BERKSHIRE HILLS BANCORP INC

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. Adjustments in 2024 were primarily related to branch sales and loss on sale of AFS securities. Adjustments in 2023 were primarily related to branch consolidations.

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.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

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

(1) Non-GAAP financial measure.

(2) 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.

(3) 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.

(4) 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.

(5) The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in tax equity investments.

(6) The non-interest income amortization is the reduction to the tax-advantaged investments and are incurred as the tax credits are generated.

(7) As of January 1, 2024, the Company elected the proportional amortization method for certain tax credits eliminating the need to adjust the efficiency ratio for tax credit impacts.

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 2023 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. Financial results discussed herein are not necessarily indicative of the results for the year 2024 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”) which operates as a commercial bank under a Massachusetts trust company charter. Established in 1846, the Bank provides business and consumer banking, mortgage, wealth management, and investment services, with a vision to be a high performing, relationship focused community bank. Berkshire has approximately $12.2 billion in assets and presently operates 91 branch offices in New England and New York (two branches were sold after June 30, 2024).

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 words such as “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 changes, 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 ("SEC"), including the Risk Factors set forth in Item 1A of the Company’s 10-K, as supplemented by its Quarterly Reports on Form 10-Q and other SEC filings.

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.

OVERVIEW

Second quarter earnings per share increased 4% year-over-year to $0.57 from $0.55 and included the benefit of lower expenses and ongoing share repurchases. The non-GAAP measure of operating earnings per share was unchanged year-over-year at $0.55 in the second quarter. Results included the benefit of ongoing loan growth and the paydown of higher cost borrowings with proceeds from the sale of lower yielding securities in recent quarters.

For the first half of the year, earnings per share decreased to $0.09 from $1.18 due to a $50 million non-operating loss on the sale of securities. The securities were carried at fair value and this loss had no significant impact on equity. First half operating earnings per share decreased 13% to $1.03 from $1.18 due to pressures on the net interest margin throughout 2023 before it began improving in 2024 including the benefit of reinvestment of the proceeds of securities sales. Total investment securities decreased by $422 million in the first half of 2024 and by $773 million in the last twelve months due to securities sales in the fourth quarter of 2023 and the first quarter of 2024.

In the second quarter of 2024, the Company entered into an agreement to sell ten New York branches, with deposits totaling $474 million at period-end which were included in liabilities held for sale. The sale of these branches is targeted for completion in the third quarter of 2024; two of them have been completed since June 30, 2024. The Company expects to record a non-operating gain for the completion of the branch sale. The Company also consolidated three Connecticut branches in June 2024. The Company plans to have 83 branches following the branch sales, including 16 branches serving the Albany and Rome/Utica markets in New York.

Total loans increased by 2% in the first half of 2024. Quarterly average deposits decreased by 2% between the fourth quarter of 2023 and the second quarter of 2024, including balances held for sale.

Measures of asset quality generally improved in the first half of 2024, with loan performance remaining at historically favorable levels. The allowance for credit losses on loans increased to 1.22% from 1.17% of total loans during this period.

The ratio of equity to assets increased to 8.3% from 8.1% during the first half of 2024. Book value per share increased by 1% to $23.58 and the non-GAAP measure of tangible book value per share increased by 2% to $23.18.

In June 2024 Senior Executive Vice President and Chief Financial Officer David Rosato resigned from the Company. Senior Managing Director and Chief Accounting Officer Brett Brbovic was promoted to Executive Vice President and the Chief Financial Officer position. Mr. Brbovic has served as Chief Accounting Officer since 2015 and also served as Interim Chief Financial Officer prior to the appointment of Mr. Rosato as Chief Financial Officer in January 2023. During the first half of 2024, the Company also announced the recruitment of commercial deposit relationship managers and private bankers. Additionally, it announced the planned move and expansion of a Boston branch to support the expanded commercial and private banking teams serving the Greater Boston market.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2024 AND JUNE 30, 2023

Summary. Second quarter 2024 net income increased year-over-year by $164 thousand, or 1%, to $24 million, benefiting from lower expenses. Second quarter 2024 operating income decreased year-over-year by $710 thousand, or 3%, to $23 million due to pressure on the net interest margin. Including the benefit of ongoing share repurchases, second quarter earnings per share increased 4% to $0.57 from $0.55. Operating earnings per share were unchanged at $0.55.

Six month net income decreased by $48 million to $4 million due to a $50 million non-operating net loss on the sale of securities in the first quarter of 2024. The securities loss had no significant impact on total equity because the securities were carried at fair value in the financial statements. The Company’s non-GAAP measure of operating income excludes securities gains/losses, restructuring costs, and other non-operating items, as discussed in the preceding discussion of non-GAAP financial measures.

First half operating income decreased year-over-year by $7 million, or 14%, to $44 million. This decrease primarily reflected sequential quarterly decreases in the net interest margin which inflected in the first quarter of 2024 and increased further in the second quarter, including the benefit of the reinvestment of proceeds from the sale of lower-yielding investment securities. Year-over-year results benefited from lower credit loss provision expense and lower operating non-interest expense.

Net Interest Income. Second quarter net interest income decreased year-over-year by $4 million, or 5%, to $89 million primarily due to a 4% decrease in average earning assets together with a decrease in the net interest margin to 3.20% from 3.24%. The decrease in earning assets was primarily due to the liquidation of lower yield investments to fund reductions of higher cost borrowings. The decrease in the margin was primarily due to the lagged impact of higher market interest rates on deposit costs compared to the earlier impact on variable rate indexed loans.

The net interest margin decreased in sequential quarters from 3.24% in the second quarter of 2023 to 3.11% in the fourth quarter of 2024 and then increased to 3.15% in the first quarter of 2024 and 3.20% in the second quarter of 2024. The second quarter yield on total earning assets increased year-over-year by 52 basis points to 5.57% from 5.05% and benefited from growth in higher yielding loans and the sale of lower yielding investment securities. The cost of funds increased 59 basis points to 2.53% from 1.94% due primarily to the impact of higher deposit costs which was partially offset by the reduction in higher cost borrowings.

Second quarter net interest income benefited from a $0.4 billion, or 4%, year-over-year increase in average loans due to 9% growth of average commercial real estate loans and 8% growth in average residential mortgage loans. The yield on average total loans increased 28 basis points to 6.05% from 5.77%. Average investment securities decreased by $0.9 billion due to the securities sales, with proceeds used to pay down borrowings and fund loan growth.

Including deposits held for sale, second quarter average deposits increased year-over-year by $0.2 billion, or 2%, as increases in higher cost money market and time deposit accounts were partially offset by decreases in lower cost transaction account balances. The cost of deposits increased 84 basis points to 2.35% from 1.51%. The cost of deposits held for sale measured 2.24% in the most recent quarter. These deposits averaged $483 million during the quarter and are expected to be sold during the third quarter. Average borrowings decreased by $0.7 billion, while the cost of borrowings increased 41 basis points to 5.55% from 5.14%.

For the first six months of the year, net interest income decreased year-over-year by $14 million, or 7%,

primarily due to a 7% decrease in the net interest margin to 3.18% from 3.40%, reflecting the market factors discussed above.

Non-Interest Income. Second quarter non-interest income increased year-over-year by $3 million, or 18%, due primarily to a $3 million increase in the category of other non-interest income. In 2024, the Company changed its method of accounting related to tax credit investments. Under the previous method there were offsetting charges to non-interest income and credits to income tax expense. These are now partially netted in income tax expense. As a result, non-interest income and income tax expense are both higher than in previous years. In the second quarter of 2023 there was a $2 million charge to other non-interest income related to tax credit investments compared to a $1 million credit in the same period of 2024.

For the first half of the year, non-interest income decreased $46 million to a loss of $12 million, compared to income of $34 million for the first half of 2023. The Company recorded a $50 million non-operating loss on the sale of available for sale securities in the first quarter of 2024. For the first half of the year, non-interest income excluding sales of AFS securities increased $4 million, or 11%, due mainly to the change in tax accounting. The securities loss had no significant impact on total equity because the securities were carried at fair value in the financial statements.

Provision Expense for Credit Losses. Second quarter provision expense decreased year-over-year by $2 million, or 19%, to $6 million. Six month provision expense decreased $5 million, or 26% to $12 million. Net loan charge-offs decreased both for the second quarter and first half. The provision resulted in increases in the allowance for credit losses on loans related to loan growth and to higher reserve levels in relation to total loans.

Non-Interest Expense. Total second quarter non-interest expense decreased year-over-year by $3 million, or 4%, to $71 million. For the first six months, this expense increased $1 million, or 1%, to $147 million. The Company recorded $3.6 million in non-operating expenses in the first quarter of 2024 related primarily to the pending branch sale. Excluding non-operating costs. for the first half of the year the Company’s non-GAAP measure of operating non-interest expense decreased year-over-year by $2 million, or 2%, to $144 million.

The Company reduced its operating non-interest expense year-over-year for both the second quarter and first half of the year. The decreases contributed to the second quarter improvement in operating results in 2024 compared to 2023. The second quarter efficiency ratio improved to 63.40% in 2024 from 63.57% in 2023.

Compensation and benefits expense is the largest expense category, totaling $81 million in the first half of 2024 and increasing by $2 million, or 2%, compared to the first half of the prior year. The Company implemented staff realignment programs in the first half of 2024. At period-end, full time equivalent staff totaled 1,283 positions, compared to 1,340 positions at year-end 2023 and 1,328 positions at midyear 2023.

For both the second quarter and first six months, excluding compensation expense, the most significant operating expense reductions were in occupancy, marketing, and the category of other non-interest expense. For the first half of the year, occupancy expense decreased by $2 million, or 9%, and reflected the benefit of 2023 branch consolidations and other premises streamlining. The Company consolidated an additional three branches in June 2024. Six month marketing expense decreased $1 million, or 39%, and included the streamlining of media contracts. Other operating expense reductions included lower costs for loan servicing and miscellaneous operating losses.

Income Tax Expense. The Company’s effective tax rate increased in 2024 compared to 2023 due to the change in the method of accounting for tax credit investments. Prior to 2024, the effective tax rate also included tax credit investment benefits, some of which are no longer recorded to income tax expense. The related increase in net tax expense was substantially offset by higher non-interest income. The second quarter effective tax rate was 23% in 2024 compared to 14% in the prior year. For the first six months of 2024, the effective tax rate was 19% and included the impact of the first quarter securities loss. The effective tax rate in the first six months of 2023 was 16%.

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2024 AND DECEMBER 31, 2023

General. Total assets decreased $0.2 billion, or 2%, to $12.2 billion in the first half of 2024. Investment securities declined by $0.4 billion and loans increased by $0.2 billion. Measures of asset quality generally remained favorable. Total deposits decreased by $1.0 billion, including $0.5 billion in balances transferred to liabilities held for sale in conjunction with the pending sale of ten branches. Loans/deposits increased to 96% from 85%. Equity/assets increased to 8.3% from 8.1%.

Investment Securities. Investment securities decreased by $0.4 billion, or 26%, to $1.2 billion during the first half of the year. This was primarily due to the sale of lower yielding securities near the end of the first quarter. This improved the Company’s liquidity in advance of the branch sale and benefited earnings as the sale proceeds were used to pay down higher cost funds. The yield on the securities portfolio was 2.44% in the second quarter of 2024 compared to 2.40% in the fourth quarter of 2023.

Loans. Total loans increased $0.2 billion, or 2%, to $9.2 billion in the first half of 2024, primarily reflecting solid and balanced ongoing commercial originations. Total loans excluded $47 million in residential mortgages transferred to held for sale consisting primarily of a bulk sale of seasoned mortgages at par. Total loans also excluded $58 million in mostly retail loan balances held for sale in the pending branch sale. Adjusting for the held for sale balances, total loans increased 3% in the first half of the year. The yield on total loans increased to 6.05% in the most recent quarter from 5.97% in the final quarter of 2023.

Commercial loans comprised 66% of total loans and increased $0.2 billion, or 4%, to $6.1 billion during the first half of 2024. Growth was recorded in all major categories of commercial loans, including an 11% increase in multifamily loans and a 9% increase in owner-occupied commercial real estate loans. Based on the supervisory definition of commercial real estate loans which excludes owner-occupied properties, the supervisory measure of commercial real estate loans to total bank regulatory capital measured 293% at period-end, compared to 286% at year-end 2023. The supervisory measure of construction loans to bank regulatory capital measured 51% at both of the above dates.

The Company has a diversified commercial real estate portfolio primarily located in suburban markets in its footprint. The commercial real estate loan portfolio increased $0.2 billion, or 4%, to $4.7 billion in the first half of 2024, and constituted 50% of the total loan portfolio at period-end. There were no net charge-offs of commercial real estate loans in the first half of 2024, Nonaccruing loans were 0.13% of total commercial real estate loans at midyear compared to 0.10% at year-end 2023. Loans rated substandard were 1.35% of commercial real estate loans, compared to 1.95% at year-end 2023. At midyear 2024, the largest property type concentrations (over 5% of the portfolio and excluding construction loans) were retail trade (20%), multifamily (14%), office (11%), healthcare (9%), and hospitality (8%). The largest category, retail trade, was primarily comprised of properties anchored by strong grocery and big box tenants in suburban areas – with no significant tenant concentrations, and negligible indoor mall exposure. The $506 million office portfolio was approximately 70% composed of Class A properties and approximately 74% of the office portfolio was maturing after 2025. Boston properties were 16% of the office portfolio, with no high-rise office buildings. Construction loans consisted primarily of multifamily (approximately 44%) and healthcare( approximately 15%) at period-end.

Residential mortgage loans comprised 30% of loans and were unchanged at $2.8 billion in the first half of 2024. Consumer loans comprised 4% of loans and were unchanged at $0.4 billion for this period..

Asset Quality and Allowance for Credit Losses on Loans

Loan performance indicators were little changed since year-end 2023 and remained at historically favorable levels. Total delinquent and non-performing loans measured 0.56% of loans at period-end, compared to 0.54% at the start of the year. This included non-performing loans measuring 0.23% and 0.24% of total loans at these respective dates.

Annualized year-to-date net loan charge-offs measured 0.13% of average loans compared to 0.26% for the year 2023. Criticized loans/total loans decreased to 2.52% of total loans from 2.71% in the first half of the year, including a reduction in classified loans to 1.35% of loans from 1.69% of loans. Criticized C&I loans decreased by $22 million, while criticized CRE loans increased by $7 million. Potential problems loans, which are defined as accruing classified loans, decreased to $103 million from $132 million for the year-to-date. Improvements in borrower risk ratings have generally reflected borrowers adjusting operations to mitigate the impact of higher interest rates on variable rate loans and to the impact of changing supply/demand conditions.

The allowance increased by $7 million, or 6%, to $112 million during the first half of the year. In addition to reflecting the 2% loan growth, this also reflected an increase in the ratio of the allowance to total loans to 1.22% from 1.17%. The increase in reserve coverage was primarily due to a 24 basis point increase to 1.60% in the reserve on commercial and industrial loans and an 11 basis point increase to 0.82% in the reserve on residential mortgage loans. This was partially offset by a 12 basis point decrease to 1.35% in the reserve on non-owner occupied commercial real estate loans. Factors contributing to higher reserves included longer expected loan lives and increased qualitative reserves related to macroeconomic and federal policy uncertainties.

Deposits and Borrowings. For the first six months of the year, total deposits decreased by $1.0 billion primarily due to $0.5 billion in balances reclassified to liabilities held for sale in conjunction with the pending sale of ten branches. Other contributing factors were a $0.2 billion decrease in daily variable payroll deposits and a $0.1 billion decrease in brokered deposits. Non-interest bearing deposits measured 23% of total deposits both at period-end and at year-end 2023. The total cost of deposits increased to 2.35% in the second quarter of 2024, compared to 2.11% in the fourth quarter of 2023. Total borrowings increased by $0.3 billion, or 60%, to $0.8 billion during the first half of the year. The cost of borrowings increased to 5.55% in the second quarter of 2024 from 5.45% in the fourth quarter of 2023.

Derivative Financial Instruments

The notional amount of derivative financial instruments totaled $4.8 billion at period-end, which was unchanged from year-end 2023. The net fair value of these instruments at period-end was a liability of $37 million, increasing from $30 million at year-end 2023. Included in derivative financial instruments are $800 million in cash flow hedges on commercial loans which mostly mature in 2025 and 2026. The Company recorded a $632 thousand charge to interest expense for the realized loss on cash flow hedging instruments in the first half of 2024, compared to $314 thousand for the same period of the prior year.

Shareholders’ Equity. Capital measures remained strong in the first half of 2024. Total shareholders’ equity was unchanged at $1.01 billion at midyear 2024 compared to year-end 2023. First half 2024 net income of $4 million compared to dividends totaling $16 million and share repurchases totaling $18 million. The Company recorded $28 million in other comprehensive income during the first half of the year due primarily to lower unrealized losses on available for sale securities including the impact of the $50 million loss recorded to earnings on the sale of securities in the first quarter of 2024.

During the first half of the year, equity/assets increased to 8.3% from 8.1% and the non-GAAP measure of tangible equity/tangible assets increased to 8.2% from 8.0%. Most of the Company’s regulatory capital ratios declined modestly due to the impact of the securities sale. Regulatory capital metrics remained strong, with the midyear risk based capital ratio measuring 14.1% and the common equity tier one capital ratio measuring 11.6%.

Book value per share increased by $0.31, or 1%, to $23.58 in the first half of 2024. The non-GAAP measure of tangible book value per share increased by $0.36, or 2%, to $23.18. Share repurchases during the first half of the year were accretive to book value measures, based on the average repurchase price of approximately $21.88 for the period.

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 pursuant to commitments and as opportunities arise, to meet customer deposit withdrawals and to repay borrowings and subordinated notes as they mature. The Company views its liquidity as satisfactory for current conditions as well as for stressed scenarios in its liquidity testing models.

At June 30, 2024, liquid assets totaling $1.7 billion included cash and equivalents totaling $1.1 billion and securities available for sale totaling $0.6 billion. At year-end 2023 liquid assets were $2.2 billion, including $1.2 billion in cash and equivalents and $1.0 billion in securities available for sale.

At June 30, 2024, wholesale funds totaled $1.2 billion, including $0.8 billion in borrowings and $0.4 billion in brokered deposits. At year-end 2023, wholesale funds totaled $1.0 billion evenly split between borrowings and brokered deposits.

Unused borrowing availability at period-end from the Federal Home Loan Bank of Boston “FHLBB” and the Federal Reserve Bank of Boston (“FRB”) totaled $3.2 billion, compared to $4.0 billion at year-end 2023. Borrowings from these sources are supported by collateral, to the extent utilized. Cash balances at the holding company totaled $74 million at period-end.

During the first half of 2024, the sale of investment securities was the primary source of funds and reductions in total deposits were the primary use of funds. At period-end, the Company had $0.4 billion in net liabilities held for sale which was targeted for completion in the third quarter of 2024 utilizing the Company’s liquidity resources as the source of funds to complete the sale.

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. 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 accumulated 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. Reductions in bond valuations due to changes in market interest rates are reversed as bonds approach maturity. These reversals are accreted to AOCI over time, restoring the book value of equity. Available for sale securities were recorded with a $145 million unrealized loss at midyear 2024 compared to $189 million at year-end 2023. This reduction was primarily due to the realization of $50 million in losses with the securities sale in the first quarter of 2024.

Tangible common equity totaled $1.0 billion at period-end and was net of an accumulated other comprehensive loss totaling $0.1 billion. 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. This ratio measured 11.6% at period-end compared to 12.0% at year-end 2023 due to the realization of previously unrealized bond losses on the event of the securities sale.

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 by the FDIC and sometimes require the approval of the Massachusetts Division of Banks. The shareholder dividend currently requires non-objection from the Federal Reserve Bank.

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.

CORPORATE RESPONSIBILITY UPDATE

Berkshire Bank is a performance and purpose-driven, values-guided bank providing strength, stability and trusted advice to create a positive impact for its clients and communities while upholding equitable, ethical, responsible and sustainable business practices. Corporate responsibility highlights in the first half of the year include:

•Berkshire was named one of the Most Trustworthy Companies in America 2024 by Newsweek and received an Association of Marketing and Communication Professionals Communitas Award for leadership in corporate responsibility for the seventh consecutive year.

•The Company released its 2023 Sustainability Report highlighting all that Berkshire is doing to be a responsible, equitable and sustainable bank while elevating its client experience and community impact.

•Berkshire expanded its Down Payment Assistance Program to help qualifying buyers achieve their dream of homeownership.

•More than 1,000 Berkshire employees participated in 50 volunteer projects contributing more than 4,600 hours of service as part of Xtraordinary Day, the bank’s annual day of service.

•Berkshire maintained its top quartile environmental, social and governance performance in the banking sector and was recognized among TIME’s America’s Best Mid-Size Companies 2024.