Net unrealized (losses) arising during the period								Net unrealized (losses) arising during the period	(9,545)		2,562		(6,983)
Less: reclassification adjustment for (losses) realized in net income	Less: reclassification adjustment for (losses) realized in net income	(314)		84		(230)		Less: reclassification adjustment for (losses) realized in net income	(473)		127		(346)
Net unrealized gain on cash flow hedging derivatives		(6,112)		1,641		(4,471)
Net unrealized loss on cash flow hedging derivatives								Net unrealized loss on cash flow hedging derivatives	(9,072)		2,435		(6,637)

Other comprehensive income		$	(6,986)	$	1,798	$	(5,188)
Other comprehensive (loss)								Other comprehensive (loss)	$	(50,470)	$	13,136	$	(37,334)

Six Months Ended June 30, 2022
Nine Months Ended September 30, 2022								Nine Months Ended September 30, 2022
Net unrealized holding loss on AFS securities:	Net unrealized holding loss on AFS securities:							Net unrealized holding loss on AFS securities:
Net unrealized (losses) arising during the period	Net unrealized (losses) arising during the period	$	(161,854)	$	42,102	$	(119,752)	Net unrealized (losses) arising during the period	$	(244,927)	$	63,741	$	(181,186)
Less: reclassification adjustment for gains realized in net income	Less: reclassification adjustment for gains realized in net income	6		(2)		4		Less: reclassification adjustment for gains realized in net income	6		(2)		4
Net unrealized holding (loss) on AFS securities	Net unrealized holding (loss) on AFS securities	(161,860)		42,104		(119,756)		Net unrealized holding (loss) on AFS securities	(244,933)		63,743		(181,190)

Net unrealized loss on cash flow hedging derivatives:	Net unrealized loss on cash flow hedging derivatives:							Net unrealized loss on cash flow hedging derivatives:
Net unrealized (loss) arising during the period	Net unrealized (loss) arising during the period	—		—		—		Net unrealized (loss) arising during the period	(5,555)		1,494		(4,061)
Less: reclassification adjustment for (losses) realized in net income	Less: reclassification adjustment for (losses) realized in net income	—		—		—		Less: reclassification adjustment for (losses) realized in net income	—		—		—
Net unrealized gain on cash flow hedging derivatives		—		—		—
Net unrealized (loss) on cash flow hedging derivatives								Net unrealized (loss) on cash flow hedging derivatives	(5,555)		1,494		(4,061)

Other comprehensive (loss)	Other comprehensive (loss)	(161,860)		42,104		(119,756)		Other comprehensive (loss)	(250,488)		65,237		(185,251)

4546

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the changes in each component of accumulated other comprehensive (loss), for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022:


(In thousands)	(In thousands)	Net unrealized holding loss on AFS Securities		Net loss on effective cash flow hedging derivatives		Net unrealized holding loss on pension plans		Total		(In thousands)	Net unrealized holding loss on AFS Securities		Net loss on effective cash flow hedging derivatives		Net unrealized holding loss on pension plans		Total
Three Months Ended June 30, 2023
Three Months Ended September 30, 2023										Three Months Ended September 30, 2023
Balance at Beginning of Period	Balance at Beginning of Period	$	(157,813)	$	(636)	$	(617)	$	(159,066)	Balance at Beginning of Period	$	(176,274)	$	(9,350)	$	(616)	$	(186,240)
Other comprehensive (loss) before reclassifications	Other comprehensive (loss) before reclassifications	(18,461)		(8,828)				(27,289)		Other comprehensive (loss) before reclassifications	(29,981)		(2,282)				(32,263)
Less: amounts reclassified from accumulated other comprehensive (loss)	Less: amounts reclassified from accumulated other comprehensive (loss)	—		(115)		—		(115)		Less: amounts reclassified from accumulated other comprehensive (loss)	—		(117)		—		(117)
Total other comprehensive (loss)	Total other comprehensive (loss)	(18,461)		(8,713)		—		(27,174)		Total other comprehensive (loss)	(29,981)		(2,165)		—		(32,146)
Balance at End of Period	Balance at End of Period	$	(176,274)	$	(9,349)	$	(617)	$	(186,240)	Balance at End of Period	$	(206,255)	$	(11,515)	$	(616)	$	(218,386)

Three Months Ended June 30, 2022
Three Months Ended September 30, 2022										Three Months Ended September 30, 2022
Balance at Beginning of Period	Balance at Beginning of Period	$	(76,392)	$	—	$	(1,845)	$	(78,237)	Balance at Beginning of Period	$	(121,154)	$	—	$	(1,845)	$	(122,999)
Other comprehensive (loss) before reclassifications	Other comprehensive (loss) before reclassifications	(44,758)		—		—		(44,758)		Other comprehensive (loss) before reclassifications	(61,434)		(4,061)		—		(65,495)
Less: amounts reclassified from accumulated other comprehensive (loss)	Less: amounts reclassified from accumulated other comprehensive (loss)	4		—		—		4		Less: amounts reclassified from accumulated other comprehensive (loss)	—		—		—		—
Total other comprehensive income	Total other comprehensive income	(44,762)		—		—		(44,762)		Total other comprehensive income	(61,434)		(4,061)		—		(65,495)

Balance at End of Period	Balance at End of Period	$	(121,154)	$	—	$	(1,845)	$	(122,999)	Balance at End of Period	$	(182,588)	$	(4,061)	$	(1,845)	$	(188,494)


(In thousands)	(In thousands)	Net unrealized holding loss on AFS Securities		Net loss on effective cash flow hedging derivatives		Net unrealized holding loss on pension plans		Total		(In thousands)	Net unrealized holding loss on AFS Securities		Net loss on effective cash flow hedging derivatives		Net unrealized holding loss on pension plans		Total
Six Months Ended June 30, 2023
Nine Months Ended September 30, 2023										Nine Months Ended September 30, 2023
Balance at Beginning of Period	Balance at Beginning of Period	$	(175,557)	$	(4,878)	$	(617)	(181,052)		Balance at Beginning of Period	$	(175,558)	$	(4,878)	$	(616)	$	(181,052)
Other comprehensive (loss) before reclassifications	Other comprehensive (loss) before reclassifications	(717)		(4,701)		—		(5,418)		Other comprehensive (loss) before reclassifications	(30,697)		(6,983)		—		$	(37,680)
Less: amounts reclassified from accumulated other comprehensive (loss)	Less: amounts reclassified from accumulated other comprehensive (loss)	—		(230)		—		(230)		Less: amounts reclassified from accumulated other comprehensive (loss)	—		(346)		—		$	(346)
Total other comprehensive (loss)	Total other comprehensive (loss)	(717)		(4,471)		—		(5,188)		Total other comprehensive (loss)	(30,697)		(6,637)		—		(37,334)
Balance at End of Period	Balance at End of Period	$	(176,274)	$	(9,349)	$	(617)	$	(186,240)	Balance at End of Period	(206,255)		(11,515)		(616)		(218,386)

Six Months Ended June 30, 2022
Nine Months Ended September 30, 2022										Nine Months Ended September 30, 2022
Balance at Beginning of Period	Balance at Beginning of Period	$	(1,398)	$	—	$	(1,845)	$	(3,243)	Balance at Beginning of Period	$	(1,398)	$	—	$	(1,845)	$	(3,243)
Other comprehensive (loss) before reclassifications	Other comprehensive (loss) before reclassifications	(119,752)		—		—		(119,752)		Other comprehensive (loss) before reclassifications	(181,186)		(4,061)				(185,247)
Less: amounts reclassified from accumulated other comprehensive (loss)	Less: amounts reclassified from accumulated other comprehensive (loss)	4		—		—		4		Less: amounts reclassified from accumulated other comprehensive (loss)	4		—		—		4
Total other comprehensive income	Total other comprehensive income	(119,756)		—		—		(119,756)		Total other comprehensive income	(181,190)		(4,061)		—		(185,251)

Balance at End of Period	Balance at End of Period	$	(121,154)	$	—	$	(1,845)	$	(122,999)	Balance at End of Period	$	(182,588)	$	(4,061)	$	(1,845)	$	(188,494)

4647

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the amounts reclassified out of each component of accumulated other comprehensive

income for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022:


						Affected Line Item in the						Affected Line Item in the
		Three Months Ended June 30,				Statement where Net Income		Three Months Ended September 30,				Statement where Net Income
(In thousands)	(In thousands)	2023		2022		is Presented	(In thousands)	2023		2022		is Presented
Realized gains on AFS securities:	Realized gains on AFS securities:						Realized gains on AFS securities:
		$	—	$	6	Non-interest income		$	—	$	—	Non-interest income

		—		(2)		Tax expense		—		—		Tax expense
		—		4		Net of tax		—		—		Net of tax

Realized (losses) on cash flow hedging derivatives:	Realized (losses) on cash flow hedging derivatives:						Realized (losses) on cash flow hedging derivatives:
		(157)		—		Interest expense		(159)		—		Interest expense
		—		—		Non-interest expense		—		—		Non-interest expense
		42		—		Tax benefit		42		—		Tax benefit
		(115)		—		Net of tax		(117)		—		Net of tax

Total reclassifications for the period	Total reclassifications for the period	$	(115)	$	4	Net of tax	Total reclassifications for the period	$	(117)	$	—	Net of tax


						Affected Line Item in the						Affected Line Item in the
		Six Months Ended June 30,				Statement where Net Income		Nine Months Ended September 30,				Statement where Net Income
(In thousands)	(In thousands)	2023		2022		is Presented	(In thousands)	2023		2022		is Presented
Realized gains on AFS securities:	Realized gains on AFS securities:						Realized gains on AFS securities:
		$	—	$	6	Non-interest income		$	—	$	6	Non-interest income

		—		(2)		Tax expense		—		(2)		Tax expense
		—		4		Net of tax		—		4		Net of tax

Realized (losses) on cash flow hedging derivatives:	Realized (losses) on cash flow hedging derivatives:						Realized (losses) on cash flow hedging derivatives:
		(314)		—		Interest expense		(473)		—		Interest expense
		—		—		Non-interest expense		—		—		Non-interest expense
		84		—		Tax benefit		127		—		Tax benefit
		(230)		—		Net of tax		(346)		—		Net of tax

Total reclassifications for the period	Total reclassifications for the period	$	(230)	$	4	Net of tax	Total reclassifications for the period	$	(346)	$	4	Net of tax

4748

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. EARNINGS PER SHARE

Earnings per share have been computed based on the following (average diluted shares outstanding are calculated using the treasury stock method):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share data)	(In thousands, except per share data)	2023		2022		2023		2022		(In thousands, except per share data)	2023		2022		2023		2022

Net income	Net income	$	23,861	$	23,115	$	51,498	$	43,311	Net income	$	19,545	$	18,717	$	71,043	$	62,028

Average number of common shares issued	Average number of common shares issued	51,903		51,903		51,903		51,903		Average number of common shares issued	51,903		51,903		51,903		51,903
Less: average number of treasury shares	Less: average number of treasury shares	7,624		5,247		7,552		4,375		Less: average number of treasury shares	7,916		6,433		7,675		5,068
Less: average number of unvested stock award shares	Less: average number of unvested stock award shares	836		838		787		795		Less: average number of unvested stock award shares	823		770		793		779

Average number of basic shares outstanding	Average number of basic shares outstanding	43,443		45,818		43,564		46,733		Average number of basic shares outstanding	43,164		44,700		43,435		46,056
Plus: dilutive effect of unvested stock award shares	Plus: dilutive effect of unvested stock award shares	89		283		216		337		Plus: dilutive effect of unvested stock award shares	183		330		205		336
Plus: dilutive effect of stock options outstanding	Plus: dilutive effect of stock options outstanding	—		1		—		4		Plus: dilutive effect of stock options outstanding	—		4		—		4
Average number of diluted shares outstanding	Average number of diluted shares outstanding	43,532		46,102		43,780		47,074		Average number of diluted shares outstanding	43,347		45,034		43,640		46,396

Basic earnings per common share:	Basic earnings per common share:	$	0.55	$	0.50	$	1.18	$	0.93	Basic earnings per common share:	$	0.45	$	0.42	$	1.64	$	1.35

Diluted earnings per common share:	Diluted earnings per common share:	$	0.55	$	0.50	$	1.18	$	0.92	Diluted earnings per common share:	$	0.45	$	0.42	$	1.63	$	1.34

For the three months ended ~~June~~September 30, 2023, ~~747~~639 thousand shares of unvested restricted stock and 49 thousand options outstanding were anti-dilutive and therefore excluded from the earnings per share calculation. For the ~~six~~nine months ended ~~June~~September 30, 2023, ~~563~~569 thousand shares of unvested restricted stock and 49 thousand options outstanding were anti-dilutive and therefore excluded from the earnings per share calculation. For the three months ended ~~June~~September 30, 2022, ~~555~~440 thousand shares of unvested restricted stock and 7468 thousand options outstanding were anti-dilutive and therefore excluded from the earnings per share calculation. For the ~~six~~nine months ended ~~June~~September 30, 2022, ~~445~~448 thousand shares of unvested restricted stock and 7569 thousand options outstanding were anti-dilutive and therefore excluded from the earnings per share calculation.

4849

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. STOCK-BASED COMPENSATION PLANS

A combined summary of activity in the Company’s stock award and stock option plans for the ~~three~~nine months ended ~~June~~September 30, 2023 is presented in the following table:


		Non-Vested Stock Awards Outstanding			Stock Options Outstanding				Non-Vested Stock Awards Outstanding			Stock Options Outstanding
(Shares in thousands)	(Shares in thousands)	Number of Shares	Weighted-Average Grant Date Fair Value		Number of Shares	Weighted-Average Exercise Price		(Shares in thousands)	Number of Shares	Weighted-Average Grant Date Fair Value		Number of Shares	Weighted-Average Exercise Price
December 31, 2022	December 31, 2022	704	$	22.85	49	$	26.46	December 31, 2022	704	$	22.85	49	$	26.46
Granted	Granted	392	27.00		—	—		Granted	400	26.87		—	—
Acquired	Acquired	—	—		—	—		Acquired	—	—		—	—
Stock options exercised	Stock options exercised	—	—		—	—		Stock options exercised	—	—		—	—
Stock awards vested	Stock awards vested	(178)	24.12		—	—		Stock awards vested	(236)	20.91		—	—
Forfeited	Forfeited	(49)	25.72		—	—		Forfeited	(72)	25.48		—	—
Expired	Expired	—	—		—	—		Expired	—	—		—	—
June 30, 2023		869	$	24.60	49	$	26.46
September 30, 2023								September 30, 2023	796	$	24.92	49	$	26.46

During the three and ~~six~~nine months ended ~~June~~September 30, 2023, there were no stock option exercises. During the three and ~~six~~nine months ended ~~June~~September 30, 2022, proceeds from stock option exercises totaled ~~$25 thousand.~~$245 thousand and $269 thousand, respectively. During the three and ~~six~~nine months ended ~~June~~September 30, 2023, there were 8258 thousand and ~~178~~236 thousand shares vested in connection with stock awards, respectively. During the three and ~~six~~nine months ended ~~June~~September 30, 2022, there were 63120 thousand and ~~111~~230 thousand shares vested in connection with stock awards, respectively. All of these shares were issued from available treasury stock. Stock-based compensation expense totaled ~~$2.3~~$2.1 million and ~~$2.1~~$1.7 million during the three months ended ~~June~~September 30, 2023 and 2022, respectively. Stock-based compensation expense totaled ~~$3.5~~$5.5 million and ~~$3.9~~$5.7 million during the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, respectively. Stock-based compensation expense is recognized over the requisite service period for all awards.

4950

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12. FAIR VALUE MEASUREMENTS

A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities that are carried at fair value.

Recurring Fair Value Measurements

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of ~~June~~September 30, 2023 and December 31, 2022, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.


		June 30, 2023									September 30, 2023
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
(In thousands)	(In thousands)	Inputs		Inputs		Inputs		Fair Value		(In thousands)	Inputs		Inputs		Inputs		Fair Value
Trading securities	Trading securities	$	—	$	—	$	6,405	$	6,405	Trading securities	$	—	$	—	$	6,171	$	6,171
Securities available for sale:	Securities available for sale:									Securities available for sale:
U.S Treasuries	U.S Treasuries	7,981		—		—		7,981		U.S Treasuries	7,873		—		—		7,873
Municipal bonds and obligations	Municipal bonds and obligations	—		63,622		—		63,622		Municipal bonds and obligations	—		58,694		—		58,694
Agency collateralized mortgage obligations	Agency collateralized mortgage obligations	—		491,340		—		491,340		Agency collateralized mortgage obligations	—		460,356		—		460,356
Agency residential mortgage-backed securities	Agency residential mortgage-backed securities	—		518,552		—		518,552		Agency residential mortgage-backed securities	—		483,201		—		483,201
Agency commercial mortgage-backed securities	Agency commercial mortgage-backed securities	—		219,777		—		219,777		Agency commercial mortgage-backed securities	—		211,371		—		211,371
Corporate bonds	Corporate bonds	—		34,473		3,930		38,403		Corporate bonds	—		34,280		3,960		38,240

Other bonds and obligations	Other bonds and obligations	—		656		—		656		Other bonds and obligations	—		656		—		656
Equity securities	Equity securities	12,868		—		—		12,868		Equity securities	12,325		—		—		12,325
Loans held for investment at fair value	Loans held for investment at fair value	—		—		401		401		Loans held for investment at fair value	—		—		408		408
Loans held for sale	Loans held for sale	—		8,708		—		8,708		Loans held for sale	—		2,342		—		2,342
Derivative assets	Derivative assets	—		52,636		100		52,736		Derivative assets	—		64,151		10		64,161
Capitalized servicing rights	Capitalized servicing rights	—		—		1,886		1,886		Capitalized servicing rights	—		—		1,706		1,706
Derivative liabilities	Derivative liabilities	—		94,656		—		94,656		Derivative liabilities	—		116,594		9		116,603


	December 31, 2022
	Level 1		Level 2		Level 3		Total
(In thousands)	Inputs		Inputs		Inputs		Fair Value
Trading securities	$	—	$	—	$	6,708	$	6,708
Securities available for sale:
U.S Treasuries	11,973		—		—		11,973
Municipal bonds and obligations	—		63,335		—		63,335
Agency collateralized mortgage obligations	—		531,945		—		531,945
Agency residential mortgage-backed securities	—		546,313		—		546,313
Agency commercial mortgage-backed securities	—		228,468		—		228,468
Corporate bonds	—		36,510		4,000		40,510


Equity securities	12,856		—		—		12,856
Loans held for investment at fair value	—		—		605		605
Loans held for sale	—		942		—		942
Derivative assets	—		54,216		25		54,241
Capitalized servicing rights	—		—		1,846		1,846
Derivative liabilities	—		97,030		—		97,030

There were no transfers between levels during the three and ~~six~~nine months ended ~~June~~September 30, 2023.

5051

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Trading Securities at Fair Value. The Company holds one security designated as a trading security. It is a tax-advantaged economic development bond issued to the Company by a local nonprofit which provides wellness and health programs. The fair value of this security is determined based on a discounted cash flow methodology. Certain inputs to the fair value calculation are unobservable and there is little to no market activity in the security; therefore, the security meets the definition of a Level 3 security. The discount rate used in the valuation of the security is sensitive to movements in the 3-month ~~LIBOR~~SOFR rate.

Securities Available for Sale and Equity Securities. Equity securities classified as Level 1 consist of publicly-traded equity securities for which the fair values can be obtained through quoted market prices in active exchange markets. Equity securities classified as Level 2 consist of securities with infrequent trades in active exchange markets, and pricing is primarily sourced from third party pricing services. AFS securities classified as Level 1 consist of U.S. Treasury securities. AFS securities classified as Level 2 include most of the Company’s debt securities. The pricing on Level 2 and Level 3 was primarily sourced from third party pricing services, overseen by management, and is based on models that consider standard input factors such as dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and condition, among other things. Level 3 pricing includes inputs unobservable to market participants.

Loans Held for Investment. The Company’s held for investment loan portfolio includes loans originated by Company and loans acquired through business combinations. The Company intends to hold these assets until maturity as a part of its business operations. For one acquired portfolio subset, the Company previously accounted for these purchased-credit impaired loans as a pool under ASC 310, as they were determined to have common risk characteristics. These loans were recorded at fair value on acquisition date and subsequently evaluated for impairment collectively. Upon adoption of ASC 326, the Company elected the fair value option on this portfolio, recognizing an $11.2 million fair value write-down charged to retained earnings, net of deferred tax impact, as of January 1, 2020. The fair value of this loan portfolio is determined based on a discounted cash flow methodology. Certain inputs to the fair value calculation are unobservable; therefore, the loans meet the definition of Level 3 assets. The discount rate used in the valuation is consistent with assets that have significant credit deterioration. The cash flow assumptions include payment schedules for loans with current payment histories and estimated collateral value for delinquent loans. All of these loans were nonperforming as of ~~June~~September 30, 2023.

Aggregate Fair Value

June 30, 2023

Aggregate

Less Aggregate

September 30, 2023

Aggregate

Less Aggregate

(In thousands)

Fair Value

Unpaid Principal

(In thousands)

Fair Value

Unpaid Principal

Loans held for investment at fair value

401

9,285

(8,884)

Loans held for investment at fair value

408

9,064

(8,656)

Aggregate Fair Value

December 31, 2022

Aggregate

Less Aggregate

(In thousands)

Fair Value

Unpaid Principal

Loans held for investment at fair value

605

10,948

(10,343)

5152

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loans Held for Sale. The Company elected the fair value option for all loans held for sale (HFS) originated for sale on or after May 1, 2012. Loans HFS are classified as Level 2 as the fair value is based on input factors such as quoted prices for similar loans in active markets.

Aggregate Fair Value

June 30, 2023

Aggregate

Less Aggregate

September 30, 2023

Aggregate

Less Aggregate

(In thousands)

Fair Value

Unpaid Principal

(In thousands)

Fair Value

Unpaid Principal

Loans held for sale

8,708

8,584

124

Loans held for sale

2,342

2,312

Aggregate Fair Value

December 31, 2022

Aggregate

Less Aggregate

(In thousands)

Fair Value

Unpaid Principal

Loans held for sale

942

927

The changes in fair value of loans held for sale for the three and ~~six~~nine months ended ~~June~~September 30, 2023, were losses of $94 thousand and gains of ~~$100 thousand and $109~~$15 thousand, respectively. During the three and ~~six~~nine months ended ~~June~~September 30, 2023, originations of loans held for sale totaled ~~$22.4~~$26.8 million and ~~$29.4~~$56.2 million, respectively. During the three and ~~six~~nine months ended ~~June~~September 30, 2023, sales of loans originated for sale totaled ~~$15.3~~$33.1 million and ~~$21.7~~$54.8 million, respectively.

The changes in fair value of loans held for sale for the three and ~~six~~nine months ended ~~June~~September 30, 2022, were ~~gains~~losses of ~~$14~~$12 thousand and ~~losses of $161~~$173 thousand, respectively. During the three and ~~six~~nine months ended ~~June~~September 30, 2022,

originations of loans held for sale totaled ~~$2.7~~$6.0 million and ~~$10.1~~$16.1 million, respectively. During the three and ~~six~~

nine months ended ~~June~~September 30, 2022, sales of loans originated for sale totaled ~~$2.0~~$6.5 million and ~~$15.1~~$21.6 million, respectively.

Interest Rate Swaps. The valuation of the Company’s interest rate swaps is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings.

Although the Company has determined that the majority of the inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of ~~June~~September 30, 2023, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Commitments to Lend. The Company enters into commitments to lend for residential mortgage loans intended for sale, which commit the Company to lend funds to a potential borrower at a specific interest rate and within a specified period of time. The estimated fair value of commitments to originate residential mortgage loans for sale is based on quoted prices for similar loans in active markets. However, this value is adjusted by a factor which considers the likelihood that the loan in a lock position will ultimately close, and by the non-refundable costs of originating the loan. The closing ratio is derived from the Bank’s internal data and is adjusted using significant management judgment. The costs to originate are primarily based on the Company’s internal commission rates that are not observable. As such, these commitments are classified as Level 3 measurements.

5253

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Forward Sale Commitments. The Company utilizes forward sale commitments as economic hedges against potential changes in the values of the commitments to lend and loans originated for sale. To Be Announced (“TBA”) mortgage-backed securities forward commitment sales are used as the hedging instrument, are classified as Level 1, and consist of publicly-traded debt securities for which identical fair values can be obtained through quoted market prices in active exchange markets. The fair values of the Company’s best efforts and mandatory delivery loan sale commitments are determined similarly to the commitments to lend using quoted prices in the market place that are observable. However, costs to originate and closing ratios included in the calculation are internally generated and are based on management’s judgment and prior experience, which are considered factors that are not observable. As such, best efforts and mandatory forward commitments are classified as Level 3 measurements.

Capitalized Servicing Rights. The Company accounts for certain capitalized servicing rights at fair value in its Consolidated Financial Statements, as the Company is permitted to elect the fair value option for each specific instrument. A loan servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans exceed adequate compensation for performing the servicing. The fair value of servicing rights is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy.

The table below presents the changes in Level 3 assets and liabilities that were measured at fair value on a recurring basis for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022.


		Assets (Liabilities)													Assets (Liabilities)
				Securities		Loans						Capitalized					Securities		Loans						Capitalized
		Trading		Available		Held for		Commitments		Forward		Servicing			Trading		Available		Held for		Commitments		Forward		Servicing
(In thousands)	(In thousands)	Securities		for Sale		Investment		to Lend		Commitments		Rights		(In thousands)	Securities		for Sale		Investment		to Lend		Commitments		Rights
Three Months Ended June 30, 2023
March 31, 2023		$	6,584	$	3,800	$	460	$	26	$	15	$	1,666
Three Months Ended September 30, 2023														Three Months Ended September 30, 2023
June 30, 2023														June 30, 2023	$	6,405	$	3,930	$	401	$	37	$	63	$	1,886

Unrealized (loss)/gain, net recognized in other non-interest income	Unrealized (loss)/gain, net recognized in other non-interest income	34		—		(18)		87		48		220		Unrealized (loss)/gain, net recognized in other non-interest income	(19)		—		28		26		(53)		(180)
Unrealized gain included in accumulated other comprehensive income	Unrealized gain included in accumulated other comprehensive income	—		130		—		—		—		—		Unrealized gain included in accumulated other comprehensive income	—		30		—		—		—		—

Paydown of asset	Paydown of asset	(213)		—		(41)		—		—		—		Paydown of asset	(215)		—		(21)		—		—		—

Transfers to held for sale loans	Transfers to held for sale loans	—		—		—		(76)		—		—		Transfers to held for sale loans	—		—		—		(72)		—		—

June 30, 2023		$	6,405	$	3,930	$	401	$	37	$	63	$	1,886
September 30, 2023														September 30, 2023	$	6,171	$	3,960	$	408	$	(9)	$	10	$	1,706

Six Months Ended June 30, 2023
Nine Months Ended September 30, 2023														Nine Months Ended September 30, 2023
December 31, 2022	December 31, 2022	$	6,708	$	4,000	$	605	$	17	$	8	$	1,846	December 31, 2022	$	6,708	$	4,000	$	605	$	17	$	8	$	1,846

Unrealized (loss)/gain, net recognized in other non-interest income	Unrealized (loss)/gain, net recognized in other non-interest income	123		—		(147)		121		55		40		Unrealized (loss)/gain, net recognized in other non-interest income	104		—		(119)		146		2		(140)
Unrealized (loss) included in accumulated other comprehensive income	Unrealized (loss) included in accumulated other comprehensive income	—		(70)		—		—		—		—		Unrealized (loss) included in accumulated other comprehensive income	—		(40)		—		—		—		—

Paydown of asset	Paydown of asset	(426)		—		(57)		—		—		—		Paydown of asset	(641)		—		(78)		—		—		—
Transfers to held for sale loans	Transfers to held for sale loans	—		—		—		(101)		—		—		Transfers to held for sale loans	—		—		—		(172)		—		—

June 30, 2023		$	6,405	$	3,930	$	401	$	37	$	63	$	1,886
September 30, 2023														September 30, 2023	$	6,171	$	3,960	$	408	$	(9)	$	10	$	1,706

Unrealized (loss)/gain relating to instruments still held at June 30, 2023		$	(266)	$	(200)	$	—	$	37	$	63	$	—
Unrealized (loss)/gain relating to instruments still held at September 30, 2023														Unrealized (loss)/gain relating to instruments still held at September 30, 2023	$	(251)	$	(40)	$	—	$	(9)	$	10	$	—

5354

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


		Assets (Liabilities)													Assets (Liabilities)
				Securities		Loans						Capitalized					Securities		Loans						Capitalized
		Trading		Available		Held for		Commitments		Forward		Servicing			Trading		Available		Held for		Commitments		Forward		Servicing
(In thousands)	(In thousands)	Securities		for Sale		Investment		to Lend		Commitments		Rights		(In thousands)	Securities		for Sale		Investment		to Lend		Commitments		Rights
Three Months Ended June 30, 2022
March 31, 2022		$	7,798	$	4,020	$	1,197	$	18	$	7	$	1,786
Three Months Ended September 30, 2022														Three Months Ended September 30, 2022
June 30, 2022														June 30, 2022	$	7,040	$	4,020	$	1,049	$	26	$	18	$	1,906

Unrealized (loss)/gain, net recognized in other non-interest income	Unrealized (loss)/gain, net recognized in other non-interest income	(556)		—		259		60		11		120		Unrealized (loss)/gain, net recognized in other non-interest income	(23)		—		(6)		41		(11)		120
Unrealized gain included in accumulated other comprehensive income	Unrealized gain included in accumulated other comprehensive income	—		—		—		—		—		—		Unrealized gain included in accumulated other comprehensive income	—		(100)		—		—		—		—

Paydown of asset	Paydown of asset	(202)				(407)		—		—		—		Paydown of asset	(205)				(247)		—		—		—

Transfers to held for sale loans	Transfers to held for sale loans	—		—		—		(52)		—		—		Transfers to held for sale loans	—		—		—		(52)		—		—

June 30, 2022		$	7,040	$	4,020	$	1,049	$	26	$	18	$	1,906
September 30, 2022														September 30, 2022	$	6,812	$	3,920	$	796	$	15	$	7	$	2,026

Six Months Ended June 30, 2022
Nine Months Ended September 30, 2022														Nine Months Ended September 30, 2022
December 31, 2021	December 31, 2021	$	8,354	$	4,030	$	1,200	$	124	$	134	$	1,966	December 31, 2021	$	8,354	$	4,030	$	1,200	$	124	$	134	$	1,966

Unrealized (loss)/gain, net recognized in other non-interest income	Unrealized (loss)/gain, net recognized in other non-interest income	(910)		—		468		130		(116)		(60)		Unrealized (loss)/gain, net recognized in other non-interest income	(933)		—		462		171		(127)		60
Unrealized (loss) included in accumulated other comprehensive income	Unrealized (loss) included in accumulated other comprehensive income	—		(10)		—		—		—		—		Unrealized (loss) included in accumulated other comprehensive income	—		(110)		—		—		—		—

Paydown of asset	Paydown of asset	(404)		—		(619)		—		—		—		Paydown of asset	(609)		—		(866)		—		—		—
Transfers to held for sale loans	Transfers to held for sale loans	—		—		—		(228)		—		—		Transfers to held for sale loans	—		—		—		(280)		—		—
Additions to servicing rights	Additions to servicing rights	—		—		0		—		—		—		Additions to servicing rights	—		—		0		—		—		—
June 30, 2022		$	7,040	$	4,020	$	1,049	$	26	$	18	$	1,906
September 30, 2022														September 30, 2022	$	6,812	$	3,920	$	796	$	15	$	7	$	2,026

Unrealized (loss)/gain relating to instruments still held at June 30, 2022		$	(436)	$	20	$	—	$	26	$	18	$	—
Unrealized (loss)/gain relating to instruments still held at September 30, 2022														Unrealized (loss)/gain relating to instruments still held at September 30, 2022	$	(459)	$	(80)	$	—	$	26	$	18	$	—

5455

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Quantitative information about the significant unobservable inputs within Level 3 recurring assets and liabilities is as follows:


		Fair Value				Significant Unobservable Input				Fair Value				Significant Unobservable Input
(In thousands)	(In thousands)	June 30, 2023		Valuation Techniques	Unobservable Inputs	Value			(In thousands)	September 30, 2023		Valuation Techniques	Unobservable Inputs	Value
Assets (Liabilities)	Assets (Liabilities)								Assets (Liabilities)
Trading Securities	Trading Securities	$	6,405	Discounted Cash Flow	Discount Rate	5.23		%	Trading Securities	$	6,171	Discounted Cash Flow	Discount Rate	5.14		%
AFS Securities	AFS Securities	3,930		Indication from Market Maker	Price	98.00%			AFS Securities	3,960		Indication from Market Maker	Price	99.00%
Loans held for investment	Loans held for investment	401		Discounted Cash Flow	Discount Rate	25.00		%	Loans held for investment	408		Discounted Cash Flow	Discount Rate	25.00		%
					Collateral Value	$0.0 - $17.8							Collateral Value	$0.0 - $18.6
Commitments to lend	Commitments to lend	37		Historical Trend	Closing Ratio	85.01		%	Commitments to lend	(9)		Historical Trend	Closing Ratio	80.39		%
				Pricing Model	Origination Costs, per loan	$	3					Pricing Model	Origination Costs, per loan	$	3
Forward commitments	Forward commitments	63		Historical Trend	Closing Ratio	85.01		%	Forward commitments	10		Historical Trend	Closing Ratio	80.39		%
				Pricing Model	Origination Costs, per loan	$	3					Pricing Model	Origination Costs, per loan	$	3
Capitalized servicing rights	Capitalized servicing rights	1,886		Discounted cash flow	Constant Prepayment Rate (CPR)	9.87		%	Capitalized servicing rights	1,706		Discounted cash flow	Constant Prepayment Rate (CPR)	8.62		%
					Discount Rate	9.57		%					Discount Rate	10.58		%
Total	Total	$	12,722						Total	$	12,246


	Fair Value				Significant Unobservable Input
(In thousands)	December 31, 2022		Valuation Techniques	Unobservable Inputs	Value
Assets (Liabilities)
Trading Securities	$	6,708	Discounted Cash Flow	Discount Rate	5.92		%
AFS Securities	4,000		Indication from Market Maker	Price	100.00		%
Loans held for investment	605		Discounted Cash Flow	Discount Rate	25.00		%
				Collateral Value	$0.0- $20.4
Commitments to lend	17		Historical Trend	Closing Ratio	80.63		%
			Pricing Model	Origination Costs, per loan	$	2
Forward commitments	8		Historical Trend	Closing Ratio	80.63		%
			Pricing Model	Origination Costs, per loan	$	2
Capitalized servicing rights	1,846		Discounted Cash Flow	Constant Prepayment Rate (CPR)	11.07		%
				Discount Rate	9.56		%
Total	$	13,184

5556

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Non-Recurring Fair Value Measurements

The Company is required, on a non-recurring basis, to adjust the carrying value or provide valuation allowances for certain assets using fair value measurements in accordance with GAAP. The following is a summary of applicable non-recurring fair value measurements. There are no liabilities measured at fair value on a non-recurring basis.

June 30, 2023

Fair Value Measurement Date

December 31, 2022

Fair Value Measurement Date

September 30, 2023

Fair Value Measurement Date

December 31, 2022

Fair Value Measurement Date

Level 3

(In thousands)

Inputs

(In thousands)

Inputs

Assets

Individually evaluated

5,773

June 2023

14,571

December 2022

Individually evaluated

5,676

September 2023

14,571

December 2022

Loans held for sale

—

June 2023

3,369

December 2022

Loans held for sale

—

September 2023

3,369

December 2022

Capitalized servicing rights

11,223

June 2023

11,201

December 2022

Capitalized servicing rights

10,850

September 2023

11,201

December 2022

Total

16,996

29,141

Total

16,526

29,141

Quantitative information about the significant unobservable inputs within Level 3 non-recurring assets is as follows:

Fair Value

(In thousands)

~~June~~September 30, 2023

Valuation Techniques

Unobservable Inputs

Range (Weighted Average) (1)

Assets

Individually evaluated

~~5,773~~5,676

Fair Value of Collateral

Discounted Cash Flow - Loss Severity

(100.00)% to ~~13.51% ((49.95)~~(0.01)% (60.44%)

Appraised Value

$0 to ~~$4,190~~$3,361 ($~~-2,611)~~2,336)

Capitalized servicing rights

~~11,223~~10,850

Discounted Cash Flow

Constant Prepayment Rate (CPR)

4.78% to ~~14.01% (11.38%~~12.22% (11.70%)

Discount Rate

9.59% to ~~17.09% (13.98%~~19.71% (15.26%)

Total

~~16,996~~16,526

(1) Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individuals properties.

Fair Value

(In thousands)

December 31, 2022

Valuation Techniques

Unobservable Inputs

Range (Weighted Average) (1)

Assets

Individually evaluated

14,571

Fair Value of Collateral

Discounted Cash Flow - loss severity

(100.00)% to 74.74% ((40.02)%)

Appraised Value

$0 to $2,160 ($643)

Loans held for sale

3,369

Fair Value of Collateral

Appraised Value

$3,369

Capitalized servicing rights

11,201

Discounted Cash Flow

Constant Prepayment Rate (CPR)

5.81% to 13.18% (10.94%)

Discount Rate

9.59% to 22.70% (16.83%)

Total

29,141

There were no Level 1 or Level 2 nonrecurring fair value measurements for the periods ended ~~June~~September 30, 2023 and December 31, 2022.

5657

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Individually evaluated loans. Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records non-recurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Non-recurring adjustments can also include certain impairment amounts for collateral-dependent loans calculated when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan. Real estate collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace. However, the choice of observable data is subject to significant judgment, and there are often adjustments based on judgment in order to make observable data comparable and to consider the impact of time, the condition of properties, interest rates, and other market factors on current values. Additionally, commercial real estate appraisals frequently involve discounting of projected cash flows, which relies inherently on unobservable data. Therefore, nonrecurring fair value measurement adjustments that relate to real estate collateral have generally been classified as Level 3. Estimates of fair value for other collateral that supports commercial loans are generally based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3.

Loans Transferred to Held for Sale. Once a decision has been made to sell loans not previously classified as held for sale, these loans are transferred into the held for sale category and carried at the lower of cost or fair value. Real estate collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace. The choice of observable data is subject to significant judgment, and there are often adjustments based on judgment in order to make observable data comparable and to consider the impact of time, the condition of properties, interest rates, and other market factors on current values. Nonrecurring fair value measurement adjustments that relate to real estate collateral have generally been classified as Level 3. Estimates of fair value for other collateral that supports commercial loans are generally based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3.

Capitalized loan servicing rights. A loan servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans exceed adequate compensation for performing the servicing. The fair value of servicing rights is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Adjustments are only recorded when the discounted cash flows derived from the valuation model are less than the carrying value of the asset. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy.

5758

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summary of Estimated Fair Values of Financial Instruments

The following tables summarize the estimated fair values (represents exit price), and related carrying amounts, of the Company’s financial instruments. Certain financial instruments and all non-financial instruments are excluded. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.


		June 30, 2023											September 30, 2023
		Carrying		Fair									Carrying		Fair
(In thousands)	(In thousands)	Amount		Value		Level 1		Level 2		Level 3		(In thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial Assets	Financial Assets											Financial Assets
Cash and cash equivalents	Cash and cash equivalents	$	640,600	$	640,600	$	640,600	$	—	$	—	Cash and cash equivalents	$	663,470	$	663,470	$	663,470	$	—	$	—
Trading securities	Trading securities	6,405		6,405		—		—		6,405		Trading securities	6,171		6,171		—		—		6,171
Equity securities	Equity securities	12,868		12,868		12,868		—		—		Equity securities	12,325		12,325		12,325		—		—
Securities available for sale	Securities available for sale	1,340,331		1,340,331		7,981		1,328,420		3,930		Securities available for sale	1,260,391		1,260,391		7,873		1,248,558		3,960
Securities held to maturity	Securities held to maturity	563,765		487,960		—		486,313		1,647		Securities held to maturity	552,981		453,729		—		452,178		1,551
Federal Home Loan Bank stock	Federal Home Loan Bank stock	34,714		N/A		N/A		N/A		N/A		Federal Home Loan Bank stock	38,912		N/A		N/A		N/A		N/A
Net loans	Net loans	8,782,183		8,727,074		—		—		8,727,074		Net loans	8,881,585		8,757,345		—		—		8,757,345
Loans held for sale	Loans held for sale	8,708		8,708		—		8,708		—		Loans held for sale	2,342		2,342		—		2,342		—
Accrued interest receivable	Accrued interest receivable	50,580		50,580		—		50,580		—		Accrued interest receivable	52,669		52,669		—		52,669		—

Derivative assets	Derivative assets	52,736		52,736		—		52,636		100		Derivative assets	64,161		64,161		—		64,151		10

Financial Liabilities	Financial Liabilities											Financial Liabilities
Total deposits	Total deposits	$	10,068,407	$	10,035,236	$	—	$	10,035,236	$	—	Total deposits	$	9,980,544	$	9,951,662	$	—	$	9,947,373	$	—
Short-term debt	Short-term debt	470,000		469,935		—		469,935		—		Short-term debt	670,000		669,981		—		669,981		—
Long-term Federal Home Loan Bank advances and other	Long-term Federal Home Loan Bank advances and other	204,345		196,824		—		196,824		—		Long-term Federal Home Loan Bank advances and other	134,295		129,182		—		129,182		—
Subordinated borrowings	Subordinated borrowings	121,238		100,739		—		100,739		—		Subordinated borrowings	121,300		94,192		—		94,192		—
Accrued interest payable	Accrued interest payable	7,096		7,096		—		7,096		—		Accrued interest payable	12,794		12,794		—		12,794		—
Derivative liabilities	Derivative liabilities	94,656		94,656		—		94,656		—		Derivative liabilities	116,603		116,603		—		116,594		9


	December 31, 2022
	Carrying		Fair
(In thousands)	Amount		Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	685,355	$	685,355	$	685,355	$	—	$	—
Trading securities	6,708		6,708		—		—		6,708
Equity securities	12,856		12,856		12,856		—		—
Securities available for sale and other	1,423,200		1,423,200		11,973		1,407,227		4,000
Securities held to maturity	583,453		507,464		—		505,508		1,956
Federal Home Loan Bank stock	7,219		N/A		N/A		N/A		N/A
Net loans	8,239,039		8,194,110		—		—		8,194,110
Loans held for sale	4,311		4,311		—		942		3,369
Accrued interest receivable	46,868		46,868		—		46,868		—

Derivative assets	54,241		54,241		—		54,216		25


Financial Liabilities
Total deposits	$	10,327,269	$	10,283,543	$	—	$	10,283,543	$	—
Short-term debt	—		—		—		—		—
Long-term Federal Home Loan Bank advances	4,445		2,782		—		2,782		—
Subordinated borrowings	121,064		110,853		—		110,853		—
Accrued interest payable	1,610		1,610		—		1,610		—
Derivative liabilities	97,030		97,030		—		97,030		—

5859

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13. NET INTEREST INCOME AFTER PROVISION/(BENEFIT) FOR CREDIT LOSSES

Presented below is net interest income after provision for credit losses for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, respectively.


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	(In thousands)	2023		2022		2023		2022		(In thousands)	2023		2022		2023		2022
Net interest income	Net interest income	$	92,759	$	81,358	$	190,292	$	150,421	Net interest income	$	90,334	$	92,084	$	280,626	$	242,505
Provision/(benefit) for credit losses	Provision/(benefit) for credit losses	8,000		—		16,999		(4,000)		Provision/(benefit) for credit losses	8,000		3,000		24,999		(1,000)
Net interest after provision for credit losses	Net interest after provision for credit losses	$	84,759	$	81,358	$	173,293	$	154,421	Net interest after provision for credit losses	$	82,334	$	89,084	$	255,627	$	243,505

5960

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SELECTED FINANCIAL DATA

The following summary data is based in part on the consolidated financial statements and accompanying notes and other information appearing elsewhere in this or prior Forms 10-Q.


		At or for the						At or for the							At or for the						At or for the
		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended September 30,						Nine Months Ended September 30,
		2023			2022			2023			2022				2023			2022			2023			2022
NOMINAL AND PER SHARE DATA	NOMINAL AND PER SHARE DATA													NOMINAL AND PER SHARE DATA
Net earnings per common share, diluted	Net earnings per common share, diluted	$	0.55		$	0.50		$	1.18		$	0.92		Net earnings per common share, diluted	$	0.45		$	0.42		$	1.63		$	1.34
Operating earnings per common share, diluted (1)(2)	Operating earnings per common share, diluted (1)(2)	0.55			0.51			1.18			0.94			Operating earnings per common share, diluted (1)(2)	0.50			0.62			1.67			1.56
Net income, (thousands)	Net income, (thousands)	23,861			23,115			51,498			43,311			Net income, (thousands)	19,545			18,717			71,043			62,028
Operating net income, (thousands) (1)(2)	Operating net income, (thousands) (1)(2)	23,878			23,562			51,486			44,351			Operating net income, (thousands) (1)(2)	21,516			27,928			73,002			72,279
Net interest income, non FTE	Net interest income, non FTE	92,759			81,358			190,292			150,421			Net interest income, non FTE	90,334			92,084			280,626			242,505
Net interest income, FTE (4)	Net interest income, FTE (4)	94,721			82,918			194,161			153,505			Net interest income, FTE (4)	92,314			93,799			286,476			247,304
Total common shares outstanding, (thousands)	Total common shares outstanding, (thousands)	44,033			45,788			44,033			45,788			Total common shares outstanding, (thousands)	43,822			45,040			43,822			45,040
Average diluted shares, (thousands)	Average diluted shares, (thousands)	43,532			46,102			43,780			47,074			Average diluted shares, (thousands)	43,347			45,034			43,640			46,396
Total book value per common share	Total book value per common share	22.11			22.15			22.11			22.15			Total book value per common share	21.70			20.93			21.70			20.93
Tangible book value per common share (2)	Tangible book value per common share (2)	21.60			21.56			21.60			21.56			Tangible book value per common share (2)	21.23			20.36			21.23			20.36
Dividends per common share	Dividends per common share	0.18			0.12			0.36			0.24			Dividends per common share	0.18			0.12			0.54			0.36
Dividend payout ratio	Dividend payout ratio	33.47		%	25.24		%	31.06		%	27.67		%	Dividend payout ratio	40.56		%	29.35		%	33.67		%	28.18		%

PERFORMANCE RATIOS (3)	PERFORMANCE RATIOS (3)													PERFORMANCE RATIOS (3)
Return on equity		7.82		%	7.82		%	8.46		%	7.31		%
Operating return on equity (1)(2)		7.82			7.97			8.46			7.49
Return on tangible common equity (1)(2)		8.26			8.33			8.92			7.81
Operating return on tangible common equity (1)(2)		8.27			8.48			8.92			7.99
Return on equity, including unrealized losses on AFS securities														Return on equity, including unrealized losses on AFS securities	7.91		%	7.31		%	9.57		%	7.55		%
Return on equity, excluding unrealized losses on AFS securities														Return on equity, excluding unrealized losses on AFS securities	6.35			6.30			7.75			6.97
Operating return on equity, including unrealized losses on AFS securities (1)(2)														Operating return on equity, including unrealized losses on AFS securities (1)(2)	8.71			10.92			9.83			8.79
Operating return on equity, excluding unrealized losses on AFS securities (1)(2)														Operating return on equity, excluding unrealized losses on AFS securities (1)(2)	6.99			9.40			7.97			8.12
Return on tangible common equity, including unrealized losses on AFS securities(1)(2)														Return on tangible common equity, including unrealized losses on AFS securities(1)(2)	8.45			7.88			10.16			8.10
Return on tangible common equity, excluding unrealized losses on AFS securities(1)(2)														Return on tangible common equity, excluding unrealized losses on AFS securities(1)(2)	6.76			6.76			8.19			7.46
Operating return on tangible common equity, including unrealized losses on AFS securities (1)(2)														Operating return on tangible common equity, including unrealized losses on AFS securities (1)(2)	9.27			11.57			10.43			9.37
Operating return on tangible common equity, excluding unrealized losses on AFS securities (1)(2)														Operating return on tangible common equity, excluding unrealized losses on AFS securities (1)(2)	7.41			9.92			8.41			8.64
Return on assets	Return on assets	0.78			0.82			0.86			0.76			Return on assets	0.66			0.67			0.80			0.73
Operating return on assets (1)(2)	Operating return on assets (1)(2)	0.78			0.84			0.86			0.78			Operating return on assets (1)(2)	0.73			1.00			0.82			0.86
Net interest margin, FTE (4)	Net interest margin, FTE (4)	3.24			3.11			3.40			2.86			Net interest margin, FTE (4)	3.18			3.48			3.33			3.05
Efficiency ratio (1)(2)	Efficiency ratio (1)(2)	63.57			66.60			61.50			69.48			Efficiency ratio (1)(2)	65.05			62.01			62.65			66.75

FINANCIAL DATA (in millions, end of period)	FINANCIAL DATA (in millions, end of period)													FINANCIAL DATA (in millions, end of period)
Total assets	Total assets	$	12,090		$	11,579		$	12,090		$	11,579		Total assets	$	12,140		$	11,317		$	12,140		$	11,317
Total earning assets	Total earning assets	11,370			10,849			11,370			10,849			Total earning assets	11,400			10,604			11,400			10,604
Total loans	Total loans	8,882			7,803			8,882			7,803			Total loans	8,984			7,943			8,984			7,943

Total deposits	Total deposits	10,068			10,115			10,068			10,115			Total deposits	9,981			9,988			9,981			9,988
Loans/deposits (%)	Loans/deposits (%)	88		%	77		%	88		%	77		%	Loans/deposits (%)	90		%	80		%	90		%	80		%
Total shareholders' equity	Total shareholders' equity	973			1,014			973			1,014			Total shareholders' equity	951			943			951			943

ASSET QUALITY
Allowance for credit losses, (millions)		$	100		$	99		$	100		$	99
Net charge-offs, (millions)		(6)			—			(13)			(3)
Net charge-offs (QTD annualized)/average loans		0.26		%	0.02		%	0.29		%	0.08		%
Provision expense/(benefit), (millions)		$	8		$	—		$	17		$	(4)

Non-accruing loans/total loans		0.32		%	0.34		%	0.32		%	0.34		%
Allowance for credit losses/non-accruing loans		353			368			353			368
Allowance for credit losses/total loans		1.13			1.27			1.13			1.27

CAPITAL RATIOS
Common equity tier 1 capital to risk-weighted assets		12.1		%	12.9		%	12.1		%	12.9		%
Tier 1 capital leverage ratio		9.6			10.2			9.6			10.2
Tangible common shareholders' equity/tangible assets (2)		7.9			8.5			7.9			8.5

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ASSET QUALITY
Allowance for credit losses, (millions)	$	103		$	96		$	103		$	96
Net charge-offs, (millions)	(5)			(6)			(18)			(9)
Net charge-offs (QTD annualized)/average loans	0.24		%	0.30		%	0.28		%	0.16		%
Provision expense/(benefit), (millions)	$	8		$	3		$	25		$	(1)

Non-accruing loans/total loans	0.30		%	0.48		%	0.30		%	0.48		%
Allowance for credit losses/non-accruing loans	386			254			386			254
Allowance for credit losses/total loans	1.14			1.21			1.14			1.21

CAPITAL RATIOS
Common equity tier 1 capital to risk-weighted assets	12.1		%	12.7		%	12.1		%	12.7		%
Tier 1 capital leverage ratio	9.8			10.1			9.8			10.1
Tangible common shareholders' equity/tangible assets (2)	7.7			8.1			7.7			8.1

(1) Operating measurements are non-GAAP financial measures that are adjusted to exclude net non-operating charges primarily related to acquisitions and restructuring activities. Refer to "Reconciliation of Non-GAAP Financial Measures" for additional information.

(2) Non-GAAP financial measure. Refer to "Reconciliation of Non-GAAP Financial Measures" for additional information.

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

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

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AVERAGE BALANCES AND AVERAGE YIELDS/RATES

The following table presents average balances and an analysis of average rates and yields on an annualized fully taxable equivalent basis for the periods included:


		Three Months Ended June 30,												Three Months Ended September 30,
		2023						2022							2023				2022
(Dollars in millions)	(Dollars in millions)	Average Balance		Interest (FTE basis)		Yield/Rate (FTE basis)		Average Balance		Interest (FTE basis)		Yield/Rate (FTE basis)				(Dollars in millions)	Average Balance		Interest (FTE basis)		Yield/Rate (FTE basis)		Average Balance		Interest (FTE basis)		Yield/Rate (FTE basis)
Assets	Assets															Assets
Loans:	Loans:															Loans:
Commercial real estate	Commercial real estate	$	4,283	$	67	6.16	%	$	3,831	$	36	3.79	%			Commercial real estate	$	4,385	$	71	6.32	%	$	3,926	$	46	4.53	%
Commercial and industrial loans	Commercial and industrial loans	1,496		27		7.27		1,447		16		4.46				Commercial and industrial loans	1,436		27		7.48		1,449		19		5.21
Residential mortgages	Residential mortgages	2,488		24		3.87		1,652		15		3.57				Residential mortgages	2,618		26		3.97		1,926		17		3.53
Consumer loans	Consumer loans	524		9		7.28		562		8		5.41				Consumer loans	513		9		7.33		587		9		6.24
Total loans (1)	Total loans (1)	8,791		127		5.77		7,492		75		3.99				Total loans (1)	8,952		133		5.88		7,888		91		4.54
Investment securities (2)	Investment securities (2)	2,236		13		2.27		2,621		13		1.97				Investment securities (2)	2,171		13		2.40		2,400		13		2.13
Short-term investments & loans held for sale (3)	Short-term investments & loans held for sale (3)	560		7		4.94		476		1		0.57				Short-term investments & loans held for sale (3)	267		3		4.76		342		2		1.96

Total interest-earning assets	Total interest-earning assets	11,587		147		5.05		10,589		89		3.34				Total interest-earning assets	11,390		149		5.19		10,630		106		3.91
Intangible assets	Intangible assets	22				x		27				X				Intangible assets	21				x		26				X
Other non-interest earning assets	Other non-interest earning assets	665				x		644								Other non-interest earning assets	449				x		494

Total assets	Total assets	$	12,274					$	11,260							Total assets	$	11,860					$	11,150

Liabilities and shareholders’ equity	Liabilities and shareholders’ equity															Liabilities and shareholders’ equity
Deposits:	Deposits:															Deposits:
Non-interest-bearing demand deposits	Non-interest-bearing demand deposits	$	2,594	$	—	—	%	$	2,903	$	—	—	%			Non-interest-bearing demand deposits	$	2,553	$	—	—	%	$	2,913	$	—	—	%
NOW and other	NOW and other	1,055		4		1.35		1,454		—		0.12				NOW and other	858		2		1.15		1,362		2		0.48
Money market	Money market	2,555		14		2.13		2,811		2		0.19				Money market	2,697		18		2.69		2,737		3		0.46
Savings	Savings	1,077		—		0.50		1,127		—		0.03				Savings	1,082		2		0.77		1,129		—		0.03
Time	Time	2,287		18		3.07		1,460		2		0.64				Time	2,440		22		3.43		1,528		3		0.85
Total deposits	Total deposits	9,568		36		1.51		9,755		4		0.17				Total deposits	9,630		44		1.81		9,669		8		0.48
Borrowings and notes (4)	Borrowings and notes (4)	1,288		17		5.14		160		2		4.61				Borrowings and notes (4)	1,010		14		5.32		251		4		5.46

Total funding liabilities	Total funding liabilities	10,856		53		1.94		9,915		6		0.24				Total funding liabilities	10,640		58		2.15		9,920		12		0.66
Other non-interest earning liabilities	Other non-interest earning liabilities	197						163								Other non-interest earning liabilities	232						206

Total liabilities	Total liabilities	11,053						10,078								Total liabilities	10,872						10,126

Total common shareholders' equity	Total common shareholders' equity	1,221						1,182								Total common shareholders' equity	988						1,024
Total shareholders’ equity ~~(2)~~(5)	Total shareholders’ equity ~~(2)~~(5)	1,221						1,182								Total shareholders’ equity ~~(2)~~(5)	988						1,024
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	12,274					$	11,260							Total liabilities and shareholders’ equity	$	11,860					$	11,150
Net interest margin, FTE	Net interest margin, FTE					3.24						3.11				Net interest margin, FTE					3.18						3.48

Total average non-maturity deposits		7,281						8,295

Supplementary data	Supplementary data															Supplementary data
Net Interest Income, non FTE	Net Interest Income, non FTE	$	92.8					$	81.4							Net Interest Income, non FTE	$	90.3					$	92.1
FTE income adjustment ~~(5)~~(6)	FTE income adjustment ~~(5)~~(6)	2.0						1.6								FTE income adjustment ~~(5)~~(6)	2.0						1.7
Net Interest Income, FTE	Net Interest Income, FTE	$	94.8					$	83.0							Net Interest Income, FTE	$	92.3					$	93.8

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

(2) The average balance for securities available for sale is based on amortized cost. ~~The average balance of equity also reflects this adjustment.~~

(3) Interest income on loans held for sale is included in loan interest income on the income statement.

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

(5) As of September 30, 2023 unrealized gains and losses, net of tax, are included in average equity. Prior period balances and financial metrics have been updated to reflect the current presentation.

(6) Fully taxable equivalent considers the impact of tax advantaged investment securities and loans. The yield on tax-exempt loans and securities is computed on a fully tax-equivalent basis using a tax rate of 27%.

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		Six Months Ended June 30,												Nine Months Ended September 30,
		2023						2022							2023				2022
(Dollars in millions)	(Dollars in millions)	Average Balance		Interest (FTE basis)		Yield/Rate (FTE basis)		Average Balance		Interest (FTE basis)		Yield/Rate (FTE basis)				(Dollars in millions)	Average Balance		Interest (FTE basis)		Yield/Rate (FTE basis)		Average Balance		Interest (FTE basis)		Yield/Rate (FTE basis)
Assets	Assets															Assets
Loans:	Loans:															Loans:
Commercial real estate	Commercial real estate	$	4,225	$	128	6.02	%	$	3,741	$	67	3.57	%			Commercial real estate	$	4,279	$	199	6.13	%	$	3,802	$	114	3.89	%
Commercial and industrial loans	Commercial and industrial loans	1,511		54		7.09		1,410		30		4.30				Commercial and industrial loans	1,486		81		7.22		1,423		50		4.60
Residential mortgages	Residential mortgages	2,386		45		3.79		1,545		28		3.57				Residential mortgages	2,464		71		3.85		1,671		45		3.55
Consumer loans	Consumer loans	531		18		7.26		538		13		4.82				Consumer loans	525		28		7.28		554		22		5.30
Total loans (1)	Total loans (1)	8,653		245		5.67		7,234		138		3.80				Total loans (1)	8,754		379		5.74		7,450		231		4.05
Investment securities (2)	Investment securities (2)	2,248		26		2.25		2,635		26		1.96				Investment securities (2)	2,222		38		2.30		2,557		39		2.02
Short-term investments & loans held for sale (3)	Short-term investments & loans held for sale (3)	437		10		4.69		837		1		0.37				Short-term investments & loans held for sale (3)	380		13		4.70		673		2		0.90

Total interest-earning assets	Total interest-earning assets	11,338		281		4.95		10,706		165		3.08				Total interest-earning assets	11,356		430		5.03		10,680		272		3.36
Intangible assets	Intangible assets	23				x		28				X				Intangible assets	22				x		27				X
Other non-interest earning assets	Other non-interest earning assets	679				x		642								Other non-interest earning assets	452				x		557

Total assets	Total assets	$	12,040					$	11,376							Total assets	$	11,830					$	11,264

Liabilities and shareholders’ equity	Liabilities and shareholders’ equity															Liabilities and shareholders’ equity
Deposits:	Deposits:															Deposits:
Non-interest-bearing demand deposits	Non-interest-bearing demand deposits	$	2,650	$	—	—	%	$	2,935	$	—	—	%			Non-interest-bearing demand deposits	$	2,617	$	—	—	%	$	2,928	$	—	—	%
NOW and other	NOW and other	1,255		10		1.52		1,455		—		0.08				NOW and other	1,121		12		1.43		1,424		2		0.22
Money market	Money market	2,607		24		1.85		2,841		3		0.17				Money market	2,637		42		2.14		2,806		6		0.27
Savings	Savings	1,062		—		0.30		1,122		—		0.03				Savings	1,069		2		0.46		1,124		—		0.03
Time	Time	2,049		28		2.66		1,542		5		0.67				Time	2,181		50		2.95		1,537		8		0.73
Total deposits	Total deposits	9,623		62		1.79		9,895		8		0.17				Total deposits	9,625		106		2.02		9,819		16		0.32
Borrowings and notes (4)	Borrowings and notes (4)	990		25		5.11		132		4		4.91				Borrowings and notes (4)	996		39		5.23		178		8		5.09

Total funding liabilities	Total funding liabilities	10,613		87		2.21		10,027		12		0.23				Total funding liabilities	10,621		145		1.82		9,997		24		0.44
Other non-interest earning liabilities	Other non-interest earning liabilities	210						164								Other non-interest earning liabilities	219						171

Total liabilities	Total liabilities	10,823						10,191								Total liabilities	10,840						10,168

Total common shareholders' equity	Total common shareholders' equity	1,217						1,185								Total common shareholders' equity	990						1,096
Total shareholders’ equity ~~(2)~~(5)	Total shareholders’ equity ~~(2)~~(5)	1,217						1,185								Total shareholders’ equity ~~(2)~~(5)	990						1,096
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	12,040					$	11,376							Total liabilities and shareholders’ equity	$	11,830					$	11,264
Net interest margin, FTE	Net interest margin, FTE					3.40						2.86				Net interest margin, FTE					3.33						3.05

Total average non-maturity deposits		7,574						8,353

Supplementary data	Supplementary data															Supplementary data
Net Interest Income, non FTE	Net Interest Income, non FTE	$	190.3					$	150.4							Net Interest Income, non FTE	$	280.6					$	242.5
FTE income adjustment ~~(5)~~(6)	FTE income adjustment ~~(5)~~(6)	3.9						3.1								FTE income adjustment ~~(5)~~(6)	5.9						4.8
Net Interest Income, FTE	Net Interest Income, FTE	$	194.2					$	153.5							Net Interest Income, FTE	$	286.5					$	247.3

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

(2) The average balance for securities available for sale is based on amortized cost. ~~The average balance of equity also reflects this adjustment.~~

(3) Interest income on loans held for sale is included in loan interest income on the income statement.

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

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NON-GAAP FINANCIAL MEASURES

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

The Company utilizes the non-GAAP measure of operating earnings in evaluating operating trends, including components for operating revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations. These items primarily include restructuring costs. Restructuring costs generally consist of costs and losses associated with the disposition of assets and liabilities and lease terminations, including costs related to branch sales.

The Company also calculates operating earnings per share based on its measure of operating earnings and diluted common shares. The Company views these amounts as important to understanding its operating trends, particularly due to the impact of accounting standards related to merger and acquisition activity. Analysts also rely on these measures in estimating and evaluating the Company’s performance. Expense adjustments in 2023 and 2022 were primarily related to branch consolidations. For 2022, fair value adjustments on securities were primarily due to unrealized equity securities losses due to changes in market conditions. Starting March 31, 2023 fair value adjustments on securities are included in operating income.

Management believes that the computation of non-GAAP operating earnings and operating earnings per share may facilitate the comparison of the Company to other companies in the financial services industry. The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community.

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

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


			At or for the Three Months Ended June 30,						At or for the Six Months Ended June 30,								At or for the Three Months Ended September 30,						At or for the Nine Months Ended September 30
(In thousands)	(In thousands)		2023			2022			2023			2022			(In thousands)		2023			2022			2023			2022
GAAP Net income	GAAP Net income		$	23,861		$	23,115		$	51,498		$	43,311		GAAP Net income		$	19,545		$	18,717		$	71,043		$	62,028
Adj: Fair value adjustments on securities (1)	Adj: Fair value adjustments on securities (1)		—			973			—			1,718			Adj: Fair value adjustments on securities (1)		—			476			—			2,194

Adj: Restructuring and other expense	Adj: Restructuring and other expense		21			35			(15)			53			Adj: Restructuring and other expense		2,607			11,473			2,592			11,526

Adj: Income taxes	Adj: Income taxes		(4)			(561)			3			(731)			Adj: Income taxes		(636)			(2,738)			(633)			(3,469)
Total operating income (non-GAAP) (2)	Total operating income (non-GAAP) (2)	(A)	$	23,878		$	23,562		$	51,486		$	44,351		Total operating income (non-GAAP) (2)	(A)	$	21,516		$	27,928		$	73,002		$	72,279

GAAP Total revenue	GAAP Total revenue		$	109,853		$	97,709		$	223,992		$	187,453		GAAP Total revenue		$	107,799		$	108,335		$	331,791		$	295,788
Adj: Fair value adjustments on securities (1)	Adj: Fair value adjustments on securities (1)		—			973			—			1,718			Adj: Fair value adjustments on securities (1)		—			476			—			2,194

Total operating revenue (non-GAAP) (2)	Total operating revenue (non-GAAP) (2)	(B)	$	109,853		$	98,682		$	223,992		$	189,171		Total operating revenue (non-GAAP) (2)	(B)	$	107,799		$	108,811		$	331,791		$	297,982

GAAP Total non-interest expense	GAAP Total non-interest expense		$	74,048		$	68,475		$	146,003		$	137,025		GAAP Total non-interest expense		$	76,513		$	81,677		$	222,516		$	218,702
Less: Total non-operating expense (see above)	Less: Total non-operating expense (see above)		(21)			(35)			15			(53)			Less: Total non-operating expense (see above)		(2,607)			(11,473)			(2,592)			(11,526)

Operating non-interest expense (non-GAAP) (2)	Operating non-interest expense (non-GAAP) (2)	(C)	$	74,027		$	68,440		$	146,018		$	136,972		Operating non-interest expense (non-GAAP) (2)	(C)	$	73,906		$	70,204		$	219,924		$	207,176

(In millions, except per share data)	(In millions, except per share data)														(In millions, except per share data)
Total average assets	Total average assets	(D)	$	12,274		$	11,260		$	12,040		$	11,376		Total average assets	(D)	$	11,860		$	11,150		$	11,830		$	11,264
Total average shareholders’ equity		(E)	1,221			1,182			1,217			1,185
Total average tangible shareholders’ equity (2)		(F)	1,198			1,155			1,194			1,157
Total average shareholders’ equity, including unrealized losses on AFS securities															Total average shareholders’ equity, including unrealized losses on AFS securities	(E)	988			1,024			990			1,096
Total average shareholders’ equity, excluding unrealized losses on AFS securities															Total average shareholders’ equity, excluding unrealized losses on AFS securities	(F)	1,231			1,189			1,222			1,187
Total average tangible shareholders’ equity, including unrealized losses on AFS securities (2)															Total average tangible shareholders’ equity, including unrealized losses on AFS securities (2)	(G)	967			998			967			1,068
Total average tangible shareholders’ equity, excluding unrealized losses on AFS securities (2)															Total average tangible shareholders’ equity, excluding unrealized losses on AFS securities (2)	(H)	1,210			1,164			1,199			1,159

Total tangible shareholders’ equity, period-end (2)(3)	Total tangible shareholders’ equity, period-end (2)(3)	(H)	951			987			951			987			Total tangible shareholders’ equity, period-end (2)(3)	(I)	930			917			930			917

Total tangible assets, period-end (2)	Total tangible assets, period-end (2)	(J)	12,068			11,552			12,068			11,552			Total tangible assets, period-end (2)	(J)	12,119			11,291			12,119			11,291
Total common shares outstanding, period-end (thousands)	Total common shares outstanding, period-end (thousands)	(K)	44,033			45,788			44,033			45,788			Total common shares outstanding, period-end (thousands)	(K)	43,822			45,040			43,822			45,040
Average diluted shares outstanding (thousands)	Average diluted shares outstanding (thousands)	(L)	43,532			46,102			43,780			47,074			Average diluted shares outstanding (thousands)	(L)	43,347			45,034			43,640			46,396

Earnings per common share, diluted	Earnings per common share, diluted		$	0.55		$	0.50		$	1.18		$	0.92		Earnings per common share, diluted		$	0.45		$	0.42		$	1.63		$	1.34
Operating earnings per common share, diluted (2)	Operating earnings per common share, diluted (2)	(A/L)	0.55			0.51			1.18			0.94			Operating earnings per common share, diluted (2)	(A/L)	0.50			0.62			1.67			1.56
Book value per common share, period-end	Book value per common share, period-end		22.11			22.15			22.11			22.15			Book value per common share, period-end		21.70			20.93			21.70			20.93
Tangible book value per common share, period-end (2)	Tangible book value per common share, period-end (2)	(H/K)	21.60			21.56			21.60			21.56			Tangible book value per common share, period-end (2)	(I/K)	21.23			20.36			21.23			20.36
Total shareholders' equity/total assets	Total shareholders' equity/total assets		8.05			8.76			8.05			8.76			Total shareholders' equity/total assets		7.83			8.33			7.83			8.33
Total tangible shareholder's equity/total tangible assets (2)	Total tangible shareholder's equity/total tangible assets (2)	(H/J)	7.88			8.54			7.88			8.54			Total tangible shareholder's equity/total tangible assets (2)	(I/J)	7.68			8.12			7.68			8.12
			x														x
Performance ratios (4)	Performance ratios (4)		x												Performance ratios (4)		x
GAAP return on equity			7.82		%	7.82		%	8.46		%	7.31		%
Operating return on equity (2)		(A/E)	7.82			7.97			8.46			7.49
Return on tangible common equity (2)(5)			8.26			8.33			8.92			7.81
Operating return on tangible common equity (2)(5)		(A+O)/(F)	8.27			8.48			8.92			7.99
GAAP return on assets			0.78			0.82			0.86			0.76
Operating return on assets (2)		(A/D)	0.78			0.84			0.86			0.78
Efficiency ratio (2)		(C-O)/(B+M+P)	63.57			66.60			61.50			69.48
Return on equity, including unrealized losses on AFS securities															Return on equity, including unrealized losses on AFS securities		7.91		%	7.31		%	9.57		%	7.55		%
Return on equity, excluding unrealized losses on AFS securities															Return on equity, excluding unrealized losses on AFS securities		6.35			6.30			7.75			6.97
Operating return on equity, including unrealized losses on AFS securities (2)															Operating return on equity, including unrealized losses on AFS securities (2)	(A/E)	8.71			10.92			9.83			8.79
Operating return on equity, excluding unrealized losses on AFS securities (2)															Operating return on equity, excluding unrealized losses on AFS securities (2)	(A/F)	6.99			9.40			7.97			8.12
Return on tangible common equity, including unrealized losses on AFS securities (2)(5)															Return on tangible common equity, including unrealized losses on AFS securities (2)(5)		8.45			7.88			10.16			8.10

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Return on tangible common equity, excluding unrealized losses on AFS securities (2)(5)											Return on tangible common equity, excluding unrealized losses on AFS securities (2)(5)		6.76		6.76		8.19		7.46
Operating return on tangible common equity, including unrealized losses on AFS securities (2)(5)											Operating return on tangible common equity, including unrealized losses on AFS securities (2)(5)	(A+O)/(G)	9.27		11.57		10.43		9.37
Operating return on tangible common equity, excluding unrealized losses on AFS securities (2)(5)											Operating return on tangible common equity, excluding unrealized losses on AFS securities (2)(5)	(A+O)/(H)	7.41		9.92		8.41		8.64
Return on assets											Return on assets		0.66		0.67		0.80		0.73
Operating return on assets (2)											Operating return on assets (2)	(A/D)	0.73		1.00		0.82		0.86
Efficiency ratio (2)											Efficiency ratio (2)	(C-O)/(B+M+P)	65.05		62.01		62.65		66.75
(in thousands)	(in thousands)										(in thousands)
Supplementary data (In thousands)	Supplementary data (In thousands)		xx								Supplementary data (In thousands)		xx
Tax benefit on tax-credit investments (6)	Tax benefit on tax-credit investments (6)	(M)	$	2,735	$	595	$	5,632	$	1,191	Tax benefit on tax-credit investments (6)	(M)	$	1,979	$	620	$	7,611	$	1,811
Non-interest income tax-credit investments amortization (7)	Non-interest income tax-credit investments amortization (7)	(N)	(2,210)		(351)		(4,495)		(708)		Non-interest income tax-credit investments amortization (7)	(N)	(1,463)		(445)		(5,959)		(1,153)
Net income on tax-credit investments	Net income on tax-credit investments	(M+N)	525		244		1,137		483		Net income on tax-credit investments	(M+N)	516		175		1,652		658

Intangible amortization	Intangible amortization	(O)	1,205		1,286		2,410		2,572		Intangible amortization	(O)	1,205		1,285		3,615		3,857
Fully taxable equivalent income adjustment	Fully taxable equivalent income adjustment	(P)	1,962		1,560		3,869		3,084		Fully taxable equivalent income adjustment	(P)	1,980		1,715		5,850		4,799

(1) Starting March 31, 2023, fair value adjustments on securities are included in operating income.

(2) Non-GAAP financial measure.

(3) Total tangible shareholders’ equity is computed by taking total shareholders’ equity less the intangible assets at period-end. Total tangible assets is computed by taking total assets less the intangible assets at period-end.

(4) Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due to rounding.

(5) Operating return on tangible common equity is computed by dividing the total operating income adjusted for the tax-affected amortization of intangible assets, assuming a 27% marginal rate, by tangible equity.

(6) The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation, low-income housing, new markets and solar.

(7) The non-interest income amortization is the reduction to the tax-advantaged ~~commercial project~~ investments ~~which~~and are incurred as the tax credits are generated.

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GENERAL

Management’s discussion and analysis of financial condition and results of operations is intended to assist in

understanding the financial condition and results of operations of the Company. The following discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and the notes thereto appearing in Part I, Item 1 of this document and with the Company’s consolidated financial statements and the notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2022 Annual Report on Form 10-K. In the following discussion, income statement comparisons are against the same period of the previous year and balance sheet comparisons are against the previous fiscal year-end, unless otherwise noted. Operating results discussed herein are not necessarily indicative of the results for the year 2023 or any future period. In management’s discussion and analysis of financial condition and results of operations, certain reclassifications have been made to make prior periods comparable. Tax-equivalent adjustments are the result of increasing income from tax-advantaged loans and securities by an amount equal to the taxes that would be paid if the income were fully taxable based on a 27% marginal rate (including state income taxes net of federal benefit). In the discussion, unless otherwise specified, references to earnings per share and "EPS" refer to diluted earnings per common share.

Berkshire Hills Bancorp, Inc. (“Berkshire” or “the Company”) is a Delaware corporation headquartered in Boston and the holding company for Berkshire Bank (“the Bank”)~~. Established in 1846, the Bank~~ which operates as a commercial bank under a Massachusetts trust company charter.~~The Bank seeks to transform what it means to bank its neighbors socially, humanly, and digitally to empower~~ Established in 1846, the financial potential of people, families, and businesses in its communities as it pursues its vision of being a leading socially responsible omni-channel community bank in New England and beyond. Berkshire Bank provides business and consumer banking, mortgage, wealth management, and investment ~~services.~~ ~~Headquartered in Boston,~~services, with a vision to be a high performing, relationship focused community bank. Berkshire has approximately $12.1 billion in assets and operates ~~100~~96 branch offices in New England and New York.

FORWARD-LOOKING STATEMENTS

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

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

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.

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FINANCIAL OVERVIEW

Berkshire reported net income of ~~$23.9~~$19.5 million, or ~~$0.55~~$0.45 per diluted share, for the three months ended ~~June~~September 30, 2023, compared to ~~$23.1~~$18.7 million, or ~~$0.50~~$0.42 per diluted share, for the year-ago period. Included in the results for the three months ended ~~June~~September 30, 2023 are net non-operating charges totaling ~~$21 thousand~~$2.6 million ($~~17 thousand~~2.0 million after-tax) ~~with no~~or $0.05 per ~~share impact.~~share. Included in the results for the three months ended ~~June~~September 30, 2022 are net non-operating charges totaling ~~$1.0~~$11.9 million ($~~447 thousand~~9.2 million after-tax) or ~~$0.01~~$0.20 per share. The Company’s non-GAAP measure of operating income totaled $21.5 million, or $0.50 per diluted share, for the three months ended September 30, 2023, compared to $27.9 million, or $0.62 per diluted share, for the year-ago period. Compared to the year-ago period, ~~second~~third quarter 2023 ~~earnings~~operating income primarily ~~reflect~~reflected higher ~~net interest income partially offset by higher credit~~loan loss provision expense and operating non-interest expense.

Berkshire’s return on average assets was ~~0.78%~~0.66% (0.73% on ~~a GAAP and~~an operating ~~basis~~basis) for the three months ended ~~June~~September 30, 2023 compared to ~~0.82% (0.84%~~0.67% (1.00% on an operating basis) for the year-ago period. Return on average tangible common equity including unrealized loss on AFS securities was ~~8.26% (8.27%~~8.45% (9.27% on an operating basis) for the three months ended ~~June~~September 30, 2023 compared to 8.33% (8.48% on an operating basis) for the year-ago period. Compared to the second quarter of 2022, FTE net interest income increased $11.8 million to $94.7 million and the net interest margin increased 13 basis points to 3.24%.

Second quarter 2023 average total earning assets increased $998 million compared to the second quarter of 2022, primarily reflecting an increase of $1.30 billion in average loans and an increase of $84 million in average short-term investments and loans HFS, partially offset by a $385 million decrease in average securities. Average total funding liabilities increased $941 million compared to the year-ago quarter, reflecting a $1.13 billion increase in average borrowings, partially offset by a $187 million decrease in average deposits.

Net income for the six months ended June 30, 2023 totaled $51.5 million, or $1.18 per diluted share, compared to $43.3 million, or $0.92 per diluted share, for the year-ago period. Included in the results for the six months ended June 30, 2023 are net non-operating credits totaling $15 thousand ($12 thousand after-tax) with no per share impact. Included in the results for the six months ended June 30, 2022 were non-operating charges totaling $1.8 million ($1.0 million after-tax) or $0.02 per share. Compared to the year-ago period, first half 2023 earnings primarily reflect higher net interest income partially offset by higher credit loss provision expense.

~~Berkshire’s return on average assets was 0.86% on a GAAP and operating basis for the six months ended June 30, 2023 compared to 0.76% (0.78%~~7.88% (11.57% on an operating basis) for the year-ago period. Return on average tangible common equity excluding unrealized loss on AFS securities was ~~8.92%~~6.76% (7.41% on ~~a GAAP and~~an operating ~~basis~~basis) for the ~~six~~three months ended ~~June~~September 30, 2023 compared to ~~7.81% (7.99%~~6.76% (9.92% on an operating basis) for the year-ago period. Per share results and equity returns have included the benefit of ongoing share repurchases.

~~First half 2023~~

Compared to the third quarter of 2022, FTE net interest income ~~increased $40.7~~decreased $1.5 million ~~compared~~ to ~~the first half of 2022~~$92.3 million and the net interest margin ~~increased 54~~decreased 30 basis points to ~~3.40%~~3.18%.

~~Average~~ Third quarter 2023 average total earning assets ~~in the first half of 2023~~ increased ~~$632~~$760 million compared to the ~~first half~~third quarter of 2022, primarily reflecting an increase of ~~$1.42~~$1.06 billion in average loans ~~partially~~ offset by ~~a $387~~decreases of $75 million ~~decrease in average securities and a $400 million decrease~~ in average short-term investments and loans HFS ~~loans.~~and $229 million in average securities. Average ~~first half~~ total funding liabilities increased ~~$586~~$720 million compared to the year-ago ~~period,~~quarter, reflecting ~~an $858~~a $759 million increase in average borrowings, partially offset by a ~~$272~~$39 million decrease in average deposits.

~~Total second~~Net income for the nine months ended September 30, 2023 totaled $71.0 million, or $1.63 per diluted share, compared to $62.0 million, or $1.34 per diluted share, for the year-ago period. Included in the results for the nine months ended September 30, 2023 are net non-operating charges totaling $2.6 million ($2.0 million after-tax) or $0.04 per share. Included in the results for the nine months ended September 30, 2022 were net non-operating charges totaling $13.7 million ($10.3 million after-tax) or $0.22 per share. The Company’s non-GAAP measure of operating income total $73.0 million, or $1.67 per diluted share, for the nine months ended September 30, 2023, compared to $72.3 million, or $1.56 per diluted share, for the year-ago period. Compared to the year-ago period, nine month 2023 operating earnings primarily reflect higher net interest income partially offset by higher credit loss provision expense and operating non-interest expense.

Berkshire’s return on average assets was 0.80% (0.82% on an operating basis) for the nine months ended September 30, 2023 compared to 0.73% (0.86% on an operating basis) for the year-ago period.

Return on average tangible common equity including unrealized loss on AFS securities was 10.16% (10.43% on an operating basis) for the nine months ended September 30, 2023 compared to 8.10% (9.37% on an operating basis) for the year-ago period. Return on average tangible common equity excluding unrealized loss on AFS securities was 8.19% (8.41% on an operating basis) for the nine months ended September 30, 2023 compared to 7.46% (8.64% on an operating basis) for the year-ago period. Per share results and equity returns have included the benefit of ongoing share repurchases.

Compared to the first nine months of 2022, FTE net interest income increased $39.2 million to $286.5 million and the net interest margin increased 28 basis points to 3.33%. Average total earning assets in the first nine months of 2023 increased $676 million compared to the first nine months of 2022, primarily reflecting an increase of $1.30 billion in average loans, partially offset by a $335 million decrease in average securities and a $293 million decrease in average short-term investments and HFS loans. Average nine month total funding liabilities increased $624 million compared to the year-ago period, reflecting an $818 million increase in average borrowings, partially offset by a $194 million decrease in average deposits.

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Third quarter non-interest income increased ~~$743 thousand~~$1.2 million year-over-year and total non-interest expense ~~increased $5.6~~decreased $5.2 million. The efficiency ratio was ~~63.6%~~65.1% for the ~~second~~third quarter of 2023 compared to ~~66.6%~~62.0% for the year-ago quarter. For the first ~~half~~nine months of the year, total non-interest income decreased ~~$3.3~~$2.1 million and non-interest expense increased ~~$9.0~~$3.8 million. The efficiency ratio was ~~61.5%~~62.7% and ~~69.5%~~66.8% for these periods, respectively.

The provision for credit losses on loans in the ~~second~~third quarter of 2023 totaled $8.0 ~~million; there was no provision expense~~million compared to $3.0 million in the year-ago quarter. For the first ~~six~~nine months of the year, the provision expense was ~~$17.0~~$25.0 million in 2023, compared to ($~~4.0)~~1.0) million in 2022. Provision expense in 2022 reflected notable improvement in pandemic-related expected credit losses. The allowance for credit losses on loans was ~~$100.2~~$102.8 million, or ~~1.13%~~1.14% of total loans, at ~~June~~September 30, 2023, compared to $96.3 million, or 1.15% of total loans at December 31, 2022.

~~Table of Contents~~

Berkshire’s total shareholders’ equity was ~~$973~~$951 million at ~~June~~September 30, 2023 compared to $954 million at December 31, 2022. The common equity Tier 1 capital ratio was 12.1% and ~~12.4%~~12.3% at ~~June~~September 30, 2023 and December 31, 2022, respectively. Tangible common equity as a percentage of tangible assets was ~~7.9%~~7.7% at ~~June~~September 30, 2023 compared to 8.0% at December 31, 2022.

Net Interest Income

Net interest income and net interest margin ~~are~~may be affected by many factors, including: changes in average balances; interest rate fluctuations and the slope of the yield curve; sales of loans and securities; residential mortgage loan and mortgage-backed security prepayment rates; product pricing; competitive forces; the relative mix, repricing characteristics and maturity of interest-earning assets and interest-bearing liabilities; non-interest-bearing sources of funds; hedging activities; and asset quality.

In response to persistent high inflation, the Federal Reserve Board increased the target federal funds rate ~~over the last six quarters.~~during 2022 and 2023. The average maximum target Federal Funds rate increased from 25 basis points in the first quarter of 2022 to ~~5.16%~~5.43% in the ~~second~~third quarter of 2023, increasing in each sequential quarter, with the largest quarterly increases occurring in the second and third quarters of 2022.

The net interest margin ~~increased~~decreased by 1330 basis points to ~~3.24%~~3.18% in the ~~second~~third quarter of 2023 compared to the year-ago ~~quarter. The margin~~quarter, reflecting increased ~~by 54 basis points to 3.40% in the second half of 2023 compared to the same period of 2022. This improvement reflected the reinvestment~~cost of funds from lower yielding investments into higher yielding loans, along with the positive interest rate sensitivity of the Company’s interest rate risk profile in the environment of rising market interest rates.

~~Second~~partially offset by increased earning asset yield. Third quarter ~~FTE~~ net interest income ~~increased~~decreased year-over-year by ~~$11.8 million.~~$1.8 million due to the lower margin which was partially offset by a 7% increase in average earning assets funded primarily by higher borrowings. Total interest income increased ~~$58.0~~$44.4 million and total interest expense increased ~~$46.6~~$46.1 million.The FTE interest adjustment increased ~~$402~~$265 thousand.

~~Second~~Third quarter 2023 average total earning assets increased ~~year-over-year by $998~~$760 million compared to the third quarter of 2022, primarily reflecting an increase of ~~$1.30~~$1.06 billion in average loans offset by decreases of $229 million in averages securities and ~~an $84~~$75 million ~~increase~~ in ~~average~~ short-term investments and loans ~~held for sale, partially offset by a $385 million decrease in average securities.~~HFS. The increase in average loans was primarily due to a ~~$452~~$459 million increase in average commercial real estate loans and ~~an $836~~a $692 million increase in average residential mortgages, reflecting growth in originations staff and ~~increased~~expansionary economic conditions supporting market demand for commercial loans.

Average total loans, average securities and average short-term investments and loans held for sale comprised ~~76%~~79%, 19% and 5%2%, respectively, of average total earning assets in the ~~second~~third quarter of 2023, compared to ~~71%~~74%, ~~25%~~23% and 4%3%, respectively, in the ~~second~~third quarter of 2022. In the current quarter, the yields on these portfolios were ~~5.77%~~5.88%, ~~2.27%~~2.40%, and ~~4.94%~~4.76% respectively, compared to ~~3.99%~~4.54%, ~~1.97%~~2.13%, and ~~0.57%~~1.96% in the same quarter of 2022.

The 128 basis point year-over-year increase in the third quarter yield on average earning assets reflected higher market interest rates and a mix shift towards higher yielding loans. The loan yield increased by 134 basis points, the securities yield increased by 27 basis points, and the yield on short-term investments and loans held for sale increased 280 basis points. Higher loans yields included increases of 179 basis points in commercial real estate, 227 basis points in commercial and industrial loans, 44 basis points in residential mortgages, and 109 basis points in consumer loans.

~~Second~~

Third quarter average total funding liabilities increased ~~$941~~$720 million, reflecting a ~~$1.13 billion~~$759 million increase in average borrowings which was partially offset by a ~~$187~~$39 million reduction in average deposits.The increase in borrowings was primarily due to higher borrowings from the Federal Home Loan Bank of ~~Boston, including further fortifying on-balance sheet liquidity with higher cash balances due to market conditions in the first quarter~~Boston.

Table of ~~2023.~~Contents

~~Second~~Compared to the prior year third quarter, third quarter average non-interest bearing deposits decreased ~~$309~~$360 million, average NOW and other interest-bearing transaction accounts decreased ~~$399~~$504 million, average money market deposits decreased ~~$256~~$40 million, and average savings deposits decreased ~~$50~~$47 million.Average time deposits increased ~~$827~~$912 million.Deposit shifts reflected the migration of some balances from lower yielding accounts to higher yielding accounts in and out of the Bank, as well as the spend-down by customers of liquidity accumulated during the pandemic. Time deposit growth included higher utilization of brokered deposits.

Average total deposits comprised ~~88%~~91% and ~~98%~~97% of average total funding liabilities in the ~~second~~third quarters of 2023 and 2022, respectively. As a percentage of average deposits, in the ~~second~~third quarter of 2023, average non-interest bearing deposits measured 27%, average NOW and other interest-bearing transaction accounts measured ~~11%~~9%,

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average money market deposits were ~~27%~~28%, average savings accounts were 11%, and average time deposits were ~~24%~~25%.The comparable percentages in the year-ago quarter were ~~respectively~~ 30%, ~~15%~~14%, ~~29%~~28%, 12%, and ~~15%~~16% respectively.

The ~~170~~149 basis point increase to ~~1.94%~~2.15% in the rate paid on average total funding liabilities in the ~~second~~third quarter of 2023 compared to 2022 primarily reflects the impact of the increase in market interest rates and increased borrowings.The rate paid on average total deposits increased ~~134~~133 basis points, reflecting higher interest rates paid and the shift in the mix of deposits.Higher deposit costs included increases of ~~123~~67 basis points in the cost of NOW and other interest-bearing transaction deposits, 4774 basis points in the cost of savings deposits, ~~194~~223 basis points in the cost of money market deposits, and ~~243~~258 basis points in the cost of time deposits.

~~First half~~ ~~FTE~~Nine month net interest income increased year-over-year by ~~$40.7 million.~~ ~~In addition~~$38.1 million due to the 28 basis point increase in the net interest margin ~~first half net interest income also benefited from~~and the ~~$632~~$676 million increase in average earning assets which was primarily driven by higher average loans which ~~were~~was mostly funded by increased average borrowings.

Non-Interest Income

Total non-interest income in the ~~second~~third quarter of 2023 increased ~~$743 thousand~~$1.2 million compared to the ~~second~~same quarter of ~~2022. The increase compared~~2022 due primarily to ~~the year-ago period primarily reflects~~ increases in ~~deposit related fees~~loan and ~~in loan~~deposit related fees partially offset by ~~decreases~~a decrease in ~~gain on SBA loan sales, wealth management fees, and~~ other non-interest income.

Total non-interest income in the first ~~half~~nine months of 2023 decreased ~~$3.3~~$2.1 million compared to the first ~~half~~nine months of 2022. The decrease compared to the year-ago period ~~reflected decreases in all major categories of non-interest income except deposit related fees, as well as the impact of a change in fair value adjustments on securities.~~

~~Deposit related fees increased year-over-year across many categories, with the largest increases recorded in cash management fees and account service charges. Loan related fee changes were~~was primarily due to ~~changes~~$4.8 million in higher tax credit amortization charges related to ~~commercial loan interest rate swap volumes and fair value adjustments. The decreases~~increased tax credit investments in ~~gain on SBA loan sales reflect lower loan demand and sale premiums as a result of increases in the prime rate of interest.Wealth management fees declined from 2022 levels; the portfolio of wealth assets under management totaled $1.4 billion at June 30,~~ 2023. ~~Other non-interest income decreased primarily due to higher~~These charges ~~for the amortization of tax credit investments (which~~ are more than offset by credits to income tax ~~expense).~~expense.

Provision for Credit Losses

The provision was an expense of $8.0 million in the ~~second~~third quarter of ~~2023; there was no provision expense~~2023 compared to $3.0 million in the ~~second quarter~~same period of 2022.The provision in the first ~~half~~nine months of 2023 was an expense of ~~$17.0~~$25.0 million, compared to a benefit of ~~$4.0~~$1.0 million in the ~~comparable~~same period of 2022.Provision expense in 2023 primarily reflected growth in the loan portfolio. The results in 2022 reflected notable improvement in pandemic-related expected credit losses.

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Non-Interest Expense

Total non-interest expense ~~increased~~decreased year-over year in the ~~second~~third quarter by ~~$5.6~~$5.2 million and in the first ~~half~~nine months of the year by ~~$9.0~~$3.8 million. Restructuring and other non-operating expense decreased by $8.9 million in both the third quarter and first nine months of the year. These expenses were primarily due to branch consolidations and premises restructurings. Operating non-interest expense increased year over year by $3.7 million in the third quarter and by $12.7 million for the first nine months of the year. The increases were primarily in compensation and benefits, technology and communications, and the category of other expenses. These increases were partially offset by decreases in occupancy and equipment expense.

Compensation and benefits expense has increased including the impact of hiring of frontline bankers.Higher technology and communications expense largely reflects investments to digitize the ~~bank.~~Bank. The increase in the category of other expenses primarily reflects increases in deposit insurance premiums.Occupancy and equipment expense has declined due to the benefit from office and branch consolidation.

The ~~second~~third quarter efficiency ratio increased year-over-year due to the 1% decrease in operating revenue and the 5% increase in operating expenses. For the first nine months of the year, the efficiency ratio improved ~~year-over-year~~ due to the 11% increase in operating revenue ~~which exceeded~~partially offset by the 8%6% increase in operating expense. ~~The first half efficiency ratio improved year-over-year due~~Quarterly operating revenue peaked in the fourth quarter of 2022 and has declined in consecutive quarters as the net interest margin has declined over these periods, with funding cost increases catching up with the higher initial sensitivity of variable rate interest earning assets to the ~~18%~~rapid increase in ~~operating revenue, which substantially exceeded the 7% increase~~market interest rates in ~~operating expense.~~

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2022.

Income Tax Expense

The Company’s effective income tax rate was ~~14.2%~~16.1% for the ~~second~~third quarter of 2023 and ~~15.6%~~15.7 % for the first ~~half~~nine months of 2023, compared to 20.9% and ~~20.4%~~20.6%, respectively, for the comparable periods of 2022, and compared to 18.7% for the full year of 2022. The lower tax rate in 2023 reflected benefit from increased tax credit investments. Differences arising between Berkshire’s effective income tax rate and the U.S. federal statutory rate of 21% are generally attributable to: (i) tax-exempt interest earned on certain investments; (ii) tax-exempt income from BOLI; (iii) tax credit investment benefits; and (iv) state income taxes.

COMPARISON OF FINANCIAL CONDITION AT ~~JUNE~~SEPTEMBER 30, 2023 AND DECEMBER 31, 2022

General

Total assets at ~~June~~September 30, 2023 were $12.1 billion, a ~~$427~~$477 million increase from December 31, 2022, primarily reflecting a ~~$547~~$649 million increase in total loans partially offset by ~~a decrease~~decreases of ~~$45~~$22 million in cash and cash equivalents and ~~$75~~$163 million in investment securities.Loan growth primarily consisted of a ~~$369~~$417 million increase in residential mortgages and a ~~$220~~$352 million increase in commercial real estate loans. The decrease in investment securities primarily represented amortizations and maturities.

Nonaccrual loans totaled ~~$28.4~~$26.6 million at ~~June~~September 30, 2023, a ~~$2.7~~$4.5 million decrease from December 31, 2022 due to lower nonaccrual commercial loans. The allowance for credit losses on loans totaled ~~$100.2~~$102.8 million at ~~June~~September 30, 2023, compared to $96.3 million at December 31, 2022. At ~~June~~September 30, 2023, the allowance as a percentage of total loans was ~~1.13%~~1.14% and as a percentage of nonaccrual loans was ~~353%~~386%, compared to 1.15% and 309%, respectively, at December 31, 2022.

At ~~June~~September 30, 2023, total liabilities were ~~$11.1~~$11.2 billion, a ~~$408~~$480 million increase from December 31, 2022, primarily reflecting ~~a $670~~an $800 million increase in total borrowings, partially offset by a ~~$259~~$347 million decrease in total deposits.

Berkshire’s total shareholders’ equity was ~~$973~~$951 million at ~~June~~September 30, 2023, a ~~$19~~$3 million ~~increase~~decrease from December 31, 2022. As a percentage of total assets, shareholders’ equity was ~~8.1%~~7.8% and 8.2% at ~~June~~September 30, 2023 and December 31, 2022, respectively. Tangible common equity equaled ~~7.9%~~7.7% of tangible assets at ~~June~~September 30, 2023 compared to 8.0% at December 31, 2022.

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Berkshire’s (consolidated) Tier 1 Leverage capital ratio and its Common Equity Tier 1 (“CET 1”), Tier 1 and Total risk-based capital ratios were ~~9.6%~~9.8%, 12.1%, 12.3% and 14.4%, respectively, at ~~June~~September 30, 2023, compared to 10.2%, 12.4%, 12.6% and 14.6%, respectively, at December 31, 2022. The Bank’s Tier 1 Leverage capital ratio and its CET 1, Tier 1 and Total risk-based capital ratios were ~~9.6%~~9.7%, 12.4%, 12.4% and 13.4%, respectively, at ~~June~~September 30, 2023, compared to 10.2%, 12.6%, ~~12,6%~~12.6% and 13.6%, respectively, at December 31, 2022.

Loans

Total loans at period-end are categorized in the financial statement in accordance with regulatory reporting.

Total loans measured ~~$8.9~~$9.0 billion at ~~June~~ September 30, 2023, increasing ~~$547~~$649 million during the ~~half~~nine months of 2023. At ~~June~~September 30, 2023, commercial loans measured ~~65%~~64% of total loans and retail loans measured ~~35%~~36% of total loans. In comparison, at December 31, 2022, commercial loans measured 66% of total loans and retail loans measured 34% of total loans.

Total commercial loans increased by ~~$212~~$270 million to ~~$5.7~~$5.8 billion during the first ~~half~~nine months of 2023 and were comprised of commercial real estate loans and commercial and industrial loans. Commercial real estate loans (which include construction loans and multifamily loans) totaled ~~$4.3~~$4.4 billion and increased by ~~$219~~$352 million during the first ~~half~~nine months of 2023. Commercial and industrial loans totaled $1.4 billion and decreased by $7$81 million. Nonaccrual commercial loans totaled ~~$17.1~~$16.2 million at ~~June~~September 30, 2023, and measured ~~0.30%~~0.28% of total commercial loans. At December 31, 2022, nonaccrual commercial loans totaled $19.4 million, measuring 0.35% of total commercial loans.

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Total retail loans increased by ~~$335~~$379 million to ~~$3.1 billion.~~$3.2 billion during the first nine months of 2023. Retail loans include residential mortgage loans and consumer loans. At ~~June~~September 30, 2023, residential mortgages totaled $2.7 billion and increased by ~~$365~~$417 million during the first ~~half~~nine months of 2023. Consumer loans totaled ~~$472~~$463 million at ~~June~~September 30, 2023 and decreased by ~~$29~~$38 million in the first ~~half~~nine months of 2023 due primarily to planned run-off of unsecured consumer balances which was partially offset by growth in home equity loans. Nonaccrual retail loans totaled ~~$11.3~~$10.4 million at ~~June~~September 30, 2023, measuring ~~0.36%~~0.33% of total retail loans. At December 31, 2022, nonaccrual retail loans totaled $11.7 million, measuring 0.42% of total retail loans.

Allowance for Credit Losses on Loans

The allowance totaled ~~$100.2~~$102.8 million at ~~June~~September 30, 2023, an increase of ~~$3.9~~$6.5 million from December 31, 2022, reflecting growth in the loan portfolio. The ratio of the allowance to total loans decreased to ~~1.13%~~1.14% from 1.15% for these respective dates.

For the commercial loan portfolio, the allowance for credit losses as a percentage of commercial loans was ~~1.20%~~1.16% at ~~June~~September 30, 2023, compared to 1.15% at December 31, 2022.The commercial allowance for credit losses represented ~~405%~~414% of ~~non-accrual~~nonaccrual commercial loans at ~~June~~September 30, 2023 compared to 326% at December 31, 2022.

For the retail loan portfolio, the allowance for credit losses as a percentage of retail loans was ~~0.99%~~1.12% at ~~June~~September 30, 2023 compared to 1.17% at December 31, 2022.The retail allowance for credit losses represented ~~275%~~342% of ~~non-accrual~~nonaccrual retail loans at ~~June~~September 30, 2023 compared to 282% at December 31, 2022.

Deposits and Borrowings

Total deposits were ~~$10.1~~$10.0 billion at ~~June 30,~~September30, 2023, a ~~$259~~$347 million decrease from year-end 2022. Most categories of deposits decreased except for higher cost time deposits as customers sought higher rate deposits in the environment of higher interest rates. Non-interest bearing deposits totaled ~~$2.6~~$2.5 billion at ~~June~~September 30, 2023, a ~~$258~~$322 million decrease from December 31, 2022.Non-maturity interest-bearing deposits totaled $5.0 billion, an ~~$803~~$837 million decrease during the first ~~half~~nine months of 2023.~~Time~~ Period-end time deposits totaled $2.4 billion, increasing ~~$802~~$812 million during this period.Borrowings totaled ~~$0.8~~$0.9 billion at period-end, increasing ~~$670~~$800 million from year-end

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2022.The increase was due to the utilization of Federal Home Loan Bank of Boston ~~advances.~~advances primarily to fund loan growth.

Derivative Financial Instruments

The notional amount of derivative financial instruments totaled ~~$4.5~~$4.8 billion at period-end, increasing ~~$15~~$245 million from year-end 2022. The net fair value of these instruments at ~~June~~September 30, 2023 was a liability of ~~$42~~$52 million, ~~decreasing $1~~increasing $9 million from December 31, 2022.

Shareholders’ Equity and Dividends

Total shareholders’ equity was ~~$973~~$951 million at ~~June~~September 30, 2023, a ~~$19~~$3 million ~~increase~~decrease from December 31, 2022. This primarily reflects net income of ~~$51~~$71 million partially offset by ~~$16~~$24 million in common stock dividends at ~~$0.18~~$0.54 per share and share repurchases totaling ~~$14~~$17 million for the repurchase of ~~628~~807 thousand shares as well as a $5$37 million increase in the accumulated other comprehensive loss reflecting ~~changes~~an increase in the after-tax net unrealized ~~loss~~losses on available-for-sale debt securities and derivative hedges.

Liquidity and Cash Flows

Liquidity is defined as the ability to generate sufficient cash flows to meet all present and future funding requirements at reasonable costs for the Company, including the Bank.Liquidity management addresses both the Company’s ability to fund new loans and investments as opportunities arise, to meet customer deposit withdrawals and to repay borrowings and subordinated notes as they mature. During the first ~~half~~nine months of 2023 the Company increased its off-balance sheet liquidity sources primarily by increasing its assets qualified for pledging against

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borrowings, and the Company views its liquidity as satisfactory for current conditions as well as for stressed scenarios in its liquidity testing models.

At ~~June~~September 30, 2023, cash and equivalents totaled ~~$0.6~~$0.7 billion and securities available for sale totaled $1.3 billion. Unused borrowing availability at that date from the Federal Home Loan Bank of Boston “FHLBB” and the Federal Reserve Bank of Boston (“FRB”) totaled ~~$3.6~~$3.4 billion.Borrowings from these sources are supported by collateral, to the extent utilized.Cash balances at the holding company totaled ~~$89~~$101 million at period-end.

During the first ~~half~~nine months of 2023, borrowings from the FHLB were the primary source of funds and the primary uses were loan growth and net deposit ~~outflows primarily in the first quarter due to industry conditions.~~outflows.

Capital Resources

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

Additional information about capital resources and regulatory capital is contained in the notes to the consolidated financial statements and in the Company's most recent Form 10-K.

The Company’s goal is to maintain sound capitalization and use capital generation to support organic growth and shareholder distributions in the form of dividends and stock repurchases.The Company’s goal is to maintain a “well-capitalized” regulatory designation under projected and stressed financial projections.

In recent periods, the Company has returned excess capital to shareholders through stock repurchases.Additionally, the Company increased the quarterly stock dividend by 50% in the fourth quarter of 2022.The Company’s long-term goal is to maintain an efficient capital structure and to provide a return in excess of the cost of its common equity capital.

As a result of rising interest rates, available for sale bond portfolios in banks are subject to unrealized losses which result in charges against other comprehensive income (“AOCI”) and reduce the book value of shareholders’ equity.Like many of its peers, the Company utilizes an option in reporting its regulatory equity which excludes changes in AOCI in the calculation of regulatory capital.

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Reductions in bond valuations due to changes in market interest rates are reversed as bonds approach maturity. T~~hese~~ These reversals are accreted to AOCI over time, restoring the book value of equity.Tangible common equity totaling ~~$951~~$930 million at period-end and was net of an accumulated other comprehensive loss totaling ~~$186~~$218 million.

While the Company monitors the book value of equity and related metrics, it primarily manages capital based on regulatory capital measures, with a focus on the common equity Tier 1 capital ratio.The Company continues to view itself as having excess capital which it plans to utilize in accordance with its capital management objectives.

As of September 30, 2023 unrealized gains and losses, net of tax, are included in average equity and in average non-interest earning assets. Prior period balances and financial metrics have been updated to reflect the current presentation. Performance measures related to return on average equity, including related non-GAAP performance measures, are presented both based on the updated averages as well as based on measures which exclude these unrealized gains and losses, net of tax. These unrealized gains and losses are primarily related to the fair values of available-for-sale securities.

In acting as a source of strength for the Bank, the Company relies in the long term on capital distributions from the Bank in order to provide operating and capital service for the Company, which in turn can access national financial markets to provide financial support to the Bank. Capital distributions from the Bank to the parent company presently require ~~approval~~non-objection by the ~~FDIC and the Massachusetts Division of Banking.~~FDIC.

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APPLICATION OF CRITICAL ACCOUNTING POLICIES

The Company’s significant accounting policies are described in Note 1 to the consolidated financial statements

included in its most recent Annual Report on Form 10-K. Modifications to significant accounting policies made during the year are described in Note 1 to the consolidated financial statements included in Item 1 of this report. The preparation of the consolidated financial statements in accordance with GAAP and practices generally applicable to the financial services industry requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and to disclose contingent assets and liabilities. Actual results could differ from those estimates.

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

• Allowance for Credit Losses on Loans

• Fair Value Measurements

These policies are considered most critical in that they are important to the Company’s financial condition and results, and they require management’s subjective and complex judgment as a result of the need to make estimates about the effects of matters that are inherently uncertain. Both of these policies were significant in determining income and financial condition in the financial statements. There is further discussion of the application of these policies in the Form 10-K.

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

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

~~ESG factors~~sustainability activities are integral to ~~the company’s vision, mission, business practices, and Berkshire’s Exciting Strategic Transformation (BEST). Berkshire focuses~~ its ESG strategy on material topics impacting its business and stakeholders including leadership & governance, human capital management, equity & inclusion, responsible banking & cybersecurity, financial access & affordability, environmental sustainability & climate change and community investment. It was one of the first banks in the country to establish a dedicated committee of our Board of Directors to oversee ESG matters. Berkshire also was the first U.S. community bank holding company with under $150 billion in assets to issue a Sustainability Bond. The Bank is a leader among community banks in integrating ESG standards into its business strategy and operations. This helps manage risk and unlock new business opportunities to create an ecosystem of value.

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

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~~Climate Change & Sustainability~~

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

~~Quarterly Highlights~~responsibility highlights include:

•~~Sustainability Bond~~: Berkshire completed the allocation of its inaugural $100 million sustainability bond less than one year after its issuance. All of the proceeds were allocated in alignment with Berkshire's Sustainable Financing Framework. Sustainalytics,launched a ~~Morningstar Company,~~new Down Payment Assistance Program to increase homeownership amongst low-to-moderate income and the global leader in high-quality ESG research, ratings, and data, independently verified that Berkshire's Sustainable Financing Framework "is credible and impactful and aligns with the International Capital Market Association's (ICMA) Sustainability Bond Guidelines 2021, Green Bond Principles 2021 and Social Bond Principles 2021". The subordinated Sustainability Bond issuance also received an investment grade rating of Baa3 from Moody's Investors Service.

~~Bond proceeds were allocated toward the following projects:~~

first-time homebuyers.

•~~Affordable & Workforce Housing: Approximately 41%~~Berkshire’s annual Xtraordinary Day of ~~the bond proceeds were allocated~~Service featured 47 volunteer events in which more than 1,000 employees contributed 4,000 hours of service to the development of 330 units of affordable and workforce housing in Massachusetts, New York and Connecticut. These projects are expected to provide housing at a rate below the prevailing market rate to individuals and families at or below 60% of the Area Median Income ("AMI") for affordable units and between 60%-80% of the AMI for workforce units

lift-up local communities.

•~~Green Buildings~~: Approximately 33% of the bond proceeds were allocated for the construction of more than 200,000 square feet of green buildings in Massachusetts and New York whose projects are expected to achieve LEED Gold or Platinum, Net Zero emissions and/or are expected to achieve greenhouse gas emissions performance in the top 15% of their municipal boundaries.

•~~Financial Access & Inclusion~~: 26% of the bond proceeds were allocated to projects located in low-moderate income and/or majority minority census tracts. This included a small business that created jobs and the redevelopment and revitalization of a former industrial site within a low-income neighborhood that helped attract new and retain existing businesses and residents.

~~Further details can be found in Berkshire's Sustainability Bond Report available on its website.~~

•~~Performance & Recognition:~~Berkshire maintained its top quartile ESG rating performance and was named ~~the recipient of the LGBT Corporate Ally Award from~~a Top Charitable Contributor by the Boston Business ~~Journal.~~Journal for the 11th consecutive year.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For additional discussion about the Company’s Quantitative and Qualitative Aspects of Market Risk, please review Item 7A of the most recent report on Form 10-K which sets forth the methodologies employed by the Company and the various aspects of its analysis of its interest rate sensitivity.

Market risk represents the risk of loss to earnings, capital and the economic values of certain assets and liabilities resulting from changes in interest rates and equity prices. The only significant market risk exposure for the Company is Interest Rate Risk (“IRR”). This is a result of the Company’s core business activities of making loans and accepting deposits.

The effective management of IRR is essential to achieving the Company’s financial objectives. The Company’s goal is to support the net interest margin and net interest income over entire interest rate cycles regardless of changes in either short- or long-term interest rates. The Company manages IRR by using two primary risk measurement techniques: simulation of net interest income and simulation of economic value of equity. These two measurements are complementary and provide both short-term and long-term risk profiles of the Company.

Net Interest Income at Risk Simulation is used to measure the sensitivity of net interest income to changes in market rates over a period of time, such as 12 or 24 months. This simulation captures underlying product behaviors, such as asset and liability repricing dates, balloon dates, interest rate indices and spreads, rate caps and floors, as well as other behavioral attributes. The simulation of net interest income also requires a number of key assumptions such as: (i) future balance sheet volume and mix assumptions; (ii) prepayment projections for loans and securities; (iii) new business loan spreads; and (iv) deposit pricing assumptions. Combined, these assumptions can be inherently uncertain, and as a result, actual results may differ from simulation forecasts due to the timing, magnitude and frequency of interest rate changes, future business conditions, as well as unanticipated changes in management strategies.

The Company uses two sets of standard scenarios to measure net interest income at risk compared to a base case with a static balance sheet and interest rates. Parallel shock scenarios assume instantaneous parallel movements in the yield curve compared to a flat yield curve scenario. Yield curve twist scenarios assume the shape of the curve flattens or steepens instantaneously.

The following tables set forth the estimated percent change in the Company’s net interest income at risk over one-year simulation periods beginning ~~June~~September 30, 2023 and December 31, 2022.


		Estimated Percent Change in Net Interest Income			Estimated Percent Change in Net Interest Income
Parallel Interest Rate Shock (basis points)	Parallel Interest Rate Shock (basis points)	June 30, 2023	December 31, 2022	Parallel Interest Rate Shock (basis points)	September 30, 2023	December 31, 2022
+200	+200	(0.3)%	1.8%	+200	(3.1)%	1.8%
+100	+100	(0.3)	0.8	+100	(1.5)	0.8
-100	-100	(0.5)	(1.6)	-100	1.2	(1.6)
-200	-200	(2.5)	(5.2)	-200	1.8	(5.2)
		Estimated Percent Change in Net Interest Income			Estimated Percent Change in Net Interest Income
Yield Curve Twist Interest Rate Shock (basis points)	Yield Curve Twist Interest Rate Shock (basis points)	June 30, 2023	December 31, 2022	Yield Curve Twist Interest Rate Shock (basis points)	September 30, 2023	December 31, 2022
Short End +100	Short End +100	(0.8)%	0.1%	Short End +100	(2.4)%	0.1%
Short End -100	Short End -100	(0.3)	(1.3)	Short End -100	1.6	(1.3)
Long End +100	Long End +100	0.7	1.0	Long End +100	1.2	1.0
Long End -100	Long End -100	(0.9)	(1.2)	Long End -100	(1.2)	(1.2)

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The net interest income at risk simulation results indicate that the Company’s interest rate risk ~~was essentially neutral for the~~changed to modestly liability sensitive under parallel shift modeled scenarios ~~as of June~~at September 30, ~~2023. This was a change~~2023 from a modestly asset sensitive profile under these scenarios as of December 31, 2022. ~~Asset sensitivity declined due to~~This change reflected several factors, including continued growth of the residential mortgage portfolio, ~~and~~increased utilization of short-term borrowings, further deposit mix shift towards ~~interest-bearing. Exposure to lower market interest rates decreased due to~~interest-bearing, and less flooring on non-maturity deposits in downward modeled scenarios.

Economic Value of Equity at Risk Simulation is conducted in tandem with net interest income simulations, to ascertain a longer-term view of the Company’s IRR position by capturing longer-term repricing risk and options risk embedded in the balance sheet. It measures the sensitivity of economic value of equity to changes in interest rates. Economic value of equity at risk simulation values only the current balance sheet. As with net interest income modeling, this simulation captures product characteristics such as loan resets, repricing terms, maturity dates, rate caps and floors. Key assumptions include loan prepayment speeds, deposit pricing elasticity and non-maturity deposit attrition rates. These assumptions can have significant impacts on valuation results as the assumptions remain in effect for the entire life of each asset and liability. All key assumptions are subject to periodic review.

Base case economic value of equity at risk is calculated by estimating the net present value of all future cash flows from existing assets and liabilities using current interest rates. The current spot interest rate curve is shocked up and down to generate new interest rate curves for parallel rate shock scenarios. These new curves are then used to recalculate economic value of equity at risk for these rate shock scenarios.

The following table sets forth the estimated percent change in the Company’s economic value of equity at risk, assuming various instantaneous parallel shocks in interest rates.


		Estimated Percent Change in Economic Value of Equity			Estimated Percent Change in Economic Value of Equity
Parallel Shock Rate Change (basis points)	Parallel Shock Rate Change (basis points)	June 30, 2023	December 31, 2022	Parallel Shock Rate Change (basis points)	September 30, 2023	December 31, 2022
+200	+200	(3.1)%	—%	+200	(6.0)%	—%
+100	+100	(1.5)	—	+100	(2.9)	—
-100	-100	0.4	(1.5)	-100	2.6	(1.5)
-200	-200	(1.0)	(5.4)	-200	4.3	(5.4)

The Company’s economic value of equity at risk profile indicates that at ~~June~~September 30, 2023 the economic value of equity ~~was close to neutral~~ in the modeled ~~scenarios. Exposure in~~scenarios was liability sensitive compared to a neutral/asset sensitive position at December 31, 2022. Equity value sensitivity was impacted by the ~~+200 basis point shock scenario has increased from December 31,2022 due primarily to an~~same factors that affected net interest income sensitivity discussed above, particularly the increase in residential ~~mortgage loans.~~mortgages and short-term borrowings.

Management utilizes both interest rate measures in the normal course of measuring and managing IRR and believes that each measure is valuable in understanding the Company’s IRR position.

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ITEM 4. CONTROLS AND PROCEDURES

a) Disclosure controls and procedures.

The principal executive officers, including the principal financial officer, based on their evaluation of disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that the Company’s disclosure controls and procedures were effective.

b) Changes in internal control over financial reporting.

There were no changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II

ITEM 1. LEGAL PROCEEDINGS

As of ~~June~~September 30, 2023, neither the Company nor the Bank was involved in any pending legal proceedings believed by management to be material to the Company’s financial condition or results of operations. Periodically, there have been various claims and lawsuits involving the Bank, such as claims to enforce liens, condemnation proceedings on properties in which the Bank holds security interests, claims involving the making and servicing of real property loans, and other issues incident to the Bank’s business. A summary of certain legal matters involving unsettled litigation or pertaining to pending transactions are as follows:

On February 4, 2020, the Bank filed a complaint in the New York State Supreme Court for the County of Albany against Pioneer Bank (“Pioneer”) seeking damages of approximately $16.0 million. The complaint alleges that Pioneer is liable to the Bank for a credit loss of approximately $16.0 million suffered by the Bank in the third quarter of 2019 as a result of Pioneer’s breaches of a series of loan participation agreements executed in 2017, 2018 and 2019 in which it served as the lead bank, as well as constructive fraud, fraudulent concealment and/or negligent misrepresentation. Pioneer filed a motion to dismiss aspects of the Bank’s complaint, which motion was allowed in part by the court to dismiss the Bank’s negligent misrepresentation claim, and denied in part by the court to allow all other claims by the Bank to proceed. The Company wrote down the underlying credit loss in its entirety in the third quarter of 2019, but recognized a partial recovery of $1.7 million early in the second quarter of 2020. The Company has not accrued for any additional anticipated recovery at this time. Extensive discovery has taken place in this action. On November 30, 2022, the Bank filed an amended complaint in its action against Pioneer setting forth more detailed allegations of Pioneer’s breaches of the loan participation agreements and stating additional claims for fraudulent inducement to cause Berkshire to join the loan participation agreements, constructive fraud and fraudulent concealment. On January 30, 2023, as part of its response to the Bank’s amended complaint, Pioneer filed a counterclaim against the Bank alleging (i) certain breaches by the Bank of the 2019 loan participation agreement stemming from actions that the Bank took to protect its interests after it learned of the facts and circumstances that caused the underlying credit loss, and (ii) that as a result of accepting the partial recovery of approximately $1.7 million in Q2 2020 the Bank should be deemed to have ratified the 2019 loan participation agreement and mooted its claims against Pioneer. Further discovery is now ongoing.

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

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ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider information regarding the Company’s risk factors as set forth in Part 1, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for fiscal year ended December 31, 2022, and Part II, Item 1A “Risk Factors” in our subsequent Quarterly Reports on Form 10-Q, each as filed with the Securities and Exchange Commission. Additional risks and uncertainties not currently known to the Company, or currently deemed to be immaterial, also may materially adversely affect the Company's business, financial condition, and/or operating results.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

(a) Recent Sales of Unregistered Securities

The Company occasionally engages in the practice of transferring unregistered securities for the purpose of completing business transactions. These shares are issued to vendors or other organizations as consideration for services performed in accordance with each contract. During the three months ended ~~June~~September 30, 2023 and 2022 there were no shares transferred.

(b) Not applicable.

(c) The following table provides certain information with regard to shares repurchased by the Company in the ~~second~~third quarter of 2023:

Total number of Average price Total number of shares
purchased as part of
publicly announced Maximum number of
shares that may yet
be purchased under
Period shares purchased paid per share plans or programs the plans or programs
April 1-30, 2023 208,563 $ 22.42 208,563 2,156,125
May 1-31, 2023 317,562 20.24 317,562 1,838,563
June 1-30, 2023 54,605 21.68 54,605 1,783,958
Total 580,730 $ 21.16 580,730 1,783,958


	Total number of	Average price		Total number of shares purchased as part of publicly announced	Maximum number of shares that may yet be purchased under
Period	shares purchased	paid per share		plans or programs	the plans or programs
July 1-31, 2023	7,821	$	20.36	7,821	1,857,940
August 1-31, 2023	—	—		—	1,857,940
September 1-30, 2023	170,926	20.00		170,926	1,687,014
Total	178,747	$	20.02	178,747	1,687,014

On January 25, 2023, the Company announced that its Board of Directors approved a stock repurchase program pursuant to which the Company is authorized to repurchase shares of Company common stock at a total cost of up to $50 million through December 31, 2023. The maximum number of shares that may be purchased under this program has been estimated based on the ~~June~~September 30, 2023 closing price per share of Company common stock of ~~$20.73.~~$20.05.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

During the three months ended ~~June~~September 30, 2023, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as that term is used in SEC regulations.

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ITEM 6. EXHIBITS


3.1						Amended and Restated Certificate of Incorporation of Berkshire Hills Bancorp, Inc.(1)
3.2						Amended and Restated Bylaws of Berkshire Hills Bancorp, Inc. (2)
4.1						Form of Common Stock Certificate of Berkshire Hills Bancorp, Inc. (3)
4.2						Certificate of Designations of Series B Non-Voting Preferred Stock of Berkshire Hills Bancorp, Inc. (4)
31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101						The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2023, formatted in Inline XBRL: (i) the Consolidated Statements of Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements tagged as blocks of text and including detailed tags.
104						The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2023, formatted in Inline XBRL.

(1) Incorporated herein by reference from the Exhibits to the Form 10-Q as filed on August 9, 2018.

(2) Incorporated herein by reference from the Exhibits to the Form 8-K as filed on June 26, 2017.

(3) Incorporated herein by reference from the Exhibits to the Form S-1, Registration Statement and amendments thereto, initially filed on March 10, 2000, Registration No. 333-32146.

(4) Incorporated herein by reference from the Exhibits to the Form 8-K as filed on October 16, 2017.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	BERKSHIRE HILLS BANCORP, INC.


Dated: ~~August~~November 9, 2023	By:	/s/ Nitin J. Mhatre
	Nitin J. Mhatre
	President and Chief Executive Officer


Dated: ~~August~~November 9, 2023	By:	/s/ R. David Rosato
	R. David Rosato
	Senior Executive Vice President and Chief Financial Officer

8384


PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	7980
Item 1A.	Risk Factors	8081
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	8182
Item 3.	Defaults Upon Senior Securities	8182
Item 4.	Mine Safety Disclosures	8182
Item 5.	Other Information	8182
Item 6.	Exhibits	8283
Signatures		8384