Part I [Consolidated Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(unaudited)) Unaudited consolidated financial statements conform to US GAAP, include all necessary adjustments, and reflect the non-material impact of ASU No. 2022-02 adoption - Interim financial statements are prepared under US GAAP and should be read with the **2022 Annual Report on Form 10-K**[331](index=331&type=chunk)[351](index=351&type=chunk)[352](index=352&type=chunk) - Effective January 1, 2023, the Company adopted ASU No. 2022-02, eliminating the TDR accounting model, which **did not materially impact** financial statements[354](index=354&type=chunk)[379](index=379&type=chunk) [Note 1. Basis of Presentation](index=13&type=section&id=Note%201%20Basis%20of%20Presentation) Consolidated financial statements are prepared under US GAAP, include all necessary adjustments, and reflect the non-material impact of ASU No. 2022-02 adoption - The financial statements consolidate the Company and its subsidiaries, eliminating all significant intercompany transactions[351](index=351&type=chunk) - The adoption of ASU No. 2022-02 on January 1, 2023, eliminated the TDR accounting model without **materially affecting** the Company's financial statements[354](index=354&type=chunk)[379](index=379&type=chunk) [Note 2. Trading Securities](index=14&type=section&id=Note%202%20Trading%20Securities) The Company holds a single tax-advantaged economic development bond as a trading security, hedged with an interest rate swap to mitigate risk Trading Security Details (in thousands) | Date | Amortized Cost | Fair Value | | :--- | :--- | :--- | | June 30, 2023 | $6,600 | $6,400 | | December 31, 2022 | $7,100 | $6,700 | - The Company entered into a swap contract to convert the fixed rate of the trading security into a variable rate as a risk management strategy[358](index=358&type=chunk) [Note 3. Securities Available for Sale, Held to Maturity, and Equity Securities](index=14&type=section&id=Note%203%20Securities%20Available%20for%20Sale,%20Held%20to%20Maturity,%20and%20Equity%20Securities) The securities portfolio includes **$1.34 billion** AFS and **$0.56 billion** HTM, with unrealized losses primarily from interest rate changes, not credit deterioration Securities Portfolio Summary as of June 30, 2023 (in thousands) | Security Type | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | | :--- | :--- | :--- | :--- | :--- | | **Available for Sale** | **$1,578,544** | **$404** | **($238,617)** | **$1,340,331** | | **Held to Maturity** | **$563,765** | **$408** | **($76,213)** | **$487,960** | | **Marketable Equity** | **$15,035** | **$—** | **($2,167)** | **$12,868** | Securities with Unrealized Losses by Duration as of June 30, 2023 (in thousands) | Duration of Loss | Gross Unrealized Losses | Fair Value | | :--- | :--- | :--- | | **AFS Securities** | | | | Less Than Twelve Months | $52,392 | $1,257,842 | | Over Twelve Months | $235,691 | $1,310,234 | | **HTM Securities** | | | | Less Than Twelve Months | $123,807 | $288,625 | | Over Twelve Months | $72,794 | $412,432 | - The Company does not intend to sell securities in an unrealized loss position and anticipates it will not be required to sell them before recovery of the amortized cost basis, supported by the company's **strong capital and liquidity**[423](index=423&type=chunk) - Unrealized losses in the AFS and HTM portfolios are **primarily driven by changes in market interest rates rather than credit deterioration**, with contractual cash flows of all mortgage-backed securities **guaranteed by FNMA, FHLMC, and GNMA**[367](index=367&type=chunk)[370](index=370&type=chunk)[392](index=392&type=chunk) [Note 4. Loans and Allowance for Credit Losses](index=20&type=section&id=Note%204%20Loans%20and%20Allowance%20for%20Credit%20Losses) Total loans grew to **$8.88 billion**, with ACLL at **$100.2 million** or **1.13%**, based on a static pool migration analysis and qualitative factors Total Loans (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Construction | $443,856 | $319,452 | | Commercial multifamily | $597,472 | $620,088 | | Commercial real estate owner occupied | $696,771 | $640,489 | | Commercial real estate non-owner occupied | $2,557,036 | $2,496,237 | | Commercial and industrial | $1,438,062 | $1,445,236 | | Residential real estate | $2,677,053 | $2,312,447 | | Home equity | $225,434 | $227,450 | | Consumer other | $246,718 | $273,910 | | **Total loans** | **$8,882,402** | **$8,335,309** | Allowance for Credit Losses on Loans (ACLL) Activity - Six Months Ended June 30, 2023 (in thousands) | | Amount | | :--- | :--- | | Balance at Beginning of Period | $96,270 | | Adoption of ASU No. 2022-02 | ($401) | | Charge-offs | ($15,621) | | Recoveries | $2,952 | | Provision for Credit Losses | $17,019 | | **Balance at End of Period** | **$100,219** | - The Allowance for Credit Losses for Loans (ACLL) is management's estimate of expected credit losses over the life of the loans, using a static pool migration analysis, a **7-quarter** forecast period, and qualitative overlays[12](index=12&type=chunk) Loans Past Due Status as of June 30, 2023 (in thousands) | Days Past Due | Amount | | :--- | :--- | | 30-59 Days | $9,219 | | 60-89 Days | $5,928 | | 90+ Days | $36,200 | | **Total Past Due** | **$51,347** | | Current | $8,831,055 | | **Total Loans** | **$8,882,402** | [Note 5. Deposits](index=34&type=section&id=Note%205%20Deposits) Total time deposits increased to **$2.44 billion** from **$1.63 billion**, with significant growth in the **$100,000** to **$250,000** tranche Time Deposits Breakdown (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Time less than $100,000 | $669,592 | $549,265 | | Time $100,000 through $250,000 | $1,102,571 | $642,600 | | Time more than $250,000 | $663,455 | $441,842 | | **Total time deposits** | **$2,435,618** | **$1,633,707** | [Note 6. Borrowed Funds](index=34&type=section&id=Note%206%20Borrowed%20Funds) Total borrowed funds significantly increased to **$795.6 million**, driven by FHLB advances, with **$3.6 billion** in total available borrowing capacity Borrowed Funds Summary (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Short-term borrowings** | **$470,000** | **$—** | | FHLB Advances | $470,000 | $— | | **Long-term borrowings** | **$325,583** | **$125,509** | | FHLB Advances and other | $204,345 | $4,445 | | Subordinated borrowings | $121,238 | $121,064 | | **Total Borrowings** | **$795,583** | **$125,509** | - The Bank's available borrowing capacity was **$2.2 billion** with the FHLB and **$1.4 billion** with the Federal Reserve Bank as of **June 30, 2023**[456](index=456&type=chunk)[483](index=483&type=chunk) - In June 2022, the Company issued **$100.0 million** in ten-year subordinated notes with a fixed rate of **5.50%** for the first five years, after which it becomes callable and switches to a floating rate[486](index=486&type=chunk) [Note 7. Derivative Financial Instruments and Hedging Activities](index=36&type=section&id=Note%207%20Derivative%20Financial%20Instruments%20and%20Hedging%20Activities) The Company held **$4.5 billion** in derivatives, including cash flow and economic hedges, to mitigate interest rate risk, with a net fair value liability of **$41.9 million** Derivative Portfolio Summary as of June 30, 2023 (in thousands) | Derivative Type | Notional Amount | Estimated Fair Value (Asset/(Liability)) | | :--- | :--- | :--- | | **Cash flow hedges** | **$800,000** | **$1,495** | | Interest rate swaps | $600,000 | $714 | | Interest rate collars | $200,000 | $781 | | **Economic hedges** | **$3,730,449** | **($43,452)** | | **Non-hedging derivatives** | **$9,369** | **$37** | | **Total** | **$4,539,818** | **($41,920)** | - The Company uses interest rate swaps as cash flow hedges to convert variable-rate commercial loans to fixed rates, protecting against interest rate variability[492](index=492&type=chunk) - Economic hedges are used to facilitate customer needs, such as converting a variable-rate loan to a fixed rate, with the Company entering into offsetting mirror-image derivatives with third-party institutions to hedge its own risk[494](index=494&type=chunk) - The Company is party to master netting arrangements with its financial institution counterparties, which provide for a single net settlement in the event of default, though assets and liabilities are not offset for presentation purposes[55](index=55&type=chunk) [Note 8. Leases](index=44&type=section&id=Note%208%20Leases) The Company's leases, primarily operating, had ROU assets of **$54.2 million** and liabilities of **$63.3 million**, with an **8.7-year** weighted-average term Lease Assets and Liabilities (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Lease Right-of-Use Assets** | | | | Operating lease ROU assets | $48,305 | $46,411 | | Finance lease ROU assets | $5,857 | $6,151 | | **Total Lease ROU Assets** | **$54,162** | **$52,562** | | **Lease Liabilities** | | | | Operating lease liabilities | $54,315 | $53,736 | | Finance lease liabilities | $8,979 | $9,306 | | **Total Lease Liabilities** | **$63,294** | **$63,042** | Weighted-Average Lease Term and Discount Rate | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Remaining Lease Term (years)** | | | | Operating leases | 8.7 | 9.3 | | Finance leases | 11.3 | 11.8 | | **Discount Rate** | | | | Operating leases | 2.78% | 2.56% | | Finance leases | 5.00% | 5.00% | [Note 9. Capital Ratios and Shareholders' Equity](index=46&type=section&id=Note%209%20Capital%20Ratios%20and%20Shareholders'%20Equity) Both the Company and Bank exceeded all regulatory capital requirements, with the Bank 'well capitalized' and CET1 at **12.1%**, despite increased AOCL Company (Consolidated) Capital Ratios | Ratio | June 30, 2023 | Dec 31, 2022 | Minimum Requirement | | :--- | :--- | :--- | :--- | | Common equity tier 1 capital | 12.1% | 12.4% | 4.5% | | Tier 1 capital to risk-weighted assets | 12.3% | 12.6% | 6.0% | | Total capital to risk-weighted assets | 14.4% | 14.6% | 8.0% | | Tier 1 capital to average assets | 9.6% | 10.2% | 4.0% | - At **June 30, 2023**, the capital levels for both the Company and the Bank **exceeded all regulatory requirements**, including the **2.5%** capital conservation buffer, with the Bank's ratios above the minimums to be considered **'well capitalized'**[65](index=65&type=chunk)[509](index=509&type=chunk) Changes in Accumulated Other Comprehensive Loss (AOCL) - Six Months Ended June 30, 2023 (in thousands) | Component | Beginning Balance | Other Comprehensive Loss | Ending Balance | | :--- | :--- | :--- | :--- | | Net unrealized loss on Securities | ($175,557) | ($717) | ($176,274) | | Net effective loss on cash flow hedging derivatives | ($4,878) | ($4,471) | ($9,349) | | Net unrealized loss on pension plans | ($617) | $— | ($617) | | **Total AOCL** | **($181,052)** | **($5,188)** | **($186,240)** | [Note 10. Earnings per Share](index=51&type=section&id=Note%2010%20Earnings%20per%20Share) For H1 2023, basic and diluted EPS were **$1.18** and **$0.92** respectively, with anti-dilutive stock awards excluded from diluted EPS calculation Earnings Per Share Calculation (Six Months Ended) | (in thousands, except per share data) | 2023 | 2022 | | :--- | :--- | :--- | | Net Income | $51,498 | $43,311 | | Average basic shares outstanding | 43,564 | 46,733 | | Dilutive effect of stock awards/options | 216 | 341 | | **Average diluted shares outstanding** | **43,780** | **47,074** | | **Basic EPS** | **$1.18** | **$0.93** | | **Diluted EPS** | **$1.18** | **$0.92** | - For the six months ended **June 30, 2023**, **563 thousand** shares of unvested restricted stock and **49 thousand** outstanding options were **anti-dilutive** and excluded from the EPS calculation[102](index=102&type=chunk) [Note 11. Stock-Based Compensation Plans](index=52&type=section&id=Note%2011%20Stock-Based%20Compensation%20Plans) Stock-based compensation expense was **$3.5 million** for H1 2023, with **392,000** non-vested awards granted and **178,000** shares vested Stock Award and Option Activity (Shares in thousands) | | Non-Vested Stock Awards | Stock Options | | :--- | :--- | :--- | | **Balance at Dec 31, 2022** | **704** | **49** | | Granted | 392 | — | | Vested | (178) | — | | Forfeited | (49) | — | | **Balance at June 30, 2023** | **869** | **49** | - Stock-based compensation expense was **$3.5 million** for the six months ended **June 30, 2023**, compared to **$3.9 million** for the same period in **2022**[519](index=519&type=chunk) [Note 12. Fair Value Measurements](index=53&type=section&id=Note%2012%20Fair%20Value%20Measurements) The Company uses a fair value hierarchy, with most instruments valued using Level 2 inputs, and Level 3 inputs for certain assets like capitalized servicing rights Recurring Fair Value Measurements as of June 30, 2023 (in thousands) | Category | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | | :--- | :--- | :--- | :--- | :--- | | **Assets** | | | | | | Trading securities | $— | $— | $6,708 | $6,708 | | Securities available for sale | $11,973 | $1,324,335 | $4,000 | $1,340,308 | | Derivative assets | $— | $54,216 | $25 | $54,241 | | **Liabilities** | | | | | | Derivative liabilities | $— | $97,030 | $— | $97,030 | - Level 1 inputs are quoted prices in active markets, Level 2 inputs are based on models using standard factors like dealer quotes and yield curves, and Level 3 inputs are unobservable to market participants[134](index=134&type=chunk)[520](index=520&type=chunk) - Non-recurring fair value adjustments are periodically recorded for certain assets, such as collateral-dependent loans, based on the fair value of underlying collateral, generally classified as **Level 3** due to significant judgment and unobservable data in appraisals[117](index=117&type=chunk)[143](index=143&type=chunk) Non-Recurring Fair Value Measurements (Level 3) (in thousands) | Assets | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Individually evaluated loans | $5,773 | $14,571 | | Capitalized servicing rights | $11,223 | $11,201 | | **Total** | **$16,996** | **$29,141** | [Note 13. Net Interest Income after Provision/(Benefit) for Credit Losses](index=62&type=section&id=Note%2013%20Net%20Interest%20Income%20after%20Provision/(Benefit)%20for%20Credit%20Losses) Net interest income increased to **$190.3 million** for H1 2023, with a **$17.0 million** provision for credit losses compared to a **$4.0 million** benefit in H1 2022 Net Interest Income & Provision Summary (in thousands) | | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net interest income | $190,292 | $150,421 | | Provision/(benefit) for credit losses | $16,999 | ($4,000) | | **Net interest after provision** | **$173,293** | **$154,421** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=63&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net income rose to **$51.5 million** for H1 2023, driven by higher net interest income and expanded NIM, with strong capital and completed sustainability bond allocation - The company's vision is to be a leading socially responsible omni-channel community bank in New England and beyond, providing a range of banking, mortgage, and wealth management services[164](index=164&type=chunk) - The discussion and analysis should be read in conjunction with the consolidated financial statements in this report and the **2022 Annual Report on Form 10-K**[190](index=190&type=chunk) [Financial Overview](index=71&type=section&id=Financial%20Overview) Net income increased to **$23.9 million** in Q2 2023 and **$51.5 million** in H1 2023, driven by higher net interest income despite increased credit loss provisions Key Performance Metrics - Q2 2023 vs Q2 2022 | Metric | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Net Income (millions) | $23.9 | $23.1 | | Diluted EPS | $0.55 | $0.50 | | Return on Average Assets (GAAP) | 0.78% | 0.82% | | Return on Avg. Tangible Common Equity (Operating) | 8.27% | 8.48% | Key Performance Metrics - H1 2023 vs H1 2022 | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net Income (millions) | $51.5 | $43.3 | | Diluted EPS | $1.18 | $0.92 | | Return on Average Assets (GAAP) | 0.86% | 0.76% | | Return on Avg. Tangible Common Equity (Operating) | 8.92% | 7.99% | [Net Interest Income](index=72&type=section&id=Net%20Interest%20Income) Net interest margin (FTE) expanded to **3.24%** in Q2 2023 and **3.40%** in H1 2023, driven by rising rates and loan growth funded by increased borrowings - The increase in net interest margin was attributed to reinvesting funds into higher-yielding loans and the positive impact of rising market interest rates, as the Federal Funds rate increased from **0.25%** in Q1 **2022** to **5.16%** in Q2 **2023**[174](index=174&type=chunk)[198](index=198&type=chunk) - In Q2 **2023** vs Q2 **2022**, average earning assets increased by **$998 million**, driven by a **$1.30 billion** increase in average loans, funded by a **$941 million** increase in average funding liabilities, **primarily a $1.13 billion increase in borrowings**, which offset a **$187 million** decrease in average deposits[168](index=168&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - Deposit mix shifted towards higher-cost time deposits, which grew to **24%** of average deposits in Q2 **2023** from **15%** in Q2 **2022**, while non-interest-bearing deposits decreased from **30%** to **27%** of the mix[177](index=177&type=chunk)[178](index=178&type=chunk) [Provision for Credit Losses](index=73&type=section&id=Provision%20for%20Credit%20Losses) The Company recorded a **$8.0 million** provision for credit losses in Q2 2023 and **$17.0 million** in H1 2023, reflecting loan portfolio growth - The provision expense in **2023** was **primarily driven by** growth in the loan portfolio[220](index=220&type=chunk) - The provision benefit in **2022** reflected a notable improvement in pandemic-related expected credit losses[197](index=197&type=chunk)[220](index=220&type=chunk) [Non-Interest Income and Expense](index=73&type=section&id=Non-Interest%20Income%20and%20Expense) Non-interest income increased by **$0.7 million** in Q2 2023, while expenses rose by **$5.6 million**, yet the efficiency ratio improved to **63.6%** due to revenue growth - Q2 **2023** non-interest income increased due to higher deposit-related fees and commercial loan interest rate swap activity, partially offset by lower gains on SBA loan sales and wealth management fees[179](index=179&type=chunk) - Non-interest expense increased year-over-year due to hiring of frontline bankers, investments in technology to digitize the bank, and higher FDIC deposit insurance premiums, partially offset by lower occupancy costs from branch consolidation[221](index=221&type=chunk)[222](index=222&type=chunk) - The efficiency ratio **improved to** **63.6%** in Q2 **2023** from **66.6%** in Q2 **2022**, and **61.5%** in H1 **2023** from **69.5%** in H1 **2022**, because operating revenue growth outpaced operating expense growth[170](index=170&type=chunk)[223](index=223&type=chunk) [Comparison of Financial Condition](index=74&type=section&id=Comparison%20of%20Financial%20Condition) Total assets grew to **$12.1 billion**, driven by **$547 million** loan growth funded by increased borrowings, while nonaccrual loans decreased - Total assets grew by **$427 million** to **$12.1 billion** in the first half of **2023**, **primarily due to a $547 million increase** in total loans[207](index=207&type=chunk) - Total liabilities increased by **$408 million**, reflecting a **$670 million** increase in borrowings (mainly FHLB advances) that **more than offset a $259 million decrease** in total deposits[208](index=208&type=chunk)[212](index=212&type=chunk) - Nonaccrual loans decreased by **$2.7 million** to **$28.4 million** during the first half of **2023**, and the allowance for credit losses as a percentage of nonaccrual loans **improved to** **353%** from **309%** at year-end **2022**[225](index=225&type=chunk) [Shareholders' Equity, Capital Resources, and Liquidity](index=75&type=section&id=Shareholders'%20Equity,%20Capital%20Resources,%20and%20Liquidity) Shareholders' equity increased to **$973 million**, supported by net income, with strong liquidity and capital ratios exceeding regulatory requirements - Shareholders' equity increased by **$19 million** to **$973 million** in H1 **2023**, driven by **$51 million** in net income, offset by **$16 million** in dividends and **$14 million** in share repurchases[257](index=257&type=chunk) - The Company's long-term goal is to maintain an efficient capital structure, support organic growth, and provide shareholder returns through dividends and stock repurchases[236](index=236&type=chunk)[260](index=260&type=chunk) - The Company has **strong liquidity**, with **$0.6 billion** in cash, **$1.3 billion** in AFS securities, and **$3.6 billion** in unused borrowing capacity from the FHLB and Federal Reserve Bank as of **June 30, 2023**[214](index=214&type=chunk)[259](index=259&type=chunk) - The Company manages capital based on regulatory ratios, focusing on the Common Equity Tier 1 (CET1) ratio, and excludes changes in Accumulated Other Comprehensive Income (AOCI) from regulatory capital calculations[261](index=261&type=chunk)[262](index=262&type=chunk) [Environmental, Social, Governance (ESG)](index=77&type=section&id=Environmental,%20Social,%20Governance%20(ESG)) Berkshire integrates ESG, fully allocated its **$100 million** Sustainability Bond to green buildings, affordable housing, and financial inclusion, and maintains a top-quartile ESG rating - The company was one of the **first U.S. banks to establish a dedicated Board committee for ESG** and the **first community bank holding company under $150 billion in assets to issue a Sustainability Bond**[241](index=241&type=chunk) - The company completed the allocation of its **$100 million** sustainability bond, with proceeds funding green buildings, affordable/workforce housing, and financial access/inclusion projects[243](index=243&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk) - Berkshire maintained its **top quartile ESG rating** and received the LGBT Corporate Ally Award from the Boston Business Journal[270](index=270&type=chunk) [NON-GAAP FINANCIAL MEASURES](index=67&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) The Company uses non-GAAP measures like operating earnings to provide supplemental performance insights, excluding non-recurring items for better trend analysis - Management uses non-GAAP measures to evaluate operating trends by excluding items like restructuring costs and, in prior periods, certain fair value adjustments, which they believe facilitates comparison with peers[129](index=129&type=chunk)[158](index=158&type=chunk)[186](index=186&type=chunk) Reconciliation of GAAP to Non-GAAP Net Income (in thousands) | | H1 2023 | H1 2022 | | :--- | :--- | :--- | | **GAAP Net income** | **$51,498** | **$43,311** | | Adj: Fair value adjustments on securities | — | $1,718 | | Adj: Restructuring and other expense | ($15) | $53 | | Adj: Income taxes | $3 | ($731) | | **Total operating income (non-GAAP)** | **$51,486** | **$44,351** | [Quantitative and Qualitative Disclosures about Market Risk](index=79&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The Company manages Interest Rate Risk (IRR) using NII and EVE simulations, showing a neutral risk profile as of **June 30, 2023**, due to portfolio shifts - The company's main market risk is Interest Rate Risk (IRR) resulting from its core business of making loans and accepting deposits, managed using Net Interest Income (NII) at Risk and Economic Value of Equity (EVE) at Risk simulations[246](index=246&type=chunk)[289](index=289&type=chunk) Estimated Percent Change in Net Interest Income (NII) | Rate Shock (bps) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | +200 | (0.3)% | 1.8% | | +100 | (0.3)% | 0.8% | | -100 | (0.5)% | (1.6)% | | -200 | (2.5)% | (5.2)% | Estimated Percent Change in Economic Value of Equity (EVE) | Rate Shock (bps) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | +200 | (3.1)% | —% | | +100 | (1.5)% | —% | | -100 | 0.4% | (1.5)% | | -200 | (1.0)% | (5.4)% | - The NII risk profile **shifted from modestly asset sensitive** at year-end **2022** to a **neutral interest rate risk profile** by **June 30, 2023**, due to growth in the residential mortgage portfolio and a shift in deposit mix towards interest-bearing accounts[274](index=274&type=chunk) [Controls and Procedures](index=81&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the last quarter - The principal executive and financial officers concluded that the Company's disclosure controls and procedures were **effective** as of the end of the period covered by the report[277](index=277&type=chunk) - **No changes occurred** in the Company's internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[252](index=252&type=chunk) Part II [Legal Proceedings](index=82&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not involved in material legal proceedings but is **actively defending** a **$16.0 million** lawsuit against Pioneer Bank and an arbitration with a former employee - The Bank filed a complaint against Pioneer Bank seeking approximately **$16.0 million** in damages related to alleged breaches of loan participation agreements, with the case ongoing and discovery in progress[297](index=297&type=chunk) - A former employee of subsidiary FCLS filed a complaint alleging wrongful termination, with the case compelled to arbitration, expected to occur in the second half of **2023**[279](index=279&type=chunk) [Risk Factors](index=83&type=section&id=Item%201A.%20Risk%20Factors) Stakeholders should review risk factors in the Company's Annual Report on Form 10-K and subsequent quarterly reports, as unforeseen risks may arise - Readers are directed to review the risk factors set forth in the Company's **Annual Report on Form 10-K** for the fiscal year ended **December 31, 2022**, and subsequent quarterly reports[280](index=280&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=84&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The Company repurchased **580,730** shares at **$21.16** average price in Q2 2023 under a **$50 million** program, with **1.8 million** shares remaining Issuer Purchases of Equity Securities - Q2 2023 | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | Max Shares Remaining Under Program | | :--- | :--- | :--- | :--- | :--- | | 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** | - On **January 25, 2023**, the Board of Directors approved a stock repurchase program authorizing the repurchase of up to **$50 million** of common stock through **December 31, 2023**[301](index=301&type=chunk) [Exhibits](index=85&type=section&id=Item%206.%20Exhibits) This section lists exhibits, including corporate documents, stock certificates, CEO/CFO certifications, and financial statements in Inline XBRL format - The report includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections **302** and **906** of the Sarbanes-Oxley Act of **2002**[286](index=286&type=chunk) - Financial statements from the Form **10-Q** are provided in Inline XBRL format[286](index=286&type=chunk)

Berkshire Hills Bancorp, Inc. (NYSE:BHLB) Q2 2023 Earnings Conference Call July 20, 2023 10:00 AM ET Company Participants Kevin Conn - SVP of IR & Corporate Development Nitin Mhatre - President and CEO David Rosato - CFO Conference Call Participants David Bishop - Hovde Group Bill Young - RBC Capital Markets Mark Fitzgibbon - Piper Sandler Chris O'Connell - KBW Operator Good morning, ladies and gentlemen. And welcome to the Berkshire Hills Bancorp Second Quarter 2023 Earnings Conference Call. At this tim ...

2Q 2023 EARNINGS PRESENTATION F ORWAR D -L OOK I N G S TAT E M E N T S NON-GAAP FINANCIAL MEASURES • Net Income of $23.9M (-14% QoQ and +1% YoY) • ROTCE of 8.27% (-132 bps QoQ and -21 bps YoY) BEST Strategic Progress • Completed allocation of $100 million Sustainability Bond in 2Q23 BEST 3 YEAR TARGETS for JUNE 2024 10-12% 100-105 bps $180-200M Top 25% Top 25% ROA Increase ROA by 75-80bps* PPNR2 Increase PPNR by $80-100M* ROTCE Increase ROTCE by 700-900bps* ESG Become top quartile bank by leading ESG indexe ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents the unaudited consolidated financial statements for Berkshire Hills Bancorp, Inc. as of March 31, 2023, and for the three months then ended, compared with prior periods. It includes the Consolidated Balance Sheets, Statements of Income, Comprehensive Income, Changes in Shareholders' Equity, and Cash Flows, along with detailed notes covering the basis of presentation, accounting policies, and specific financial statement line items [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets reached **$12.32 billion** by March 31, 2023, primarily due to increased cash and net loans, with liabilities rising from higher borrowings and shareholders' equity improving to **$995.5 million** Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$12,319,976** | **$11,662,864** | | Total cash and cash equivalents | $1,006,562 | $685,355 | | Net loans | $8,583,976 | $8,239,039 | | Total securities | $2,045,778 | $2,033,436 | | **Total Liabilities** | **$11,324,496** | **$10,708,802** | | Total deposits | $10,067,545 | $10,327,269 | | Total borrowings | $1,025,571 | $125,509 | | **Total Shareholders' Equity** | **$995,480** | **$954,062** | [Consolidated Statements of Income](index=7&type=section&id=Consolidated%20Statements%20of%20Income) For the three months ended March 31, 2023, the company reported net income of **$27.6 million**, a significant increase from **$20.2 million** in the same period of 2022, driven by a substantial rise in net interest income despite higher provision for credit losses Income Statement Summary (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Interest Income | $97,533 | $69,063 | | Provision for Credit Losses | $8,999 | ($4,000) | | Total Non-interest Income | $16,606 | $20,681 | | Total Non-interest Expense | $71,955 | $68,550 | | **Net Income** | **$27,637** | **$20,196** | | **Diluted EPS** | **$0.63** | **$0.42** | [Consolidated Statements of Comprehensive Income/(Loss)](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%2F(Loss)) Total comprehensive income for Q1 2023 was **$49.6 million**, a significant turnaround from a **$54.8 million** loss in Q1 2022, driven by net income and positive other comprehensive income Comprehensive Income/(Loss) (in thousands) | Component | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Income | $27,637 | $20,196 | | Other Comprehensive Income/(Loss) | $21,986 | ($74,994) | | **Total Comprehensive Income/(Loss)** | **$49,623** | **($54,798)** | [Consolidated Statements of Changes in Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' equity increased to **$995.5 million** by March 31, 2023, primarily due to comprehensive income, partially offset by cash dividends and share repurchases - Key drivers of the change in shareholders' equity in Q1 2023 were net income of **$27.6 million** and other comprehensive income of **$22.0 million**[344](index=344&type=chunk) - The company declared cash dividends of **$0.18 per share**, totaling **$8.0 million**[344](index=344&type=chunk) - Treasury shares were repurchased for **$1.2 million** during the quarter[344](index=344&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash increased by **$321.2 million** in Q1 2023, driven by significant cash provided by financing activities, which offset cash used in investing activities for loan growth Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash from operating activities | $37,314 | $13,351 | | Net cash from investing activities | ($339,993) | ($672,075) | | Net cash from financing activities | $623,886 | $638,168 | | **Net change in cash** | **$321,207** | **($20,556)** | [Notes to Consolidated Financial Statements (Unaudited)](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) The notes detail accounting policies and financial data, covering securities, loans, deposits, borrowings, derivatives, leases, capital ratios, EPS, stock compensation, and fair value measurements - Effective January 1, 2023, the Company adopted **ASU No. 2022-02**, which eliminated the troubled debt restructuring (TDR) accounting model and enhanced disclosure requirements for loan restructurings for borrowers in financial difficulty[372](index=372&type=chunk)[396](index=396&type=chunk) - The company's allowance for credit losses on loans (ACLL) methodology uses a static pool migration analysis over a **7-quarter forecast period** with a **1-year reversion**, supplemented by qualitative factors[425](index=425&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=57&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial performance, highlighting increased net income driven by net interest income growth and margin expansion, alongside analysis of financial condition, liquidity, and capital resources - Q1 2023 net income was **$27.6 million** (**$0.63/share**), up from **$20.2 million** (**$0.42/share**) in Q1 2022, driven by loan growth, higher interest rates, expense control, and share repurchases[230](index=230&type=chunk) - The net interest margin expanded by **97 basis points** year-over-year to **3.58%** in Q1 2023, benefiting from a positive interest rate sensitivity profile[209](index=209&type=chunk)[212](index=212&type=chunk) - The provision for credit losses was an expense of **$9.0 million** in Q1 2023, compared to a **$4.0 million** benefit in Q1 2022, reflecting loan growth and a changed economic outlook[210](index=210&type=chunk)[217](index=217&type=chunk) - Total assets grew by **$657 million** during the quarter to **$12.3 billion**, primarily due to a **$321 million** increase in cash and a **$347 million** increase in loans, funded mainly by a **$900 million** increase in borrowings[265](index=265&type=chunk)[266](index=266&type=chunk) [Comparison of Operating Results (Q1 2023 vs. Q1 2022)](index=65&type=section&id=Comparison%20of%20Operating%20Results) Q1 2023 operating results improved significantly year-over-year, with FTE net interest income rising to **$99.4 million** and the efficiency ratio improving to **59.5%**, despite increased non-interest expenses Key Performance Metrics (Q1 2023 vs Q1 2022) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | FTE Net Interest Income | $99.4M | $70.6M | | Net Interest Margin (FTE) | 3.58% | 2.61% | | Non-Interest Income | $16.6M | $20.7M | | Non-Interest Expense | $72.0M | $68.6M | | Efficiency Ratio | 59.51% | 72.61% | - The increase in FTE net interest income was driven by a **$57.5 million** rise in interest income, partially offset by a **$29.0 million** increase in interest expense, reflecting the higher interest rate environment[213](index=213&type=chunk) - The cost of total funding liabilities increased by **113 basis points** to **1.36%**, reflecting higher market rates and a shift in deposit mix[240](index=240&type=chunk) [Comparison of Financial Condition (Mar 31, 2023 vs. Dec 31, 2022)](index=67&type=section&id=Comparison%20of%20Financial%20Condition) The company's financial condition strengthened by March 31, 2023, with total assets growing to **$12.3 billion**, funded by increased borrowings, while loans expanded and shareholders' equity improved - Total loans increased by **$347 million** during the quarter, with commercial loans up **$216 million** and retail loans up **$131 million**[246](index=246&type=chunk)[247](index=247&type=chunk)[268](index=268&type=chunk) - Total deposits decreased by **$260 million** to **$10.1 billion**, reflecting customer utilization of excess liquidity and shifts to higher-yielding investments[270](index=270&type=chunk) - Borrowings increased by **$900 million** to **$1.0 billion**, primarily through FHLB advances to fortify liquidity[252](index=252&type=chunk) - The allowance for credit losses to total loans ratio was **1.13%** at March 31, 2023, compared to **1.15%** at year-end 2022[248](index=248&type=chunk) [Liquidity and Capital Resources](index=68&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity and capital, bolstering cash with FHLB borrowings and holding capital ratios well above regulatory minimums, while returning capital to shareholders - The company views its liquidity as satisfactory for current conditions and stressed scenarios, with total unused borrowing capacity of **$3.1 billion** from the FHLBB and FRB, plus **$519 million** from correspondent banks[273](index=273&type=chunk)[274](index=274&type=chunk) Key Capital Ratios | Ratio | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Common Equity Tier 1 (CET1) | 12.1% | 12.4% | | Total Risk-Based Capital | 14.4% | 14.6% | | Tier 1 Capital Leverage | 9.9% | 10.2% | - The company's capital management goal is to maintain a 'well-capitalized' status while supporting organic growth and shareholder distributions[296](index=296&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=72&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages Interest Rate Risk (IRR) through NII and EVE simulations, showing a modest asset-sensitive NII profile and modest negative EVE sensitivity, with no significant change in the modeled IRR profile Estimated % Change in Net Interest Income (NII) at Risk (1-Year) | Parallel Rate Shock (bps) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | +200 | 1.6% | 1.8% | | +100 | 0.8% | 0.8% | | -100 | (1.3%) | (1.6%) | Estimated % Change in Economic Value of Equity (EVE) at Risk | Parallel Rate Shock (bps) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | +200 | (1.9%) | — | | +100 | (0.9%) | — | | -100 | (0.3%) | (1.5%) | - The NII simulation results indicate a modest asset-sensitive position to parallel rate shocks, with falling rate exposure declining due to upward pressure on deposit costs[290](index=290&type=chunk) [Item 4. Controls and Procedures](index=74&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - The principal executive officers concluded that the Company's disclosure controls and procedures were effective as of March 31, 2023[312](index=312&type=chunk) - No changes occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[329](index=329&type=chunk) [PART II. OTHER INFORMATION](index=75&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=75&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in legal proceedings, including a **$16.0 million** lawsuit against Pioneer Bank and an arbitration with a former employee, none of which are deemed material to financial condition - The Bank is in litigation with Pioneer Bank, seeking **~$16.0 million** in damages for alleged breaches of loan participation agreements. Discovery is ongoing[314](index=314&type=chunk) - A former employee of subsidiary FCLS has filed a complaint for wrongful termination, which is proceeding to arbitration in the second half of 2023[332](index=332&type=chunk) [Item 1A. Risk Factors](index=76&type=section&id=Item%201A.%20Risk%20Factors) A new material risk factor highlights the systemic impact of recent bank failures, causing market volatility and increased scrutiny on liquidity, deposits, and capital, potentially adversely affecting the company - Recent failures of other banks (**Silvergate**, **Silicon Valley Bank**, **Signature Bank**, **First Republic Bank**) have created a new systemic risk[317](index=317&type=chunk) - The company's stock price and financial condition may be negatively impacted by volatility and negative depositor confidence in the banking sector, with increased scrutiny on liquidity, uninsured deposits, and capital[295](index=295&type=chunk)[318](index=318&type=chunk) - Banking regulators are expected to increase premiums for FDIC deposit insurance and may implement stricter regulatory requirements, which could materially impact the business[334](index=334&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=77&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company had no unregistered equity sales in Q1 2023 but repurchased **47,275 shares** at **$25.17** each, with approximately **1.95 million shares** remaining authorized under the program Share Repurchases in Q1 2023 | Period | Total Shares Purchased | Average Price Paid | Shares Remaining in Program | | :--- | :--- | :--- | :--- | | Jan 2023 | — | — | 1,995,211 | | Feb 2023 | — | — | 1,995,211 | | Mar 2023 | 47,275 | $25.17 | 1,947,936 | | **Total** | **47,275** | **$25.17** | **1,947,936** | - On January 25, 2023, the Board approved a stock repurchase program authorizing up to **$50 million** in repurchases through December 31, 2023[321](index=321&type=chunk) [Item 3. Defaults Upon Senior Securities](index=77&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities occurred during the reporting period - There were no defaults upon senior securities during the reporting period[335](index=335&type=chunk) [Item 4. Mine Safety Disclosures](index=77&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This disclosure item is not applicable to the company's operations - This item is not applicable to the company[322](index=322&type=chunk) [Item 5. Other Information](index=77&type=section&id=Item%205.%20Other%20Information) No additional information is reported under this item - There is no other information to report for this item[323](index=323&type=chunk) [Item 6. Exhibits](index=78&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents, Sarbanes-Oxley certifications, and Inline XBRL financial statements - The report includes standard corporate governance documents, Sarbanes-Oxley certifications (**302** and **906**), and Inline XBRL data files as exhibits[337](index=337&type=chunk) [Signatures](index=79&type=section&id=Signatures)

Start Time: 10:00 January 1, 0000 10:47 AM ET Berkshire Hills Bancorp, Inc. (NYSE:BHLB) Q1 2023 Earnings Conference Call April 20, 2023, 10:00 AM ET Company Participants Nitin Mhatre - President and CEO David Rosato - CFO Greg Lindenmuth - CRO Kevin Conn - IR, Corporate Development Officer Conference Call Participants Billy Young - RBC Capital Markets Mark Fitzgibbon - Piper Sandler David Bishop - Hovde Group Chris O’Connell - KBW Operator Hello, everyone, and welcome to the Berkshire Hills Bancorp First Qu ...

COMMERCIAL REAL ESTATE VS. PEERS 10 Year Avg. 0.36% 0.26% 0.09% 0.01% -0.01% -0.02% 1Q22 2Q22 3Q22 4Q22 1Q23 S U P E R V I S O R Y C R E / T R B C C O N S T R U C T I O N / T R B C 259% 4Q21 333% 4Q22 333% 223% 39% 4Q21 26% 4Q22 26% 38% 300% 100% BHLB Peer Median Federal Monitoring Guideline C R E N C O / A V G . C R E L O A N S Annualized CRE NCO/ Avg. CRE Loans | --- | --- | --- | --- | --- | |-------|-------|--------------|------------------------|-------| | | | 10 Year Avg. | CRE NPL/ EOP CRE Loans | 0. ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2022 ☐ 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 Delaware 04-3510455 (I.R.S. Employer Identification No.) 60 State Street Boston Massachusetts 02109 (Address of principal ...

Berkshire Hills Bancorp, Inc. (NYSE:BHLB) Q4 2022 Earnings Conference Call January 26, 2023 10:00 AM ET Company Participants Kevin Conn - IR, Corporate Development Officer Nitin Mhatre - President and CEO Sean Gray - COO Brett Brbovic - Chief Accounting Officer and Interim CFO Greg Lindenmuth - CRO Stephen Finocchio - Treasurer Conference Call Participants Billy Young - RBC Mark Fitzgibbon - Piper Sandler David Bishop - Hovde Group Laurie Hunsicker - Compass Point Chris O'Connell - KBW Operator Good morning ...

Table of Contents 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 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: September 30, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period f ...

Berkshire Hills Bancorp, Inc. (NYSE:BHLB) Q3 2022 Earnings Conference Call October 20, 2022 10:00 AM ET Company Participants Kevin Conn - IR, Corporate Development Officer Nitin Mhatre - President, CEO Brett Brbovic - Chief Accounting Officer and Interim CFO Greg Lindenmuth - CRO Sean Gray - COO Conference Call Participants Billy Young - RBC Mark Fitzgibbon - Piper Sandler David Bishop - Hovde Group LLC Laurie Hunsicker - Compass Point Chris O'Connell - KBW Operator Hello everyone, and welcome to today's Be ...