Beacon Financial CorpBBT
Beacon Financial Corp Income Taxes Disclosure
Income Taxes
Provision for Income Taxes
Income tax expense is comprised of the following amounts:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In Thousands) | |||||||||||||||||
| Current provision: | |||||||||||||||||
| Federal | $ | 7,175 | $ | 16,464 | $ | 960 | |||||||||||
| State | 2,068 | 6,120 | 1,788 | ||||||||||||||
| Total current provision | 9,243 | 22,584 | 2,748 | ||||||||||||||
| Deferred provision (benefit) | |||||||||||||||||
| Federal | 14,063 | 912 | 12,922 | ||||||||||||||
| State | 8,285 | (520) | 3,245 | ||||||||||||||
| Total deferred provision (benefit) | 22,348 | 392 | 16,167 | ||||||||||||||
| Total provision for income taxes | $ | 31,591 | $ | 22,976 | $ | 18,915 | |||||||||||
Income tax expense is comprised of the following amounts:
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| (Dollars In Thousands) | |||||||||||
| Expected income tax expense at statutory federal tax rate | $ | 25,591 | 21.0 | % | |||||||
State taxes, net of federal income tax benefit (1) | 8,192 | 6.7 | % | ||||||||
| Tax credit investments | |||||||||||
Investments in affordable housing and new markets tax credits (2) | (1,391) | (1.1) | % | ||||||||
Investments in historic tax credits (3) | (526) | (0.4) | % | ||||||||
| Nontaxable or non deductible items | |||||||||||
| Tax-exempt interest income | (2,307) | (1.9) | % | ||||||||
| Bank-owned life insurance | (954) | (0.8) | % | ||||||||
| Merger and restructuring expense | 1,250 | 1.0 | % | ||||||||
| Other non deductible items | 1,584 | 1.3 | % | ||||||||
| Other adjustments | 152 | 0.1 | % | ||||||||
| Total provision for income taxes | $ | 31,591 | 25.9 | % | |||||||
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(1) State taxes in Massachusetts and New York make up the majority (greater than 50%) of the tax effect in this category of the rate reconciliation.
(2) Company has adopted proportional amortization for these investments. Therefore, the tax credit category includes the tax credit, net of the proportional amortization.
(3) Company has adopted the deferral method for these investments. Therefore, the tax credit category includes the tax benefit for these credits.
Income tax expense is comprised of the following amounts:
| Year Ended December 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (Dollars In Thousands) | |||||||||||||||||||||||
| Expected income tax expense at statutory federal tax rate | $ | 19,255 | 21.0 | % | $ | 19,722 | 21.0 | % | |||||||||||||||
| State taxes, net of federal income tax benefit | 4,395 | 4.8 | % | 3,977 | 4.2 | % | |||||||||||||||||
| Bank-owned life insurance | (424) | (0.5) | % | (443) | (0.5) | % | |||||||||||||||||
| Tax-exempt interest income | (597) | (0.7) | % | (307) | (0.3) | % | |||||||||||||||||
| Merger and restructuring expense | 528 | 0.6 | % | 159 | 0.2 | % | |||||||||||||||||
| Energy tax credits | — | — | % | (4,504) | (4.8) | % | |||||||||||||||||
| Investments in affordable housing projects | (607) | (0.7) | % | (917) | (1.0) | % | |||||||||||||||||
| Other, net | 426 | 0.5 | % | 1,228 | 1.3 | % | |||||||||||||||||
| Total provision for income taxes | $ | 22,976 | 25.0 | % | $ | 18,915 | 20.1 | % | |||||||||||||||
The amount of income taxes paid (net of refunds received) for federal and state taxes:
| 2025 | |||||
| (Dollars In Thousands) | |||||
| Federal | $ | 9,171 | |||
| State: | |||||
| Massachusetts | $ | 4,160 | |||
| New York | 863 | ||||
| Other | 774 | ||||
| Total state | $ | 5,797 | |||
| Total federal and state | $ | 14,968 | |||
Deferred Tax Assets and Liabilities
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at the dates indicated are as follows:
| At December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In Thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Allowance for credit losses | $ | 73,001 | $ | 35,163 | |||||||
| Operating leases - liability | 24,051 | 11,924 | |||||||||
| Deferred compensation | 10,364 | 4,088 | |||||||||
| Identified intangible assets and goodwill | 4,199 | 4,666 | |||||||||
| Supplemental Executive Retirement Plans | 2,473 | 2,427 | |||||||||
| Net operating loss carryforwards | 155 | 145 | |||||||||
| Postretirement benefits | 505 | 811 | |||||||||
| Tax credit carryforward | 6,986 | — | |||||||||
| Nonaccrual interest | 1,300 | 780 | |||||||||
| Restricted stock and stock option plans | 339 | 1,153 | |||||||||
| Unrealized loss on investment securities available-for-sale | 6,831 | 15,629 | |||||||||
| Acquisition fair value adjustments | 98,047 | 11,531 | |||||||||
| Depreciation | 3,183 | — | |||||||||
| Loan servicing rights | 2,868 | — | |||||||||
| Other | 335 | 166 | |||||||||
| Total gross deferred tax assets, before valuation allowance | 234,637 | 88,483 | |||||||||
| Valuation allowance | (400) | — | |||||||||
| Deferred tax assets, net of valuation allowance | 234,237 | 88,483 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Right-of-use asset - operating leases | 22,592 | 11,591 | |||||||||
| Identified intangible assets and goodwill | 49,654 | 6,475 | |||||||||
| Deferred loan origination costs, net | 3,357 | 3,926 | |||||||||
| Depreciation | — | 723 | |||||||||
| Prepaid expense | 1,015 | 377 | |||||||||
| Accrued Expense | 2,048 | 7,121 | |||||||||
| Investment in partnership | 906 | 1,646 | |||||||||
| Loan servicing rights | 5,174 | — | |||||||||
| Other | 4 | 4 | |||||||||
| Total gross deferred tax liabilities | 84,750 | 31,863 | |||||||||
| Net deferred tax asset | $ | 149,487 | $ | 56,620 | |||||||
Valuation Allowances
The components of the Company’s valuation allowance on its deferred tax asset, net as of December 31, 2025 and 2024 are as follows:
| At December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In Thousands) | |||||||||||
| State valuation allowances | $ | (400) | $ | — | |||||||
The state tax valuation allowance, net of Federal benefit, is due to management's assessment that it is more likely than not that certain deferred tax assets recorded for the difference between the book basis and the state tax basis in certain tax credit limited partnership investments will not be realized. Management anticipates that the remaining excess state tax basis realized upon termination of these partnerships will be a capital loss upon disposition, and that capital loss may not be deductible in some of the Company's state tax jurisdictions.
The valuation allowance as of December 31, 2025 is subject to change in the future as the Company continues to periodically assess the likelihood of realizing its deferred tax assets.
Unrecognized Tax Benefits
On a periodic basis, the Company evaluates its income tax positions based on tax laws and regulations and financial reporting considerations, and records adjustments as appropriate. This evaluation takes into consideration the status of taxing authorities’ current examinations of the Company’s tax returns, recent positions taken by the taxing authorities on similar transactions, if any, and the overall tax environment in relation to uncertain tax positions.
The following table presents changes in unrecognized tax benefits for the years ended December 31, 2025, 2024, and 2023:
| At December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In Thousands) | |||||||||||||||||
| Balance at January 1 | $ | 643 | $ | 638 | $ | 621 | |||||||||||
| Acquired unrecognized tax benefits | 11,502 | — | — | ||||||||||||||
| Additions based on tax positions related to the current year | — | — | — | ||||||||||||||
| Additions for tax positions of prior years | 981 | 5 | 34 | ||||||||||||||
| Reductions for tax positions of prior years | (84) | — | — | ||||||||||||||
| Reductions due to lapse of statue of limitations | (897) | — | (17) | ||||||||||||||
| Settlements | (221) | — | — | ||||||||||||||
| Balance at December 31 | $ | 11,924 | $ | 643 | $ | 638 | |||||||||||
It is reasonably possible that over the next twelve months the amount of unrecognized tax benefits may change from the reevaluation of uncertain tax positions arising in examinations, in appeals, or in the courts, or from the closure of tax statutes. The Company does not expect any significant changes in unrecognized tax benefits during the next twelve months.
All of the Company's unrecognized tax benefits, if recognized, would be recorded as a component of income tax expense, therefore, affecting the effective tax rate. The Company recognizes interest and penalties, if any, related to the liability for uncertain tax positions as a component of income tax expense.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction as well as in various states. In the normal course of business, the Company is subject to U.S. federal, state, and local income tax examinations by tax authorities. Other than open statutes of limitation pertaining specifically to the Berkshire Hills Bancorp, Inc. amended returns filed for 2015 through 2018 to claim 2020 NOL carryback refunds, the Company is no longer subject to examination for tax
years prior to 2022. Berkshire Hills Bancorp, Inc. has been selected for a federal income tax audit for the years 2017 through 2020 pertaining to the amended returns filed. Brookline Bancorp, Inc. and Subs has been selected for a New York City income tax audit for the years 2016, 2017 and 2018. Berkshire Hills Bancorp, Inc. and Subs has been selected for a Connecticut income tax audit for the years 2022, 2023, and 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.