Beacon Financial Corp

(1)Basis of Presentation

Overview

The Company is a bank holding company (within the meaning of the Bank Holding Company Act of 1956, as amended) and the parent of Beacon Bank & Trust, a Massachusetts-chartered trust company. The Bank is a member of the Federal Reserve System. The Company's primary business is to provide commercial, business and retail banking services to its corporate, municipal and retail customers through the Bank and its non-bank subsidiaries. The Company is also the parent of Clarendon Private. Clarendon Private is a registered investment advisor with the SEC. Through Clarendon Private and the Trust and Investments Division of the Bank, the Company offers a wide range of wealth management services to individuals, families, endowments and foundations to help these clients meet their long-term financial goals.

Beacon Bank & Trust operates 147 full-service banking offices in New England and New York with three additional lending offices. The Bank's activities include acceptance of commercial, municipal and retail deposits, origination of mortgage loans on commercial and residential real estate located principally in New England and New York, origination of commercial loans and leases, investment in debt and equity securities, and the offering of cash management and wealth, trust and investment advisory services. The Company also provides specialty equipment financing through its subsidiary Eastern Funding and provides small business lending through its subsidiary 44 Business Capital, both of which operate as national business lines.

The Company and the Bank are supervised, examined and regulated by the FRB. As a Massachusetts-chartered trust company, the Bank is subject to supervision, examination and regulation by the Massachusetts Division of Banks. Clarendon Private is also subject to regulation by the SEC.

The FDIC offers insurance coverage on all deposits up to $250,000 per depositor. As FDIC-insured depository institutions, the Bank is also subject to supervision, examination and regulation by the FDIC.

Basis of Financial Statement Presentation

The unaudited consolidated financial statements of the Company presented herein have been prepared pursuant to the rules of the SEC for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by GAAP. In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures considered necessary for the fair presentation of the accompanying consolidated financial statements have been included. Interim results are not necessarily reflective of the results of the entire year. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances are eliminated in consolidation.

In preparing these consolidated financial statements, management is required to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, income, expenses and disclosure of contingent assets and liabilities. Actual results could differ from those estimates based upon changing conditions, including economic conditions and future events. Material estimates that are particularly susceptible to significant changes in the near-term include the determination of the ACL and the determination of fair market values of assets and liabilities.

The judgments used by management in applying these critical accounting policies may be affected by a further and prolonged deterioration in the economic environment, which may result in changes to future financial results. For example, subsequent evaluations of the loan and lease portfolio, in light of the factors then prevailing, may result in significant changes in the allowance for loan and lease losses in future periods, and the inability to collect outstanding principal may result in increased loan and lease losses.

Reclassification

Certain previously reported amounts have been reclassified to conform to the current year's presentation.

Segment Reporting

An operating segment is defined as a component of a business for which separate financial information is available that is evaluated regularly by the CODM in deciding how to allocate resources and evaluate performance.

The Company is a bank holding company operating through a single business segment, which derives interest income on loan and lease products the Company offers to customers. Substantially all of the Company’s total revenues, pre-tax income, and assets is driven by the banking business.

The President and Chief Executive Officer of the Company acts as the Company’s CODM. The CODM regularly reviews comprehensive financial information with the reported measures focused on net interest income and net income. This financial information reviewed is consistent with the information presented within the Company’s financial statements.

The CODM uses the reported measures of net interest income and net income to assess performance by comparing to and monitoring against budget and prior year results. This information is used to manage resources to drive business and net earnings growth, including investment in key strategic priorities, as well as determine the Company's ability to return capital to shareholders.

(2)Business Combinations

On September 1, 2025 (the “Merger Date”), the Company completed its previously announced merger of equals with Brookline Bancorp, Inc., a Delaware corporation (“Legacy Brookline”), pursuant to the Agreement and Plan of Merger, dated as of December 16, 2024, by and among the Company, Commerce Acquisition Sub, Inc. and Legacy Brookline (the “Merger Agreement”). On September 1, 2025, Commerce Acquisition Sub, Inc. merged with and into Legacy Brookline (the “Merger”), immediately followed by the merger of Legacy Brookline with and into the Company (the “Holdco Merger”), with the Company as the resulting corporation. The Company also changed its name from Berkshire Hills Bancorp, Inc. to Beacon Financial Corporation (“Beacon”). Immediately following the closing of the Holdco Merger, the Company changed its New York Stock Exchange ticker symbol for its common stock, par value $0.01 per share, from “BHLB” to “BBT.”

Pursuant to the terms of the Merger Agreement, as of the closing of the Holdco Merger, each share of Legacy Brookline common stock, par value $0.01 per share, was converted into the right to receive 0.42 shares (the “Exchange Ratio”) of Company Common Stock, with cash to be paid in lieu of fractional shares.

Immediately following the Holdco Merger, Berkshire Bank, a wholly owned subsidiary of the Company, Bank Rhode Island, a wholly owned subsidiary of Legacy Brookline, and PCSB Bank, a wholly owned subsidiary of Legacy Brookline, each merged with and into Brookline Bank, a wholly owned subsidiary of Legacy Brookline, with Brookline Bank as the surviving bank (the “Bank Mergers” and, together with the Merger and the Holdco Merger, the “Transaction”). In connection with the Bank Mergers, Brookline Bank changed its name to Beacon Bank & Trust.

The Transaction was treated as a business combination under ASC 805 and was accounted for as a reverse merger using the acquisition method of accounting. Therefore, Legacy Brookline was deemed the acquirer for financial reporting purposes even though the Company was the legal acquirer. As such, the historical financial statements of Legacy Brookline became the historical financial statements of the combined company. In addition, the assets acquired, including identified intangible assets, and assumed liabilities of the Company as of the Merger Date, have been recorded at their estimated fair value.

As the legal acquirer, the Company issued approximately 37.7 million shares of common stock in connection with the merger, which represented approximately 45% of the voting interests upon completion of the merger. In accordance with U.S. GAAP, the purchase price in a reverse acquisition is determined based on the number of equity interests the legal acquiree would have had to issue to give the owners of the legal acquirer the same percentage equity interest in the combined entity that results from the reverse acquisition. Therefore, the first step in calculating the purchase price of the merger is to determine the ownership of the combined company following the merger.

The following table summarizes the ownership of the combined Company, as well as the market capitalization of the combined company using shares of the Company and Legacy Brookline outstanding at August 31, 2025 and the Company’s closing price on August 31, 2025:

The following table summarizes the hypothetical number of shares Legacy Brookline would have to issue to give the Company’s owners the same percentage ownership in the combined company (based on shares of Legacy Brookline common stock outstanding at August 31, 2025):

The purchase price was calculated based on the number of hypothetical shares of Legacy Brookline common stock issued to Company stockholders multiplied by the share price, as summarized in the following table (amounts in thousands):

The following table provides the purchase price allocation as of the Merger Date and the assets acquired and liabilities assumed at their estimated fair value as of the Merger Date as recorded by the Company. The Company recorded the estimate of fair value based on initial valuations available at the Merger Date and these estimates were considered preliminary as of September 30, 2025, and subject to adjustment for up to one year after the Merger Date. While the Company believes the information available on the Merger Date provided a reasonable basis for estimating fair value, the Company expects it may obtain additional information and evidence during the measurement period that would result in changes to the estimated fair value amounts. The measurement period ends on the earlier of one year after the Merger Date or the date the Company is able to determine all necessary information about the facts and circumstances that existed as of the Merger Date has been obtained. As of September 30, 2025, all of the fair value determinations are preliminary with the exception of those assets and liabilities where carrying value has been determined to reasonably represent fair value.

The Company recorded approximately $112.2 million of goodwill in connection with the merger, none of which is deductible for tax purposes. The amount of goodwill recorded reflects the synergies and operational efficiencies that are expected to result from the Merger. The descriptions below describe the methods used to determine the fair value of significant assets acquired and liabilities assumed, as presented above:

Cash and due from banks –The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.

Short-term investments –The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.

Investment Securities available-for-sale –Fair values for investment securities were based on the market value of the securities on the date of the merger and, for any securities that were sold shortly after the merger, the actual sales prices of the securities when they were sold.

Loans held for sale – The loans held for sale portfolio was recorded at fair value based on quotes or bids from third party investors and/or recent sale prices.

Loans, net – Inputs and assumptions used in the fair value estimate of the loan portfolio include interest rate, servicing, credit and liquidity risk, and required equity return. The fair value of loans was calculated using a discounted cash flow analysis based on the remaining maturity and repricing terms. Cash flows were adjusted by estimating future credit losses and the rate of prepayments. Projected monthly cash flows were then discounted to present value using a risk-adjusted market rate for similar loans.

Premises and equipment –The fair values of premises are based on a market approach, by obtaining third-party appraisals and broker opinions of value for land, office and branch space.For other assets included in premises and equipment, the carrying value of the assets was determined to approximate fair value.

Core deposit intangible – Core deposit intangible represents the low cost of funding acquired Core deposits provide relative to the Company’s marginal cost of funds. The fair value was estimated based on a discounted cash flow methodology that gave consideration to expected customer attrition rates, net maintenance cost of the deposit base, interest costs associated with customer deposits, and the alternative cost of funds. The cash flows from estimated net cost savings derived from the acquired Core deposits were discounted to present value and summed to arrive at the fair value of the core deposit intangible. The intangible asset is being amortized over 12 years using the sum of years digits, based upon the period over which estimated economic benefits are estimated to be received.

Customer relationship intangible – The customer relationship intangible asset was valued using the multi-period excess earnings method under the income approach. The intangible asset is being amortized over 12 years using the sum of years digits, based upon the period over which estimated economic benefits are estimated to be received.

Other assets, bank owned life insurance, and accrued interest receivable – The carrying amount of these assets is a reasonable estimate of fair value.

Deposits –The fair values used for the demand and savings deposits equal the amount payable on demand at the Merger Date. The fair values for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered to the contractual interest rates on such time deposits.

Borrowings –The fair values of FHLB advances and long-term debt instruments are estimated based on quoted market prices for the instrument if available, or for similar instruments if not available, or by using discounted cash flow analyses, based on current incremental borrowing rates for similar types of instruments.

Other liabilities – The carrying amount of these liabilities is a reasonable estimate of fair value.

The following table provides a reconciliation between the unpaid principal balance of acquired Purchased-credit deteriorated loans (“PCD”) loans and the purchase price:

Loans acquired are recorded at fair value with no carryover of the related allowance for credit losses. PCD are loans that have experienced more than insignificant credit deterioration since origination. The allowance for credit losses is determined on a collective basis and is allocated to the individual loans. The sum of the loan’s purchase price and the allowance for credit losses becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan.

Non-PCD loans have not experienced a more than insignificant deterioration in credit quality since origination. The difference between the fair value and outstanding balance of the non-PCD loans is recognized as an adjustment to interest income over the lives of the loan.

In accordance with ASC 326, Financial Instruments – Credit Losses, immediately following the Merger, the Company established a $67.2 million allowance for credit losses on the $8.52 billion of acquired non-PCD loans through provision for credit losses in the Consolidated Statement of Income.

The Company's operating results for three and nine months ended September 30, 2025 include the operating results of the acquired assets and assumed liabilities of the Company subsequent to the Merger Date.

The Company recorded merger related expenses of $45.9 million and $47.3 million during the three and nine months ended September 30, 2025.

The following table presents unaudited pro forma information as if the Merger had occurred on January 1, 2024. The pro forma adjustments give effect to any change in interest income due to the accretion of the discount (premium) associated with the fair value adjustments to acquired loans, any change in interest expense due to estimated premium amortization/discount accretion associated with the fair value adjustment to acquired interest-bearing deposits and long-term debt and the amortization of the core deposit intangible that would have resulted had the deposits been acquired as of January 1, 2024. The pro forma information is not indicative of what would have occurred had the merger occurred as of the beginning of the year prior to the Merger Date. The pro forma amounts below do not reflect the Company's expectations as of the date of the pro forma information of further operating cost savings and other business synergies expected to be achieved, including revenue growth as a result of the merger and the effects of the balance sheet repositioning completed subsequent to the merger. As a result, actual amounts differed from the unaudited pro forma information presented.

(3)Investment Securities

Investment Securities Available-for-Sale

The following tables set forth investment securities available-for-sale at the dates indicated:

As of September 30, 2025, the fair value of all investment securities available-for-sale was $1.7 billion, with net unrealized losses of $37.8 million, compared to a fair value of $895.0 million and net unrealized losses of $69.4 million as of December 31, 2024. As of September 30, 2025, $825.6 million, or 47.5% of the portfolio, had gross unrealized losses of $49.2 million, compared to $705.3 million, or 78.8% of the portfolio, with gross unrealized losses of $70.2 million as of December 31, 2024.

As of September 30, 2025 and December 31, 2024, the Company did not classify any securities as held to maturity; all securities were held as available-for-sale.

Investment Securities as Collateral

As of September 30, 2025 and December 31, 2024, respectively, $1.3 billion and $792.0 million of investment securities were pledged as collateral for repurchase agreements; municipal deposits; treasury, tax and loan deposits; swap agreements; FRB borrowings; and FHLB borrowings. The Bank hadno outstanding FRB borrowings as of September 30, 2025 and December 31, 2024.

Allowance for Credit Losses-Available-for-Sale Securities

For available-for-sale securities in an unrealized loss position, management first assesses whether (i) the Company intends to sell the security, or (ii) it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either criterion is met, any previously recognized allowances are charged-off and the security's amortized cost is written down to fair value through income. If neither criterion is met, the security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and any adverse conditions specifically related to the security, among other factors.

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, an allowance for credit loss is recorded, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through the ACL is recognized in OCI. Adjustments to the allowance are reported as a component of credit loss expense. Available-for-sale securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible or when either of the aforementioned criteria regarding intent or requirement to sell is met. The Company has made the accounting policy election to exclude accrued interest receivable on available-for-sale securities from the estimate of credit losses. Accrued interest receivables associated with debt securities available-for-sale totaled $8.0 million as of September 30, 2025, compared to $4.1 million as of December 31, 2024.

A debt security is placed on nonaccrual status at the time any principal or interest payments become more than 90 days delinquent or if full collection of interest or principal becomes uncertain. Accrued interest for a debt security placed on nonaccrual is reversed against interest income. There were no debt securities on nonaccrual status and therefore there was no accrued interest related to debt securities reversed against interest income for the nine months ended September 30, 2025 and 2024.

Assessment for Available for Sale Securities for Impairment

Investment securities as of September 30, 2025 and December 31, 2024 that have been in a continuous unrealized loss position for less than twelve months or twelve months or longer are as follows:

The Company performs regular analyses of the investment securities available-for-sale portfolio to determine whether a decline in fair value indicates that an investment security is impaired. In making these impairment determinations, management considers, among other factors, projected future cash flows; credit subordination and the creditworthiness; capital adequacy and near-term prospects of the issuers.

Management also considers the Company's capital adequacy, interest-rate risk, liquidity and business plans in assessing whether it is more likely than not that the Company will sell or be required to sell the investment securities before recovery. If the Company determines that a security investment is impaired and that it is more likely than not that the Company will not sell or be required to sell the investment security before recovery of its amortized cost, the credit portion of the impairment loss is recognized in the Company's consolidated statement of income and the noncredit portion is recognized in accumulated other comprehensive income. The credit portion of the impairment represents the difference between the amortized cost and the present value of the expected future cash flows of the investment security. If the Company determines that a security is impaired and it is more likely than not that it will sell or be required to sell the investment security before recovery of its amortized cost, the entire difference between the amortized cost and the fair value of the security will be recognized in the Company's consolidated statement of income.

Investment Securities Available-For-Sale Impairment Analysis

The following discussion summarizes, by investment security type, the basis for evaluating if the applicable investment securities within the Company’s available-for-sale portfolio were impaired as of September 30, 2025. The Company has determined it is more likely than not that the Company will not sell or be required to sell the investment securities before recovery of its amortized cost. The Company's ability and intent to hold these investment securities until recovery is supported by the Company's strong capital and liquidity positions as well as its historically low portfolio turnover. If market conditions for investment securities worsen or the creditworthiness of the underlying issuers deteriorates, it is possible that the Company may recognize additional impairment in future periods.

In the following discussion, purchase activity excludes the impact of the Merger.

U.S. Government-Sponsored Enterprises

The Company invests in securities issued by GSEs, including GSE debentures, MBSs, and CMOs. GSE securities include obligations issued by the FNMA, the FHLMC, the GNMA, the FHLB and the Federal Farm Credit Bank. As of September 30, 2025, the Company held GNMA MBSs and CMOs, and SBA commercial loan asset-backed securities in its available-for-sale portfolio with an estimated fair value of $249.2 million compared to $36.9 million as of December 31, 2024.

All securities are performing and backed by the implicit (FHLB/FNMA/FHLMC) or explicit (GNMA/SBA) guarantee of the U.S. Government. Therefore, despite unrealized losses in some of the securities within the portfolio, management has determined that the investment securities are not impaired. See discussion on the portfolio below.

As of September 30, 2025, the Company owned 67 GSE debentures with a total fair value of $328.4 million, and a net unrealized loss of $13.4 million. As of December 31, 2024, the Company held 34 GSE debentures with a total fair value of $176.3 million, with a net unrealized loss of $18.8 million. As of September 30, 2025,51 of the 67 securities in this portfolio were in an unrealized loss position. As of December 31, 2024,23 of the 34 securities in this portfolio were in an unrealized loss position. During the nine months ended September 30, 2025 and 2024, the Company didnot purchase any GSE debentures.

As of September 30, 2025, the Company owned 106 GSE CMOs with a total fair value of $339.7 million and a net unrealized loss of $4.0 million. As of December 31, 2024, the Company held 59 GSE CMOs with a total fair value of $55.5 million with a net unrealized loss of $7.0 million. As of September 30, 2025,57 of the 106 securities in this portfolio were in an unrealized loss position. As of December 31, 2024,57 of the 59 securities in this portfolio were in an unrealized loss position. During the nine months ended September 30, 2025 and 2024, the Company didnot purchase any GSE CMOs.

As of September 30, 2025, the Company owned 193 GSE MBSs with a total fair value of $332.4 million and a net unrealized loss of $11.3 million. As of December 31, 2024, the Company held 141 GSE MBSs with a total fair value of $148.3 million with a net unrealized loss of $18.6 million. As of September 30, 2025,96 of the 193 securities in this portfolio were in an unrealized loss position. As of December 31, 2024,92 of the 141 securities in this portfolio were in an unrealized loss position. During the nine months ended September 30, 2025, the Company didnot purchase any GSE MBSs compared to the same period in 2024 when the Company purchased $4.1 million of GSE MBSs.

Municipal Obligations

The Company invests in certain state and municipal securities with high credit ratings for portfolio diversification and tax planning purposes. Full collection of the obligations is expected because the financial conditions of the issuing municipalities are sound, they have not defaulted on scheduled payments, the obligations are rated investment grade, and the Company has the ability and intent to hold the obligations for a period of time to recover the amortized cost. As of September 30, 2025, the Company owned 252 municipal obligation securities with a total fair value of $235.4 million and a net unrealized gain of $4.7 million. As of December 31, 2024, the Company owned 39 municipal obligation securities with a total fair value of $20.3 million and a net unrealized loss of $0.3 million. As of September 30, 2025,21 of the 252 securities in this portfolio were in an unrealized loss position. As of December 31, 2024,13 of the 39 securities in this portfolio were in an unrealized loss position. During the nine months ended September 30, 2025, the Company purchased $1.3 million of municipal securities compared to the same period in 2024 when the Company purchased $7.3 million of municipal securities.

Corporate Obligations

The Company may invest in high-quality corporate obligations to provide portfolio diversification and improve the overall yield on the portfolio. As of September 30, 2025, the Company held 25 corporate obligation securities with a total fair value of $48.3 million and a net unrealized gain of $0.1 million. As of December 31, 2024, the Company held 4 corporate obligation securities with a total fair value of $12.3 million and a net unrealized gain of $0.1 million. As of September 30, 2025,4 of the 25 securities in this portfolio were in an unrealized loss position. As of December 31, 2024,1 of the 4 securities in this portfolio were in an unrealized loss position. During the nine months ended September 30, 2025 and 2024, the Company didnot purchase any corporate obligations.

U.S. Treasury Bonds

The Company invests in securities issued by the U.S. government. As of September 30, 2025, the Company owned 59 U.S. Treasury bonds with a total fair value of $454.8 million and a net unrealized loss of $13.9 million. As of December 31, 2024, the Company held 65 U.S. Treasury bonds with a total fair value of $481.9 million and a net unrealized loss of $24.8 million. As of September 30, 2025,33 of the 59 securities in this portfolio were in an unrealized loss position. As of December 31, 2024,50 of the 65 securities in this portfolio were in an unrealized loss position. During the nine months ended September 30, 2025, the Company purchased $9.9 million of U.S. Treasury bonds, compared to the same period in 2024 when the Company purchased $58.4 million U.S. Treasury bonds.

Foreign Government Obligations

As of September 30, 2025 and December 31, 2024, the Company owned 1 foreign government obligation security with a fair value of $0.5 million, which approximated cost. As of September 30, 2025, the security was held at par. As of December 31, 2024, the security was in an unrealized loss position. During the nine months ended September 30, 2025, the Company repurchased the same type of foreign government obligation that had matured.

Portfolio Maturities

The final stated maturities of the debt securities are as follows for the periods indicated:

Actual maturities of debt securities will differ from those presented above since certain obligations amortize and may also provide the issuer the right to call or prepay the obligation prior to scheduled maturity without penalty. MBSs and CMOs are included above based on their final stated maturities; the actual maturities, however, may occur earlier due to anticipated prepayments and stated amortization of cash flows.

As of September 30, 2025, issuers of debt securities with an estimated fair value of $437.5 million had the right to call or prepay the obligations. Of the $437.5 million, approximately $24.2 million matures in less then 1 year, $71.5 million matures in 1-5 years, $72.2 million matures in 6-10 years, and $269.6 million matures after ten years. As of December 31, 2024, issuers of debt securities with an estimated fair value of approximately $118.6 million had the right to call or prepay the obligations. Of the $118.6 million, approximately $4.8 million matures in less then 1 year, $67.4 million matures in 1-5 years, $38.9 million matures in 6-10 years, and $7.5 million matures after ten years.

Security Sales

The Company sold investment securities available-for-sale during the nine months ended September 30, 2025 where the proceeds from the sale of investment securities available-for-sale were $176.3 million. Securities sales executed during the nine months ended September 30, 2025 were related to the Merger, resulting in a restructuring of the portfolio. There wasno gain or loss on the sale. During the nine months ended September 30, 2024, the Company didnot sell any investment securities available-for-sale.

(4)Loans and Leases

The following table presents the amortized cost of loans and leases and weighted average coupon rates for the loan and lease portfolios at the dates indicated:

Accrued interest on loans and leases, which were excluded from the amortized cost of loans and leases totaled $79.4 million and $37.5 million at September 30, 2025 and December 31, 2024, respectively, and were included in other assets in the accompanying consolidated balance sheets.

The net unamortized deferred loan origination costs and premiums and discounts on acquired loans included in total loans and leases were $(311.4) million and $(19.6) million as of September 30, 2025 and December 31, 2024, respectively. The $291.8 million increase in 2025 was driven by the discount determined on the loan portfolio assumed in the merger.

Loans and Leases Pledged as Collateral

As of September 30, 2025 and December 31, 2024, there were $6.7 billion and $3.6 billion respectively of loans and leases pledged as collateral for repurchase agreements; municipal deposits; treasury, tax and loan deposits; swap agreements; FRB borrowings; and FHLB borrowings. The Bank didnot have any outstanding FRB borrowings as of September 30, 2025 and December 31, 2024.

(5)Allowance for Credit Losses

The following tables present the changes in the allowance for loan and lease losses by portfolio segment for the periods indicated:

The allowance for credit losses for unfunded credit commitments was $13.7 million, and $6.0 million at September 30, 2025 and December 31, 2024, respectively and includes the provision of $8.4 million for credit losses on unfunded commitments during the three months ended September 30, 2025.

Provision for Credit Losses

The provision (credit) for credit losses are set forth below for the periods indicated:

Allowance for Credit Losses Methodology

Management has established a methodology to determine the adequacy of the ACL that assesses the risks and losses expected on the loan and lease portfolio and unfunded commitments. Additions to the ACL are made by charges to the provision for credit losses. Losses on loans and leases are charged off against the allowance when all or a portion of a loan or lease is considered uncollectible. Subsequent recoveries on loans previously charged off, if any, are credited to the allowance when realized.

To calculate the allowance for loans collectively evaluated, management uses models developed by a third party. The Bank’s core ACL process uses CRE, C&I, and retail lifetime loss rate models to calculate the expected losses over the life of the loan based on exposure at default loan attributes and reasonable, supportable economic forecasts. The exposure at default considers the current unpaid balance, prepayment assumptions and expected utilization assumptions. Key assumptions used in the models include portfolio segmentation, prepayments, and the expected utilization of unfunded commitments, among others. The portfolios are segmented by loan level attributes such as loan type, loan size, date of origination, and delinquency status to create homogenous loan pools. Pool level metrics are calculated and loss rates are subsequently applied to the pools as the loans have like characteristics. Prepayment assumptions are embedded within the models and are based on the same data used for model development and incorporate adjustments for reasonable and supportable forecasts. Model development data and developmental time periods vary by model, but all use at least ten years of historical data and capture at least one recessionary period. Expected utilization is based on current utilization and a LEQ factor. LEQ varies by current utilization and provides a reasonable estimate of expected draws and borrower behavior. Assumptions and model inputs are reviewed in accordance with model monitoring practices and as information becomes available.

Loans acquired in connection with the Merger have losses estimated using historical loss rate models based on the historical performance of various loan segments, which is segmented primarily by FDIC code, estimates of each segment’s weighted average life, and statistical model to capture the impact of future economic conditions on the base loss rates.

The ACL estimate for both the banks core model as well as the legacy Berkshire model incorporates reasonable and supportable forecasts of various macro-economic variables over the remaining life of loans and leases. The development of the reasonable and supportable forecast assumes each macro-economic variable will revert to long-term expectations, with reversion characteristics unique to specific economic indicators and forecasts. Reversion towards long-term expectations generally beginstwo tothree years from the forecast start date and largely completes within the first five years. Management elected to use multiple economic forecasts in determining the reserve to account for economic uncertainty. The forecasts include various projections of gross domestic product, interest rates, property price indices, and employment measures. Scenario weighting and model parameters are updated to reflect facts and circumstances as of the financial statement date.

As of September 30, 2025, management continued to apply qualitative adjustments to the Company’s models. These adjustments are designed to address model limitations and are generally targeted to specific risks within the certain portfolios (e.g., office and specialty vehicle) based on recent collateral valuations and performance trends. Additionally, portfolio level metrics such as delinquency, population of adversely graded loans, non-accruals, etc. are used to inform management’s evaluation of the credit risk in the portfolio and adjustments are made as appropriate. These adjustments included both positive and negative adjustments with a total impact to the provision of $22.6 million at September 30, 2025, of which $3.5 million is related to the legacy Berkshire portfolio. Management reviews these factors on a quarterly basis as market conditions and segment performance evolve.

Specific reserves are established for loans individually evaluated for impairment when amortized cost basis is greater than the discounted present value of expected future cash flows or, in the case of collateral-dependent loans, when there is an excess of a loan's amortized cost basis over the fair value of its underlying collateral. When loans and leases do not share risk characteristics with other financial assets they are evaluated individually. Individually evaluated loans are reviewed quarterly with adjustments made to the calculated reserve as necessary.

The general allowance for loan and lease losses was $184.3 million as of September 30, 2025 and $107.5 million as of December 31, 2024. The increase is primarily due to the merger with Berkshire Bank loans in the third quarter, which added $84.4 million to the allowance for loan and lease losses.

The specific allowance for loan and lease losses was $69.4 million as of September 30, 2025, compared to $17.5 million as of December 31, 2024. The specific allowance increased $51.9 million during the nine months ended September 30, 2025, primarily due to the Merger, which added specific reserves totaling $46.6 million, $28.2 million for commercial real estate loans, $18.2 million for commercial and industrial loans, and $0.2 million for consumer loans.

As of September 30, 2025, management believes the methodology for calculating the allowance is sound and the allowance provides a reasonable basis for determining and reporting on expected losses over the lifetime of the Company’s loan portfolios.

Credit Quality Assessment

At the time of loan origination, a rating is assigned based on the capacity to pay and general financial strength of the borrower, the value of assets pledged as collateral, and the evaluation of third party support such as a guarantor. The Company continually monitors the credit quality of the loan portfolio using all available information. The officer responsible for handling each loan is required to initiate changes to risk ratings when changes in facts and circumstances occur that warrant an upgrade or downgrade in a loan rating. Based on this information, loans demonstrating certain payment issues or other weaknesses may be categorized as delinquent, adversely risk-rated, nonperforming and/or put on nonaccrual status. Additionally, in the course of resolving such loans, the Company may choose to restructure the contractual terms of certain loans to match the borrower's ability to repay the loan based on their current financial condition. If a restructured loan meets certain criteria, it may be categorized as a modified loan.

The Company reviews numerous credit quality indicators when assessing the risk in its loan portfolio. For all loans, the Company utilizes an eight-grade loan rating system, which assigns a risk rating to each borrower based on a number of quantitative and qualitative factors associated with a loan transaction. Factors considered include industry and market conditions; position within the industry; earnings trends; operating cash flow; asset/liability values; debt capacity; guarantor strength; management and controls; financial reporting; collateral; and other considerations. In addition, the Company's independent loan review group evaluates the credit quality and related risk ratings in all loan portfolios. The results of these reviews are reported to the Risk Committee of the Board of Directors on a periodic basis and annually to the Board of Directors. For the consumer loans, the Company heavily relies on payment status for calibrating credit risk.

The ratings categories used for assessing credit risk in the commercial real estate, multi-family mortgage, construction, commercial, equipment financing, condominium association and other consumer loan and lease classes are defined as follows:

1 -4 Rating—Pass

Loan rating grades "1" through "4" are classified as "Pass," which indicates borrowers are performing in accordance with the terms of the loan and are less likely to result in loss due to the capacity of the borrower to pay and the adequacy of the value of assets pledged as collateral.

5 Rating—OAEM

Borrowers exhibit potential credit weaknesses or downward trends deserving management's attention. If not checked or corrected, these trends will weaken the Company's asset and position. While potentially weak, currently these borrowers are marginally acceptable; no loss of principal or interest is envisioned.

6 Rating—Substandard

Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt. Substandard loans may be inadequately protected by the current net worth and paying capacity of the obligors or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy. Although no immediate loss of principal is envisioned, there is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Collateral coverage may be inadequate to cover the principal obligation.

7 Rating—Doubtful

Borrowers exhibit well-defined weaknesses that jeopardize the orderly liquidation of debt with the added provision that the weaknesses make collection of the debt in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Serious problems exist to the point where partial loss of principal is likely.

8 Rating—Definite Loss

Borrowers deemed incapable of repayment. Loans to such borrowers are considered uncollectible and of such little value that continuation as active assets of the Company is not warranted.

Assets rated as "OAEM," "substandard" or "doubtful" based on criteria established under banking regulations are collectively referred to as "criticized" assets.

Credit Quality Information

The following table presents the amortized cost basis of loans in each class by credit quality indicator and year of origination as of September 30, 2025.

As of September 30, 2025, there wereno loans categorized as definite loss.

For residential mortgage and home equity loans, the borrowers' credit scores at origination contribute as a reserve metric in the retail loss rate model.

• Primarily represents loans made to trusts and purchased mortgages.

The following tables present the recorded investment in loans in each class as of December 31, 2024, by credit quality indicator.

As of December 31, 2024, there wereno loans categorized as definite loss.

• Primarily represents loans made to trusts and purchased mortgages.

Age Analysis of Past Due Loans and Leases

The following table presents an age analysis of the amortized cost basis in loans and leases as of September 30, 2025.

The Company didnot recognize any interest income on nonaccrual loans for the three and nine months ended September 30, 2025.

The following tables present an age analysis of the recorded investment in originated and acquired loans and leases as of December 31, 2024.

Individually Evaluated Loans and Leases

Loans and leases which do not share similar risk characteristics with other loans are individually evaluated for credit losses. A loan is individually evaluated when, based on current information and events, it is probable that the Company will be unable to collect all amounts due (both interest and principal) according to the contractual terms of the loan agreement. The loans and leases risk-rated "substandard" or worse are individually evaluated. Specific reserves are established for loans and leases with deterioration in the present value of expected future cash flows or, in the case of collateral-dependent loans and leases, any increase in the loan or lease amortized cost basis over the fair value of the underlying collateral discounted for estimated selling costs. In contrast, the loans and leases which share similar risk characteristics and are not included in the individually evaluated population are collectively evaluated for credit losses.

The following tables present information regarding individually evaluated and collectively evaluated allowance for loan and lease losses for credit losses on loans and leases at the dates indicated.

Loan Modifications

The following tables present the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty during the periods indicated.

The following tables present the aging analysis of loan modifications made to borrowers experiencing financial difficulty during the periods indicated.

(6)Goodwill and Other Intangible Assets

The following table sets forth the carrying value of goodwill and other intangible assets at the dates indicated:

The addition of goodwill and the increase in core deposit intangibles, at September 30, 2025, are due to excess of the purchase price paid over the fair value of the net assets acquired from the Merger. In connection with the Merger, an intangible asset for wealth and investment services for customer relationships was recognized with a fair value of $14.0 million.

The weighted-average amortization period for the intangible assets is 11.4 years.

The estimated aggregate future amortization expense (in thousands) for other intangible assets for each of the next five years and thereafter is as follows:

(7)Accumulated Other Comprehensive Income (Loss)

For the three and nine months ended September 30, 2025 and 2024, the Company’s accumulated OCI (loss) includes the following three components: (i) unrealized holding gains (losses) on investment securities available-for-sale; (ii) change in the fair value of cash flow hedges; and (iii) adjustment of accumulated obligation for postretirement benefits.

Changes in accumulated OCI (loss) by component, net of tax, were as follows for the periods indicated:

(8)Derivatives and Hedging Activities

The Company executes loan level derivative products such as interest rate swap agreements with commercial banking customers to aid them in managing their interest rate risk. The interest rate swap contracts allow the commercial banking customers to convert floating rate loan payments to fixed rate loan payments. The Company concurrently enters into offsetting swaps with a third party financial institution, effectively minimizing its net risk exposure resulting from such transactions. The third party financial institution exchanges the customer's fixed rate loan payments for floating rate loan payments. As the interest rate swap agreements associated with this program do not meet hedge accounting requirements, changes in the fair value are recognized directly in earnings. Based on the Company's intended use for the loan level derivatives at inception, the Company designates the derivative as either an economic hedge of an asset or liability, or a hedging instrument subject to the hedge accounting provisions of FASB ASC Topic 815, "Derivatives and Hedging".

The Company believes using interest rate derivatives adds stability to interest income and expense and allows the Company to manage its exposure to interest rate movements. The Company enters into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for the Company making fixed payments. The Company enters into interest rate swaps as hedging instruments against the interest rate risk associated with the Company's FHLB borrowings and loan portfolio. For derivative instruments that are designated and qualify as cash flow hedging instruments, the effective portion of the gains or losses is reported as a component of OCI, and is reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

The following table reflects the Company's derivative positions as of the date indicated below for interest rate derivatives which qualify as cash flow hedges for accounting purposes.

The Company utilizes risk participation agreements with other banks participating in commercial loan arrangements. Participating banks guarantee the performance on borrower-related interest rate swap contracts. Risk participation agreements are derivative financial instruments and are recorded at fair value. These derivatives are not designated as hedges and therefore, changes in fair value are recorded directly through earnings in other non-interest income at each reporting period. Under a risk participation-out agreement, a derivative asset, the Company participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower, for a fee paid to the participating bank.

The Company offers foreign exchange contracts to commercial borrowers to accommodate their business needs. These foreign exchange contracts do not qualify as hedges for accounting purposes. To mitigate the market and liquidity risk associated with these foreign exchange contracts, the Company enters into similar offsetting positions.

Asset derivatives and liability derivatives are included in other assets and accrued expenses and other liabilities on the unaudited consolidated balance sheets.

The following tables present the Company's customer related derivative positions for the periods indicated below for those derivatives not designated as hedging.

Certain derivative agreements contain provisions that require the Company to post collateral if the derivative exposure exceeds a threshold amount. The Company posted collateral to dealer counterparties of $1.2 million in the normal course of business as of September 30, 2025, compare to $0.9 million as of December 31, 2024.

The tables below present the offsetting of derivatives and amounts subject to master netting agreements not offset in the unaudited consolidated balance sheet at the dates indicated.

The Company has agreements with certain of its derivative counterparties that contain credit-risk-related contingent provisions. These provisions provide the counterparty with the right to terminate its derivative positions and require the Company to settle its obligations under the agreements if the Company defaults on certain of its indebtedness or if the Company fails to maintain its status as a well-capitalized institution.

The guidance in ASU 2017-12 requires that amounts in accumulated OCI that are included in the assessment of effectiveness should be reclassified into earnings in the same period in which the hedged forecasted transactions impact earnings. A portion of the balance reported in accumulated OCI related to derivatives will be reclassified to interest expense as interest payments are made or received on the Company’s interest rate swaps. The Company monitors the risk of counterparty default on an ongoing basis.

(9)Stock Based Compensation

As of September 30, 2025, the Company hadone active equity plan: the 2025 Plan. The 2025 Plan was approved by the Company's stockholders at the May 2025 special meeting of stockholders of the Company, subject to and contingent upon the Merger being consummated. The 2021 Plan was discontinued on August 31, 2025 in connection with the Merger. No further shares will be granted as awards under the 2021 Plan and all previously outstanding and unvested awards under the 2021 Plan vested as a result of the Merger.

All of the shares that have been awarded under the 2025 Plan are time-based shares awarded to employees that vest ratably overtwo years with one-half of such shares vesting on the first and second anniversary dates of the awards.

If a participant leaves the Company prior to the anniversary date of an award, any unvested shares are usually forfeited. Dividends declared with respect to shares awarded will be held by the Company and paid to the participant only when the shares vest.

Under the 2025 Plan, shares of the Company's common stock are reserved for issuance as restricted stock awards to officers, employees, and non-employee directors of the Company. Shares issued upon vesting may be either authorized but unissued shares or reacquired shares held by the Company as treasury shares. Any shares not issued because vesting requirements are not met will be retired back to treasury and be made available again for issuance under the 2025 Plan.

During the three and nine months ended September 30, 2025,218,503 shares were issued upon satisfaction of required conditions of the 2025 Plan. During the three and nine months ended September 30, 2024,432,279 shares were issued upon satisfaction of required conditions of the 2021 Plan.

Total expense for the Plans was $0.5 million and $0.9 million for the three months ended September 30, 2025 and 2024, respectively. Total expense for the Plans was $2.4 million and $2.8 million for the nine months ended September 30, 2025 and 2024, respectively.

During both the three and nine months ended September 30, 2025, an additional $2.7 million of expense was incurred on the 2021 Plan to account for the accelerated vesting of shares as a result of the Merger. This expense was recorded as part of merger and restructuring expense.

(10)EPS

The following table is a reconciliation of basic EPS and diluted EPS:

(11)Fair Value of Financial Instruments

A description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring and non-recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. There were no changes in the valuation techniques used during the three and nine months ended September 30, 2025 and September 30, 2024.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following tables set forth the carrying value of assets and liabilities measured at fair value on a recurring basis at the dates indicated:

Investment Securities Available-for-Sale and Equity Securities

The fair value of investment securities is based principally on market prices and dealer quotes received from third-party and nationally-recognized pricing services for identical investment securities such as U.S. Treasury and agency securities. These prices are validated by comparing the primary pricing source with an alternative pricing source when available. When quoted market prices for identical securities are unavailable, the Company uses market prices provided by independent pricing services based on recent trading activity and other observable information, including but not limited to market interest-rate curves, referenced credit spreads and estimated prepayment speeds, where applicable. These investments include GSE debentures, GSE mortgage-related securities, SBA commercial loan asset backed securities, corporate debt securities, municipal obligations and U.S. Treasury bonds, all of which are included in Level 2. As of September 30, 2025, certain corporate debt securities and municipal obligations were valued using pricing models included in Level 3.

Additionally, management reviews changes in fair value from period to period and performs testing to ensure that prices received from the third parties are consistent with management's expectation of the market. Changes in the prices obtained from the pricing service are analyzed from month to month, taking into consideration changes in market conditions including changes in mortgage spreads, changes in U.S. Treasury security yields and changes in generic pricing of 15-year and 30-year securities. Additional analysis may include a review of prices provided by other independent parties, a yield analysis, a review of average life changes using Bloomberg analytics and a review of historical pricing for a particular security.

Loans Held for Investment

The Company’s held for investment loan portfolio includes loans acquired through business combinations.The Company intends to hold these assets until maturity as a part of its business operations.These loans were recorded at fair value on acquisition date and subsequently marked to fair value each quarter. Certain inputs to the fair value calculation are unobservable; therefore, the loans meet the definition of Level 3 assets. All of these loans were nonperforming as of September 30, 2025.

Derivatives and Hedging Instruments

The fair value of interest rate derivatives designated as hedging instruments, loan level derivatives, risk participation agreements (RPA in/out), and foreign exchange contracts represent a Level 2 valuation and are based on settlement values adjusted for credit risks associated with the counterparties and the Company and observable market interest rate curves and foreign exchange rates where applicable. Credit risk adjustments consider factors such as the likelihood of default by the Company and its counterparties, its net exposures and remaining contractual life. To date, the Company has not realized any losses due to a counterparty's inability to pay any net uncollateralized position. Refer also to Note 8, "Derivatives and Hedging Activities."

There were no transfers between levels for assets and liabilities recorded at fair value on a recurring basis at September 30, 2025 and December 31, 2024, respectively.

The following tables summarize information about significant unobservable inputs related to the Company's categories of Level 3 financial assets and liabilities measured on a recurring basis.

The following table summarizes the changes in estimated fair value for all assets and liabilities measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3)

Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below at the dated indicated:

Collateral-Dependent Impaired Loans and Leases

For nonperforming loans and leases where the credit quality of the borrower has deteriorated significantly, fair values of the underlying collateral were estimated using purchase and sales agreements (Level 2), or comparable sales or recent appraisals (Level 3), adjusted for selling costs and other expenses.

OREO

The Company records OREO at the lower of cost or fair value. In estimating fair value, the Company utilizes purchase and sales agreements (Level 2) or comparable sales, recent appraisals or cash flows discounted at an interest rate commensurate with the risk associated with these cash flows (Level 3), adjusted for selling costs and other expenses.

Repossessed Assets

Repossessed assets are carried at estimated fair value less costs to sell based on auction pricing (Level 2).

The table below presents quantitative information about significant unobservable inputs (Level 3) for assets measured at fair value on a non-recurring basis at the dates indicated.

(1) Fair value is generally determined through independent appraisals of the underlying collateral. The Company may also use another available source of collateral assessment to determine a reasonable estimate of the fair value of the collateral. Appraisals may be adjusted by management for qualitative factors such as economic factors and estimated liquidation expenses. The range of the unobservable inputs used may vary but is generally 0% -10% on the discount for costs to sell and 0% -15% on appraisal adjustments.

Summary of Estimated Fair Values of Financial Instruments

The following table presents the carrying amount, estimated fair value, and placement in the fair value hierarchy of the Company's financial instruments at the dates indicated. This table excludes financial instruments for which the carrying amount approximates fair value. Financial assets for which the fair value approximates carrying value include cash and cash equivalents, restricted equity securities, and accrued interest receivable. Financial liabilities for which the fair value approximates carrying value include non-maturity deposits, short-term borrowings, and accrued interest payable. There were no transfers between levels during the three months and nine months ended September 30, 2025.

Loans Held for Sale

Fair value is measured using quoted market prices when available. If quoted market prices are not available, comparable market values may be utilized. These assets are typically categorized as Level 2.

The fair values of performing loans and leases was estimated by segregating the portfolio into its primary loan and lease categories — commercial real estate mortgage, multi-family mortgage, construction, commercial, equipment financing, condominium association, residential mortgage, home equity and other consumer. These categories were further disaggregated based upon significant financial characteristics such as type of interest rate (fixed / variable) and payment status (current / past-due). Using the exit price valuation method, the Company discounts the contractual cash flows for each loan category using interest rates currently being offered for loans with similar terms to borrowers of similar quality and incorporates estimates of future loan prepayments.

The fair values of deposit liabilities with no stated maturity (demand, NOW, savings and money market savings accounts) are equal to the carrying amounts payable on demand. The fair value of certificates of deposit represents contractual cash flows discounted using interest rates currently offered on deposits with similar characteristics and remaining maturities. The fair value estimates for deposits do not include the benefit that results from the low-cost funding provided by the Company's core deposit relationships (deposit-based intangibles).

The fair value of federal funds purchased is equal to the amount borrowed. The fair value of FHLB advances and repurchase agreements represents contractual repayments discounted using interest rates currently available for borrowings with similar characteristics and remaining maturities. The fair values reported for retail repurchase agreements are based on the discounted value of contractual cash flows. The discount rates used are representative of approximate rates currently offered on borrowings with similar characteristics and maturities. The fair values reported for subordinated deferrable interest debentures are based on the discounted value of contractual cash flows. The discount rates used are representative of approximate rates currently offered on instruments with similar terms and maturities.

(12)Commitments and Contingencies

Off-Balance Sheet Financial Instruments

The Company is party to off-balance sheet financial instruments in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include loan commitments, standby and commercial letters of credit, and loan level derivatives. According to GAAP, these financial instruments are not recorded in the financial statements until they are funded or related fees are incurred or received.

The contract amounts reflect the extent of the involvement the Company has in particular classes of these instruments. Such commitments involve, to varying degrees, elements of credit risk and interest-rate risk in excess of the amount recognized in the consolidated balance sheets. The Company's exposure to credit loss in the event of non-performance by the counterparty is represented by the fair value of the instruments. The Company uses the same policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Financial instruments with off-balance-sheet risk at the dates indicated follow:

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee by the customer. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if any, is based on management's credit evaluation of the borrower.

Standby and commercial letters of credit are conditional commitments issued by the Company to guarantee performance of a customer to a third party. These standby and commercial letters of credit are primarily issued to support the financing needs of the Company's commercial customers. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

From time to time, the Company enters into loan level derivatives, risk participation agreements or foreign exchange contracts with commercial customers and third-party financial institutions. These derivatives allow the Company to offer long-term fixed-rate commercial loans while mitigating the interest-rate or foreign exchange risk of holding those loans. In a loan level derivative transaction, the Company lends to a commercial customer on a floating-rate basis and then enters into a loan level derivative with that customer. Concurrently, the Company enters into offsetting swaps with a third-party financial institution, effectively minimizing its net interest-rate risk exposure resulting from such transactions. The fair value of these derivatives are presented in Note 8.

Lease Commitments

The Company leases certain office space under various noncancellable operating leases as well as other assets. These leases have terms ranging from 1 year to over 19 years. Certain leases contain renewal options and escalation clauses which can increase rental expenses based principally on the consumer price index and fair market rental value provisions. All of the Company's current outstanding leases are classified as operating leases.

The Company considered the following criteria when determining whether a contract contains a lease, the existence of an identifiable asset and the right to obtain substantially all of the economic benefits from use of the asset through the period. The Company uses the FHLB classic advance rates available as of the lease's start dates as the discount rate to determine the net present value of the remaining lease payments.

Total lease commitments increased from $44.8 million as of December 31, 2024 to $92.2 million as of September 30, 2025. The increase is due to the addition of leases from legacy Berkshire branch locations.

A summary of future minimum rental payments under such leases at the dates indicated follows:

Certain leases contain escalation clauses for real estate taxes and other expenditures, which are not included above. The total real estate taxes were $2.0 million and $1.8 million for the nine months ended September 30, 2025 and 2024, respectively. Total other expenditures were $0.4 million and $0.4 million for the nine months ended September 30, 2025 and 2024, respectively. Total rental expense was $6.7 million and $6.8 million for the nine months ended September 30, 2025 and 2024, respectively. Total rental expense was $2.2 million and $2.2 million for the three months ended September 30, 2025 and 2024, respectively.

Legal Proceedings

In the normal course of business, there are various outstanding legal proceedings. In the opinion of management, after consulting with legal counsel, the consolidated financial position and results of operations of the Company are not expected to be affected materially by the outcome of such proceedings.

(13)Tax Equity Investments

The Company typically accounts for tax equity investments using the proportional amortization method, if certain criteria are met. The election to account for tax equity investments using the proportional amortization method is done so on a tax credit program-by-tax credit program basis. Under the proportional amortization method, the Company amortizes the initial cost of the investment, which is inclusive of any delayed equity contributions, that are unconditional and legally binding or for equity contributions that are contingent on a future event, when that event becomes probable, in proportion to the income tax credits that are allocated to the Company over the period of the investment.

Under the proportional amortization method, the Company amortizes the initial cost of the investment, inclusive of delayed equity contributions, in proportion to the income tax credits that are allocated to the Company over the period of the investment. The net benefits of these investments, which are comprised of income tax credits and operating loss income tax benefits, net of investment amortization, are recognized in the Consolidated Statements of Income as a component of income tax expense. At September 30, 2025 and December 31, 2024 the carrying value of all tax equity investments was $72.4 million and $29.6 million, respectively, and were included in other assets on the Unaudited Consolidated Balance Sheets.

The carrying value of the investments accounted for under the proportional amortization method ("PAM") on September 30, 2025 included $22.2 million of delayed equity contributions described in the chart below. The delayed equity contributions were included in other liabilities on the Unaudited Consolidated Balance Sheets.

As of September 30, 2025, the Company's delayed equity contributions were estimated to be paid as follows:

The following table presents income tax credits and other income tax benefits, as well as amortization expense, associated with all tax credit investments.

There wasno material non-income tax related expense associated with these investments recorded outside of income tax expense for the three and nine months ended September 30, 2025 and 2024. There wereno impairment losses recorded on tax equity investments during the three and nine months ended September 30, 2025 and 2024.